Supreme Court’s “Omnicare” Decision Follows Middle Path Advocated by Lane Powell and WLF

greeneddavisjGuest Commentary

By Douglas W. Greene and Claire Loebs Davis, Shareholders with Lane Powell PC in Seattle, Washington. They co-authored WLF’s amicus brief pro bono in Omnicare.

In the opinion issued on March 24 in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund (“Omnicare”), the Supreme Court rejected the two extremes advocated by the parties regarding how the truth or falsity of statements of opinion should be considered under the securities laws. Instead, it adopted the middle path advocated in the amicus brief filed by Lane Powell on behalf of Washington Legal Foundation (“WLF”).

In doing so, the Court also laid out a blueprint for examining claims of falsity under the securities laws, which we believe will do for falsity analysis what Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007), did for scienter analysis. Hence, Omnicare will help defense counsel defeat claims that opinions were false or misleading in § 11 cases, as well as in cases brought under § 10(b) of the Securities Exchange Act. Continue reading

Update: Illinois Supreme Court Rejects Plaintiffs’ Lawyer’s Request to Remove Justice from $11 Billion Case

Ill. S CtOn March 4 in “By Treating Recusal Motions as a Game, Lawyers are Eroding Public Confidence in our Courts,” Washington Legal Foundation’s Chief Counsel Rich Samp wrote about the corrosive effect of plaintiffs’ lawyers’ demands that unfriendly judges be recused from hearing their cases. Much of the commentary centered around the multiple motions plaintiffs’ lawyers in a case called Price v. Philip Morris filed to recuse Illinois Supreme Court Justice Lloyd A. Karmeier from participating in the lawyers’ request to re-open that court’s 2005 decision.

As reported yesterday in Legal Newsline, the state high court denied the most recent request to disqualify Justice Karmeier from the Price case on March 11. The Court has yet to rule on the request to re-open the case.

WLF Web Seminar Explores New General Personal Jurisdiction Arguments under SCOTUS’s “Bauman” Ruling

Litigating away from “Home”: General Personal Jurisdiction One Year after the Supreme Court’s Daimler AG v. Bauman Decision

Mr. Beck utilized a PowerPoint slide presentation. The archive of the program, which includes a viewable version of the slides, is available at WLF’s website here.  If you would prefer to watch the video above, a PDF of the slides are available here.

Related materials on Daimler AG v. Bauman and its application in civil litigation:

New Jersey High Court Confirms Proper Test for Defining “Independent Contractor”

body_TabakmanMEGuest Commentary

by Mark E. Tabakman, Fox Rothschild LLP

A November 2014 I authored for Washington Legal Foundation, New Jersey Supreme Court Set to Rule on Definition of “Independent Contractor”, analyzed questions that had been certified to the New Jersey Supreme Court on whether an individual was an independent contractor under New Jersey wage-hour laws. My reading of the tea leaves was that the Court would adopt the test already engrafted into the New Jersey Unemployment Law. That is in fact what the Court did.

On January 14, 2015, the Court in Hargrove v Sleepy’s, LLC (“Hargrove”) (Dkt. No. A-70-12) resolved the issue of when an individual may be properly classified as an independent contractor under the New Jersey Wage Payment Act (“WPA”) and the New Jersey Wage Hour Law (“WHL”) and held that the “ABC” test governs. Under the ABC test, services performed by an individual are deemed to be employment unless the following is shown:

(a) that the individual has been and will continue to be free from control…;

(b) that the services provided are either outside the usual course of business…or performed outside of all the places of business of the enterprise…; and,

(c) that the individual is customarily engaged in an independently established trade, occupation, profession, or business.

The Court noted that both of New Jersey’s wage and hour laws neither defined “employee” or “independent contractor” nor set forth the standards to be utilized in such analyses. The Court then examined the plain language of the laws and the implementing regulations of both laws, and concluded that deference should be given to the position of the New Jersey Department of Labor and Workforce Development (“NJDOL”), as it was the Agency charged with interpreting and enforcing these laws. On that basis, the Court concluded that the same test, under both laws, should be utilized to determine whether or not an employment relationship existed.

In holding that the ABC test governs, the Court rejected the common law “right to control” test and the “economic realities” test because the “right to control” test, as the Court noted, is incompatible with the legislature’s goal of ensuring economic security and the “economic realities” test, as the Court noted, could lead to inconsistent results.

By requiring that each element be satisfied, the ABC test (which NJDOL supports and utilizes) facilitated, as the Court explained, “greater income security” for workers—the underlying purpose of both laws at issue. The ABC test presumes that an employment relationship exists and places the burden on the employer to prove differently. The last prong (i.e. independently established business), is where the issue is joined most of the time and where (often) most of the cases flounder for the putative employer. Accordingly, the Hargrove decision has decidedly and emphatically increased the coverage and protection of New Jersey’s wage and hour laws in favor of “employees.”

Businesses in New Jersey that presently utilize or are considering use of independent contractors would be well advised to work with experienced employment counsel to ensure compliance with the Court’s holding.

A Key Ruling for Food Labeling Class Action Defendants Issued on “Reasonable Consumer” Standard

Smith_JamesGuest Commentary

by James D. Smith, Bryan Cave LLP

In what seems likely to become a defining case on appeal, Northern District of California Judge Lucy Koh granted summary judgment this week in a long-running food labeling class action. The plaintiff in Brazil v. Dole Packaged Foods, LLC, No. 12-CV-01831-LHK (N.D. Cal.), alleges that 10 Dole products are misbranded because their labels say the products contain “All Natural Fruit.” Mr. Brazil contends this is false because the products contain ascorbic acid (commonly known as Vitamin C) and citric acid (found in citrus). Both of those ingredients, of course, are naturally occurring compounds; many food manufacturers add them because of their natural preservative effects. The 10 products include diced apples, pears, oranges, and grapefruit packed in juice. For the past two years, Mr. Brazil and his counsel have pressed this litigation, alleging that the product labels somehow deceived him because neither he nor any other reasonable consumer would believe that fruit packed in juice contains Vitamin C or citric acid.

The procedural history is long, but readers interested in food labeling class actions in the Northern District of California may want to review Judge Koh’s earlier substantive rulings. By the time she granted summary judgment on December 8, Judge Koh had narrowed the case to a single injunction class. As an aside, Judge Koh’s November 6, 2014, order decertifying the damages class nicely shows why a hedonic damages regression analysis—which many food labeling class action plaintiffs try to rely on to show class-wide damages—isn’t feasible in these types of cases. This most recent ruling in Brazil is noteworthy because it explains that a named plaintiff’s subjective interpretation of a label isn’t sufficient to meet the burden of proving that the label is likely to mislead consumers under California’s Unfair Competition Law (“UCL”).

Granting summary judgment, Judge Koh concluded “there is insufficient evidence that the ‘All Natural Fruit’ label statement on the challenged Dole products was likely to mislead reasonable consumers and that the label statements were therefore unlawful on that basis.” That plaintiff did not attempt to use consumer surveys to establish that the labeling statements could mislead a significant portion of the public or of targeted consumers. Instead, he relied on informal FDA statements that “natural” means nothing artificial or synthetic “has been included in, or has been added to, a food that would not normally be expected to be in the food.” (Emphasis added.) As we’ll see, that plaintiff’s failure to establish that consumers would not normally expect ascorbic acid or citric acid to be in the food doomed his claims. Continue reading

Ninth Circuit Thwarts Plaintiffs’ Efforts to Evade Removal Under CAFA

Cruz-Alvarez_FFeatured Expert Contributor – Civil Justice/Class Actions

Frank Cruz-Alvarez, Shook, Hardy & Bacon, L.L.P. with Rachel A. Canfield,  Shook, Hardy & Bacon, L.L.P.

Addressing a question of first impression, the U.S. Court of Appeals for the Ninth Circuit Court of Appeals, sitting en banc, weighed into an issue that has split the circuit courts involving the invocation of federal mass-action jurisdiction. Corber v. Xanodyne Pharmaceuticals, Inc.¸ Nos.13-56306 & 13-56310, — F.3d —-, 2014 WL 6436154 (9th Cir. Nov. 18, 2014). This is just one in a series of recent federal decisions limiting plaintiffs’ efforts to avoid federal class or mass action jurisdiction.

To prevent class-action abuse, the Class Action Fairness Act of 2005 (“CAFA”) expands federal jurisdiction over certain class or mass actions that fall within its purview. Corber, 2014 WL 6436154, at *11. In pertinent part, CAFA defines mass actions as any civil action in which “monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiff’s claims involve common questions of law or fact.” 28 U.S.C. § 1332(d)(11)(B)(i).

Treated as companion cases, Romo v. Teva Pharmaceuticals USA, Inc., and Corber v. Xanodyne Pharmaceuticals, Inc., were two of twenty-six cases pending before the district court, and more than forty actions filed in California state courts, alleging injuries due to the ingestion of an ingredient found in certain pain relief drugs. Corber, 2014 WL 6436154, at *7. A number of the actions were brought by one group of plaintiffs’ attorneys who sought to obtain coordination of the actions pursuant to section 404 of the California Code of Civil Procedure, which permits coordination of civil actions containing a common question of fact or law if one judge hearing all of the actions for all purposes will promote the ends of justice. Id. at *8-9. In an attempt to obtain coordination in state court and evade federal jurisdiction, these plaintiffs’ attorneys superficially segmented the cases to involve fewer than 100 plaintiffs and crafted the petitions for coordination absent an express proposal that the actions be jointly tried. Continue reading

True, not False: SCOTUS “Omnicare” Case Highlights Need for Clarity on Key Securities Class Action Issue

greeneddavisjGuest Commentary

Douglas W. Greene and Claire Loebs Davis, Lane Powell LLP

On November 3, 2014, the U.S. Supreme Court will hear oral argument in Laborers District Counsel Construction Industry Pension Fund v. Omnicare, Inc., which concerns the standard for judging the falsity of an opinion challenged in an action under Section 11 of the Securities Act of 1933. In the U.S. Court of Appeals for the Sixth Circuit decision under review (“2013 Omnicare decision”), the court held that a statement of opinion can be “false” even if the speaker genuinely believed the stated opinion. This holding is contrary to the U.S. Supreme Court’s decision in Virginia Bankshares, Inc. v. Sandberg, which held that a statement of opinion is a factual statement as to what the speaker believes—meaning a statement of opinion is “true” as long as the speaker genuinely believes the opinion expressed, i.e., if it is “subjectively” true.

We authored an amicus brief on a pro bono basis for Washington Legal Foundation (“WLF”) in Omnicare that emphasizes the importance of clarifying the standard for challenging “false” statements of opinion under all the federal securities laws, not just Section 11. WLF’s view that such clarification is needed was reinforced by an October 10, 2014 decision in a subsequently filed securities class action against Omnicare under Section 10(b) of the Securities Exchange Act of 1934. In re Omnicare, Inc. Sec. Litig. (“2014 Omnicare decision”). In the 2014 Omnicare decision, the Sixth Circuit appeared to embrace the proposition that a statement of opinion is not actionable if it is subjectively true—at least under Section 10(b)—but then held that the subjective falsity inquiry should be analyzed within the element of scienter. The opinion reflects the continued confusion that pervades analysis of this issue, jumbling subjective falsity with other concepts, and conflating the separate elements of falsity and scienter.

As part of its scienter analysis, the Sixth Circuit also grappled with another important question: whose state of mind counts for purposes of determining a corporation’s scienter? Although the Sixth Circuit believes the standard it enunciated constitutes a “middle ground” between restrictive and liberal tests among the federal circuit courts, its ruling misunderstands the nature of the scienter inquiry and conflicts with the Supreme Court’s 2011 ruling in Janus Capital Group, Inc. v. First Derivative Traders, and thus risks expanding corporate liability beyond the proper reach of Section 10(b).

After discussing the proper analysis of statements of opinion, and explaining errors in the 2013 Omnicare decision, we explain and analyze both holdings in the 2014 Omnicare decision. Continue reading