High Court Should Not “DIG” Dart Cherokee Basin Case

supreme courtDart Cherokee Basin Operating Co. v. Owens, which raises right-of-removal issues under the Class Action Fairness Act (CAFA), is among the more important civil justice cases being heard by the Supreme Court this term. Legal commentators are virtually unanimous in concluding that the trial court adopted an overly restrictive standard governing removal of cases from state to federal court. Yet, as Columbia Law Professor Ronald Mann noted in a recent column for ScotusBlog, questioning during the October 7 oral argument revealed that the Court may be reluctant to decide the case at all. Every question posed to counsel for Petitioner focused on “vehicle” issues, not on the merits of his CAFA arguments. Several justices even suggested that the case might be dismissed as improvidently granted—which would be a terrible mistake.

On closer examination, the procedural posture issues that troubled the Court at oral argument turn out to be insubstantial; they should not dissuade the Court from addressing the Question Presented by the petition. Moreover, as explained in Washington Legal Foundation’s amicus brief, it is critical that the Court retain jurisdiction in this case to unwind the judicially created doctrine that motivated the mistake below in the first place. Dart Cherokee provides the Court an ideal opportunity to end the rule of construction whereby federal courts continue to narrowly construe federal removal statutes against the party seeking removal, contrary to Supreme Court precedent and despite the utter lack of any textual basis for doing so. Continue reading

Jurisdiction Still on Target for Supreme Court “Dart” Case

supreme courtAlthough the Supreme Court is scheduled to hear oral arguments on October 7 in a case addressing the scope of removal jurisdiction under the Class Action Fairness Act (CAFA)—Dart Cherokee Basin Operating Co. v. Owens—Public Citizen has urged the Court to dismiss the case as improvidently granted based on what it views as procedural roadblocks to reaching the merits. Last Friday, Columbia Law Professor Ronald Mann’s column for SCOTUSblog spotlighted Public Citizen’s amicus argument and stated, “[M]y sense is that the jurisdictional question [raised by Public Citizen] will seem a lot more contestable to the Justices than the issue on the merits,” adding that the Court might even consider dismissing the petition. Mann is probably correct that the Court is likely to be unimpressed by the lower courts’ merits decision—that a removal petition is deficient unless accompanied by documentary evidence supporting the petition’s allegations that the prerequisites for removal have been met. But the Court is likely to be equally unimpressed by Public Citizen’s “jurisdictional” argument, which has not been raised by the parties at any stage of these proceedings.

Public Citizen bases its argument on the fact that the Tenth Circuit did not directly address the district court’s decision to remand a case removed from state court by the Petitioners under CAFA. CAFA permits defendants in class actions to appeal remand decisions, but they first must petition the appeals court for an order accepting the appeal. In this case, the Tenth Circuit (by an equally divided 4-4 vote) denied the defendants’ petition for permission to appeal. Public Citizen contends that the only issue properly before the Supreme Court is whether the Tenth Circuit abused its discretion in denying permission for an appeal, not whether the district court erred in remanding the case.

That contention is without merit. First, the issue raised by Public Citizen cannot even remotely be deemed “jurisdictional” in nature. The Supreme Court has appellate jurisdiction over any case that has come before a federal appeals court, whether “before or after rendition of judgment or decree.” 28 U.S.C. § 1254(1). Supreme Court jurisdiction does not depend on whether the appeals court has rendered a judgment on the merits of the trial court’s determination. Because this appeal came before the Tenth Circuit, the Supreme Court has jurisdiction to review it. Continue reading

Actions Speak Louder Than Words: Argentina Continues to Stiff its Creditors

ArgentinaEver since its final courtroom defeat earlier this summer in its long-running battle with holdout bondholders, Argentina has attempted to portray itself as a responsible debtor that wants to pay all legitimate obligations. The Kirschner regime claims that its July 2014 default on the nation’s bond repayment obligations was forced upon it involuntarily by U.S. District Judge Thomas Griesa. Argentina asserts that it wants to act responsibly by making interest payments on its external indebtedness and would do so but for the injunction issued by “crazy old Judge Griesa” at the request of holdout bondholders (or, as Argentina refers to them, “vulture funds”). But Argentina’s recent actions don’t match its rhetoric; it continues its well-established policy of refusing to pay obligations that it has no plausible basis for contesting. Argentina has expressed a desire to repair its tarnished reputation within financial markets, but nothing in its recent conduct suggests movement in that direction.

A good case in point is Republic of Argentina v. BG Group PLC, a case decided by the U.S. Supreme Court earlier this year. That case involved claims by BG Group, a British natural gas company, that Argentina had breached a contract by taking steps designed to drive BG Group out of business. In 2007, an international arbitration panel unanimously agreed and entered a $185 million judgment in favor of BG Group. Rather than paying the judgment, Argentina sought to appeal the arbitration award within the U.S. court system. After years of protracted litigation, the Supreme Court in March 2014 upheld the arbitration award. Continue reading

Noel Canning: A Triumph of Judicial Restraint Over Originalism

noelIn its late June decision in NLRB v. Noel Canning, the U.S. Supreme Court unanimously invalidated President Obama’s efforts to make three recess appointments to the National Labor Relations Board.  The Court was sharply divided, however, on the rationale for its decision.  Five justices joined Justice Breyer’s majority opinion, which rejected the most sweeping challenges to the recess appointments and ruled against the Administration on the much narrower ground that the Senate was not, in fact, in recess at the time that the appointments were made.  As a long-time advocate of judicial restraint, I applaud the narrow approach adopted by Justice Breyer.  Justice Scalia’s opinion concurring only in the judgment would have had the effect of preventing future Presidents from making recess appointments except in the rarest of circumstances.  To me, it illustrates the shortcomings of originalism as a means of ensuring judicial restraint.

Article II of the Constitution mandates that the President ordinarily must obtain “the Advice and Consent of the Senate” before appointing an officer of the United States.  The Recess Appointments Clause creates a limited exception to that requirement by authorizing the President, on a temporary basis, “to fill up all Vacancies that may happen during the Recess of the Senate.”  Noel Canning forced the Court to construe the meaning of two phrases contained in the clause.

First, what is meant by “the Recess of the Senate?”  Those challenging the NLRB appointments claimed that the phrase refers only to an inter-session recess, i.e., a break between formal sessions of Congress.  On the other hand, President Obama asserted (as have all recent Presidents) that the phrase also encompasses an intra-session recess, such as a summer recess in the midst of a session.  The NLRB appointments would have been improper under the challengers’ interpretation because the Senate indisputably was not on an inter-session recess at the time of the appointments.

Second, what is the scope of the phrase “Vacancies that may happen?”  The challengers asserted that the phrase refers only to vacancies that first come into existence during a recess.  President Obama (and his predecessors dating back for at least a century) urged a broader reading that would also encompass vacancies that arise prior to a recess but continue to exist during that recess.  The NLRB appointments would have been improper under the challengers’ interpretation because they were made to fill offices that first became vacant before the start of the recess in question.

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In Oklahoma, Class Action Fairness Act Comes Up Short, But Daimler v. Bauman Does The Trick

OklahomaConcerns that businesses were being victimized by abusive lawsuits filed in state courts—in particular, nationwide class actions and mass actions—led Congress to adopt the Class Action Fairness Act (CAFA) in 2005. Congress intended that CAFA ease removal of class and mass actions from state to federal court. The law has had mixed results in that regard, , as plaintiffs’ lawyers have devised a variety of clever ways to evade CAFA and thereby ensure that their nationwide suits can remain in state court. If a recent Oklahoma state-court decision is any indication, however, the plaintiffs’ bar may finally have met its match: the Supreme Court’s January 2014 decision in Daimler AG v. Bauman. That decision imposed strict limitations on a court’s exercise of general jurisdiction over out-of-state defendants. The Oklahoma court invoked Daimler to dismiss hundreds of plaintiffs from a mass action that the U.S. Court of Appeals for the Tenth Circuit already had deemed not removable under CAFA.

The case involved product liability claims by 702 individuals from 26 States, each of whom alleged that she had suffered injuries from pelvic mesh surgical devices manufactured by Ethicon, Inc. (a subsidiary of Johnson & Johnson). CAFA permits removal to federal court of “mass actions” filed by 100 or more plaintiffs raising substantially similar claims. To reduce the risk of removal, the plaintiffs’ lawyers grouped the claims into 11 separate lawsuits, each containing fewer than 100 plaintiffs. Nonetheless, it was obvious that the plaintiffs wanted the cases tried together: they filed the lawsuits in a tiny Oklahoma county with only a single trial judge, thereby ensuring that all 702 claims would be heard by a single judge. They also took steps to prevent removal based on diversity of citizenship: they included at least one New Jersey resident as a plaintiff in each of the 11 lawsuits. Because the defendants have their principal places of business in New Jersey, the inclusion of one New Jersey plaintiff in each case eliminated complete diversity of citizenship and thus precluded removal based on diversity. Continue reading

Justices Should Decline Solicitor General’s Misguided Advice, Review State Antitrust Liability Case

oneokIn adopting the Natural Gas Act (NGA), Congress determined that wholesale natural gas pricing issues should be the exclusive preserve of the Federal Energy Regulatory Commission (FERC) and thus that State efforts to regulate the wholesale market were preempted.  Courts uniformly barred States from seeking to regulate any “practice . . . affect[ing]” the wholesale rates charged by natural gas companies—until a 2013 U.S. Court of Appeals for the Ninth Circuit decision that is the subject of a pending Supreme Court certiorari petition.  ONEOK, Inc. v. Learjet, Inc., No. 13-271.  The decision below would permit plaintiffs’ lawyers to proceed with antitrust challenges under state laws to industry practices that directly affected wholesale prices.  The court reasoned that preemption was inappropriate because the challenged practices also directly affected a small number of retail natural gas sales.

In response to an invitation from the justices, the Solicitor General of the United States last week filed a brief urging that certiorari be denied.  Interestingly, however, the Solicitor General’s brief agrees with the defendants (natural gas suppliers who engage primarily in wholesale transactions) that the Ninth Circuit’s anti-preemption ruling was dead wrong.  The Solicitor General recommends against Supreme Court review primarily because he concludes that other courts are unlikely to repeat the Ninth Circuit’s error, particularly with respect to transactions arising after Congress revised the NGA in 2005.  But in light of the Ninth Circuit’s fundamental misunderstanding of the scope of NGA preemption, I am far less sanguine that it will eventually see the error of its ways.  Unless review is granted, there is every reason to believe that the Ninth Circuit will adhere to its anti-preemption precedent in future cases.

On ten or more occasions every term, the justices request the views of the Solicitor General on whether the Court should grant specific certiorari petitions.  The Solicitor General correctly recognizes in his ONEOK brief that merely because the decision below was incorrect is not alone sufficient grounds to recommend that review be granted.  The Court has limited the size of its docket to about 75 cases per term.  The justices thus usually adhere to the dictates of Supreme Court Rule 10, which states that the Court generally will grant certiorari only in cases that raise an “important question of federal law” and that have decided the question in a manner that conflicts with a relevant decision of the Supreme Court or other appellate courts.  Accordingly, the Solicitor General not infrequently recommends that the Court deny a certiorari petition even though he concludes, as here, that the decision below was incorrectly decided.

But the Solicitor General’s principal rationale for recommending a denial of certiorari—that the Ninth Circuit’s error is of reduced importance because it is unlikely to be repeated—is subject to serious question.  The plaintiffs accuse natural gas traders of having manipulated privately published price indices in 2001-02.  Because buyers and sellers rely on those indices as reference points for pricing all types of natural gas transactions, the direct effect of the alleged manipulation was to raise wholesale natural gas prices.  While conceding that wholesale purchasers were barred by the NGA from challenging the alleged manipulation on state antitrust grounds, the Ninth Circuit held that preemption did not extend to suits brought by retail purchasers who challenged the very same manipulation, because retail sales fall outside of FERC’s jurisdiction.  The court concluded this despite the fact that the alleged manipulation unquestionably was a “practice . . . affect[ing]” wholesale prices within the meaning of the NGA.

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Solicitor General’s Brief in Medical Device Tort Case Capitulates to Plaintiffs’ Bar

DOJThe Obama Administration has been a faithful friend of the plaintiffs’ bar, particularly regarding federal preemption of State-law tort claim against product manufacturers. The Food and Drug Administration has, for example, proposed a regulation (with direct input from plaintiffs’ lawyers) on labeling of generic drugs that would sweep away a federal preemption defense upheld twice by the U.S. Supreme Court.

A Supreme Court brief filed on May 20 by the Solicitor General of the United States provides another example of just how committed the Administration is to this mutually beneficial friendship. In urging the Court to deny review in a medical device preemption case, the brief urges the Court to ignore an express preemption statute and to effectively overrule its 2008 pro-preemption decision in Riegel v. Medtronic.

The Supreme Court has steered a middle course when previously considering claims that the federal statute at issue, 21 U.S.C. § 360k(a), preempts product liability suits against medical device manufacturers. It held in a 1996 case that federal law does not preempt claims involving the vast majority of medical devices: those devices being marketed based on a determination that they are “substantially equivalent” to devices already on the market as of 1976 (so-called § 510(k) devices).   The Court explained that FDA never undertook a formal review of the safety and effectiveness of such devices, and thus there was no reason to believe that Congress intended to prevent States from imposing their own safety and effectiveness requirements. The Court later held in Riegel that § 360k(a) generally does preempt design defect and failure-to-warn claims involving the small number of Class III devices that FDA has approved for marketing following a safety and effectiveness review undertaken in accordance with the agency’s rigorous pre-market approval (PMA) process.

The Solicitor General’s office submitted its brief in connection with a petition (Medtronic v. Stengel) seeking review of a U.S. Court of Appeals for the Ninth Circuit decision that claims involving a PMA device for delivering pain medication were not preemped. (WLF filed an amicus brief in support of certiorari). Riegel left open the possibility that some State law claims might escape § 360k(a) preemption if they were “parallel” to federal law; i.e., if the State were simply imposing the very same requirements on a device that FDA regulations specific to the device already imposed. Lower courts have struggled in the ensuing years to craft a workable definition of a “parallel claim,” and the Stengel petition asks the Supreme Court to resolve a well-entrenched conflict among the federal appeals courts regarding the meaning of the parallel-claims exception. Last October, the Supreme Court invited the Solicitor General to comment on the petition. Continue reading