Wednesday, December 05, 2018

Trying to Evade a Class Action

In Geismann, M.D., P.C. v. ZocDoc, Inc., Geismann , a Missouri professional corporation, commenced a class action in Missouri state court against the defendant, claiming that it had violated the Telephone Consumer Protection Act by sending unsolicited advertisements by fax.  Geismann, a Delaware corporation, also moved for class certification.  ZocDoc removed the case to the District Court for the Eastern District of Missouri.  Two weeks later, ZocDoc made an offer of judgment to Geismann, pursuant to Rule 68 of the Federal Rules of Civil Procedure for (a) $6,000 plus reasonable attorney's fees in satisfaction of Geismann's individual claims and (b) an injunction prohibiting the defendant from engaging in similar statutory violations in the future.  Geismann rejected the offer of judgment because it did not provide relief to the other members of the class.  ZocDoc moved to transfer the case to the Southern District of New York, which motion was granted.

Upon transfer of the case, ZocDoc moved to dismiss the complaint on the ground that the offer of judgment provided full satisfaction of Geismann's claim and the action was moot.  The District Court granted ZocDoc's motion.  Geismann appealed.

The Second Circuit reversed based on the Supreme Court's decision in Campbell-Ewald Co. v. Gomez, which held that the failure to accept an offer of judgment is not a basis to dismiss an action because such failure, like any unaccepted contract offer, is a legal nullity with no operative effect on a  plaintiff's individual claim.  The Supreme Court, however, left open the possibility that the result would be different if the defendant deposited the full amount of the plaintiff's individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.

Before the Second Circuit had issued its decision but after the Supreme Court's decision in Cambell-Ewald, ZocDoc filed a motion with the District Court to deposit a check in the amount of $6,100 payable to the clerk of the court in satisfaction of Geismann's judgment.  The Court granted the motion.

After the Second Circuit's decision, the judgment was vacated and the case remanded to the District Court.  The Court stated that ZocDoc's deposit on the funds with the clerk did not match the Supreme Court's hypothetical case in Campbell-Ewald in that it was deposited pursuant to a judgment that no longer existed and should not have been entered in the first place.

ZocDoc filed a letter motion to the District Court seeking leave to deposit an additional $13,900 with the Court under Rule 67, explaining that "ZocDoc hereby makes an open-ended offer to Geismann with no expiration date on a total of $20,000 (twenty thousand dollars) and for all injunctive relief Geismann seeks in the operative complaint."  It further stated that after depositing the funds, it would  seek to perfect the Cambell-Ewald hypothetical by filing a motion for summary judgment in which it will ask the Court to enter a judgment in favor of Geismann and against ZocDoc for the full amount of Geismann's individual claims and to dismiss the class allegations without prejudice..  The District Court granted ZocDoc's letter motion to deposit the funds and to make a summary judgment motion.  ZocDoc moved for summary judgment and asked that the Court dismiss the action as moot in that ZocDoc had deposited the money and consented to the injunctive relief.  The Court granted the motion, dismissed the action and dismissed the class claims without prejudice.  Geisman appealed.

The Second Circuit again reversed, holding that the deposit with the clerk of the $20,000 was not the same as a bank account in plaintiff's name (the hypothetical in Campbell-Ewald) because the plaintiff does not have the right to withdraw the funds at any time.  Hence, the deposit did not render Geismann's individual claims moot.  Also, at the time of the deposit, the District Court was not divested of power to enter a judgment in favor of Geismann.  Again, Geismann's individual claims were not mooted by the deposit.  The Court acknowledged that Geismann's claims could be rendered moot if ZocDoc surrendered to the complete relief sought by Geismann, but that complete relief includes its class claims.  The Court concluded that the District Court had to resolve the pending class certification motion before entereing judgment and declaring an action moot based solely on relief provided to a plaintiff on an individual basis.  To hold otherwise would allow a defendant to thwart class litigation at will through the use of tactical procedural maneuvers.

The Second Circuit's decision in this case can be found here.

Tuesday, December 04, 2018

CPLR 3102 proceeding not a "civil action" for purposes of removal

In Teamsters Local 404 Health Services & Insurance Plan v. King Pharmaceuticals, the Teamsters Local 404 Health Services & Insurance Plan ("Teamsters Plan") had commenced a proceeding, seeking pre-action discovery under CPLR 3102(c).  It sought to obtain settlement agreement, licensing agreements and any other related agreements between King Pharmaceuticals , Meridian Technologies, Inc. and Pfizer, Inc., the respondents in the proceeding (collectively, the "Respondents") and Teva Pharmaceutical Industries, Ltd. ("Teva"), which documents would assist Teamsters Plan in drafting a complaint by bringing to light certain "pay-for- delay" or "reverse-payment" agreements under which the Respondents were paid to hold off bringing a generic EpiPen to market until June 2015, which agreements Teamsters Plan contended violated state consumer protection laws and state and federal antitrust laws.  King Pharmaceutical attempted to remove the proceeding to federal court and to dismiss because such pre-action disclosure was not available under the Federal Rules of Civil Procedure.  The District Court remanded the case to state court, holding that there was no federal question jurisdiction and that diversity jurisdiction was barred by 28 U.S.C. 1441(b)'s "forum defendant" rule.  That rule provides that when a defendant resides in the state in which the action is commenced, the defendant cannot remove the case to federal court.

The Second Circuit affirmed, but on different grounds.  The Court held that a proceeding brought under CPLR 3102 does not state a substantive cause of action, which is required for a case to be removable.

The decision in this case can be found here.

(Apologies are in order.  This post has been sitting in draft version since mid-October.  I neglected to push the Publish button.  Sorry.)

Monday, December 03, 2018

Doctrine of Functus Officio

Under the doctrine of functus officio, once a panel of arbitrators has exercised its authority to adjudicate the issues submitted to it, the authority of the arbitrators over those question is ended.  In General Re Life Corp. v. Lincoln Nat'l Life Ins. Co., the arbitrators issued an award, and then later issued a "clarification" of the award.  The parties each tried to confirm the award -- Lincoln attempted to confirm the award as clarified and General Re sought to confirm the award as originally issued.  The question was whether the arbitrators had the power to issue the clarification.

The Second Circuit joined the Third, Fifth, Sixth, Seventh and Ninth Circuit in holding that their was an exception to functus officio where an arbitration award fails to address a contingency that later airses or when the award is susceptible to more than one interpretation.  The District Court had accepted the clarification and, on appeal, the Second Circuit affirmed.

The decision in this case can be found here.

Thursday, April 19, 2018

Serving as a juror. The Court assumed, without deciding, that the inability to serve as a juror is a collateral conseqence of a conviction is sufficient to support a writ of coram nobis in Porcelli v. United States. This did not help Porcelli because the Court denied the petition on the merits. The decision can be found here.
Correction. No, this is not a correction of a misstatement I have made on this blog -- or anywhere else for that matter. I am correcting a misstatement of fact made by Jeffrey Toobin in his fascinating book on the Supreme Court, The Nine. On page 77, Toobin states that Judges Richard Arnold and Morris Arnold "were the only brothers in American history to serve on the same federal court of appeals.


Well, apparently Toobin has never heard of Augustus Hand and Billings Learned Hand of the Second Circuit.

Wednesday, March 28, 2018

Ban on Alcohol reversed; rest of sentence OKed

Betts was a bad boy.  He had been convicted of bank fraud, and sentenced to two years imprisonment and five years' supervised release.  The Court had also required that he pay restitution and to notify his probation officer within 72 hours if he was arrested.  Betts had been arrested for driving without a license, and he had not notified his probation officer.  He also had not made the restitution payments.  He pleaded guilty to violating his plea agreement.  He was sentenced to 10 months' imprisonment and an additional four years of supervised release.  As part of his sentence, the Court required him to abstain from alcohol use during his supervised release and required substance abuse testing, stating that there would be zero tolerance for the use of any drugs at all.  Betts appealed.

The Second Circuit rejected Betts's position that the four years of supervised release was unreasonable because if was within the Sentencing Guidelines range, although on the high side of the range.  Any sentence within the Guidelines range is deemed presumptively reasonable.  The Court similarly rejected Betts's claim that his offense did not warrant the four years and that the District Court had wrongly rejected his mitigation evidence.

The Court found that the requirement that the zero tolerance for the use of any drugs was permissible, noting that it did not apply to any prescription drugs.

The Court did find that the ban on alcohol was not not reasonably reasonably related to any of the factors outlined in Section 5D1.3(b) of the Guidelines and vacated that provision of the sentence.

The decision in United States v. Betts can be found here.

Friday, March 23, 2018

Preempted by the Organic Foods Production Act

Three parents brought a class action against Abbott Laboratories, Inc., claiming that it had included in its baby formula, which was purported to be "organic," contained ingredients not allowed by the Organic Foods Production Act (the "Act").  Their claims were brought under New York and California statutory and common law.  The trial court dismissed the action, holding that the claims were preempted by federal law.  On appeal, the Second Circuit affirmed.  The Act allows Abbott to label its formula organic pursuant to a certified organic plan.  All Abbott did was state that its product was certified organic, which is was.  The Court held that the parents' claim would require an adjudication of the product's organic status, something not envisioned by the Act.  Accordingly, the state law claims were preempted and the case dismissed.  The Second Circuit's decision is in accord with a decision of the Eighth Circuit.

The decision in Marentette v. Abbott Laboratories, Inc. can be found here.