Civil Procedure & Federal Courts Blog

Recap of Today's Decision in Shady Grove v. Allstate

Here's a brief recap of today's SCOTUS decision in Shady Grove Orthopedic Assocs. v. Allstate Ins. Co., which considers whether New York's bar on class actions for certain statutory-damages claims (N.Y. C.P.L.R. 901(b)) precludes class certification in a federal court diversity action. The result is essentially a 5-4 decision, with Scalia writing the Opinion of the Court. Justice Stevens, however, is the tie-breaking vote, and he joins only certain parts of Scalia's opinion and writes a separate concurrence. Justice Ginsburg writes the dissent. The fractured ruling means that considerable uncertainty remains on how federal courts should resolve other potential conflicts between state law and the Federal Rules of Civil Procedure.

The first issue the Court confronts is whether Federal Rule 23 "is sufficiently broad to control the issue before the court, thereby leaving no room for the operation of seemingly conflicting state law." On this issue, five Justices (Scalia, joined by Roberts, Stevens, Thomas and Sotomayor) hold that Rule 23 does control the issue. Therefore, Rule 23 will trump New York's 901(b) unless Rule 23 violates the Rules Enabling Act. (This is Part II-A of Scalia's opinion.)

The same five Justices then hold that Rule 23 does not violate the Rules Enabling Act, but Stevens does not join Scalia's reasoning on this and writes a separate concurrence. Channeling Sibbach, Scalia reasons that a Federal Rule passes muster as long as it "really regulates procedure." Stevens' approach is more deferential to state law: a Federal Rule "cannot govern a particular case in which the rule would displace a state law that is procedural in the ordinary use of the term but is so intertwined with a state right or remedy that it functions to define the scope of the state-created right." Despite their different approaches, Scalia and Stevens agree that Rule 23 is validly applied.

In dissent, Justice Ginsburg (joined by Kennedy, Breyer & Alito) reasons that Rule 23 should be construed not to collide with New York law. Therefore the applicability of New York law presents what has been called a relatively unguided Erie choice, not one that hinges on Rule 23's validity under the Rules Enabling Act. Under this approach, Ginsburg reasons, New York's 901(b) is binding in federal court if (per Hanna v. Plumer) "application of the state rule would have so important an effect upon the fortunes of one or both of the litigants that failure to apply it would be likely to cause a plaintiff to choose the federal court." Thus, Ginsburg reasons that New York's 901(b) should apply: "Shady Grove seeks class relief that is ten thousand times greater than the individual remedy available to it in state court. As the plurality acknowledges, forum shopping will undoubtedly result if a plaintiff need only file in federal instead of state court to seek a massive monetary award explicitly barred by state law."

For additional coverage and commentary on Shady Grove, see SCOTUSblog and the Mass Tort Litigation Blog.

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Today's SCOTUS Decision in Shady Grove v. Allstate

The Court issued its much anticipated decision today, which is available here. More details to come. See earlier coverage here, here, and here.

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Decision of Interest on Joinder

BNA's U.S. Law Week reports today on the Fifth Circuit's recent decision in Acevedo v. Allsup's Convenience Stores, Inc., No. 09-10417, ___ F.3d ___, 2010 WL 908678, 2010 U.S. App. LEXIS 5382 (March 15, 2010). The plaintiffs were approximately 800 current and former employees who sought payment of unpaid wages and overtime under the Fair Labor Standards Act. The district court dismissed the claims on the basis that the plaintiffs were not properly joined.

The Fifth Circuit panel held that denying joinder was not an abuse of discretion, reasoning that federal courts may refuse joinder of parties even if the requirements of Fed. R. Civ. P. 20 are satisfied:

"[A]ssuming arguendo that Allsup's company-wide policies allow Appellants to satisfy Rule 20's transaction test, denying joinder in this case would still not be an abuse of discretion. . . . [D]istrict courts have considerable discretion to deny joinder when it would not facilitate judicial economy and when different witnesses and documentary proof would be required for plaintiffs' claims."

The panel did, however, reverse the district court for dismissing all of the plaintiffs' claims as a result of the misjoinder: "[S]ince Rule 21 establishes that misjoinder of parties is not a ground for dismissing an action, the district court erred when it dismissed this entire action, rather than simply dismissing the claims of any misjoined plaintiffs."

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Today: SCOTUS hears arguments in Morrison v. National Australia Bank

The Supreme Court will hold oral argument in Morrison v. National Australia Bank, a securities class action by foreign investors against a large Australian Bank with a Florida subsidiary.  The Court will consider whether there is enough of a connection to the U.S. to maintain jurisdiction.  The questions presented are:

I. Whether the antifraud provisions of the United States securities laws extend to transnational frauds where: (a) the foreign-based parent company conducted substantial business in the United States, its American Depository Receipts were traded on the New York Stock Exchange and its financial statements were filed with the Securities Exchange Commission (“SEC”); and (b) the claims arose from a massive accounting fraud perpetrated by American citizens at the parent company’s Florida-based subsidiary and were merely reported from overseas in the parent company’s financial statements. 

II. Whether this Court, which has never addressed the issue of whether subject matter jurisdiction may extend to claims involving transnational securities fraud, should set forth a policy to resolve the three-way conflict among the circuits (i.e., District of Columbia Circuit versus the Second, Fifth and Seventh Circuits versus the Third, Eighth and Ninth Circuits). 

III. Whether the Second Circuit should have adopted the SEC’s proposed standard for determining the proper exercise of subject matter jurisdiction in transnational securities fraud cases, as set forth in the SEC’s amicus brief submitted at the request of the Second Circuit, and whether the Second Circuit should have adopted the SEC’s finding that subject matter jurisdiction exists here due to the “material and substantial conduct in furtherance of” the securities fraud that occurred in the United States.

Further coverage of today's oral argument is available at The National Law Journal.  Paul Karlsgodt at the Class Action Blawg posted commentary on the Second Circuit decision in Morrison back in 2008.

RJE

Fischer on Unintended Disclosure of Privileged Information

Professor James Fischer (Southwestern University School of Law) has posted "How Should Lawyers Handle the Unintended Disclosure of Possibly Privileged Information" on SSRN.  

The abstract states:

The inadvertently sent email that contains opposing counsel’s settlement strategy, the opposing party’s client opinion letter negligently included in a discovery response, and the opposing party’s work papers taken by a whistle blowing client all share a common theme – the materials were not intended to be disclosed by the opposing party to the recipient lawyer. Notwithstanding the similarities, case law, commentary, and ethics opinions have tended to treat the issues as separate. This separation has not, however, helped lawyers who are subjected to conflicting and inconsistent opinions as to how they should respond in situations when they have received information that may possibly be privileged.

This article makes two contentions. First, with respect to the privileged status of the disclosed materials, all disclosures unintended from the standpoint of the privilege holder should be treated under a single standard that asks whether the privilege holder exercised reasonable care in maintaining the confidentiality of the materials. Second, with respect to the receiving lawyers professional obligations, lawyers who receive materials that are possibly privileged should be allowed to read the materials (1) to determine whether the materials are privileged and (2) to better argue the contention to the court that the materials are not privileged. A lawyer who reads the materials, even past the point when the privileged status of the materials is arguably apparent, should not be deemed to have engaged in professionally improper behavior as long as (1) the lawyer notifies opposing counsel of receipt of the materials and (2) makes no surreptious use of the materials until their status has been clarified by the court.

~clf

Robertson on Transnational Litigation and Institutional Choice

Cassandra Burke Robertson (Case Western) has posted on SSRN her article, Transnational Litigation and Institutional Choice, 51 Boston College Law Review (forthcoming 2010). Here's the abstract:

When U.S. corporations cause harm abroad, should foreign plaintiffs be allowed to sue in the United States? Federal courts are increasingly saying no. The courts have expanded the doctrines of forum non conveniens and prudential standing to dismiss a growing number of transnational cases. This restriction of court access has sparked considerable tension in international relations, as a number of other nations view such dismissals as an attempt to insulate U.S. corporations from liability. A growing number of countries have responded by enacting retaliatory legislation that may ultimately harm U.S. interests. This article argues that the judiciary’s restriction of access to federal courts ignores important foreign relations, trade, and regulatory considerations. The article applies institutional choice theory to recommend a process by which the three branches of government can work together to establish a more coherent court-access policy for transnational cases.

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Wasserman on Iqbal and Procedural Mismatches

Howard Wasserman (Florida International) has posted on SSRN his recent symposium piece, Iqbal, Procedural Mismatches, and Civil Rights Litigation, 14 Lewis & Clark L. Rev. 157 (2010). Here's the abstract:

Understanding the twin pleading cases of Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal from the vantage point of only a few months (or even years) requires as much prediction as explanation. Early confusion is a product of the long-heralded link between substance and procedure. What we are seeing now may be less about Court-imposed changes to procedure as about changes to substantive law and a “mismatch” between new substance and the old procedure of the Federal Rules. Much of the current business of federal courts involves constitutional litigation under 42 U.S.C. § 1983 and Bivens, a species of civil action unheard of when the Federal Rules and the system of notice pleading and broad, wide-ranging discovery were created in 1938. That pleading system arguably does not work with such “modern” litigation and Iqbal reflects the Court’s effort to make federal pleading and discovery rules more consistent and more functional with this particularly vulnerable area of new federal substance. Unfortunately, the greater detail demanded by the new pleading rules may be impossible in many civil rights cases, where plaintiffs cannot know or plead essential information with particularity at the outset without the benefit of discovery - discovery that Iqbal stands to deny to plaintiffs who fail to plead with the necessary detail. The predictable result, illustrated by one Ninth Circuit decision just two months after Iqbal, will be a significant decrease in enforcement and vindication of federal constitutional and civil rights. 

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Dollar Amount of Class Action Settlements Increased in 2009

Reuters reports that the amount of class action settlements rose in 2009.  The article states:

"The total dollar amount of settlements of U.S. class-action securities lawsuits rose 39 percent in 2009 and could rise further this year as cases stemming from the financial crisis wind on.

There were 103 settlements totaling $3.83 billion last year, up from 97 settlements totaling $2.75 billion in 2008, according to a study released on Wednesday by Stanford Law School and Cornerstone Research."

For more details about the rise in class action settlements as well as discussion about trends and predictions for the future, see here.

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Luppi & Parisi on Litigation and Legal Evolution

Professor Barbara Luppi (Universitå degli studi di Modena e Reggio Emilia Facolta di Economia) and Professor Francesco Parisi (University of Minnesota Law School) have posted "Litigation and Legal Evolution: Does Procedure Matter?" on SSRN.

The abstract states:

Gordon Tullock’s critique of the common law runs against much of the conventional wisdom in the law and economics literature. In this paper we revisit one of the most controversial aspects of Tullock’s critique. By applying Tullock’s own model of rent-seeking to litigation, we study the effect of alternative procedural rules on civil litigation. Our results provide support for Tullock’s controversial critique of the common law, revealing an evolutionary bias in the production of legal rules by courts. We extend the standard litigation model to study the effects of alternative procedural systems on the evolution of the common law.

~clf

Solimine on Ex Parte Young

Professor Michael E. Solimine (University of Cincinnati College of Law) has posted "Ex Parte Young: An Interbranch Perspective" on SSRN.  It is published in the University of Toledo Law Review.

The abstract states:

Ex parte Young (1908) is an honored icon of the federal courts canon, because it empowers federal courts to enforce the Constitution against the states. But it has had a strange and ironic career. It is not simply because the case was heavily criticized by liberals at the time, since it struck down Progressive Era legislation. Nor was it that liberals, decades later, resurrected the case to empower federal judges to enjoin discriminatory state action during the Civil Rights Era. It is also that the controversy over the decision engaged the critical response of the other branches of the federal government. This article, a contribution to a symposium on the centennial of Ex parte Young, addresses the waxing and waning of the case, focusing on the reaction of the other branches, a reaction that, in various ways, continued for many decades. Part I of the article discusses the varying litigation strategies of litigants, with different ideological agendas, who sought to utilize Ex parte Young-type relief throughout the twentieth century. Part II addresses the response of Congress to the decision, principally by the enactment of the three-judge district court to hear cases seeking that relief. Part III considers how the Executive branch, through the Department of Justice, has responded to the case and its progeny. The article concludes by situating the interbranch reaction to Ex parte Young in the literature on the various relationships and interactions between the courts, Congress, and the Presidency.

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Judge Hellerstein Rejects Proposed 9/11 First Responders' Settlement

The New York Law Journal reports here.  Judge Hellerstein indicated that the settlement formula was too complicated for each individual plaintiff and that the attorneys' fees (33% of each award) were too high.

This will be an interesting story to watch, as he seems to essentially be conducting a class action-style fairness hearing on a group of cases consolidated as an MDL.

RJE

Giesen on Burdens of Proof in European Tort Law

Ivo Giesen (Utrecht University) has posted The Reversal of the Burden of Proof in the Principles of European Tort Law: A Comparison with Dutch Tort Law and Civil Procedure Rules to SSRN.

Abstract:     
Although it is not one of its main features, the Principles of European Tort Law (PETL) have devoted some attention to the rules regarding the burden of proof in tort cases, especially to the possibility of a reversal of that burden. Since such a reversal of the burden of proof will be highly relevant for the substantive outcome of a tort case, one needs to be able to justify such a reversal on normative grounds. However, that justification is not always advanced clearly enough in the PETL. At the same time the PETL focus largely on the possible exceptions to the general rule on the burden of proof. As a result, the underlying general rule as such has not been codified. This paper analyses the burden of proof rules in the PETL not only from a more technical point of view, but also from the perspective of the possible influence they might have on the substantive outcome of tort cases. To highlight their content, importance and possible inspirational force for a future ‘European tort law,’ these Principles are contrasted with their counterparts under Dutch tort law. The aim is to answer the question whether the choices made in the PETL are justifiable and whether the Dutch tort system can – or maybe even should – seek inspiration from these Principles.

RJE

Vote of Egyptian Constitutional Court opens door for the appointment of women judges in Egypt

On Sunday, Egypt's Constitutional Court issued an opinion opening the door for the appointment of women judges in Egypt by reversing a previous decision by the General Assembly of State Council to exclude women from the judiciary.  The General Assembly had voted by an overwhelming majority in February to prohibit women from being given judicial appointments.  The Constitutional Court's decision came as a result of a "request for clarification" by Egyptian Prime Minister Ahmed Nazif.  The Constitutional Court voted that the general assembly did not have the power to decide the issue and that the decision about whether to appoint women judges is within the administrative committee's jurisdiction.

The administrative committee will take up the question next week.  If the administrative committee decides to approve women judicial candidates, then women would be eligible for judicial appointment by presidential decree following approval of the candidate by the administrative committee.

The Jordan Times reports about the Egyptian Constitutional Court's decision here.

~clf

Nagareda on Pre-Trial as Trial in Complex Litigation

Richard Nagareda (Vanderbilt University School of Law) has posted 1938 All Over Again? Pre-Trial as Trial in Complex Litigation to SSRN.

Abstract:     
This Essay for the Sixteenth Annual Clifford Symposium analyzes the transformation of the pre-trial process for complex civil litigation. Settlement, rather than trial, has emerged as the dominant endgame. As a result, in functional terms, the pre-trial phase effectively operates as the trial. Over the past quarter-century, doctrinal developments have shifted steadily backward within the pre-trial phase the major checkpoints for judicial scrutiny of claims. The key developments consist of the Supreme Court’s summary judgment “trilogy” (1986), the rise of Daubert scrutiny for the admissibility of expert testimony (1993), the elaboration of a distinctive law of class action certification (circa 2006) and, most recently, the invigoration of pleading standards in the Court’s Twombly and Iqbal decisions (2007 and 2009).

During the same period, an equally dramatic transformation has taken place with respect to litigation scholarship. Insights from economics, cognitive psychology, and finance – among other non-law disciplines – have broadened the vocabulary now available for analysis. Two big-picture points emerge from this literature: first, costs (especially, the ability to impose costs on one’s opponent) matter greatly to the choice whether to continue litigation or to settle; and, second, risk (or, more specifically, variance) matters in the pricing of civil claims via settlement, above and beyond calculations of expected value.

The emergence of judicial checkpoints in the pretrial phase has elicited considerable debate – most strikingly, today, over the Court’s pleading decisions. At one level, those decisions are rightly seen as pushing against the ethos of the 1938 reforms that put into place our modern notice-pleading regime. Yet, in a deeper historical sense, we actually find ourselves today in much the same position as the 1938 reformers. Today, as then, there is a lingering – but, often, undertheorized – sense that procedure itself is having an undue and even deleterious effect on the pricing of claims via settlement. It is just that the procedure now suspected to be distortive consists of the 1938 reforms. This Essay explains, in particular, how the Court’s attention to pleading standards in recent years marks a shift of emphasis from the regulation of variance in the litigation process to a concern over cost imposition.

The various pretrial checkpoints today exhibit a similar structural feature. They seek to manage variance or cost imposition by way of third-party judicial regulation – specifically, court rulings that signal “stop” or “go” on the road to trial. Evaluation of procedural doctrine as an enterprise of regulation opens up inquiry to the existence of other potential regulatory modes. This Essay concludes with examination of alternatives in the nature of first-party regulation (e.g., cost shifting) and regulation in the form of judicial action that would not be dispositive vis-à-vis trial but, rather, would seek to inform directly the pricing of claims in the settlement endgame.

RJE

Judicial Conference Approves More Free Access to Federal Court Documents

The National Law Journal's Blog of LegalTimes (BLT) reports here that the Judicial Conference voted to approve greater free access to federal court documents.  Under the new rule, members of the public will be able to have free access to up to ten dollars worth of documents each quarter. Previously, the public was allowed free access to ten dollars worth of documents in an entire year. This means that 75% of PACER users will have free access, while high volume users will continue to be charged.  In addition to the increased free access to documents through PACER, the Judicial Conference also voted to reduce the cost of obtaining digital recordings of certain court proceedings from $26 to a mere $2.40, and all federal courts that record their proceedings will be encouraged to make the recordings of their proceedings available for purchase.

~clf

Iqbal and Strange Bedfellows?

The Blog of the Legal Times is reporting an interesting development on the effort to legislatively overrule the Supreme Court's pleading decisions in Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly (see earlier coverage here, here, here, here, and here). The story Christian Group Joins Campaign on Pleading Standard begins: 

"The conservative Alliance Defense Fund is lining up in opposition to a pair of U.S. Supreme Court decisions that changed the standard for filing most civil lawsuits — a move that aligns the Christian litigation group with some unlikely allies."

For a copy of the Alliance Defense Fund's letter to Senate Judiciary Committee Chair Patrick Leahy, see here.

(Hat Tip: How Appealing)

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Spottswood on Hearings

Mark Spottswood (Northwestern) has posted on SSRN his article Hearings. Here's the abstract:

This article explores a constantly recurring procedural question: When is fact-finding improved by a live hearing, and when would it be better to rely on a written record? Unfortunately, when judges, lawyers, and rulemakers consider this issue, they are led astray by the widely shared - but false - assumption that a judge can best determine issues of credibility by viewing the demeanor of witnesses while they are testifying. In fact, a large body of scientific evidence indicates that judges are more likely to be deceived by lying or mistaken witnesses when observing their testimony in person than if the judges were to review a paper transcript of the testimony. Witness presence, in other words, may often harm, rather than improve, the accuracy of credibility assessments. The fact that legal actors value hearings for mistaken reasons does not mean that hearings have no value, but it does raise the concern that hearings will be employed when they are unneeded or even harmful, especially given the lack of available guidance on this question. In this article, I attempt to remedy this problem by providing a sound set of guiding principles concerning both the utility and the harms of live hearings.

Hearings will often, but not always, do more harm than good. In addition to the fact that demeanor cues generally impair, rather than aid, credibility judgments, there are a number of cognitive biases that may arise from having one’s first impressions of a witness be visual and auditory impressions. These include a persistent human tendency to trust or distrust witnesses based on their physical attractiveness, their social status, their race, or other features that may make them similar to, or different than, the fact-finder. On the flip side, hearings may help a judge make sense of confusing evidence. In addition, live hearings often feel fairer to participants than paper-based decisions, due in large part to the desire to have expressive input in decisions that affect us. And sometimes, a live hearing may be preferable for reasons of cost or practicality.

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Nash on Instrument Choice in Federal Jurisdiction

Jonathan Remy Nash (Emory University) has posted Instrument Choice in Federal Jurisdiction: Rules, Standards, and Discretion to SSRN.

Abstract:     
Congress and the federal courts have traditionally adopted rules, as opposed to standards, to establish the boundaries of federal district court jurisdiction. More recently, the Supreme Court has strayed from this path in two areas: federal question jurisdiction and admiralty jurisdiction. Commentators have generally supported the use of discretion in determining federal question jurisdiction, but they have not recognized the relationship to the rule-standard distinction, nor more importantly have they considered the importance of where discretion enters the jurisdictional calculus. In this Article, I argue that predictability and efficiency make it normatively desirable to have rules predominate jurisdictional boundaries, and thus to leave standards – through discretion – to dominate the landscape of abstention. I also argue that the effect of a standard-based jurisdictional boundary may be substantially replicated – to the extent that the metric is the ultimate question of whether the case will be heard in federal court – by having a rule determine the jurisdictional boundary and then giving the federal court discretion to abstain from exercising that jurisdiction, where the courts’ discretionary standard for abstention in the second setting closely resembles the standard used to define the jurisdictional boundary in the first setting. Given this substantial equivalence, migration of the standard from the jurisdictional boundary to abstention is normatively desirable.

RJE

Health Care Reform's Fate Hinges on Civil Procedure "Whiz"

This weekend's New York Times piece Parliamentarian in Role as Health Bill Referee begins with the following story from Alan S. Frumin's law school days:

"To his classmates, one trait stood out. He was a whiz at mastering the mind-numbing rules of civil procedure. Today, Mr. Frumin puts his procedural acumen to use as the parliamentarian of the United States Senate."

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(Hat Tip: Suzanna Sherry)

Nichol on Equal Access to the Civil Justice System

Professor Gene R. Nichol, Jr. (University of North Carolina School of Law) posted "Judicial Abdication and Equal Access to the Civil Justice System" on SSRN.  It will be published in Case Western Reserve Law Review.

The abstract states:

The massive chasm which exists between American claims of equal justice and the reality of a civil adjudication system that excludes millions because they can't afford to hire a lawyer is well known. This article explores one cornerstone of our national embarrassment - "poor people's justice" - the decisions and the obligations of judges. Judges - state and federal - shoulder a singular and defining role in creating, maintaining and assuring open, effective and meaningful access to the system of justice they administer. United States Supreme Court justices, inferior federal court judges, state supreme court justices, and state trial and appellate jurists work atop a massive, monopolistic, government-proffered, violence-secured system for the orderly resolution of civil disputes. They set, quite literally, the constitutive markers of legitimate judicial decision-making. But by ignoring the exclusion from our civil regime which occurs for those unable to afford counsel, American judges have abdicated this central mission.

~clf