SCOTUS Issues Decision in Shady Grove

The Supreme Court has issued its decision in Shady Grove Orthopedic Associates v. Allstate Insurance, a case making a fresh contribution to the Erie/Hanna line of cases. Here is an excerpt from the Syllabus:

After respondent Allstate refused to remit the interest due under New York law on petitioner Shady Grove’s insurance claim, Shady Grove filed this class action in diversity to recover interest Allstate owed it and others. Despite the class action provisions set forth in Federal Rule of Civil Procedure 23, the District Court held itself deprived of jurisdiction by N. Y. Civ. Prac. Law Ann. §901(b), which precludes a class action to recover a “penalty” such as statutory interest. Affirming, the Second Circuit acknowledged that a Federal Rule adopted in compliance with the Rules Enabling Act, 28 U. S. C. §2072, would control if it conflicted with §901(b), but held there was no conflict because §901(b) and Rule 23 address different issues—eligibility of the particular type of claim for class treatment and certifiability of a given class, respectively. Finding no Federal Rule on point, the Court of Appeals held that §901(b) must be applied by federal courts sitting in diversity because it is “substantive” within the meaning of Erie R. Co. v. Tompkins , 304 U. S. 64 (1938) .

Held: The judgment is reversed, and the case is remanded.

Scalia, J., announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I and II–A, in which Roberts, C. J., and Stevens, Thomas, and Sotomayor, JJ., joined, an opinion with respect to Parts II–B and II–D, in which Roberts, C. J., and Thomas, and Sotomayor, JJ., joined, and an opinion with respect to Part II–C, in which Roberts, C. J., and , Thomas, J., joined. Stevens, J ., filed an opinion concurring in part and concurring in the judgment. Ginsburg, J., filed a dissenting opinion, in which Kennedy, Breyer, and Alito, JJ., joined.

Federal Judge Tosses $100 Million Punitive Damages Award Against BP

Horvitz & Levy LLP report on their blog about the federal district court judge who threw out a $100 million punitive damages award, not for excessiveness, but because he felt the plaintiffs had not presented clear and convincing evidence that the defendant, BP, acted with intent to harm or engaged in gross negligence. Read their post about the cased here.

Prof. Hartnett Posts Essay on Twombly & Iqbal

Professor Edward Hartnett (Seton Hall) recently posted an essay entitled Responding to Twombly and Iqbal: Where Do We Go from Here? on SSRN. Here is the Abstract:

As reflected in the title of their article, Inventing Tests, Destabilizing Systems, Professors Clermont and Yeazell contend that the Supreme Court in Twombly and Iqbal invented a “new and foggy test” for judging the sufficiency of a complaint and “have destabilized the entire system of litigation.” As they see it, the Court’s approach is “thoroughly new,” and the Court “effectively creat[ed] a civil procedure hitherto foreign to our fundamental procedural principles.”

Elsewhere, I have offered a more-optimistic take on these cases, emphasizing the connections these decisions have with prior law and suggesting ways in which they can be tamed. See Taming Twombly—Even After Iqbal, 158 U. Pa. L. Rev. 473 (2010). Rather than rehash those arguments here, I instead take up Professors Clermont and Yeazell’s challenging question, “Where Do We Go from Here?” and address several of the proposals made to respond to Twombly and Iqbal by statute or rule amendment.

I also offer my own proposal, which focuses on the core issue at stake in debates about Twombly and Iqbal: should a plaintiff be able to obtain discovery in an effort to uncover evidence without which he or she cannot prevail? My proposal has something to offer plaintiffs, defendants, and the judicial system. I believe it represents an improvement over the current law and better than other proposed legislative and rulemaking responses to Twombly and Iqbal. Surely it could be improved by the perspectives of others in the academy, on the bench, or at the bar. Nevertheless, in deciding where we go from here, stumbling in the right direction is better than standing still or trying to go backwards.

This piece may be downloaded by visiting http://ssrn.com/abstract=1567694.

Judge Scheindlin Sets New Standards for E-Discovery Shortfalls

Per the ABA's Litigation News, March 3, 2010:

In an 85-page opinion in Pension Committee of the Univ. of Montreal Pension Plan v. Banc of America Securities, LLC, Judge Shira Scheindlin sanctioned 13 plaintiffs for negligence or gross negligence in their identification, preservation, and collection of electronically stored information. . . . Judge Scheindlin’s opinion states that “. . .This is a case where plaintiffs failed to timely institute written litigation holds and engaged in careless and indifferent collection efforts after the duty to preserve arose.”

Judge Scheindlin found particular fault with the sanctioned plaintiffs’ failure to issue litigation holds until after the stay was lifted in 2007. She also found the sanctioned plaintiffs had failed to identify, collect, and preserve sources of potentially relevant and responsive electronic evidence, such as back-up tapes.

Judge Scheindlin found that 6 of the 13 plaintiffs had been grossly negligent and ordered a burden-shifting jury instruction as to them.

The Pension Committee decision’s sharpest break with precedent is the creation of a burden-shifting test for spoliation. Traditionally, a party is entitled to an adverse inference instruction as to spoliated evidence only if it can show, among other prerequisites, that the evidence was relevant to the party’s claim or defense and that the party suffered real prejudice as a result of the spoliation.

Noting that it is almost impossible for a party to make such a showing when it cannot know the substance of the spoliated evidence, Judge Scheindlin created a new burden-shifting test. If a party can show that spoliation was the result of bad faith or gross negligence, prejudice may be presumed. The burden then shifts to the spoliating party to rebut that presumption.

The full story is viewable by clicking here.

Interview with MDL Panel Chair Published in Third Branch Newsletter

The Third Branch, the newsletter of the U.S. Courts, recently published an interview with Judge John G. Heyburn (W.D. Ky.) to discuss the role of the Judicial Panel on Multidistrict Litigation. You can read the interview by clicking here.