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EMPLOYMENTWestlaw Journal

41969500

VOLUME 31, ISSUE 12 / JANUARY 4, 2017

AUTOMOTIVE3 Goodyear asks SCOTUS

to restrict federal judges’ inherent sanctions power

BANK & LENDER LIABILITY5 U.S. justices could

allow Miami to sue banks over lending bias

Bank of America Corp. v. City of Miami (U.S.)

BANKRUPTCY6 Justices debate creditor

collusion, role of settlements in bankruptcy cases

Czyzewski v. Jevic Holding Corp. (U.S.)

EMPLOYMENT9 Business groups urge

Supreme Court to OK narrower review of EEOC subpoena rulings

McLane Co. v. EEOC (U.S.)

ENVIRONMENTAL11 Landowners’ bid to split

parcel on protected river now before high court

Murr v. Wisconsin (U.S.)

HEALTH LAW13 Supreme Court wades

into ‘transgender restroom’ dispute, taking on case from Virginia

Gloucester County School Board v. G.G. (U.S.)

INTELLECTUAL PROPERTY15 U.S. top court to hear

dispute over trademark for band The Slants

Lee v. Tam (U.S.)

WHITE-COLLAR CRIME20 Supreme Court to hear

qualified immunity case over 9/11 detentions

Ashcroft v. Turkmen (U.S.)

SPECIAL ISSUE

U.S. Supreme Court report: A preview of upcoming cases U.S. Supreme Court decisions affect the laws and jurisprudence across many practice areas. In this special year-end issue, Westlaw Journals provides subscribers with a comprehensive look at cases pending before the nation’s top court.

Our writers contribute analysis of cases in the myriad fields we cover throughout the year. The court’s rulings in practice areas such as business and finance, class actions, employment, bankruptcy, technology and health frequently influence the law in many other subjects.

In a challenge to the Obama administration, the court will decide if the U.S. Department of Justice overreached by sending public schools a letter telling them to generally treat transgender students consistent with their gender identity.

Some other issues before the court include: whether a city can be an “aggrieved person” under

the Fair Housing Act; which standard appellate courts should apply to a trial court’s decision to quash or enforce an Equal Employment Opportunity Commission subpoena request; and whether creditor settlements can ignore bankruptcy priority.

Westlaw Journals also reports on a case before the court asking if high-ranking federal officials can be sued for the detention of non-citizens after the 9/11 attacks.

We trust readers will find this compendium of groundbreaking legal developments helpful in keeping up with the ever-changing legal landscape.

Westlaw Journals will continue to provide updates on the high court’s actions in the coming months.

Westlaw Journals editorial team

REUTERS/Jonathan Ernst

Red velvet drapes hang at the back of the courtroom at the U.S. Supreme Court building in Washington. The court’s 2016-2017 term began in October with eight justices, and the chances of a ninth justice being nominated and confirmed by the end of the term are uncertain.

© 2017 Thomson Reuters2 | WESTLAW JOURNAL n EMPLOYMENT

Westlaw Journal EmploymentPublished since May 1986

Director: Mary Ellen Fox

Editors: Tricia [email protected]

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Managing Desk Editor: Robert W. McSherry

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Westlaw Journal Employment (ISSN 2155-594X) is published biweekly by Thomson Reuters.

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TABLE OF CONTENTS

U.S. SUPREME COURT REPORT

AutomotiveGoodyear asks SCOTUS to restrict federal judges’ inherent sanctions power ................................................ 3

Bank & Lender LiabilityU.S. justices could allow Miami to sue banks over lending bias (U.S.) ............................................................5

BankruptcyJustices debate creditor collusion, role of settlements in bankruptcy cases (U.S.) ........................................6Claims for time-barred debt do not violate FDCPA, debt collector argues (U.S.) ..........................................8

EmploymentBusiness groups urge Supreme Court to OK narrower review of EEOC subpoena rulings (U.S.) ..................9

EnvironmentalLandowners’ bid to split parcel on protected river now before high court (U.S.) ............................................11

Health LawSupreme Court wades into ‘transgender restroom’ dispute, taking on case from Virginia (U.S.) ................13

Intellectual PropertyU.S. top court to hear dispute over trademark for band The Slants (U.S.) .....................................................15Patent exhaustion case added to Supreme Court’s queue (U.S.) ...................................................................15Attorneys weigh in on high court ‘substantial portion’ patent debate (U.S.) ................................................. 17Justices hear clashing arguments over laches defense to patent suits (U.S.) ................................................19

White-Collar CrimeSupreme Court to hear qualified immunity case over 9/11 detentions (U.S.) ...............................................20

Expert Analysis: By Elizabeth Kurpis, Esq., Mintz, Levin, Cohn, Ferris, Glovsky & PopeoKnockoffs: To kill or not to kill, that is the copyright question before the Supreme Court ...........................22

Expert Analysis: By Matthew D’Amore, Esq., Morrison & Foerster Supreme Court to consider reach of U.S. patent laws to exported goods ....................................................24

Expert Analysis: By Alexandra Laks, Esq., Morrison & FoersterClass dismissed … But not quite: Supreme Court to review appealability of class certification denials when plaintiffs voluntarily dismiss case .............................................................................................26

AviationAviation company wins support in Supreme Court challenge of FAA rule (U.S.) .........................................28Supreme Court asked to clarify Montreal Convention’s 2-year filing limit (U.S.) ..........................................29

Bank & Lender LiabilityLawyer wants Supreme Court to review CFPB ratification of enforcement action (U.S.) .............................30

BankruptcyBarclays says high court need not take preemption case in SemGroup Chapter 11 (U.S.) ............................31

Class ActionCollective-action waivers in employee arbitration clauses arrive at high court (U.S.) ..................................32

DerivativesBig banks ask Supreme Court to review Libor antitrust decision (U.S.) ........................................................ 33

EmploymentEEOC urges Supreme Court not to expand pre-suit conciliation process (U.S.) ..........................................34

InsuranceInsurance group asks Supreme Court to review Michigan tax for ERISA conflict (U.S.) ...............................36

Medical MalpracticeFederal court lacked jurisdiction in VA benefits dispute, government tells justices (U.S.) ........................... 37

PharmaceuticalCalifornia high court erred on jurisdiction when it let Plavix case proceed, petition says (U.S.) ..................38

Securities Litigation & RegulationSecurities law profs ask justices to hear tolling issue in Deepwater Horizon suit (U.S.) ..............................40Government contractor asks Supreme Court to review ‘failure to disclose’ securities suit (U.S.) .................41

Toxic TortsManufacturers ask high court to hear jurisdiction dispute in toxic exposure case (U.S.) .............................42

Case Index ........................................................................................................................................................43

JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 3© 2017 Thomson Reuters

Alison Frankel updates her blog, “On the Case,” multiple times throughout each day on WestlawNext Practitioner Insights. A founding editor of Litigation Daily, she has covered big-ticket litigation for more than 20 years. Frankel’s work has appeared in The New York Times, Newsday, The American Lawyer and several other national publications. She is also the author of “Double Eagle: The Epic Story of the World’s Most Valuable Coin.”

REUTERS/Mike Blake

U.S. SUPREME COURT REPORT

AUTOMOTIVE

Goodyear asks SCOTUS to restrict federal judges’ inherent sanctions powerBy Alison Frankel

(Reuters) – In its 1991 decision in Chambers v. NASCO Inc., 501 U.S. 32 (1991), the U.S. Supreme Court gave federal trial judges a lot of leeway to police the integrity of their dockets.

The case involved a Louisiana television station operator that backed out of a deal to

sell the station, then engaged in all sorts of litigation chicanery when the purchaser sued to enforce the sales contract. The justices held that the district judge properly exercised his inherent power when he awarded the erstwhile purchaser all of its attorney fees to punish the TV station operator for its misconduct.

Various federal rules of civil procedure might have covered some of the operator’s bad acts, the Supreme Court said, but “requiring the court to apply the other mechanisms to discrete occurrences before invoking the inherent power to address remaining instances of sanctionable conduct would serve only to foster extensive and needless satellite litigation, which is contrary to the aim of the rules themselves.”

Three years after the Chambers decision, the Supreme Court looked at sanctions for civil contempt in International Union, United Mine Workers v. Bagwell, 512 U.S. 821 (1994). In Bagwell, which involved contempt sanctions for the union’s repeated violations of an injunction against strike-related activities, the justices were more leery of federal judges’ power.

The Supreme Court found that the sanctions were akin to a criminal penalty because they were intended to punish the union, not to coerce compliance with the injunction. In that circumstance, the court said, the union was entitled to the due process protections for criminal defendants.

In a concurrence, Justice Antonin Scalia highlighted a fundamental concern about judges issuing sanctions.

“That one and the same person should be able to make the rule, to adjudicate its violation, and to assess its penalty is out of accord with our usual notions of fairness and separation of powers,” he wrote. “And it is worse still for that person to conduct the adjudication without affording the protections usually given in criminal trials.”

I’m reminding you about these two seemingly divergent takes on federal judges’ power to set sanctions because the current court is going to have to reconcile them this term in Goodyear Tire & Rubber Co. v. Haeger, No. 15-1406, cert. granted, 137 S. Ct. 30 (U.S. Sept. 29, 2016), which presents the question of whether trial judges must “tailor compensatory civil sanctions imposed under inherent powers to harm directly caused by sanctionable misconduct when the court does not afford sanctioned parties the protections of criminal due process.”

The tire company filed its merits brief Nov. 14, arguing that if Bagwell and Chambers are in tension — which they certainly seem to be — then Bagwell should control. According to Goodyear’s lawyers at Squire Patton Boggs, the 9th U.S. Circuit Court of Appeals mistakenly relied on Chambers to affirm a $2.7 million sanction against the company and its outside lawyers, awarded under the trial judge’s equitable powers.

The underlying product liability case claimed that Goodyear tires were responsible for a motor home accident that injured four members of the Haeger family. After about five years of litigation, Goodyear settled the case in 2010 for an undisclosed amount.

Several months later, the Haegers’ lawyer read an account of a different case involving the same supposedly defective tires. In that case, Goodyear produced data from heat and speed tests that the company did not turn over in the Haegers’ suit.

The Haegers argued that the entire course of the case was warped by that failure to disclose the testing data. (In their brief opposing Goodyear’s petition for Supreme Court review, the Haegers’ Supreme Court counsel, John Egbert of Jennings Strouss & Salmon, said the company “sent the Haegers on a completely misdirected frolic.”)

The trial judge, U.S. District Judge Roslyn Silver of Phoenix, agreed. She wrote a

Sept. 29Cert. granted

4 | WESTLAW JOURNAL n EMPLOYMENT © 2017 Thomson Reuters

Question presented

Is a federal court required to tailor compensatory civil sanctions imposed under inherent powers to harm directly caused by sanctionable misconduct when the court does not afford sanctioned parties the protections of criminal due process?

lengthy opinion detailing Goodyear’s alleged misconduct and, citing her inherent authority to issue sanctions, ended up awarding the Haegers $2.7 million — just about all of their lawyers’ fees and costs in the case. Haeger v. Goodyear Tire & Rubber Co., 906 F. Supp. 2d 938 (D. Ariz. 2012).

The judge said it would be “inappropriate to limit the award to the fees and costs that could be directly linked to the misconduct” because “it would be impossible to draw the precise causal connections between the misconduct and the fees (the Haegers) incurred.”

A split 9th Circuit panel issued its affirmance of Judge Silver’s sanction in March 2016. Haeger v. Goodyear Tire & Rubber Co., 813 F.3d 1233 (9th Cir. 2016).

In its Supreme Court brief, Goodyear said Judge Silver effectively hit the company with a criminal penalty because the sanctions award is not tethered to whatever harm the Haegers suffered from the alleged litigation misconduct. (That is especially true, the company said, because the Haegers recently settled a fraud suit against Goodyear’s outside counsel that sought the same fees and costs they were awarded in the sanctions decision.)

Goodyear’s failure to disclose the testing data, the company contends, did not cause the Haegers to incur legal costs of $2.7 million.

“Causation functions as an important check on a court’s inherent power,” the brief said. “Without this constraint, courts are free to impose more drastic monetary sanctions under inherent powers than those available for the ostensibly more serious sanction of contempt.”

Under the Supreme Court’s holding in Bagwell, Goodyear said, if the company had defied a court order from Judge Silver and been found to be in contempt, it would be on the hook for less money than the judge awarded via her inherent authority. Goodyear called that a “perverse” outcome.

“Given that contempt covers direct defiance of a court order, one would not expect inherent authority sanctions to entail much

more sweeping relief for subtler forms of misconduct,” it said.

The company also claimed the 9th Circuit decision is “dangerous” precedent that essentially allows trial courts free rein to punish misconduct.

“The absence of a causation requirement pries open the door to an almost boundless view of monetary awards under inherent authority,” the brief said. “The 9th Circuit majority took a step in that direction, implying that lost settlement value might justify a high sanctions amount. But going beyond fees would be the equivalent of transforming an inherent powers sanctions award into a tort remedy, creating a host of proof and due process problems.”

The views expressed in this article are not those of Reuters News. WJ

Related Filings: Petitioner’s brief: 2016 WL 6768939 Opposition brief: 2016 WL 3440022

WESTLAW JOURNAL AUTOMOTIVE

This publication provides up-to-date information on devel-opments in automotive product liability suits from around the country. Included are a tire defect report supplement, coverage of federal preemption issues, and important developments on class action claims, vehicle stability, seat belts, air bags and crashworthiness. Lemon laws, design defects, engine failure, and the efforts of the National Highway Traffic Safety Administration (NHTSA) are also reviewed in depth.

Call your West representative for more information about our print and online subscription packages, or call 800.328.9352 to subscribe.


Nov. 8Argument held

Questions presented

Bank of America Corp. v. City of Miami

1. By limiting suit to “aggrieved person[s],” did Congress require that a Fair Housing Act plaintiff plead more than just Article III injury-in-fact?

2. The FHA requires plaintiffs to plead proximate cause. Does proximate cause require more than just the possibility that a defendant could have foreseen that the remote plaintiff might ultimately lose money through some theoretical chain of contingencies?

Wells Fargo & Co. v. City of Miami

1. Whether the term “aggrieved” in the Fair Housing Act imposes a zone-of-interests requirement more stringent than the injury-in-fact requirement of Article III.

2. Whether the city of Miami is an “aggrieved person” under the Fair Housing Act.

The justices heard arguments in appeals filed by Bank of America and Wells Fargo challenging a lower court’s decision to permit the lawsuits by the Florida city against the banks.

REUTERS/Larry Downing REUTERS/Shannon Stapleton

BANK & LENDER LIABILITY

U.S. justices could allow Miami to sue banks over lending bias(Reuters) – The U.S. Supreme Court on Nov. 8 indicated it could allow Miami to pursue lawsuits accusing major banks of predatory mortgage lending to black and Hispanic home buyers resulting in loan defaults that drove down city tax revenues and property values.

Bank of America Corp. et al. v. City of Miami, No. 15-1111; Wells Fargo & Co. v. City of Miami, No. 15-1112, oral argument held (U.S. Nov. 8, 2016).

The eight justices heard arguments in appeals filed by Bank of America Corp. and Wells Fargo & Co. challenging a lower court’s decision to permit the lawsuits by the Florida city against the banks. The cases were filed under the Fair Housing Act, a federal law outlawing discrimination in housing.

In September 2015, the Atlanta-based 11th U.S. Circuit Court of Appeals overturned a lower

court’s decision to dismiss such lawsuits by the city against Bank of America, Wells Fargo and Citigroup Inc. City of Miami v. Wells Fargo & Co., 801 F.3d 1258 (11th Cir. 2015); City of Miami v. Bank of Am. Corp., 800 F.3d 1262 (11th Cir. 2015).

Citigroup decided not to appeal to the Supreme Court. If the court splits 4-4, the 11th Circuit ruling would stand and Miami would prevail, but no national precedent would be set.

Based on the questions asked by the justices, it appeared unlikely the banks would gain the five votes needed to win the case outright.

But it was possible that a ruling for Miami could allow the lawsuits to move forward while narrowing the scope of the cases and potentially lowering the amount of damages the city could win.

Chief Justice John Roberts seemed most skeptical of the city’s lawsuit, at one point questioning whether a loss of property taxes could count as a direct injury that could give rise to a lawsuit. Chief Justice Roberts said the city’s alleged injuries are “derivative of the injury to the homeowners who had the subprime mortgages and who suffered the foreclosure and so on.”

Fellow conservative Justice Anthony Kennedy, who could cast the key vote to avoid a 4-4 split, seemed somewhat sympathetic

to the banks, particularly over the amount of damages they could face.

Liberal Justice Elena Kagan was among those who seemed open to the case moving forward, saying the Fair Housing Act was designed to address harms to communities, not just individuals.

“Who better than the city to recognize that interest and assert it?” Justice Kagan said.

The banks have said a ruling favoring Miami would lead to a surge of similar suits.

The court is due to rule by the end of June.

Miami accused Wells Fargo, Bank of America and Citigroup of steering non-white borrowers into higher-cost loans they often could not afford, even if they had good credit.

The city said the banks’ conduct caused Miami to lose property tax revenues, drove down property values and required the city to pay the costs of repairing and maintaining properties that went into foreclosure due to discriminatory lending.

Several U.S. cities, including Los Angeles and Oakland, have launched similar lawsuits. WJ

(Reporting by Lawence Hurley; editing by Will Dunham)

Related Filing: Argument transcript: 2016 WL 6600973


Dec. 7Argument held

Question presented

Whether a bankruptcy court may authorize the distribution of settlement proceeds in a manner that violates the statutory priority scheme.

The question for the high court is whether Section 507’s priority scheme — which clearly applies to Chapter 11

reorganization plans — is also mandatory in Chapter 11 cases resolved through structured dismissals.

BANKRUPTCY

Justices debate creditor collusion, role of settlements in bankruptcy casesBy Donna Higgins

Attorneys for a trucking company and its former drivers who were left out of a deal that resolved the firm’s bankruptcy case squared off Dec. 7 before the justices of the U.S. Supreme Court, who asked about the role of settlements in bankruptcy cases and the threat of collusion among creditors.

Czyzewski et al. v. Jevic Holding Corp. et al., No. 15-649, oral argument held (U.S. Dec. 7, 2016).

The drivers are seeking to overturn a ruling from the 3rd U.S. Circuit Court of Appeals

upholding a settlement that resolved Jevic Transportation Inc.’s Chapter 11 case without a formal reorganization plan, a move known as a “structured dismissal.”

The settlement did not pay the drivers anything on their claims for severance pay under the Worker Adjustment and Retraining Notification Act, 29 U.S.C.A. § 2101, which requires employers to provide notice to employees before a mass termination. Instead, all the money was used to pay the Jevic bankruptcy estate’s administrative expenses, taxes or general unsecured creditors.

Wage-related claims have a higher priority under the Bankruptcy Code’s distribution scheme than claims of general unsecured creditors, but they come in below administrative expenses.

This case presented unusual circumstances that made the settlement the best possible outcome, even though the drivers got nothing, Kirkland & Ellis’ Christopher Landau, who argued for Jevic, said during the one-hour session before the eight justices.

The settlement maximized the recovery for the creditors who did get paid, while leaving the drivers no worse off than they would have

been with any other possible outcome, he said.

The Bankruptcy Code gives courts discretion to approve such settlements, he said.

Justice Sonia Sotomayor said she did not see why this case was all that unusual.

“It seems to me that wanting to exclude the claims of one or more creditors is the ordinary situation,” she said. “Every junior creditor wants money. They’re happy to exclude anybody they can … or anybody who will concede to doing it.”

The high court is weighing whether, outside the context of a formal Chapter 11 reorganization plan, a bankrupt company’s assets can be distributed to creditors in a way that differs from the Bankruptcy Code’s rules for the order in which claims are paid.

Jevic’s position, if adopted, “would wreak havoc on the basic process of bankruptcy,”

the drivers’ counsel, Danielle Spinelli of Wilmer Cutler Pickering Hale and Dorr, told the justices.

“If debtors could distribute estate property to creditors at any time without regard to the priority scheme before a plan, there wouldn’t be much left of the scheme,” she said.

CHAPTER 11 FILING

New Jersey-based Jevic fired the drivers around the same time it filed for bankruptcy in May 2008 in the U.S. Bankruptcy Court for the District of Delaware, where the company was incorporated.

At that time Jevic owed more than $20 million in taxes and general unsecured debt, plus another $53 million to Sun Capital Partners IV LLP, which had acquired Jevic in a 2006 leveraged buyout, and CIT Group/Business Credit Inc., which later refinanced Sun’s debt, according to Jevic’s brief opposing Supreme Court review.

Four years later, the Bankruptcy Court, over the drivers’ objections, approved a settlement that resolved a fraudulent-conveyance action that the creditors committee had filed against Sun and CIT. Under the agreement, the Chapter 11 case would be dismissed once the settlement was implemented.

The U.S. District Court for the District of Delaware, and later the 3rd Circuit, affirmed the settlement and dismissal. In re Jevic Holding Corp. et al., No. 08-11006, 2014 WL 268613 (D. Del. Jan. 24, 2014); In re Jevic Holding Corp., 787 F.3d 173 (3d Cir. 2015).

The drivers then petitioned the Supreme Court for review, which was granted.

‘AN UNCONFIRMABLE PLAN’

Justice Elena Kagan asked why the Bankruptcy Code does not address the applicability of the priority rules to settlements outside Chapter 11 plans.

“Did Congress just not think that this might happen?” she asked.

Settlements were not intended as a method for distributing an estate’s assets, Spinelli replied.


Settlements yield funds that become assets of the bankruptcy estate, which are then distributed to creditors in accordance with priority, she said.

The code provides only two options for distributing estate assets, both of which must abide by the priority scheme — either a confirmed reorganization plan under Chapter 11 or conversion to Chapter 7, after which the estate is liquidated and creditors are paid with those funds, Spinelli said.

If neither of those options is feasible, a case can be dismissed, meaning that no assets are distributed and the parties revert to their prebankruptcy positions, she said.

“No provision of the Bankruptcy Code permits what happened here,” she said. “This was a naked priority violation for its own sake. … Taking value from senior creditors and giving it to junior creditors for its own sake is not permitted.”

Structured dismissals like the one in this case are often used when a debtor and its creditors cannot agree on a reorganization plan, according to Sarah E. Harrington, assistant to the solicitor general, who argued

for the U.S. government as amicus curiae in support of the drivers.

“What you have is an agreement that is, in essence, an unconfirmable plan,” she said.

“Congress enacted the priority scheme precisely to prohibit the kind of collusive-looking agreements that happened here, where you have high-priority and low-priority creditors kind of squeezing out the middle creditors,” Harrington said.

THE WORLD OF 363(B)

The Bankruptcy Code’s priority rules apply only in the context of Chapter 11 reorganization plans, Landau said.

Outside of that context, he said, courts have discretion under Section 363(b) of the Bankruptcy Code, 11 U.S.C.A. § 363(b), to make decisions about the use, sale or lease of estate assets.

“Congress drew a line that the absolute-priority rule as such applies to plans,” he said. “When you are not in the world of plans, you are in the world of 363(b), which has play in the joints.”

Adherence to priority is a major factor judges use when making decisions under

Section 363(b) but they have discretion to allow settlements that violate priority under extraordinary circumstances like the ones in this case, he said.

“Let’s just assume that you are right, that … this is one of these extraordinary circumstances in which some people can be made better off and nobody will be made worse off,” Justice Kagan said. “Still, the question is: Where is the authorization for that in the Bankruptcy Code? Because that’s like a big principle. … I think we would have known about it if that’s the way bankruptcy proceedings were supposed to go.”

The lack of a statutory provision allowing approval of settlements that violate priority also troubled Justice Stephen Breyer.

“So where does the bankruptcy trustee or any court get the power to say that a group of people can, in fact, reverse the order in which these assets will be distributed?” Justice Breyer asked. “That is what is bothering me, and presumably the government, and certainly the workers here.” WJ


WestlaW journal bankruptcy

This reporter offers comprehensive coverage of significant issues in both business and consumer bankruptcy proceedings. The editors track dockets, summarizing recent developments and their implications for the debtor, its creditors, officers and directors, employees, and other parties. This reporter covers a wide range of topics regarding business and consumer bankruptcies and includes analysis of the most noteworthy case law and legislation. Important litigation documents are also included.



Midland Funding LLC v. Johnson, No. 16-348, petitioner’s opening brief filed (U.S. Nov. 14, 2016).

Debt collectors should not have to fear they might be violating the Fair Debt Collection

Practices Act when they file proofs of claim that comply with all requirements of the Bankruptcy Code, Midland Funding LLC says in the Nov. 14 brief.

Midland is seeking to overturn a ruling from the 11th U.S. Circuit Court of Appeals in Aleida Johnson’s FDCPA suit against the company stemming from its efforts to collect on a credit card debt. Johnson v. Midland Funding LLC, 823 F.3d 1334 (11th Cir. 2016).

The FDCPA, 15 U.S.C.A. § 1692, prohibits debt collectors from using “any false, deceptive or misleading representation or means in connection with the collection of any debt.”

Numerous other federal appeals courts have held that filing a proof of claim for a stale debt does not violate the FDCPA, so the Supreme Court should correct the 11th Circuit’s “outlying interpretation,” Midland argues.

Midland has received support, in the form of amicus curiae briefs, from the U.S. Chamber of Commerce; DBA International, a trade

Jan. 17Argument set

Questions presented

1. Whether the filing of an accurate proof of claim for an unextinguished time-barred debt in a bankruptcy proceeding violates the Fair Debt Collection Practices Act.

2. Whether the Bankruptcy Code, which governs the filing of proofs of claim in bankruptcy, precludes the application of the Fair Debt Collection Practices Act to the filing of an accurate proof of claim for an unextinguished time-barred debt.

BANKRUPTCY

Claims for time-barred debt do not violate FDCPA, debt collector arguesBy Donna Higgins

Filing proofs of claim for debts that are time-barred under state statutes of limitation, as allowed under the Bankruptcy Code, does not violate the federal law that bans misleading debt collection tactics, a collection firm has argued in its opening brief to the U.S. Supreme Court.

association representing debt purchasers; ACA International, which represents collection agencies and other creditors; the National Creditors Bar Association and corresponding state associations; and Resurgent Capital Services, a company that files proofs of claim in bankruptcy cases and says it has faced similar FDCPA suits.

FDCPA SUIT

Johnson filed for Chapter 13 relief in 2014 in the U.S. Bankruptcy Court for the Southern District of Alabama. Midland filed a proof of claim for the credit card debt even though a collection suit would have been barred by Alabama’s six-year statute of limitations for such claims, Ala. Code § 6-2-34.

Johnson objected to the claim, and the Bankruptcy Court disallowed it. Shortly after that, she filed her FDCPA suit against Midland in the U.S. District Court for the Southern District of Alabama.

The District Court granted Midland’s motion to dismiss the case, and the 11th Circuit reversed. Midland petitioned the high court for review, which was granted in October.

The Bankruptcy Code defines a “claim” broadly, and including time-barred debts within that definition is “wholly consistent with the policies animating bankruptcy:

most notably, the code’s core purpose of comprehensively bringing all of a debtor’s debts into a single bankruptcy proceeding and resolving them,” Midland argues in the brief.

The code includes extensive protection for debtors and makes it a simple matter for debtors or the trustees who oversee their bankruptcy estates to weed out old debts, the company said.

FDCPA PROTECTS CONSUMERS, NOT CREDITORS

Even if a stale claim slips through, in most cases that will not harm the debtor, Midland contends.

In most Chapter 13 cases, when a debtor’s repayment plan is confirmed, the debtor is required to dedicate all of his or her disposable income to the plan, so the number of allowed claims will not affect the debtor’s monthly payments, Midland argues.

Only other creditors would be harmed if an invalid claim were to be allowed, because they would get a smaller portion of the debtor’s plan payments — but the FDCPA is designed to protect consumers, not bankruptcy creditors, Midland says.

Finally, Midland argues, even if the FDCPA could be interpreted to ban proofs of claim for stale debts, the Bankruptcy Code’s provisions allowing such claims would still be controlling because the code was enacted a year after the FDCPA.

“It would be inconsistent with Congress’ objective in expanding the definition of ‘claim’ to construe an earlier-enacted, nonbankruptcy statute to limit the proofs of claim that can be filed in a bankruptcy proceeding,” Midland said. WJ

Attorney:Petitioner: Kannon K. Shanmugam, Williams & Connolly, Washington, DC

Related Filings: U.S. Chamber of Commerce amicus brief: 2016 WL 6873060 DBA International amicus brief: 2016 WL 6892605 ACA International amicus brief: 2016 WL 6916171 Creditors’ bar associations amicus brief: 2016 WL 6916170 Resurgent Capital’s amicus brief: 2016 WL 6892606 Petition: 2016 WL 4983173


McLane Co. v. Equal Employment Opportunity Commission, No. 15-1248, amici briefs filed (U.S. Nov. 21, 2016).

A trial court has conducted hearings, heard witness testimony, and “is the closest to the factual and evidentiary issues at play,” so a more thorough de novo review is unnecessary, the business groups say in a Nov. 21 brief.

In September the Supreme Court agreed to hear food distributor McLane Co.’s challenge

to the 9th U.S. Circuit Court of Appeals’ reversal of a lower court ruling and approval of the EEOC’s subpoena seeking personal information of other company employees in its investigation of a worker’s sex discrimination claim.

The company has asked the high court to determine the proper standard of review of a court’s ruling in an EEOC administrative action, noting that the 9th Circuit is the only appellate court to conduct a de novo review instead of a narrower or more deferential review for clear legal error only.

De novo review requires the appellate court to determine if the trial judge has misconstrued the law, while a clear-error review determines if the judge made an obvious error in deciding the facts.

RELEVANT AND NECESSARY INFO

The case came before the 9th Circuit after the U.S. District Court for the District of Arizona refused to enforce an EEOC subpoena against McLane seeking information related to the company-mandated employee strength test. EEOC v. McLane Co., No. 12-2469, 2012 WL 5868959 (D. Ariz. Nov. 19, 2012).

EMPLOYMENT

Business groups urge Supreme Court to OK narrower review of EEOC subpoena rulingsBy Tricia Gorman

Appellate courts should defer to trial court decisions regarding subpoena requests by the Equal Employment Opportunity Commission, several business groups and law professors say in two amici briefs recently filed in the U.S. Supreme Court.

Sept. 29Cert. granted

Question presented

Whether a district court’s decision to quash or enforce an EEOC subpoena should be reviewed de novo, which only the 9th Circuit does, or should be reviewed deferentially, which eight other circuits do, consistent with the Supreme Court’s precedents concerning the choice of standards of review.

Damiana Ochoa filed a sex discrimination claim with the EEOC against McLane in 2008 after she was fired for failing to pass a physical capability test following her maternity leave.

She alleged the company violated Title VII of the Civil Rights Act, 42 U.S.C.A. § 2000e, by discriminating against her based on her gender when it terminated her employment.

In investigating Ochoa’s claims, the EEOC asked the company for information about the test and the employees who have taken it.

McLane provided some general information, including the gender and test scores, but refused to provide “pedigree information” — names, addresses, Social Security numbers and phone numbers — of the test takers. It also refused to provide information about when and why it had terminated employees who failed the test, according to 9th Circuit opinion.

The EEOC filed a subpoena enforcement action against the company in Arizona federal court in 2012.

U.S. District Judge G. Murray Snow required McLane to provide some additional information but said the pedigree information was not necessary for the agency to determine if the company used the strength test in a discriminatory way.

The EEOC appealed, and the 9th Circuit panel reversed in part and vacated in part, finding the requested information relevant to the agency’s investigation. EEOC v. McLane Co., 804 F.3d 1051 (9th Cir. 2015).

“At the investigative stage, the EEOC is trying to determine only whether ‘reasonable cause’ exists ‘to believe that the charge is true,”’ the panel said. “So the relevance standard in this context sweeps more broadly than it would at trial.”

IRRELEVANT INFO

In its petition for certiorari filed with the Supreme Court in April, McLane argued that the information the EEOC sought on other employees was irrelevant to its investigation since Ochoa had not compared the company’s treatment of her to the treatment of other workers.

By allowing the commission broad subpoena powers to collect material, the 9th Circuit essentially nullified limits that Title VII places on the EEOC’s jurisdiction, the petition said.

Opposing the company’s petition, the EEOC said the appeals court properly conducted a de novo review of Judge Snow’s subpoena decision because the panel found legal error. The panel determined that the judge erred in ruling that the commission did not need certain information to establish if the company’s strength test was discriminatory, the EEOC said.

’ABUSIVE INVESTIGATIVE TACTICS’

The Chamber of Commerce, Equal Employment Advisory Council and National Federation of Independent Business Small Business Legal Center said in their brief supporting McLane that de novo review of subpoena decisions would only prolong the


Attorney perspectives on McLane Co. v. EEOC

Sage Knauft, partner with Walsworth LLP Orange, California

While McLane v. EEOC will turn on whether the 9th Circuit should provide more deference to the district courts, and thereby fall in line with the standard of review employed by all other federal courts of appeal, it may have far-reaching implications on the proper scope of the EEOC’s subpoena power when it investigates employment discrimination claims.

The District Court in McLane expressed the view that the EEOC should only be entitled to employees’ private information which can lead to identity theft when it is misappropriated by others, in certain narrowly defined circumstances.

As Justice Milan D. Smith stated in his concurring opinion in the 9th Circuit’s underlying opinion, “it may be that the EEOC’s insistence here on obtaining Social Security numbers and other information that could be used to steal an employee’s identity will endanger the very employees it seeks to protect.”

Employers wishing to safeguard their employees’ private information should follow this case closely.

Timm Schowalter, shareholder with Sandberg Phoenix & von Gontard, St. Louis

The key issue for employers is the manner in which the courts have interpreted the scope of the EEOC’s investigative authority. The leading case involving EEOC requests for information is the U.S. Supreme Court’s decision in Equal Employment Opportunity Commission v. Shell Oil Co., 104 S. Ct. 1621 (1984), which set forth a “relevancy” standard for the scope of the EEOC’s investigative authority.

The EEOC consistently has relied on Shell Oil to argue that the concept of “relevancy” in commission investigations is far broader than that provided under the Federal Rules of Civil Procedure. The court in Shell Oil articulated that although the EEOC is “entitled to access only to evidence ‘relevant’ to the charge under investigation, … courts have

generously construed the term ‘relevant’ and have afforded the commission access to virtually any material that might cast light on the allegations against the employer.”

However, the Supreme Court also made it clear that the EEOC’s subpoena power is limited to access documents or data “relevant to the charge under investigation.”

Since Shell Oil, the EEOC has aggressively used its subpoena power to burden employers with overreaching subpoenas that at times are tantamount to roving fishing expeditions, especially under the current administration. The EEOC’s modus was never more apparent in McLane where the EEOC sought information that the District Court found to be entirely immaterial to the pending charge of discrimination and, therefore, quashed the subpoena. Then, the 9th Circuit reviewed the request de novo, opting not to show deference to the District Court’s decision on the EEOC subpoena.

Thus, the only legal issue before the Supreme Court is whether federal appellate courts give deference to district court judgments on EEOC subpoenas or whether the appellate courts review such decisions de novo.

Given the limited issue before the Supreme Court it is likely that the Supreme Court will limit its review to the lone legal issue before the court and not provide a substantive ruling on the EEOC investigative authority under Shell Oil. With that said, however, we anxiously anticipate dicta on the scope of the EEOC’s authority that may provide some persuasive authority to thwart the aggressive tactics of the EEOC.

Christina Alabi, associate with Gould & Ratner, Chicago

The Supreme Court’s ruling will either allow the 9th Circuit to maintain its oft-freestanding reputation or bring the circuit in line with eight other circuits. Reversing the 9th Circuit will certainly move the circuit split more toward a deferential standard of review. If the Supreme Court upholds the 9th Circuit’s ruling, it will in effect broaden the relevance scope in EEOC administrative investigations and the like.

The relevance employee Social Security numbers nationwide will provide to admissible prima facie evidence is minimal, at most, if at all, to the gender discrimination issue.

With respect to an employer’s disclosure of Social Security numbers pursuant to a subpoena, I highlight Judge Milan D. Smith’s concurrence point: “The EEOC’s insistence … on obtaining Social Security numbers and other information that could be used to steal employee’s identity [may] endanger the very employees it seeks to protect.”

The Supreme Court’s ruling is certainly an opinion administrative agencies, employers and employment law attorneys await.


Murr et al. v. Wisconsin et al., No. 15-214, reply brief filed (U.S. July 27, 2016).

The Murr family says the merger of the two lots for development purposes amounted to an improper regulatory taking because it interfered with their full

use of the property.

The Murrs’ suit against the state of Wisconsin and St. Croix County went as far as the Wisconsin Court of Appeals, which affirmed a summary judgment for the defendants. Murr v. State, 359 Wis. 2d 675 (Wis. Ct. App. 2014).

The state Supreme Court denied the family’s petition for review in April 2015.

But in January the U.S. Supreme Court granted certiorari to consider whether the “parcel as a whole” concept in property takings cases requires that commonly owned, contiguous parcels must be combined to determine if a taking occurred.

The case is a rare example of the Supreme Court choosing to review a state court decision that the state’s highest court has declined to review.

TWIN RIVERSIDE PARCELS

In 1960 William and Margaret Murr bought and later built a recreational cabin on a

Question presented

In a regulatory taking case, does the “parcel as a whole” concept as described in Penn Central Transportation Co. v. City of New York, 438 U.S. 104, 130-31 (1978), establish a rule that two legally distinct, but commonly owned contiguous parcels, must be combined for takings analysis purposes?

EEOC’s already lengthy process that often includes “abusive investigation tactics,” the brief says.

“The EEOC often demands as part of investigation of even the most straightforward individual claim, voluminous information that has no relevance to the charge under investigation in an effort to ‘fish’ for possible targets for systemic enforcement,” the groups say.

In a separate brief filed Nov. 21, law professors who teach and write about federal procedure and administrative law said they also support a deferential review of trial court subpoena decisions.

The professors “regard the allocation of adjudicative responsibilities to the different federal courts based on their institutional competencies to be of paramount importance,” the brief says.

The professors note that the 9th Circuit is the only circuit to follow the de novo review standard on such decisions, and they say the high court must “unify” all of the circuits in deferring to a trial court.

“In resolving this case, the court’s guidance will transcend the specific context of EEOC subpoenas,” the professors say. WJ

Related Filings: Business groups’ brief: 2016 WL 6892598 Law professors’ brief: 2016 WL 6873055

ENVIRONMENTAL

Landowners’ bid to split parcel on protected river now before high courtA Wisconsin family’s state court challenge to a county ordinance that merged their adjacent riparian parcels on the federally protected St. Croix River, preventing them from selling or developing one of them, is fully briefed and pending before the U.S. Supreme Court.

1.25-acre lot along the St. Croix River in Troy, Wisconsin. The Murrs later bought a virtually identical adjacent lot for investment purposes, according to the Court of Appeals opinion.

The St. Croix is one of the original rivers given federal protection under the National Wild and Scenic Rivers Act of 1968, 16 U.S.C.A. § 1271.

In the mid-1970s St. Croix County passed an ordinance intended to mitigate poor shoreline planning, prevent soil erosion and pollution, minimize flood damage, and preserve the river’s scenic and natural characteristics.

The ordinance provides that lots cannot be developed unless they have at least 1 acre of project area.

Each of the Murrs’ lots has insufficient project area because much of the property is too steep for development, the opinion said.

In 1994 and 1995 the couple gave the lots to their four children, one of whom later

sought a variance from the county so the family could sell the undeveloped parcel as a buildable lot.

The Murrs say the purpose of the intended sale was to finance “flood proofing” improvements to the cabin, which had been damaged in multiple floods over the years.

County authorities denied the variance application. The decision was affirmed by the St. Croix County Circuit Court in August 2008 and by the Wisconsin Court of Appeals in February 2011.

TAKINGS ACTION

The Murr children then sued the county and the state in the Circuit Court, saying the ordinance and the state code provision on which it was based effected an uncompensated taking of their property under Article I, Section 13, of the Wisconsin Constitution.

After the Circuit Court granted summary judgment to the defendants, the Wisconsin

Jan. 15, 2016

Cert. granted


The case is a rare example of the U.S. Supreme Court choosing to review a state

court decision that the state’s highest court has

declined to review.

Court of Appeals affirmed the ruling in December 2014.

The appeals court said that although the ordinance effectively merged the two adjacent lots for sale or development purposes, the Murrs failed to make a sufficient showing of economic loss because they were not deprived of all or substantially all practical use of the property.

‘PARCEL AS A WHOLE’

In their April opening brief and July reply brief, the Murrs assert both the “takings” clause of the Fifth Amendment and the 14th Amendment’s provision that no “state deprive any person of life, liberty or property, without due process of law.”

They say the state Court of Appeals wrongly applied the “parcel as a whole” presumption of Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), because that case involved segmentation of a single parcel

into parts rather than aggregation of two parcels into one.

The high court’s decisions in takings cases have rejected both segmentation and aggregation of lots, the petitioners say.

The Murrs argue the ordinance treats them unfairly because a landowner who owned a single undeveloped, nonconforming lot would have its development rights grandfathered.

RESPONDENTS’ BRIEFS

The county and the state filed response briefs in June.

Contesting the relevance of Penn Central, St. Croix County says the “parcel as a whole” theory is a red herring in this case because, whether the Murr lots are separate or combined, the owners retain “sufficient valuable use” of the property to preclude a takings claim.

The county maintains that the appeals court correctly compared the value of the adjacent lots with separate residences on each to the value of the lots with only one residence on both and found less than a 10 percent value reduction.

The state court said the combined parcel with one house was worth $698,000, while the two lots sold separately with a house on

each would fetch a total of $771,000. Such a small economic loss “fell far short of the mark” to be a regulatory taking, the county says.

The state of Wisconsin says the case boils down to whether lots created and defined under state law, then merged pursuant to a pre-existing state law merger provision, should be considered a single “parcel” for regulatory takings purposes.The relevant parcel should be determined by a landowner’s “reasonable expectations” as shaped by state law, the state argues, citing Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992).

Under this approach, the two lots given to the Murr children are clearly a single parcel because their objectively reasonable expectations were that they would take title to a single merged parcel under pre-existing Wisconsin regulations, the state says.

Former Vice President Walter Mondale, competing groups of states, environmental organizations, and pro-development factions are among the parties behind the 20 amicus briefs filed in the case. WJ

Related Filings: Reply brief: 2016 WL 4072806 County’s response brief: 2016 WL 3254214State’s response brief: 2016 WL 3227033 Opening brief: 2016 WL 1459199

WESTLAW JOURNAL EXPERT & SCIENTIFIC EVIDENCE

This reporter offers coverage of significant litigation involving how courts interpret the Daubert and Frye standards regarding the admission of expert and scientific testimony. It covers all stages of litigation, from complaint to final appellate decision and each issue. It is a source for determining which evidence courts are likely to allow and which evidence courts tend to disallow, which is especially important in situations where there may be conflicting opinions within the scientific community about the same subject. It covers both federal and state cases on all major issues in this area



Oct. 28Cert. granted

Questions presented

1. If Auer v. Robbins, 519 U.S. 452 (1997), is retained, should deference extend to an unpublished agency letter that, among other things, does not carry the force of law and was adopted in the context of the very dispute in which deference is sought?

2. With or without deference to the agency, should the Department of Education’s specific interpretation of Title IX and 34 C.F.R. § 106.33 be given effect?

HEALTH LAW

Supreme Court wades into ‘transgender restroom’ dispute, taking on case from VirginiaBy Michael Scott Leonard

The U.S. Supreme Court will decide whether the Obama administration overreached by using Title IX’s ban on sex discrimination to protect transgender students who want to use public school restrooms that correspond to their gender identity rather than their biological sex.

Gloucester County School Board v. G.G. ex rel. Grimm, No. 16-273, cert. granted, 2016 WL 4565643 (U.S. Oct. 28, 2016).

Granting certiorari Oct. 28, the justices agreed to review a 4th U.S. Circuit Court of Appeals decision upholding the policy.

G.G. ex rel. Grimm v. Gloucester Cty. Sch. Bd., 822 F.3d 709 (4th Cir. 2016).

A divided 4th Circuit panel concluded in July that an informal U.S. Department of Education letter describing the administration’s position to the petitioner in the case, Virginia’s Gloucester County School Board, was a binding agency rule entitled to a high degree of judicial deference.

The unpublished letter, sent after the litigation by transgender student Gavin Grimm was already underway, directed the school district to let Grimm use the boys’ room. Grimm, identified in court documents as G.G. because he is only 17, was born a girl but identifies as a boy.

In its Supreme Court petition, the school board challenged the level of scrutiny the 4th Circuit applied to the Department of Education letter, arguing that the appeals court erred by analyzing the letter as an agency’s reading of its own rule rather than as a construction of Title IX.

Title IX, 20 U.S.C.A. § 1681(a), prohibits schools that receive federal funding from discriminating against students or employees

based on their sex, among other things. The law contains a regulatory exception allowing sex-segregated bathrooms.

Courts are more deferential to agency interpretations of their own rules than to their construction of statutes within their administrative jurisdiction, and the Department of Education letter did not deserve the benefit of that deference, the school board said in its petition.

“Some regard transgender restroom access as one of the great civil rights issues of our time,” the board said. “[But] this case is not really about whether G.G. should be allowed to access the boys’ restrooms, nor even primarily about whether Title IX can be interpreted to require [that result].

“Fundamentally, this case is about whether an agency employee can impose that policy in a piece of private correspondence,” the

petition added. “If the court looks the other way, then the agency officials in this case — and in a host of others to come — will have become a law unto themselves.”

SCHOOL BOARD DECISION

Grimm’s dispute with the school board stems from the board’s decision in December 2014 to ban transgender students from using bathrooms corresponding to their gender identity. The resolution allowed trans students to use private unisex bathrooms if they would prefer. Grimm’s school has three of those.

According to the petition, the board adopted the policy after students and parents complained that Grimm’s presence in the boys’ room violated the privacy rights of non-transgender boys. Grimm, who has considered himself a boy since the age of 12, had begun using the boys’ room that fall, with permission, after formally starting his gender transition the previous summer, the petition said.

Parents also allegedly expressed concerns that a policy of letting transgender students use the bathrooms of their choice would invite abuse by peeping Toms.

Shortly after the school board announced the resolution, trans-rights lawyer Emily Prince, who was not formally counsel for Grimm, sent an email notifying the Department of Education about the board’s ruling and requesting guidance.

An official responded in January 2015 with a letter stating that in the agency’s view, Title IX requires public schools to let transgender students use the bathroom corresponding to their gender identity.


“If the court looks the other way, then the agency officials in this case — and in a host of others to come — will have

become a law unto themselves,” the petition says.

A STATUTORY INTERPRETATION

Calling the unisex bathrooms “stigmatizing,” Grimm challenged the board’s resolution in the U.S. District Court for the Eastern District of Virginia in June 2015, two days after the end of the school year, alleging violations of his rights under Title IX.

U.S. District Judge Robert G. Doumar dismissed the Title IX claim three months later. G.G. ex rel. Grimm v. Gloucester Cty. Sch. Bd., 132 F. Supp. 3d 736 (E.D. Va. 2015).

Judge Doumar agreed with the school board’s argument that the Department of Education letter constituted a statutory interpretation rather than an administrative one. Unpublished guidance letters, unlike formal agency rules, do not deserve judicial deference in that context, he said.

To hold otherwise would effectively turn informal agency opinions into binding rules of law, which would ultimately encourage agencies to bypass formal rulemaking procedures that safeguard the public’s rights, the judge found.

AUER DEFERENCE

Turning to the merits, Judge Doumar rejected the proposition advanced by Grimm and the Obama administration that Title IX’s ban on sex discrimination also protects gender identity.

The only way Title IX protects gender-identity discrimination is if the law means “subjective gender” wherever it refers to “sex,” but that interpretation would have the absurd and impermissible result of allowing discrimination based on biological sex, he said.

Grimm appealed.

Reversing, a 4th Circuit panel held 2-1 in April that a Department of Education regulation promulgated under Title IX — 34 C.F.R. § 106.33, which permits sex-segregated restrooms — is ambiguous regarding whether a transgender boy counts as male or female.

The appeals court noted that under Auer v. Robbins, 519 U.S. 452 (1997), courts are supposed to uphold an agency’s reading of an ambiguity in its own regulation unless it is “plainly erroneous.”

Given the purposes of Title IX and society’s evolving understanding of transgenderism, it was not plainly erroneous to determine that “sex” discrimination includes discrimination based on gender identity, the panel said.

After the full 4th Circuit declined to rehear the case en banc, the panel refused to stay its ruling for the duration of any Supreme Court appeal. G.G. ex rel. Grimm v. Gloucester Cty. Sch. Bd., 824 F.3d 450 (4th Cir. 2016); No. 16-1733, 2016 WL 3743189 (4th Cir. July 12, 2016).

The Supreme Court reversed that part of the decision when it accepted the case, staying the 4th Circuit’s decision pending its own ruling.

The nation’s highest court will now have the chance to resolve the issue — if the court soon seats a ninth justice, or if five members of its shorthanded roster can agree on a result before then.

NATIONAL CONTROVERSY

Meanwhile, as Grimm’s suit was moving through the trial and appeals courts, it was helping to spark a national controversy over how to weigh the desire of transgender people to use the bathrooms where they feel most comfortable against the concerns of others offended or threatened by that idea.

In March, North Carolina passed a high-profile new law, House Bill 2, requiring people in public schools or government buildings to use bathrooms corresponding to their biological sex at birth.

The U.S. Department of Justice responded May 9 — just three weeks after the 4th Circuit’s Grimm ruling — by suing the state

and Republican Gov. Pat McCrory in federal court.

The federal civil rights suit accuses them of violating Title IX and Title VII, 42 U.S.C.A. 2000e, which prohibits workplace sex discrimination. United States v. North Carolina, No. 16-cv-425, complaint filed, 2016 WL 2730796 (M.D.N.C. May 9, 2016).

McCrory filed his own suit in federal court the same day, accusing the Justice Department of stretching the definition of sex discrimination beyond its commonly accepted meaning and usurping Congress’ authority by substantively broadening Title VII and Title IX. McCrory v. United States, No. 16-cv-238, complaint filed, 2016 WL 2616917 (E.D.N.C. May 9, 2016).

The controversy has cost North Carolina at least $500 million, according to conservative estimates, as large companies like PayPal have scrubbed plans to expand in the state and sports leagues like the NBA and college basketball’s Atlantic Coast Conference have moved major events out of Charlotte.

On May 13, four days after the Justice Department and North Carolina sued each other, the agency and the Department of Education sent a “dear colleague” letter out to public schools across the country advising them that restricting bathroom usage by transgender students violated Title IX.

Nine states challenged the dear-colleague letter in a Texas federal court less than two weeks later. Texas v. United States, No. 16-cv-54, complaint filed, 2016 WL 3023276 (N.D. Tex. May 25, 2016).

Others have since followed suit. WJ

Related Filing: Petition: 2016 WL 4610979


Lee v. Tam, No. 15-1293, cert. granted (U.S. Sept. 29, 2016).

The justices said they would hear the Obama administration’s appeal of a lower court ruling last year that sided with the Portland-based Asian-American rock band in its

free-speech challenge to part of the 1946 law governing federal trademarks.

John Connell, a lawyer for The Slants, said he was pleased with the court’s decision to hear the appeal and looked forward to vindicating the band’s First Amendment rights.

The Supreme Court will hear arguments and decide the case in its coming term, which begins Oct. 3 and ends next June.

The cases began after the band lost a ruling at the U.S. Patent and Trademark Office. An agency tribunal refused to grant trademark protection for the band’s name in 2013, saying it was offensive to people of Asian descent. Some consider the term “slant eye” a racist slur.

Jan. 18Argument set

Question presented

Whether the disparagement provision in 15 U.S.C.A. § 1052(a) is facially invalid under the free speech clause of the First Amendment.

INTELLECTUAL PROPERTY

U.S. top court to hear dispute over trademark for band The Slants(Reuters) – The U.S. Supreme Court on Sept. 29 agreed to decide whether a federal law barring trademarks on racial slurs violates free speech rights in a case involving an Oregon band called The Slants.


Patent exhaustion case added to Supreme Court’s queueBy Patrick H.J. Hughes

Printer cartridge reseller Impression Products has convinced the U.S. Supreme Court to hear arguments over the applicability of the patent exhaustion doctrine, hoping the high court will overturn a Federal Circuit win for printer manufacturer Lexmark International.

The tribunal relied on a provision of the 1946 Lanham Act that prevents the registration of marks that may disparage certain people.

In appealing to the U.S. Court of Appeals for the Federal Circuit in Washington, Slants front man Simon Tam argued the band adopted the name to reclaim the word slants as a “badge of pride.”

The Federal Circuit ruled last December that the disparagement provision of the 1946 Lanham Act was unconstitutional. Though it might lead to more hateful trademarks in the future, the court said, the First Amendment forbids government from banning offensive speech. In re Tam, 808 F.3d 1321 (Fed. Cir. 2015).

In April, the federal government asked the Supreme Court to hear its appeal of the ruling in the band case, saying that if not overturned, the decision would permit trademarking “even the most vile racial epithet.”

The Federal Circuit ruled that the disparagement provision of the 1946 Lanham Act was

unconstitutional.

The administration said the law does not restrict speech because the disputed names may still be used without federal registration. Such registration, however, can help protect trademarks nationwide in court and block the import and sale of counterfeit goods.

Paul Fucito, a trademark office spokesman, declined to comment. WJ

(Reporting by Andrew Chung; editing by Will Dunham)

Dec. 2Cert. grantedImpression Products Inc. v. Lexmark

International Inc., No. 15-1189, cert. granted, 2016 WL 1117396 (U.S. Dec. 2, 2016).

The high court agreed to consider whether patent exhaustion applies in foreign jurisdictions, a decision that could have significant consequences for various industries engaged in international trade.

Generally, the patent exhaustion doctrine terminates the right to sue a customer who

purchased an authorized patented product, meaning patent holders cannot prohibit resales or set a resale price.

However, in the case involving Impression and Lexmark, the full U.S. Court of Appeals

for the Federal Circuit ruled that the doctrine does not apply to products first sold abroad or sold with certain post-sale restrictions.

Impression wants the Supreme Court to declare that a sale abroad exhausts a U.S. patent holder’s right to sue for infringement, as the court recently held in a decision over copyrighted works.


Questions presented

1. Whether a “conditional sale” that transfers title to the patented item while specifying post-sale restrictions on the article’s use or resale avoids application of the patent exhaustion doctrine and therefore permits the enforcement of such post-sale restrictions through the patent law’s infringement remedy.

2. Whether, in light of Kirtsaeng v. John Wiley & Sons Inc., 133 S. Ct. 1351 (2013), that the common law doctrine barring restraints on alienation that is the basis of the exhaustion doctrine “makes no geographical distinctions,” a sale of a patented article — authorized by the U.S. patentee — that takes place outside of the United States exhausts the U.S. patent rights in that article.

“Once again the Supreme Court has granted cert. in a case where the Federal Circuit drew a distinction between patent and copyright law,” said Kirkland & Ellis partner John C. O’Quinn, who is not involved in the case.

“The Supreme Court’s decision to review the case shows that at least some on that court believe as a presumptive matter that where they address similar issues, patent and copyright law should be interpreted to reach the same result,” O’Quinn added.

PATENT EXHAUSTION

The case concerns discounted single-use cartridges Lexmark sold under a program that expressly prohibited resale and required buyers to return empty cartridges for recycling.

Impression obtained Lexmark’s cartridges in the U.S. and abroad, modified them to circumvent the patented single-use design, and resold them in the U.S., according to court documents.

When Lexmark sued for infringement, Impression presented a first-sale defense, arguing that Lexmark could not enforce patent rights after the first sale.

The case eventually made it to the Federal Circuit.

In a 10-2 decision in February, the en banc court said Lexmark’s foreign sales did not exhaust the company’s right to sue for patent infringement in the U.S. Lexmark Int’l v. Impression Prods., 816 F.3d 721 (Fed. Cir. 2016).

Regarding the post-sale restrictions, the Federal Circuit reiterated its decision in Mallinckrodt Inc. v. Medipart Inc., 976 F.2d 700 (Fed. Cir. 1992), that a “single-use only” restriction was a valid condition for the resale of a patented medical device and did not prevent a patent owner from suing for infringement.

In March, Impression asked the high court to review the Federal Circuit’s ruling.

FOLLOWING KIRTSAENG

In its petition Impression noted the Supreme Court recently eliminated boundaries for the first-sale doctrine for copyright holders in Kirtsaeng v. John Wiley & Sons Inc., 133 S. Ct. 1351 (2013).

The Kirtsaeng court said foreign and domestic sales alike exhaust a copyright holder’s right to sue for infringement in the United States. Impression says the same logic should apply to patent cases.

The company also says the Federal Circuit’s decision erroneously removed important limits on patent rights, adding that “there is no room in the exhaustion doctrine for continuing post-sale restrictions.”

Numerous friend-of-the-court briefs supported Impression’s arguments, urging the high court to reverse the Federal Circuit’s decision.

Lexmark, on the other hand, said precedent has already answered the questions Impression raised.

“Because patent law precedents offer no conflict or other reason to grant review, Impression looks to this court’s interpre-tation of the Copyright Act in Kirtsaeng,” Lexmark’s opposition brief said.

U.S. GOVERNMENT’S ADVICE

The government chimed in with its opinions about the case in October.

“This court has repeatedly found patent rights exhausted … even when the patentee attempted to impose restrictions on post-sale use or resale,” the government’s brief said.

The government also said the high court should review the Federal Circuit’s proclamation that foreign sales never trigger the exhaustion of U.S. patent rights.

The U.S. government advocated a rule of “presumptive exhaustion,” whereby patent owners can reserve their domestic patent rights after authorized foreign sales through an express license, but those rights otherwise expire automatically.

This understanding follows legislation enacted by Congress and free trade agreements signed by the president, the government said. WJ

Related Filings: Reply brief: 2016 WL 3098606Opposition brief: 2016 WL 2997339 Petition: 2016 WL 1130030



Attorneys weigh in on high court ‘substantial portion’ patent debateBy Patrick H.J. Hughes

After the Supreme Court grilled biotech firms Life Technologies Corp. and Promega Corp. on the practical implications of finding that sending a single component of a patented invention abroad can constitute infringement, IP experts told Thomson Reuters how they expect the justices to decide the issue.

Life Technologies Corp. et al. v. Promega Corp., No. 14-1538, oral argument held (U.S. Dec. 6, 2016).

At oral argument Dec. 6, the justices weighed Life Tech’s request that they overturn the U.S. Court of Appeals for the Federal Circuit’s decision that under the U.S. Patent Act, one American-made component — a polymerase — was a “substantial portion” of a DNA test at the heart of the dispute.

The “substantial portion” verbiage at the center of the dispute comes from Section 271(f)(1) of the Patent Act, 35 U.S.C.A. § 271(f)(1), which lays out inducement

liability for Americans supplying allegedly infringing components to foreign companies.

Promega has asked the Supreme Court to follow the Federal Circuit’s interpretation of Section 271(f)(1). Rather than applying a quantitative analysis, the appeals court favored a qualitative approach to determining whether a single component could constitute a substantial portion of a patented invention.

ATTORNEY OBSERVATIONS ON ORAL ARGUMENT

Baker Botts LLP partner Lisa M. Kattan, who previously served as a senior investigative attorney at the International Trade Commission, said the justices frequently raised questions about the “real-world implications” of their interpretation of Section 271(f)(1).

She found it noteworthy that Justice Anthony Kennedy commented on the complexity of global supply chains, while Justice Stephen Breyer expressed concern about the extraterritorial effects of the court’s decision.

Dori Hines, who leads the electrical and computer technology practice group at Finnegan, Henderson, Farabow, Garrett & Dunner, found that the justices’ examination of the Patent Act, and their examples of when components are substantial, foreshadowed an opinion in favor of a qualitative approach.

“This focus on the language of the statute and the practical implications of the decision should lead to a flexible standard for infringement under Section 271(f)(1), rooted in a qualitative analysis,” Hines said.

Morrison & Foerster IP partner Matthew D’Amore said he thought a key question at the oral argument was whether the presumption against extraterritoriality applied, noting that statute expressly contemplates an extraterritorial impact as opposed to a statute that is silent as to its extraterritorial effect.

He also noted the specific facts in the dispute between Life Tech and Promega do not lead to a clear test for suppliers.

“While a qualitative test like that adopted by the Federal Circuit might benefit patent holders, it increases the uncertainty for suppliers, and unless the court comes out with a quantitative-type test, the court’s decision may not resolve that uncertainty even if it reverses or remands,” D’Amore said.

John DiMatteo, a partner at Holwell Shuster & Goldberg, predicted the case would turn in favor of Life Tech.

“If the questioning at oral argument is any indication of how the court will rule, I expect that the Vegas odds makers are predicting that the Supreme Court will reverse the Federal Circuit and rule that 271(f)(1) applies to multiple components, not one,” he said.

“Most of the justices seemed skeptical of the argument that one should construe 271(f)(1) as qualitative instead of quantitative, emphasizing the complexities that would result from the former compared to the latter,” DiMatteo added.

Tom Duston, IP partner at Marshall Gerstein, predicted before the oral argument that a decision in favor of patent owners may, ironically, disadvantage U.S. suppliers.

“Faced with such potential liability under U.S. patent law, foreign customers may simply turn to non-U.S. suppliers whose goods do not present these risks,” Duston warned.

Dec. 6Argument held

“To … provide clear direction for all manufacturers with international operations, the Supreme Court will need to provide a clear definition or standard for determining the ‘substantial portion of the components of the patented invention,’” Baker Botts partner Daniel Hulseberg said.

THE PATENT AND THE COMPONENT

Madison, Wisconsin-based Promega is the exclusive assignee of U.S Patent Reissue No. 37,984, which covers a kit for determining a person’s identity through DNA.

Promega accused Life Tech and several others of infringing the ’984 patent in 2010 in the U.S. District Court for the Western District of Wisconsin.

Promega said California-based Life Tech, which had a license to sell the patented DNA-testing kit in certain fields, was making,


Question presented

Whether the Federal Circuit erred in holding that supplying a single, commodity component of a multi-component invention from the United States is an infringing act under 35 U.S.C.A. § 271(f)(1), exposing the manufacturer to liability for all worldwide sales.

using and selling the products to those in fields not covered by the license, such as clinical diagnostics and research markets.

While many of the kits were assembled and sold outside the U.S., Promega said Life Tech and others violated Section 271(f)(1) because the allegedly infringing product’s five components included one supplied from the U.S.

In February 2012 the District Court tossed the $52 million jury verdict, saying Life Tech could not be liable under Section 271(f)(1) because one component could never be a substantial portion of a multicomponent invention. Promega Corp. v. Life Techs. Corp., No. 10-cv-281, 2012 WL 12862829 (W.D. Wis. Sept. 13, 2012).

On appeal, the Federal Circuit overturned the District Court ruling. Promega Corp. v. Life Techs. Corp., 773 F.3d 1338 (Fed. Cir. 2014). The decision allowed Promega to salvage some of a $52 million jury verdict that the trial court vacated on post-trial motions.

Life Tech filed a certiorari petition in June 2015.

SECTION 271(F)(1)

At the oral argument, Life Tech reiterated its objection to the Federal Circuit’s interpretation of the Patent Act, saying its reading of Section 271(f)(1) conflicted with Section 271(f)(2), which says special circumstances have to exist for a single commodity to violate the Patent Act.

Justice Samuel Alito asked Life Tech for a specific number of components that would constitute “substantial portion.”

While Life Tech admitted that “substantial portion” is ambiguous, the company also said the term should be interpreted narrowly.

“The principle against extraterritoriality drives you in the direction of saying Congress meant only to allow U.S. patents to operate outside the United States in very narrow circumstances,” Life Tech said.

When Justice Alito asked Promega what “substantial portion” meant, Promega’s attorney said a jury should be told to follow the dictionary definition, which says “considerable in importance and/or amount.”

The polymerase’s importance to the DNA-kit shows it is a substantial portion of the product, Promega argued.

Promega also dismissed the fear that U.S. suppliers would be threatened if Section 271(f)(1) was interpreted broadly, saying the other elements of induced infringement also have to be shown.

“[Suppliers] have to, number one, know that there is a patent. They have to know that the product is going to be combined with others. They have to know that the combination, if practiced in the United States, would infringe,” Promega said.

Promega said Life Tech had to have known its product would have been combined with others, and if that combination would have happened in the U.S., the result would have been infringement.

The solicitor general’s office also offered the government’s view that a single commodity component is never enough to satisfy Section 271.

“We are asking the court to hold that (f)(1) reaches the supply of all or a large portion of the components of the invention, not any important portion of the invention. And the way we had put it is that it reaches the supply of all or something tantamount to all of the components,” the government argued. WJ


WESTLAW JOURNAL INTELLECTUAL PROPERTY

This publication keeps corporations, attorneys, and indi-viduals updated on the latest developments in intellectual property law. The reporter covers developments in state and federal intellectual property lawsuits and legislation affecting intellectual property rights. It also covers impor-tant decisions by the U.S. Justice Department and the U.S. Patent and Trademark Office. Coverage includes copyright infringement, Lanham Act, trademark infringement, patent infringement, unfair competition, and trade secrets




Justices hear clashing arguments over laches defense to patent suitsBy Patrick H.J. Hughes

Two diaper manufacturers have presented to the U.S. Supreme Court reasons for and against letting patent infringement defendants take advantage of the laches doctrine, an equitable defense applied when a plaintiff waits too long to sue.

“The issue in the case … is whether the judge-made equitable doctrine of laches survives the six-year limitation on damages provided by Congress,” he said, noting that in Petrella, laches did not survive a similar limitations period in copyright law.

“Although there are obvious differences between copyrights and patents, the Supreme Court has been unwilling recently to make special rules for patent cases,” he said.

John DiMatteo, a partner at Holwell Shuster & Goldberg in New York, who is not involved in the case, predicts that “the court will follow the logic of Petrella and preclude the defense of laches in patent cases.”

At argument Justice Ruth Bader Ginsburg, who wrote the Petrella opinion, appeared to want to “follow her previous logic and deny the defense of laches in patent cases,” DiMatteo said.

Justice Ginsburg seemed to be joined by Justices Sonia Sotomayor, Samuel Alito and Elena Kagan, he noted.

Ha Kung Wong, a New York-based partner of Fitzpatrick, Cella, Harper & Scinto, who is not involved in the case, also said the court appeared to be leaning toward eliminating laches in patent suits.

Before the oral argument, Wong had warned that “the elimination of this long-standing defense could potentially expose the innovative industry to increased abusive

SCA Hygiene Products Aktiebolag et al. v. First Quality Baby Products LLC et al., No. 15-927, oral argument held (U.S. Nov. 1, 2016).

First Quality Baby Products said the U.S. Court of Appeals for the Federal Circuit properly

recognized the defense as necessary to protect alleged infringers prejudiced by a patent owner’s delay in bringing suit, and the high court should, too.

SCA Hygiene Products, on the other hand, said the high court should rule as it did in Petrella v. Metro-Goldwyn-Mayer Inc., 134 S. Ct. 1962 (2014), which abolished laches for copyright cases.

At oral argument Nov. 1, the parties discussed the differences between copyright and patent law to see if the court’s reasoning in Petrella could be applied to patent cases.

They also debated whether giving courts discretion to allow the laches defense would frustrate Congress’ intent in enacting the Patent Act, which contains a six-year time limit on filing suit and does not mention laches.

EXPERTS’ REACTIONS

J. Michael Jakes, a partner at Finnegan, Henderson, Farabow, Garrett & Dunner in Washington, who is not involved in the case, described the decision the high court has to make.

litigation tactics resulting in undue damages or forced settlements based on weak or frivolous patent claims.”

Afterward, Wong observed that the justices seemed swayed by SCA Hygiene’s reasoning that “in the patent context, damages are limited to a reasonable royalty … and limited to only six years, so the cost to the innovator would not be that significant.”

Christopher K. Larus, partner at the Minneapolis office of Robins Kaplan LLP, who is not involved in the litigation, also said the court, including Chief Justice John Roberts, appeared to lean in favor of barring laches in patent cases.

However, Larus also observed that the justices — Justice Stephen Breyer in particular — raised concerns about how patent owners and those accused of infringement would be affected if laches were no longer available as a defense.

“Maintaining the status quo would generally be favorable for companies facing patent infringement claims, who may seek to use a laches defense to avoid large damage awards where a patent holder’s delay in bringing suit has either made it harder to defend the case or led the defendant to make economic decisions based on the expectation that no suit would be brought,” Larus said.

THE DIAPER PATENT SUIT

The controversy stems from U.S. Patent No. 6,375,646, which covers SCA Hygiene’s “absorbent pants-type diaper.”

Beginning in 2003 SCA Hygiene, a paper-products maker headquartered in Stockholm, sent letters accusing First Quality Baby Products, a New York-based hygienic supply company, of infringing the ’646 patent. However, SCA Hygiene did not sue First Quality until 2010.

After several years of litigation, First Quality moved for summary judgment based on laches.

Question presented

Whether and to what extent the defense of laches may bar a claim for patent infringement brought within the Patent Act’s six-year statutory limitations period.

The fear of “patent trolls” is unwarranted,

the petitioner said.

Nov. 1Argument held


“Injecting judicial discretion into the statutory scheme would frustrate the will of Congress and create uncertainty about something as fundamental as the timeliness of suit,” SCA Hygiene argued.

However, Justice Breyer, who wrote the dissent in Petrella, said the differences between the two intellectual property law areas were relevant to whether laches should still apply in patent suits.

Copyright law’s limitation period only allows damages from profits earned during the statutory period minus the costs to produce those profits, Justice Breyer said.

In a patent dispute, a company might spend hundreds of millions of dollars on research and development in reliance on a technology, only to be sued later for all the profits from a particular patent, he explained.

First Quality reiterated Justice Breyer’s distinction and added that unlike in copyright law, patent infringement is a strict liability

U.S. District Judge Joseph H. McKinley Jr. of the Western District of Kentucky granted the motion. SCA Hygiene Prods. v. First Quality Baby Prods., No. 10-cv-122, 2013 WL 3776173 (W.D. Ky. July 16, 2013).

In September 2014 a three-judge Federal Circuit panel affirmed. SCA Hygiene Prods. v. First Quality Baby Prods., 767 F.3d 1339 (Fed. Cir. 2014).

A year later, a split en banc Federal Circuit court also affirmed. SCA Hygiene Prods. v. First Quality Baby Prods., 807 F.3d 1311 (Fed. Cir. 2015).

SCA Hygiene filed a certiorari petition in January, and the high court agreed in May to decide the issue.

COPYRIGHT VS. PATENT

During the oral argument, SCA Hygiene reminded the justices that they held in Petrella that a statute with an express limitations period should not have that time period shortened with the laches doctrine.

An egregious patent holder can wait for a company to invest before bringing suit and collecting profits from the alleged

infringers’ most profitable years, the respondent said.

offense, as “independent invention is no defense.”

Copyright law requires knowledge that a work is infringing, and the potential infringer “can always choose some other form of expression,” First Quality said, noting that accused patent infringers do not have such an option.

An egregious patent holder can wait for a company to invest before bringing suit and collecting profits from the alleged infringers’ most profitable years, First Quality said.

This fear of “patent trolls” is unwarranted, SCA Hygiene said, noting that principles of estoppel can still apply to punish misleading conduct.

“And if you search for cases where so-called patent trolls have been barred by laches, you will find very, very few,” SCA Hygiene said. WJ

Attorneys:Petitioner: Martin J. Black, Dechert LLP, Philadelphia, PA

Respondent: Seth P. Waxman, Wilmer Cutler Pickering Hale & Dorr, Washington, DC


WHITE-COLLAR CRIME

Supreme Court to hear qualified immunity case over 9/11 detentionsBy Phyllis L. Skupien, Esq.

The U.S. Supreme Court has agreed to review a ruling that exposes senior federal officials to suits for tort damages for their detention of non-citizens after the 9/11 attacks.

The plaintiffs sought damages from high-ranking federal officials, including former U.S. Attorney General John Ashcroft and former FBI Director Robert Mueller, asserting they knew there was no evidence the plaintiffs were connected to terrorism.

The detainees claimed they were subjected to harsh conditions including sleep deprivation, verbal and physical abuse by jail guards, and solitary confinement due to their religion and ethnic background.

9/11 DETAINEES

After the Sept. 11 attacks, illegal immigrants deemed to be “of interest” to the investigation were subjected to an unwritten “hold until cleared” policy, under which they would not be released until the FBI had cleared them of any connections to terrorism.

During the investigation, federal officials arrested over 700 illegal immigrants

Ashcroft et al. v. Turkmen et al., No. 15-1359; Ziglar v. Turkmen et al., No. 15-1358; Hasty et al. v. Turkmen et al., No. 15-1363, cert. granted (U.S. Oct. 11, 2016).

“Efforts to hold government officials personally liable for alleged official misconduct are highly disruptive and likely to impair the performance of their duties,” Richard Samp, chief counsel of the Washington Legal Foundation, said in a statement.

The lawsuit arose from the arrest of Arab and Muslim individuals who were illegally in the

United States and detained for months after the Sept. 11 terrorist attacks. In the original suit, filed in the U.S. District Court for the Eastern District of New York in 2002, the plaintiffs said the length and conditions of their confinement violated their constitutional rights.

Jan. 18Argument set


on charges that they had violated U.S. immigration law.

The detainees were held in the Administrative Maximum Special Housing Unit in Brooklyn, New York, where they remained under restrictive conditions for three to eight months.

As they were illegal immigrants and in violation of immigration policy, their arrest was not at issue. But the plaintiffs contend that the authorities lacked any individualized information that indicated they were terrorists and justified their confinement and its restrictive conditions.

Eight plaintiffs originally sued top administrative official and prison officials, seeking compensatory and punitive damages, as well as attorney fees and costs.

Citing Bivens v. Six Unknown Names Agents of the FBI, 40 U.S. 388 (1971), they alleged their treatment violated their substantive due process and equal protection rights, entitling them to damages from the officials in their individual capacity. In Bivens, the U.S. Supreme Court held that a violation of Fourth Amendment rights by federal officers under color of federal authority can give rise to a claim for damages.

LOWER COURT PROCEEDINGS

In 2013 the District Court granted motions to dismiss by the federal officials. Turkmen v. Ashcroft, 915 F. Supp. 2d 314 (E.D.N.Y. 2013). But the 2nd U.S. Circuit Court of Appeals allowed the claims to proceed in an opinion issued June 17, 2015. Turkmen v. Hasty, 789 F.3d 218 (2d Cir. 2015).

REUTERS/Kevin Lamarque/File Photo

The lawsuits claim former FBI Director Robert Mueller (L) and former U.S. Attorney General John Ashcroft (R), shown here in 2004, knew there was no evidence the plaintiffs were connected to terrorism.

Questions presented

1. Whether the judicially inferred damages remedy under Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971), should be extended to the novel context of this case, which seeks to hold the former attorney general and director of the FBI personally liable for policy decisions made about national security and immigration in the aftermath of the Sept. 11, 2001, terrorist attacks.

2. Whether the former attorney general and FBI director are entitled to qualified immunity for their alleged role in the treatment of respondents, because it was not clearly established that aliens legitimately arrested during the Sept. 11 investigation could not be held in restrictive conditions until the FBI confirmed that they had no connections with terrorism.

3. Whether respondents’ allegations that the attorney general and FBI director personally condoned the implementation of facially constitutional policies because of an invidious animus against Arabs and Muslims are plausible, as required by Ashcroft v. Iqbal, 556 U.S. 662 (2009), in light of the obvious alternative explanation — identified by the court in Iqbal — that their actions were motivated by a concern that, absent fuller investigation, the government would unwittingly permit a dangerous individual to leave the United States.

Ashcroft and Mueller filed the petition in May. In it, they argue that the judicially inferred remedy of Bivens should not be extended to high-level policymakers dealing with issues of national security. They also contend that they did not personally condone discriminatory policies after the attacks.

AMICUS BRIEF

The Washington Legal Foundation filed the only amicus brief in favor of granting certiorari in conjunction with former U.S. attorneys general William Barr, Alberto Gonzales, Ed Meese, Michael Mukasey and Dick

Thornburgh, along with former FBI directors William Sessions and William Webster.

They argue the senior officials are entitled to qualified immunity for their alleged role in the treatment of the detainees because it was not clear that the FBI could not hold them until the agency confirmed they were not connected to terrorism. The U.S. Justice Department’s Office of Inspector General issued a report in 2003 criticizing the FBI’s procedure.

The amicus brief also says discriminatory intent cannot be shown due to the obvious explanation that the Department of Justice did not want to allow dangerous individuals to leave the United States and continue to be a threat.

The Supreme Court on Oct. 11 agreed to hear the case and is expected to issue its ruling by the end of June 2017.

In response to the grant of the writ of certiorari, WLF Chief Counsel Richard Samp said: “The appeals court decision wrongly strips the attorney general and FBI director of the protection from tort claims to which the qualified immunity doctrine entitles them. … Qualified immunity is supposed to protect all government officials except those who are plainly incompetent or knowingly violate the law.” WJ

Related Filings: Petition: 2016 WL 2732091 Washington Legal Foundation amicus brief: 2016 WL 3194588


EXPERT ANALYSIS

Knockoffs: To kill or not to kill, that is the copyright question before the Supreme CourtBy Elizabeth Kurpis, Esq. Mintz, Levin, Cohn, Ferris, Glovsky & Popeo

On Oct. 31, the U.S. Supreme Court heard oral arguments in Star Athletica LLC v. Varsity

Brands Inc., No. 15-866, a case in which Varsity Brands has alleged that competitor Star Athletica infringed Varsity’s copyrighted stripe, chevron, color block and zigzag designs by applying them to Star Athletica’s cheerleading uniforms.

The issue was not whether each company’s stripes and chevrons were substantially similar. Instead, the issue was whether Varsity’s designs were copyrightable at all — and this is where things get fuzzy.

The case was first heard by the U.S. District Court for the Western District of Tennessee, which held that Varsity’s designs are not separable from the utilitarian function of the cheerleading uniform and therefore are not copyrightable.

The 6th U.S. Circuit Court of Appeals reversed, concluding that the designs could be copyrighted because the combinations of stripes, chevrons, color blocks and zigzags allow the garment to be recognizable as a cheerleading uniform, which conceptually separates it from the basic function of the underlying article of clothing.

Star Athletica then petitioned the Supreme Court to review the case in hopes of getting some clarity.

Because a useful article itself cannot be copyrighted, copyright owners rely on the

Oct. 31Argument held

Because there is no concise and uniform definition of “conceptual separability,” the meaning of this term has become an important

unresolved question in U.S. copyright law.

concept of “conceptual separability” to protect their designs.

Conceptual separability essentially allows for a component of an article that is separate from its utility aspect to be copyrighted.

Because there is no concise and uniform definition of “conceptual separability,” the meaning of this term has become an important unresolved question in U.S. copyright law.

Further compounding the issue, federal courts have applied a variety of tests to determine when, if ever, a design on clothes is conceptually separable. Unfortunately, no clear-cut rule has emerged to settle disputes like the one that exists in the Star Athletica case.

As a result, when Star Athletica’s petition for certiorari was granted, IP professionals and owners expected the Supreme Court to finally address the confusion that has mounted with regard to this concept.

Unfortunately, many were disappointed, as the justices seemingly failed to do so based on their line of questioning.

They neither brought up the issue directly nor showed interest in discussing under what circumstances a useful article can be protected.

Rather, the justices focused overwhelmingly on whether the specific designs in question were utilitarian or not, leading one to believe that we may end up with a far narrower ruling than most interested followers had hoped for.

POTENTIAL OUTCOMES AND THE FASHION INDUSTRY

A Supreme Court ruling in favor of Star Athletica could deal a significant blow to the fashion industry in terms of copyright protection.

Generally speaking, companies and designers have been able to rely on copyrights to protect things such as original fabric prints.

Here, Varsity is arguing that the chevron designs on their cheerleading uniforms fall more in line with a fabric “print” or “design,” rather than a utilitarian and non-copyrightable aspect of the uniform.

Elizabeth Kurpis is an attorney with Mintz, Levin, Cohn, Ferris, Glovsky & Popeo in New York. She advises fashion companies on a variety of legal issues and matters, including trademark, licensing and other intellectual property-related issues, supplier management, manufacturer negotiations, import-export issues, privacy, technology concerns, and corporate structuring and restructuring. She can be reached at [email protected].

Stripping away legal protection would essentially be saying that stripes, chevrons, color blocks and zigzags as applied to a uniform would not be copyrightable, but would be if they were a printed design — a seemingly lopsided result.

And because these designs were actually copyrighted already, a ruling for Star Athletica would undermine the rights designers assumed they already had, a tough pill to swallow where often their work already straddles numerous IP protections —usually without neatly falling under any.

If the Supreme Court rules for Varsity and establishes a single test for determining whether a design is conceptually separable from its utilitarian function, it would likely provide the fashion industry with more confidence in the ability to protect through copyright certain design elements of apparel and accessories.


Question presented

What is the appropriate test to determine when a feature of a useful article is protectable under Section 101 of the Copyright Act?

Designers will have clearer guidance on how best to protect portions of their work that may not have been deemed covered under U.S. copyright law because they were considered to be strictly “useful.”

At present, numerous tests exist for analyzing whether such elements are copyrightable. As a result, at present the outcome depends on the test used in the jurisdiction where the enforcement action is brought or maintained.

Of particular interest to the fashion industry is the effect that the high court’s ruling will have on powerhouse fast-fashion retailers and others currently relying on the lack of protections for designs in U.S. copyright law.

Because so few protections currently exist for such fashion designs, some powerhouse fast-fashion retailers have been able to generate substantial revenue producing near-copycat designs from the runways of luxury brands and selling them at a significantly lower price point.

They are able to do so much faster than the traditional model allows. As a result, such knockoff pieces can become available in stores even before the original designs are produced and delivered to retailers.

Under those circumstances, the merchandise from fast-fashion companies is often posted on a retailer’s website as soon as samples are available, which allows customers to order the pieces as production is being completed.

These fast-fashion companies understand that the protections afforded to ready-to-wear companies and their designs are extremely limited and difficult to enforce.

Because of these limitations, they have created successful business models that are based on exploiting the ambiguity in copyright protection by copying only the uncopyrightable elements of a fashion design, including shapes and visual elements of a garment, while taking care to avoid copying logos or specific custom prints.

If the Supreme Court rules in favor of Varsity, fast-fashion retailers will have to adjust their business models accordingly, as elements of

the designs that may not have been deemed copyrightable may become so.

They will also have to carefully assess how any new judicial standard will affect each copy. They will further need to analyze whether elements that were traditionally considered “useful” may be copyrightable under the new standard.

This will be risky business until the new test is litigated and the fashion industry can see how the courts apply it in practical terms.

Although it is not known if this case will lead to a single test for determining conceptual separability, one thing that is clear from oral arguments is that the justices understand the implications of their decision.

Justice Sonia Sotomayor pointed out that depending on the end result, the knockoff might be eliminated altogether.

This could have a deep impact on fast-fashion retailers in particular because knockoffs are the foundation of their business model.

While the justices understand the broad financial and legal implications of their decision, there is a lot of basic information they need to digest. Justice John Roberts made that clear when he asked whether it would make a difference if the chevrons and stripes were stitched rather than applied.

Other justices struggled with the issue of whether camouflage should receive copyright protection, since it is a distinctive design that also serves a practical purpose.

Considering that the answers to these questions are still uncertain, one would think that a concise test would be the best way to resolve these ambiguities.

MORE THAN JUST FASHION

Although this case mainly focuses on the fashion industry, the Supreme Court’s ruling may also have ramifications for other industries such as that of 3-D printing.

As with any new copying technology — think CD burners and Napster for the music industry — the invention of 3-D printers

creates a host of IP issues, some of which the Supreme Court may touch upon here.

At the most basic level, any objects printed that are strictly nonfunctional or ornamental, such as a unique jewelry design, would be protected by U.S. copyright law.

On the other hand, objects that are designed strictly as utilitarian and functional articles, such as a hanger, would not be.

The issues affecting the 3-D printing industry fall somewhere in between and also involve the doctrine of conceptual separability.

Should the Supreme Court rule in favor of Varsity, the law would allow the utilitarian core of an object to be separated from its creative parts and therefore be eligible for copyright protection.

Such a ruling would change the landscape of the law, as copyrights would then be allowed to apply to certain “useful articles,” protections for which were traditionally not available.

The potential consequences for the 3-D printing industry are enormous, as this expansion can hypothetically apply to any printed object so long as the owners can argue that there are elements that are not strictly utilitarian.

For instance, a 3-D printed pen cap that does anything other than strictly cover the top of a pen can be protected by U.S. copyright law.

With the Star Athletica case, the 3-D printing industry is hoping the Supreme Court will provide some guidance on how to separate creative, copyrightable designs from unprotected utilitarian objects because the survival of the industry may depend on it.

Star Athletica is a case that the copyright world generally, and the fashion world specifically, has anxiously been following in hopes of receiving some clarity in the murky body of copyright law that has developed over the years.

In addition to the fashion industry, the advancement of a test by the Supreme Court for determining when certain elements of a useful article are copyrightable may have significant implications for other industries that produce goods that combine artistic and utilitarian elements.

Depending upon which side the Supreme Court ruling falls, the parameters of copyright protection in the fashion industry may be clarified or even completely redefined. We wait with bated breath, Supreme Court. WJ

A Supreme Court ruling in favor of Star Athletica could

deal a significant blow to the fashion industry in terms

of copyright protection.


EXPERT ANALYSIS

Supreme Court to consider reach of U.S. patent laws to exported goodsBy Matthew D’Amore, Esq. Morrison & Foerster

The Federal Circuit’s decision has created substantial ambiguity, because it forces U.S. producers to guess at

whether their single component is itself a “substantial portion” of combinations assembled outside the U.S.

Matthew D’Amore is a partner in Morrison & Foerster’s intellectual property and life sciences practice groups in New York. He advises and represents life sciences clients in resolution of complex IP disputes, including Hatch-Waxman litigation, inter partes review proceedings and patent licensing. Additionally, he has represented clients in patent matters involving medical devices, biotechnology, internet technology, software design, interactive television, electronics, semiconductors, manufacturing and financial services. He can be reached at [email protected]. This expert analysis was first published as a Morrison & Foerster Client Alert on June 28. Republished with permission.

In an important case for manufacturers and life sciences companies that supply their products from the United States to overseas markets, the United States Supreme Court heard argument on December 6, 2016, over whether the shipment of a single non-infringing article from the United States could make the supplier liable for worldwide damages under the U.S. patent laws if that article is used in an infringing composition outside the United States.

EXECUTIVE SUMMARY

At the urging of petitioner Life Technologies Corporation (“LifeTech”) and the Solicitor General, on June 27, 2016, the Supreme Court granted certiorari of the following question:

“Whether the Federal Circuit erred in holding that supplying a single, commodity component of a multi-component invention from the United States is an infringing act under 35 U.S.C. § 271(f)(1), exposing the manufacturer to liability for all worldwide sales.”

The Supreme Court will thus decide whether the manufacture of a product outside the United States, and the sale of that product outside the United States, could give rise to worldwide liability in the U.S. if that product would infringe a U.S. patent and if it contains a single component or ingredient supplied from the U.S.

A decision in the case is expected by the end of June 2017.

BACKGROUND

LifeTech made or procured Taq polymerase, an enzyme used for amplifying DNA for analysis, in the United States and supplied that enzyme to a manufacturing center in the United Kingdom. There, the enzyme is packaged into a genetic testing kit to be sold worldwide, including in the U.S.

Promega sued for patent infringement, contending, among other things, that the genetic testing kit manufactured in the UK would infringe a U.S. patent.

It argued not only that the sales of that kit into the U.S. infringe its patents under 35 U.S.C. § 271(a), but also that LifeTech’s shipment from the U.S. of the kit’s Taq enzyme made LifeTech liable for damages based on sales of the kit worldwide under 35 U.S.C. § 271(f)(1).1

The jury found for Promega and awarded lost profits based on the worldwide sales of LifeTech’s kits.

The district court overturned that verdict, holding that because § 271(f)(1) refers to the supply of “all or a substantial portion of the components of a patented invention,”

it could not apply to the export of a single component from the U.S.

In Promega Corp. v. Life Technologies Corp., 773 F.3d 1338 (Fed. Cir. 2014), the Federal Circuit reversed.

Focusing on whether the polymerase represented a “substantial portion” of the kit, the court observed that, “[w]ithout Taq polymerase, the genetic testing kit recited in the [Promega] patent would be inoperable” and that “LifeTech’s own witness admitted that the Taq polymerase is one of the ‘main’

and ‘major’ components of the accused kits.” Id. at 1356.

The appellate court thus found § 271(f)(1) was satisfied by the supply of a single component: “The evidence demonstrates that LifeTech supplied a substantial portion of the patented invention — the polymerase — to its overseas facility as a component of its accused genetic testing kits.” Id.

LifeTech petitioned for certiorari, and the Supreme Court asked for the views of the Solicitor General.

After the SG filed a brief supporting LifeTech’s position, the Supreme Court granted certiorari to consider LifeTech’s liability.2

IMPORTANCE OF THE DECISION

Under the Federal Circuit’s decision, U.S. manufacturers, including chemical companies, pharmaceutical manufacturers, and component manufacturers, could be liable for patent infringement for the shipment of a single non-infringing component or ingredient from the U.S. to another country — if that component or ingredient represented a “substantial portion” of the patented


product made outside the United States, and if the manufacturers actively induced the combination or assembly of that patented product.

The Federal Circuit’s decision has created substantial ambiguity, because it forces U.S. producers to guess at whether their single component is itself a “substantial portion” of combinations assembled outside the U.S.

The appellate court’s decision also expands the extra territorial reach of the U.S. patent laws.

The Supreme Court’s decision may clarify these questions and provide increased certainty to U.S. exporters. WJ

NOTES1 35 U.S.C. § 271(f)(1) provides that “whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the

patent if such combination occurred within the United States, shall be liable as an infringer.”

2 The Supreme Court did not grant review of another question presented by LifeTech — whether 35 U.S.C. §271(f)(1) required the inducement of a third party. The Federal Circuit held that it did not — that the combination is what must be induced, not a separate actor. The SG argued against certiorari on that question, contending that the Federal Circuit’s decision was correct and also that the question need not be reached because it appeared that separate but affiliated companies were involved in LifeTech’s conduct.

The WESTLAW JOURNALS blog is your source for the latest developments in practice areas like business and finance, IP and technology, product liability, and environmental law.

Daily postings from our attorney-editors keep you up to date on important news and analysis and provide a look at what they’re working on for future print issues of Westlaw Journals.

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EXPERT ANALYSIS

Class dismissed … But not quite: Supreme Court to review appealability of class certification denials when plaintiffs voluntarily dismiss caseBy Alexandra Laks, Esq. Morrison & Foerster

Question presented

Whether a federal court of appeals has jurisdiction under both Article III and 28 U.S.C. § 1291 to review an order denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice.

Alexandra Laks is a litigation associate in the San Francisco office of Morrison & Foerster. Her practice focuses on false advertising, unfair competition, False Claims Act and privacy litigation, including the defense of consumer class actions, agency enforcement proceedings, qui tam actions and complex commercial litigation. She can be reached at [email protected]. This expert analysis was first published on Morrison & Foerster’s Class Dismissed blog May 26. Republished with permission.

Does a federal court have jurisdiction to review an order denying class certification after the named plaintiffs voluntarily dismiss their claims with prejudice? That is the question the Supreme Court will consider in Microsoft Corp. v. Baker, Docket No. 15-457.

Class action plaintiffs have increasingly relied on this tactic to obtain immediate appellate review of district court denials of class certification decisions, even where

the Court of Appeals has denied discretionary review under Rule 23(f).

The Supreme Court’s decision in Baker will determine whether plaintiffs may continue this practice.

BAKER BACKGROUND

The Baker case concerns a challenge to Microsoft’s Xbox 360 game console. A group of plaintiffs filed an action in the Western District of Washington in 2007, alleging that the Xbox drive scratched game disks during normal game play.

The district court denied certification, finding that only a small percentage of the consoles actually manifested the defect, and that determining whether scratching resulted from a defect versus misuse would require individual inquires.

The plaintiffs filed a 23(f) petition with the Ninth Circuit, but the Ninth Circuit denied the petition.

In 2011, the Baker plaintiffs — who had opted out of the original action — filed a virtually identical lawsuit in the same District, arguing that an intervening Ninth Circuit decision required a different result.

The district court disagreed, striking Baker’s class allegations. Plaintiffs again filed a 23(f) petition, which the Ninth Circuit again denied.

The Baker plaintiffs then voluntarily dismissed the case with prejudice. Their express purpose was to obtain immediate Ninth Circuit review of the district court’s class certification order.

THE NINTH CIRCUIT REVIEWS THE CASE

Plaintiffs filed an appeal from the court’s final judgment, challenging the court’s class certification decision.

Microsoft argued that permitting the appeal allowed plaintiffs to end run Rule 23(f),

which expressly governs appellate review of class certification decisions and gives the appellate court discretion to grant or deny interlocutory appeals of such decisions.

The Supreme Court in Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978), rejected former decisions requiring federal courts to accept immediate appeals of class certification

The Baker decision promises to clarify the viability of a current trend in class action litigation: lose class certification,

dismiss the case with prejudice, and then file for appeal.

denials to avoid the “death knell” of class claims, finding that the benefit to plaintiffs was outweighed by the burden on judicial resources in requiring immediate review.

Congress then adopted Rule 23(f) in 1998 as a compromise to address the “death knell” issue, permitting plaintiffs to petition a Court of Appeals to grant discretionary, interlocutory review for any reason — including because the costs of litigation exceed the plaintiff’s individual claim — while at the same time rejecting immediate appeals as of right from class certification decisions.

The Ninth Circuit ignored Microsoft’s arguments.

Relying on its prior decision in Berger v. Home Depot USA, Inc., 741 F.3d 1061 (9th Circ. 2014), the court focused on the existence of an actual controversy, stating that “‘in the

Jan. 15, 2016

Cert. granted


absence of a settlement, a stipulation that leads to a dismissal with prejudice does not destroy the adversity in that judgment necessary to support an appeal….’” Baker v. Microsoft Corp., 797 F.3d 607, 612 (9th Cir. 2015), cert. granted in part, 136 S. Ct. 890, 193 L. Ed. 2d 783 (2016) (quoting Berger, 741 F.3d at 1064).

Microsoft filed a petition for a writ of certiorari.

The Supreme Court granted the petition on January 15, 2016.

SUPREME COURT STATUS UPDATE

Microsoft and amici filed their opening briefs in March.

Microsoft argues that Plaintiffs’ voluntary dismissal tactic violates Livesay and thwarts the discretionary review process created under Rule 23(f). Microsoft also argues that,

because plaintiffs voluntarily dismissed their case, there is no longer a case or controversy required for Article III jurisdiction and plaintiffs’ claims are moot.

Plaintiffs filed their responding brief on May 16. They argue that prohibiting appeals of class certification decisions from

Microsoft’s “atextual” reading of Rule 23(f) and the “final judgment” rule under 28 U.S.C. 1291, Plaintiffs argue, fails as a matter of law and policy.

BAKER’S BOTTOM LINE

The Baker decision promises to clarify the viability of a current trend in class action litigation: lose class certification, dismiss the case with prejudice, and then file for appeal.

While Plaintiffs risk losing their individual claims if their appeal is denied, they view the ability to obtain immediate review of the district court’s class certification decision as being worth it.

If the Supreme Court in Baker sides with Microsoft, this practice will end.

Moreover, the Supreme Court’s decision may impact current Ninth Circuit food misbranding decisions on appeal, such as Jones v. ConAgra, which reached the Ninth Circuit through this practice.

An early decision in Microsoft’s favor could deprive the Ninth Circuit of jurisdiction to hear Jones and similar cases altogether. WJ

Microsoft argues that Plaintiffs’ voluntary dismissal tactic violates Livesay and thwarts the discretionary

review process created under Rule 23(f).

voluntary dismissals will undermine class actions, as the cost of litigating individual claims vastly exceeds the minimal value of such claims.

They contend that the Supreme Court’s holding in United States v. Procter & Gamble, 356 U.S. 677, 680-681 (1958), in which the Court rejected the defendant’s argument that it lacked jurisdiction because the United States had requested dismissal of its claims, forecloses Microsoft’s argument.

WESTLAW JOURNAL AVIATION

Over the years, this reporter has provided practitioners and observers with coverage of the legal issues surrounding major air disasters, general aviation accidents, helicopter accidents, the Montreal Convention, the Warsaw Convention, and the Airline Deregulation Act. This publication also delivers detailed coverage of cases involving the Transportation Security Administration, the Foreign Sovereign Immunities Act, and the Federal Tort Claims Act, with special sections on international crash cases and helicopter accidents. It also covers cases on loss and damage to luggage and cargo, airport injuries, on-board non-crash injuries, and ticketing issues.



June 24Petition filed

The petitioner is asking the Supreme Court to decide what level of deference

is due an agency’s interpretation of common

law terms.

AVIATION

Aviation company wins support in Supreme Court challenge of FAA ruleA flight-sharing company’s U.S. Supreme Court challenge to a Federal Aviation Administration determination that the company must comply with regulations for common carriers has won the support of a think tank and public interest law firms.

Flytenow Inc. v. Federal Aviation Administration, No. 16-14, brief of amici curiae Southeastern Legal Foundation et al. filed (U.S. July 29, 2016).

Flytenow Inc. v. Federal Aviation Admini-stration, No. 16-14, brief of amici curiae Cato Institute et al. filed (U.S. July 25, 2016).

Amicus briefs by the Cato Institute and a group of interested parties headed by the Southeastern Legal Foundation and the National Federation of Independent Business Small Business Legal Center support Flytenow Inc.’s position that the

FAA’s interpretation of the common law term “common carrier” is not entitled to deference.

FLYTENOW’S PETITION

Flytenow’s petition says the company operates a program, much like the Uber service for drivers, that allows pilots who are planning a flight to communicate with passengers who may want to fly with them and share expenses, such as fuel costs. Flyetnow does not employ pilots; it simply acts as a facilitator between pilots and potential ride-sharing passengers, according to the petition.

The FAA has long recognized the right of pilots and passengers to share expenses, the petition says. Traditionally, pilots posted their planned flights on local airport bulletin boards for potential passengers to see. But in January 2014, Flytenow launched an internet-based platform to communicate the availability of flight-sharing.

The FAA notified pilots that their internet-based communications were unlawful, and the agency considered operations advertising on Flytenow’s website to be illegal charter services.

The suit challenges a final FAA order that says pilots who communicate via Flytenow’s flight-sharing website are common carriers who must obtain a commercial license.

The FAA issued a final order Aug. 14, 2014, ruling that pilots who communicate via the website are common carriers who must obtain a commercial license.

After concluding that the FAA’s decision was not plainly erroneous and did not infringe the pilots’ free speech rights, the District of Columbia Circuit Court of Appeals denied Flytenow’s petitions for review and for a rehearing en banc. Flytenow Inc. v. FAA, 808 F.3d 882 (2015).

Flytenow filed its certiorari petition June 24, asking the Supreme Court to decide what level of deference is due an agency’s interpretation of common law terms. The petition challenges the FAA’s conclusion that pilots who do not earn a commercial profit are nonetheless common carriers.

The petition also challenges the court of appeals’ decision that the FAA could discriminate against content-based internet communications.

THE AMICUS BRIEFS

The Cato Institute is a think tank that describes itself as “dedicated to advancing the principles of individual liberty, free markets, and limited government.” It is joined in its amicus brief by nonprofit technology policy think tank TechFreedom.

The brief says the D.C. Circuit erred when it granted broad deference to the FAA’s determination of what constitutes common carriage under the highly deferential

precedent set by the Supreme Court in Auer v. Robbins, 519 U.S. 452 (1997).

For centuries, the brief argues, the definition of a common carrier focused on its defining quality at common law, that being a man “undertaking for hire” to carry the goods of other persons.

Conversely, private transporters who do not hold themselves out for public hire are not common carriers, the brief says.

Under this long-established common law, Flytenow pilots would need to hold themselves out for public hire to be common carriers, the brief says.

The Flytenow cost-sharers retain the right to reject any member of the public for any reason, which means they cannot be a common carrier, according to the brief.

Rather than deferring to the FAA’s interpretation of a common law term, the D.C. Circuit should have followed the lead of the majority of federal appeals courts, which have found no judicial deference is owed to an agency’s interpretation of common law terms, the brief argues.

The Southeastern Legal Foundation’s amicus brief argues that any deference afforded to a federal agency must be consistent with the Constitution and administrative law.

Any deference afforded a federal agency offends the constitutional principle of separation of powers because it enables the agency to interpret the rules that it promulgates, according to the brief.

Similarly, deference to agency determinations exempts agencies from the notice-and-comment requirements of the Administrative Procedure Act, again leaving agencies free to promulgate regulations and later interpret them, the brief says. WJ

Related Filings: Amicus brief (Southeastern Legal Foundation): 2016 WL 4120701 Amicus brief (Cato Institute): 2016 WL 4268635 Petition: 2016 WL 3564280


AVIATION

Supreme Court asked to clarify Montreal Convention’s 2-year filing limitBy Aaron Rolloff

The U.S. Supreme Court has been asked to decide whether a federal suit filed after the expiration of the Montreal Convention’s two-year limitations period is timely if the plaintiff had first filed in a foreign court within that time.

Von Schoenebeck et al. v. Koninklijke Luchtvaart Maatschappij NV, aka KLM Royal Dutch Airlines, No. 16-670, petition for cert. filed (U.S. Nov. 8, 2016).

Johanna Von Schoenebeck filed suit in South Africa within two years after her flight on KLM

Royal Dutch Airlines, but then sought to file in the U.S. after the two-year period ended.

The 9th U.S. Circuit Court of Appeals ruled in August that the U.S. suit was untimely under the Montreal Convention.

Von Schoenebeck and her husband, Andre, took a KLM flight from Amsterdam to San Francisco in August 2008, according to their petition for a writ of certiorari.

On the flight, Von Schoenebeck was allegedly injured when she bent forward to pick up her handbag and the passenger in the seat in front of her tried to adjust his headrest. The headrest malfunctioned, causing the seat back to collapse and allegedly crush Von Schoenebeck, who sustained back and neck injuries, the petition says.

The Montreal Convention, 2242 U.N.T.S. 309, 1999 WL 33292734 (May 28, 1999), to which the United States and South Africa are signatories, provides passengers with certain rights against air carriers.

Article 35(1) of the Convention sets a two-year limit for passengers to bring an action against a carrier, starting from the date of the passenger’s arrival at his final destination.

The Von Schoenebecks filed an action in South Africa in 2010, within the Convention’s two-year limit. But under South African law, KLM demanded that the couple pay security for the costs of litigation.

Unable to pay the money, the Von Schoenebecks withdrew the South African action and filed suit in the U.S. District Court for the Northern District of California in October 2013.

KLM argued that the U.S. suit was untimely, falling outside the two-year limit under the Convention. The District Court agreed. Von Schoenebeck et al. v. Koninklijke Luchtvaart Maatschappij NV, aka KLM Royal Dutch Airlines, No. 13-cv-4992, 2014 WL 1867001 (N.D. Cal. May 8, 2014).

The 9th Circuit affirmed in August. Von Schoenebeck et al. v. Koninklijke Luchtvaart Maatschappij NV, aka KLM Royal Dutch Airlines, No. 14-16061, 2016 WL 4207975 (9th Cir. Aug. 10, 2016).

The Von Schoenebecks filed their petition for certiorari Nov. 8, arguing that the U.S. Supreme Court should review the 9th Circuit decision in order to clarify the two-year limit not only for U.S. air passengers, but for millions of other international passengers around the world.

The petition argues that the Convention’s two-year limit applies only to the first suit filed in a competent court and that subsequent suits do not need to be initiated in the two-year window.

The Von Schoenebecks also argue that the 9th Circuit ruling is an impermissible judicial modification of an international treaty.

Further, the petition says, under the 9th Circuit ruling, plaintiffs would have to file duplicate lawsuits in every jurisdiction in which they might later find they need to litigate. This would lead to a flood of filings and cause carriers to have to defend against multiple suits in different countries, leading to a situation that would benefit no one, the petition says.

The Montreal Convention is intended to protect passenger rights, but the 9th Circuit ruling undermines those rights, allowing air carriers, as “repeat players,” to use litigation tactics to prevent passengers from bringing successful claims, the Von Schoenebecks say.

Finally, an opinion from the U.S. District Court for the Southern District of New York, in the 2nd Circuit, conflicts with the 9th Circuit ruling, according to the petition. The court in In re Air Crash off Long Island, New York, on July 17, 1996, 65 F. Supp. 2d 207 (S.D.N.Y. 1999), ruled that in the inverse situation, a new suit could be filed in France after the two-year window when a suit had been filed in the U.S. during the two-year period. WJ


Nov. 8Petition filed

The petitioners argue that the 9th Circuit ruling

is an impermissible judicial modification of an

international treaty.


BANK & LENDER LIABILITY

Lawyer wants Supreme Court to review CFPB ratification of enforcement actionBy Stephanie Backes

A California attorney has asked the U.S. Supreme Court to review an appeals panel’s decision upholding the Consumer Financial Protection Bureau’s retroactive ratification of a 2012 enforcement action initiated before the U.S. Senate confirmed the appointment of the agency’s director.

Gordon v. Consumer Financial Protection Bureau, No. 16-673, petition for cert. filed (U.S. Nov. 17, 2016).

In a petition for certiorari, Chance E. Gordon argues the 9th U.S. Circuit Court of Appeals incorrectly concluded that the CFPB was

authorized to prosecute the enforcement action and order him to repay $11 million to clients

he allegedly duped via a prepaid “mortgage relief” program.

The 9th Circuit in April held that CFPB Director Richard Cordray was authorized to ratify all actions taken during the18-month period between his initial installation as director and the Senate’s confirmation, despite the fact his 2012 recess appointment was invalid. Gordon v. CFPB, 819 F.3d 1179 (9th Cir. 2016).

In a dissent, Circuit Judge Susan Ikuta said federal courts lack subject matter jurisdiction over the dispute since no one had the executive power required to file and prosecute the enforcement action.

RECESS APPOINTMENT

President Barack Obama, mistakenly believing the Senate was in recess, installed Cordray as CFPB director Jan. 4, 2012, using the Recess Appointments Clause of Article II of the Constitution, U.S.C.A. Const. Art. II § 2, cl. 3. The Senate eventually confirmed the appointment in July 2013.

According to the petition, the Senate was in session on that date, meaning Cordray was not a validly appointed officer of the United States in 2012 and therefore lacked executive authority to file and prosecute the enforcement action. His retroactive ratification of the action violates Article II, the petition says.

“If federal officials are permitted to retroactively affirm ultra vires acts without giving more than a momentary thought to their propriety, Article II’s limitations on the president’s appointment powers will be reduced to ‘a mere demarcation on parchment,’” the petition says, quoting James Madison’s The Federalist No. 48.

NO STANDING

The petition says federal courts lack subject matter jurisdiction over the dispute because Cordray was a private citizen during the CFPB action against Gordon.

“By authorizing federal courts to entertain suits under federal statues at the behest of individuals who have no authority to enforce them …, [the 9th Circuit decision] constitutes a significant relaxation of [constitutional] standing requirements and thus erodes the separation of powers,” the petition says.

CIRCUIT SPLIT

According to the petition, courts have never allowed ratification of judgments resulting from unauthorized enforcement actions, and the 9th Circuit’s ruling directly contradicts recent decisions of the District of Columbia Circuit and the 3rd Circuit.

The petition says the D.C. Circuit, in Intercollegiate Broadcasting System Inc. v. Copyright Royalty Board, 796 F.3d 111 (D.C. Cir. 2015), placed limits on ratification to ensure independent evaluation of the merits of a prior action.

Ratification of a prior, invalid action requires “a subsequent determination” by “a properly appointed official” who “has the power to conduct an independent evaluation of the merits and does so,” the petition says, quoting Intercollegiate.

In Advance Disposal Services East Inc. v. NLRB, 820 F.3d 592 (3d Cir. 2016), the 3rd Circuit required a “detached and considered affirmation” of an agency’s previous action as a condition for a valid ratification.

Unlike the 9th Circuit, which upheld “blanket ratification,” the 3rd Circuit in Advance approved ratification only after a thorough

Nov. 17Petition filed

“By authorizing federal courts to entertain suits under federal statues at the behest of individuals who have no authority to enforce them …, [the 9th Circuit decision] constitutes a

significant relaxation of [constitutional] standing requirements and thus erodes the separation of powers,” the petition says.

analysis of each ratification point, the petition says.

It says Supreme Court precedent also favors strict limitations on retroactive ratification, citing Federal Election Commission v. NRA Political Victory Fund, 513 U.S. 88 (1994), in which the high court said a ratifier must have had the ability “to do the act ratified at the time the act was done.”

Congress also frowns on after-the-fact ratification, according to the petition. Prohibiting retroactive ratification makes it more likely that officials will adhere to the appointment limitations outlined in Article II, the petition says. WJ



BANKRUPTCY

Barclays says high court need not take preemption case in SemGroup Chapter 11By Lisa Uhlman

An appeals court rightly found a Bankruptcy Code provision barring bankruptcy trustees from avoiding allegedly constructively fraudulent swap transactions also applies to bankrupt SemGroup’s litigation trustee, Barclays Bank has argued to the U.S. Supreme Court.

REUTERS/Sergio Perez

Aug. 19Petition filed

Whyte v. Barclays Bank PLC et al., No. 16- 239, respondent’s brief filed (U.S. Oct. 24, 2016).

The 2nd U.S. Circuit Court of Appeals correctly held that the “presumption against preemption” of state law does not apply

when the federal government has long regulated the area, such as commodities

markets, the bank said in a brief opposing the litigation trustee’s petition for certiorari.

UNDERLYING RULINGS

Section 546(g) of the Bankruptcy Code, 11 U.S.C.A. § 546(g), provides a “safe harbor” that prevents bankruptcy trustees from seeking to avoid constructively fraudulent transfers a debtor makes in connection with swap transactions. Trustees may only avoid intentionally fraudulent transfers.

Here, a week before its 2008 bankruptcy filing, SemGroup paid Barclays $143 million to accept a risky portfolio of commodities derivatives. The deal “protected the market from the potentially severe disruption that could have been caused by the default of a major market participant,” Barclays says in its brief.

SemGroup ultimately confirmed a reorganization plan that established a litigation trust, to which the creditors assigned certain claims, including state law avoidance actions.

In 2012, when the commodities positions had allegedly become profitable, litigation trustee Bettina M. Whyte sued Barclays in the U.S. District Court for the Southern District of New York, seeking to avoid the transaction as a constructively fraudulent conveyance under New York law.

Barclays moved to dismiss, saying Section 546(g) preempted the claims.

Whyte countered that the safe harbor did not apply because she was suing in her role as a litigation trustee, not as a bankruptcy trustee.

The District Court sided with Barclays and dismissed the case, and the 2nd Circuit affirmed the decision.

ATTEMPTED ‘END RUN’Whyte filed a certiorari petition in August, arguing that the 2nd Circuit wrongly found the presumption against preemption does not apply in bankruptcy cases. She also said Section 546(g) does not bar creditors from bringing state law claims to avoid constructively fraudulent swap transactions.

In its opposition brief, Barclays argues that the 2nd Circuit properly rejected Whyte’s attempted “end run” around Section 546(g).

While the litigation trustee argued that the appeals court ignored the presumption against preemption, the court actually applied the Supreme Court’s own preemption framework in finding that the “history of federal rather than state power” in this context means “the presumption applies with little force,” the bank says.

The Supreme Court has given the presumption more weight in areas historically regulated by the federal government, and the 2nd Circuit correctly held that the regulation of creditors’ rights in bankruptcy regarding financial transactions is a matter of federal law, Barclays says.

The appeals court noted that Section 546(g)’s safe harbor involves securities markets, which the federal government extensively regulates, and found there was “no measurable concern about federal intrusion into traditional state domains.”

NO CONFLICT WITH PRIOR RULINGWhyte also argued that the appeals court’s decision conflicted with BFP v. Resolution

Trust Corp., 511 U.S. 531 (1994), but Barclays says that case is distinguishable because the court found nothing countered the assumption that an extensive state law regulatory background was relevant to the claims at issue.

“Here, unlike in BFP, there is not a long history of creditors bringing constructive fraudulent-conveyance claims under state law to unwind securities transactions after a debtor has filed for Chapter 11 bankruptcy,” the bank says.

Even if the 2nd Circuit had found the presumption against preemption is never applicable in bankruptcy, the case still would not warrant high court review because application of the presumption would not alter the outcome, Barclays says.

Federal law preempts state law, even in fields where states traditionally regulate, when the state law conflicts with Congress’ purposes, it explains.

“Permitting creditors or litigation trustees to bring constructive fraudulent-conveyance claims — when bankruptcy trustees are barred from bringing those same claims by Section 546’s safe harbors — would render Section 546 a nullity,” the bank says, noting Congress’ intention to minimize market volatility.

Barclays therefore urged the Supreme Court to deny Whyte’s petition for certiorari. WJ

Related Filings: Respondent’s brief: 2016 WL 6247551 Petition: 2016 WL 4474567


CLASS ACTION

Collective-action waivers in employee arbitration clauses arrive at high courtBy Michael Scott Leonard

Four similar employment disputes have reached the U.S. Supreme Court this term, with workers challenging arbitration clauses that require them to waive their collective-action rights and employers urging the justices to order the contracts enforced.

Ernst & Young LLP et al. v. Morris et al., No. 16-300, respon-dents’ brief filed (U.S. Nov. 21, 2016).

Epic Systems Corp. v. Lewis, No. 16-285, respondents’ brief filed (U.S. Nov. 14, 2016).

National Labor Relations Board v. Murphy Oil USA Inc., No. 16-307, respondents’ brief filed (U.S. Nov. 10, 2016).

Patterson et al. v. Raymours Furniture Co., No. 16-388, petition for cert. filed (U.S. Sept. 22, 2016).

Sept. 8Petition filed




The employers and workers filed certiorari petitions in September focusing on the National Labor Relations Board’s 2012 ruling that contract clauses requiring individual arbitration of employment-related claims violate Section 7 of the National Labor Relations Act, 29 U.S.C.A. § 157, which guarantees workers the right to bargain and litigate collectively.

The board also found that the arbitration agreements violated Section 8 of the NLRA, 29 U.S.C.A. § 158, which makes it an unfair labor practice for employers to interfere with their workers’ rights under Section 7.

After two federal appeals courts agreed with the NLRB and three rejected the board’s reasoning, four of the five losing parties appealed, asking the Supreme Court to determine whether Section 7 collective-action rights can overcome the federal statutory presumption that arbitration agreements are valid.

4 PETITIONS

Each of the four cases at the high court’s doorstep accuses an employer of violating the wage-and-hour provisions of the Fair Labor Standards Act, 29 U.S.C.A. § 201, through practices such as stiffing employees on overtime and misclassifying them as contractors.

Two of the petitioners are defendants: accounting giant Ernst & Young and health care software company Epic Systems Corp.

They are asking the Supreme Court to review rulings by the 9th and 7th U.S. Circuit Courts of Appeals, respectively, which earlier this year adopted the NLRB’s conclusion that federal law prevents employers from requiring workers to waive their collective-action rights. Morris v. Ernst & Young, 834 F.3d 975 (9th Cir. 2016); Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016).

A third petitioner, former Raymours Furniture Co. employee Connie Patterson, has asked the justices to reverse a 2nd Circuit decision that rejected her proposed collective action in September, finding the company’s arbi-tration agreements enforceable. Patterson v. Raymours Furniture Co., No. 15-2820, 2016 WL 4598542 (2d Cir. Sept. 2, 2016).

The fourth petitioner is the NLRB itself, which wants the high court to restore the board’s ruling allowing a Murphy Oil worker to pursue a collective action against the company. The 5th Circuit overturned the board’s decision in October 2015.

Murphy Oil v. Nat’l Labor Relations Board, 808 F.3d 1013 (5th Cir. 2015).

FEDERAL ARBITRATION ACT

Because the appellate opinions now before the high court came down on opposite sides of the issue, the pending petitions challenge rulings on both sides of the circuit split.

Patterson and the NLRB have asked the Supreme Court to hold that employee contracts requiring individual arbitration violate the NLRA and are therefore unenforceable pursuant to the “savings clause” of the Federal Arbitration Act, 9 U.S.C.A. § 2.

The FAA generally requires the enforcement of arbitration clauses, but the law’s savings clause provides that an arbitration agreement is invalid if any “grounds … exist at law or in equity for [its] revocation.”

According to Patterson’s petition, the NLRA would preempt the FAA’s arbitration-promoting purpose even absent the explicit

Each of the four cases at the high court’s doorstep accuses an employer of violating the wage-and-hour provisions of the

Fair Labor Standards Act through practices such as stiffing employees on overtime and misclassifying them as contractors.

savings clause, since normal statutory rules teach that a later-adopted statute implicitly repeals any existing law with which it is incompatible. The FAA’s enactment predated the NLRA’s by a decade.

The FAA’s savings clause makes that result obvious, both Patterson and the NLRB say.

“If statutory labor protections could be bypassed so easily, nothing would prevent employers from prohibiting their employees from picketing, striking or taking other concerted actions to improve workplace conditions — as long as the employer required its employees to pursue their workplace complaints through an individual arbitration procedure instead,” Patterson wrote in her Sept. 22 petition.

Patterson’s petition also cites Sections 2 and 3 of the Norris-LaGuardia Act, 29 U.S.C.A. §§ 102 and 103, which declare any contract that interferes with workers’ “full freedom of association, self-organization and designation of representatives of [their] own choosing” to be unenforceable.


‘CONTRARY CONGRESSIONAL COMMAND’

The other two petitions, filed by Ernst & Young and Epic Systems, take the opposite position, challenging appellate decisions that invalidated their employee arbitration agreements on NLRA grounds.

The two employers say the decisions against them ignored the Supreme Court’s ruling — in CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012), and other related cases — that courts must “rigorously enforce arbitration agreements” unless “the FAA’s mandate has been overridden by a contrary congressional command.”

According to those petitions, another federal statute cannot preempt the FAA’s general rule merely by including provisions that are incompatible with the arbitration law. The “contrary congressional command” standard requires statutory language explicitly overriding the FAA’s mandate, they say.

“The [9th Circuit] majority … followed the wrong mode of analysis, which unsurprisingly

“This critical question involving the intersection of the FAA and NLRA has percolated through several appellate courts,” Murphy Oil wrote in its respondents’ brief Nov. 10. “A deep circuit split has developed between the 5th, 2nd and 8th circuits on the one hand and the 7th and 9th circuits on the other.”

“Despite the fact that the 5th Circuit, not the [NLRB], has correctly decided this issue, the court should grant the board’s petition for a writ of certiorari,” the brief added.

Former Epic Systems employee Jacob Lewis filed a brief Nov. 14 opposing certiorari, calling the circuit split “shallower [and] less clear” than the other litigants say. WJ

Related Filings: Respondents’ brief (Morris): 2016 WL 6916215 Respondents’ brief (Lewis): 2016 WL 6873250 Respondents’ brief (Murphy Oil): 2016 WL 6803229 Petition (Patterson): 2016 WL 5390666 Petition (NLRB): 2016 WL 4761717 Petition (Ernst & Young): 2016 WL 4710181 Petition (Epic Systems): 2016 WL 4611259

led it to the wrong result,” Ernst & Young wrote in its Sept. 8 petition.

“The majority expressly declined to search for a ‘contrary congressional command’ and ignored the presumption in favor of arbitration by attempting to reconcile the NLRA and the FAA on an equal footing,” the petition added. “But … [i]f the majority’s approach were correct, the FAA would yield any time an arbitration agreement could conflict with another federal statute.”

That would eviscerate the FAA’s policy of promoting arbitration, the accounting firm argues.

2 RESPONDENTS SUPPORT CERTIORARI

Three of the four respondents have filed Supreme Court briefs. In an unusual turn, two of the three — Murphy Oil and former Ernst & Young employee Stephen Morris — asked the justices to review the rulings in their favor, stressing the importance of resolving a growing circuit split over a recurring question of national importance.

DERIVATIVES

Big banks ask Supreme Court to review Libor antitrust decisionBy Peter H. Hamner, Esq.

Several global banks are asking the U.S. Supreme Court to review a decision that revived antitrust claims accusing them of conspiring to manipulate the Libor benchmark interest rate.

Bank of America Corp. et al. v. Gelboim et al., No. 16-545, petition for cert. filed (U.S. Oct. 20, 2016).

In their petition for certiorari, the banks argue the 2nd U.S. Circuit Court of Appeals

incorrectly reversed a lower court’s decision that dismissed antitrust allegations in the ongoing multidistrict litigation against 16 banks.

The 2nd Circuit in May held that the plaintiff bondholders and Charles Schwab Corp. adequately alleged that they suffered an antitrust injury by paying artificially fixed prices. Gelboim et al. v. Bank of Am. Corp., 823 F.3d 759 (2d Cir. 2016).

Defendants named in actions alleging Libor manipulation are Credit Suisse Group AG, Bank of America Corp., JPMorgan Chase & Co., HSBC Holdings, Barclays Bank, Lloyds Banking Group, WestLB AG, UBS AG, Royal Bank of Scotland, Deutsche Bank, Citibank, Rabobank Group, Norinchukin Bank, Bank of Tokyo-Mitsubishi UFJ, Societe Generale and Royal Bank of Canada.

ALLEGED RATE-RIGGING

Libor is set daily by the British Bankers’ Association and represents the mean of rate quotes reported by member banks considered to be the most creditworthy. It is the published rate that international banks charge each other for short-term loans and it underpins many financial transactions.

In 2011 Charles Schwab Corp. sued the banks in three complaints on behalf of itself, the Schwab Short-Term Bond Market fund and the Schwab Money Market Fund, alleging the banks manipulated Libor in their own favor from August 2007 to May 2010.

Schwab claimed the rate manipulation lowered its returns on financial instruments that it and its funds purchased in violation of federal and state antitrust laws and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.A. § 1961.

Ellen Gelboim and Linda Zacher, known as the bondholder plaintiffs, later sued the banks in the Southern District of New York in 2012 on behalf of all purchasers of debt securities tied to Libor. They claimed the

Oct. 20Petition filed


manipulation reduced the value of debt securities that they owned.

The Judicial Panel on Multidistrict Litigation consolidated all Libor-related suits for pretrial proceedings before U.S. District Judge Naomi Reice Buchwald of the Southern District of New York in 2011. In re Libor-Based Fin. Instruments Antitrust Litig., 802 F. Supp. 2d 1380 (J.P.M.L. 2011).

DISMISSAL, REVIVAL OF THE ANTITRUST CLAIMS

Judge Buchwald agreed to toss the antitrust claims in 2013, finding that the plaintiffs failed to allege they suffered an antitrust injury through reduced competition. In re Libor-Based Fin. Instruments Antitrust Litig., 935 F. Supp. 2d 666 (S.D.N.Y. 2013).

The plaintiffs’ alleged harm came from the defendant banks’ misrepresentations, not reduced competition, the judge said.

Although her decision disposed of all the Schwab and bondholder claims, the judge allowed other investors to go forward with nonantitrust-related claims.

The 2nd Circuit rejected appeals by Schwab and the bondholders, saying it lacked

jurisdiction because Judge Buchwald’s ruling was not a “final decision” and did not dispose of all claims in the consolidated action. In re Libor-Based Fin. Instruments Antitrust Litig., Nos. 13-3565 and 13-3636, 2013 WL 9557843 (2d Cir. Oct. 30, 2013).

FIRST SUPREME COURT TRIP

The bondholders petitioned the Supreme Court to review the 2nd Circuit’s decision, and the high court unanimously reversed the panel’s holding. Gelboim v. Bank of Am. Corp., 135 S. Ct. 897 (2015).

Writing for the high court, Justice Ruth Bader Ginsburg said, “Nothing about the initial consolidation of their civil action with other cases in the Libor [multidistrict litigation] renders the dismissal of their complaint in any way tentative or incomplete.”

Following the Supreme Court’s decision to allow the antitrust appeal to proceed, the

2nd Circuit heard the case and revived the claims.

SECOND TRIP?

The banks are now asking the top court to review the appeals court ruling that vacated the dismissal of the antitrust claims.

They claim the court should grant the petition because the alleged manipulation did not affect competition.

“Any alleged manipulation of the noncompetitive USD Libor-setting process cannot have impaired or displaced competition, because there was never any competition over Libor in the first place — and because competition in the actual market for financial products continued unabated,” the petition says.

“By allowing to proceed claims that are based on conduct that did not impede any competitive process, and on an injury that cannot have flowed from any competitive harm, the decision … takes antitrust law into uncharted — indeed, forbidden — territory,” the banks argue. WJ


“[T]he decision … takes antitrust law into uncharted

— indeed, forbidden — territory,” the petition says.


EMPLOYMENT

EEOC urges Supreme Court not to expand pre-suit conciliation processBy Tricia Gorman

The U.S. Supreme Court should reject a challenge that would require the Equal Employment Opportunity Commission to identify and investigate the claim of every individual subjected to alleged discrimination before it can sue an employer, the agency says.

The Geo Group Inc. v. Equal Employment Opportunity Commission et al., No. 16-302, opposition brief filed (U.S. Nov. 10, 2016).

Title VII of the Civil Rights Act of 1964, 42 U.S.C.A. § 2000e-5(b), mandates that

the EEOC attempt to settle discrimination disputes with employers before filing suit.

The commission must investigate to determine if a “reasonable cause” exists

to believe that a worker’s claims are true and try to eliminate the alleged wrong via “conference, conciliation and persuasion.”

In its Nov. 10 opposition brief, the EEOC says the high court precluded the challenge filed by The Geo Group Inc., in its ruling in Mach Mining LLC v. EEOC, 135 S. Ct. 1645 (2015).

The justices’ opinion in Mach Mining found that a court may conduct a limited review of the conciliation process and gives the

commission discretion in filing discrimination claims on behalf of a class of employees, the brief says.

“For a court to conduct a more searching inquiry — by, for example, requiring the commission to take specified investigative steps or to secure particular types of information in every case — would be to depart from the statute Congress enacted and impose the sort of ‘extraprocedural requirements’ that Mach Mining rejected,” the EEOC says.

The Geo Group, which runs federal and state correctional and detention facilities, has asked the high court to review an appellate decision that reversed summary judgment for the company after finding that the EEOC did not have to identify and investigate every allegedly aggrieved employee.

ALLEGED SEXUAL HARASSMENT

The case arose in September 2010 when the EEOC sued The Geo Group in the U.S.


District Court for the District of Arizona alleging it violated Title VII by subjecting a female correctional officer to a hostile work environment because of her gender and to harassment and retaliation.

The commission and the Civil Rights Division of the Arizona attorney general’s office had investigated claims by corrections officer Alice Hancock that a male supervisor grabbed her crotch and that the company failed to stop the harassment.

Hancock was ultimately terminated, allegedly in retaliation for her complaints, according to the commission’s brief.

The EEOC and the state agency found other current and former female workers who alleged they had suffered similar “egregious” harassment, the brief says.

The agencies unsuccessfully attempted conciliation with the company in the process of seeking relief for Hancock and more than 20 unidentified women, the brief says.

But Judge Susan Bolton found that the two agencies had failed to complete pre-suit conciliation by not fully investigating the unidentified women’s claims. Arizona et al. v. Geo Group Inc. et al., No. 10-cv-1995, 2012 WL 8667598 (D. Ariz. Apr. 17, 2012).

Title VII requires “individual conciliation,” the judge said, granting The Geo Group summary judgment.

The agencies appealed to the 9th U.S. Circuit Court of Appeals.

The appeals court panel unanimously vacated Judge Bolton’s ruling, saying that under Mach Mining, the EEOC need not identify and conduct conciliation on behalf of each affected employee.

SUPREME COURT REVIEW

The Geo Group filed its certiorari petition Sept. 6, asking the high court to determine if the 9th Circuit erred in its decision because the EEOC had not identified or investigated all the claims.

The company argues that the appeals court improperly cited Mach Mining as the basis for its decision to overturn summary judgment.

Mach Mining did not address whether the EEOC’s conciliation process was sufficient, only how much judicial oversight is permitted, the company says.

“The 9th Circuit’s decision improperly empowers EEOC to disregard the statutory prerequisites established by Congress — that EEOC may only sue on claims it has already investigated, issued a reasonable cause determination and attempted conciliation,” the petition says.

In opposing the company’s petition, the EEOC argues that the Mach Mining decision says the commission can fulfill its conciliation requirements on behalf of a class and that the commission has discretion over the scope of an investigation.

According to the commission, Title VII does not require it to identify each individual during a preliminary investigation.

“Because the existence and scope of an unlawful employment practice may be clear before every individual adversely affected by that practice has been identified, the EEOC has long relied on 42 U.S.C.A. § 2000e-5 to bring suits seeking relief for groups or classes that include individuals who have not yet been identified when the suit is filed,” the brief says.

The EEOC says identifying every individual would undermine Title VII, prolong investigations and increase costs. WJ

Attorneys:Petitioner: Shawn Oller and Kristy L. Peters, Littler Mendelson PC, Phoenix, AZ; Philip L. Ross, Littler Mendelson PC, Walnut Creek, CA

Respondents: P. David Lopez, Jennifer S. Goldstein, Lorraine C. Davis and Anne N. Occhialino, U.S. Equal Employment Opportunity Commission, Washington, DC

Related Filings: Opposition brief: 2016 WL 6679336 Petition: 2016 WL 4728799

“The 9th Circuit’s decision improperly empowers EEOC

to disregard the statutory prerequisites established by Congress,” the petition says.

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INSURANCE

Insurance group asks Supreme Court to review Michigan tax for ERISA conflictBy Thomas Parry

An insurance industry association has asked the U.S. Supreme Court to review a federal appellate court’s ruling that a Michigan health insurance tax does not interfere with the administration of plans governed by the Employee Retirement Income Security Act.


Self-Insurance Institute of America Inc. v. Snyder et al., No. 16-593, petition for cert. filed (U.S. Oct. 31, 2016).

The Self-Insurance Institute of America argued in an Oct. 31 certiorari petition that Michigan’s Health Insurance Claims Assessment Act, Mich. Comp. Laws Ann.

§ 550.1731, ran afoul of ERISA’s express preemption provision, 29 U.S.C.A. § 1144(a).

Passed in 2011, HICA imposed a 1 percent tax on health insurance claims for all in-state services rendered to Michigan residents, court documents noted.

HICA also required that plan administrators submit quarterly tax returns and other records to the state, a requirement that the Self-Insurance Institute of America argued interfered with the management of health plans governed by ERISA.

SIIA first made this argument in a 2011 lawsuit against Republican Gov. Rick Snyder and other state officials in the U.S. District Court for the Eastern District of Michigan.

It sought a declaration that ERISA’s express preemption provision prohibited the application of HICA to any ERISA-covered entities.

The District Court dismissed the suit, and the 6th U.S. Circuit Court of Appeals affirmed, finding that HICA’s aim was to collect taxes, not regulate ERISA plans. Self-Ins. Inst. of Am. Inc. v. Snyder, 761 F.3d 631 (6th Cir. 2014).

In March 2016 the U.S. Supreme Court vacated the decision in light of its judgment in Gobeille v. Liberty Mutual Insurance Co., 136 S. Ct. 936 (2016), a case that touched on state regulations and ERISA.

REAFFIRMATION

On remand, the 6th Circuit reaffirmed. Self-Ins. Inst. of Am. Inc. v. Snyder, 827 F.3d 549 (6th Cir. 2016).

In Gobeille the Supreme Court had held that a Vermont law was preempted by ERISA because it intruded on the regulation of “a central matter of plan administration,” the panel explained.

Michigan’s record-keeping requirements made no such intrusion, the panel said.

Furthermore, the panel held that the “deliberately expansive” powers of ERISA’s express preemption provision did not create “a state law-free zone.”

SIIA’s suit failed under the preemption provision because it did not show that HICA

attempted to govern an area that Congress intended ERISA to control exclusively, the panel said.

‘TALISMANIC INCANTATION’

In its certiorari petition, SIIA argued that the 6th Circuit had “paid only lip service” to the Supreme Court’s holding in Gobeille.

Calling the panel’s interpretation of Gobeille “myopic,” “anti-textual” and “constrained,” SIIA argued that the Supreme Court had ruled that ERISA could preempt state tax collection law.

The 6th Circuit panel relied on a “talismanic incantation” that tax collection did not intrude on health plan administration, SIIA argued.

However, Michigan’s HICA tax and reporting requirements imposed administrative burdens on ERISA managers’ core fiduciary duty of processing and disbursing payments for health care services, SIIA argued.

The burdens would impact ERISA administration by encouraging managers to organize payments in line with the newly state-required documentation, the association argued.

According to SIIA, the Supreme Court gave the 6th Circuit a chance to clarify ERISA’s preemption powers, but the panel instead reaffirmed its pre-Gobeille interpretation and added to the “quagmire” giving rise to confusion over the law’s role. WJ


The Michigan law required that plan administrators submit quarterly tax returns and other records

to the state, a requirement that the Self-Insurance Institute of America says interfered with the

management of health plans governed by ERISA.


MEDICAL MALPRACTICE

Federal court lacked jurisdiction in VA benefits dispute, government tells justicesA veteran’s petition to the U.S. Supreme Court should be denied because it relates only to the payment of benefits and not medical malpractice, according to the government.


The petitioner says the 11th Circuit erroneously decided that “the performance of diagnostic procedures”

and similar decisions are “benefit” issues because all medical determinations are beyond the jurisdiction

of the Board of Veterans’ Appeals.

The plaintiff says his physicians never proposed sedation so he could endure the clinic’s closed MRI, like the one shown here, and instead suggested he undergo an “open” MRI, at another facility.

Milbauer v. United States, No. 16-236, response brief filed (U.S. Nov. 23, 2016).

Richard Milbauer failed to follow the proper procedures for bringing his claims against a

Florida Veterans Affairs clinic under the Veterans Judicial Review Act, 38 U.S.C.A. § 511, which bars federal district court review of any VA decision related to “the provision of benefits” to veterans, according to the government’s response brief.

While Milbauer argues that the clinic’s failure to arrange an open MRI at a civilian facility or offer any alternative diagnostic procedures for 10 months was malpractice, the government maintains it was a benefits decision that should have gone through the Department of Veterans Affairs.

The Veterans Judicial Review Act addresses disputes over payments of benefits while another law, the Federal Tort Claims Act, 28 U.S.C.A. § 1346, routinely allows veterans to sue VA personnel for medical negligence, as Milbauer has done, according to his petition for certiorari.

OPEN OR CLOSED MRI?

Milbauer says he visited the Florida clinic for a shoulder injury in 2005. His VA doctor ordered an MRI at the clinic, which has only a closed MRI machine, but Milbauer allegedly could not undergo the test because he suffers from severe claustrophobia.

Milbauer says his VA treating physicians never proposed sedation so he could endure the clinic’s closed MRI or offered any alternative diagnostic procedure. Instead, they suggested he undergo an “open” MRI, at a non-VA facility, he says.

But Milbauer says had to pursue the paperwork for obtaining and arranging an open MRI himself, which delayed treatment of his shoulder for 10 months. That ultimately made it impossible for VA doctors to repair

his torn rotator cuff, ending his 37-year career in construction, according to his petition.

Milbauer sued in the U.S. District Court for the Middle District of Florida for medical negligence under the Federal Tort Claims Act.

While FTCA claims are made in federal courts, the Veterans Judicial Review Act creates a separate administrative review process that begins with the local VA office. Veterans must appeal the local office’s determination to the Board of Veterans’ Appeals.

If that fails, the veterans may appeal to the Court of Veterans’ Claims, then to the federal

appeals court for the circuit where the VA facility is located, and finally to the Supreme Court.

The District Court held that the Veterans Judicial Review Act barred Milbauer’s claims because they concerned a “particular benefit”

and “the process of obtaining that benefit.” Milbauer v. United States, No. 11-cv-149, 2013 WL 3815625 (M.D. Fla. July 22, 2013).

Milbauer twice appealed the decision, but the 11th U.S. Circuit Court of Appeals ultimately held that resolving the claim would have required the District Court to decide whether he “was entitled to a certain level of benefits” and whether VA doctors “properly followed” VA policies. Milbauer v. United States, 587 Fed. Appx. 587 (11th Cir. 2014).

The appeals court denied a rehearing, and the petition for certiorari followed.

Milbauer argues the 11th Circuit erroneously decided that “the performance of diagnostic procedures” and similar decisions are “benefit” issues because all medical determinations are beyond the jurisdiction of the Board of Veterans’ Appeals.

GOVERNMENT’S RESPONSE

The federal government argues in a brief in opposition to the petition that the District Court correctly viewed the lawsuit as a benefits issue.

“The court reasoned that petitioner sought to challenge ‘the process of obtaining authorization for the VA to pay for the MRI’ and that his grievance is therefore ‘with the


VA’s benefits procedure, not with the medical treatment he received,’” the response brief says.

Similarly, the 11th Circuit properly found that the Veterans Judicial Review Act barred Milbauer’s claims, the government says.

“The court reiterated that the VJRA bars claims that the VA ‘failed to render appropriate medical services’ when such

Attorneys:Plaintiff-appellant: Mahesha P. Subbaraman, Subbaraman PLLC, Minneapolis, MN

Defendant-respondent: acting Solicitor General Ian H. Gershengorn and Principal Deputy Assistant Attorney General Benjamin C. Mizer, Department of Justice, Washington, DC

Related Filings: Response brief: 2016 WL 6916214 Petition: 2016 WL 4474572

claims would require a court to assess the VA’s process for providing a benefit or to determine whether the VA acted properly in denying a benefit,” according to the brief.

Both courts agreed that Milbauer’s assertion that the VA doctors failed to offer him alternative diagnostic procedures was raised late in the proceedings and was too closely tied to the benefits issue to qualify as a medical negligence claim, the government said. WJ

PHARMACEUTICAL

California high court erred on jurisdiction when it let Plavix case proceed, petition saysBy Michael Scott Leonard

Bristol-Myers Squibb is urging the U.S. Supreme Court to overturn a California Supreme Court decision that the drugmaker’s business contacts with the state gave its courts personal jurisdiction over injury claims involving the blood thinner Plavix.


Bristol-Myers Squibb Co. v. Superior Court for the County of San Francisco et al., No. 16-466, petition for cert. filed (U.S. Oct. 7, 2016).

In an Oct. 7 certiorari petition, Bristol-Myers says the state court is part of a “persistent

minority” of high-level tribunals that have ignored the U.S. Supreme Court’s jurisdictional precedents, improperly blurring the line between specific and general jurisdiction through a hybrid inquiry that is incompatible with due process.

According to the petition, the California high court has adopted a “sliding scale” approach to the rule that specific jurisdiction is proper only when a defendant’s in-state contacts are directly related to the plaintiffs’ claims.

General jurisdiction, meanwhile, is appropriate whenever a defendant has such “continuous and systematic” contacts with a state that it is fair to say the company is “at home” there.

But under the sliding-scale test, the more “intense” a defendant’s California contacts,

the less “related” they must be to the lawsuit for a plaintiff to establish specific jurisdiction.

The court followed that approach when it let nearly 600 non-California plaintiffs join a lawsuit over Plavix, which Bristol-Myers did not research, design or manufacture in the state, the petition says, adding that the company also did not prepare “marketing, packaging or regulatory materials” there.

According to the petition, the sliding-scale test improperly meets the general-jurisdiction inquiry halfway, even though the Supreme Court has made clear that specific and general jurisdiction are distinct concepts subject to different rules.

The justices must resolve the pronounced divide between the different appeals circuits and state high courts, Bristol-Myers says, noting that California’s state courts now use a different jurisdictional test from its federal courts, leaving the door open to “jurisdictional gamesmanship” by plaintiffs.

“Nine circuits have held that a plaintiff’s suit does not ‘relate to or arise out of’ a defendant’s forum-state contacts unless those contacts in some way caused the plaintiff’s injury,” the petition says. “But the California Supreme Court … holds that a defendant is subject to specific jurisdiction even if the plaintiff would have suffered precisely the same injuries had the defendant never made contact with the forum.

Petitioner Bristol-Myers says the California high court is part of a “persistent minority” of high-level tribunals that have

ignored the U.S. Supreme Court’s jurisdictional precedents.

“That is wrong, and the enduring division on this question is intolerable,” the petition adds.

BLOOD DISORDER ALLEGATIONS

The Plavix case, filed in San Francisco state court, accuses Bristol-Myers of failing to warn users that Plavix, an anticoagulant designed to protect users against strokes and heart attacks, also creates an unacceptably high risk of both those conditions, as well as internal bleeding and potentially fatal blood disorders such as ulcers and hematomas.


The suit, which is not a class action, involves 86 named plaintiffs from California and 575 from other states.

The drugmaker moved to toss the case on jurisdictional grounds, but the trial court held that the company’s business in California — where it maintains five “small” offices, according to the petition — was sufficient to confer general jurisdiction.

On appeal, the 1st District Court of Appeal reversed that ruling but found California’s courts have specific jurisdiction over the case. Bristol-Myers Squibb Co. v. Super. Ct., 228 Cal. App. 4th 605 (Cal. Ct. App., 1st Dist. 2014).

Bristol-Myers’ nationwide marketing of Plavix created enough of a nexus with California to support specific jurisdiction there, the appellate court said.

The state Supreme Court agreed in August. Bristol-Myers Squibb Co. v. Super. Ct., 1 Cal. 5th 783 (Cal. 2016).

A MULTIPRONGED CIRCUIT SPLIT

In its petition, Bristol-Myers says that ruling misinterpreted the requirement that a company’s in-state business “relate” directly to the claims against it.

In the absence of direct guidance from the U.S. Supreme Court, different federal appeals courts and state supreme courts

have taken varying, incompatible approaches to the “relatedness” requirement, the company says.

Some of those courts have “concluded that the relatedness requirement is satisfied only if the defendant’s forum-state conduct is a ‘but for’ cause of the plaintiff’s injury,” according to the petition.

Others focus instead on proximate cause, asking whether having to go to court in a given state would have been a reasonably foreseeable consequence of the defendant’s lawsuit-related business contacts, the drugmaker says.

And a third group, including the California Supreme Court, does not require any causal connection at all between the defendant’s business and the plaintiff’s injuries, so long as the defendant does enough total business in the state.

“Courts on every side of the split recognize the significance of the choice between these three standards,” the petition says. “These different tests have produced divergent results in suits materially indistinguishable from this one.”

The justices should step in to provide some long-overdue clarity and uniformity, Bristol-Myers says. WJ

Attorneys:Petitioner: Anand Agneshwar, Arnold & Porter, New York, NY; Daniel S. Pariser, Arnold & Porter, Washington, DC; Neal K. Katyal, Jessica L. Ellsworth, Frederick Liu, Sean Marotta and Mitchell P. Reich, Hogan Lovells US LLP, Washington, DC


REUTERS/Jeff Haynes


SECURITIES LITIGATION & REGULATION

Securities law profs ask justices to hear tolling issue in Deepwater Horizon suitBy Peter H. Hamner, Esq.

A group of securities law professors is asking the U.S. Supreme Court to review an appeals panel’s ruling that a shareholder waited too long to file a lawsuit alleging Transocean Ltd. misrepresented the safety of the Deepwater Horizon oil rig.

REUTERS/U.S. Coast Guard/Handout

Eleven law professors say a federal judge incorrectly dismissed as untimely a securities fraud lawsuit stemming from the Deepwater Horizon oil rig explosion. Here, fire boat crews battle the blazing remnants of the rig April 21, 2010.


DeKalb County Pension Fund v. Transocean Ltd. et al., No. 16-206, amici brief filed (U.S. Sept. 14, 2016).

In their friend-of-the-court brief, the 11 law professors say hearing the case will allow the

court to revisit its decision in American Pipe & Construction Co. v. Utah, 94 S. Ct. 756 (1974).

In American Pipe, the high court said that under certain circumstances, the filing of a class action tolls the limitations period for later individual actions that purported class members bring.

The 2nd U.S. Circuit Court of Appeals had declined to apply the American Pipe tolling principal to a Transocean shareholder’s lawsuit because the limitations period at issue in the case was a statute of repose and the panel decided that American Pipe applies only to statutes of limitations. DeKalb Cty. Pension Fund v. Transocean Ltd et al., 817 F.3d 393 (2d Cir. 2016).

A statute of limitations period begins to run when an injury occurs or should have been discovered, while a repose period is a fixed timespan that starts at the time of the event that allegedly caused the injury. Repose periods cannot be tolled for any reason.

In their brief in support of petitioner DeKalb County Pension Fund, the law professors say the 2nd Circuit decision incorrectly limits American Pipe’s scope.

EXPLOSION REVEALS PROXY MISSTATEMENTS

According to DeKalb’s suit, Transocean’s October 2007 proxy statement on the quality of its drilling fleet and safety practices led GlobalSantaFe Corp. investors to vote in favor of a merger with Transocean even though the negotiated price per share was too low.

The Deepwater Horizon disaster in April 2010 killed 11 workers, injured 17 others and caused one of the largest oil spills in American history.

The explosion at a Transocean oil rig in the Gulf of Mexico revealed that Transocean had “dramatically underinvested” in environmental and worker-protection measures despite telling shareholders the opposite in the proxy statement, the suit said.

DeKalb, which had exchanged its GlobalSantaFe stock for Transocean stock in the merger, said it suffered damages when Transocean’s share price plummeted in the wake of the disaster.

Bricklayers and Masons Local Union No. 5 Ohio Pension Fund filed a complaint against

Transocean on Sept. 30, 2010, asserting claims for violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C.A. §§ 78n(a) and 78t(a).

DeKalb joined the suit in December 2010, and the fund and Bricklayers successfully formed a lead plaintiff group in 2011.

U.S. District Judge Lorna G. Schofield of the Southern District of New York dismissed Bricklayers from the case for lack of standing in 2012. Bricklayers and Masons Local Union No. 5 Ohio Pension Fund v. Transocean Ltd., 866 F. Supp. 2d 223 (S.D.N.Y. 2012).

She then dismissed DeKalb’s claims in 2014, finding that the window for filing the suit expired Oct. 2, 2010, three years after Transocean issued the proxy statement in dispute and two months before DeKalb first appeared in the case. DeKalb Cty. Pension Fund v. Transocean Ltd., 36 F. Supp. 3d 279 (S.D.N.Y. 2014).

Judge Schofield found that the three-year statute of repose applicable to Section 14 claims began to run from the date of the alleged violation and not from when the alleged misrepresentations were disclosed.

She also ruled that DeKalb’s claims did not relate back to September 2010, when Bricklayers filed the original complaint.


The 2nd Circuit affirmed, finding that American Pipe’s tolling provision does not apply to statutes of repose.

THE PETITION AND LAW PROFESSORS’ BRIEF

DeKalb is now petitioning the Supreme Court to review the 2nd Circuit’s holding.

According to DeKalb’s petition for certiorari, the top court should hear the case because the terms “statute of limitations” and “statute of repose” were not around when American Pipe was decided, leading to confusion among the courts.

“Interpreting American Pipe to apply only to some time bars — those deemed ‘statutes of limitations’ rather than ‘statutes of repose’ under the modern usage of those terms — would be inconsistent with its purpose,” the petition says.

The law professors concur, arguing that the 2nd Circuit’s decision will clog the courts.

The ruling will “induce putative class members to make protective filings in nearly half of securities class actions that reach a court order on class certification and at least one-quarter of all filed securities class actions,” the professors’ brief says.

“Injured investors with Section 14 claims who have any inkling that the original filer might turn out to be a flawed representative are well-advised to make protective filings, whether moving to intervene or filing a separate lawsuit in the same or a different court, prior to the expiration of the three-year limitations period to avoid having their rights cut off,” the law professors said. WJ

Related Filings: Amici brief: 2016 WL 4938266 Petition: 2016 WL 4363502

SECURITIES LITIGATION & REGULATION

Government contractor asks Supreme Court to review ‘failure to disclose’ securities suitBy Peter H. Hamner, Esq.

A government contractor is urging the U.S. Supreme Court to review a decision to revive a lawsuit accusing it of failing to disclose that it overcharged New York City for work on a payroll modernization project.

Leidos Inc. v. Indiana Public Retirement System, No. 16-581, petition for cert. filed (U.S. Oct. 31, 2016).

In its Oct. 31 petition for certiorari, Leidos Inc. says the 2nd U.S. Circuit Court of Appeals

incorrectly determined the company violated securities laws by failing to comply with two Securities and Exchange Commission regulations: Item 303 of Regulation S-K, 17 C.F.R. § 229.303, and Financial Accounting Standard No. 5.

The shareholders allege Leidos violated the regulations by failing to disclose the billing issue on its March 2011 10-K form. The 10-K form is an annual report that publicly owned companies must submit to the SEC.

Item 303 requires disclosure of any known trends or uncertainties that could have a material impact on a firm’s financial condition, and FAS 5 requires disclosure of “loss contingencies” — a potential event, such as a lawsuit, that will cause a negative outcome if it occurs.

A three-judge panel of the 2nd Circuit held that the failure-to-disclose allegations

sufficiently showed Leidos potentially violated federal securities laws. In re SAIC Inc. Sec. Litig., No. 12-cv-1353, 2014 WL 4953614 (S.D.N.Y. Sept. 30, 2014).

CITYTIME PROJECT

According to the 2nd Circuit, New York City hired Leidos in 2000 as the prime government contractor for its CityTime venture, a project to develop an automated timekeeping program for city employees.

Leidos officials and a staffing firm allegedly engaged in a kickback scheme that led to hiring too many workers and overbilling the city, the appeals court’s opinion said.

The company’s audit team eventually discovered the fraud and reported its finding to the company March 9, 2011. Although the original budget for CityTime was $63 million, Leidos billed the city $635 million, 10 times as much, through May 2011, the opinion said.

Leidos did not disclose the audit team’s March 9 findings in its Form 10-K, filed with the SEC just two days later, March 11, 201l, and it did not disclose at the end of that month that the federal government charged SAIC’s project manager and the staffing firm’s employees with fraud, the opinion said.

The contractor announced June 2, 2011, that the U.S. attorney’s office for the Southern District of New York and the New York City Department of Investigation were probing the CityTime contract.

As a result, the company’s stock price fell from $17.21 to $12.97 between June 2, 2011, and Sept. 1, 2011 — one day after the


“This is a question of critical importance given the sheer volume of securities litigation in the United States, particularly in the 2nd and 9th circuits, which see more federal securities

cases than the rest of the circuits combined,” the petition says.

city terminated the CityTime contract, the opinion said.

FAILURE TO DISCLOSE

The Indiana Public Retirement System and two affiliated pension funds filed a securities fraud suit against SAIC in 2012, and the company moved to dismiss.

U.S. District Judge Deborah A. Batts of the Southern District of New York declined to toss the Item 303 and FAS 5 claims but dismissed allegations related to Leidos’ alleged misstatements about its internal controls and misrepresentations in its 2011 annual report. In re SAIC Inc. Sec. Litig.,


TOXIC TORTS

Manufacturers ask high court to hear jurisdiction dispute in toxic exposure caseBy Kenneth Bradley, Esq.

A manufacturers association is asking the U.S. Supreme Court to hear the appeal of a railway company that says the Montana Supreme Court wrongly decided its state courts have jurisdiction to hear a lawsuit alleging the company exposed an employee to several toxins.

BNSF Railway Co. v. Tyrrell et al., No. 16-405, amicus brief filed (U.S. Oct. 28, 2016).

“In violation of fair play and justice, manufacturers and other businesses are routinely sued in jurisdictions with little or

no connection to the lawsuits,” which could have a profound impact on asbestos-related litigation, the National

Association of Manufacturers says in an amicus brief filed with the high court Oct. 28.

The groups says Montana has become a destination for claims raised under the Federal Employers’ Liability Act, 45 U.S.C.A. § 56, because its Supreme Court has interpreted the statute of limitation in a more liberal way than have several federal circuit courts.

NAM represents small and large manufacturers in every industry across all 50 states, according to the brief.

The dispute here is based partly on a suit Kelli Tyrrell, as special administrator of Brent Tyrrell’s estate, filed in Montana’s Yellowstone County 13th Judicial District Court against BNSF Railway Co.

Tyrrell alleged that Brent was exposed to various carcinogenic materials while working for BNSF, developed kidney cancer as a result and died, according to an opinion the Montana Supreme Court handed down, Tyrrell v. BNSF Railway Co., 383 Mont. 417 (Mont. 2016).

The complaint did not allege that Brent ever worked for the railway company in Montana or that any of the alleged exposure took place there, according to the opinion.

BNSF unsuccessfully moved for dismissal in the trial court. The company argued the court had no personal jurisdiction over it.

The trial judge found his court had general jurisdiction under Montana’s long-arm statute, Montana Rule of Civil Procedure 4(b)(1), because of BNSF’s “continuous and systematic activities within Montana,” according to the state Supreme Court opinion.

BNSF appealed to the Montana Supreme Court, where the appeal was consolidated with that of another out-of-state BNSF employee who had filed a lawsuit under FELA related to knee injuries he allegedly sustained while serving as a fuel truck driver.


In a 6-1 decision, the state high court agreed with the trial judge.

“Montana courts have general personal jurisdiction over BNSF under the FELA and Montana law,” the majority said.

The railway company appealed to the U.S. Supreme Court.

In its amicus brief, NAM says it is important for the high court to hear the petition. The justices have already found that a state court can only exercise general personal jurisdiction over businesses that are “at home” in that state, by way of incorporation or by having their principal place of business there, according to the brief.

NAM cites Daimler AG v. Bauman, 134 S. Ct. 746 (2014), in support of its argument.

In Daimler the Supreme Court established the test for determining whether a business is “at home” in a particular state, NAM says.

If the Montana Supreme Court’s ruling is not reversed, it “will dissolve the significance of Daimler,” the brief says.

“Manufacturers and other businesses should not be compelled to appear in jurisdictions when they have insufficient connection to the locale and when the incident, people and evidence are hundreds or thousands of miles away,” NAM argues.

The high court should hear the appeal because letting the Montana decision stand would create exceptions to the U.S. Supreme Court’s general jurisdiction, the association says. WJ

Related Filings: Amicus brief: 2016 WL 6472612 Petition: 2016 WL 5462798

No. 12-cv-1353, 2013 WL 5462289 (S.D.N.Y. Sept. 30, 2013).

Leidos asked Judge Batts to reconsider, and she dismissed all the claims against SAIC on Jan. 30, 2014. In re SAIC Inc. Sec. Litig., No. 12-cv-1353, 2014 WL 407050 (S.D.N.Y. Jan. 30, 2014).

The shareholders then asked for leave to file a proposed amended complaint with only the Item 303 and FAS 5 claims but Judge Batts denied the request as futile. In re SAIC Inc. Sec. Litig., No. 12-cv-1353, 2014 WL 4953614 (S.D.N.Y. Sept. 30, 2014).

The pension funds appealed and the 2nd Circuit unanimously overruled Judge Batts’ decision, finding the shareholders’ Item 303 and FAS 5 allegations support their claim that SAIC violated federal securities laws.

CIRCUIT SPLIT

Leidos is now urging the Supreme Court to review the 2nd Circuit’s decision, saying a circuit split exists between the 2nd and 9th circuits that the high court should resolve.

The 9th Circuit held in In re NVIDIA Corp. Securities Litigation, 768 F.3d 1046 (9th

Cir. 2014), that Item 303 does not create a duty to disclose that is actionable under federal securities laws, the company said. The Supreme Court denied certiorari in that case.

“This is a question of critical importance given the sheer volume of securities litigation in the United States, particularly in the 2nd and 9th circuits, which see more federal securities cases than the rest of the circuits combined,” the petition says. WJ



CASE INDEX

Ashcroft et al. v. Turkmen et al., No. 15-1359; Ziglar v. Turkmen et al., No. 15-1358; Hasty et al. v. Turkmen et al., No. 15-1363, cert. granted (U.S. Oct. 11, 2016) ........................................................................................................................................................................................ 20

Bank of America Corp. et al. v. City of Miami, No. 15-1111; Wells Fargo & Co. v. City of Miami, No. 15-1112, oral argument held (U.S. Nov. 8, 2016) .................................................................................................................................................................................................................5

Bank of America Corp. et al. v. Gelboim et al., No. 16-545, petition for cert. filed (U.S. Oct. 20, 2016) ............................................................................33

BNSF Railway Co. v. Tyrrell et al., No. 16-405, amicus brief filed (U.S. Oct. 28, 2016) ......................................................................................................42

Bristol-Myers Squibb Co. v. Superior Court for the County of San Francisco et al., No. 16-466, petition for cert. filed (U.S. Oct. 7, 2016) ......................38

Czyzewski et al. v. Jevic Holding Corp. et al., No. 15-649, oral argument held (U.S. Dec. 7, 2016) .....................................................................................6

DeKalb County Pension Fund v. Transocean Ltd. et al., No. 16-206, amici brief filed (U.S. Sept. 14, 2016) .................................................................... 40

Epic Systems Corp. v. Lewis, No. 16-285, respondents’ brief filed (U.S. Nov. 14, 2016) .....................................................................................................32

Ernst & Young LLP et al. v. Morris et al., No. 16-300, respondents’ brief filed (U.S. Nov. 21, 2016) ...................................................................................32

Flytenow Inc. v. Federal Aviation Administration, No. 16-14, brief of amici curiae Cato Institute et al. filed (U.S. July 25, 2016) .................................... 28

Flytenow Inc. v. Federal Aviation Administration, No. 16-14, brief of amici curiae Southeastern Legal Foundation et al. filed (U.S. July 29, 2016) ............................................................................................................................................................................................................ 28

Gloucester County School Board v. G.G. ex rel. Grimm, No. 16-273, cert. granted, 2016 WL 4565643 (U.S. Oct. 28, 2016) ...........................................13

Gordon v. Consumer Financial Protection Bureau, No. 16-673, petition for cert. filed (U.S. Nov. 17, 2016)...................................................................... 30

Impression Products Inc. v. Lexmark International Inc., No. 15-1189, cert. granted, 2016 WL 1117396 (U.S. Dec. 2, 2016) ............................................. 15

Lee v. Tam, No. 15-1293, cert. granted (U.S. Sept. 29, 2016) ............................................................................................................................................. 15

Leidos Inc. v. Indiana Public Retirement System, No. 16-581, petition for cert. filed (U.S. Oct. 31, 2016) .......................................................................... 41

Life Technologies Corp. et al. v. Promega Corp., No. 14-1538, oral argument held (U.S. Dec. 6, 2016) .............................................................................17

McLane Co. v. Equal Employment Opportunity Commission, No. 15-1248, amici briefs filed (U.S. Nov. 21, 2016) ............................................................9

Midland Funding LLC v. Johnson, No. 16-348, petitioner’s opening brief filed (U.S. Nov. 14, 2016) ...................................................................................8

Milbauer v. United States, No. 16-236, response brief filed (U.S. Nov. 23, 2016) ............................................................................................................... 37

Murr et al. v. Wisconsin et al., No. 15-214, reply brief filed (U.S. July 27, 2016) ................................................................................................................... 11

National Labor Relations Board v. Murphy Oil USA Inc., No. 16-307, respondents’ brief filed (U.S. Nov. 10, 2016) .........................................................32

Patterson et al. v. Raymours Furniture Co., No. 16-388, petition for cert. filed (U.S. Sept. 22, 2016) ...............................................................................32

SCA Hygiene Products Aktiebolag et al. v. First Quality Baby Products LLC et al., No. 15-927, oral argument held (U.S. Nov. 1, 2016) ......................... 19

Self-Insurance Institute of America Inc. v. Snyder et al., No. 16-593, petition for cert. filed (U.S. Oct. 31, 2016) ...............................................................36

The Geo Group Inc. v. Equal Employment Opportunity Commission et al., No. 16-302, opposition brief filed (U.S. Nov. 10, 2016)................................34

Von Schoenebeck et al. v. Koninklijke Luchtvaart Maatschappij NV, aka KLM Royal Dutch Airlines, No. 16-670, petition for cert. filed (U.S. Nov. 8, 2016) .............................................................................................................................................................................................................. 29

Whyte v. Barclays Bank PLC et al., No. 16-239, respondent’s brief filed (U.S. Oct. 24, 2016) .............................................................................................31

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