March 9, 2007
In case you missed it
Items of interest this week:
- The Supreme Court decided Sinochem, unanimously holding that forum non conveniens, like other threshold nonmerits issues, may be resolved before difficult issues of jurisdiction (both of the subject matter and the person).
- Benjamin Spencer posts a provocative article challenging some basic assumptions about the allocation of power between Congress and the courts.
- The 10th Circuit holds that the district court "essentially ceded its duty to conduct factfinding to the advisory jury. As we have held, 'the findings of such a jury are, of course, merely advisory; the trial court must . . . make its own findings and ‘review on appeal is of the findings of the court as if there had been no verdict from an advisory jury.'"
March 8, 2007
The Thursday Interview
Click the link at the bottom of this post to listen to this week's installment of the Thursday interview. This week's interview is with Prof. Suja Thomas of the University of Cincinnati College of Law about her two most recent articles, "The PSLRA's Seventh Amendment Problem" and "Why Summary Judgment is Unconstitutional."
Here's the abstract for "PSLRA":
This Article is the first to examine the proper role of the jury in private securities fraud litigation. In the Private Securities Litigation Reform Act, Congress required that a securities fraud complaint plead "a strong inference" of scienter. The courts have disagreed on the standard that satisfies this requirement, and likewise, the involved parties disagree. Defendant corporations argue for a stringent standard that would result in the dismissal of many claims, while plaintiff investors support a flexible standard that would allow more claims to go forward. Indeed, the Supreme Court's resolution of this issue may have an impact beyond securities litigation. If a stringent standard is adopted, special pleading may be permitted in other types of cases, including employment discrimination cases. Thus these cases may be dismissed before any discovery has been conducted. In the present context, securities law experts have not addressed the constitutional issue posed by the special pleading requirement; whether this requirement violates the Seventh Amendment right to a jury trial. The Supreme Court has held that a modern procedure must satisfy the substance of the English common law jury trial in 1791 to be constitutional under the Seventh Amendment. Accordingly, the special pleading rules developed in 21st century securities litigation must be viewed through an 18th century common law lens. This Article argues that the scienter standards developed by the courts in securities cases do not comport with substance of the common law jury trial and thus are constitutionally problematic. Contrary to the common law, the courts improperly engage in one or more steps of assessing the reasonableness of facts and corresponding inferences pled by the plaintiffs. This Article also acknowledges the possible constitutional infirmity posed by the PSLRA's "strong inference" standard itself and the heightened pleading requirements and proposes an alternative standard to dismiss a securities fraud claim that comports with the Seventh Amendment.
Here's the abstract for "Summary Judgment":
Summary judgment is cited as a significant reason for the dramatic decline in the number of jury trials in civil cases in federal court. Judges extensively use the device to clear the federal docket of cases deemed meritless. Recent scholarship even has called for the mandatory use of summary judgment prior to settlement. While other scholars question the use of summary judgment in certain types of cases (for example, civil rights cases), all scholars and judges assume away a critical question: whether summary judgment is constitutional. The conventional wisdom is that the Supreme Court settled the issue a century ago in Fidelity & Deposit Co. v. United States. But a review of that case reveals that the conventional wisdom is wrong: the constitutionality of summary judgment has never been resolved by the Supreme Court. This Essay is the first to examine the question and takes the seemingly heretical position that summary judgment is unconstitutional. The question is governed by the Seventh Amendment which provides that “[i]n Suits at common law, . . . the right of trial by jury shall be preserved, and no fact tried by jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.” The Supreme Court has held that “common law” in the Seventh Amendment refers to the English common law in 1791. This Essay demonstrates that no procedure similar to summary judgment existed under the English common law and also reveals that summary judgment violates the core principles or “substance” of the English common law. The Essay concludes that, despite the uniform acceptance of the device, summary judgment is unconstitutional. The Essay then responds to likely objections, including that the federal courts cannot function properly without summary judgment. By describing the burden that the procedure of summary judgment imposes upon the courts, the Essay argues that summary judgment may not be necessary to the judicial system but rather, by contrast, imposes significant costs upon the system.
A big thank you to Prof. Thomas for the interview.
March 7, 2007
A Sinochem Concern
I agree with the Supreme Court's decision in Sinochem. I am concerned, however, that an unintended consequence of the opinion will be federal courts dismissing cases on forum non conveniens ("FNC") grounds where there is an obvious lack of subject matter jurisdiction.
I am particularly concerned about this possibility in the removal context. If district courts do not read Sinochem carefully, I predict we will see them ignoring remand motions in cases involving simple jurisdictional issues and issuing dismissals that are based on an FNC doctrine the state court would not have applied and that will not usually preclude the plaintiff from refiling in state court. Although such a result may seem justified by some of the categorical language early in the opinion, it flies in the face of Sinochem's facts, the language late in the opinion limiting the holding, and the Court's desire for effecient resolution of threshold, non-merits issues.
If district courts want wide latitude in choosing among the threshold issues they will first resolve, Sinochem, at least in its early parts, seems to give it to them. Writing for a unanimous court, Justice Ginsburg says in the first paragraph of the opinion:
We hold that a district court has discretion to respond at once to a defendant's forum non conveniens plea, and need not take up first any other threshold objection. In particular, a court need not resolve whether it has authority to adjudicate the cause (subject-matter jurisdiction) or personal jurisdiction over the defendant if it determines that, in any event, a foreign tribunal is plainly the more suitable arbiter of the merits of the case.
The emphasis on the words "at once" and "any" are mine, not the Court's. I add it because that's what defendants will emphasize in their motions to dismiss, and district courts, eager to clear their dockets, may find it difficult to resist the following interpretation: if a district court is faced with more than one threshold, non-merits issue, it may choose which one it will first resolve without considering the relative complexity of the issues.
Consider the typical removal scenario. Where diversity jurisdiction is at issue, it is unlikely that the face of the complaint will demonstrate complete diversity of citizenship. Plaintiffs who prefer state court don't just file suit there and hope the defendant doesn't remove. Instead, they sue a diversity destroying and/or home state defendant. Plaintiffs employ this tactic not with high hopes the defendant won't remove; but in hopes of winning a motion to remand, which usually involves the issue of fraudulent joinder. The defendant will move to dismiss using the expansive language in Sinochem to convince the district court that it need not concern itself with the fraudulent joinder/subject matter jurisdiction issue raised in plaintiff's remand motion (whether simple or complex) so long as it is comfortable dismissing for forum non conveniens.
In the removal context, this result is particularly undesirable for two reasons. First, by removing a case wherein FNC is an issue, the defendant has ensured application of the federal FNC doctrine, as opposed to the state doctrine or statute. In my experience, where state FNC differs from federal FNC, it is generally more plaintiff-friendly than the federal doctrine. Misconstruing Sinochem, the district court will often reach a different outcome than the state court would have reached, and, in far too many cases, the district court will do so despite an obvious lack of subject matter jurisdiction.
Secondly, under Chick Kam Choo, the district court's FNC dismissal does not necessarily have preclusive effect in state court. A plaintiff could refile the same suit in state court and relitigate the FNC issue under state law. (What if the defendant removes again?) Consequently, a district court's decision to ignore a simple jurisdictional issue to dismiss the case on FNC grounds does not advance Sinochem's efficiency concern.
To avoid this result, district courts must keep in mind that the Sinochem facts are a far cry from the run-of-the-mill FNC case. Sinochem involved a subject matter jurisdiction issue of first impression in the Third Circuit, and the jurisdiction of the alternative forum (a Chinese Admiralty court) had already been "raised, determined, and affirmed on appeal." The Court leaves open the possibility that the district court's approach in Sinochem--ignoring the subject matter jurisdiction issue to resolve the FNC issue--would be inappropriate in a case where a conditional dismissal was necessary to pave the way for litigation in the foreign forum. The Court says:
We therefore need not decide whether a court conditioning a forum non conveniens dismissal on the waiver of jurisdictional or limitations defenses in the foreign forum must first determine its own authority to adjudicate the case.
The language at the end of the opinion is also critical to an accurate understanding of the Sinochem holding because it narrows what the Court might be understood to say earlier in the opinion. Quoting Ruhrgas, the court says:
If, however, a court can readily determine that it lacks jurisdiction over the cause or the defendant, the proper course would be to dismiss on that ground. In the mine run of cases, jurisdiction “will involve no arduous inquiry” and both judicial economy and the consideration ordinarily accorded the plaintiff's choice of forum “should impel the federal court to dispose of [those] issue[s] first.”
Sinochem does not stand for the proposition that a federal district court may resolve a threshold forum non conveniens issue over any and all issues of subject matter jurisdiction. Instead, Sinochem merely permits a federal district court to resolve a relatively simple forum non conveniens issue without first resolving a complex jurisdictional issue.
For my part, I hope district courts avoid an expansive reading of Sinochem and are slow to find a jurisdictional issue whose complexity warrants ignoring it to dismiss a case on FNC grounds. In particular, I certainly hope district courts don't believe that a defendant's mere allegation of fraudulent joinder constitutes the kind of "arduous inquiry" that justifies skipping over the jurisdictional issue altogether.
March 6, 2007
This month marks the second anniversary of the Supreme Court's unanimous decision in Exxon Mobile Corp. v. Saudi Basic Indus. Corp. There, confronting expansive interpretation of the doctrine from some lower courts, the Court narrowed the doctrine nearly to point of nonexistence. To the extent the doctrine still applies, its overlap with preclusion makes it, to put it generously, of mild significance.
After Saudi Basic, lower courts have found occasion to dismiss federal court actions under Rooker-Feldman, e.g., Industrial Comm. & Elect. Inc. v. Monroe County 2005 WL 1253881 (11th Cir):; Federacion de Maestros v. Junta de Relaciones del Trabajo (1st Cir); McCormick V. Braverman (6th Cir.), but it seems accurate to generalize that most lower courts are reading the decision correctly and denying requests to dismiss under Rooker-Feldman.
The Supreme Court's tone sends a clear enough message: enough with Rooker-Feldman, it's almost never going to apply, preclusion is the answer to many of these questions, and there's no bar to parallel litigation. Yet the doctrine continues to be litigated frequently, and appears routinely in cases involving preclusion issues. Even though preclusion defenses would dispose of most cases that even ostensibly implicate Rooker-Feldman, courts cannot skip the Rooker-Feldman question to resolve the preclusion defense under the hypothetical jurisdiction doctrine.The Rooker-Feldman doctrine limits the court's subject-matter jurisdiction, while preclusion is a merits-based defense.
If the Court wants to kill the Rooker-Feldman discussion, it is going to have to fire a bullet that directly hits the doctrine in the areas where it continues to overlap with preclusion. It might hold, for example, that the Rooker-Feldman doctrine only prevents a party from suing a judge or state tribunal for injuries caused by a decision. Otherwise, preclusion principles control.
--RR and Counseller
March 5, 2007
USSCT decides Sinochem
Today in Sinochem, the Supreme Court unanimously held that forum non conveniens, like other threshold nonmerits issues, may be resolved before difficult issues of jurisdiction (both of the subject matter and the person). While the Court's earlier rejection of hypothetical jurisdiction forbids a court from assuming its own power to decide the merits of a case, choosing among threshold nonmerits grounds does not entail an ultra vires assumption of substantive, law-declaring power.