Friday, December 29, 2006

Ninth Circuit Holds that Use of State Statute of Limitations Does Not Alter Time Available for Service of Process

BNA’s United States Law Week reported in Vol. 75, No. 23 (Dec. 19, 2006) on the case S.J. v. Issaquah School District No. 411, --- F.3d ----, 2006 WL 3544858 (9th Cir. Dec. 11, 2006). Here is an excerpt from the case:

This appeal presents the question whether, in an action arising under federal law where there is no federal statute of limitations, a federal court borrows the state's time period for service of process as well as for filing suit.

S.J., a juvenile, appeals the district court's dismissal of his claims under the Individuals with Disabilities Education Act ("IDEA"), 20 U.S.C. § 1400 et seq., against the Issaquah School District and its Superintendent and Director of Special Education (collectively, "Issaquah"). The IDEA had no statute of limitations at the time, so the district court applied Washington's Administrative Procedure Act ("WAPA"), RCW 34.05.542(2), which provides that a petition for review must be filed and served within thirty days of service of the final order by a state administrative agency. As S.J. conceded that he had not attempted to serve Issaquah until after the thirty-day period, the district court concluded that it lacked jurisdiction.

We have previously held that Rule 3 of the Federal Rules of Civil Procedure controls when an action which arises under federal law is "commenced" for purposes of tolling the statute of limitations borrowed from state law. Sain v. City of Bend, 309 F.3d 1134, 1136 (9th Cir.2002). It follows that federal procedural rules thereafter govern the action, at least when there is a federal rule to apply. Here there is, because Rule 4(m) of the Federal Rules of Civil Procedure provides a time limit for service of process (120 days). Accordingly, we hold that a federal court borrowing a state's time period for filing suit brought under federal law should not also borrow the state's time limits for serving the complaint. As S.J.'s IDEA action was timely commenced for purposes of tolling the borrowed statute of limitations when it was filed within 30 days, we reverse.

BNA subscribers may read the full report by clicking here.

Thursday, December 28, 2006

Seventh Circuit Holds Excusable Neglect Analysis to be Inapplicable To Extensions of Time for Service of Process

BNA’s United States Law Week reported in Vol. 75, No. 23 (Dec. 19, 2006) on the case United States v. McLaughlin, --- F.3d ----, 2006 WL 3530589 (7th Cir. Dec. 8, 2006). Here is an excerpt from the case:

Rule 4(m) states that if the defendant isn't served within 120 days, the district court "shall dismiss the action without prejudice . . . or direct that service be effected within a specified time; provided that if the plaintiff shows good cause for the failure, the court shall extend the time for service for an appropriate period." In other words, if good cause for the delay is shown, the court must extend the time for service, while if good cause is not shown, the court has a choice between dismissing the suit and giving the plaintiff more time ("direct that service be effected within a specified time"). Henderson v. United States, 517 U.S. 654, 662-63, 116 S.Ct. 1638, 134 L.Ed.2d 880 (1996); Coleman v. Milwaukee Board of School Directors, 290 F.3d 932, 934 (7th Cir.2002). Thus the plaintiff who fails to demonstrate good cause for his delay throws himself on the mercy of the district court.

The rule specifies no criteria for the exercise of mercy. Some courts think that when as in this case an extension is sought after the 120-day deadline has passed, the plaintiff must show "excusable neglect," as that is the standard laid down by Rule 6(b)(2) for motions "made after the expiration of the specified period" for making the motion. Turner v. City of Taylor, 412 F.3d 629, 650 (6th Cir.2005); McGuire v. Turnbo, 137 F.3d 321, 324 (5th Cir.1998). We disagree. Rule 4(m) authorizes the district court, in a case in which the 120 days have elapsed, to "direct that service be effected within a specified time"; only if the plaintiff failed to meet the new deadline and filed a motion for an extension of time would Rule 6(b)(2) come into play. E.g., Troxell v. Fedders of North America, Inc., 160 F.3d 381, 383 (7th Cir.1998); Horenkamp v. Van Winkle & Co., 402 F.3d 1129, 1132 (11th Cir.2005); United States v. 2,164 Watches, More or Less, Bearing a Registered Trademark of Guess?, Inc., 366 F.3d 767, 772 (9th Cir.2004); Committee Note to 1993 Amendments, Rule 4(m). Rule 6(b)(2) is less generous to dawdlers than Rule 4(m), not only in requiring the plaintiff to show excusable neglect if his motion for an extension is itself untimely, but also in not requiring the judge to grant the motion even if good cause is shown. The difference in standards may be accidental, or may reflect the fact that ignoring litigation deadlines delays the finality of litigation, see Committee Note to 1946 Amendment of Rule 6, Subdivision (b), whereas missing service deadlines merely postpones the commencement of litigation. Whatever the explanation, the difference is plain enough.

Conceivably (no stronger word is possible), it could make a difference in this case whether, as we do not believe, a finding of excusable neglect is a precondition to granting an untimely motion for an extension of time within which to serve the complaint. Neglect is excusable (though not justifiable-- "neglect" implies lack of justification) if there is a reason, which needn't be a compelling reason, to overlook it. Pioneer Investment Services Co. v. Brunswick Associates Limited Partnership, 507 U.S. 380, 394-95, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993); United States v. Guy, 140 F.3d 735 (7th Cir.1998). A common reason is that the neglect didn't harm anyone, United States v. Coney, 407 F.3d 871, 875 (7th Cir.2005), but it will not suffice if no excuse at all is offered or if the excuse is so threadbare as to make the neglect inexplicable. Marquez v. Mineta, 424 F.3d 539, 541-42 (7th Cir.2005); United States v. Guy, supra, 140 F.3d at 736; Prizevoits v. Indiana Bell Tel. Co., 76 F.3d 132, 134 (7th Cir.1996).

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Tuesday, December 26, 2006

Second Circuit Addresses Standards for Class Certification Under Rule 23

BNA’s United States Law Week reported in Vol. 75, No. 23 (Dec. 19, 2006) on the case Miles v. Merrill Lynch & Co. (In re Initial Public Offering Securities Litigation), --- F.3d ----, 2006 WL 3499937 (2d Cir. Dec. 5, 2006). Here is an excerpt from the case:

This appeal primarily concerns the issue, surprisingly unsettled in this Circuit, as to what standards govern a district judge in adjudicating a motion for class certification under Rule 23 of the Federal Rules of Civil Procedure. Comprehended within this broad issue are subsidiary issues such as whether a definitive ruling must be made that each Rule 23 requirement has been met or whether only some showing of a requirement suffices, whether all of the evidence at the class certification stage is to be assessed or whether a class plaintiff's evidence, if not fatally flawed, suffices, and whether the standards for determination of a Rule 23 requirement are lessened when a Rule 23 requirement overlaps with an aspect of the merits of the proposed class action. Finally, the appeal presents the question whether granting a motion for class certification in the pending litigation exceeded the District Court's discretion.

. . .

In light of the foregoing discussion, we reach the following conclusions: (1) a district judge may certify a class only after making determinations that each of the Rule 23 requirements has been met; (2) such determinations can be made only if the judge resolves factual disputes relevant to each Rule 23 requirement and finds that whatever underlying facts are relevant to a particular Rule 23 requirement have been established and is persuaded to rule, based on the relevant facts and the applicable legal standard, that the requirement is met; (3) the obligation to make such determinations is not lessened by overlap between a Rule 23 requirement and a merits issue, even a merits issue that is identical with a Rule 23 requirement; (4) in making such determinations, a district judge should not assess any aspect of the merits unrelated to a Rule 23 requirement; and (5) a district judge has ample discretion to circumscribe both the extent of discovery concerning Rule 23 requirements and the extent of a hearing to determine whether such requirements are met in order to assure that a class certification motion does not become a pretext for a partial trial of the merits.

In drawing these conclusions, we add three observations. First, our conclusions necessarily preclude the use of a "some showing" standard, and to whatever extent Caridad might have implied such a standard for a Rule 23 requirement, that implication is disavowed. Second, we also disavow the suggestion in Visa Check that an expert's testimony may establish a component of a Rule 23 requirement simply by being not fatally flawed. A district judge is to assess all of the relevant evidence admitted at the class certification stage and determine whether each Rule 23 requirement has been met, just as the judge would resolve a dispute about any other threshold prerequisite for continuing a lawsuit. Finally, we decline to follow the dictum in Heerwagen suggesting that a district judge may not weigh conflicting evidence and determine the existence of a Rule 23 requirement just because that requirement is identical to an issue on the merits.

BNA subscribers may read the full report by clicking here.

Friday, December 22, 2006

Hartnett Posts Notre Dame Law Review Piece Arguing against the Style Amendments to the FRCP

Edward Hartnett has posted his article Against (Mere) Restyling on SSRN. The article, which lobbies against the approval of the restyling amendments to the Federal Rules of Civil Procedure scheduled to take effect Dec. 1, 2007, will appear in the upcoming issue of the Notre Dame Law Review. Here is the abstract:

The Federal Rules of Civil Procedure have been completely rewritten. Unless the Supreme Court balks or the Congress intervenes, the bench and bar will be using the new restyled version of the Federal Rules of Civil Procedure in a little more than a year.

As have other procedural reformers before them, the restylists seek to make procedural rules simpler, clearer, more accessible, and easier to understand. Yet the restylists have set themselves a goal that is at once insufficiently ambitious and overly difficult. Unlike prior reformers, they do not seek to create a better procedure. Unlike those who brought us the original Federal Rules of Civil Procedure, they do not seek to supersede reexisting statutory procedures. To the contrary, the restylists attempt to completely rewrite the Federal Rules of Civil Procedure while leaving the law of procedure the same as it was before their reform.

This task is nearly impossible, as this Essay illustrates with some examples drawn from the changes made to the proposed restyled rules in response to public comment. In addition, the goal of preserving existing meaning is at war with the goal of clarity and simplicity. Rather than confront this dilemma head on, the proposed restyled rules add an additional layer of ambiguity, and do so in a way that brings to the fore the interpretive battle that rages between those who follow the plain meaning of the text and those who seek the lawmakers' purpose in legislative history. Finally, although the restylists have attempted to prevent their handiwork from superseding statutory procedures, their method of doing so rests on a view of the supersession provision of the Rules Enabling Act that is almost certainly wrong.

For these reasons, the proposed restyled Federal Rules of Civil Procedure should not be approved.

The piece can be downloaded by clicking here.

Thursday, December 21, 2006

Washington Law Review Publishes Article Discussing Appellate Review of Discovery Orders in Federal Court

The Washington Law Review has just published an article by Cassandra Burke Robertson entitled Appellate Review of Discovery Orders in Federal Court: A Suggested Approach for Handling Privilege Claims, 81 Wash. L. Rev. 733 (2006). Here's the Abstract:

The federal circuit courts of appeals have generally recognized that a party suffers real hardship when the district court erroneously orders it to disclose privileged information. Review of the disclosure order after final judgment is usually an insufficient remedy; once the information has been disclosed, it can never again be fully confidential. Consequently, the courts have struggled to provide a mechanism by which such orders can be immediately appealed. However, privilege orders presenting novel questions of law or issues of first impression do not clearly fit within the doctrinal requirements of the most common methods of interlocutory review. Appellate courts have therefore applied varying exceptions or extensions to those requirements in an effort to encompass such privilege orders within them.

This Article proposes a two-tiered system of review to remedy the harm caused by erroneous disclosure orders without stretching the current system of interlocutory review so far that the benefits of the final judgment rule vanish. The Article recommends that review begin in the district court with a motion to certify a discretionary appeal under 28 U.S.C. § 1292(b), which requires a district court to certify an order that "involves a controlling question of law as to which there is substantial ground for difference of opinion," if "an immediate appeal from the order may materially advance the ultimate termination of the litigation." If a district court refuses to certify an order even though it clearly satisfies the requirements of § 1292(b), then the appellate court should exercise its mandamus power to review the case. This two-tiered system of review would provide a consistent mechanism by which the most difficult and important privilege orders could be immediately reviewed, but would not impose too heavy a burden on the already-crowded appellate dockets.

Wednesday, December 20, 2006

Eleventh Circuit Holds District Court Had No Jurisdiction to Enjoin Fee Dispute Between Attorneys Under State Law

BNA’s United States Law Week reported in Vol. 75, No. 22 (Dec. 12, 2006) on the case Burr & Forman v. Blair, --- F.3d ----, 2006 WL 3391427 (11th Cir. Nov. 27, 2006). Here is an excerpt from the case:

The Anti-Injunction Act serves as a check on the broad authority recognized by the All Writs Act. It prohibits federal courts from utilizing that authority to stay proceedings in state court unless the requirements of one of three narrow exceptions are met. Under the Anti-Injunction Act, an injunction halting a state court proceeding is inappropriate, "except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments." 28 U.S.C. § 2283. The All Writs Act and the Anti-Injunction Act are closely related, and where an injunction is justified under one of the exception's to the latter a court is generally empowered to grant the injunction under the former. See Olin Corp. v. Ins. Co. of North America, 807 F.Supp. 1143, 1152 (S.D.N.Y.1992). Thus, in assessing the propriety of an injunction entered to stop a state court proceeding, the sole relevant inquiry is whether the injunction qualifies for one of the exceptions to the Anti-Injunction Act.

. . .

We now turn to the applicability of the "protect and effectuate its judgments" exception, the so-called "relitigation exception." This exception is essentially a res judicata concept. For an injunction to be proper under this exception, each of the claim preclusion requirements of the applicable state law--here, Alabama law--must be met. In Alabama, for res judicata to be applied there must be (1) a prior judgment on the merits; (2) rendered by a court of competent jurisdiction; (3) substantial identity of the parties; and (4) the same cause of action in both law suits. Wesch v. Folsom, 6 F.3d 1465, 1471 (11th Cir.1993).

The district court twice remanded the state court action pursuant to 28 U.S.C. § 1407(c), first on July 6, 2004 and then on July 22, 2005. In both remand orders, the court noted that it lacked subject matter jurisdiction due to a lack of citizenship diversity between the parties. An order remanding a case for lack of subject matter jurisdiction is not reviewable. 28 U.S.C. § 1447(d) ("An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise[.]"). Section 1447(d) bars not only appellate review of a a remand order, but also reconsideration of the order by the remanding district court. Harris v. Blue Cross/Blue Shield of Alabama, Inc., 951 F.2d 325, 330 (11th Cir.1992).

Much as in our Harris decision, the district court, "having relinquished jurisdiction, could not reassert it [.]" Id. at 330. Once the court remanded the case for the first time, any jurisdiction it may have had over the case ceased. The court, therefore, lacked subject matter jurisdiction to issue the Merits Order disposing of Blair and Trussell's claim. Because the court lacked subject matter jurisdiction to issue it, the order was not entered by a court of competent jurisdiction. Thus, the Injunction does not fall within the Anti-Injunction Act's relitigation exception.

BNA subscribers may read the U.S. Law Week report by clicking here.

Tuesday, December 19, 2006

Columbia Law Review Publishes Symposium Issue on Litigation Reform, Including Panel on CAFA & PSLRA

The Columbia Law Review recently published its November 2006 edition, which is a symposium issue on “A Ten Year Retrospective on Litigation Reform.” One symposium panel was dedicated to the Class Action Fairness Act, and included the following works:

Samuel Issacharoff, Settled Expectations in a World of Unsettled Law: Choice of Law After the Class Action Fairness Act, 106 Colum. L. Rev. 1839

Richard A. Nagareda, Aggregation and Its Discontents: Class Settlement Pressure, Class-Wide Arbitration, and CAFA, 106 Colum. L. Rev. 1872

Stephen B. Burbank, Aggregation on the Couch: The Strategic Uses of Ambiguity and Hypocrisy, 106 Colum. L. Rev. 1924

Another panel focused on the Private Securities Litigation Reform Act (PSLRA) and included the following works:

Stephen J. Choi And Robert B. Thompson, Securities Litigation And Its Lawyers: Changes During The First Decade After The PSLRA, 106 Colum. L. Rev. 1489

John C. Coffee, Jr., Reforming The Securities Class Action: An Essay On Deterrence and Its Implementation, 106 Colum. L. Rev. 1534

James D. Cox And Randall S. Thomas, Does The Plaintiff Matter? An Empirical Analysis Of Lead Plaintiffs In Securities Class Actions, 106 Colum. L. Rev. 1587

Monday, December 18, 2006

Ninth Circuit Holds Court May Decide Determine Whether Contract for Arbitration was Unconscionable

BNA’s United States Law Week reported in Vol. 75, No. 22 (Dec. 12, 2006) on the case Nagrampa v. MailCoups, Inc., --- F.3d ----, 2006 WL 3478345 (9th Cir. Dec. 4, 2006). Here is an excerpt from the case:

The arbitrability of a particular dispute is a threshold issue to be decided by the courts. See Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) ("The question whether the parties have submitted a particular dispute to arbitration, i.e., the 'question of arbitrability,' is 'an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise.' " (alteration in original) (quoting AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986))); John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 547, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964) ("The duty to arbitrate being of contractual origin, a compulsory submission to arbitration cannot precede judicial determination that the . . . agreement does in fact create such a duty."). Under the FAA, arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. In analyzing whether an arbitration agreement is valid and enforceable, "generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening § 2." Doctor's Assocs., 517 U.S. at 687, 116 S.Ct. 1652.

. . .

We do not construe either Buckeye or Prima Paint to stand for the principle that if plaintiffs challenge an arbitration provision as unenforceable due to unconscionability, they may not include additional contractual or statutory claims in their complaint. An argument that the arbitration agreement itself is procedurally unconscionable may be informed, as required by California state substantive law, by a determination of whether it is contained within a larger contract of adhesion. If the district court decides that the arbitration provision is unenforceable, then the remaining claims that address the contract as a whole were never properly arbitrable; a claim such as fraud in the inducement would lie within the jurisdiction of the district court. The district court also has the discretion under federal arbitration law, Buckeye, 126 S.Ct. at 1209, as well as under California law, Cal. Civ.Code § 1670.5, to sever the unconscionable arbitration provision and enforce the remainder of the contract. If, on the other hand, the district court decides that the arbitration agreement is valid and enforceable, then it should stay or dismiss the action pending arbitration proceedings to allow the arbitrator to decide the remaining claims, including those relating to the contract as a whole. Finally if, after examining the crux of the complaint, the district court concludes that the challenge is not to the arbitration provision itself but, rather, to the validity of the entire contract, then the issue of the contract's validity should be considered by an arbitrator in the first instance. Buckeye, 126 S.Ct. at 1208-09.

BNA subscribers may read the U.S. Law Week report by clicking here.

Friday, December 15, 2006

Fifth Circuit Rejects Summary Judgment for Officer Based on Qualified Immunity in 1983 Claim

Per Brown v. Lippard, --- F.3d ----, 2006 WL 3598524, (5th Cir. Dec. 12, 2006):

Lippard [the officer] asserts that there was no evidence properly before the district court that his actions were in bad faith, and therefore that Brown did not overcome the immunity shield. The evidence that Lippard was acting in bad faith came from both a fellow officer and an inmate who described Brown's behavior as cooperative and unthreatening. But Lippard complains that such evidence was not in the record on summary judgment, but from the prior action dismissed for failure to exhaust remedies, and the judge mistakenly took judicial notice of it.

Lippard's argument is off point. The district judge did not have to credit the testimony of the officer and inmate "for the truth asserted." Taylor v. Charter Med. Corp., 162 F.3d 827, 830 (5th Cir.1998). The judge only had to notice that such testimony existed, because the testimony's very existence raises an issue of fact sufficient to overcome summary judgment. Especially here, where Lippard does not so much as allege that his actions were in response to Brown's misbehavior. Because the testimony's existence was "not subject to reasonable dispute" and "capable of accurate and ready determination," Fed. R. Evid. 201(b), it was not improper to take judicial notice of it.

Thursday, December 14, 2006

Prof. Myriam Giles and Practitioner Gary Friedman Publish Penn Article Challenging the Class Action Agency Costs "Myth"

Professor Myriam Gilles and Gary B. Friedman have just published an article entitled, Exploding The Class Action Agency Costs Myth: The Social Utility of Entrepreneurial Lawyers, 155 U. Penn. L. Rev. 103 (2006). Here is an excerpt from the Introduction:

John Coffee observed twenty years ago that "[h]igh agency costs" inherent in class action litigation "permit opportunistic behavior by attorneys" and, "[a]s a result, it is more accurate to describe the plaintiff's attorney as an independent entrepreneur than as an agent of the client." Jonathan Macey and Geoffrey Miller picked up on this theme in a highly influential 1991 article, recognizing that "the single most salient characteristic of class and derivative litigation is the existence of 'entrepreneurial' plaintiffs' attorneys [who, because they] are not subject to monitoring by their putative clients . . . operate largely according to their own self-interest . . . ."

Today, these insights have become canonical. No one doubts that class action plaintiffs' attorneys operate, in reality, as independent entrepreneurs guided by self-interest. The conventional wisdom further posits that there is tremendous social disutility in the fact that class actions are "characterized by high agency costs: that is, a significant possibility that litigation decisions will be made in accordance with the lawyer's economic interests rather than those of the class."

The conventional wisdom is half right. Class action plaintiffs' lawyers are indeed independent entrepreneurs driven by the desire to maximize their gain, even at the expense of class members' compensation. Where the conventional wisdom has gone wrong, however, is in condemning this as a bad thing and proposing reforms for class action practice designed to correct this conflict by increasing the compensation of absent class members.

In fact, as we will show, the so-called "agency cost" problem is mostly a mirage. So far as the vast majority of small-claims class actions go, concerns with the undercompensation of absent class members are totally misplaced. In reality, there is generally no legitimate utilitarian reason to care whether class members with small claims get compensated at all. Nor is there any economic reason to fret that entrepreneurial plaintiffs' lawyers are being overcompensated.
There is but one true objective here--one valid normative measure by which to gauge any class action procedure or practice, or any proposed reform. All that matters is whether the practice causes the defendant-wrongdoer to internalize the social costs of its actions. Once this normative polestar is accepted, much of the recent literature on class actions comes up for reexamination.

Wednesday, December 13, 2006

Fourth Circuit Discusses Differing Standards for Abstention of Declaratory and Nondeclaratory Claims

Per Great American Ins. Co. v. Gross, 468 F.3d 199 (4th Cir. Oct. 30, 2006):

When a complaint states claims for both nondeclaratory and declaratory relief, there is a question as to which standard--Colorado River or Brillhart/Wilton--governs the decision whether to order a stay in favor of the parallel state proceedings. Some courts have held that the Brillhart/Wilton discretionary standard is per se supplanted by the harsher Colorado River standard whenever an action includes both declaratory and non-frivolous nondeclaratory claims. See Kelly Inv., Inc. v. Continental Common Corp., 315 F.3d 494, 497 n. 4 (5th Cir.2002); Village of Westfield v. Welch's, 170 F.3d 116, 124 n. 5 (2d Cir.1999). Other courts hold that jurisdiction is mandatory (subject only to Colorado River constraints) if the nondeclaratory claims can exist independently of the declaratory claims, such that they could survive even if the declaratory claims vanished. See United Nat'l Ins. Co. v. R & D Latex Corp., 242 F.3d 1102, 1112-13 (9th Cir.2001). Another view, embraced by some district courts, looks to the "heart of the action" to determine if the Colorado River or the Brillhart/Wilton standard should apply. See, e.g. ITT Indus., Inc. v. Pacific Employers Ins. Co., 427 F.Supp.2d 552, 555- 56 (E.D.Pa.2006). Under this standard, if the outcome of the nondeclaratory claims hinges on the outcome of the declaratory ones, the Brillhart/Wilton standard governs; conversely, if the opposite applies, the Colorado River standard controls. See Lexington Ins. Co. v. Rolison, 434 F.Supp.2d 1228, 1236 (S.D.Ala.2006).

Our jurisprudence suggests that, in a "mixed" complaint scenario, the Brillhart/Wilton standard does not apply, at least to the nondeclaratory claims. For example, in Chase Brexton, we stated that the Brillhart/ Wilton standard does not apply when a declaratory judgment claim is joined with a nondeclaratory claim, such as a claim for damages or injunctive relief. 411 F.3d at 466-67. Because a court is required to address nondeclaratory claims, per Colorado River, we observed that the benefit derived from exercising discretion not to grant declaratory relief is frustrated. Id. at 466.

. . .

We need not express a definitive view on this point to resolve the Insureds' argument, because even if we applied the more relaxed Brillhart/ Wilton standard to Great American's complaint, the result would not change. To determine whether to proceed with a federal declaratory judgment action when a parallel state court action is pending, we have focused on four factors: (1) whether the state has a strong interest in having the issues decided in its courts; (2) whether the state court could resolve the issues more efficiently than the federal court; (3) whether the presence of overlapping issues of fact or law might create unnecessary entanglement between the state and federal court; and (4) whether the federal action is mere procedural fencing in the sense that the action is merely the product of forum shopping. Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 377 (4th Cir.1994).

Tuesday, December 12, 2006

Third Circuit Holds CAFA Contains a Typo; Remand Orders Must Be Appealed Within Seven Days

Per Morgan v. Gay, 466 F.3d 276 (3d Cir. Oct. 16, 2006):

This appeal raises what is an issue of first impression in this Circuit: whether a statutory provision from the Class Action Fairness Act (CAFA), Pub.L. No. 109-2, 119 Stat. 4 (2005) (codified in scattered sections of 28 U.S.C.), will be read according to the uncontested intent of Congress rather than as it is literally (but mistakenly) written.

. . .

The issue that we now address is whether 28 U.S.C. § 1453(c)(1), which states that a federal appellate court "may accept an appeal" from a remand order "if application is made to the court of appeals not less than 7 days after entry of the order," should be interpreted by this Court to mean "not more than 7 days after entry of the order." Because the uncontested legislative intent behind § 1453(c) was to impose a seven-day deadline for appeals, we conclude that the statute as written contains a typographical error and should be read to mean "not more than 7 days."

. . .

It should come as no surprise that all three circuits to have examined this question have also found that § 1453(c)(1) should not be literally applied. See Amalgamated, 435 F.3d at 1146; Miedema, 450 F.3d at 1326; Pritchett v. Office Depot, Inc., 420 F.3d 1090, 1093 n. 2 (10th Cir.2005) ( "Given Congress' stated intent to impose time limits on appeals of class action remand orders and the limited availability of appeals prior to the statute's enactment, we can think of no plausible reason why the text of [the] Act would instead impose a seven-day waiting period followed by a limitless window for appeal.").

This Court does not need to step into a statutory interpretation debate over the role of legislative history and congressional intent to conclude that § 1453(c)(1) needs common sense revision that accurately reflects the uncontested intent of Congress. Judge Harold Leventhal has been famously quoted as saying that citing legislative history is like "looking over a crowd and picking out your friends." In the case of § 1453(c)(1), however, the crowd speaks with one voice. We therefore read "not less than" as "not more than" in accord with the intent of Congress.

Monday, December 11, 2006

Second Circuit Joins Three Other Circuits In Holding Party Seeking Removal Under CAFA Has the Burden of Establishing Jurisdiction

Per DiTolla v. Doral Dental IPA of New York, --- F.3d ----, 2006 WL 3335125 (2d Cir. Nov. 17, 2006):

It is well-settled that, prior to CAFA's enactment, "[t]he party asserting federal jurisdiction [bore] the burden of proving that the case [was] properly in federal court." Gilman v. BHC Sec., 104 F.3d 1418, 1421 (2d Cir.1997) (citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936)). It is an issue of first impression in this Court whether CAFA has changed this traditional rule. Substantially for the reasons articulated by the District Court, we join three of our sister circuits and hold that it has not. See Miedema v. Maytag Corp., 450 F.3d 1322, 1328-29 (11th Cir.2006); Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 685 (9th Cir.2006); Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 448 (7th Cir.2005).

We reject Doral Dental's argument that it would be "unsound" to hold that Congress intended to adopt the traditional rule in the context of CAFA actions. On the contrary, it would be thoroughly unsound for this Court to reject a longstanding rule absent an explicit directive from Congress. See id. We presume that Congress, when it enacted CAFA, knew where the burden of proof had traditionally been placed. By its silence, we conclude that Congress chose not to alter that rule. See Cannon v. University of Chicago, 441 U.S. 677, 699, 99 S.Ct. 1946, 60 L.Ed.2d 560 (1979) ("[I]t is not only appropriate but also realistic to presume that Congress was thoroughly familiar with ... precedents [interpreting a private right of action in various statutes] and that it expected its enactment [of Title IX] to be interpreted in conformity with them.").

Friday, December 08, 2006

W.D. Texas Analyzes Certification of Issues Class; Denies Motion for Class Certification

Per Norwoodv.RaytheonCo., 237 F.R.D. 581 (W.D. Tex. Sept. 11, 2006):

Plaintiffs seek to represent a class of putative plaintiffs consisting of "[a]ll radar technicians, operators, and/or mechanics who have suffered and/or are suffering certain illnesses, injuries and/or death as a direct and proximate result of exposure" to radiation caused by Defendants' "design, manufacture and distribution of Radar Devices." The proposed class would include those asserting independent or derivative claims based on "their personal relationship with persons who suffered injuries and/or death as a result of exposure to ionizing radiation emitted from Defendants' RADAR devices, including, without limitation, spouses, parents, children, dependents, other relatives or significant others."

In order to be certified, every class action must meet the four prerequisites found in Rule 23(a). Mullen v. Treasure Chest Casino, LLC, 186 F.3d 620, 623 (5th Cir.1999). . . . In addition, a class must satisfy the requirements of Rule 23(b) in one of three ways. Fed. R. Civ. P. 23(b). Plaintiffs attempt to certify the proposed class pursuant to Rule 23(b)(3). The proponents of a Rule 23(b)(3) class must show that the proposed class meets two additional requirements, known as "predominance" and "superiority . . . . Plaintiffs seek the certification of an issues class pursuant to Rule 23(c)(4). . . . If the Court were to certify an issues class, the remaining issues would be adjudicated on an individual basis. . . . The fact that Plaintiffs seek to certify an issues class pursuant to Rule 23(c)(4) affects the predominance inquiry. The Fifth Circuit has clearly mandated that proponents of class certification cannot circumvent the predominance requirement "through the nimble use of [Rule 23](c)(4)." Castano v. Am. Tobacco Co., 84 F.3d 734, 745 n.21 (5th Cir.1996).

. . .

To briefly summarize . . . [w]eighing Plaintiffs' proffered common issues against the remaining individual issues, the Court concludes that the common issues do not predominate. This determination is based on its findings that (1) numerous individual factual and legal issues must be adjudicated, (2) the complexity of adjudicating the individual issues is compounded by variations in state and foreign laws, and (3) the Court cannot determine that Plaintiffs' proffered issues will be central to the litigation.

. . .

Although the proposed class meets the requirements of Rule 23(a), it does not meet the requirements of Rule 23(b)(3). Specifically, the complexity of the numerous individual factual and legal determinations are compounded by variations in state and foreign laws, so that the Court cannot conclude that common issues predominate. In addition, the fact that this is not a negative value suit, in combination with multiple manageability problems, causes the Court to conclude that class adjudication is not superior. Thus, the Court is of the opinion that Plaintiffs' Renewed Motion for Class Certification should be denied.

Thursday, December 07, 2006

E.D.Va. Considers Differing Circuit Interpretations of Leading Case on Availability of Default Judgment in Multiple-Defendant Cases

Per Jefferson v. Briner, Inc., --- F.Supp.2d ----, 2006 WL 3209957 (E.D.Va. Nov. 6, 2006):

This case presents the unusual situation where a plaintiff seeks a default judgment against one defendant, and yet the remaining, answering defendants have been exonerated from all liability. Stated more precisely, where multiple defendants are alleged to be jointly liable and the answering defendants have prevailed, must the action against the defaulting defendant be dismissed (and entry of default judgment refused) so as to prevent inconsistent judgments among the joint defendants? See Frow v. De La Vega, 82 U.S. (15 Wall.) 552, 554, 21 L.Ed. 60 (1872). Frow is the leading case on the subject of the availability of default judgment in actions involving multiple defendants. . . .

. . .Here, this court acted in accordance with Frowby waiting to address the issue of default judgment against [non-answering defendant Mortgage Store Financial, Inc.] MSF until the court first "proceed[ed] with the cause upon the answers of the other defendants," Briner and Carteret. Id. at 554. Accordingly, whether default judgment against MSF is appropriate is now ripe for decision.

. . .

Although many jurisdictions have narrowly construed Frow to bar entry of a default judgment against one of several defendants only if the theory for recovery is one of true joint liability, [FN6] the Fourth Circuit has interpreted Frow more broadly. The Fourth Circuit last revisited Frow almost forty years ago in United States ex rel. R.F. Hudson v. Peerless Ins. Co., 374 F.2d 942 (4th Cir.1967), an action prosecuted against a contractor and a contractor's surety. In Hudson, the contractor answered the complaint and denied liability. Id. at 943. However, the surety failed to respond and the district court entered default judgment against it. Id. In holding the default judgment against the surety to be premature, the court of appeals held: Although Frow was a case of joint liability, we think the procedure established for multiple defendants by Rule 54(b) is strikingly similar and applicable not only to situations of joint liability but to those where the liability is joint and/or several. Id. at 944 (emphasis added). The court went on to note that even when co-defendants are alleged to be "closely interrelated," and one of the multiple defendants "establishes that plaintiff has no cause of action or present right of recovery, the defense generally inures also to the benefit of a defaulting defendant[.]" Id. at 945 (citations omitted). Thus, the Fourth Circuit has concluded that Frow applies not only to defendants who are alleged to be jointly liable, but also to those defendants thought to be jointly and/or severally liable, or who are otherwise closely interrelated. [FN7]

FN6. See, e.g., McMillian/McMillian, Inc. v. Monticello Ins. Co., 116 F.3d 319 (8th Cir.1997) (Frownot extended to situation where the co-defendants shared closely related interests but were not truly jointly liable); Whelan v. Abell, 953 F.2d 663, 674 (D.C.Cir.1992) ("... in cases involving multiple defendants, a default order that is inconsistent with a judgment on the merits must be set aside only when liability is truly joint--that is, when the theory of recovery requires that all defendants be found liable if any one of them is liable--and when the relief sought can only be effective if judgment is granted against all.") (citation omitted), amended at No. 90-7016, 1992 U.S.App. LEXIS 6180 (D.C.Cir.), cert. denied sub. nom., Toomey v. Whelan, 506 U.S. 906, 113 S.Ct. 300, 121 L.Ed.2d 223 (1992); In re Uranium Antitrust Litig., 617 F.2d 1248, 1256-58 (7th Cir.1980) (Frow rule not applicable when defendants are alleged to be jointly and severally liable); Int'l Controls Corp. v. Vesco, 535 F.2d 742, 746-47 n. 4 (2d Cir.1976) ("... at most, Frowcontrols in situations where the liability of one defendant necessarily depends upon the liability of the others"), cert. denied, 434 U.S. 1014, 98 S.Ct. 730, 54 L.Ed.2d 758 (1978).

FN7. Other Circuit Courts of Appeals have taken a similar stance to that of the Fourth Circuit when interpreting Frow. See In re: First T.D. & Inv., Inc., 253 F.3d 520, 532 (9th Cir.2001) (extending Frowto certain circumstances where defendants have closely related defenses or are otherwise similarly situated, even if not jointly and severally liable, so as to avoid inconsistent judgments against multiple defendants); Lewis v. Lynn, 236 F.3d 766, 768 (5th Cir.2001) (citing Hudson and holding that it would " 'incongruous' and 'unfair' to allow some defendants to prevail, while not providing the same benefit to similarly situated defendants.") (citation omitted and emphasis added); Wilcox v. Raintree Inns of Am., Inc., No. 94-1050, 1996 U.S.App. LEXIS 1501, at *7-8 (10th Cir. Feb. 2, 1996) (unpublished) (extending Frow to cases where multiple defendants have "closely related" defenses); Gulf Coast Fans v. Midwest Elecs. Imp., 740 F.2d 1499, 1512 (11th Cir.1984) (holding that "when defendants are similarly situated, but not jointly liable, judgment should not be entered against a defaulting defendant if the other defendant prevails on the merits" to be "sound policy") (emphasis added). Although the Circuits are split on the extent to which Frow applies, see supra footnote 6, the underlying theme of Frow is indisputable: logically inconsistent judgments among multiple defendants are to be avoided, and a finding of inconsistency will preclude the entry of default judgment against a non-appearing defendant.