Malveaux Publishes Article on Pre-Dismissal Discovery and Iqbal

Professor Suzette Malveaux (Catholic University) has just published an Article entitled Front Loading and Heavy Lifting: How Pre-Dismissal Discovery Can Address the Detrimental Effect of Iqbal on Civil Rights Cases as part of the Lewis & Clark Law Review's Iqbal Symposium. Here is the Abstract:

Although the Federal Rules of Civil Procedure are trans-substantive, they have a greater detrimental effect on certain substantive claims. In particular, the Supreme Court’s recent interpretation of Rule 8(a)(2)’s pleading requirement and Rule 12(b)(6)’s dismissal criteria - in Bell Atlantic v. Twombly and Ashcroft v. Iqbal - sets forth a plausibility pleading standard which makes it more difficult for potentially meritorious civil rights claims alleging intentional discrimination to survive dismissal. Such claims are more vulnerable to dismissal because: plaintiffs alleging intentional discrimination often plead facts consistent with both legal and illegal conduct; discriminatory intent is often difficult, if not impossible, to unearth pre-discovery because of informational inequities between the parties; and the plausibility standard’s subjective nature fails to provide sufficient guidance to courts ruling on dismissal motions. This increased risk of dismissal threatens to undermine civil rights enforcement, compromise court access, and incentivize unethical conduct. In response to this risk, courts are empowered and encouraged to utilize narrow, targeted, pre-dismissal discovery to determine plausibility at the pleading stage (“plausibility discovery”) so that the trans-substantive application of the Rules does not work an injustice against civil rights and other cases involving informational inequities. Courts should consider permitting some limited discovery towards the front of the litigation (front loading) for the purpose of determining a case’s viability (heavy lifting). Courts already use early, targeted, pre-merits discovery to resolve threshold issues such as class certification, qualified immunity and jurisdiction. These models, while imperfect, illustrate how courts are willing and able to order clearly defined, narrow discovery to successfully resolve various preliminary litigation matters. Similarly, plausibility discovery is authorized and justified on policy grounds. This Article concludes with the types of arguments parties are likely to make post-Iqbal and a roadmap for how courts can order plausibility discovery while equitably balancing the parties’ competing interests.

This Article may be downloaded by clicking here.

The Supreme Court has issued its opinion in Hertz Corp. v. Friend, No. 08-1107, in which it held that a corporation's principal place of business for purposes of the diversity jurisdiction statute is its "nerve center". Here is the Syllabus:

Respondents, California citizens, sued petitioner Hertz Corporation in a California state court for claimed state-law violations. Hertz sought removal to the Federal District Court under 28 U. S. C. §§1332(d)(2), claiming that because it and respondents were citizens of different States, §§1332(a)(1), (c)(1), the federal court possessed diversity-of-citizenship jurisdiction. Respondents, however, claimed that Hertz was a California citizen, like themselves, and that, hence, diversity jurisdiction was lacking under §1332(c)(1), which provides that “a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.” To show that its “principal place of business” was in New Jersey, not California, Hertz submitted a declaration stating, among other things, that it operated facilities in 44 States, that California accounted for only a portion of its business activity, that its leadership is at its corporate headquarters in New Jersey, and that its core executive and administrative functions are primarily carried out there. The District Court concluded that it lacked diversity jurisdiction because Hertz was a California citizen under Ninth Circuit precedent, which asks, inter alia, whether the amount of the corporation’s business activity is “significantly larger” or “substantially predominates” in one State. Finding that California was Hertz’s “principal place of business” under that test because a plurality of the relevant business activity occurred there, the District Court remanded the case to state court. The Ninth Circuit affirmed.

Held:

1. Respondents’ argument that this Court lacks jurisdiction under §1453(c)—which expressly permits appeals of remand orders such as the District Court’s only to “court[s] of appeals,” not to the Supreme Court, and provides that if “a final judgment on the appeal” in a court of appeals “is not issued before the end” of 60 days (with a possible 10-day extension), “the appeal shall be denied”—makes far too much of too little. The Court normally does not read statutory silence as implicitly modifying or limiting its jurisdiction that another statute specifically grants. E.g., Felker v. Turpin , 518 U. S. 651 . Here, replicating similar, older statutes, §1254 specifically gives the Court jurisdiction to “revie[w] … [b]y writ of certiorari” cases that are “in the courts of appeals” when it grants the writ. The Court thus interprets §1453(c)’s “60-day” requirement as simply requiring a court of appeals to reach a decision within a specified time—not to deprive this Court of subsequent jurisdiction to review the case. See , e.g., Aetna Casualty & Surety Co. v. Flowers , 330 U. S. 464 . Pp. 4–5.

2. The phrase “principal place of business” in §1332(c)(1) refers to the place where a corporation’s high level officers direct, control, and coordinate the corporation’s activities, i.e., its “nerve center,” which will typically be found at its corporate headquarters. Pp. 5–19.

(a) A brief review of the legislative history of diversity jurisdiction demonstrates that Congress added §1332(c)(1)’s “principal place of business” language to the traditional state-of-incorporation test in order to prevent corporations from manipulating federal-court jurisdiction as well as to reduce the number of diversity cases. Pp. 5–10.

(b) However, the phrase “principal place of business” has proved more difficult to apply than its originators likely expected. After Congress’ amendment, courts were uncertain as to where to look to determine a corporation’s “principal place of business” for diversity purposes. If a corporation’s headquarters and executive offices were in the same State in which it did most of its business, the test seemed straightforward. The “principal place of business” was in that State. But if those corporate headquarters, including executive offices, were in one State, while the corporation’s plants or other centers of business activity were located in other States, the answer was less obvious. Under these circumstances, for corporations with “far-flung” business activities, numerous Circuits have looked to a corporation’s “nerve center,” from which the corporation radiates out to its constituent parts and from which its officers direct, control, and coordinate the corporation’s activities. However, this test did not go far enough, for it did not answer what courts should do when a corporation’s operations are not far-flung but rather limited to only a few States. When faced with this question, various courts have focused more heavily on where a corporation’s actual business activities are located, adopting divergent and increasingly complex tests to interpret the statute. Pp. 10–13.

(c) In an effort to find a single, more uniform interpretation of the statutory phrase, this Court returns to the “nerve center” approach: “[P]rincipal place of business” is best read as referring to the place where a corporation’s officers direct, control, and coordinate the corporation’s activities. In practice it should normally be the place where the corporation maintains its headquarters—provided that the headquarters is the actual center of direction, control, and coordination, i.e. , the “nerve center,” and not simply an office where the corporation holds its board meetings. Pp. 13–19.

(i) Three sets of considerations, taken together, convince the Court that the “nerve center” approach, while imperfect, is superior to other possibilities. First, §1332(c)(1)’s language supports the approach. The statute’s word “place” is singular, not plural. Its word “principal” requires that the main, prominent, or most important place be chosen. Cf., e.g., Commissioner v. Soliman , 506 U. S. 168 . And the fact that the word “place” follows the words “State where” means that the “place” is a place within a State, not the State itself. A corporation’s “nerve center,” usually its main headquarters, is a single place. The public often considers it the corporation’s main place of business. And it is a place within a State. By contrast, the application of a more general business activities test has led some courts, as in the present case, to look, not at a particular place within a State, but incorrectly at the State itself, measuring the total amount of business activities that the corporation conducts there and determining whether they are significantly larger than in the next-ranking State. Second, administrative simplicity is a major virtue in a jurisdictional statute. Sisson v. Ruby , 497 U. S. 358 . A “nerve center” approach, which ordinarily equates that “center” with a corporation’s headquarters, is simple to apply comparatively speaking . By contrast, a corporation’s general business activities more often lack a single principal place where they take place. Third, the statute’s legislative history suggests that the words “principal place of business” should be interpreted to be no more complex than an earlier, numerical test that was criticized as too complex and impractical to apply. A “nerve center” test offers such a possibility. A general business activities test does not. Pp. 14–17.

(ii) While there may be no perfect test that satisfies all administrative and purposive criteria, and there will be hard cases under the “nerve center” test adopted today, this test is relatively easier to apply and does not require courts to weigh corporate functions, assets or revenues different in kind, one from the other. And though this test may produce results that seem to cut against the basic rationale of diversity jurisdiction, accepting occasionally counterintuitive results is the price the legal system must pay to avoid overly complex jurisdictional administration while producing the benefits that accompany a more uniform legal system. Pp. 17–18.

(iii) If the record reveals attempts at jurisdictional manipulation—for example, that the alleged “nerve center” is nothing more than a mail drop box, a bare office with a computer, or the location of an annual executive retreat—the courts should instead take as the “nerve center” the place of actual direction, control, and coordination, in the absence of such manipulation. Pp. 18–19.

(d) Although petitioner’s unchallenged declaration suggests that Hertz’s “nerve center” and its corporate headquarters are one and the same, and that they are located in New Jersey, not in California, respondents should have a fair opportunity on remand to litigate their case in light of today’s holding. P. 19.

297 Fed. Appx. 690, vacated and remanded.

Breyer, J., delivered the opinion for a unanimous Court.

M.D. Alabama Notes Split Re Ancillary Jurisdiction to Determine Matters of Expungement

Per Hall v. Alabama Slip Copy, 2010 WL 582076 (M.D. Ala. Feb. 18, 2010):

[I]n 1994 the Supreme Court issued its opinion in Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) and explained the limited reach of ancillary jurisdiction. Tyler, --- F.Supp.2d at ----, 2009 WL 4059156 at *2. The Supreme Court stated that ancillary jurisdiction exists in two separate, but related, premises: “(1) to permit disposition by a single court of claims that are, in varying respects and degrees, factually interdependent; and (2) to enable a court to function successfully, that is, to manage its proceedings, vindicate its authority, and effectuate its decrees.” Id. at 379-80, 114 S.Ct. at 1676 (citations omitted).

After the Kokkonen decision, a split among the circuits has developed with regard to whether a federal district court has ancillary jurisdiction to determine matters of expungement. See United States v. Paxton, 2007 WL 2081483 (M.D.Ala.2007) (unpublished). Several circuits, including the First, Third, Eighth, and Ninth, have concluded that, after Kokkonen, a request for expungement does not serve the limited purposes necessary for invocation of ancillary jurisdiction and that equitable considerations standing alone are not sufficient to support jurisdiction over such a request. See United States v. Coloian, 480 F.3d 47, 52 (1st Cir.2007); United States v. Meyer, 439 F.3d 855, 859-60 (8th Cir.2006); United States v. Dunegan, 251 F.3d 477, 479-80 (3d Cir.2001); United States v. Sumner, 226 F.3d 1005, 1013-15 (9th Cir.2000)

This Court has not found any Eleventh Circuit opinions on expungement in general since the Kokkonen case. See also Tyler, --- F.Supp.2d at ----, 2009 WL 4059156 at *2 (noting the lack of a post- Kokkonen opinion from the Eleventh Circuit); United States v. Carson, 366 F.Supp.2d 1151, 1155 (M.D.Fla.2004) (finding that the Eleventh Circuit has published no opinions on expungement in general outside the realm concerning the now-repealed “Youth Corrections Act”); Paxton, 2007 WL 2081483 at *1 (citing Carson and the proposition that the Eleventh Circuit has not addressed the issue). Absent statutory authority and a post- Kokkonen opinion from the Eleventh Circuit, this Court agrees with the analysis set forth by the First, Third, Eighth, and Ninth Circuits as well as the district courts in Tyler, Carson, and Paxton. Kokkonen effectively narrowed the scope of ancillary jurisdiction. Therefore, the court does not have ancillary jurisdiction to determine the issue of expungement.

D. Puerto Rico Judge Denies E-Mail Discovery Request Based on Its Expense

Per BNA's Digital Discovery & e-Evidence, Feb. 22, 2010:

"The U.S. District Court for the District of Puerto Rico denied a discovery request for e-mail production Jan. 20, holding that the $35,000 costs of production, not including privilege and confidentiality reviews, far exceeded the potential of producing relevant information (Rodriguez-Torres v. Government Development Bank of Puerto Rico, D.P.R., No. 3:09-cv-1151, 1/20/10)."

BNA subscribers may access the full article by clicking here.

Second Circuit Reaffirms Tough View of Matsushita Standard

Per U.S. Information Systems, Inc. v. International Broth. of Elec. Workers Local Union Number 3 Slip Copy, 2010 WL 571769 (2d Cir. Feb. 19, 2010):

Here, the district court articulated the correct summary judgment standard when it said that “ ‘[t]o survive a motion for summary judgment ..., a plaintiff seeking damages for a violation of § 1 [of the Sherman Act] must present evidence “that tends to exclude the possibility” that the alleged conspirators acted independently.’ “ U.S. Info. Sys., Inc. v. Int'l Bhd. of Elec. Workers Local Union No. 3, No. 00 Civ. 4763(RMB)(JCF), 2007 WL 2746902, at *2, 2007 U.S. Dist. LEXIS 69760, at *8 (S.D.N.Y. Sept. 18, 2007) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986)) (alterations in U.S. Info. Sys.). The appellants argue that the Supreme Court altered this standard in Eastman Kodak Co. v. Image Technical Services, 504 U.S. 451 (1992), by stating that “ Matsushita demands only that the nonmoving party's inferences be reasonable in order to reach the jury,” id. at 468. We disagree. This language explains the Matsushita standard. It does not alter it. This view is supported by Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), where the Supreme Court cited Matsushita for the proposition that “at the summary judgment stage a [Sherman Act] § 1 plaintiff's offer of conspiracy evidence must tend to rule out the possibility that the defendants were acting independently,” id. at 554.

Here, the district court properly granted summary judgment to the appellees after concluding that “it is equally plausible that [the non-Local 3 appellees] acted in their own self-interest independent of Local 3 and of one another.” U.S. Info. Sys., Inc., 2007 WL 2746902, at *2, 2007 U.S. Dist. LEXIS 69760, at *8 (internal quotation marks omitted).