Wednesday, March 16, 2011

Decision of Interest: Twombly/Iqbal and Affirmative Defenses

Last week Judge Jerome B. Simandle (U.S. District Court for the District of New Jersey) issued an opinion addressing whether the approach to pleading articulated by the Supreme Court in Twombly and Iqbal applies to the pleading of affirmative defenses. He concludes:

“This Court joins the two other Districts in this Circuit that have addressed this issue by holding that the heightened pleading standard of Twombly and Iqbal does not apply to affirmative defenses.”

The case is FTC v. Hope Now Modifications (No. 09-cv-1204), and the full opinion can be found on Justia and Pacer.


March 16, 2011 in Recent Decisions, Twombly/Iqbal | Permalink | Comments (0)

Tuesday, March 15, 2011

Simard & Tidmarsh on Foreign Citizens in U.S. Class Actions

Professors Linda Sandstrom Simard (Suffolk) and Jay Tidmarsh (Notre Dame) have posted on SSRN a draft of their article Foreign Citizens in Transnational Class Actions, which will be published in the Cornell Law Review. Here's the abstract:

This Article addresses an increasingly important question: When, if ever, should foreign citizens be included as members of an American class action? The existing consensus holds that courts should exclude from class membership those foreign citizens whose country does not recognize an American class judgment. Our analysis begins by establishing that this consensus is flawed. Rather, to minimize the costs associated with relitigation in a foreign forum, we must distinguish between foreign claimants who are likely to commence a subsequent foreign proceeding from those who are unlikely to do so; distinguishing between those who come from recognizing and nonrecognizing countries creates needless inefficiency. Using standard tools of economic analysis, we examine the benefits and costs of the consensus rule and compare them to the costs and benefits of other possible rules. In this comparison, the consensus rule tends to perform poorly. As a matter of theory, the most efficient rule for deciding which foreign citizens to include and exclude is evident, but real-world informational constraints frustrate the application of this rule in practice. Because no rule regarding the inclusion and exclusion of foreign citizens is the most efficient in all situations, we propose that courts use rebuttable presumptions: include foreign citizens with claims that are not individually viable and exclude foreign citizens with claims that are viable.


March 15, 2011 in Class Actions, International/Comparative Law, Recent Scholarship | Permalink | Comments (0)

Monday, March 14, 2011

More on SCOTUS Discussion of Pleading Standards in Last Week's Skinner Decision

We covered earlier the Supreme Court's discussion of federal pleading standards in its Skinner v. Switzer opinion, issued last week. Howard Wasserman has some additional commentary over at PrawfsBlawg in a post entitled "Some hints (or further confusion) about the state of pleading?"


March 14, 2011 in Recent Decisions, Twombly/Iqbal, Weblogs | Permalink | Comments (0)

Rotunda on Compulsory Counterclaims in Bankruptcy Court

Ronald Rotunda (Chapman University) has posted Stern v. Marshall, and the Power of Bankrupcty Courts to Issue Final Orders On All Compulsory Counterclaims to SSRN.

Article III of the Constitution grants federal district judges, appellate court judges, and Supreme Court Justices important constitutional protections (lifetime tenure and no salary diminution) to guarantee their independence. However, the Supreme Court has allowed Congress to create, under Article I, a different class of judges (called "Article I judges"). These judges (such as tax court and bankruptcy court judges) do not have Article III protection and thus do not share Article III independence. Although we might think of Article I judges as administrative law hearing officers, they do exercise some judge-like powers. The extent of those powers raises fundamental questions because we do not want Congress to avoid the guarantees of Article III by simply shifting Article III powers to Article I judges. 

In Stern v. Marshall, the Supreme Court will examine the scope of the power of Article I judges. For "core matters," bankruptcy judges have full power to enter final orders. For "non-core" matters, bankruptcy judges can only issue proposed orders, which Article III courts review de novo. Does the Constitution permit Article I judges to issue final orders simply because a claim is a compulsory counterclaim? 

Stern v. Marshall involves the probate dispute between Anna Nicole Smith (former Playboy Playmate) and E. Pierce Marshall, the son of billionaire J. Howard Marshall. Smith’s claim in the bankruptcy court was that Pierce Marshall had tortiously interfered with his father’s oral promises to Smith. However, the probate court, after a jury trial, rejected that claim, before the Article III district court heard the issue. If this tort dispute is not a "core" matter, the probate court’s decision is collateral estoppel and bars Smith. If it is core simply because it is a compulsory counterclaim, then the bankruptcy court’s contrary decision supporting Smith is not merely proposed but final. Then, it governs because it came before the probate courts’ decision. This lengthy litigation (continuing for approximately 15 years, with both of the original parties now dead) has all the elements of a TV drama. However, the legal issues are quite serious. If the Court allows Article I courts to issue final orders simply because the rules of procedure designate a counterclaim as compulsory, that will greatly broaden the powers of Article I judges.


March 14, 2011 in Federal Courts, Federal Rules of Civil Procedure, Recent Scholarship | Permalink | Comments (1)