Wednesday, February 28, 2007

E.D. Louisiana Discusses Home State Exception to CAFA

Per In re Ingram Barge Co., 2007 WL 148647 (E.D. La. Jan. 10, 2007):

The Benoit Plaintiffs were residents of the area of New Orleans, Louisiana known as the Lower Ninth Ward. Their property was allegedly damaged in the aftermath of Hurricane Katrina when the Barge ING4727, in the custody and control of LNA, broke lose from its mooring and struck the flood wall on the east side of the Industrial Canal, causing or contributing to the failure of that flood wall. The Benoit Plaintiffs brought this action in the Civil District Court for the Parish of Orleans, State of Louisiana, alleging negligence against all of the defendants for their actions which allegedly contributed to the levee breach. The defendants removed the action to this Court alleging jurisdiction under the Multiparty, Multiforum Trial Jurisdiction Act ("MMTJA") (28 U.S.C. §§ 1369, 1441(e)), the Class Action Fairness Act (28 U.S.C. § 1332(d)) and diversity of citizenship (28 U.S.C. § 1332). The Benoit Plaintiffs then filed this Motion to Remand, claiming that this Court lacks subject matter jurisdiction.

Under 28 U.S.C. § 1332(d), the Class Action Fairness Act, the federal district court has original jurisdiction over any action in which: (1) the case is a class action brought on behalf of at least one hundred putative class members; (2) the amount in controversy exceeds $5,000,000, exclusive of interests and costs; (3) any member of a class of plaintiffs is a citizen of a state different from any defendant. Here, it is undisputed that the basic elements are met. See, Rec. Doc. 389. The putative class has hundreds of members and the amount in controversy clearly exceeds $5,000,000. See, Rec. Doc. 1. Also, the Benoit Plaintiffs include citizens of Louisiana and LNA, a defendant, is a citizen of Maryland and Virginia. See, Rec. Doc. 389.

Although the basic elements for federal jurisdiction under the Class Action Fairness Act are satisfied, the Benoit plaintiffs argue that the "Home State" exception dictates that this Court should decline to exercise jurisdiction. Under the "Home State" exception, the district court must decline to exercise jurisdiction if more than two-thirds of the potential plaintiffs are citizens of the state in which the action was filed and at least one of the primary defendants is also a citizen of that state. 28 U.S.C. § 1332(d)(4). The Benoit plaintiffs point out that this case was filed in Louisiana and more than two thirds of the plaintiffs are Louisiana citizens. Then they argue that the primary defendants are the Louisiana citizens, Castaing, Grabert, Dufrene, Templit and Thigpan because these men were personally responsible for the towage and mooring of the Barge ING 4727. See, Rec. Doc. 343.

Although these defendants allegedly had direct roles in the alleged harm, they are not the primary defendants. The primary defendant in this action is LNA. These other defendants were all working in some respect for LNA at the time of the incident. LNA is the party that will and is most able to bear most of the liability if the plaintiffs prevail. Therefore, LNA is the primary defendant.

Tuesday, February 27, 2007

Ninth Circuit Upholds Class Certification for Wal-Mart Sex Discrimination Suit

Per Dukes v. Wal-Mart, Inc., --- F.3d ----, 2007 WL 329022 (9th Cir. Feb. 06, 2007):

Plaintiffs' Third Amended Complaint, brought on behalf of six named plaintiffs and all others similarly situated, asserts claims against Wal-Mart for sex discrimination under Title VII of the 1964 Civil Rights Act. Plaintiffs alleged that women employed in Wal-Mart stores: (1) are paid less than men in comparable positions, despite having higher performance ratings and greater seniority, and (2) receive fewer--and wait longer for--promotions to in-store management positions than men. Plaintiffs contend that Wal-Mart's strong, centralized structure fosters or facilitates gender stereotyping and discrimination, that the policies and practices underlying this discriminatory treatment are consistent throughout Wal-Mart stores, and that this discrimination is common to all women who work or have worked in Wal-Mart stores.

Plaintiffs seek class-wide injunctive and declaratory relief, lost pay, and punitive damages. They do not seek any compensatory damages on behalf of the class, which is estimated to include more than 1.5 million women. The class encompasses women employed in a range of Wal-Mart positions--from part-time, entry-level, hourly employees to salaried managers.

. . .

For the reasons set forth above, we hold that the district court acted within its broad discretion in concluding that it would be better to handle this case as a class action instead of clogging the federal courts with innumerable individual suits litigating the same issues repeatedly. The district court did not abuse its discretion in finding that Plaintiffs have met the pleading requirements of Rule 23. Wal-Mart failed to point to any specific management problems that would render a class action impracticable in this case, and the district court has the discretion to modify or decertify the class should it become unmanageable. Although the size of this class action is large, mere size does not render a case unmanageable. We deny Plaintiffs cross-appeal, because the district court did not abuse its discretion when it found that backpay for promotions may be limited to those Plaintiffs for whom proof of qualification and interest exists. Finally, we must reiterate that our findings relate only to class action procedural questions; we neither analyze nor reach the merits of Plaintiffs' allegations of gender discrimination.

Monday, February 26, 2007

E.D. Louisiana Analyzes Local Controversy Exception to CAFA; Determines Plaintiff Failed to Meet Burden of Proving the Exception

Per Gauntt v. Louisiana Citizens Property Insurance Corp., 2007 WL 128801 (E.D. La. Jan. 16, 2007):

This matter comes before the Court on a motion to remand filed by the plaintiffs. In their motion to remand, the plaintiffs assert that this Court lacks jurisdiction to hear this case due to the "local controversy" exception of the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d) (Rec.Doc.18). . . . Having considered the memoranda of counsel, the record and the applicable law, the Court finds that it has jurisdiction to hear this matter under the CAFA, 28 U.S.C. § 1332(d). In this case, the putative class consists of Louisiana citizens who purchased valued policy homeowners insurance from one of four defendants, State Farm, Allstate, Lafayette or Louisiana Citizens Property Insurance Corp. ("Citizens"). Insurance policies are deemed "valued policies" when the premiums charged are calculated in relation to the value of the property. Here, the plaintiffs allege that their property values declined as a result of damage caused by Hurricanes Katrina and/or Rita, but their insurers continued to charge premiums based on the pre-storm values of their properties. The plaintiffs brought this putative class action suit seeking a refund of the amounts that they were allegedly overcharged in state court. State Farm removed the action to this Court asserting jurisdiction under the CAFA and other statutes. The facts outlined above show, and it is undisputed that, the basic elements of CAFA federal subject matter jurisdiction are satisfied. . . . Thus, this Court has jurisdiction to hear this action, unless one of the CAFA exceptions applies.

The plaintiffs claim that the "local controversy" exception to the CAFA applies to this case. Under the "local controversy" exception, a district court must decline jurisdiction when: (1) greater than two thirds of the members of the putative class are citizens of the state in which the action was filed; (2) at least one defendant is a defendant from whom members of the putative class seek significant relief, whose alleged conduct forms a significant basis of the asserted claims, and who is a citizen of the state in which the action was filed; (3) the principal injuries resulting from the alleged conduct of each defendant were incurred in the state in which the action was filed; and (4) no other class action asserting the same or similar factual allegations has been filed against any of the defendants within the last three years preceding the filing of the instant class action. 28 U.S.C. § 1332(d)(4). The language of the CAFA favors federal jurisdiction over class actions. Evans v. Walter Industries, Inc., 449 F.3d 1159, 1163 (11th Cir.2006). Furthermore, the legislative history suggest that Congress intended the local controversy exception to be narrow, with all doubts resolved "in favor of exercising jurisdiction over the case." Id. (citing, S.Rep. No. 109-14 at 42, U.S.Code Cong. & Admin. News 3, 40). Thus, the party opposing removal bears burden of proving the application of an exception to the CAFA. See, Robinson v. Cheetah Transp., 2005 WL 468820, *4 (W.D.La.) (citing, S.Rep. No. 109-14 at 44 (2005), as reprinted in 2005 U.S.C.C.A.N. 3, 41; Berry v. American Express Pub. Corp, 381 F.Supp.2d 1118, 1122 (C.D.Cal 2005)).

The dispute here involves the requirement that at least one defendant from whom members of the putative class seek significant relief, whose alleged conduct forms a significant basis of the asserted claims, and is a citizen of the sate in which the action was filed. The defendants contend that the plaintiffs do not seek significant relief from the Louisiana defendants, Lafayette and Citizens, and that the that their conduct did not from a significant basis of the asserted claims. . . . The plaintiffs, on the other hand, contend that they do seek significant relief from Lafayette and Citizens and that the Louisiana defendants' actions form a significant basis of the alleged claims. . . . The term "significant" is not defined in the CAFA, however other Courts have examined the legislative history and arrived a definition. The case law concludes that a putative class seeks "significant relief" against the defendant when the relief sought against that defendant is a significant portion of the relief sought by the class. See, Evans, 449 F.3d at 1167 (citing, Robinson, 2006 WL 468820, *4 and Kearns v. Ford Motor Co., 2005 WL 3967998 (C.D.Cal.)). This involves an assessment of how many member of the putative class were allegedly harmed by the in-state defendants and a comparison of the relief sought between all defendants and each defendant's ability to pay a potential judgment. Id. (citing, Robinson, 2006 WL 468820, *4).

The plaintiffs are correct that all of the defendants have the ability to pay a judgment and that millions of dollars is "significant" according to the dictionary definition of the word. However, the test for "significant relief" requires an assessment of the number of potential class members that were harmed by the in-state defendants and a comparison of the relief sought from all of the defendants. The market share statistics cited above show that it is likely that only a small portion of the members of the putative class were harmed by the Louisiana defendants and, as a result, the relief sought from them is relatively small as compared to the relief sought from the out-of-state defendants.

The "local controversy" exception is narrowly construed and the party seeking removal bears the burden of proving that it is met. The plaintiffs have failed to meet their burden.

Friday, February 23, 2007

Article Examines Class-Action Exceptions to Article III "Case or Controversy" Requirement

The Review of Litigation has published an article in its Winter 2007 issue by Daniel Zariski, Leonard Feldman, Malaika Eaton, and Darin Sands. "Mootness in the Class Action Context: Court-Created Exceptions to the 'Case or Controversy" Requirement of Article III" is available on Westlaw at 26 REVLITIG 77. Here is an excerpt from the Introduction:

[W]hat . . . happens when a named plaintiff's claim becomes moot depends on two factors, one substantive and one procedural. The first factor is timing--specifically, whether a motion for class certification was filed or decided before the named plaintiff's claims became moot. The second factor is the jurisdiction in which the named plaintiff brought suit because federal courts are split on a variety of the issues relating to the mootness doctrine in the class action context. However, the question remains: What should happen to a class action lawsuit when, for any of the reasons set out above, the named plaintiff's individual claims become moot?

As described in Part II below, the Supreme Court has provided some guidance on the intricacies of how courts should apply the mootness doctrine in the class action context. The Court has clarified that the mooting of a named plaintiff's claim after a district court has ruled on a class certification motion generally will not moot the class allegations. Beyond this outer bound, however, the Court has not yet spoken.

The issue of what happens when a named plaintiff's claims become moot before a district court's decision on a class certification motion has fractured the lower courts, as described in Part III below. Four broad approaches have developed. Some courts, following a strict approach to mootness in the class action context, have held that the settlement of a representative plaintiff's claim before a class certification decision renders the entire action moot. Other courts, concerned about the practical effect of the strict approach, have searched for a narrow yet defined exception and have held that the claim can continue so long as a class certification motion was filed prior to the mooting of the named plaintiff's claim. More recently, in an approach that departs from constitutional limitations, a number of courts have even held that a class action can proceed despite the mooting of the named plaintiff's claim if the claim was rendered moot by the actions of the defendant before the named plaintiff had a reasonable opportunity to file a motion for class certification. Others still, particularly in those jurisdictions where the circuit court has not yet adopted any of the previous three approaches, have adopted an ad hoc approach in which various exceptions and considerations are analyzed and then applied specifically to the facts of the case at hand.

Part IV analyzes and critiques each approach discussed in Part III and then recommends an alternative that (a) avoids trampling the constitutional limitations imposed on the federal courts by requiring the controversy between the parties to be live at the time of the district court's certification decision, and (b) limits the potential for abuse of the mootness doctrine by defendants in order to avoid the class certification vehicle. As discussed in Part IV, each of the approaches discussed in Part III raises troubling constitutional and practical concerns. Although no approach is (or can be) perfect, the approach recommended by this article best effectuates both the rules of civil procedure and Article III's "case or controversy" requirement. If and when a better solution is identified, it will most likely require Congressional or Supreme Court action.

Thursday, February 22, 2007

N.D. California Discusses Circuit Split Re: Whether Later Served Defendant May Remove When Initial 30 Days Have Passed; Adopts Last-Served Rule

Per Bonner v. Fuji Photo Film, 461 F. Supp. 2d 1112 (N.D. Cal. Nov. 13, 2006):

The case thus squarely poses an unsettled question of law: may a later-served defendant remove a case even though the thirty-day removal period has already expired as to the first-served defendant? In other words, does the thirty-day period begin to run as to all defendants when it begins to run as to any of them (the "first-served rule"), or does each defendant have its own thirty-day clock (the "last-served rule")?The Ninth Circuit has not decided a case squarely on point. See United Computer Sys. v. At & T Corp., 298 F.3d 756, 763 n. 4 (9th Cir.2002) (noting a split of authority on the issue but "express[ing] no opinion today on the propriety of either rule").

The circuit courts are divided on the issue. Compare Brown v. Demco, Inc., 792 F.2d 478, 481-82 (5th Cir.1986) (applying the first-served rule), with Marano Enters. of Kan. v. Z-Teca Rests., L.P., 254 F.3d 753, 756-57 (8th Cir.2001) (applying the last-served rule); and Brierly v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527, 533 & n. 3 (6th Cir.1999) (applying the last-served rule); see also McKinney v. Bd. of Tr. of Md. Cmty. College, 955 F.2d 924, 927-28 (4th Cir.1992) (applying a variant of the first-served rule that allows new defendants thirty days to join an "otherwise valid" petition for removal). And district courts have come to competing conclusions, even within the Ninth Circuit. Compare McAnally Enters. Inc. v. McAnally, 107 F.Supp.2d 1223, 1227-29 (C.D.Cal.2000) (applying first-served rule), and Biggs Corp. v. Wilen, 97 F.Supp.2d 1040, 1044-46 (D.Nev.2000) (same), and Transp. Indem. v. Fin. Trust Co., 339 F.Supp. 405, 406-07 (C.D.Cal.1972) (same), with Griffith v. Am. Home Prods. Corp., 85 F.Supp.2d 995, 1000-01 (E.D.Wash.2000) (applying last-served rule). Indeed, even judges within the Northern District of California have not agreed upon the proper approach. Compare Varney v. Johns-Manville Corp., 653 F.Supp. 839, 840 (N.D.Cal.1987) (applying first-served rule), with Ford v. New United Motors Mfg., Inc., 857 F.Supp. 707, 710 (N.D.Cal.1994) (applying last-served rule).

It is not possible to discern a preferred approach to this issue among the courts that have addressed it. Several courts have described the "first-served rule" as the "majority rule." See McAnally, 107 F.Supp.2d at 1227; Wilen, 97 F.Supp.2d at 1044; see also 14C Wright et al., Federal Practice and Procedure § 3732, at 336-39 & nn. 74-75 (citing a significantly larger number of cases adopting the first-served rule). Yet the cases also indicate a trend away from that rule and in favor of the last-served rule. . . . This Court hereby adopts the last-served rule.

Tuesday, February 20, 2007


Here is the Syllabus of the case, which was decided today:


Certiorari to the Supreme Court of Oregon

No. 05–1256. Argued October 31, 2006—Decided February 20, 2007

In this state negligence and deceit lawsuit, a jury found that Jesse Williams’ death was caused by smoking and that petitioner Philip Morris, which manufactured the cigarettes he favored, knowingly and falsely led him to believe that smoking was safe. In respect to deceit, it awarded $821,000 in compensatory damages and $79.5 million in punitive damages to respondent, the personal representative of Williams’ estate. The trial court reduced the latter award, but it was restored by the Oregon Court of Appeals. The State Supreme Court rejected Philip Morris’ arguments that the trial court should have instructed the jury that it could not punish Philip Morris for injury to persons not before the court, and that the roughly 100-to-1 ratio the $79.5 million award bore to the compensatory damages amount indicated a “grossly excessive” punitive award.


1. A punitive damages award based in part on a jury’s desire to punish a defendant for harming nonparties amounts to a taking of property from the defendant without due process. Pp. 4–10.

(a) While “[p]unitive damages may properly be imposed to further a State’s legitimate interests in punishing unlawful conduct and deterring its repetition,” BMW of North America, Inc. v. Gore, 517 U. S. 559 , unless a State insists upon proper standards to cabin the jury’s discretionary authority, its punitive damages system may deprive a defendant of “fair notice … of the severity of the penalty that a State may impose,” id., at 574; may threaten “arbitrary punishments,” State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U. S. 408 ; and, where the amounts are sufficiently large, may impose one State’s (or one jury’s) “policy choice” upon “neighboring States” with different public policies, BMW, supra, at 571–572. Thus, the Constitution imposes limits on both the procedures for awarding punitive damages and amounts forbidden as “grossly excessive.” See Honda Motor Co. v. Oberg, 512 U. S. 415 . The Constitution’s procedural limitations are considered here. Pp. 4–5.

(b) The Due Process Clause forbids a State to use a punitive damages award to punish a defendant for injury inflicted on strangers to the litigation. For one thing, a defendant threatened with punishment for such injury has no opportunity to defend against the charge. See Lindsey v. Normet, 405 U. S. 56 . For another, permitting such punishment would add a near standardless dimension to the punitive damages equation and magnify the fundamental due process concerns of this Court’s pertinent cases—arbitrariness, uncertainty, and lack of notice. Finally, the Court finds no authority to support using punitive damages awards to punish a defendant for harming others. BMW, supra, at 568, n.11, distinguished. Respondent argues that showing harm to others is relevant to a different part of the punitive damages constitutional equation, namely, reprehensibility. While evidence of actual harm to nonparties can help to show that the conduct that harmed the plaintiff also posed a substantial risk to the general public, and so was particularly reprehensible, a jury may not go further and use a punitive damages verdict to punish a defendant directly for harms to those nonparties. Given the risks of unfairness, it is constitutionally important for a court to provide assurance that a jury is asking the right question; and given the risks of arbitrariness, inadequate notice, and imposing one State’s policies on other States, it is particularly important that States avoid procedure that unnecessarily deprives juries of proper legal guidance. Pp. 5–8.

(c) The Oregon Supreme Court’s opinion focused on more than reprehensibility. In rejecting Philip Morris’ claim that the Constitution prohibits using punitive damages to punish a defendant for harm to nonparties, it made three statements. The first—that this Court held in State Farm only that a jury could not base an award on dissimilar acts of a defendant—was correct, but this Court now explicitly holds that a jury may not punish for harm to others. This Court disagrees with the second statement—that if a jury cannot punish for the conduct, there is no reason to consider it—since the Due Process Clause prohibits a State’s inflicting punishment for harm to nonparties, but permits a jury to consider such harm in determining reprehensibility. The third statement—that it is unclear how a jury could consider harm to nonparties and then withhold that consideration from the punishment calculus—raises the practical problem of how to know whether a jury punished the defendant for causing injury to others rather than just took such injury into account under the rubric of reprehensibility. The answer is that state courts cannot authorize procedures that create an unreasonable and unnecessary risk of any such confusion occurring. Although States have some flexibility in determining what kind of procedures to implement to protect against that risk, federal constitutional law obligates them to provide some form of protection where the risk of misunderstanding is a significant one. Pp. 8–10.

2. Because the Oregon Supreme Court’s application of the correct standard may lead to a new trial, or a change in the level of the punitive damages award, this Court will not consider the question whether the award is constitutionally “grossly excessive.” P. 10.
340 Ore. 35, 127 P. 3d 1165, vacated and remanded.

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

Landowner May Not Maintain Federal Suit When Currently Facing State Criminal Proceedings Under Younger Doctrine, Eighth Circuit Holds

Per Cormack v. Settle-Beshears, 474 F.3d 528 (8th Cir. Jan. 23, 2007):

[Plaintiff] argues that [defendant city] Van Buren's annexation of his property and enforcement of its ordinance prohibiting the sale of fireworks amounted to a regulatory taking. Although under Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985), federal courts are barred from considering the merits of a takings claim until a private litigant exhausts state remedies, Cormack believes that an exception applies to this case. If a state's remedies are inadequate or unavailable, exhaustion is not required, see id. at 196-97, 105 S.Ct. 3108, and Cormack claims that Arkansas has no remedy which would adequately compensate him for the taking.

This exception to Williamson County is narrow, and the claimant bears the “heavy burden” of showing that the state remedy is inadequate. Deniz v. Municipality of Guaynabo, 285 F.3d 142, 146 (1st Cir.2002). We have been unable to find a case in which this court has declared a state's inverse condemnation procedures to be inadequate, and in Collier v. City of Springdale, 733 F.2d 1311 (8th Cir.1984), we held that Arkansas provides adequate mechanisms for its citizens to be justly compensated for takings. See id. at 1316-17.

At oral argument counsel for Cormack contended that case law since Collier demonstrates that Arkansas state remedies are inadequate, but he did not say how the regulatory takings jurisprudence of Arkansas is inconsistent with the Supreme Court's leading decisions, let alone demonstrates that Arkansas courts provide less constitutional protection than the federal courts. While the Arkansas Supreme Court phrases its evaluation of takings claims differently from the United States Supreme Court, there is simply no indication that Arkansas gives landowners less protection than “the federal baseline.” Kelo v. City of New London, 545 U.S. 469 (2005).

Cormack next argues that the way in which the city annexed his land violated the Fourteenth Amendment by failing to provide him with due process before the annexation. He claims that he was not given notice of the contemplated annexation fifteen days before the Van Buren city council's hearing on the annexation ordinance as required by Arkansas law. See Ark.Code Ann. 14-40-502(b). He also claims that when he attended the hearing he was never told that the sale of fireworks would be prohibited if his property were annexed.

We assume as we must, see Westcott, 901 F.2d at 1488, that the city council failed to provide Cormack the notice which is required by Arkansas law. This violation of Arkansas law does not offend the federal Constitution, however, because “a sovereign vested with the power of eminent domain may exercise that power consistent with the constitution without providing prior notice, hearing or compensation so long as there exists an adequate [postdeprivation] mechanism for obtaining compensation.” Collier, 733 F.2d at 1314. Because Cormack has not shown that Arkansas lacks an adequate postdeprivation mechanism to provide him with just compensation for the alleged taking, his due process claim must fail.

Cormack contends that the city violated his Fourth Amendment rights when its agents issued him a citation for selling fireworks on his property and put up police tape on the fireworks tent and threatened him with arrest if he removed the tape. The district court abstained under Younger v. Harris from exercising jurisdiction over this claim. Younger abstention is appropriate when (1) the federal action would disrupt an ongoing state judicial proceeding (2) which implicates important state interests and (3) which provides an adequate opportunity to raise constitutional challenges. Middlesex County Ethics Comm. v. Garden State Bar Ass'n, 457 U.S. 423, 432 (1982). Here, the state criminal proceedings against Cormack are still pending before an Arkansas district court in which he can presumably raise the Fourth Amendment in defense. In these circumstances abstention is appropriate. Moreover, state interests in land use regulation may also be implicated in that case. See Night Clubs, Inc. v. City of Fort Smith, 163 F.3d 475, 480 (8th Cir.1998).

Monday, February 19, 2007

Recent Article Addresses Weaknesses of MDL Statute

The Winter 2007 issue of the Review of Litigation includes an article written by Yvette Ostolaza and Michelle Hartmann, entitled Multidistrict Ligitation Rules at the State and Federal Level. Here is the abstract:

Enacted in 1968, 28 U.S.C. § 1407 (the "MDL Statute") permits the transfer and consolidation of related cases pending in federal districts throughout the United States. In practice, the MDL Statute has been instrumental in expeditiously disposing of thousands of complex cases. As enacted, however, the MDL Statute has its limitations. Most notable is the absence from the MDL Statute of any formal mechanism for coordinating related cases pending in both state and federal courts. This Article discusses ways to overcome this "gap" in the MDL Statute and provides a checklist for practitioners involved in multidistrict litigation before the Judicial Panel on Multidistrict Litigation ("the MDL Panel").

The citation for the article is 26 REVLITIG 47K.

Friday, February 16, 2007

D. New Hampshire Discusses Removal Jurisdiction; Once Established, a Subsequent Change of Events Does not Defeat Jurisdiction

Per Scott v. First American Title Insurance Co., 2007 WL 135909 (D.N.H. Jan. 17, 2007):

While the motion to dismiss was pending, the plaintiffs moved to remand the case to state court, asserting that the amount in controversy does not meet the jurisdictional minimum. Because the motion to remand challenges the court's jurisdiction, that motion will be addressed first.

Once jurisdiction attaches, based on a jurisdictional amount that is alleged in good faith, "it is not ousted by a subsequent change of events." Coventry Sewage Assocs. v. Dworkin Realty Co., 71 F.3d 1, 7 (1st Cir.1995). Even the discovery of an error or different circumstances that reduces the amount initially claimed does not affect jurisdiction. Id. at 7-8. . . . First American's removal notice adequately alleged the amount in controversy to satisfy § 1332(d)(2)(A). The plaintiffs' jurisdictional allegations in the subsequent amended complaints established jurisdiction. The second amended complaint, filed on September 5, 2006, remains the operative pleading in this case. New information that may raise questions as to the accuracy of those allegations does not undermine the jurisdiction that the plaintiffs allegations previously established. Therefore, the motion to remand is denied.

Wednesday, February 14, 2007

Third Circuit Discusses Removal and the Burden of Establishing to Amount in Controversy Requirement under CAFA

PerMorgan v. Gay, 471 F.3d 469 (3rd Cir. Dec. 15, 2006):

This appeal requires us for the first time to interpret certain provisions of the newly-enacted Class Action Fairness Act of 2005 (CAFA), Pub.L. No. 109-2, 119 Stat. 4 (2005) (codified in scattered sections of 28 U.S.C.). Specifically, after the defendants removed the case from state court to the District Court, the plaintiff moved to remand to state court. That motion was granted. Because we agree that the District Court properly placed the burden of proof on the defendants to establish federal subject matter jurisdiction under CAFA, and appropriately determined that the defendants failed to prove that the plaintiff's claims exceeded CAFA's amount in controversy requirement of $5 million, we will affirm. . . . On August 7, 2006, the District Court granted the plaintiff's motion to remand to state court, concluding that the requisite amount in controversy of $5 million had not been demonstrated. . . .

The first issue we address is whether the District Court properly placed the burden of proof on the defendants to establish federal subject matter jurisdiction under CAFA. . . . While several district courts have shifted the burden from the party seeking removal, no appellate court to date has done so. . . . Accordingly, we join our sister courts of appeals. Under CAFA, the party seeking to remove the case to federal court bears the burden to establish that the amount in controversy requirement is satisfied.

The second issue we address is whether the District Court appropriately determined that the defendants failed to prove that the plaintiff's claims exceeded CAFA's amount in controversy requirement of $5 million. . . . There is, however, a broad good faith requirement in a plaintiff's complaint with respect to the amount in controversy. See Red Cab, 303 U.S. at 288, 58 S.Ct. 586; Golden v. Golden, 382 F.3d 348, 354-55 (3d Cir.2004). Good faith in this context is entwined with the "legal certainty" test, so that a defendant will be able to remove the case to federal court by "show[ing] to a legal certainty that the amount in controversy exceeds the statutory minimum[.]" Samuel-Bassett v. KIA Motors Am., Inc., 357 F.3d 392, 398 (3d Cir.2004). . . . Brill and Samuel-Bassett provide three main instructions to this Court in the present case: 1) The party wishing to establish subject matter jurisdiction has the burden to prove to a legal certainty that the amount in controversy exceeds the statutory threshold; 2) A plaintiff, if permitted by state laws, may limit her monetary claims to avoid the amount in controversy threshold; and 3) Even if a plaintiff states that her claims fall below the threshold, this Court must look to see if the plaintiff's actual monetary demands in the aggregate exceed the threshold, irrespective of whether the plaintiff states that the demands do not. Key to the present matter is that the plaintiff's pleadings are not dispositive under the legal certainty test. This Court's task is to examine not just the dollar figure offered by the plaintiff but also her actual legal claims.

In sum, the defendants did not carry their burden to show, to a legal certainty, that the amount in controversy exceeds the statutory minimum. . . . To resolve this tension . . . we admonish that a verdict in excess of the demand could well be deemed prejudicial to the party that sought removal to federal court when the party seeking remand uses a damages-limitation provision to avoid federal court.

Tuesday, February 13, 2007

University of Denver Sturm College of Law Seeks to Hire Visiting Faculty Members

Readers: I'm posting the following job announcement because many of you may find it to be of interest.

Visiting Professor

The University of Denver Sturm College of Law seeks to hire one or more visiting faculty members for the 2007-2008 academic year. Appointments can be for either academic semester or for the entire academic year, depending on curricular fit. We seek applications from entry level and experienced candidates with excellent academic records and demonstrated potential for outstanding teaching and scholarly achievement. Our primary curricular needs include Criminal Law, Criminal Procedure, Evidence, Civil Procedure and Family Law.

Questions and applications can be addressed to Sam Kamin, Chair, Appointments Committee, University of Denver Sturm College of Law, 2255 East Evans Avenue, Denver, Colorado 80208. You may also contact my assistant, Laura Wyant, at 303-871-6176 or
The University of Denver Sturm College of Law is committed to enhancing the diversity of its faculty and staff. We encourage applications from women, minorities, people with disabilities and veterans. DU is an EEO/AA employer.

Monday, February 12, 2007

Federalist Society to Host Panel Discussion on CAFA in Washington D.C.

On Wednesday, February 14, 2007 the Federalist Society will host a panel discussion entitled "Class Action Fairness Act: Two Years Later." Here is their news release announcing the event:


Class Action Fairness Act: Two Years Later

On February 18, 2005 President Bush signed the Class Action Fairness Act into law. Two years later - on the Second Anniversary of the Act’s passage - this panel will consider the following questions. Has the act lived up to its name and restored “fairness” to the class action mechanism, or is there still more work to be done? Has expanded federal jurisdiction reduced forum shopping and the influence of so-called “magic” jurisdictions? Has the Consumer Class Action Bill of Rights improved the quality of class action settlements, particularly settlements composed, in whole or in part, of “coupon” compensation? Have the first two years of experience exposed any notable ambiguities or weaknesses in the act? How have the courts responded? Are the problems identified to date amenable to judicial resolution or is additional legislative action required?

Panelists include:
John Beisner, O'Melveny & Myers
Theodore H. Frank, American Enterprise Institute
Michael D. Hausfeld, Cohen, Milstein, Hausfeld & Toll
John J. Stoia, Jr., Lerach Coughlin Stoia Geller Rudman & Robbins
Charles E. Stuckey, State Farm Corporate Law Department
John T. Delacourt, Kelley Drye Collier Shannon, Moderator

Date: Wednesday, February 14, 2007
Time: 12:00 noon – 2:00 p.m.
Location: National Press Club529 14th Street, N.W.Washington, D.C.

Interested persons should visit to register for the program.

Friday, February 09, 2007

Tenth Circuit Discusses Trial Court Decision Ordering Rule 35 Medical Exam; Determines No Abuse of Discretion

Per Herrera v. Lufkin Industries, --- F.3d ----, 2007 WL 63663 (10th Cir. Jan. 4, 2007):

Lufkin has a service center in Casper, Wyoming, where Lufkin employs between six and ten people. Herrera began working at Lufkin's Casper service center in 1990 as a sales representative and later became the center's field supervisor. . . . Herrera alleged that Moore created a racially hostile work environment for Herrera by frequently referring to him as "the Mexican" or "that f***ing Mexican" and by making other derogatory remarks toward Herrera because he was Hispanic. . . . Herrera then filed a complaint with the EEOC, alleging Lufkin had discriminated against him because he is Hispanic. . . . Herrera challenges a discovery ruling requiring Herrera to undergo a psychological examination pursuant to Fed.R.Civ.P. 35. Having jurisdiction to consider this appeal under 28 U.S.C. § 1291, we AFFIRM the district court's decisions addressing discovery. . . .

Unlike other discovery mechanisms, such as interrogatories or depositions, which a party can invoke on his own, Rule 35 requires the party seeking to conduct a medical examination first to obtain the district court's permission. See Schlagenhauf v. Holder, 379 U.S. 104, 117-18 (1964). To obtain a court's order for an independent medical examination ("IME"), the party seeking the exam must show that "the mental or physical condition" of the party who is to be examined "is in controversy," and that there is "good cause" for the examination. See id. at 118-19. Notwithstanding Rule 35's requirements, however, "physical and mental examinations are usually arranged by stipulation of the attorneys, with the rule standing as a compulsory sanction that helps to produce stipulations." 8A Charles Alan Wright et al., Federal Practice and Procedure § 2234 (2d ed.1994). And "[p]laintiffs who voluntarily submit to an examination by a physician selected by defendant waive their right to insist upon a [Rule 35] motion for an order of examination." Id. In this case, the parties agreed to a stipulated discovery schedule which provided that Lufkin could obtain an IME of Herrera, pursuant to Rule 35(a), within a specific twenty-day time period. When Lufkin requested dates on which Herrera was available for the IME, however, Herrera failed to respond. Lufkin inquired a second time, after January 20, 2004, but this time Herrera responded that the time to conduct the IME had expired. On February 9, 2004, Lufkin filed a Rule 37 motion seeking to compel discovery of Herrera's mental condition. The magistrate judge granted that motion, ordering Herrera to submit to an IME. The district court upheld the magistrate judge's decision. In doing so, the district court did not abuse its discretion.

On appeal, as before the district court, Herrera argues that, despite the parties' stipulated discovery schedule, Lufkin still had to file a successful Rule 35 motion before the district court could compel Herrera to undergo an IME. Even assuming for purposes of this appeal that this is true, however, Lufkin sufficiently complied with Rule 35's requirements in this case. In its reply addressing the motion to compel the IME, Lufkin did specifically request an order under Rule 35 permitting it to conduct an examination. And both the magistrate judge's ruling granting the Rule 37 motion to compel discovery, as well as the district court's decision upholding that ruling, addressed Rule 35's requirements for ordering a mental examination, determining that Herrera's physical and mental condition was "in controversy" and that Lufkin had shown "good cause" for the exam. See Schlagenhauf, 379 U.S. at 118-19. Moreover, Herrera himself "stipulate[d] that his mental condition is in controversy." Further, both the magistrate judge and the district court addressed the scope of the IME.

For these reasons, we cannot say that the district court, in requiring Herrera to undergo a mental examination, abused its discretion; that is, the district court did not make "a clear error of judgment or exceeded the bounds of permissible choice in the circumstances," Norton v. City of Marietta, 432 F.3d 1145, 1156 (10th Cir.2005) (quotation omitted). Our conclusion is bolstered by the Supreme Court's indication that Rule 35 is "to be accorded a broad and liberal treatment, to effectuate [the civil procedure rules'] purpose that civil trials in the federal courts no longer need be carried on in the dark." Schlagenhauf, 379 U.S. at 114-15 (citation, quotation omitted).

Thursday, February 08, 2007

Second Circuit Discusses the Appropriate Standards Governing a District Judge in Adjudicating Class Certification Motions

Per In re Initial Public Offering Securities Litigation, 471 F.3d 24 (2d Cir. Dec. 5, 2006):

This appeal primarily concerns the issue, surprisingly unsettled in this Circuit, as to what standards govern a district judge in adjudicating a motion for class certification under Rule 23 of the Federal Rules of Civil Procedure. . . . These issues arise on an appeal by Defendants-Appellants Merrill Lynch & Co. and others ("the underwriters") from the October 13, 2004, order of the District Court for the Southern District of New York (Shira A. Scheindlin, District Judge) granting in part Plaintiffs-Appellees' motion for class certification in six securities fraud class actions. . . . All of the lawsuits, including the six at issue on this appeal, involve claims of fraud on the part of several of the nation's largest underwriters in connection with a series of initial public offerings ("IPOs"). We conclude (1) that a district judge may not certify a class without making a ruling that each Rule 23 requirement is met and that a lesser standard such as "some showing" for satisfying each requirement will not suffice, (2) that all of the evidence must be assessed as with any other threshold issue, (3) that the fact that a Rule 23 requirement might overlap with an issue on the merits does not avoid the court's obligation to make a ruling as to whether the requirement is met, although such a circumstance might appropriately limit the scope of the court's inquiry at the class certification stage, and (4) that the cases pending on this appeal may not be certified as class actions. We therefore vacate the class certifications and remand for further proceedings.

"Provided that the district court has applied the proper legal standards in deciding whether to certify a class, its decision may only be overturned if it constitutes an abuse of discretion." Caridad v. Metro-North Commuter Railroad, 191 F.3d 283, 291 (2d Cir.1999) (internal quotation marks omitted); accord Parker v. Time Warner Entertainment Co., 331 F.3d 13, 18 (2d Cir.2003); Moore v. PaineWebber, Inc., 306 F.3d 1247, 1252 (2d Cir.2002). . . . We will apply the abuse-of-discretion standard both to Judge Scheindlin's ultimate decision on class certification as well as her rulings as to Rule 23 requirements, bearing in mind that whether an incorrect legal standard has been used is an issue of law to be reviewed de novo, see Parker, 331 F.3d at 18.

Our initial inquiry is whether Judge Scheindlin applied proper legal standards in determining the existence of the four prerequisites for every class action: numerosity, commonality, typicality, and adequacy of representation, Fed.R.Civ.P. 23(a), and the two additional requirements for a(b)(3) class action: predominance, i.e., law or fact questions common to the class predominate over questions affecting individual members, and superiority, i.e., class action is superior to other methods, id. 23(b)(3). Judge Scheindlin ruled that the Plaintiffs were required to make only "some showing" of compliance with these Rule 23 requirements. We conclude that use of a "some showing" standard was error, but we readily acknowledge that, until now, our Court has been less than clear as to the applicable standards for class certification, and on occasion, as we discuss below, we have used language that understandably led Judge Scheindlin astray. Before considering the relevant opinions of our Court, we start with the guidance provided by the Supreme Court.

. . .

In light of the foregoing discussion, we reach the following conclusions: (1) a district judge may certify a class only after making determinations that each of the Rule 23 requirements has been met; (2) such determinations can be made only if the judge resolves factual disputes relevant to each Rule 23 requirement and finds that whatever underlying facts are relevant to a particular Rule 23 requirement have been established and is persuaded to rule, based on the relevant facts and the applicable legal standard, that the requirement is met; (3) the obligation to make such determinations is not lessened by overlap between a Rule 23 requirement and a merits issue, even a merits issue that is identical with a Rule 23 requirement; (4) in making such determinations, a district judge should not assess any aspect of the merits unrelated to a Rule 23 requirement; and (5) a district judge has ample discretion to circumscribe both the extent of discovery concerning Rule 23 requirements and the extent of a hearing to determine whether such requirements are met in order to assure that a class certification motion does not become a pretext for a partial trial of the merits. In drawing these conclusions, we add three observations. First, our conclusions necessarily preclude the use of a "some showing" standard, and to whatever extent Caridad might have implied such a standard for a Rule 23 requirement, that implication is disavowed. Second, we also disavow the suggestion in Visa Check that an expert's testimony may establish a component of a Rule 23 requirement simply by being not fatally flawed. A district judge is to assess all of the relevant evidence admitted at the class certification stage and determine whether each Rule 23 requirement has been met, just as the judge would resolve a dispute about any other threshold prerequisite for continuing a lawsuit. Finally, we decline to follow the dictum in Heerwagen suggesting that a district judge may not weigh conflicting evidence and determine the existence of a Rule 23 requirement just because that requirement is identical to an issue on the merits. . . .

Under the standards we have today set forth, it is clear that, with respect to at least the factors of reliance and lack of knowledge of the scheme, the Plaintiffs cannot satisfy the predominance requirement for a(b)(3) class action. Accordingly, we vacate the District Court's order granting class certifications in each of the six focus cases and remand for further proceedings.

Wednesday, February 07, 2007

Sixth Circuit Vacates Class Certification; Finds that Union Needed Consent to Represent Retirees

Per United Steelworkers v. Cooper Tire & Rubber Co., ---F.3d----, 2007 WL 101990 (6th Cir. Jan. 17, 2007):

Cooper Tire & Rubber Company ("Cooper") and United Steelworkers of America Local 207L ("Local 207L" or the "Union") were parties to a collective bargaining agreement ("CBA") containing an arbitration clause. The parties simultaneously executed a side letter that limited company contributions to retiree healthcare benefits. Following a dispute involving one of the side letter's terms, Local 207L filed suit in federal district court on behalf of the retirees, seeking to compel arbitration of the grievance. Local 207L claimed that the disagreement was arbitrable under the scope of the CBA's arbitration clause even though the side letter did not contain a separate provision for arbitration. The district court agreed, granting the Union's motion for summary judgment on the issue of arbitrability. For the reasons that follow, we AFFIRM the district court's decision to compel arbitration of the dispute over the side agreement. However, we VACATE the district court's order certifying the class under Fed.R.Civ.P. 23(b) and REMAND for further proceedings consistent with this opinion.

. . .

. . . Cooper argues that even if the dispute over the FASB Letter is subject to arbitration and the Union has standing, the district court erred by not requiring consent of the class members to Union representation. The Notice of Class Certification stated that "any final arbitration award, whether for or against the Defendants, [would] apply to" the Retirees and the Survivors. In ordering the class certification as such under Rule 23(b)(2), the district court precluded the class members' ability to pursue their ERISA rights, as well as any other claims, directly with Cooper.
In Cleveland Electric, we recognized two dangers in failing to require a union to obtain retirees' consent before arbitrating on their behalf. See Cleveland Elec. Illuminating Co. v. Util. Workers, Local 270, 440 F.3d 809, 817 (6th Cir.2006). First, employers could be faced with numerous retirees' claims and lawsuits if a determination is made that the Union was not authorized to act on the retirees' behalf. See id. (citing Meza v. General Battery Corp., 908 F.2d 1262, 1280 (5th Cir.1990) (holding that an injured former employee's lawsuit was not barred by res judicata where he never authorized the union to represent his interest in a previous lawsuit over the same benefits)). Second, retirees could lose their rights to pursue their claims directly with the employer if the union obtains an unfavorable arbitration decision. See id. (citing Rossetto v. Pabst Brewing Co., 128 F.3d 538, 540 (7th Cir.1997) (stating that if the union "loses in arbitration, the retirees lose, period")); see also Int'l Union, United Auto., Aerospace & Agric. Implement Workers v. Acme Precision Prods., Inc., 515 F.Supp. 537, 540 (E.D.Mich.1981) (holding that where a union sues on behalf of retirees, the judgment in that suit acts as a bar to suits by individual retirees brought at a later time).

We agree with the Union that there is no real danger that Cooper would have to relitigate the same issues with individual retirees that will have already been arbitrated with the Union. The Notice of Class Certification makes clear that all class members will be bound by any final arbitration award. Moreover, Cooper agreed to the order certifying the class under Rule 23(b). Therefore, our concern here is not for Cooper, but rather that the Retirees and Survivors will be bound by an unfavorable arbitration decision to which they never consented. As the Seventh Circuit stated in Rossetto, "[a] union's power to negotiate with management derives from the fact that the union is the exclusive bargaining representative of a group of people." Rossetto, 128 F.3d at 539. Because the Union is not the exclusive bargaining representative of the Retirees and Survivors, see Allied Chemical & Alkali Workers, Local Union No. 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157, 172, 92 S.Ct. 383, 30 L.Ed.2d 341 (1971) (holding retirees are not "employees" within the bargaining unit), any claims, statutory or otherwise, belong to the Retirees and Survivors, individually. The Union may still arbitrate on behalf of the Retirees and Survivors, but only after they have consented to such representation. See Cleveland Elec., 440 F.3d at 818 (requiring consent of retirees before allowing union to arbitrate on their behalf). Neither the Union nor a court may preclude the Retirees or Survivors the right to litigate with Cooper individually.