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

(Not) Inconceivable!: Florida Trial Judge Tosses Food Class Action on CAFA Grounds

Amy's KitchenIn a December 2013 post, Two More Food Labeling Class Action Rulings: Harbingers of the New Year?, we lauded Southern District of Florida Judge James Cohn for dismissing claims in a food-labeling class-action lawsuit based on the labeling of products that the plaintiff, Ms. Reilly, never actually purchased.

Judge Cohn issued two more opinions in Reilly v. Amy’s Kitchen, Inc. on March 7. After this one-two punch, the life of Reilly’s case may be no more.

In the first decision, Judge Cohn denied the plaintiff’s motion to reconsider his December 9 order that Reilly lacked standing to sue for alleged injuries caused by products she didn’t purchase. In the second, Judge Cohn dismissed the remaining claims for lack of subject matter jurisdiction. We’ll focus on the second ruling here.

Amy’s Kitchen argued in its motion to dismiss that Reilly’s dramatically thinner suit (from 60 claims to 3 after the December 9 order) failed to achieve the requisite amount in controversy of $5 million under the Class Action Fairness Act (CAFA). Unlike the plaintiffs in these food-labeling class actions, who likely could never produce proof of their purchases if asked, the defendants had very precise sales records. Amy’s Kitchen presented evidence that during the period of time Reilly alleges she was injured, it sold only $1,045,993 of the supposedly offending pizzas, veggie burgers, and enchiladas in Florida.

Vizzini

Vizzini

Judge Cohn agreed that because Reilly never had standing to sue for all 60 products, she could not meet the $5 million amount-in-controversy requirement from the outset.  The court held it could dismiss the suit for lack of subject matter jurisdiction”unless it appears to a ‘legal certainty’ that Plaintiff’s remaining claims meet CAFA’s $5 million jurisdictional minimum.” Reilly attempted to argue that the value of the injunctive relief she sought, combined with attorneys’ fees, could elevate the three claims to $5 million. Judge Cohn found such a possibility (as Wallace Shawn’s Vizzini in The Princess Bride liked to say) “inconceivable,” which falls quite short of “legal certainty.”

Judge Cohn dismissed Reilly’s claims without prejudice, but it seems unlikely an amended complaint will change the judge’s mind. Reilly will proceed with her appeal of the trial court’s December 9 standing decision to the U.S. Court of Appeals for the Eleventh Circuit, which, we expect, will be as unsuccessful as her motion to Judge Cohn for reconsideration.

Also published at WLF’s Forbes.com contributor page

Update: Ninth Circuit Agrees to Reconsider Class Action Fairness Act Circumvention Ruling En Banc

9thCirLast November in Eighth Circuit Ruling Deepens Circuit Split on Class Action Fairness Act Circumvention Tactic, we discussed the latest in a series of federal appeals court decisions involving plaintiffs’ lawyers’ efforts to keep their class action lawsuits in state court despite CAFA (the Class Action Fairness Act). In Atwell v. Boston Scientific, the Eighth Circuit rejected an attempt to strategically break large numbers of plaintiffs with identical claims into groups less than 100 with the unstated goal of consolidation for trial. The court specifically departed from an approach taken by another federal appeals court, the Ninth Circuit, which endorsed that tactic and allowed a class action to remain in state court.

We noted at the end of that November post that the defendants in that Ninth Circuit case, Romo v. Teva, had filed a motion with the court for a rehearing en banc.  Washington Legal Foundation supported that request with an amicus brief.

Yesterday, the Ninth Circuit issued an order granting the Romo defendants’ request, and vacating the three-judge panel’s ruling. The en banc panel will hear oral arguments on the case June 16. In the meantime, plaintiffs can no longer cite to the Ninth Circuit’s September 2013 decision as precedent for their CAFA circumvention tactics, leaving the Eighth’s Circuit’s Atwell ruling as the most recent appellate statement on the matter.

Read WLF’s press release on the Ninth Circuit’s order here.

Food Court Delivers Plaintiffs’-Lawyer Consortium Mixed Results in Four January Rulings

food-courtCross-posted at WLF’s Forbes.com contributor site

Last July in a Legal Pulse post entitled “Who’s Filling the Food Court with Lawsuits: Consumers or Lawyers?,” we noted the extensive involvement in food “mislabeling” class actions of a consortium of plaintiffs’ lawyers, some of whom had been active in tobacco litigation. Led by the law firm Pratt & Associates, the group filed 24 class actions in the Northern District of California in less than two months in 2012. We’ve now identified a total of 34 cases the consortium has brought to the Food Court.

In that post we offered a chart tracking the current status of the consortium’s cases.  Our updated chart is available here. Kindly let us know if we missed any.

Northern District of California judges have been busy this month on the group’s cases, issuing four substantive rulings.

Gustavson v. Wrigley Sales Co. Judge Koh’s order in this case is the only complete victory of the four for plaintiffs or defendants. After rejecting Wrigley’s motion to dismiss on preemption grounds last September, Judge Koh reversed herself on that issue in this January 7 decision. What changed? Wrigley cited FDA commentary on a 1993 nutrient content labeling rule which supported the company’s use of the term “sugar free” on its gum. The plaintiff’s suit would require placement of certain FDA-required qualifying language on the gum label in a manner different from what FDA rules allow, so Judge Koh held the claim expressly preempted. She dismissed Gustavson’s claims with prejudice. Continue reading

Dispelling the Myths of Asbestos Litigation: Bankruptcy Judge Finds that Misrepresentations Inflated Settlement Values

faulkFeatured Expert Column

by Richard O. Faulk, Hollingsworth LLP

There was a “shot heard ‘round the world” in asbestos litigation on January 9, 2014.  On that day, U.S. Bankruptcy Court Judge George Hodges for the Western District of North Carolina issued an important order finding that a “startling pattern of misrepresentation” and withholding of exposure evidence in asbestos lawsuits resulted in unfairly “inflated” recoveries.  See In Re Garlock Sealing Technologies, LLC, et al., No. 10-3167 (W.D.N.C., Jan. 9, 2014). With those findings, Judge Hodges firmly rejected the exaggerated claim values urged by plaintiffs’ counsel in a major Chapter 11 bankruptcy, and estimated the debtors’ liability at $125 million, approximately $1 billion less the amount asserted by the claimants.

This order will surely influence asbestos litigation throughout the United States.  Defendants in pending cases will press for full disclosure of settlements made with the bankruptcy trusts of insolvent companies – and Congress and state legislators will continue their quest for reforms to ensure complete disclosure of settlements to preclude exaggerated recoveries against peripheral defendants.  The House of Representatives has already passed H.R. 982 (the “FACT” Act), which requires asbestos trusts to publish claimants’ names and the nature of their claims  States such as Ohio and Oklahoma, have passed similar bills, and another is close to passage in Wisconsin.

But the path to reform has been long and incredibly costly. For many years, plaintiffs’ lawyers resisted disclosure of claims and settlements with the bankruptcy trusts. They resisted even though the claims might contain useful evidence of exposure to the bankrupt parties’ products, and although settlements might be used as credits or offsets against the solvent defendants’ liability. Without a meaningful way to offset insolvent companies’ settlements, defendants faced a “Hobson’s choice.” They could accept inflated settlement values – or risk judgments inflated by their inability to obtain offsets.  America’s courts, which expanded asbestos liability when “necessity” moved them to “change and invent,” see., e.g., Jenkins v. Raymark Industries,  782 F.2d 468, 473 (5th Cir. 1986), were largely nonresponsive to the injustice of this situation – as though the common law restrained change, rather than enabled adaptation and flexibility. See generally, Richard O. Faulk, Dispelling the Myths of Asbestos Litigation: Solutions for Common Law Courts, 44 S. Tex. L. Rev. 945 (2003). Inevitably, more defendants joined their insolvent brethren in bankruptcy – where claims and settlements were cloaked in mythical secrecy. Continue reading

Court Ruling Recalls Injudicious Average Wholesale Price Litigation Crusade

Cross-posted by Forbes.com at WLF’s contributor site

A little over a decade ago, federal regulators and state attorneys general initiated a litigation campaign to alter how government health care programs reimbursed doctors for prescription drugs. Like most “regulation by litigation” efforts, this campaign seized upon laws of broad application such as the False Claims Act (FCA) and encouraged private lawsuits of questionable merit. Government enforcers have long since moved on to other crusades, but as a federal court decision last month reflects, some private suits still drag on, burdening American businesses with needless legal expenses.

AWP. In the early 2000s, the federal government reimbursed health care providers based in part on a drug’s average wholesale price, or “AWP.” Some likened AWP to the sticker price, or MSRP, of a new car: an inflated number which almost no one actually paid. Everyone involved in health care was aware of the illusory nature of AWP, and federal and state regulators urged legislative change, but Congress resisted reform. So unelected officials and their brethren in the plaintiffs’ bar sought to impose change. As this 2002 WLF Working Paper explains, they devised legal theories which branded AWP as an overcharging scheme, and accused drug makers, price publishers, and other entities such as pharmacy benefit managers (PBMs) of perpetrating a fraud. State attorneys general filed billion-dollar fraud actions and plaintiffs’ lawyers teamed up with “whistleblowers” to file qui tam suits under the FCA.

The ensuing litigation crusade provided moderate returns at best to the plaintiffs’ lawyers and state AGs who jumped on board. For instance, in 2009, the Alabama Supreme Court dashed the state’s (and its contingent-fee lawyers’) dreams of a huge payday, dismissing two AWP cases, finding no fraud existed. Continue reading

Two More Food Labeling Class Action Rulings: Harbingers of the New Year?

Not from lactating cows

Not from lactating cows

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

In our Legal Pulse commentaries on regulation-by-litigation of food labeling, one issue has predominated this year: What is a “reasonable consumer”? Two court decisions issued on consecutive days last week, one from the infamous Food Court (the Northern District of California) and the other from the Southern District of Florida, turned in large part on that issue and indicate that judges will continue addressing the question in 2014.

You Mean They’re Not from Cows? Ang v. Whiteway Foods, authored by Judge Conti of the ND of California, involved consumer fraud claims against the maker of soymilk/almond milk/coconut milk and related yogurt products. The plaintiffs challenged the use of the term “milk” in the products as well as ingredient references to “evaporated cane juice” (ECJ).

Judge Conti found that an earlier settlement in a similar Florida lawsuit barred Mr. Ang’s ECJ-based claims due to res judicata. He then turned to the soy/almond/coconut “milk” claims. He first found that federal labeling rules preempt Mr. Ang’s claims. Federal rules do not prescribe how the plant-based beverages must be labeled, and the rules relating to “milk” only “pertain to what milk is, rather than what it is not.” In such situations, federal rules require that products use “the common or usual name” for the food. Judge Conti found that the “Silk” drink makers did that, and thus Mr. Ang’s suit would improperly impose rules beyond what FDA requires. Continue reading

Trial Court Rules Offer of Judgment Before Class Certification Motion Moots Case

faxmachine_logo_2

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

Three dentists, a pest control service, and two others received unsolicited faxes for tickets to a Tampa Bay Buccaneers’ home game. . . .

Looking for the punch line? This is not the beginning of a bad joke about a last place football team. It’s a scenario that gave rise to a class-action lawsuit in the U.S. District Court for the Middle District of Florida. The undeservedly overlooked October 24 opinion, which dismissed the case and accepted an unorthodox defense gambit, offers one judge’s candid thoughts on how the class-action mechanism can be abused.

The Telephone Consumer Protection Act, passed in 1991 when fax machines were used for more than collecting dust, imposed a $500 fine per unsolicited fax sent, which rose to $1,500 if plaintiffs could prove “willful or knowing” spamming activity. Not surprisingly, the Act has been popular with class action lawyers. The lawyers plaintiffs in Stein v. Buccaneers Limited Partnership claimed to be suing on behalf of over 100,000 people who received the ticket solicitation via fax.

The plaintiffs filed suit in state court, and Buccaneers Limited Partnership (BLP) removed it to federal court on August 16. Three days later, BLP offered judgment to six of the plaintiffs under Federal Rule of Civil Procedure 68, which constituted complete relief for their alleged injuries. On August 21, BLP moved to dismiss the class action because its offer of judgment removed the plaintiffs’ interest in the case, and thus they no longer had Article III standing to proceed. The following day, the plaintiffs moved for class certification. The sequence of these events critically influenced the court’s reasoning.

On the question of mootness after an offer of judgment, presiding Judge Steven Merryday lacked binding precedent from the U.S. Court of Appeals for the Eleventh Circuit. Two opinions from the Southern District of Florida had previously found class actions moot in similar circumstances. One circuit, the Seventh, had also upheld mootness previously, while four others (the ThirdFifthNinth, and Tenth) had rejected it. Judge Merryday found the Seventh Circuit’s reasoning in Damasco v. Clearwater Corp. most compelling. Continue reading

Demonization by Litigation: Food Ingredient Makers Face Frivolous Charges

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

When some future legal scholar writes the history of how the public health activist-plaintiffs’ bar-government regulator axis of paternalism tried to use litigation to alter America’s food choices, S.F. v. Archer Daniels Midland et al. may not even merit a mention. But for now, it stands as the most notorious illustration of how a baseless lawsuit can effectively demonize one disfavored food ingredient.

The Complaint. S.F. is the mother of S.E.F., a fourteen-year old who suffers from Type 2 diabetes. Archer Daniels Midland (ADM) and the other three defendants (Cargill, Ingredion Inc., and Tate & Lyle Ingredients Americas) make up the entire corn refiners industry. They refine corn into, among other things, high fructose corn syrup (HFCS), a food ingredient public health activists have long vilified. In her complaint, S.F. rattled off inflammatory allegation after another, including such unsubstantiated charges as “HFCS is a toxin.” She eventually got around to asserting that HFCS is “unreasonably dangerous” and caused her daughter’s diabetes. She demanded $5 million in damages.

The suit achieved its immediate, and perhaps only, goal of garnering sympathetic media attention. Most reports parroted the plaintiff’s outlandish statements and quoted professional food activists who are attacking HFCS in others venues, such as before the Food and Drug Administration (FDA). Of course only scant reporting has been done on the suit since, with just a few stories in the trade press about the defendants’ motions to dismiss, documents which have effectively exposed the suit as legally and factually baseless.

Undeniable Legal Flaws. The legal flaws in the plaintiff’s case, detailed in the defendants’ initial motion to dismiss and their November 1 reply memo, are abundant and clear, so we’ll only briefly summarize them here: Continue reading

Update: Target of “License or Else” Patent Suit Turns Tables, Files RICO Action

feeding frenzyTwo weeks ago in Court Rulings Show Abusive Patent Litigators Can Be Beaten (But Is It Worth The Cost?), WLF’s Glenn Lammi noted the determination of one patent litigation defendant, FindTheBest.com, to oppose an infringement suit filed by patent assertion entity Lumen View Technology. The company’s CEO, who we have since learned was a co-founder of advertising company DoubleClick, pledged to spend $1 million to fight the suit.

It seems that FindTheBest will spend some of that money playing offense, not defense. On September 16, the company filed a complaint against Lumen View Technology alleging civil violations of the Racketeering Influenced and Corrupt Organizations Act, better known as RICO. The facts alleged in the complaint, which include references to Lumen’s “license or else” demand letter, will likely look familiar to targets of such litigation, but will be quite eye-opening to everyone else. The letter promised “full-scale litigation” and “all motion practice as well as protracted discovery” (our emphasis) if FindTheBest didn’t pay the licensing fee. The letter went on to illuminate the “protracted discovery” pressure point, emphasizing the disruption and potential embarrassment that could result from Lumen’s digging through FindTheBest’s electronic documents.

FindTheBest also alleges that Lumen’s attorney told FindTheBest’s attorney that FindTheBest could be prosecuted for a “hate crime” because its CEO used a popular slang term for patent assertion entity when referring to a co-inventor of the patent Lumen holds.

As a Washington Post blog post pointed out, this is not the first time a patent litigation target has sued its tormentors under RICO. Cisco filed a similar action against an entity asserting infringement of a Wi-Fi related patent, but a federal court dismissed the RICO claims in January.