Tuesday, February 28, 2006

Supreme Court Issues Opinion Discussing Relationship between Rooker-Feldman Doctrine and Preclusion Law

Per Professor Tom Rowe at Duke Law (from the Federal Courts listserv):

The Supreme Court last Tuesday reversed a Rooker-Feldman dismissal, applying its decision last Term in Exxon Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280 (2005). The decision is Lance v. Dennis --- S.Ct. ----, 2006 WL 386360 (U.S. Feb. 21, 2006) (per curiam). The decision below was one of the cases arising out of the Colorado legislative re-redistricting. A three-judge district court had dismissed on Rooker-Feldman grounds because it found the citizen plaintiffs in the case before it in privity with the Colorado General Assembly, which had been a losing party in state-court litigation also challenging the redistricting.

No, says the per curiam opinion for eight Justices. Reliance on preclusion law to determine privity for Rooker-Feldman purposes "erroneously conflated preclusion law with Rooker-Feldman." (In a footnote, the Court reserves decision on whether Rooker-Feldman might ever be applied against a prior nonparty, as when an estate tries a "de facto appeal" to federal court against an earlier state-court decision involving the decedent.) The opinion makes the interesting point that incorporating preclusion principles into Rooker-Feldman analysis risks subverting Congress's direction in § 1738 to look largely to state law in determining the preclusive effect of state-court judgments into a uniform federal body of law on their preclusive effect.

Significantly, as in Exxon Mobil v. Saudi Basic, the analytical part of the Court's opinion makes no use of the "inextricably intertwined" test that had been so prominent in much lower-court Rooker-Feldman jurisprudence since the Feldman decision in 1983. The opinion quotes the term in describing the proceedings below and doesn't say anything favorable or unfavorable about it. But once again we have an authoritative illustration that "inextricably intertwined"--whatever role might remain for it, which a co-author and I discuss in a shortly forthcoming article in the Federal Courts Law Review--is not a general or threshold test for the applicability of Rooker-Feldman.

Justice Stevens dissented, although he agreed that Rooker-Feldman did not apply. He would have reached the preclusion question and held the plaintiffs precluded under applicable Colorado law. He expresses the view that Feldman was erroneously decided (he dissented, I think alone, from Justice Brennan's opinion in Feldman) and characterizes Justice Ginsburg's "lucid" (I agree with that) opinion in Exxon Mobil as having "finally interred the so-called 'Rooker-Feldman doctrine.'" That seems to me to go a bit far, because Exxon Mobil did state narrow circumstances in which Rooker-Feldman does apply.

Justice Ginsburg, joined by Justice Souter, joins the Court's opinion and adds that while the Stevens dissent argues "persuasively" that "issue preclusion warrants affirmance," that state-law issue is better left for remand. Justice Alito apparently participated, without writing, because there's no notation that he wasn't involved.

Thanks to Professor Rowe for this helpful post.

Oregon Supreme Court Affirms $79.5 Million Punitive Damages Award Accompanying $521K Compensatories Based on “Extraordinarily Reprehensible” Conduct

BNA’s U.S. Law Week (Volume 74 Number 31 Tuesday, February 21, 2006, Page 1491 ISSN 1522-4317) is reporting on Williams v. Philip Morris, Inc., 340 Or. 35, --- P.3d ---- (Or. Feb. 2, 2006):

“Punitive damages award of $79.5 million atop compensatory damages of $521,000 to deceased smoker's widow, although vastly exceeding single-digit ratio of punitive to compensatory damages, is not grossly excessive in violation of 14th Amendment's due process clause in view of cigarette maker's extraordinarily reprehensible conduct, which put significant number of victims at profound risk for decades, and severe criminal penalties for such conduct under Oregon law."

Here's an excerpt from the opinion:

[T]here can be no dispute that Philip Morris's conduct was extraordinarily reprehensible. Philip Morris knew that smoking caused serious and sometimes fatal disease, but it nevertheless spread false or misleading information to suggest to the public that doubts remained about that issue. It deliberately did so to keep smokers smoking, knowing that it was putting the smokers' health and lives at risk, and it continued to do so for nearly half a century.

Philip Morris's fraudulent scheme would have kept many Oregonians smoking past the point when they would otherwise have quit. Some of those smokers would eventually become ill; some would die. Philip Morris's deceit thus would, naturally and inevitably, lead to significant injury or death.

Monday, February 27, 2006

SCOTUS Holds that Title VII's Employee-Numerosity Requirement Is Not Jurisdictional

The Supreme Court recently issued an opinion in Arbaugh v. Y & H Corp. dba The Moonlight Café, --- S.Ct. ----, 2006 WL 397863 (Feb. 22, 2006), in which it held, per Justice Ginsburg, that the employee-numerosity requirement of Title VII of the Civil Rights Act of 1964 is not jurisdictional and thus cannot not be raised defensively late in a lawsuit. Here's an excerpt from the Syllabus:

Title VII’s numerical threshold does not circumscribe federal-court subject-matter jurisdiction. Instead, the employee-numerosity requirement relates to the substantive adequacy of Arbaugh’s Title VII claim, and therefore could not be raised defensively late in the lawsuit. . . . Arbaugh invoked federal-question jurisdiction under §1331, but her case “aris[es]” under a federal law, Title VII, that specifies, as a prerequisite to its application, the existence of a particular fact, i.e., 15 or more employees. The Court resolves the question whether that fact is “jurisdictional” or relates to the “merits” of a Title VII claim mindful of the consequences of typing the 15-employee threshold a determinant of subject-matter jurisdiction, rather than an element of Arbaugh’s claim for relief. First, “subject-matter jurisdiction, because it involves the court’s power to hear a case, can never be forfeited or waived.” United States v. Cotton, 535 U. S. 625, 630. Moreover, courts, including this Court, have an independent obligation to determine whether subject-matter jurisdiction exists, even in the absence of a challenge from any party. Ruhrgas AG v. Marathon Oil Co., 526 U. S. 574, 583. . . . Second, in some instances, if subject-matter jurisdiction turns on contested facts, the trial judge may be authorized to review the evidence and resolve the dispute on her own. If satisfaction of an essential element of a claim is at issue, however, the jury is the proper trier of contested facts. Reeves v. Sanderson Plumbing Products, Inc., 530 U. S. 133, 150–151. Third, when a federal court concludes that it lacks subject-matter jurisdiction, the complaint must be dismissed in its entirety. Thus, the trial court below dismissed, along with the Title VII claim, pendent state-law claims fully tried by a jury and determined on the merits. In contrast, when a court grants a motion to dismiss for failure to state a federal claim, the court generally retains discretion to exercise supplemental jurisdiction, pursuant to §1367, over pendent state-law claims.

. . .

[W]hen Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character. Applying that readily administrable bright line here yields the holding that Title VII’s 15-employee threshold is an element of a plaintiff’s claim for relief, not a jurisdictional issue.”

Friday, February 24, 2006

LII Bulletin Previews Day v. Crosby Argument to Occur Monday before the Supreme Court

Cornell's LII Bulletin has posted the following preview of the oral argument slated to take place in Day v. Crosby (04-1324) before the Supreme Court this coming Monday:


Day v. Crosby (04-1324)
Oral argument date: February 26, 2006

Patrick Day is currently incarcerated in the state of Florida, serving a 55-year sentence for second-degree murder. Florida State Courts affirmed his conviction, and in 2003 Day petitioned for habeas corpus review in United States District Court. Under 28 U.S.C. 2254, Day was allowed to petition for a writ of habeas corpus, but the habeas rules provide a statute of limitations for filing the writ, and allow a district court to dismiss the petition sua sponte (on its own volition) for any one of a number of reasons. In fact, Day's petition was late, but the district court did not dismiss the petition for this reason until after it asked for the State to file a response to Day's petition. In its response the state failed to raise the statute of limitations defense. In this case the Supreme Court must decide whether the State waived its statute of limitations defense when it failed to raise the defense in its responsive pleading and whether the district court was correct in dismissing the petition sua sponte even after the State erroneously admitted in its response that Day's petition was timely. The case raises legal and policy considerations, especially in regard to the federal review of otherwise final state court criminal decisions.

The full preview is available at http://www.law.cornell.edu/supct/cert/04-1324.html.

E.D. Va. Says MWAA's Status Does Not Confer FQ Jurisdiction; Holds Post-Contracting Disputes Do Not Implicate Sufficient Federal Interest

Per San Jose Const. Gp., Inc. v. Metro. Wash. Airports Auth.,--- F.Supp.2d ----, 2006 WL 354217 (E.D.Va. Feb. 14, 2006):

At the outset, it is important to note that there is nothing in the nature of MWAA itself that warrants federal question jurisdiction. MWAA is not a federal entity; the chartering legislation specifically notes that MWAA is independent of the federal government. MWAA is a creation of state law, established by a joint compact between Virginia and the District of Columbia for the purpose of leasing and operating the Airport from the federal government. And significantly, both the Virginia and the District of Columbia enabling statutes creating the compact make clear that courts of the Commonwealth of Virginia are vested with original jurisdiction of “all actions brought by or against [MWAA], which courts shall in all cases apply the law of the Commonwealth of Virginia.” See Va.Code § 5.1-173(A); D.C.Code Ann. § 9-922. For these reasons, WMAA's status furnishes no basis for federal question jurisdiction.

. . .

The scope of the federal interest in MWAA's contracts extends to the solicitation and awarding of contracts, but not to the administration and termination of contracts after they have been awarded. Accordingly, San Jose's claims that MWAA violated the Contracting Manual by improperly administering and terminating the parties' contract do not implicate any “continuing but limited” federal interest in the Airport.

Because San Jose's allegations do not implicate the “limited federal interest” in free and open competition in the solicitation and award of MWAA contracts, San Jose's claims do not meet the “arising under” standard for federal question jurisdiction under § 1331. Accordingly, the Court lacks subject matter jurisdiction to adjudicate San Jose's claims, and the case must therefore be dismissed.

Thursday, February 23, 2006

Tenth Circuit Reaffirms that Dismissal for Lack of Jurisdiction is Without Prejudice, Clarifies Styskal

Per Brereton v. Bountiful City Corp., 434 F.3d 1213 (10th Cir. Jan. 26, 2006):

A longstanding line of cases from this circuit holds that where the district court dismisses an action for lack of jurisdiction, as it did here, the dismissal must be without prejudice. See, e.g., Albert v. Smith's Food & Drug Ctrs., Inc., 356 F.3d 1242, 1249 (10th Cir.2004); Martinez v. Richardson, 472 F.2d 1121, 1126 (10th Cir.1973) ("It is fundamental ... that a dismissal for lack of jurisdiction is not an adjudication of the merits and therefore ... must be without prejudice."). See also 9 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 2373, at 406 (2d ed.1995). Since standing is a jurisdictional mandate, a dismissal with prejudice for lack of standing is inappropriate, and should be corrected to a dismissal without prejudice. County of Mille Lacs v. Benjamin, 361 F.3d 460, 464-65 (8th Cir.), cert. denied, 543 U.S. 956, 125 S.Ct. 408, 454, 160 L.Ed.2d 318 (2004).

. . .

The continuing validity of the first of these principles has recently been qualified, if not disavowed, by a panel of this court. See Styskal v. Weld County Bd. of County Comm'rs, 365 F.3d 855 (10th Cir.2004). Styskal, while not purporting to overrule our prior authority on this question, nevertheless concludes that the Supreme Court's opinion in Semtek International Inc. v. Lockheed Martin Corp., 531 U.S. 497, 121 S.Ct. 1021, 149 L.Ed.2d 32 (2001) has effectively undermined the preclusion rationale that supported the "without prejudice" requirement. Styskal, 365 F.3d at 858 ("The premise underlying these decisions is that a dismissal of a claim with prejudice necessarily has claim-preclusive effects in other jurisdictions.... That premise, however, was recently rejected by the United States Supreme Court [in Semtek ]."). Because the broad language in Styskal concerning Semtek's effect on jurisdictional dismissals has the potential to create some confusion, we take this opportunity to clarify our law on this subject.

To begin with, Semtek must be read within its factual and analytical context. . . . The issue before the Supreme Court was "whether the claim-preclusive effect of a federal judgment dismissing a diversity action on statute-of-limitations grounds is determined by the law of the State in which the federal court sits." Id.

. . .

The defendant in Semtek contended that Rule 41(b), which provides the default rule in federal court for determining when a judgment represents an "adjudication on the merits," also governed the issue of the preclusive effect of the prior federal judgment in state court. The Supreme Court disagreed, for three reasons. . . . [Third], the phrase "adjudication on the merits," as used in Rule 41(b), while preventing refiling in the same federal court, should not be read to preclude the assertion of claims in state court in cases where the federal court has not passed upon the substantive merits of the claim. Id. at 502-03, 121 S.Ct. 1021.

It is Semtek's third rationale that forms the basis of the decision in Styskal. Expanding on the reasoning in Semtek, the Styskal court declined to reverse the district court's dismissal with prejudice of state-law claims over which it lacked jurisdiction. Styskal, 365 F.3d at 859. But in Semtek, the Supreme Court had dealt only with the effect of a dismissal with prejudice on a non-jurisdictional ground. See Semtek, 531 U.S. at 501, 121 S.Ct. 1021 (noting that district court's dismissal "did not pertain to the excepted subjects of jurisdiction, venue, or joinder"). The Supreme Court did not indicate any intention to do away with the general rule, reflected in Rule 41(b) and endorsed in its prior decision in Costello, that a dismissal for lack of jurisdiction should be entered without prejudice.

. . .

Styskal, then, could not have and did not purport to overrule our prior, long-standing line of cases requiring that a dismissal for lack of jurisdiction be without prejudice. Rather, we read Styskal only to say that where a federal court erroneously dismisses "with prejudice" claims over which it lacks jurisdiction, a state court need not be blinded by this nomenclature into barring a subsequent action on the same claim that is properly brought within its jurisdiction. Read in this way, Styskal is entirely consistent with Semtek, and with our prior cases. We specifically decline to read Styskal as abrogating our duty to correct a district court disposition erroneously entered "with prejudice" on jurisdictional grounds. While leaving such a dismissal with prejudice intact might have no effect on a plaintiff's attempt to bring his claim in state court, it is our responsibility to correct an action by the district court that exceeds its jurisdiction. Gold, 159 F.3d at 1311.

Wednesday, February 22, 2006

First Circuit Treats LLC’s as Unincorporated Associations for Diversity Purposes

Per Pramco, LLC v. San Juan Bay Marina, Inc., 435 F.3d 51 (1st Cir. Jan. 19, 2006).

Pramco brought this action "on behalf of CFSC Consortium, LLC," which purchased the underlying loan from the Small Business Administration. In its complaint, Pramco is identified as a limited liability company, organized under the laws of Delaware, with its principal place of business in New York. CFSC Consortium, LLC (CFSC) is also identified as a limited liability company, organized in Delaware, with its principal place of business in Minnesota. The complaint identified the defendants as citizens of Puerto Rico, and alleged that there was complete diversity of parties.

The jurisdictional facts alleged in the complaint are insufficient to establish the existence of complete diversity. Limited liability companies are unincorporated entities. The citizenship of an unincorporated entity, such as a partnership, is determined by the citizenship of all of its members. Carden v. Arkoma Assoc., 494 U.S. 185, 195-96, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990) (limited partnership). Neither the Supreme Court nor this circuit has yet directly addressed whether that rule also applies to limited liability companies. However, every circuit to consider this issue has held that the citizenship of a limited liability company is determined by the citizenship of all of its members. See Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 121 (4th Cir.2004); GMAC Commercial Credit LLC v. Dillard Dep't Stores, Inc., 357 F.3d 827, 829 (8th Cir.2004); Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374 F.3d 1020, 1022 (11th Cir.2004); Provident Energy Assocs. of Mont. v. Bullington, 77 Fed.Appx. 427, 428 (9th Cir.2003); Homfeld II, L.L.C. v.Comair Holdings, Inc., 53 Fed.Appx. 731, 732-33 (6th Cir.2002); Handelsman v. Bedford Vill. Assocs. Ltd. P'ship, 213 F.3d 48, 51-52 (2d Cir.2000); Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir.1998); see also 13B Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure: Juris.2d § 3630 (Supp.2005). We see no reason to depart from this well-established rule.

Tuesday, February 21, 2006

Tulane Law Review Publishes Article on Antitrust Class Action Settlements

The Tulane Law Review has recently published an article by J. Douglas Richards entitled What Makes An Antitrust Class Action Remedy Successful?: A Tale Of Two Settlements, 80 Tulane L. Rev. 621 (2005). Here is the abstract:

Against the background of today's political climate, J. Douglas Richards presents the stories of two controversial recent antitrust class action settlements--the 2005 settlement of the "indirect purchaser" antitrust class action involving the drug Relafen and the unsuccessful proposed settlement of the multidistrict federal litigation against Microsoft for its monopolistic practices in late 2001. This Article focuses on specific aspects of antitrust class action effectiveness that have been problematic and controversial, using the Relafen and Microsoft cases to illustrate various issues that have engendered substantial controversy in recent cases. Richards contends that antitrust class actions, which represent progressive economic empowerment of the most vulnerable segments of American society against economic domination by corporate interests, stand at a crossroads between some of today's most powerful political currents. Richards indicates that conservative organizations and corporate interests have expended vast energies in recent years formulating and popularizing the rhetoric of "tort reform," which threatens simultaneously to undermine the substance of antitrust law and to stifle class action procedures that are essential to the effective functioning of private antitrust enforcement.

Monday, February 20, 2006

Fifth Circuit Holds that Government’s Dismissal of Its Own Appeal Commences the 30-Day Period for Seeking Attorney’s Fees Under EAJA

Per the Fifth Circuit in Pierce v. Barnhart, --- F.3d ----, 2006 WL 335663 (Feb. 14, 2006):

We first address whether the plaintiffs' applications for attorney's fees were timely under the EAJA. An application for attorney's fees under the EAJA shall be submitted "within thirty days of final judgment in the action." 28 U.S.C. § 2412(d)(1)(B) (2000). The EAJA defines "final judgment" as "a judgment that is final and not appealable." Id. § 2412(d)(2)(G). The Supreme Court has interpreted "final judgment" for purposes of § 2412(d)(1)(B) as "a judgment rendered by a court that terminates the civil action for which EAJA fees may be received." Melkonyan v. Sullivan, 501 U.S. 89, 96, 111 S.Ct. 2157, 115 L.Ed.2d 78 (1991). According to the Court, the thirty-day EAJA clock "begins to run after the time to appeal that 'final judgment' has expired." Id.

. . .

When Congress added a statutory clause defining "final judgment" under the EAJA as "a judgment that is final and not appealable," it included an example in the legislative history indicating that the thirty-day period begins once the government dismisses its appeal. See H.R.Rep. No. 99-120(I), at 22 n.26 (1985), reprinted in 1985 U.S.C.C.A.N. 132, 151 n.26 ("When the Government dismisses an appeal, the date of dismissal commences the thirty-day period.").

We hold that where, as here, the government dismisses its own appeal, the date of dismissal commences the thirty-day period. In the present case, the plaintiffs filed their applications more than three months after this court dismissed the government's consolidated appeal. These applications, under our holding, were clearly untimely under the EAJA, depriving the district court of jurisdiction to consider the merits of the applications.In an effort to avoid being found "untimely" under the EAJA, the plaintiffs contend that the magistrate judge's orders reaffirming his prior decisions were "final judgments" under the EAJA, entitling them to new thirty-day periods to file their requests for attorney's fees. The magistrate judge, however, did not issue orders of remand as requested by the plaintiffs. Rather, the magistrate judge found these separate requests "unnecessary," concluding that his previous sentence-four judgments in these cases remained in effect. Accordingly, the magistrate judge merely reaffirmed his prior decision in each case. To adopt the plaintiffs' view would allow claimants, who are trying to meet the statutory requirements but have otherwise failed to fall within the EAJA's thirty-day period, to seek orders reaffirming prior decisions in order to start new EAJA filing periods. Because the plaintiffs' interpretation of "final judgment" is not supported by the decisions interpreting § 2412(d)(1)(B) and because it creates an incentive for claimants to create new "final judgments" for purposes of the EAJA clock, we decline to adopt this view.

Friday, February 17, 2006

Sixth Circuit Denies Federal Jurisdiction over State Law Claim Invoking Federal Public Policy

Per Eastman v. Marine Mechanical Corp., --- F.3d ----, 2006 WL 335466 (6th Cir. Feb 15, 2006):

The plaintiff's complaint in this case, in its original iteration, identifies only federal law as the source of the public policy allegedly violated, and it is on that basis that we consider the jurisdictional issue. The plaintiff alleged that his termination violated public policy found in 18 U.S.C. § 287, . . . and in 31 U.S.C. § 3729 . . . . Neither of these two statutes creates private rights of action to enforce individual rights . . . . The absence of a private right of action might seem to be dispositive in light of the Supreme Court's holding in Merrell Dow, in which the Court withheld federal jurisdiction in a state tort action alleging negligence based in part on the misbranding of a drug in violation of federal law . . . .

However, in Grable & Sons, the Supreme Court cautioned that Merrell Dow cannot be read so simply. "Merrell Dow should be read in its entirety as treating the absence of a federal private right of action as evidence relevant to, but not dispositive of, the 'sensitive judgments about congressional intent' that § 1331 requires." Grable & Sons, 125 S.Ct. at 2370. According to Grable & Sons, "arising under" jurisdiction for state-law claims based on an interpretation of federal law can be found in section 1331 only when there is "not only a contested federal issue, but a substantial one"; and "federal jurisdiction is consistent with congressional judgment about the sound division of labor between state and federal courts governing the application of § 1331."

. . .

[T]he meaning of the two statutes cited by the plaintiff is not in serious dispute in this case. It hardly can be disputed that submitting fraudulent claims to the federal government would contravene national policy. Nor can it be gainsaid that government contractors ought not commit felonies or defraud their customer, or that whistleblowers should not be punished for exposing their employer's fraud. Marine Mechanical does not dispute these points. Moreover, Congress' withholding a private right of action from these statutes is an important signal to its view of the substantiality of the federal question involved.

. . .

[W]e conclude that the reference in the plaintiff's complaint to the federal statutes cited as a source of public policy does not create a substantial federal question in this case.

Next, and perhaps more importantly, we find that accepting jurisdiction of this state employment action would be disruptive of the sound division of labor between state and federal courts envisioned by Congress. We address this issue because "the presence of a disputed federal issue and the ostensible importance of a federal forum are never necessarily dispositive; there must always be an assessment of any disruptive portent in exercising federal jurisdiction." Grable & Sons, 125 S.Ct. at 2368.

Thursday, February 16, 2006

Yale Law & Policy Review Publishes Article Critical of 9/11 Victim Compensation Fund

The Yale Law & Policy Review has just published an article by Elizabeth Berkowitz entitled The Problematic Role of the Special Master: Undermining The Legitimacy of the September 11th Victim Compensation Fund, 24 Yale L. & Policy Rev. 1 (2006). Here is an excerpt from the Introduction:

Despite its practical and noble intentions, the ATSSSA [Air Transportation Safety and System Stabilization Act], and the Fund in particular, is a hastily constructed legislative patchwork that fails on a variety of counts. Given the speed of its enactment, the ATSSSA establishes only the bare bones of the Fund, furnishing few details and delegating much of its formation to an administrator called the Special Master. As authorized by the Act, the Special Master singlehandedly controls all operations of the Fund, wields broad power to create procedural and substantive rules, adjudicates claims exempt from judicial or administrative review, and manages an unlimited budget with no cap on expenditures. Congress failed to set bright-line rules, enunciate exclusionary definitions, or articulate a principled system of compensation. There is simply no "rationale, restraint, ethic or coherence" in the definition of awards, leaving the Special Master unilaterally responsible for filling in nearly every detail of the program.

In certain respects, the power the Act entrusts to the Special Master is sensible. Significant judicial review or congressional oversight generally slows the process of compensation. Furthermore, a single individual, especially one with expertise like the Special Master, is better suited to issue appropriate awards through a uniformly administered compensation scheme and can promptly construct a reliable and efficient procedure providing more immediate closure to the victims. Notwithstanding these benefits, the role granted to the Special Master is highly problematic and represents a significant defect in the Act. The ATSSSA's Special Master is a powerful decision maker vested with unfettered discretion to craft and run the Fund. All of our traditions, constitutional, doctrinal, and otherwise, militate against such authority being concentrated in a single individual. Moreover, previous congressional experience with national compensation schemes warns against the vesting of such discretion in a single individual. "The September 11th Fund will remain controversial because the source of the definition of its awards-- however able and committed--is not in any sense democratic."

. . .

This Article challenges the legitimacy of the Fund, and in part the statute that created it, by focusing on the role of the Special Master.

Wednesday, February 15, 2006

Sixth Circuit Finds No Federal Question Jurisdiciton in Shareholder Suit Raising Tax Code Issues

The Sixth Circuit in Mikulski v. Centerior Energy Corp., No. 03-4486 (Jan. 26, 2006), recently held that in a shareholder suit in alleging state breach of contract and fraud claims arising out of corporate misreporting of taxable dividends was properly in state court, notwithstanding the fact that the federal tax code is cited in the complaint. The suit, said the court, was not preempted by the Internal Revenue Code, raising issues too incidental to state law claims to warrant federal question jurisdiction.

Tuesday, February 14, 2006

Second Circuit Holds that Federal Courts Have Diversity Jurisdiction over Private Actions under the TCPA

The Second Circuit in Gottlieb v. Carnival Corporation 05-2733 (Feb. 3, 2006) has held that federal courts have diversity jurisdiction over private causes of action brought under § 227 of the Telephone Consumer Protection Act (47 U.S.C. § 227). The court wrote that although the TCPA intended to divest federal courts of federal question jurisdiction, there was nothing in the statute that divested federal courts of diversity jurisdiciton over private actions under the TCPA.

Monday, February 13, 2006

Sixth Circuit: Abuse of Discretion to Dismiss Solely Based on Failure to Respond to 12(b)(6) Motion to Dismiss

Per the Sixth Circuit in Bangura v. Hansen, 434 F.3d 487 (6th Cir. Jan. 18, 2006):

The district court abused its discretion in holding that Plaintiffs waived their APA claims. In a footnote in its opinion, the district court disposed of all of Plaintiffs' APA claims. The district reasoned that Plaintiffs waived the APA claims by failing to address them in Plaintiffs' response to defendant's motion to dismiss. In Carver v. Bunch, this Court held that a district court abused its discretion in dismissing a plaintiff's claims solely because the plaintiff failed to respond to the defendant's motion to dismiss for failure to state a claim. 946 F.2d at 452. It reasoned that such a dismissal was akin to a dismissal for failure to prosecute, and thus, governed by the standard set forth in Rule 41 of the Federal Rules of Civil Procedure. Id. It then determined that in order for a district court to dismiss a plaintiff's claims in response to a 12(b)(6) motion, the district court must “conclude ‘beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief,’ ” regardless of whether the plaintiff responded. Id. (quoting Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972)). Analogizing to a summary judgment motion, the court also noted that the Federal Rules of Civil Procedure place the burden on the moving party to demonstrate that the plaintiff failed to state a claim for relief. Id. at 454-55. In this case, the district court failed to address whether Plaintiff's complaint stated a claim for relief under the APA and dismissed the APA claims solely because Plaintiffs failed to respond to Defendant's motion. Thus, the district court's dismissal rested on impermissible grounds.Moreover, the factual basis underlying the district court's determination that Plaintiffs waived their APA claims is clearly erroneous. The district court states that Plaintiffs “fail to even mention [their APA claims] in their Memorandum.” (Op. & Or. Granting Mot. to Dismiss, March 23, 2003.) In fact, half of Plaintiffs' memorandum in response to Defendants' motion to dismiss is devoted to their APA claims and rebutting Defendants' contention that Plaintiffs do not have standing to seek judicial review for their APA claims.

Finally, the district court erroneously placed the burden on Plaintiffs to demonstrate that they stated a claim for relief. As noted above, this Court has determined that on a 12(b)(6) motion, the moving party bears the burden of demonstrating that the plaintiff failed to state a claim. Carver, 946 F.2d at 455. In this case, Defendants did not argue in their memorandum in support of their motion to dismiss that Plaintiffs failed to state a claim for relief under the APA. Instead, Defendants argued that the court lacked subject matter jurisdiction to hear any of Plaintiffs' claims and that Plaintiffs failed to state a substantive or procedural due process claim. Because Defendants did not offer a single argument to support their assertion that Plaintiffs failed to state a claim for relief under the APA, Defendants failed to meet their burden of proof, and the district court should have dismissed Defendants' motion

Friday, February 10, 2006

Sixth Circuit Decertifies 23(b)(2) Class Based on Individual Claims for Money Damages

The Sixth Circuit has decertified a class previously certified under Rule 23(b)(2) because of the money damages sought by the plaintiffs. In Reeb v. Ohio Dep't of Rehab. and Corr., (6th Cir. 2006), Judge Alice M. Batchelder wrote, "Title VII [of the 1964 Civil Rights Act] cases in which plaintiffs seek individual compensatory damages are not appropriately brought as class actions under Rule 23(b)(2) because such individual claims for money damages will always predominate over requested injunctive or declaratory relief."

BNA's Class Action Litigation Report has a full story on the case here.

Thursday, February 09, 2006

Ninth Circuit Interprets Language Setting Time For Appeal in CAFA

Per BNA's U.S. Law Week:

The Class Action Fairness Act does not mean what it says with respect to appeals from orders granting or denying motions for remand of class actions to state court, the U.S. Court of Appeals for the Ninth Circuit held Jan. 26 in a per curiam order (Amalgamated Transit Union Local 1309, AFL-CIO v. Laidlaw Transit Services Inc., 9th Cir., No. 05-56567, 1/26/06).

In 28 U.S.C. § 1453(c)(1), CAFA provides that an appeals court "may accept an appeal" from an order granting or denying a remand "if application is made to the court of appeals not less than 7 days after entry of the order." The court concluded that the provision contemplates an application for a discretionary appeal governed by Fed.R.App.P. 5(a), which must be filed not more than seven days after entry of the order. Because CAFA's use of the term "less" to establish a waiting period for filing an application "is entirely illogical," the court boldly inserted "a word of the exact opposite meaning" into the statute.

U.S. Law Week, Volume 74 Number 29 Tuesday, February 7, 2006, Page 1454, ISSN 1522-4317.

The full article on the case is available to BNA subscribers here. A PDF copy of the Ninth Circuit's opinion can be obtained by here.

Wednesday, February 08, 2006

Seventh Circuit Holds That Adding New Defendants "Commences" Action against Them for Purposes of CAFA

BNA's U.S. Law Week is reporting on Knudsen v. Liberty Mutual Insurance Co. (7th Cir. Jan. 27, 2006), a Class Action Fairness Act commencement case. Here is BNA's summary of the holding:

"Amended complaint alleging that parent insurer and all of its affiliates and subsidiaries mishandled their medical cost and utilization databases in adjusting certain claims commences new suit for purposes of Class Action Fairness Act because original complaint filed against parent alone provided no notice that affiliates and subsidiaries, which employ different medical cost and utilization databases, were charged with mishandling those databases."

U.S. Law Week, Volume 74 Number 29 Tuesday, February 7, 2006, Page 1455 ISSN 1522-4317.

BNA subscribers can read the full U.S. Law Week article by clicking here. The opinion is available at the Seventh Circuit's website.

Tuesday, February 07, 2006

Seventh Circuit Holds that Failure to Raise Affirmative Defence Per FRCP Rule 8(c) Does Not Constitute Waiver

Per the Seventh Circuit in Curtis v. Timberlake, --- F.3d ----, 2005 WL 3728794 (7th Cir. Oct. 06, 2005):

[Appellant] contends that the magistrate judge erred in granting summary judgment because the guards failed to assert lack of exhaustion in their answers and therefore waived this affirmative defense. We disagree. Noncompliance with § 1997e(a) is an affirmative defense, Brengettcy v. Horton, 423 F.3d 674, 682 (7th Cir.2005); Massey v. Helman, 196 F.3d 727, 734-35 (7th Cir.1999), and Curtis is correct that Fed.R.Civ.P. 8(c) requires affirmative defenses to be raised in the pleadings. Nonetheless, we have held that a delay in asserting an affirmative defense waives the defense only if the plaintiff was harmed as a result. Williams v. Lampe, 399 F.3d 867, 870-71 (7th Cir.2005) (per curiam); Carter v. United States, 333 F.3d 791, 796 (7th Cir.2003). Curtis was not prejudiced; he was aware of the exhaustion issue even when he filed his complaint, and he confronted the defense in responding to the motion for summary judgment. Accordingly, there was no abuse of discretion in permitting the defense to be raised at summary judgment.

Monday, February 06, 2006

Second Circuit Holds that Diversity Jurisdiction Is Available for Private Actions under the TCPA

The Second Circuit in Gottlieb v. Carnival Corp., --- F.3d ----, 2006 WL 257103 (2d Cir. Feb. 03, 2006), has held that although there is no federal question jurisdiction over private causes of action brought under the Telephone Consumer Protection Act, diversity jurisdiction remains available so long as the requirements of the federal diversity statute are satisfied. Here is an excerpt from the opinion:

This case presents the question of whether federal courts have diversity jurisdiction over private causes of action brought under the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227. Plaintiff-appellant Sherman Gottlieb ("Gottlieb") appeals from a judgment of the United States District Court for the Eastern District of New York (Glasser, J.), entered on May 3, 2005, dismissing his claims under the TCPA for lack of subject matter jurisdiction and dismissing his parallel state law claims for lack of supplemental jurisdiction. Relying primarily on this Court's decision in Foxhall Realty Law Offices, Inc. v. Telecommunications Premium Services, Ltd., 156 F.3d 432 (2d Cir.1998), where we held that Congress intended to divest the federal courts of federal question jurisdiction over private TCPA claims, the district court concluded that "jurisdiction over TCPA claims resides in the state courts exclusively" and that federal courts lack diversity jurisdiction over such claims. Gottlieb v. Carnival Corp., 367 F.Supp.2d 301, 307 (E.D.N.Y.2005). The district court reasoned that "it must be assumed that [the Second Circuit] used its words carefully and advisedly" when we stated in Foxhall that state courts have "exclusive jurisdiction" over TCPA claims. Id. at 309. Our ruling in Foxhall, however, related only to the existence of federal question jurisdiction over private TCPA claims; we did not consider in that case whether federal courts have diversity jurisdiction over such claims. We hold here that Congress did not divest the federal courts of diversity jurisdiction over private actions under the TCPA. We thus vacate the judgment of the district court and remand the case for further proceedings.

Friday, February 03, 2006

10th Circuit Holds that Failure to Appeal Rejection of Qualified Immunity Does Not Preclude Later Appeal of Denial of Summary Judgment on Same Grounds

Per the Tenth Circuit in Robbins v. Wilkie, 433 F.3d 755 (10th Cir. Jan. 10, 2006):

Robbins also contends Defendants' failure to appeal the district court's order denying dismissal on qualified immunity precludes Defendants from appealing an order denying summary judgment on the same qualified immunity issues. Robbins reasons that allowing Defendants to appeal a second denial of qualified immunity after failing to appeal the first denial would be an end-run around the timeliness requirements of the notice of appeal provision of the Federal Rules of Appellate Procedure. Fed. R.App. P. 4(a)(1)(B).

Although this issue is one of first impression in this circuit, the Supreme Court and several other circuits have addressed the issue. In Behrens v. Pelletier, defendant filed a motion to dismiss on qualified immunity, which the district court denied after dismissing some of plaintiff's claims as time-barred. 516 U.S. 299, 303, 116 S.Ct. 834, 133 L.Ed.2d 773 (1996). Defendant appealed the denial of qualified immunity and the Ninth Circuit affirmed. Id. at 303-04, 116 S.Ct. 834. Subsequently, the district court reversed course on the statute-of-limitations question, concluding none of the plaintiff's claims were time barred. Id. at 304, 116 S.Ct. 834. In response, the defendant filed a motion for summary judgment on qualified immunity, including the claims that were previously dismissed as time-barred. Id. The district court denied this motion and the Ninth Circuit dismissed defendant's appeal for lack of jurisdiction. Id. at 304-05, 116 S.Ct. 834.

The Supreme Court reversed, concluding there was jurisdiction over the second interlocutory appeal. Id. at 309-311, 116 S.Ct. 834. In so doing, the Court surmised that resolution of the immunity question may "require more than one judiciously timed appeal." Id. at 309, 116 S.Ct. 834 (quotation omitted). The Court reasoned that a defendant should be permitted to raise the qualified immunity defense at successive stages of litigation because different legal factors are relevant at various stages. Id. In particular, in a motion to dismiss, courts are limited to reviewing conduct alleged in the complaint, whereas in a motion for summary judgment, courts examine evidence accumulated during discovery. Id.Several circuits have interpreted and applied Behrens in cases postured similar to the case before us. In Grant v. City of Pittsburgh, the Third Circuit held that a defendant's failure to appeal an order denying dismissal on qualified immunity does not preclude him from appealing a subsequent denial of the same legal arguments in a motion for summary judgment on qualified immunity. 98 F.3d 116, 120-21 (3d Cir.1996). The court adopted the reasoning of Behrens by noting that although defendant's two motions raised the same legal theory, the second motion differed because it relied on matters developed during discovery. Id.; see also Vega v. Miller, 273 F.3d 460, 466 (2d Cir.2001).

The Ninth Circuit went further in Knox v. Southwest Airlines by asserting jurisdiction over an appeal of an order denying a second motion for summary judgment after defendant failed to appeal the denial of his first summary judgment motion. 124 F.3d 1103, 1105-06 (9th Cir.1997). Defendants' first motion for summary judgment on qualified immunity was denied by the district court because of a disputed issue of fact. Id. at 1105. Defendant filed a second summary judgment motion making the same legal arguments, but providing additional evidence. Id. Citing Behrens, the Ninth Circuit asserted jurisdiction over defendants' second motion for summary judgment. Id. at 1106.

Robbins attempts to distinguish Grant, Vega, and Knox and instead argues that the District of Columbia Circuit's decision in Kimberlin v. Quinlan should guide our analysis. 199 F.3d 496 (D.C.Cir.1999). In Kimberlin, Defendants moved for dismissal or summary judgment arguing, inter alia, that prison inmates do not have a clearly established First Amendment right to contact the press, and plaintiff failed to meet the heightened pleading standard applied to motive-based civil rights claims. Id. at 499. The district court denied the motion and defendants appealed only the heightened pleading standard ruling. Id. After discovery, defendants again moved for dismissal or summary judgment claiming the law was not clearly established. Id. The district court denied the motion concluding that its prior ruling that the law was clearly established was law of the case, and the appellate court affirmed. Id. at 499, 502.

Although Kimberlin, like Grant and Vega, is factually similar to the case presently before this court, Robbins' argument that Kimberlin supports the assertion we lack jurisdiction to consider Defendants' appeal is erroneous. The court in Kimberlin did not dispose of the case by asserting a lack of jurisdiction. Rather, it examined the merits by reviewing the propriety of the district court's application of the law of the case doctrine. Id. at 500-02. The court determined that the district court had correctly applied the law of the case doctrine because the same legal question had been decided in a prior stage of litigation and no prudential reasons existed for revisiting the prior decision. Id. In any event, the court proceeded to actually examine the underlying law of the case concluding that the First Amendment right at issue was "without doubt [ ] clearly established." Id. at 502.

Therefore, after Behrens, no circuit has held that an appellate court lacks jurisdiction over denial of a motion for summary judgment when the motion raises the same legal arguments as a prior un-appealed motion to dismiss but relies on evidence developed during discovery. [FN1] Similarly, we decline to adopt such a rule. In carving out an exception to the finality requirement for appeals involving qualified immunity, the Supreme Court recognized that qualified immunity is both a right to avoid standing trial and a right to avoid the burdens of pretrial matters such as discovery. Behrens, 516 U.S. at 308, 116 S.Ct. 834. Requiring public officials to choose at which stage of litigation to raise a qualified immunity defense is inconsistent with these purposes. If public officials can avoid discovery by success on a motion to dismiss based on qualified immunity, they should not be prevented from filing the motion because of a fear that denial of the motion will prevent them from raising the defense again once their evidence is strengthened through discovery. Additionally, public officials should not be forced to appeal an order denying dismissal on qualified immunity to preserve appeal of a potential subsequent order denying summary judgment on the same issue. Such a rule would dramatically increase the number of interlocutory appeals at the dismissal stage. Vega, 273 F.3d at 465; Grant, 98 F.3d at 121. Thus, in the present case, Defendants' failure to appeal the district court's denial of dismissal on qualified immunity does not divest this court of jurisdiction to consider Defendants' current appeal because Defendants' summary judgment motion relies in part on evidence developed during discovery.

Thursday, February 02, 2006

Seventh Circuit Holds That Substituting Named Plaintiff Does Not Commence a New Action for Purposes of CAFA (under Illinois Law)

Per the Seventh Circuit in Phillips v. Ford Motor Co., --- F.3d ----, 2006 WL 217942 (7th Cir. Jan. 30, 2006) (Posner, J.):

Before us are petitions for leave to appeal under the Class Action Fairness Act of 2005, Pub.L. 109-2, 119 Stat. 4, from orders remanding two class action suits to Illinois state courts. The question the petitions present is whether amending a complaint to add or substitute named plaintiffs (class representatives) "commences" a new suit. Id., § 9. The suits were filed before the effective date of the Class Action Fairness Act but the amendments came after. So if the amendments are deemed to commence new suits, these suits are removable to federal district court; otherwise not. Knudsen v. Liberty Mutual Ins. Co., 411 F.3d 805, 806 (7th Cir.2005); Pritchett v. Office Depot, Inc., 404 F.3d 1232 (10th Cir.2005). No appellate court has yet decided whether adding named plaintiffs to a class action suit "commences" a new suit for purposes of removal under CAFA.

* * *

Since the question for decision . . . is whether adding named plaintiffs commences a new suit in state court, the answer should depend on state procedural law. The clearest case in which an amended complaint does not kick off a new suit is where the amendment "relates back" to the original complaint. For then the fact that the statute of limitations has run (as it may have against the named plaintiffs in Boxdorfer ) is not a bar, as it would be if the amended complaint did not relate back--that is, if it stated a new claim and thus kicked off a new suit. [citations omitted]. Under Illinois law as under federal law, an amendment relates back when it arises out of "the same transaction or occurrence set up in the original pleading." [citations omitted]. That well describes these cases--obviously Boxdorfer but only a little less clearly Phillips, for remember that the original complaint in that case included the 1996 model year.

Relation back to add named plaintiffs in a class action suit is of particular importance because of the interests of the unnamed members of the class. Suppose Mr. X files a class action and after the statute of limitations has run the defendant settles with X. If a named plaintiff cannot be substituted for X with relation back to the date of the filing of the original complaint, the class will be barred from relief. That is the fate looming in Boxdorfer if relation back is denied, and for all we know in Phillips as well for class members who own 1996 Ford models. Since, for this reason, Illinois in effect allows named plaintiffs to be substituted with relation back ("in effect" because the formal rule is that the filing of a class action tolls the statute of limitations for class members, so that they can if necessary be substituted for the named plaintiffs, without being barred by reason of the passage of time since the suit was filed), [citations omitted], the addition of such plaintiffs in the two cases before us did not commence new suits. Remand was therefore required, as the district judges ruled.

Wednesday, February 01, 2006

Sixth Circuit Reduces Punitive Damages Award in Light of State Farm v. Campbell

Today the Sixth Circuit issued an opinion in Clark v. Chrysler Corp., No. 04-5279, in which they reduced a $3 million punitive damages award to $471,258.26 in light of the Supreme Court's holding in State Farm Mutual Automobile Ins. Co. v. Campbell, in which the high Court indicated that punitive damages awards exceeding a single-digit multiple of compensatory damages would likely be unconstitutionally excessive. In Clark, the Sixth Circuit ultimately concluded that the defendant's wrongdoing was insufficiently reprehensible to warrant a punitive award beyond twice the level of compensatory damages.

The full text of the Sixth Circuit's opinion can be viewed by clicking here.