April 2, 2008
District Court Enjoins New Patent Rules in Light of Interpretation of PTO Rulemaking Authority
The Eastern District of Virginia has issued a summary judgment ruling permanently enjoining the US Patent Office from putting its proposed new limitations on the number of claims, requests for continued examinations, and continuations in effect. Dennis Crouch has posted the opinion in Tafas v. Dudas, here.
In the patent world, the PTO's proposed new rules -- which would have limited applicants in various ways that had not been done before -- had caused a firestorm of criticism. I won't bore you with those details, but the statutory interpretation issues in the case are more broadly interesting, I would think.
The first issue. The first issue the court faced was whether 35 USC 2(b)(2) vested the PTO with substantive rulemaking power. That statute empowers the PTO to "establish regulations, not inconsistent with law" to "govern the conduct of proceedings in the office." The court followed Federal Circuit case law and held that this granted only procedural, not substantive, rulemaking power, and, more interestingly, held that despite the fact that the PTO was required to follow 5 USC 553's notice and comment provision -- which applies only to substantive rulemaking did not mean the power was substantive; rather, it required the PTO to publish for notice and comment its procedural rule changes and enactments. The court, finally, found support for its reading of this section in the fact that Congress has debated giving the PTO substantive rulemaking power.
Once the court reached that conclusion, the rest was fairly easy, I think, and noncontroversial: because the PTO lacked substantive rulemaking power, it could not make substantive declarations about the scope of the Patent Act, only procedural ones. Thus, if the proposed rules were substantive, they were invalid.
The court then analyzed each of the changes and found they clearly fell on the "substantive" side of this dichotomy. Now, each of these is very patent-specific, and though interesting to me, I doubt of much import to most of you. Read the opinion, above, if you're a patent jock.
Dennis Crouch reports rumors that the PTO is planning to appeal, so stay tuned.
March 31, 2008
Revised: Interpretation of Section 1332 and Removal Statutes
As I've mentioned elsewhere, I also teach civil procedure and have authored a "hornbook" on that subject, as well as statutory interpretation. So, I love it when the two issues collide.
And that they are doing, and a recent case in my view provides a very good vehicle for the Supreme Court to resolve the problems. The case is Picciotto v. Continental Cas. Co., 512 F3.d 9 (1st Cir. 2008). It raises a very fundamental question about statutory interpretation and federal subject matter jurisdiction: is subject matter jurisdiction determined on a claim-by-claim basis, or not, when diversity is the basis for federal court subject matter jurisdiction? The Picciotto court held that it was not - that diversity is determined on a "case" basis. I think that the case is quite wrong, though the result was can be rationalized on the basis of dictum in numerous supreme court decisions.
Let me explain why.
It's best to start with what is undisputed: even this panel agreed that jurisdiction over federal question claims is determined on a claim-by-claim basis. The statute that authorizes such jurisdiction gives federal courts power over "all civil actions arising under" federal law. Thus, "civil action" means "claim," at least in 28 USC 1331. That seems settled.
Section 1332 gives federal court diversity jurisdiction over "civil actions" that meet the diversity requirements. It thus uses the same phrase -- "civil actions" -- that 1331 does.
Does it mean something different?
Enter Picciotto. The case stemmed from the alleged botched settlement of a toxic tort case, and makes Bleak House seem tame. In this particular aspect of the litigation, the Picciottos filed a suit against various insurance companies, alleging conspiracy to violate state insurance law, fraud, and various other state claims. Subject matter jurisdiction was founded on 1332, diversity. The party the person not named as a defendant, however, was the lawyer (Casher) who had allegedly botched the settlement in the first place, and Casher was a citizen of the same state as the plaintiff.
Now, the way I look at this, the existence of jurisdiction is unquestioned: the court had subject matter jurisdiction over the claim against the insurance companies -- it was over $75,000 and between citizens of different states -- and the question would be whether Casher was indispensable under Rule 19; if so, the court should dismiss the case under Rule 19(b) if he could not be joined without destroying subject matter jurisdiction. But, there is no doubt the court had subject matter jurisdiction, in my view.
BUT, and this is where I disagree, because Casher would be joined as a defendant, if at all, under Rule 19, if the claim against Casher arose out of the same case or controversy, and so was within 28 USC 1367(a), while there would not be original jurisdiction under 1332 over that claim (citizens from the same state on both sides of the claim), there would be supplemental subject matter jurisdiction under 1367(b) because claims by plaintiffs against parties joined under Rule 19 are NOT excluded. So, the court would have original jurisdiction over the claims by the plaintiffs against the insurance companies and supplemental jurisdiction over the claim against Casher. (Of course, the court could always decline supplemental jurisdiction under 1367(c).)
The Picciotto court rejected that approach, though. In rejecting the argument that joinder of Casher was so long as the plaintiff did not assert a claim against Casher (put to the side how that can be), the court reasoned that "[w]ithout Casher... there is no viable civil action over which the district court may assert 'original jurisdiction...." Relying on case law decided before the adoption of 1367, the court held that 'original jurisdiction' required a "viable lawsuit," and, without joinder of Casher, there was no "viable lawsuit." That part to me is what's wrong, the more I think on it. Viable lawsuits are not the condition of subject matter jurisdiction under 1332; a claim between citizens of different states in an amount exceeding $75,000 is.
The court, in addition, then explained how, in its view, the Supreme Court's decision in Exxon Mobil Corp. v. Allapatah Serv., Inc., 545 US 546 (2005) supported interpreting Section 1367 to be consistent with reading original jurisdiction to turn on a "viable lawsuit," and so not even permit examination of whether supplemental jurisdiction was available over the claim. Explained the panel:
By definition, the Rule 19(b) indispensability determination means that there is no viable lawsuit without the missing party. Where jurisdiction depends solely on diversity of citizenship, the absence of a nondiverse, indispensable party is not a mere procedural defect. Rather, it destroys the district court's original subject matter jurisdiction. Calcote v. Texas Pac. Coal & Oil Co., 157 F.2d 216, 219, 221 (5th Cir. 1946) ("[W]here jurisdiction depends solely upon diversity of citizenship . . . the absence of indispensable parties absolutely defeats federal jurisdiction."). Thus, ancillary jurisdiction was not available to cure the jurisdictional defect in a diversity case when the absence of an indispensable party meant that there was no case over which the district court could exercise original jurisdiction.
The plain language of the supplemental jurisdiction statute incorporates this well established requirement that there be a viable action over which the district court has "original jurisdiction" before supplemental jurisdiction may be considered. Section 1367(a) grants supplemental jurisdiction over related claims in "any civil action of which the district courts have original jurisdiction," and § 1332 defines the requirements for "original jurisdiction" in diversity cases. In Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546 (2005), the Court explained how these two jurisdictional provisions interact: "Incomplete diversity destroys original jurisdiction with respect to all claims, so there is nothing to which supplemental jurisdiction can adhere." Id. at 554. The complete diversity requirement is consistently imposed on a case-by-case, rather than a claim-by-claim, basis: "In a case with multiple plaintiffs and multiple defendants, the presence in the action of a single plaintiff from the same State as a single defendant deprives the district court of original diversity jurisdiction over the entire action." Id. at 553 (citing Strawbridge, 7 U.S. 267; Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 375 (1978)).
The Court in Allapattah dubbed this view of complete diversity the "contamination theory" because the inclusion of a nondiverse party "contaminates every other claim in the complaint, depriving the court of original jurisdiction over any of these claims." Id. at 560. The "contamination theory" makes sense in the context of the complete diversity requirement, the Court said, because "the presence of nondiverse parties on both sides of a lawsuit eliminates the justification for providing a federal forum." Id. at 562.
The justification for diversity jurisdiction cited by the Court "is to provide a federal forum for important disputes where state courts might favor, or be perceived as favoring, home-state litigants." 545 U.S. at 553-54. Although the Allapattah majority rejected the "contamination theory" with regard to the amount-in-controversy requirement, the Court distinguished that requirement from the diversity requirement where the "contamination theory"remains applicable. Id. at 562. The four dissenting justices inAllapattah agreed with the majority that the supplemental jurisdiction statute did not alter the "contamination theory"approach to complete diversity:
"'[O]riginal jurisdiction' in § 1367(a) hasthe same meaning in every case: [An]underlying statutory grant of originaljurisdiction must be satisfied. . . . Section1332 . . . predicates original jurisdiction onthe identity of the parties (i.e., [their]complete diversity) . . . .'"
Id. at 592-93 (Ginsburg, J., dissenting) (quoting Rosario Ortega v.Star-Kist Foods, Inc., 370 F.3d 124, 139-40 (1st Cir. 2004)).
Additionally, the "contamination theory" prevents plaintiffs from creating diversity jurisdiction "simply by omitting [the nondiverse party] from the original complaint and then waiting for [that party] to be joined under Rule 19." Acton, 668 F.2d at 79-80; accord Allapattah, 545 U.S. at 565 ("The contamination theory . . . means this ruse would fail. . . .").
Given the continuing vitality of the "contamination theory," the Picciotos' argument fails at the § 1367(a) threshold. Casher must be joined because she is both necessary and indispensable. The conclusion that she is indispensable means that there is no viable suit without her presence, and thus no suit over which the district court has original jurisdiction. Yet, if she were joined, her presence would destroy the district court's original jurisdiction under § 1332. Thus no suit over which the district court has original jurisdiction exists here without Casher – because the district court ruled that her presence was indispensable – and no suit exists with Casher – because her presence will destroy diversity.
We note that the inquiry into indispensability is an equitable, not a jurisdictional, inquiry. See Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, 7 Federal Practice & Procedure: Civil 3d § 1611, at 169. However, in the context of a suit wherejurisdiction is founded solely on diversity of citizenship and where the indispensable party is nondiverse, the indispensability conclusion has the effect of destroying diversity and, thus, eliminating any basis for original jurisdiction.
Thus, the supplemental jurisdiction statute does not apply because there is no civil action to which any additional claims may attach.
So, I think the analysis would be: so long as joinder of a plaintiff is not required by Rule 19, there would be a "viable lawsuit" and so supplemental jurisdiction could attach. That makes some sense, I suppose, because the net effect is that if a plaintiff is trying to sue in federal court and leaves off a plaintiff who MUST be joined, then the federal court should dismiss the case, since the court can't adjudicate the claim without joinder of the additional plaintiff. Okay. But, that result is not, I believe, what the statutes require (see below). Further, I have a very, very hard time making the Exxon dictum work with the plain text of 1332 and 1367: neither statute says anything about how citizenship is more fundamental than money, one, and 1367 does not remotely hint that it applies if the amount in controversy is not met, but citizenship is not. You have to ignore the text -- completely -- to get where the Supreme Court wants the system to be. (Of course, they could do that!)
Where does this leave me? I think it leaves me here: 1367 means what it says, and its text allows joinder, not just of a plaintiff whose claim fails to meet the $75,000 threshhold, but also of a plaintiff who is a citizen of the same state as a defendant (so long as the claim arises out of the same case or controversy as the diverse plaintiff's claims). (But, 1367 would not allow a plaintiff to assert a claim against a nondiverse defendant, since the defendant would likely be joined under Rule 19 or 20.) This leaves 1367 constitutional -- complete diversity is only a requirement of 1332, not the constitution -- but it is a strange, awkward result.
But I'm not the first person to think 1367 to be strange, awkward, and worse! And it is not irrational for Congress to conclude that this awkward system, constitutional but awkward, makes sense.
Now, in defense of the court, the Supreme Court in Exxon used some powerful dicta to suggest that citizenship "contaminated" claims, but its holding was much different and, in fact, is inconsistent with the result reached in Picciota: a claim by a diverse party that does not meet the amount in controversy requirement can be joined with a claim by a diverse party that does.
There is so much muddled in this argument that I frankly don't know where to begin. First off, 1367 doesn't use the phrase "viable lawsuit" or talk about "pendent" or "ancillary" jurisdiction. Those old common law concepts are no more: there's a statute now, and the text of the statute controls. Secondly, if it is true, as the court says, that if an indispensable party's nonjoinder defeats original jurisdiction, why is some of Section 1367(b) there? There's no need to exclude claims by plaintiffs joined under Rule 19, since there will never be a "viable lawsuit" without them. The court's approach renders 1367(b) in some ways superfluous. Third, construing diversity jurisdiction to turn on "viable lawsuits" flies in the face of the fact that 1332 uses the same language as 1331 ("civil action"), and the fact that the claim is the building block of all of litigation: personal jurisdiction, venue, federal question jurisdiction, judgment as a matter of law, summary judgment -- even the scope of discovery turn on adjudication of "claims."
March 30, 2008
Use of Committee Reports in Statutory Interpretation
Interesting article, unfortunately not on the web page for the Arkansas Law Review, by a student, entitled Michael L. Culotta, The Use of Committee Reports in Statutory Interpretation: A Suggested Framework for the Federal Judiciary, 60 Ark. L. Rev. 687 (2007). Interestingly, the author breaks down the various possible sources of non-textual legislative input (as well as the related form of "signing statements"), and provides a reasoned (if light-handed) approach as to why some, but not all, of it should "matter" to interpretive problems.
Essentially, he concludes that committee reports are the "most reliable" forms of meaning, with conference reports coming in a close second -- but that nothing else should be consulted, whether in the form of statements of single legislators or statements made at public hearings.
On the surface, of course, he's right: it may be that a single legislator says something that isn't reflective of Congressional intent. But, what if 10 legislators, all of the bill's sponsors, spoke and ascribed to the bill the same meaning? What if all 435 members of the House said the exact same thing about what the bill meant? I think the tougher issues lay behind this article, but it is an interesting introduction to the obvious issues created by legislative history.