Supreme Court Update: Mississippi v. AU Optronics (12-1036), Daimler AG v. Bauman (11-965), Ray Haluch Gravel Co. v. Central Pension Fund (12-992) and Order List
Greetings, Court fans!
In this first Update of the new year, we bring you three significant decisions and a number of cert grants. On the decision front, we have Mississippi v. AU Optronics (12-1036), in which the Court ruled that parens patriae suits brought by states are not mass actions and thus are not subject to removal to federal court under the Class Action Fairness Act; Daimler AG v. Bauman (11-965), where the Court made it more difficult to sue foreign corporations in U.S. courts; and Ray Haluch Gravel Co. v. Central Pension Fund (12-992), holding that an attorney's fee request – whether statutory or contractual – does not affect the deadline to appeal.
In Mississippi v. AU Optronics Corp. (12-1036), a unanimous Court held that a suit brought by the State of Mississippi against LCD manufacturers was not a "mass action" subject to removal under the Class Action Fairness Act ("CAFA"). In the suit, Mississippi claimed that the LCD manufacturers violated state antitrust and consumer protection statutes by forming a cartel to restrict competition and raise prices. In addition to its requests for injunctive relief, civil penalties, and various other remedies, Mississippi sought monetary restitution for purchases made by its citizens. Defendants removed the case, arguing that it was either a class action or a mass action under CAFA. The district court found that it was not a class action because it was "not brought pursuant to Federal Rule of Civil Procedure 23 or a ‘similar State statute or judicial procedure.'" But the district court found that Mississippi's action did constitute a mass action under CAFA because it was a civil action "in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs' claims involve common questions of law or fact." The district court reached this conclusion based on Fifth Circuit precedent holding that "persons" and "plaintiffs" should be defined as the "real parties in interest." Here, the citizens of Mississippi were real parties in interest, according to the district court, because Mississippi was seeking restitution on their behalf. The district court nevertheless remanded the action to state court, however, because it concluded that it fell within an exception to CAFA which excludes from mass actions civil actions brought on behalf of the "general public." The Fifth Circuit agreed that the suit was a mass action, but held that it did not fall within the general public exception because it sought relief for specific individuals. Thus, the Fifth Circuit found the case removable under CAFA.
The Supreme Court reversed in a highly textual analysis by Justice Sotomayor. The Court reasoned that the words "person" and "plaintiffs" in the definition of a "mass action" must mean the same thing and it simply did not make sense, in the Court's view, to conclude that "plaintiffs" included unnamed persons. Indeed, elsewhere, CAFA explicitly refers to named and unnamed plaintiffs, underscoring that Congress knew how to include such individuals when it intended to do so. Further, the structure of the mass action provisions of CAFA would be unworkable if this interpretation were adopted. While CAFA provides for removal of a mass action where the claims of 100 or more persons are to be tried jointly, jurisdiction in the federal courts exists only over those plaintiffs who claims are in excess of $75,000. If "plaintiffs" included unnamed persons who were the "real parties in interest," this analysis would be nearly impossible. Similarly, transfers of mass actions are permissible only with the consent of a majority of the plaintiffs. Again, such a provision would be unworkable if the plaintiffs were unidentified "real parties in interest."
Notably, the Court's decision is clearly limited to CAFA's mass action provisions. The Court noted, without any apparent concern, the fact that courts do look beyond the pleadings in various other contexts when determining diversity jurisdiction. In addition, the Court did not reach the issue of whether an AG action could be a class action under CAFA, as that issue was not raised by the parties on appeal.
Daimler AG v. Bauman (11-965) involved foreign plaintiffs suing a foreign defendant over events outside of the United States, raising questions about the limits of federal courts' personal jurisdiction over foreign defendants. A group of Argentinian residents sued Daimler – a company headquartered in Germany – in the Northern District of California, alleging that Daimler's Argentinian subsidiary, Mercedes-Benz Argentina, committed human rights violations during Argentina's "Dirty War" from 1976-1983. The plaintiffs claimed jurisdiction was proper based on the extensive California contacts of Mercedes-Benz USA ("MBUSA"), another Daimler subsidiary which is incorporated in Delaware and has a principal place of business in New Jersey. The plaintiffs invoked the court's general jurisdiction, claiming Daimler could be sued in California for any claims arising against it anywhere in the world. Plaintiffs pointed out, among other things, that California sales of Mercedes Benz cars – which MBUSA imports for sales through independent dealers – account for 2.4% of Daimler's worldwide sales. Based in part on the agreement setting forth the relationship between Daimler and MBUSA, which specifically denies the creation of any agency relationship, the district court refused to attribute MBUSA's California contacts to Daimler; it also concluded that Daimler's own contacts in California were insufficient to support general jurisdiction. The Ninth Circuit initially agreed but reversed itself on rehearing, concluding that the plaintiffs had established an agency relationship sufficient to impute MBUSA's contacts to Daimler.
Not so fast, said the Court. "Exercises of personal jurisdiction so exorbitant," wrote Justice Ginsburg on behalf of herself and seven of her colleagues, "are barred by due process constraints on the assertion of adjudicatory authority." The Court's decision included a long discussion – touching on such old chestnuts as Pennoyer v. Neff and International Shoe – of the jurisprudence on general or all-purpose jurisdiction on one hand, and specific or conduct-linked jurisdiction on the other. With respect to the former, as set forth in Goodyear Dunlop Tires Operations, S.A. v. Brown (2011), federal courts may assert general jurisdiction over a foreign corporation only when its ties to the state in which suit is brought are "so constant and pervasive ‘as to render [it] essentially at home in the forum State.'" The Court stressed that specific jurisdiction – in which a court's authority depends on the "relationship among the defendant, the forum, and the litigation" – has been the ascendant, while general jurisdiction – on which the plaintiffs relied – "has come to occupy a less dominant place in the contemporary scheme." On the facts, the plaintiffs failed to clear the high bar. "Even if we were to assume that MBUSA is at home in California, and further to assume MBUSA's contacts are imputable to Daimler [under an agency theory], there would still be no basis to subject Daimler to general jurisdiction in California, for Daimler's slim contacts with the State hardly render it at home there" as Goodyear requires. While the plaintiffs asked the Court to approve general jurisdiction over a corporation in every State in which it "engages in a substantial, continuous, and systematic course of business," the Court found that formulation "unacceptably grasping." The "continuous and systematic" language harkened back to International Shoe's discussion of specific – not general – jurisdiction. Whatever its contacts with California, Daimler could not be said to be "at home" there because neither Daimler nor MBUSA is incorporated in California or has a principal place of business in the Golden State. If Daimler's contacts were sufficient for general jurisdiction in California, the same would be true in every other state in which MBUSA had sizable sales. "Such exorbitant exercises of all-purpose jurisdiction would scarcely permit out-of-state defendants ‘to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.'"
Justice Sotomayor concurred in the judgment, but disagreed with how the majority got there. The Court acknowledged MBUSA's considerable contacts, Daimler conceded that those contacts warranted the exercise of general jurisdiction in California over MBUSA, and the Court assumed that MBUSA's contacts could be attributed to Daimler; the question presented was whether, notwithstanding these facts, admissions, and assumptions, Daimler itself has sufficient contacts to warrant general jurisdiction. In Justice Sotomayor's view, the majority answered in the negative based not on any lack of contacts between Daimler and California, but on the existence of similar contacts in many other forums – a consideration previous jurisprudence considered immaterial. To her mind, in focusing on the fact that MBUSA had considerable contacts not only with California but with many other jurisdictions and insisting that contacts in one state must be viewed in comparison to a company's "nationwide and worldwide" activities, the Court created a new standard for multinational corporations: "too big for general jurisdiction." Justice Sotomayor would have decided the matter on a different basis: that jurisdiction would be unreasonable "given that the case involves foreign plaintiffs suing a foreign defendant based on foreign conduct, and given that a more appropriate forum is available." She noted that in the specific jurisdiction context courts consider two prongs: (1) whether the defendant has sufficient contacts with the forum state, and (2) whether exercising jurisdiction would be reasonable under the circumstances. Although she acknowledged that the Court has never determined whether the reasonableness prong applies in general jurisdiction cases and the parties did not brief the issue, she nonetheless would have decided this case on reasonableness, "without foreclosing future consideration of whether that prong should be limited to the specific jurisdiction context."
In Ray Haluch Gravel Co. v. Central Pension Fund, the Court tackled a more cut-and-dried question, but one with important implications for finality: whether a notice of appeal was timely when it was filed within 30 days after a decision addressing contractual attorney's fees, but not within 30 days of an earlier decision on the merits. The plaintiff union sued defendant Ray Haluch Gravel over its refusal to pay contributions to union-affiliated benefit funds, as required under a collective bargaining agreement. The union raised claims under both ERISA, which provides for statutory attorney's fees, and the collective bargaining agreement (CBA), which provided for contractual attorney's fees. Following a bench trial, the district court invited the plaintiff to submit a fee request along with proposed findings of facts and conclusions of law, reasoning that, although typically such submissions are made after a judgment, in this case the fees were potentially part of the damages at issue. The plaintiff opted to submit its fee petition separately, though before the district court rendered its decision on the merits of the ERISA and CBA claims. The district court issued a memorandum and order on June 17, 2011 in favor of the plaintiff on the ERISA and CBA issues, though for less than the plaintiff had sought; it entered judgment the same day. The district court did not, however, rule on the motion for attorney's fees until July 25, 2011, at which point it awarded some but not all of the requested fees. The plaintiff appealed from both orders on August 15, 2011, prompting the defendant to contend that the appeal was untimely because the June 17 decision was a final judgment under 28 U.S.C. § 1291 and notice of any appeal was due 30 days thereafter; the plaintiff countered that there was no final decision until July 25,when the court ruled on the fee motion. The First Circuit sided with the plaintiff: although an unresolved attorney's fee issue generally doesn't prevent a judgment from becoming final, "where, as here, an entitlement to attorneys' fees derives from a contract . . . the critical question is whether the claim for attorneys' fees is part of the merits." The First Circuit determined that, under the CBA, payment of attorney's fees was an element of damages, meaning that the June 17, 2011 decision was not final under § 1291.
The Court, stepping in to resolve a circuit split, reversed in a unanimous decision authored by Justice Kennedy. The Court grounded its decision in its holding in Budinich v. Becton Dickinson & Co. (1988), which concluded that "as a general matter, at least, . . . a claim for attorney's fees is not part of the merits of the action to which the fees pertain," and that consistency in the application of § 1291 favored a "uniform rule that an unresolved issue of attorney's fees . . . does not prevent judgment on the merits from being final." The Court first rejected the plaintiff's central argument: that this case – unlike Budinich – involved contractual fees and thus that the fees were part of damages and not collateral to the merits decision. The Court explained that Budinich had already rejected the distinction raised by the plaintiffs. While fees in many instances had been traditionally considered an aspect of costs, Budinich accepted that that was not always the case, and nonetheless adopted a bright line rule that attorney's fees are collateral for § 1291 purposes. If the Court adopted the plaintiff's view, "the operational consistency and predictability stressed in Budinich would be compromised in many instances. Operational consistency is not promoted by providing for different jurisdictional effect to district court decisions that leave unresolved otherwise identical fee claims based solely on whether the asserted right to fees is based on a contract or a statute." Responding to plaintiff's argument that treating a contractual fee motion as going to the merits would avoid piecemeal litigation, the Court noted that Federal Rule of Civil Procedure 58(e) already permits courts to delay the running of the time to file an appeal in most cases until the entry of an order disposing of a timely fee motion. With the main issue resolved, the Court also rejected the plaintiff's separate claim that the June 17 decision was not final because some of the claimed fees were incurred before litigation began. In the plaintiff's view, these fees were beyond the scope of Budinich because they were not fees "attributable to the case." The Court was blunt: "The fact that some of the claimed fees accrued before the complaint was filed is inconsequential." Investigation, preliminary research, and pre-litigation drafting are "standard preliminary steps" toward litigation and thus fall within the reach of Budinich.
In addition to the decisions, the Court has granted cert in the following eight new cases:
POM Wonderful LLC V. Coca-Cola Company (12-761), which asks "[w]hether the court of appeals erred in holding that a private party cannot bring a Lanham Act claim challenging a product label regulated under the Food, Drug, and Cosmetic Act."
Limelight Networks, Inc. v. Akamai Technologies (12-786), which asks "[w]hether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) even though no one has committed direct infringement under § 271(a)."
Argentina v. NML Capital, LTD. (12-842), which involves the Foreign Sovereign Immunities Act of 1976 and asks "[w]hether post-judgment discovery in aid of enforcing a judgment against a foreign state can be ordered with respect to all assets of a foreign state regardless of their location or use, as held by the Second Circuit, or is limited to assets located in the United States that are potentially subject to execution under the FSIA, as held by the Seventh, Fifth, and Ninth Circuits."
Susan B. Anthony List v. Steven Driehaus (13-193), which raises two questions: (1) "To challenge a speech-suppressive law, must a party whose speech is arguably proscribed prove that authorities would certainly and successfully prosecute him, as the Sixth Circuit holds, or should the court presume that a credible threat of prosecution exists absent desuetude or a firm commitment by prosecutors not to enforce the law, as seven other Circuits hold?" and (2) "Did the Sixth Circuit err by holding, in direct conflict with the Eighth Circuit, that state laws proscribing ‘false' political speech are not subject to pre-enforcement First Amendment review so long as the speaker maintains that its speech is true, even if others who enforce the law manifestly disagree?"
U.S. v. Clarke (13-301), which asks "[w]hether an unsupported allegation that the Internal Revenue Service issued a summons for an improper purpose entitles an opponent of the summons to an evidentiary hearing to question IRS officials about their reasons for issuing the summons."
CTS Corporation v. Waldberger (13-339), which involves preemption under CERCLA and asks "[d]id the Fourth Circuit correctly interpret 42 U.S.C. § 9658 [addressing limitations periods] to apply to state statutes of repose in addition to state statutes of limitations?"
Nautilus, Inc. v. Biosig Instruments, Inc. (13-369), which presents two questions: (1) "Does the Federal Circuit's acceptance of ambiguous patent claims with multiple reasonable interpretations so long as the ambiguity is not ‘insoluble' by a court defeat the statutory requirement of particular and distinct patent claiming?" and (2) "Does the presumption of validity dilute the requirement of particular and distinct patent claiming?"
ABC, Inc., et al. v. Aereo, Inc. (13-461), which asks : "[w]hether a company ‘publicly performs' a copyrighted television program when it retransmits a broadcast of that program to thousands of paid subscribers over the Internet."
And, finally, the Court has invited the Solicitor General to weigh in on three cert petitions:
B&B Hardware, Inc. v. Hargis Industries, Inc. (13-352), which would ask (1) "whether the [Trademark Trial and Appeal Board's] finding of a likelihood of confusion precludes [the respondent] from relitigating that question in infringement litigation in which likelihood of confusion is an element," and (2) "[w]hether, if issue preclusion does not apply, the district court was obliged to defer to the TTAB's finding of a likelihood of confusion absent strong evidence to rebut it."
Picard v. JPMorgan Chase & Co. (13-448), which involves claims lodged against financial institutions by the Trustee in the Madoff bankruptcy and subrogation rights assigned to the Trustee by the Securities Investor Protection Corporation. The appeal would ask (1) "[w]hether, in conflict with decisions of the Third and Sixth Circuits, SIPC's right to subrogation is limited to customers' SIPA claims against a failed brokerage's estate and therefore does not reach claims against third parties that share responsibility for the brokerage's collapse and customers' losses;" (2) "[w]hether, in conflict with decisions of the Fourth and Eighth Circuits, federal statutory silence overrides any right to contribution under state law for liabilities arising under the federal statute regardless of whether Congress intended to preempt the state law;" and (3) "[w]hether, in conflict with decisions of the First and Seventh Circuits, a trustee lacks standing under SIPA or the Bankruptcy Code to assert claims against parties that hastened or deepened the bankruptcy and are therefore general to all of an estate's customers or creditors."
Comptroller of Treasury of MD v. Wynne (13-485), which would ask: "Does the United States Constitution prohibit a state from taxing all the income of its residents—wherever earned—by mandating a credit for taxes paid on income earned in other states?"
No doubt we'll be back soon. Until then, stay warm!
Kim, Jenny & Julie