Category: Litigation

4th Cir. First to Apply "Disability" Definition Under ADAAA – ADA Amendments Act of 2008

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On January 23rd, in a ground-breaking decision under the ADA Amendments Act of 2008 (“ADAAA”), the United States Court of Appeals for the Fourth Circuit held that an injury that left the plaintiff unable to walk for seven months and that, without surgery, pain medication, and physical therapy, likely would have rendered the plaintiff unable to walk for far longer can constitute a disability under the Americans with Disabilities Act.  The Fourth Circuit in Summers v. Altarum Institute, Corp. indicated that it is the first appellate court to apply the ADAAA’s expanded definition of “disability.”

The Court reversed a District Court’s dismissal of the plaintiff’s case pursuant to a Rule 12(b)(6) motion.  The U.S. District Court for the Eastern District of Virginia based its dismissal of the plaintiff’s disability-based discharge claim on its view that the plaintiff’s impairment was temporary and therefore not covered by the Americans With Disabilities Act. In its reversal, the Fourth Circuit held that the plaintiff “has unquestionably alleged a ‘disability’ under the ADAAA sufficiently plausible to survive a Rule 12(b)(6) motion.”

Article by:

Timothy M. McConville

Of:

Odin, Feldman & Pittleman, P.C.

Let the Light of Day Shine Re: SEC (Securities and Exchange Commission) Insider Trading Case

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We want to spend a moment talking about an old subject—the Securities and Exchange Commission’s insider trading case against Mark Cuban—and Cuban’s new business venture that has resulted from that case. The case, the SEC’s handling of the matter, and Cuban’s reactions (then and now) say a lot about how “the G” does business and may even be revelatory in the future.

As you recall, the SEC charged Cuban with insider trading in 2008. The case was originally dismissed by the trial court. The Fifth Circuit Court of Appeals reinstated the case, concluding that the inquiry into whether Cuban had, in fact, traded on the basis of material, non-public information was simply too fact-intensive for the trial court to have decided without a full factual inquiry.

This, of course, is the problem with fraud-based government enforcement: the question of a person’s intent is difficult to determine without an expensive factual inquiry—and the costs of such an inquiry (combined with the potential consequences) are so high that many people settle with the G rather than seek to exonerate themselves. Historically, the SEC “extorted” settlements (not our view, necessarily, see Al’s Emporium Commentary in the Wall Street Journal Online Edition as of October 19, 2010) in reliance on this heavy burden. At the heart of the SEC’s effort was the “no admit or deny” settlement.

In these settlements, the SEC would recite each allegation of wrongdoing against a defendant as well as the terms under which the defendant had settled the charges. The defendant would neither admit nor deny the SEC’s allegations. Since Mary Jo White took over at the helm of the SEC in April 2013, she purportedly has set a new course, requiring that defendants must admit wrongdoing in more and more settlements—whether or not that changes the seemingly extortive nature of these cases remains to be seen.

But Cuban, with his seemingly unlimited resources and non-retiring personality, would not be extorted. He fought back, all the way through trial, and won. Ultimately, a jury of Cuban’s peers concluded (among other things) that the SEC had not proven that Cuban received confidential information, that he traded on such information, or that he had acted knowingly or recklessly (with “fraudulent intent”) when trading. (See the Associated Press’ “Big Story” on October 16, 2013, which has a digital recreation of the jury verdict form).

When he walked out of the courtroom, Cuban went ballistic on the SEC. See his comments on YouTube – his specific comments about the SEC are found beginning about the 50th second of the clip.

“When you put someone on the stand and accuse them of being a liar, it is personal,” he said, criticizing specific members of the SEC’s staff and, generally, the SEC’s enforcement practices. Since then, Cuban has reinforced his criticism, stating: “There’s such a revolving door, and [the SEC] was run by attorneys with an attorney’s mind-set looking for their next job. It’s a résumé builder,” [Cuban] said. “No wonder they say or do whatever they damn well please. I’m like, ‘OK, I’m going to start calling them out by name.” (WSJ’s Law Blog)

Cuban isn’t stopping with these castigatory remarks. He is putting his money where his mouth is. Cuban’s latest business venture is to publicize SEC trial transcripts (which are not generally publicly available). Cuban hopes that, by publicizing trial tactics and tactics he believes are problematic, he will change the way this agency of the G does business.

Article by:

Vincent P. (Trace) Schmeltz III

Of:

Barnes & Thornburg LLP

Eastern District of North Carolina (E.D.N.C.) Bankruptcy Court Rules that Borrower Can Raise Unfair and Deceptive Trade Practices Claims Against Lender Based on Refusal to Modify Loan

Poyner Spruill

 

Does a lender have a duty to act in good faith when negotiating with a  borrower during a commercial loan modification?  In an order issued recently by the United States Bankruptcy Court for the Eastern District of North Carolina, in In re: Burcam Capital II, LLC, the court denied a lender’s motion to dismiss a borrower’s claims against the lender.  The Borrower alleged that the lender’s failure to modify the terms of the loan constituted a breach of the lender’s obligation to deal with the borrower in good faith, as well as an unfair or deceptive trade practice.  This was because the borrower alleged that the servicer, as agent of the lender, wanted the loan to go into default as a means of acquiring the real property collateral.  While the court acknowledged that the lender had no obligation to modify the terms of the loan, the court still reasoned that the failure to modify the loan under the particular circumstances of this case could constitute a breach of the lender’s obligations to proceed in good faith, and could constitute an unfair and deceptive trade practice under North Carolina law.

Burcam Capital II, LLC (Burcam Capital) is the owner of commercial real property containing retail and office units in Raleigh, NC.  The real property serves as collateral for two separate loans, with both loans administered by CWCapital Asset Management, LLC (CWCapital) as special servicer.  Burcam Capital defaulted on its note payments in 2011, and CWCapital initiated foreclosure as a result of this default.  On June 28, 2012, Burcam Capital filed for relief under Chapter 11 of the United States Bankruptcy Code to stay the foreclosure.

In the course of the bankruptcy proceedings, Burcam Capital filed a complaint against CWCapital alleging that after Burcam Capital’s default, CWCapital acted outside of its narrow role as special servicer of the debt.  In particular, Burcam Capital alleged that CWCapital concocted a scheme whereby CWCapital would position itself to either buy the debt from the lender whose loans it was servicing at an artificially low price, or would buy the real property collateral at the foreclosure sale for below market value in order to benefit itself at the expense of both Burcam Capital and the lender whose loans CWCapital was servicing.  Burcam Capital alleged that in furtherance of this scheme, CWCapital obtained a severely below market appraisal for the real property collateral and refused to deal with Burcam Capital in any meaningful way regarding any modification or work-out.

CWCapital moved to dismiss the complaint on the basis that neither the lender nor CWCapital breached the loan contract, and that absent a breach of contract or allegations of deceit, there could be no liability for CWCapital under North Carolina Law.  CWCapital argued that because under the existing loan contract neither CWCapital nor the lender had any obligation to modify the existing loan, the complaint against CWCapital and the lender should be dismissed.

While the court acknowledged that a lender does not have to reach an agreement with its borrower to modify its loan, and it does not act improperly when enforcing its rights, such as initiating foreclosure when the loan goes into default, the court refused to dismiss the complaint against CWCapital and the lender.  The court reasoned that Burcam Capital’s complaint alleged facts that could constitute a breach of the implied covenant of good faith and fair dealing which is applicable to contracts in North Carolina, together with facts that could constitute deceptive trade practices.  Unfortunately, the court did not explain its reasoning in great detail.  In particular, the court did not specifically address CWCapital’s argument that CWCapital cannot be liable for failing to act in good faith if there was never any breach by CWCapital of the existing loan contract.  Nevertheless, the court agreed with Burcam Capital’s allegations that CWCapital’s negotiations were a sham and its appraisal of the property constituted a ruse that could rise to the level of a breach of the lender’s obligations to deal in good faith as well as a false and deceptive trade practice.

One of the primary lessons for lenders in this case is that when the lender agrees to entertain discussions regarding potential loan modifications it should take steps to ensure that it will be seen by any future court or jury as having considered a borrower’s loan modification proposals in good faith.  Burcam Capital’s complaint placed great emphasis on CWCapital’s refusal to provide any reasoning behind its rejection of Burcam Capital’s modification proposals, CWCapital’s representative in the negotiations having no actual authority to agree to the terms of any settlement or work-out agreement, and CWCapital never informing Burcam Capital of what types of offers it would agree to regarding any future modification or work-out of the existing loan.  Once negotiations with a borrower begin, the lender should take steps to ensure that its negotiations are conducted in good faith.  If there are credible allegations that the lender refused to negotiate in good faith, such allegations may be used to prevent an early dismissal of a borrower’s counter-claims against a lender.

One means of preventing such allegations may be for the lender to require that the borrower agree to a pre-negotiation agreement prior to entering into loan modification discussions with the lender.  A well drafted pre-negotiation agreement can help reduce misunderstandings and later claims by a borrower against a lender.  The pre-negotiation agreement can help establish the ground rules of the discussion, and should include, among other things, agreements that: (a) no oral or written statements made during the negotiation may be used against the other side (to encourage open discussion); (b) any statements made prior to or during the negotiations are not admissible in court for any reason; and (c) confirm the validity of the existing loan documents.  While lenders may encounter some resistance from borrowers in using such an agreement, if a borrower does agrees to its terms, a lender may negotiate more freely because the risk of any liability to the lender as a result of such negotiations is minimized.

In this case, the court did not agree that Burcam Capital’s claims against CWCapital should be dismissed, so not all is lost for CWCapital.  While Burcam Capital survives in its battle against CWCapital, it must now prove its allegations against CWCapital in court, which is a much higher hurdle than simply arguing that its claims have some legal merit and should not be dismissed.  CWCapital recently amended its answer to Burcam Capital’s complaint in light of the court’s refusal to dismiss CWCapital’s claims, and Burcam Capital will now bear the burden of proving that the actions alleged in its complaints are true and that those actions constituted a breach of CWCapital’s obligation to deal in good faith and an unfair and deceptive trade practice.

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Of:

Poyner Spruill LLP

Supreme Court Will Rule on Whether Agency-Approved Beverage Label Can Be Challenged as ‘False Advertising’ in Federal Court

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On January 10, 2014, the U.S. Supreme Court agreed to hear an appeal by Pom Wonderful LLC against The Coca-Cola Company.  The Court will examine whether Pom can bring a federal Lanham Act false advertising claim against a Minute Maid juice product label that had been approved by the U.S. Food and Drug Administration (FDA).  (Pom Wonderful LLC v. The Coca-Cola Co., U.S. Supreme Court case no. 12-761).

At issue in the lawsuit is a Minute Maid label for “Pomegranate Blueberry Flavored Blend of 5 Juices.”  The label presents the words “Pomegranate Blueberry” in larger type than the remainder of the phrase.  Pom claimed that the label was misleading because the product contains 0.3 percent pomegranate juice and 0.2 percent blueberry juice.

A California federal trial court and the 9th Circuit federal appeals court in California both ruled that Pom could not bring a Lanham Act false advertising claim against the label, since it had been specifically examined and approved by the FDA.  Pom has argued that the decisions were contrary to established law in other U.S. courts, and that federal regulations establish a floor –but not a ceiling — on what an advertiser is required to do to avoid a claim that the advertising is false and misleading.  Coca-Cola has argued that product labeling that is specifically authorized by the Food, Drug and Cosmetic Act (FDCA) and approved by the FDA cannot be charged as false or misleading under another federal statute such as the Lanham Act.

Although the question before the Supreme Court is whether a private party can bring a Lanham Act claim challenging a product label regulated under the FDCA, the Supreme Court’s decision could potentially have significant implications for the alcohol beverage industry.  For example:

  • If the Supreme Court rules that a competitor cannot bring a Lanham Act claim against a label that has been approved by the FDA, a natural question is whether the same rule will apply with regard to alcohol beverage labels that have been reviewed and approved by the Alcohol and Tobacco Tax and Trade Bureau (TTB) (by its terms, the Federal Alcohol Administration Act does not preempt the Lanham Act); and
  • If a Lanham Act claim would be barred against labels approved by TTB, a question may arise about whether a Lanham Act claim would be barred on elements of the label that TTB does not specifically review as a matter of policy – such as contrast, size and placement of label elements.

The Supreme Court is expected to hear argument this spring and decide the case by June 2014.  Depending on the decision, alcohol beverage industry members could find they have additional insulation against a federal false advertising claim, but they may likewise be limited in bringing a federal false advertising lawsuit against a competitor’s label that has been approved by TTB.

Article by:

Robert W. Zelnick

Of:

McDermott Will & Emery

Federal District Court in Mississippi Provides Good Discussion of Negative Corpus from National Fire Protection Association (NFPA) 921

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The United States District Court for the Southern District of Mississippi recently handed down its opinion in Russ v. Safeco Insurance Company of America, 2013 WL 1310501 and the opinion provides a good example of the 2011 change in NFPA 921 commonly known as the negative corpus.  In Russ, plaintiff was an insured of Safeco Insurance Company at the time he suffered a fire loss for property located in Ovett, Mississippi.  Safeco denied the claim asserting various defenses to coverage, such as plaintiff’s failure to submit to an EUO and that the fire loss was incendiary.  The court had before it several competing motions, including plaintiff’s motion to strike Safeco’s origin and cause expert, primarily on the basis that the investigator’s initial and addendum report conflicted and for the investigator’s alleged failure to follow NFPA 921.

The court set forth in its analysis that NFPA 921 has “established guidelines and recommendations for the safe and systematic investigation or analysis of fire and explosion incidents.  It even cited the 8thCircuit opinion previously reported on this blog, Russell v. Whirlpool Corp., 702 F.3d 450, 454 (8th Cir. 2012).  However, the court also stated that reliance on a methodology other than NFPA 921 does not necessarily render an expert’s opinions, per se, unreliable.  Schlesinger v. United States, 212 WL 407098 (EDNY 2012)  Although the court seemed to recognize that an expert could rely on methodology other than NFPA 921, it found that NFPA 921 was applicable to the Safeco expert’s opinions because “an expert who purports to follow NFPA 921 must apply its contents reliably.”  In other words, this court believed that you did not necessarily have to follow NFPA 921, but if an expert did choose to utilize it, the investigator would be required to follow it in toto.

The court went on to provide a good discussion of the history of the negative corpus which began in 1992.  Negative corpus was initially used to deem a fire incendiary by ruling out the possibility of any accidental cause.  However, in 2011, the NFPA rejected the use of the negative corpus, finding that the process was not consistent with the scientific method.  The court sided with approval in NFPA 921, Section  18.6.5 (2011 Ed.) stating “it is improper to base hypotheses on the absence of any support of evidence . . . that is, it is improper to opine a specific ignition source that has no other evidence to support it, even though all other hypothesized sources were eliminated.”

Applying this rationale to the facts of the case, the court found that no foundational evidence or specific facts such as eye witness testimony or the finding of an accelerant were cited by Safeco’s expert in support of his conclusions. Instead, the investigator simply speculated that the fire was probably caused by human involvement due to the absence of supportive evidence for certain accidental causes.

This case can be used as a good example of how to effectively use NFPA 921 even in jurisdictions where a court has not deemed NFPA 921 the standard.  It can still be argued that if NFPA 921 is utilized, then it has to be used for all of the principles it contains.  In other words, an expert should not be allowed to adopt some NFPA 921 provisions and feel free to disregard others.  It is also a good example of how to utilize negative corpus and its inconsistency with the scientific method to limit an origin and cause expert’s opinions.

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Of:

Armstrong Teasdale

 

ACI's 3rd National Forum on Securities Litigation & Enforcement

The National Law Review is pleased to bring you information about the upcoming American Conference Institute National Forum on Securities Litigation & Enforcement.

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When

Thursday, February 27 – Friday, February 28 ,2014

Where

Washington, D.C.

ACI’s 3rd National Advanced Forum on Securities Litigation and Enforcement, this time in Washington, DC, is the only event in the industry where experienced in-house counsel, leading litigators, renowned jurists, and regulatory and enforcement officials from federal and state agencies will assemble in our nation’s capital to provide the highest level insights on the most current developments in the field.

Now, more than ever, lenders/issuers, officers and directors, underwriters, auditors, investment managers and broker-dealers need to know how to prepare for and respond to litigation, and how to deal with regulation and enforcement initiatives from various federal and state agencies.

In response, ACI has developed the 3rd installment of its lauded Securities Litigation and Enforcement conference, which will provide practitioners with the knowledge and expert strategies that they need in order to prepare for and defend against the newest claims and claimants.

Join us in Washington, DC, and hear from a highly regarded faculty featuring in-house counsel from the top financial services companies and leading outside counsel from law firms that excel in securities litigation, renowned judges, and key government bodies, including SEC, FINRA, PCAOB, U.S. Attorney’s Offices (EDNY & SDNY), and various state securities departments.

Employee’s Complaint About Union Officials Watching Porn is Deemed “Human Imperfection” But Not Grounds for Retaliation

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A union employee was suspended then terminated after being indicted – as part of an identity theft investigation by the prosecutor – which involved the public posting of names, salaries and Social Security numbers of the company’s managers during a previous strike. During her suspension, the employee claimed that she witnessed the union president and vice president looking at pornography during business hours, which she then reported to the union’s regional leaders. The employee also alleged that the union sabotaged her post-termination grievance process.

As a result, the employee sued the union under section 101 of the Labor-Management Reporting and Disclosure Act, alleging that she was retaliated against for raising a matter of union concern relating to the general interest of its members (i.e., her complaint about union officials watching porn during business hours). The Fourth Circuit found that the employee’s complaint did not rise to the level needed to meet the test and added that “human imperfection must be kept in some perspective.”

On Monday, the United States Supreme Court denied the employee’s bid for certiorari. (see Melissa H. Trail v. Local 2850 United Defense Workers of America et al., case number 13-332).

Article by:

Adam L. Bartrom

Of:

Barnes & Thornburg LLP

Federal Circuit Grants Patent Term Adjustment After Allowance When Continued Examination Requested

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On January 15, 2014, the U.S. Court of Appeals for the Federal Circuit decided Novartis v. Lee (No. 2013-1160, -1179), holding that time spent in “continued examination” is excluded from a patent term adjustment even where the continued examination occurs after the application has been pending for more than three years. However, the Federal Circuit also held that the time excluded for continued examination is limited to the time before allowance of the application, and therefore positive patent term adjustment accrues from the date the application is allowed to issuance of the patent, as long as no later examination occurs.

Patent Term Adjustment

Applicants may be entitled to patent term adjustment (PTA) to remedy certain delays caused by the U.S. Patent and Trademark Office (USPTO) during prosecution of an application. 35 U.S.C. § 154 specifies the patent term guarantees which, if not met, can serve as bases for PTA. In particular, § 154(b)(1)(B) provides one day of PTA for every day an application is pending for more than three years (known as “B delay”). According to § 154(b)(1)(B)(i), B delay does not include “any time consumed by continued examination of the application,” such as the filing of a Request for Continued Examination.

The Federal Circuit’s Decision

According to Novartis’ interpretation of the statute, applicants are entitled to PTA for any time spent by the USPTO after three years from the application filing date, even if continued examination has been requested. In contrast, the USPTO argued that the statutory language clearly excludes any time consumed by continued examination, no matter when it was initiated.

The Federal Circuit agreed with the USPTO, stating that PTA “should be calculated by determining the length of time between application and patent issuance, then subtracting any continued examination time and determining the extent to which the result exceeds three years.” The Federal Circuit also found the USPTO’s construction was otherwise supported by the statutory purpose and structure.

However, the Federal Circuit agreed with Novartis on the other statutory interpretation issue. Novartis argued that time consumed by continued examination should be limited to the time before allowance of an application, as long as no later examination actually occurred, while the USPTO argued that any time up until issuance of a patent should be excluded. The Federal Circuit rejected the USPTO’s reasoning, indicating that because a case not involving continued examination would undisputedly be entitled to the time from allowance to issuance, there was no basis for treating a case involving continued examination differently.

The following schematic illustrates the Federal Circuit’s holding:

USPTO

Article by:

Of:

Sterne, Kessler, Goldstein & Fox P.L.L.C.

Supreme Court Holds That State Attorney General Actions are Not “Mass Actions” Under Class Action Fairness Act (CAFA)

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On January 14, the Supreme Court of the United States held that lawsuits that are filed in the name of a State Attorney General but seek relief on behalf of a State’s citizens cannot be removed to federal court as “mass actions” under the Class Action Fairness Act (CAFA). See Mississippi ex rel. Hood v. AU Optronics Corp., No. 12-1036 (Jan. 14, 2014). Resolving a split between the Fifth Circuit on the one hand and the Fourth, Seventh and Ninth Circuits on the other, the ruling means that businesses will have to defend AG actions in state courts, and state courts will have to resolve whether such actions can proceed even though the consumers on whose behalf they are brought have agreed to settle their claims in a class action or, conversely, to pursue their own claims individually rather than collectively.

“Mass Actions”

CAFA gives federal courts original subject matter jurisdiction over certain “class actions” and “mass actions.” It defines a “class action” as “any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action” and defines a “mass action” as “any civil action . . . in which the monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact, except that jurisdiction shall exist only over those plaintiffs whose claims in a mass action [exceed $75,000, exclusive of interest and costs].” 28 U.S.C. §§ 1332(d)(1)(B), (d)(11)(B)(i).[1] Excluded from the definition of “mass action” are (among other things) actions in which “all of the claims are asserted on behalf of the general public (and not on behalf of individual claimants or members of a purported class) pursuant to State statute specifically authorizing such action . . . .” Id.§ 1332(d)(11)(B)(ii)(III).

The Hood Case

Jim Hood, the Attorney General of Mississippi, filed a parens patriaeaction that alleged that the companies that manufacture and market liquid crystal display (LCD) panels had engaged in price-fixing that violated the Mississippi Consumer Protection Act and Mississippi Antitrust Act. Hood sought equitable and compensatory relief on behalf of both the State and its citizens. The defendants removed the action to federal court under CAFA and the Attorney General moved to remand. The district court remanded, finding that the suit was not a “mass action” because it fell within the definition’s “general public” exception. The Fifth Circuit reversed. Looking at each claim rather than the action as a whole, it reasoned that the real parties in interest were not only the State but also the individual citizens who had purchased LCD products, and as a result the “claims of 100 or more persons [we]re proposed to be tried jointly.” Id. § 1332(d)(11)(B)(i). Hood then petitioned for certiorari, which the Supreme Court granted.

The Supreme Court’s Decision

Yesterday, the Supreme Court unanimously reversed. Justice Sotomayor’s opinion is a primer on statutory construction:

Respondents argue that the [mass action] provision covers [AG actions] because “claims of 100 or more persons” refers to “thepersons to whom the claim belongs, i.e., the real parties in interest to the claims,” regardless of whether those persons are named or unnamed. We disagree.

To start, the statute says “100 or more persons,” not “100 or more named or unnamed real parties in interest.” Had Congress intended the latter, it easily could have drafted language to that effect. Indeed, when Congress wanted a numerosity requirement in CAFA to be satisfied by counting unnamed parties in interest in addition to named plaintiffs, it explicitly said so: CAFA provides that in order for a class action to be removable, “the number of members of all proposed plaintiff classes” must be 100 or greater, and it defines “class members” to mean “the persons (named or unnamed) who fall within the definition of the proposed or certified class.” Congress chose not to use the phrase “named or unnamed” in CAFA’s mass action provision, a decision we understand to be intentional.

More fundamentally, respondents’ interpretation cannot be reconciled with the fact that the “100 or more persons” referred to in the statute are not unspecified individuals who have no actual participation in the suit, but instead the very “plaintiffs” referred to later in the sentence—the parties who are proposing to join their claims in a single trial….[2]

The Court then rejected the argument that “plaintiffs” should be read as including both named and unnamed parties, finding that such a reading “stretches the meaning of ‘plaintiff’ beyond recognition” and would impose an “administrative nightmare” on the lower courts:

The term “plaintiff” is among the most commonly understood of legal terms of art: It means a “party who brings a civil suit in a court of law.” It certainly does not mean “anyone, named or unnamed, whom a suit may benefit,” as respondents suggest.

…

Yet if the term “plaintiffs” is stretched to include all unnamed individuals with an interest in the suit, then §1332(d)(11)(B)(i)’s requirement that “jurisdiction shall exist only over those plaintiffs whose claims [exceed $75,000]” becomes an administrative nightmare that Congress could not possibly have intended. How is a district court to identify the unnamed parties whose claims in a given case are for less than $75,000? Would the court in this case, for instance, have to hold an evidentiary hearing to determine the identity of each of the hundreds of thousands of unnamed Mississippi citizens who purchased one of respondents’ LCD products between 1996 and 2006 (the period alleged in the complaint)? Even if it could identify every such person, how would it ascertain the amount in controversy for each individual claim?

…

We think it unlikely that Congress intended that federal district courts engage in these unwieldy inquiries. By contrast, interpreting “plaintiffs” in accordance with its usual meaning—to refer to the actual named parties who bring an action—leads to a straightforward, easy to administer rule under which a court would examine whether the plaintiffs have pleaded in good faith the requisite amount. Our decision thus comports with the commonsense observation that “when judges must decide jurisdictional matters, simplicity is a virtue.”[3]

The decision means that the troubling trend of retaining private class action lawyers to file public AG actions in state courts can continue and could conceivably quicken. It also raises a number of interesting questions the Court did not address, for example whether AG actions are barred by agreements to settle class actions brought on behalf of the same consumers,[4] or affected by agreements to resolve claims in individual arbitration rather than representative litigation.[5]

[1]           The defendants did not ask the Court to hold that the case qualified as a “class action,” although they had raised that point below. See Opinion at 4 & n.2.

[2]           Opinion at 5-6 (emphasis in original, citations omitted).

[3]           Id. at 7-10 (citations omitted).

[4]           Cf. New Mexico ex rel. King v. Capital One Bank (USA) N.A., 13-0513, 2013 WL 5944087, at *4-8 (D.N.M. Nov. 4, 2013) (finding that class action settlement barred AG action to the extent it sought compensatory relief).

[5]           Cf. Iskanian v. CLS Transp. Los Angeles, LLC, 206 Cal. App. 4th 949, 964 (2012) (finding that Concepcion requires enforcement of waiver of right to bring representative action under California’s Private Attorney General Act), review granted Sept. 19, 2012 (No. S204032).

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Of:

Drinker Biddle & Reath LLP

FDA (Food and Drug Administration) Declines Courts’ Requests to Define “Natural” with respect to GMO (Genetically-Modified Organisms) Foods

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The FDA recently issued a letter to three federal district court judges declining the courts’ requests to adopt a definition of “natural” or to state whether the terms “natural” or “all natural” can be used to refer to foods containing genetically-modified organisms (GMOs) to help resolve pending consumer class actions over the term. The FDA cited three reasons for its decision not to define the term(s): (1) it would prefer to use a public, administrative process than to define the term in the context of private litigation; (2) the definition implicates other agencies, most notably, the USDA; and, (3) the FDA has limited resources and other matters currently take priority.

As noted in our August 2013 Alert on the issue, Judge Yvonne Gonzalez Rogers of theNorthern District of California started the trend in Cox v. Gruma Corp., a case in which the plaintiff alleges that Gruma’s use of “all natural” on its tortilla shells violates various consumer protection laws because they contain genetically-modified corn. In Van Atta v. General Mills, pending in Colorado and involving GMOs in granola products, a magistrate judge agreed with Judge Rogers and recommended a stay of proceedings in the case pending the FDA’s response to Judge Rogers’s request. Most recently, in Barnes v. Campbell Soup Co., also pending in the Northern District of California and involving GMOs in various soups, a different judge also stayed the case pending the FDA’s response.

These cases are potentially quite important because there are many pending consumer class actions, particularly in California, over whether the use of some variant of the term “all natural” is proper in light of one or more ingredients in the food at issue. Indeed, some quip that food labeling litigation has replaced tobacco and asbestos as the favorite category of suit for the plaintiffs’ bar. Thus, the FDA’s response to the request by these courts, and the courts’ further actions based on the response, could resolve or guide the resolution of many of these cases.

In a related development, the Grocery Manufacturers’ Association has recently filed a citizen’s petition asking FDA to state that GMO foods may be labeled “natural.” The FDA alluded to the possible filing of this petition in its letter, but did not state whether it is willing to take up the issue using that procedure, which does allow for public comment.

A copy of the FDA’s letter can be found here.

Article by:

Of:

Barnes & Thornburg LLP