Friday, June 30, 2006

Federal Circuit Declines to Apply Res Judicata after Default Judgment Was Entered in Trademark Case

Per Sharp Kabushiki Kaisha v. Thinksharp, Inc., 448 F.3d 1368 (Fed. Cir. May 30, 2006):

ThinkSharp … did not file an answer in the word-and-design opposition. Thus the [United States Patent and Trademark Office, Trademark Trial and Appeal] Board entered a default judgment sustaining Sharp's opposition to the word-and-design mark. However, ThinkSharp contested Sharp's opposition to registration of the word mark THINKSHARP….Sharp asserted that the default judgment in its favor on the word-and-design mark operated as res judicata to preclude ThinkSharp from contesting Sharp's opposition to registration of the word mark.

A default judgment can operate as res judicata in appropriate circumstances. See Morris v. Jones, 329 U.S. 545, 550-51, 67 S.Ct. 451, 91 L.Ed. 488 (1947) (internal citation omitted). Sharp argues that the legal effect of the default judgment in the word-and-design opposition is that the Board ruled in favor of Sharp as to the merits of all of Sharp's pleadings in that opposition, and that Sharp's uncontested allegations therein must now be taken as undisputed fact. Sharp states that this precludes the Board's decision in favor of ThinkSharp in the opposition to the word mark registration. Sharp states that in Board proceedings, as in federal courts, claim preclusion is to be applied where the necessary prerequisites are established.

… [T]his is not a situation where the applicant, after a judgment had been entered against it, adopted a second mark in an attempt to avoid the preclusive effect of a previous judgment. … In the present case, not only were the marks different and the prior dismissal solely on default, but res judicata would deny ThinkSharp its day in court without a “clear and persuasive basis for that denial.” The Court in Kremer v. Chemical Construction Corporation, 456 U.S. 461, 485 n. 26 (1982) stated that “so long as opposing parties had an adequate opportunity to litigate disputed issues of fact, res judicata is properly applied to decisions of an administrative agency acting in a ‘judicial capacity.’ ” The corollary is that when a party did not have an opportunity to litigate disputed issues, a decision to permit such litigation is favored. Sharp has not established that the issue of likelihood of confusion as to the word mark should have been litigated in the defaulted opposition to the word-and-design mark.

Thursday, June 29, 2006

Civil Rules Committee Approved Proposed Rules and Forms Amendments and New Rules

Here's an update from the U.S. Courts Web site regarding recent action taken by the Advisory Committee on Civil Rules:

At its May 22-23, 2006, meeting, the Advisory Committee on Civil Rules considered comments on proposed rules and forms amendments published for comment in February and August 2005. The Advisory Committee approved: (1) comprehensive style amendments to Federal Rules of Civil Procedure 1-86; (2) "style-substance" amendments to Civil Rules 4, 9, 11, 14, 16, 26, 30, 31, 40, 71.1, and 78 (rule amendments separate from style project); (3) style amendments to Civil Rules 16, 26, 33, 34, 37, and 45 governing the discovery of electronic information; (4) style revisions to Illustrative Civil Forms; and (5) proposed new Civil Rule 5.2, which implements the E-Government Act of 2002. The Advisory Committee will transmit the proposed amendments and new rule to the Committee on Rules of Practice and Procedure with a recommendation that they be approved and transmitted to the Judicial Conference for its consideration.

The Advisory Committee also approved for publication: (1) proposed new Civil Rule 62.1 on Indicative Rulings; (2) a proposed amendment to Civil Rule 48 on jury polling; and (3) proposed amendments to Civil Rules 13 and 15 governing the right to amend a pleading. The Advisory Committee will forward its recommendations to publish to the Committee on Rules of Practice and Procedure for consideration at its June 2006 meeting.

Finally, the Advisory Committee considered reports on proposed rules amendments governing time computation, depositions of witnesses testifying on behalf of an organization and disclosure of expert witness testimony, the effect of a motion for attorney's fees on the time to appeal, summary judgment, and notice pleading.

According to Professor Tom Rowe, "this month the Standing Committee sent the restyled rules on to the Judicial Conference with a recommendation that they be approved and forwarded to the Supreme Court. Thus the restyled Civil Rules are on track to take effect December 1,

Wednesday, June 28, 2006

Ninth Circuit Ninth Circuit Rules on Timeliness of Federal Officer Removal

Per Durham v. Lockheed Martin Corp., 445 F.3d 1247 (9th Cir. Apr 26, 2006):

[Plaintiff’s complaint revealed a basis for “federal enclave” removal jurisdiction. Defendant chose not to remove because of the difficultly in getting 61 co-defendants to consent to removal. Ten days after service of the complaint, plaintiff’s answers to defendant’s interrogatories revealed a basis for “federal officer” removal jurisdiction. Defendant filed notice of removal 39 days after service of complaint.]

If Durham's responses to Lockheed's interrogatories didn't reset the removal clock, Lockheed's removal was untimely. If the responses did, the district court erred in remanding the case, and in awarding Durham costs and fees. To answer the timeliness question, we begin with the text of the removal statute:

If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable, except that a case may not be removed on the basis of jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action.28 U.S.C. § 1446(b) (emphasis added).

In the language of the statute, the question here is whether the case stated by Durham's complaint was “removable.” Removable is not a defined term in the statute, and there are two plausible ways to construe it in the context of federal officer removals. First, we could interpret “removable” as binary--either there's some basis for removal, or there's not. Under this reading of the statute, the case was “removable” when Lockheed received the complaint because the defendants--had they unanimously agreed to it--could have removed the case on federal enclave grounds. The second way to interpret “removable” is to look to each ground for removal separately. Under this reading, a case does not become removable until the particular basis on which removal is sought becomes apparent from the record. Seen in this light, the case wasn't removable until Lockheed learned that it could remove the case unilaterally based on federal officer jurisdiction.

Because it's so important to the federal government to protect federal officers, removal rights under section 1442 are much broader than those under section 1441. Federal officers can remove both civil and criminal cases, while section 1441 provides only for civil removal. Unlike other defendants, a federal officer can remove a case even if the plaintiff couldn't have filed the case in federal court in the first instance. And removals under section 1441 are subject to the well-pleaded complaint rule, while those under section 1442 are not. Whereas all defendants must consent to removal under section 1441, a federal officer or agency defendant can unilaterally remove a case under section 1442.

…[W]here the timeliness of a federal officer's removal is at issue, we extend section 1442's liberal interpretation to section 1446. As far as the federal officer is concerned, the case isn't “removable” until the federal officer ground for removal is disclosed--otherwise, a single holdout defendant or a wily plaintiff can defeat the federal government's interest in providing a federal forum for its agents. We therefore hold that a federal officer defendant's thirty days to remove commence when the plaintiff discloses sufficient facts for federal officer removal, even if the officer was previously aware of a different basis for removal.

Tuesday, June 27, 2006

Seventh Circuit Holds That Intent is Irrelevant in Fair Debt Collection Practices Act Claims

Per Sims v. GC Services L.P., 445 F.3d 959 (7th Cir. Apr 26, 2006):

In reviewing a defendant's motion for summary judgment in an FDCPA case, this Court will find a triable issue of fact if the collection letter is confusing or unclear on its face. Chuway v. National Action Financial Services, Inc., 362 F.3d 944, 948 (7th Cir.2004). The burden of proof is on the plaintiffs to present evidence of confusion (beyond their own) in the form of an objective measure, like “a carefully designed and conducted consumer survey.” Id. Mere speculation that the unsophisticated debtor could be confused by a dunning letter is not enough for an FDCPA plaintiff to survive a summary judgment motion. (citation omitted) Where it is apparent that a collection letter would not confuse a significant fraction of the population, summary judgment should be granted in favor of the defendant unless the plaintiff has presented “objective evidence of confusion.” Taylor v. Cavalry Investment, LLC, 365 F.3d 572, 575 (7th Cir.2004).

Plaintiffs argue that defendants' violations were “intentional,” in that they chose all capital lettering and low-leading and light gray font for the validation notice. But intent is not an element of an FDCPA violation. See Gearing v. Check Brokerage Corp., 233 F.3d 469, 472 (7th Cir.2000). If debt collectors go to great lengths to produce confusing letters and attempt to deceive the recipients, their intent would not matter if the letters on their face contained the required notifications and would not confuse the unsophisticated consumer. Conversely, debt collectors might make every effort to make the letters clear and not confusing, yet if the letters would confuse the unsophisticated consumer and violate the statute, debt collectors would be held liable. In short, intent plays no role in determining whether a particular letter violates the FDCPA.

Monday, June 26, 2006

N.D. Ill. Finds that Bankruptcy Jurisdiction is Limited after Confirmation of Chapter 11 Plan

Per In re Federalpha Steel LLC, 341 B.R. 872 (Bkrtcy. N.D. Ill., May 31, 2006):

Bankruptcy jurisdiction exists over claims that either arise under title 11 or that arise in or are “related to” a case under title 11. 28 U.S.C. § 1334(b). The Trust's claims in Counts III through XII plainly do not arise under title 11 because they are state law claims, not claims “created or determined by a statutory provision of title 11.” Wood v. Wood (In re Wood), 825 F.2d 90, 96 (5th Cir.1987)… The real question, and the question the parties dispute, is whether the claims in Counts III through XII are at least “related to” the Federalpha bankruptcy.

They are not. Under the Seventh Circuit's strict interpretation of “related to” jurisdiction, a dispute is “related to” a bankruptcy only if “the dispute affects the amount of property for distribution [i.e., the debtor's estate] or the allocation of property among creditors.” In re FedPak Sys., Inc., 80 F.3d 207, 213-14 (7th Cir.1996) (internal quotation omitted). A particular dispute's mere overlap with the debtor's affairs is not enough. Home Ins. Co. v. Cooper & Cooper, Ltd., 889 F.2d 746, 749 (7th Cir.1989)….

After confirmation of a chapter 11 plan, moreover, “related to” jurisdiction is “sharply reduced.” Cytomedix, Inc. v. Perfusion Partners & Assocs., Inc., 243 F.Supp.2d 786, 789 (N.D.Ill.2003); see Pettibone Corp. v. Easley, 935 F.2d 120, 122 (7th Cir.1991). The number of issues potentially affecting the estate or the administration of the case necessarily decreases at that point. Conseco, Inc. v. Davis (In re Conseco, Inc.), 318 B.R. 425, 432 (Bankr.N.D.Ill.2004). Post-confirmation “related to” jurisdiction is therefore appropriate “only to ensure that reorganization plans are implemented and to protect estate assets devoted to implement the confirmed plan.” Cytomedix, 243 F.Supp.2d at 789. Once assets have left the estate, the court's jurisdiction to decide disputes involving them lapses. FedPak, 80 F.3d at 214.

Given the dismissal of Counts III through XII for lack of jurisdiction, the only practical option is for the court to exercise its discretion under 28 U.S.C. § 1334(c)(1) and abstain from hearing the claims in Counts I and II. To do anything else would be inefficient and wasteful.

Friday, June 23, 2006

Stupidity is a Legitimate Basis for Attorney Sanctions

Per In re Hein, 341 B.R. 903 (Bkrtcy. N.D.Ind. March 1, 2006):

Stupidity--acting without sufficient forethought--is a legitimate basis for imposing sanctions upon an attorney. See e.g., Smith v. Ricks, 31 F.3d 1478 (9th Cir.1994). For example, the failure to appear for a scheduled hearing or conference is the basis for sanctions under Rule 16(f) of the Federal Rules of Civil Procedure and the imposition of sanctions under that rule does not depend upon a finding of bad faith, willfulness, or contemptuousness. Matter of Sanction of Baker, 744 F.2d 1438, 1440-41 (10th Cir.1984). Negligence will suffice. Id. at 1441. See also Harrell v. U.S., 117 F.R.D. 86, 88 (E.D.N.C.1987); Barsoumian v. Szozda, 108 F.R.D. 426 (S.D.N.Y.1985). Similarly, the jurisprudence under Rule 11 does not exempt counsel from sanctions because of stupidity. Quite to the contrary, acting without thinking is the very basis for sanctions under that rule. See, Thornton v. Wahl, 787 F.2d 1151, 1154 (7th Cir.1986). An empty head but a pure heart is no defense. Chambers v. American Trans Air, Inc., 17 F.3d 998, 1006 (7th Cir.1994); Zuniga v. United Can Co., 812 F.2d 443, 452 (9th Cir.1987). In a like manner, whether sanctions are considered pursuant to 28 U.S.C. § 1987, 11 U.S.C. § 105, or the inherent power of the court, when the issue is whether counsel's actions have needlessly complicated or delayed the proceeding, the failure to consider before you act is not regarded as a defense. Knepper v. Skekloff, 154 B.R. 75 (N.D.Ind.1993). Consequently, although counsel may not have intentionally failed to appear for the matters scheduled in this case for February 7 and 8, 2006, that does not insulate him from sanctions.

… Actions which create such unnecessary costs and delays are clearly sanctionable, both in terms of expecting counsel to reimburse its adversary and, at least to some extent, the United States.

Thursday, June 22, 2006

SCOTUS Holds that PLRA’s Exhaustion Requirement Requires Proper Exhaustion of Administrative Remedies

Per Woodford v. Ngo, No. 05–416 (Jun. 22, 2006) [From the Syllabus]:

The Prison Litigation Reform Act of 1995 (PLRA) requires a prisoner to exhaust any available administrative remedies before challenging prison conditions in federal court. 42 U. S. C. §1997e(a). Respondent filed a grievance with California prison officials about his prison conditions, but it was rejected as untimely under state law. He subsequently sued petitioner officials under §1983 in the Federal District Court, which granted petitioners’ motion to dismiss on the ground that respondent had not fully exhausted his administrative remedies under §1997e(a). Reversing, the Ninth Circuit held that respondent had exhausted those remedies because none remained available to him.

Held: The PLRA’s exhaustion requirement requires proper exhaustion of administrative remedies.

(a) Petitioners claim that a prisoner must complete the administrative review process in accordance with applicable procedural rules, including deadlines, as a precondition to bringing suit in federal court, but respondent contends that §1997e(a) allows suit once administrative remedies are no longer available, regardless of the reason. To determine the correct interpretation, the Court looks for guidance to both administrative and habeas corpus law, where exhaustion is an important doctrine. Administrative law requires proper exhaustion of administrative remedies, which “means using all steps that the agency holds out, and doing so properly.” Pozo v. McCaughtry, 286 F. 3d 1022, 1024. Habeas law has substantively similar rules, though its terminology is different. Pp. 5–11.

(b) Given this background, the Court is persuaded that the PLRA requires proper exhaustion. Pp. 11–17.

Alito, J., delivered the opinion of the Court, in which Roberts, C. J., and Scalia, Kennedy, and Thomas, JJ., joined. Breyer, J., filed an opinion concurring in the judgment. Stevens, J., filed a dissenting opinion, in which Souter and Ginsburg, JJ., joined.

N.D. Illinois Decertifies Class After Finding There Was No Violation of WARN’s Notification Requirement

Per Phason v. Meridian Rail Corp., 2006 WL 1235090 (N.D. Ill. May 8, 2006):

. . . In the complaint, the plaintiff class alleges that Meridian Rail Corporation ("Meridian") failed to provide notice of a plant closing or mass layoff pursuant to the Worker Adjustment and Retraining Notification Act ("WARN"), see 29 U.S.C. § 2101 et seq. . . .

. . . It is uncontested that Meridian is an "employer" under the WARN Act and gave no WARN Act notice to its employees when it sold its business to Nortrak. At issue is whether Meridian was obligated to give the notice. The WARN Act requires employers who employ more than 100 employees to provide a 60- day warning of a plant closing or mass layoff if the shutdown or layoff results in an employment loss at a single site of employment during any 30-day period for 50 or more employees, excluding part-time employees. 29 U.S.C. § 2101(a). . . .

. . .

Because the undisputed evidence in the record establishes that less than 19 laid-off workers suffered an employment loss, this court finds that the plaintiff class cannot establish that 50 or more employees suffered an employment loss due to Meridian's sale of the plant to Nortrak. . . .
This court's decision on summary judgment also affects the previous court order to certify the class. The court rested its decision to certify the class on the plaintiffs' representation that 50 or more putative class members were "affected employees" under the WARN Act. On summary judgment, this court finds that the evidence does not support the plaintiffs' representation. Based on this finding, the court now decertifies the class.

Wednesday, June 21, 2006

$98 Million Settlement Announced in Smith Barney Brokers’ Overtime and Wage Claims

BNA reported on June 9th in its Class Action Litigation Report (Vol. 7, No. 11, page 372) that Citigroup's Smith Barney brokerage unit has agreed to pay $98 million to settle claims on behalf of thousands of current and former brokers (Bahramipour v. Citigroup Global Markets Inc. f/k/a Salomon Smith Barney, N.D. Cal., No. 04-4440, settlement announced 5/24/06).

The BNA report stated: “The allegations in the Smith Barney cases are similar to those in other litigation…alleg[ing] that throughout the securities industry, employees are incorrectly classified as exempt from overtime because they were primarily hired to sell securities and therefore do not qualify for the administrative exemption under federal or state wage laws.”

The settlement comes after a federal district judge permitted plaintiffs to pursue an opt-out class action under the Fair Labor Standards Act. Bahramipour v. Citigroup Global Markets, Inc., Slip Copy, 2006 WL 449132 (N.D.Cal. February 22, 2006).

BNA subscribers may access the full report by clicking here.

Tuesday, June 20, 2006

Eleventh Circuit Rules that Plaintiff Bears Burden of Proof for “Local Controversy” Exception to Federal Jurisdiction under CAFA

Per Evans v. Walter Industries, Inc., --- F.3d ----, 2006 WL 1374688 (11th Cir. May 22, 2006):

CAFA's language favors federal jurisdiction over class actions and CAFA's legislative history suggests that Congress intended the local controversy exception to be a narrow one, with all doubts resolved "in favor of exercising jurisdiction over the case." S.Rep. No. 109-14 at 42. The Senate Report on CAFA further states that the local controversy exception: "is a narrow exception that was carefully drafted to ensure that it does not become a jurisdictional loophole…."

The district court correctly determined that the plaintiffs bear the burden of establishing that they fall within CAFA's local controversy exception. CAFA allows for removal of class actions that meet certain minimal requirements. CAFA does not change the traditional rule that the party seeking to remove the case to federal court bears the burden of establishing federal jurisdiction….The parties do not dispute that the defendants have carried this burden and established that this action meets CAFA's basic requirements for removal to federal court--i.e., the controversy exceeds $5,000,000 and at least one plaintiff and one defendant are from different states (the minimal diversity requirement). However, when a party seeks to avail itself of an express statutory exception to federal jurisdiction granted under CAFA, as in this case, we hold that the party seeking remand bears the burden of proof with regard to that exception.

To avail themselves of the local controversy exception, the plaintiffs must prove that greater than two-thirds of the proposed class members are Alabama citizens…Plaintiffs have offered little proof [of this]. [W]e know nothing about the percentage of the total class represented by the 10,118 people on which plaintiffs' evidence depends. Moreover, the class, as defined in the complaint, is extremely broad, extending over an 85-year period…plaintiffs have not carried their burden of demonstrating that more than two-thirds of the plaintiff class are Alabama citizens.

We also hold that plaintiffs have failed to prove the "significant defendant" prong of the local controversy exception…Plaintiffs rely on their complaint and an attorney affidavit to establish that U.S. Pipe is a significant defendant. These documents, however, do not provide any enlightenment at all with respect to the significance of the relief that is sought against U.S. Pipe, or its comparative significance relative to the relief sought from the other 17 named co-defendants. In short, there is simply no evidence that U.S. Pipe was "significant" with respect to liability.

Monday, June 19, 2006

M.D. Ala. Rejects Personal Jurisdiction over Members of Council of Lloyd's

Per Redmon v. Society and Corp. of Lloyds, --- F.Supp.2d ----, 2006 WL 1635435 (M.D.Ala. Jun. 15, 2006):

[Redmon, a former professional football player, initiated this insurance coverage dispute in Alabama state court, naming, inter alia, Members of the Council of Lloyds of London in addition to underwriters of his disability insurance. The question was whether Alabama could exercise personal jurisdiction over the Council Members of Lloyds]

In the instant transactions, the Council Member defendants did not individually or collectively engage in any activity subjecting them to general or specific personal jurisdiction in Alabama. Sixteen of the eighteen Council Members have never been to Alabama. The other two Council Members have only been to Alabama once, as an agent in an unrelated matter. None of the Council Members' contacts with Alabama are sufficient to be deemed "continuous and systematic" such that the Council Members reasonably anticipated being haled into Alabama courts.Straining to extend the reach of this Court, Redmon relies upon Lloyd's contacts with the forum in order to subject the individual Council Members to personal jurisdiction in Alabama. However, a court cannot exercise personal jurisdiction over a defendant solely on the basis of an employer's contacts with the forum. Williams Elec. Co. v. Honeywell, Inc., 854 F.2d 389, 391-92 (11th Cir.1988); see also Painewebber, Inc. v. Chase Manhattan Private Bank (Switz.), 260 F.3d 453 (5th Cir.2001). Moreover, "[a]n officer who has never been in Alabama nor conducted personal business in the state through an alter ego or through personal agents, may not be subject to jurisdiction in Alabama." South Alabama Pigs, 305 F.Supp.2d at 1260. [FN9] Due to the business structure of Lloyd's of London, a connection between the Council Members and Alabama is even more tenuous.

Friday, June 16, 2006

D.C. Circuit Reverses District Court's Rejection of FRCP Rule 60(b)(1) Motion

Last month in FG Hemisphere Associates, LLC v. Democratic Republic of Congo, 447 F.3d 835
(D.C. Cir. May 19, 2006), the D.C. Circuit, per Judge Williams, overturned a district court's rejection of a Rule 60(b)(1) motion by the Democratic Republic of Congo seeking relief from a default judgment against certain properties they own in the District of Columbia.

The D.C. Circuit felt that it was an abuse of discretion for the district court to deny the Rule 60 motion because the DRC's two-and-a-half month delay in responding to the writs of execution was mainly attributable to the time needed to transport the motion to the DRC, the time needed to translate motion, and the time needed to determine what department within DRC was responsible for answering. Further, there was no danger of prejudice to the judgment creditor as a result of the delay and DRC's claim that properties were immune from execution under Foreign Sovereign Immunities Act (FSIA) was potentially meritorious.

Thursday, June 15, 2006

Supreme Court Affirms Applicability of Bar Against Appellate Review of Remand Orders in SLUSA Context

The Supreme Court also today issued an opinion (Kircher v. Putnam Funds Trust et al., No. 05–409 (Jun. 15, 2006)) ruling that the bar against appellate consideration of district court remands found in 28 U. S. C. §1447(d) applies to all remands based on the grounds specified in §1447(c), including lack of subject-matter jurisdiction. Thus, the district court's remand of cases as improperly removed under SLUSA (The Securities Litigation Uniform Standards Act of 1998) was not a decision that the circuit court was entitled to second-guess and reverse.

Justice Souter delivered the opinion of the Court in which all justices except Justice Scalia joined in full. Justice Scalia joined as to Parts I, III, and IV and filed an opinion concurring in part and concurring in the judgment.

SCOTUS Rejects Federal Question Jurisdiction over FEHBA Plan Reimbursement Claim

The Supreme Court has just issued a decision in Empire Healthchoice Assurance Inc. v. McVeigh, No. 05–200 (Jun. 15, 2006). Here is an excerpt from the Syllabus:

Under the Federal Employees Health Benefits Act of 1959 (FEHBA), the Office of Personnel Management (OPM) negotiates and regulates health-benefits plans for federal employees. See 5 U. S. C. §8902(a). . . .

OPM has contracted with the Blue Cross Blue Shield Association (BCBSA) to provide a nationwide fee-for-service health plan administered by local companies (Plan). . . . Petitioner Empire HealthChoice Assurance, Inc. (Empire), administers the BCBSA Plan as it applies to federal employees in New York State. Respondent Denise McVeigh (McVeigh) is the administrator of the estate of Joseph McVeigh (Decedent), a former Plan enrollee who was injured in an accident. This case originated when a state-court tort suit brought by McVeigh against third parties alleged to have caused the Decedent's injuries terminated in a settlement. Empire filed this suit in federal court invoking 28 U. S. C. §1331, which authorizes jurisdiction over "civil actions arising under the ... laws ... of the United States." Empire sought reimbursement of the $157,309 it had paid under the Plan for the Decedent's medical care, with no offset for McVeigh's attorney's fees or other litigation costs in the state-court tort action. The District Court granted McVeigh's motion to dismiss for want of subject-matter jurisdiction.

. . .

Held: Section 1331 does not encompass Empire's suit.

Justice Ginsburg delivered the opinion of the Court, in which Roberts, Stevens, Scalia, and Thomas joined. Justice Breyer filed a dissenting opinion, in which Kennedy, Souter, and Alito joined.

Commentators will likely be evaluating whether this case reflects a new uncertainty about federal question jurisdiction wrought by the Court's decision last year in Grable & Sons v. Darue, 545 U.S. 308 (2005). Observers are also certain to highlight the fact that Justices Scalia and Alito found themselves on opposite sides of this decision.

Seventh Circuit Finds Malpractice Suit Regarding Federal Criminal Case Not Removable Despite Relevance of Applicable Federal Law

Per Hays v. Cave, 446 F.3d 712 (7th Cir. May 3, 2006):

This is a case of some novelty but little difficulty. The plaintiff brought suit in an Illinois court, charging the defendants, a law firm and its lawyers who had represented him in a federal criminal case (he was convicted, and did not appeal, and the denial of his motion for postconviction relief under 28 U.S.C. § 2255 was affirmed in Hays v. United States, 397 F.3d 564 (7th Cir.2005)), with legal malpractice under Illinois common law. The defendants removed the case to federal district court on the ground that it really arose under federal law because, as the district court ruled in refusing to remand the case, the resolution of a malpractice claim growing out of the defense of a federal criminal case would “require a substantial evaluation of applicable federal law,” specifically a determination of the meaning and scope of the federal criminal statutes under which Hays had been convicted.

Having accepted jurisdiction of the case, the district judge dismissed it on the merits, precipitating this appeal, in which Hays contends that the district court never obtained jurisdiction because the suit was not removable…

The standard applied by the district judge in deciding to deny the motion to remand was incorrect. A defendant might have defenses based on federal law to claims that arose only under state law, and it might be predictable at the outset that most of the time and the other resources consumed in the litigation would be devoted to those defenses. Yet with immaterial exceptions, a case filed in state court under state law cannot be removed to federal court on the basis that there are defenses based on federal law. Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003); Louisville & Nashville R.R. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 53 L.Ed. 126 (1908);

…Nothing in federal law prevents a disappointed litigant in a federal case from suing his lawyer under state malpractice law. E.g., Kregos v. Stone, 88 Conn.App. 459, 872 A.2d 901, 903 (2005); Burns v. Goudeau, 888 So.2d 1031, 1031-32 (La.App.2004)

Wednesday, June 14, 2006

Ninth Circuit Rules on Tax Court’s Jurisdiction to Hear Collection Due Process Appeals

Per Gorospe v. C.I.R., 446 F.3d 1014 (9th Cir. May 03, 2006):

The appeal presents the question of whether the United States Tax Court has plenary jurisdiction to hear all appeals from collection due process (“CDP”) proceedings before the Internal Revenue Service (“IRS”). We reaffirm the principle that the Tax Court's jurisdiction over appeals from CDP determinations is limited to issues over which the Tax Court would have had jurisdiction to consider the underlying tax liability.

…Once the IRS has notified a taxpayer of its intent to impose a lien or a levy, the taxpayer has the right to a CDP hearing before the IRS Office of Appeals, and is entitled to raise defenses and to contest the levy or lien. 26 U.S.C. § 6330(c)(2)(A). After receiving a determination from the IRS Office of Appeals, a taxpayer may seek judicial review, either in the Tax Court or in district court. 26 U.S.C. § 6330(d). This appeal concerns the boundaries of the Tax Court's jurisdiction in CDP appeals.

The Tax Court is an Article I “court of limited jurisdiction and lacks general equitable powers.” Comm'r v. McCoy, 484 U.S. 3, 7, 108 S.Ct. 217, 98 L.Ed.2d 2 (1987) (per curiam). Its subject matter jurisdiction is statutorily granted by 26 U.S.C. § 7442, and is defined and limited by Title 26 of the United States Code. Estate of Branson, 264 F.3d at 908. Thus, we must consider whether Congress authorized the Tax Court to hear appeals of the IRS Office of Appeals's determinations in trust fund recovery penalty cases. The plain language of 26 U.S.C. § 6330(d) requires us to hold that Congress did not so intend.

Taking [the language of § 6330(d)] at face value, it is apparent that the Tax Court does not have plenary jurisdiction over appeals of CDP determinations. Rather, it has jurisdiction only where it would have had jurisdiction to consider the underlying tax liability. Where the Tax Court would not have had jurisdiction over the underlying tax liability, jurisdiction rests in the district courts. Moore v. Comm'r, 114 T.C. 171, 175, 2000 WL 283865 (2000).

Eleventh Circuit Discusses Two Disputed CAFA Issues: 7-Day Language and Burden of Establishing Federal Court Jurisdiction

Per Miedema v. Maytag Corp., --- F.3d ---, 2006 WL 1519630 (11th Cir. June 5, 2006):

We review de novo the district court's decision to remand for lack of subject matter jurisdiction. Evans v. Walter Indus., Inc., ---F.3d ----, ----, slip op. at 2275 (11th Cir.2006)

The CAFA [Class Action Fairness Act] permits a court of appeals to accept an application to appeal if the application is made to the court of appeals “ not less than 7 days after entry of the [district court's] order” granting or denying a motion to remand a class action to the state court from which it was removed. 28 U.S.C. § 1453(c)(1) (emphasis added). Several circuits have declined to read the “not less than” language literally, concluding that it was a typographical error, or that such a reading would be illogical…While we have not addressed this issue directly, it is clear that we did not read § 1453(c)(1) literally in Evans, where we stated that § 1453(c)(1) “provides for an ‘application’ to the court of appeals ··· within 7 days of the district court's remand order.” Evans, --- F.3d at ----, slip op. at 2275 (emphasis added). We now reaffirm that construction of § 1453(c)(1), for to read it literally would produce an absurd result.

Maytag contends that the district court…erred by applying the traditional rule that the removing defendant bears the burden of establishing subject matter jurisdiction…We disagree. The Seventh and Ninth Circuits have, in detailed opinions, rejected the very kind of argument Maytag now presents. See Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 448 (7th Cir.2005) (holding that CAFA's “naked legislative history” does not alter the well established rule that a proponent of subject matter jurisdiction bears the burden of persuasion on the amount in controversy); Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 686 (9th Cir.2006) (per curiam) (“CAFA's silence, coupled with a sentence in a legislative committee report untethered to any statutory language, does not alter the longstanding rule that the party seeking federal jurisdiction on removal bears the burden of establishing that jurisdiction.”). In Evans-which was decided after the instant case was fully briefed-this Circuit agreed with the Seventh and Ninth Circuits that “CAFA does not upset the traditional rule that the removing party bears the burden of proof with regard to establishing federal court jurisdiction.”--- F.3d at ----, slip op. at 2278.... [W]e conclude that the district court did not err by placing the burden of establishing subject matter jurisdiction on Maytag…

Tuesday, June 13, 2006

Mercer Law Review Publishes Symposium Issue on Rule 68

In its latest issue of volume 57 the Mercer Law Review recently published a Symposium on Rule 68 entitled "Revitalizing FRCP 68: Can Offers of Judgment Provide Adequate Incentives for Fair, Early Settlement of Fee-Recovery Cases?" Westlaw subscribers can access the Foreword to the Symposium by clicking here.

Monday, June 12, 2006

Seventh Circuit Holds Only Prevailing Party Is Entitled to Attorney Fees Under the Fair Debt Collection Practices Act

Per Dechert v. Cadle Co., 441 F.3d 474 (7th Cir. Mar. 16, 2006):

. . . We cannot find a case under [the Fair Debt Collection Practices Act] in which the issue is discussed, though plenty of cases under it assume that only a prevailing party is entitled to an award of attorneys' fees and costs. E.g., Zagorski v. Midwest Billing Services, Inc., 128 F.3d 1164, 1166 (7th Cir.1997) (per curiam). The assumption is sound. As we noted in the Palmetto case, supra, 375 F.3d at 547, the Supreme Court has “encouraged consistent interpretation” of federal fee-shifting provisions, “across the federal statutes,” as allowing an award of attorneys' fees and costs only to a prevailing party. There is nothing to rebut the presumption-which we have called “conclusive ··· absent a clearly contrary indication,” id.-in a case under the Fair Debt Collection Practices Act. There is no ambiguity in “successful action to enforce ··· liability” for actual or statutory damages. Both Crabill and Nagle concluded, with respect to the materially identical language in the Fair Credit Reporting Act (“successful action to enforce any liability under this section,”15 U.S.C. § 1681o(a)(2)), that a “successful action” is indeed one in which the plaintiff was a prevailing party within the meaning that Buckhannon and the other decisions that we have cited assign to that term.

Friday, June 09, 2006

Minnesota Law Review Publishes Essay on Politicization of the Federal Rules

The Minnesota Law Review has just published was is certain to be an important contribution to the study of the Federal Rules of Civil Procedure, an essay by Martin H. Redish and Uma M. Amuluru entitled, The Supreme Court, the Rules Enabling Act, and the Politicization of the Federal Rules: Constitutional and Statutory Implications, 90 Minn. L. Rev. 1303 (2006). Here is an excerpt from the Introduction:

To a certain portion of the populace, the Federal Rules of Civil Procedure probably represent little more than highly technical and esoteric directives for the day-to-day operation of the federal litigation process--if, indeed, they represent anything at all. Even the average federal litigator may well think of the Rules primarily as either technical requirements that must be complied with or strategic devices employable to facilitate victory. In reality, however, many of the Federal Rules have a dramatic impact on fundamental socio-political and economic concerns: the allocation of governmental resources, the redistribution of private wealth, the effectiveness of legislatively imposed behavioral proscriptions, and concerns of fairness and equality. This is probably not what either the Congress that originally authorized them, the Advisory Committee that originally prepared them, or the Supreme Court Justices who originally promulgated them expected the Rules to do. Recognized at the time or not, however, the choices made by the drafters of the Rules have often had a significant impact on foundational moral, economic, and social choices made by society as a whole.

Over the last twenty-five years or so, the political stakes involved in shaping the Federal Rules of Civil Procedure have gradually risen to the surface, and those interest groups most affected have responded accordingly. During that time, the process by which the Rules are revised has been made considerably more open, and affected organizations and entities have significantly increased their efforts to influence the direction those revisions take.

Thursday, June 08, 2006

Eighth Circuit Holds Particularity Requirement Will Not Be Relaxed for Qui Tam Relator to Conduct Discovery to Meet Pleading Requirement

Per U.S. ex rel Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552 (8th Cir. Mar. 6, 2006):

Dr. Joshi argues the district court erred in not permitting him to conduct discovery in order to satisfy Rule 9(b)'s pleading requirements. Although Dr. Joshi couches his argument in terms of a discovery request, we view his argument more generally as a request to relax Rule 9(b)'s pleading requirements by allowing him to plead his complaint generally at the outset and to “fill in the blanks” following discovery.

The issue of whether to relax Rule 9(b)'s pleading requirements for complaints brought under the FCA [False Claims Act] and to permit early discovery is one of first impression in this circuit. . . . We join the more recent decisions and therefore reject Dr. Joshi's request to permit discovery to satisfy Rule 9(b). . . .

Wednesday, June 07, 2006

Third Circuit Holds That Consent Order from ALJ Confers Prevailing Party Status for Fee Claim Under IDEA

Per P.N. v. Clementon Bd. of Educ., 442 F.3d 848 (3d Cir. Apr. 5, 2006):

. . . [T]he [Individuals with Disabilities Education Act (IDEA)], 20 U.S.C. § 1440, et seq., contains a specific provision authorizing an order for such fees as “part of the costs to the parents of a child with a disability who is the prevailing party.” J.O. ex rel. C.O. v. Orange Tp. Bd. of Educ., 287 F.3d 267, 271 (3d Cir.2002). . . .

. . .

This court has held that Buckhannon applies to the fee-shifting provision of the IDEA. . . .

. . .

[Clementon Board of Education] . . . argues that because the [Administrative Law Judge] here did not and could not retain jurisdiction to enforce its consent orders in accordance with Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994), these orders lacked the judicial imprimatur required by Buckhannon to confer prevailing party status.

. . .

As is clear from A.R. ex rel. R.V. v. New York City Dept. of Educ., 407 F.3d 65 (2d Cir.2005), a settlement of administrative proceedings that is judicially enforceable meets the Buckhannon requirements. Because the consent orders entered here were enforceable through an action under 28 U.S.C. § 1983 and under state law, these consent orders . . . satisfy Buckhannon.

Tuesday, June 06, 2006

W.D. Arkansas Holds CAFA Does Not Apply Where Relation Back Establishes Commencement Prior to CAFA Effective Date

Per Whitehead v. The Nautilus Gp., Inc., --- F. Supp. ----, 2006 WL 1027147 (W.D. Ark. Apr. 18, 2006):

. . . The Court must look to Arkansas law for a determination of the relation back issue. Id., 434 F.3d at 1071-74.

. . .

Whitehead's first amended complaint relates back to his original complaint if the claims asserted in his first amended complaint “arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in” his original complaint. SeeArk. R. Civ. P. 15(c). Whitehead's claims of unjust enrichment and fraud as alleged in both complaints arise out of Nautilus' recalls in January 2004 and November 2004. Many characteristics of the original complaint remain in the first amended complaint. For example, the proposed class definition and parties remains the same. The Court finds Whitehead's claims as asserted in the first amended complaint arose out of the conduct, transactions and occurrences set forth in his amended complaint. The Court also finds Whitehead's first amended complaint relates back to original complaint. Therefore, the Court finds this civil action was commenced on February 9, 2005, prior to the effective date of CAFA, and that CAFA does not apply to this civil action.

. . .

Nautilus filed a timely notice of removal, but the issue here is whether Nautilus may assert a new ground for jurisdiction, not asserted in its notice of removal, in its response to Whitehead's motion to remand. Nautilus did not assert this Court had subject matter jurisdiction over this civil action based on a federal question in its notice of removal but waited until it filed a response to Whitehead's motion to remand to pursue the federal question jurisdiction issue. Nautilus filed its response of December 27, 2005, or 77 days after Whitehead's first amended complaint was filed and 63 days after Nautilus removed the case. Nautilus has argued its notice of removal can be amended to assert this new ground for subject matter jurisdiction. The Court does not agree.

Ninth Circuit Holds Exhaustion of Wrong Remedies Not Reasonable Delay

Per Americopters, L.L.C. v. F.A.A., 441 F.3d 726 (9th Cir. Mar. 21, 2006):

. . . The petitions for review were not filed until January 2004, almost one-and-a-half years after the purported FAA orders were issued.

. . .

Although a delay resulting from the exhaustion of applicable administrative remedies may be a reasonable ground for delay, see Reder, 116 F.3d at 1263, an attempt to exhaust the wrong remedy is not. . . .

At the point the FAA refused their requests for hearings under § 13.20(c)-September 19, 2002-Jan's and Americopters had exhausted their administrative remedies. Instead of timely filing petitions for review with this court, they decided to try another administrative route. . . .
We need not decide whether Jan's and Americopters were unreasonable in taking the § 13.5 route--clearly they were not required to do so--for the ultimately fatal detour took place when they filed complaints with the district court. We have held that filing in the wrong court is not a reasonable ground for delay. See Sierra Club, 885 F.2d at 593 (refusing jurisdiction because petitioner delayed by initially “fil[ing] for judicial review of the FAA action in the wrong court”). Only after the district court dismissed their claims in December 2003 did Jan's and Americopters finally file petitions for review with us.

Monday, June 05, 2006

Sixth Circuit Finds TIA Does Not Bar SMJ re Specialty Plates

Per A.C.L.U. of Tenn. V. Bredesen, 441 F.3d 370 (6th Cir. Mar. 17, 2006):

First, the district court was not deprived of subject matter jurisdiction in this case by the Tax Injunction Act (TIA), 28 U.S.C. § 1341, as argued by New Life. New Life claims that the extra cost for a “Choose Life” specialty license plate constitutes a tax that may not, under the TIA, be enjoined by a federal district court if a plain, speedy and efficient remedy may be had in Tennessee courts. Even making the somewhat artificial assumption that it is really the payments that are being challenged in this case, the payments are most closely analogous to payments for simple purchases from the government. Ordinary purchase payments are not taxes under the TIA, and neither is the extra payment for a specialty license plate. It follows that the TIA did not deprive the district court of subject matter jurisdiction in this case.

Eighth Circuit Finds No Abuse of Discretion in 20% Reduction in Attorney’s Fees

Per Simpson v. Merchants & Planters Bank, 441 F.3d 572 (8th Cir. Mar. 20, 2006):

We review the district court's award of attorney's fees for abuse of discretion. Hensley, 461 U.S. at 437, 103 S.Ct. 1933. Most of the other claims that Simpson brought were either voluntarily dismissed or were disposed of on summary judgment. The claims that proceeded to trial were for constructive discharge (based on sex and based on disability) and for Equal Pay Act violations. We cannot say that the twenty-percent reduction was an abuse of discretion, and we therefore, affirm.

Friday, June 02, 2006

9th Circuit Spars over Timing of Permissive Appeal in CAFA Cases

In a follow-up to a case reported here this past February [click here for prior post] the Ninth Circuit recently denied a rehearing en banc in the case of Amalgamated Transit Union Local 1309, AFL-CIO v. Laidlaw Transit Services, Inc., --- F.3d ---, 2006 WL 1387491 (9th Cir. May 22, 2006). The earlier decision had held that the Class Action Fairness Act (CAFA) created deadline of seven court days for filing appeal of district court's ruling on motion to remand class action.

Six Circuit Judges dissented to the denial of rehearing en bank (BYBEE, Circuit Judge, with whom Judges KOZINSKI, O'SCANNLAIN, RYMER, CALLAHAN, and BEA]. Here's an excerpt from the dissent:

Is less more? To lawyers, unlike philosophers, the question may appear facetious, but the answer has real-life implications. Section 5(a) of the Class Action Fairness Act of 2005 (“CAFA”), creates 28 U.S.C. § 1453(c)(1), which provides for a permissive appeal when the district court refuses to accept a class action removed from state court. See Bush v. Cheaptickets, Inc., 425 F.3d 683, 685 (9th Cir.2005). Specifically, section 1453(c)(1) provides:[A] court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not less than 7 days after entry of the order.28 U.S.C. § 1453(c)(1).
Despite the clarity of this language, the panel announced that it would read the phrase “not less than 7 days” to mean “not more than 7 days.” Amalgamated Transit Union Local 1309 v. Laidlaw Transit Servs., Inc., 435 F.3d 1140, 1145-46 (9th Cir.2006). As a result, the appellants' application, filed 43 days after the district court's order, was untimely.

The court now follows the misguided approach of the Tenth Circuit, which has announced that it too will read the phrase “not less than 7 days” as if it had been written “not more than 7 days.” See Pritchett v. Office Depot, Inc., 420 F.3d 1090, 1093 n. 2 (10th Cir.2005). I dissent from our refusal to rehear this case en banc because “I am convinced the parade is marching in the wrong direction.” United States v. Smith, 440 F.2d 521, 527 (7th Cir.1971) (Stevens, J., dissenting). The Republic will certainly survive this modest, but dramatic, emendation of the United States Code; I am not so sanguine that in the long term it can stand this kind of abuse of our judicial power.