Wednesday, December 10, 2014
Federal Rule of Evidence 606(b) is one of the few evidence rules that usually makes the crossover into Civil Procedure books. Continuing its expansive reading in Tanner v. U.S. of 606(b)'s general prohibition on juror testimony on an inquiry into the validity of a verdict, the Court yesterday issued Warger v. Shauers, which held that Rule 606(b) barred juror testimony in a proceeding to obtain a new trial on the ground that a juror lied during voir dire.
EvidenceProf Blog had a good post summarizing the case yesterday.
Monday, November 17, 2014
We covered earlier the Supreme Court’s per curiam decision in Johnson v. City of Shelby summarily reversing the Fifth Circuit. It’s a short opinion—just two and a half pages—but it has some important things to say about pleading standards. Here are a few quick thoughts:
The primary issue in the case is whether the district court properly rejected the plaintiffs’ due process claim for failing to invoke 42 U.S.C. § 1983 explicitly in their complaint. The Fifth Circuit had affirmed based on a misguided line of lower court decisions finding complaints to be “fatally defective” for failing to cite § 1983. The Supreme Court’s Johnson opinion makes clear that this line of cases is wrong—a plaintiff’s failure to cite § 1983 in his or her complaint is not fatal. From page 1 of the slip opinion: “Federal pleading rules call for ‘a short and plain statement of the claim showing that the pleader is entitled to relief,’ Fed. Rule Civ. Proc. 8(a)(2); they do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted.”
Nonetheless, the Court states that—on remand—the Johnson plaintiffs “should be accorded an opportunity to add to their complaint a citation to § 1983.” [Slip Op., p.3] This is admittedly somewhat puzzling. Why would there be any need to amend the complaint to include something that is not required? One possible explanation is that the plaintiffs had asked the district court for leave to amend the complaint, but the court refused and the Fifth Circuit affirmed that refusal. It is valuable, therefore, for the Supreme Court to reemphasize—with its citation to Rule 15(a)(2)—the Federal Rules’ instruction that “[t]he court should freely give leave when justice so requires.” [See Slip Op., p.3] In any event, the Supreme Court simply insists that the plaintiffs have an opportunity to add a citation to § 1983 to their complaint (as they requested). Given the Supreme Court’s conclusion that no such citation is required, it would be entirely proper for the Johnson plaintiffs and the lower court to agree that no amendment to the complaint is necessary in order for the plaintiffs’ claims to be resolved on the merits.
The most intriguing part of the Supreme Court’s Johnson opinion, however, may be the paragraph discussing Twombly and Iqbal. The Court initially notes that Twombly and Iqbal do not resolve whether the plaintiffs were required to cite § 1983 in the complaint, because Twombly and Iqbal “concern the factual allegations a complaint must contain to survive a motion to dismiss.” [Slip Op., p.2 (court’s emphasis)] But the Court goes on to say that the complaint in Johnson was “not deficient” under Twombly and Iqbal because the plaintiffs “stated simply, concisely, and directly events that, they alleged, entitled them to damages from the city. Having informed the city of the factual basis for their complaint, they were required to do no more to stave off threshold dismissal for want of an adequate statement of their claim. See Fed. Rules Civ. Proc. 8(a)(2) and (3), (d)(1), (e).” [Slip Op., pp.2-3]
Can a plaintiff really comply with Twombly and Iqbal merely by “stat[ing] simply, concisely, and directly events that, they alleged, entitled them to damages from the city”? Yes. Keep in mind: even Iqbal recognized that non-conclusory allegations must be accepted as true at the pleadings phase, without any inquiry into whether the truth of those allegations is plausibly suggested by other allegations. One of many frustrating aspects of the Iqbal majority opinion was that it failed to explain what made the crucial allegations in the Iqbal complaint too conclusory to be accepted as true. But I’ve argued elsewhere that one way to make sense of Twombly and Iqbal—in light of the text and structure of the Federal Rules and Supreme Court precedent that remains good law—is through a transactional approach to pleading. That is, an allegation is conclusory when it fails to identify adequately the acts or events that entitle the plaintiff to relief from the defendant. It is only when an allegation obscures the underlying real-world events with mere legal conclusions that it should be disregarded as conclusory under Iqbal.
On this point, it’s particularly interesting that the plaintiffs’ claim in Johnson was “that they were fired by the city’s board of aldermen, not for deficient performance, but because they brought to light criminal activities of one of the aldermen.” [Slip Op., p. 1] Such a claim—like the claim at issue in Iqbal—hinges on the defendants’ intent. Properly understood, Iqbal does not hold that an allegation is “conclusory” simply because it alleges that a defendant acted with a certain state of mind. Rather, such an allegation should be accepted as true—including its description of the defendant’s intent—as long as it provides a basic identification of the liability-generating events or transactions. The Supreme Court’s reasoning in Johnson is consistent with this approach, and confirms that Twombly and Iqbal need not be read to impose heightened burdens on plaintiffs at the pleadings phase.
All in all, Johnson v. City of Shelby is a short-but-sweet per curiam opinion that not only gets the right result on the primary issue presented, but also reflects a more sensible approach to pleading generally. Lower courts should take note.
Saturday, November 15, 2014
On Monday we covered Johnson v. City of Shelby, a per curiam Supreme Court decision on pleading that summarily reversed the Fifth Circuit. Here’s some of the coverage of that decision from this past week:
- City of Shelby: New SCOTUS Pleadings Opinion in Visual Context (Colin Starger)
- SCOTUS Per Curiam Procedure Decisions Raise (At Least) As Many Questions As They Settle (Michael Dorf)
- Twombly’s Remorse (Barry Barnett)
Monday, November 10, 2014
We’ve been watching Johnson v. City of Shelby, a case raising some important questions on pleading standards that the Supreme Court relisted several times. Today the Court issued a per curiam decision summarily reversing the Fifth Circuit. It appears following today’s order list (beginning at page 11 of the .pdf file). Here are some highlights:
Plaintiffs below, petitioners here, worked as police officers for the city of Shelby, Mississippi. They allege that they were fired by the city’s board of aldermen, not for deficient performance, but because they brought to light criminal activities of one of the aldermen. Charging violations of their Fourteenth Amendment due process rights, they sought compensatory relief from the city. Summary judgment was entered against them in the District Court, and affirmed on appeal, for failure to invoke 42 U. S. C. §1983 in their complaint.
We summarily reverse. Federal pleading rules call for “a short and plain statement of the claim showing that the pleader is entitled to relief,” Fed. Rule Civ. Proc. 8(a)(2); they do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted. See Advisory Committee Report of October 1955, reprinted in 12A C. Wright, A. Miller, M. Kane, R. Marcus, and A. Steinman, Federal Practice and Procedure, p. 644 (2014 ed.) (Federal Rules of Civil Procedure “are designed to discourage battles over mere form of statement”); 5 C. Wright & A. Miller, §1215, p. 172 (3d ed. 2002) (Rule 8(a)(2) “indicates that a basic objective of the rules is to avoid civil cases turning on technicalities”).
Our decisions in Bell Atlantic Corp. v. Twombly, 550 U. S. 544 (2007), and Ashcroft v. Iqbal, 556 U. S. 662 (2009), are not in point, for they concern the factual allegations a complaint must contain to survive a motion to dismiss. A plaintiff, they instruct, must plead facts sufficient to show that her claim has substantive plausibility. Petitioners’ complaint was not deficient in that regard. Petitioners stated simply, concisely, and directly events that, they alleged, entitled them to damages from the city. Having informed the city of the factual basis for their complaint, they were required to do no more to stave off threshold dismissal for want of an adequate statement of their claim. See Fed. Rules Civ. Proc. 8(a)(2) and (3), (d)(1), (e). For clarification and to ward off further insistence on a punctiliously stated “theory of the pleadings,” petitioners, on remand, should be accorded an opportunity to add to their complaint a citation to §1983. See 5 Wright & Miller, supra, §1219, at 277–278 (“The federal rules effectively abolish the restrictive theory of the pleadings doctrine, making it clear that it is unnecessary to set out a legal theory for the plaintiff’s claim for relief.” (footnotes omitted)); Fed. Rules Civ. Proc. 15(a)(2) (“The court should freely give leave [to amend a pleading] when justice so requires.”).
Friday, November 7, 2014
Whether, under Federal Rule of Civil Procedure 4(m), a district court has discretion to extend the time for service of process absent a showing of good cause, as the Second, Third, Fifth, Seventh, Ninth, Tenth, and Eleventh Circuits have held, or whether the district court lacks such discretion, as the Fourth Circuit has held?
You can find links to the cert. stage briefing (as well as the merits briefs as they come in) at SCOTUSblog’s Chen case file.
Thursday, October 16, 2014
Cases on Tap for Tomorrow’s SCOTUS Conference: Are Cert Grants Coming on Pleading and Personal Jurisdiction?
A couple of cases on the calendar for tomorrow's Supreme Court conference are worth a quick mention. Both appear on SCOTUSblog’s "relist" list. (That they had already been calendared for previous conferences and avoided a quick cert. denial presumably means they generated at least some interest or need for further inquiry.)
One is Johnson v. City of Shelby, a case out of the Fifth Circuit that raises some interesting questions about pleading standards that we covered earlier. This is the second time Johnson has been relisted.
Another is AEP Energy Services v. Heartland Regional Medical Center, a case out of the Ninth Circuit on personal jurisdiction. Here are the questions presented in AEP:
1. Whether due process permits a court to exercise specific personal jurisdiction over non-consenting, out-of-state defendants based on the plaintiffs’ bare allegation that the defendants engaged in a nationwide conspiracy outside the forum that had an intended effect inside the forum (as well as presumably in every other state).
2. Whether due process permits a court to exercise specific personal jurisdiction over non-consenting, out-of-state defendants when the defendants’ limited forum conduct bears no causal relationship to the plaintiffs’ claim.
You can find all of the AEP cert-stage briefs at SCOTUSblog. The Ninth Circuit’s opinion is In re Western States Wholesale Natural Gas Antitrust Litigation, 715 F.3d 716.
Tuesday, October 14, 2014
The Supreme Court of Ohio issued an interesting decision last week involving standing, subject matter jurisdiction, and whether they can be challenged via Ohio Rule 60(b) after the opportunity for a direct appeal has passed. The case is Bank of America, N.A. v. Kutcha.
Marianna Bettman has an analysis of the opinion, calling it a “Field Day for Civil Procedure Geeks.”
Thursday, October 9, 2014
1. Is a federal complaint subject to dismissal when it fails to cite the statute authorizing the cause of action?
2. Do the lower federal courts have authority to create pleading requirements for complaints when those requirements are not contained in the Federal Rules of Civil Procedure?
3. Should a federal complaint be dismissed when it alleges the elements of a 42 U.S.C. § 1983 claim, but does not cite 42 U.S.C. § 1983?
It's been re-calendared for this Friday's conference (10/10). Here's the Fifth Circuit's decision below.
(Hat Tip: Shaun Shaughnessy)
We've been following the diversity-jurisdiction saga of a GlaxoSmithKline holding company ("GSK"). Last year in Johnson v. SmithKline Beecham Corp., No. 12-2561 (3d Cir. June 7, 2013), the Third Circuit ruled that GSK's ten-by-ten foot subleased office in Delaware makes Delaware its principal place of business and thus a Delaware citizen for diversity purposes.
Since then, GSK has tried to use its newfound Delaware citizenship to forum-shop in several other diversity cases. Before Johnson, GSK had removed one of these cases, A.S. v. SmithKlineBeecham Corp. d/b/a GlaxoSmithKline, a personal injury case alleging that GSK's drug Paxil caused birth defects, from Pennsylvania state court. The district court remanded the case in 2012, holding that GSK was a Pennsylvania citizen. After Johnson held in 2013 that GSK was a Delaware citizen, GSK removed the case a second time. This time, the district court denied plaintiffs' motion to remand.
On an interlocutory appeal by permission, the Third Circuit reversed and remanded with instructions to remand to Pennsylvania state court. The court held that the second removal was untimely under 28 U.S.C. §1446(b), both because it was filed more than 30 days after GSK's receipt of the complaint, and because in a diversity case, removal may not occur more than one year after the commencement of the action. The court rejected both equitable tolling of the time period and the notion that the second notice of removal "related back" to the first notice of removal. A.S. v. SmithKline Beecham Corp. d/b/a GlaxoSmithKline, No. 14-1229 (3d Cir. Oct. 9, 2014).
Hat tip: Howard Bashman of the How Appealing blog, who argued the successful appeal for the plaintiffs.
Thursday, August 14, 2014
Echoing the May 2, 2014 Report to the Standing Committee by the Advisory Committee on Civil Rules, the chair of the Advisory Committee, Judge David G. Campbell, has signaled that he would adopt the position of the proposed change to FRCP 37(e). Vicente v. City of Prescott, No. CV–11–08204–PCT–DGC (D. Ariz. Aug. 8, 2014), 2014 WL 3894131.
The proposed amendment to Rule 37(e) provides:
If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court may:
(1) upon finding prejudice to another party from loss of the information, order measures no greater than necessary to cure the prejudice; or
(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation:
(A) presume that the lost information was unfavorable to the party;
(B) instruct the jury that it may or must presume the information was unfavorable to the party; or
(C) dismiss the action or enter a default judgment.
Thus, the proposal rejects cases that permit an adverse inference instruction on a showing of negligence or gross negligence. As the Advisory Committee reported to the Standing Committee:
Circuits that permit adverse inference instructions on a showing of negligence or gross negligence adopt [the] rationale . . . that the adverse inference restores the evidentiary balance, and that the party that lost the information should bear the risk that it was unfavorable. See, e.g., Residential Funding Corp. v. DeGeorge Finan. Corp., 306 F.3d 99 (2d Cir. 2002). Although this approach has some logical appeal, the Advisory Committee has several concerns with this approach when applied to ESI. First, negligently lost information may have been favorable or unfavorable to the party that lost it. Consequently, an adverse inference may do far more than restore the evidentiary balance; it may tip the balance in ways the lost evidence never would have. (click here and go to page 314)
In Vicente, Judge Campbell stated that "the Court tends to believe that such an instruction requires a showing of bad faith," although the case did not require a decision on the point. (n. 10) Footnote 10 goes on to use the sentences quoted above almost verbatim, but without attribution.
Thursday, August 7, 2014
In Walsh v. U.S. Bank, N.A., No. A13-0742 (Aug. 6, 2014), the Minnesota Supreme Court held:
[W]e now decline to engraft the plausibility standard from Twombly and Iqbal onto our traditional interpretation of Minn. R. Civ. P. 8.01. We decline to do so despite the fact that the relevant text of Fed. R. Civ. P. 8(a)(2) is identical to the text of Minn. R. Civ. P. 8.01. . .
. . . A claim is sufficient against a motion to dismiss for failure to state a claim if it is possible on any evidence which might be produced, consistent with the pleader’s theory, to grant the relief demanded.
Hat tip: James Pielemeier
Saturday, August 2, 2014
From the summary prepared by court staff of the Ninth Circuit:
Reversing the district court’s denial of a motion for a remand to state court, the panel held that neither the federal question statute nor the Class Action Fairness Act provided the district court with subject matter jurisdiction over the Hawaii Attorney General’s complaints against six credit card providers, alleging that each violated state law by deceptively marketing and improperly enrolling cardholders in add-on credit card products.
Joining the Fifth Circuit, the panel held that the Attorney General’s claims were not preempted by National Bank Act provisions completely preempting state law claims challenging interest rates charged by national banks. . . . [T]he complaints’ state law claims were not preempted because they did not challenge the “rate of interest” that the card providers charged. Instead, . . . the complaints’ unfair and deceptive practice claims targeted alleged marketing misrepresentations, and their unjust enrichment claims arose from the purported failure to obtain consent before enrolling consumers in debt protection products.
Agreeing with the Second, Third, and Fourth Circuits, the panel held that CAFA did not provide an alternate basis for jurisdiction because the Attorney General brought civil enforcement actions or common law parens patriae suits, rather than class actions, and the complaints specifically disclaimed class status.
State of Hawaii ex rel. Louie v. HSBC Bank Nevada, N.A., No. 1:12-cv-00266-LEKKSC (Aug. 1, 2014).
Thursday, July 31, 2014
A recent opinion from the California Court of Appeals perhaps illustrates the extent to which defendants have been emboldened by the United States Supreme Court's decision striking down personal jurisdiction in Daimler AG v. Bauman.
In Bristol-Myers Squibb Co. v. Superior Court of San Francisco County, No. A140035 (Cal. App. July 30, 2014), BMS filed a petition for writ of mandate to reverse the trial court's ruling upholding personal jurisdiction. The court set the scene:
Defendant Bristol-Myers Squibb Company (BMS) has been sued by dozens of California residents in a coordinated proceeding before the San Francisco Superior Court. They allege defects in Plavix, a drug BMS manufactures and sells throughout the country. Jurisdiction over BMS as to these plaintiffs is conceded. The question presented is whether California also has jurisdiction over BMS regarding identical Plavix defects claims brought by hundreds of non-resident co-plaintiffs, the real parties in interest here (RPI), in the same coordinated proceeding, consistent with the Due Process Clause of the Fourteenth Amendment.
The trial court had upheld general jurisdiction over the non-residents' claims against BMS because:
[I]t had sold in the state nearly $1 billion worth of Plavix between 2006 and 2012 and 196 million Plavix pills between 1998 and 2006, had been registered with the California Secretary of State to conduct business since 1936, maintained an agent for service of process in Los Angeles, operated five offices in California that employed approximately 164 people, employed approximately 250 in-state sales representatives, owned a facility in Milpitas employing 85 people that was used primarily for research, operated other facilities that were used primarily for research and laboratory activities in Aliso Viejo, San Diego and Sunnyvale, and had a small office in Sacramento that was used by the company’s Government Affairs group.
Despite these extensive contacts with California, the appellate court concluded that after Daimler, California could not exercise general jurisdiction over BMS because it was not "at home" in the forum.
All was not lost for the non-resident plaintiffs, however. Turning to specific jurisdiction, the court relied on Keeton v. Hustler Magazine to show that "the doctrine of specific jurisdiction can apply to the claims of a non-resident against a non-resident." Further, the court noted that although the United States Supreme Court has not yet defined "what it means for a suit to 'arise out of' or 'relate' to a defendant’s contacts with the State," California has adopted the “'substantial connection' test, under which the relatedness requirement is satisfied if 'there is a substantial nexus or connection between the defendant’s forum activities and the plaintiff’s claim.'”
The court held that there was a "substantial connection" between BMS' extensive contacts with California and the non-residents' claims of injury involving Plavix:
BMS has “deliberately exploited” the relevant market in the State (Keeton, supra, 465 U.S. at p. 781) for many years, having sold over 196 million Plavix pills in California between 1998 and 2006 and nearly $1 billion worth of Plavix between 2006 and 2012.
Further, plaintiffs allege BMS’s Plavix sales in California have led to injuries to California residents that are the same as those suffered by the RPI.
Finally, the court held that BMS had not satisfied its burden of showing that California's exercise of specific jurisdiction was unreasonable.
Hat tip: Levi Wilkes (St. Thomas J.D. Candidate 2015)
Friday, July 25, 2014
In a 4-3 decision, the Wisconsin Supreme Court has adopted the plausibility pleading standard of the U.S. Supreme Court's opinion in Bell Atlantic Corp. v. Twombly. Data Key Partners v. Permira Advisers LLC, No. 2012AP1967 (Wis. July 23, 2014).
The court reversed the Wisconsin Court of Appeals' ruling that plaintiffs had alleged sufficient facts to show breach of fiduciary duty against the defendants. Wisconsin's pleading rule requires a complaint to contain "[a] short and plain statement of the claim, identifying the transaction or occurrence or series of transactions or occurrences out of which the claim arises and showing that the pleader is entitled to relief." Wis. Stat. § 802.02(1)(a).
The court held that "[p]laintiffs must allege facts that, if true, plausibly suggest a violation of applicable law," stating that "Twombly is consistent with our precedent." The court also asserted that Twombly had overruled Conley v. Gibson. (In my view, however, Twombly only overruled Conley's "no set of facts" standard, not the entire opinion.)
Justice Shirley Abramson, for two other justices, dissented.
I would follow Wisconsin law and conclude that as a general rule, parties need not plead specific facts at the motion-to-dismiss phase. In the instant case, although the plaintiffs raised the business judgment rule in their complaint, the plaintiffs also set forth sufficient facts to plead around the rule and provide notice to the defendants of the claim being alleged.
. . . Under Twombly/Iqbal, federal district courts have increased the rate at which they grant motions to dismiss.
No Wisconsin case has adopted the rule as stated in Twombly and Iqbal. Twombly was not argued or briefed in the instant case. The majority opinion relies on the Twombly heightened pleading standard without any briefing or argument. I have written before that this court should give counsel the opportunity to develop arguments before the court in the adversarial system. . . .
Wednesday, July 23, 2014
By now most folks have seen yesterday’s conflicting rulings over whether the Affordable Care Act authorizes subsidies for individuals who purchase insurance on a federal exchange (as opposed to exchanges run by the states). The D.C. Circuit found that such subsidies were not statutorily authorized (the Halbig case). And an hour later, the Fourth Circuit found that the subsidies were statutorily authorized (the King case).
The merits of these decisions, as a practical matter and in terms of statutory interpretation, have received tremendous attention. But Article III standing was also an issue in both Halbig and King. Who, after all, suffers the constitutionally required “injury in fact” by virtue of receiving a subsidy? The answer: People who would be subject to the individual mandate if they are entitled to the subsidy but would not be subject to the individual mandate (on income grounds) without the subsidy. Here’s how the Halbig majority explained it with respect to one of the plaintiffs in that case, David Klemencic:
Klemencic resides in West Virginia, a state that did not establish its own Exchange, and expects to earn approximately $20,000 this year. He avers that he does not wish to purchase health insurance and that, but for federal credits, he would be exempt from the individual mandate because the unsubsidized cost of coverage would exceed eight percent of his income. The availability of credits on West Virginia’s federal Exchange therefore confronts Klemencic with a choice he’d rather avoid: purchase health insurance at a subsidized cost of less than $21 per year or pay a somewhat greater tax penalty.
The D.C. Circuit found that this was sufficient for purposes of Article III standing, and the Fourth Circuit reached the same conclusion. From the Halbig majority opinion (footnote omitted):
The government characterizes Klemencic’s injury as purely ideological and hence neither concrete nor particularized. But, although Klemencic admits to being at least partly motivated by opposition to “government handouts,” he has established that, by making subsidies available in West Virginia, the IRS Rule will have quantifiable economic consequences particular to him. See Clapper v. Amnesty Int’l USA, 133 S. Ct. 1138, 1147 (2013) (explaining that a “threatened injury” that is “certainly impending” may “constitute injury in fact” (emphasis and internal quotation marks omitted)). Those consequences may be small, but even an “‘identifiable trifle’” of harm may establish standing. Chevron Natural Gas v. FERC, 199 F. App’x 2, 4 (D.C. Cir. 2006) (quoting United States v. Students Challenging Regulatory Agency Procedures, 412 U.S. 669, 689 n.14 (1973)); see Bob Jones Univ. v. United States, 461 U.S. 574, 581-82 (1983) (noting that Bob Jones University sued for a tax refund of $21.00). Klemencic thus satisfies the requirement of establishing an injury in fact, and because that injury is traceable to the IRS Rule and redressable through a judicial decision invalidating the rule, we find that he has standing to challenge the rule.
And from the King opinion:
We agree that this represents a concrete economic injury that is directly traceable to the IRS Rule. The IRS Rule forces the plaintiffs to purchase a product they otherwise would not, at an expense to them, or to pay the tax penalty for failing to comply with the individual mandate, also subjecting them to some financial cost. Although it is counterintuitive, the tax credits, working in tandem with the Act’s individual mandate, impose a financial burden on the plaintiffs.
The defendants’ argument against standing is premised on the claim that the plaintiffs want to purchase “catastrophic” insurance coverage, which in some cases is more expensive than subsidized comprehensive coverage required by the Act. The defendants thus claim that the plaintiffs have acknowledged they would actually expend more money on a separate policy even if they were eligible for the credits. Regardless of the viability of this argument, it rests on an incorrect premise. The defendants misread the plaintiffs’ complaint, which, while mentioning the possibility that several of the plaintiffs wish to purchase catastrophic coverage, also clearly alleges that each plaintiff does not want to buy comprehensive, ACA-compliant coverage and is harmed by having to do so or pay a penalty. The harm in this case is having to choose between ACA-compliant coverage and the penalty, both of which represent a financial cost to the plaintiffs. That harm is actual or imminent, and is directly traceable to the IRS Rule.
Tuesday, July 1, 2014
The opinion by Judge Keenan in Al Shimari v. CACI Premier Technology, Inc., No. 13-1937 (4th Cir. June 30, 2014) sums it up:
In this appeal, we consider whether a federal district court has subject matter jurisdiction to consider certain civil claims seeking damages against an American corporation for the torture and mistreatment of foreign nationals at the Abu Ghraib prison in Iraq. The primary issue on appeal concerns whether the Alien Tort Statute, 28 U.S.C. § 1350, as interpreted by the Supreme Court in Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659 (2013), provides a jurisdictional basis for the plaintiffs’ alleged violations of international law, despite the presumption against extraterritorial application of acts of Congress. We also address the defendants’ contention that the case presents a “political question” that is inappropriate for judicial resolution under our decision in Taylor v. Kellogg Brown & Root Services, Inc., 658 F.3d 402 (4th Cir. 2011).
We conclude that the Supreme Court’s decision in Kiobel does not foreclose the plaintiffs’ claims under the Alien Tort Statute, and that the district court erred in reaching a contrary conclusion. Upon applying the fact-based inquiry articulated by the Supreme Court in Kiobel, we hold that the plaintiffs’ claims “touch and concern” the territory of the United States with sufficient force to displace the presumption against extraterritorial application of the Alien Tort Statute. See Kiobel, 133 S. Ct. at 1669. However, we are unable to determine from the present record whether the claims before us present nonjusticiable political questions. Therefore, we do not reach the additional issue of the district court’s dismissal of the plaintiffs’ common law claims, and we vacate the district court’s judgment with respect to all the plaintiffs’ claims and remand the case to the district court. We direct that the district court undertake factual development of the record and analyze its subject matter jurisdiction in light of our decision in Taylor and the principles expressed in this opinion.
Congratulations to Civil Procedure Professors Erwin Chemerinsky, Helen Hershkoff, Allan Paul Ides, Stephen I. Vladeck, and Howard M. Wasserman, who submitted an amicus brief on behalf of the plaintiffs-appellants.
Monday, June 30, 2014
While everyone waits with bated breath for the Supreme Court to wrap up the current Term with decisions in Hobby Lobby and Harris, the Court granted certiorari in Gelboim v. Bank of America (No. 13-1174). From the cert petition, here is the question presented (with the usual wind-up):
The question “whether consolidated cases retain their separate identity or become one case for purposes of appellate jurisdiction has divided the courts of appeals.” United States ex rel. Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214, 216 (D.C. Cir. 2003). “Some circuits hold that consolidated cases remain separate actions and no Rule 54(b) certification is needed to appeal the dismissal of any one of them. Others treat consolidated cases as a single action, or presume that they are, allowing the presumption to be overcome in highly unusual circumstances. Still other circuits apply no hard and fast rule, but focus on the reasons for the consolidation to determine whether the actions are one or separate.” Id. (citations and alterations omitted). This Court granted certiorari to resolve the conflict in Erickson v. Maine Central Railroad Co., 111 S. Ct. 38 (1990) (mem.), but the petition was subsequently dismissed, 111 S. Ct. 662 (1990) (mem.).
The Question Presented is:
Whether and in what circumstances is the dismissal of an action that has been consolidated with other suits immediately appealable?
Saturday, June 28, 2014
Plaintiff Barko worked for Kellogg Brown & Root, a defense contractor and former subsidiary of Halliburton. He filed a False Claims Act claim against KBR:
In essence, Barko alleged that KBR and certain subcontractors defrauded the U.S. Government by inflating costs and accepting kickbacks while administering military contracts in wartime Iraq. During discovery, Barko sought documents related to KBR’s prior internal investigation into the alleged fraud. KBR had conducted that internal investigation pursuant to its Code of Business Conduct, which is overseen by the company’s Law Department.
KBR argued that the internal investigation had been conducted for the purpose of obtaining legal advice and that the internal investigation documents therefore were protected by the attorney-client privilege. . . .
After reviewing the disputed documents in camera, the District Court determined that the attorney-client privilege protection did not apply because, among other reasons, KBR had not shown that “the communication would not have been made ‘but for’ the fact that legal advice was sought.” . . . KBR’s internal investigation, the court concluded, was “undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice.”
. . . The District Court . . . ordered KBR to produce the disputed documents to Barko . . .
The D.C. Circuit granted KBR's petition for writ of mandamus, holding that the District Court's privilege ruling was clearly legally erroneous under Upjohn v. United States, and that it was otherwise appropriate to grant the writ:
[T]he District Court also distinguished Upjohn on the ground that KBR’s internal investigation was undertaken to comply with Department of Defense regulations that require defense contractors such as KBR to maintain compliance programs and conduct internal investigations into allegations of potential wrongdoing. The District Court therefore concluded that the purpose of KBR’s internal investigation was to comply with those regulatory requirements rather than to obtain or provide legal advice. In our view, the District Court’s analysis rested on a false dichotomy. So long as obtaining or providing legal advice was one of the significant purposes of the internal investigation, the attorney-client privilege applies, even if there were also other purposes for the investigation and even if the investigation was mandated by regulation rather than simply an exercise of company discretion.
The D.C. Circuit rejected KBR's request to reassign the case to a different District Judge. In re Kellogg Brown & Root, Inc., No. 14-5055 (D.C. Cir. June 27, 2014).
Tuesday, June 24, 2014
In the latest Supreme Court round of Halliburton Co. v. Erica P. John Fund, Inc., the Court declined Halliburton's invitation to overrule Basic v. Levinson, but remanded to allow Halliburton, at the class certification stage, to attempt to rebut the presumption that the alleged misrepresentations actually affected the price of the stock. The Court's final two paragraphs:
More than 25 years ago [in Basic], we held that plaintiffs could satisfy the reliance element of the Rule 10b–5 cause of action by invoking a presumption that a public, material misrepresentation will distort the price of stock traded in an efficient market, and that anyone who purchases the stock at the market price may be considered to have done so in reliance on the misrepresentation. We adhere to that decision and decline to modify the prerequisites for invoking the presumption of reliance. But to maintain the consistency of the presumption with the class certificationrequirements of Federal Rule of Civil Procedure 23, defendants must be afforded an opportunity before class certification to defeat the presumption through evidencethat an alleged misrepresentation did not actually affect the market price of the stock.
Because the courts below denied Halliburton that opportunity, we vacate the judgment of the Court of Appeals for the Fifth Circuit and remand the case for further proceedings consistent with this opinion.
Some coverage of the case:
Friday, June 20, 2014
SCOTUS: IRS Summons Challenger Must Show Facts Giving Rise to Plausible Inference of Improper IRS Motive
The IRS examined the tax returns of Dynamo Holdings Limited Partnership, and issued summonses to the respondents, "four individuals associated with Dynamo whom the Service believed had information and records relevant to Dynamo’s tax obligations. None of the respondents complied with those summonses."
The IRS instituted proceedings in District Court to compel the respondents to comply with the summonses. The IRS submitted an investigating agent’s declaration that the testimony and records sought were necessary to “properly investigate the correctness of [Dynamo’s] federal tax reporting” and that the summonses were “not issued to harass or for any other improper purpose.” In reply, the respondents pointed to circumstantial evidence suggesting that the IRS had “ulterior motives” for issuing the summonses: to “punish [Dynamo] for refusing to agree to a further extension of the applicable statute of limitations,” and to “evad[e] the Tax Court[’s] limitations on discovery.” Accordingly, the respondents asked for an opportunity to question the agents about their motives.
The District Court ordered the respondents to comply with the summonses. The Court of Appeals for the Eleventh Circuit reversed, holding that a simple “allegation of improper purpose,” even if lacking any “factual support,” entitles a taxpayer to “question IRS officials concerning the Service’s reasons for issuing the summons.”
The Supreme Court, in a unanimous opinion authored by Justice Kagan, vacated the Eleventh Circuit's opinion and remanded, holding that the Eleventh Circuit had applied an incorrect legal standard:
A person receiving an IRS summons is . . . entitled to contest it in an enforcement proceeding. . . . As part of the adversarial process concerning a summons’s validity, the taxpayer is entitled to examine an IRS agent when he can point to specific facts or circumstances plausibly raising an inference of bad faith. Naked allegations of improper purpose are not enough: The taxpayer must offer some credible evidence supporting his charge. But circumstantial evidence can suffice to meet that burden; after all, direct evidence of another person’s bad faith, at this threshold stage, will rarely if ever be available. And although bare assertion or conjecture is not enough, neither is a fleshed out case demanded: The taxpayer need only make a showing of facts that give rise to a plausible inference of improper motive. That standard will ensure inquiry where the facts and circumstances make inquiry appropriate, without turning every summons dispute into a fishing expedition for official wrongdoing. . . . But that is not the standard the Eleventh Circuit applied. . . . [T]he Court of Appeals viewed even bare allegations of improper purpose as entitling a summons objector to question IRS agents.
United States v. Clarke, No. 13-301 (U.S. June 19, 2014).