Finger on the Pulse: From Our Blogroll and Beyond

  • Ninth Circuit rules credit card late fees and over-limit fees are not punitive damages subject to constitutional limitations; Judge Reinhardt concurs, reluctantly (California Punitive Damages)
  • In a case not involving smelly washers, Judge Posner-led Seventh Circuit panel rejects a class certification (Class Action Countermeasures)
  • Legal and judicial activism has real economic consequences: court ruling deters Shell from pursuing new domestic oil resources (E&E News)
  • Critical question in forthcoming Supreme Court Aereo copyright case: What does “to the public” mean? (Copyhype)
  • The venerable Business Judgment Rule comes under attack (D&O Diary)
  • Sixth Circuit narrows the applicability of Michigan’s “FDA defense” law in drug liability cases (Drug & Device Law)
  • FDA continues to conjure up requirements for “medical foods,” this time through two warning letters (FDA Law Blog)
  • Patent troll sues FTC (Patent Progress)

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

Supreme Court Observations: Bauman v. DaimlerChrysler

dchildreGuest Commentary

by Donald Earl Childress III, Associate Professor of Law, Pepperdine University School of Law

On January 14, 2014, the Supreme Court handed down its decision in Bauman v. DaimlerChrysler. N1 Writing for all members of the Court except Justice Sotomayor (who concurred only in the judgment), Justice Ginsburg explained (following her opinion for a unanimous court in Goodyear) N2 that general jurisdiction is only available over a corporate defendant in the place of its incorporation, the place of its principal place of business, or, “in an exceptional case,” in another forum where it is “essentially at home.”  N3  Since none of these affiliations applied to the relationship between Daimler and California, the Court held that Daimler could not be sued in California for injuries allegedly caused by a subsidiary of Daimler in Argentina.  The Court sidestepped the precise issue it was asked to decide by Daimler in its certiorari petition (an issue written about in the Washington Legal Foundation’s On the Merits publication here):  whether a subsidiary’s contacts can be imputed to a parent corporation to establish general personal jurisdiction.  N4  If the Court did not decide the precise issue it was asked to decide, then what did it decide?

The Court’s Ruling

In Bauman, the Supreme Court held that Daimler was not subject to general jurisdiction in California for injuries allegedly caused by a subsidiary of Daimler in Argentina.  Before reaching this conclusion, the Court made several points designed perhaps to send not-so-subtle hints to lower courts.  Continue reading “Supreme Court Observations: Bauman v. DaimlerChrysler”

As Comment Deadline Nears, WLF Advisory Board Member Speaks Out on Proposed Discovery Rule Amendments

longandwindingWhen we noted the beginning of the comment period for the Federal Rules Advisory Committee’s proposed amendments to the Federal Rules of Civil Procedure governing the discovery process with a post last August, the February 15 deadline seemed eons away.

But in mere two weeks, that stretch of the long-and-winding road that is Federal Rules reform will have come and gone. Along the way, WLF has been privileged to testify before the Advisory Committee last November and was the first public interest organization to file public comments with it last October. In order to inform the discussion and explain why the Rules reform effort is so vitally important, WLF published a “Conversations With” paper earlier this month featuring former Attorney General Dick Thornburgh, University of Denver’s (and former Colorado Supreme Court Justice) Rebecca Kourlis, and Goldberg Segalla LLP partner John Jablonski.

In a recent Corporate Counsel magazine, GlaxoSmithKline General Counsel Dan Troy authored a must-read article on e-discovery reform, “Changing Federal Rules to Reduce Discovery Costs.” WLF is honored to have Dan as a member of our Legal Policy Advisory Board. He brought the emerging effort to reform the Federal Rules to our and the public’s attention four years ago by authoring a WLF Legal Backgrounder along with GSK Assistant General Counsel John O’Tuel entitled A Toolkit For Change: How The Federal Civil Rules Advisory Committee Can Fix A Civil Justice System “In Serious Need Of Repair”.  In his Corporate Counsel article, Dan focused on the extreme costs of document preservation in the digital age, and the need to not only adopt proposed amendments to Rule 37(e), but also further strengthen the standard for imposing sanctions for “spoliation.”  In terms of the preservation burden, he wrote:

As just one example of the amounts of data at issue, my own company, GlaxoSmithKline, has preserved 57.6 percent of its company email, amounting to 203 terabytes of information. This would be 20 times the amount of the printed collections of the Library of Congress.

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

Supreme Court Set to Examine “Definiteness” of Patent Claims in Nautilus Case

bethShaw-0580editConvertedProfile-e1360002102239Featured Expert Column

Beth Z. Shaw, Brake Hughes Bellermann LLP

Patent claims define the scope of a patentee’s rights. Therefore, patent claims are required to be “definite” and to point out the actual invention described in the patent. Once a patent issues from the United States Patent and Trademark Office, however, that patent is presumed valid.

The United States Court of Appeals for the Federal Circuit has interpreted this definiteness requirement of the patent statute in many cases over the years. This year, the Supreme Court will evaluate whether the Federal Circuit used the right framework in Nautilus, Inc. v. Biosig Instruments, Inc.

Like many patent cases, Nautilus has a somewhat complicated procedural history. The patents and accused products relate to heart rate monitors mounted on exercise equipment. Biosig sued Nautilus for patent infringement, but the district court found Biosig’s patent claim indefinite as a matter of law, based at least in part on Biosig’s submissions to the Patent Office during a prior reexamination of the patent. On appeal, the Federal Circuit reversed. The majority panel (Judges Newman and Wallach) held that the disputed claim language could be construed and was therefore not “insolubly ambiguous.” Judge Schall concurred. The Federal Circuit noted that if the meaning of the claim is discernible, even if the conclusion is “one over which reasonable persons will disagree, we have held the claim sufficiently clear to avoid invalidity on indefiniteness grounds.” By embracing this standard, the court accords “respect to the statutory presumption of patent validity,” and protects “the inventive contribution of patentees, even when the drafting of their patents has been less than ideal.”

The Supreme Court will examine how the Federal Circuit’s acceptance of patent claims with multiple reasonable interpretations–so long as the ambiguity is not “insoluble” by a court–correlates with the statutory requirement of particular and distinct patent claiming. Additionally, the Supreme Court will examine how the presumption of validity affects the requirement of particular and distinct patent claiming.

Various companies that operate in the software arena filed an amicus brief in support of Nautilus’s petition for writ of certiorari, arguing that the Patent Office alone cannot solve the problem of indefinite patents, and that the Federal Circuit’s refusal to “police” indefinite patents distorts patentee behavior at the Patent Office. The amicus noted that the Patent Office has recently increased efforts to apply a revitalized indefiniteness standard during the patent application process. Yet, the amicus argued, a failure by the courts to demand precision in claim drafting reinforces incentives for patent applicants to write vague claims.

This is a truly significant case which has far-reaching implications in all areas of patent law. The meaning and “clarity” of patent claims are at the heart of virtually every patent case. As such, the decision in Nautilus may prove to be the case with some of the most far-reaching implications in 2014 and beyond.

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.