Civil Procedure & Federal Courts Blog

Note on Approval and Rejection of Non-Class Settlements

Alexandra Rothman (Fordham Law Review) has posted a draft of her note Bringing an End to the Trend: Cutting "Approval"and "Rejection" Out of Non-Class Mass Settlement to SSRN.

Abstract:      
In March 2010, Judge Alvin K. Hellerstein of the U.S. District Court for the Southern District of New York rejected a mass settlement between the City of New York and the 9/11 first responders and rescue workers. The settlement was not a class action but some ten thousand cases aggregated for efficiency purposes. Nonetheless, Hellerstein, invoking the spirit of Rule 23(e) of the Federal Rules, which provides for judicial approval of settlement in class actions, decided that the settlement was not enough. Hellerstein’s actions inspired a debate over whether judges have the authority to approve or reject settlements absent class certification. This Note continues this discussion, and in doing so, contends that the 9/11 “rejection” was part of a larger trend of judges “approving” non-class mass settlements, even though the Federal Rules do not sanction such conduct. In presenting this trend, this Note discusses three examples of non-class action, multidistrict litigation before turning to the 9/11 settlement. This Note concludes that judicial “approval” and “rejection” of settlement, although a pragmatic response to the burdens of mass litigation, is inconsistent with the Federal Rules and adversarial system, and therefore, courts should bring an end to this practice. 

RJE

New article argues for application of state summary judgment standards in diversity cases under Stevens’ view in Shady Grove

In Shady Grove, the Rules Enabling Act, and the Application of State Summary Judgment Standards in Federal Diversity Cases, forthcoming in St. John’s Law Review, Professor Matthew Lyon of Lincoln Memorial University Duncan School of Law argues:

that Justice Stevens’ concurring opinion in Shady Grove (which, following the “narrowest grounds” rule of Marks, is the controlling precedent on the section 2072(b) issue) has revived the possibility that a Federal Rule that otherwise controls the issue in dispute might be invalidated under the REA as abridging, enlarging, or modifying a substantive right.  This is the view taken by a number of post-Shady Grove lower court decisions discussed in the article.  The specific “substantive right” on which the article focuses is that conferred by states with more liberal summary judgment standards than the federal standard.  Ultimately, it is plausible that Shady Grove may open the door to the application of state summary judgment standards by courts sitting in diversity. 

The SSRN cite is here.

--PHM

Ninth Circuit Minces No Words on Supreme Court’s Pleading Jurisprudence

Judge Fletcher of the Ninth Circuit recently upheld a pro se prisoner’s complaint for supervisory liability for deliberate indifference to the dangers of violent attack in county jail.  Starr v. Baca, 2011 WL 2988827 (9th Cir. July 25, 2011).  

The court traced the history of notice pleading from 1938, and then continued:

In several recent cases, without benefit of statute, the Supreme Court has applied what appears to be higher pleading standard under Rule 8(a) [citing Dura Pharmaceuticals, Twombly, and Iqbal].  . . . In two cases decided during roughly the same period, the Court appears to have applied the original, more lenient version of Rule 8(a) [citing Swiekiewicz and Erickson]. . . .

The juxtaposition of Swierkiewicz and Erickson, on the one hand, and Dura, Twombly, and Iqbal, on the other, is perplexing. Even though the Court stated in all five cases that it was applying Rule 8(a), it is hard to avoid the conclusion that, in fact, the Court applied a higher pleading standard in Dura, Twombly and Iqbal.

But whatever the difference between these cases, we can at least state the following two principles common to all of them. First, to be entitled to the presumption of truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively. Second, the factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation. . . .

Viewed in the light of all of the Supreme Court's recent cases, we hold that the allegations of Starr's complaint satisfy the standard of Rule 8(a). We do not so hold merely because Starr's complaint, like the complaint in Erickson, alleges deliberate indifference in violation of the Eighth and Fourteenth Amendments. Rather, we so hold because his complaint complies with the two principles just stated.

Judge Trott, relying primarily on Iqbal, dissented.

Do Your Students Think Discovery Is Boring?

From Elie Mystal (Above The Law) comes the story Beverly Hills Brawl: Escape From The Deposition Room! It begins:

Have you ever been to a deposition that got physical? Maybe some fisticuffs, or a little shoving? No? Well, obviously you’ve been hanging out in the wrong conference rooms. A complaint filed in Santa Monica Superior Court and reported on by Courthouse News Service accuses a Drinker Biddle partner of “robust, unlawful force” that resulted in opposing counsel breaking his wrist.

The story includes excerpts from the deposition transcript as well.

--A

Buehler on Nicastro

Professor Dustin Buehler (Arkansas-Fayetteville) has posted on SSRN a draft of his article, Economic Evolution, Jurisdictional Revolution. Here’s the abstract:

In June 2011, the Supreme Court issued its first personal jurisdiction decision in two decades. In J.McIntyre Machinery, Ltd. v. Nicastro, the Court considered whether the placement of a product in the “stream of commerce” subjects a nonresident manufacturer to personal jurisdiction in states where the product is distributed. The Court issued a fractured opinion with no majority rule, with some justices expressing reluctance to “refashion basic jurisdictional rules” without additional information on “modern-day consequences.” This Article explores the consequences of these rules by providing the first law-and-economics analysis of personal jurisdiction. A descriptive analysis of the effect that jurisdictional rules have on litigation incentives demonstrates that rules restricting personal jurisdiction decrease the number of lawsuits, and increase the likelihood that injurers will escape liability and be inadequately deterred. Additionally, a normative analysis of the stream of commerce doctrine shows that a broad version of that doctrine best aligns the private and social incentives of litigation. Based on these conclusions, the Article argues that it is time for a revolution in personal jurisdiction: the Supreme Court should allow expansive jurisdiction over nonresident manufacturers in product liability cases.

--A

NPR's Take on Patents: Politicizing Litigation

I don't usually use this forum for editorializing, but I posted the following to Prawfsblawg, and I thought that the radio program might be of interest to our readers:

I absolutely adore the NPR program This American Life.  I wait for the new episode every weekend.  I laugh.  I cry.  I congratulate myself for donating to WBEZ Chicago.  But I must say that I was disappointed by this week's episode, When Patents Attack.  Perhaps disappointed is the wrong word, but definitely puzzled.

The episode was reported by Laura Sydell and Alex Blumberg who is also a co-host of Planet Money -- an NPR podcast I like so much that I have assigned several episodes to my International Business Transactions students.  The hour-long episode is devoted to the evils of patent trolls and the destructive litigation that they bring.  

Now, I'm not an IP attorney, so I'll try to steer clear of commenting on the story from a patents perspective.  But what I found interesting about the reporting was the political take.  The reporters begin and end from an unapologetic stance that patent litigation is destructive (and believe me, there is no love for lawyers in this story).  They are entirely dismissive of the idea that patents in the high-tech world promote and protect innovation.  This is a perfectly reasonable position to take -- I've seen it done plenty in scholarly commentary and the mainstream press.  I've also seen the opposing position defended.  

What bothered me was the very hostile take on litigation.  The talking points about meritless litigation and nuisance lawsuits could have been taken word for word from the tort reform lobby.  If this had been a story about the ability of plaintiffs to stand on their rights to sue big corporations for just about anything else (antitrust, employment discrimination, personal injury, consumer rights), my guess is that it would have been a story about how bad, bad corporate defendants work to keep plaintiffs out of court.  

I was also unimpressed by the tone of the reporting.  Sydell and Blumberg purported to uncover a massive chain of shady deals and holding companies, which appeared to me to just be normal ways of conducting transactions, not a reason to indict (or approve)  the underlying asset being transferred.  They also cited statistics such as "80% of software engineers surveyed believe that the patent system hinders innovation rather than promotes it."  But this doesn't prove much -- it simply reflects what software engineers believe, and tells us nothing about how they actually behave.  Good economists and social scientists can answer that question with much better data.  The use of such figures again harkens back to the talking points of the tort reform folks who will tell you that surveys of judges and lawyers reveal massive discovery abuse.  In fact, studies of actual discovery practices show a very different picture.  For those interested in more about these facts, Linda Mullenix has several great articles about this.

Finally, the story didn't do much in the way of discussing the issues of ex ante or ex post patent enforcement.  They mention the number of redundant patents and hammer home the idea of a litigation-heavy environment, but did very little to explore the idea that the U.S. has made a regulatory choice to have a relatively relaxed patent approval regime reliant on ex post private enforcement.  Would an approach which requires vigorous and expensive prosecution of patents ex ante have more or less of a chill on innovation?  We would never know from this story that this is even a question that one should ask about a regulatory and adjudicatory system.  

It is an interesting topic and an interesting story, but falls short of some of the better reporting that I expect from the TAL and Planet Money teams.  It also reinforces that pursuit of a political agenda or conclusion in one arena (high tech innovation) might not suit your tastes in another, namely larger issues of court access, litigant behavior, agency design, and regulatory enforcement.

RJE

Faculty Hiring Announcement: University of Oxford

From SSRN's Legal Scholarship Network comes the following announcement:

University of Oxford, Faculty of Law
Fixed - Term Three-Year Departmental Lecturership in Civil Procedure

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SDNY Dismisses Class Action Claim under Illinois State Law, Distinguishing Shady Grove

            The SDNY recently considered a motion to dismiss the third amended class-action complaint alleging federal and state antitrust violations by major record labels in selling music over the internet.  In re Digital Music Antritrust Litigation, 2011 WL 2848195 (S.D.N.Y. July 18, 2011, No. 06 MD 1780). 

            Plaintiffs had added a claim under Illinois antitrust law on behalf of all Illinois-resident indirect purchasers.  The Illinois statute at issue authorized a suit for damages by an injured private party, but provided that only the State Attorney General, not a private party, could “maintain a class action in any court of this State for indirect purchasers asserting claims under this Act.”

            Applying Shady Grove Orthopedic Assoc. v. Allstate Ins. Co., 130 S. Ct. 1431 (2010), the court first concluded that Rule 23 applied to the situation, but reached a different conclusion from Shady Grove on whether Rule 23 in this instance “abridge[d], enlarge[d], or modif[ied] a substantive right.”  As to that question, the court held that Justice Stevens’ concurrence in Shady Grove formed the “narrowest grounds” and was therefore controlling over Justice Scalia’s plurality opinion.  

            Under Justice Stevens’ analysis of §2072(b), then, the court held:

[The Illinois indirect-purchaser] statute provides a procedure that is “so bound up with the state-created right or remedy that it defines the scope of that substantive right or remedy.” Shady Grove, 130 S.Ct. at 1450 (Stevens, J., concurring in part and concurring in the judgment). Therefore, applying the federal rule to override this process would be “an application of a federal rule that effectively abridges, enlarges, or modifies a state-created right or remedy” and is disallowed. Id. at 1451. Unlike the New York law at issue in Shady Grove, its limitation is not contained in a generally applicable procedural rule but, rather, in the same paragraph of the same statute that creates the underlying substantive right. In re Wellbutrin, 756 F.Supp.2d at 677. It applies only to that statute. Id. “Furthermore, courts have observed that the Illinois statute represents a policy judgment as to the feasibility of managing duplicative recovery, which the legislature has entrusted to the Attorney General but not to individual indirect purchasers.” Id. That policy judgment is substantive.

            Thus, the court dismissed plaintiffs’ claim on behalf of indirect purchasers under Illinois law.  (Numerous other claims, however, remain pending.)

--PHM

Tennessee Supreme Court Declines to Adopt “Plausibility” Pleading Standard

            Yesterday, the Supreme Court of Tennessee refused to adopt Twombly and Iqbal for Tennessee state court pleading, and upheld an amended complaint for retaliatory discharge against a motion to dismiss for failure to state a claim.  Webb v. Nashville Area Habitat for Humanity, Inc., 2011 WL 2905584 (Tenn. No. M2009-01552, July 21, 2011).    

            After reviewing much of the law review literature on Twombly and Iqbal, the court concluded:

In summary, it must be remembered that we are addressing the standard in assessing the sufficiency of a single document filed at the very beginning of a case—the complaint. Our motion-to-dismiss jurisprudence reflects the principle that this stage of the proceedings is particularly ill-suited for an evaluation of the likelihood of success on the merits or of the weight of the facts pleaded, or as a docket-clearing mechanism. Rule 8.01 has not been amended and still only requires “(1) a short and plain statement of the claim showing that the pleader is entitled to relief, and (2) a demand for judgment for the relief the pleader seeks.” We decline to reinterpret Rule 8 to require a pleader to demonstrate “plausibility” and continue to adhere to the well established standards set forth in section 1 of this opinion [which cited Tennessee’s policy of “liberal notice pleading” and its adherence to the “no set of facts” standard].

 --PHM

ABA Responds to Senator’s Questions About Student Debt, Law School Accreditation

            The ABA sent a memorandum on July 20 to Senator Grassley (posted on the ABA web site here) responding to the Senator’s 31 written questions posed earlier this month. 

            The story is reported in the National Law Journal here.

--PHM

Zamir and Ritov on the Burden of Proof in Civil Litigation

Professors Eyal Zamir (Hebrew University) and Ilana Ritov (Hebrew University) have posted on SSRN a copy of their article, Loss Aversion, Omission Bias, and the Burden of Proof in Civil Litigation.  Here is the abstract:

The basic rule in civil litigation is that the plaintiff carries the burden of proof and the general standard of proof is preponderance of the evidence. The plaintiff prevails if she establishes her case with a probability exceeding 0.5. Drawing on insights from behavioral economics and new experimental findings, this paper makes the following arguments: 1. Since litigants tend to take the status quo as the pertinent reference point, erroneous dismissal of a claim is likely to be perceived as denying the plaintiff deserved gains, and erroneous acceptance of a claim perceived as inflicting undeserved losses on the defendant. Loss aversion thus provides a powerful justification for placing the burden of proof on the plaintiff; 2. Ceteris paribus, inasmuch as the law strives to minimize the total costs of erroneous judicial decisions, loss aversion calls for setting the standard of proof considerably higher than 51%; 3. Notwithstanding the formal rule of 51%, behavioral insights and experimental findings lend support to the hypothesis that the actual standard of proof in civil litigation is higher than 51%. This phenomenon is likely due to factfinders’ omission bias. Burden of proof is not a mere tiebreaker; it sets a reference point and creates a default effect.

--A

Keitner on Corporate Alien Tort Cases

Chimene Keitner (Hastings College of the Law) has posted The Politics of Alien Tort Cases to SSRN.

Abstract:      
This very brief symposium contribution considers recent developments relating to corporate liability for international law violations under the Alien Tort Statute, including the Second Circuit's decisions in Presbyterian Church of Sudan v. Talisman and Kiobel v. Royal Dutch Petroleum. Ultimately, the political branches bear responsibility for weighing competing considerations and developing a regulatory framework for corporate liability that takes into account multiple intersecting policy goals. In the meantime, federal judges will continue to grapple with the implications of corporate ATS cases in their courtrooms. In so doing, they should be wary of modifying doctrine in response to policy considerations in corporate ATS cases that could have unintended negative consequences for ATS cases against individuals, or for other cases involving the interpretation and application of international law.

RJE

Silberman on Morrison v. National Australia Bank

Professor Linda Silberman (NYU) has posted on SSRN a copy of her article, Morrison v. National Australia Bank: Implications for Global Securities Class Actions, which appears in the Swiss Yearbook of Private International Law.  The article concludes:

The bright-line rule in Morrison is the right proxy for application of the securities laws and best accommodates the regulatory interests of the U.S. and other countries. In a class-action lawsuit, a significant U.S. investor presence generates necessary incentives for private plaintiffs’ attorneys to bring a class-action lawsuit, irrespective of the presence of foreign investors in the class. Indeed, an exchange-based rule aligns the appropriate incentives for plaintiffs’ lawyers that will allocate litigation resources to fraud most likely to harm U.S. investors. Under this approach, plaintiffs’ lawyers will pursue suits where there is a significant U.S. trading presence rather than one where there is only limited U.S. trading but a large global class. It is also consistent with the expectations of the parties.

Whether this result should be mirrored globally is less clear. Perhaps transnational global classes that are able to take into account the substantive standards of different regulatory regimes are workable internationally, perhaps on a regional basis where greater harmonization and consensus about procedures exist. What is undoubtedly called for, however, is greater international cooperation, which could take the form of increased regulatory cooperation or perhaps even an international treaty.

--A

Louisiana Federal District Court Dismisses RICO Claims Against BP

The story is reported in JURIST here.

--PHM

First Circuit Upholds Specific Jurisdiction Over Israeli Citizen in Contract Case

In one of the first federal Court of Appeals cases to cite both Goodyear and Nicastro, the First Circuit has upheld the exercise of personal jurisdiction by the District of Massachusetts over an Israeli business manager formerly employed by the plaintiff, who was the U.S. owner of a company with an office in Massachusetts.  Adelson v. Hananel, 2011 WL 2698330 (1st Cir. July 13, 2011). 

The parties disputed the compensation terms of an oral contract.  After a full trial on the merits resulting in a judgment for the plaintiff employer, defendant appealed the lower court’s finding of specific personal jurisdiction as well as the merits rulings.

Defendant was “a native, citizen, and resident of Israel,” and was based in the employer’s Israel office.  He had visited Massachusetts only twice (once before entering into the employment contract), but had frequent communications with a Massachusetts company related to his employer, and funding for the Israeli office came through Massachusetts.  Defendant’s budgets were “routinely faxed to the office in Massachusetts.”  He “sought this employment contract with a company whose key officers were all located in Massachusetts,” according to the court, and hence demonstrated purposeful availment of the privilege of conducting business in Massachusetts.

The case is factually distinct from either Goodyear or Nicastro, as it involves neither “stream of commerce” nor general jurisdiction.  The court cited the two recent Supreme Court cases, but apparently did not think they merited a reexamination of the personal jurisdiction analysis in an international contract case.

--PHM

Shapiro on Ex Parte Young

Professor David Shapiro (Harvard) has posted on SSRN his article, Ex Parte Young and the Uses of History, which appears in the NYU Annual Survey of American Law.  Here is the abstract:

Ex parte Young, an iconic decision that recently celebrated its centennial, was not very well-received at birth but most scholars, now and in the recent past, agree that the case was correctly decided. Yet the range of justifications for the result, and the analyses of its implications, are strikingly diverse. (The disagreements about its significance are exemplified by the three opinions in the Supreme Court’s recent decision in Va. Office for Prot. & Advocacy v. Stewart.)

How can such a range of views exist about so famous and esteemed a decision – a debate that extends to such matters as its rationale, its novelty, and even the proper characterization of its holding, the lessons it teaches about state-federal relations, and the proper role of the federal courts? And what, if anything, does this tell us about the nature of legal scholarship? These are the questions addressed in this article. Briefly stated, the conclusions reached are that over-reading of the case by scholars and courts has led to a backlash in which the case has been undervalued, and that arguments about what the case “really” stands for tend to mask more important questions about both the substance and the process of constitutional interpretation.

--A

HBO Documentary To Follow Five Years in Environmental Case

An HBO documentary, Mann v. Ford, will air Monday, July 18, 2011, at 9:00 p.m. Eastern time.  It follows a mass action filed in 2006 arising out of the alleged negligent toxic poisoning of the Ramapough Mountain Indians’ land from the Ford assembly plant in Mahwah, N.J. 

A synopsis of the film is here http://www.hbo.com/#/documentaries/mann-v-ford/synopsis.html on the HBO web site.

--PHM

Zimmerman on Agency-Based Aggregate Settlements

Adam Zimmerman (St. John's University School of Law) has a great post over at the Reg Blog on procedural protections in aggregate agency-based settlements.  From the post:

"agency settlements may frustrate court access just like class actions. Agency settlements may “crowd out” private litigation by exhausting the limited funds of a defendant, requiring that the claimants waive rights to sue, or simply foreclosing class action litigation. In addition, like private class counsel, agencies may have conflicts with the victims they compensate. Agencies may succumb to capture by the businesses they regulate, seek quick settlements to resolve embarrassing missteps in regulatory policy, or lack incentives and input to address victims’ interests."

RJE

Koppel on Shady Grove

Professor Glenn Koppel (Western State University) has posted on SSRN a draft of his article, The Fruits of Shady Grove: Seeing the Forest for the Trees, which is forthcoming in the Akron Law Review.  Here is the abstract:

In piecing together the fragments of the Supreme Court’s 2010 decision in Shady Grove Orthopedic Associates v. Allstate Insurance Company, the Court’s most extensive treatment of, “Erie/Hanna,” issues since Gasperini unsettled the doctrinal waters 14 years earlier, this symposium article finds, in Justice Stevens’ pivotal concurrence that lies at the Court’s center between the plurality and the dissent, a principled Middle Way to guide the Court in calibrating the balance of power in judicial federalism between the federal courts’ interest in procedural uniformity and the states’ interest in uniform intra-state enforcement of their substantive policies. Shady Grove augurs a return to a modified formalist approach to interpreting procedural rules that recognizes a normative difference between, “procedure,” and, “substance,” and that accords considerable, but not determinative, weight to the text of rules to achieve greater predictability in the uniform application of the Federal Rules.

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Senator Grassley Asks the ABA to Answer 31 Detailed Questions By July 25

            Chuck Grassley (R-Iowa), Ranking Member of the Judiciary Committee, sent a letter on July 11 to ABA President Stephen Zack “to express concern after reading a June 9, 2011 article in The Chronicle of Higher Education that reported that the American Bar Association (ABA) 'was found to be out of compliance with 17 regulations, including the need to consider student-loan default rates in assessing programs.'”  He continued: 

My concern is that the ABA, which has the power to accredit law schools, was barely granted renewed recognition by the U.S. Department of Education’s accreditation experts. Moreover, in the eyes of the National Advisory Committee on Institutional Quality and Integrity, the ABA appears to be doing little to assess student-loan default rates in its law school accreditation process. 

The New York Times also addressed similar issues in an April 30, 2011 article regarding what many law students interviewed by the New York Times referred to as a “bait and switch” practice regarding merit-based scholarships.  According to the New York Times, ABA accredited law schools “offer more scholarships than [they] plan to renew[.]”  One result of this practice is that many law students lose their merit-based scholarships after their first year because they failed to maintain a certain grade-point average.  The New York Times articles raised concerns that some schools appear to set their grading curves in a manner which results in a large number of students losing their merit-based scholarships.

(Footnotes omitted.)

            Senator Grassley then requested that the ABA provide written answers to 31 questions by July 25, 2011.  The questions relate mainly to student financial issues such as student scholarships, loan repayment education programs, and programs to prevent default on student loans.            

            Some of the questions, though, relate to the number of law schools that the ABA has accredited in the last 20 years, as well as the qualifications of the accreditation committee members. 

            Another article about Senator Grassley’s letter appears in the National Law Journal today.

--PHM