Civil Procedure & Federal Courts Blog

Company Cannot Assert Attorney-Client Privilege Against Its Director, Delaware Court Holds

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).

PM

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.

--PM

Curry and Ward on Twiqbal's Effect on Removal Rates from State to Federal Court

To be published in Texas Tech Law Review and posted on SSRN: Are Twombly & Iqbal Affecting Where Plaintiffs File? A Study Comparing Removal Rates by State, by Jill Curry and Matthew Ward.

Abstract:

This article originated from a 2010-11 study the Federal Judicial Center conducted to examine the impact, if any, of the Supreme Court decisions in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal on civil litigation in the United States federal courts. To examine this impact, we compared removal rates of cases to federal courts between states using notice pleading standards and states using fact pleading standards. We predicted that heightened pleading standards in federal courts would encourage plaintiffs in cases with federal and state claims, especially plaintiffs alleging a violation of their civil rights, to file in
state courts to benefit from the liberal notice pleading standard. Therefore, defendants would be more likely to remove such cases filed in notice pleading state court to federal courts to take advantage of the newly announced heightened pleading standard. After reviewing existing commentary and existing empirical research about the impact of Twombly and Iqbal, we explain the methodology for our removal study, present the results of a preliminary study to examine removal rates of four states, and subsequently present the results of our expanded examination of removal rates of all fifty states and the District of Columbia. However, the results demonstrate that these expectations were not met. There was no systematic increase in the rate of removal after Twombly and Iqbal and the effect was not more pronounced in notice pleading states compared to fact pleading states, questioning the assertion that cases are being diverted from federal court to state courts due to heightened pleading standards.  

--PM      

Kritzer and Drechsel on Local News Coverage of Civil Litigation

Herbert M. Kritzer and Robert E. Drechsel have posted on SSRN a paper entitled “Local News of Civil Litigation: All the Litigation News That's Fit to Print or Broadcast,” 96 Judicature, No. 1, pp. 16-22.

Abstract:

What is the nature of the coverage of civil litigation by local newspapers and local television? That is the question considered in this paper. Drawing upon news clips from 2004 (11 media markets around the U.S.), 2006 (9 media markets in the Midwest), and 2007 (9 media markets in the Midwest), we present a portrait of litigation as locally reported. We find (a) torts make up a minority of reports, (b) very few verdicts are reported, and (c) dollar figures are mentioned in a modest proportion of cases but when mentioned tend to be large. We also find significant differences in the reporting practices of local television and local newspapers, particularly with regard to the types of cases discussed (more torts on television and more cases against government in the newspapers). We conclude with some speculations about the implications of our analysis for debates over civil justice “reform.”

PM

Federal Court Strikes Down Secrecy of Delaware Chancery Court Arbitrations

            A federal district court in Delaware has held that because the First Amendment provides a qualified right of access to arbitration proceedings established by Delaware law and implemented by the Delaware Court of Chancery, such proceedings must be open to the public.  Delaware Coalition for Open Government v. Strine, No. 1:11-1015, 2012 WL 3744718 (D. Del. Aug. 30, 2012).

            Delaware law gives the Court of Chancery “the power to arbitrate business disputes when the parties request a member of the Court of Chancery, or such other person as may be authorized under rules of the Court, to arbitrate a dispute.” 10 Del. C. § 349(a).  Once the parties file an appropriate  petition, "the Chancellor appoints a Chancery Court judge to preside over the case as the arbitrator." 

The Chancery Court Rules require that all parts of the proceeding, including all filings and all contacts between the arbitrator and any party are 'confidential and not of public record.' Del. Ch. Ct. R. 97 a)(4), 98(b). The Register in Chancery does not file the parties' petition on the court's public  docketing system. Id. 97(a)(4). None of the hearings is open to the public.

            Plaintiff challenged the confidentiality provisions of the law, arguing that the First Amendment prevents the defendants from closing the proceeding to the public and press.  Judge McLaughlin granted plaintiff's motion for judgment on the pleadings. 

Although the Supreme Court has never addressed access to civil judicial proceedings, every Court of Appeals to consider the issue, including the Court of Appeals for the Third Circuit, has held that there is a right of access to civil trials. See Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1061 (3d Cir.1984); . . . .

The Delaware proceeding, although bearing the label arbitration, is essentially a civil trial. . . . In the Delaware proceeding, the parties submit their dispute to a sitting judge acting pursuant to state authority, paid by the state, and using state personnel and facilities; the judge finds facts, applies the relevant law, determines the obligations of the parties; and the judge then issues an enforceable order. This procedure is sufficiently like a civil trial that Publicker Industries governs. . . .

The public benefits of openness are not outweighed by the defendants' speculation that such openness will drive parties to use alternative non-public fora to resolve their disputes. Even if the procedure fell into disuse, the judiciary as a whole is strengthened by the public knowledge that its courthouses are open and judicial officers are not adjudicating in secret.

PM

Delaware Supreme Court Affirms $2 Billion Judgment Plus Fees

            The Delaware Supreme Court in Americas Mining Corp. v. Theriault, No 29, 2012 (Del. S. Ct. Aug. 27, 2012), has just affirmed a $2.0316 billion judgment plus an award of plaintiff’s attorneys’ fees in the amount of 15% of the total judgment, or more than $304 million.

            As summarized by the Delaware Supreme Court:  

The Court of Chancery held that the defendants-appellants,
Americas Mining Corporation (“AMC”), the subsidiary of Southern Copper
Corporation’s (“Southern Peru”) controlling shareholder, and affiliate
directors of Southern Peru (collectively, the “Defendants”), breached their
fiduciary duty of loyalty to Southern Peru and its minority stockholders by
causing Southern Peru to acquire the controller’s 99.15% interest in a Mexican
mining company, Minera México, S.A. de C.V. (“Minera”), for much more than it was worth, i.e., at an unfair price.

The Plaintiff challenged the transaction derivatively on
behalf of Southern Peru. The Court of Chancery found the trial evidence
established that the controlling shareholder, Grupo México, S.A.B. de C.V.
(“Grupo Mexico”), through AMC, “extracted a deal that was far better than
market” from Southern Peru due to the ineffective operation of a special
committee (the “Special Committee”).

Hat tip: Delaware Business Court Insider.

PM

Report on New York State's Commercial Litigation Courts Released

The Chief Judge's Task Force on Commercial Litigation in the 21st Century: Report and Recommendations to the Chief Judge of the State of New York (June 2012) is available on the New York courts web site.  The Commercial Division in New York state courts began as a pilot project in 1993 and now is established in eight counties.  A Task Force was commissioned to study commercial litigation "to ensure that the New York Judiciary helps our State retain its role as the preeminent financial and commercial center of the world."

The Task Force's recommendations include:

• establishing a new class of Court of Claims judges

• increasing the monetary threshold for actions to be heard in the Commercial Division

• providing Commercial Division Justices with additional law clerks

• rehiring Judicial Hearing Officers

• recruiting seasoned commercial litigation practitioners as Special Masters

• convening an Institute on Complex Commercial Litigation

• earlier assignment of cases

• revised procedures on expert discovery

• limits on privilege logs

• adjustments to e-discovery

• creating a permanent statewide Advisory Council on the Commercial Division.

PM

No Cameras In the Courtroom? Try Puppets Instead!

The Wall Street Journal reports that a news station, WOIO 19 is covering one of Ohio's biggest corruption trials using puppets in a show called The Puppet's Court.  Because cameras are not allowed in the courtroom, reporter Kirk Maynard reenacts bits of testimony and trial with scenes like this: 

 

According to the WSJ, 

The result is a cross between "The Sopranos" and "The Muppet Show" that has elicited some complaints from viewers and hand-wringing from journalism professors. But since the trial began in January, "The Puppet's Court" has led a ratings surge for the station's late news show and won praise from some politicians.

I, personally, think it is one of the funniest things I've ever seen, and a genuinely creative response to some of the absurdities of American courts.  Perhaps next year I'll allow my students to perform a puppet show in lieu of the final exam.

RJE

 

 

Conference: Human Rights Litigation in State Courts and Under State Law

U.C. Irvine School of Law is hosting a conference entitled Human Rights Litigation in State Courts and Under State Law on Friday, March 2, 2012.

The panels look great:

9:00 a.m.-10:30 a.m. Panel 1
Human Rights Litigation in State Courts and Under State Law: The Experience So Far

• Michael Goldhaber
• Paul Hoffman
• Austen Parrish
• Moderator: Michael Robinson-Dorn

10:30 a.m.-10:45 a.m. Break

10:45 a.m.-12:15 p.m. Panel 2
Federalism and Foreign Relations Issues Raised by Human Rights Litigation in State Courts and Under State Law

• David Kaye
• Chimène Keitner
• Julian Ku
• Ed Swaine
• Moderator: Michael Ramsey

12:15 p.m.-1:30 p.m. Lunch

1:30 p.m.-3:00 p.m. Panel 3
Conflict of Laws and Doctrinal Issues in Human Rights Litigation in State Courts and Under State Law

• Patrick Borchers
• Anthony Colangelo
• Symeon Symeonides
• Moderator: Trey Childress

3:00 p.m.-3:15 p.m. Break

3:15 p.m.-4:45 p.m. Panel 4
The Future of Human Rights Litigation in State Courts and Under State Law

• Roger Alford
• Lee Crawford-Boyd
• Kristin Myles
• Beth Stephens
• Moderator: Chris Whytock

RJE

Recent steps taken to regulate expert testimony in med mal cases

Move over, Daubert -- here’s an interesting article in the online American Medical News about states tightening up expert testimony in medical liability cases. 

--PHM

California Supreme Court Holds California Confidentiality of Medical Information Act Is Not Preempted By Federal Fair Credit Reporting Act

            Plaintiff Brown and his two children were patients of dentist Reinholds.  Dr. Reinholds billed Brown $600 for a crown that Brown claimed he never received.  Brown refused to pay the bill, and Reinholds referred the debt to a collection agency (defendant Mortensen). 

            The story continues: “Over the next two years, Mortensen repeatedly disclosed the contents of Brown's and his children's dental charts to the three major national consumer reporting agencies, Experian, Equifax, and Trans Union. Additionally, Mortensen disclosed to the agencies the Browns' names, Social Security numbers, dates of birth, addresses, telephone numbers, and Brown's and his children's entire dental history with Dr. Reinholds, including alleged dental treatments.”

       Brown and his children sued Mortensen for violation of the California Confidentiality of Medical Information Act (Civ.Code, § 56 et seq.), which 

prohibits the unauthorized dissemination of individually identifiable medical information and provides for compensatory damages and other remedies. . . . The trial court sustained a demurrer with leave to amend and then, when Brown elected not to amend, dismissed the action. 

The Court of Appeal affirmed. While it rejected the trial court's conclusion that Brown's Confidentiality Act claims were impermissibly vague, it accepted Mortensen's alternative argument that the FCRA preempted them. The Court of Appeal opined that all state law claims arising from the furnishing of information to consumer reporting agencies are preempted by the FCRA. . . .  Reasoning that Mortensen had acted as a furnisher of credit information when disclosing the Browns' medical information to various credit agencies, the court affirmed dismissal.

            The California Supreme Court reversed, holding that the FCRA did not preempt the California cause of action.  Brown v. Mortensen, --- P.3d ----, 51 Cal.4th 1052, 2011 WL 2409913.  

            The Consumer Credit Reporting Reform Act of 1996 amended the FCRA by imposing affirmative duties on entities that furnish information to consumer reporting agencies, and by adding a state-law preemption clause, 15 U.S.C. § 1681t(b)(1)(F): “(b) No requirement or prohibition may be imposed under the laws of any State—[¶] (1) with respect to any subject matter regulated under—[¶] ... [¶] (F) section 1681s–2 of this title, relating to the responsibilities of persons who furnish information to consumer reporting agencies . . . .”

            Following four federal district courts, the California Supreme Court held that the preemption of state law was limited to the two specific areas “regulated under . . . section 1681s-2,” which are “what a furnisher must do to ensure the information it provides is accurate (a subject covered in exhaustive detail by the many subparts of § 1681s–2(a)), and what a furnisher must do upon receiving official notice that the accuracy or completeness of its information is in dispute.”  It further stated, “Our own inspection of the overall statutory scheme and the pertinent legislative history reveals evidence suggesting Congress never intended in section 1681t(b)(1)(F) to preempt state laws regulating medical privacy and thereby to relieve entities otherwise obligated to maintain confidentiality of the duty to do so when reporting credit information.”

            Thus, the claims for damages under the California Confidentiality Act, “having as their gravamen issues neither of accuracy nor of credit dispute resolution, do not involve the same subject matter as section 1681s–2 and are not preempted.”

            The article in the online journal amednews.com (American Medical News)  says Mortensen is considering petitioning SCOTUS for review.

--PHM

NYTimes Reports on NY Judicial Salary Freeze

The New York Times has an article on the judicial salary freeze in New York, reporting that many judges are leaving the bench in favor of private practice.

RJE

Washington Supreme Court Rejects Twombly/Iqbal

The Washington State Supreme Court decided yesterday to maintain the pleading standard that has long applied in Washington state courts, rebuffing a request to adopt the federal pleading standard that the U.S. Supreme Court embraced in Twombly and Iqbal. The decision is McCurry v. Chevy Chase Bank (No. 81896-7). Here’s an excerpt (footnote and some citations omitted):

Chevy Chase urges this court to reconsider the standard for dismissing a motion under CR 12(b)(6) in light of changes in the United States Supreme Court case law regarding Fed. R. Civ. P. 12(b)(6). Under CR 12(b)(6) a plaintiff states a claim upon which relief can be granted if it is possible that facts could be established to support the allegations in the complaint. See Halvorson v. Dahl, 89 Wn.2d 673, 674, 574 P.2d 1190 (1978) (“On a [CR] 12(b)(6) motion, a challenge to the legal sufficiency of the plaintiff’s allegations must be denied unless no state of facts which plaintiff could prove, consistent with the complaint, would entitle the plaintiff to relief on the claim.”); see also Christensen v. Swedish Hosp., 59 Wn.2d 545, 548, 368 P.2d 897 (1962) (citing Conley v. Gibson, 355 U.S. 41 (1957)).

However the United States Supreme Court has recently revised its dismissal standard under Fed. R. Civ. P. 12(b)(6), permitting dismissal unless the claim is plausibly based upon the factual allegations in the complaint – a more difficult standard to satisfy. See Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) (“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Chevy Chase encourages this court to similarly construe CR 12(b)(6). We decline.

...

The Supreme Court’s plausibility standard is predicated on policy determinations specific to the federal trial courts. The Twombly Court concluded: federal trial courts are incapable of adequately preventing discovery abuses, weak claims cannot be effectively weeded out early in the discovery process, and this makes discovery expensive and encourages defendants to settle “largely groundless” claims. See 550 U.S. at 557-58, 559.  Neither party has shown these policy determinations hold sufficiently true in the Washington trial courts to warrant such a drastic change in court procedure.

Nor has either party here addressed countervailing policy considerations. For example, do current discovery expenses justify plaintiffs’ loss of access to that discovery and general access to the courts, particularly in cases where evidence is almost exclusively in the possession of defendants? Could runaway discovery expenses be addressed by better means – perhaps involving more court oversight of the discovery process or a change in the discovery rules?

Although three Justices dissented, they agreed with the majority about the pleading standard. From the dissenting opinion: “My discussion of CR 12(b)(6) should not be confused with the Fed. R. Civ. Pr. 12(b)(6) standard articulated by the United States Supreme Court. See Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). I do not suggest we modify our rule to align with the federal “plausible” standard in our decision today.”

--A

(Hat Tip: Brooke Coleman)

Bybee and Pincock on How the State "Sells" its Judiciary

Professor Keith J. Bybee (Syracuse University College of Law) and Heather Pincock have posted "Efficient, Fair, and Incomprehensible: How the State 'Sells' Its Judiciary" on SSRN.

The abstract states:

Sociolegal scholars often approach dispute resolution from the perspective of the disputants, emphasizing how the resources on each side shape the course of conflict. We suggest a different, “supply-side” perspective. Focusing on the state’s efforts to establish centralized courts in place of local justice systems, we consider the strategies that a supplier of dispute resolving services uses to attract disputes for resolution. We argue that state actors often attempt to “sell” centralized courts to potential litigants by insisting that the state’s services are more efficient and fair than local courts operating outside direct state control. Moreover, we argue that state actors also invest significant energy in claiming that the local courts are incomprehensible. Thus, in its efforts to introduce and advance centralized courts, the state argues not only that it offers the best version of what the citizenry wants, but also that it is impossible to conceive that people would want something other than what the state offers. We illustrate our argument and explain its significance by examining judicial reform in New York, where there has been a decades-long effort to displace local justice systems.

~clf

Acquaviva & Castiglione on Judicial Diversity

Gregory L. Acquaviva (Law Clerk, Unites States Court of Appeals for the Third Circuit) and John D. Castiglione (Latham & Watkins) have posted "Judicial Diversity on State Supreme Courts" on SSRN.  It will be published in the Seton Hall Law Review.

The abstract states:

State courts of last resort are, in many ways, the primary expositors of law in the United States. Much of the law that affects people on an everyday basis - criminal law, contracts, family law, wills, trusts, and estates, just to name a few - fall within their purview. And yet we know surprisingly little about just who sits on these courts. Indeed, state supreme court judges have been aptly described as “perhaps the most important and least written about group within the judicial system” of the United States. There is little information regarding the composite characteristics of the jurists on state courts of last resort, and the last study on the characteristics and experiences of the state supreme court justices is twelve years old. 

In this Article, we present the findings of a comprehensive examination of the demographic and experiential characteristics of all judges on the courts of last resort of the fifty states. The most important part of this examination was a survey developed for this project and submitted to every state supreme court justice in the country. In this survey, we asked the justices to self-report information regarding race, gender, religion, schooling, prior work experience, community involvement, bar association membership, and pro bono experience. The raw data we collected through this survey, augmented by publicly available resources, are presented throughout and as addenda to this Article.

~clf

Dodson on Federal Pleading and State Discovery

Professor Scott Dodson (William & Mary School of Law) has posted "Federal Pleading and State Presuit Discovery" on SSRN.  It will be published in the Lewis & Clark Law Review.

The abstract states:

This Symposium Article explores the role that state presuit discovery could play in rectifying the information imbalance caused by Twombly and Iqbal. Several states allow presuit discovery in state courts. The Article explores the utility and limitations of using these state presuit discovery mechanisms in state court to gain access to information that plaintiffs need to survive a federal motion to dismiss under Twombly and Iqbal.

~clf

UPDATED: Texas Supreme Court Justices Sued in Federal Court for Failing to Rule on Class Certification Appeal

Plaintiffs in a Texas state court class action against Southwestern Bell have been waiting years for the Texas Supreme Court to decide whether the trial court's order certifying the class was proper. Southwestern Bell appealed to the Texas Supreme Court in November 2005, and oral argument occurred in March 2007.

As reported here, the plaintiffs have now sued the nine Justices of the Texas Supreme Court in federal court, seeking declaratory relief. Plaintiffs are asking the court to declare that the Texas Supreme Court's delay is depriving them of their rights to due process and judicial access, and that "the Texas Supreme Court is constitutionally bound to make a decision at a meaningful time and in a meaningful manner." The case is Marketing On Hold, Inc. v. Jefferson, No. 10-cv-00104-SS (W.D. Tex.). Docket information is available via Justia and Pacer.

(Hat Tip: Roger Baron)

Update from the "be careful what you wish for" department: The Texas Supreme Court issued its 27-page decision today, reversing the lower court and decertifying the plaintiff class. It concluded that "the putative class representative failed to establish that it adequately represents the class."

(Hat Tip: Alexandra Albright)

--A

New York Times Editorial on Managing the Increasing Number of Pro Se Litigants

New Hampshire Chief Justice John T. Broderick, Jr. and California Chief Justice Ronald M. George published an OpEd in the New York Times, entitled "A Nation of Do-It-Yourself Lawyers," regarding handling the increasing number of pro se litigants.  In addition to increasing access to counsel, the Chief Justices discussed the idea of unbundling legal services and permitting lawyers to engage in "limited scope representation" by representing the client in only part of the case.

The Chief Justices point out that: 

"some lawyers have expressed concern that limited legal representation will encourage litigants to dissect their cases in an effort to save money, sacrificing quality representation that the litigant might otherwise be able to afford. We have also heard the argument that by offering too much assistance to self-represented litigants, the courts themselves are undermining the value of lawyers and the legal profession. Apparently, some are concerned that the court system will become so user-friendly that there will be no need for lawyers."

However, the Chief Justices expressed their view that the benefits to permitting limited scope representation might outweigh any of these criticisms, particularly in light of the increasing inability of many litigants to afford comprehensive legal services:

"Litigants who can afford the services of a lawyer will continue to use one until a case or problem is resolved. Lawyers make a difference and clients know that. But for those whose only option is to go it alone, at least some limited, affordable time with a lawyer is a valuable option we should all encourage.  In fact, we believe that limited-scope-representation rules will allow lawyers — especially sole practitioners — to service people who might otherwise have never sought legal assistance. We also believe that carefully drafted ethical rules allowing lawyers to handle part of a case give the legal profession an opportunity to help the courts address the ever-growing number of litigants who cross our thresholds."

~clf

LeRoy on the Effect of Partisan Election of Judges on Judicial Review of Employment Arbitrations

Professor Michael H. LeRoy (University of Illinois College of Law) has posted "Do Partisan Elections of Judges Produce Unequal Justice? When Courts Review Employment Arbitrations" on SSRN in the Working Paper Series.

The abstract states:

Partisan election of judges is a growing concern as large contributions pour into judicial elections. State judges raised $157 million for their campaign funds from 1999 to 2006. Caperton v. A.T. Massey Co. Inc., 129 S.Ct. 2252 (2009), ruled that a state supreme court justice who cast the deciding vote for a company whose president contributed $2.3 million to his campaign violated the losing company’s due process rights.

I examine whether partisan judicial elections affect court review of arbitrator rulings (called awards) in employment disputes. For this study, I added a new variable – method for selecting judges – to my database of 223 state court rulings from 1975-2008.

I relate this empirical research to a strategic model of corporate avoidance of liability in employment disputes. Some employers avoid lawsuits by requiring employment arbitration, and implementing favorable arbitration rules. When awards are appealed to court, employers continue to influence the outcome by designating the court for reviewing an award. This model suggests that some employers would expand their influence by strategically supporting judges who run for office in political campaigns.

I found that in state trial courts where an award was challenged, employees won only 32.1% of cases before party-affiliated judges. But in states where judges were appointed or elected in non-partisan races, employees prevailed in 52.7% of the cases.

The partisan election effect was not observed, however, in appellate cases. Employees won 43.2% of cases before party-affiliated judges, and 50.0% of cases before judges who were appointed or elected in non-partisan races.

My results provide preliminary and limited support for the concern that partisan judicial elections produce unequal justice for ordinary people who are not large campaign donors. But, there are important caveats. This study did not determine whether judges in these cases actually accepted campaign support from employer groups. These judges may have ruled through a more ideological prism than appointed and non-partisan judges.

In the same vein, the finding of no partisan effect at the appellate level is not conclusive – and does not mean that party-affiliated appellate judges are as neutral as their appointed counterparts. Even in partisan judicial elections, it appears that only some appellate candidates raise war chests and declare campaign positions. A seemingly biased judge, such as the justice in Caperton, can be outvoted by more neutral judges on the appellate panel, thereby muffling the effect of campaign spending in partisan elections.

My findings do not prove that employers seek venue before judges who receive their campaign contributions, but they offer preliminary statistical evidence that suggests that this is possible. The fact that employers can designate venue in an arbitration contract reinforces this possibility. In sum, the shocking example in Caperton, along with the preliminary data in my study, suggests that employers are able to expand the liability-avoidance model by donating to judges who would review their arbitration awards.

~clf

Schwartz on the the Federal Arbitration Act

David S. Schwartz (University of Wisconsin) has posted The Federal Arbitration Act and the Power of Congress Over State Courts to SSRN.

Abstract:     
The Federal Arbitration Act is unconstitutional as it has been applied to the states over the past 20 years. In its 1984 decision in Southland Corp. v. Keating, the Supreme Court held that FAA is substantive law binding on state courts under the Supremacy Clause. The resulting doctrine of FAA preemption has nullified dozens of state contract laws, sewn confusion in the courts, and poised the FAA to become a significant "tort reform" statute. The FAA is thus an important example of a larger recent trend of efforts to impose tort reform, indirectly, by federal regulation of state court procedure.

States' sovereignty over the structure, jurisdiction and procedure of their courts is fundamental to federalism. The Supremacy Clause requires state courts to apply federal substantive law, but the constitution assumes state courts will do so applying their own neutral rules of procedure. While state courts' implementation of federal substantive law may incidentally, in isolated cases, affect state procedural rules, Congressional efforts to impose procedural rules on state courts abridge the states' "residual and inviolable sovereignty" and impermissibly commandeer both state judges and legislatures.

The FAA is procedural regulation, notwithstanding Southland. It governs contracts about procedure and overrides the fundamentally procedural allocation of decisionmaking authority between courts and arbitrators. Looked at through every relevant context in which a substance-procedure distinction has been applied, arbitration enforcement is a procedural matter, and Congress is without power to impose it on the states.

RJE