Civil Procedure & Federal Courts Blog

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

Toyota Shareholder Judge Declines to Exercise Supplemental Jurisdiction

In the Toyota shareholder litigation, the plaintiffs have had trouble maintaining a sizable lawsuit in federal court.  Last year, the Supreme Court ruled that plaintiffs do not have standing to bring federal securities law claims for shares that were bought on a foreign exchange.  (Morrison v. National Australia Bank).  The Toyota plaintiffs responded to this development by amending their complaint to add claims under Japanese law.  The district judge hearing the case, however, declined to exercise supplemental jurisdiction to hear these claims because they would "substantially predominate" over the remaining federal claims in the case.

The National Law Journal has further coverage here.

RJE

Another Decision of Interest on the Alien Tort Statute: Flomo v. Firestone (7th Cir.)

Hot on the heels of last week’s D.C. Circuit decision on corporate liability under the Alien Tort Statute, the Seventh Circuit issued a decision today in Flomo v. Firestone Natural Rubber Co. (No. 10-3675). The opinion by Judge Richard Posner begins:

This suit under the Alien Tort Statute, 28 U.S.C. § 1350, pits 23 Liberian children against the Firestone Natural Rubber Company, which operates a 118,000-acre rubber plantation in Liberia through a subsidiary; various Firestone affiliates and officers were also joined as defendants. . . . The plaintiffs charge Firestone with utilizing hazardous child labor on the plantation in violation of customary international law. The Alien Tort Statute confers on the federal courts jurisdiction over “any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” The principal issues presented by the appeal are whether a corporation or any other entity that is not a natural person (the defendant is a limited liability company rather than a conventional business corporation) can be liable under the Alien Tort Statute, and, if so, whether the evidence presented by the plaintiffs created a triable issue of whether the defendant has violated “customary international law.”

--A

(Hat Tip: Howard Bashman)

Thoughts on the Federal Judiciary Committee’s study of 12(b)(6) motions after Iqbal

            As most of you know, the FJC released its study comparing 12(b)(6) motions in 2006 and 2010 in March 2011.  Overall, the study takes the view that the empirical effect of Iqbal has been modest.  As I mentioned in a previous post, some are emphasizing the finding that the FJC found no increase in the rate of grants of motions without leave to amend. 

            I have an updated quantitative study coming out in the University of Richmond Law Review in the fall.  My study concludes that Iqbal has had a significant effect not only on the rate of granting 12(b)(6) motions with leave to amend (a finding shared by the FJC), but also without leave to amend.  Another finding of my updated study is that a case is 1.74 times more likely to be entirely dismissed upon the granting of a 12(b)(6) motion under Iqbal than under Conley.  The FJC reached a different result on a similar question.     

            Richmond accepted this article before the FJC results came out, and I am reworking it over the summer to incorporate a review of the FJC results and a comparison with my own.  The draft of the Richmond article on my SSRN page does not contain these revisions yet.  I welcome all comments!

            I wanted to limit the length of this post.  Please contact me for a fuller version of these preliminary remarks.             

            1.  Database inclusions and exclusions.  Here are the major differences between the FJC's database and the database for my updated study:

Table 1

FJC Study and Hatamyar Study Database Parameters

Database parameter	FJC	Hatamyar
Time period	Two separate six-month periods (January to June 2006 and January to June 2010)	A five-year continuous period (May 22, 2005 to May 18, 2010)
Number of cases	1,922	1,333
Number of U.S. district courts	23	86
Method of retrieval	CM/ECF codes in 23 district courts; translation of PDF documents to text; electronic search.	Electronic searches of Westlaw DCT database.
Pro se plaintiffs, including prisoner and non-prisoner	Not included	Included
12(c) motions	Not included	Included
12(b)(6) motions directed to counterclaims	Not included	Included
Motions decided under Rule 9(b) (fraud) or the PSLRA	Included	Not included
District court reviews of motions decided by magistrates	Not included	Included
MDL cases	Not included	Included

             

            II.  Results.  Table 2 compares the overall results of the two studies, removing all pro se plaintiffs from the calculations for my database so as to approximate the FJC's.

Table 2

Comparison of FJC and Hatamyar Overall Results, Represented Plaintiffs Only

Denied				Granted at least in part
FJC		Hatamyar		FJC		Hatamyar
2006	2010	2006	2010	2006	2010	2006	2010
34%	25%	34%	27%	66%	75%	66%	73%
(239)	(305)	(51)	(46)	(461)	(916)	(98)	(123)

Notes:  The FJC figures include only orders entered in 23 districts from January through June 2006 and January through June 2010.  The Hatamyar figures include orders entered in 86 districts in all of calendar year 2006 and from January through June 2010.   

            Overall, as shown in Table 2, the two studies are close in their overall percentages, when looking at represented plaintiffs only.  First, even when the plaintiff was represented, both studies found a significant increase, from 2006 to 2010, in the percentage of 12(b)(6) motions granted at least in part – from 66% to 75% in the FJC study, and from 66% to 73% in my study.  Second, both studies found that 12(b)(6) motions were denied in 34% of cases in 2006 in which the plaintiff was represented by counsel. 

            A comparison of these results may shed some light on the debate as to whether cases reported in Westlaw fairly represent the “universe” of cases.  My database included only cases reported in Westlaw, and the FJC’s database included cases gleaned as thoroughly as possible from the courts’ electronic filing records.  Yet both my study and the FJC’s found the same percentage – 34% -- of motions denied in 2006.  I think that these results may tend to disprove the hypothesis advanced by the FJC that published cases are more likely to report the grant of a 12(b)(6) motion to dismiss than unpublished cases.  Further, in 2010, the percentage of motions granted at least in part (in cases with represented plaintiffs) was actually higher in the FJC study (75%) than in my study (73%), which was based solely on cases reported in Westlaw.  This is the opposite of what one would predict if grants of 12(b)(6) motions were more likely to be published than denials.    

            The real divergence in the results of the two studies is seen when considering pro se plaintiffs, which the FJC omitted from its study.  This is shown in Table 3.

Table 3

Comparison of FJC and Hatamyar Results:

Both Represented and Pro Se Plaintiffs Included in Hatamyar Results

Denied				Granted at least in part
FJC		Hatamyar		FJC		Hatamyar
2006	2010	2006	2010	2006	2010	2006	2010
34%	25%	27%	20%	66%	75%	73%	80%
(239)	(305)	(58)	(48)	(461)	(916)	(157)	(189)

Notes:  The FJC figures include only orders entered in 23 districts from January through June 2006 and January through June 2010 and include only cases in which the plaintiff was represented by counsel.  The Hatamyar figures include orders entered in 86 districts in all of calendar year 2006 and from January through June 2010, and include both represented and pro se plaintiffs.  

            Finally, I ran some logistic regressions in an attempt to limit my database so as to more closely approximate that of the FJC.  The FJC reports the rulings as an initially binary choice (deny vs. grant at least in part), so I recoded the rulings in my database to either “denied” or “granted at least in part.”  In addition, I limited the database, as did the FJC, to cases in which the plaintiff was represented by counsel and that were decided by a district court judge. 

            First, I used all the cases in my database from 2005 to 2010, except as otherwise limited above.  The results indicate that even taking out the pro se cases, the odds of a court granting a 12(b)(6) motion, at least in part, as compared to denying the motion, were expected to be 1.79 times greater under Iqbal than under Conley (p = 0.002), all other variables held constant.

            Second, I used only the cases in my database from 2006 (Jan to Dec) and from 2010 (Jan to May 18), and otherwise limited as described above (no pro se, no magistrate judges).  Here, the results indicate that even leaving out the pro se cases, the odds of a court granting a 12(b)(6) motion, at least in part, as compared to denying the motion, were expected to be 1.92 times greater in 2010 than in 2006 (p = 0.013), all other variables held constant. 

 

Decision of Interest: Ninth Circuit on the Class Action Fairness Act

The Ninth Circuit’s recent decision in Westwood Apex v. Contreras (No. 11-55362), 2011 WL 1744960, considers which kinds of defendants may remove a class action to federal court under the Class Action Fairness Act’s removal provision (28 U.S.C. § 1453(b)). The opinion by Judge Milan Smith begins:

The Class Action Fairness Act of 2005 (CAFA), Pub. L. No. 109-2, 119 Stat. 4, confers federal jurisdiction over class action lawsuits where the amount in controversy exceeds $5,000,000 and the adversaries are minimally diverse. When a class action satisfying these conditions is filed in state court, Section 5 of CAFA provides that “such action may be removed by any defendant without the consent of all defendants.” 28 U.S.C. § 1453(b). In this appeal, we address whether CAFA Section 5, 28 U.S.C. § 1453(b), allows a party joined to an action as a defendant to a counterclaim (an additional counterclaim defendant) to remove the case to federal court. We hold that § 1453(b) does not permit additional counterclaim defendants to remove an action to federal court, and we affirm the district court’s decision to remand this case to state court.

The court explains:

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D.C. Circuit Decision in Doe v. Exxon Mobil: The Alien Tort Statute, Justiciability, Standing and More

Today the U.S. Court of Appeals for the D.C. Circuit handed down its decision in Doe v. Exxon Mobil Corp. (No. 09-7125). The panel splits 2-1, with Judge Rogers writing the 112-page Opinion for the Court (joined by Judge Tatel) and Judge Kavanaugh writing a 39-page dissent. The majority opinion begins:

Pursuant to a contract with the Indonesian government, Exxon Mobil Corporation, a United States corporation, and several of its wholly owned subsidiaries (hereinafter “Exxon”) operated a large natural gas extraction and processing facility in the Aceh province of Indonesia in 2000–2001. Plaintiffs-appellants are fifteen Indonesian villagers from the Aceh territory. Eleven villagers filed a complaint in 2001 alleging that Exxon’s security forces committed murder, torture, sexual assault, battery, and false imprisonment in violation of the Alien Tort Statute (“ATS”) and the Torture Victim Protection Act (“TVPA”), and various common law torts. (The Doe I complaint.) Four other Aceh villagers alleged in 2007 that Exxon committed various common law torts. (The Doe VIII complaint.) All plaintiffs-appellants allege that Exxon took actions both in the United States and at its facility in the Aceh province that resulted in their injuries. The district court dismissed the statutory claims, see Doe I v. Exxon Mobil Corp., 393 F. Supp. 2d 20 (D.D.C. 2005), and discovery proceeded on the tort claims. Those claims, however, were subsequently dismissed for lack of prudential standing. See Doe VIII v. Exxon Mobil Corp., 658 F. Supp. 2d 131 (D.D.C. 2009). Plaintiffs-appellants challenge the dismissals of their complaints and Exxon filed a cross-appeal, inter alia raising for the first time that as a corporation it was immune from liability under the ATS.

For the reasons that follow, we conclude that aiding and abetting liability is well established under the ATS. We further conclude under our precedent that this court should address Exxon’s contention on appeal of corporate immunity and, contrary to its view and that of the Second Circuit, we join the Eleventh Circuit in holding that neither the text, history, nor purpose of the ATS supports corporate immunity for torts based on heinous conduct allegedly committed by its agents in violation of the law of nations. We affirm the dismissal of the TVPA claims in view of recent precedent of this court. We conclude, however, that Exxon’s objections to justiciability are unpersuasive and that the district court erred in ruling that appellants lack prudential standing to bring their non-federal tort claims and in the choice of law determination.

More coverage at Associated Press (Mark Sherman), Blog of the Legal Times (Mike Scarcella), How Appealing (Howard Bashman), and Volokh Conspiracy (Jonathan Adler).

--A 

Hot Off The Presses: Recent Articles Of Interest

With a hat tip to the Current Index to Legal Periodicals, here are some recent articles that may be of interest:

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Luff on Litigation as Regulatory Gap-Filler

Professor Patrick Luff (Washington & Lee) has posted on SSRN a draft of his article, Risk Regulation and Regulatory Litigation on SSRN. Here’s the abstract:

Since at least the 1960s, when Congress enacted civil rights statutes that provided for private enforcement, courts have been hotbeds of public policy. Only recently, however, has this phenomenon been recognized for what it is: courts have become essential actors in the regulatory state. What little scholarship there is on the use of courts to achieve regulatory ends is often heavy on rhetoric, but short on theory. While commentators have been quick to criticize the phenomenon of regulatory litigation, they have done little to determine what it actually is. As a result, the young field of regulatory litigation lacks fundamental theoretical discussions necessary for the fruitful development of the field. This article fills the gaps in the theoretical literature in three ways. First, this article presents the theory that regulatory litigation has developed to address the gaps between socially demanded levels of risk regulation and the amount of risk protection actually provided by the state. Second, this article collects and analyzes the scholarship to date that attempts to find the line that divides regulatory from non-regulatory litigation, and explains how and why previous definitions of regulatory litigation have fallen short. Finally, this article presents a theoretical discussion of the nature of regulatory litigation that distinguishes between top-down regulation through statutory promulgation and bottom-up regulation that occurs through the remedial choices made by litigants and judges.

--A

SCOTUS Cert Grant of Interest: Mims v. Arrow Financial

Last week the Supreme Court granted certiorari in Mims v. Arrow Financial Services LLC (No. 10-1195), which presents the question: Did Congress divest the federal district courts of their federal-question jurisdiction under 28 U.S.C. § 1331 over private actions brought under the Telephone Consumer Protection Act?

SCOTUSblog’s case file is available here, which contains links to the Eleventh Circuit’s opinion below and the cert-stage briefs.

--A

ABA Annual Meeting in Toronto August 4-9

The American Bar Association will hold its annual meeting in Toronto from August 4-9 (announcement).

The schedule of programs reveals that there are several comparative programs on Canadian law (Trial Practice and Tactics in Canada and the United States; Calculating Damages in an Employment Case: Strategies for the Canadian and U.S. Litigant; Resolving Construction Disputes in the U.S. and Canada; and numerous others).

Naturally, there is a program on “Class Actions after Wal-Mart v. Dukes.”

--PHM

Kochan On Iqbal And The Word "Conclusory"

Professor Donald Kochan (Chapman University) has posted on SSRN a draft of his article, While Effusive, 'Conclusory' is Still Quite Elusive: The Story of a Word, Iqbal, and a Perplexing Lexical Inquiry of Supreme Importance, which is forthcoming in the University of Pittsburgh Law Review.  Here’s the abstract:

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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

Could Wal-Mart Extend Beyond Class Actions?

Like Adam, I have also gotten into the Op-Ed game for Wal-Mart commentary.  My Op-Ed appears in today's National Law Journal and explores the ways in which the 23(a)(2) analysis might leak into interpretations of the common question language found in other Federal Rules.

RJE