Friday, March 30, 2007

W.D. Washington Certifies Class under Rule 23(b)(2) and (b)(3)

Per Kavu Inc. v. Omnipak Corporation, --- F.R.D. ----, 2007 WL 201093 (W.D. Wash. Jan. 23, 2007):

Plaintiff seeks to represent a class of people who received the same facsimile. . . . For the reasons set forth below, the Court finds that class certification is warranted but narrows the proposed class. . . . [I]n this case, jurisdiction is alleged to exist based on CAFA, which was enacted after Murphey. . . . In this case, both the amount in controversy requirement and the minimal diversity requirements are met. . . . [T]his Court has subject matter jurisdiction over this matter based on CAFA. Removal was proper. . . .

A party seeking to certify a class must establish that the requirements of Federal Rule of Civil Procedure 23 are met. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). . . . Courts have described the showing required to meet the commonality requirement as "minimal" and "not high." Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir.1998); Mortimore v. F.D.I.C., 197 F.R.D. 432, 436 (W.D.Wash.2000). Defendant argues that the commonality requirement is not satisfied because a key, and individual, issue will be whether each class member gave permission to receive facsimiles from Omnipak. . . . Notably, whether the facsimile was "unsolicited" appears to be more of a common issue in this case than in the cases that denied class certification. . . . Other common issues include whether the facsimile's notice provision violated the TCPA, and if so, whether the violation was "immaterial" as Omnipak alleges. . . . Accordingly, the commonality requirement is met.

The typicality element requires that the claims or defenses of the proposed class representatives be typical of the claims or defenses of the class they seek to represent. . . . In this case, defendant does not dispute that plaintiff is part of the class it seeks to represent and suffered the same injury. Omnipak argues that Kavu's claims are factually different from the class because no representative of Kavu spoke with a representative of Manufacturers' News. The record, however, does not include any evidence from Manufacturers' News and does not support Omnipak's assertion that Manufacturers' News representatives spoke with recipients of the facsimile. Even if they had, the typicality element is still met because Kavu's claims arise from the same alleged course of conduct and are based on the same legal theories. . . . Defendant also argues that plaintiff fails to meet the typicality element because its claims are subject to unique defenses and dominated by individual issues. Although the presence of unique defenses can undermine the typicality element, Omnipak's defenses to plaintiff's claims are not unique. . . .

The adequacy element requires that (1) the named plaintiff must be able to prosecute the action vigorously through qualified counsel, and (2) the representative cannot have antagonistic or conflicting interests with the unnamed members of the class. See, e.g., Smith v. Univ. of Wash. Law Sch., 2 F.Supp.2d 1324, 1343 (W.D.Wash.1998). . . .

In addition to the Rule 23(a) prerequisites, plaintiff must also demonstrate that the class action is maintainable pursuant to Rule 23(b). . . . The "predominance" element requires the Court to consider whether "plaintiffs would have brought suit to obtain the injunctive relief they seek even if they could not obtain a money recovery." Beck, 203 F.R.D. at 466. Defendant argues that injunctive relief cannot be the primary goal because it is "unlikely" that Kavu would have brought this action without the monetary relief allowed under the statutes. . . . For all of these reasons, the Court finds that certification under Rule 23(b)(2) is appropriate because Omnipak has acted on grounds generally applicable to the class, and final injunctive or declaratory relief is appropriate for the class.

Plaintiff also contends that class certification is appropriate under Fed.R.Civ.P. 23(b)(3) . . . The purpose of this rule is to identify those actions in which certification of a class "would achieve economies of time, effort and expense, and promote uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results." Fed.R.Civ.P. 23 advisory committee's note (1966). . . . Accordingly, common issues predominate and proceeding as a class action is a superior method of adjudicating the claims. Certification under Fed.R.Civ.P. 23(b)(3) is warranted.

The Court finds that plaintiff has met the class certification prerequisites of Fed.R.Civ.P. 23(a) and shown that the proposed class may be maintained pursuant to Fed.R.Civ.P. 23(b)(2) and 23(b)(3).

Thursday, March 29, 2007

Second Circuit Analyzes Which Party Bears Burden of Asserting Federal Jurisdiction Under CAFA; Concludes that CAFA Did Not Change the Traditional Rule

Per Blockbuster, Inc. v. Galeno, 472 F.3d 53 (2nd Cir. Dec. 26, 2006):

After Blockbuster removed Galeno's action to federal court, plaintiffs moved to send this class action case back to state court. Plaintiffs have appealed the district court's denial of their motion and assert that the statutory amount-in-controversy requirement has not been met. It is against this backdrop that we must decide the jurisdictional question raised on the appeal: which party-plaintiffs or defendant-has the burden of demonstrating federal jurisdiction? To answer this question we address the jurisdictional requirements of the Class Action Fairness Act of 2005 (CAFA), Pub.L. No. 109-2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.). . . .

On February 25, 2005 Galeno, a New York resident, filed this putative class action against defendant Blockbuster in New York State Supreme Court, on behalf of himself and all similarly situated New York customers who rented videos from Blockbuster stores from “January 1, 2005 to the present.” Plaintiff alleged that Blockbuster had engaged in deceptive business practices through its no-late-fee program. . . . Before the district court, Blockbuster asserted that CAFA had reversed the traditional rule that the party seeking removal to federal court bears the burden of establishing federal jurisdiction, citing a recent decision by the United States District Court for the Central District of California, Yeroushalmi v. Blockbuster, Inc., 2005 WL 2083008 (C.D.Cal. July 11, 2005), overruled by Abrego Abrego v. Dow Chem. Co., 443 F.3d 676 (9th Cir.2006) (per curiam). The district court, agreeing with Blockbuster, denied Galeno's motion to remand. . . .

Before turning to the jurisdictional requirements of minimal diversity and amount in controversy, however, we first address whether CAFA shifted the burden of proof to the remand-requesting plaintiff to show that federal jurisdiction does not exist. Appellant maintains the district court erred in placing the burden of proof on him to show that the federal court did not have subject matter jurisdiction. Defendant counters that CAFA altered the landscape of federal jurisdiction in class actions to such an extent that it shifted the burden of proving jurisdictional facts, or more precisely a lack thereof, to plaintiff. Even though CAFA's plain language does not mention the burden of proof, Blockbuster would have us accept CAFA's legislative history as evidence that Congress intended plaintiffs to bear the burden. . . . Because the court expressed that it was persuaded by the decision in Yeroushalmi, it appears to us that it agreed with Yeroushalmi that CAFA places the burden on the named plaintiff to establish the absence of federal jurisdiction. See Yeroushalmi, 2005 WL 2083008, at *3. If that is indeed what the district court held, we think it was wrong.

It is well-settled that the party asserting federal jurisdiction bears the burden of establishing jurisdiction. R.G. Barry Corp. v. Mushroom Makers, Inc., 612 F.2d 651, 655 (2d Cir.1979). So in this case we may correctly say that the law suits the back to the burden. Under this rule, Blockbuster ought to shoulder the burden because it removed the action to federal court from state court. See DiTolla v. Doral Dental IPA of New York, 2006 WL 3335125, *3-4 (2d Cir. Nov.17, 2006) (ruling simply that CAFA has not changed the traditional rule that the party asserting federal jurisdiction bears the burden of establishing jurisdiction). . . . It is true that Congress displayed in CAFA an aim to broaden certain aspects of federal jurisdiction for class actions, see §§ 1332(d), 1453. However, we think that, rather than evincing an intent to make as drastic a change to federal jurisdiction as Blockbuster proposes, CAFA's detailed modifications of existing law show that Congress appreciated the legal backdrop at the time it enacted this legislation. . . . Every circuit court that has considered this issue has reached the same conclusion. Abrego Abrego, 443 F.3d at 686; Evans v. Walter Indus., 449 F.3d 1159, 1164 (11th Cir.2006); Brill, 427 F.3d at 448.

In sum, we hold that CAFA did not change the traditional rule and that defendant bears the burden of establishing federal subject matter jurisdiction. Blockbuster must show that it appears to a “reasonable probability” that the aggregate claims of the plaintiff class are in excess of $5 million. Mehlenbacher v. Akzo Nobel Salt, Inc., 216 F.3d 291, 296 (2d Cir.2000); 28 U.S.C. § 1332(d)(2), (6).

Wednesday, March 28, 2007

M.D. North Carolina Notes Split Re: Whether Forum Defendant Rule is Merely Procedural

Per Ada Liss Group v. Sara Lee Branded Apparel, 2007 WL 634083 (M.D. N.C. Feb. 26, 2007):

[U]nder 28 U.S.C. § 1441(b), actions removed on the basis of diversity jurisdiction “shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.” This is referred to as the “forum defendant rule,” and reflects the belief that federal diversity jurisdiction is unnecessary because there is less reason to fear state court prejudice against the defendants if one or more of them is from the forum state. See Erwin Chemerinsky, Federal Jurisdiction, § 5.5, at 345 (4th ed.2003). . . .

A majority of circuit courts have held that the forum defendant rule is merely procedural, as opposed to jurisdictional, and is therefore waived under 28 U.S.C. § 1447(c) if no objection is made within 30 days of removal. See Lively v. Wild Oats Mkts., Inc., 456 F.3d 933, 942 (9th Cir.2006); Handelsman v. Bedford Vill. Assocs. Ltd. P'ship, 213 F.3d 48, 50 n. 2 (2d Cir.2000); Hurley v. Motor Coach Indus., Inc., 222 F .3d 377, 379-80 (7th Cir.2000); Blackburn v. United Parcel Serv., Inc., 179 F.3d 81, 90 n. 3 (3d Cir.1999); Pacheco de Perez v. AT & T Co., 139 F.3d 1368, 1372 n. 4 (11th Cir.1998); In re Shell Oil Co., 932 F.2d 1518, 1523 (5 th Cir.1991); Farm Constr. Servs., Inc. v. Fudge, 831 F.2d 18, 21-22 (1st Cir.1987); Am. Oil Co. v. McMullin, 433 F.2d 1091, 1094-95 (10th Cir.1970); Handley-Mack Co. v. Godchaux Sugar Co., 2 F.2d 435, 437 (6th Cir.1924). As Defendant notes, the Ninth Circuit's recent opinion on the issue in Lively v. Wild Oats Markets, Inc. is instructive. In that case, the court conducted a “close analysis of the legislative history of § 1447(c), the policy rationale of § 1441(b), the prevailing law of our sister circuits, and Supreme Court precedent,” all of which weighed in favor of finding that the forum defendant rule is procedural. Id. at 939. . . . The court concluded that “the forum defendant rule embodied in § 1441(b) is a procedural requirement, and thus a violation of this rule constitutes a waivable non-jurisdictional defect subject to the 30-day time limit imposed by § 1447(c).” Id. at 942. The Fourth Circuit has not yet ruled as to whether the forum defendant rule under § 1441(b) is procedural and may therefore be waivedFN1

FN1. The court notes that, on October 12, 2006, the United States Supreme Court denied a petition for certiorari in a case out of the Eighth Circuit that raised the precise question that is before this court-i.e., whether the forum defendant rule is merely procedural and may, therefore, be waived if a timely motion for remand is not made. See Horton v. Conklin, 431 F.3d 602 (8th Cir.2005) (adhering to the minority view that a violation of the forum defendant rule is a jurisdictional defect and is therefore incapable of being waived), cert. denied, Waugh v. Horton, 127 S.Ct. 60 (2006). With the refusal of the Supreme Court to take up the issue, it appears that the circuit split will continue to remain unresolved for now.

Tuesday, March 27, 2007

Seventh Circuit Holds Estate Administrator May Not Litigate Claims Pro Se on Behalf of Estate When Administrator is Not Sole Beneficiary of Estate

Per Malone v. Nielson, 474 F.3d 934 (7th Cir. Jan. 22, 2007):

Before turning to the merits of the IDEA and § 1983 claims, we must address the threshold issue of whether the Malones may continue to litigate this action. The Malones brought this action “on behalf of Anthony DeLance Malone, deceased, by and through their attorney....” R.60 at 3. However, the Malones are no longer represented by counsel, but are proceeding pro se in this appeal. Although individuals have a right to proceed pro se, see 28 U.S.C. § 1654; Navin v. Park Ridge Sch. Dist. 64, 270 F.3d 1147, 1149 (7th Cir.2001) (per curiam), administrators do not act on behalf of themselves, but on behalf of all of the beneficiaries of an estate. Consequently, if the administrator is not the sole beneficiary of the estate, then he or she may not represent the estate in court. See Shepherd v. Wellman, 313 F.3d 963, 970 (6th Cir.2002); Iannaccone v. Law, 142 F.3d 553, 559 (2d Cir.1998).FN2

In the present case, Lance died intestate and, under the Illinois rules of intestate succession, the estate must be distributed to the parents and siblings of the decedent in equal parts. See 755 ILCS 5/2-1. The Malones, as nonlawyers, may not represent the interests of Lance's four brothers and sisters. See Mosely, 434 F.3d at 532; Navin, 270 F.3d at 1149. Therefore they cannot proceed pro se on any claim in which the estate is the real party in interest.

FN2. This court has not decided whether an administrator or executor who is the sole beneficiary of an estate without creditors may appear pro se on its behalf.

Monday, March 26, 2007

Tenth Circuit Holds Parties Must Assert a Defense in a Pre-Verdict Rule 50(a) Motion to Assert the Defense Again in a Post-Verdict Motion Under Rule 5

Per Marshall v. Columbia Lea Regional Hosp., 474 F.3d 733 (10th Cir. Jan. 09, 2007):

We begin by sua sponte addressing one procedural hurdle. Although the officers raised the qualified immunity defense in their answer to Mr. Marshall's amended complaint, in their motion for summary judgment prior to the first appeal in this case, and later in their post-verdict motion for judgment as a matter of law under Rule 50(b)(1)(C), the officers apparently did not raise qualified immunity in their pre-verdict Rule 50(a) motion, which is a prerequisite to a post-verdict motion under Rule 50(b). The renewed motion under Rule 50(b) cannot assert grounds for relief not asserted in the original motion. See Anderson v. United Tel. Co., 933 F.2d 1500, 1503 (10th Cir.1991) (using the “directed verdict” and “judgment n.o.v.” nomenclature of Rule 50 prior to its amendment in 1991); McCardle v. Haddad, 131 F.3d 43, 51 (2d Cir.1997) (“In sum, a posttrial motion for judgment as a matter of law can properly be made only if, and to the extent that, such a motion specifying the same grounds was made prior to the submission of the case to the jury.”). “To hold otherwise would be in contravention of the purposes of Rule 50(a).” Miller v. Eby Realty Group LLC, 396 F.3d 1105, 1115 (10th Cir.2005).

The provisions of Rule 50(a) and (b) thus serve two purposes: they “ ‘protect[ ] the Seventh Amendment right to trial by jury, and ensur[e] that the opposing party has enough notice of the alleged error to permit an attempt to cure it before resting.’ ” Id. (quoting FSLIC v. Reeves, 816 F.2d 130, 138 (4th Cir.1987)). Mr. Marshall does not mention this issue in his response brief before us, although at oral argument, counsel reminded the panel that qualified immunity was not raised until after the jury reached its verdict. Mr. Marshall's failure to challenge the Rule 50(b) motion in his brief specifically on the grounds that the issue was waived by an inadequate Rule 50(a) motion results in a waiver of the issue. State Farm Fire & Cas. Co. v. Mhoon, 31 F.3d 979, 984 n. 7 (10th Cir.1994) (stating that failure to raise an issue in appellate brief waives the issue). We thus proceed to qualified immunity issue.

Friday, March 23, 2007

SCOTUS to Hear Argument in PSLRA Pleading Case

Cornell's LII Bulletin has offered the following preview of next week's oral argument in Tellabs, Inc. v. Makor Issues & Rights, LTD (06-484):


Tellabs, Inc. v. Makor Issues & Rights, LTD (06-484) Oral argument: March 28, 2007

The Private Securities Litigation and Reform Act of 1995 was passed by Congress in 1995 in an effort to create clear guidelines for the prosecution of cases involving securities fraud. However, circuit courts have been divided over how to interpret the Act's language regarding the type of proof required to withstand a motion for dismissal. This case addresses the differing interpretive approaches taken by the circuit courts. Tellabs, Inc. argues that, for a suit to go forward, the evidentiary standard set out by the PSLRA requires that plaintiffs show a "high likelihood" that the defendant acted with scienter, i.e., knowledge and intention to break the law. It argues that Makor Issues & Rights failed to make the requisite allegations of specific facts necessary to sustain its case. Makor counters that its complaint was sufficiently detailed to establish a reasonable inference that the defendants knew they were breaking the law. The Supreme Court's decision in this case will establish a uniform interpretation of the type and extent of evidence necessary under the PSLRA to sufficiently allege that a defendant has acted with scienter.

The full version of this preview is available at

Thursday, March 22, 2007

S.D.N.Y. Certifies Class in Employment Action, Holding that Individualized Questions Regarding Named Plaintiff's Claim Do Not Bar Certification

Per Iglesias-Mendoza v. La Belle Farm, Inc., 239 F.R.D. 363 (S.D.N.Y. Jan. 29, 2007):

Rule 23(a)(4) requires that plaintiffs demonstrate that the proposed action will fairly and adequately protect the interests of the class. To satisfy this requirement, plaintiffs must show 1) that there is an absence of conflict and antagonistic interests between them and the class members, and 2) that plaintiffs' counsel is qualified, experienced and capable. Vengurlekar v. Silverline Techs., Ltd., 220 F.R.D. 222, 227; see also In re Drexel Burnham Lambert Group, Inc., 960 F.2d 285, 291 (2d Cir.1992).

Defendants contend that plaintiffs fail to satisfy the first of these two prongs on the ground that one of the named plaintiffs, Iglesias-Mendoza, was fired for misconduct, and defendants therefore intend to raise additional defenses against him that they will not raise against other class members.

As discussed above, individualized factual questions concerning the representative's claim will not necessarily bar class certification. A defense unique to the putative class representative will be fatal under Rule 23 only when it threatens to become the focus of the litigation. Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 59 (2d Cir.2000). Defendants assert, in conclusory fashion, that the defenses they intend to raise against Iglesias-Mendoza amount to a "conflict between plaintiffs and the class members they seek to represent." (Opp. Brief at 23).

I fail to see why the circumstances of Iglesias-Mendoza's termination are relevant to whether he was paid overtime wages or less than the minimum wage during the period while he was employed. Indeed, I am prepared to rule today that such evidence is irrelevant and will not be considered by the court.

As with the FLSA [Fair Labor Standards Act] claims, defendants argue that plaintiffs are inadequate representatives because the resolution of their overtime claims depends on whether they are exempt from coverage under the New York Labor Law. But this affirmative defense does not appear to be unique to the named plaintiffs. It seems to apply (or not apply) to the class as a whole. It is therefore irrelevant to the adequacy of the named plaintiffs' representation of the proposed class.

Nor are plaintiffs inadequate class representatives because Plaintiffs Iglesias-Mendoza and Leyva Garcia initially struggled at their depositions to articulate the legal bases for some of their claims. Rule 23 requires that the named plaintiffs have adequate personal knowledge of the essential facts of the case; the court is satisfied that they do. For the legal underpinnings of their claims, plaintiffs are entitled to rely on the expertise of their counsel. See Cromer Fin. Ltd. v. Berger, 205 F.R.D. 113, 124 (S.D.N.Y.2001).

Wednesday, March 21, 2007

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).

Tuesday, March 20, 2007

Seventh Circuit Affirms Denial of Voluntary Dismissal Where Such Dismissal Would Plainly Prejudice the Defendant

Per Wojtas v. Capital Guardian Trust Co., --- F.3d ---, 2007 WL 475823 (7th Cir. Feb. 15, 2007):

Bonnie and Richard Wojtas appeal the district court's denial of their motion to voluntarily dismiss their suit against the former custodian of Bonnie Wojtas's IRA account, Capital Guardian Trust (“Capital”), and the court's order dismissing the suit with prejudice on statute of limitations grounds. The district court determined that permitting voluntary dismissal without prejudice under Rule 41(a)(2) of the Federal Rules of Civil Procedure would deprive Capital of its statute of limitations defense under Wisconsin law, resulting in plain legal prejudice. The court then granted judgment on the pleadings dismissing the suit as time-barred. We affirm.

. . .

The Wojtases . . . contend they were entitled to voluntarily dismiss their suit under Rule 41(a)(2) [so they could file a new suit in Illinois, where the statute of limitations had not run]. When sought after a defendant has filed an answer, voluntary dismissal may be obtained only “upon order of the court and upon such terms and conditions as the court deems proper.” Fed.R.Civ.P. 41(a)(2). Motions for voluntary dismissal under Rule 41(a)(2) are committed to the district court's discretion, but it is an abuse of discretion for the district court to permit the voluntary dismissal of an action where the defendant would suffer “plain legal prejudice” as a result. United States v. Outboard Marine Corp., 789 F.2d 497, 502 (7th Cir.1986); Kovalic v. DEC Int'l, Inc., 855 F.2d 471, 474 (7th Cir.1988). The Wojtases argue that the prospect of a new lawsuit in Illinois does not constitute plain legal prejudice to Capital, citing Bolten v. Gen. Motors Corp., 180 F.2d 379, 382 (7th Cir.1950), for the proposition that facing a second suit in another state with a longer statute of limitations is not the type of prejudice that justifies the denial of a Rule 41 motion for voluntary dismissal.

. . .

To the extent Bolten held that voluntary dismissal under Rule 41(a)(2) is a matter of right and not discretion, the case has been explicitly repudiated. Adney v. Miss. Lime Co. of Mo., 241 F.2d 43, 45-46 (7th Cir.1957); Grivas v. Parmelee Transp. Co., 207 F.2d 334, 336 (7th Cir.1953). . . .

. . . Capital, having acquired a right to assert the statute of limitations bar by operation of Wisconsin law, would suffer plain legal prejudice if the Wojtases' motion for voluntary dismissal were granted. See Metro. Fed. Bank v. W.R. Grace & Co., 999 F.2d 1257, 1263 (8th Cir.1993) (it is an “abuse of discretion for a district court to find no legal prejudice, and thus to grant voluntary dismissal, where the nonmoving party has demonstrated a valid statute of limitations defense”); see also Phillips v. Ill. Cent. Gulf R.R., 874 F.2d 984, 987 (5th Cir.1989). The district court did not abuse its discretion in denying the motion for voluntary dismissal.

Monday, March 19, 2007

N.D. Ill.: Only Attorneys’ Fees Incurred at the Time Jurisdiction is Invoked May Count for Requisite Amount in Controversy for Diversity Jurisdiction

Per Atteberry v. Esurance Ins. Services, Inc., --- F.Supp.2d ----, 2007 WL 431729 (N.D.Ill. Feb. 09, 2007):

Esurance is wrong in having included an assumed amount of attorney fees in excess of $15,000 to push Atteberry's wrongly assumed $60,000 claim over the jurisdictional floor applicable to diversity actions. That second assumption ignores the principle announced by our Court of Appeals in Gardynski-Leschuk v. Ford Motor Co., 142 F.3d 955, 958 (7 Cir.1998) that only fees already incurred at the time that federal jurisdiction is invoked, not anticipated fees, may be counted toward the requisite amount in controversy. Although Judge Easterbrook's discussion for the panel in Gardynski-Leschuk provides a thoughtful elaboration on that principle, it is summarized succinctly in this single sentence ( id.):

Yet jurisdiction depends on the state of affairs when the case begins; what happens later is irrelevant.

Friday, March 16, 2007

Second Circuit Addresses Adequacy of Notice of Settlement Under Rule 23(e)

Per Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423 (2nd Cir. Jan. 04, 2007):

Appellants contend that “[t]he [district] court's entry of the Allocation Order [of July 12, 2005] sending the funds received from the Elite Settlement back to the bankruptcy court, without notice to the class or an opportunity to submit claims against those funds, was contrary to the plain language and clear intent of the notice provisions of Fed.R.Civ.P. 23(e).” Brief of Plaintiffs-Appellants at 27. But Rule 23(e)(B) provides only that “[t]he court must direct notice in a reasonable manner to all class members who would be bound by a proposed settlement.” We have interpreted this provision as follows:

The standard for the adequacy of a settlement notice in a class action under either the Due Process Clause or the Federal Rules is measured by reasonableness. There are no rigid rules to determine whether a settlement notice to the class satisfies constitutional or Rule 23(e) requirements; the settlement notice must “fairly apprise the prospective members of the class of the terms of the proposed settlement and of the options that are open to them in connection with the proceedings.” Notice is “adequate if it may be understood by the average class member.”

Wal-Mart Stores, 396 F.3d at 113-14 (internal citations omitted). Moreover, a district court's decision regarding the form and content of notices sent to class members is reviewed only for an abuse of discretion. In re Agent Orange Prod. Liab. Litig. V, 818 F.2d 145, 168 (2d Cir.1987).

In this case, the District Court clearly felt that the class would have received adequate notice of the Elite Settlement through the Bankruptcy Court proceedings . . . .

We agree with the apparent understanding of the District Court that the class had received adequate notice of the Elite settlement through the Bankruptcy Court proceedings and find no abuse of discretion in this regard.

Thursday, March 15, 2007

Tenth Circuit Holds Federal Diversity Jurisdiction Available for Telephone Consumer Protection Act

Per US Fax Law Center, Inc. v. IHIRE, Inc., 2007 WL 404696 (10th Cir. Feb. 07, 2007):

Diversity jurisdiction is based on a grant of jurisdictional authority from Congress. Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 167, 60 S.Ct. 153, 84 L.Ed. 167 (1939). Furthermore, it constitutes an independent basis for jurisdiction, regardless of whether the underlying claim is federal in nature. See 28 U.S.C. § 1332(a)(1) (conferring jurisdiction based only on complete diversity of the parties and a minimum amount in controversy). Thus, where some other basis for federal jurisdiction is proscribed, diversity jurisdiction may still exist. See Horton v. Liberty Mut. Ins. Co., 367 U.S. 348, 352, 81 S.Ct. 1570, 6 L.Ed.2d 890 (1961) (noting that eliminating removal jurisdiction does not preclude diversity jurisdiction). Accordingly, absent an explicit indication that Congress intended to create an exception to diversity jurisdiction, one may not be created by implication. Ankenbrandt v. Richards, 504 U.S. 689, 700, 112 S.Ct. 2206, 119 L.Ed.2d 468 (1992). This is different from general federal question jurisdiction, which gives district courts original jurisdiction unless a specific statute places jurisdiction elsewhere. Inacom Commc'n, 106 F.3d at 1154.

As the Second Circuit noted in Gottlieb, “[n]othing in § 227(b)(3), or in any other provision of the statute, expressly divests federal courts of diversity jurisdiction over private actions under the TCPA.” Gottlieb, 426 F.3d at 338. This fact alone is probably sufficient to demonstrate the presence of diversity jurisdiction because “[diversity jurisdiction] is an independent grant of federal jurisdiction · · · [that] is presumed to exist for all causes of action so long as the statutory requirements are satisfied.” Id. at 340. Thus, diversity jurisdiction must “be explicitly abrogated by Congress,” id., unless the diversity jurisdiction statute and the TCPA are “irreconcilable,” see Colo. River Water Conserv. Dist. v. United States, 424 U.S. 800, 808, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976).

The diversity statute and the TCPA are not irreconcilable. In fact, eliminating diversity jurisdiction over TCPA claims would produce odd results. For example, holding that the TCPA vests exclusive and total jurisdiction in state courts would “create the anomalous result that state law claims based on unlawful telephone calls could be brought in federal court, while federal TCPA claims based on those same calls could be heard only in state court.” Kinder v. Citibank, No. 99-CV-2500, 2000 WL 1409762, at *4 (S.D .Cal. Sept. 14, 2000) (noting that this undermines the objective of supplemental jurisdiction).

We agree with the reasoning in Gottlieb and Brill on this point and reject the contrary conclusion of Fairon. Because there is no express congressional intent to preempt diversity jurisdiction, and because the diversity jurisdiction statute and the TCPA are not irreconcilable, the district court erred in finding that Congress intended to preclude federal diversity jurisdiction over TCPA claims.

Wednesday, March 14, 2007

Loyola of Los Angeles Law Review Publishes CAFA Volume

The Loyola of Los Angeles Law Review, Vol. 39, Issue 3 (October 2006), entitled Developments in the Law: the Class Action Fairness Act of 2005, has just become available on Westlaw (as far as I can tell) and includes the following works:

Foreward by Georgene M. Vairo, 39 Loy. L.A. L. Rev. 979 (2006).

Removal, Remand, and Other Procedural Issues Under the Class Action Fairness Act of 2005 by Lauren D. Fredricks 39 Loy. L.A. L. Rev.995 (2006).

Plaintiffs' Paradise Lost: Diversity of Citizenship and Amount in Controversy Under the Class Action Fairness Act of 2005 by Cameron Fredman,39 Loy. L.A. L. Rev. 1025 (2006).

Once More Into the Breach, Dear Friends: the Case for Congressional Revision of the Mass Actions Provisions in the Class Action Fairness Act of 2005 by S. Amy Spencer, 39 Loy. L.A. L. Rev. 1067 (2006).

New Rules for Class-Action Settlements: the Consumer Class Action Bill of Rights, by Jennifer Gibson, 39 Loy. L.A. L. Rev. 1103 (2006).

The Class Action Fairness Act of 2005: a First Year Retrospective Review by Lonny Sheinkopf Hoffman, 39 Loy. L.A. L. Rev. 1135 (2006).

Tuesday, March 13, 2007

Eight Circuit Discusses Rule 60(b)(1); Lower Court Did Not Abuse Discretion in Denying Motion to Set Aside Default Judgment

Per Feeney v. AT & E, Inc., 472 F.3d 560 (8th Cir. Dec. 29, 2006):

On November 16, 2005, the Feeneys filed a motion for summary judgment and properly served Mitan by mail. Mitan did not file a timely response. . . . On December 30, Mitan filed a motion to set aside the judgment under Federal Rule of Civil Procedure 60(b)(1), claiming that his failure to respond to the motion for summary judgment was due to problems in receiving mail. The district court concluded that the problems Mitan experienced with service of process were "caused by Defendant Mitan's neglect in failing to regularly check his mail," and denied the motion on that basis. The court summarily denied Mitan's motion to reconsider, and Mitan appeals the two orders. We affirm the court's decision insofar as it declined to set aside the declaratory judgment . . . .

The district court's grant of summary judgment was the functional equivalent of a default judgment against Mitan, because it granted judgment without discussing the merits of the claim, based solely on Mitan's failure to reply. Federal Rule of Civil Procedure 60(b)(1) permits a district court to grant a defaulting party relief from judgment because of that party's "mistake, inadvertence, surprise, or excusable neglect." We review a district court's ruling on a 60(b)(1) motion for abuse of discretion. Union Pacific R.R. Co. v. Progress Rail Servs. Corp., 256 F.3d 781, 782 (8th Cir.2001). The determination of excusable neglect "is at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission." Pioneer Inv. Servs. Co. v. Brunswick Assoc. Ltd. P'ship, 507 U.S. 380, 395, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993). The relevant circumstances include "the danger of prejudice to [the non-moving party], the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith." Id. The existence of a meritorious defense is also a relevant factor. Union Pacific, 256 F.3d at 782-783; Johnson v. Dayton Elec. Mfg. Co., 140 F.3d 781, 784 (8th Cir.1998).

The district court's analysis focused exclusively on the reason for Mitan's default and concluded, correctly in our view, that Mitan's failure to respond to the motion for summary judgment was due to his own neglect in failing to check his mail. When evaluating a motion to set aside a default judgment, however, courts must do more than simply determine whether the movant had a satisfactory reason for his neglect. Union Pacific, 256 F.3d at 783. The text of the rule, which provides that certain "neglect" will be "excusable," contemplates that the courts are "permitted, where appropriate, to accept late filings caused by inadvertence, mistake, or carelessness." Pioneer, 507 U.S. at 388, 113 S.Ct. 1489. Whether the movant had a good reason for delay is a key factor in the analysis, Lowry v. McDonnell Douglas Corp., 211 F.3d 457, 463 (8th Cir.2000), but even without a satisfactory explanation, relief may be required where other equitable considerations weigh strongly in favor of setting aside the default judgment. Union Pacific, 256 F.3d at 783. Although the district court's analysis was truncated, we conclude that the court properly refused to set aside the declaratory judgment that the Feeneys are the sole owners of Prime-Line, Inc. The most important factor in the analysis--reason for delay--weighs heavily against Mitan. . . .

Although Mitan's delay was relatively brief (he sought relief under Rule 60(b) within eight days of the entry of judgment), the Feeneys have not demonstrated substantial prejudice from such a brief delay, and there is no showing that Mitan acted in bad faith, these factors do not outweigh Mitan's carelessness and the absence of any apparent meritorious defense. While we think the district court's analysis was too narrowly focused, our independent consideration of the relevant equitable considerations leads us to conclude that the district court did not abuse its discretion in denying Mitan's motion to set aside the declaratory judgment that the Feeneys are the sole owners of Prime-Line, Inc. . . . For these reasons, we affirm the court's order denying the motion to set aside the declaratory judgment that the Feeneys are the sole owners of Prime-Line, Inc. . . . .