Friday, June 28, 2013
This week the Supreme Court issued its much-anticipated decisions in Windsor v. United States (on the federal Defense of Marriage Act) and Hollingsworth v. Perry (on California’s Prop. 8). Both cases presented significant questions with respect to Article III jurisdiction and standing, which were excellently summarized earlier this year by Marty Lederman’s seven-part series for SCOTUSblog.
In Windsor, a five-Justice majority opinion authored by Justice Kennedy (joined by Ginsburg, Breyer, Sotomayor, and Kagan) found that Article III jurisdiction was proper and that the Court should not invoke prudential grounds to refrain from exercising jurisdiction; the majority then concluded that DOMA was unconstitutional.
In Perry, a five-Justice majority opinion authored by Chief Justice Roberts concluded that the intervenors who supported Proposition 8 lacked Article III standing to challenge the district court’s order declaring Prop. 8 unconstitutional and enjoining California officials from enforcing it. Perry was a particularly interesting 5-4 split: The Chief was joined by Scalia, Ginsburg, Breyer, and Kagan. Justice Kennedy dissented, joined by Thomas, Alito, and Sotomayor.
From a jurisdictional standpoint, one crucial difference was that in Windsor, the federal government enforced DOMA (by denying Windsor the requested refund) and then proceeded to seek review of both the district court and appellate court rulings that DOMA was unconstitutional. As Kennedy puts it: “It would be a different case if the Executive had taken the further step of paying Windsor the refund to which she was entitled under the District Court’s ruling.” In Perry, on the other hand, the California government did not appeal the district court’s order and injunction. Perhaps the standing inquiry in Perry would have come out differently if the California government had adopted a litigation strategy similar to the one the U.S. government took in Windsor.
For anyone counting heads, here’s how each Justice came down on the Article III issues in both cases:
- Kennedy, Alito and Sotomayor supported exercising jurisdiction in both Windsor and Perry. (Alito is somewhat unique as to Windsor, because he argued that the U.S. government “clearly is not a proper petitioner” given its position that DOMA was unconstitutional; he argued instead that jurisdiction was proper because the House of Representatives’ Bipartisan Legal Advisory Group had standing as intervenors.)
- Roberts and Scalia opposed exercising jurisdiction in both Windsor and Perry.
- Ginsburg, Breyer and Kagan supported jurisdiction in Windsor and opposed jurisdiction in Perry.
- Thomas supported jurisdiction in Perry and opposed jurisdiction in Windsor.
Thursday, June 27, 2013
From The Legal Intelligencer, part 3 of 3:
Each state and federal court might have its own inviolable power to adjudicate cases and issue orders within its territory. But that does not stop judges from cooperating in the face of mass-tort litigation that arises both in state and federal court.
U.S. District Judge Barbara Jacobs Rothstein, of the Western District of Washington and a visiting judge to the U.S. District Court for the District of Columbia, said that for many years input was not obtained from state-court judges, but that has changed.
Wednesday, June 26, 2013
From The Legal Intelligencer, Part 2 of 3:
The number of mass torts filings in the United States hasn't seen a precipitous drop-off, but profit margins for the law firms defending those cases have taken a hit.
A confluence of events over the past five years has caused mass torts work, namely in the pharmaceutical space, to face increasing rate sensitivity. That has caused firms to either reconfigure their mass torts practices or de-emphasize the work altogether. Even some still involved with defending mass torts now use the once lucrative work more as a springboard for other assignments in practice areas facing less rate pressure.
Tuesday, June 25, 2013
The Philadelphia Court of Common Pleas, recently a hotbed for mass-tort litigation, may have seen its mass claims drop by 70 percent in 2012. But that does not mean that mass torts are slackening elsewhere.
Lawyers told The Legal that mass-tort cases are being filed in other jurisdictions because of the uncertainty that was created after many administrative changes were made to the Complex Litigation Center, including the end of reverse bifurcation and the end of consolidation in pharmaceutical cases.
Monday, June 24, 2013
With all of this week’s end-of-the-Term anticipation and excitement, some of today’s cert. grants may have slipped below the radar. But here are two cases that will be argued next Term that may be of interest:
Sunday, June 23, 2013
Thursday, June 20, 2013
Today the Supreme Court issued its decision in American Express Co. v. Italian Colors Restaurant (No. 12-133), another important arbitration case. The Court divides 5-to-3, with Justice Scalia writing the majority opinion (joined by Roberts, Kennedy, Thomas and Alito), and Justice Thomas writing a brief concurring opinion. Justice Kagan writes a dissenting opinion (joined by Ginsburg and Breyer). Justice Sotomayor took no part.
Justice Scalia’s majority opinion begins: “We consider whether a contractual waiver of class arbitration is enforceable under the Federal Arbitration Act when the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery.” The answer: yes. The FAA’s mandate that arbitration provisions are “valid, irrevocable, and enforceable” applies [p.3], and “[n]o contrary congressional command requires us to reject the waiver of class arbitration here.” [p.4]. The opinion continues: “Respondents argue that requiring them to litigate their claims individually—as they contracted to do—would contravene the policies of the antitrust laws. But the antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.” [p.4]
Wednesday, June 19, 2013
Plaintiff, a Florida limited liability company, filed a diversity suit against Sheraton in the Southern District of New York. After three years and much discovery, the action was dismissed without prejudice for lack of subject matter jurisdiction when it was revealed that at least one of the members of plaintiff's limited liability company was a New York citizen, as was Sheraton. Plaintiff then tried to cure the jurisdictional defect by dropping the non-diverse member of its company and filing a new action alleging the same claims.
The district court also dismissed the second action for lack of subject matter jurisdiction, ruling that 28 U.S.C. §1359 prohibited such "engineering" of diversity jurisdiction. The court also granted Sheraton's motion for "just costs," including $200,000 in attorney's fees, under 28 U.S.C. §1919 ("Whenever any action or suit is dismissed in any district court . . . for want of jurisdiction, such court may order the payment of just costs.")
The Second Circuit reversed, holding that Section 1919's allowance of "just costs" did not include attorney's fees, and that the invocation of the common-law "bad faith" exception to the American Rule on attorney's fees was not appropriate in the case. Castillo Grand, LLC v. Sheraton Operating Corp., No. 11-2457 (2d Cir. June 18, 2013).
In Budinich v. Becton Dickinson & Co., 486 U.S. 196 (1988), this Court held that a district court’s decision on the merits that left unresolved a request for statutory attorney’s fees was a “final decision” under 28 U.S.C. § 1291. The question presented in this case, on which there is an acknowledged conflict among nine circuits, is whether a district court’s decision on the merits that leaves unresolved a request for contractual attorney’s fees is a “final decision” under 28 U.S.C. § 1291.
You can find a link to the First Circuit’s decision below and the cert-stage briefing at SCOTUSblog’s case file.
Saturday, June 15, 2013
Clinical Professor Sarah Ricks of Rutgers-Camden has published Current Issues in Constitutional Litigation. The book is part of the Context and Practice Casebook series and she uses it to teach a popular course of the same title. You can read more about it here.
Friday, June 14, 2013
(Hat Tip: Jack Preis)
Wednesday, June 12, 2013
It’s a quick read at <3 pages, where “<3” actually means “less than 3” as opposed to a sideways emoticon heart.
From the National Law Journal:
A study released on Tuesday
by the American Constitution Society for Law and Policy identified a
"statistically significant" relationship between ballooning campaign
contributions by business interest to state supreme court candidates and
pro-business decisions by those courts.
Researchers studied more than 2,345 business-related state high court opinions between 2010 and 2012 and campaign contributions during that same time to sitting state high court judges. As the percentage of contributions from business groups went up, the probability of a pro-business vote by judges — defined as any decision that made a business better off — went up as well.
The study's author was Joanna Shepherd, a professor at Emory University School of Law. During a teleconference, she said the findings demonstrated that state court elections were becoming increasingly politicized and expensive. She pointed to surveys showing concern within the judiciary and among the general public about the influence of outside dollars on the courts.
To read more of the article, click here.
Monday, June 10, 2013
Today was arbitration day at the Supreme Court (well, that and raisins). In addition to granting certiorari in BG Group PLC v. Argentina, the Court issued a unanimous decision in Oxford Health Plans LLC v. Sutter (No. 12-135). Justice Kagan writes the Court’s opinion in Oxford, which begins:
Class arbitration is a matter of consent: An arbitrator may employ class procedures only if the parties have authorized them. See Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662, 684 (2010). In this case, an arbitrator found that the parties’ contract provided for class arbitration. The question presented is whether in doing so he “exceeded [his] powers” under §10(a)(4) of the Federal Arbitration Act (FAA or Act), 9 U. S. C. §1 et seq. We conclude that the arbitrator’s decision survives the limited judicial review §10(a)(4) allows.
Here’s more from Justice Kagan’s opinion on the relationship between Oxford and Stolt-Nielsen [Op. at 6-7]:
Today the Supreme Court granted certiorari in BG Group PLC v. Republic of Argentina (No. 12-138), which presents the question: “In disputes involving a multi-staged dispute resolution process, does a court or instead the arbitrator determine whether a precondition to arbitration has been satisﬁed?”
You can find links to the D.C. Circuit’s decision below and the cert-stage briefing at SCOTUSblog’s case file.
Sunday, June 9, 2013
class actions (consolidated in an MDL in Minnesota) are notable for the whimsical names of their subclasses, the Soggy
Plaintiffs and the Cloggy Plaintiffs.
The Eighth Circuit upheld the settlement of several class actions
alleging damage caused by defective brass
plumbing fittings sold by defendants Radiant and Uponor. The Soggy Plaintiffs have already experienced
leaking (in some cases causing severe damage) and the Cloggy Plaintiffs have
not yet experienced leaks but have the same fittings.
"The proposed settlement agreement stipulated that after two leaks, soggy plaintiffs would be entitled to have their entire plumbing system replaced at Uponor and Radiant's expense. Cloggy plaintiffs who had demonstrated 'by way of a flow test that a differential in water flow . . . of more than 50% [exists] between the hot and cold lines' would also be entitled to replacement of their brass fittings, and if that proved insufficient, to a new plumbing system."
After notice of the proposed settlement had been sent, Ortega, a California resident, moved to intervene as of right. His motion was denied as untimely. He and 26 other class members then objected to the settlement, arguing that notice had been deficient, that the scope of the release of defendants was overbroad, and that the settlement did not account for a cause of action available under California law. All of these arguments were rejected and the district court's approval of the settlement was upheld. In re Uponor, Inc., F1807 Plumbing Fittings Products Liability Litigation, No. 12-2761 (8th Cir. June 7, 2013).
Saturday, June 8, 2013
In an absurdly lengthy opinion, which I must admit to only skimming, the Third Circuit has held that a ten-by-ten foot subleased office makes Delaware the principal place of business of a GlaxoSmithKline holding company, and thus upheld diversity jurisdiction over a personal injury action involving thalilomide. (Yes, thalilomide, the anti-nausea-in-pregnancy drug from the late 50's and early 60's that caused birth defects.) Plaintiffs claim to have discovered new evidence showing that defendants were aware of the drug's defects while marketing it. Johnson v. SmithKline Beecham Corp., No. 12-2561 (3d Cir. June 7, 2013.)
The plaintiffs are Pennsylvania citizens and they claimed that four defendants were also Pennsylvania citizens. So when defendants removed the action from Pennsylvania state court, plaintiffs moved to remand. That motion was denied and the issue certified for interlocutory appeal. Apparently the issue of these companies' citizenship for diversity purposes has come up in several other cases and the district court rulings have conflicted.
As a naive law student, I concluded that any corporate structure that I could not understand was up to no good, and I have found no reason to change my mind about this well into middle age. Three of the four defendants that plaintiffs claimed were Pennsylvania citizens are entities affiliated with GlaxoSmithKline plc, the British entity that is the "global head" of the GlaxoSmithKline group of companies. Defendant SmithKline Beecham Corp. was once a Pennsylvania corporation, but it converted in 2009 to a Delaware LLC. As far as I understood, the purpose of the conversion was to avoid "unnecessary tax liability." (Wish I could convert myself to a Delaware LLC!) SmithKline Beecham then dissolved. The court thus held that SmithKline Beecham was not a Pennsylvania citizen because it had converted itself into a new entity, defendant GSK LLC.
GSK LLC operates the US division of GlaxoSmithKline plc. Its headquarters is still in Philadelphia, "where it occupies 650,000 square feet of office space and employs 1,800 people" – the same as when it was still SmithKline Beecham. SmithKline Beecham's board of directors became GSK LLC's "board of managers." Does that mean GSK LLC's principal place of business is still Pennsylvania?
No. As an LLC, GSK LLC's citizenship for diversity purposes is derivative of its owner's (or "member's") citizenship. Its sole member is GSK Holdings, a Delaware corporation with its principal place of business in (according to the Third Circuit) Delaware. GSK Holdings subleases a ten-by-ten foot office in Delaware. It has one employee who works about 20 hours per year. Its three directors hold quarterly 15-30 minute meetings in Delaware (at least one of the directors is usually physically present at the meetings) to discuss GSK Holdings' investments.
As for the fourth defendant at issue, Avantor, it evidently moved its principal place of business to Pennsylvania five days after the removal, so the court held that it was still a New Jersey citizen at the time of removal.
Thursday, June 6, 2013
stunning development, the Oklahoma Supreme Court has invalidated a sweeping
tort reform bill passed in 2009. The
particular provision at issue in Douglas
v. Cox Retirement Properties, Inc., 2013 OK 37, a wrongful
death action against a nursing home, was the requirement of an expert's "affidavit
of merit" to be filed with or shortly after the filing of the complaint in
a professional negligence claim. When
the plaintiff failed to file the affidavit of merit, the trial court granted
defendant's motion to dismiss. The
Oklahoma Supreme Court reversed.
The expert affidavit of merit requirement was just one portion of Oklahoma H.B. 1603, the so-called Comprehensive Lawsuit Reform Act of 2009. The bill has 90 separate sections encompassing such disparate topics as transfer of cases, limitations on noneconomic damages, suing fast food providers, and a host of other provisions. The court held that H.B. 1603 violated Article 5, Section 57 of the Oklahoma Constitution ("Every act of the Legislature shall embrace but one subject, which shall be clearly expressed in its title"), commonly known as the single-subject rule. "The purposes of the single-subject rule are to ensure the legialtors or voters of Oklahoma are adequately notified of the potential effect of the legislation and to prevent logrolling."
A separate opinion, Wall v. Marouk, 2013 OK 36 (June 4, 2013), also invalidated the affidavit of merit requirement in a medical malpractice action. The court held that the requirement violated two other Oklahoma constitutional provisions, one prohibiting "special laws" (Okla. Const. art. 5, §46), and the other guaranteeing right of access to the courts (Okla. Const. art. 2, §6).
Sunday, June 2, 2013
Michael Klausner, Jason Hegland, and Matthew Goforth, all of Stanford Law School, have published on SSRN the first of two updates to earlier empirical studies of securities class actions, entitled "When are Securities Class Actions Dismissed, When Do They Settle, and for How Much? — An Update."
In this article, we briefly present some basic statistics on the timing of dismissals and settlements in securities class actions. In contrast to the popular image of securities class actions, we find that over half of all cases are either dismissed or settle well before discovery begins. 38% of cases are either dismissed with prejudice on the first motion to dismiss or are dropped before a second complaint is filed. Another 15% of cases settle either before the first motion to dismiss was ruled on or after an initial dismissal without prejudice. The article provides additional descriptive statistics on how securities class actions are resolved and the timing of their resolution.