Establishment Of New Precedent Does Not Start 30-Day Clock For Removal

Under 28 U.S.C. § 1446(b), a case that was not removable when originally filed may still be removed if the defendants receive an “amended pleading, motion or other paper from which it may first be ascertained that the case is one which is or has become removable.” The defendants may file a notice of removal within 30 days of receiving that indication that the case is now removable. Typically such an indication is the filing by one of the parties of an amended pleading or other paper that raises a federal question.

However, in Dahl v. R.J. Reynolds Tobacco Co., 478 F.3d 965 (8th Cir. Feb. 28, 2007), defendants argued that the publication of a new precedent in the Eighth Circuit establishing that cases like the one in Dahl were removable started a new 30-day clock under § 1446(b). The Eighth Circuit rejected that argument, holding that the receipt of an opinion from a different case did not constitute an “amended pleading, motion or other paper” for purposes of the removal statutes.

Expert Testimony Remains Absolutely Privileged Against Being Basis For Claims

Most states recognize an absolute privilege for statements in testimony or pleadings in a judicial proceeding. In MacGregor v. Rutberg, 478 F.3d 790 (7th Cir. Feb. 27, 2007), the plaintiff attempted to carve out an exception for expert testimony. She argued that while acting as an expert for a patient that was suing her for malpractice, defendant neurosurgeon gave testimony that defamed her. Applying Illinois law, the court refused to exempt expert testimony from the absolute testimonial privilege. The court observed, "Litigation is costly enough without judges’ making it more so by throwing open the door to defamation suits against expert witnesses."

Award Of Costs Must Be Charged To Party, Not Counsel

Pursuant to Fed. R. Civ. P. 54(D)(1) and 28 U.S.C. § 1920(6), “costs” are awarded to prevailing parties “as of course” for various trial-related expenses including court fees, reporters, and court-appointed experts.

In In re Cardizem CD Antitrust Litig., 481 F.3d 355 (6th Cir. Feb. 22, 2007), the district court ordered an attorney for an objector to the proposed class-action settlement to pay the compensation of a settlement administrator hired to disburse $80 million in settlement funds to the class. After unsuccessfully objecting to the settlement, the objector took an appeal, which was dismissed for failure to post bond. On remand the class plaintiffs sought sanctions and costs caused by the delay. The district court rejected various sanctions but awarded costs of over $250,000 for the settlement administrator’s fees as a court-appointed expert under 28 U.S.C. § 1920(6).

The Sixth Circuit reversed because the award was charged to objector’s counsel, while the court interpreted the statute and rules to permit awards to be charged only to parties, i.e., the objector here and not her counsel. The court rejected the argument that district courts have inherent or equitable power to charge awards of “costs” to counsel. However, in remanding, the court noted without deciding the question of whether settlement administrators are “court-appointed experts” for purposes of § 1920(6), and cited a circuit split.

U.S. Supreme Court To Consider “Federal Officer” Removal By Tobacco Company

In Watson v. Philip Morris Companies, Inc., 420 F.3d 852 (8th Cir. 2005), plaintiffs brought a class action against a tobacco company for selling “Light” cigarettes allegedly in violation of the Arkansas Deceptive Trade Practices Act. The defendants removed to federal court under 28 U.S.C. § 1442(a)(1), which permits removal by any officer of the United States “or any person acting under that officer.” The district court and the Eight Circuit agreed that in following the FTC’s detailed instructions governing cigarette testing and tar/nicotine disclosures in advertising, defendants were “acting under” the agency’s orders for purposes of the removal statute.

After plaintiffs filed a cert. petition in the U.S. Supreme Court, the Court asked the Solicitor General’s Office to weigh in. The SG concluded that Eighth Circuit made a fact-specific error but recommended that the case was not worthy of decision by the U.S. Supreme Court.

Nevertheless, the Court granted certiorari. The Court has limited the issue on review to the following question: “Whether a private actor doing no more than complying with federal regulation is a ‘person acting under a federal officer’ for the purpose of 28 U.S.C. § 1442(a)(1), entitling the actor to remove to federal court a civil action brought in state court under state law.”

[The Supreme Court issued its ruling on June 11, 2007, and my discussion appears here.]

California Court Finds No Authority To Force Parties Into Private Mediation

In Jeld-Wen, Inc. v. Superior Court, 146 Cal. App. 4th 536, 53 Cal. Rptr. 3d 115 (4th Dist. Jan. 4, 2007), the California Appellate Court held that trial courts do not have the authority to order parties in a complex civil action to attend and pay for private mediation.

In this multi-party construction case, the trial court deemed the matter “complex” within the local rules, and appointed a mediator to conduct settlement conferences for up to 100 hours at $500 per hour. Jeld Wen served objections and did not attend the mediation sessions but invited informal settlement talks. The trial court granted the other parties’ motion to compel Jeld-Wen to attend the mediation, and Jen-Weld appealed.

Reversing, the appellate court noted that although there are certain statutes in place requiring mediation for cases valued at under $50,000, this case exceeded that threshold. It held that in larger cases mediation is purely voluntary, and the trial court must have the agreement of all parties before it can enter an order requiring mediation. Moreover, even after a case is ordered to mediation, the parties have the absolute right to withdraw.

U.S. Supreme Court To Consider Whether Movant Obtaining Preliminary Injunction Is “Prevailing Party” Entitled To Attorneys’ Fees

The U.S. Supreme Court has agreed to resolve an apparent conflict in the federal appellate courts concerning whether a plaintiff who successfully obtains a preliminary injunction is a “prevailing party” for purposes of fee-shifting statutes. Struhs v. Wyner, 127 S. Ct. 1055 (granting cert. Jan. 12, 2007).

The Eleventh Circuit ruled in Wyner v. Struhs, 179 Fed. Appx. 566 (2006), that plaintiffs who sued under 42 U.S.C. § 1983 and obtained a preliminary injunction against enforcement of state rules that would have interfered with their public performance art that featured nudity, but did not prevail on the later facial challenge to those rules, were still “prevailing parties” entitled to attorneys’ fees. In contrast, the Fourth Circuit held in Smyth v. Rivero, 282 F.3d 268 (2002), that a preliminary injunction is not a ruling on the merits and therefore cannot be the basis for considering the movant a “prevailing party.”

Party Performing Contract Under Protest May Bring Declaratory Judgment Act Claim

In the context of a patent dispute, the U.S. Supreme Court has clarified that federal jurisdiction exists under the Declaratory Judgment Act even though a plaintiff actually performs under a disputed contract, as long as the plaintiff maintains that performance is subject to controversy.

In MedImmune v. Genentech, Inc., 127 S. Ct. 764 (U.S. Jan. 9, 2007), Genentech maintained that MedImmune’s primary product infringed on its patent and demanded royalties. MedImmune maintained that the patent was not enforceable but agreed to pay royalties through a license agreement under protest because of the risk of liability for treble damages and attorney’s fees. It then brought a declaratory judgment action, but the trial court and the Federal Circuit held that such claims could not be brought because MedImmune in fact was performing under the contract so there was no dispute for purposes of Article III.

The U.S. Supreme Court held that jurisdiction did exist, and that by enacting the Declaratory Judgment Act, Congress specifically wanted to avoid requiring a party to breach a contract as a precondition to federal jurisdiction. It noted that the Court’s jurisprudence in government cases made this clear (i.e., Congress did not require a party to actually perform an illegal act for there to be jurisdiction for a declaratory judgment action), and agreed with the many lower courts that had reached the same conclusion with respect to disputes among private parties.

Federal Courts Borrowing State Limitations Periods Must Not Borrow Service Rules

It is well-established federal practice that where an action arises under federal law but Congress has not established a specific limitations period, courts borrow the statute of limitations for the most closely analogous action in the relevant state. However, in S.J. v. Issaquah School Dist. No. 411, 470 F.3d 1288 (9th Cir. Dec. 11, 2006), the court noted that this rule does not extend to borrowing state procedural rules that might be included in that statute.

In this case, it was undisputed that the district court properly applied the limitations period in the Washington Administrative Procedure Act (“WAPA”) to plaintiffs’ claims under the federal Individuals with Disabilities Act. However, the appellate court held that the lower court should not also have applied the 30-day limitations period from the WAPA governing the amount of time in which to effect service of process. Instead, it should have applied Fed. R. Civ. P. 4(m), which establishes a 120-day limit for serving process.

Texas Requires New Trial On Attorney’s Fee Award After Damages Cut On Appeal

The Texas Supreme Court has considered the effect on an attorney’s fee award of an appellate ruling that drastically reduced the damages awarded.

In Barker v. Eckman, 213 S.W.3d 306 (Tex. Nov. 17, 2006), plaintiffs sued for multiple breaches of contract going back several years. Over objections that most of the claims were untimely, the court entered judgment on a jury verdict for $112,000 and for attorney’s fees under the contract of $250,000. The intermediate appellate court struck all but $16,180 in damages, but held that appeal of the attorney’s fees issue had been waived. The Supreme Court upheld the reduction in damages, but reversed on the waiver issue.

Finding that there was no proper record on which to base a reduction of the fee award at the appellate level, the court remanded for a new trial on the amount of fees attributable to the upheld claims. The court noted that “[n]ot every appellate adjustment to the damages which a jury considered as ‘results obtained’ when making attorney’s fees findings will require reversal,” but in this case the large reduction in damages showed that the error was not harmless and required a new trial.

Statute Awarded Fees On Motions To Enforce Even Though Judgment Was Silent

Under California Corporations Code § 15634, a limited partner has the right to inspect the partnership’s books and records. In Berti v. Santa Barbara Beach Properties, 145 Cal.App.4th 70, 51 Cal.Rptr.3d 364 (2d Dist. Nov. 27, 2006), plaintiffs brought litigation under § 15634 that ultimately was settled under an agreement that was merged into a judgment that did not provide or attorneys’ fees.

When plaintiff brought various motions to enforce the settlement and then sought attorneys’ fees for those efforts, the trial court denied the motion as there was no fee provision in the judgment. However, the appellate court found that the statutory right to fees was superior, and entitled plain­tiffs to fees notwithstanding the absence of a provision for fees within the judgment.

This case illustrates a principle the federal courts have grappled with for some time as well under fee-shifting statutes and offers of judgment. The lesson here is -- before you settle, make sure you know whether attorney's fees snuck their way into the settlement by operation of law.