Civil Procedure & Federal Courts Blog

SCOTUS Cert Grant of Interest on CAFA Jurisdiction & Removal: Standard Fire Insurance v. Knowles

Today the Supreme Court granted certiorari in The Standard Fire Insurance Co. v. Knowles (11-1450). Here’s the question presented in the petition for certiorari:

Last Term, this Court held that in a putative class action “the mere proposal of a class . . . could not bind persons who were not parties.” Smith v. Bayer Corp., 131 S. Ct. 2368, 2382 (2011). In light of that holding, the question presented is:

When a named plaintiff attempts to defeat a defendant’s right of removal under the Class Action Fairness Act of 2005 by filing with a class action complaint a “stipulation” that attempts to limit the damages he “seeks” for the absent putative class members to less than the $5 million threshold for federal jurisdiction, and the defendant establishes that the actual amount in controversy, absent the “stipulation,” exceeds $5 million, is the “stipulation” binding on absent class members so as to destroy federal jurisdiction?

You can find links to the lower court opinion and the cert-stage briefing at SCOTUSblog's casefile.

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Delaware Supreme Court Affirms $2 Billion Judgment Plus Fees

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

            As summarized by the Delaware Supreme Court:  

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

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

Hat tip: Delaware Business Court Insider.

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2011 Report on Consumer Bankruptcy Filings Released

The report on consumer bankruptcies required by the Bankruptcy Abuse Prevention and Consumer Protection Act has been released for 2011. 

The highlights state, "1.3 million debtors filing for personal bankruptcy in 2011. Compared to 2010, 2011 saw a 11% in drop in case filings, 23% drop in filer assets, 25% drop in filer liabilities, and 28% incidence of repeat filers."

The full report is available here.

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Procedural Notes from the Drug and Device Law Blog

The Drug and Device Law Blog has some interesting commentary on two recent cases with procedural issues, the first is consolidation of related actions under a local Rule 40.1 and the second is 30(b)(6) depositions.

RJE

Second Circuit Allows Appeal of Class Certification in Google Books Case

Last week the U.S. Court of Appeals for the Second Circuit granted Google’s Rule 23(f) petition to appeal the district court’s order certifying the Google Books class action [Authors Guild v. Google, Inc., __ F. Supp. 2d __, 2012 WL 1951790 (S.D.N.Y. May 31, 2012)]. Here’s the full text of the Second Circuit’s order:

Petitioner, through counsel, moves, pursuant to Federal Rule of Civil Procedure 23(f), for leave to appeal the district court’s order granting Respondents’ motion for class certification. Upon due consideration, it is hereby ORDERED that the petition is GRANTED. See Sumitomo Copper Litig. v. Credit Lyonnais Rouse, Ltd., 262 F.3d 134, 139-40 (2d Cir. 2001).

The Second Circuit docket number is 12-2402.

Interestingly, Judge Denny Chin was an original member of the appellate panel that considered Google’s 23(f) petition (along with Judges Richard Wesley and Peter Hall). Because Judge Chin was the judge who granted class certification at the trial level, he recused himself.

More coverage available from Julie Bosman (NY Times) and Jonathan Stempel (Reuters).

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Wasserman on Marder, McElroy on Cameras in the Federal Courts

Now available on the Courts Law section of JOTWELL is an essay by Prof. Howard Wasserman (Florida International) entitled SCOTUS in Focus: Two Takes on Cameras in the Federal Courts. It reviews two recent articles: Nancy S. Marder, The Conundrum of Cameras in the Courtroom, Ariz. St. L. Rev. (forthcoming 2012), and Lisa T. McElroy, Cameras at the Supreme Court: A Rhetorical Analysis, BYU L. Rev. (forthcoming 2012). The review begins:

Television cameras in the courtroom probably have been debated since there have been cameras to bring into the courtroom, with periodic spikes in attention around high-profile cases–O.J. Simpson’s criminal trial or Bush v. Gore or this term’s Supreme Court arguments on the Affordable Care Act. In the past two decades, a communications revolution has turned that occasional spike in attention into a constant drumbeat. More attention from more outlets is focused on the federal courts, particularly the Supreme Court. And video is ever-more accessible, as people can watch on a multitude of devices in a multitude of places, and ever-less obtrusive, so courtroom actors can easily be recorded without knowing it.

Yet, as Nancy Marder puts it, “the revolution has been stopped cold at the steps to the U.S. federal courthouse.” And the Justices themselves have erected and manned the barricades–rejecting calls for more open and immediate coverage of oral arguments in the obviously unique ACA cases, fighting Congress over who wields power to decide whether to allow cameras, and even jumping into disputes over cameras in the lower federal courts in high-profile cases.

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Two Articles About Appeals in the Federal System

Two articles about the Federal Rules and appeals have been posted to SSRN.

Bryan Lammon (Washington University) has posted Rules, Standards, and Experimentation in Appellate Jurisdiction.

The current system of interlocutory appeals in federal court has long been criticized for its complexity and unpredictability, and federal courts scholars have long debated how best to reform it. But much of this discussion occurs at an abstract level. Scholars debate the effects of potential reforms — such as whether a particular reform will increase the number of interlocutory appeals — and these arguments have a substantial empirical element. They are often based, however, on implicit theories of judicial and litigant behavior, not empirical evidence. All of these arguments contain plausible positions on the potential effects of particular reforms. And therein lies the problem; there is no way to evaluate such arguments other than to agree or disagree with the logic and normative commitments at their core. Some empirical evidence could go a long way toward breaking the current stalemate in interlocutory appeal reform. 

This article offers a means of using experimentation, initiated and overseen by judges, to generate evidence about the consequences of different approaches to interlocutory appeals. Under this experimental approach, the Courts of Appeals would be permitted to take differing positions on the appealability of particular orders; repeated application of these different rules would then illustrate their effects. The courts could reassess these different rules in light of their observed consequences. Although such experimentation (sometimes called "percolation") is controversial, it could work in the interlocutory appeals context. As a specific means for facilitating such experimentation, this article looks to the choice between rules and standards and suggests the modest and feasible reform of making the current collateral order exception more standard-like. In so doing, this article shows how standards can facilitate rapid and fruitful experimentation in a hierarchical judiciary, something the literature on rules and standards has often overlooked.

 

Andrew Pollis has posted Civil Rule 54(b): Seventy-Five and Ready for Retirement.

As we commemorate the diamond anniversary of the Federal Rules of Civil Procedure, this article takes a critical look at one of the failed rules: Rule 54(b). Although many commentators have noted difficulties with Rule 54(b), this is the first to describe them comprehensively, analyze their root causes, and offer a workable alternative. 

When an order resolves a discrete claim in a multi-claim action, Rule 54(b) permits a district court to sever the order for immediate appeal by finding “no just reason for delay.” The rule was designed to ease the hardship on litigants who would otherwise have to await the conclusion of the entire case to appeal an adverse ruling. 

But the rule has spawned seventy-five years of chaos. Courts struggle to evaluate whether an order fully adjudicates a discrete and severable claim. They struggle to evaluate what “no just reason for delay” really means. At the heart of the problem lies a power clash; Rule 54(b) puts the district court in charge of deciding when an appellate court is required to hear an appeal. Not surprisingly, appellate courts often resist. And they often question Rule 54(b) certifications only after full briefing and oral argument. 

It is time to end the struggle. And a better solution exists. This article advocates the repeal of Rule 54(b) and, in its place, a resort to a discretionary-appeal system to permit trial courts to certify certain orders for immediate appeal and to permit appellate courts to decide whether to hear them.

RJE

Mulligan and Staszewski on The Supreme Court's Regulation of Civil Procedure

Just published in UCLA Law Review: "The Supreme Court’s Regulation of Civil Procedure: Lessons From Administrative Law" by Lumen N. Mulligan and Glen Staszewski.

Abstract:

In this Article, we argue that the U.S. Supreme Court should route most Federal Rules of Civil Procedure issues through the notice-and-comment rulemaking process of the Civil Rules Advisory Committee instead of issuing judgments in adjudications, unless the Court can resolve the case solely through the deployment of traditional tools of statutory interpretation. While we are not the first to express a preference for rulemaking on civil procedure issues, we advance the position in four significant ways. First, we argue that the Supreme Court in the civil procedure arena is vested with powers analogous to most administrative agencies. Second, building upon this insight, we present a justification for favoring rulemakings over adjudications by analogy to administrative law. Third, we couple this preference for rulemaking over adjudication with three criteria detailing when this presumption should apply. Namely, we conclude that civil procedure issues are better resolved by reference to the Advisory Committee if the issue (a) requires an interpretation of a rule that rests substantially upon legislative facts, (b) calls for the resolution of a Chevron step-two-like ambiguity, or (c) seeks a resolution that approximates a legislative rule. Only when traditional tools of statutory interpretation—text, history, and purpose—will resolve a case should the Court retain its disposition in the adjudicatory form. Fourth, we offer the mechanisms for pragmatically achieving this preference for rulemaking both under existing law as well as through a new “referencing” procedure, without unduly constraining the flexibility needed by lower courts to implement the civil rules effectively. In so doing, we contend that expanding the Court’s use of rulemaking not only should result in better rules but should also bolster the democratic legitimacy of the Court’s civil-rules decisionmaking.

PM

SCOTUS Cert Grant on Mootness (and International Child Abduction): Chafin v. Chafin

Yesterday the Supreme Court granted certiorari in Chafin v. Chafin (11-1347), a case about mootness that might be of interest. Here’s the question presented:

Under the International Child Abduction Remedies Act 42 U.S.C. §§ 11601-11610 (2000) and the Hague Convention on the Civil Aspects of International Child Abduction a parent may file a petition for return of their minor child/custodian to the child's country of habitual residence if it appears that the child has been wrongfully abducted. Once an Order has issued from the District Court returning the child to the petitioning custodian and an appeal has been filed by the respondent the Circuits are spilt as to whether the return of the child to the country of habitual residence renders the appeal moot. The Eleventh Circuit, in Bekier v. Bekier, 248 F.3d 1051 (2001), held that such an appeal is clearly moot since the relief sought by petitioner has been granted and the Court had "no authority 'to give opinions on moot questions or abstract propositions ... which cannot affect the matter in issue in the case before [the Court]''' Bekier at 1054. The Court provided that no actual affirmative relief could be provided to the appellant. However, this decision and others like it has come under great scrutiny by other Circuits. Specifically the Fourth Circuit, in Fawcett v. McRoberts, 326 F.3d 491 (2003), has held that "[c]ompliance with a trial court's order does not moot an appeal (of a Petition for Return of Custody under the aforementioned Acts) if it remains possible to undo the effects of compliance or if the order will have a continuing impact on future action." Fawcett at 494. The Fourth Circuit in Fawcett held that even after the return of a child in compliance with the lower court's order that "this Court can [affect the matter in issue]." Id. To consider the merits of an appeal and potentially reverse the lower court's decision would have a considerable effect. In contrast, the Eleventh Circuit's unfathomable position on this particular matter eliminates the basis and purpose of the appeal process.

Whether an appeal of a District Court's ruling on a Petition for Return of Children pursuant to International Child Abduction Remedies Act and the Hague Convention on the Civil Aspects of International Child Abduction becomes moot after the child at issue returns to his or her country of habitual residence, as in the Eleventh Circuit's Bekier case, leaving the United States Court system lacking any power or jurisdiction to affect any further issue in the matter or should the United States Courts retain power over their own appellate process, as in the Fourth Circuit's Fawcett case, and maintain jurisdiction throughout the appellate process giving the concerned party an opportunity for proper redress.

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Study Suggests That Arbitrator Background and Claimant Representation Affect Securities Arbitration Outcomes

Stephen J. Choi, Jill E. Fisch and Adam C. Pritchard have posted a paper on SSRN entitled “The Influence of Arbitrator Background and Representation on Arbitration Outcomes.”  

The conclusion states: 

In this study we examine the relationship between an arbitrator’s background and the outcome in securities arbitration. For the public arbitrators, we find that industry experience and status as a professional arbitrator are correlated with statistically significant decreases in arbitration awards. This decrease, however, is tempered when claimant is represented by counsel. We also find that prior experience as a regulator for the public arbitrators is correlated with a statistically significant increase in arbitration awards. We do not find substantial evidence that the presence of an attorney for the respondent mitigates this effect. Turning to the industry arbitrator, we find that industry arbitrators with regulatory experience correlate with a statistically significant decrease in arbitration awards. This effect, however, is mitigated when the claimants have an attorney. 

Our findings have important implications for how FINRA regulates arbitrator background into the future. Our most consistent finding is that representation by counsel can reduce or eliminate the effect of arbitration background on arbitration outcomes. Supporters of arbitration often highlight its streamlined proceedings and lower costs compared to litigation as an advantage for small claimants. Our findings suggest that, even with streamlined procedures, claimants who lack attorneys are disadvantaged. 

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Discovery Sanctions Order in Apple Patent Litigation

U.S. District Judge Leonard Davis of the Eastern District of Texas imposed sanctions last week on Apple for halting a deposition of one of its employees, Mr. Allié, in a patent dispute. Might be of use for civil procedure professors looking for a current example for teaching purposes. Below is the portion of the order setting forth the sanctions:

Continue reading

Hoffman on “Rulemaking in the Age of Twombly and Iqbal”

Lonny Hoffman has just posted on SSRN the above-titled paper.

Abstract:

In this article I am essentially trying to answer one critical question: Faced with the controversy triggered by the Supreme Court’s decisions in Bell Atlantic Co. v. Twombly (2007) and Ashcroft v. Iqbal (2009), particularly over access to the courts, why have judicial rulemakers not proposed rule reforms to address the concerns raised? This question is particularly puzzling when one realizes that over the last seventy-five years the rules committees have consistently rejected proposals to stiffen pleading requirements along lines similar to what the Court decreed in Twombly and Iqbal. It is as if Congress had repeatedly voted against amending a statute that had been on the books for years only to have the Court through judicial interpretation effectively rewrite the law as though it had been amended. While we reasonably might predict that at least some in Congress would call for a legislative response if this happened, five years after Twombly no proposals for rule reform have been forthcoming and there is no momentum on the rules committees in favor of reform. Why? In this paper I argue that uncovering what has kept rulemakers from acting in the past permits us to interrogate whether those reasons can justify the same course in the future. Ultimately, I conclude that the justifications of the past are no longer sufficient and that the case for immediate rule reform is strong. Beyond its immediate relevance to the unresolved pleading problem, the added perspective gained by examination of the rulemakers’ deliberations can also deepen our understanding of the rulemaking process generally, providing new insights about how the process of making new rules and evaluating existing ones may be improved.

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Second Circuit Holds Petition to Compel Arbitration Cannot Be Voluntarily Dismissed

From JDSupra, by Katten Muchin Rosenman LLP:

The U.S. Court of Appeals for the Second Circuit affirmed the Southern District of New York’s vacatur of a petitioner’s voluntary notice of dismissal of a petition to compel arbitration. Petitioner and respondent had entered into an arbitration agreement and petitioner had filed a petition to compel arbitration. After some litigation, petitioner filed a notice of voluntary dismissal under the Federal Rules of Civil Procedure. The Second Circuit found that the Federal Rule of Civil Procedure allowing for voluntary dismissal (Rule 41) did not apply to petitions to compel arbitration and that the petitioner lacked the right to voluntarily and unilaterally dismiss the petition for arbitration. Additionally, the Second Circuit found that allowing parties to voluntarily dismiss petitions to compel arbitration would inappropriately expand the voluntary dismissal right, as the Rule allows one party to curtail the other’s right of voluntary dismissal by filing an answer or a motion for summary judgment, but under the Federal Arbitration Act, a respondent’s option is limited: he can file a motion for summary judgment, but not an answer, in response to a motion to compel arbitration.

ISC Holding AG v. Nobel Biocare Finance AG, Nos. 10-4867-cv(L), 11-239-cv(CON) (2d Cir. July 25, 2012).

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Schwartz Offers "A Dose of Reality for Medical Malpractice Reform" in New Article

Joanna Schwartz has just posted the above-titled article on SSRN.

Abstract:

Every year, medical error kills and injures hundreds of
thousands of people and costs billions of dollars in lost income, lost
household production, disability, and health care expenses. Conventional wisdom
is that malpractice litigation does little to improve patient safety and, in
fact, harms the cause. Lawsuits are believed to offer little useful information
about medical error. But the deeper problem, critics contend, is that the fear
of malpractice liability inhibits the kind of openness and transparency needed
to identify and address the root causes of medical error.

This Article tests the conventional wisdom by examining the
role that medical malpractice lawsuits actually play in hospital patient safety
efforts. I conducted a national survey of health care professionals and
thirty-five in-depth interviews of those responsible for managing risk and
improving patient safety in hospitals across the country. Drawing on this
research, I find reason to believe that malpractice litigation is not
significantly compromising the patient safety movement’s call for transparency.
In fact, the opposite appears to be occurring: the openness promoted by patient
safety advocates is transforming hospitals’ relationship to lawsuits and risk.
Hospitals, once afraid of disclosing and discussing error for fear of
liability, increasingly encourage transparency with patients and medical staff.
Moreover, lawsuits are playing a previously unconsidered role in hospital
patient safety efforts – as a source of valuable data about weaknesses in
hospital policy, practices, staff, and administration. These new and
counterintuitive observations should inform open and pressing questions about
medical malpractice reform and the best ways to improve patient safety.

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Talesh on Dispute Resolution Design

Shauhin A. Talesh has posted a paper entitled "How Dispute Resolution Design Matters: An Organizational Analysis of Dispute Resolution Structures and Consumer Lemon Laws" on SSRN. 

Abstract:

This study demonstrates how the structure of dispute
resolution shapes the extent to which managerial and business values influence
the meaning and implementation of consumer protection law, and consequently,
the extent to which repeat players are advantaged. My analysis draws from,
links, and contributes to two literatures that examine the relationship between
organizational governance structures and law: neo-institutional studies of law
and organizations and socio-legal studies of repeat players’ advantages in
disputing. Specifically, I compare an instance where powerful state consumer
protection laws are resolved in private dispute resolution forums funded by
automobile manufacturers but operated by independent third-party organizations
(California) with one where consumer disputes are resolved in public
alternative dispute resolution processes run and administered by the state
(Vermont). Through in-depth interviews and an ethnographic study of the
training programs that dispute resolution arbitrators undergo in each state, I
show how different dispute resolution structures operating in California and
Vermont give different meanings to substantially similar lemon laws. Although
my data do not allow me to establish a causal relationship, they strongly
suggest that the form of the dispute resolution structure, and how business and
state actors construct the meaning of lemon laws through these structures, have
critical implications for the effectiveness of consumer protection laws for
consumers.

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Judge Sanctions Greenberg Traurig and TD Bank for Discovery Abuses

The ABA Journal online reports:

Saying that a well-known law firm and its client bank had often handled a major case "in an Inspector Clouseau-like fashion,” a federal judge in Miami has sanctioned both for what she called a “pattern of discovery abuses before, during, and after trial.”

U.S. District Judge Marcia Cooke declined, however, to sanction individually any of the lawyers at Greenberg Traurig whose “handling of this case left much to be desired.” That's because she found they didn't act willfully or in bad faith as they helped client TD Bank defend against a civil damages suit brought by some of the investors fleeced by then-attorney Scott Rothstein, reports Bloomberg. Over 200 attorneys worked on the matter at Greenberg Traurig.

Cooke did find that TD Bank, against whom Texas-based Coquina Investors won a $67 million verdict in January for aiding and abetting Rothstein's fraud, "willfully concealed relevant evidence from its trial counsel.”

In addition to requiring both the bank and the law firm to pay the investors' legal fees for pursuing the sanctions motion, the judge also made a finding that TD Bank "had actual knowledge of Rothstein’s fraud.” While the finding was made after the verdict, it would benefit the investors in a potential appeal.

The case is Coquina Investments v. Rothstein, No. 10-60786-Civ-COOKE/BANDSTRA (S. D. Fla. Aug. 3, 2012).

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AALS Section on Federal Courts: Annual Award for Best Untenured Article on the Law of Federal Jurisdiction

From Steve Vladeck:

The AALS Section on Federal Courts is pleased to announce the
creation of an annual award for the best article on the law of federal
jurisdiction by a full-time, untenured faculty members at an AALS member or
affiliate school—and to solicit nominations (including self-nominations) for the
prize to be awarded at the 2013 AALS Annual Meeting in New Orleans.

 

The purpose of the award program is to recognize outstanding
scholarship in the field of federal courts by untenured faculty members.  To
that end, eligible articles are those in the field of Federal Courts law that
were published by a recognized journal during the twelve-month period ending on
September 1, 2012 (date of actual publication determines
eligibility).  Eligible authors are those who, at the close of nominations
(i.e., as of September 15, 2012), are untenured, full-time
faculty members at AALS member or affiliate schools, and have not previously won
the award.

 

Nominations (or questions about the award) should be directed
to Steve Vladeck at American University Washington College of Law ([email protected]), Chair-Elect of the AALS Section on
Federal Courts. Without exception, all nominations must be received by 11:59
p.m. (EDT) on September 15, 2012. Nominations will be reviewed by
a prize committee comprised of Professors Richard H. Fallon, Jr. (Harvard),
Amanda Frost (American), and Carlos Vázquez (Georgetown), with the result
announced at the Federal Courts section program at the 2013 AALS Annual Meeting.

PM