Civil Procedure & Federal Courts Blog

SCOTUS Decision in Amgen: Class Certification in Securities Fraud Cases

Today the Supreme Court issued its decision in Amgen v. Connecticut Retirement Plans (No. 11-1085), covered earlier here. The basic issue is whether, in a securities fraud case, proof of “materiality” is required in order to certify a class action. The Court splits 6-to-3, with Justice Ginsburg writing the majority opinion (joined by Roberts, Breyer, Alito, Sotomayor, and Kagan). Here’s an excerpt from the first few paragraphs of Justice Ginsburg’s opinion (Slip Op. 2-3):

The issue presented concerns the requirement stated in Rule 23(b)(3) that “the questions of law or fact common to class members predominate over any questions affecting only individual members.” Amgen contends that to meet the predominance requirement, Connecticut Retirement must do more than plausibly plead that Amgen’s alleged misrepresentations and misleading omissions materially affected Amgen’s stock price. According to Amgen, certification must be denied unless Connecticut Retirement proves materiality, for immaterial misrepresentations or omissions, by definition, would have no impact on Amgen’s stock price in an efficient market.

While Connecticut Retirement certainly must prove materiality to prevail on the merits, we hold that such proof is not a prerequisite to class certification. Rule 23(b)(3) requires a showing that questions common to the class predominate, not that those questions will be answered, on the merits, in favor of the class. Because materiality is judged according to an objective standard, the materiality of Amgen’s alleged misrepresentations and omissions is a question common to all members of the class Connecticut Retirement would represent. The alleged misrepresentations and omissions, whether material or immaterial, would be so equally for all investors composing the class. As vital, the plaintiff class’s inability to prove materiality would not result in individual questions predominating. Instead, a failure of proof on the issue of materiality would end the case, given that materiality is an essential element of the class members’ securities­fraud claims. As to materiality, therefore, the class is entirely cohesive: It will prevail or fail in unison. In no event will the individual circumstances of particular class members bear on the inquiry.

Essentially, Amgen, also the dissenters from today’s decision, would have us put the cart before the horse. To gain certification under Rule 23(b)(3), Amgen and the dissenters urge, Connecticut Retirement must first establish that it will win the fray. But the office of a Rule 23(b)(3) certification ruling is not to adjudicate the case; rather, it is to select the “metho[d]” best suited to adjudication of the controversy “fairly and efficiently.”

Justice Alito writes a concurring opinion. Justice Scalia writes a dissenting opinion. And Justice Thomas writes a dissenting opinion (joined by Kennedy and partially by Scalia).

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SCOTUS Decision on FRCP 54(d): Marx v. General Revenue Corp.

Yesterday, the Supreme Court issued its decision in Marx v. General Revenue Corp., covered earlier here. Justice Thomas’s majority opinion begins:

Federal Rule of Civil Procedure 54(d)(1) gives district courts discretion to award costs to prevailing defendants“[u]nless a federal statute … provides otherwise.” The Fair Debt Collection Practices Act (FDCPA), 91 Stat. 881, 15 U. S. C. §1692k(a)(3), provides that “[o]n a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs.” This case pre­sents the question whether §1692k(a)(3) “provides other­wise” than Rule 54(d)(1). We conclude that §1692k(a)(3) does not “provid[e] otherwise,” and thus a district court may award costs to prevailing defendants in FDCPA cases without finding that the plaintiff brought the case in bad faith and for the purpose of harassment.

Justice Sotomayor dissents, joined by Justice Kagan.

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Sherry on Why Courts Can't Fix Erie

Suzanna Sherry (Vanderbilt) has posted A Pox on Both Your Houses: Why the Courts Can't Fix the Erie Doctrine to SSRN.

As Erie Railroad Co. v. Tompkins celebrates its 75th anniversary, it is becoming more apparent that it is on a collision course with itself. The Court keeps trying – and failing – to sort out the tensions within the Erie doctrine and between it and the Federal Rules of Civil Procedure. The Court’s latest Erie decision, Shady Grove, was yet another attempt to separate substance from procedure and navigate the strait between the Rules of Decision Act and the Rules Enabling Act. It was a disaster, in large part because of the internal incoherence of the Erie doctrine itself and its profound incompatibility with the guiding principles of the Federal Rules of Civil Procedure. Shady Grove thus brings to the forefront the need for a normative choice between federal procedural uniformity and transsubstantivity on the one hand, and state authority on the other. I suggest that instead of filtering that normative choice through the convoluted and self-contradictory Erie doctrine, judges should confront it directly as they do in other contexts (including most prominently preemption doctrine). This suggestion in turn has implications far beyond the narrow Shady Grove issue.

 

RJE

SCOTUS Decision in Clapper v. Amnesty International: Article III Standing

Today the Supreme Court decided Clapper v. Amnesty International (No. 11-1025), covered earlier here. By a 5-to-4 vote, it found that the plaintiffs lacked Article III standing to challenge the 2008 amendments to the Foreign Intelligence Surveillance Act.

Justice Alito wrote the majority opinion (joined by Roberts, Scalia, Kennedy, and Thomas) and Justice Breyer wrote the dissent (joined by Ginsburg, Sotomayor, and Kagan).

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Trial in BP Oil Spill Case

The trial in the BP Oil Spill case began yesterday in New Orleans federal court, before U.S. District Judge Carl Barbier. Coverage at…

• AP (Michael Kunzelman)
• NPR (Mark Memmott)
• NY Times (Clifford Krauss & Barry Meier)
• Times-Picayune (Mark Schleifstein)

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More Coverage of Gunn v. Minton

Here’s some more coverage of last week’s Supreme Court decision in Gunn v. Minton, which addresses Grable and federal question jurisdiction:  

• Prof. Josh Blackman (South Texas)
• Prof. Rodger Citron (Touro), Justia
• Prof. Ronald Mann (Columbia), SCOTUSblog

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SCOTUS Opinion in Gunn v. Minton

Today the Supreme Court issued a unanimous opinion in Gunn v. Minton, covered earlier here and here. The case revisits the recurring problem of when a federal law ingredient in a state law cause of action is sufficient for federal question jurisdiction (cases "arising under" federal law). It's a pretty quick turnaround--oral argument was on January 16.

Chief Justice Roberts authors the opinion, which endorses and applies the test developed eight years ago in Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U. S. 308 (2005). Here’s one colorful passage on Grable [Slip Op. 6], which the Chief distills into a four-part test:

[E]ven where a claim finds its origins in state rather than federal law—as Minton’s legal malpractice claim indisputably does—we have identified a “special and small category” of cases in which arising under jurisdiction still lies.  Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U. S. 677, 699 (2006).  In outlining the contours of this slim category, we do not paint on a blank canvas.  Unfortunately, the canvas looks like one that Jackson Pollock got to first. See 13D C. Wright, A. Miller, E. Cooper, & R. Freer, Federal Practice and Procedure §3562, pp. 175–176 (3d ed. 2008) (reviewing general confusion on question).

In an effort to bring some order to this unruly doctrine several Terms ago, we condensed our prior cases into the following inquiry: Does the “state-law claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities”?  Grable, 545 U. S., at 314.  That is, federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.  Where all four of these requirements are met, we held, jurisdiction is proper because there is a “serious federal interest in claiming the advantages thought to be inherent in a federal forum,” which can be vindicated without disrupting Congress’s intended division of labor between state and federal courts.  Id., at 313–314.

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SCOTUS Decision on Article III & Mootness: Chafin v. Chafin

Yesterday the Supreme Court issued a unanimous decision in Chafin v. Chafin (No. 11-1347), which addresses Article III mootness in the context of the Hague Convention on the Civil Aspects of International Child Abduction.

Chief Justice Roberts wrote the opinion, and Justice Ginsburg authored a concurring opinion that was joined by Justices Scalia and Breyer.

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Article contends co-authored pieces have more impact than solo-author pieces

This is obviously not Civil Procedure-centered, but I thought it was interesting for those of us who periodically participate in faculty hiring or promotion decisions in which the subject of co-authored pieces comes up.

Christopher Anthony Cotropia and Lee Petherbridge have posted on SSRN their paper, "The Dominance of Teams in the Production of Legal Knowledge."

Abstract:     
Using a database that contains over 19,000 law review articles published in top 100 law reviews between 1990 and 2010, we demonstrate that team authors dominate solo authors in the production of legal knowledge. Team research is on average more frequently cited than individual research, and teams are more likely than individuals to produce exceptionally high impact research. These results suggest that a legal research culture that encourages cooperativity and collaboration could foster an intellectual connectedness helpful to improving the quality of knowledge production by legal academics.

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Symeonides' 26th Annual Choice-of-Law Survey

Symeon Symeonides (Willamette) has posted on SSRN his Twenty-Sixth Annual Survey of American Choice-of-Law Cases, which will be published in the American Journal of Comparative Law. Here’s the abstract:

This is the Twenty-Sixth Annual Survey of American Choice-of-Law Cases. It is intended as a service to fellow teachers and students of conflicts law, in the United States and abroad.

Of the 4,300 cases decided in 2012 by state and federal courts, this Survey reviews 1,225 appellate cases, focusing on those cases that may contribute something new to the development or understanding of conflicts law, particularly choice of law. Highlights include:

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Symposium on Judicial Review of Arbitral Awards and Mediated Settlement Agreements (Penn State, Feb. 22)

Announcement below. Additional details here.

It is now commonplace for parties to use private procedures, such as arbitration and mediation, to resolve legal disputes. When one of the parties refuses to comply with the results of these procedures, however, our public courts may be forced to decide whether to provide assistance with enforcement. Indeed, there is now substantial satellite litigation arising out of arbitral awards and mediated settlement agreements. Under these conditions, the grounds for, and standards of, judicial review are critical.  

On February 22, 2013, the Penn State Yearbook on Arbitration and Mediation will hold a symposium focusing on this relationship between the courts and private procedures. The symposium is entitled: “The Role of the Courts: Judicial Review of Arbitral Awards and Mediated Settlement Agreements.” 

The symposium will feature the following outstanding procedural law and dispute resolution experts:

• Arbitral awards and judicial review—Professors Jeff Stempel (UNLV),  Maureen Weston (Pepperdine) and Allen Blair (Hamline)
• Mediated settlement agreements and judicial review—Professors Jennifer Reynolds (Oregon), Jim Coben (Hamline) and Jacqueline Nolan-Haley (Fordham)
• Hybrids and judicial review—Professors Ellen Deason (Ohio State) and Andrea Schneider (Marquette), with commentary by Professors Jim Coben (Hamline) and Nancy Welsh (Penn State)

 Professor Tom Carbonneau (Penn State) will deliver the closing remarks.

 The symposium also will be webcast. 

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Eisenberg, Fisher, and Rosen-Zvi on Loser-Pays Norm in Israeli Courts

Theodore Eisenberg, Talia Fisher, and Issachar Rosen-Zvi have posted on SSRN their paper, When Courts Determine Fees in a System with a Loser Pays Norm: Fee Award Denials to Winning Plaintiffs and Defendants.

Abstract:

Unlike the English rule governing court fees and costs, under which the loser pays litigation costs, and the American rule, under which each party pays its own costs, Israel vests in judges full discretion to assess fees and costs. Given concerns about both the English and American rules, and the absence of empirical information about how either functions, an empirical study of judicial fee award practices should be of general interest. We report evidence that Israeli judges apply multiple de facto fee systems: a nearly one way fee-shifting system that dominates in tort cases, a loser pays system that operates when publicly owned corporations litigate, and a loser pays system with discretion to deny fees in other cases. Although a loser pays norm dominates in Israel, with fees awarded in 80% of cases, Israeli judges often exercised their discretion to protect losing litigants, especially individuals, by denying fees. For individual plaintiffs and defendants, the denial rate exceeded 30% for defendants who prevailed against individuals and was about one-quarter for plaintiffs who prevailed against individuals. Judges protected individual plaintiffs against fee awards more than corporations. In cases lost by individual plaintiffs, fees were denied to successful defendants 29.9% of the time compared to denials in 18.0% of cases lost by corporate plaintiffs and 16.7% of cases lost by governmental plaintiffs. In cases lost by individual defendants, fees were denied to successful plaintiffs 22.7% of the time compared to 9.8% denials in cases lost by corporate defendants and 28.6% denials in cases lost by government defendants. In addition to varying by whether plaintiffs or defendants prevailed and by party status, the fee denial pattern varied by case category and judicial district. Theorizing about optimal fee rules should account for the variety of fee outcomes observed in practice.

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Shill on Jurisdictional Competition and Foreign Judgment Enforcement

Prof. Gregory Shill (Hofstra) has posted on SSRN a draft of his article, Ending Judgment Arbitrage: Jurisdictional Competition and the Enforcement of Foreign Money Judgments in the United States, which will appear in the Harvard International Law Journal. Here’s the abstract:

Recent multi-billion-dollar damage awards issued by foreign courts against large American companies have focused attention on the once-obscure, patchwork system of enforcing foreign-country judgments in the United States. That system’s structural problems are even more serious than its critics have charged. However, the leading proposals for reform overlook the positive potential embedded in its design.

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Donelson & Prentice on Pleading Rule 10b-5 Claims Under the Private Securities Litigation Reform Act

Professors Dain Donelson and Robert Prentice (University of Texas, McCombs School of Business) have published Scienter Pleading and Rule 10b-5: Empirical Analysis and Behavioral Implications, 63 Case Western L. Rev. 441 (2012). Here’s the abstract:

Pleading requirements are the keys to the courthouse. Nowhere is this more true than with rule 10b-5 class action securities fraud claims. Provisions of the Private Securities Litigation Reform Act of 1995 impose special pleading burdens upon plaintiffs regarding the scienter element and bar them from discovery when defendants file a motion to dismiss. This Article begins with a doctrinal history of the scienter element of a rule 10b-5 claim  that  indicates that many key legal questions remain unsettled and that application of legal rules to specific factual allegations regarding a particular type of defendant—external auditors—is extraordinarily muddled. To determine whether the impression arising from this extensive but nonsystematic examination of the case law is accurate, we also empirically examine rule 10b-5 claims against auditors and  confirm  that few facts are consistently viewed by the courts as indicating the presence (or absence) of scienter. This lack of clarity in the law and its application makes it difficult for either plaintiffs or defendants to evaluate the settlement value of claims. Furthermore, the law’s excessive vagueness affords judges virtually untrammeled discretion. The literature of behavioral psychology and related fields indicates that excessive discretion exacerbates problems that arise from unconscious judicial bias.

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Walsh on Crowe: Building the Federal Judiciary

Now available on the Courts Law section of JOTWELL is an essay by Kevin Walsh (Richmond) entitled Building the Federal Judiciary. It reviews a recent book by Justin Crowe (Williams College, Political Science), Building the Judiciary: Law, Courts, and the Politics of Institutional Development, Princeton University Press. Kevin’s review begins:

Scholars working within the field of “Federal Courts” have, from the beginning, been concerned about the past and future of the federal courts as instruments of government. But the beginning of Federal Courts as a field was in the early 1950s, several decades after the Judiciary Act of 1891 created the intermediate circuit courts of appeals and almost three decades after the Judiciary Act of 1925 reconfigured the relationship between the Supreme Court and all other courts in the United States deciding questions of federal law. And the trajectory that the federal judiciary has traveled since that time has been relatively consistent. To the extent that this may have resulted in a failure to appreciate the forces that had already made the federal courts so powerful by the time Federal Courts came into its own, Justin Crowe’s recent book Building the Judiciary offers a helpful corrective.

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Judge Rules on Motion to Dismiss Second Amended Complaint in BP Securities Litigation

On February 6, Judge Keith Ellison in the Southern District of Texas granted in part and denied in part defendants' motion to dismiss the Second Amended Complaint in MDL No. 10-md-2185, In re BP p.l.c. Securities Litigation. The ruling was summarized in the National Law Journal as "allow[ing] investors to go forward on claims that BP and former chief executive officer Anthony Hayward misled the public about the scope of BP's operating management system, or OMS—a safety program introduced before the 2010 [Deepwater Horizon] disaster spread millions of gallons of oil throughout the Gulf of Mexico."

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Rate of Class Action Filings Hard To Gauge, Commentator Reports

An online ABA Section of Litigation article by Robert J. Herrington, “The Numbers Game – Dukes and Concepcion” attempted to address whether class action filings may be down after Dukes and Concepcion.  Like many of us, he discovered that such data is generally unavailable.  His review of several non-random surveys was inconclusive.

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Stanford Law School Symposium (Feb. 8): Lessons from the Chevron Ecuador Litigation

Tomorrow is the Stanford Journal of Complex Litigation’s inaugural symposium. Details and a full list of speakers below:

Download Stanford Journal of Complex Litigation Symposium Program - Feb 8 2013 

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PS: As you may have seen, last week witnessed some new developments in the Chevron-Ecuador litigation.

Mississippi Law Journal Symposium: Poverty and Access to Justice (Friday, Feb. 8)

Details and a list of speakers available at The Faculty Lounge.

You can RSVP here, using the following information:  

• Event ID: 1881
• Event Password: Supra

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What do Ronald Reagan and Bob Marley have in common?

Answer #1: Today is their birthday.

Answer #2: They were never on Twitter.

If any of our readers would like to get links to this blog’s posts via Twitter, follow @Adam_Steinman. That’s likely to be the bulk of my Twitter feed (I don’t know how to make cat GIFs.)

Here are some other folks in the civil-procedure-federal-courts-o-sphere that I’ve come across so far…

• Cynthia Fountaine (Southern Illinois University), @clfountaine
• Jasminka Kalajdzic (University of Windsor), @JKal
• Benjamin Spencer (Washington & Lee University), @PROFSPENCER
• Beth Thornburg (Southern Methodist University), @btSMU
• Steve Vladeck (American University), @steve_vladeck
• Kevin Walsh (University of Richmond), @kevincwalsh
• Mr. T, @MrT

I’m new at this, so if you know of others please feel free to share.

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