Join Us for "The Illinois Supreme Court: Preview of Coming Attractions"

Register now to join us for the first in a new series of webinars by Sedgwick’s Complex Litigation Appellate Task Force. In addition to discussing important decisions coming this fall from the Illinois Supreme Court in the fields of tort law, the law of evidence, insurance law and civil and appellate procedure, we’ll be spotlighting the importance of an appellate lawyer on the trial team, as well discussing our exhaustive empirical research on the state Supreme Court’s decision-making since 2000. To learn more and register, click here.

Image courtesy of Flickr by Teemu008.

Illinois Supreme Court Seems Likely to Reinstate Attorney General's Appeal from ICC Order

In the recently concluded September term, the Illinois Supreme Court heard one of the shortest civil arguments it has heard in many years in People ex rel. Madigan v. Illinois Commerce Commission. Madigan seems likely to result in guidance from the Court as to the interplay of the various filing deadlines which apply to challenging administrative decisions of the Illinois Commerce Commission. Our detailed summary of the facts and lower court orders in Madigan is here.

Madigan arises from the decision of the Illinois Commerce Commission allowing the respondent water company to impose a 1.25% reconciliation charge on its customers, and refusing to require a special sewer rate for low-volume customers. The Attorney General attempted to appeal both aspects of the decision.

Illinois Supreme Court Rule 335 requires that, when administrative review goes initially to the Appellate Court, review is had through a petition for review. It’s been held that Rule 335 incorporates the 30-day filing deadline of Rule 303(A). The Public Utilities Act, on the other hand – 220 ILCS 5/10-201(a) – provides for a thirty-five day filing deadline, but speaks of notices of appeal.

And that’s where things get really interesting. The Fifth District of the Appellate Court struck down Section 10-201 twenty-seven years ago in Consumers Gas Co. v. Illinois Commerce Commission. So the Appellate Court held that the matter was simple – the thirty-five day limit was a separation of powers violation, thirty days governed, so the appeal was untimely.

Counsel for the Attorney General led off in the short argument. He explained that because of the confused state of the law, the Attorney General had filed both a notice of appeal and a petition for review on the thirty-fifth day. Counsel argued that the cases holding that Rule 335 incorporated a thirty-day default time limit had been superseded by subsequent statutory amendments, increasing most statutory deadlines previously set at thirty days to thirty-five. Given that the legislature has now made it clear that thirty-five days is the default filing deadline, the earlier cases should no longer be followed. Justice Freeman asked whether the Court should overrule the earlier authority, and counsel for the Attorney General responded that the Court could reverse without doing so, but he agreed that the Court should clarify exactly what the rules are.

Counsel for the Commerce Commission concluded, urging the Court to clarify that appeals from the Commission’s decision simply required strict compliance with the provisions of the Public Utility Act, Section 10-201.

We expect Madigan to be decided in three to four months.

Image courtesy of Flickr by Dan Moyle.

Illinois Supreme Court Agrees to Unravel Procedural Tangle in Internet Posting Case

Our previews of the newest additions to the Illinois Supreme Court’s civil docket continue with Hadley v. Subscriber Doe. Hadley is a defamation case arising from an anonymous internet posting, but that issue comes wrapped in a couple of interesting procedural problems.

The plaintiff was a candidate for political office. At the end of an online newspaper article discussing the plaintiff’s fiscal positions, an anonymous reader posted a defamatory comment about the plaintiff. The plaintiff filed a defamation suit against the poster, using only his online screen-name. Then the plaintiff sent the cable company a subpoena, demanding that they disclose who the poster’s ISP address belonged to.

At the hearing on the motion to quash, the trial court noted that the whole matter would be better addressed within the context of Supreme Court Rule 224. Rule 224 allows persons who wish to engage in discovery for the sole purpose of identifying a person who might be liable to them in damages to file a verified petition for such discovery.

Based on the trial court’s instructions, the plaintiff filed an amended complaint. The first count was the defamation claim against the poster. The second count named the internet company as the respondent and asked, pursuant to Rule 224, for an order that the poster’s identity and address be disclosed.

After a hearing, the trial court entered an order granting the Rule 224 petition for disclosure on the grounds that the poster’s comment was not susceptible to an innocent construction, and could reasonably be interpreted as an assertion of fact. On reconsideration, the poster brought up a procedural problem. He asked whether the Court’s order was a standard order on a Rule 224 action, which would be immediately appealable, or an order disposing of one count of a two count complaint, in which case it would require Rule 304(a) language finding that it was a final order and appeal shouldn’t be postponed? The trial court expressed the opinion that its order was final as disposing of the Rule 224 issue, but just to make sure, the court added Rule 304(a) language.

The majority of the Court of Appeal affirmed, dealing in some detail with the issues of innocent construction and whether an anonymous post on an internet comments thread can reasonably be construed as a factual assertion. The majority then turned to the procedural issues.

First up was the question of the statute of limitations. The poster said there’s no reason to disclose his name because the plaintiff can’t possibly state a claim within the one-year statute of limitations. The defendant conceded that the plaintiff had filed his complaint within the one-year statute, but the complaint was directed only against the poster’s fictitious screen name. The poster said a complaint suing a fictitious person is a nullity, so that doesn’t satisfy the statute. The Appellate Court conceded that the issue had never been addressed in a Rule 224 case, but they turned to another recent case of the Supreme Court, in which the Court held that a suit against an alias of an actual person is not a nullity. The screen name was a fictitious name, the Court held, not a fictitious person. Since the poster had been sued within the one year statute, the statute of limitations defense failed.

Next, the court turned to the jurisdictional question. The majority concluded that even though the plaintiff’s petition had been stated in a single complaint with the defamation claim – which was still pending – it was an ordinary Rule 224 order. The only other procedural tool available to determine the identity of a missing defendant was found in 735 ILCS 5/2-402, but that wouldn’t work here, because Section 2-402 was intended to identify additional defendants when you’d already named one. Here, the poster was the only defendant.

The majority conceded that the case was a procedural tangle. Rule 224 petitions are ordinarily supposed to be brought before filing suit, and they’re the sole claim – when the petition is resolved, the case is over, and can proceed up on appeal as a final order. Here, the defamation claim was still pending before the trial court. But even if that ordinarily would render the order non-final, the Court concluded, the Rule 304(a) language took care of the problem.

Justice Birkett dissented on the procedural issue. He argued that the case couldn’t be treated as a Rule 224 petition – it hadn’t been brought as an independent, standalone action. He pointed out that the only reason a Rule 224 order was final and appealable is it usually concluded the action. But that wasn’t true here, so there was no basis for an appeal. Besides, there was no need for a Rule 224 petition in this case, according to Justice Birkett. The plaintiff could have simply subpoenaed the internet company and demanded the name and address of the account holder. “No matter how you dress it up,” Justice Birkett concluded, “this is a nonfinal discovery order, which is not appealable.” Regardless of the important issues and rights at stake, the trial court was “simply looking for a jurisdictional hook . . . to have an immediate appeal.” Justice Birkett believed that no such jurisdictional hook existed. 

Image courtesy of Flickr by Marcelo Graciolli.

Illinois Supreme Court Agrees to Decide If Accountant-Client Privilege Applies to Will Contests

In the closing days of its September term, the Illinois Supreme Court allowed a petition for leave to appeal in Brunton v. Kruger. Brunton involves the scope of the accountant-client privilege – more specifically, what happens to that privilege after the client dies, and how the privilege can be waived.

In Brunton, an accounting firm assisted a couple with estate planning. As part of that planning process, both spouses executed a will and a trust. By 2011, both of the testators had died, leaving three adult sons and one daughter. The wife’s will was admitted to probate. It bequeathed her tangible person property to her husband, who was deceased by then, and the residue of her estate was to be distributed pursuant to the Trust. The Trust said that one of the three sons would get the entirety of the family farm, and everything else would be distributed to the three sons equally. Both trusts said that the couple was “mindful” of their daughter, but they were deliberately making no provision for her because they had provided for her in other ways.

Just after probate was opened, the daughter filed a will challenge, alleging undue influence by one of the sons. The sons, who were defending the will, issued a deposition subpoena to the accountants, seeking all the estate documents. Not long after, the daughter subpoenaed the estate planning documents as well. The accountants provided the documents to the sons’ representatives, but refused to provide them to the daughter, claiming accountant-client privilege. The trial court initially agreed and refused to compel production, but after a second subpoena from the daughter, the court held that the privilege had been waived by the sons when they requested the documents, and the accountants produced them. Counsel for the accountants declined to produce the documents and appealed the trial court’s order.

Section 27 of the Illinois Public Accounting Act says that a certified public accountant cannot be compelled to produce information obtained by him or her “in his confidential capacity” as a CPA. In 2002, the Eighth Circuit construed the privilege and held that it only covered information obtained during the course of auditing a financial statement. The Appellate Court in Brunton refused to follow that decision, pointing out that the whole purpose of auditing a financial statement is so that third parties can read your work product. The Court commented that accountants do many things beyond auditing financial statements, and one of those functions is participating in estate planning. The Court believe that the legislature wouldn’t have used such broad language in describing the privilege if it was only concerned about a small fraction of the accountant’s job.

The Court held that there were two reasons to compel production of this material. First, the Court noted that the attorney-client privilege, which is construed similarly in most cases to the accountant-client privilege, is automatically waived in a will contest. The Court held that it saw no reason to construe the accountant’s privilege differently, so the materials were producible solely because the case was a will contest.

Alternatively, the Court said any privilege has been waived. The accountants argued that they held the privilege, and they hadn’t waived anything, but the Court said that the privilege exists to encourage full communication by the clients, so the privilege is held by the client. Since the sons – the people defending the estate – had already subpoenaed the estate documents themselves, the Court said that waived any privilege, and the material had to be produced to the daughter.

We expect Brunton to be decided in six to eight months.

Image by Flickr courtesy of Ken Mayer.

Illinois Supreme Court Holds Improper Venue Not a Jurisdictional Defect in Administrative Review

A unanimous Illinois Supreme Court recently decided Slepicka v. The Illinois Department of Public HealthThe Court defined proper venue for an action under state law for judicial review of an administrative decision, and rejected a claim that improper venue was a jurisdictional defect necessitating dismissal. Our detailed summary of the facts and lower court opinions in Slepicka is here. Our report on the oral argument is here.

Slepicka arose from a nursing home’s notice of involuntary transfer or discharge, sent to a resident based upon nonpayment. The plaintiff exercised her right to an administrative hearing, and the hearing was conducted at the defendant nursing home in Cook County. Some time later, an administrative decision approving the transfer or discharge was issued from the Department’s office in Springfield. The plaintiff filed a complaint for administrative review in the Circuit Court for Sangamon County – where Springfield is – rather than in Cook County. The Circuit Court denied the defendant’s motion to dismiss for improper venue, but ultimately upheld the transfer/discharge order. On appeal, the Appellate Court held that Sangamon County was not a proper venue, but that the defect was not jurisdictional. The Court transferred the matter to Cook County Circuit Court for a do-over.

In an opinion by Justice Freeman, the Supreme Court affirmed in part and vacated in part. The Court noted that complaints for judicial review under the Administrative Review Law must be filed in the Circuit Court for the county where: (1) “any part of the hearing or proceeding culminating in the administrative decision was held,” (2) any part of the subject matter involved is situated, or (3) any part of the transaction which gave rise to the proceedings occurred. The second and third factor clearly pointed towards Cook County. The plaintiff argued that venue was proper in Sangamon County under the first test because “part of the hearing or proceeding” – the final decision – had been reached in Sangamon County.

The Court disagreed. Carefully parsing the language of the statute using the settled rules of statutory construction, the Court concluded that the writing and mailing of the administrative decision did not constitute “part of the hearing or proceeding.” In addition, the Court noted that acceptance of the plaintiff’s argument could easily lead to forum shopping, since venue could vest in a particular county based on purely ministerial acts such as mailing an administrative decision.

The Court then addressed the question of what impact the improper venue should have on the case. The defendant argued that because administrative review is performed pursuant to special statutory jurisdiction – and strict compliance with the statutory rules is required – improper venue was a jurisdictional defect. The Court disagreed. The Court noted Section 2-104(a) of the Code of Civil Procedure provides that improper venue is never grounds for dismissal, and nothing in the Administrative Review Law exempts proceedings under that statute from Section 2-104(a). The Court noted that it had decided nearly fifty years ago, in Merit Chevrolet, Inc. v. Department of Revenue, that administrative actions could be transferred on grounds of improper venue.

Ultimately – and not surprisingly – the Court reached a pragmatic result. Although the Sangamon County Circuit Court would have been justified in immediately transferring the matter to Cook County, that did not mean that the Court lacked jurisdiction to proceed. Since the Sangamon County court had reached a decision, appeal at the Appellate Court was a matter of right, and the Appellate Court should have reached the merits. Accordingly, the Supreme Court vacated the transfer order and remanded the matter to the Appellate Court for review of the merits of the Department’s decision.

Image courtesy of Flickr by Brad Clinesmith.

Illinois Supreme Court Rejects Expansive Interpretation of Exception to Open-and-Obvious

In the recently concluded September term, the Illinois Supreme Court reaffirmed the “open-and-obvious peril” doctrine and gave needed definition to the “distraction” exception to that rule, unanimously reversing a decision of the Fifth District in Bruns v. The City of Centralia. Our detailed summary of the facts and lower court decisions in Bruns is here. Our report on the oral argument is here.

Bruns arose from an accident in the spring of 2012. The plaintiff, just days short of her eightieth birthday, arrived at an eye clinic for her appointment. She had been to the clinic nine times before. In front of the clinic, the sidewalk had cracked and become uneven in one stretch due to the effect of the roots of a nearby tree. Three years before, the clinic had offered to remove the tree at its own expense, but the City had denied permission due to the tree’s historic significance. The plaintiff had noticed the defect in the sidewalk during each previous visit, and believed she had noticed it on the day of the accident. But she was focused on the door of the clinic, and she fell. When the plaintiff sued the City, the City moved for summary judgment, arguing that the sidewalk defect was an open-and-obvious hazard as a matter of law. The Circuit Court granted summary judgment, but the Court of Appeal reversed, holding that the “distraction” exception – which reinstates the duty of care when a land owner or occupant should expect that the invitee’s attention will be distracted, and he or she will not perceive the risk, or will forget about it – potentially applied.

The Supreme Court unanimously reversed in an opinion by Justice Theis. Reviewing previous decisions applying the distraction exception, the Court concluded that it is not enough for the plaintiff to merely show that he or she was not focused on the risk. The Court held that for the exception to apply, the plaintiff must show that a foreseeable circumstance required him or her to focus attention elsewhere, and fail to notice (or forget about) the open-and-obvious risk. The plaintiff had shown, at most, that she was focused on the clinic door, the Court commented. She had not proven that she had to do so.

The Court noted that a finding of an open-and-obvious danger was not an automatic bar to finding that the defendant owed the plaintiff a duty of care. The doctrine merely goes to the first two steps in the standard four-factor test for duty (reasonable foreseeability of injury; likelihood of injury; burden of guarding against the injury; and consequences of placing that burden on defendant). Thus, the Court suggested that in an appropriate case, a duty could be found even with respect to an open-and-obvious risk. But in Bruns, the Court found no duty as a matter of law. Even though the burden of repairing the single stretch of sidewalk would presumably not be great, the Court emphasized the miles of sidewalk the City was responsible for, and concluded that the burden was unjustifiably great, given the nature of the risk.

Image courtesy of Flickr by Kristian Bjornard.

Testing Liability: The Legacy of Brown v. Superior Court in Products Liability

Now over 25 years old, Brown v. Superior Court established a significant precedent regarding medical products liability, and products liability generally. In addition to its specific holdings, Brown has been credited with articulating the three separate theories of products liability—manufacturing defect, design defect, and failure to warn—at a time when these were often lumped into a single claim of strict products liability. The court in Brown unanimously held that:

1)  Strict products liability for defect design does not apply to prescription drugs,

2)  Strict liability for failure to warn in prescription drug cases is limited to information that was reasonably scientifically known or knowable at the time of distribution, and

3)  The market share theory applied in Sindell v. Abbott Laboratories does not apply to breach of warranty or fraud claims and a defendant is only liable for an apportionment equal to its then market share of the subject product.

In the time since Brown, its blanket restriction on design defect claims, which remains a minority rule, has been expanded in California to all implanted medical devices, such as IUDs, breast implants and artificial joints. Attempts to expand it further to selected non-prescription medical products have so far been unsuccessful, although on a case-by-case basis. Conversely, its ruling on warnings follows the national majority rule and has been applied to products claims generally. The market share theory has not seen wide application, presumably in part because of the restrictions imposed by Brown. For more details regarding the history and legacy of Brown, please see my article in the September 2014 issue of Los Angeles Lawyer, which can be found here.

Copyright 2014 Los Angeles Lawyer. Reprinted with permission.

"I'll Tell You What Really Happened": In the 6th Circuit, Experts Can Contradict Their Clients' Testimony

The weight of expert testimony in product liability cases can hardly be overstated. Because complex questions of scientific and medical causation often hold sway, juries are thirsty for someone to tell them what the evidence means, and thus the inevitable “battle of the experts” ensues. But what happens when an expert tells the jury that the physical evidence means his client’s own recollection of events is wrong? According to the Sixth Circuit Court of Appeals, such expert opinion is not only admissible, but district courts abuse their discretion by excluding it.

In Lee v. Smith & Wesson Corp., 2014 WL 3715084, --- F.3d --- (6th Cir., Jul. 29, 2014), the plaintiff’s testimony was very clear that the third target practice shot he fired from his Smith & Wesson revolver – during which the gun discharged improperly and seriously injured Lee’s face – was no different from the previous two: He had no difficulty with the gun, the cylinder was closed when he fired, and he never touched the thumb latch. His sole causation expert’s opinion, however, was directly contrary: “When Mr. Lee attempted to fire his gun for the third shot, the cylinder failed to fully close and the gun would not fire. Not understanding the problem and as the cylinder appeared to be closed, Mr. Lee pushed on the thumb latch and in so doing was able to cock and fire the gun with the result experienced.”

Defendant Smith & Wesson sought to exclude the opinion of Lee’s expert on the ground that it was fundamentally inconsistent with his client’s testimony and thus irrelevant under Federal Rule of Evidence 702. The district court agreed and granted Smith & Wesson’s motion in limine. Thereafter, Lee agreed to a stipulated dismissal and appealed.

The Sixth Circuit reversed and remanded, holding that “a party is not precluded from proving his case by any relevant evidence, even though that evidence may contradict the testimony of a witness previously called by him.”  Thus, “[e]ven under the deferential abuse-of-discretion standard, the district court’s exclusion of [the expert’s] testimony as inadmissible under Rule 702 was not proper.” The “expert testimony should have been admitted” because the expert “had the appropriate qualifications, he used reliable methods, and his opinion was based on physical evidence from the accident.” As the first two reasons were never challenged, the court’s ruling necessarily turns on the expert opinion’s foundation in the evidence.

The court began, however, by pointing out that the expert’s opinion had support from other testimonial evidence. Specifically, Lee’s friend and another witness each testified that the gun’s cylinder was open in the moments immediately after the third shot. According to the court, “[t]his evidence supports [the expert’s] theory and contradicts Lee’s testimony.” As a result, “a reasonable fact finder could conclude that Lee thought he had closed the chamber but in fact did not, and instead overlooked the opening,” and thus his expert’s opinion based on that predicate “would be highly relevant to determining whether the gun was defective.”

“It is true,” the Sixth Circuit conceded, “that expert testimony should be excluded if it relies on facts that no jury could accept, or relies on the rejection of facts that any jury would be required to accept.” However, the court held, those facts must be grounded in the physical evidence. To illustrate, the Court cited its decision in Greenwell v. Boatwright, 184 F.3d 492, 497-98 (6th Cir. 1999), a motor vehicle collision case in which the plaintiff’s theory – supported by eyewitness testimony – was that the defendant’s truck “fish-tailed,” but the defendant’s expert relied on physical evidence in opining that no fish-tailing occurred. The Greenwell court held that such expert testimony was only properly excluded where the opposing party “present[ed] facts that plainly contradict the physical evidence upon which the expert based his theory of the accident.”

The Court concluded by making an observation that might reasonably be called the loadstar of its analysis: “A tort plaintiff should be able to testify honestly to his memory of what happened and still have his lawyer argue that on the evidence as a whole it is more probable than not that the memory was faulty.”

The Sixth Circuit’s analysis holds a certain logical appeal. It makes sense that an expert could demonstrate from the physical evidence that a witness’s recollection must have been mistaken. On the other hand, only the witness is an expert in his or her own conduct. It therefore seems odd to allow an expert to substitute his own speculative version of events – constructed specifically to support his theory – for the witness’s own contrary recollection, simply because the physical evidence does not absolutely prohibit the expert’s version. It is doubly odd to compel a district court, whose evidentiary rulings are usually granted wide latitude, to admit expert opinion despite testimonial evidence that is directly contradictory. Indeed, the Sixth Circuit’s own use of eyewitness testimony to buttress the expert’s opinion suggests that testimonial evidence is not as irrelevant to the analysis as the Court’s articulated rule would require.

Oddities aside, it remains that, in the Sixth Circuit at least, a party is no longer bound to causation theories that match his own testimony – as long as his expert can explain how the physical evidence supports, or at least does not negate, a contradictory opinion. Although corroborating testimonial evidence is apparently beneficial, as well.

Image courtesy of Flickr by Steve Jurvetson.

Texas Supreme Court Upholds Class Representative's Authority to Dispose of Unclaimed Settlement Proceeds

A sharply divided Texas Supreme Court recently held that unclaimed class action settlement funds may be disposed of in the manner selected by the parties and are not subject to the state’s Unclaimed Property Act. In Highland Homes Ltd. v. The State of Texas, the court considered a settlement between a prominent Texas home builder and a class of subcontractors arising from a dispute over deductions in pay made by the homebuilder to cover the cost of providing adequate liability insurance coverage. The settlement required the defendant to establish a fund to pay claims. Recognizing that some class members might remain unlocated or fail to file a timely claim, the settlement provided that any settlement checks not negotiated within 90 days would be void and that these and any other unclaimed funds would be given to the Nature Conservancy. This type of cy pres settlement procedure has proven controversial recently and some court and commentators have criticized such arrangements. Nevertheless the trial court approved the settlement..

The state of Texas intervened in the case, asserting that the disposition of unclaimed settlement funds violated the Texas Unclaimed Property Act. Under the Act property not claimed within three years is presumed abandoned and is placed in the custody of the Comptroller to hold for the owner. The state argued that regardless of the terms of the settlement, any unclaimed settlement funds must be disposed of according to the statute. The court of appeals agreed with the state and ordered that the undistributed funds be held by the claims administrator for three years and then remitted to the Comptroller.

The Supreme Court reversed. In an opinion authored by Chief Justice Hecht, the five-justice majority reasoned that the Unclaimed Property Act did not apply because the funds were not really unclaimed. The class members had asserted claims and exercised ownership of the funds through the class representative. Once the class was certified the representative has the authority to dispose of any claims including the ability to direct the disposition of funds that could not be paid directly to the class members. 

Justice Devine penned a dissent on behalf of four justices. In their view the class certification rules were trumped by the Unclaimed Property Act because a procedural rule cannot enlarge or diminish any substantive rights. Once the settlement was funded, the dissent reasoned, the proceeds became the property of the individual class members and because subject to the Act.

The Highland Homes opinion upholds the ability of class representatives and defendants to strike class action settlements. If state unclaimed property statutes necessarily apply to all unclaimed settlement proceeds, parties to class litigation will have lost a considerable degree of flexibility in crafting settlements. Cy pres provisions would be difficult or impossible to enforce, as would provisions where the defendant obtains a reversion of the unclaimed funds. While fund-and-claim class action settlement arrangements are subject to some legitimate criticism, especially where the claims process is made unduly burdensome, the inability to use such an arrangement would deprive litigants of what is often a reasonable means of resolving disputes, especially in cases where the scope of actual loss by the class members is in dispute or cannot be readily ascertained. 

Image courtesy of Flickr by J.R.

The Adverse Amicus: Does Court Acceptance of Factual Assertions Require a More Active Response?

The September 1 issue of the New York Times reports on an upcoming article on the role of amicus curiae briefs in shaping Supreme Court opinions. The article, authored by William and Mary professor, Allison Orr Larsen, addresses the tendency of Supreme Court Justices to cite factual assertions made by amici. These assertions may inject matters into the Court’s decision making process that were not placed before the trial court and may not have received the vetting that a factual assertion by a party has received. While various Justices have warned against resorting to such off-the-record facts, Professor Larsen has turned up a number of instances where Supreme Court opinions have cited amicus briefs for various factual matters—including instances where the briefs themselves provide no further authority for backing up the claim.

The acceptance of and reliance upon friend-of-the-court briefs varies greatly among the appellate courts. Texas, for example, takes a rather welcoming attitude towards such briefs. In jurisdictions where a robust amicus practice is allowed, Professor Larsen’s work suggests that litigants should take claims made in amicus briefs seriously. Where a claim lacks a basis in the record it may be necessary to move the court to strike that portion of the brief and to remind the court of its responsibility to judge the case based upon the record before it, not the assertions of an interested “friend.”

Fifth Circuit Applies Punitive Damages Limitations to Statutory Civil Penalties

It’s not uncommon for state and federal regulatory schemes to provide for an award of statutory civil penalties to deter and punish certain conduct that it is difficult to monetize in a suit for damages. Frequently penalties may be assessed on a per-violation or per-day basis, permitting an astronomical award that bears little relation to the actual harm sustained by the persons for whose benefit the statute has been enacted. The Telephone Consumer Protection Act with its $500 per violation penalty for sending unsolicited fax advertisements is perhaps the best well known of these statutes but numerous others appear in the United States Code and among the state statutes.

Since these penalties are not intended primarily to compensate the victim of the unlawful practice and exist largely for the public purposes of punishing conduct deemed socially unacceptable the question arises of whether laws governing punitive damages awards constrain the courts in determining the total amount of punitive damages that may be awarded.

In Forte v. Wal-Mart Stores [pdf] four optometrists alleged that Wal-Mart had violated the Texas Optometry Act by writing into lease agreements with the optometrists a provision providing a minimum number of hours that the optometrists’ in-store offices would be opened. The optometrists conceded that they had sustained no damages but the jury awarded them nearly 4 million, amounting to a civil penalty of $1000 per day for each day the offending leases were in effect. The district court entered a remittitur reducing the civil penalty to approximately $1.4 million.

The Fifth Circuit reversed the civil penalty award under Chapter 41 of the Texas Civil Practice and Remedies Code, which governs the award of punitive damages. The court applied the Code’s definition of punitive damages which encompass any damages awarded as a penalty but not for compensatory purposes. The Optometry Act’s penalty provisions were specifically penal and nature and were not intended as compensation. The Fifth Circuit distinguished the case from a prior holding that had held Chapter 41 did not extend to civil penalties for the filing of false liens because in the prior case statutory damages provision expressly mentioned punitive damages indicating that the statutory penalty itself was no considered punitive damages by the legislature and because the statutory damages provision in the false liens case was not characterized as a penalty.

The Fifth Circuit then determined that the punitive damages cap under Chapter 41 was zero because the Chapter provided that punitive damage could only be recovered when the plaintiff received some non-nominal award of actual damages.

The result of the holding is dramatic. In effect, Chapter 41’s general provision that punitive damages may not be recovered in the absence of actual damages is permitted to trump a specific statutory provision allowing for the recovery of a civil penalty in the absence of actual damages. It will be necessary to carefully examine every Texas statute providing for a civil penalty to determine whether it is subject to Chapter 41’s zero cap.

Because Wal-Mart prevailed on its statutory argument the Fifth Circuit was not required to rule upon the interesting constitutional question of whether Due Process constrains a state’s ability to impose a civil penalty disproportionate to the actual harm caused by the unlawful activity. If Due Process limits a jury’s ability to award punitive damages to some reasonable ratio of the actual damages, it would seem that the legislature’s ability to meet out punishment through civil penalties is similarly limited.

Florida High Court to Decide If Party Must Object to a Fundamentally Inconsistent Verdict to Preserve Issue

We, the jury, return the following verdict:
1. Did Defendants place the product 
    on the market with a design defect,
    which was a legal cause of the
    decedent’s death?
    YES _______ NO X
2.  Was there negligence on the part of
     Defendants which was a legal cause of
     decedent’s death?
     YES X NO ________

The Florida Supreme Court has accepted review of a Third District case involving whether a party waives a challenge to a fundamentally inconsistent verdict by failing to object before the jury is discharged.  See Coba v. Tricam Indus., Inc., No. SC12-2624. The Third District decided that a waiver does not occur under these circumstances.  To view the Third District’s opinion, click here.

After Robert Coba, a civil engineer, died from a falling from a ladder, his estate sued Tricam, the ladder manufacturer, and Home Depot, the seller, for strict liability and negligence.  The verdict form contained the following two interrogatories:

(1) Did Defendants, Tricam Industries and/or Home Depot, place the ladder on the market with a design defect, which was a legal cause of Roberto Coba’s death?

(2) Was there negligence on the part of Defendants, Tricam Industries and/or Home Depot, which was a legal cause of Roberto Coba’s death?

Because plaintiff’s products liability theory at trial was based on a design defect only, the jury inconsistently found that there was no design defect, but that the defendants’ negligence was the legal cause of the Coba’s death.  After the jury was discharged, defendants moved to set aside the verdict, claiming that there was insufficient evidence to sustain the jury’s negligence finding. The trial court denied the motion.

On appeal, the Third District found that the trial court erred in denying defendants’ motion to set aside the verdict in accordance with their motion for directed verdict. The court acknowledged that normally, a party would have waived their objection to a purportedly inconsistent verdict if they failed to object before the jury was discharged. The court, however, held that an exception to this rule exists where the inconsistency “is of a fundamental nature.”

The court relied on the Fourth District’s 2004 opinion in Nissan Motor Co. v. Alvarez and the Fifth District’s 1985 decision in American Catamaran Racing Ass’n v. McCollister—both factually similar cases where the jury was presented with a similar verdict form. In both decisions, the district courts considered the fact that the only evidence of negligence that had been introduced related to the alleged design defect. Because both juries found that there was no defect, the Fourth and Fifth Districts held that a concurrent finding of negligence could not be sustained. The Third District adopted the reasoning in these cases to hold that a party does not have to object to such a fundamentally inconsistent verdict.

The court also stated there was no need to remand for a new trial because the jury had already decided on the only evidence that had been presented—specifically, the alleged design defect. Because no other evidence had been introduced to support any other cause of action, the Third District held that no issue remained to be resolved.

Senior Judge Schwartz dissented in part, reasoning that defendants had waived their right to complain of an inconsistent verdict because they failed to request that the inconsistency be resolved after the verdict was returned. Judge Schwartz further explained that even if this were not the case, he believed that the appropriate remedy is to grant a new trial so that a jury—not the court—can resolve the inconsistency.

This article will be updated once the Florida Supreme Court decides the case.


Florida High Court to Decide Whether Statute of Frauds Applies to Oral Agreement to Split Lottery Winnings



On June 20, 2014, the Florida Supreme Court accepted review of a Fifth District decision that certified the following question of great public importance:

Is an oral agreement to play the lottery and split the proceeds in the event a winning ticket is purchased unenforceable under the statute of frauds when: there is no time agreed for the complete performance of the agreement; the parties intended the agreement to extend for longer than one year and it did extend for a period of fourteen years; and it clearly appears from the surrounding circumstances and the object to be accomplished that the oral agreement would last longer than one year.

See Browning v. Poirier, No. SC13-2416. To view the Fifth District’s opinion click here.

Howard Browning and Lynn Poirier lived together as a couple between 1991 and 2009.  In 1993, the couple orally agreed that they would split the winnings of any lottery tickets purchased by either of them while they remained in a relationship. In  2007, Poirier purchased a winning ticket and received $1 million dollars less taxes. Poirier, however, refused to give Browning half of the proceeds. Browning in turn sued for breach of an oral contract and unjust enrichment, seeking half of Poirier’s winnings. Poirier moved for directed verdict on both causes of actions, claiming the statute of frauds as a defense. The trial court granted Poirier’s motion on both counts, entering final judgment in favor of Poirier.

Rehearing the case en banc, the Fifth District held that Poirier was entitled to a directed verdict on the breach of contract claim because the couple’s agreement was voided by the statute of frauds. Citing the Florida Supreme Court case of Yates v. Ball, the district court explained that an oral contract with no specified date for performance is subject to the statute of frauds if it is clear that the parties intended for it to last longer than one year.  The district court highlighted that Browning and Poirier’s lottery agreement was to extend until the couple’s relationship ended. The court stated that any suggestion that the couple had intended for their relationship—and thereby, the lottery agreement—to end within one year was belied by the evidence indicating their intention for a long-term commitment. Ultimately, the district court certified this issue to the supreme court.

The Fifth District reversed the trial court’s judgment on Browning’s claim for unjust enrichment. Because Browning testified that he had given Poirier the money to purchase the winning ticket with the implied understanding that they would share the proceeds, the district court held that a directed verdict should not have been granted in Poirer’s favor.

Judges Torpy and Griffin dissented in part.  They agreed that the directed verdict on the unjust enrichment count was error, but characterized the majority’s conclusion on the contract claim as ignoring the plain language of the statute, stating that it only considers contracts which clearly cannot—as opposed to likely will not—be performed within one year. Browning made a similar argument in his initial brief to the supreme court, contending that the qualifying rule articulated in Yates contradicts the plain language of the statute of frauds and improperly brings the subject contract within its reach.

This article will be updated once this Court decides the case.

Image courtesy of Flickr by Mark Ou.




Florida High Court to Decide Which Test Governs Component Parts Doctrine


On April 8, 2014, the Florida Supreme Court heard oral arguments in an asbestos case concerning the liability of a defendant who has sold a component part to a manufacturer who then incorporates the part into its own products.  See Aubin v. Union Carbide Corp., No. SC12-2075.  On review was a decision from the Third District Court of Appeal which held that the Third Restatement of Torts’ component parts doctrine was the governing standard, expressly rejecting the Second Restatement’s test.   See Union Carbide Corp. v. Aubin, 97 So. 3d 886 (Fla. 3d DCA 2012).  To view the district court opinion click here and to view the supreme court oral argument click here.

Aubin worked as a superintendent at his father’s construction company from 1972 to 1974. During this time, he routinely handled and was exposed to joint compounds and ceiling textures. One of the ingredients in these materials was a chrysotile asbestos product mined, processed, and sold by Carbide. After contracting mesothelioma, Aubin filed suit alleging negligence and strict liability as a result of design, manufacturing, and warning defects.

The Third District held that the trial court had erred in: (1) deciding that Aubin’s claims were governed by the Second Restatement’s “consumer expectations” test as opposed to the Third Restatement “risk-utility/risk-benefit” test, (2) denying Carbide’s motion for directed verdict on the design defect claim, and (3) failing to instruct the jury that Carbide could have discharged its duty to warn end-users by adequately warning the intermediary manufacturer.

The district court disagreed that its own precedent in Kohler v. Marcotte—which adopts the Third Restatement’s component parts doctrine—was not binding because the Florida Supreme Court had previously adopted the Second (rather than the Third) Restatement.  The district court stated that absent overruling from the supreme court, the Third Restatement’s test controls in the Third District.  That test provides that a component part seller or distributor is liable when: (a) the component is defective in itself and the defect causes the harm; or (b) the seller or distributor substantially participates in the integration of the component into the design of the product; and (c) the integration of the component causes the product to be defective; and (d) the defect in  the product causes the harm.

Focusing on the first “avenue” of liability under the Third Restatement, the district court held that Aubin’s design defect claim failed because he did not establish how the design of the product caused his harm—specifically, that its design caused the product to be more dangerous than raw chrysotile asbestos is in its natural state.  

The Third District also acknowledged that there was no general rule for determining whether a manufacturer may rely on an intermediary to warn end-users, thereby discharging its own duty to warn. Citing the Third Restatement’s comments, the court stated that the inquiry was controlled by a reasonableness standard and included factors such as the gravity of the product’s risk, the likelihood that the intermediary will convey the warning, and the feasibility of warning the end-user. The court also referenced the “learned intermediary” doctrine—which considers the intermediary’s education, knowledge, expertise, and relationship with the end-user—as an informative (but not dispositive) factor. Therefore, the court affirmed the trial court’s finding that there was sufficient evidence to create a factual issue over Aubin’s claim that product had a defective warning.

After acknowledging that a manufacturer’s duty to warn may be discharged by reasonable reliance on an intermediary, the court also held that it was error for the trial court to not have incorporated this into the jury instructions.

Aubin later moved to certify direct conflict, claiming that the Third District’s decision directly conflicted with Fourth District precedent applying the Second Restatement. The court denied Aubin’s motion, explaining that the outcome of its decision would have been the same under the Second Restatement, because the pertinent tests were comparable.


Image courtesy of Flickr by Aaron Suggs.


Governor Brown Taps Cuellar to Fill Latest Vacancy on California Supreme Court


Governor Jerry Brown has nominated Stanford law professor Mariano-Florentino Cuellar to fill the most recent vacancy on the California Supreme Court created by the impending retirement of Justice Marvin Baxter. Cuellar is “a renowned scholar who has served two presidents and made significant contributions to both political science and law,” Brown said.  “His vast knowledge and even temperament will – without question – add further luster to our highest court.”

Cuellar was born in Matamoros, Mexico. As a child he crossed the border each day to attend Catholic school in Brownsville, Texas, until he and his family relocated to California’s Imperial Valley when he was 14. After earning a bachelor’s degree from Harvard in 3 years (magna cum laude, 1993), he received a Master’s degree in political science from Stanford in 1996, followed by a law degree from Yale in 1997, and his Ph.D. in political science from Stanford in 2000. He then served as law clerk to Chief Judge Mary M. Schroeder of the United States Court of Appeals for the Ninth Circuit. 

Since the culmination of his clerkship in 2001, Cuellar has been a professor at Stanford. He is currently the Stanley Morrison Professor of Law at Stanford Law School, as well as the Director of Stanford’s Freeman Spogli Institute for International Studies, where he is also a Senior Fellow. According to his faculty biography, his work at Stanford involves “the intersection of law, public policy, and political science.” His courses deal with issues of administrative law, regulation and bureaucracy, executive power, and national security. 

Professor Cuellar’s tenure at Stanford has included governmental, as well as academic, endeavors. In fact, even before he assumed his faculty position at Stanford, he interrupted his Ph.D. program to serve as Senior Advisor to the Under Secretary (Enforcement) of the Treasury from 1997 to 1999, focusing on financial crime enforcement, terrorism financing countermeasures, immigration, and border security. In 2008 and 2009, he served as Co-Chair of the Immigration Policy Working Group for the Obama-Biden Transition Project, where he worked to formulate policies on immigration, borders, and refugees. In 2009 and 2010, he served as Special Assistant to the President for Justice and Regulatory Policy, leading the White House Domestic Policy Council’s work on criminal justice and drug policy; civil rights and liberties; immigration, borders, and refugees; public health and safety; rural development and agriculture policy; and regulatory reform. 

From 2011 to 2013, Cuellar co-chaired the National Equity and Excellence Commission, instituted by Congress to seek ways to improve the performance of public schools. He is currently an Obama appointee to the Council of the Administrative Conference of the United States, which monitors the fairness and efficiency of federal regulatory programs. He is also a board member of the American Constitution Society, often described as a progressive counterpart to the conservative Federalist Society, and the Constitution Project, a non-profit think tank that builds bipartisan consensus on constitutional and legal issues.

Beyond Stanford, Professor Cuellar is associated with the Council on Foreign Relations, the American Bar Association, the La Raza Lawyers’ Association of California, and the National Hispanic Bar Association, among others.  He is married to former Santa Clara County Superior Court Judge Lucy H. Koh, who is now a federal district court judge for the Northern District of California pursuant to an appointment by President Obama.

Because Cuellar has not served on the bench, glimpses of his prospective judicial outlook must be gleaned from his writings and his appearances in the media. A brief survey of his publications reflects an interest and expertise in national and international matters:

  • Governing Security: The Hidden Origins of American Security Agencies, Stanford: Stanford University Press, 2013.
  • “Securing” the Nation: Law, Politics, and Organization at the Federal Security Agency, 1939-1953, 76 U. Chi. L. Rev. 587 (2009) (arguing that American public law is driven by 1) how the executive branch defines national security and 2) how politicians compete to control public organizations that implement the law, and analyzing the intersection of those dynamics by investigation the history of the U.S. Federal Security Agency and drawing perspectives from separation of powers, organization theory, and the study of American political development.)
  • The Political Economies of Criminal Justice, 75 U. Chi. L. Rev. 941 (2008) (responding to the proposition that politicians increasingly govern by framing social policy choices as criminal justice problems, and concluding that “reshaping the [crime-governance connection] to achieve more defensible social goals is a subtle enterprise. Sensible changes in criminal justice could almost certainly yield an acceptable social equilibrium less dependent on incarceration.”)
  • Auditing Executive Discretion, 82 Notre Dame L. Rev. 227 (2006) (proposing an audit framework similar to “sample adjudication of class action” in lieu of the deferential or non-existent judicial review of executive decision-making and reaching 3 conclusions: “(1) Judicial review fails to constrain a broad range of discretionary executive decisions subject to mistakes or malfeasance. (2) The limitations of traditional judicial review do not imply that discretionary executive branch decisions should be immune from some form of review. (3) Arguments for broad executive discretion are often radically underdeveloped and fail to withstand scrutiny.”)
  • The International Criminal Court and the Political Economy of Antitreaty Discourse, 55 Stanford L. Rev. 1597 (May 2003) (arguing that the United States objects to the ICC on “process-oriented” grounds because a “focus on procedure sounds marginally more principled to international audiences than a brute realist assertion that American interests are best served by keeping unfettered control of military decisions.” “Yet this comes with costs: It elides the debate over the value of the brute realist position that American military power should be subject to few meaningful constraints and instead makes it look like the most important question is about the procedural shortcomings of a court that is precisely meant to address the arbitrariness in international criminal justice that critics use to assail it.”)

Cuellar’s appearances in the media have often revolved around his role in shaping the Obama Administration’s immigration policy. His appointment to President Obama’s Immigration Policy Working Group was interpreted by experts as confirmation that President Obama was committed to comprehensive immigration reform. Cuellar observed earlier this year that such reform “is more likely now than it has been in decades.” 

Cuellar’s own experience with immigration shapes his views on the subject now. He told The Stanford Daily last year that “when you grow up on the border, you realize that a legal demarcation has such a huge effect in distinguishing one country from another, for example, and the whole structure of law shapes who’s a citizen and therefore who counts in one society for another.” He recounted to Stanford Magazine being stopped by a law enforcement agent while jogging along the border in Calexico when he was 16, and being asked to provide his papers. He described the encounter as reflecting the “duality” of law enforcement, whose role is to protect, yet who can also spark fear in the community it polices. He acknowledges, though, that moving to the U.S. with a green card gave him “a clear sense that even the very imperfect country I was joining was an extraordinary place.”

Cuellar has also spoken out about “the problem of staggering education inequity.” “Our nation’s stated commitments to academic excellence,” he has written, “are often eloquent but, without more, an insufficient response to challenges at home and globally.” He has also criticized leaders who “decry but tolerate disparities in student outcomes that are not only unfair, but socially and economically dangerous.” 

Pervading his opinions on these and other topics, however, is a fundamental realism. He describes the core of all his research efforts as “trying to look at how societies and legal systems and organizations take on problems that are so difficult to solve that nobody can really expect that they’re likely to be completely solved – ever.” His conclusion: “The world is as messy and complicated as it is beautiful and full of possibility.” As a result, says Hoover Institution Senior Fellow Abraham Sofaer, Cuellar is “not an ideologue,” but is “interested in … practical solutions.” According to Sofaer, a legal adviser to the U.S. Department of State during Ronald Reagan’s and George H.W. Bush’s presidencies, he and Cuellar “could serve in the same administration.”

Justice Marvin Baxter, whose position Cuellar has been nominated to fill, is widely regarded as the court’s most conservative justice. On the other hand, Cuellar was described by Hank Greely, another law professor at Stanford, as “certainly to the left of the middle of the American political spectrum.” Greely qualified his description, however, by noting that Cuellar is “fundamentally a pragmatist.” Thus, while Cuellar’s nomination will likely pull the overall outlook of the Court leftward, its new ideological center may be more moderate than Cuellar’s bona fides might indicate. Moreover, Governor Brown’s second consecutive appointment to the state’s highest bench of an academic with no judicial experience (former U.C. Berkley law professor Goodwin Liu was the first) suggests the Court’s new makeup will include a willingness to approach issues from a fresh perspective and, at any rate, an intellectual bent.

Before Cuellar can take his place on the state’s highest bench, his nomination must be approved by California’s Commission on Judicial Appointments, and by the electorate on the upcoming November ballot.

Image courtesy of Flickr by Lauren Mitchell.