April 29, 2011
Green on Horizontal Erie
Michael Steven Green (William & Mary) has posted Horizontal Erie and the Presumption of Forum Law to SSRN.
According to Erie Railroad v. Tompkins and its progeny, a federal court interpreting state law must decide as the state’s supreme court would. In this Article, I argue that a state court interpreting the law of a sister state is subject to the same obligation. It must decide as the sister state’s supreme court would.
Horizontal Erie is such a plausible idea that one might think it is already established law. But the Supreme Court has in fact given state courts significant freedom to misinterpret sister-state law. And state courts have taken advantage of this freedom, by routinely presuming that the law of a sister state is the same as their own - often in the face of substantial evidence that the sister state’s supreme court would decide differently. This presumption of similarity to forum law is particularly significant in nationwide class actions. A class will be certified, despite the fact that many states’ laws apply to the plaintiffs’ actions, on the ground that the defendant has failed to provide enough evidence to overcome the presumption that sister states’ laws are the same as the forum’s. I argue that this vestige of Swift v. Tyson needs to end.
Applying horizontal Erie to state courts is also essential to preserving federal courts’ obligations under vertical Erie. If New York state courts presume that unsettled Pennsylvania law is the same as their own while federal courts in New York do their best to decide as the Pennsylvania Supreme Court would, the result will be the forum shopping and inequitable administration of the laws that are forbidden under Erie and its progeny. As a result, federal courts have often held that they too must employ the presumption of similarity to forum-state law, despite its conflict with their obligations under vertical Erie. Applying horizontal Erie to state courts solves this puzzle.
What's the Alternative?: 9th Circuit Opinion Shows Flaws With Forum Non Conveniens Analysis; Professor Suggests Solution
In its opinion in Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947), in which the Supreme Court first laid out the test for forum non conveniens, the Court noted that "unless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed." In preparing to teach Civil Procedure again this spring, I had to look askance at this conclusion because it didn't accord with what I had seen in most forum non conveniens cases, including a recent one from the Ninth Circuit. Trying to find empirical evidence on the subject I came across the excellent recent article, When Is An Alternative Forum Available? Rethinking the Forum Non Conveniens Analysis, 85 Ind. L. J. (2010), by Joel H. Samuels, a professor at the University of South Carolina School of Law. Not only does the article propose a new framework for properly and effectively resolving forum non conveniens cases, but it also conducts an empirical analysis of every published federal court decision since 1982 that has considered the doctrine of forum non conveniens. So, what was the Ninth Circuit case, and what's the matter with forum conveniens (can't you tell that it's out of style)?
The Ninth Circuit case was Cariajano v. Occidental Petroleum Corp., 626 F.3d 1137 (9th Cir. 2010). In Cariajano, the plaintiffs were (1) several dozen adult and child members of the Achuar tribe, indigenous people who have long resided along the rivers of the northern Peruvian rainforest; and (2) Amazon Watch, a nonprofit corporation. The defendant was Occidental Petroleum Corp., a petroleum and oil exploration company. The plaintiffs sues the defendant in Los Angeles County Superior Court, asserting various causes of action relating to the defendant's environmental contamination and release of hazardous waste in Peru. The defendant removed the action to the United States District Court for the Central District of California and got the court to dismiss under the forum non conveniens doctrine.
To grant this motion under current forum non conveniens doctrine, the Central District of California had to reach two conclusions: First, it had to find that the defendant satisfied its burden of proving that an available alternative forum -- in this case Peru -- existed for the action. And second, if such a forum existed, the court had to weigh a variety of private and public interest factors to determine whether the case should have been dismissed. Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981)
The Ninth Circuit found that the Central District of California did not properly balance the public and private interest factors, but it really took the court to task for its conclusion that Peru was an adequate alternate forum. Specifically, the Ninth Circuit concluded that
-"The district court abused its discretion by accepting at face value Occidental's “stipulation and consent to jurisdiction in Peru” without considering the glaring absence of a waiver of the statute of limitations, which Occidental's own expert suggests may have run."
-"In assessing whether Peru afforded Plaintiffs a satisfactory remedy, the district court erroneously failed to weigh Plaintiffs' expert testimony, which unequivocally asserts that Peru provides no practical remedy at all for Plaintiffs." To wit,
-The district court focused upon the claim of the plaintiff's expert that the plaintiffs' action could proceed against the defendant in Peruvian court but ignored the fact that "there [wa]s no evidence that Plaintiffs could be entitled to anything more than nominal damages, which would mean that Peru would offer "no practical remedy for the plaintiff's complained of wrong."
-"Moreover, the district court did not consider whether Peruvian law provides any remedy at all for Amazon Watch's California Unfair Competition claim."
-The district court found that the plaintiffs failed to make a sufficient showing of corruption in Peru to avoid dismissal, ignoring evidence from the defendant's own expert of a Peruvian judiciary undergoing a transition that is, at best, volatile: he noted that the Peruvian Office of Judgeship Control, which investigates misconduct, requested the dismissal of 126 judges in 2007, up from 94 in 2006. The Office's investigations resulted in the temporary suspension of 86 judges in 2007, up from 36 in 2006. The Office issued 1,263 disciplinary sanctions in 2007, and admonished 473 judges and 443 court officers, while fining 84 judges and 67 court officers. Meanwhile, in the same period the Office brought 1,505 disciplinary processes that ended in exonerations and another 940 that were declared inadmissible.
So, was the Central District of California's opinion an anomaly, the exception to Gilbert's general rule that "unless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed." Or, were the plaintiffs exceedingly lucky that the Ninth Circuit stepped up and actually dug into the issue of whether Peru was truly an adequate alternative forum?
Let's go to Professor Samuels for the answer. As noted, Professor Samuels reviewed each of the 1447 published federal court decision since the Supreme Court's landmark 1982 opinion in Piper Aircraft that has considered the doctrine of forum non conveniens. The results? From 1982, only 18% of forum non conveniens motions were granted. But, from 1982 to 2007, 42% of such motions were granted, and the percentage of dismissals is increasing with 54% of such motions being granted in 2008 (although only 30% were granted in 2007).
So, dismissals pursuant to forum non conveniens are for from rare, but what about the Central District of California's threadbare analysis of whether Peru was an adequate alternative forum? Well, according to Professor Samuels' data set, the plaintiffs were lucky that the Central District of California even conducted an adequate alternative forum (AAF) analysis. According to his data, 31% of courts hearing and 24% of courts granting forum non conveniens motions did not even conduct AAF analyses, and 24% of courts granting such motions. Moreover, the deck was actually more stacked against the plaintiffs at the circuit level, where federal circuit courts in 38% of cases failed to conduct AAF analyses.
But, when courts do conduct such AAF analyses, do they usually do so in a more thorough manner than the Central District of California? According to Professor Samuels, the answer is "sometimes." In other cases,
-"Courts sometimes bypass AAF decisions by “assuming” that the AAF is adequate;"
-"Other courts consider AAF without any meaningful review or analysis;" and
-"As lower courts struggle to apply the two-part Piper inquiry, they often blend the AAF test into the balancing of private and public factors that should take place only after the court has established that an AAF exists."
The fact that many courts have been insouciant to the question of whether alternative forums are truly adequate is not surprising given the fact that the Court in Piper Aircraft held that the requirement of an alternative forum is ordinarily satisfied if the defendant is amenable to service of process in another jurisdiction except in "rare circumstances" when "the remedy offered by the other forum is clearly unsatisfactory." But when is an alternative forum adequate? This is the question that many courts either have ignored or dealt with inconsistently, and it is the question that "lies at the heart of whether it is reasonable to dismiss a case on this basis."
So, what's the solution? Well, according to Professor Samuels, the answer is "a new framework for properly and effectively resolving forum non conveniens cases, focusing on the first prong of the two-prong analysis: establishing whether an AAF exists for the case." According to Professor Samuels, in determining whether it should dismiss an action under the doctrine of forum conveniens so that it can be brought in forum 2 (F2), a court (forum 1 of F1) should apply
a six-factor test for determining whether an alternative forum is available. Each factor, like the entire analysis for forum non conveniens, should be evaluated with the burden of persuasion on the party moving for the forum non conveniens dismissal. The factors courts should consider are: (1) whether all defendants are subject to the jurisdiction of F2 according to the law of F2; (2) whether F2 provides a meaningful remedy; (3) whether the plaintiff will be treated fairly in F2; (4) whether all plaintiffs have practical access to the courts of F2; (5) whether F2 provides procedural due process; and (6) whether F2 is a stable forum. If the court hearing the forum non conveniens motion determines that any one of the six factors is not true for F2, then it should find the alternative forum unavailable.
Based upon these factors (which Professor Samuels explains in more detail in his article), it is easy to see why the the Central District of California should have denied the defendant's motion to dismiss in Cariajano. Of course, application of this six-factor test would be quite time consuming, so Professor Samuels proposes another solution:
Because the test for an AAF proposed in this Article is comprehensive, applying it will be time consuming for any court....
However, the court need not always conduct an in-depth inquiry into the availability of an alternative forum. Such an inquiry is important when a case is going to be dismissed, it is entirely unnecessary when a court intends to deny the motion and keep the case in F1 (the American forum). The detailed six-factor inquiry laid out above does not matter when a court will balance the private and public interest factors and conclude that the forum non conveniens motion should be denied.
I think that Professor Samuels' solution is fascinating and one that courts should adopt. I also think that the article is essential for Civil Procedure professor teaching students what is actually going on with the doctrine of forum non conveniens in cases across the country. And, he's not done. He promises that "[a] subsequent article, titled An Empirical Analysis of Forum Non Conveniens Cases in the Federal Courts Since Piper, will explore the data more comprehensively in search of broader lessons to be gleaned from the treatment of forum non conveniens motions by federal courts since 1982." I'm definitely looking forward to it.
SCOTUS Oral Argument in Erica P. John Fund v. Halliburton
The questions presented in Halliburton are:
(1) Whether the Fifth Circuit correctly held, in direct conflict with the Second Circuit and district courts in seven other circuits and in conflict with the principles of Basic Inc. v. Levinson, 485 U.S. 224 (1988), that plaintiffs in securities fraud actions must satisfy not only the requirements set forth in Basic to trigger a rebuttable presumption of fraud on the market, but must also establish loss causation at class certification by a preponderance of admissible evidence without merits discovery.
(2) Whether the Fifth Circuit improperly considered the merits of the underlying litigation, in violation of both Eisen v. Carlise & Jacquelin, 417 U.S. 156 (1974), and Federal Rule of Civil Procedure 23, when it held that a plaintiff must establish loss causation to invoke the fraud-on-the-market presumption even though reliance and loss causation are separate and distinct elements of security fraud actions and even though proof of loss causation is common to all class members.
As we covered earlier, this second question appears to overlap with issues being considered in Wal-Mart Stores v. Dukes, which was argued before the Supreme Court one month ago and also involves the extent to which a court must consider the merits of class claims at the certification stage.
For some of the coverage of the Halliburton argument, check out BNA’s Class Action Litigation Report (subscription required), JURIST, and SCOTUSblog’s argument recap by Prof. Linda Mullenix (Texas). The Conglomerate has also been hosting a roundtable on the case, which includes analysis of the oral argument.
April 28, 2011
AALS Call For Papers on "Procedural Reform: Rulemaking v. Legislation"
The AALS Section on Civil Procedure has issued the following Call for Papers in connection with the January 2012 annual meeting:
The Executive Committee of the AALS Section on Civil Procedure invites the submission of papers for presentation at the Annual Meeting of the AALS January 4-8, 2012, in Washington, D.C.
The topic of our panel will be "Procedural Reform: Rulemaking v. Legislation." Procedural reform has enjoyed (or suffered from, depending on one’s point of view) considerable attention in recent years. Procedural topics are in the mainstream media. Supreme Court cases have reformed bedrock principles. Rulemakers regularly debate amendments to an ever-expanding corpus of rules. And the legislative branch seeks to undo some reforms while initiating still others.
Papers presented by the panel will put this constellation of procedural reforms into a broader perspective. The debate about whether procedural reform is more properly the province of rulemakers or lawmakers is neither new nor, perhaps, even resolvable. Yet it remains relevant-urgent, even, given the stakes. We invite the submission of papers that address this topic in whole or in part. Papers that address the topic in whole might, for example, consider the use of empirical evidence as an engine for procedural reform. Or institutional choice theory might be applied to the procedural landscape. Even if your work addresses the topic only in part, we encourage you to submit it; we will be selecting papers so that the panel, considered as a whole, will generate a dialogue to explore the broader issues.
Drafts of the papers submitted for consideration must be received by September 1, 2011. Submissions should be sent to email@example.com. Papers already accepted for publication will be considered.
April 27, 2011
SCOTUS Decision in AT&T Mobility v. Concepcion
The Supreme Court issued its decision in AT&T Mobility LLC v. Concepcion today. The Court divided 5-4, with Justice Scalia writing the majority opinion (joined by Chief Justice Roberts and Justices Kennedy, Thomas, and Alito) and Justice Breyer writing the dissent (joined by Justices Ginsburg, Sotomayor, and Kagan). Justice Thomas also writes a concurring opinion.
As covered earlier here, the case involved the application of California’s so-called Discovery Bank rule, which allows consumers to challenge as unconscionable contractual waivers of the right to arbitrate disputes on a class-wide basis. Justice Scalia’s majority opinion concludes:
Because it “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,” Hines v. Davidowitz, 312 U. S. 52, 67 (1941), California’s Discover Bank rule is preempted by the FAA. The judgment of the Ninth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.
Joined at the Hip?: Is the Fraudulent Misjoinder Doctrine the Fraudulent Joinder Doctrine's Twin or a Red-Headed Stepchild?
Courts have long recognized fraudulent joinder as an exception to the complete diversity rule....Fraudulent joinder occurs when a plaintiff files a frivolous or illegitimate claim against a non-diverse defendant solely to prevent removal....When determining if a party has been fraudulently joined, a court considers whether there is any reasonable basis in fact or law to support a claim against a nondiverse defendant.
A more recent, somewhat different, and novel exception to the complete diversity rule is the fraudulent misjoinder doctrine which one appellate court and several district courts have adopted. Fraudulent misjoinder occurs when a plaintiff sues a diverse defendant in state court and joins a viable claim involving a nondiverse party, or a resident defendant, even though the plaintiff has no reasonable procedural basis to join them in one action because the claims bear no relation to each other. In such cases, some courts have concluded that diversity is not defeated where the claim that destroys diversity has "no real connection with the controversy" involving the claims that would qualify for diversity jurisdiction. In re Prempro Products Liability Litigation, 591 F.3d 613 (8th Cir. 2010).
While somewhat recent, the Eleventh Circuit's opinion creating the fraudulent misjoinder doctrine was more than 15 years ago in Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353 (11th Cir. 1996). And, as the Eighth Circuit noted last year in Prempro, the Eleventh Circuit remains the only appellate court to adopt the doctrine although other appellate courts have acknowledged it. And, in Prempro, the Eleventh Circuit joined the ranks of these other appellate courts, acknowledging the doctrine but finding that it did not need to adopt or apply it given the facts before it. As the Eighth Circuit also noted, several district courts have adopted the doctrine, but several other district courts have refused to adopt it. Moreover, as E. Farish Percy, a professor at The University of Mississippi School of Law, noted in her article, Defining the Contours of the Emerging Fraudulent Misjoinder Doctrine, 29 Harv. J.L. & Pub. Pol'y 569 (2006), even courts that have adopted the doctrine are sharply split over how to apply it. So, what will and should happen with the doctrine in the future?
Let's start at the start. In Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353 (11th Cir. 1996), plaintiffs brought a putative class action in Alabama state court, which eventually alleged (1) fraud violations arising from the sale of automobile service contracts; and (2) fraud violations arising from the sale of extended service contracts in connection with the sale of retail products. Like some of the plaintiffs, some of the automobile class defendants resided in Alabama while Lowe's Home Centers, the merchant class defendant, was a resident of North Carolina, unlike any plaintiff. Lowe's removed the action to federal court and successfully moved to sever the claims against it, with the district court concluding that there was "no allegation of joint liability between Lowe's and any other defendant and no allegation of conspiracy" and that "there was an improper and fraudulent joinder, bordering on a sham." The Eleventh Circuit later affirmed, finding that
Although certain putative class representatives may have colorable claims against resident defendants in the putative "automobile" class, these resident defendants have no real connection with the controversy involving Appellants...and Appellee Lowe's in the putative "merchant" class action. We hold that the district court did not err in finding an attempt to defeat diversity jurisdiction by fraudulent joinder. We do not hold that mere misjoinder is fraudulent joinder, but we do agree with the district court that Appellants' attempt to join these parties is so egregious as to constitute fraudulent joinder.
While the Eleventh Circuit referred to the plaintiffs' joinder of the two classes as "fraudulent joinder," this type of joinder was clearly a different species than previous fraudulent joinders. The Eleventh Circuit did not find that the plaintiffs claims against the automobile class defendants were illegitimate; instead, it found that the joinder of these claims with the claims against Lowe's was illegitimate, which is why subsequent courts have referred to the holding in Tapscott as the fraudulent misjoinder doctrine.
Courts' reactions to Tapscott have been mixed. Some district courts have adopted the doctrine as a means of ensuring defendants their statutory right of removal to the federal courts and precluding plaintiffs from preventing removal to federal court. See, e.g., In re Diet Drugs, No. 98-20478, 1999 WL 554584 (E.D.Pa. July 16, 1999)(unreported) (explaining that plaintiffs' egregious misjoinder “wrongfully deprives Defendants of their right of removal.”); Reed v. American Medical Sec. Group, Inc., 324 F.Supp.2d 798, 805 (S.D.Miss. 2004) (adopting the fraudulent misjoinder doctrine because “diverse defendants ought not be deprived of their right to a federal forum by such a contrivance as this.”). See also Laura J. Hines & Steven S. Gensler, Driving Misjoinder: The Improper Party Problem in Removal Jurisdiction, 57 Ala. L. Rev. 779, 825 (2006).
But, as the Eighth Circuit also noted,
Other courts have criticized Tapscott, arguing that questions of joinder under state law do not implicate federal subject matter jurisdiction, federal jurisdiction is to be narrowly construed, and the fraudulent misjoinder doctrine has created an unpredictable and complex jurisdictional rule. See, e.g., Osborn v. Metropolitan Life Ins. Co., 341 F.Supp.2d 1123, 1127 (E.D.Cal. 2004) (rejecting fraudulent misjoinder because "the last thing the federal courts need is more procedural complexity."); Rutherford v. Merck & Co., 428 F.Supp.2d 842, 851 (S.D.Ill. 2006) (holding that Tapscott is an improper expansion of federal diversity jurisdiction, and misjoinder should be resolved by a state court); 14B Charles Alan Wright et al., Federal Practice and Procedure § 3723, at 876 (4th ed.2009) (explaining that fraudulent misjoinder adds "a level of complexity-and additional litigation-to a federal court's decision regarding removal.").
So, who is right? Well, first, let's consider why some courts have rejected the doctrine. These courts mainly have rejected the doctrine on two grounds. In Osborn, the Eastern District of California refused to adopt the doctrine because, inter alia, defendants should move to sever in state court and then remove within 30 days of severance as permitted by 28 U.S.C. Section 1446(b) rather initially removing and asking for severance. As the court itself noted, however, this could lead to problems in which severance is not accomplished within the 1 year time limit for removal in 28 U.S.C. Section 1446(b) (which seems to me to be enough of a reason for courts to adopt the doctrine).
Second, the Eastern District of California rejected the doctrine because it "adds to the complexity of a federal court's decision as to removal and...even in the Eleventh Circuit not all procedural misjoinder rises to the level of fraudulent joinder. And, in Rutherford, the Southern District of Illinois artfully explained in rejecting the doctrine that "[m]any courts have foundered on shoals of tautology in trying to define fraudulent misjoinder." Instead, the court noted that courts have split over many aspects of the doctrine and then concluded that
just as no clear standards for the application of the Tapscott doctrine have emerged, the Court predicts that no such standards will emerge. The Court is well aware from its experience that determinations about proper joinder are of necessity highly discretionary, involving intensely case-specific decisions about the fairest and most economical way to adjudicate particular claims....The Court fails to see how the adoption of the Tapscott doctrine, which elevates a court's discretion concerning joinder into a jurisdictional principle, is likely to promote predictable results at either the trial court level or on review. In sum, the Court has refused to follow Tapscott in the past,...and the Court will continue to do so until such time as the doctrine of fraudulent misjoinder is adopted by the Supreme Court of the United States or the Seventh Circuit Court of Appeals.
So, basically, courts have rejected the fraudulent misjoinder doctrine because it is unnecessary in many cases and is difficult to apply. But is the Southern District of Illinois correct that no clear standards will emerge? It is certainly possible, but I don't see any reason why they couldn't emerge when appellate courts start applying the doctrine. And, I think that in her aforementioned article, Professor Percy does a dynamite job of setting forth what those standards should be.
State v. Federal Law
First, Professor Percy notes that "[c]ourts are divided on whether to analyze alleged fraudulent misjoinder pursuant to the state or federal procedural rule governing permissive joinder of parties." And, she argues for application of state joinder rules for 5 reasons:
-"If joinder is permissible under state rules but impermissible under federal rules, no intent to wrongfully defeat removal jurisdiction can be inferred from such joinder simply because it fails to meet the federal threshold for joinder of claims;"
-"The language of the removal statute itself suggests that state procedural law controls;"
-"Applying the federal rule to determine misjoinder violates Rule 82 of the Federal Rules of Civil Procedure if such application inappropriately expands federal jurisdiction;"
-"No district court has provided a compelling explanation for its reference to the federal joinder rule when evaluating allegations of fraudulent misjoinder;" (check out the article for all of these explanations)
-"The use of state joinder rules is supported by legislative history." (again, check out the article for all of the details)
Second, while most courts adopting the fraudulent misjoinder doctrine have extended the doctrine to misjoined plaintiffs, at least one court has reached the contrary conclusion. According to Professor Percy, "[g]iven the Supreme Court's holding that '[t]he Federal courts may and should take such action as will defeat attempts to deprive wrongfully parties entitled to sue in the Federal courts of the protection of their rights in those tribunals,' it is appropriate for courts to apply the fraudulent misjoinder doctrine to cases where diverse plaintiffs have misjoined non-diverse plaintiffs in an attempt to defeat removal."
Professor Percy notes that "[o]f all the unresolved issues concerning the application of the fraudulent misjoinder doctrine, establishing an appropriate definitional test appears to have posed the most difficulty to district courts." Some courts use the language of Tapscott and find fraudulent misjoinder only when plaintiffs engage in "egregious misjoinder." Other courts find that "mere misjoinder" is sufficient to trigger the doctrine. And still other courts apply the doctrine using the same standard that they apply to fraudulent joinder cases, i.e., the apply the fraudulent misjoinder doctrine when the plaintiff had no reasonable basis for joining the jurisdictional spoiler. Professor Percy finds that courts should follow this latter approach, concluding that
Using the "reasonable basis for the joinder" test to define fraudulent misjoinder is most consistent with Supreme Court precedent, is most sensitive to federalism concerns, avoids the difficulties posed by the egregious misjoinder and mere misjoinder standards, and relieves courts of the burden of having to develop an entirely new framework for evaluating fraudulent procedural misjoinder because it simply mimics the traditional fraudulent joinder framework.
Remand or Dismiss?
Finally, Professor Percy points out that courts applying the fraudulent misjoinder doctrine have split over whether to sever and remand misjoinded claims or sever and dismiss (without prejudice) such claims. Profesor Percy advocates he former option, contending that
Arguably, the federal district court has no jurisdiction over the misjoined claim, and therefore has no authority to dismiss the claim. Moreover, it is more efficient for the federal court to remand the misjoined claim back to the state court where it was filed. If the plaintiff no longer desires to prosecute the misjoined claim, the plaintiff can easily dismiss the claim in state court. If, however, the court dismisses the claim brought by or against the misjoined party without prejudice, and the plaintiff intends to pursue it in state court, the plaintiff will be forced to refile the claim in state court. Thus, the more expedient approach is simply to remand the misjoined claims to state court.
So, will we ever achieve uniformity under the fraudulent misjoinder doctrine, or is the Southern District of Illinois correct that no clear standards will emerge? Well, the way that I see it, appellate courts eventually will have to start adopting or refusing to adopt the doctrine. It is possible, but extremely unlikely, that these appellate courts will act uniformly. But, once they do start acting, it is going to create circuit splits. And, once these circuit splits sharpen, the issue is bound to reach the Supreme Court. And, when it does, the hope would be that the Supremes will lay down some uniform standards for application of the doctrine. My guess is that those standards look a lot like the standards set forth in Profesor Percy's article.
April 26, 2011
Risch on Injunctions in Patent Law
Over at PrawfsBlawg, Michael Risch has a posting about "Civil Procedure in Patent Clothing." The post concerns the retrial of issues in a patent contempt proceeding in the case of Tivo v. Echostar. From the posting:
I think the best way to read the case is that the retrial of infringement only happens where the court finds colorable differences. In other words, where the redesign is targeted at the specific claim elements that were disputed and proven at trial. If the changes are only small, then the judge can verify that there is still infringement (or not). But where the changes are big and targeted at disputed claim elements, then allegations of continued infringement by other product features must be retried. This interpretation helps reconcile the seemingly contradictory quotes above, and also makes sense in practice.
There are longer term consequences from this rule. First, it might give an incentive to overlitigate, because patentees will now want to prove as many alternate forms of infringement as possible. Of course, maybe they do that anyway. Second, it puts pressure on the rule that winning parties cannot appeal arguments they lost. After all, it is much cheaper to file a contempt claim than to retry infringement in case of a design around, and then appeal the court's errors.
April 25, 2011
What's It All About Alfie?: Compiling All of the Data on the Effect of Twombly and Iqbal on 12(b)(6) Motions
What has been the effect of Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), on motions to dismiss for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6)? It looks like there are at least 7 relevant sources of information about the topic, and most of them have been blogged about in one place or another on the internet. In this post, I thought I would post links to all of this information as well as brief summaries of what each found.
(1) Patricia Hatamyar, a professor at the St. Thomas University School of Law, took up this question in her piece (blogged about here), The Tao of Pleading: Do Twombly and Iqbal Matter Empirically?, 59 Am. U. L. Rev. 553 (2010), in which she "conclude[d], with some caution, that Twombly and Iqbal have significantly increased the rate at which 12(b)(6) motions have been granted by district courts, and suggest[ed] that this result, if desirable, should be accomplished by the normal rule amendment process rather than by a ruling of the Court."
(2) Last month, the Federal Judicial Center released its report, Motions to Dismiss for Failure to State a Claim After Iqbal, which concluded...well, it depends on your perspective. Adam blogged about it here, and Howard Wasserman blogged about it over at PrawfsBlawg, leading to a spirited back-and-forth in the comments section. The Executive Summary concluded that
•There was a general increase from 2006 to 2010 in the rate of filing of motions to dismiss for failure to state a claim (see infra section III.A).
•In general, there was no increase in the rate of grants of motions to dismiss without leave to amend. There was, in particular, no increase in the rate of grants of motions to dismiss without leave to amend in civil rights cases and employment discrimination cases (see infrasection III.B.1).
•Only in cases challenging mortgage loans on both federal and state law grounds did we find an increase in the rate of grants of motions to dismiss without leave to amend. Many of these cases were removed from state to federal court. This category of cases tripled in number during the relevant period in response to events in the housing market (see infrasection III.B.1). There is no reason to believe that the rate of dismissals without leave to amend would have been lower in 2006 had such cases existed then.
•There was no increase from 2006 to 2010 in the rate at which a grant of a motion to dismiss terminated the case (see infra section III.B.1).
(3) William M. Janssen of the Charleston School of Law, recently published Iqbal “Plausibility” in Pharmaceutical and Medical Device Litigation, 71 La. L. Rev. 541 (2011).
This Article studied the actual effect of Iqbal on the cohort of more than 264 federal pharmaceutical and medical device cases of every type, released from the day of the decision in Iqbal through August 31, 2010. The results of that study of more than 15 months of case law suggest that Iqbal is not having a dramatic impact on this cohort, although its impact cannot be conclusively dismissed as inconsequential either. There have been aggressive applications of Iqbal on occasion. In the 21.2% of the time when Iqbal appears facially to be impactful, a closer examination reveals that this observed effect is, in large measure, decreasing in incidence, coupled with an ability for correction, and frequently avoidable through accessible sources of information. Moreover, this Article cannot rule out that even those perceived effects may be phantoms, because repeated, longstanding, and frequently cited federal precedent among the lower federal courts may well have led to functionally identical results even without Iqbal's emergence. Nevertheless, validly assessing the true impact of Iqbal on pharmaceutical and medical device litigation (or, for that matter, federal litigation generally) remains a risky business. The Iqbal opinion is still too new, the hard data surrounding its use too thin, the steadied nature of its application too uncertain, and the legislative efforts to unwork it too unknown.
This data is amenable to a few observations. First, the raw totals of newly filed motions to dismiss jumped meaningfully in the four months following the Iqbal decision when compared to the filing activity in the four months immediately preceding theTwombly decision, but that growth in numbers has stopped and begun to ebb through the 13 months after Iqbal. Second, the volume of dismissal motions granted likewise jumped in the four months following Iqbal when compared to the four months preceding Twombly, but that growth, too, seems to have stalled and begun to recede. Third, when measured against new-motion filing activity, the percentage of motions to dismiss that were granted has remained essentially level. In fact, when the data for the full last 13 months is considered, the percentage of motions granted has actually fallen to a point lower now than it was during the pre-Twombly period. Fourth, the number of motions to dismiss that were denied also rose significantly in the period after Iqbal as compared to the period before Twombly, but that growth has likewise now ended and the numbers have begun to recede. Whether these figures represent actual trends, or mere anomalies influenced by the small volumes of data and the brief window of time, remains unclear.
(5) Andrea Kuperman prepared the Memorandum, Review of Case Law Applying Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal for the United States Judicial Conference Standing Rules Committee and its Civil Rules Committee. The Memo summarized the holdings and reasoning of cases discussing and applying Iqbal through late July 2010. According to Professor Janssen,
In summarizing the decision law through this period, the study offered several observations on patterns and similarities in some of the studied opinions:
·Some courts reaffirm that the federal "notice" pleading regime "remains intact";
·Other courts commented that Twombly and Iqbal "have raised the bar for defeating a motion to dismiss based on failure to state a claim" (with one court suggesting that future plaintiffs may seek to avoid a federal forum);
·Some courts have dismissed pleadings after noting that the result would have been the same even before Twombly (although other courts have stated or implied the opposite);
·Many courts of appeals decisions focus on the "context-specific" nature of the Iqbal analysis, which, surmised the study's author, "may give courts some flexibility to apply the analysis more leniently in cases where pleading with more detail may be difficult."
Highlighting a recurring challenge present in any post-Iqbal analysis, the study noted:
While it seems likely that Twombly and Iqbal have resulted in screening out some claims that might have survived before those cases, it is difficult to determine from the case law whether meritorious claims are being screened under the Iqbal framework or whether the new framework is effectively working to sift out only those claims that lack merit earlier in the proceedings.
(6) Senior Federal Judicial Center researchers Emery G. Lee III and Thomas E. Willging published Attorney Satisfaction with the Federal Rules of Civil Procedure: Report to the Judicial Conference Advisory Committee on Civil Rules. As noted by Professor Janssen, this paper
summarized the comments received during a survey conducted by the National Employment Lawyers Association, which sought to assess the impact of "plausibility" pleading on the law practices of employment attorneys. More than 70% of those responding agreed that Iqbal and/or Twombly had "affected how [they] structure complaints in employment discrimination cases." When asked about the nature of that effect, the responders replied that they "include more factual allegations in the complaint than...prior to Twombly/Iqbal" (94.2% agreeing) and that they "have to respond to motions to dismiss that might not have been filed prior to Twombly/Iqbal" (74.6%). Fewer than 15% of responders agreed that they "conduct more factual investigation" after Twombly/Iqbal, that they "screen cases more carefully" after Twombly/Iqbal, or that they "raise different claims" after Twombly/Iqbal. Of those who had actually filed an employment discrimination case since the Twombly decision was released, only 7.2% agreed that a case had been dismissed "for failure to state a claim under the standard announced inTwombly/Iqbal."
(7) Lee and Willging also published In Their Words: Attorney Views About Costs and Procedures in Federal Civil Litigation. As noted by Professor Janssen, this paper
reported on individual telephone interviews with 35 attorneys concerning their personal federal litigation experiences. The interviewees were comprised of 16 who primarily represented plaintiffs, 12 who primarily represented defendants, and 7 who represented both about equally. Most agreed they had not "seen any impact" and "reported no effect" from Twombly/Iqbal in their practices, and "none of the attorneys identified an increase in the likelihood that [a Rule 12(b)(6)] motion would be granted." Many interviewees did, however, note an increase in litigation costs occasioned by "the increased frequency of litigating 12(b)(6) motions." Most interviewees reported that "notice" pleading was already "rare" and often intentionally so based on "longstanding personal practice of pleading specific facts." Among the quoted comments were: "My complaints are detailed, for tactical reasons....I want the reader, including the judge or more likely his clerk, to say to himself 'Well, if he can prove this, he wins'"; "it is a good idea to put as much detail as possible into a complaint so as to make a good first impression on the judge"; "always included more than is necessary for notice pleadings, and we are generally very specific about the facts"; "never did notice pleading, always much more"; "I plead to influence the court"; and "I have a tendency to do fact pleading."
As you can see, I have taken these brief summaries from Professor Janssen's article, and I think (a) that it does a really nice job of explaining the research done on Twombly/Iqbal to this point; and (b) that it nicely anchors that research by focusing upon a discrete set of cases -- pharmaceutical and medical device cases -- and seeing the effect on that subset of cases. Part of the reason that I find this anchoring so useful is that, as the authors of the recently released FJC report acknowledged, the monkey wrench of a significant increase in financial-instrument cases (in the wake of the mortgage crisis) complicates the before-and-after analysis (Indeed, as Scott Dodson noted in the comments section of Howard Wasserman's post at PrawfsBlawg, maybe we should remove these cases from the numbers to get a more accurate picture).
So, What's It All About Alfie? Well, I don't think that question can be answered quite yet. The recently released FJC did not report data on what happens after dismissals with leave to amend in the wake of Twombly/Iqbal, and the authors note that they will report that data in future reports. This data seems to be the missing piece of the puzzle in reaching final conclusions. But based upon these above 7 sources of information, I think that the picture is starting to come into focus.
Sullivan on Iqbal and Employment Discrimination
Professor Charles Sullivan (Seton Hall) has published Plausibly Pleading Employment Discrimination, 52 William & Mary L. Rev. 1613 (2011). Here’s the abstract:
The Supreme Court’s unanimous 2002 decision in Swierkiewicz v. Sorema N.A., which took a very permissive approach to pleading discrimination claims, may or may not remain good law after Ashcroft v. Iqbal. As is well known, Iqbal took a restrictive approach to pleading generally under the Federal Rules of Civil Procedure, and its application to employment discrimination cases could pose serious problems for plaintiffs attempting to get into federal court. In addition, there is certainly a tension between Swierkiewicz and Iqbal. This is in part because the former is a strong reaffirmation of notice pleading as it has traditionally been understood whereas the latter makes clear that “plausible pleading” is something very different. But it is also because Iqbal was, after all, a discrimination case, albeit brought under the Constitution rather than a federal statute, and its finding that the discrimination alleged there was not plausibly pled could easily be applied to statutes such as Title VII, the Age Discrimination in Employment Act, and the Americans with Disabilities Act.
Numerous scholars have analyzed Iqbalgenerally and several have addressed the application of plausible pleading to claims under the antidiscrimination laws. A respectable view is that Swierkiewicz remains good law, although the commentators recognize legitimate questions about its continued vitality. This Article, while agreeing that readings of both Swierkiewicz and Iqbal would permit this result, nevertheless explores the contrary possibility: supposing Iqbal sub silentio overruled Swierkiewicz and applies plausible pleading to discrimination claims, what must a plaintiff plead to avoid dismissal for failure to state a claim?
The most obvious response is that the plaintiff should plead a prima facie case of discrimination under the traditional McDonnell Douglas Corp. v. Green standard. Although Swierkiewicz held that pleading a prima facie case was not necessary, in part because there are other ways of proving discrimination, it did not suggest that such pleading would be insufficient. There are, however, complications with pleading a traditional prima facie case that should be explored. Further, there are at least three alternatives for attorneys who cannot, consistent with Rule 11, allege such a prima facie case. First, the Article proposes that the plaintiff might survive a Rule 12(b)(6) motion by pleading “direct evidence” of discrimination. Although the term has a checkered history in discrimination jurisprudence, the pleading context suggests a new look at an old concept. Second, the Article addresses the possibility of pleading the existence of a “comparator” whose more favorable treatment than the plaintiff may make the claim of discrimination plausible.
Third, and perhaps most radically, the Article argues that plaintiffs should be able to take the Supreme Court at its word in Iqbal that, in deciding a motion to dismiss for failure to state a claim, a district court must take as true all facts, as opposed to legal conclusions, alleged in the complaint. The Article proposes that plaintiffs plead the existence of social science research showing the pervasiveness of discrimination. Taken as true, this body of literature may well nudge a particular claim across the border drawn by the Supreme Court between a “possible” claim and a “plausible” one.
NYTimes Runs Op-Ed on Flag Registration Practices for Ships
For those of us interested in the more international aspects of procedure and liability, the New York Times has an interesting Op Ed by Rose George this morning about the practice of registering a ship under the flag of countries with which it has no or little connection.