The Federal Circuit Muddies Its Venue Transfer Jurisprudence

federal circuit Patent plaintiffs, especially those resembling “patent trolls,” routinely sue in plaintiff-friendly forums, such as the Eastern District of Texas, or in other forums thousands of miles away from a defendant’s home base. Plaintiffs use the attendant inconveniences as leverage when pursuing quick settlements. Such venue manipulation is an item of significant concern to repeat player defendants of patent lawsuits.

Congress considered and rejected venue reforms as part of the America Invents Act of 2011, which may be one reason such provisions are not included in current reform efforts on Capitol Hill. Another reason may be that over the last five years, the U.S. Court of Appeals for the Federal Circuit has built up a robust jurisprudence which gives defendants a fair chance at having lawsuits transferred to a more convenient forum. Our 2010 Legal Pulse post The Federal Circuit Messes with (the Eastern District of) Texas Yet Again examined a series of Federal Circuit rulings which together have provided predictable standards for judging venue transfer requests under 28 U.S.C. § 1404(a).

However, two Federal Circuit decisions issued on the same day—February 27—by the same panel of judges now threaten the prevailing clarity on patent litigation transfer of venue. In both cases, Judges Prost and Reyna affirmed the lower courts’ denial of defendants’ motions to transfer with Judge Newman twice dissenting. In re Apple Inc. originated in the Eastern District of Texas, while In re Barnes & Noble, Inc. was filed in the Western District of Tennessee. The plaintiff in In re Apple is a Luxembourg company with one employee which has a Plano, Texas subsidiary whose six employees manage the company’s patent portfolio. The plaintiff in In re Barnes & Noble registered to do business in Tennessee just before filing this suit (as well as 19 other identical suits in the same court) and is a one-employee company with a home office. Continue reading

Supreme Court Observations: AU Optronics Ruling Empowers State Attorney General-Trial Lawyer Alliance

supreme courtCross-posted at WLF’s Forbes.com contributor page

In its unanimous Mississippi ex rel. Hood v. AU Optronics ruling, the Supreme Court on Tuesday refused to interpret the Class Action Fairness Act (CAFA) so as to allow the “mass action” removal of a parens patriae suit in which the State of Mississippi was the only named plaintiff.  The decision marks only the second time that the high court has considered the 2005 statute, which Congress enacted to expand a defendant’s ability to remove to federal court a class action that did not satisfy the traditional requirements of diversity jurisdiction.  (Last term, a unanimous Court in Standard Fire Insurance Co. v. Knowles ruled in favor of removal in a case where the class representative attempted to avoid CAFA jurisdiction by stipulating to damages below the threshold amount in controversy).

Utilizing a “real-parties-in-interest” analysis, the U.S. Court of Appeals for the Fifth Circuit had agreed with the district court that the case constituted a “mass action” under CAFA.  But on the question of the applicability of CAFA’s “general public” exception, the appeals court reversed the district court, which had remanded the case back to state court on the basis that it was “asserted on behalf of the general public (and not on behalf of individual claimants or members of a purported class)” under 28 U.S.C §1332(d)(11)(B)(ii)(III).  Oddly, the Supreme Court didn’t bother weighing in on CAFA’s “general public” exception, holding instead that the suit failed even to meet the basic definition of a “mass action” because it did not involve 100 or more named plaintiffs.  The Court rejected the lower courts’ “real-parties-in-interest” approach in favor of a narrow reading of the statutory language.

As a result, state attorneys-general and their trial bar friends are now free to avoid federal court altogether by simply running their class and mass actions through an AG’s office as a parens patriae suit.  The trial lawyers will still receive their big contingent-fee awards, and they can continue to send AGs their out-of-state campaign contributions.  According to a recent report, for example, the Mississippi AG’s “plaintiffs’ firm contributors were all out of state, and they made no contributions to any other candidates for statewide office in Mississippi.”  In only two instances where contingent-fee law firms represented Mississippi in securities fraud class actions did the firms not make a previous contribution to the AG’s campaign.  They did so subsequently, however, according to the report.

If this staggering conflict of interest is ever to be reined in, the Court has left it up to Congress to do so.  That’s a shame, inasmuch as the Supreme Court should take a greater interest in cleaning up practices that treat courtrooms like cash registers and corrode the integrity of the judicial process.

Reform of Federal Civil Procedure Rules May Lead to Heightened Pleading Standard in Patent Suits

patentsCross-posted by Forbes.com at WLF’s contributor page

As the process of amending the Federal Rules of Civil Procedure (FRCP) enters a critical juncture, most discussion and attention (including here at The Legal Pulse) have deservedly focused on proposed changes to rules governing the pre-trial discovery process. However, one particular proposed change, overlooked for the most part, would require plaintiffs alleging patent infringement to provide more information in their initial complaints. The Advisory Committee on Civil Rules proposes to abrogate Rule 84 and along with it, the sample complaint forms to which the rule refers, including one relating to patent suits: Form 18.

What Is Form 18? This form has become well-known to patent litigants, especially accused infringers. The judiciary created Form 18 in 1938. It permits plaintiffs to provide a bare minimum of information: a jurisdictional statement, general assertion of patent ownership, a claim of infringement, and a request for relief. A complaint crafted in compliance with Form 18 would thus be in accord with another Federal Rule of Civil Procedure, Rule 8, which dictates pleading standards. In its 2007 Bell Atlantic v. Twombly and 2009 Ashcroft v. Iqbal rulings, the Supreme Court found that the then-existing interpretation of Rule 8—that some relief is “possible”—was incorrect and ruled that plaintiffs must demonstrate that its version of the events is “plausible.” The Court pointedly said that Rule 8 “demands more that an unadorned, the-defendant-unlawfully-harmed-me accusation.”

Form 18 Trumps Rule 8. Patent infringement complaints drafted in minimal conformance with Form 18 are decidedly “unadorned.” Defendants are denied fair notice of their alleged violation, a fault which is magnified exponentially in some patent litigation, such as suits brought by “patent-assertion entities.” As stated in a 2011 letter urging the Administrative Office of the U.S. Courts to address Form 18′s flaws:

[Its] limitations are immediately apparent when the template is used—as is frequently the case—to accuse an entire website or channel of commerce of infringing, in some unspecified manner, a method or software patent. Continue reading

Eleventh Circuit Stacks Deck Against Defendants in Never-Ending Engle Product Liability Litigation

11th CircuitCross-posted at WLF’s Forbes.com contributor page

In Walker v. R.J. Reynolds Tobacco Co., the U.S. Court of Appeals for the Eleventh Circuit has ruled that even though Florida state courts failed to require plaintiffs to establish from the trial record that a previously tried issue was actually decided in their favor, it would not intervene. The tobacco defendants had argued that the Due Process Clause of the U.S. Constitution bars state courts from departing from their normal procedural rules in such a radical manner.  They expected the appeals court to vindicate its earlier ruling in Brown v. R.J. Reynolds Tobacco Co., 611 F.3d 1324 (11th Cir. 2010). 

Walker arises in the aftermath of an abortive effort to try all product liability claims against tobacco manufacturers in a single class-action trial. The trial court initially certified a class consisting of all smokers nationwide who had suffered an illness due to smoking. The class was later limited to Florida smokers. Early phases of the trial had gone on for more than a year when an appeal of the class certification order finally reached the Florida Supreme Court.

The Court ruled in its 2006 Engle decision that continuing the case as a class action was “not feasible because individualized issues such as legal causation, comparative fault, and damages predominate.” In other words, the Court did not believe that a single jury could make meaningful factual determinations that would be applicable to each of the thousands of class members. But the Court left open the possibility that some of the factual findings already made by the class action jury could be used in the subsequent lawsuits brought by individual smokers. Continue reading

Two Cheers for Judicial Actions in Facebook, eBay Class Action Settlements

ebay_thumbfacebookCross-posted at WLF’s Forbes.com contributor site

Class action lawyers had a bit of a rough week in the U.S. District Court for the Northern District of California, a jurisdiction that has seen more than its fair share of class action lawsuits lately.

Fraley v. Facebook. We last discussed the fate of a class action lawsuit against Facebook and its “Sponsored Stories” program almost exactly a year ago. At that time, Judge Richard Seeborg had called into question some aspects of the proposed settlement, including the lawyers’ fee request and the proposed cy pres award.

The settlement has now been finalized. In his August 26 order, Judge Seeborg approved a $20 million settlement fund, from which class members can each claim $15.

Fraley’s lawyers sought fees amounting to 37.5% of the settlement (which equaled $950/hour for lead counsel and $350/hour for second-year associates). Facebook, to its credit, opposed the fee request.

The plaintiffs’ lawyers argued that Judge Seeborg’s ordered injunctive relief (increased transparency for the Sponsored Stories program) had a monetary value to the class members sufficient to justify a fee 12.5% higher than the “common” fee of 25%.  Judge Seeborg responded that “there is nothing to suggest, however, that any class member will see a single dollar more in his or her pocket as a result of any of the injunctive provisions.”  Continue reading

In Circuit Courts, SCOTUS’s Comcast Ruling Doesn’t Make it Through the Rinse Cycle

spin cycleCross-posted at WLF’s Forbes.com contributor site

Last year in Butler v. Sears, Roebuck & Co., the U.S. Court of Appeals for the Seventh Circuit overturned a district court’s denial of certification for a class of plaintiffs who alleged injury resulting from a mold-causing defect in Whirlpool-manufactured washing machines.  On appeal, Sears argued that plaintiffs failed to satisfy the requirement of predominance in class action litigation, but to no avail.  Announcing that “Predominance is a question of efficiency,” Judge Richard Posner (writing for the court) concluded that the class should be certified for the sake of efficiency—even though not every plaintiff actually encountered the alleged mold problem, and even though the suit implicated some twenty-seven different washer models.  Sears went on to petition the Supreme Court for certiorari.

Earlier this year, the Supreme Court decided Comcast Corp. v. Behrend, in which it held a class fails to meet the predominance standard under 23(b)(3) if the offered evidence does not show that damages are capable of measurement on a class-wide basis.  On the same day it decided Comcast, the Supreme Court granted review and vacated the panel opinion in Butler, remanding the case for reconsideration in light of Comcast.

But Judge Posner is evidently sticking to his guns. Concluding that the Supreme Court’s decision in Comcast did not “cut the ground out from under [the court’s earlier] decision,” Judge Posner this week authored a new opinion that, on the merits, is substantially indistinguishable from the first one. Continue reading

On Consecutive Days, Appeals Courts Fortify Defendants’ Efforts to Remove Class Actions from States

9thCir8th CircuitAs anticipation builds for the U.S. Supreme Court’s next big CAFA case later this fall, two federal appeals courts are doing their part to make removal under the Class Action Fairness Act (CAFA) a little easier.

In Raskas v. Johnson & Johnson, the U.S. Court of Appeals for the Eight Circuit held that a removing defendant need not prove the $5 million jurisdictional threshold to an absolute certainty, but only need show that a fact finder might legally conclude that the damages exceed $5 million.  So long as the trier of fact might award more than $5 million in damages, CAFA’s amount-in-controversy requirement is satisfied.

In a CAFA removal case decided the next day, the Ninth Circuit held in Roth v. CHA Hollywood Medical Center, LP that removal is not barred after 30 days by 28 U.S.C. § 1446 so long as the defendant discovers its own facts or information supporting removal.  The Court held that the 30 day time limit for removal applies only when the plaintiff has put a defendant on notice that the case is removable.  Thus, a defendant can conceivably remove a case at any time based on its own information, so long as it received no indication of removability from the plaintiff.

Both of these decisions are part of an encouraging trend permitting out-of-state defendants, in order to ensure that their cases will be heard in an impartial forum, to remove those cases from state to federal court.

Update: Ireland Formally Adopted Counterproductive “Plain Packaging” for Tobacco

black_market_8bitsAs the European Union moves even closer to adopting plain packaging for tobacco products, Ireland has just agreed to implement a scheme to increase that nation’s black market in counterfeit tobacco and seize trademarks worth billions of dollars with its own “plain packaging” initiative.  Granted, Ireland has not characterized its new plain packaging program this way, but these are undoubtedly two unintended consequences of a policy for which there is little, if any, scientific support that it will reduce tobacco consumption or advance public health.

As WLF carefully explained when Australia proposed a similar policy, plain packaging is an entirely counterproductive way to address health concerns of tobacco consumption. Plain packaging laws will have unintended consequences on those nations adopting them by creating a vigorous black market in cigarettes and forcing tobacco prices down as new and cheaper cigarettes enter the marketplace.

Such realities are unlikely to deter public health activists, whose drive toward plain packaging laws amounts to an ideological crusade. In their world, legal protections for property rights like trademarks should not exist and, as the head of the UN’s World Health Organization has publicly stated, any effort to uphold those rights amounts to “harassment.”

The perilous slope that we expressed concern about here a year ago in The Slippery Slope for Plain Packaging: Ireland, UK Look Into Idea of Plain Packaged Alcohol has become quite a bit more slippery.

FDA And Caffeine: Selective Regulation By Unsubtle Threat

baseballbat

Cross-posted at WLF’s Forbes.com contributor page

Hey you!  Yes you, food company (no, not you, coffee proprietor). We’re not happy that your product has caffeine in it. Um, you know, you really might want to reconsider that particular ingredient.

Fans of smaller government might almost be tempted to applaud the Food and Drug Administration’s (FDA) recent approach to addressing caffeine in processed foods and drinks. Unsubtle threats and heavy-handed persuasion take up no space in the Federal Register, require little time or staff, and can produce big results for little cost.

Washington Legal Foundation certainly prefers smaller government. But as firm believers in due process, fair notice, consistency, and transparency from our Fourth Branch of government, we won’t be applauding FDA on this. The agency should stop its sabre-rattling, make a defensible case for bureaucratic action, and pursue a public process if need be.

As it often does on many issues, FDA is taking its cues on caffeine from professional activists and publicity-seeking politicians. U.S. Senators and state attorneys general have been busily besmirching (and subpoenaing) energy drink makers. The City Attorney of San Francisco (the city that banned the Happy Meal) has sued Monster Beverage for allegedly marketing its drink to children. Then last November, Center for Science in the Public Interest (CSPI) dispatched a two-page letter to FDA on the “new craze” of adding caffeine to processed foods. Continue reading

9th Circuit Refuses to Designate Utility Poles as Solid Waste Polluter

penta-poleWEBCross-posted at WLF’s Forbes.com contributor site

The U.S. Court of Appeals for the Ninth Circuit has certainly earned its reputation as a circuit willing to push out the boundaries of environmental laws and regulations. Consider its June 1, 2012 en banc ruling in Karuk Tribe of Ca. v. U.S. Forest Service, where seven of the sitting eleven judges held that the Forest Service’s decision not to regulate low-level mining activity on public lands constituted an action under the Endangered Species Act, requiring the Service to consult with the Fish and Wildlife Service. In a dissent joined by three other judges, Judge Milan Smith began his opinion with an image and quote from Gulliver’s Travels, and wrote “decisions such as this one, and some other environmental cases recently handed down by our court undermine the rule of law, and make poor Gulliver’s situation seem fortunate.” On March 19, the Supreme Court regrettably denied review in Karuk Tribe.

We must, however, give the Ninth Circuit credit on its environmental rulings when it is due, and it’s earned some accolades with its April 3 Ecological Rights Foundation v. Pacific Gas & Elec. ruling. And despite the “citizen’s group” plaintiff’s loss, the decision is one that on this Earth Day, environmental advocates should be applauding as well.

The plaintiffs sued under the citizen suit provisions of the Clean Water Act (CWA) and the Resource Conversation and Recovery Act (RCRA), alleging that poles treated with pentachlorophenol (PCP) contributed “solid waste” to waters of the United States through stormwater runoff. In other words, when it rains, PCP washes off of the poles and enters various bodies of water. As the court noted, EPA has not decided whether to regulate utility poles as “point sources” of pollution under the CWA. Reviewing applicable judicial precedents, the 9th Circuit panel concluded that because neither the poles themselves nor their owners channel or collect the runoff, the plaintiffs had no claim under the CWA. Continue reading