Civil Procedure & Federal Courts Blog

Remus and Zimmerman on The Corporate Settlement Mill

Dana Remus (North Carolina) and Adam Zimmerman (Loyola Los Angeles) have posted The Corporate Settlement Mill to SSRN.

From cases involving “robo-signed” mortgages to catastrophic oil spills, the United States legal system increasingly encourages corporate wrongdoers to design and implement their own high-volume settlement programs to compensate thousands of unrepresented victims. These private settlement systems rely on corporate economies of scale to resolve massive disputes as comprehensively as a class action, but entirely outside of the court system. We call these systems “corporate settlement mills.”

Like class action settlements and “no fault” insurance options, corporate settlement mills may ameliorate many of the most commonly criticized features of individualized litigation. They offer redress to people who often cannot afford counsel, handle large volumes of claims quickly and predictably, and reduce court congestion. For those reasons such programs are increasingly required by federal laws, regulatory bodies and as a matter of complex litigation practice. 
But corporate settlement mills also have a dark side. When sophisticated corporate actors quietly settle large numbers of cases in assembly-line fashion, they threaten transparency, fair dealing, and the rule of law. We argue that this new category of dispute resolution is more dangerous than others because a single, self-interested party—the prospective defendant itself—designs and oversees the entire determination process. Corporate settlement mills thus raise fundamental questions about how far policymakers may go to privatize our public, and historically neutral, system of adjudication.

Drawing lessons from other movements to privatize government, we argue that corporate settlement mills can provide an appropriate alternative to public adjudication as long as they remain answerable to the regulators, courts, and claimants that rely on them. We therefore offer specific suggestions to make them more accountable—including targeted prospective regulation, judicial review, stakeholder participation, and ethical reform. In so doing, we broaden the debate over what constitutes mass litigation, in the hope that lawmakers realize the benefits of large private settlements, without frustrating administrative regulation or the judiciary’s authority to “say what the law is.”

RJE

Moore on the Civil Caseload of the Federal District Courts

I have recently posted on SSRN a draft of my paper, The Civil Caseload of the Federal District Courts, which is forthcoming in the University of Illinois Law Review.  The paper examines many of the statistics available from the Administrative Office of the United States Courts, and at the time of finishing the draft, the latest available annual statistics were from fiscal year 2012. 

Naturally, within a week of my submitting the draft, the AO came out with the FY2013 statistics.  I will be revising this draft to incorporate the latest figures, but for now, I would like to share the draft with the community.  I welcome any comments, and feel free to email me ([email protected]) rather than commenting here on the blog.

Abstract:

In the fractious debate about the civil justice system, the dominant narrative of the Civil Rules Advisory Committee is that federal civil litigation takes too long and costs too much and that pretrial discovery is largely to blame.  After repeatedly narrowing the federal discovery rules over the last thirty years, the Advisory Committee has recently proposed yet another round of rules amendments designed to limit discovery.  These proposals have generated an unprecedented amount of passionate (and largely negative) public comment.

Strangely, to justify its position that civil litigation is subject to unacceptable delays, the Advisory Committee has not used the government's own caseload statistics – even those statistics that were instituted in 1990 for the very purpose of measuring "delay."  Nor has the Advisory Committee examined caseload statistics to see whether the proportions of different types of civil cases have changed over time, or how those changes might be relevant to its proposed restrictions on discovery.

This article fills in those gaps.  Examining the voluminous publicly-available statistics on the federal courts, I offer a radical interpretation: since 1986, instead of an "explosion" of the civil docket, the opposite has occurred: if not quite an implosion, at least stagnation.  For example, the number of new civil cases filed since 1986 has increased a mere 1%, and the number of weighted civil filings per authorized district court judge has actually declined 1% since 1986.  It is the criminal docket that has overwhelmed the civil docket, but it is civil litigation that has been the target of endless "reform" efforts. 

Moreover, five of the six largest categories of federal civil case types today are those that are typically brought by the "have-nots" of society: individuals pressing tort, prisoner, civil rights, labor, and Social Security claims.  Contract cases, the only large category primarily brought by organizations, have fallen to only 9% of civil case filings.  Of all litigants in the top three categories of cases, civil rights litigants have the most to fear from the proposed discovery amendments: most federal tort litigation is already under coordinated pretrial discovery in conjunction with multidistrict litigation, and there is little discovery in prisoner litigation.  Policy discussions about civil litigation should explicitly consider how proposals would impact the majority of individuals seeking relief in the federal courts.

 

Zimmerman on Presidential Settlements

Adam Zimmerman (Loyola Los Angeles) has posted Presidential Settlements to SSRN.

Large groups repeatedly turn to the White House to collectively resolve complex disputes, much like a class action. Such presidential settlements go back at least as far as the early republic, as well as the Progressive Era, when Teddy Roosevelt famously brokered settlements among private groups following a rash of accidental injuries and deaths in mining, rail, and even, football. More modern variants include mass compensation schemes like the Holocaust Victim Settlement, Pan Am Flight 103 Settlement, and the BP Oil Spill Settlement brokered by Presidents Clinton, Bush and Obama. In each case, the President helped resolve a sprawling class action-like dispute among warring parties, while also advancing a broader executive agenda. Just as the President has extended power over the administrative state, presidential settlements demonstrate the growth of executive authority in mass dispute resolution to provide restitution for widespread harm.

But this use of executive power creates problems for victims purportedly served by presidential settlements. When the President settles massive private disputes, he resolves them like other forms of complex litigation, but without the judicial review, transparency, and participation thought necessary to resolve potential conflicts of interests among the victims. The Presidents’ other duties as the Chief Executive also aggravate conflicts with groups who may rely entirely on such settlements for relief. 

This Article recommends that the President adopt complex litigation principles to reduce conflicts of interests, to increase transparency, and to improve public participation in White House driven settlements. Envisioning the President as the “Settler-In-Chief,” this Article also raises new questions about how the coordinate branches of government, as well as actors inside the White House, may regulate executive settlement practice consistent with the Separation of Powers.

RJE

Today's SCOTUS Oral Argument in Wood v. Moss

Here’s the transcript of today’s Supreme Court oral argument in Wood v. Moss. It’s a Bivens case brought by plaintiffs who had been protesting against President George W. Bush during his visit to a restaurant in Oregon. They allege that the defendants, who were secret service agents, engaged in unconstitutional viewpoint discrimination by moving them farther away from the President than a similar group that was expressing support for the President.

The crux of the defendants’ position is that they are protected by qualified immunity, but the case could have ramifications for pleading standards more generally. The argument included quite a bit on Iqbal, and there were several questions about the discovery that would likely ensue if the claims were allowed to move forward.

PS: Here is an analysis of the oral argument by Lyle Denniston (SCOTUSblog).

 

Civil Rules Advisory Committee Publishes Agenda for April Meeting

The Advisory Committee on Civil Rules has published a 580-page Agenda for its upcoming meeting in Portland, Oregon on April 10-11, 2014.

Hat tip: Kevin Clermont.

Dodson and Starger Produce "Video Article"

Expanding their earlier map of SCOTUS pleading cases, Scott Dodson and Colin Starger have now produced a seven-minute video visually demonstrating the relationship between the cases.  You can watch this interesting endeavor here.

A more traditional form of the paper will appear this spring in the Federal Courts Law Review.

Today's SCOTUS Decision in Lexmark v. Static Control: Some Interesting Bits on Standing and Iqbal

The Supreme Court issued a unanimous decision today in Lexmark International, Inc. v. Static Control Components, Inc. It’s principally a Lanham Act case, but Justice Scalia’s opinion has some interesting discussion on Article III standing, prudential standing, and whether Congress has (or has not) authorized a cause of action [See Part II, pp.6-9]. Justice Scalia recognized that the plaintiff in Lexmark had Article III standing based on its “allegations of lost sales and damages to its business reputation.” [p.6] Although the parties had “treat[ed] the question on which we granted certiorari as one of ‘prudential standing,’” he found this “misleading.” [p.6] Instead, he explained [p.9]:

[T]he question this case presents is whether Static Control falls within the class of plaintiffs whom Congress has authorized to sue under §1125(a). In other words, we ask whether Static Control has a cause of action under the statute.⁴ That question requires us to determine the meaning of the congressionally enacted provision creating a cause of action. In doing so, we apply traditional principles of statutory interpretation. We do not ask whether in our judgment Congress should have authorized Static Control’s suit, but whether Congress in fact did so. Just as a court cannot apply its independent policy judgment to recognize a cause of action that Congress has denied, see Alexander v. Sandoval, 532 U.S. 275, 286–287 (2001), it cannot limit a cause of action that Congress has created merely because “prudence” dictates.

Footnote 4 states:

We have on occasion referred to this inquiry as “statutory standing” and treated it as effectively jurisdictional. See, e.g., Steel Co. v. Citizens for Better Environment, 523 U.S. 83, 97, and n. 2 (1998); cases cited id., at 114–117 (Stevens, J., concurring in judgment). That label is an improvement over the language of “prudential standing,” since it correctly places the focus on the statute. But it, too, is misleading, since “the absence of a valid (as opposed to arguable) cause of action does not implicate subject-matter jurisdiction, i.e., the court’s statutory or constitutional power to adjudicate the case.’ ” Verizon Md. Inc. v. Public Serv. Comm’n of Md., 535 U.S. 635, 642–643 (2002) (quoting Steel Co., supra, at 89); see also Grocery Mfrs. Assn. v. EPA, 693 F.3d  169, 183–185 (Kavanaugh, J., dissenting), and cases cited therein; Pathak, Statutory Standing and the Tyranny of Labels, 62 Okla. L. Rev. 89, 106 (2009).

There’s also a footnote that mentions Iqbal [footnote 6, on p.15]: 

Proximate causation is not a requirement of Article III standing, which requires only that the plaintiff ’s injury be fairly traceable to the defendant’s conduct. Like the zone-of-interests test, see supra, at 8–9, and nn. 3–4, it is an element of the cause of action under the statute, and so is subject to the rule that “the absence of a valid (as opposed to arguable) cause of action does not implicate subject-matter jurisdiction.” Steel Co., 523 U.S., at 89. But like any other element of a cause of action, it must be adequately alleged at the pleading stage in order for the case to proceed. See Ashcroft v. Iqbal, 556 U.S. 662, 678–679 (2009). If a plaintiff ’s allegations, taken as true, are insufficient to establish proximate causation, then the complaint must be dismissed; if they are sufficient, then the plaintiff is entitled to an opportunity to prove them.

 

Maxeiner on the FRCPs at 75

James Maxeiner  (University of Baltimore) has posted The Federal Rules at 75: Dispute Resolution, Private Enforcement or Decision According to Law? to SSRN.

This essay is a critical response to the 2013 commemorations of the 75th anniversary of the Federal Rules of Civil Procedure.

The Federal Rules of Civil Procedure were introduced in 1938 to provide procedure to decide cases on their merits. The Rules were designed to replace decisions under the “sporting theory of justice” with decisions according to law. By 1976, at midlife, it was clear that they were not achieving their goal. America’s proceduralists split into two sides about what to do. 

One side promotes rules that control and conclude litigation: e.g., plausibility pleading, case management, limited discovery, cost indemnity for discovery, and summary judgment (“dispute resolution”). The other side defends rules that open litigation to investigation of possible rights: e.g., notice pleading, open and free discovery, and limited summary judgment (“private enforcement”). 

Both sides focus on process. They overlook the essential goal of civil justice the world over: “to apply the applicable substantive law to the established facts in an impartial manner, and pronounce fair and accurate judgments.” They forget decisions according to law.

Abroad we can see systems of civil justice that work, if only we would look. Whereas the heroes of American civil justice, David Dudley Field, Jr., Roscoe Pound, Charles E. Clark, and Edson D. Sunderland, looked abroad for solutions, today’s proceduralists from the private enforcement side tell us to avert our eyes from foreign systems. Why? Supposedly our system in its goals is exceptional. In fact, it is not. We could and should learn from others.

RJE

Morley on Avoiding Adversarial Adjudication

Michael Morely (Harvard Law School) has posted Avoiding Adversarial Litigation to SSRN.

There are a variety of procedural vehicles through which litigants may seek a substantive court ruling or order that declares or modifies their legal rights and obligations without actually litigating the merits of a case as a whole, or particular issues within the case. These alternatives include defaults, failures to oppose motions for summary judgment, stipulations of law, waivers and forfeitures, stipulations of law, confessions of error, and consent decrees. Courts presently apply different standards in determining whether to accept or allow litigants to take advantage of each of these vehicles for avoiding adversarial adjudication. Because all of these procedural alternatives share the same underlying structural similarity, however, courts should apply a single, consistent, unified standard to all of them. 

Article III’s prohibition on hypothetical suits places outer bounds on the range of false factual and legal premises on which a court may base a judgment. Courts should go beyond this constitutional minimum, however, and apply an accuracy-centric approach in deciding whether to issue requested relief when litigants inadvertently or deliberately, expressly or implicitly, seek to have the court avoid considering the merits of a claim, issue, or argument in a case. If the court — based on its background knowledge of the law, experience with similar cases, or independent legal research — harbors doubts about the validity of a litigant’s legal premises or contentions, or believes the parties have overlooked a potentially valid claim, issue, or argument, it should decline to grant the requested relief and direct the litigants to brief the matter. 

Adopting an accuracy-centric approach helps courts perform not only their law-declaring function of expounding the law and generating accurate precedents, but their dispute-resolution function, as well. Litigants, the public, and courts themselves have a strong interest in having courts resolve cases, and issues in cases, in accordance with the substance of applicable law, even when they are acting primarily in a dispute-resolution capacity.

RJE

Coleman on Reinert on Meritless Litigation

Now available on the Courts Law section of JOTWELL is an essay by Brooke Coleman (Seattle) entitled Recognizing the Value of Failure in Civil Litigation. It reviews a recent article by Alex Reinert (Cardozo), Screening Out Innovation: The Merits of Meritless Litigation, 89 Ind. L. J. (forthcoming).

 

TRO Entered Against Mt. Gox in Class Action

I have admittedly fallen down on my self-appointed job of reporting on bitcoin litigation.  Somewhat belatedly, I provide an update on some of the litigation surrounding the collapse of Mt. Gox, one of the earliest, largest, and best-known bitcoin exchanges. 

On Feb. 27, 2014, a putative class action, Greene v. Mt. Gox Inc., Mt. Gox KK, Tibanne KK, and Mark Karpeles, No. 1:14-cv-1437, was filed in the Northern District of Illinois.  Subject matter jurisdiction was premised on the Class Action Fairness Act.  The complaint alleged counts for consumer fraud, common law fraud, negligence, and conversion, among other causes of action.

Two classes are proposed:

(1) Payment Class: All persons in the United States who paid a fee to Mt. Gox to buy, sell, or otherwise trade bitcoins.

(2) Frozen Currency Class: All persons in the United States who had bitcoins or Fiat Currency stored with Mt. Gox on Feb. 7, 2014.

On March 9, 2014, Mt. Gox Co., Ltd., which apparently is also known as Mt. Gox KK, filed a bankruptcy petition under Chapter 15 (foreign proceeding) in the Northern District of Texas, No. 3:14-bk-31229.  Under the automatic stay, the Greene proceeding was stayed against defendant Mt. Gox KK.

However, as against the remaining defendants, Judge Feinerman in the Greene case entered a temporary restraining order on March 11, 2014.  The court ruled that plaintiff had demonstrated a likelihood of success on the merits with respect to claims under the Illinois Consumer Fraud Act, common law fraud, negligence, conversion, and for an accounting, and restrained the defendants from selling, transferring, disposing of, or concealing any of their assets or records, including preservation of their web site. 

Annual Report on Federal Courts for FY 2013 Posted

The Administrative Office of the United States Courts has posted Judicial Business of the United States Courts: Annual Report of the Director 2013.

Deposition of Justin Bieber in Alleged Bodyguard-Attacks-Photographer Case

Want a cringe-worthy example of a difficult deponent?  Try this excerpt of Justin Bieber's deposition in Binion v. Bieber, pending in state court in Miami.   The complaint alleges:

7. At the aforedescribed date, time and place, Plaintiff, who is a 56 year old professional photographer, was legally on the sidewalk outside of the Hit Factory, taking photographs of Defendant BIEBER.
8. Defendant BIEBER, who is an internationally famous recording artist, did not want the Plaintiff to take photographs of him, so he directed HESNY and three other bodyguards to confront Plaintiff, and to forcibly take the memory card from Plaintiff’s camera.
9. In compliance with BIEBER’s instructions, Defendant HESNY threw Plaintiff against a wall, began choking him, and threatened Plaintiff with a gun, while the other bodyguards (whose names are unknown to the Plaintiff, pending further discovery), assisted him in threatening Plaintiff and forcibly removing the memory card from his camera.

Thanks to Brittany Cooper for passing this along!

 

New Cert Grant on Statute of Limitations in Class Action

The Supreme Court has granted certiorari in Public Employees' Retirement System of Mississippi v. IndyMac MDS, Inc.

Question presented:

Issue: Whether the filing of a putative class action serves, under American Pipe & Construction Co. v. Utah, to satisfy the three year time limitation in § 13 of the Securities Act with respect to the claims of putative class members.

SCOTUSblog has a post on the case.

New Grants of Certiorari

SCOTUS has granted the petitions for certiorari in the following cases of interest to proceduralists:

Warger v. Shauers:

Issue: Whether Federal Rule of Evidence 606(b) permits a party moving for a new trial based on juror dishonest during voir dire to introduce juror testimony about statements made during deliberations that tend to show the alleged dishonesty.

Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund:

Issue: Whether, for purposes of a claim under Section 11 of the Securities Act of 1933, 15 U.S.C. § 77k, a plaintiff may plead that a statement of opinion was “untrue” merely by alleging that the opinion itself was objectively wrong, as the Sixth Circuit has concluded, or must the plaintiff also allege that the statement was subjectively false – requiring allegations that the speaker’s actual opinion was different from the one expressed – as the Second, Third, and Ninth Circuits have held.

SCOTUS Holds SLUSA Does Not Preclude State-Law Class Action

The Supreme Court, in Chadbourne & Parke LLC v. Troice, in an opinion by Justice Breyer, held that the Securities Litigation Uniform Standards Act of 1998 did not forbid "a class action in which the plaintiffs allege (1) that they 'purchase[d]' uncovered securities (certificates of deposit that are not traded on any national exchange), but (2) that the defendants falsely told the victims that the uncovered securities were backed by covered securities."

An analysis of the opinion is on SCOTUSblog here.