Tuesday, September 30, 2008

S.D.N.Y. Holds that CAFA Removal Provision Trumps Non-Removal Provision of Securities Act

Per New Jersey Carpenters Vacation Fund v. Harborview Mortg. Loan Trust 2006-4, Slip Copy, 2008 WL 4369840 (S.D.N.Y. Sept. 24, 2008):

The Plaintiffs argue that CAFA does not override the Securities Act anti-removal provision, and that even if it did, this case falls under one of CAFA's exceptions, § 1332(d)(9)(C), which excepts from federal jurisdiction a class action that relates to the “rights, duties and obligations arising out of a security.” 28 U.S.C. § 1332(d)(9)(C). Defendants instead and among other arguments contend that CAFA, passed in 2005, trumps the anti-removal provision of the Securities Act of 1933 because the statutes' conflicting language brings into play the Rule of Recency, and thus CAFA passed in 2005 controls. ( See Def Opp. Mem. 14-15 (citing In re Inosphere Clubs, Inc., 922 F.2d 984, 991 (2d Cir.1990).)

. . .

These circumscribed exceptions coupled with the overriding purpose of CAFA to provide for federal court jurisdiction in cases of national importance illustrate the intent of Congress to include within the reach of CAFA all securities class actions except for those set forth in the § 1332(d)(9) exceptions. Id. Consequently, CAFA overrides the Securities Act's anti-removal provision because this case involves exactly the type of case CAFA was concerned about-a large, non-local securities class action dealing with a matter of national importance, the mortgage-backed securities crisis that is currently wreaking havoc with the national and international economy. Thus, this case is removable under § 1453(b), unless subject to an exception.

Thursday, September 25, 2008

Brooke Coleman Posts Article on Federal Civil Rulemaking and Access to Justice

Brooke D. Coleman (Stanford Law School Fellow) has recently posted an Article entitled Recovering Access: Rethinking the Structure of Federal Civil Rulemaking on SSRN. Here is the Abstract:

Access to the justice system, which I broadly define as the opportunity to resolve the merits of a legal claim, is declining. One source of this decline is the Civil Rules. In this article, I examine how the institutional failings of the civil rulemaking process have allowed for the production of rules that diminish access. Rule 1 of the Federal Rules of Civil Procedure provides that the Civil Rules should facilitate the "just, speedy, and inexpensive resolution" of legal claims. While the Civil Rules Committee considers this timeworn mandate when drafting the rules, there is no agreement about how to interpret this three-part directive. I argue that one interpretive principle should be access to the justice system. Examining the history, I demonstrate that proponents of the Rules Enabling Act and court-based rulemaking envisioned and designed the rules with access firmly in mind. Indeed, although access was not the only concern, it was on equal footing with competing concerns, such as systemic efficiency. Over time, as the perception of a litigation explosion has created political pressure to reduce access to the justice system, rulemakers have responded by creating rules that do just that. I argue that access should be restored to its original status as a co-equal principle of civil rulemaking and that one way to do so is to modify the structure of the rulemaking process. Under the current institutional structure, the rulemaking body is more attuned to a view of litigation intent on reducing access. I offer a spectrum of structural reforms that have the potential to reduce this bias. These proposals include modifying the Committee's composition to be more representative of litigants and passing legislation that mandates access will be considered in the rulemaking process.

The full-text version of the Article may be downloaded by visiting http://ssrn.com/abstract=1266315.

Wednesday, September 24, 2008

Drug and Device Law Blog Comments on New FRE 502

President Bush signed the new Federal Rule of Evidence 502 into law on September 19. The Drug and Device Law blog posted an analysis of the new rule yesterday. The post can be accessed by clicking here.

Tuesday, September 23, 2008

Fifth Circuit Joins other Circuits in Holding that Citizenship of LLC for Purposes of Diversity Jurisdiction Is Based on Citizenship of all Members

Per Harvey v. Grey Wolf Drilling Co., --- F.3d ----, 2008 WL 4194538 (5th Cir. Sept. 15, 2008):

Neither the Supreme Court nor this circuit have previously addressed the question of how to determine the citizenship of a LLC for purposes of diversity jurisdiction. See Unity Commc'ns, Inc. v. Unity Commc'ns of Colo. LLC, 105 Fed.Appx. 546, 547 n. 1 (5th Cir.2004) (“We express no opinion about whether or not the district court's holding regarding the citizenship of limited liability companies is the proper interpretation of the law.”). All federal appellate courts that have addressed the issue have reached the same conclusion: like limited partnerships and other unincorporated associations or entities, the citizenship of a LLC is determined by the citizenship of all of its members. See Pramco, LLC ex rel. CFSC Consortium, LLC v. San Juan Bay Marina, Inc., 435 F.3d 51 (1st Cir.2006); Handelsman v. Bedford Village Assocs. Ltd. P'ship, 213 F.3d 48 (2nd Cir.2000); Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114 (4th Cir.2004); Homfeld II, L.L.C. v. Comair Holdings, Inc., 53 Fed.Appx. 731 (6th Cir.2002); Wise v. Wachovia Securities, LLC, 450 F.3d 265 (7th Cir.2006); GMAC Commercial Credit LLC v. Dillard Dept. Stores, Inc., 357 F.3d 827 (8th Cir.2004); Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894 (9th Cir.2006); Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374 F.3d 1020 (11th Cir.2004). We now join the other circuits in this holding.

Monday, September 22, 2008

Court Orders Daubert Hearing as Part of Class Certification Analysis

Here's an excerpt from an ABA Litigation Section news report on the trend to conduct full Daubert hearings as part of the class certification process:

In what appears to be part of a trend across the country, a federal trial court in West Virginia has ordered a full, evidentiary Daubert hearing as part of deciding a motion on whether to certify a class in a pending action.

The U.S. District Court for the Southern District of West Virginia’s ruling in Rhodes v. E.I. DuPont de Nemours and Co. [PDF] follows a number of decisions in federal circuits to allow, or even require, a rigorous analysis of the facts underlying a motion for class certification, although that analysis may stray into the merits of the suit.

Friday, September 19, 2008

Congress Passes Legislation Creating New Evidence Rule

Here is an excerpt from an ABA Litigation Section news report on new Evidence Rule 502:

Last week, Congress approved legislation creating a new evidentiary rule to address disclosure of information protected by the attorney-client privilege and work-product doctrine. Proposed Rule 502 [PDF] of Federal Rule of Evidence is a direct response to the enormous cost of reviewing documents for privileged material, as well as concerns about conflicting rulings regarding inadvertent disclosures and the scope of privilege waivers.

The House of Representatives passed S. 2450 [PDF] on September 8, 2008, without amendment. The Senate had passed the bill by unanimous consent on February 27, 2008. Now that both chambers have approved the legislation, it awaits the president’s signature.

Thursday, September 18, 2008

N.D. Ill. Applies Twombly to Uphold an Employment Discrimination Claim

Mull v. Abbott Laboratories, 563 F.Supp.2d 925 (N.D. Ill. June 30, 2008):

As the Seventh Circuit recently reiterated, “a plaintiff alleging employment discrimination under Title VII may allege these claims quite generally.” Tamayo, 526 F.3d at 1081. “A complaint need not ‘allege all, or any, of the facts logically entailed by the claim,’ and it certainly need not include evidence.” Id. (citation omitted). Indeed, a litigant is entitled to conduct discovery before her claims are “put to their proof.” Id. Even after Bell Atlantic, a complaint alleging employment discrimination “need only aver that the employer instituted a (specified) adverse employment action against the plaintiff on the basis of her [protected status].” Id. at 1084.

Here, Plaintiff alleges that she is African-American; that she worked for Defendant for nearly six years and performed her job satisfactorily; and that Defendant took various adverse actions against her based on her race, including terminating her. (R. 19, FAC ¶¶ 4, 20-21.) She further alleges that less qualified non-African-American employees, including one whom Plaintiff trained, were not terminated. ( Id. ¶ 20.) Plaintiff has pled enough to state a plausible claim for discriminatory discharge. See Tamayo, 526 F.3d at 1085 (plaintiff adequately stated sex discrimination claim where she alleged that she is female; she suffered adverse employment action; defendant discriminated against her based on her sex; and similarly situated male employees were treated more favorably). As in Tamayo, Plaintiff has pled enough facts to “provide the defendants with sufficient notice to begin to investigate and defend against her claim.” Id. Accordingly, this aspect of Defendant's motion to dismiss is denied.

Monday, September 15, 2008

Massachusetts SJC Adopts Twombly Interpretation of Its Own State Pleading Rules

Per Iannacchino v. Ford Motor Co., 451 Mass. 623, 888 N.E.2d 879 (Mass. June 13, 2008):

The standard for reviewing adequacy of complaints
. While we have concluded that the plaintiffs' complaint is insufficient on the basis of the standard described in Nader v. Citron, 372 Mass. 96, 98, 360 N.E.2d 870 (1977), see note 7, supra, we take the opportunity to adopt the refinement of that standard that was recently articulated by the United States Supreme Court in Bell Atl. Corp. v. Twombly, --- U.S. ----, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). See Eigerman v. Putnam Invs., Inc., 450 Mass. 281, 286 n. 7, 877 N.E.2d 1258 (2007) (noting that this court may consider adopting Bell Atl. Corp. standard for evaluating adequacy of complaint challenged by motion to dismiss for failure to state claim pursuant to rule 12[b][6] ).

. . .

We agree with the Supreme Court's analysis of the Conley language, which is the language quoted in our decision in Nader v. Citron, supra, and we follow the Court's lead in retiring its use. The clarified standard for rule 12(b)(6) motions adopted here will apply to any amended complaint that the plaintiffs may file.

Thursday, September 11, 2008

Congress Passes New Evidence Rule 502: September 8, 2008

On September 8, 2008, the House unanimously passed without amendment
S. 2450
, a bill adding new Evidence Rule 502 to the Federal Rules of Evidence. The Senate had earlier approved by unanimous consent without amendment
S. 2450 on February 27, 2008. See Sen. Rept. No. 110-264. The President is expected to sign the legislation in the next several weeks.

The legislation protects against the inadvertent waiver of the attorney-client privilege or the work product protection. The new rule will apply in all proceedings commenced after the date of enactment and, insofar as is just and practicable, in all proceedings pending on such date of enactment.
S. 2450 is identical to Evidence Rule 502, as approved by the Judicial Conference of the United States in September 2007. Congress, with the consent of the Judicial Conference, added additional language to the explanatory note accompanying Rule 502. The "Statement of Congressional Intent Regarding Rule 502 of the Federal Rules of Evidence" is posted at http://www.uscourts.gov/Congressional _Record_re_S2450.pdf.

Unlike other amendments to the federal rules of practice, procedure, and evidence that take effect automatically unless Congress acts affirmatively to modify, defer, or reject it, "[a]ny such rule creating, abolishing, or modifying an evidentiary privilege shall have no force or effect unless approved by Act of Congress." See 28 U.S.C. § 2074(b).

Monday, September 08, 2008

Prof. Field Posts Article on Federal Circuit's Approach to Choice of Law for Procedural Matters on SSRN

Ted Field, a Visiting Assistant Professor of Law at Chicago-Kent has recently posted an Article entitled Improving the Federal Circuit's Approach to Choice of Law for Procedural Matters in Patent Cases on SSRN. Here is the Abstract:

Because of its virtually exclusive jurisdiction over patent cases from the entire country, the United States Court of Appeals for the Federal Circuit faces a unique situation with respect to choice of law for procedural matters in patent cases. Normally, in a non-patent-related case, a district court applies the procedural-law precedent of the U.S. Court of Appeals for the circuit in which the district court sits. However, because the Federal Circuit's jurisdiction is based on subject matter rather than geography, the court has had to choose whether (1) to develop and apply its own precedent to procedural matters or (2) to apply the precedent of the regional circuit court in which the district court sits. Under its current choice-of-law rules, the Federal Circuit by default is supposed to apply the law of the regional circuit to procedural matters. But where the procedural matter in question sufficiently pertains to patent law, the court is supposed to apply its own law under the current choice-of-law rules.

Problems have arisen in the application of these rules. For one thing, the Federal Circuit has articulated these rules in many different ways over the years. And this inconsistent articulation has led to inconsistent application. As a result, district courts and litigants in patent cases often cannot be sure which law applies to a particular procedural issue. This article evaluates the Federal Circuit's current rules and contrasts these current rules with several other possible rules. To evaluate these different possibilities, this article considers how each of them advances or retards the institutional interests, needs, and goals of the players involved-namely, the Federal Circuit, the district courts, and litigants. Ultimately, this article concludes that the best approach for the Federal Circuit is to develop and apply its own law to all procedural matters in patent cases.

This Article may be downloaded by visiting http://ssrn.com/abstract=1257125.

Wednesday, September 03, 2008

California SCT Holds that an Agreement to Have Judicial Review of the Merits of an Arbitration Award Is Enforceable under Cal. Arbitration Act

Professors Arnold Rosenburg and William Slomanson brought the following case to my attention (this is a quotation from Prof. Rosenburg's email):

Last week, the California Supreme Court held in Cable Connection, Inc. v. DIRECTTV, Inc., No. S147767 (August 26, 2008) that an agreement to subject the merits of an arbitration award to judicial review for errors of law is enforceable under the California Arbitration Act. The U.S. Supreme Court six months earlier held in Hall Street Associates, L.L.C. v. Mattel, Inc., ___ U.S. ___, 128 S.Ct. 1396 (2008) that the contrary is true under the Federal Arbitration Act, but noted that its holding did not preempt state laws on arbitration.

This ruling has significant implications for commercial and consumer arbitration agreements. Drafters of arbitration clauses in California now have to weigh whether it is in their clients’ best interest to provide for judicial review or instead, to make the arbitration award effectively the final say on the merits of the dispute.

Tuesday, September 02, 2008

Prof. Nagareda Posts Article on Class Certification

Professor Richard A. Nagareda (Vanderbilt) has recently posted an Article entitled Class Certification in the Age of Aggregate Proof on SSRN. The Article is slated to appear in the New York University Law Review in 2009. Here is the Abstract:

Few pre-trial motions in our civil justice system elicit as much controversy as those for the certification of class actions. This Article offers the first account in the literature of the challenges faced today by courts in light of an important series of federal appellate decisions that direct the courts to resolve competing expert submissions on the class certification question in the pre-trial stage - even when the dispute overlaps with the merits of the litigation - in the course of determining the application of Rule 23.

Across broad swaths of class action litigation today, proponents of class certification invoke aggregate proof - evidence, typically of an economic or statistical nature, that presupposes the cohesiveness of the aggregate unit for litigation and, from that perspective, seeks to reveal quantitatively a common wrong attributable to the defendant. Debates over the proper role of aggregate proof unite what otherwise might seem disparate disputes over class certification today across securities, antitrust, RICO, consumer fraud, and employment discrimination litigation. Too often, however, courts have taken at face value the evidentiary form that aggregate proof assumes in class certification.

This Article urges a new conceptualization of the challenges facing courts in class certification today. The real question about aggregate proof in class certification is not one that speaks to the relationship between the court and the fact finder in the (usually, purely hypothetical) event of a class-wide trial. Rather, the institutional relationship that really matters is the one between the court and the legislature as expositors of governing law. Properly understood, aggregate proof offers not so much a contested view of the facts but, more fundamentally, a contested account of governing law - one eminently suited for judicial resolution and appellate correction de novo, without concern about possible intrusion into the role of the fact finder.

This Article exposes how renewed attention to the judicial role to say what the law is can lend coherence to the law of class certification, offering the first extended assessment of such controversial recent litigation as the civil RICO class action against the tobacco industry concerning its marketing of light cigarettes and the largest employment discrimination class action in history against Wal-Mart concerning the pay and promotion of its hourly female employees. The Article concludes by relating the analysis of class certification to larger changes in the civil justice system to grapple with the reality of settlement, rather than trial, as the endgame of litigation.

The full version of the Article may be downloaded by visiting http://ssrn.com/abstract=1247720.