The Appellate Strategist

Insights on appellate issues, trial consultations, and evaluating appeals

Two New Candidates for SCOTUS Nomination Emerge

By Kirk Jenkins on Posted in Federal, Supreme Court Vacancy

According to the San Francisco Chronicle, two new candidates have emerged as possible Supreme Court nominees to replace retiring Justice John Paul Stevens. 

Justice Carlos Moreno of the California Supreme Court began his career as a deputy city attorney in Los Angeles.  Justice Moreno received his first two judicial nominations from Republican Governors George Deukmejian and Pete Wilson. In 1998, he was appointed to the United States District Court by President Clinton. In 2001, he was appointed to the California Supreme Court by Democratic Governor Gray Davis.

Judge Kim McLane Wardlaw of the Ninth Circuit was in private practice until 1995. She was appointed to the United States District Court by President Clinton in 1995, and elevated to the Ninth Circuit in 1998.

Replacing Justice Stevens By the First Monday in October

By Kirk Jenkins on Posted in Federal, Supreme Court Vacancy

President Obama made a statement this afternoon, suggesting that he would nominate a replacement for retiring Justice John Paul Stevens within "weeks." In describing his ideal nominee, the President suggested that he would be looking for someone who agreed with Stevens’ spirited dissent in Citizens United v. FEC:

I will seek someone in the coming weeks with similar qualities — an independent mind, a record of excellence and integrity, a fierce dedication to the rule of law, and a keen understanding of how the law affects the daily lives of the American people.  It will also be someone who, like Justice Stevens, knows that in a democracy, powerful interests must not be allowed to drown out the voices of ordinary citizens. 

Senator Patrick Leahy, the chair of the Senate Judiciary Committee, said today that he expected to have hearings on the President’s Supreme Court nominee this summer.  Meanwhile, Newsweek is reporting that Secretary of Homeland Security Janet Napolitano is on the short list for the vacancy, along with Solicitor General Elena Kagan, Judge Diane Wood and Judge Merrick Garland.

Reaction to Stevens’ announcement continues in Washington.  Vice President Joseph Biden issued a statement.  Tony Mauro at The Legal Times has the statements of the other Justices, plus retired Justices O’Connor and Souter. The Ninth Justice, the National Journal’s new blog on the Supreme Court vacancy, has reactions from many more Senators.

Supreme Court Justice John Paul Stevens To Retire This Summer

By Kirk Jenkins on Posted in Federal, Supreme Court Vacancy

The New York Times and CNN are reporting that Justice John Paul Stevens will retire when the Court reaches the end of its term in June.  The Appellate Strategist will post further information on the story as President Obama’s search for a successor shifts into high gear.

UPDATE: The Supreme Court has posted a copy of Justice Stevens’ retirement letter [pdf].  As Douglas Berman points out over at Sentencing Law and Policy, Justice Stevens has increased pressure on the Senate to confirm a replacement quickly by making his retirement effective when the Court rises for the summer, not when his replacement is confirmed and sworn in.  Tony Mauro at The Legal Times  has reactions from members of the Senate and Chief Justice Roberts’ statement.

The Short List For a Supreme Court Vacancy

By Kirk Jenkins on Posted in Constitutional Law, Federal, Supreme Court Vacancy

Within the past several weeks, Supreme Court Justice John Paul Stevens has dropped several hints that he might be about to announce his retirement.   Even though nothing’s definite yet, the news media and the legal blogs are busy speculating about possible replacements. Here’s the roundup – both the “short list” and some of the long shots:

According to The Washington Post’s blog, The Swamp, Jess Bravin of The Wall Street Journal  and Mark Sherman at The Associated Press, there are only three names on the list:

  • Solicitor General Elena Kagan, the former Dean of Harvard Law School,  who has served as Solicitor General since 2009;
     
  • Judge Diane Wood of the Seventh Circuit.  Before her appointment, Judge Wood was Deputy Assistant Attorney General in the Antitrust Division of the Justice Department; and
     
  • Judge Merrick Garland of the D.C. Circuit. Judge Garland was Principal Associate Deputy Attorney General under President Clinton before his elevation to the Court of Appeals.

Kevin Rudin of National Public Radio lists General Kagan and Judges Wood and Garland as the front-runners, but suggests two intriguing possibilities:

Tom Goldstein of SCOTUSBlog writes that there is only one real candidate: General Kagan. Nevertheless, he handicaps a number of additional possibilities in addition to Judges Wood and Garland and Governor Granholm:

  • Secretary of State Hillary Clinton;
     
  • Professor Cass R. Sunstein, who is Felix Frankfurter Professor of Law at Harvard, and currently serves as Administrator of the Office of Management and Budget Office of Information and Regulatory Affairs;
     
  • Attorney General Eric Holder;
     
  • Governor Deval Patrick of Massachusetts. Governor Patrick served as Assistant Attorney General for the Civil Rights Division in the Clinton Justice Department. From 2000 through 2004, he was General Counsel and Executive Vice President of Coca-Cola; and
     
  • Senator Amy Klobuchar of Minnesota.  Senator Klobuchar served as a county prosecutor for several years and later was in private practice.

At the New York Times, Peter Baker lists a number of these candidates and adds four new ones:

  • Professor Harold Koh, former Dean of Yale Law School, where he specialized in international law, and now the Legal Adviser to the State Department;
     
  • Professor Pamela S. Karlan of Stanford, who specializes in voting rights and the political process;
     
  • Senator Richard Durbin of Illinois, who was both in private practice for a number of years before his election to Congress in 1983; and
     
  • Senator Claire McCaskill of Missouri, who was a long-time local prosecutor before her election as state Auditor.

Finally, Law 360 interviewed appellate specialists from leading firms around the country, asking them to complete this sentence: “If I were Obama, My Supreme Court Pick Would Be . . ."

The results were interesting and – with the exception of General Kagan’s six votes – showed little overlap with the list of candidates discussed above. Aside from Professor Kathleen Sullivan of Stanford Law School, an authority on constitutional law who was prominently mentioned last year when Justice Souter retired, the only new candidate receiving more than one nomination was the person I suggested:

"In nominating a successor to Justice John Paul Stevens, President Obama should seek not only a brilliant lawyer, but someone who would bring a breadth of real-world experience to a Court which today consists of nine former judges from the Federal Circuits.  Through most of the twentieth century, Supreme Court nominees were frequently drawn from outside the Federal appellate courts, including Congress, the Cabinet and the private bar.  President Obama should revive that tradition by nominating Senator Sheldon Whitehouse of Rhode Island.

Over the next decade, the Supreme Court will likely face a range of important issues in criminal law, including Federal sentencing, the death penalty, habeas corpus and issues arising from the Government’s anti-terrorism efforts.  Senator Whitehouse would bring an important perspective to these issues, having served as both a United States Attorney and as his state’s Attorney General before his election to the Senate, as well as serving on the Judiciary Committee and the Select Committee on Intelligence in the Senate.

In addition, the Court will certainly be asked over the next several years to define the parameters of its recent landmark cases impacting both the legislative and political process, such as Heller v. District of Columbia and Citizens United v. FEC.  Having served in both the state and Federal government, Senator Whitehouse would bring a deep understanding of those worlds, far removed from the judiciary, to the Court’s debates.

In his four years in the Senate, Senator Whitehouse has demonstrated not only that he has a keen legal mind, but has shown himself to be an incisive, aggressive investigator in Senate committee rooms.  Two of the finest twentieth-century Justices — Hugo Black and Earl Warren — held political office before joining the Court.  President Obama should elevate another: Senator Sheldon Whitehouse."

California Supreme Court: Is The Economic Crisis Having An Effect On The State’s Highest Court?

By on Posted in California, Civil and Appellate Procedure

Statistics show that the number of civil cases accepted for review by California’s highest court has varied dramatically in recent years, but by any count, the numbers are still small.

According to a report released by the State’s Administrative Office of the Courts, for the year 2008, the California Supreme Court granted 6% of all civil petitions for review, down from 8% the previous year (2007) but up from the mere 3% granted in 2006. 

For 2008, out of a total of 5,989 civil petitions, the court
• denied just over 5,400
• outright granted 82
• granted and held 210
• granted and transferred 51 back to the intermediate court of appeal. 

These numbers may seem exceedingly low, but consider that many litigants just don’t understand the court’s limited function in reviewing decisions of the lower courts.  Review by the California Supreme Court is discretionary.  As a judicial policy maker, the court typically accepts only those issues that may affect other litigants or when necessary to resolve a conflict in the published decisions.  But many litigants do not understand this unique function, choosing to seek review even when they cannot satisfy these special requirements.  Thus, a great many petitions are denied out of hand.

Maximizing the chances for review:  read and comply with the court’s special requirements.  Follow the rules.  List the issue presented first, followed by an explanation of why this case deserves to be one of the select few that should make the cut.  The petition for review is less a legal document, explaining why the petitioner should win under the law, than it is a persuasive plea on why the court should hear the case.

Going Forum Shopping? Supreme Court Holds That Federal Class Action Rule Trumps State Anti-Class Statute in Diversity Action

By on Posted in Constitutional Law

The United States Supreme Court just issued an opinion holding that state statutes that purport to limit a claimant’s ability to bring a class action do not govern proceedings in federal court, even in a diversity case.  Shady Grove Orthopedic Assoc., P.A. v. Allstate Ins. Co. began as claimant Shady Grove’s attempt to recover statutory interest from Allstate under New York law.  Shady Grove sued in federal court in Brooklyn, seeking class action status, arguing that Allstate routinely failed to pay interest on overdue benefits.

The District Court dismissed the action for lack of subject matter jurisdiction.  The court accepted Allstate’s argument that a New York statute that precluded a suit for the recovery of a “penalty” from proceeding as a class action controlled in a diversity suit.  The Second Circuit affirmed.  It found that there was no conflict between the New York statute and Federal Rule of Civil Procedure 23 because the statute governed the eligibility of a case for class treatment while Rule 23 only governed whether an eligible case would be certified.

A closely divided Supreme Court disagreed.

Justice Scalia, writing for the court, held that the determination of whether the class could proceed as a class action was governed solely by Rule 23.  New York had no power to govern federal court proceedings through its anti-class action statute.  The only real question was whether Rule 23 violates the Rules Enabling Act in this instance by altering the parties’ substantive rights.  It does not.  The class action procedure is merely a joinder rule that does not change the underlying substantive position of the case.  It rejected Allstate’s argument that the New York statute had created a substantive right to be free of class action’s in penalty cases.  Ultimately, the characterization of the state rule as substantive or procedural did not matter:

In sum, it is not the substantive or procedural nature or purpose of the affected state law that matters, but the substantive or procedural nature of the Federal Rule.  We have held…that the validity of a Federal Rule depends entirely upon whether it regulates procedure….If it does, it is authorized by [the Rules Enabling Act] and is valid in all jurisdictions regardless of its incidental effect upon state-created rights.

Justice Scalia acknowledged that the result of the opinion would produce forum shopping.  However, such forum shopping is merely the “inevitable…result of a uniform system of federal procedure.”

The dissenters, led by Justice Ginsburg, preferred to view the New York statute as regulating the remedy permitted for violating the statute, not an attempt to interfere with federal procedure.  By allowing a class action to proceed in federal court where it could not have been brought in state court, the majority had effectively amended a state statute: “The Court today approves Shady Grove’s attempt to transform a $500 case into a $5,000,000 award, although the State creating the right to recover has proscribed this alchemy.”

This opinion may well have profound effects on federal practice:

  • State restrictions on class actions will not govern federal diversity cases.  Attorneys contemplating removal under the Class Action Fairness Act must take this fact into account. 
  • State tort reform measures that are couched in terms of procedure, such as special joinder rules, may not be applied in federal diversity cases.
  • In arguing for the application of rules derived from state law, it may not be sufficient to argue that the rule is “substantive” in nature.  To displace a federal procedural rule it will be necessary to show that the rule violates the Rules Enabling Act.

At minimum, Shady Grove, substantially limits a state’s ability to restrict class actions. The opinion may have additional, far-ranging effects on the relationship of state and federal law.

California: Cutting Back On Punitive Damages Against Insurers?

By on Posted in Insurance, Punitive Damages

With a recent employment decision, the California Supreme Court has handed insurance companies a compelling new argument, potentially limiting their exposure to punitive damages in bad faith cases. The question is: when is an insurance company subject to punitive damages for the acts of an employee/ adjuster in connection with the handling of a single insured’s claim for benefits? The answer is, in all probability: not as often as it was before.

In California, a corporate defendant can only be subject to punitive damages if a corporate officer, director or managing agent committed, authorized, or ratified the wrongful conduct. Cal. Civil Code, § 3294(b). Everyone knows who the officers and directors are, but the meaning of "managing agent" has been open to debate.

In 1999, the State Supreme Court, in White v. Ultramar, Inc. (1999) 21 Cal.4th 563, held a managing agent is someone who makes "corporate policy."

But White was an employment case. For the next decade, insureds continued to argue that the managing agent test was different for corporate insurer defendants. They relied on a 1972 State Supreme Court opinion – a holdover from the Bird Court – in an insurance bad faith case: Egan v. Mututal of Omaha Ins. Co. (1979) 24 Cal.3d 809. Egan, decided before the punitive damages statute was amended, had said that the corporate insurer could be liable for punitives for the adjuster’s malicious, fraudulent or oppressive acts because the insurer vested the adjuster with discretion over the handling of the claim.

Egan’s test for managing agent (discretion over a single claim) appears at odds with White’s narrower test (one who makes "corporate policy.") Which rule applies in bad faith cases? The White court clearly intended to narrow Egan’s definition of managing agent, but was Egan still good law in insurance lawsuits? White did not overrule Egan and in fact sometimes cited with it with seeming approval.

The tension between the two tests went unresolved, and indeed largely unnoticed until 2009. Then, one California intermediate court of appeal came down on the Egan side in an insurance case. (Major v. Western Mut. Ins. Co. (2009) 169 Cal.App.4th 1197.) Major held that it is the vesting of discretion in the adjuster that matters, not so much whether that adjuster is thereby making corporate policy.

But Major was on the books for barely half a year when it turned out to be not so "major" after all. In Roby v. McKesson Corp. (2009) 47 Cal.4th 686, the California Supreme Court explained what it meant by the making of "corporate policy," in the bargain further narrowing the test:

"we were referring to formal policies that affect a substantial part of the company and that are the type likely to come to the attention of corporate leadership. It is this sort of broad authority that justifies punishing an entire company for an otherwise isolated act of oppression, fraud or malice." (Emphasis added.)

Note the critical language:

  • The policy must be "formal;" it must affect a "substantial part of the company;" it should be of the type "likely" to come to the attention of the corporation’s leadership; indeed, the very rationale for imposing punitive damages is to punish the corporation for something it did, in its own right, not for a renegade or isolated act.
     
  • Roby thereby rejects the notion that a corporation can be subject to punitive damages for what might be characterized as the making of ad hoc "policy." Yet that is precisely what a rogue or unsupervised insurance adjuster does when "maliciously" handling a single claim.

Defense lawyers take note: Roby offers a potent new weapon in the arsenal for defending against punitive damage claims in bad faith cases. It is far from clear that an insurer can be subject to any punitive damages for merely vesting discretion in an adjuster in connection with a single claim for benefits.

Keeping Tort Out of a Business Dispute: The Tenth Circuit and the Economic Loss Rule

By Kirk Jenkins on Posted in Products Liability

In law school, it seemed simple enough: business relationships were generally governed by contract and warranty, and tort was reserved for conduct that hurt people or damaged property. But in practice, the line is constantly shifting: the plaintiffs’ bar – often aided by state legislatures – tries to turn routine business disputes into torts, while the defense bar responds that the parties’ relationship should be governed by the terms of their negotiated contract.

The Supreme Court chose an apt metaphor for this battle in a 1986 maritime case, worrying that if this trend were allowed to develop too far, “contract law would drown in a sea of tort.”

Defense lawyers have a potent weapon at their command in defending their clients’ negotiated allocations of risk: the economic loss rule. Economic losses are frustrated commercial expectations: “it wasn’t worth what I paid,” or “it broke,” or “I didn’t make as much money as I expected.” The economic loss rule, simply stated, holds that where a plaintiff has suffered nothing but economic losses, tort claims are barred, and he or she must sue, if at all, on the contract.

Last week, the Tenth Circuit reaffirmed this important doctrine in Mountain Bird, Inc. v. Goodrich Corporation [pdf]. There, plaintiff purchased an aircraft which included an optional de-icing system which the manufacturer said was “certified for flight in icing conditions.” The plaintiff added an additional after-market de-icing system, also manufactured by the same defendant. Five years after it was purchased, the aircraft crashed, allegedly due to ice accumulating on the wings. The owner of the aircraft sued in tort, seeking to recover the value of the plane.

On appeal, plaintiffs argued that their claim came under an exception to the economic loss rule for expert services. Plaintiff offered an affidavit saying that it wouldn’t have bought the plane if the defendant hadn’t issued a form saying it was certified for flight in icing conditions.

The Court disagreed, pointing out that the defendant hadn’t claimed to be a certification expert:

[W]e would not infer that a car manufacturer held itself out as a vehicle safety certification expert by advertising that its cars complied with federal safety regulation. To do so would permit the special relationship exception to swallow the rule by allowing tort claims against every manufacturer of a regulated product.

The plaintiffs pointed to a controversial line of California cases imposing tort duties based on a series of policy-based factors, including the extent to which the transaction was intended to affect plaintiff, the closeness of the connection between the defendant’s conduct and the plaintiff’s injury, and the moral blameworthiness of defendant’s conduct. The Court declined to apply these cases where the parties’ relationship was already governed by a contract.

In the forty-five years since the economic loss rule was first stated by the California Supreme Court, the doctrine has spread to nearly every state in the country. However, the contours of the doctrine vary somewhat from state to state.

In 2004, the American Law Institute announced that as part of its ongoing work on the third generation of Restatements, it would undertake the “Restatement (Third) of Torts: Economic Torts and Related Wrongs.” Unfortunately, that project has been on hold since 2007, when the Reporter resigned. Given that the conflict between contract and tort continues every day in commercial litigation across the country, it is time for work on the ALI’s proposed Restatement to resume. In the meantime, when looking for a tool to weed out tort claims from a business dispute, defense counsel should keep the economic loss rule firmly in mind.

Innocent Blood: California Style. May the “Innocent” Insured Recover Despite a Coinsured’s Intentional, Excluded Act?

By on Posted in California, Insurance

The problem of coverage for the so-called "innocent insured" is a recurring one.  The issue arises when there is more than one insured on the policy and one commits an act that would bar coverage.  Does that act bar coverage for all, or only for the intentional actor?  In California, this problem has reared its head again, or, more accurately, two heads, in the form of two cases the state Supreme Court has agreed to hear and decide.  One presents the issue in the context of property coverage, the other as whether there is a duty to defend the non-actor insured under a liability policy.

  • Century National Ins. Co. v. Garcia, S179252, rev. gr. 3/17/10.  The state Supreme Court just granted review last week.  At issue is whether an insurer may enforce an exclusion in a fire policy that denies coverage to "innocent insureds" for damages from a fire intentionally caused by a coinsured.  The gist of the insured’s argument is that California Insurance Code Section 2071 mandates the language of fire policies, and it couches the intentional acts exclusion in terms of "the insured."  Century National’s policy barred coverage for all when any insured acted intentionally.  Garcia asks whether insurers may deviate from the statute’s prescribed language, and to what extent.
     
  • Minkler v. Safeco Ins. Co., S174106, question certified 8/12/10.  Minkler, now fully briefed, asks whether the severability clause in a liability insurance policy can trump an intentional acts exclusion which prohibits coverage for all insureds when "an insured" — i.e., any insured — has committed an excluded intentional act.  In Minkler, one insured committed child sex abuse.  The victim sued not only the abuser but his mother, also an insured, for negligently-supervising her adult son.  The victim and insured in Minkler argue that the severability clause creates separate insurance policies, and therefore, an "innocent" insured sued for negligently-supervising the intentional actor is entitled to a defense.  Their theory is that because there supposedly are "separate" policies, the only intent that is relevant is that of the mother, who never committed an intentional act.  The insurer, by contrast, contends that the severability clause was never designed to rewrite the plain language of the exclusions.  The insurer is represented by Appellate Strategist lawyers.

Knowing the Difference Between Erroneous and Void Judgments May Save Your Own Appeal

By on Posted in Civil and Appellate Procedure

On March 23, the U.S. Supreme Court issued a unanimous opinion limiting the rights of litigants to challenge a judgment outside the ordinary appeals process by arguing the judgment is "void." In United Student Aid Funds v. Espinosa (.pdf), the Supreme Court considered an order in a chapter 13 bankruptcy case that approved a plan allowing a student loan debtor to discharge his obligation to pay interest on his loans once he had paid off the principal. The court had erred in approving the plan because a student loan debtor must establish "undue hardship" to obtain an interest discharge in a separate proceeding in which the debtor must serve a summons on the creditor.

Years after the plan was approved, the creditor brought an action to recover the interest and for relief from the judgment under Federal Rule 60(b)(4), arguing that the initial order approving the plan was void. 

The Supreme Court disagreed.

Such a collateral attack is available only where the trial court acted without "an arguable basis for jurisdiction" or where the other party’s due process rights were violated. The bankruptcy court certainly had the authority to approve a plan. It simply committed a legal error in not requiring proof of "undue hardship." Further, the lender had actual notice of the proposed plan. The irregularity in not serving a separate summons did not amount to a due process violation.  If lender was unhappy with the order approving the plan it had to file a timely appeal.

The lesson to litigants is clear and important.  Even if you think that the trial court is acting outside its authority, do not defer an appeal on the theory that the judgment can be attacked as void later on.  So long as there is some arguable basis that the court had jurisdiction to enter the order, it must be challenged through a timely appeal.

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