Wednesday, November 30, 2005

E.D. Pa. Holds that Clayton Act's Venue Clause Is Exclusive When Suing Domestic Defendants

Addressing an issue that has divided the circuits and that the Third Circuit has yet to address, the court in Cumberland Truck Equipment Co. v. Detroit Diesel Corp., --- F.Supp.2d ----, 2005 WL 3054548 (E.D. Pa. Nov. 14, 2005) has held that a plaintiff suing a domestic defendant for antitrust violations must use the Clayton Act's venue clause exclusively. However, the court also held that the plaintiff may establish venue for an alien defendant pursuant to the general alien venue statute, 28 U.S.C. Section 1391(d):

The issue of which statutes govern proper venue in antitrust cases against corporate defendants is hotly contested not only by the parties, but also by federal courts throughout the country. Courts have adopted three distinct approaches for assessing proper venue when a plaintiff asserts personal jurisdiction pursuant to Section 12. First, some courts suggest that a plaintiff suing a domestic defendant for antitrust violations must use the Section 12 venue clause exclusively, but allow a plaintiff suing an alien defendant to use the general alien venue statute, 28 U.S.C. § 1391(d), to supplement the Section 12 venue clause. See, e.g., In re Automotive Refinishing, Civ. A. No. MDL-1426, 2002 WL 31261330, at *9 (E.D.Pa. July 31, 2002), aff'd 358 F.3d 288 (3d Cir.2004); Gen. Elec. Co. v. Bucyrus-Erie Co., 550 F.Supp. 1037, 1040 (S.D.N.Y.1982). A second set of courts allow plaintiffs to establish venue under Section 12 or an alternative general venue source interchangeably. See, e.g., New York v. Morton Salt Co., 266 F.Supp. 570, 574-75 (E.D.Pa.1967); Phila. Hous. Auth. v. Am. Radiator & Standard Sanitary Corp., 291 F.Supp. 252, 255 (E.D.Pa.1968). Finally, other courts find that the Section 12 venue clause is the exclusive venue provision for all defendants, alien and domestic, and it preempts the general venue statutes. See, e.g., GTE New Media Servs. Inc. v. Bellsouth Corp., 199 F.3d 1343, 1351 (D.C.Cir.2000); Mgmt. Insights, Inc. v. CIC Enters., Inc., 194 F.Supp.2d 520, 532 (N.D.Tex.2001).

The Third Circuit's decision in Automotive Refinishing suggests that this Circuit would adopt the first approach, allowing Section 12's venue clause to be supplemented for alien but not domestic defendants.

C.D. Cal. Publishes Opinion Certifying 23(b)(2) Class Alleging Labor Law Violations

Judge Consuelo B. Marshall in Wang v. Chinese Daily News, Inc.,--- F.R.D. ----, 2005 WL 3148239 (C.D. Cal. Jan. 20, 2005) just published an opinion from last January certifying a group of plaintiffs seeking both injunctive and monetary relief as a Rule 23(b)(2) class. Plaintiffs, on behalf of themselves and all others similarly situated, filed the suit alleging multiple labor violations by Defendant Chinese Daily News, Inc. pursuant to the Fair Labor Standards Act (“FLSA”), the California Business and Professions Code § 17200 et seq. and the California Labor Code. The case is interesting because of its thorough analysis of each of the requirements for class certification under Rule 23(a) and its analysis of the case both under Rule 23(b)(2) and Rule 23(b)(3). The (b)(3) damages class analysis was offered solely as an alternate ground for certification in the event an appellate court disagrees with the court's certification under Rule 23(b)(2).

In this case, numerosity was questioned by the defendant because the plaintiffs numbered only 160 employees of the defendant. The court however had no difficulty finding the numerosity requirement satisfied. The propriety of certifying the class under Rule 23(b)(2) was also questioned given the fact that plaintiffs sought significant monetary damages (unpaid overtime, statutory penalties, attorneys' fees, and costs) in addition to injunctive relief. The court thought differently, holding that the monetary relief sought did not predominate over the signficance of the injunctive relief sought. Thus, Rule 23(b)(2) certification was deemed appropriate, although in light of the presence of substantial monetary damages claims, the Court ordered that notice and an opportunity to opt out be given to class members consistent with Rule 23(c)(2)(B).

Tuesday, November 29, 2005

SCOTUS Issues Opinion in Removal Jurisdiction Case

The Supreme Court has issued a decision in Lincoln Property Co. et al. v. Roche, a case that addressed various issues surrounding removal jurisdiction under 28 U.S.C. s. 1441. Here is a portion of the Syllabus released today:

Title 28 U.S.C. § 1441 authorizes the removal of civil actions from state court to federal court when the state-court action is one that could have been brought, originally, in federal court. When federal-court jurisdiction is predicated on the parties’ diversity of citizenship, see §1332, removal is permissible “only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which [the] action [was] brought.” §1441(b).

Christophe and Juanita Roche, plaintiffs below, respondents here, leased an apartment in a Virginia complex, Westfield Village, managed by Lincoln Property Company (Lincoln). The Roches commenced suit in state court against diverse defendants, including Lincoln, asserting serious medical ailments from their exposure to toxic mold in their apartment, and alleging loss, theft, or destruction of personal property left in the care of Lincoln and the mold treatment firm during the remediation process. The Roches identified themselves as Virginia citizens and defendant Lincoln as a Texas corporation. Defendants removed the litigation to a Federal District Court, invoking that court’s diversity-of-citizenship jurisdiction. In their consolidated federal-court complaint, the Roches identified themselves and Lincoln just as they did in their state-court complaints. Lincoln, in its answer, admitted that it managed Westfield Village, and did not seek to avoid liability by asserting that some other entity was responsible for managing the property. After discovery, the District Court granted defendants’ motion for summary judgment, but before judgment was entered, the Roches moved to remand the case to state court. The District Court denied the motion, but the Fourth Circuit reversed, holding the removal improper on the ground that Lincoln failed to show the nonexistence of an affiliated Virginia entity that was a real party in interest.

Held: Defendants may remove an action on the basis of diversity of citizenship if there is complete diversity between all named plaintiffs and all named defendants, and no defendant is a citizen of the forum State. It is not incumbent on the named defendants to negate the existence of a potential defendant whose presence in the action would destroy diversity. Pp. 6—13.

The High Court reversed the Fourth Circuit and remanded. Readers can view the full Syllabus by visiting Cornell's LII website here.

Indirect Purchaser Suit against Microsoft Under South Carolina Law Cannot Proceed

BNA's Class Action Litigation Report is reporting that in a putative indirect purchaser class action against Microsoft under South Carolina law was dismissed on Nov. 2 by the U.S. District Court for the District of Maryland (In re Microsoft Corp. Antitrust Litigation, D. Md., No. MDL 1332, 11/2/05; Mark v. Microsoft Corp., D. Md., No. JFM-05-1608, 11/2/05):

"Judge J. Frederick Motz, who is handling nationwide federal multidistrict antitrust litigation against Microsoft, dismissed the state antitrust claims because he 'has no reason to disagree' with a prior district court decision finding that South Carolina has adopted the federal rule enunciated in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), 'that indirect purchasers cannot recover under state antitrust laws,' In re Wiring Device Antitrust Litigation, 498 F. Supp. 79, 88 (E.D.N.Y. 1980)." BNA's Class Action Litigation Report, Volume 06, Number 22, November 25, 2005, Page 817.

Plaintiffs in the case had attempted to style their claim as one for unjust enrichment under South Carolina general common law. That effort was rejected as an attempt to get around the limits imposed by Illinois Brick and embraced by South Carolina.

Monday, November 28, 2005

Eighth Circuit Adopts Declatory Judgment Action Abstention Test

The Eighth Circuit in Scottsdale Ins. Co. v. Detco Industries, Inc., 426 F.3d 994 (8th Cir. Oct. 20, 2005) has resolved the question of how lower courts are to determine whether or not they should stay or dismiss a declaratory judgment action when there are no parallel state court proceedings. Adopting the test set forth by the Fourth Circuit in Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 422 (4th Cir.1998), the court embraced the following six-factor test:

(1) whether the declaratory judgment sought “will serve a useful purpose in clarifying and settling the legal relations in issue”; (2) whether the declaratory judgment “will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the [federal] proceeding”; (3) “the strength of the state's interest in having the issues raised in the federal declaratory judgment action decided in the state courts”; (4) “whether the issues raised in the federal action can more efficiently be resolved in the court in which the state action is pending”; (5) “whether permitting the federal action to go forward would result in unnecessary ‘entanglement’ between the federal and state court systems, because of the presence of ‘overlapping issues of fact or law’ ”; and (6) “whether the declaratory judgment action is being used merely as a device for ‘procedural fencing’--that is, ‘to provide another forum in a race for res judicata’ or ‘to achiev[e] a federal hearing in a case otherwise not removable.’ ”

Second Circuit Dismisses Holocaust Compensation Class Action Lawsuit

The Second Circuit in Whiteman v. Dorotheum GmbH & Co. KG, --- F.3d ----, 2005 WL 3117196 (2d Cir. Nov. 23, 2005) per Judge Cabranes, has just dismissed a class action filed on behalf of victims of the Nazi regime for Holocaust-era deprivations. The dismissal was on the ground that the federal courts lacked subject matter jurisdiction over the case based on the view of the Executive Branch that the matter would be better resolved in an alternate forum through an international agreement between the relevant sovereign nations involved. The key question facing the court was how much deference should be accorded to views of the Executive Branch in asserting jurisdiction over a foreign sovereign under the Foreign Sovereign Immunities Act of 1976 (“FSIA”):

We consider [that] question today. The past two presidential administrations, notwithstanding their differences in political affiliation, have committed the United States to a policy of resolving Holocaust-era restitution claims through international agreements rather than litigation. Consistent with that policy, the United States has engaged in extensive international negotiations culminating in a 2001 executive agreement with Austria to establish a fund to compensate Austrian Jews (and their heirs and successors) whose property was confiscated during the Nazi era and the Second World War. Distributions from the Austrian compensation fund remain, however, contingent on the dismissal of this case. Accordingly, the United States has submitted a Statement of Interest urging dismissal.

In light of the Supreme Court's political question jurisprudence, as well as its recent rulings directing “case-specific deference” to the expressed foreign policy interests of the United States, Sosa v. Alvarez-Machain, 124 S.Ct. 2739, 2766 n. 21 (2004); see also Altmann, 541 U.S. at 702, we hold that deference to a statement of foreign policy interests of the United States urging dismissal of claims against a foreign sovereign is appropriate where, as here, (1) the Executive Branch has exercised its authority to enter into executive agreements respecting the resolution of those claims; (2) the United States Government (a) has established through an executive agreement an alternative international forum for considering the claims in question, and (b) has indicated that, as a matter of foreign policy, the alternative forum is superior to litigation; and (3) the United States foreign policy advanced by the executive agreement is substantially undermined by the continuing pendency of the claims. Mindful of the Supreme Court's recent emphasis (albeit in a different legal context) on preserving the “ ‘capacity of the President to speak for the Nation with one voice in dealing with other governments' to resolve claims ··· arising out of World War II,” Am. Ins. Ass'n v. Garamendi, 539 U.S. 396, 424 (2003) (quoting Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363, 381 (2000)), we dismiss plaintiffs' claims against Austria in deference to the stated foreign policy interests of the United States.

Thursday, November 24, 2005

Seventh Circuit Affirms Notice Pleading

The Seventh Circuit in Doe v. Smith, --- F.3d ----, 2005 WL 3099687 (7th Cir. Nov. 21, 2005), per Judge Easterbrook, has rejected a lower court's effort to impose heightened pleading requirements in a federal wiretapping case. The case involves allegations of videotaping an intimate encounter without the permission or knowledge of one of the participants and distributing the resulting recording. The district court dismissed the complaint because it did not plead that the defendant had "intercepted" anything as required under the federal wiretapping statute, 18 U.S.C. §§ 2510-22:

The complaint does not maintain that Smith “intercepted” anything. Yet pleadings in federal court need not allege facts corresponding to each “element” of a statute. It is enough to state a claim for relief-and Fed.R.Civ.P. 8 departs from the old code-pleading practice by enabling plaintiffs to dispense with the need to identify, and plead specifically to, each ingredient of a sound legal theory. See, e.g., Swierkiewicz v. Sorema N.A., 534 U.S. 506, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002); McDonald v. Household International, Inc., No. 04-3259 (7th Cir. Sept. 29, 2005); Bartholet v. Reishauer A.G. (Zürich), 953 F.2d 1073 (7th Cir.1992). Plaintiffs need not plead facts; they need not plead law; they plead claims for relief. Usually they need do no more than narrate a grievance simply and directly, so that the defendant knows what he has been accused of. Doe has done that; it is easy to tell what she is complaining about. Any district judge (for that matter, any defendant) tempted to write “this complaint is deficient because it does not contain···” should stop and think: What rule of law requires a complaint to contain that allegation? Rule 9(b) has a short list of things that plaintiffs must plead with particularity, but “interception” is not on that list.

Complaints initiate the litigation but need not cover everything necessary for the plaintiff to win; factual details and legal arguments come later. A complaint suffices if any facts consistent with its allegations, and showing entitlement to prevail, could be established by affidavit or testimony at a trial. See, e.g., Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). The consistency proviso is why some complaints may be dismissed pronto: litigants may plead themselves out of court by alleging facts that defeat recovery. See, e.g., Walker v. Thompson, 288 F.3d 1005 (7th Cir.2002). Complaints also may be dismissed when they show that the defendant did no wrong. For example, a complaint alleging that a sports team violated the antitrust laws by restricting peanut sales on the stadium's grounds is defective because the antitrust laws do not entitle one person to sell goods on someone else's property. See Elliott v. United Center, 126 F.3d 1003 (7th Cir.1997). Doe has not pleaded herself out of court; none of the complaint's allegations shows that Smith is sure to succeed. The complaint does not say, for example, that she consented to the recording. Doe will have to prove some facts that she did not plead, but that's common.

Wednesday, November 23, 2005

Civil Procedure Cases to be Argued Next Week before the Supreme Court

Several cases related to federal civil practice and procedure will be argued before the U.S. Supreme Court next Monday and Tuesday:

- Wachovia Bank v. Schmidt (04-1186): Former Wachovia Bank customer Schmidt sued the bank in South Carolina state court after the IRS determined that the investment strategy Wachovia had recommended was illegal. Wachovia, a North Carolina based company, removed the case to federal court based on diversity. Wachovia appealed an adverse decision on the merits to the Fourth Circuit Court of Appeals. The Fourth Circuit dismissed the case altogether, holding that the S.C. federal court never had subject matter jurisdiction because Wachovia has branches in South Carolina, and therefore there was no diversity of citizenship between the parties.

- Buckeye Check Cashing v. Cardegna (04-1264): Cardegna received a loan from Buckeye Check Cashing but later alleged that they charged a rate in excess of the level permitted by Florida law. Ignoring an arbitration clause in the loan agreement, Cardegna initiated a class action lawsuit. Buckeye moved to compel arbitration under the clause but Cardegna responded that because the contract was void ab initio, the arbitration clause never became effective. The issue here is whether courts should be able to make this determination or whether an arbitrator should make this initial call.

- Will v. Hallock (04-1332): Hallock's claim under the Federal Tort Claims Act against the United States was subsequently dismissed after determining that the claim fell within one of the exceptions to the United States' waiver of sovereign immunity under the FTCA. Hallock then brought the same claim against the individual federal officers involved in the alleged wrongful seizure of her property. The officers argue that the FTCA's judgment bar provision, which prevents a plaintiff from suing multiple times on the same FTCA claim, should bar the suit against them.

Full summaries of these cases can be viewed by visiting Cornell's LII website.

D. Alaska Rejects "Critical Self-Analysis" Privilege

A federal court in Alaska has issued an opinion rejecting the so-called "critical self-analysis" privilege asserted by a defendant in an environmental case seeking to protect internal risk assessments from discovery (Adams v. Teck Cominco Alaska, Inc., --- F.Supp.2d ----, 2005 WL 3071474, November 03, 2005). Having failed to find that the internal reports were protected by the attorney-client privilege as a result of the party's regular disclosure of the reports to an affiliated entity outside the attorney-client relationship, the court also rejected the proposed "critical self-analysis" privilege on the ground that the Ninth Circuit has yet to recognize the novel privilege.

Tuesday, November 22, 2005

Investors Fail to Secure Lifting of Stay Of Their Claims Against Firm in Receivership

BNA's U.S. Law Week is reporting on a Third Circuit case addressing the standards for granting a motion to lift a stay of litigation imposed as part of nonbankruptcy receivership proceedings :

"Investors who alleged that a firm in receivership proceedings had fraudulently induced their investment failed to show that a stay of litigation should be lifted to allow them to pursue their claims, the U.S. Court of Appeals for the Third Circuit held Nov. 8 (United States v. Acorn Technology Fund LP, 3d Cir., No. 04-3663, 11/8/05). The court took this occasion to delineate the specific factors to be used in determining whether to lift a stay of litigation entered in nonbankruptcy receivership proceedings. Adopting a three-factor test used by the Ninth Circuit, Judge Franklin S. Van Antwerpen ultimately decided that the factors weighed against lifting the stay in this case."

U.S. Law Week, Volume 74 Number 19 Tuesday, November 22, 2005, Page 1293, ISSN 1522-4317. BNA subscribers can access the story on the case by clicking here. Westlaw subscribers can view the case by clicking here.

Judge Scheindlin Rejects Rule 69(a) Authority to Attach Foreign Property

Judge Scheindlin also has just published a decision (Mones v. Commercial Bank of Kuwait, S.A.K.,--- F.Supp.2d ----, 2005 WL 1653930 (S.D.N.Y. July 12, 2005)) rejecting the authority to order a foreign bank to transfer assests from abroad into the Southern District of New York under FRCP Rule 69(a). New York law, to which the S.D.N.Y. must look under Rule 69, clearly does not provide the court with the authority to require a financial intermediary to transfer property from outside the jurisdiction said the court. However, Rule 69 provides two exceptions that could have been interpreted to provide such authority:

Rule 69 does contain two clauses that arguably provide the Court with power beyond the limitations of state law. First, state law is superceded “where any statute of the United States governs” and second, enforcement of judgments shall be by writ of execution, governed by state procedures, “unless the court directs otherwise.” The first exception is irrelevant because no federal statute governs this case. However, several courts have discussed the possibility that the second exception, “unless the court directs otherwise,” authorizes courts to exceed state procedures governing writs of execution and to enforce money judgments by ordering delivery of a judgment debtor's assets in just these circumstances. While the Second Circuit does not appear to have interpreted Rule 69's “otherwise” clause, the First Circuit has held that the “ ‘otherwise’ clause is narrowly construed” and that there is no reason to depart from the traditional view that Rule 69(a)“ ‘limit[s] all federal process on money judgments to the type of process available under state law.” ’ The “otherwise” clause should be invoked only in “extraordinary circumstances” and “does not authorize enforcement of a civil money judgment by methods other than a writ of execution, except where ‘well established principles [so] warrant.” In Motorola Credit Corporation v. Uzan, a judgment creditor moved for an order requiring various banks.

. . .

Petitioner has failed to show any special or extraordinary circumstances that would warrant the invocation of the “otherwise” language in Rule 69, even if this Court considers that clause to authorize the exercise of power beyond the limits of New York law.

S.D.N.Y. Provides Thorough Lead Plaintiff Analysis under PSLRA

Judge Scheindlin has issued an opinion from this past summer that was just published yesterday (In re eSpeed, Inc. Sec. Lit., --- F.Supp.2d ----, 2005 WL 1653933 (S.D.N.Y. July 13, 2005)), in which she provides an excellent example of how to analyze motions to serve as lead plaintiff in a securities fraud action under the standards established by the Private Securities Litigation Reform Act (PSLRA). Under the Act, the preferred lead plaintiff is the one with the greatest financial loss from the alleged harm. However, various harmed investors may affiliate with one another and aggregate their losses in an effort to qualify for lead plaintiff status as a group.

In this case, two different groups were vying for the appointment and presented competiting accounting methods to calculate their respective losses. This required Judge Scheindlin to resolve the matter in part by determining that the LIFO accounting method (last in, first out) rather than the FIFO method (first in, first out) would be used to estimate losses, reflecting a more recent trend in that direction.

Monday, November 21, 2005

Plaintiffs Suing Pfizer for Alleged Harmful Side Effects of Mirapex Denied Class Certification

The plaintiffs suing Pfizer for alleged harmful side effects of the drug Mirapex have been denied class certification by a California federal court in Sweet v. Pfizer, --- F.Supp.2d ----, 2005 WL 3074602 (C.D. Cal. November 15, 2005). In the case, the plaintiffs alleged that the drug, which is prescribed to control the symptoms of Parkinson's Disease, resulted in obsessive compulsive disorder side effects, a side effect Pfizer did not communicate to the FDA. The court concluded that although commonality and numerosity were satsified, typicality, adequacy of representation, predominance, and superiority were all not satisfied here. Incidentally, both predominance and superiority were found lacking based on reasons related to choice of law.

The opinion provides a good discussion and review of each of these class action requirements.

No Privilege Log, No Privilege Holds D. Conn. Judge

A federal judge in Connecticut (Breon v. Coca-Cola Bottling Co. of New England, --- F.R.D. ----, 2005 WL 3071501 (D. Conn. November 04, 2005)) has held that the defendant's failure to produce a privilege log explaining the basis for refusing to produce documents resulted in the privilege claim being waived and rendered the documents discoverable:

Defendant has provided the court with no privilege log. However, in its response to plaintiff's requests for production defendant did provide a skeletal argument outlining the documents it claims are privileged, including titles, dates and the names of authors and recipients. The court cannot, however, conclude that either the attorney-client privilege or work-product immunity applies on the basis of such little information. Having failed to provide adequate information for such a determination, the defendant has not perfected its claim of privilege. Since the documents are not privileged, they are discoverable. Therefore, the defendant is ordered to provide plaintiff's counsel with the documents requested in production requests 1, 3-6, 10, 14 and 18-20.

The opinion is also useful because it provides more general pointers regarding asserting claims of privilege and work-product protection during disovery.

Friday, November 18, 2005

Seventh Circuit Denies Costs as "Exorbitant" after Previously Acknowledging Entitlement to Costs

The ABA Journal eReport is reporting that the Seventh Circuit has rejected all costs sought by attorneys in a case because their statement of costs was excessive, even though the court had previously agreed that the lawyers were entitled to costs because of their adversary's frivolous appeal:

"A three-judge panel of the 7th U.S. Circuit Court of Appeals, based in Chicago, criticized a statement of costs and fees supplied by attorneys for Budget Rent A Car as "exorbitant." And as punishment, the judges denied recovery of costs altogether, even though the appeals court had ruled earlier that Budget was entitled to recover sanctions caused by what the appeals court termed a "frivolous appeal." Budget Rent A Car System Inc. v. Consolidated Equity, No. 05-3579 (Nov. 4)."

The article is worth looking at because it serves as a cautionary tale for those attorneys filing cost reports with courts. The full article is available by clicking here.

D.R.I. Holds That Infringing Cybersquatter Did Not Purposefully Avail Itself of State of Trademark Holder

A federal court in Rhode Island has held that an alleged cybersquatter and trademark infringer did not purposefully avail itself of the forum state simply by virtue of the forum's status as the plaintiff's home state (Subsalve USA Corp. v. Watson Mfg., Inc., 392 F.Supp.2d 221 (D.R.I. Sept. 29, 2005)). Thus, the court declined to exercise personal jurisdiction over the defendant in the case:

It is well settled, however, that “[t]he mere existence of a website does not show that a defendant is directing its business activities towards every forum where the website is visible.” McBee v. Delica Co., Ltd., 417 F.3d 107, 124 (1st Cir.2005). Furthermore, “given the omnipresence of Internet websites today, allowing personal jurisdiction to be premised on such a contact alone would ‘eviscerate’ the limits on a state's jurisdiction over out-of-state or foreign defendants.” Id.; see also Swarovski, 2003 WL 22014581, at *8 (holding that interactive website did not satisfy purposeful availment prong where defendant (1) did not specifically target Rhode Islanders or assert that it had unique connection with Rhode Island, (2) made no sales to Rhode Island residents, and (3) had no other contacts with Rhode Island).

E.D. Va. Imposes Fees and Costs under EFTA, Denies Sanctions

A Virginia Federal court (Moore v. Southtrust Corp., 392 F.Supp.2d 724 (E.D. Va. September 28, 2005)) has just published an opinion in which it ordered plaintiffs to pay defendant's attorney fees and costs pursuant to the fee-shifting provision of the Electronic Funds Transfer Act (EFTA), 15 U.S.C. 1693 et seq.:

[I]n the instant case, in order to determine if the defendant is entitled to reasonable attorney's fees and costs, the court must first determine if the plaintiff brought this suit in bad faith. As stated above, section 1693m(f) provides that “[o]n a finding by the court that an unsuccessful action under this section was brought in bad faith or for purposes of harassment, the court shall award to the defendant attorney's fees reasonable in relation to the work expended and costs.” 15 U.S.C. § 1693m(f) (2004).

. . .

[T]he plaintiff in the instant case . . . acted in bad faith in bringing the lawsuit against SouthTrust. As evidenced by the plaintiff's admissions in his deposition, the plaintiff filed suit even though he knew that either he or his wife had conducted the alleged unauthorized transactions, failed to investigate the charges before filing his claim, claimed that his card had been stolen when he knew that it had not, wrote a letter to the bank on fake law firm stationery rescinding some of the charges, claimed that the bank had violated the EFTA when, in fact, his own actions were fraudulent, and continued to litigate his claims long after he knew that his claims had no merit. These facts, which are substantiated by the plaintiff's own deposition, support the court's finding that he acted in bad faith in bringing this lawsuit against the defendant. Therefore, pursuant to section 1693m(f) of the EFTA, the court finds that the defendant is entitled to “attorney's fees reasonable in relation to the work expended and costs.” 15 U.S.C. § 1693m(f) (2004).

The court also denied a motion for Rule 11 sanctions against the plaintiff:

Although the defendant complied with the “safe harbor” provision of Rule 11, it served the letter and filed its motion for sanctions after this court had already entered its summary judgment order. Although the court does not deny that the plaintiff's conduct throughout this case has been egregious, a motion for sanctions filed at this point in the case does not meet the intended purpose of Rule 11 because the court has already ruled on the plaintiff's Complaint. Furthermore, even if the defendant had not failed to cross this procedural hurdle, the court would not be inclined to award monetary sanctions in this case because of the plaintiff's limited ability to pay and the large award of attorney's fees granted to the defendant. Any money paid by the plaintiff would be better spent in compensating the defendant for its attorney's fees and costs in defending this case, rather than satisfying sanctions. Furthermore, the court feels that the large award of attorney's fees and costs granted to the defendant is enough of a deterrence to keep the plaintiff from filing lawsuits in bad faith in the future.

Thursday, November 17, 2005

D. Maine Judge Issues Thorough Attorneys Fee Opinion

Judge Hornby in D. Maine (Nilsen v. York County, --- F.Supp.2d ----, 2005 WL 3006684 (D. Me. Nov. 10, 2005)) has just issued a very thorough opinion providing a detailed discussion of the various methods of calculating appropriate attorney fees awards across the circuits in a common fund case. He ultimately rejected the popular multi-factored tests in favor of the "market-mimicking" approach embraced by the Seventh Circuit. Applying the market-mimicking approach, Judge Hornby found that the 30% share of the $3.3 million settlement won by the civil rights plaintiffs' attorneys was too high and permitted an award of 25%.

D. Maine Holds that Late Service on Removing Defendants Resulted in Post-CAFA Commencement

A federal court in Maine (Dinkel v. General Motors Corp.,--- F.Supp.2d ----, 2005 WL 3006728 (D. Me. Nov. 09, 2005)) has applied state commencement rules to hold that late service on removing defendants resulted in post-CAFA commencement, thus rendering the entire state action removable:

The plaintiff initially "commenced" this class action in state court before the Class Action Fairness Act of 2005 ("CAFA") became effective. At first, therefore, it was not removable to federal court under CAFA. After CAFA became effective, however, the plaintiff "commenced" his class action against additional defendants.

. . .

Under Kansas Rules of Civil Procedure, however, filing the complaint alone does not necessarily "commence" the lawsuit. That filing "commences" the lawsuit only if process is served within 90 days thereafter. Otherwise (i.e., if more than 90 days passes), the lawsuit does not "commence" until service of process occurs.

. . .

If Dinkel had served all the defendants within ninety days, the entire lawsuit would have "commenced" on its filing date, February 17, 2005, one day before CAFA's effective date, and no defendant could have removed it; CAFA does not apply to state class actions pending when CAFA was signed. But Dinkel did not serve the Removing Defendants within the ninety days. As to them, the Kansas lawsuit was not "commenced" until they were actually served, K.S.A. § 60-203(a), which was after the effective date of CAFA. For them, "a new window of removal" was opened. [citations omitted]

. . .

Under removal practice, the entire lawsuit is removable or not removable, not merely the claims against particular defendants. Here, the late service upon the Removing Defendants, commencing the lawsuit as to them after CAFA became effective, made Dinkel's entire lawsuit properly removable under CAFA.

Wednesday, November 16, 2005

Federal Asbestos Legislation Will Top Senate Agenda in 2006

Reuters is reporting that legislation to create a $140 billion fund to compensate asbestos victims will be one of the first legislative issues taken up by the U.S. Senate next year according to Senate Majority Leader Bill Frist. The Senate bill, if enacted, would end hundreds of thousands of asbestos lawsuits by creating a privately-funded trust to compensate victims harmed by exposure to asbestos.

Click here for the full story.

Tenth Circuit Rejects Notice Challenge Based on Late Actual Notice to Shareholders

Per BNA's Class Action Litigation Report (Volume 06 Number 21 November 11, 2005, Page 782):

Late receipt of notice of a proposed class settlement plan didn't jeopardize a settlement in a securities case, the U.S. Court of Appeals for the Tenth Circuit decided Oct. 28 (DeJulius v. Sprint Corp., 10th Cir., No. 04-3091, 10/28/05).

The notice plan in the securities class action against Sprint Corp. gave the class as a whole sufficient notice "to flush out any objections that might arise to the fairness of the settlement," the Tenth Circuit said.

BNA subscribers can access the full article on the case by clicking here.

N.D. W. Va. Approves E-Mail Service of Process on Overseas Defendant

A West Virginia federal court has held that e-mail service is permissible against foreign defendants that have proven to be elusive. In the case, Williams v. Advertising Sex LLC., --- F.R.D. ----, 2005 WL 2837574 (N.D. W. Va. Oct. 25, 2005), the plaintiff initially sought to serve the defendants pursuant to Rule 4(f)(3) as opposed to the means outlined in Rules 4(f)(1) or (2). Because the Fourth Circuit Court of Appeals had not yet addressed that issue, the district court adopted the reasoning of the Ninth Circuit in Rio Properties, Inc., v. Rio International Interlink, 284 F.3d 1007, 1014-15 (9th Cir.2002), which held that each of Rule 4(f)'s three methods for international service of process is equivalent to one another. Thus, the court concluded that the plaintiff's petition for service under Rule 4(f)(3) of the Federal Rules of Civil Procedure could proceed without seeking service under the other provisions of Rule 4(f).

The court then went on to hold that Rule 4(f)(3)'s two requirements for application to a case--that the means of service be "directed by the court" and "not prohibited by international agreement"--were satisfied because issuance of an order by the court would satisfy the first requirement and Australia, the home of the defendants, was not a signatory to the Hague service convention. Having found that Rule 4(f)(3) applied to the case, the court went on to determine whether service by e-mail comported with the standards of due process:

In this case, the record establishes that the defendants are "sophisticated participants in e-commerce." In her motion, Williams has provided e-mail addresses for defendant Scott Moles and related website addresses through which Moles conducts e-commerce. These websites are well established and maintained for the purposes of e-commerce. In short, Williams has demonstrated that a reliable channel of communication to defendant Moles exists by way of e-mail addresses linked to established websites that Moles uses to conduct business.

Further, Williams proposes to serve process by e-mail by utilizing the website service "Proof of Service--electronic" ("PoS-e") , which offers encrypted on-line delivery of documents and returns a digitally signed proof of delivery once the document has been received by the target e-mail, thus enhancing the reliability of electronic service.

Williams has established that her prior attempts to serve the defendants have resulted in Moles' direct knowledge that he is sought for the receipt of legal documents from the United States. Rather than ease the process, Moles' knowledge has only erected barriers to formal service. Thus, given the circumstances of this case, a direction to serve process by e-mail in addition to international registered mail and international standard mail to all known addresses of the defendants is "reasonably calculated ... to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Mullane, 339 U.S. at 314 (1950).

Tenth Circuit Expounds upon Standards for Rule 60(b) Post-Judgment Relief

Then Tenth Circuit's recent decision in Zurich North America v. Matrix Service, Inc., 426 F.3d 1281 (10th Cir. Oct. 18 2005) provides an excellent discussion of the standards for obtaining post-judgment relief under various provisions of FRCP Rule 60(b), specifically Rule 60(b)(2) [new evidence], (b)(3) [fraud] and (b)(6) [any other reason].

Relief under Rule 60(b)(2) was properly denied said the court because the purported new evidence was simply pre-existing information of which Zurich's counsel was aware but neglected to seek. Relief under Rule (b)(3) was properly denied because the alleged fraud--the failure of the adversary to produce documents--failed to rise to the level of fraud between the parties. Finally, relief under Rule 60(b)(6) was properly denied because no other basis for relief was put forward beyond the previously alleged fraud; as the court noted, "Parties moving for relief under Rule 60(b) cannot simply throw in subsection (6) without any new arguments and expect to obtain a new trial."

Tuesday, November 15, 2005

Tenth Circuit Holds that Employees Must Cooperate with EEOC to Exhaust Administrative Remedies under ADEA

The Tenth Circuit in Shikles v. Sprint/United Management Co., 426 F.3d 1304 (10th Cir. Oct. 20, 2005), has determined that a private sector employee is required to cooperate with the Equal Employment Opportunity Commission ("EEOC") in connection with its investigation of age discrimination charges in order to exhaust his administrative remedies under the Age Discrimination in Employment Act ("ADEA"). This holding is significant because the text of the ADEA does not state whether a plaintiff must cooperate with the EEOC while the EEOC processes his or her charge:

Although we have not addressed whether a plaintiff must cooperate with the EEOC in order to exhaust his or her administrative remedies under the ADEA, we have held that such cooperation is required under both Title VII and the ADA. See McBride v. CITGO Petroleum Corp., 281 F.3d 1099, 1107 (10th Cir.2002) ( "[T]he district court was not clearly erroneous in finding that [the plaintiff] failed to cooperate with the EEOC and, therefore, failed *1310 to exhaust her administrative remedies [under the ADA]."); Khader v. Aspin, 1 F.3d 968, 971 (10th Cir.1993) (holding that under Title VII " '[g]ood faith effort by the employee to cooperate with the agency and the EEOC and to provide all relevant, available information is all that exhaustion requires' " and continuing that "when a complainant refuses or fails to provide the agency information sufficient to evaluate the merits of the claim," he or she has not exhausted his or her administrative remedies) (quoting Wade v. Sec'y of Army, 796 F.2d 1369, 1377 (11th Cir.1986)).Thus, because we must interpret the similar charge filing requirements of the ADEA, Title VII, and the ADA consistently, we will be bound in this case by our prior Tenth Circuit authority interpreting the charge filing requirements of Title VII and the ADA, unless there is a meaningful difference between this case, McBride, and Khader.

. . .

[After finding no meaningful difference between the case before it and the cited precedent, the court stated its conclusion:] Accordingly, we hold that a private sector employee must cooperate with the EEOC in order for the employee to exhaust his or her administrative remedies under the ADEA.

Alabama Federal Court Holds that Amended Complaint Does Not Trigger CAFA

Per BNA's Class Action Litigation Report (Volume 06 Number 21 November 11, 2005 Page 774):

"An amended complaint, filed after the effective date of the Class Action Fairness Act to correct the defendant's name and address, relates back to the initial filing of the suit pre-CAFA, a federal court in Alabama ruled Oct. 6. The court remanded a dispute between drugstores and a pharmacy benefit manager to state court (Eufaula Drugs Inc. v. ScripSolutions, M.D. Ala., No. 2:05cv370-A, 10/6/05)."

The court reasoned that determining the date of commencement for CAFA purposes is akin to determining it for statute of limitations purposes and thus a "relation-back" analysis is appropriate.

Subscribers may view the entire article by clicking here

Monday, November 14, 2005

Eighth Circuit Adopts Fourth Circuit Test for Determining Whether to Exercise Jurisdiction over Declaratory Judgment Action

The Eighth Circuit in Scottsdale Ins. Co. v. Detco Industries, Inc., 426 F.3d 994 (8th Cir. Oct. 20, 2005), has adopted the Fourth Circuit's six-factor test to determine whether abstention by the district court would be appropriate in a declaratory judgment action in which there are no parallel state court proceedings:

In Aetna Casualty & Surety Co. v. Ind-Com Electric Co., for example, the Fourth Circuit articulated a six-factor test to determine whether abstention by the district court would be appropriate in a declaratory judgment action in which there are no parallel state court proceedings. 139 F.3d at 422. According to the Fourth Circuit, the relevant factors to consider are: (1) whether the declaratory judgment sought "will serve a useful purpose in clarifying and settling the legal relations in issue"; (2) whether the declaratory judgment "will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the [federal] proceeding"; (3) "the strength of the state's interest in having the issues raised in the federal declaratory judgment action decided in the state courts"; (4) "whether the issues raised in the federal action can more efficiently be resolved in the court in which the state action is pending"; (5) "whether permitting the federal action to go forward would result in unnecessary 'entanglement' between the federal and state court systems, because of the presence of 'overlapping issues of fact or law' "; and (6) "whether the declaratory judgment action is being used merely as a device for 'procedural fencing'--that is, 'to provide another forum in a race for res judicata' or 'to achiev[e] a federal hearing in a case otherwise not removable.' " Id. (internal citations omitted).

We agree with our sister circuits that a federal district court is afforded greater discretion in determining whether to exercise jurisdiction over a declaratory judgment action than in other circumstances. We also agree that the district court's discretion is limited when no parallel proceedings are pending in state court, because in those circumstances there are less-pressing interests of practicality and wise judicial administration. For example, in the absence of parallel state court proceedings, it is less likely that "the claims of all parties in interest can satisfactorily be adjudicated" in the state court proceeding. Wilton, 515 U.S. at 283, 115 S.Ct. 2137 (quoting Brillhart, 316 U.S. at 495, 62 S.Ct. 1173). Accordingly, we conclude that the Fourth Circuit's six-factor test should be applied by the district court in determining whether to exercise jurisdiction over a declaratory judgment action.

Fifth Circuit Denies Request for Discovery under Rule 56(f)

Last week the Fifth Circuit in Baker v. American Airlines, Inc., --- F.3d ----, 2005 WL 3005487 (5th Cir. Nov. 09, 2005), upheld the denial of a request under Rule 56(f) for further discovery in order to respond to a summary judgment motion. In doing so, the court affirmed that a specific showing that additional evidence creating a genuine issue of fact would be discovered is required:

For a party to mandate relief under Rule 56(f), the party must show "both why it is currently unable to present evidence creating a genuine issue of fact and how a continuance would enable the party to present such evidence. The ... party may not simply rely on vague assertions that additional discovery will produce needed, but unspecified, facts in opposition to summary judgment." Baker argues that the extension would not be oppressive or disruptive to the trial process, but she has not made the required showing under Rule 56(f) to merit the requested relief. Moreover, another criteria for relief under Rule 56(f) is that the movant must have exercised due diligence in discovery. Again, Baker's actions justify denial of the requested relief. Baker did not initiate discovery until the last days of the allotted time. By that time, any responses were not required until after the summary judgment briefing schedule was completed. Baker knew (or should have known) the briefing schedule and the discovery period. Nevertheless, she failed to act diligently in the pursuit of evidence. Her problem is one of her own making; Rule 56(f) precludes appellate relief in this situation. [citations omitted]

Saturday, November 12, 2005

Victims of Katrina Sue to Force FEMA to Provide Timely Aid

Class Action Asks Court to Order FEMA to Live Up to Its Obligations

NEW YORK, Nov. 10 /PRNewswire/ -- A prominent New York law firm, a Washington-based civil rights legal organization, and a California not-for-profit legal organization, together with a Louisiana Law Professor today filed a class-action suit in the United States District Court for the Eastern District of Louisiana to force the Federal Emergency Management Agency (FEMA) to provide timely aid to victims of Hurricane Katrina living in Louisiana, Mississippi and Alabama.

The lawsuit, the first file against FEMA in relation to its response to Katrina, says that the agency has violated and continues to violate Federal law by failing to discharge its obligations as the federal agency chartered to care for victims of natural disasters.

Jurist has a story on the lawsuit here.

AP's coverage is available by clicking here.

Friday, November 11, 2005

Class Actions Conference Underway in Washington, D.C.

I am currently attending the class action conference sponsored by the ABA Tort Trial & Insurance Practice Section entitled "The Future of Class Action Litigation in America." The event is quite informative and has included presentations from judges, practitioners, and law professors. The Class Action Fairness Act has been a major topic of discussion here, with speakers providing various perspectives on the legislation and how it will impact class action litigation.

One prominent theme has been the enormous burden that CAFA's new "Frankenstein" notice provisions (requiring relevant governmental officials to be notified of proposed settlements) have placed on class action litigants. The jurisdictional issues that CAFA has brought about (when is "commencement"; who are "citizens" under CAFA; who is a "primary" defendant," etc.) are also being discussed, although one Professor thought that these were typical matters that accompany a major shift to a new legal regime that would eventually go away. Overall, most seemed resigned to the fact that class action practice would shift to the federal courts and that the federal judiciary needed more resourses and support to handle the increased burden. One practitioner predicted that pushing cases into federal court would lead plaintiff's lawyers to experiment more with pleading federal question cases (if they will be in federal court anyway under CAFA).

The conference concludes early this afternoon.

Thursday, November 10, 2005

FJC Puts Out Class Action Litigation Guide for Judges

The Federal Judicial Center has published a booklet titled "Managing Class Action Litigation: A Pocket Guide for Judges." According to the FJC Web site, "This guide is designed to help federal judges manage the increased number of class actions expected as a result of the Class Action Fairness Act of 2005. As called for in that legislation, the guide is part of a continuing effort of the federal judiciary to identify 'best practices' for managing class actions and ensuring that class action settlements primarily benefit class members." Practitioners should find this a useful resource as well.

A copy of the booklet can be obtained by clicking here.

Wednesday, November 09, 2005

Eleventh Circuit: No Rule 60(b)(4) Relief Based on Jurisdictional Errors

Per the Eleventh Circuit in In re Optical Technologies, Inc., 425 F.3d 1294 (11th Cir. Sep. 20, 2005):

Pursuant to Rule 60(b)(4) [of the Federal Rules of Civil Procedure], a court may relieve a party from a final judgment or order based on a finding that the judgment is void." Burke v. Smith, 252 F.3d 1260, 1263 (11th Cir.2001). "However, it is well-settled that a mere error in the exercise of jurisdiction does not support relief under Rule 60(b)(4)." Oakes v. Horizon Fin., S.A., 259 F.3d 1315, 1319 (11th Cir.2001). Furthermore, as a general matter, parties to a proceeding that do not raise jurisdictional objections are entirely barred from attacking jurisdiction collaterally. See Chicot County Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 377, 60 S.Ct. 317, 320, 84 L.Ed. 329 (1940). The only exception to this arises from a constitutionally defective failure of process.

The confirmation order is clearly not void as to appellants. Under Chicot County, because they were parties to the bankruptcy proceedings and could have challenged jurisdiction in the confirmation stage of the case, appellants must demonstrate that they were denied due process in order to challenge the bankruptcy court's jurisdiction collaterally. As discussed supra, appellants had constitutionally adequate notice of the confirmation proceedings. At this stage of the case, they do not allege any defect of process. As a result, the voidability argument fails, as does appellants' only basis for challenging the bankruptcy court's prior jurisdiction.

Bo Does Jurisdiction: No Illinois Jurisdiction over California Web Site Defaming Bo Jackson

A district court judge in Illinois in Jackson v. California Newspapers Partnership, Slip Copy, 2005 WL 2850116 (N.D. Ill. Oct. 27, 2005), has held that a Web site that allegedly defamed former ball player Bo Jackson, an Illinois resident, cannot be sued in Illinois because of its passivity vis-a-vis that state. Although the site was deemed to be interactive for California residents, Illinois residents were not privy to the same site privileges. Thus, under Zippo Manufacturing Co. v. Zippo Dot Com. Inc., 952 F.Supp. 1119 (W.D.Pa.1997) the court held that a passive Web site could not support jurisdiction. The court also considered application of Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482 (1984), but concluded that because the Web site was not targeted at Illinois residents, did not use Illinois sources, and the brunt of Jackson's harm was felt nationwide rather than in Illinois in particular, the case was distinguishable from Calder.

Tuesday, November 08, 2005

Civil Rules Committee Considered Proposed New Rules and Amendments

From the Federal Rulemaking Web site:

At its October 27-28, 2005, meeting, the Advisory Committee on Civil Rules considered a number of proposals suggesting amendments to the Federal Rules of Civil Procedure. The Advisory Committee declined to take action on some proposals and agreed to consider other proposals further, including proposals to amend Civil Rules 8 (general rules of pleading), 15 (amended and supplemental pleadings), 26(a)(2)(B) (expert reports from employees designated as testifying experts), 30(b)(6) (notice or subpoena directed to an organization), 33 and 36 (signatories to discovery responses), 48 (polling the jury), 54(d) and 58(c) (motion for attorney's fees and the time to file an appeal), and 60 (indicative rulings). For more information on the Advisory Committee's actions, please click on this link,

Eleventh Circuit Holds that Order Compelling Arbitration but Retaining Jurisdiction over Rule 11 Motion is Final Appealable Order

The Eleventh Circuit in Jackson v. Cintas Corp., 425 F.3d 1313 (11th Cir. Sep. 21, 2005) has recently published an opinion in which they held that an order dismissing a complaint and compelling arbitration is a final appealable decision even though the district court retains jurisdiction over a motion for sanctions under Rule 11:

"When it compelled arbitration, dismissed the complaint, and entered a judgment, the district court disposed of this case on the merits; no issues remained before the court. Although the district court retained jurisdiction to decide a motion for sanctions under Rule 11, that motion raised a collateral issue . . . . The district court entered a judgment and dismissed the entire case on the merits. That judgment was a final decision, even though the district court retained jurisdiction to decide a motion for sanctions. We, therefore, have jurisdiction to decide the merits of this appeal."

Eighth Circuit Upholds Dismissal under PSLRA

The Eighth Circuit in In re Cerner Corp. Securities Litigation, 425 F.3d 1079 (8th Cir. Oct. 06, 2005) upheld the district court's dismissal of a complaint for failing to satisfy the heightened pleading standards imposed by the Private Securities Litigation Reform Act's (PSLRA). The court held that the complaint failed to satisfy the falsity pleading standard because it did not plead facts that "necessarily show that the defendants' statements were misleading." Further, the plaintiff's scienter allegations were insufficient because they did not reveal "unusual" trading activity sufficient to support an inference of scienter. Finally, the court upheld the district court's denial of leave to amend because the plaintiff made no effort to demonstrate how he would change the complaint to satisfy the pleading strictures of the PSLRA, even though he had ample opportunity to do so.

Monday, November 07, 2005

Preview of Martin v. Franklin Capital Corp.

SCOTUSblog has a thorough preview/summary of Martin v. Franklin Capital Corp., which will be argued tomorrow before the Supreme Court. The Court will be deciding what standard governs a federal district court’s discretion under 28 U.S.C. 1447(c) to “require payment of just costs and any actual expenses, including attorney fees, incurred as the result of removal” when it remands a removed case to state court.

View the SCOTUSblog summary by clicking here.

Eighth Circuit Holds that an Order Remanding to an ERISA Plan Administrator Is Not an Appealable Final Order

The Eighth Circuit in Borntrager v. Central States, Southeast and Southwest Areas Pension Fund, 425 F.3d 1087 (8th Cir. Oct. 10, 2005) recently rejected an invitation to hold that an order remanding a case to an ERISA plan administrator for further proceedings is an appealable final order. Consistent with other circuits, the court held that such orders are "interlocutory in nature and therefore not immediately appealable." The court indicated that to be appealable, the order would have to satisfy the collateral order standard, under which an interlocutory order is immediately appealable if it conclusively "resolve[s] an important issue completely separate from the merits of the action" and is "effectively unreviewable on appeal from a final judgment."

Applying the collateral order standard, the court concluded that "the district court has not conclusively resolved an important issue completely separate from the merits of the action that would be effectively unreviewable on appeal from a final judgment."

District Courts Must Spell Out Reasons for FRCP Rule 54(b) Certification Says 10th Circuit

The Tenth Circuit in Stockman's Water Co., LLC v. Vaca Partners, L.P., 425 F.3d 1263 (10th Cir. Oct. 12, 2005) dismissed a matter certified for appeal under FRCP Rule 54(b) on the ground that the district court failed to fulfill its duty to explain the basis for its decision. The rule permits certification of a claim for appeal while other claims remain before the district court provided that the district court makes "an express determination that there is no just reason for delay." The Tenth Circuit has indicated that this language means that courts entering a Rule 54(b) certification should "clearly articulate their reasons and make careful statements based on the record supporting their determination of 'finality' and 'no just reason for delay' so that we [can] review a 54(b) order more intelligently[ ] and thus avoid jurisdictional remands."

Because the district court here offered no analysis of the factors relevant under Rule 54(b), the certification order failed to comport with Rule 54(b)'s requirement that a final judgment be entered only upon an express determination that there is no just reason for delay. As a result, the appellate panel concluded that the district court's certification order failed to provide it with appellate jurisdiction over the appeal.

Dismissal of Tamoxifen Suit Upheld by Second Circuit

The Second Circuit (In re Tamoxifen Citrate Antitrust Litigation, --- F.3d ----, 2005 WL 2864654 (2d Cir. Nov. 02, 2005)) recently upheld the dismissal of a suit brought by consumers of the drug tamoxifen citrate against the drug's patent holders and generic manufacturer. The suit alleged that a settlement agreement entered into by the defendants violated federal and state antitrust laws. The district court dismissed the complaint pursuant to FRCP Rule 12(b)(6) based on its conclusion that the settlement agreement was not a violation of antitrust law and that the plaintiffs did not suffer antitrust injury as a result of the alleged violation.

Friday, November 04, 2005

SCOTUS to Determine Scope of Immunity Waiver for "Negligent Transmission" by Postal Service

The Legal Information Institute (LII) is also reporting today on another case the Supreme Court will hear next week (Nov. 7), Dolan v. United States Postal Service (04-848). Here's their summary:

Petitioner Barbara Dolan sustained serious injuries when she tripped over a stack of letters, packages, and other mail that an employee of the United States Postal Service left on her porch. She sued the United States Postal Service and the United States in federal court under the Federal Tort Claims Act, alleging that the United States Postal Service employee's negligence that led to her fall made them responsible for her injuries. The district court dismissed Dolan's complaint for lack of subject matter jurisdiction and found that the "negligent transmission" exception to the Federal Tort Claims Act barred claims for physical injury, as well as those for damaged or delayed mail. In granting certiorari, the United States Supreme Court must determine the scope of the statutory exception to the Federal Tort Claims Act, and whether it truly extends to "any claim" arising out of negligent transmission, including those for physical injury to individuals, or whether it is limited to claims for damaged mail.

For their full story, click here.

High Court to Hear Arguments on Standard for Awarding Legal Fees under Removal Statute

On Tuesday, November 8, 2005 the Supreme Court will hear arguments in Martin v. Franklin Capital Corp., a case that will take up the following question: What legal standard governs decision on whether to award fees and expenses under 28 U.S.C. § 1447(c) upon remanding removed case to state court? Briefs can be obtained through Westlaw by clicking here.

Here is the summary of the case from Cornell's LII:

Under 28 U.S.C. § 1447(c), a federal court "may" award attorney's fees against the removing party when remanding a case back to a state court. However, the circuit courts are currently split on the question of what legal standard applies to determine whether such an award is given. In this case, the Supreme Court will resolve the split and decide whether an award is presumptively granted, is given according to a balancing test that weighs the interests of the parties, or is reserved for exceptional circumstances — such as when the defendant lacks a reasonable basis for removing. The standard that is chosen by the Court will affect how aggressively defendants file motions to remove to federal courts, and in turn, affect the number of cases on the federal court dockets. In deciding which standard to apply, the Court must weigh the interest of the federal courts in reducing the number of cases on their dockets against the right of defendants to have their cases heard by federal courts.

Their full preview of the case can be found by clicking here.

Latest on the Effort to Split the Ninth Circuit had an article yesterday entitled "Latest Plan to Split 9th Circuit Aims to Sidestep Debate," which discusses the latest efforts on Capitol Hill to achieve a breakup of the Ninth Circuit. Click here for the full story.

Sixth Circuit Holds that Damages for Emotional Distress Are Not Allowed under the FMLA

The Sixth Circuit in Brumbalough v. Camelot Care Centers, Inc., --- F.3d ----, 2005 WL 2861035 (6th Cir. Nov. 02, 2005) has joined several other circuits in holding that damages for emotional distress are unavailable under the Family Medical Leave Act (FMLA):

"The underlying logic to these courts' conclusion is this: Because the FMLA specifically lists the types of damages that an employer may be liable for, and it includes damages only insofar as they are the actual monetary losses of the employee such as salary and benefits and certain liquidated damages, the FMLA does not permit recovery for emotional distress."

Thursday, November 03, 2005

Jury Finds Merck Not Liable over Vioxx

Straying for a moment from federal civil practice, it is worth reporting that a New Jersey state court jury has found that Merck is not liable to a 60-year-old postal worker who argued that Vioxx caused his heart attack. The jury found that Merck provided adequate warning to doctors about Vioxx's health risks and made no effort to conceal information about the increased risks of heart attack associated with the drug.

Get the full story from Reuters by clicking here.

Filing Second Amended Complaint Does Not Recommence the Action for Purposes of CAFA Says E.D. Ca.

Addressing a frequently litigated issue, a court in the Eastern District of California in Richina v. Maytag Corp., Slip Copy, 2005 WL 2810100 (E.D. Ca. Oct. 26, 2005) has held that the plaintiff's filing of a second amended complaint after the enactment date of the Class Action Fairness Act (CAFA) did not recommence the action such that the action could be deemed commenced at the time of that filing for purposes of CAFA. This was so even though the state court had granted a demurrer with respect to the plaintiff's prior complaint, something that extinguishes the complaint under California law. The court reasoned that because the Plaintiff's core fraudulent concealment claim consistently appeared in each of the plaintiff's filings, no new action could be said to have commenced through the filing of the second amended complaint.

3d Circuit Says No Waiver of Sovereign Immunity for Private Rights of Action under the Residential Lead-Based Paint Hazard Reduction Act

The Third Circuit in Cudjoe ex rel. Cudjoe v. Department of Veterans Affairs, 426 F.3d 241 (3d Cir. Oct. 13, 2005) recently held that the Toxic Substances Control Act's waiver of sovereign immunity for any federal, state, interstate, and local substantive and procedural requirements with respect to lead-based paint did not extend to the private action for treble damages under the Residential Lead-Based Paint Hazard Reduction Act:

At issue is whether the private right of action for treble money damages under the Residential Lead-Based Paint Hazard Reduction Act is one of the "substantive and procedural requirements" to which the government has waived immunity in 15 U.S.C. § 2688. Because a waiver of sovereign immunity must be unambiguously expressed and may not be implied, Pena, 518 U.S. at 192, 116 S.Ct. 2092, and must be strictly construed in favor of the sovereign, Orff, 125 S.Ct. at 2610, we will not interpret "substantive and procedural requirements" to include a private suit under 42 U.S.C. § 4852d(b)(3).

Notably absent from the listed examples of substantive and procedural requirements is any explicit reference to a private right of action for money damages. The only language in 15 U.S.C. § 2688 that perhaps comes close is the submission to any "civil penalty ... imposed[.]" But a civil penalty is defined as "a fine assessed for a violation of a statute or regulation." Black's Law Dictionary 1168 (8th ed.2004). The example given in the dictionary is "the EPA levied a civil penalty of $10,000 on the manufacturer for exceeding pollution limits." Id. Similarly, the Residential Lead-Based Paint Hazard Reduction Act itself distinguishes between "monetary penalties" (as enforced by HUD under 42 U.S.C. § 3545(f)) on the one hand, and "civil liability" on the other. Compare 42 U.S.C. § 4852d(b)(1) with 42 U.S.C. § 4852d(b)(3). Because an express, unambiguous waiver is required to waive sovereign immunity, we will not construe "civil penalty" under 15 U.S.C. § 2688 broadly to include the private suit for money damages available under 42 U.S.C. § 4852d(b)(3).

Wednesday, November 02, 2005

D.C. Circuit Holds that No Judicial Review Is Available for Employment Terminations Linked to Security Clearance Decisions

The D.C. Circuit in Bennett v. Chertoff, 425 F.3d 999 (D.C. Cir. Oct 18, 2005) has held that there is no federal subject matter jurisdiction over an employment discrimination claim that challenged as pretextual the government agency's proferred reason for termination of the employee: the employee's inability to sustain a security clearance. Security clearance determinations relate to complex areas of foreign relations and national security and they are inherently discretionary and sensitive. Thus, the court, per Judge Rogers, held that courts may not inquire into such decisions.

Fifth Circuit Holds that Class Rep. Can Achieve Adequacy Based on Retention of Outside Lawyer Unaffiliated with Class Counsel

In Feder v. Electronic Data Systems Corp., --- F.3d ----, 2005 WL 2757510, (5th Cir. Oct. 24, 2005) the State of New Jersey was named lead plaintiff in a securities class action. New Jersey engaged retired New Jersey Superior Court Judge C. Judson Hamlin (Hamlin) to oversee securities class actions in which New Jersey was involved, including this one. The defendants challenged the adequacy of New Jersey as class representative based on their arrangement with Hamlin:

Appellants note that Hamlin is an "outside lawyer" for New Jersey, and they claim that his involvement violates Berger I. [Berger v. Compaq Computer Corp., 257 F.3d 475, 478 (5th Cir.2001)]. In discussing the adequacy standards of Rule 23 in Berger I, however, we addressed the relationship between the class representative and the class counsel. We did not address the present situation in which another attorney, not affiliated with class counsel, is engaged by the class representative to assist it in its monitoring of class counsel. The guidelines in Berger I do not prevent a proposed class representative from hiring an outside attorney (not affiliated with class counsel) to help the class representative in carrying out its role as such and in overseeing proposed class counsel, as long as that outside attorney has no conflicts with the class.

Tuesday, November 01, 2005

SCOTUS to Hear Oral Argument Tomorrow in Case Addressing FRCP Rule 50 Issue

Cornell's Legal Information Institute (LII) reports:

Unitherm Food Systems v. Swift Eckrich (04-597)
Oral argument date: November 2, 2005

Rule 50(a) of the Federal Rules of Civil Procedure empowers a judge to determine an issue herself, rather than submitting it to the jury, when the evidence is insufficient for a reasonable jury to conclude to the contrary. When the judge's determination of the particular issue makes it impossible for the losing party to prevail in its overall claim or defense, the judge will enter a "judgment as a matter of law" against the party. Because such a judgment deprives the losing party of its constitutional right to a jury trial, the rules governing the exercise of Rule 50(a) power are very important. This case addresses a significant question about these rules: may a court of appeal review the sufficiency of evidence presented at trial, when a party loses a
pre-verdict motion for judgment as a matter of law under Rule 50(a), but then fails to renew the motion under Rule 50(b) after the jury has reached a verdict? The Supreme Court's resolution will greatly impact the speed and quality of review of trial court decisions by courts of appeal, as well as the power these courts possess to overturn improper verdicts.

Get a full summary of the case and the issues at