Tag: supreme court

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

DrinkerBiddle

 

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

Supreme Court Will Review Limelight and Nautilus Re: Patent Infringement Litigation

Schwegman Lundberg Woessner

 

Continuing its heightened interest in IP law, on Friday the Supreme Court granted petitions for cert. to review Limelight Networks, Inc. v. Akami Technologies, Inc., U.S., No 12-786 and Nautilus, Inc. v. Biosig Instruments, Inc., U.S., 13-339. The other two grants were in a (c) and TM and so of less interest to this patent attorney.

In Limelight, the Fed. Cir. held that a defendant could be found liable for inducing infringement under 271(b) even if no one party performed the acts necessary to meet the requirement that there be direct infringement of 271(a). In the biotech/pharma space, this question becomes relevant when a testing lab measures the level of a biomarker but a specialist draws the diagnostic conclusion required by the claim.

I had not commented on the Nautilus decision in the past because the Fed. Cir. “rule” holding that a claim term violated 112(2) only if it was “insolubly ambiguous” was favorable to patentees (and, indirectly, to prosecutors). This “rule” has been challenged as essentially too lenient to said ambiguous patent claims – and the Court may consider if the presumption of validity of an issued patent lowers the bar of the statutory requirement of particular and distinct patent claiming.

I don’t think that the Fed. Cir. has erred in attempting to preserve the validity of an issued claim by reading it in view of the specification, even including “inherent parameters”, but the Supreme Court seldom takes up a Fed. Cir. decision to give them praise for preserving patentees’ shrinking bundle of rights.

Article by:

Warren Woessner

Of:

Schwegman, Lundberg & Woessner, P.A.

Wisconsin Supreme Court Upholds Broad Asbestos Exclusion

vonBriesen

 

In Phillips v. Parmelee, 2013 WI 105 (Dec. 27, 2013), the Wisconsin Supreme Court upheld the validity of a broad asbestos exclusion.

In 2006, Daniel Parmelee and Aquila Group (“Sellers”) sold an apartment building to Michael Phillips, Perry Petta and Walkers Point Marble Arcade, Inc. (“Buyers”) covered by an American Family business owners policy. Prior to selling the building to Buyers, Sellers received a property inspection report noting the probable presence of asbestos. However, Buyers claimed Sellers never put them on notice that the property probably contained asbestos and eventually filed suit.

The trial court granted American Family’s motion for declaratory judgment due to the policy’s broadly worded asbestos exclusion. The court of appeals upheld the trial court’s decision.

The asbestos exclusion at issue stated as follows:

This language does not apply to … “property damage” … with respect to:

a. Any loss arising out of, resulting from, caused by, or contributed to in whole or in part by asbestos, exposure to asbestos, or the use of asbestos. “Property damage” also includes any claim for reduction in value of real estate or personal property due to its contamination with asbestos in any form at any time.

b. Any loss, cost, or expense arising out of or in any way related to any request, demand, order, or statutory or regulatory requirement that any insured or others identify, sample, test for, detect, monitor, clean up, remove, contain, treat, detoxify, neutralize, abate, dispose of, mitigate, destroy, or any way respond to or assess the presence of, or the effects of, asbestos.

….

f. Any supervision, instructions, recommendations, warnings or advice given or which should have been given in connection with any of the paragraphs above.

The only issue presented to the Wisconsin Supreme Court was whether the asbestos exclusion in the American Family policy precluded coverage for the losses claimed by Buyers.

First, Buyers argued the term “asbestos” is ambiguous because it is undefined in the American Family policy and there are various forms and meanings of “asbestos.” The court was unpersuaded and found a reasonable person reading the policy would understand the word “asbestos” to mean any form of asbestos.

Buyers then argued the broad language of the asbestos exclusion invites multiple reasonable interpretations and it should be narrowly construed against American Family. The court found the case law cited by Buyers in support of their position to be factually distinguishable because the exclusion language in that policy was materially different from the broad, comprehensive language in the American Family policy, which included a wider range of asbestos-related losses than the case law cited by Buyers.

Finally, Buyers asserted that the Sellers negligently failed to disclose defective conditions or any other toxic or hazardous substances contained on the property. However, the court found nothing in the record to demonstrate the Buyers sustained any loss related to electrical or plumbing issues. Rather, the loss arose from asbestos.

For the aforementioned reasons, the Wisconsin Supreme Court upheld the court of appeals’ decision giving force to American Family’s broadly worded asbestos exclusion.

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von Briesen & Roper, S.C.

Top Ten Intellectual Property Stories from 2013

Schwegman Lundberg Woessner

 

I admit it, I like lists, even completely subjective ones like this one, that is tilted toward patent law and prep/pros. So in no particular order, except for number one, here we go:

top 10 2013 intellectual property patent

  1.  Myriad [Add your pun title here!]. No story can top a unanimous Supreme Court opinion (Thomas writing even!) holding that a discrete chemical molecule is really a data storage device made for us all by Mother Nature, and so is a “natural product”. More troubling, I fear, are Judge Lourie’s two opinions below, holding that the broadly-claimed diagnostic methods were patent-ineligible as “abstract ideas.” Combine this with Mayo and PerkinElmer v. Intema and you get caught in a perfect storm that can sink almost any claim to a diagnostic method.
  2. CLS Bank v. Alice. A big story indeed, as commentators tried, with little success, to unravel the threads in multiple opinions issued by the Fed. Cir. judges. Now the Supreme Court will try to define an abstract idea. Is C =pi(D) carved into a brick concrete enough for you?
  3. Inequitable Conduct goes into IP hospice. While we still have a duty of candor and good faith in dealing with the PTO, Rule 1.56(b) is gone. A simple failure to submit even “material” information will seldom, if ever, lead to an IC holding. In 1st Media v Electronic Arts, Sony, a defendant in the suit, petitioned for cert., playing the “rigid test” card, but the Supreme Court stood pat and denied the petition. In Network Signatures v. State Farm, Judge Newman suggested that facially false petitions would not amount to “egregious misconduct” unless they involved statutory standards of patentability, as opposed to formal PTO filings. However, the Supreme Court also denied cert.  in Apotex v. Cephalon, in which the Cephalon attorney and scientist obtained a patent on an invention made by their supplier – both the D.C. and the Fed. Cir found IC. And where are the final PTO rules?
  4. The rise of the Written Description Requirement as a patent-killer. I predicted this trend post-Ariad and the Fed. Cir. has ruled accordingly. It is much easier to invalidate a claim by finding that the specification does not demonstrate enough “possession” of the claimed invention that it is to have to sort through all those messy Wands factors for enablement. Even with a lot of structural data, Novozymes’ patent on its improved enzyme sank like a stone. And the Fed. Cir. has pretty much ignored patentee’s attempts to argue that a thin disclosure can be supplemented by information available to the art. See Wyeth v. Abbott Labs. Even “Gentry Gallery” –based decisions seem to be in vogue again (no support in specification for later claim amendment) – see Synthes v. Spinal Kinetics. However, possession did “rule” in Sanofi-Aventis v. Pfizer, so perhaps it is possible to turn this ocean liner around.
  5. Section 112(b) Indefiniteness. Supreme Court may grant cert to resolve the question: “Does the Federal Circuit’s acceptance of ambiguous patent claims with multiple reasonable interpretations—so long as the ambiguity is not ‘insoluble’ by a court—defeat the statutory requirement of particular and distinct patent claiming.” Nautilus v Biosig Instruments. This is one of the few lines of Fed. Cir. decisions that favor patentees.
  6. Who induced infringement, or did they? In Limelight Networks v. Akami Techs., the Supreme Court may well grant cert. to decide the question: “Whether the Fed. Cir. erred in holding that a defendant may be held liable for inducing patent infringement under [271(b)] even though no one has committed direct infringement under [271(a)]?” This somewhat muddled question could be clearer if “no one” was defined more completely, but the Solicitor General has recommended that the Court take this one up, so watch out.
  7. The Rise of Secondary Considerations. In the wake of KSR’s termination of the teaching-suggestion-motivation test, the Fed. Cir. and the Board are increasingly looking for, and giving weight to, the oft neglected bag of secondary considerations. The court has noted that unexpected results are a secondary consideration (I don’t think that John Deere said that), and has put increased emphasis on long-felt need, failure of others, commercial success and the like. This does not mean that applicants or patentees will always “win”, but it significantly increases the number of patentability “chips” they have to play. For example, see Galderma v Tolmar, Appeal No. 2013-1034 ( Fed. Cir., December 11, 2013)in which a split panel of the Fed. Cir. found Galderma’s add-on patent for adapalene obvious, but spent a lot of space evaluating unexpected results and defining “teaching away.”
  8. Has Cybor’s Time Finally Come? The Fed. Cir. en banc will soon decide whether or not Fed. Cir. panels should overrule its practice of reviewing claim construction de novo, as a matter of law. Cybor has been much reviled in recent years, but there are voices that feel Cybor comports with the mission of the Fed. Cir. to bring uniformity to patent law. If the court takes this step, some commentators think that the Supreme Court will be the final arbiter.
  9. Stem Cell Research to Continue. The suit seeking to ban Federal funding for embryonic stem cell research was finally dismissed.
  10. The Battle Against “Patent Trolls” continues. And continues to threaten a system that has worked to advance innovation for over 200 years. The biggest threat posed by attempts to limit suits by NPE’s against – mostly – high tech communications companies is that they tar patent holders as a group, particularly universities and individual inventors and start-ups, by making it more difficult/costly for them to enforce their patent rights against deep pocket infringers. H.R. 3309 is just one of the latest shotgun blasts fired at the patent system. Now the Office may have a new “Director” who believes that the patent system is broken and needs to be fixed. I don’t like legislative and administrative bodies cooperating to fix a problem that almost no one has clearly defined. The last time this happened, there was a bill passed to reduce the backlog by severely limiting application filing and prosecution in general.

Merry holidays (or year-end rushes) to us all and many happy allowances!

Article by:

Warren Woessner

Of:

Schwegman, Lundberg & Woessner, P.A.

It's Official—The Supreme Court Announces That It Will Review The Contraceptive Mandate

Image

On Nov. 26, 2013, U.S. Supreme Court announced that it will review two cases in which for-profit employers challenged the application of the contraceptive mandate under the Patient Protection and Affordable Care Act. The cases are Sebelius v. Hobby Lobby Stores and Conestoga Wood Specialites Corp. v. Sebelius.

Both employers say that their religious beliefs bar them from providing employees with drugs or other items that they consider abortifacients. These employers argue that the Free Exercise Clause of the First Amendment and the Religious Freedom Restoration Act protects their religious beliefs and therefore bars the application of the contraceptive mandate. In contrast, the government argues that for-profit corporations cannot exercise religion and therefore have no protection from the mandate.

Supreme Court

At present, the federal courts of appeal are deeply divided on this issue. Three circuits—the Seventh, Tenth, and D.C. Circuits—have upheld challenges to the mandate, while two circuits—the Third and the Sixth—have rejected these challenges. The most recent decision came from the Seventh Circuit in Korte v. Sebelius, Case No. 12-3841, and Grote v. Sebelius, Case No. 13-1077.  The court’s ruling, issued Nov. 8, 2013, held that the Religious Freedom Restoration Act barred the application of the mandate to closely held, for-profit corporations when the mandate substantially burdened the religious-exercise rights of the business owners and their companies.

The Supreme Court will likely hear oral argument in the consolidated Hobby Lobby andConestoga case in March 2014. The decision is expected to decide whether—and to what extent—for-profit corporations have a right to exercise religion. Many commentators see parallels between this case and the Citizens United case in which the Court held that corporations had a First Amendment right to make certain political expenditures. If the Court finds that corporations also have religious rights, it could have significant impact on the application of other laws—including the Title VII, the ADA, the FMLA, etc. For example, could a religious employer object to providing FMLA leave for an employee to care for a same-sex spouse, even in a state that recognizes same-sex unions? Keep an eye on this case—it could have far-reaching consequences.

Article by:

Mark D. Scudder

Of:

Barnes & Thornburg LLP

Employer Group Health Plans and the Constitutionality of the ACA

Focus turns to completing 2012 and 2013 compliance tasks following the U.S. Supreme Court’s decision.

Today, the U.S. Supreme Court ruled that virtually the entire Patient Protection and Affordable Care Act of 2010 (ACA) is constitutional (with the exception of a Medicaid issue that is not directly relevant to employers), validating the full range of past, present, and future ACA requirements. Employers now must continue to press ahead with 2012 and 2013 ACA compliance requirements, particularly if these tasks were placed on a back burner awaiting the decision.

The Decision

Writing for a 5-4 majority in National Federation of Independent Business et al. v. Sebelius, Chief Justice John G. Roberts, Jr., found that the individual mandate in the ACA is a permissible exercise of Congress’s taxing authority, stating that “[t]he Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax.” Chief Justice Roberts also wrote that “because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.” Chief Justice Roberts was joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor, Stephen G. Breyer, and Elena Kagan. Justices Antonin Scalia, Anthony M. Kennedy, Clarence Thomas, and Samuel Anthony Alito, Jr., dissented.

Next Steps for Employers

Now that the ACA has been upheld, employer group health plans must focus on a number of pressing tasks for 2012 and 2013 compliance with the ACA. In the coming weeks and months, employers should do the following:

  • Determine whether they are appropriately aggregating group health plan valuation data in order to support 2012 Form W-2 reporting.
  • Prepare to receive, and properly distribute or apply, any Medical Loss Ratio rebates associated with 2011 insured health coverage.
  • Finalize Summary of Benefits and Coverage material for inclusion in the 2013 Open Enrollment package.
  • Complete updates to Summary Plan Descriptions and plan documents to capture and describe the 2011 and 2012 ACA changes to their plan design.
  • Reflect the 2013 plan year $2,500 cap on salary deferral contributions into healthcare spending accounts in 2013 Open Enrollment material, payroll processes, and administration systems.
  • Understand and begin to determine the patient-centered outcomes trust fund fees due in July 2013.
  • Begin to identify whether their group health plans are both affordable and available to full-time employees in order to avoid any shared responsibility penalty in 2014.
  • Prepare for audits associated with their participation in the Early Retiree Reinsurance Program, if applicable.
  • Review possible design changes to retiree drug programs to reflect the change in Medicare Part D subsidy taxation rules.
  • Review future plan design changes to blunt the balance sheet impact of the 2018 Cadillac Tax.

Implications

While the Supreme Court decision is an important milestone in the federal debate over expanding healthcare coverage, it likely represents just the first in a series of future federal discussions and actions in the coming months and years.

The federal debate now moves to the November election cycle. The ACA no doubt will play a large role in the upcoming elections, but it is premature to expect any quick legislative reversals to ACA provisions, as any changes would require a significant shift in power.

In the interim, employer group health plans should continue to examine and implement those ACA requirements that will be effective in 2012, 2013, and later years into the design and operation of their group health plans.

We will release future LawFlashes and hold webinars as further guidance becomes available.

Copyright © 2012 by Morgan, Lewis & Bockius LLP

Supreme Court Upholds ACA, Including the Individual Mandate

The National Law Review recently featured an article by Meghan C. O’Connor of von Briesen & Roper, S.C. regarding The Supreme Courts Recent Ruling on ObamaCare:

This morning, June 28, 2012, the U.S. Supreme Court issued its opinion in theAffordable Care Act (ACA) cases. The individual mandate, requiring the purchase of health insurance, was held constitutional under Congress’ taxing power. The Court did not address the severability issue as to whether other ACA provisions are unconstitutional because the mandate survived. However, the Court did address Medicaid expansion, holding that the expansion is constitutional as long as states would lose only new federal funds – rather than all funding – for failing to comply with the new Medicaid requirements.

Stay tuned for a full summary of the Court’s decision as well as the potential effect of the decision on providers.

©2012 von Briesen & Roper, s.c