Monday, May 13, 2013
Last week, the U.S. Court of Appeals for the Fifth Circuit issued an important decision on personal jurisdiction: Ainsworth v. Moffett Engineering, Ltd., No. 12-60155 (May 9, 2013). In an opinion by Judge Patrick Higginbotham (joined by Judges Jerry Smith and Jennifer Elrod), the court reaffirms its “stream-of-commerce approach to personal jurisdiction” [Slip Op. 1] in the wake of J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011). Below are some excerpts (footnotes omitted). From Slip Op. 3-4:
In cases involving a product sold or manufactured by a foreign defendant, this Circuit has consistently followed a “stream-of-commerce” approach to personal jurisdiction, under which the minimum contacts requirement is met so long as the court “finds that the defendant delivered the product into the stream of commerce with the expectation that it would be purchased by or used by consumers in the forum state.” Under that test, “mere foreseeability or awareness [is] a constitutionally sufficient basis for personal jurisdiction if the defendant’s product made its way into the forum state while still in the stream of commerce,” but “[t]he defendant’s contacts must be more than ‘random, fortuitous, or attenuated, or of the unilateral activity of another party or third person.’”
On interlocutory appeal, Moffett argues that application of the Fifth Circuit’s stream-of-commerce approach is no longer proper after the Supreme Court’s decision in McIntyre…. We disagree and find that application of the stream-of-commerce approach in this case does not run afoul of McIntyre’s narrow holding….
Sunday, May 5, 2013
Today’s New York Times features a story by Adam Liptak, Corporations Find a Friend in the Supreme Court, which discusses several of the Court’s recent decisions on civil procedure, including Comcast v. Behrend, Wal-Mart v. Dukes, AT&T Mobility v. Concepcion, Kiobel v. Royal Dutch Petroleum, and Standard Fire Insurance v. Knowles.
Saturday, May 4, 2013
Plaintiff is a director of the defendant Company, a Delaware corporation, and he owns an entity that was the Company's largest shareholder. The remaining directors of the Company are also defendants. The Board of Directors established a Special Committee to explore strategic alternatives for the Company. Plaintiff was a member of the Special Committee. Later, the entity owned by Plaintiff announced it would nominate candidates for election at the Company's annual meeting. The defendants then secretly "sprang into action" and 11 days later, Company counsel notified Plaintiff by email that a special Board meeting would occur the next day to approve a recapitalization in which an entity controlled by one of the defendants would emerge as the largest shareholder of the Company. At meetings of the Special Committee and the Board of Directors the next day, the recapitalization was approved over Plaintiff's negative vote. The day after that, the Company announced the recapitalization and also announced that it was postponing the annual meeting and deferring the record date. That same day, Plaintiff filed suit challenging the recapitalization and the postponement of the annual meeting and record date.
Plaintiff subpoenaed counsel to the Company and to the Special Committee for documents relating to the planning and scheduling of the special meetings and the structuring of the recapitalization. Defendants asserted the attorney-client privilege and work product protection.
The court granted Plaintiff's motion to compel, holding that until the day the Board voted to approve the recapitalization, the Company could not assert either privilege against Plaintiff, who was a director of the Company. After the Board voted to recapitalize, however, sufficient adversity existed between Plaintiff and the Company such that Plaintiff could no longer have a reasonable expectation that he was a client of the Board's counsel. Kalisman v. Friedman, 2013 Del. Ch. LEXIS 100 (Delaware Court of Chancery, April 17, 2013).
Wednesday, May 1, 2013
Pro se plaintiff Robin Petersen was recruited to work in Saudi Arabia as a flight instructor for a subsidiary of Boeing Corporation. His complaint alleged that on arrival in Saudi Arabia, he was forced to sign an employment agreement which he was not given time to read and which he was told he must sign or else return immediately to the U.S. at his own expense. This agreement contained a forum selection clause requiring any contractual disputes to be resolved in the Labor Courts of Saudi Arabia. Petersen then alleged a series of wrongful incidents in Saudi Arabia perpetrated by his employer. Finally returning to the U.S. after the intervention of the U.S. Consulate, he filed suit alleging breach of contract and other claims. He submitted an affidavit along with his complaint claiming that he was not financially capable of returning to Saudi Arabia to pursue the lawsuit, that he would be subject to harsh conditions there, and that the forum selection clause was foisted on him through fraud and undue pressure. He also submitted a report from the U.S. Department of State indicating that, among other things, he would not be able to obtain a fair trial in Saudi Arabia.
The district court dismissed the lawsuit without a hearing under Rule 12(b)(3), holding the forum selection clause enforceable. The district court also denied leave to amend the complaint, although plaintiff submitted additional information indicating that he would not even be eligible for a visa to Saudi Arabia.
The Ninth Circuit reversed and remanded for an evidentiary hearing. Under M/S Bremen v. Zapata Off-Shores Co. and Carnival Cruise Lines, Inc. v. Shute, a forum selection clause may be unenforceable if, for example, “the inclusion of the clause in the agreement was the product of fraud or overreaching,” or “the party wishing to repudiate the clause would effectively be deprived of his day in court were the clause enforced.” The court held that the complaint and other materials raised an issue of fact as to whether the forum selection clause was enforceable under Bremen, thus requiring an evidentiary hearing, and that the district court abused its discretion by denying leave to amend the complaint. Petersen v. Boeing Co.,, No. 11-18075 (9th Cir. April 26, 2013).
Monday, April 22, 2013
Some early blog and twitter chatter casts the Supreme Court’s cert grant in DaimlerChrysler AG v. Bauman as a sequel to last week’s Kiobel decision on the Alien Tort Statute (ATS). Although Daimler is an ATS case, the Court does not seem poised to revisit its test (such as it is) for extraterritorial application of the ATS. The question presented in Daimler is about personal jurisdiction in general—actually, it’s about general personal jurisdiction in general. According to the defendant’s petition for certiorari, “[t]he question presented is whether it violates due process for a court to exercise general personal jurisdiction over a foreign corporation based solely on the fact that an indirect corporate subsidiary performs services on behalf of the defendant in the forum State.”
This question calls to mind an issue from the Court’s 2011 Goodyear decision—one that Justice Ginsburg’s unanimous opinion acknowledged but did not address. The petitioners in Goodyear were foreign subsidiaries of an American parent company, and they objected to personal jurisdiction in North Carolina state court. Here’s an excerpt from the end of the Court’s opinion [131 S. Ct. at 2857]:
Respondents belatedly assert a “single enterprise” theory, asking us to consolidate petitioners' ties to North Carolina with those of Goodyear USA and other Goodyear entities. See Brief for Respondents 44–50. In effect, respondents would have us pierce Goodyear corporate veils, at least for jurisdictional purposes. See Brilmayer & Paisley, Personal Jurisdiction and Substantive Legal Relations: Corporations, Conspiracies, and Agency, 74 Cal. L. Rev. 1, 14, 29–30 (1986) (merging parent and subsidiary for jurisdictional purposes requires an inquiry “comparable to the corporate law question of piercing the corporate veil”). But see 199 N.C.App., at 64, 681 S.E.2d, at 392 (North Carolina Court of Appeals understood that petitioners are “separate corporate entities ... not directly responsible for the presence in North Carolina of tires that they had manufactured”). Neither below nor in their brief in opposition to the petition for certiorari did respondents urge disregard of petitioners' discrete status as subsidiaries and treatment of all Goodyear entities as a “unitary business,” so that jurisdiction over the parent would draw in the subsidiaries as well.
One caveat, of course, is that the Supreme Court’s ultimate decisions do not always hew closely to the precise questions for which it has granted certiorari. But if the Court’s concern in Daimler is the extraterritorial application of the ATS, I suspect it would have GVR’d the case for reconsideration in light of Kiobel—as it did today with another Ninth Circuit ATS case (Rio Tinto v. Sarei).
Daimler AG is a German public stock company that does not manufacture or sell products, own property, or employ workers in the United States. The Ninth Circuit nevertheless held that Daimler AG is subject to general personal jurisdiction in California—and can therefore be sued in the State for alleged human-rights violations committed in Argentina by an Argentine subsidiary against Argentine residents—because it has a different, indirect subsidiary that distributes Daimler AG-manufactured vehicles in California. It is undisputed that Daimler AG and its U.S. subsidiary adhere to all the legal requirements necessary to maintain their separate corporate identities.
The question presented is whether it violates due process for a court to exercise general personal jurisdiction over a foreign corporation based solely on the fact that an indirect corporate subsidiary performs services on behalf of the defendant in the forum State.
You can find a link to the Ninth Circuit’s decision below and other information about the case at SCOTUSblog’s casefile.
Thursday, April 18, 2013
Yesterday the U.S. Court of Appeals for the Ninth Circuit decided Makaeff v. Trump University, __ F.3d __, 2013 WL 1633097, No. 11-55016. As the opinion explains, “California law provides for the pre-trial dismissal of certain actions, known as Strategic Lawsuits Against Public Participation, or SLAPPs, that ‘masquerade as ordinary lawsuits’ but are intended to deter ordinary people ‘from exercising their political or legal rights or to punish them for doing so.’” [Slip Op. 10] Ms. Makaeff invoked California's anti-SLAPP statute and moved to strike Trump University’s defamation counterclaim against her. The district court denied her motion, but the Ninth Circuit reverses and remands for the district court to apply California’s anti-SLAPP law and to consider whether Trump had shown “a reasonable probability of proving, by clear and convincing evidence, that Makaeff made her critical statements with actual malice.” [Slip Op. 32-33]
Two judges on the three-judge panel—Judge Kozinski and Judge Paez—author concurring opinions questioning whether California’s anti-SLAPP statute properly applies in federal court under the Erie doctrine. Here are some excerpts from Judge Kozinski’s concurrence [Slip Op. 32-37]:
I join Judge Wardlaw’s fine opinion because it faithfully applies our law, as announced in United States ex rel. Newsham v. Lockheed Missiles & Space Co., 190 F.3d 963, 973 (9th Cir. 1999), and its progeny. But I believe Newsham is wrong and should be reconsidered.
Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938), divided the law applicable to diversity cases into two broad categories. Overruling Swift v. Tyson, 41 U.S. 1 (1842), it held that state law, rather than federal common law, applies to matters of substance. Erie, 304 U.S. at 78–79. But when it comes to procedure, federal law governs. See Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 & n.7 (1996); see also Hanna v. Plumer, 380 U.S. 460, 473 (1965) (“Erie and its offspring cast no doubt on the long-recognized power of Congress to prescribe housekeeping rules for federal courts . . . .”).
In most cases, it’s easy enough to tell whether a rule is substantive or procedural. Whether a defendant is liable in tort for a slip-and-fall, or has a Statute of Frauds defense to a contract claim, is controlled by state law. Just as clearly, the time to answer a complaint, the manner in which process is served, the methods and time limits for discovery, and whether the jury must be unanimous are controlled by the Federal Rules of Civil Procedure. The latter is true, even though such procedural rules can affect outcomes and, hence, substantive rights. See Hanna, 380 U.S. at 471.
But the distinction between substance and procedure is not always clear-cut. While many rules are easily recognized as falling on one side or the other of the substance/procedure line, there are some close cases that call for a more nuanced analysis. See, e.g., Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 130 S. Ct. 1431, 1437 (2010); Gasperini, 518 U.S. at 428.…
Wednesday, April 17, 2013
Today the Supreme Court decided Kiobel v. Royal Dutch Petroleum Co. (No. 10-1491), a long-pending case involving the Alien Tort Statute (ATS). Although the Court is unanimous that the ATS does not provide jurisdiction in this particular case, there is a 5-4 split on the reasoning.
Chief Justice Roberts authors the majority opinion, joined by Scalia, Kennedy, Thomas, and Alito. In addition, Justice Kennedy files a concurring opinion, and Justice Alito files a concurring opinion that Thomas joins.
Justice Breyer authors an opinion concurring in judgment, joined by Ginsburg, Sotomayor, and Kagan.
Tuesday, April 16, 2013
Today the Supreme Court decided Genesis Healthcare Corp. v. Symczyk (No. 11-1059), which addresses whether collective action claims under the Fair Labor Standard Act (FLSA) are “justiciable when the lone plaintiff’s individual claim becomes moot.” [Slip Op. 1]. The Court splits 5-4, with Justice Thomas writing the majority opinion (joined by Roberts, Scalia, Kennedy, and Alito) and Justice Kagan writing the dissent (joined by Ginsburg, Breyer, and Sotomayor).
The Third Circuit had held that the Symczyk’s claim was moot because the defendant had made a Rule 68 offer of judgment that would have “fully satisfied” her claim, even though the plaintiff did not accept the offer. Although there is a circuit split on “whether an unaccepted offer that fully satisfies a plaintiff ’s claim is sufficient to render the claim moot,” Justice Thomas and the majority decline to resolve it--finding that Symczyk had conceded the issue. [Slip Op. at 5.] They therefore “assume, without deciding, that petitioners’ Rule 68 offer mooted respondent’s individual claim” [Slip Op. 5], and they ultimately conclude [Slip Op. 6]:
In the absence of any claimant’s opting in, respondent’s suit became moot when her individual claim became moot, because she lacked any personal interest in representing others in this action. While the FLSA authorizes an aggrieved employee to bring an action on behalf of himself and “other employees similarly situated,” 29 U.S C. § 216(b), the mere presence of collective-action allegations in the complaint cannot save the suit from mootness once the individual claim is satisfied.
In dissent, Justice Kagan rejects the idea that Symczyk’s individual claim was moot, noting that “an unaccepted offer of judgment cannot moot a case.” [Dissenting Op. 3] She adds: “So a friendly suggestion to the Third Circuit: Rethink your mootness-by-unaccepted-offer theory. And a note to all other courts of appeals: Don’t try this at home.” [Dissenting Op. 4]
Given the majority’s failure to address whether an unaccepted Rule 68 offer renders a claim moot--and Justice Kagan's forceful critique of that notion--the broader implications of Genesis are unclear. If lower federal courts accept Justice Kagan’s “friendly suggestion,” then she would be correct that Genesis is “the most one-off of one-offs, explaining only what (the majority thinks) should happen to a proposed collective FLSA action when something that in fact never happens to an individual FLSA claim is errantly thought to have done so.” [Dissenting Op. 1]. But if any circuits continue to follow the mootness-by-unaccepted-offer theory, Genesis ratifies a strategy that allows “defendants to ‘pick off’ named plaintiffs with strategic Rule 68 offers before certification." [Slip Op. 3] Even on that point, the majority’s reasoning is confined to the FLSA scenario--rather than, say, Rule 23 class actions. Justice Thomas notes that “Rule 23 actions are fundamentally different from collective actions under the FLSA.” [Slip Op. 6].
Friday, April 5, 2013
Another Semtek in the Making? Delaware Supreme Court Holds Collateral Estoppel Bars Shareholder Derivative Suit
Allergan, the pharmaceutical company, agreed to pay $600 million in civil and criminal fines after a Department of Justice investigation into the company's allegedly improper marketing of BOTOX for off-label uses. Several Allergan shareholders then filed shareholder derivative suits, some in federal district court in California (which were consolidated) and one in Delaware Chancery Court. Allergan moved to dismiss both actions for failure to plead demand futility under Rule 23.1 (the Delaware rule is "substantially the same" as Federal Rule 23.1).
The federal court dismissed the California action with prejudice (the dismissal is currently on appeal). The Delaware Chancery Court held that the California judgment did not bar the Delaware action and denied Allergan's motion to dismiss.
On interlocutory appeal, the Delaware Supreme Court reversed. Pyott v. Louisiana Municipal Police Employees' Retirement System, No. 380, 2012 (Del. April 4, 2013). Citing Semtek, the court first held that the preclusive effect of the California judgment would be determined by California state law. The California federal court held, as a matter of Delaware law, that demand was not futile and dismissed the derivative complaint "on the merits of demand futility."
Applying California preclusion law, the Delaware Supreme Court held that the issue of "whether, under Rule 23.1, the failure to make demand on the Allergan board is excused because such a demand would have been futile" was precluded. The court held that "because the real plaintiff in a derivative suit is the corporation, 'differing groups of shareholders who can potentially stand in the corporation's stead are in privity for the purposes of issue preclusion.'"
In addition, the court addressed and rejected plaintiffs' argument that the California plaintiffs' representation was inadequate. The Delaware Chancery Court had applied an irrebutable presumption that derivative plaintiffs who file their complaints without seeking books and records, very shortly after the announcement of a "corporate trauma," are inadequate representatives. The Delaware Supreme Court rejected such an irrebutable presumption.
Tuesday, April 2, 2013
Yesterday’s Supreme Court order list includes “GVRs” in two class actions, remanding them “for further consideration in light of Comcast Corp. v. Behrend.” The two cases are RBS Citizens, N.A. v. Ross (No. 12-165), which was sent back to the Seventh Circuit, and Whirlpool Corp. v. Glazer (No. 12-322), which was sent back to the Sixth Circuit. For more coverage, check out:
- Lyle Denniston (SCOTUSblog)
- Lawrence Hurley (Reuters)
- Jessie Kokrda Kamens & Martina S. Barash (Bloomberg BNA, Class Action Litigation Report; subscription required)
- Alexandra Lahav (Mass Tort Litigation Blog)
Monday, April 1, 2013
Today the Supreme Court granted certiorari in Atlantic Marine Construction Co. v. U.S. District Court for the Western District of Texas (No. 12-929). The case involves the interplay between forum-selection clauses and motions to transfer venue. Here are the questions presented:
Following the Court’s decision in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), the majority of federal circuit courts hold that a valid forum-selection clause renders venue “improper” in a forum other than the one designated by contract. In those circuits, forum-selection clauses are routinely enforced through motions to dismiss or transfer venue under Fed. R. Civ. P. 12(b)(3) and 28 U.S.C. § 1406. The Third, Fifth, and Sixth Circuits, however, follow a contrary rule. This Petition presents the following issues for review:
1. Did the Court’s decision in Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988), change the standard for enforcement of clauses that designate an alternative federal forum, limiting review of such clauses to a discretionary, balancing-of-conveniences analysis under 28 U.S.C. § 1404(a)?
2. If so, how should district courts allocate the burdens of proof among parties seeking to enforce or to avoid a forum-selection clause?
You can find a link to the Fifth Circuit’s decision below and other information about the case at SCOTUSblog’s casefile.
Friday, March 29, 2013
This week the U.S. Court of Military Commission Review denied petitions for writs of mandamus filed by the ACLU (order here) and a group of several media outlets (order here) in connection with the military commission trials at Guantanamo Bay, Cuba. The petitions were filed under the All Writs Act [28 U.S.C. § 1651(a)], and challenged a protective order issued by the Military Commission Judge. Among other things, the protective order authorizes automatic closure of proceedings and sealing of records whenever classified information is disclosed, even if the information is publicly known, and prohibits personal testimony by the defendants about their experiences while in U.S. custody.
The Court’s order does not address the merits of the petitioners’ arguments, or whether the All Writs Act is properly invoked in this context. Rather, it concludes that the case “is not ripe for our review.” From the order regarding the media petitioners:
This controversy is not ripe for our review. The judge has issued a protective order in accordance with Military Commission Act (MCA) Sec. 949p-3, 10 U.S.C. §949p-3. Petitioners have not alleged a single instance where the Military Commission Judge has improperly applied Amended Protective Order #1 to deny Petitioners access to information, sufficient to warrant the sort of extraordinary relief petitioners seek. See MCA Sec. 949d(c). See generally Clapper v. Amnesty International, 133 S. Ct. 1138 (2013); Cheney v. United States, 542 U.S. 367 (2004); Am. Civil Liberties Union v. U.S. Dep’t of Def., 628 F.3d 612 (D.C. Cir. 2011) (discussing classified information and Freedom of Information Act).
We emphasize the limited scope of our holding. We are not ruling on the merits of the parties claim that there is writ jurisdiction under the All Writs Act, 28 U.S.C. § 1651(a).
Judge Silliman authored a concurring opinion urging the Court to address whether it has jurisdiction under the All Writs Act and arguing that 28 U.S.C. § 2241(e)(2) “explicitly stripped our Court of such jurisdiction.”
Steve Vladeck (American University) has more coverage at Lawfare.
Wednesday, March 27, 2013
Today the Supreme Court decided Comcast Corp. v. Behrend (No. 11-864), a case challenging a Third Circuit decision affirming certification of an antitrust class action. For our earlier coverage, see here and here. By a 5-to-4 vote, the Court concluded that the class action did not satisfy Rule 23(b)(3). Justice Scalia writes the majority opinion. Here’s an excerpt [Slip Op. 6-7]:
Respondents’ class action was improperly certified under Rule 23(b)(3). By refusing to entertain arguments against respondents’ damages model that bore on the propriety of class certification, simply because those arguments would also be pertinent to the merits determination, the Court of Appeals ran afoul of our precedents requiring precisely that inquiry. And it is clear that, under the proper standard for evaluating certification, respondents’ model falls far short of establishing that damages are capable of measurement on a classwide basis. Without presenting another methodology, respondents cannot show Rule 23(b)(3) predominance: Questions of individual damage calculations will inevitably overwhelm questions common to the class.
The dissenting opinion is co-authored by Justices Ginsburg and Breyer, and joined by Sotomayor and Kagan. Among other things, the dissenters argue that case should have been DIG’ed—that the writ of certiorari should have been dismissed as improvidently granted. [See Dissenting Op. 1-2] They note that the Supreme Court had reformulated the question presented when granting certiorari, but that “our reformulated question was inapt” given Comcast’s failure to preserve certain issues.Turning to Rule 23, the dissenting opinion states:
While the Court’s decision to review the merits of the District Court’s certification order is both unwise and unfair to respondents, the opinion breaks no new ground on the standard for certifying a class action under Federal Rule of Civil Procedure 23(b)(3). In particular, the decision should not be read to require, as a prerequisite to certification, that damages attributable to a classwide injury be measurable “‘on a class-wide basis.’” See ante, at 2–3 (acknowledging Court’s dependence on the absence of contest on the matter in this case); Tr. of Oral Arg. 41. To gain class-action certification under Rule 23(b)(3), the named plaintiff must demonstrate, and the District Court must find, “that the questions of law or fact common to class members predominate over any questions affecting only individual members.” This predominance requirement is meant to “tes[t] whether proposed classes are sufficiently cohesive to warrant adjudication by representation,” Amchem Products, Inc. v. Windsor, 521 U.S. 591, 623 (1997), but it scarcely demands commonality as to all questions. See 7AA C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure §1778, p. 121 (3d ed. 2005) (hereinafter Wright, Miller, & Kane). In particular, when adjudication of questions of liability common to the class will achieve economies of time and expense, the predominance standard is generally satisfied even if damages are not provable in the aggregate. See Advisory Committee’s 1966 Notes on Fed. Rule Civ. Proc. 23, 28 U. S. C. App., p. 141 (“[A] fraud perpetrated on numerous persons by the use of similar misrepresentations may be an appealing situation for a class action, and it may remain so despite the need, if liability is found, for separate determination of the damages suffered by individuals within the class.”); 7AA Wright, Miller, & Kane §1781, at 235–237. Recognition that individual damages calculations do not preclude class certification under Rule 23(b)(3) is well nigh universal.
Tuesday, March 19, 2013
Today the Supreme Court issued a unanimous decision in Standard Fire Insurance Co. v. Knowles (No. 11-1450), covered earlier here. The Court concludes that removal under the Class Action Fairness Act (CAFA) is proper even if the named plaintiff in a state court class action stipulates that the class will not seek aggregate damages in excess of CAFA’s $5 million threshold.
Justice Breyer’s opinion (a quick read at 7 pages) emphasizes that—prior to class certification—the named plaintiff’s stipulation is not binding on the other class members:
[A] plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified. See Smith v. Bayer Corp., 564 U. S. ___, ___ (2011)…. Because his precertification stipulation does not bind anyone but himself, Knowles has not reduced the value of the putative class members’ claims. For jurisdictional purposes, our inquiry is limited to examining the case “as of the time it was filed in state court,” Wisconsin Dept. of Corrections v. Schacht, 524 U. S. 381, 390 (1998). At that point, Knowles lacked the authority to concede the amount-in-controversy issue for the absent class members. [Slip Op. 4]
Justice Breyer is more sympathetic to a different argument against CAFA jurisdiction. He writes:
The strongest counterargument, we believe, takes a syllogistic form: First, this complaint contains a presently nonbinding stipulation that the class will seek damages that amount to less than $5 million. Second, if the state court eventually certifies that class, the stipulation will bind those who choose to remain as class members. Third, if the state court eventually insists upon modification of the stipulation (thereby permitting class members to obtain more than $5 million), it will have in effect created a new, different case. Fourth, CAFA, however, permits the federal court to consider only the complaint that the plaintiff has filed, i.e., this complaint, not a new, modified (or amended) complaint that might eventually emerge. [Slip Op. 5-6]
But he is ultimately unpersuaded:
Our problem with this argument lies in its conclusion. We do not agree that CAFA forbids the federal court to consider, for purposes of determining the amount in controversy, the very real possibility that a nonbinding, amount-limiting, stipulation may not survive the class certification process. This potential outcome does not result in the creation of a new case not now before the federal court. To hold otherwise would, for CAFA jurisdictional purposes, treat a nonbinding stipulation as if it were binding, exalt form over substance, and run directly counter to CAFA’s primary objective: ensuring “Federal court consideration of interstate cases of national importance.” §2(b)(2), 119 Stat. 5. It would also have the effect of allowing the subdivision of a $100 million action into 21 just-below-$5-million state-court actions simply by including nonbinding stipulations; such an outcome would squarely conflict with the statute’s objective. [Slip Op. 6]
Wednesday, March 6, 2013
Professor Simona Grossi (Loyola Los Angeles) has posted on SSRN a draft of her article, Federal Question Jurisdiction: The Compass, the Maze and the Trap. Here’s the abstract:
On February 20, 2013, the Supreme Court announced its decision in Gunn v. Minton. There the Court revisited the scope of statutory “arising under” jurisdiction in the context of a legal malpractice suit premised on alleged attorney errors committed in a prior patent litigation. The significance of the decision transcends the specific context in which it arose. Although Gunn involved patent law arising under jurisdiction, 28 U.S.C. §1338, that jurisdictional standard is interpreted in precisely the same manner as the identically worded §1331 standard. Hence, the decision in Gunn applies to a full range of federal question cases in which a federal issue is embedded in a state-law claim. In addition, Gunn provides insight into the ongoing clash between principle and docket-management concerns that has become so characteristic of Supreme Court decisions in the realm of procedure.
The Gunn opinion was much anticipated by the legal community since prior decisions by the Court had generated considerable confusion as to the scope of arising under jurisdiction in so-called “federal-ingredient” cases. Some commentators hoped that the Court would adopt the creation test as the exclusive measure of jurisdiction. Others hoped for a clarification of the federal-ingredient test. Still others, like this author, hoped that the Court would redirect the jurisdictional analysis to the traditional fundamental principles that once animated federal question jurisdiction. As I explain in my article, everyone will be disappointed by the result.
Monday, March 4, 2013
1. Whether due process permits a court to exercise personal jurisdiction over a defendant whose sole “contact” with the forum State is his knowledge that the plaintiff has connections to that State.
2. Whether the judicial district where the plaintiff suffered injury is a district “in which a substantial part of the events or omissions giving rise to the claim occurred” for purposes of establishing venue under 28 U.S.C. § 1391(b)(2) even if the defendant’s alleged acts and omissions all occurred in another district.
You can find a link to the 9th Circuit’s opinion below and other information about the case at SCOTUSblog’s casefile.
Here’s a story on the case from the AP.
Here are links to some recent coverage of last week’s Supreme Court decision in Clapper v. Amnesty International, which rejected a challenge to federal wiretapping procedures for lack of Article III standing:
Wednesday, February 27, 2013
Today the Supreme Court issued its decision in Amgen v. Connecticut Retirement Plans (No. 11-1085), covered earlier here. The basic issue is whether, in a securities fraud case, proof of “materiality” is required in order to certify a class action. The Court splits 6-to-3, with Justice Ginsburg writing the majority opinion (joined by Roberts, Breyer, Alito, Sotomayor, and Kagan). Here’s an excerpt from the first few paragraphs of Justice Ginsburg’s opinion (Slip Op. 2-3):
The issue presented concerns the requirement stated in Rule 23(b)(3) that “the questions of law or fact common to class members predominate over any questions affecting only individual members.” Amgen contends that to meet the predominance requirement, Connecticut Retirement must do more than plausibly plead that Amgen’s alleged misrepresentations and misleading omissions materially affected Amgen’s stock price. According to Amgen, certification must be denied unless Connecticut Retirement proves materiality, for immaterial misrepresentations or omissions, by definition, would have no impact on Amgen’s stock price in an efficient market.
While Connecticut Retirement certainly must prove materiality to prevail on the merits, we hold that such proof is not a prerequisite to class certification. Rule 23(b)(3) requires a showing that questions common to the class predominate, not that those questions will be answered, on the merits, in favor of the class. Because materiality is judged according to an objective standard, the materiality of Amgen’s alleged misrepresentations and omissions is a question common to all members of the class Connecticut Retirement would represent. The alleged misrepresentations and omissions, whether material or immaterial, would be so equally for all investors composing the class. As vital, the plaintiff class’s inability to prove materiality would not result in individual questions predominating. Instead, a failure of proof on the issue of materiality would end the case, given that materiality is an essential element of the class members’ securitiesfraud claims. As to materiality, therefore, the class is entirely cohesive: It will prevail or fail in unison. In no event will the individual circumstances of particular class members bear on the inquiry.
Essentially, Amgen, also the dissenters from today’s decision, would have us put the cart before the horse. To gain certification under Rule 23(b)(3), Amgen and the dissenters urge, Connecticut Retirement must first establish that it will win the fray. But the office of a Rule 23(b)(3) certification ruling is not to adjudicate the case; rather, it is to select the “metho[d]” best suited to adjudication of the controversy “fairly and efficiently.”
Justice Alito writes a concurring opinion. Justice Scalia writes a dissenting opinion. And Justice Thomas writes a dissenting opinion (joined by Kennedy and partially by Scalia).
Federal Rule of Civil Procedure 54(d)(1) gives district courts discretion to award costs to prevailing defendants“[u]nless a federal statute … provides otherwise.” The Fair Debt Collection Practices Act (FDCPA), 91 Stat. 881, 15 U. S. C. §1692k(a)(3), provides that “[o]n a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs.” This case presents the question whether §1692k(a)(3) “provides otherwise” than Rule 54(d)(1). We conclude that §1692k(a)(3) does not “provid[e] otherwise,” and thus a district court may award costs to prevailing defendants in FDCPA cases without finding that the plaintiff brought the case in bad faith and for the purpose of harassment.
Justice Sotomayor dissents, joined by Justice Kagan.