Class actions, remands, voluntary dismissals, enhanced damages in patent actions, and more.
October 14, 2019
Last week saw decisions addressing the propriety of CAFA removal in a Rule 23(f) appeal, the grant of an untimely remand motion, voluntary dismissals in bankruptcy, denials of summary judgment in IDEA cases, Rule 41(d) cost orders, notices of appeal, and an interlocutory challenge to the legality of Matthew Whitaker’s appointment as Assistant Attorney General. There were also a few cert-stage developments in the Supreme Court, including an interesting petition on finality and the Patent Act’s punitive-enhancement provision.
The Seventh Circuit addressed subject-matter jurisdiction as part of a Rule 23(f) class-certification appeal
In Dancel v. Groupon, Inc., the Seventh Circuit tackled a potential CAFA-related subject-matter jurisdiction issue before it could get to the merits of a Rule 23(f) interlocutory class-certification appeal.
The plaintiff in Dancel brought a purported class action against Groupon for using a photo from her Instagram account to promote a voucher. She sued in state court, where the parties litigated for a few years. The plaintiff eventually moved to certify a class that differed from the one in her complaint, which led Groupon to remove the suit to federal court under the Class Action Fairness Act.
In federal court, the plaintiff moved to remand the suit. She argued that Groupon had not identified any non-diverse class members in its notice of removal; it had said only that the class would “undoubtedly” include some members that would meet the minimal-diversity requirement. The plaintiff also argued that, even if minimal diversity existed, Groupon had waived its right to remove by waiting too long to seek removal.
The district court denied the motion to remand, and the plaintiff did not seek permission to appeal that decision under 28 U.S.C. § 1453(c). The parties instead litigated the propriety of class certification, with the district court eventually declining to certify the class. The plaintiff then sought permission to appeal this decision under Rule 23(f), which the Seventh Circuit granted. But on appeal, the plaintiff wanted the Seventh Circuit to also address the remand decision.
The Seventh Circuit declined to address the argument that Groupon had waived its right to remand. There was no overlap between that issue and the later denial of class certification. And the waiver argument did not go to the district court’s subject-matter jurisdiction, so the Seventh Circuit was not required to address the matter on appeal.
Minimal diversity was a different matter. That did affect the district court’s subject-matter jurisdiction. And the record before the Seventh Circuit did not establish minimal diversity. The court did not have to order the case remanded, however, as Groupon could amend its notice of removal to adequately allege minimal diversity. The Seventh Circuit accordingly ordered a limited remand for Groupon to allege minimal diversity (plus conduct any necessary discovery on the matter).
Dancel v. Groupon, Inc., 2019 WL 5057669 (7th Cir. 2019), available at the Seventh Circuit and Westlaw.
The Third Circuit reviewed the grant of an untimely motion to remand
In Wells Fargo Bank v. Dey-El, the Third Circuit held that it could review an order that remanded a case to state court because the motion to remand was untimely.
The case began as a state-law mortgage foreclosure action in New Jersey state court, but the defendants removed the action on both federal-question and diversity grounds. The bank then moved to remand the action, arguing (among other things) that (1) federal-question jurisdiction did not exist under the well-pleaded-complaint rule and (2) removal was improper under the forum-defendant rule (the defendant borrowers were citizens of New Jersey). The district court granted the motion and remanded the matter to state court. The borrowers then appealed.
28 U.S.C. § 1447(d) says that the courts of appeals lack jurisdiction—“by appeal or otherwise”—to review remand orders. (The statute contains a few irrelevant exceptions to this bar.) But the Supreme Court has held that this bar applies only to remands authorized under § 1447(c): remands (1) due to a lack of federal jurisdiction or (2) on a timely motion pointing out a defect in removal.
The remand in Wells Fargo Bank was in part due to a defect in removal: the forum-defendant rule. But the motion pointing out that defect was not timely; it was filed more than 30 days after the removal. The Third Circuit accordingly concluded that this portion of the district court’s remand was not made under § 1447(c), so § 1447(d) did not bar review of it.
In a footnote, the court noted an issue about whether it could address the entire remand order, not just the portion of the order that dealt with the forum-defendant rule. Only the forum-defendant portion of the remand fell outside § 1447(c); the district court also remanded for lack of federal-question jurisdiction, which is a remand authorized by § 1447(c). So arguably the court had jurisdiction to address only the non-barred forum-defendant issue. But § 1447(d) discusses the reviewability of “orders,” not issues within those orders. So arguably the entire order—and all its grounds—were fair game. And a circuit split exists on the scope of review in these circumstances. But the Third Circuit avoided weighing in on the issue, as the borrowers had not challenged the lack of federal-question jurisdiction in their appeal.
The Third Circuit went on to affirm the remand order.
Wells Fargo Bank v. Dey-El, 2019 WL 4926970 (3d Cir. 2019), available at the Third Circuit and Westlaw.
The Fifth Circuit on appealing the voluntary dismissal of a bankruptcy petition
In In re Penn, the Fifth Circuit held that a bankruptcy court’s decision was not final or appealable when it denied plan confirmation and dismissed—at the debtor’s request—the bankruptcy petition.
Penn involved the district court’s jurisdiction over appeals from bankruptcy proceedings. The form bankruptcy plan in the Western District of Texas allows debtors to keep only the first $2,000 of a tax refund. The debtor in Penn wanted to keep all of her refund (over $5,000) for home repairs. But the bankruptcy court denied her motion to do so and offered several alternatives that might allow the debtor to complete the home repairs. The debtor declined this invitation and instead asked the district court to deny confirmation of her plan and dismiss the bankruptcy petition. The bankruptcy court did so, and the debtor appealed to the district court, which affirmed the bankruptcy court’s decision. The debtor then appealed to the Fifth Circuit.
The court of appeals held that the bankruptcy court’s decision was not final, so the district court lacked jurisdiction. District courts generally have jurisdiction over only “final judgments, orders, and decrees . . . of bankruptcy judges entered in cases and proceedings.” Denial of a motion to confirm a bankruptcy plan is generally not final—the process of achieving an approved plan is not yet over.
Granted, the case in Penn was dismissed. But it was dismissed at the debtor’s request. And a party cannot manufacture an appeal over an interlocutory order by voluntarily dismissing the remainder of its case. (We’ve seen this issue a lot recently.) The Fifth Circuit offered a helpful explanation of why:
Were we to reach the merits and conclude that the bankruptcy court erred in denying the request to retain the entire tax refund, the bankruptcy court could deny confirmation on remand based on one of the Trustee’s other objections. Penn might request another dismissal and again appeal to the district court, and then again to this court. And so on. This is precisely the scenario that the final-judgment rule is designed to prevent.
Other avenues for appellate review existed, such as a certified bankruptcy appeal under 28 U.S.C. § 158(d)(2). But the debtor in Penn had availed herself of none of them. The Fifth Circuit accordingly held that the district court lacked jurisdiction over the case, vacated the district court’s judgment, and remanded for the district court to dismiss the appeal.
In re Penn, 2019 WL 5081268 (5th Cir. 2019), available at the Fifth Circuit and Westlaw.
The Fifth Circuit on appeals in IDEA cases
In A.B. v. Clear Creek Independent School District, the Fifth Circuit held that the denial of summary judgment in an IDEA review was final and appealable.
In A.B., a school district had removed a disabled child from the general-education classroom, intending to instruct the child separately. But a state hearing officer determined that this removal violated the Individuals with Disabilities Education Act and ordered the school to keep the child in the general-education classroom. The child’s parents then sued in federal court, seeking attorneys’ fees as prevailing parties. The school district counter-sued to reverse the hearing officer’s decision. On the school district’s motion for summary judgment, the district court affirmed the state hearing officer’s conclusion that the child should be kept in the general-education classroom. The district court reserved the issue of attorneys’ fees for later resolution, and the school district appealed.
The Fifth Circuit held that it had jurisdiction over the appeal. Denials of summary judgment are normally not final and appealable. But in the context of A.B., the decision on the school district’s summary-judgment motion essentially resolved the administrative-review portion of the lawsuit: “By denying the school district’s motion for summary judgment, the district court was, in effect, affirming the hearing officer’s decision. All that remained for the district court was to decide the question of attorney’s fees.” And a judgment on the merits is final despite an outstanding issue of attorneys’ fees.
The court went on to affirm the district court’s judgment.
A.B. v. Clear Creek Independent School District, 2019 WL 5092471 (5th Cir. 2019), available at the Fifth Circuit and Westlaw.
The Fifth Circuit held that an order to pay costs under Rule 41(d) was not appealable
In Sammons v. Economou, the Fifth Circuit held that it lacked jurisdiction to review an order that the plaintiff pay the costs incurred in a voluntarily dismissed action.
The litigation in Sammons started before the High Court of the Republic of the Marshall Islands. After that court announced its inclination to dismiss the plaintiff’s claims (but before the court could actually do so), the plaintiff voluntarily dismissed his suit. He then filed another action, based on similar allegations and against the same defendants, in the Western District of Texas. In accordance with Rule 41(d), the district court (1) ordered the plaintiff to pay the costs the defendants had incurred defending the action in the Marshall Islands and (2) administratively closed the case pending payment. The plaintiff appealed.
The Fifth Circuit rejected all three proffered grounds for appellate jurisdiction.
First, the decision was not “final” under 28 U.S.C. § 1291. Granted, the district court had administratively closed the case pending payment. But an administrative closure is equivalent to a stay that won’t support appellate jurisdiction. And the merits of the plaintiff’s suit were not yet resolved.
Second, the decision was not appealable under collateral-order doctrine. Interim fee orders are generally reviewable on appeal from a final judgment. And although exceptions to that general rule exist—when payment of fees would make them unrecoverable, or in the context of post-judgment proceedings—none applied to Sammons. A party’s refusal to pay the Rule 41(d) order did not make the order unreviewable.
Finally, mandamus was not appropriate, primarily because the matter could be reviewed on appeal from a final judgment. And there was no indication that the plaintiff could not pay the ordered costs (a situation that has warranted mandamus in the past).
Sammons v. Economou, 2019 WL 5078614 (5th Cir. 2019), available at the Fifth Circuit and Westlaw.
The Sixth Circuit used a notice of appeal to limit the scope of an appeal
In Stewart v. City of Memphis, the Sixth Circuit read a notice of appeal to limit the scope of an appeal: the plaintiffs could appeal the dismissal of their Monell claim but not a related ruling on the admissibility of an expert’s testimony.
The suit arose from the fatal shooting of the plaintiffs’ son by Memphis police officers, with the plaintiffs suing both the officer and his employer, the City of Memphis. Both defendants eventually moved for summary judgment. The district court granted the city’s motion on the plaintiffs’ Monell claim. But the district court denied the officer’s motion for summary judgment. In the course of deciding the officer’s motion, though, the court deemed inadmissible the plaintiffs’ proposed expert witness. The plaintiffs appealed only the dismissal of their claim against the city.
Before getting to the notice of appeal, the opinion suggests an overlooked jurisdictional issue. The opinion notes that after the summary-judgment decision the plaintiffs voluntarily dismissed their claims against the individual officer without prejudice. That means the Sixth Circuit probably lacked jurisdiction over the appeal. As just discussed in relation to the Fifth Circuit’s decision in Penn, voluntary dismissals without prejudice are often a classic attempted end run around the final-judgment rule.
Regardless, the Sixth Circuit found another jurisdictional problem, this one in the notice of appeal. The district court decided many issues in a single order, including the Monell claim and the admissibility of the plaintiffs’ expert witness. But the plaintiffs designated only part of that order—dismissal of the Monell claim—in their notice of appeal. This, the Sixth Circuit thought, limited the scope of the plaintiffs’ appeal to the Monell claim. Had the plaintiffs designated the entire order in their notice, the expert-witness issue might be within the scope of appeal (there was an additional issue as to mootness, as only the officer had moved to exclude the expert witness, and the city did not join that motion). But by designating only the Monell claim, the plaintiffs “narrowed their appeal” to only that issue. The court accordingly lacked jurisdiction to review the exclusion of the expert witness.
This is another example of courts (wrongfully, in my opinion) narrowing the scope of an appeal due to the contents of a notice of appeal. The proposed amendments to Rule 3(c) that will fix this can’t come soon enough.
Stewart v. City of Memphis, 2019 WL 5096074 (6th Cir. 2019), available at the Sixth Circuit and Westlaw.
The Fifth Circuit dismissed an interlocutory challenge to Matthew Whitaker’s appointment as Acting Attorney General
In United States v. Valencia, the Fifth Circuit held that it lacked jurisdiction to review the denial of a motion that challenged the legality of Matthew Whitaker’s appointment as Acting Attorney General.
The defendant in Valencia moved to dismiss his indictment, arguing that Whitaker’s designation as Acting Attorney General violated the Appointments Clause. The district court denied the motion, and the defendant appealed.
The defendant argued that the district court’s decision was appealable under the collateral-order doctrine. But the Fifth Circuit rejected this argument. The district court had conclusively resolved the legality of the indictment, and the court could assume that the decision resolved an important issue completely separate from the merits. But the decision was effectively reviewable on appeal from a final judgment. The Fifth Circuit accordingly dismissed the appeal for lack of jurisdiction.
United States v. Valencia, 2019 WL 5061109 (5th Cir. 2019), available at the Fifth Circuit and Westlaw.
New cert petition on finality and the Patent Act’s punitive-enhancement provision
When a plaintiff is awarded compensatory damages in a patent-infringement action, the district court can increase those damages up to three times. But the decision to increase damages is not always made at the same time as any award of compensatory damages; it might come later. A new cert petition asks if an award of compensatory damages is final and appealable despite an unresolved issue as to the damages enhancement. The case is Brigham and Women’s Hospital, Inc. v. Perrigo Co., No. 19-450.
Intuition might suggest that a decision on only compensatory damages is not final. After all, if a punitive enhancement is possible, an award of compensatory damages does not end district court proceedings; more remains to be done, namely the potential punitive enhancement.
But in the context of attorneys’ fees, the Supreme Court has held that a decision on the merits is final regardless of any outstanding fees issues. The Court reasoned that a decision resolving all merits issues is final, and fees are not part of the merits. So an outstanding fees issue does not affect the finality of the merits decision. This rule has important consequences for the timeliness of an appeal—the time for appealing the merits decisions begins to run once that decision is entered. Appellants who wait to file their notice of appeal until after the fee issue is resolved risk that notice coming too late to appeal the merits. (I’ve argued that this is a silly rule, but it’s well established, with the Court reaffirming it in 2014.)
The petition in Brigham and Women’s Hospital argues that the Patent Act’s punitive enhancement is, like attorneys’ fees, not part of the merits. So the time for appealing the merits decisions begins to run with entry of that decision, not once the district court decides any punitive-enhancement issues. And if that’s the rule, the notice of appeal in Brigham and Women’s Hospital was filed too late to appeal the merits.
The respondent has already waived its right to respond, and the petition is not yet scheduled for conference.
Petition for a Writ of Certiorari, Brigham and Women’s Hospital, Inc. v. Perrigo Co., No. 19-4501 (Sep. 30, 2019), available at the Supreme Court and Westlaw.
Cert denied in Andreoli and Xitronix Corp.
Finally, the Supreme Court denied cert last week in two petitions I’ve been following for some time. Andreoli v. Youngevity International Corp asked if the denial of an anti-SLAPP motion is immediately appealable under the collateral-order doctrine. And Xitronix Corp. v. KLA-Tencor Corp. asked if the Federal Circuit’s exclusive jurisdiction over patent appeals included appeals of Walker Process claims.
I thought that both petitions were worth granting. But I’m also not very good at predicting the Supreme Court’s cert grants. So both issues will have to wait for another day.