The Appellate Strategist

Insights on appellate issues, trial consultations, and evaluating appeals

Argument Report: Suit for Tortious Interference Barred After It’s Tossed From Probate Court?

By Kirk Jenkins on Posted in Illinois

Our reports on the civil oral arguments of the Illinois Supreme Court’s November term continue with Bjork v. O’Meara. Our pre-argument preview of Bjork is here. Watch the oral argument here.

Before his death, decedent begins taking steps to transfer a bank account to the plaintiff. He dies before the process is completed. The plaintiff intervenes in the will contest, but discovery shows that the bank account was never transferred, and the plaintiff loses her challenge. Later the plaintiff files a suit against the executor for tortious interference with testamentary capacity. Is the suit barred by the six-month statute of limitations on will contests?

That’s the question in Bjork. Before the Circuit Court, the plaintiff insisted that she was stating a tort claim against the executor, not challenging the will. The Circuit Court dismissed anyway. The Appellate Court affirmed, holding that although the plaintiff couldn’t have received complete relief in a will contest, she could have filed her claim in Probate Court in conjunction with the will proceeding.

Based upon the oral argument, the Supreme Court may reverse. The plaintiff began by making it clear that before the decedent’s death, he had begun the process of transferring the bank account. Justice Garman asked whether the plaintiff had tried to prove interference with testamentary capacity in the Probate Court, or just that the account was not in the estate. Counsel responded that at the time of filing her petition to return property, plaintiff had believed that the transfer of the bank account was complete, only discovering otherwise in discovery. Justice Freeman asked whether plaintiff’s allegations of fraud or undue influence would invalidate the will. Counsel responded that such allegations could invalidate the will in other cases, but the plaintiff’s claim had nothing to do with the will. Justice Burke asked whether plaintiff had standing in the Probate Court after her petition was denied, and counsel responded that she did not, listing a variety of distinctions between a will contest and a suit at law for tortious interference. Justice Theis confirmed that the Probate Court had granted the executor’s motion to dismiss the plaintiff, and asked whether at that point, there was nowhere for plaintiff to go but appeal. Counsel agreed that his client’s only remaining choices at that point were appeal or filing the separate lawsuit. Justice Burke asked whether the plaintiff was merely seeking a personal judgment against the executor, and counsel confirmed this: plaintiff was seeking nothing from the estate. Counsel argued that affirmance of the Appellate Court’s opinion would essentially allow a fiduciary to wash fraud through the Probate Act.

Counsel for the defendant faced a hotter bench than had the plaintiff. Justice Burke asked how a will contest could have worked for the plaintiff, since she had no standing. Counsel responded that plaintiff did, in fact, had standing as an interested party under the will — plaintiff’s petition for return of property from the estate was clearly an attack on the will. Justice Thomas pointed to the conflict we discussed in our pre-argument preview between Robinson v. First State Bank of Monticello and In re Estate of Ellis, asking counsel about the Ellis court’s comment that Robinson was limited to situations where the plaintiff had deliberately chosen not to prosecute an available challenge in Probate Court. Counsel argued that the plaintiff had, in fact, appeared in Probate Court, so the Ellis situation didn’t apply. Justice Thomas followed up, asking whether the plaintiff had had the opportunity to contest the will but had chosen not to do so.  Counsel responded that the defendant believed that the Probate Court’s holding that the plaintiff lacked standing to proceed was wrong. Justice Theis asked what relief plaintiff could have gotten in Probate Court. Counsel responded that plaintiff could have filed her tortious interference claim in that Court. Justice Burke pointed out that a tortious interference claim was brought against an individual, not the estate, and wondered why such a claim didn’t fall outside the Probate Act. Counsel responded that the claim was still within the jurisdiction of the Probate Court. Justice Theis sought to clarify the series of events at the Probate Court — when did the Probate Court find that it lacked jurisdiction? Counsel responded that the court had so held on the plaintiff’s motion for reconsideration after her petition was denied. Chief Justice Kilbride asked counsel whether a claim for tortious interference was directed against the estate. Counsel responded that once the Probate Court acquired jurisdiction, it had jurisdiction over all related claims, whether they were, strictly speaking, directly against the estate or not. Justice Thomas asked counsel whether he could cite authority for the proposition that plaintiff had to pursue an appeal after being dismissed at the Probate Court, and counsel cited Robinson and Ellis. Justice Garman asked whether the plaintiff could have filed a complaint in the Law Department while probate was still pending. Counsel responded that no, plaintiff was required to pursue the action in Probate Court, including through an appeal.

When the plaintiff returned to the lectern for rebuttal, the Chief Justice asked counsel what he had filed in probate. Counsel responded that he had filed a petition to return property, and later a citation to discover information. When discovery showed that the transfer of the bank account had not been completed, counsel tried to depose a bank employee; but the Probate Court had denied permission, and the tort claim followed.

Bjork should be decided in the next three to six months.

California Supreme Court: Trial Courts Must Act as ‘Gatekeepers’ to Exclude Speculative Expert Testimony

By Hall Marston on Posted in Drug & Device

Yesterday, the California Supreme Court issued a unanimous opinion confirming the obligation of California trial judges to act as gatekeepers to insulate jurors from speculative expert testimony.  The Court affirmed a trial court discretionary ruling excluding an expert’s opinion on future lost profits where the opinion lacked any objective factual anchor and applied standards so inherently subjective that they could not be reliably applied. While noting that California does not apply Daubert standards to new scientific techniques, the Court cited the U.S. Supreme Court’s seminal opinions in the area (Daubert , Kumho, and Joiner), and the Federal Rules of Evidence, as well as the “gatekeeper” vocabulary that most practitioners associate with federal jurisprudence, perhaps signaling that the widely-understood gap between admissibility of expert testimony in California state courts and their federal counterparts may not be as wide as most thought.

Sargon Enterprise, Inc. v. University of Southern California, S191550, involved a breach of contract action brought by the maker of new, patented dental implant against the university’s School of Dentistry, seeking lost profits allegedly caused by the breach.   The case was tried twice, with the first jury awarding $433,000 in compensatory damages. Following an appeal, at the second trial the court excluded Sargon’s expert witness on lost profits, and the parties then stipulated to the entry of judgment in the original amount of compensatory damages, and Sargon appealed again. The Court of Appeal reversed the exclusion of the expert testimony in a non-published opinion. The Supreme Court unanimously affirmed the trial court, reversing the Court of Appeal.

While not a start-up, Sargon was a small dental implant company with sales barely in excess of $100,000, and less than 20 employees. It invented an implant that distinguished itself from the conventional technology because it could be implanted immediately following the tooth extraction and contained both the implant and the full restoration, i.e., the crown. Where other implants required two steps, Sargon’s required only one because its mechanism seated the implant into the bone socket immediately, making it ready for placement of the crown. The dental school agreed to conduct a five-year clinical trial of the implant, but allegedly breached the agreement by failing to fulfill contractually-specified reporting requirements.

Sargon’s expert was a CPA and an attorney with experience as a business and industry analyst and forensic accountant. His opinion was that Sargon’s lost profits ranged from $220 million to $1.18 billion, based on a market share approach that analogized Sargon to the six largest dental implant companies, based on the innovativeness of the various companies as compared to perceived innovation in the Sargon device. For company in this market to be successful it required innovation, clinical studies, and outreach to general practitioners. Because Sargon’s one step implant was such an innovation that met a market need (ease of use, shortened healing time, and overall cost), the expert opined that Sargon was assured of succeeding in the product mix, and was entitled to a favorable clinical study outcome from the university (which was denied it through the alleged breach). Therefore, Sargon would take over market share from the other larger companies, even though he acknowledged that he assumed that the larger companies were innovative based on their revenues rather than the technology they employed or products they produced.

The Court stressed twin concerns as it approached the subject. First, judges are charged with the duty to “exclude matter which does not rise to a clearly sufficient degree of value; something more than a minimum of probative value is required.” Second, this judicial function is particularly important with expert testimony about dizzying figures “where a jury’s common sense is less available than usual to protect it.” California statutory authority requires that expert testimony has no value if its basis is unsound, because an expert can only rely on matter of a type that other expert reasonably rely upon in forming an opinion upon the subject to which his testimony relates. Thus, borrowing a bit from Daubert’s helpfulness requirement, the Court noted that expert opinion may not be based on unsupported assumptions, speculation or conjecture. The trial judge’s gate keeping responsibilities enforce these requirements by barring unsupported expert opinion. (Sounding another Daubert note, the Court emphasized that the focus must on methodology not the ultimate conclusions.)

After observing that California law has always required that there be evidence to support the fact of lost profits, even if the amount cannot be calculated with certainty, the Court then turned to the proffered opinion. The problem, as the trial judge observed, was that “innovativeness” is simply too ephemeral a factor on which to base a lost profits projection. Suppose, the trial judge said in his opinion, Miss Oklahoma contracts with Greyhound to get her to the Miss America contest, and breached the contract. If she were allowed to compete, can it be said that she would have won over Miss Colorado, or if she didn’t win, would have beaten out Miss Montana? Likewise, whether the implant is good, better or best has to be determined in the market not the jury room. The Court amplified the analogy by turning to professional football, where a hypothetical team claims lost profits because a lineman could not play. Who is to say that it was the lineman, who was great at sacks, made the difference in a successful season, as opposed to a cornerback who was great at interceptions? Sargon’s expert’s testimony was inadmissible because he could only speculate as to the performance of its implant in the market, and hence it was within the trial judge’s discretion (and part of his duty) to exclude the proffered opinion.

Most California lawyers perceive a bright line between state and federal law when it comes to expert testimony, with federal law being more restrictive and California more lax. Sargon could be the harbinger of a change bringing the standards more closely into alignment.

Four New Civil Opinions Coming From the Illinois Supreme Court Thursday

By Kirk Jenkins on Posted in Illinois

The Illinois Supreme Court has announced that on Thursday morning, it will file opinions in four civil cases heard during its September term. They are:

  • Center Partners, Ltd. v. Growth Head GP, LLC, No. 113107 et seq. – (1) Does the doctrine of subject matter waiver for the attorney-client privilege extend from litigation to business negotiations? (2) Can documents shared among partners in a business negotiation be protected by the work product privilege? For our preview of the case, see here. For our report on the oral argument, see here.
     
  • Carr v. Koch, No. 113414 – Do plaintiffs have standing to challenge the Illinois education funding system as a violation of the equal protection clause of the Illinois constitution? For our preview of the case, see here. For our report on the oral argument, see here. 
  • Toftoy v. Rosenwinkel, No. 113569 – Does the Farm Nuisance Act, 740 ILCS 70/1, bar a nuisance suit where defendants started a cattle operation on property across from an unoccupied farmhouse, and several years later, plaintiffs demolished the farmhouse and constructed a new family home? For our preview of the case, see here. For our report on the oral argument, see here.
     
  • Rodriquez v. The Department of Financial and Professional Regulation, No. 113706 – Where an action for attorneys fees under 5 ILCS 100/10-55(c) is not brought simultaneously with a challenge to an administrative rule, is a subsequent action for fees barred as res judicata? For our preview of the case, see here. For our report on the oral argument, see here.

Business and Commercial Issues Will Dominate the Upcoming Calendar of California Supreme Court

By on Posted in California

On December 4, 2012, the California Supreme Court is scheduled to hold oral arguments in Los Angeles on six matters, five of which are civil matters addressing a variety of business and commercial issues. Presumably these matters will all be submitted at the close of argument, so (barring any order to vacate the submission) the final decisions in these cases will be due by March 4, 2013.  Please note that the substantive briefs for these cases have not yet been posted, but a link to those briefs will be added to the update of pending California Supreme Court cases on this blog.

  • Is a Contemporaneous Factual Misrepresentation of Contract Terms Admissible Under the Parol Evidence Rule? 

In Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (S190581) the Supreme Court will address whether the fraud exception to the parol evidence rule permits evidence of a contemporaneous factual misrepresentation as to the terms contained in a written agreement at the time of execution, or whether such evidence is inadmissible under Bank of America National Trust & Savings Association v. Pendergrass (1935) 4 Cal.2d 258, 263, as “a promise directly at variance with the promise of the writing.”  For more details, see the B & P 17200/Class Actions/Commercial update page.

  • To What Degree Can the Reach of a §17200 Action Be Extended by the Continuing Violation Doctrine, the Accrual Doctrine or the Delayed Discovery Rule?

The scope of the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) will be addressed in Aryeh v. Canon Business Solutions, Inc. (S184929), in which the Supreme Court will address to what degree, if any, an such an action can be expanded by the following doctrines: (1) the continuing violation doctrine, under which a defendant may be held liable for actions that take place outside the limitations period if those actions are sufficiently linked to unlawful conduct within the limitations period;  (2) the continuous accrual doctrine, under which each violation of a periodic obligation or duty is deemed to give rise to a separate cause of action that accrues at the time of the individual wrong, be asserted in such an action; or, (3) the delayed discovery rule, under which a cause of action does not accrue until a reasonable person in the plaintiff’s position has actual or constructive knowledge of facts giving rise to a claim.  For more details, see the B & P 17200/Class Actions/Commercial update page.

  • Can a Corporation Correct Its Suspended Status and Salvage an Appeal Initiated While Suspended? 

In Bourhis v. Lord (S199887 and S199889, consolidated) the Supreme Court accepted review after the Court of Appeal denied a motion to dismiss the appeal before the principle briefing, to address the following issue: If a corporation’s corporate status is suspended due to nonpayment of taxes at the time it files a notice of appeal, can the appeal proceed if the corporation thereafter revives its status even if it does not do so until the time for filing the notice of appeal has expired?  For more details, see the B & P 17200/Class Actions/Commercial update page.

  • Which State Law Controls Whether a Dissolved Corporation Lacks the Capacity To Be Sued?

The Supreme Court will also contribute to the body of choice of law opinions in Greb v. Diamond International (S183365) in the context of whether a California plaintiff alleging personal injuries from asbestos can pursue a claim against a dissolved Delaware corporation when the complaint was filed more than three years after the dissolution of the corporation.  Does California Corporations Code § 2010 or Delaware General Corporation Law § 278 control? For more details, see the Civil Procedure/Evidence/Discovery update page.

  • Is an Employer Entitled to a Jury Instruction on Mixed Motives for Firing an At-Will Employee?

In Harris v. City of Santa Monica (S181004) the Supreme Court will also address whether the “mixed-motive” defense apply to employment discrimination claims under the Fair Employment and Housing Act, (Gov. Code, § 12900 et seq.).  For more details, see the Employment – Other update page.

Argument Report: Does a Notice of Security Interest on Crops Require Strict Compliance?

By Kirk Jenkins on Posted in Illinois

Our reports on the civil oral arguments of the Illinois Supreme Court’s November term continue with State Bank of Cherry v. CGB Enterprises, Inc. Our pre-argument preview of State Bank of Cherry is here.  Watch the oral argument here.

State Bank arises from a farmer’s note to the plaintiff bank, using certain crops as security. After the farmer sold the crop to a grain elevator, the bank sent the grain elevator a Notice of Security Interest, citing the Food Security Act, 7 U.S.C. § 1631(e). When the grain elevator paid the farmer rather than the bank, the bank sued.

The defendant moved to dismiss, pointing out that the plaintiff bank’s Notice of Security Interest omitted one mandatory disclosure — the county in which the crops were located. The Circuit Court denied the motion to dismiss, but a divided panel of the Appellate Court reversed, holding that the state Commercial Code (which required substantial compliance only) was preempted by the Food Security Act. The Food Security Act required strict compliance, the Appellate Court held, and the plaintiff’s Notice of Security Interest was therefore ineffective.

Based upon the oral argument, it appears relatively likely that the Supreme Court will affirm. Counsel for the plaintiff began by pointing out that omitting the exact location of the crops had no effect on anything, since the crops were brought to the defendant grain elevator. Justice Burke asked whether, since the Food Security Act created limited exceptions to the general rule that good faith purchasers take free of any security interest, the Court should require strict compliance. Counsel responded that the plaintiff had substantially complied with the requirements of the Act, and that strict compliance would elevate form over substance. Counsel pointed out that the defendant grain elevator had issued two drafts for the subject crops, the first including the name of the bank as a co-payee, before issuing a second to the farmer alone. Justice Garman asked counsel if Congress intended that substantial compliance should be sufficient, why didn’t it say so? Justice Garman followed up by asking whether Congress had acted to overrule the holding in Farm Credit Midsouth, PCA v. Farm Fresh Catfish Co., the Eighth Circuit case on strict compliance relied upon by the Appellate Court. Counsel conceded that Congress had not yet acted to overrule the decision. Justice Thomas pointed out that Congress had failed to challenge Farm Fresh despite having made several amendments to the Food Security Act in the intervening years, and counsel conceded that that was so.

Counsel for the defendant grain elevator challenged the plaintiff’s argument that the statute was merely intended to facilitate interstate commerce; rather, counsel argued, the principal purpose of the Act was to protect the buyers of farm products and make the requirements applicable to farm security interests uniform throughout the country. Justice Garman asked whether it made any difference that the defendant had known about the bank, and initially issued a check to both the bank and the farmer.   Counsel responded that the Act clearly stated that the notice requirements are not waived by actual notice. Justice Freeman asked why the name of the county in which the crops were found was so important — what could possibly go wrong if the county name was missing? Counsel responded that whatever Congress’ reason for requiring the name of the county, the form used by the bank for its security interest contained a blank for the county – which was not filled in. Justice Karmeier pointed out that the bank’s form contained a box under the county blank stating that, when the box is checked, products are covered "wherever located" — does that mean that once the box is checked, notice is sufficient statewide?   Counsel responded that the form was the lender’s, not one that flowed directly from the statute. Justice Burke pointed out that the law was hardly uniform if everyone was permitted to make up their own form. Counsel responded that strict compliance applied to the categories of information that had to be reported, not the form in which disclosure was made. Both Justices Garman and Thomas asked what the logical reason was for requiring strict compliance for direct notice – given to the buyer — but accepting substantial compliance for central notice. Counsel responded that central notice is intended merely to put buyers on inquiry notice, where direct notice is intended to give buyers every fact necessary under the statute.

During rebuttal, Justice Freeman asked a two part question: would a ruling for the plaintiff bank spawn a lot of litigation, and what should be the test for determining substantiality? Counsel responded that logic and equity dictated that if the buyer had all the information it needed to identify the protected crops, that should be enough, and follow-on litigation should not concern the Court.

The Court will likely file an opinion in State Bank in four to six months.

Stengel Preemption on En Banc Review

By on Posted in Drug & Device

As we noted here, the Ninth Circuit Court of Appeals’ decision in Stengel v. Medtronic Inc. is making its way through en banc review. Stengel, which involved both Riegel express preemption and Buckman implied preemption of state law claims regarding medical devices, was re-heard by the full Ninth Circuit on September 19, 2012. An audio recording of the hearing is available here. Pending the en banc panel’s ultimate determination, readers interested in the scope of Buckman implied preemption may appreciate my article, recently published by the Washington Legal Foundation, which briefly surveys the competing interpretations of Buckman in the federal appellate circuits and analyzes the Stengel opinion in that context.

Remaining Civil Opinions For 2012 from the Illinois Supreme Court

By Kirk Jenkins on Posted in Illinois

With the November term in full swing and the holidays rapidly approaching, the Illinois Supreme Court has announced that the Court expects to file opinions on three remaining days in 2012: November 29, December 13 and December 28.

The Court’s civil docket is largely up to date, accounting for the usual time between argument and opinion. Every civil case on the January and March argument dockets has been decided. One remains from the May term, and we will likely see that opinion soon: 

  • Wilson v. Edward Hospital, No. 112898 – Are actual agency and apparent agency separate claims for purposes of the res judicata doctrine and the prohibition against claim-splitting set forth by the Supreme Court in Hudson v. City of Chicago, 228 Ill.2d 462 (2008) and Rein v. David A. Noyes & Co., 172 Ill.2d 325 (1996), so that summary judgment entered on the actual agency claims in plaintiffs’ initial suit bars plaintiffs’ apparent agency claims in a refiled suit, even in the face of a ruling that there is a question of fact as to the apparent agency claims?

As readers of The Appellate Strategist will recall, the Court’s September term was especially heavy in civil arguments, with thirteen cases being argued, presenting a number of challenging issues. Based on the Court’s experience in recent years, we would expect between three and six cases from the September term to be handed down in December.  The cases are:

Call of the Docket for September 13:

  • Hernandez v. Bernstein, No. 113054 — (1) Is an action for legal malpractice based on one factual theory one claim for purposes of res judicata, or two? (2) Does a plaintiff’s voluntary dismissal of the remainder of his claim render the trial court’s order dismissing one of plaintiff’s factual theories final for purposes of res judicata? For our preview of the case, see here. For our report on the oral argument, see here.

Call of the Docket for September 18:

  • Center Partners, Ltd. v. Growth Head GP, LLC, No. 113107 et seq. – (1) Does the doctrine of subject matter waiver for the attorney-client privilege extend from litigation to business negotiations? (2) Can documents shared among partners in a business negotiation be protected by the work product privilege? For our preview of the case, see here. For our report on the oral argument, see here.
     
  • Cooney v. Rossiter, No. 113227 – (1) Was the plaintiffs’ action barred pursuant to res judicata by the earlier Federal action, even though the earlier Federal action was a class, rather than an individual claim? (2) Did a court-appointed psychological evaluator in a custody hearing have absolute immunity from suit for alleged misconduct in connection with his opinions? For our preview of the case, see here. For our report on the oral argument, see here.
     
  • Carr v. Koch, No. 113414 – Do plaintiffs have standing to challenge the Illinois education funding system as a violation of the equal protection clause of the Illinois constitution? For our preview of the case, see here. For our report on the oral argument, see here.
     
  • EMC Mortgage Corp. v. Kemp, No. 113419 – (1) Is a judgment of foreclosure final and appealable, or must an appeal await a final order approving the sale and distributing the proceeds? (2) Is an order of foreclosure immediately appealable when standing is challenged on the grounds that the order is void? For our preview of the case, see here. For our report on the oral argument, see here.
     
  • Mathis v. Mathis, No. 113496 – In a bifurcated dissolution proceeding, when a grounds judgment has been entered, and when there is a lengthy delay between the date of entry of the grounds judgment and the hearing on ancillary issues, is the appropriate date for valuation of marital property the date of dissolution or a date as close as practicable to the date of trial of the ancillary issues? For our preview of the case, see here. For our report on the oral argument, see here.

Join us after the jump for the remaining cases.

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Argument Report: Debating an Arbitrator’s Power to Interpret a Collective Bargaining Agreement

By Kirk Jenkins on Posted in Illinois

Our reports on the November term oral arguments at the Illinois Supreme Court begin with Griggsville Perry Community Unit School District No. 4 v. Illinois Educational Labor Relations Board. Our preview of Griggsville is here.

Griggsville-Perry arose from the firing of a noncertified paraprofessional who worked in an elementary school library. After a number of complaints about her performance, the superintendant of the school district notified the employee that she would be fired at an upcoming meeting. The employee and her union representative appeared before the board and the employee testified, but the board fired her. The union filed a grievance, and the arbitrator ordered the employee reinstated, finding that she was entitled to a statement of the specific acts and omissions that the board alleged justified her discharge. The Appellate Court reversed, noting that the collective bargaining agreement said nothing about limiting discharge to just, good or proper cause. The Court found that the arbitrator’s decision was without support in either past practice of the parties or the interpretation of similar contract language in other cases.

Judging from the active questioning of both sides, the Justices of Supreme Court seem conflicted about Griggsville. Counsel for the Educational Labor Relations Board began by emphasizing the deferential standard of review – the Board reviews the decision of the arbitrator, and the Court then reviews the Board’s decision for clear error. Justice Burke asked counsel whether the parties’ agreement to arbitrate necessarily implies dismissal only for just cause. Counsel responded that the agreement implies a lesser standard of arbitrary and capricious. Justice Theis asked counsel how the court should define just cause, arbitrary and capricious, and exactly what the difference was. Counsel responded that "just cause" requires a "fit" between the alleged act and the penalty of dismissal. An "arbitrary and capricious" standard, on the other hand, required mere reasoned support for the penalty, rather than a close fit. Justice Theis followed up, asking whether there was a standard in between the two. Counsel responded that the intermediate standard was progressive discipline.

Counsel for the Board argued that the Board’s decision could not be reversed based on a finding that the arbitrator had misinterpreted the collective bargaining agreement; if the decision was derived from the essence of the contract, the decision had to be affirmed. Justice Garman asked whether the "essence of the contract" included elements merely implied in the contract, and counsel responded that there was a "common law of the shop" which the parties knew would be used to fill in gaps in the contract. Justice Theis asked counsel to point out where the arbitrary and capricious standard was to be found in the agreement. Counsel argued that the standard was inherent in the contractual grievance procedure. Justice Theis pressed counsel, challenging the basis for his claim; counsel responded that industrial common law supported his view, but pointed out that whether or not the arbitrator correctly interpreted industrial common law was not a matter subject to judicial review. Justice Garman asked counsel whether it made a difference that the Board and the Union could not reach an agreement on a just cause standard. Counsel responded that the arbitrator could not apply at will or "just cause," because the parties couldn’t reach agreement on either standard. Therefore, the applicable standard must be arbitrary and capricious. Justice Theis commented that the arbitrator had looked at both at will and just cause, and settled somewhere in the middle — but it wasn’t entirely clear what "the middle" standard meant. Counsel argued that arbitrary and capricious was not an intermediate standard, but was in fact a low bar.

Counsel for the school board attempted to refocus the discussion, arguing that the case was not about contract interpretation. Justice Thomas suggested that there was "nothing earth-shattering" about the arbitrator’s award, but counsel disagreed. The arbitrator’s award was contrary to what the parties had negotiated, counsel insisted; requiring a reasoned evidentiary hearing whenever employees are given a mere opportunity to be heard would represent a significant change in the law, particularly since it wasn’t clear what the arbitrator’s view of just cause would be in any particular case. Counsel reviewed the parties’ contract negotiations in detail: first, the union had proposed progressive discipline. The board had responded with a proposal for "manifest weight of the evidence," with a right to notice and hearing. Ultimately, the parties had agreed to waive their competing proposals: leaving matters at "employment at will." Counsel argued that the union had squarely rejected an "arbitrary and capricious" standard, barring the arbitrator from imposing one. Justice Thomas asked counsel what was wrong with the Board’s view that the arbitrator had merely found that the contract contained an implicit requirement that notice and hearing be meaningful. Counsel responded that the arbitrator’s decision was merely just cause by another name, giving the union what it had rejected in negotiations. Justice Burke noted that a line of Federal cases holds that an agreement to arbitrate employment disputes necessarily implies just case, and asked counsel what an arbitrator was to do if employment was at will and there was no standard of review. Counsel responded that the arbitrator should confirm that an employee had received notice and union representation, and no more. Justice Theis asked whether the arbitrator’s decision didn’t amount to saying that there must be some kind of standard for an employee’s meeting not to be meaningless? Counsel responded that the problem was that the arbitrator had failed to take into account the fact that the standard at issue had been rejected at the collective bargaining table. Justice Karmeier pointed out that the relevant provision of the collective bargaining agreement actually referred to a right to a "meeting," not a "hearing," and asked counsel whether the distinction made a difference. Counsel agreed that the agreement did not use the word "hearing" to describe the employee’s rights.

In rebuttal, counsel argued that the case was not ultimately about the employee’s rights under section 2.6 of the collective bargaining. Rather, according to counsel, the dispute revolved around the employee’s right under section 2.1 to review materials in his or her personnel file and attach dissenting or explanatory material. According to counsel, the arbitrator had reversed the board’s decision because the employee was terminated based on notes about her job performance which the employee had not seen, which the board reviewed in executive session. Justice Theis asked whether counsel’s argument was ultimately procedural rather than substantive, and counsel answered that the arbitrator had never in fact reached the issue of whether just cause had been proven.

The Court should file its opinion in Griggsville within three to six months.

Glazer Should Be Added to SCOTUS’ Class Action Docket

By Kirk Jenkins on Posted in Class Actions

As I’ve noted in several previous posts, (see here, and here, and here), the new term at the U.S. Supreme Court is shaping up as a major one for class action litigation. Today I preview Whirlpool Corp. v. Glazer, a case still in the petition stage which the Court will likely consider in a December conference. Review is urgently needed in Glazer. The Court should grant the petition for certiorari.

The named plaintiffs in Glazer seek to represent all persons who have purchased Whirlpool front-loading automatic washing machines in Ohio since 2001. The plaintiffs allege that all such machines accumulate excessive mold and mildew, or biofilm, as to emit offensive odors.

But here’s the thing: this so-called “defect” isn’t just uncommon; it’s vanishingly rare. Consumer Union’s annual reliability surveys report that less than 1% of all owners report the biofilm problem. Data from customer call centers puts the incidence of the “defect” at two tenths of one percent during the one-year warranty period. According to Whirlpool’s cert petition, at least ninety-seven percent of all buyers, including buyers who have used their washers for more than a decade, have never experienced the “defect.”

So it’s an easy case, right? Federal Rule 23 isn’t supposed to be a magic wand that conjures up vast class actions out of nothing. The rationale of having the rule is that there are significant numbers of people with real, live claims – claims that would pass Article III muster – that can’t be brought individually either because too little money is at stake, or individual suits would overwhelm the courts, or both. One would think that if a bare minimum of ninety-seven percent of all class members have no claim in the Article III sense, class certification should necessarily have been denied, at least under the plaintiffs’ vastly overbroad class definition.

But wait, it gets far worse. Twenty-one different washer models are involved in Glazer. They’re built on two different platforms which share only a few common components. The model designs changed markedly over what is now an eleven-year class period. The defendant’s knowledge and disclosure regarding any potential for odors changed materially over the period (despite the extreme rarity of the issue, a team was deployed to analyze it and recommend design, manufacturing and product literature changes to reduce the rate even further). Buyers’ compliance with use and care instructions was all over the board, creating a wealth of causation and product misuse defenses, each and every one of which required individualized fact finding.

Nevertheless, the district court certified a class on plaintiffs’ claims for tortious breach of warranty, negligent design, and negligent failure to warn under Rule 23(a) and 23(b)(3). The Sixth Circuit affirmed. The court brushed aside the problem of individual wash habits (upon which each claim depends) and the fact that the vast majority of the class members had never actually experienced any problem at all, commenting that the class members who had never experienced the alleged odor problem might have been injured by paying too much for the washing machine – a theory never argued by the plaintiffs or briefed on appeal, and apparently not recognized in Ohio where this case is pending.

The questions raised by the Sixth Circuit’s decision in Glazer are of enormous importance. Although the plaintiff seeks to represent “only” 200,000 Ohio consumers, it’s estimated that multiple class actions already filed against several manufacturers of front-loading washing machines across the country potentially involve millions of class members. Already, the Glazer opinion is influencing other courts, with the Seventh Circuit endorsing the Sixth Circuit’s view in a similar case against Sears only a few days ago [pdf].

The lead question proposed by Whirlpool’s cert petition is whether a class may be certified under Federal Rule 23(b)(3) when most class members could not sue on their own behalf. Whirlpool points out two principal reasons why the answer is an emphatic “no”: (1) allowing such classes violates the Wal-Mart v. Dukes requirement that named plaintiffs and absent class members share a common injury; and (2) certifying a class including a significant number of uninjured parties violates Article III, the Rules Enabling Act and Rule 23 itself. The petition points out that the Circuits are split on this issue: the Second and Eighth bar classes with any uninjured members, the Third, Sixth and Ninth Circuits view the issue as irrelevant to class certification, and the Seventh Circuit takes an intermediate view. It is worth noting that the recent Seventh Circuit opinion does not make reference to Wal-Mart v. Dukes, a startling omission that underscores the danger of Glazer becoming a de facto "alternative" to Dukes.

The petition also criticizes the Court of Appeals’ decision for failing to take seriously the searching inquiry under Rule 23 required by the Dukes Court. The Court of Appeals virtually disregarded Whirlpool’s substantial factual showing regarding individualized and disputed factual issues, making no effort to resolve conflicts bearing directly on the requirements of Rule 23. The petition also points out that the Sixth Circuit limited its discussion of predominance to a single sentence – far short of the convincing proof of compliance with Rule 23 required to justify certification.

Not surprisingly given the serious threat to the business community posed by “no injury” class actions, Whirlpool’s cert petition has attracted heavyweight amicus support. The Pacific Legal Foundation writes that permitting class members to proceed without Article III standing “will flood the federal courts with ‘lawyers’ lawsuits.’”   Given that the vast majority of class actions settle once they’re certified, the PLF writes that such “no injury” suits are ripe for abuse. According to the Product Liability Advisory Council’s brief, allowing such class actions “presage[s] a toxic litigation environment for manufacturers doing business in the United States,” since even a defect experienced by only a single consumer of a mass-produced product might, in theory, become the basis for an enormous class action. PLAC adds a compelling economic argument, pointing out that while traditional class actions in effect spread the cost of compensating a few injured consumers to all users of a product, a “no injury” class settlement would amount to little more than a tax on the product. In a joint amicus brief, the U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers argue that allowing the Sixth Circuit’s decision to stand would amount to a significant step away from the rigorous analysis and enforcement of Rule 23 required by the Court in Dukes. The Wall Street Journal’s editorial board has urged the Court to grant cert as well.

On October 9, the Court requested a response to the cert petition – a hopeful sign that the Court is taking a hard look at the case. The Seventh Circuit’s endorsement of Glazer may raise the odds of a grant even further. The plaintiff’s reply is currently due November 30.

Video Interview: Discussing What to Expect from the Supreme Court During Obama’s Second Term with LXBN TV

By Kirk Jenkins on Posted in Supreme Court Vacancy

Late last week, I had the opportunity to speak with Colin O’Keefe of LXBN regarding what a second term for President Obama means for the Supreme Court. In the brief interview, I offer my thoughts on how the makeup of the court may change and what issues they may address. 

https://youtube.com/watch?v=Dv0EXKv7S7I%3Fversion%3D3%26hl%3Den_US

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