Congress adopted the Class Action Fairness Act (CAFA) in 2005 in response to concerns that plaintiffs’ lawyers were gaming the system to prevent removal of class actions and “mass actions” (lawsuits with more than 100 named plaintiffs) from state court to federal court. CAFA provided state-court defendants the option of removing a case to federal court when the suit is both substantial and involves numerous plaintiffs, even when complete diversity of citizenship is lacking.
Immediately thereafter, the plaintiffs’ bar began to undermine CAFA by coming up with new ways to keep their mass lawsuits in state courts. Among other schemes, plaintiffs’ lawyers divided their clients (often numbering in the thousands) among multiple lawsuits in the same state court, thereby ensuring that CAFA’s 100-plaintiff threshold would not be surpassed in any one lawsuit. An excellent 2014 en banc decision from the U.S. Court of Appeals for the Ninth Circuit imposed strict limits on use of this removal-defeating tactic. The court held in Corber v. Xanodyne Pharmaceuticals, Inc. that if, after filing their separate lawsuits, the plaintiffs ask the state court to coordinate the cases for all purposes, the cases should be deemed unified and thus removable under CAFA’s mass-action provision. But a Ninth Circuit panel decision this month, Briggs v. Merck Sharp & Dohme, creates a roadmap that allows plaintiffs to coordinate their lawsuits yet avoid removal—thereby eviscerating Corber. The decision suggests that the panel (Judges Fletcher, Berzon, and Paez) feels free to thumb their collective nose at Ninth Circuit en banc decisions; it ought to be reversed. Continue reading
Rule 23(f) of the Federal Rules of Civil Procedure gives appeals courts unfettered discretion in deciding whether to permit an interlocutory appeal from a class certification decision. Most circuits have exercised that discretion sparingly. But a U.S. Court of Appeals for the Ninth Circuit decision issued last week affirmed that circuit’s unique rule: plaintiffs (but not defendants) are entitled to take an immediate appeal from an adverse class certification ruling, even when an appeals court panel has previously denied discretionary appeal under Rule 23(f). All plaintiffs need do is stipulate to dismissal of the complaint with prejudice, and then seek review of the order denying certification in connection with an appeal from the final judgment of dismissal. Never mind that a plaintiff who stipulates to dismissal of his lawsuit might reasonably be deemed to have abandoned his claims. Continue reading
Since the war against militant Islamists began in earnest in 2001, a cornerstone of U.S. national security policy has been to employ military commissions to hear criminal charges filed against al Qaeda leaders responsible for the September 11 (and subsequent) attacks. A decision last week by the U.S. Court of Appeals for the D.C. Circuit, al Bahlul v. U.S., throws that policy into disarray. It struck down a 2006 congressional statute permitting a wide variety of criminal charges to be brought before military commissions. Incredibly, the court invoked international law to do so, ruling that the U.S. Constitution only permits military commissions to consider those criminal charges that are accepted throughout the world as constituting violations of the international law of war.
It is questionable whether U.S. courts should ever look to international law for guidance when interpreting the U.S. Constitution. It is unfathomable for a court to hold (as did the D.C. Circuit) that the U.S. Constitution is controlled by international law, and to do so in a manner that significantly impedes the government’s ability to conduct trials before military commissions. The Obama Administration should ask the Supreme Court to overturn this ill-conceived decision. Continue reading
The California Supreme Court earlier this month issued an opinion that subjects litigants who settle their patent disputes to scrutiny under state antitrust law. The court reasoned that such settlements may create unreasonable restraints on trade. While the decision in In re Cipro Cases I & II to reinstate antitrust claims was not overly surprising—after all, the U.S. Supreme Court had previously held in FTC v. Actavis, Inc. that some patent litigation settlements might violate federal antitrust law—the breadth of the California Supreme Court’s decision could have a particularly negative impact on the free-enterprise system. Indeed, the decision suggests that parties to a patent litigation settlement will have great difficulty ever avoiding California antitrust liability if the settlement entails transferring anything of value from the patent holder to the alleged infringer. Because Cipro’s new state-law antitrust standard is so much more exacting than the standard announced by the U.S. Supreme Court in Actavis, federal antitrust law may well trump California’s standard. Indeed, were Cipro to reach the U.S. Supreme Court, the Court likely would reverse on federal preemption grounds.
“Reverse-Payment” Patent Settlements
When parties to litigation enter into a settlement, one would normally expect that any cash payments would flow from the defendant to the plaintiff. The normal expectations have been reversed in the context of litigation involving prescription-drug patents, however, as a result of financial incentives created by the Hatch-Waxman Act, a federal statute designed to ensure that generic versions of prescription drugs enter the market more quickly. The Act includes a provision that permits generic companies, by declaring to the Food and Drug Administration a belief that the patent held by a brand-name drug company is invalid, to essentially force the patentee to immediately file a patent infringement suit. It also grants huge financial awards to generic companies that successfully challenge drug patents. Continue reading
The government of Venezuela has become a notorious abuser of private property rights, seizing the property of corporations and political opponents without offering any compensation. Unable to obtain redress in Venezuelan courts, property owners with increasing frequency have turned to U.S. courts for compensation. The U.S. Court of Appelas for the Eleventh and D.C. Circuits issued nearly simultaneous decisions earlier this month in suits filed by property owners against Venezuela. While the courts reached facially inconsistent results—the Eleventh Circuit dismissed one property owner’s claim while the D.C. Circuit allowed the claims of another group of property owners to move forward—the two courts sent a similar message. Both courts made clear that while they are reluctant to inquire into the validity of a foreign sovereign’s internal conduct, such judicial restraint does not prevent courts from protecting Americans’ rights when property is taken in clear violation of international law.
Any effort to sue a foreign sovereign in a U.S. court faces a major obstacle: the Foreign Sovereign Immunities Act (FSIA). The Supreme Court has held that the FSIA is the sole basis for obtaining jurisdiction over a foreign state in our courts. The statute states explicitly that a foreign state is absolutely immune from the jurisdiction of U.S. courts unless a specific FSIA statutory exemption is applicable. The only exemption potentially available to those whose property has been confiscated is 28 U.S.C. § 1605(a)(3), which denies immunity in cases “in which rights in property taken in violation of international law are in issue.” The Eleventh and D.C. Circuits agreed that the availability of the § 1605(a)(3) exemption depends to a large extent on whether the plaintiff is a citizen of the foreign state; if so, federal courts are far less willing to exercise jurisdiction. Continue reading
Federal courts have been inundated in recent years by suits filed by plaintiffs who have suffered no injury but who allege that a federal statute provides them with “standing” to sue for alleged violations of federal law. Such lawsuits can be extremely lucrative for the plaintiffs’ bar when the statute provides for an award of statutory damages (typically, $100 to $1,000) for each violation; by filing their suits as nationwide class actions, attorneys can often plausibly seek to recover billions of dollars. The Supreme Court may soon make it much more difficult for such suits to survive a motion to dismiss. The Court on Friday will consider whether to grant review in Spokeo v. Robins, a case that squarely addresses whether plaintiffs can assert Article III standing where their only “injury” is the affront to their sensibilities caused by the belief that someone is not complying federal law. The Court has indicated a strong interest in addressing the issue; Spokeo is an appropriate vehicle for doing so and ought to be granted.
The U.S. Solicitor General recently filed a brief recommending that the Court not hear Spokeo. That brief may, ironically, increase the likelihood that the Court will agree to hear the case, because the Solicitor General very pointedly declined to endorse the appeals court’s rationale for concluding that the plaintiff has standing.
Spokeo involves claims filed under the Fair Credit Reporting Act (FCRA), one of dozens of federal statutes that offer a bounty (in the form of statutory damages) to those who demonstrate a violation of a federal statute. Spokeo, Inc. operates a “people search engine”—it aggregates publicly available information from phone books, social networks, and other sources into a database that is searchable via the Internet, and displays the results of searches in an easy-to-read format. It has always emphasized that it does not verify or evaluate any piece of data and does not guarantee the accuracy of information offered. Continue reading
At issue in Kimble v. Marvel Enterprises
The Supreme Court’s 1964 decision in Brulotte v. Thys Co. has been among the Court’s more heavily criticized patent law decisions. A number of academics and appeals court judges have complained that Brulotte, which establishes a rule governing construction of patent licensing agreements, is based on a misunderstanding of the economic considerations underlying such agreements. Perhaps in response to that criticism, the Court granted certiorari in Kimble v. Marvel Enterprises, Inc. to consider a single question: should it overturn the 50-year-old Brulotte rule? The Court will hear oral arguments in Kimble on March 31.
The correct answer is a resounding “no.” At oral argument, the record will show that parties negotiating patent licensing agreements have relied on Brulotte for half a century when drafting terms governing royalty payments. Overturning Brulotte would be a patent troll’s dream. It could expose licensees to unforeseen royalty demands based on long-forgotten license agreements that they reasonably assumed—in reliance on the Brulotte rule—imposed no additional payment obligations after the expiration of the licensed patent. As with patent trolls, the potential liability in some cases may be so high that in terrorem settlement is the licensee’s only reasonable choice. In other cases, the nuisance value of the claim may be smaller than the cost to litigate. Either way, a shortsighted decision in Kimble could lead to decades of costly and vexatious litigation to no one’s benefit. Continue reading