FJC study on post-Twombly motions to dismiss released

The Federal Judicial Center has released its report on post-Twombly motions to dismiss. It is available here.

SCOTUS Issues Opinion in Matrixx Initiatives v. Siracusano (Securities Fraud Pleading Case)

The U.S. Supreme Court issued an opinion today in Matrixx Initiatives v. Siracusano, No. 09-1156, a case addressing the sufficiency of the pleading in a securities fraud case. Here is an excerpt from the Syllabus:

Respondents filed this securities fraud class action, alleging that petitioners (hereinafter Matrixx) violated § 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5 by failing to disclose reports of a possible link between Matrixx's leading product, Zicam Cold Remedy, and loss of smell (anosmia), rendering statements made by Matrixx misleading. Matrixx moved to dismiss the complaint, arguing that respondents had not pleaded the element of a material misstatement or omission and the element of scienter. The District Court granted the motion, but the Ninth Circuit reversed. It held that the District Court erred in requiring an allegation of statistical significance to establish materiality, concluding instead that the complaint adequately alleged information linking Zicam and anosmia that would have been significant to a reasonable investor. It also held that Matrixx's withholding of information about reports of adverse effects and about pending lawsuits by Zicam users gave rise to a strong inference of scienter.

Held: Respondents have stated a claim under § 10(b) and Rule 10b-5.

Congress Considering Lawsuit Abuse Reduction Act, Again

Per BNA's U.S. Law Week, March 15, 2011, Vol. 79, no. 34:

A House Judiciary subcommittee recently held hearings on the Lawsuit Abuse Reduction Act, which would amend Federal Rule of Civil Procedure 11 to make it more like the 1983 version of the rule, which lacked a safe harbor provision and was generally more strict than the current 1993 version of the rule by mandating sanctions for rule violations.

A full article on these hearings is available to BNA subscribers here.

Discovery Sanctions: Default Judgment, $1M Fine

Per BNA's U.S. Law Week, March 15, 2011, Volume 79 No. 34:

A patent case plaintiff's discovery misconduct elicited sanctions of a default judgment and a $1 million fine from the U.S. District Court for the Northern District of Illinois Feb. 23. The court initially sanctioned the plaintiff when its witness made statements during his deposition that contradicted the statements made in the plaintiff's motion for summary judgment. The same witness subsequently admitted that he turned back the clock on source code on zip disks at issue in the case, as well as “wiping” USB drives, which makes deleted files unrecoverable even with advanced equipment. The court also found that the plaintiff's responses to numerous discovery orders were excessively delayed. The court said that a “party's failure to preserve evidence alone constitutes bad faith, [and] the additional destruction of evidence is beyond sufficient to warrant a default judgment against that party.” It also imposed a $1 million fine on the plaintiff, and required counsel to pay costs and attorneys' fees related to the sanctions motion. Rosenthal Collins Group LLC v. Trading Technologies International Inc., N.D. Ill., No. 05 C 4088, 2/23/11.

Younger Bars Federal Relief for Juror on Facebook

Per BNA's U.S. Law Week, March 15, 2011, Volume 79 No. 34:

The U.S. District Court for the Eastern District of California Feb. 14 declined to issue a temporary restraining order to a juror seeking to enjoin a California trial court judge from enforcing an order requiring him to issue a consent with Facebook to provide updates he made during a criminal trial. The juror noted on his Facebook account that he was “still” on jury duty and “bored” during the case, and left other comments regarding evidence in the case. The court became alert to these comments when another juror became friends with the original juror on Facebook and noted the comments to defense counsel. The California trial court judge ordered the juror to issue a consent to Facebook to supply those comments after Facebook declined to provide the information, feeling it was constrained by the Stored Communications Act. The juror, having lost an appeal to an intermediate state court, was seeking review with the California Supreme Court when he also filed the TRO request with a federal court, noting he did not feel the state supreme court would rule in time. The federal court declined to issue a TRO under the Younger abstention doctrine. It found that the juror did not show “state law either procedurally or substantively bars presentation of his claims to the California Supreme Court” and that the juror did not contest the other two prongs of the Younger doctrine in that there was a pending state court proceeding that implicated important state interests. Juror Number One v. California, E.D. Cal., No. Civ. 2:11-397, 2/14/11.

Class Action Waiver Unenforceable If Individual Suits Too Costly

A class action waiver in an arbitration agreement is unenforceable when it would effectively preclude plaintiffs from enforcing their statutory rights, the U.S. Court of Appeals for the Second Circuit held March 8 (In re American Express Merchants' Litigation, 2d Cir., No. 06-1871-cv, 3/8/11).

BNA subscribers can read a story about this case here.

Eleventh Circuit Determines Proper Vehicle for Enforcing Forum-Selection Clauses

Per Slater v. Energy Services Group Intern. Inc., --- F.3d ----, 2011 WL 782023 (11th Cir. Mar. 8, 2011):

Slater contends that the district court abused its discretion by dismissing her claims for improper venue pursuant to Rule 12(b)(3) rather than applying the transfer analysis under 28 U.S.C. 1404(a). Slater claims that because § 1404(a) is the only proper procedural mechanism for enforcing a forum-selection clause which designates venue in another United States District Court, the district court erred by applying Rule 12(b)(3) instead of § 1404(a).

Our sister circuits disagree regarding the appropriate vehicle for enforcing forum-selection clauses. Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285, 1289 (11th Cir.1998) (recognizing circuit split); see e.g., Kerobo v. Sw. Clean Fuels, Corp., 285 F.3d 531, 539 (6th Cir.2002) (holding that the proper analysis is under 28 U.S.C. § 1404(a)); Richards v. Lloyd's of London, 135 F.3d 1289, 1292 (9th Cir.1998) (applying Rule 12(b)(3) to an international forum-selection clause); Lambert v. Kysar, 983 F.2d 1110, 1112 n.1 (1st Cir.1993) (applying Rule 12(b)(6)); AVC Nederland B.V. v. Atrium Inv. P'ship, 740 F.2d 148, 153 & n.8 (2d Cir.1984) (applying Rule 12(b)(1) to an international forum-selection clause).

. . .

[W]e conclude that § 1404(a) is the proper avenue of relief where a party seeks the transfer of a case to enforce a forum-selection clause, while Rule 12(b)(3) is the proper avenue for a party's request for dismissal based on a forum-selection clause.