Friday, April 28, 2006

C.D.Cal. Interprets “Significant Relief” and “Significant Basis” in Determining Whether CAFA’s “Local Controversy Exception” Applies

Per Kearns v. Ford Motor Co., Not Reported in F.Supp.2d, 2005 WL 3967998 (C.D.Cal. Nov. 21, 2005) [case just published]:

Ford asserts removal jurisdiction based on the Class Action Fairness Act of 2005 (“CAFA,” or “the Act”). Plaintiff has filed a Motion to Remand, arguing that this suit falls under the so-called “Local Controversy Exception” to CAFA jurisdiction.

While Congress was intent on significantly expanding the jurisdiction of the federal courts over class action suits, it conceded that certain “truly local” actions could be reasonably heard in state courts without the risk of undue bias against the defendants, since they too were local. Three exceptions were provided to CAFA jurisdiction to deal with such situations...

[CAFA's "local controversy exception" allows a federal court to decline removal where at least one defendant is a defendant from whom significant relief is sought by members of the plaintiff class, whose conduct forms a significant basis for the claims asserted, and is a citizen of the State in which the action was originally filed. 28 U.S.C. § 1332(d)(4)(A)(II).]

Defendant Ford argues that it is the “real” defendant, that Claremont Ford is not a party from whom significant relief is sought, and that no such California party exists. In particular, Ford asserts that once all relevant parties are joined (presumably all dealers that participated in the CPO [“Certified Pre-Owned”] program), the relief sought from Ford will dwarf the relief sought from each individual dealer. Therefore, Ford argues, it is the only party from whom significant relief is sought, and, since it is not a citizen of California, clause (II) does not apply, and removal should be allowed...This Court [ ]agrees.

. . .

The term “significant relief” is not used in any statute aside from CAFA... One common usage seems closer to the meaning urged on the court by Plaintiff. Without great specificity, Kearns argues that significant relief is sought from Claremont Ford because the relief sought is not inconsequential. The other common usage seems closer to the interpretation advocated by Ford. It argues that the relief sought from Claremont Ford must be viewed relative to the overall relief “ ‘sought by the class ( [as opposed to] just a subset of the class membership).” ’ (quoting S.Rep. No. 109-14 at 40). That is to say, Claremont Ford's share of damages would not largely satisfy the claims of the entire class.

As with “significant relief,” the term “significant basis” is new in CAFA....Because the term “significant basis” is ambiguous, an appeal to the legislative history is appropriate. While Kearns is likely correct that the conduct of dealers as a group forms a significant basis for the claims, this is not true of any single dealer like Claremont Ford. Its involvement is no different from that of the imagined insurance agent in the Committee Report, who presumably markets the program to clients, accepts and processes their applications, and handles billing. It is Ford, like the insurance company, that promulgates and oversees the overall alleged fraud. As such, if the Committee Report [S.Rep. No. 109-14] discounts the insurance agents' conduct as not forming a “significant basis” for the claims of the class members, the definition of that term must similarly exclude the conduct of Claremont Ford and other dealers...

...Ford has demonstrated that the case meets the diversity and amount-in-controversy requirements of CAFA jurisdiction and that none of the exceptions to CAFA jurisdiction applies. Therefore, the case was properly removed to this Court, and the Motion to Remand is DENIED.

Thursday, April 27, 2006

SCOTUS Rules on Steps Required to Notify Homeowner Prior to Tax Sale, Where Government is Aware that Actual Notice Never Reached Homeowner

JONES v. FLOWERS (No. 04-1477)
Web-accessible at:

Argued January 17, 2006; Decided April 26, 2006

Petitioner Jones continued to pay the mortgage on his Arkansas home after separating from his wife and moving elsewhere in the same city. Once the mortgage was paid off, the property taxes-which had been paid by the mortgage company-went unpaid, and the property was certified as delinquent. Respondent Commissioner of State Lands mailed Jones a certified letter at the property's address, stating that unless he redeemed the property, it would be subject to public sale in two years. Nobody was home to sign for the letter and nobody retrieved it from the post office within 15 days, so it was returned to the Commissioner, marked 'unclaimed.' Two years later, the Commissioner published a notice of public sale in a local newspaper. No bids were submitted, so the State negotiated a private sale to respondent Flowers. Before selling the house, the Commissioner mailed another certified letter to Jones, which was also returned unclaimed. Flowers purchased the house and had an unlawful detainer notice delivered to the property. It was served on Jones' daughter, who notified him of the sale. He filed a state-court suit against respondents, alleging that the Commissioner's failure to provide adequate notice resulted in the taking of his property without due process. Granting respondents summary judgment, the trial court concluded that Arkansas' tax sale statute, which sets out the notice procedure used here, complied with due process. The State Supreme Court affirmed.


1. When mailed notice of a tax sale is returned unclaimed, a State must take additional reasonable steps to attempt to provide notice to the property owner before selling his property, if it is practicable to do so...

2. Because additional reasonable steps were available to the State, given the circumstances here, the Commissioner's effort to provide notice to Jones was insufficient to satisfy due process.

Roberts, C. J., delivered the opinion of the Court, in which Stevens, Souter, Ginsburg, and Breyer, JJ., joined.
Thomas, J., filed a dissenting opinion, in which Scalia and Kennedy, JJ., joined. Alito, J., took no part in the consideration or decision of the case.

Fourth Circuit Decertifies Class Based on Superiority of Pending Bankruptcy Proceedings

Per Gregory v. Finova Capital Corp., 442 F.3d 188 (4th Cir. March 14, 2006):

Appellee-noteholders filed a class action suit against the principal lender of the now-bankrupt company that issued the notes. The district court certified the class action. However, there is a currently pending bankruptcy adversary proceeding dealing with most of the same questions at issue in the class action. We reverse the class certification because, in light of the adversary proceeding, the class action is not the superior method for the fair and efficient adjudication of the controversy.

. . .

It was an abuse of discretion for the district court to find the class action superior without analyzing whether it was superior to the adversary proceeding--the only other pending, collective proceeding having to do with the same controversy as the class action. By failing to analyze whether the class action was superior to the adversary proceeding, the district court did not consider “the extent and nature of any litigation concerning the controversy already commenced by or against members of the class,” as Rule 23(b)(3)(B) advises.

. . .

Our conclusion is reinforced by the fact that the class action plaintiffs have acknowledged that, if successful in the adversary proceeding, they could be made “more or less whole.” The fact that the relief sought in the two actions differs slightly is not enough to persuade us that the class action is superior.

Wednesday, April 26, 2006

District Courts May Dismiss Habeas Petitions Under AEDPA for Untimeliness Sua Sponte

Yesterday, the Supreme Court held, in Day v. McDonough, --- S.Ct. ----, 2006 WL 107110 (Apr. 25, 2006), per Justice Ginsburg, that district courts may dismiss habeas petitions on the court’s initiative for failing to comply with AEDPA’s one-year limitation, so long as both parties are given notice and an opportunity to present their positions, the plaintiff is not significantly prejudiced, and justice is better served by the dismissal. Here’s an excerpt from the Syllabus:

(a) . . . [I]n appropriate circumstances, a district court may raise a time bar [to federal habeas petition] on its own initiative. The District Court in this case confronted no intelligent waiver on the State's part, only an evident miscalculation of time. In this situation the Court declines to adopt either an inflexible rule requiring dismissal whenever [the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA)'s] one-year clock has run, or, at the opposite extreme, a rule treating the State's failure initially to plead the one-year bar as an absolute waiver. Rather, the Court holds that a district court has discretion to decide whether the administration of justice is better served by dismissing the case on statute of limitations grounds or by reaching the merits of the petition. This resolution aligns the statute of limitations with other affirmative defenses to habeas petitions, notably exhaustion of state remedies, procedural default, and nonretroactivity. . . .

(b) Before acting sua sponte, a court must accord the parties fair notice and an opportunity to present their positions. It must also assure itself that the petitioner is not significantly prejudiced by the delayed focus on the limitation issue, and “determine whether the interests of justice would be better served” by addressing the merits or by dismissing the petition as time barred.

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

Delaware Law Review Publishes Article on 2005 Changes to Federal Jurisdiction

The Delaware Law Review has published an article by Gregory P. Joseph, trial attorney and former chair of the ABA Section of Litigation, entitled Federal Class Action Jurisdiction After CAFA, Exxon Mobil and Grable, 8 Del. L. Rev. 157, which discusses changes in federal jurisdiction in 2005. Here’s the abstract:

2005 featured dramatic changes in federal jurisdiction effected by the Class Action Fairness Act of 2005, Pub. L. 109-2 ("CAFA") and the United States Supreme Court decisions in Exxon Mobil Corp. v. Allapattah Services ("Exxon Mobil") and Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing ("Grable"). This article explores the impact of CAFA, Exxon Mobil and Grable on federal jurisdictional principles governing class actions.

Tuesday, April 25, 2006

LII Bulletin Previews Empire HealthChoice Assurance v. McVeigh Oral Argument to Occur Today Before the Supreme Court

Cornell’s LII Bulletin has posted the following preview of the oral argument slated to take place in Empire HealthChoice Assurance v. McVeigh (05-200) before the Supreme Court today:


Empire HealthChoice Assurance v. McVeigh (05–200)
Oral argument date: April 25, 2006

This case derives from a reimbursement action brought by Empire HealthChoice Assurance, a private healthcare provider, against a federal employee who received health care benefits under the terms of a contract brought into being by the Federal Employees Health Benefits Act. The District and Circuit courts held that federal law did not govern the action, and that the action should have been raised under state contract law in state court. The Supreme Court must now decide whether the Federal Employees Health Benefits Act creates a federal common law basis for Empire's claim, and thus whether the federal courts have jurisdiction over cases brought to enforce provisions of contracts created under the Act.

The full preview is available here.

Monday, April 24, 2006

LII Bulletin Previews Today's Supreme Court Oral Argument in Kircher v. Putnam Funds Trust

Cornell’s LII Bulletin posted the following preview of the oral argument that took place today for Kircher v. Putnam Funds Trust (05-409):


Kircher v. Putnam Funds Trust (05-409)
Oral argument date: April 24, 2006

Petitioners are a group of investors who owned shares in mutual funds offered or advised by respondents, Putnam Funds Trust. These investors brought a class action suit in Illinois state court asserting breach of fiduciary duty and alleging that the mutual funds set prices in a way that allowed arbitrageurs to exploit differences in prices to the detriment of long-term investors. The respondents removed the suit to federal court pursuant to the Securities Litigation Uniform Standards Act (SLUSA). The judge then remanded the case to state court because the petitioners had not alleged a loss “in connection with the purchase or sale of securities” as required under the Act. Pursuant to 28 U.S.C. § 1447(d), such a remand is not appealable if the remand is for lack of subject matter jurisdiction. The Seventh Circuit, in conflict with previous decisions by the Second, Ninth, and Eleventh Circuits, ruled that the remand was reviewable because the basis of the SLUSA remand was not lack of subject matter jurisdiction, and therefore 28 U.S.C. § 1447(d) does not apply. In deciding this case, the Supreme Court will address whether 28 U.S.C. § 1447(d) bars appellate review of remand orders in suits removed under statutes such as SLUSA.

The full preview is available at

D.N.M. Holds that FCRA Does Not Preempt Claims under New Mexico's Credit Bureaus Act

Per Apodaca v. Discover Financial Services, 417 F.Supp.2d 1220 (D.N.M. Mar. 2, 2006):

Equifax does not present any authority to show that the preemption language in the FCRA [Fair Credit Reporting Act] was meant to apply to such statutory claims under the NMCBA [New Mexico's Credit Bureaus Act], and I find no grounds to support such a theory in this case. In interpreting a preemption clause, courts “‘must give effect to [its] plain language unless there is good reason to believe Congress intended the language to have some more restrictive meaning.’” Am. Bankers Ass'n v. Gould, 412 F.3d 1081, 1086 (9th Cir.2005) (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983)). Courts also start with the presumption that Congress has not intended to preempt state law, because we assume “‘that the historic police powers of the States [are] not to be superseded by [federal legislation] unless that is the clear and manifest purpose of Congress.’” Id. (quoting Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992)).

In this case, the plain language of the FCRA only mentions claims “in the nature of defamation, invasion of privacy, or negligence”; it does not purport to preempt, or grant immunity from, every conceivable type of claim that could arise under a state statute. Accordingly, I conclude that the FCRA does not preempt Plaintiff's state-law claims under the NMCBA in this case.

W.D. Wis. Discusses Doctrine of Primary Jurisdiction

Per Peters v. Astrazeneca, LP, 417 F.Supp.2d 1051 (W.D.Wis., Mar. 3, 2006):

Next, defendants argue that the court should abstain from deciding this case in deference to the “primary jurisdiction” of the FDA. The doctrine of primary jurisdiction is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties and applies where a claim that is originally cognizable in courts “requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body,” United States v. Western Pacific R.R. Co., 352 U.S. 59, 63-64, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956). In deciding whether to apply the primary jurisdiction doctrine, a court should take into account the doctrine's two primary interests: resolving technical questions of fact through an agency's specialized expertise prior to judicial consideration of the legal claims and consistency and uniformity in the regulation of an area which Congress has entrusted to a specific agency. [citations omitted] In the past, the doctrine has been applied in matters that required the FDA's special expertise to resolve an issue in the first instance. [citations omitted] . . . .

In this case, it is unclear what issues, if any, defendants want the FDA to resolve. In their reply brief, defendants allege that the FDA considered whether to require defendants to warn against special senses damages, but decided not to require that warning when it approved Prilosec for over-the-counter sale. Defs.' Reply Br., at 2-3. Even assuming that this is true, it demonstrates only that the FDA has already had an opportunity to pass on the issue in the first instance. However, “[a]n FDA determination that a warning is not necessary may be sufficient for federal regulatory purposes but still not be sufficient for state tort law purposes.” [citation omitted]

Furthermore, plaintiff's claims are grounded in state tort law. Although the issues plaintiff raises require some technical analysis, questions such as whether Prilosec is a defective product, whether defendants breached any duties owed to the plaintiff by failing to give adequate warnings and whether the plaintiff's injuries were caused by defendants' conduct are legal questions that fall within the conventional experience of judges, not administrative agencies. Defendants fail to show how this case is any different from the thousands of other personal injury suits regularly decided by courts.

Finally, plaintiff seeks monetary damages only. A court may refuse to invoke primary jurisdiction when a plaintiff is seeking damages for injury to his property or person, as this is the type of relief courts routinely evaluate. Ryan v. Chemlawn Corp., 935 F.2d 129, 131 (7th Cir.1991) (lower court improperly invoked primary jurisdiction doctrine when plaintiff sought monetary damages only). The FDA does not have authority to grant the compensatory or punitive damages sought by plaintiff in this case.

Because I do not find that the doctrine of primary jurisdiction is applicable to this case, defendants' motion to dismiss will be denied with respect to their request that the court abstain from hearing this case in deference to the FDA.

Friday, April 21, 2006

N.D. Illinois Holds that Plaintiffs Are Not Required to Meet Heightened Pleading Standard of PSLRA when Alleging Negligence

Per Blau v. Harrison, Slip Copy, 2006 WL 850959 (N.D. Ill. Mar. 24, 2006):

Defendants contend that both the Private Securities Litigation Reform Act's [(PLSRA)] heightened pleading standards and the heightened pleading requirements of Federal Rule of Civil Procedure 9(b), apply to Plaintiffs' Section 14(a) claims. Defendants argue that Blau's Section 14(a) claims must plead with particularity facts that give rise to a strong inference of negligence on the part of all defendants. Defendants further argue that Plaintiffs' Complaint fails to meet the heightened standards as it fails to state with particularity facts giving a strong inference of negligence. Further, in its allegations based upon “information and belief,” the Complaint fails to state with particularity all facts on which that belief is formed as required by the PSLRA. 15 U.S.C. § 78u-4(b)(1).

Plaintiffs respond that its Section 14(a) claims are sufficiently pled pursuant to Federal Rule of Civil Procedure 8(a). Plaintiffs argue that because the Complaint purports that Defendants acted with negligence, not fraud, the heightened pleading requirements of the PSLRA are not implicated. Thus, Plaintiff contends that its Complaint is sufficiently pled in accordance with Fed. R. Civ. Pro. 8(a) as the Complaint neither alleges intentional conduct, nor does the Complaint “sound in fraud.”

. . .

. . Plaintiffs' Complaint sets forth a Section 14(a) claim alleging that Defendants acted negligently; thus, they need not plead fraud at all, let alone fraud with particularity. Simply, Plaintiffs' Section 14(a) allegations are not required to meet the PSLRA particularity requirements because these claims are based on averments of negligence. Plaintiffs allege that the Defendants acted negligently in not revealing the “no premium” offer which resulted in shareholders voting on the proxy without benefit of the knowledge of the alternative offer. Plaintiffs charge that this material omission/misrepresentation from this proxy statement caused them injury, and that the proxy solicitation itself was an essential link in the transaction. Specifically, the Complaint alleges that the Proxy Statement was materially misleading because “it failed to disclose material facts about Mr. Dimon's offer on behalf of Bank One to engage in a transaction with no premium for Bank One shareholders.” The Complaint further alleges that Defendants were negligent in disseminating the Proxy Statement containing the materially false and misleading statements. The Complaint also states that each shareholder has been damaged “··· as a direct and proximate result of such violations because they were denied an opportunity to make an informed decision in response to the proposed transaction with respect to the Merger premium ···” Accordingly, the Court finds that Blau's Complaint sufficiently pled violations of Section 14(a).

Thursday, April 20, 2006

Federal Circuit Clarifies When Business Conducted by Licensee in Forum State Subjects Licensor to Personal Jurisdiction

Per Breckenridge Pharmaceutical, Inc. v. Metabolite Laboratories, Inc.. --- F.3d ---, 2006 WL 895208 (Fed. Cir. Apr. 7, 2006):

The district court correctly stated this court's law that personal jurisdiction may not be exercised constitutionally when the defendant's contact with the forum state is limited to cease and desist letters, "without more." However, the district court erred in concluding that Metabolite's attorney letters represented the extent of its contacts with Florida. In several prior decisions, we have attempted to clarify what "other activities" permit a district court to exercise personal jurisdiction over an out-of-state defendant in compliance with due process, but cases like the present indicate that there is a need in the district courts for clearer guidance on this issue.

. . .

In sum, our case law has held as follows: where a defendant has sent cease and desist letters into a forum state that primarily involve a legal dispute unrelated to the patent at issue, such as an injunction obtained for misappropriation of trade secrets, the exercise of personal jurisdiction is improper. Silent Drive, 326 F.3d at 1202. Likewise, a defendant may not be subjected to personal jurisdiction if its only additional activities in the forum state involve unsuccessful attempts to license the patent there. Hildebrand, 279 F.3d at 1356. The same is true where the defendant has successfully licensed the patent in the forum state, even to multiple non-exclusive licensees, but does not, for example, exercise control over the licensees' sales activities and, instead, has no dealings with those licensees beyond the receipt of royalty income. Red Wing Shoe, 148 F.3d at 1357-58.

In contrast, the defendant is subject to personal jurisdiction in the forum state by virtue of its relationship with its exclusive forum state licensee if the license agreement, for example, requires the defendant-licensor, and grants the licensee the right, to litigate infringement claims. Akro, 45 F.3d at 1546. Finally, the defendant will also be subject to personal jurisdiction in the forum state if the exclusive licensee (or licensee equivalent) with which it has established a relationship is not headquartered in the forum state, but nonetheless conducts business there. Genetic Implant, 123 F.3d at 1457-59.

. . .

Here, in addition to sending letters into the forum state, which we presume qualify as "cease and desist" letters, Metabolite has entered into an exclusive license with PamLab, a company that, while not headquartered or incorporated in Florida, conducts business in Florida. As part of the license agreement, Metabolite granted PamLab the right to sue for patent infringement with Metabolite's written consent, and the parties agreed to "discuss in good faith the appropriate action, if any, with respect to third party infringers of the Licensed Patents, and to cooperate reasonably in any enforcement actions". Metabolite granted PamLab "full control of the prosecution or maintenance" of any patent or application that Metabolite abandons or permits to lapse and agreed to provide PamLab with an executed power of attorney for that purpose. . . . That this exclusive license agreement not only contemplated an ongoing relationship between PamLab and Metabolite beyond royalty payments but has actually resulted in such a relationship is obvious from the facts of this case. Metabolite coordinates with PamLab in sending cease and desist letters and in litigating infringement claims in Florida and elsewhere and, as is the case here, licensor and licensee are often represented jointly by counsel. As such, we hold that, through its relationship with PamLab, which sells products in Florida, Metabolite has purposefully availed itself to the privilege of conducting activities within Florida.

Wednesday, April 19, 2006

Fifth Circuit holds New Action Commences with New Defendant Under CAFA

Per Braud v. Transp. Serv. Co. of Ill., --- F.3d ----, 2006 WL 880051 (5th Cir. Apr. 6, 2006):

A distinct issue, however, is whether an amendment of the complaint through the addition of a new defendant “commences” a new suit for purposes of CAFA. . . .

. . .

We agree with the Seventh Circuit that amendments that add a defendant “commence” the civil action as to the added party. We reach this conclusion based on two considerations, of which only the latter has been discussed by that court.

First, the district court's remark that “there's no specific language in the CAFA legislation itself ··· that would support that position that if a new party was added [post-CAFA to a pre-CAFA case then] CAFA would apply” misses the mark. Precisely because CAFA does not define “commencement” of an action, it is obvious that CAFA is not intended to replace caselaw deciding when a lawsuit is considered “commenced” as to a new defendant.

. . .

Second, we agree with the Knudsen I court that the addition of a new defendant “opens a new window of removal” under 1446(b). Section 1446(b) indicates that a case that was previously non-removable can become removable when a new party is added. As explained in Wright, Miller & Cooper, supra, § 3732 at 311-48, § 1446(b) “supplements the thirty-day removal period described in the first paragraph of the provision,” which covers only the period for effecting removal to federal court following the “receipt or filing” of the initial pleading.

. . .

. . . Therefore, as to the new defendant, removability is determined as of the date of receipt of service of the amended complaint, not as of the date on which the original suit was filed in state court.

. . .

. . . [A] new defendant can remove even if the plaintiff decided to add it more than one year after the initial suit. Therefore, there is no indication that the time when the initial suit was filed has any relevance as to when an action “commences” under CAFA for an amendment adding a new defendant. Rather, the correct approach is that used in Adams, Martinez, and Miller, which, because of concerns regarding notice and limitations, looked at commencement as to a new defendant as of the date of service of the amended pleading (or receipt of that pleading under 1446(b)).

Thus, although “an amendment of the complaint will not revive the period for removal if a state court case previously was removable but the defendant failed to exercise his right to do so,” a different result generally is reached if the pleading amendment provides (1) a “new basis for removal” or (2) “changes the character of the litigation so as to make it substantially a new suit.” 14C Wright, Miller & Cooper, supra, § 3732 at 311-48.

Tuesday, April 18, 2006

American University Law Review Publishes Article on Private Rights of Action Under Federal Securities Law

American University Law Review has just published an article by Jeffrey T. Cook entitled Recrafting the Jurisdictional Framework for Private Rights of Action Under the Federal Securities Law 55 Am. Univ. L. Rev. 621 (2006), which discusses jurisdictional inconsistencies in federal securities law. Here’s an excerpt from the Introduction:

Congress recently enacted the Class Action Fairness Act of 2005 ("CAFA") to expand federal jurisdiction over class action lawsuits. Congress was particularly alarmed by the targeting of plaintiff-friendly jurisdictions in state courts for the determination of lawsuits of national scope and interest. This type of forum shopping has thrived in recent years in the securities context. Stemming from the largest corporate frauds in history such as Enron and WorldCom, lawsuits have proliferated in state courts across the country for the sole purpose of avoiding federal court jurisdiction. Despite addressing these very concerns in the general class action context, Congress curiously exempted the federal securities laws from the provisions of CAFA. The explanation is apparent: an underappreciation of the overly nuanced jurisdictional framework for private rights of action under the federal securities laws.

Private rights of action have been an integral part of the federal securities enforcement scheme since its original formulation in the wake of the stock market crash of 1929. These provisions are, in essence, a means of investor protection. With the ebbs and flows of the securities markets, however, investor protection has been a fluctuating concept in the eyes of Congress. In bad times, investors merit protection from corporate wrongdoers and securities professionals manipulating the markets. In good times, investors become the pawns of plaintiffs' lawyers seeking to exploit their clients' misfortunes for their own gains. Under these competing forces, the evolution of the private rights of action under the federal securities laws is far from a model of clarity or consistency.

. . .

. . . Part I of this Article provides an overview of the sequence of legislation that has shaped private securities actions and, more specifically, their jurisdictional provisions. That sequence comprises: (1) the 1933 Act and the "interrelated" provisions of the 1934 Act; (2) the substantial revisions to private securities litigation in the 1990s in the PSLRA and SLUSA; and (3) the recent enactments of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act") and CAFA which, despite having less direct impact on private securities litigation, suggest how to remedy the federal securities jurisdictional framework in a manner consistent with current legislative intent.

Part II discusses recent judicial interpretations of the non-removal provision of the 1933 Act in light of its amendment by SLUSA. Courts have had to grapple with not only how to interpret the plain language of the amendment (especially in light of clear legislative intent to the contrary), but also how to minimize the actual exploitation of its loopholes as highlighted in the massive litigation generated by the likes of Enron and WorldCom. Judicial uncertainty on both issues--coupled with the expanse and impact of the exploitation--highlight the need for immediate legislative reform in the manner proposed here.

Part III details a proposed amendment to the non-removal provision of the 1933 Act as a means of harmonizing the overall jurisdictional framework for private rights of action under the federal securities laws. Specifically, the non-removal provision should be amended to permit removal of those 1933 Act claims which "sound in fraud"--that is, those premised on allegations of fraudulent conduct. This proposal has a number of advantages. First, the proposal reinforces a growing trend in federal securities litigation and jurisprudence to apply certain federal procedural and securities provisions to claims of fraud in both form and substance. Second, the proposal would make the federal securities jurisdictional framework consistent with various expressions of legislative intent by: (1) preserving a plaintiff's choice of forum as presumably intended in the original enactment of the non-removal provision in 1933; (2) curtailing the forum shopping targeted--but thus far missed--in the PSLRA and SLUSA in the 1990s; and (3) reflecting a number of the measures recently implemented in CAFA in 2005. Third, this proposal would nullify yet another byproduct of forum shopping: piecemeal litigation of "otherwise non-removable" claims under Section 1441(c) of the general removal statutes. Fourth, the proposal would promote both judicial economy and fairness to investors by streamlining the "race for [the] assets" in securities fraud litigation under uniform standards in federal court.

Monday, April 17, 2006

Wake Forest Law Review Publishes Article on Personal Jurisdiction over Nonresident Alien Defendants

The Wake Forest Law Review has just published an article by Prof. Austen L. Parrish entitled Sovereignty, Not Due Process: Personal Jurisdiction over Nonresident Alien Defendants, 41 Wake Forrest L. Rev. 1 (2006), which discusses whether due process or sovereignty in international law is the basis for personal jurisdiction over nonresident aliens. Here’s the abstract:

The Due Process Clause, with its focus on a defendant's liberty interest, has become the key, if not only, limitation on a court's exercise of personal jurisdiction. This due process jurisdictional limitation is universally assumed to apply with equal force to alien defendants as to domestic defendants. With few exceptions, scholars do not distinguish between the two. Neither do the courts. "Countless cases assume that [foreigners] have all the rights of U.S. citizens to object to extraterritorial assertions of personal jurisdiction."

But is this assumption sound? This Article explores the uncritical assumption that the same due process considerations apply to alien defendants as to domestic defendants in the personal jurisdiction context. It concludes that the current approach to personal jurisdiction over foreign defendants is doctrinally inconsistent with broader notions of American constitutionalism. The inconsistency is particularly stark given recent Fifth Amendment jurisprudence, including those cases involving Guantánamo Bay detainees. The limits on a court's power to assert extraterritorial personal jurisdiction over alien defendants derive not from the Due Process Clause, as commonly assumed, but from the inherent attributes of sovereignty under international law. The Article concludes by suggesting two frameworks for determining when a court may exercise personal jurisdiction over a nonresident, alien defendant. For theoretical coherence and pragmatic reasons, the Court should untether the personal jurisdiction analysis from the Constitution in international cases. Sovereignty, not due process, limits a U.S. court's extraterritorial assertion of personal jurisdiction.

Friday, April 14, 2006

Ninth Circuit Holds CAFA Does Not Shift Burden to Plaintiff to Prove No Removal Jurisdiction

Per Abrego v. Dow Chemical Co., --- F.3d ----, 2006 WL 864300 (9th Cir. Apr. 4, 2006):

Dow maintains that under CAFA and contrary to preexisting removal jurisdiction law: (1) plaintiffs bear the burden of refuting the district court's removal jurisdiction. . . . The disputes between the parties on these discrete issues reflect a larger disagreement over whether the changes wrought by CAFA generally are limited to those enunciated in CAFA's text, or whether courts should infer a broader transformation of jurisdictional principles than the statutory language indicates.

. . .

Dow points to no language in CAFA to support its argument. That is not surprising for, as the Seventh Circuit noted in rejecting the position Dow supports, there simply is no such language in the statute regarding the burden as to remand. See Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 448 (7th Cir.2005) (noting that none of CAFA's language "is even arguably relevant" to this burden-shifting argument).

Instead, Dow relies on language from a Senate Judiciary Committee Report (the "Committee Report"), issued ten days after CAFA's passage into law, which states: "If a purported class action is removed pursuant to these jurisdictional provisions, the named plaintiff(s) should bear the burden of demonstrating that the removal was improvident (i.e., that the applicable jurisdictional requirements are not satisfied)." S.Rep. No. 109-14, at 42 (Feb. 28, 2005), as reprinted in 2005 U.S.C.C.A.N. 3, 40. Dow is correct that consideration of legislative history is appropriate where statutory language is ambiguous. Ambiguity, however, is at least a necessary condition. See Exxon Mobil, 125 S.Ct. at 2626 ("Extrinsic materials have a role in statutory interpretation only to the extent they shed a reliable light on the enacting Legislature's understanding of otherwise ambiguous terms."); Garcia v. United States, 469 U.S. 70, 76 n. 3 (1984) (" 'Resort to legislative history is only justified where the face of the Act is inescapably ambiguous ....' " (quoting Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 395- 96 (1951) (Jackson, J., concurring)).

In this instance, the statute is not ambiguous. Instead, it is entirely silent as to the burden of proof on removal. Faced with statutory silence on the burden issue, we presume that Congress is aware of the legal context in which it is legislating. See Cannon v. Univ. of Chi., 441 U.S. 677, 696-97 (1979) ("It is always appropriate to assume that our elected representatives, like other citizens, know the law...."); United States v. LeCoe, 936 F.2d 398, 403 (9th Cir.1991) ("Congress is, of course, presumed to know existing law pertinent to any new legislation it enacts.").

. . .

The legal context in which the 109th Congress passed CAFA into law features a longstanding, near-canonical rule that the burden on removal rests with the removing defendant. See Gaus, 980 F.2d at 566-67; Sanchez, 102 F.3d at 402. More generally, "[i]t is to be presumed that a cause lies outside [the] limited jurisdiction [of the federal courts] and the burden of establishing the contrary rests upon the party asserting jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (internal citations omitted).

As we have noted, CAFA contains a series of modifications of existing principles of federal subject matter jurisdiction, both statutory and judge-created. CAFA thus evidences detailed appreciation of the background legal context. Given the care taken in CAFA to reverse certain established principles but not others, the usual presumption that Congress legislates against an understanding of pertinent legal principles has particular force.

. . .

The traditional rule of burden allocation in determining removal jurisdiction was meant to comport with what the Supreme Court has termed "[t]he dominant note in the successive enactments of Congress relating to diversity jurisdiction," that is, "jealous restriction, of avoiding offense to state sensitiveness, and of relieving the federal courts of the overwhelming burden of 'business that intrinsically belongs to the state courts' in order to keep them free for their distinctive federal business." Indianapolis v.. Chase Nat'l Bank, 314 U.S. 63, 76 (1941); see Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108 (1941) (noting that "[n]ot only does the language of the Act of 1887 evidence the Congressional purpose to restrict the jurisdiction of the federal courts on removal, but the policy of the successive acts of Congress regulating the jurisdiction of federal courts is one calling for the strict construction of such legislation"). This rule of restriction extends to removal jurisdiction, especially insofar as it is based on the diversity jurisdiction of the federal courts. See Syngenta Crop Prot., 537 U.S. at 32 ("The right of removal is entirely a creature of statute and 'a suit commenced in a state court must remain there until cause is shown for its transfer under some act of Congress.' These statutory procedures for removal are to be strictly construed." (internal citation omitted)); Gaus, 980 F.2d at 566 ("The 'strong presumption' against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper."); see also Gould v. Mutual Life Ins. Co. of N.Y., 790 F.2d 769, 773 (9th Cir.1986) ( "Removal jurisdiction is statutory and strictly construed.").

We therefore hold that under CAFA the burden of establishing removal jurisdiction remains, as before, on the proponent of federal jurisdiction. In Brill, the Seventh Circuit--the only circuit that has addressed the burden of proof question under CAFA--came to the same conclusion. Brill emphasized that the single passage of legislative history upon which Dow now relies, "does not concern any text in the bill that eventually became law." 427 F.3d at 448. . . .

Thursday, April 13, 2006

Supreme Court Action: Rules and Amendments Approved

From the Federal Rulemaking Homepage:

On April 12, 2006, the Supreme Court of the United States approved the following new rules and amendments to the Federal Rules of Appellate, Bankruptcy, Civil (including the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions), and Criminal Procedure, and the Federal Rules of Evidence:

-Appellate Rule 25 and new Appellate Rule 32.1;
- Bankruptcy Rules 1009, 5005, 7004;
- Civil Rules 5, 9, 14, 16, 24, 26, 33, 34, 37, 45, 50, and 65.1; new Civil Rule 5.1; Civil Form 35; and Supplemental Rules A, C, and E, and new Supplemental Rule G;
- Criminal Rules 5, 6, 32.1, 40, 41, and 58; and
- Evidence Rules 404, 408, 606, and 609.

(Approved new Appellate Rule 32.1 only applies to decisions issued on or after January 1, 2007.)

The new rules and amendments have been transmitted to Congress and will take effect on December 1, 2006, unless Congress enacts legislation to reject, modify, or defer the amendments.

It is worth noting that the changes to the FRCP include the e-discovery amendments

Wednesday, April 12, 2006

Legal Affairs Features Debate on Daubert and Litigant-Funded Science

The Debate Club over at Legal Affairs features a debate between Michael L. Martinez and Jay P. Kesan entitled "Judges in Lab Coats?" The Debate has as its central question, "Should evidence from commissioned scientific studies be banned? If not, do trial judges following Daubert need more guidance about how to evaluate mercenary research and, if so, what kind?" Here's the introduction to the Debate:

"In 1993, the Supreme Court decision in the Daubert case changed how scientific evidence is presented in federal court. Under Daubert, the trial judge serves as a gatekeeper for the types of expert evidence that may be admitted, instead of the jury evaluating the evidence on its own. Many legal academics and tort lawyers have claimed that, since then, there has been a perverse incentive for defendants (chemical and pharamaceutical companies are often cited) to fund "scientific" studies to be used in litigation, studies that often come to conclusions opposite those reached in peer-reviewed research. As a result, drugs have been allowed that increase risks of cancer and pose other safety problems, according to critics. Even if this mercenary research can't disprove the peer-reviewed studies, it can create enough of an appearance of uncertainty about key evidence to sway a courtroom."

The full debate can be accessed by clicking here.

Tuesday, April 11, 2006

Foreign Intelligence Surveillance Act (FISA) Procedures Published for Public Comment

From the Federal Rulemaking Homepage:

The FISA Court proposes to adopt procedures for reviewing petitions filed under §501(f) of FISA.

The procedures are proposed in accordance with §106 of the USA Patriot Improvement and Reauthorization Act of 2005, and are available by clicking the following link,

Comments may be submitted electronically and are due by 5:00 p.m.(Eastern) on Wednesday, April 19, 2006.

Monday, April 10, 2006

Second Circuit Holds that District Court Abused Discretion in Denying Request for Attachment Order

Per Capital Ventures Intern. v. Argentina, --- F.3d ----, 2006 WL 759752 (2d Cir. Mar. 23, 2006):

The question . . . is whether the district court erred in denying CVI's application [for attachment order]--despite the fact that all statutory requirements were satisfied-- based on its view that CVI was unlikely to realize any money from attachment and, perhaps, that granting the order could have generated confusion surrounding the Exchange Offer.

. . .

. . . [A] motion court presented with an application for an order of attachment must determine whether a statutory ground for attachment exists, whether the applicant has established a likelihood of success on the merits, and whether the remedy is needed to secure payment or obtain jurisdiction. It has discretion to the extent that these determinations require weighing of evidence and also in balancing competing considerations. It will be held to have abused that discretion only if it "applies legal standards incorrectly or relies upon clearly erroneous findings of fact, or proceed[s] on the basis of an erroneous view of the applicable law." Register.Com, Inc. v. Verio, Inc., 356 F.3d 393, 398 (2d Cir.2004) (internal citation and quotation marks omitted). Where, however, a statutory ground for attachment exists and both need and likelihood of success are established, its discretion does not permit denial of the remedy for some other reason, at least absent extraordinary circumstances and perhaps even then. As one court explained,

"though an attachment is an extraordinary remedy, which may be greatly abused by designing men--a remedy not known to the common law, and one, therefore, which courts should watch with scrupulous jealousy, inasmuch as its effects are so destructive to individual credit, and being one which clothes the creditor with such extraordinary power over his debtor's estate, that it should only be granted upon full and satisfactory evidence that the application is well founded--still, when a creditor fairly brings himself, by his application, within the spirit and intent of the statute authorizing this remedial and provisional." Rowles v. Hoare, 61 Barb. 266 (Sup.Ct.N.Y.Co.1870) (emphasis added).

. . .

In this case, CVI satisfied each of the requirements of Sections 6201 and 6212 and demonstrated a need for attachment as required by Section 6223. That being so, the district court erred to the extent it denied relief because it considered CVI's chances of realizing on the Principal Collateral to be remote.

Friday, April 07, 2006

Eleventh Circuit Holds that Class Certification for ERISA Action Is Inappropriate Where Each Individual Must Prove Reliance

Per Heffner v. Blue Cross, --- F.3d ----, 2006 WL 784782 (11th Cir. Mar. 29, 2006):

. . . [I]n order to be entitled to relief each class member must prove that he relied on the no deductible term of his plan's [summary plan description (SPD)] where the other plan documents do provide that there is a calendar year deductible. In a variety of contexts, we have held that the reliance element of a class claim presents problems of individualized proof that preclude class certification. See, e.g., Sikes v. Teleline, Inc., 281 F.3d 1350, 1361-63 (11th Cir.2002) (reversing Rule 23(b)(3) class certification of civil RICO claim in part because the district court erred in presuming reliance); Andrews v. Am. Tel. & Tel. Co., 95 F.3d 1014, 1023-24 (11th Cir.1996) (reversing certification of Rule 23(b)(3) class action asserting mail and wire fraud claims on grounds of unmanageability in part because each plaintiff would be required to prove reliance which meant that the claims were "not wholly subject to class-wide resolution"); Hudson v. Delta Air Lines, Inc., 90 F.3d 451, 457 (11th Cir.1996) (affirming denial of class certification based on lack of commonality prerequisite of Rule 23(a)(2) because reliance element of ERISA claims was "not susceptible to class-wide proof"). Although this Court has not determined that individual reliance issues weigh against Rule 23(b)(2) certification, the Fifth Circuit has. See Bolin v. Sears, Roebuck & Co., 231 F.3d 970, 978 (5th Cir.2000) (concluding that "individual findings of reliance necessary to establish RICO liability and damages preclude ... (b)(2) certification"). We agree with the Bolin decision.

Even if Heffner proves that he purchased prescription drugs in reliance on the Funding Plus SPD's calendar year deductible provision, only he will be entitled to relief on that proof. Other class members will not. "[F]inal injunctive relief or corresponding declaratory relief with respect to the class as a whole" would not be warranted. See Fed.R.Civ.P. 23(b)(2); see also Jones v. Am. Gen. Life & Accident Ins. Co., 213 F.R.D. 689, 702 (S.D.Ga.2002) (refusing to certify class under Rule 23(b)(2) "[b]ecause each individual's reliance would be in question" and "there would be no way to say with any certainty that the same relief would be appropriate for all class members").

As we have explained, "the claims contemplated in a(b)(2) action are class claims, claims resting on the same grounds and applying more or less equally to all members of the class." Holmes v. Continental Can Co., 706 F.2d 1144, 1155 (11th Cir.1983). Moreover, the forms of relief available in Rule 23(b)(2) class actions are in the nature of group remedies that benefit the entire class. See Cooper, 390 F.3d at 720 ("the basic premise of ... a [Rule 23(b)(2)] class action [is] that class members suffer a common injury properly addressed by class-wide equitable relief"); Murray, 244 F.3d at 812 (vacating Rule 23(b)(2) class certification because plaintiffs' claim for compensatory damages predominated over class's claim for equitable relief where plaintiffs "[did] not seek damages as a group remedy" but "[i]nstead ... [sought] damages as a remedy for their alleged individual pain and suffering") (quotation marks and citations omitted); Holmes, 706 F.2d at 1155 n. 8 ("Injuries remedied through (b)(2) actions are really group, as opposed to individual injuries.") (quotation marks and citation omitted). Certification under Rule 23(b)(2) is proper when the relief sought necessarily affects all class members. See Holmes, 706 F.2d at 1157.

Success by the class representative in this case, however, will not result in relief to other class members. That is because, in order to be entitled to the relief that the class seeks, each plaintiff must prove reliance on the SPD of his or her plan. Injunctive or declaratory relief, and any other equitable relief based on it, will not automatically flow to the class "as a whole" even if Heffner succeeds in proving reliance on his SPD. Accordingly, we hold that it was abuse of discretion to certify under Rule 23(b)(2) the plaintiffs' ERISA claims seeking individualized relief for Blue Cross' imposition of the calendar year deductibles. Cf. In re Elec. Data Sys. Corp. "ERISA" Litig., 224 F.R.D. 613, 629 (E.D.Tex.2004) (certifying ERISA breach of fiduciary duty class action brought on the plan's behalf under Rule 23(b)(2) because "monetary relief will go to the Plan itself" and "is in the nature of a group remedy").

Thursday, April 06, 2006

D.C. Circuit Upholds Denial of Class Certification in Hispanic Farmer Discrimination Suit for Lack of Commonality

Per Garcia v. Johanns, --- F.3d ----, 2006 WL 825015 (D.C. Mar. 31, 2006):

First, the appellants contend that the district court erred in denying class certification of their discriminatory treatment claim based on the geographic spread of the local decisionmakers, labeling it a "pattern and practice" claim, see Appellants' Br. at 40. But see Garcia I, 211 F.R.D. at 22 ("Commonality is defeated ... by the large numbers and geographic dispersion of the decision-makers ...."). As with a Title VII claim, to establish a charge of pattern and practice discrimination under ECOA [Equal Credit Opportunity Act], a putative class must prove that "discrimination was the company's standard operating procedure--the regular rather than the unusual practice." Bazemore v. Friday, 478 U.S. 385, 398, 106 S.Ct. 3000, 92 L.Ed.2d 315 (1986) (quoting Teamsters v. United States, 431 U.S. 324, 336, 97 S.Ct. 1843, 52 L.Ed.2d 396 (1977)). Similarly, to show commonality under Federal Rule of Civil Procedure 23(a)(2), the plaintiff must "make a significant showing to permit the court to infer that members of the class suffered from a common policy of discrimination that pervaded all of the [defendant's] challenged ... decisions." Hartman, 19 F.3d at 1472.

"As is now well recognized, the class action commonality criteria are, in general, more easily met when a disparate impact rather than a disparate treatment theory underlies a class claim." Stastny v. S. Bell Tel. & Tel. Co., 628 F.2d 267, 274 n. 10 (4th Cir.1980). Establishing commonality for a disparate treatment class is particularly difficult where, as here, multiple decisionmakers with significant local autonomy exist. Id. at 278-80 (reversing class certification because of geographic separation of workforce and autonomy of local decisionmakers); see also Cooper, 390 F.3d at 715. The appellants failed to identify any centralized, uniform policy or practice of discrimination by the USDA that formed the basis for discrimination against Hispanic loan applicants with varied eligibility criteria in over 2,700 counties nationwide over a 20-year period. Rather, despite the appellants' allegation that the USDA's actions are those of a "single actor," their claims arise from multiple individual decisions made by multiple individual committees. Moreover, they do not cite a single reversal of a district court's denial of class certification based on no commonality resulting from the geographic spread of the decisionmakers. Cf. Stastny, 628 F.2d at 278-79 (district court abused discretion in certifying class of employees spread through "great number of geographically dispersed facilities" with "almost complete local autonomy"). Our standard of review is deferential and the appellants have failed to convince us that the district court abused its discretion in denying class certification to the appellants' alleged disparate treatment class.

Harvard Journal on Legislation Publishes Article on Why Reliance Should be an Essential Element of Consumer Fraud Class Action Suits

The Harvard Journal of Legislation has just published an article by Prof. Sheila B. Scheuerman entitled The Consumer Fraud Class Action: Reining in Abuse by Requiring Plaintiffs to Allege Reliance as an Essential Element, 43 Harv. J. on Legis. 1 (2006), which discusses the need for reliance as an element of consumer fraud class action suits to be considered at certification of the class. Here is an excerpt from the Introduction:

This Article argues that the recent rise in consumer fraud class action lawsuits is tied to the concomitant failure of many state courts to require reliance during class certification. In particular, it contends that the lack of a reliance requirement creates incentives for plaintiffs' attorneys to bring consumer fraud class action suits without ever alleging that the consumers relied on, and hence that they were damaged by, the alleged misrepresentation, all in the hopes of forcing a settlement. The Article also provides a detailed history of the FTC, the subsequent rise in state consumer fraud statutes, and the early failure of both federal and state government agencies to adequately pursue violations of these laws. It then asserts that this failure and the subsequent rise of public law tort theory led state courts to slowly chip away at the element of reliance in a misguided attempt to provide adequate deterrence. However, now that both the FTC and state attorneys general enforce these consumer protection laws with more vigor, the Article concludes that requiring reliance for the resolution of private suits, while not requiring it in cases of public enforcement, creates the correct balance of individual justice and deterrence.

. . .

Recent attempts at reform, such as the Class Action Fairness Act of 2005, which principally addresses the appropriate forum for class litigation and imposes limits on types of settlements, will do little to stem the tide of such suits. Before the Class Action Fairness Act became law, for instance, Yale law professor George Priest explained to President Bush that the bill was "not going to solve the problem." Rather, the solution, according to Priest, required tighter application of the liability standards underlying a proposed class. This Article attempts to fill the gap identified by Professor Priest by offering substantive guidance on how to fix the underlying liability rules in misrepresentation class actions: courts should treat fraud like fraud and require plaintiffs to allege "reliance" as an essential element of a consumer misrepresentation case.

Part I of this Article describes the new "misrepresentation" action and explains why state consumer fraud statutes have become attractive class action vehicles. Part II examines the origins of the misrepresentation class action and describes how the forces that drove the creation of the consumer protection laws in the 1960s still serve as the backdrop for the current interpretation of the private damages action.

Part III examines modern consumer fraud suits brought by the government and contrasts the standards applicable to government suits with those applicable to private actions. It explains how courts have embraced the public purpose of a government suit--deterrence and punishment--in interpreting private consumer fraud statutes and have abandoned the traditional tort requirement of reliance-causation.

Part IV describes the "public tort law" theory that has contributed, in large part, to the abandonment of reliance-causation by state courts. It contrasts "public law" theory with the traditional understanding of the tort system as a means of providing redress and shows how public law theory provides an interpretative foundation for understanding the relaxation of reliance-causation requirements in misrepresentation class action suits.

Finally, Part V argues that the historical forces that led to the creation of the consumer class action--and the "public law" approach to these statutes-- should no longer provide the interpretative framework for misrepresentation cases. Requiring reliance for private suits achieves the proper balance of public and private resources: allowing government agencies to seek restitution and injunctive relief where there is no consumer reliance and letting private litigants seek damages where reliance provides a causal connection between the defendant's conduct and the injury. Part V concludes that reinstating the traditional reliance requirement is an appropriate and simple fix that would restore the balance between public enforcement and private litigation.

Wednesday, April 05, 2006

Ninth Circuit Holds 11 Amendment Does Not Shield State from Class Action Seeking Return of Unconstitutionally Seized Property

BNA’s Class Action Litigation (Volume 07 Number 06, Fri., Mar. 24, 2006, Page 1, ISSN 1529-8000) is reporting on Suever v. Connell--- F.3d ----, 2006 WL 618869 (9th Cir. Mar. 14, 2006):

The 11th Amendment does not shield the California controller from a class action by persons seeking return of property that was unconstitutionally seized under the state's escheat scheme. . . .

The Circuit Court stated:

The Eleventh Amendment does not bar the class's claims insofar as the claims request the return of the class's property. This court in Taylor held that the Eleventh Amendment did not apply to funds that had been escheated, but not permanently escheated, because the State held such funds in custodial trust for the benefit of property owners-the funds were not State funds. Id. at 931 (“Before California escheated property is ‘permanently’ escheated, it is like a car that is towed and held in an impound lot. The car is in the custody of the impounding government, but it is held for its owner, if one turns up.”). Claims requesting the return of individuals' property are less likely to offend a state's sovereign immunity than claims requesting the payment of government funds. See id. at 932-35. Hence, although the Eleventh Amendment ordinarily bars claims primarily requesting funds held in the State's coffers, sovereign immunity does not apply to claims alleging such funds are individuals' property that the State improperly seized through ultra vires or unconstitutional acts.

The full discussion is available to BNA subscribers by clicking here.

Tuesday, April 04, 2006

Fourth Circuit Holds that Class Action Not Superior Method Under Rule 23(b)(3) Compared to Adversarial Bankruptcy Proceeding

BNA’s Class Action Litigation (Volume 07 Number 06, Fri., Mar. 24, 2006, Page 184, ISSN 1529-8000) is reporting on Gregory v. Finova Capital Corp., --- F.3d ----, 2006 WL 619063 (4th Cir. Mar. 14, 2006):

A class of noteholders alleging securities law violations against the principal lender to the now-bankrupt note issuer should not have been certified. . . .

The suit does not meet Fed. R. Civ. P. 23(b)(3)'s requirement that a class action be the "superior method for the fair and efficient adjudication of the controversy," . . . because the securities fraud issues will have to be decided in a pending adversary proceeding in the issuer's bankruptcy.

The full discussion is available to BNA subscribers by clicking here.

Monday, April 03, 2006

Georgetown Law Journal Publishes Article on Comparative Civil and Criminal Procedure

Georgetown Law Journal has just published an article by Prof. David A. Sklansky and Prof. Stephen C. Yeazell entitled Compatative Law Without Leaving Home: What Civil Procedure Can Teach Criminal Procedure, and Vice Versa, 94 Geo. L.J. 683 (2006), which discusses the need for and benefits of comparative work contrasting civil and criminal procedure within the American judicial system. Here’s an excerpt from the introduction:

This is a plea for comparative work in civil and criminal procedure. . . . We argue [. . . for . . .] regularly contrasting American civil and criminal procedure with each other. This is a plea for comparative work in our own backyards. It seeks to demonstrate that such work has benefits, illuminating the significance of overlooked features and providing a more stable base for reform.

. . .

In the pages that follow we seek to demonstrate what is lost when civil and criminal process are treated as incomparable, and what is gained when they are not. The first Part of this Article provides some historical context. Although the divide between civil and criminal process is quite old, the current contours of that divide are not. One needs to go back only a century or so to find a world in which the chasm was far narrower than it is today. Revisiting that world helps to underscore the contingency of our current thinking about civil and criminal process and will provide the conceptual platform for the remainder of the Article.

The second Part of the Article describes four areas in which modern civil and criminal process address similar problems in starkly different ways-- settlement, finality, discovery, and remedies for failed process. In each of these areas, we suggest, criminal process and civil process each has something to teach the other. Civil settlement practice might profitably borrow from the tradition on the criminal side that case dispositions need judicial approval; criminal practice might learn from the tradition on the civil side of involving judges in the negotiations leading up to settlement. The notorious complexity of double jeopardy law could be alleviated--and the oddity of some of its features made more apparent--by more frequent comparison with civil doctrines of former adjudication. Civil discovery might benefit from some of the limiting mechanisms of criminal discovery; criminal discovery might profitably emulate, to some degree, the symmetry of civil discovery. And lessons can be learned from comparing the law of malpractice on the civil side with criminal doctrines regarding effective assistance of counsel.

The third and concluding Part of the Article discusses two areas-- evidence and professional ethics--in which civil and criminal rules are already more or less unified, and have been so for a relatively long time. In each of these fields, we argue, cross-fertilization between civil and criminal litigation has improved the rules applied in both sets of cases. Rules regarding expert testimony, for example, have benefited from the presumption that they should apply equally in civil and in criminal cases. The same is true of rules regarding the proper limits of zealous advocacy.

A final caveat is in order before we begin. This is a speculative Article, not a comprehensive program for reform. We think that comparing criminal and civil procedure can generate helpful insights and highlight overlooked possibilities, and we give examples of such insights and possibilities in the pages that follow. We do not claim that every possibility we identify deserves to be pursued, nor that we have identified all areas that might profitably be pursued. What we do claim, and what we hope our examples help to show, is that American civil and criminal process have things to teach each other.