Civil Procedure & Federal Courts Blog

Specific, Not General, Jurisdiction Upheld Over Non-Residents' Claims Against Bristol-Myers

A recent opinion from the California Court of Appeals perhaps illustrates the extent to which defendants have been emboldened by the United States Supreme Court's decision striking down personal jurisdiction in Daimler AG v. Bauman.

In Bristol-Myers Squibb Co. v. Superior Court of San Francisco County, No. A140035 (Cal. App. July 30, 2014), BMS filed a petition for writ of mandate to reverse the trial court's ruling upholding personal jurisdiction.  The court set the scene:

Defendant Bristol-Myers Squibb Company (BMS) has been sued by dozens of California residents in a coordinated proceeding before the San Francisco Superior Court. They allege defects in Plavix, a drug BMS manufactures and sells throughout the country. Jurisdiction over BMS as to these plaintiffs is conceded. The question presented is whether California also has jurisdiction over BMS regarding identical Plavix defects claims brought by hundreds of non-resident co-plaintiffs, the real parties in interest here (RPI), in the same coordinated proceeding, consistent with the Due Process Clause of the Fourteenth Amendment.

The trial court had upheld general jurisdiction over the non-residents' claims against BMS because:

[I]t had sold in the state nearly $1 billion worth of Plavix between 2006 and 2012 and 196 million Plavix pills between 1998 and 2006, had been registered with the California Secretary of State to conduct business since 1936, maintained an agent for service of process in Los Angeles, operated five offices in California that employed approximately 164 people, employed approximately 250 in-state sales representatives, owned a facility in Milpitas employing 85 people that was used primarily for research, operated other facilities that were used primarily for research and laboratory activities in Aliso Viejo, San Diego and Sunnyvale, and had a small office in Sacramento that was used by the company’s Government Affairs group.

Despite these extensive contacts with California, the appellate court concluded that after Daimler, California could not exercise general jurisdiction over BMS because it was not "at home" in the forum.  

All was not lost for the non-resident plaintiffs, however.  Turning to specific jurisdiction, the court relied on Keeton v. Hustler Magazine to show that "the doctrine of specific jurisdiction can apply to the claims of a non-resident against a non-resident."  Further, the court noted that although the United States Supreme Court has not yet defined "what it means for a suit to 'arise out of' or 'relate' to a defendant’s contacts with the State," California has adopted the “'substantial connection' test, under which the relatedness requirement is satisfied if 'there is a substantial nexus or connection between the defendant’s forum activities and the plaintiff’s claim.'”

The court held that there was a "substantial connection" between BMS' extensive contacts with California and the non-residents' claims of injury involving Plavix:

BMS has “deliberately exploited” the relevant market in the State (Keeton, supra, 465 U.S. at p. 781) for many years, having sold over 196 million Plavix pills in California between 1998 and 2006 and nearly $1 billion worth of Plavix between 2006 and 2012.
Further, plaintiffs allege BMS’s Plavix sales in California have led to injuries to California residents that are the same as those suffered by the RPI.

Finally, the court held that BMS had not satisfied its burden of showing that California's exercise of specific jurisdiction was unreasonable. 

Hat tip: Levi Wilkes (St. Thomas J.D. Candidate 2015)

Michalski and Wood on Twombly and Iqbal at the State Level

Roger Michalski (Brooklyn Law School) and Abby Wood (USC Gould School of Law) have posted Twombly and Iqbal at the State Level to SSRN.

This paper contributes to the empirical literature on pleading standards by studying the effect of Twombly and Iqbal at the state level. Studying pleading in the states is appealing for three reasons.

First, the findings of this paper are the first to address the empirical workings of pleading regimes where most litigation in the United States occurs. States account for the majority of civil litigation, yet they are understudied doctrinally and empirically. Here, we examine filing behavior, the content and length of complaints, the use of amended complaints, voluntary dismissals, motion to dismiss filed, and dismissal rates. 

Second, federal civil procedures only vary across time. There is only one pre-Iqbal federal pleading regime and one post-Iqbal regime. When we consider pleading at the state level, we can leverage differences across space and time. When some states change pleading standards while others do not (as here), we are presented with a natural experiment on the effects of pleading standards ripe for empirical study.

Third, our focus on the state level allows us to introduce synthetic controls to the study of pleading. Using synthetic controls frees us from one of the basic vulnerabilities of using one specific state (or group of states) as a comparison category – the threat that the states are fundamentally different, and we are instead comparing apples and oranges. Synthetic controls allows us to construct a composite of states as a control state, which, by construction, is a close match to the treatment state. 

Until now, we simply did not know whether the existing literature at the federal level analyzed an outlier jurisdiction or whether pleading functions similarly in both state and federal courts. This paper fills that gap and lays the groundwork for future empirical research on national procedural uniformity and divergence.

Wiessner on Mass Claims in the Context of Argentina's Debt Defaults

My colleague Siegfried Wiessner, Professor of Law and the Director of St. Thomas' Graduate Program in Intercultural Human Rights, has posted on SSRN his article Democratizing International Arbitration? Mass Claims Proceedings in Abaclat v. Argentina.  This is a fascinating account of the decision of the International Center for the Settlement of Investment Disputes to allow some 60,000 individual Italian bondholders to proceed against Argentina for its default on those bonds – the first mass claim presented before an ICSID tribunal.  In support of the ICSID's decision, Professor Wiessner surveys US class action practice, the European Union's collective redress mechanisms (including representative collective actions, group actions, and test cases), and International Mass Claims Commissions.

Abstract:     

Mass claims have been accepted, in principle, in the landmark 2011 ICSID Decision on Jurisdiction and Admissibility of Abaclat v. Argentina. Welcoming this development as providing novel access for the common man and woman to international investment arbitration, the author explores related streamlined procedures in domestic and international law -- such as class actions and international mass claims commissions as well as vanguard use of technology and statistical methods -- that allow the processing of a high number of claims arising from common factual and/or legal issues with a view toward elaborating rules and mechanisms tailor-made for the context of international arbitration.

Wisconsin Adopts Twombly's Plausibility Standard

In a 4-3 decision, the Wisconsin Supreme Court has adopted the plausibility pleading standard of the U.S. Supreme Court's opinion in Bell Atlantic Corp. v. Twombly.  Data Key Partners v. Permira Advisers LLC,  No. 2012AP1967 (Wis. July 23, 2014).

The court reversed the Wisconsin Court of Appeals' ruling that plaintiffs had alleged sufficient facts to show breach of fiduciary duty against the defendants.  Wisconsin's pleading rule requires a complaint to contain "[a] short and plain statement of the claim, identifying the transaction or occurrence or series of transactions or occurrences out of which the claim arises and showing that the pleader is entitled to relief."  Wis. Stat. § 802.02(1)(a).

The court held that "[p]laintiffs must allege facts that, if true, plausibly suggest a violation of applicable law," stating that "Twombly is consistent with our precedent."  The court also asserted that Twombly had overruled Conley v. Gibson.  (In my view, however, Twombly only overruled Conley's "no set of facts" standard, not the entire opinion.)

Justice Shirley Abramson, for two other justices, dissented.

I would follow Wisconsin law and conclude that as a general rule, parties need not plead specific facts at the motion-to-dismiss phase.  In the instant case, although the plaintiffs raised the business judgment rule in their complaint, the plaintiffs also set forth sufficient facts to plead around the rule and provide notice to the defendants of the claim being alleged.

. . . Under Twombly/Iqbal, federal district courts have increased the rate at which they grant motions to dismiss.  

No Wisconsin case has adopted the rule as stated in Twombly and Iqbal.  Twombly was not argued or briefed in the instant case.  The majority opinion relies on the Twombly heightened pleading standard without any briefing or argument. I have written before that this court should give counsel the opportunity to develop arguments before the court in the adversarial system. . . .

Article III Standing and Yesterday's ACA Decisions (Halbig & King)

By now most folks have seen yesterday’s conflicting rulings over whether the Affordable Care Act authorizes subsidies for individuals who purchase insurance on a federal exchange (as opposed to exchanges run by the states). The D.C. Circuit found that such subsidies were not statutorily authorized (the Halbig case). And an hour later, the Fourth Circuit found that the subsidies were statutorily authorized (the King case).

The merits of these decisions, as a practical matter and in terms of statutory interpretation, have received tremendous attention. But Article III standing was also an issue in both Halbig and King. Who, after all, suffers the constitutionally required “injury in fact” by virtue of receiving a subsidy? The answer: People who would be subject to the individual mandate if they are entitled to the subsidy but would not be subject to the individual mandate (on income grounds) without the subsidy. Here’s how the Halbig majority explained it with respect to one of the plaintiffs in that case, David Klemencic:

Klemencic resides in West Virginia, a state that did not establish its own Exchange, and expects to earn approximately $20,000 this year. He avers that he does not wish to purchase health insurance and that, but for federal credits, he would be exempt from the individual mandate because the unsubsidized cost of coverage would exceed eight percent of his income. The availability of credits on West Virginia’s federal Exchange therefore confronts Klemencic with a choice he’d rather avoid: purchase health insurance at a subsidized cost of less than $21 per year or pay a somewhat greater tax penalty.

The D.C. Circuit found that this was sufficient for purposes of Article III standing, and the Fourth Circuit reached the same conclusion. From the Halbig majority opinion (footnote omitted):

The government characterizes Klemencic’s injury as purely ideological and hence neither concrete nor particularized. But, although Klemencic admits to being at least partly motivated by opposition to “government handouts,” he has established that, by making subsidies available in West Virginia, the IRS Rule will have quantifiable economic consequences particular to him. See Clapper v. Amnesty Int’l USA, 133 S. Ct. 1138, 1147 (2013) (explaining that a “threatened injury” that is “certainly impending” may “constitute injury in fact” (emphasis and internal quotation marks omitted)). Those consequences may be small, but even an “‘identifiable trifle’” of harm may establish standing. Chevron Natural Gas v. FERC, 199 F. App’x 2, 4 (D.C. Cir. 2006) (quoting United States v. Students Challenging Regulatory Agency Procedures, 412 U.S. 669, 689 n.14 (1973)); see Bob Jones Univ. v. United States, 461 U.S. 574, 581-82 (1983) (noting that Bob Jones University sued for a tax refund of $21.00). Klemencic thus satisfies the requirement of establishing an injury in fact, and because that injury is traceable to the IRS Rule and redressable through a judicial decision invalidating the rule, we find that he has standing to challenge the rule.

And from the King opinion:

We agree that this represents a concrete economic injury that is directly traceable to the IRS Rule. The IRS Rule forces the plaintiffs to purchase a product they otherwise would not, at an expense to them, or to pay the tax penalty for failing to comply with the individual mandate, also subjecting them to some financial cost. Although it is counterintuitive, the tax credits, working in tandem with the Act’s individual mandate, impose a financial burden on the plaintiffs.

The defendants’ argument against standing is premised on the claim that the plaintiffs want to purchase “catastrophic” insurance coverage, which in some cases is more expensive than subsidized comprehensive coverage required by the Act. The defendants thus claim that the plaintiffs have acknowledged they would actually expend more money on a separate policy even if they were eligible for the credits. Regardless of the viability of this argument, it rests on an incorrect premise. The defendants misread the plaintiffs’ complaint, which, while mentioning the possibility that several of the plaintiffs wish to purchase catastrophic coverage, also clearly alleges that each plaintiff does not want to buy comprehensive, ACA-compliant coverage and is harmed by having to do so or pay a penalty. The harm in this case is having to choose between ACA-compliant coverage and the penalty, both of which represent a financial cost to the plaintiffs. That harm is actual or imminent, and is directly traceable to the IRS Rule.

 

 

Free CLE for ABA Members on the Legal Implications of Mobile Devices

The ABA is presenting a free (to members) Webinar called "The Mobile Transformation: The Extraordinary Legal Implications of Billions of Mobile Devices" on Monday, July 21, 2014 from 1:00-2:30 p.m.   

Information on the Webinar is here.

Call for Papers -- AALS Section on Civil Procedure

The Civil Procedure Section of the AALS will present a panel, “The Rising Bar to Federal Courts: Beyond Pleading and Discovery,” at the 2015 AALS Annual Meeting in Washington, D.C.  The panel will run from 10:30 a.m. to 12:15 p.m. on Saturday, January 3, 2015, at the Washington Marriott Wardman Park Hotel.  This panel brings together a group of people with different roles and perspectives to provide insights and commentary on the effects of civil procedure rules and doctrine on the current federal court docket.  Confirmed outside speakers include a United States District Court judge, an empirical researcher from the Federal Judicial Center, a plaintiffs’ side attorney, and a lawyer from the defense bar. 

The Section seeks 1-2 academic speakers/papers for further perspective on how developments in rules and case law are acting at the federal trial court level to affect and restrict the nature of the court docket.  While tremendous attention has been given to Twombly/Iqbal and discovery rules, our panel seeks to go beyond these two “usual suspects” to focus on other developments in doctrine and rulemaking that also alter the potential for court access, including, but not limited to, issues around personal jurisdiction, mandatory ADR, transnational litigation, and class actions.    

The selected author(s) will present their papers at the AALS annual meeting in January 2015 in Washington, D.C.  Neither the AALS nor the Section is able to provide travel funding.  The selected authors and all panelists will have the opportunity to publish their papers in the Journal of Civil Rights and Economic Development (St. John’s Law School), subject to final approval by the journal editors. 

All draft papers must be submitted by Tuesday, September 2, 2014.  Please send submissions to Rebecca Hollander-Blumoff, Chair of the Section on Civil Procedure, by email to [email protected].  Respondents will be notified of the Section’s decision by the end of September.  

Cert Grant on Issue Preclusion in Trademark Case

The Supreme Court has granted cert in a trademark infringement case involving a collateral estoppel issue.  The questions presented in B&B Hardware, Inc. v. Hargis Industries, Inc., No. 13-352, are:

(1) Whether the Trademark Trial and Appeal Board’s finding of a likelihood of confusion precludes respondent from relitigating that issue in infringement litigation, in which likelihood of confusion is an element; and (2) whether, if issue preclusion does not apply, the district court was obliged to defer to the Board’s finding of a likelihood of confusion absent strong evidence to rebut it.

Hat tip: Professor Ira Nathenson, who also explained that the Trademark Trial and Appeal Board is not an Article III court, and that the nature of Likelihood-of-Confusion inquiries can vary between the TTAB and the District Court.

Abu Ghraib Prisoners' Claim Allowed Under Alien Tort Statute

The opinion by Judge Keenan in Al Shimari v. CACI Premier Technology, Inc., No. 13-1937 (4th Cir. June 30, 2014) sums it up:

In this appeal, we consider whether a federal district court has subject matter jurisdiction to consider certain civil claims seeking damages against an American corporation for the torture and mistreatment of foreign nationals at the Abu Ghraib prison in Iraq.  The primary issue on appeal concerns whether the Alien Tort Statute, 28 U.S.C. § 1350, as interpreted by the Supreme Court in Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659 (2013), provides a jurisdictional basis for the plaintiffs’ alleged violations of international law, despite the presumption against extraterritorial application of acts of Congress.  We also address the defendants’ contention that the case presents a “political question” that is inappropriate for judicial resolution under our decision in Taylor v. Kellogg Brown & Root Services, Inc., 658 F.3d 402 (4th Cir. 2011). 

We conclude that the Supreme Court’s decision in Kiobel does not foreclose the plaintiffs’ claims under the Alien Tort Statute, and that the district court erred in reaching a contrary conclusion. Upon applying the fact-based inquiry articulated by the Supreme Court in Kiobel, we hold that the  plaintiffs’ claims “touch and concern” the territory of the United States with sufficient force to displace the presumption against extraterritorial application of the Alien Tort Statute.  See Kiobel, 133 S. Ct. at 1669. However, we are unable to determine from the present record whether the claims before us present nonjusticiable political questions.  Therefore, we do not reach the additional issue of the district court’s dismissal of the plaintiffs’ common law claims, and we vacate the district court’s judgment with respect to all the plaintiffs’ claims and remand the case to the district court. We direct that the district court undertake factual development of the record and analyze its subject matter jurisdiction in light of our decision in Taylor and the principles expressed in this opinion.

Congratulations to Civil Procedure Professors Erwin Chemerinsky, Helen Hershkoff, Allan Paul Ides, Stephen I. Vladeck, and Howard M. Wasserman, who submitted an amicus brief on behalf of the plaintiffs-appellants.