Monday, July 31, 2006

Fifth Circuit Says Alleged Compliance With Federal Law is Insufficient to Dissolve Consent Decree

Per Frazar v. Ladd, --- F.3d ---, 2006 WL 2023106 (5th Cir. July 20, 2006):

[D]efendants moved pursuant to Rule 60(b)(5) to terminate the entire consent decree or, in the alternative, to dissolve the consent decree as to all urban areas of Texas. Defendants argued that they were in compliance with federal Medicaid law, therefore rendering the consent decree unnecessary, and its enforcement inequitable. Defendants argued that the ends of the consent decree had been met (i.e., compliance with the federal law), and it was no longer equitable that the judgment should have prospective application...

Plaintiffs argued that defendants were not entitled to Rule 60(b)(5) relief because: (1) compliance with federal law alone was insufficient to warrant dissolution of the consent decree; (2) defendants were not in compliance with federal law; (3) defendants had never attempted to comply, in good faith, with certain provisions of the consent decree; and (4) the objects of the consent decree had not been attained.

Defendants contend that the district court applied the incorrect legal standard for consent decree modification in institutional reform cases and argue that the district court failed to follow the Supreme Court's admonishments in Frew II [Frew ex rel. Frew v. Hawkins, 540 U.S. 431 (2004) (holding that Eleventh Amendment did not bar enforcement of consent decree)] regarding federalism, separation of powers, democratic accountability, and deference to those state officials responsible for administering public institutions and programs. The contention is that instead of following Frew II, the district court placed too much importance on the Rufo v. Inmates of the Suffolk County Jail, 502 U.S. 367 (1992) test for consent decree modification.


Defendants are seemingly attempting to re-litigate the claims underlying the Consent Decree. If the basis for a meritorious Rule 60(b) motion is that the claims underlying the consent decree are not meritorious, then parties to consent decrees would be permitted to file periodic Rule 60(b) motions asserting compliance with federal law and, in effect, continually re-litigate the underlying claims until a court determines the defendants are in compliance with federal law and the decree is dissolved. The party filing the Rule 60(b) motion would potentially be able to eliminate consent decree obligations, even if there is no attempted compliance with its legally enforceable terms, no showing that conformity to federal law makes compliance with the consent decree substantially more onerous or unworkable, and no showing that the requested relief is sufficiently tailored to the changed factual circumstances. See Rufo, 502 U.S. at 384-91; Cooper v. Noble, 33 F.3d 540, 545 (5th Cir.1994). It follows that the parties opposing dissolution would not enjoy the benefits for which they bargained or the judicially enforceable obligations upon which they relied in entering into the consent decree; and the parties seeking dissolution would paradoxically be entitled to equitable relief despite their inequitable behavior. A Rule 60(b) motion is not a vehicle by which Defendants may disregard the voluntary obligations contained in the Consent Decree, allow time to pass, and then litigate the underlying claims in hopes of never actually complying with [ ] its terms. If the Court wished the law to be that consent decrees must be dissolved if defendants comply with federal law, it would have expressly stated so. It did not. A rule of law based on a single factor (compliance with federal law) is the opposite of the Court's requirement of equitable flexibility. We hold that the district court properly determined that the applicable legal standard in this case came from Rufo and Cooper.

Friday, July 28, 2006

First Circuit Holds that Failure to Supplement Responses to Interrogatories Does Not Warrant New Trial

Per Colon-Millin v. Sears Roebuck De Puerto Rico, Inc., ---F.3d ---, 2006 WL 2008016 (1st Cir. July 19, 2006):

...Our review of the record reveals that the defendants did not comply with their obligation under Fed.R.Civ.P. 26(e)(2) to supplement their responses to the plaintiff's written interrogatories. This failure led to trial testimony that understandably surprised the plaintiff. Nevertheless, the plaintiff failed to respond to the surprise at trial in a manner that justifies a new trial. She did not object to the defense witnesses' testimony, and she did not request a continuance in order to respond or seek any other sanction for a discovery violation. Furthermore, the district court did not err in its jury instructions, and the plaintiff had the opportunity to state the grounds of her objections to the jury instructions on the record. We therefore conclude that the district court did not abuse its discretion in denying the plaintiff's motion for a new trial.

Thursday, July 27, 2006

Fifth Circuit Rejects Stream-of-Commerce Argument as Basis for Establishing Jurisdiction over Defendant Insurance Policy Issuer

Per Meadows v. Hartford Life Ins. Co., 429 F. Supp. 2d 853 (S.D. Tex. Apr 27, 2006) :

Plaintiff argues…that the McCamish Defendants "designed the COLI [corporate-owned life insurance] policies specifically for national corporations, [and] knew that the policies would be used to insure the lives of [Texas] employees," which was akin to delivering products into the "stream of commerce" with the knowledge that the products would be used in Texas. See Document No. 37 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980) (holding that jurisdiction may be asserted over a nonresident defendant when the defendant actually "delivers its products into the stream of commerce with the expectation they will be purchased by consumers in the forum state.")). However, the stream of commerce theory does not apply here, where the only "product" at issue was an insurance policy delivered to Camelot in Ohio, and where there is no allegation that any product was delivered to Plaintiff in Texas. Moreover, it is uncontroverted that the McCamish Defendants did not sell the insurance policy at issue, but instead provided administrative and policy design services in Georgia. [Citation omitted] The mere fact that Plaintiff, one of the covered employees under the Ohio-purchased Camelot policy, happens to be a Texas resident is insufficient to confer specific jurisdiction under a stream-of-commerce theory. See, e.g., Ham v. La Cienega Music Co., 4 F.3d 413, 416 n. 10 (5th Cir.1993) (even where defendants' activities connected them to Texas within the meaning of the stream-of-commerce cases, the contacts were insufficient to support jurisdiction given "at best a highly attenuated relationship" between the litigation and those activities).

Wednesday, July 26, 2006

8th Cir. BAP Imposes Sanctions on Creditor for "Frivolous" Appeal of Amended Bankruptcy Plan

Per In re Schachtele, 343 B.R. 661 (8th Cir. BAP May 11, 2006):

[W]hat makes these appeals particularly frivolous are the points that (i) Tina Livestock [an unsecured creditor] lacked standing to object to the amended plans and (ii) the issues on the merits of the objections were res judicata because the original Plan, containing the same treatment of creditors, was confirmed without being appealed. Counsel does not respond to the res judicata point at all. And, the only response offered by counsel on the fact that Tina Livestock lacked standing to object to the amended plans is that the bankruptcy court “ruled that counsel had standing when that issue was raised by Debtors' counsel” and that, had the bankruptcy court not ruled he had standing, counsel would not have been permitted to present his arguments.

We find this explanation to be unsatisfactory for several reasons. First, counsel does not cite to the record anywhere where the bankruptcy court ruled he had standing, and we could find none. The Orders confirming the amended plans are summary orders simply confirming the respective plans and do not address Tina Livestock's objections or its standing at all. Further, the parties did not submit the transcripts of the hearings on confirmation of the First or Second Amended Plans and, despite the fact that we expressly invited the parties to supplement the record to submit the transcript of the hearing on confirmation of the First Amended Plan, they declined to do so, with Tina Livestock expressly stating the only transcript it wished to submit was the one from the hearing on allowance of its late-filed claim.

. . .

We reiterate that the res judicata and standing issues are what particularly rendered these appeals frivolous and, because Tina Livestock's response to those issues are absent or unconvincing, we find sanctions are warranted in this case. [A sanctions award of $4,201 in attorney fees and costs assessed against creditor's counsel were imposed].

Tuesday, July 25, 2006

N.D. Ill. Holds Removal Untimely; Indicates that “Paper or Other Order” Exception Applies Only to Those Generated in the Same Suit

Per G.M. Sign, Inc. v. Global Shop Solutions, Inc., Not Reported in 430 F.Supp.2d 826 (N.D. Ill. May 9, 2006):

The principle question in the instant case, and in similar TCPA [Telephone Consumer Protection Act , 47 U.S.C. § 227] claims, is whether Congress has exercised its right to exclude federal jurisdiction over private claims under this act. Defendant argues that prior to the Seventh Circuit's decision in Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 451 (7th Cir.2005), the general consensus was that Congress had excluded federal jurisdiction, and therefore removal would have been in bad faith, against authority, and risked the imposition of sanctions. Therefore, defendant did not remove when it was first served with the lawsuit, but did so on November 21, 2005, 32 days after the October 20, 2005 decision in Brill. It argues that removal is timely under the "order or other paper" exception of § 1446.

If the action was originally removable, defendant's present removal is untimely. Both parties agree in this case that all the requirements for diversity jurisdiction have been met, and existed at the time of the initial pleading. Because the TCPA is a federal statute, ordinarily TCPA claims would "arise under" the laws of the United States.

In the instant case, the "order or other paper" exception does not apply, because defendant could have removed the action originally. Jurisdiction over TCPA claims in federal court was not expressly prohibited by either the TCPA or Title 28 of the United States Code. Some of the language in the TCPA, and in the act's legislative history, had led courts in this and other jurisdictions to question Congress's intent regarding federal jurisdiction. However, that does not lead to an inevitable conclusion that seeking removal in the instant case would have been improper before the Seventh Circuit had ruled on the matter. When the instant suit was initiated, there was no binding precedent contrary to removal. Whether federal courts could hear TCPA claims in a diversity suit remained an open question.

. . .

Because this case was removable as stated in the pleadings, this court need not decide whether the Seventh Circuit's decision in Brill was an "order or other paper." However, this court would be inclined to follow the majority of cases interpreting the statute, which hold that the "order or other paper" must be generated in the same suit.

Monday, July 24, 2006

Tulane Law Review Publishes Symposium on Class Actions in the Gulf Region after Hurricane Katrina

The Tulane Law Review has just published a Symposium issue entitled "Class Actions in the Gulf South and Beyond," 80 Tul. L. Rev. 1591 (2006). Here is an excerpt from the Foreword to the Symposium:

The Tulane Law Review is proud to publish its last Issue in Volume 80, a symposium issue entitled "Class Actions in the Gulf South and Beyond." We originally scheduled the authors of these articles to present their research and insight as part of a live symposium in February 2006. Our goal was to update and discuss the relevant issues that have unfolded in this area of law since our last live symposium on complex litigation in 2000 entitled "Class Actions in the Gulf South." This goal was timely in light of the recent significant legislation affecting complex litigation, the Class Action Fairness Act of 2005.

Unfortunately, the effect that Hurricane Katrina has had on our city from August 29, 2005, made facilitating a live event in February 2006 impossible. We owe our gratitude to all of our authors who submitted their articles in spite of the cancellation of the live symposium, particularly those who also had to evacuate from the Gulf South in the fall. Because of our authors' perseverance and dedication to scholarship, the Review can proudly present this symposium.

Here is a listing of the articles included in the Symposium:

- Class Actions After The Class Action Fairness Act Of 2005, Edward F. Sherman
- A Primer On The Class Action Fairness Act Of 2005, Sarah S. Vance
- Interpreting The Class Action Fairness Act In A Truly Fair Manner, Allan Kanner
- Congressional Welcome To Federal Court--The Class Action Fairness Act: Has The Party Just Begun? James M. Garner
- The Class Action Fairness Act: An Ill-Conceived Approach To Class Settlements Robert H. Klonoff & Mark Herrmann
- Erie And Choice Of Law After The Class Action Fairness Act, Patrick Woolley
- A Model State Mass Tort Settlement Statute Francis E. Mcgovern
- Louisiana Complex Litigation Charles S. Mccowan, Jr. & Calvin C. Fayard, Jr.

Friday, July 21, 2006

Fifth Circuit Explains Fraudulent Joinder Doctrine, Rules that Rule 21 Does not Contemplate Substitution of Parties to Create Jurisdiction

Per Salazar v. Allstate Texas Lloyd's, Inc., 2006 WL 1881850 (5th Cir. July 10, 2006):

The central question is whether a district court can appropriately assert removal jurisdiction by dismissing a nondiverse in-state defendant and replacing it with a diverse foreign defendant, where the nondiverse in-state defendant was the only named defendant in the action when the suit was removed. So, we must decide whether a district court can create removal jurisdiction based on diversity by substituting parties. It cannot.

The district court premised its swap, and concomitant assertion of jurisdiction, on rules 17(a), 19, and 21…. The district court explained its reliance on rule 17(a) by stating that Allstate Illinois, and not Allstate Texas, is the "real party in interest." By its terms, however, rule 17(a) applies only to plaintiffs: "Every action shall be prosecuted in the name of the real party in interest ..." (emphasis added). Because the rule does not provide a mechanism for ensuring that a defendant is a real party in interest, it cannot support the district court's action.

We must next consider whether rules 19 and 21, and our related jurisprudence regarding fraudulent joinder, authorize the substitution of parties to create diversity jurisdiction….

[U]nder the fraudulent joinder doctrine, federal removal jurisdiction premised on diversity cannot be defeated by the presence of an improperly-joined nondiverse and/or in-state defendant. See, e.g., Smallwood v. Ill. Cent. R.R., 385 F.3d 568 (5th Cir.2004) (en banc), cert. denied, 544 U.S. 992. "[T]he test for fraudulent joinder is whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state [or nondiverse] defendant, which stated differently means that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state [or nondiverse] defendant." Id. at 573.

… The fundamental flaw in Allstate Texas's argument . . . , however, is that because there has never been more than one defendant in this suit, this is not a typical fraudulent joinder case. In the paradigmatic fraudulent joinder case, a plaintiff sues a nominal nondiverse/in-state defendant along with a diverse foreign defendant in an effort to make sure that its claims against the diverse defendant stay in state court. At the time of removal, the diverse defendant is already a party, and the only question is whether the court can disregard the nondiverse/in-state defendant for purposes of assessing jurisdiction. Indeed, all the cases cited by Allstate Texas on this issue fall into this pattern.

Salazar, however, did not hail Allstate Illinois into state court and attempt to force the association to stay there by joining a nominal nondiverse/in-state defendant. Allstate Illinois was not a party at the time of removal, and accordingly our fraudulent joinder jurisprudence offers no guidance on the validity of the district court's action.

Thursday, July 20, 2006

Virginia Law Review Publishes Article on SCOTUS’ Recent Erie Decisions

The Virginia Law Review recently published an article by Professors Earl Dudley Jr. and George Rutherglen entitled Deforming the Federal Rules: An Essay on What’s Wrong With the Recent Erie Decisions, 92 Va. L.R. 707 (2006). Here is the Introduction:

The Supreme Court's most recent decisions under the Erie doctrine seem to lose track of the constitutional principles underlying that doctrine in a maze of procedural detail. From "one of the modern cornerstones of our federalism," Erie apparently has been demoted to the role of an esoteric procedural technicality, one whose true meaning is hard to discern and whose application is impossible to predict. The deceptively simple essence of Erie is that in our federal system, state law is paramount unless and until displaced by some valid piece of federal law. The main area of difficulty in applying the Erie doctrine has involved potential clashes between state law and the Federal Rules of Civil Procedure.

In Gasperini v. Center for Humanities, Inc., the Court held that a state statute providing for enhanced appellate review of jury verdicts must be followed by federal trial courts (but not federal courts of appeal) in diversity cases. This decision creates a rule that is a pastiche of federal and state law, but neither the one nor the other. Through such ad hoc lawmaking, the decision almost turns the Erie doctrine on its head by creating "'a transcendental body of law outside of any particular State but obligatory within it."' In Semtek International Inc. v. Lockheed Martin Corp., the Court held that a dismissal that "operates as an adjudication upon the merits" nevertheless does not preclude a subsequent action in a different forum on the same claim. We are left to wonder what kind of judgment is necessary to bring litigation to a close.

These decisions are puzzling and for that reason have attracted a chorus of academic criticism. Yet decisions so complex and counterintuitive demand explanation as much as criticism, and this Essay will seek to explain how the Supreme Court has reached this impasse in applying and expounding the Erie doctrine. Part I will locate the initial problem in the unwonted complexity of the Court's holdings. Convoluted legal doctrine may be the natural consequence of hard-fought constitutional controversies, but the principles underlying the Erie doctrine should have been long settled by now. Debates over Erie issues hardly elicit the same passionate intensity as controversies over abortion, affirmative action, sexual freedom, or capital punishment. In Gasperini and Semtek, the Court could have reached a better decision in each case by the simple expedient of directly confronting the choice whether to give full effect to a Federal Rule of Civil Procedure, and if not, declaring it partially or wholly invalid. Part II will offer an explanation of why the Court did not take this course. There are three components to this explanation: first, implicit or explicit doubts about the scope and validity of the Federal Rules; second, a tendency to give the Federal Rules an artificially narrow interpretation to avoid perceived conflicts with state law; and third, a resort to case-by-case determinations as the dominant means of resolving questions under the Erie doctrine when a federal rule is claimed to infringe upon a state substantive right. This Essay will conclude with some reflections on the consequences of these decisions for the stability of the Federal Rules and their ability "to secure the just, speedy, and inexpensive determination of every action."

Wednesday, July 19, 2006

E.D. Ark. Declines to Apply Civil Rights Exception to Well-Pleaded Complaint Rule in Disbarment Case

Per McCullough v. Ligon, 430 F. Supp. 2d 846 (E.D.Ark. May 11, 2006)

A narrow exception to the well-pleaded complaint rule allows removal of certain civil rights actions pursuant to 28 U.S.C. § 1443. To be removable, the defendant must rely "upon a law providing for equal civil rights stated in terms of racial equality." Neal v. Wilson, 112 F.3d 351, 355 (8th Cir.1997) (citing 28 U.S.C. § 1443(1) and Georgia v. Rachel, 384 U.S. 780, 782 (1966)). Further, the defendant must show by reference to a law of general application or similarly "firm prediction" that he is denied or cannot enforce such civil rights in state court. Georgia, 384 U.S. at 800, 804.

It is undisputed that the state disciplinary actions against plaintiffs do not arise under the Constitution, laws, or treaties of the United States. Plaintiffs argue, however, that the civil rights exception to the well-pleaded complaint rule applies in this case. As to the first requirement, plaintiffs contend that they rely upon civil rights laws stated in terms of racial equality because their pleaded claims under 42 U.S.C. §§ 1981, 1983, 1985, and the Fourteenth Amendment involve alleged racial discrimination. Although plaintiffs ignore the requirement that the laws themselves be stated in terms of racial equality, their claim under § 1981 may nonetheless qualify for removal. See City of Greenwood v. Peacock, 384 U.S. 808, 825 (1966); Neal, 112 F.3d at 355. However, plaintiffs have not met the second requirement under the civil rights exception because they fail to point to any state law or other equally firm prediction that indicates they will be prevented from enforcing their § 1981 rights in state court. See Neal, 112 F.3d at 355.

Citing the Supreme Court's decision in Georgia v. Rachel, plaintiffs argue that this court should hold a hearing to determine whether their racial discrimination claims warrant removal under 28 U.S.C. § 1443(1). However, the Rachel Court did not hold that any allegations of racial discrimination require a hearing to determine whether the underlying state court action may be removed. Id. at 800-05. Rather, the Court allowed removal of criminal proceedings in Rachel based on specific rights under the Civil Rights Act of 1964 that precluded prosecution of the alleged racially motivated crimes. See Rachel, 384 U.S. at 804-05; see also City of Greenwood, 384 U.S. at 831 (discussing scope of Rachel decision). Contrary to plaintiffs' argument, the mere allegation of racial discrimination does not allow a federal district court to consider otherwise unremovable actions. See City of Greenwood, 384 U.S. at 832. Therefore, plaintiffs' argument is without merit. For all of the above reasons, the state disbarment actions are not removable under 28 U.S.C. § 1443(1). Defendants' motion to remand is granted.

Tuesday, July 18, 2006

U.C. Davis Law Review Publishes Article Contemplating the Future of Judicial Settlement Conferences

The University of California- Davis Law Review has just published an article by Professor Jeffrey Parness entitled Improving Judicial Settlement Conferences, 39 U.C. Davis L. Rev. 1891 (2006) Here is the Introduction:

Legal academics have long asked how judicial civil case settlement conferences "can be conducted to maximize their usefulness without seriously threatening the appropriate role of judges in formal adjudication." Some have found the threats so significant and the benefits so speculative that they conclude there should be very few, if any, judicial settlement conferences. Though the numbers of such conferences likely will, and should, continue to grow, certain warnings by the critics must be heeded. Even the most ardent supporters of increased managerial judging have expressed concerns about the absence of written guidelines to govern judicial settlement conferences.

While judicial settlement conferencing is here to stay, far too often it is undertaken with unbounded, unbridled, and virtually unfettered trial court discretion. New written guidelines are needed. Unfortunately, federal judicial rulemakers, who have prompted most of the significant civil procedure reforms within American trial courts, beginning with their promulgation of the Federal Rules of Civil Procedure in 1938, have shown little leadership in the area of judicial settlement conferences. Further, notwithstanding the Federal Arbitration Act (and its broad use of Commerce Clause powers), Congress is likely to provide little or no leadership. Fortunately, however, federal and state civil procedure lawmakers interested in new written settlement conference guidelines can look to some local federal district rules, as well as to a smattering of state statutes and court rules, for assistance. In doing so, they should heed critics who warn about the threats judicial settlement conferences pose to the traditional judicial role as well as about the need for participant control and written standards.

Monday, July 17, 2006

N.D. Fla. Strictly Applies Florida Law Re “Commencement” of an Action in Deciding Applicability of CAFA

Per Jones v. Fort Dodge Animal Health, Slip Copy, 2006 WL 1877103 (N.D. Fla. July 5, 2006):

…Florida law expressly provides that commencement occurs when the complaint is filed, Fla. R. Civ. P. 1.050, and Defendant has offered no case law suggesting that Florida courts require timely service as an additional requirement to effecting commencement. Thus, this Court finds that this action commenced upon Plaintiff filing her complaint [on Feb. 17, 2005, one day prior to CAFA’s effective date], and CAFA does not apply. Such a strict interpretation of Florida's rule regarding commencement is consistent with this Circuit's “rule of construing removal statutes strictly and resolving doubts in favor of remand.” [See Footnote 9 below] Miedema v. Maytag Corp., No. 06-12430, 2006 WL 1519630, at *15 (11th Cir. Jun. 5, 2006). This interpretation is also consistent with the statutory construction of Florida's Rules of Civil Procedure, which already provide an adequate state remedy for failure to provide timely service. Under Rule 1.070, a court may dismiss an action without prejudice if a plaintiff cannot show good cause or excusable neglect for its failure to serve on time. Fla. R. Civ. P. 1.070(j).

Footnote 9: This approach of strictly interpreting state commencement statutes has also been used by other circuits considering this issue. See Braud v. Transp. Serv. Co., 445 F.3d 801, 803-04 (5th Cir .2006) (finding the date of commencement to be the date of filing under Louisiana law, but acknowledging that under other state statutes, such as Connecticut's, commencement occurs on the date of service); Bush v. Cheaptickets, Inc., 425 F.3d 683, 686 (9th Cir .2005) (strictly adhering to California law for purposes of defining commencement, while acknowledging that this may lead to unanticipated results in states allowing a significant lapse of time between filing and providing service); Cannon v. Kroger Co., 837 F.2d 660, 664 (4th Cir.1988) (“It is clear that a federal court must honor state court rules governing commencement of civil actions when an action is first brought in state court and then removed to federal court, even though the cause of action arises from federal law.”).

Friday, July 14, 2006

Fifth Circuit Holds that CAFA “Primary Defendant” Exception Requires that All Primary Defendant Be States

Per Frazier v. Pioneer Americas LLC, --- F.3d ----, 2006 WL 1843629 (5th Cir. July 06, 2006):
Section 1332(d)(5)(A) excepts from CAFA jurisdiction “any class action in which ··· the primary defendants are States, State officials, or other governmental entities [‘states'] against whom the district court may be foreclosed from ordering relief.” Plaintiffs urge that remand is proper here because DEQ [Louisiana Department of Environmental Quality], a primary defendant, is undisputedly a state entity. Defendants respond that this exception requires that all primary defendants be states, and Pioneer is a primary defendant.

Defendants' reading is correct. The plain text of § 1332(d)(5)(A), using the definite article before the plural nouns, requires that all primary defendants be states. Had Congress desired the opposite, it would have used “a” and the singular, or no article. There is no tension between this plain language and the legislative history, which explains that the exception is not meant to create a loophole whereby plaintiffs can avoid CAFA jurisdiction by naming a state as a primary defendant in an action largely targeting non-states.

We must also reject plaintiffs' suggestion that this result violates the Eleventh Amendment and the principles of state sovereign immunity. Because CAFA eliminated the requirement of unanimity of consent to removal, a state may find itself in a case removed to federal court without having joined in the removal. Such a state, having taken no affirmative act, has not waived immunity and can still assert it. Also contrary to plaintiffs' suggestion, the simple act of assuming jurisdiction over a case with a state defendant does not step on its sovereign immunity. A federal court may ignore sovereign immunity until the state asserts it. CAFA, like other statutes, provides jurisdiction over cases in which states may, if they choose, be defendants, thus respecting state dignity interests.

It is true that, absent possible waiver of immunity by DEQ, the federal courts might be “foreclosed from ordering relief” because Louisiana has waived its immunity in state, but not federal, court. Yet that is the price of sovereign immunity, and in any event § 1332(d)(5)(A) is clear--all primary defendants must be states.

Wednesday, July 12, 2006

Cornell Law Review Publishes Article Analyzing Standard of Proof for Establishing Jurisdiction

The Cornell Law Review has published an article written by Professor Kevin M. Clermont entitled Jurisdictional Fact, 91 Cornell L. Rev. 973 (2006). Here is the Abstract:

What kind of factual showing must the plaintiff make in order to establish, say, personal jurisdiction? While that question may seem simple enough, real difficulties in regard to the standard of proof arise when there is a similarity of the facts entailed in the jurisdictional determination and those on the merits. Surely, the plaintiff has to do more than allege that the defendant is the author of state-directed acts or omissions. Yet, almost as surely, the plaintiff should not have to prove the cause of action in order to establish jurisdiction. The plaintiff thus must have to show something between allegation and proof.

From a morass of confused cases on this procedural point of significance, this Article draws a startlingly clear rule that covers jurisdictional fact, and much more. On any factual element or legal question of forum authority, from subject-matter jurisdiction to venue whenever properly challenged, the proponent of forum authority must make the usual showing of "more likely than not," subject to this exception: if that element or question overlaps the merits of the claim, the proponent need provide only prima facie proof to establish the forum's authority. Depending on the particular threshold issue's importance, "prima facie" might mean any of the standards below the more-likely-than-not standard, namely, slightest possibility, reasonable possibility, substantial possibility, or equipoise. That lower standard will allow the judge to decide efficiently but definitively whether the forum has authority to decide the merits--doing so without entailing or foreclosing any decision on the merits, a decision to which a higher standard would apply.

Tuesday, July 11, 2006

Second Circuit Rules That Federal Arbitration Act Does Not Authorize Nationwide Service of Process

Per Dynegy Midstream Services v. Trammochem, --- F.3d ----, 2006 WL 1612722 (2d Cir. Jun 13, 2006):

Respondents-appellees are parties to an arbitration in New York. The arbitrators in that dispute issued a subpoena directing petitioner-appellant to produce documents and electronic data. Petitioner chose to ignore the subpoena, and respondents filed a motion to compel compliance in the United States District Court for the Southern District of New York (Baer, J.). The district court granted the motion to compel, over petitioner's objection that the court lacked personal jurisdiction over it. Petitioner filed a timely notice of appeal.

We hold, as an initial matter, that where an order compelling compliance with an arbitrator's subpoena disposes of the entire case, it is a final order for the purposes of appellate jurisdiction. In addition, we hold that the Federal Arbitration Act does not authorize nationwide service of process and therefore the district court lacked personal jurisdiction over appellant. Because we lack personal jurisdiction, we find it unnecessary to address whether the Federal Arbitration Act authorizes the issuance of documents-only subpoenas to third parties.

BNA reported on this case recently in U.S. Law Week (Vol. 74, No. 49, page 1771). BNA subscribers may read the U.S. Law Week report on the case by clicking here.

Monday, July 10, 2006

Washington Law Review Publishes Article on Unpublished Federal Appellate Opinions

The Washington Law Review has just published an article by Prof. Sarah Ricks entitled, The Perils of Unpublished Non-precedential Federal Appellate Opinions: A Case Study of the Substantive Due Process State-Created Danger Doctrine in One Circuit, 81 Washington Law Review 217 (2006):

About 80% of federal appellate decisions are non-precedential. The Article examines the practical consequences for district courts and litigants confronting inconsistent appellate opinions issued by the same federal circuit. Specifically, this is a case study comparing the divergent binding and non-precedential opinions applying one frequently invoked constitutional theory within the U.S. Court of Appeals for the Third Circuit, the “state-created danger” theory of substantive due process.

The comparison demonstrates that the risks of non-precedential opinions are real. During the six-year interval between binding state-created danger decisions, the Third Circuit created inconsistent non-precedential opinions on the identical legal theory. Doctrinal divergence between the Third Circuit’s binding and non-precedential opinions has undermined the predictive value of precedential state-created danger decisions, creating an obstacle to settlement at both the trial and appellate levels. In turn, district courts’ unpredictable application of the non-precedential opinions has undermined the critical appellate functions of ensuring that like cases are treated alike, that judicial decisions are not arbitrary, and that legal issues resolved at the appellate level need not be relitigated before the district courts.

The practice of issuing non-precedential opinions is justified on efficiency grounds, as a mechanism for overburdened appellate courts to manage their dockets. But doctrinal inconsistency between the Third Circuit’s precedential and non-precedential opinions undercuts the efficiency rationale because doctrinal divergences may have led plaintiffs and defendants to value cases differently­potentially leading to more litigation, fewer settlements, and additional need for judicial decision-making.

This Article proposes several reforms to reduce doctrinal inconsistency between precedential and non-precedential opinions. Because an appellate court should weigh the same considerations in making each of its publication decisions, the Third Circuit should replace its amorphous publication guideline with specific criteria. The Article concludes by suggesting that, consistent with the common law tradition of empowering the applying court to assess the persuasive value of a judicial decision, the Third Circuit should no longer refuse to cite its own non-precedential opinions, and should follow several circuits in expressly according persuasive value to its non-precedential opinions.

University of Chicago Law Review Publishes Article on Settlement Class Actions

The University of Chicago Law Review has just published an article by Martin H. Redish and Andrianna D. Kastanek entitled Settlement Class Actions, The Case-or-Controversy Requirement, and the Nature of the Adjudicatory Process, 73 U. Chi. L. Rev. 545 (2006). Here is an excerpt from the Introduction:

It would hardly be an overstatement to suggest that the nature of the litigation process has changed dramatically over the past forty years. Modern procedure has been altered to keep up with the significant changes over the same period in the governing substantive law, which has significantly expanded the scope of private responsibility and liability through the rapid expansion of both statutory and common law bases for suit. This is particularly true in the areas of civil rights, consumer protection, and products liability. Experts may reasonably debate whether the socioeconomic and political effects of these changes in substantive law are beneficial or harmful. But few would doubt the troubled state in which modern litigation procedure finds itself as a result, at least in large part, of the dramatic expansion of the scope of substantive liability. The procedural device routinely employed as the means of resolving the countless individual claims that may now be made against economically powerful defendants is the class action, authorized for use in the federal courts by Rule 23 of the Federal Rules of Civil Procedure. Though the device finds its origins in ancient practice and received codification in the original Federal Rules of Civil Procedure in 1938, the practice assumed its modern form--dramatically different from its earlier structure--in the amendments of 1966. Although that alteration was designed to make the class action device capable of resolving the disputes to which the dramatic expansion in substantive liability was to give rise, the difficulties inherent in any attempt to resolve thousands of parallel, but not necessarily identical, claims in one proceeding could not have been foreseen. The sometimes overwhelming complications that inevitably accompany an attempt to litigate countless claims in one proceeding have proven to be more than the device is capable of handling.


The Article is designed to serve two important functions, neither of which has yet been attempted in the literature or judicial decisions. First, it provides a detailed examination of the textual and normative groundings of the adverseness requirement that the Supreme Court has regularly gleaned from the case-or-controversy requirement. Second, it explores the fatal constitutional difficulties created by the settlement class action device. It is time for commentators on class actions to move beyond the constitutional vacuum in which they traditionally view the procedure and instead consider it within the much broader constitutional and political framework of which it is only a small part.

Friday, July 07, 2006

Fifth Circuit Holds that CAFA Does Not Permit Review of Otherwise Non-Reviewable Remand Decisions beyond CAFA Context

Per Patterson v. Dean Morris, L.L.P. , 448 F.3d 736 (5th Cir. May 3, 2006):

CAFA explicitly limits the power of removal of class actions to “case[s] under this section,” i.e., § 1453. 28 U.S.C. § 1453(c)(1). “The application of § 1453(c)(1) is therefore limited to the context of CAFA.” Wallace v. La. Citizens Prop. Ins. Corp., 2006 WL 848585, at *2 (5th Cir. Mar.31, 2006). Though CAFA also provides that we “may accept an appeal from an order of a district court granting or denying a motion to remand a class action,” this precatory language cannot serve as a mandate for us to reach otherwise non-reviewable remand decisions once we determine that CAFA is inapplicable [which the court did here, because the action commenced the day before CAFA became effective].

Ordinarily, “once a matter related to a bankruptcy case is equitably remanded, it is not subject to federal appellate review on any basis.” Arnold v. Garlock, Inc., 278 F.3d 426, 438 (5th Cir.2001). CAFA provides only for review of a remand order premised on the prerequisites of § 1453 or on claims with an adequate nexus to CAFA. See Wallace, 2006 WL 848585, at *2. There is no such nexus here.

We do not need to consider the Browning equitable factors to determine whether jurisdiction under CAFA obtains; we need only consider the commencement date of plaintiffs' claims. Furthermore, nothing in the text of CAFA suggests that Congress intended to supplant its policy of prohibiting appellate review of equitable remand orders in bankruptcy for class actions that do not satisfy CAFA's requirements.Because these actions commenced on February 17, 2005 (one day before CAFA took effect), CAFA cannot provide the basis for our review of the equitable remand. To hold otherwise would be to treat plaintiffs differently from every other bankrupt class subject to equitable remand before the enactment of CAFA.

Thursday, July 06, 2006

Fourth Circuit Finds Insufficient Basis for Treating Prior Wrongful Death Award as a Nondischargeable Debt under 11 U.S.C. s. 523(a)(6)

Per In re Duncan, 448 F.3d 725 (4th Cir. May 24, 2006):

Jacqueline Duncan filed a petition for Chapter 7 bankruptcy in the Eastern District of Virginia and listed the wrongful death award as a debt [to the estate of her daughter]. The Estate brought this adversary proceeding to contest the dischargeability of the award under 11 U.S.C. § 523(a)(6), which makes debts that arise from willful and malicious injuries nondischargeable in bankruptcy. The Estate then moved for offensive summary judgment, arguing that the state court judgment collaterally estopped relitigation of the controlling issue of whether Jacqueline Duncan intended to injure Meigan…. The district court … held that Jacqueline Duncan's debt, stemming from that verdict, was dischargeable as a part of her bankruptcy petition. The Estate then appealed to this court.

The controlling issue in the adversary proceeding is whether Jacqueline Duncan intended to injure her daughter. Under 11 U.S.C. § 523(a)(6), a debt is not dischargeable in a Chapter 7 bankruptcy if it arises from a “willful and malicious injury by the debtor to another.” [It] is not satisfied by negligent, grossly negligent or reckless conduct. Moreover, the mere fact that a debtor engaged in an intentional act does not necessarily mean that he acted willfully and maliciously for purposes of § 523(a)(6). See In re Moore, 357 F.3d 1125, 1128 (10th Cir.2004). Therefore, in order for collateral estoppel to apply here, the issue of whether Jacqueline Duncan intended to injure Meigan (as opposed to engaging in an intentional act that injured the child) must have been both litigated in and necessary to the state court proceeding. Sharma, 472 S.E.2d at 275. It must also be identical to an issue litigated in the state court. Angstadt, 457 S.E.2d at 87-88. The Estate grounds its argument for precluding the litigation of this issue on two aspects of the state court judgment: (a) the finding that Jacqueline Duncan was liable for wrongful death, and (b) the jury's award of punitive damages.

The finding that Jacqueline Duncan was liable for wrongful death does not support the application of collateral estoppel because it was judged by a different legal standard than the “willful and malicious injury” inquiry under § 523(a)(6)…. The state court judgment for punitive damages likewise does not support application of collateral estoppel because the record does not establish that it was based on a finding identical to the controlling issue under § 523(a)(6).

Wednesday, July 05, 2006

Washington University Law Review Publishes Article on CAFA and Exxon v. Allapattah Services

The Washington Law Review has just published an article by Professor Adam Steinman entitled, Sausage-Making, Pigs' Ears, and Congressional Expansions of Federal Jurisdiction: Exxon Mobil v. Allapattah and its Lessons for the Class Action Fairness Act, 81 Wash. L. Rev. 279 (2006). Here's the Abstract:

The year 2005 witnessed two watershed developments in federal jurisdiction: the U. S. Supreme Court's decision in Exxon Mobil Corp. v. Allapattah Services, Inc. and the enactment of the Class Action Fairness Act (CAFA). Allapattah and CAFA raise the same fundamental question: how should courts interpret a statute whose text would expand federal jurisdiction far beyond what Congress apparently intended? In Allapattah, the Court confronted this question in resolving an aspect of the supplemental jurisdiction statute that had deeply divided both the judiciary and academia. CAFA's expansion of federal jurisdiction over class actions will require courts to struggle with this question once again. In light of these recent events and their common theme, this Article has two goals. First, it argues that CAFA--like its older cousin the supplemental jurisdiction statute--contains a fundamental disconnect between the legislative history and the statutory text. While CAFA's legislative history indicated that Congress meant to expand federal jurisdiction only to certain large class actions with interstate dimensions, the unambiguous text of CAFA authorizes removal of virtually every state court class action to federal court. This conflict threatens to create the same level of judicial and academic disagreement that plagued the supplemental jurisdiction statute over the last decade-and-a-half. Second, this Article examines Justice Anthony Kennedy's majority decision in Allapattah to divine its lessons for interpreting CAFA. Allapattah sent mixed messages, however. The Court's language in Allapattah imparted an unmistakable endorsement of textualism--jurisdictional statutes should be read no more narrowly or broadly than the text provides. But the Court's ultimate conclusion compromised strict fidelity to the text in order to avoid expanding jurisdiction far beyond what Congress apparently intended. The Court chose a compromise interpretation that expanded federal jurisdiction farther than the legislative history anticipated but not as far as the plain meaning of the statutory text would require. Thus, federal courts interpreting CAFA face a dilemma: follow Allapattah's explicit lesson and construe CAFA according to its text, or follow Allapattah's implicit lesson and strike a compromise between the legislative history and the statutory text. For courts following the latter approach, a compromise reading of CAFA may be available. This reading would eliminate certain requirements that had impeded the removal of class actions in the past, but it would not create an independent basis for removing all state court class actions; rather, a basis for removal must exist elsewhere in federal law.

Tuesday, July 04, 2006

Alabama Law Review Publishes Article on Doctrine of Procedural Misjoinder

The Alabama Law Review has just published an article by Professors Laura Hines and Steven Gensler entitled Driving Misjoinder: The Improper Party Problem in Removal Jurisdiciton, 57 Ala. L. Rev. 779 (2006). Here's the Abstract:

This Article explores, and ultimately embraces, a new exception to the complete diversity rule in removal cases: the doctrine of procedural misjoinder. We argue that the doctrine offers federal courts a vital tool with which to police joinder gamesmanship. Absent this power, plaintiffs may preclude defendant access to federal courts by the relatively simple expedient of joining in state court largely unrelated claims against or on behalf of nondiverse parties. The resulting lawsuit thus fails the complete diversity test, rendering such cases removal-proof. Like fraudulent joinder, the long-standing practice of ignoring nondiverse parties against whom no valid claim may be asserted, the doctrine of procedural misjoinder would permit federal courts to disregard any diversity-destroying parties who have been added improperly to the state lawsuit. Because access to the federal courts is at stake, we believe federal courts should adopt this new doctrine, applying federal joinder standards to test the legitimacy of plaintiffs' party alignments before denying removal jurisdiction.