Federal Courts May Rule On Forum Motions Without First Determining Jurisdiction

Before considering dispositive motions going to the merits of the case, federal courts typically must be satisfied that they have subject-matter and personal jurisdiction.

In Sinochem Int’l Co. Ltd. v. Malaysia Int’l Shipping Corp., 127 S. Ct. 1184 (U.S. Mar. 5, 2007), the Supreme Court confirmed that the same considerations do not apply to a motion to dismiss based on forum non conveniens because such a motion is not a disposition on the merits. Such motions do not entail the court’s assumption of any substantive law-declaring power; therefore, there is no requirement that the court first undertake the discovery necessary to ascertain that it has either subject-matter or personal juris­diction. Here, the Supreme Court characterized the international dispute at issue as being a textbook case for immediate dismissal because the jurisdictional issues would be difficult to determine and the forum non conveniens considerations weighed heavily in favor of dismissal.

U.S. Supreme Court Holds False Claims Act “Original Source” Rule Is Jurisdictional

In Rockwell Int’l Corp. v. United States, 127 S. Ct. 1397 (U.S. Mar. 27, 2007), the Supreme Court noted that the False Claims Act, 31 U.S.C. §§ 3729, et seq., eliminated federal court jurisdiction over qui tam actions brought by a private party “relator” based upon the public disclosure of allegations reported in the news media unless such party is “an original source of the information.” In this case, a former Rockwell engineer named James Stone brought a qui tam action alleging that Rockwell knowingly employed a defective system for disposing of toxic waste, and the Government intervened. Ultimately the case proceeded to trial and the jury found in part for Stone, and the lower courts affirmed.

The Supreme Court reversed for lack of jurisdiction, finding that Stone was not the “original source” of the information upon which the claims were based. The Court held that where claims are brought based on publicly disclosed information, a relator’s status as the original source of that information is jurisdictional and must be considered de novo even where, as argued here, the defendant conceded the issue. Here, Stone had informed Rockwell that its system was faulty due to a defective piping system, but the final pretrial order (which superseded the pleadings), and all the proofs at trial, concerned an entirely different defect. Because Stone had no independent knowledge of the defect that actually was at stake, the district court lacked jurisdiction over the matter.

California’s Unfair Competition Law Now Requires Representative Claimant To Have Injury And Meet Class Action Prerequisites

In 2004, the voters of California approved Proposition 64 to amend the Unfair Competition Law (Bus. & Prof. Code §§ 17200, et al.) (“UCL”). Until that time, the statute permitted individuals to act as private attorneys general to bring lawsuits for alleged unfair competition on behalf of others even if the plaintiffs themselves had not suffered loss of money or property. Because the traditional requirements for class actions and individual standing did not have to be met, the UCL had been the subject of controversy. Proposition 64 added the requirements that the representative have suffered injury in fact, and that the action “complies with Code of Civil Procedure Section 382.”

In Amalgamated Transit Union, Local 1756 v. Superior Court, 55 Cal. Rptr. 3d 585 (Cal. App. (2d Dist.) Feb. 28, 2007, modified Mar. 22, 2007), the court held that that despite the lack of any express language in proposition 64 concerning class actions, the reference to § 382 was meant to engraft onto the Unfair Competition Law the requirement that any representative action proceed as a class action and satisfy traditional certification requirements.

[Note that on June 20, 2007, the California Supreme Court granted review, superceding this opinion. Amalgamated Transit Union, Local 1756 v. Superior Court, 161 P.3d 1, 61 Cal.Rptr.3d 459 (Cal. June 20, 2007).]

U.S. Supreme Court Rejects Ninth Circuit Rule Against Attorney’s Fees In Bankruptcy

In 1991, the Ninth Circuit held that an unsecured creditor is precluded from recovering attorney’s fees authorized by a prepetition contract if such fees were incurred in postpetition litigation involving issues peculiar to bankruptcy law rather than basic contract enforcement questions. In re Fobian, 951 F.2d 1149 (9th Cir. 1991).

Resolving a split in the circuits, the Supreme Court held in Travelers Cas. & Surety Co. of America v. Pacific Gas & Elec. Co., 127 S. Ct. 1199 (U.S. Mar. 20, 2007), that the Fobian rule was not supported by the Bankruptcy Code. Finding that “claims enforceable under applicable state law will be allowed in bankruptcy unless they are expressly disallowed, the Court held that the absence of textual support for the Ninth Circuit’s rule was “fatal,” and it rejected the applicable lower court precedents.

Punitive Damages Limited To Compensatory Award Where Plaintiff Not Vulnerable

In Jet Source Charter, Inc. v. Doherty, 148 Cal. App. 4th 1, 55 Cal. Rptr. 3d 176 (4th Dist. Jan. 30, 2007, modified Feb. 28, 2007), the plaintiffs successfully sued aircraft brokers for breach of fiduciary duty in selling them aircraft while willfully deceiving them concerning the price the brokers had negotiated with the sellers (and thereby making additional money on the side). The jury awarded approximately $5 million in compensatory damages, and more than $25 million in punitive damages against various defendants.

On appeal, the court held, “Where, as here, substantial compensatory damages have been awarded, and the conduct in question only involves economic damage to a single plaintiff who is not particularly vulnerable, an award which exceeds the compensatory damages awarded is not consistent with due process” under State Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S. 408 (2003).

Plaintiff May Dismiss Without Prejudice On Eve Of Mandatory Settlement Conference

In Franklin Capital Corp. v. Wilson, 148 Cal. App. 4th 187, 55 Cal. Rptr. 3d 424 (4th Dist. Feb. 28, 2007), the plaintiff attempted to take a voluntary dismissal without prejudice on the eve of a mandatory settlement conference with the court. Nevertheless, the court held the conference, vacated the voluntary dismissal and entered dismissal with prejudice. By that time, plaintiff’s counsel already had a long record of missed court hearings and had been ordered to pay sanctions.

Nevertheless, the appellate court found that a plaintiff has an absolute right pursuant to statute to take a voluntary dismissal without prejudice at any time prior to commencement of “trial” or the pendency of an impending dispositive procedure, and that the mandatory settlement conference did not fall under any of those categories. Thus, the trial court had no authority to convert the voluntary dismissal to one with prejudice.

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.]