We recently reported on the Sixth Circuit’s practice of curtailing extensions of time and not granting them as freely as in the past. Thus far, the reports related to that are largely anecdotal and there is no formal policy change or related pronouncement from the Court. That could change, as illustrated by a recent Second Circuit decision, RLI Insurance Company v. JDA Marine Inc. In that decision, the Second Circuit refused to reinstate an appeal after a dismissal based on the failure to file a brief in compliance with a scheduling order. The decision is certainly an interesting (albeit perhaps a frightening) read, with the Second Circuit chronicling its past history of extensions of time and the effect that those have on its docket. The Court noted: “altering a culture in which much of the bar had come to believe that briefing schedules were issued only to be automatically extended until convenient for counsel to file a brief was difficult.” The decision in the Second Circuit case, which refused to permit a subsequent request for extension, shows that the Second Circuit’s policy has teeth. The Sixth Circuit, at least at this point, has not made any such formal pronouncement related to extensions of time. However, the Second Circuit’s opinion provides a cautionary tale for those attorneys who might believe that extensions of time will be automatically granted in perpetuity.
We have previously reported on the Sixth Circuit’s caseload and the trend toward the use of unpublished opinions. We’ve discussed that the number of published decisions per judge, the opinions that are the most important to create precedent, are fairly consistent throughout all circuits. But the latest statistics show an interesting trend toward the use of unsigned and unreasoned opinions.
The federal courts of appeals decided just over 35,000 cases on the merits last year, and those break down to about 4,300 published opinions, 7,000 signed but unpublished opinions, 18,700 unsigned but reasoned opinions, and 5,000 decisions without either reasoning or a signature. The vast majority of the unreasoned merits opinions come from the Eighth and Ninth circuits, and those summary dispositions make up nearly half of the decisions in those circuits. This continues a long-term trend towards the increasing use of such decisions:
The large jump in the past year is probably due to the federal appellate courts deciding thousands of more decisions in 2012 than the year before. And the number of published opinions in all circuits did fall in favor of unpublished opinions. (Notably, the Sixth Circuit was among those few that issued more published opinions in 2012 than in 2011.) But most circuits have dealt with these extra cases through unpublished, reasoned decisions. Only the Eighth and Ninth circuits actually issued fewer unpublished but reasoned decisions in favor of an additional 2,750 decisions that were both unreasoned and unsigned.
While many litigants may not care about having a signed or unpublished opinion, I have yet to have a client that was happy with a summary disposition on appeal. This begs the question of whether reducing the time to decide appeals through opinions without reasoning or explanation will hurt the public trust in the courts over the long term.
On a lighter note, the statistics also show that the Sixth Circuit was the home of the only oral disposition in all of the federal circuit courts in 2012. The Sixth Circuit has a history of oral decisions, in which the court would summarily affirm a decision at the conclusion of oral argument. That trend has largely now been wisely replaced with written decisions before oral argument. In other words, cases where the Court may have ruled on from the bench in the past are not even making the oral argument cut now (we have reported several times about the lower percentage of cases that now receive oral argument).
In Gardner v. Heartland Industrial Partners, LP, the Sixth Circuit reversed a decision that held that the plaintiffs’ state law tort claims for tortious interference with contract were completely preempted by ERISA. The Sixth Circuit framed the question as one of jurisdiction – in other words, whether plaintiffs’ complaint stated a federal question allowing defendants to remove to federal court and triggering preemption.
The Sixth Circuit considered whether the tortious interference claim, concerning alleged interference with plaintiffs’ SERP, satisfied two conditions for preemption: (1) the plaintiff complains about the denial of benefits to which he is entitled only because of the terms of an ERISA regulated benefit plan; and (2) the plaintiff does not allege the violation of any legal duty independent of the ERISA plan. Here, the Sixth Circuit found that the defendant’s duty not to interfere with the SERP agreement arose under Michigan law, rather than the terms of the SERP itself. Nor was defendant’s duty derived from or conditioned upon the terms of the SERP. In other words, “nobody needs to interpret the plan to determine whether that duty exists.” Although the terms of the SERP could become relevant in measuring the amount of damages, the Sixth Circuit found that insufficient to trigger preemption. As a result, the district court lacked jurisdiction and the Sixth Circuit remanded with instructions to remand the case to state court.
ERISA is often a quagmire for unsuspecting litigants, particularly with preemption and jurisdictional issues. This case sets forth the governing standard for ERISA preemption and provides a useful road map for parties seeking to avail themselves of the preemption protections of ERISA.
In Kepley v. Lanz , the Sixth Circuit yesterday reversed the dismissal for lack of standing of an action brought by former shareholders of a Kentucky corporation. In response to the defendant’s motion to dismiss, the district court had sua sponte dismissed the action as derivative in nature, meaning that the individuals did not have appropriate standing to pursue the claim.
The Sixth Circuit wasted little time in reversing. It recognized that the defendant’s alleged threat had forced the plaintiffs to sell their shares of stock at a price lower fair market value. This, the Sixth Circuit found, was a quintessential individual harm rather than a derivative harm suffered by the corporation as a whole. The Sixth Circuit also waded through a choice of law issue concerning the appropriate tests for direct or derivative claims under Kentucky law. After surveying relevant authorities from Kentucky and Delaware, the Court found “little substantive distinction between the tests proposed by the parties.” As the Sixth Circuit framed the test, “we find the focus to be on (1) the nature of the duty owed and (2) the nature of the injuries suffered.” In light of that articulation of the test, the Sixth Circuit had little trouble in finding that the harm suffered was specific to the individual plaintiffs. The Court also recognized that because they are no longer shareholders, if the dismissal stood, they would not be able to bring a derivative action because they would lack standing to do that, which would place them in a proverbial Catch-22 scenario.
This opinion is helpful in not only fleshing out the standards under Kentucky law for direct versus derivative actions, but also explaining the essence of the test. And although this turned on Kentucky law, it is probably safe to say that this opinion could influence other actions arising from other states within the Circuit.
We’re all too familiar with them: Electronic filing mistakes in the Case Management and Electronic Case Files (CM/ECF) system (now adopted by every Circuit). They include everything from filing in the wrong case to submitting the wrong document. And we’re just as familiar with corrected electronic docket entries. As we all know, the CM/ECF system does not allow for mulligans. Once a filing error is made, an updated or corrected docket entry is necessary because the original entry cannot be updated or deleted. While this makes for long and messy dockets, a party’s right to pursue a case is generally unaffected.
The real problem arises in those rare cases when a lawyer’s filing error jeopardizes his or her client’s right to appeal. Earlier today, in a case of first impression, the Sixth Circuit addressed that very issue: Can a technical error in an electronic filing make an appeal untimely? Guided by the weight of authority from its sister courts, the Sixth Circuit panel unanimously answered, “no.” See Shuler, Shuler v. Garrett (6th Cir. Case Nos. 12-6270/13-5050) (PDF).
(You may now breathe a sigh of relief.)
As all Sixth Circuit practitioners (hopefully) know, a notice of appeal “must be filed with the district clerk within 30 days after the entry of the judgment or order appealed from.” Fed. R. App. P. 4(a)(1)(A). But this 30-day period for filing can be tolled. If a party files a timely Rule 59 motion, the time to file a notice of appeals runs instead from the entry of the order dismissing the motion. See Fed. R. App. P. 4(a)(4)(A)(iv). In Shuler, the defendants moved to dismiss the plaintiffs’ appeal as untimely because of a technical error in the filing of the plaintiffs’ Rule 59 motion. Federal Civil Rule 59 gives parties 28 days to file a motion to alter or amend a judgment. See Fed. R. Civ. P. 59(e). Unfortunately, when plaintiffs’ counsel went to file a motion to amend on the last day of the 28-day period provided by the rule, she entered the wrong docket information and her client’s motion ended up being listed as filed on the docket of another case. After realizing her mistake the next day, the lawyer promptly filed a notice of ECF correction with another copy of the motion attached. She did not actually re-file the motion, however, until six days later. The defendants seized upon the district court’s ruling that the Rule 59 motion was untimely and argued before the Sixth Circuit that the filing of the Rule 59 motion did not toll the running of the 30-day period for filing a notice of appeal from the district court’s judgment. In effect, the defendants argued, the filing of the Rule 59 motion under the wrong docket meant that it had not been filed at all.
In a panel opinion written by Judge Daughtrey, the Sixth Circuit unanimously rejected the defendants’ argument and denied the motion to dismiss the appeal. Following the lead of other Circuit Courts that have addressed the issue in similar contexts, the Sixth Circuit held that the district court erred in ruling that the plaintiffs’ Rule 59 motion was not timely filed, and thus “[i]t follows that the motion effectively tolled the 30-day period for filing the notice of appeal, which was, in turn, timely filed.” In so ruling, the panel highlighted how the Sixth Circuit has “honored the admonition in Rule 5(d)(4) of the Federal Rules of Civil Procedure since its amendment in 1991,” which provides that “[t]he clerk shall not refuse to accept for filing any paper presented for that purpose solely because it is not presented in proper form as required by these rules or any local rules or practices.” Fed. R. Civ. P. 5(d)(4). In denying the motion to dismiss, the panel also noted that there was “no evidence that defendants suffered any prejudice as a result of the delay in filing because, on the same day that plaintiffs’ counsel filed the motion electronically (albeit under the wrong docket number), counsel also served paper copies of the motion on the defendants, as local rules required.” The panel thus ordered the Sixth Circuit clerk to issue a new briefing schedule.
As Shuler shows, electronic filing errors all too common in the federal courts. Fortunately, the Sixth Circuit offers a number of online links providing guidance on how to file electronic documents properly, including addressing common technical problems as well as providing a list of permissible filings (to make sure that your document is properly categorized). And when in doubt, call the Case Manager assigned to your case. The Case Managers at the Sixth Circuit are very friendly and helpful. They would rather receive your call than fix your filing error.
Expect the Sixth Circuit’s Shuler decision to be followed in the remaining Circuits.
In Estate of William R. Barney, Jr. v. PNC Bank, the Court framed the issue as “whether Ohio law permits a principal to hold a bank liable for money that the principal entrusted a fiduciary to deposit at the bank in which the fiduciary then withdrew, without the principal’s permission, and squandered.” Answering that question in the negative, the Court upheld the dismissal of the complaint against the bank related to the fiduciary’s absconding with $1.2 million of trust assets. The defrauding party opened a checking account at the bank as executor of an estate and deposited substantial sums of money into that account. Unfortunately for the plaintiffs, he then withdrew about $1.2 million of it and deposited it in accounts for his own personal business, which ultimately failed.
The plaintiffs raised a variety of negligence-based theories, but the bank moved to dismiss based on Ohio’s Uniform Fiduciaries Act. The act provides that if a check is drawn on the principal’s account by a fiduciary who is empowered to do so, the bank may pay the check without being liable except under a couple of narrow exceptions. Because the complaint alleged that the individual did in fact possess authority to withdraw money from the accounts, it effectively insulated the bank from liability. As the Court recognized, the effect of this statutory section “is to assign the risk that a fiduciary might defraud a principal to the principal instead of to a third party (like a bank).” The bank thus had no duty to monitor the use of funds and detect the wrongdoing unless there was some basis for the bank to have actual knowledge of the breach of fiduciary duty.
While this opinion is premised on Ohio law, because the statute in question is part of the Uniform Act, it may well have broader repercussions. The Court’s opinion also provides a good overview of pleading requirements in this area which will be important to understand both for plaintiffs and defendants in these types of cases.
Two of the most important issues for deciding when to appeal are often the chances of success and how long will it take to get a decision. This post briefly addresses the newly released statistics for 2012.
Because it is an important part of the decision whether to appeal, we have often covered reversal rates in civil appeals at the Sixth Circuit. Of 786 civil appeals decided on the merits in 2012, only 127 were reversed or remanded for a rate of about 16%—which was higher than any circuit except the D.C. Circuit. But this number is only the beginning when assessing the chances for reversal (even apart from the merits of the appeal). We have previously noted that reversal rates vary significantly by district, by judge, and by procedural posture. Empirical scholarship has also shown that federal appellate courts are more likely to reverse after a jury trial than a summary judgment decision or a bench trial.
Turning to the timing of appeals, the average appeal currently takes 14.7 months in the Sixth Circuit. This reflects positive improvement to the 15.5 months that we reported two years ago, but it’s still good for only second slowest ahead of the Ninth Circuit. The federal courts of appeal have, overall reduced their time from 11.7 months in 2010 to 9.8 months. But the good news for the future is that the Sixth Circuit has made significant progress against its backlog by deciding 600 more cases than were filed, reducing its overall docket load about 15%. Another year like 2012 that and appeals will likely be moving significantly faster.
In an interesting, albeit unusual, decision the Sixth Circuit found that it could not review the propriety of an injunction based on mootness in Appalachian Regional Healthcare, Inc. v. Coventry Health and Life Insurance Company. The backdrop for the case concerns Kentucky’s transition from fee-for-services for its Medicaid program to managed care (the opinion also offers a nice primer on managed care for those who are interested). Coventry, a managed care organization, ended up entering into a contract with Appalachian, which was a rural hospital. As a result of a number of factors, Coventry notified Appalachian that it intended to terminate the agreement. At that point, Appalachian ran into court and sought injunctive relief to prevent the termination based on the threat and harm to its patient population. The district court ultimately granted an injunction that kept Appalachian in Coventry’s network until November 1, 2012.
Coventry sought to appeal the injunction decision, but the Sixth Circuit determined that because the injunction had expired, the appeal was moot. Coventry sought to salvage the appeal by claiming that the case involved injuries that are capable of repetition yet evading review, but the Sixth Circuit was not persuaded. The Court recognized that there was no compulsion between Coventry and Appalachian to enter into any further contract, so the situation was not likely to repeat itself.
Another interesting aspect of the decision was that it considered Coventry’s appeal based on the district court’s denial of its motion for bond in connection with the injunction. The district court declined to impose any bond upon its conclusion that Coventry would suffer little, if any, harm if the injunction were entered. Although the Sixth Circuit found the district court’s characterization inaccurate, it did not find reversible error in denying the bond. Overall, the Court emphasized that Coventry had not substantiated its bond request with sufficient estimates of the damages it would suffer upon compliance with the preliminary injunction. As a result, the Court found no abuse of discretion in denying any bond. (This is a good practice pointer for parties who want the enjoining party to post a bond – you must produce evidence substantiating your likely damages).
On Monday, the Supreme Court sent Whirlpool Corp v. Glazer back to the Sixth Circuit for further consideration in light of Comcast Corp. v. Behrend, 569 U.S. — (2013). The decision was GVR’d, meaning that the Court granted the writ of certiorari, vacated the judgment, and remanded without reaching the merits.
In Glazer, as we discussed in May, the plaintiffs purchased front-loading Whirlpool washing machines that were allegedly susceptible to mold buildup. On appeal from certification of the class, Whirlpool argued, among other things, that the district court failed to conduct a “rigorous analysis” of the factual record before certifying the class. Because the case involved different washing machine designs and variations in consumer’s efforts to repair, the defendants contended that plaintiffs could not show commonality and that each class member’s claim would require individualized inquiries.
Affirming class certification (and citing the Third Circuit’s Comcast decision), the Sixth Circuit held that “courts need not resolve all factual disputes on the merits before deciding if class certification is warranted.” The court went on to conclude that the underlying causes of mold buildup and the sufficiency of Whirlpool’s warnings were capable of classwide resolution. In addition, although some class members had not suffered an actual injury, the Sixth Circuit rejected the argument that the class was overbroad.
Comcast could bear upon Glazer in several ways. Building on Wal-mart v. Dukes, the Court in Comcast concluded that the class was improperly certified under Rule 23(b)(3). The appellate court there was faulted for failing to resolve factual disputes that were key to the Rule 23(b)(3) requirements. In particular, the Court determined that the plaintiffs’ damages evidence failed to match up with their theory of liability. Writing for the majority, Justice Scalia stressed that the court must measure damages resulting from “the particular  injury on which  liability is premised.” As applied to the Comcast plaintiffs, their “model f[ell] far short of establishing that damages are capable of measurement on a classwide basis.” Comcast’s emphasis on rigorous fact finding and scrutiny of damages evidence could be relevant to Glazer on remand. As discussed above, Whirlpool has argued that the fact findings in Glazer were insufficient, and that the no-injury class was overbroad.
This morning, the U.S. Supreme Court accepted certiorari on a case that the Sixth Circuit Appellate Blog has been watching since July 2011: Coalition to Defend Affirmative Action v. Regents of the University of Michigan (6th Cir., Case Nos. 08-1387/1389/1534 & 09-1111).
In Coalition to Defend Affirmative Action, Integration and Immigrant Rights and Fight for Equality by Any Means Necessary v. Regents of the Univ. of Michigan (PDF), a divided panel of the Sixth Circuit struck down a 2006 voter-approved amendment to the Michigan constitution, Proposal 2, which prohibits Michigan’s public colleges and universities from granting “preferential treatment to any individual or group on the basis of race, sex, color, ethnicity, or national origin.” Over a strong dissent by Judge Gibbons, the panel majority, written by Judge Cole, ruled that Proposal 2 ran afoul of U.S. Supreme Court precedent interpreting the Equal Protection Clause because it “unconstitutionally alters Michigan’s political structure by impermissibly burdening racial minorities.”
As this blog reported, the en banc Court accepted review of the panel decision and, in November 2012, affirmed the ruling. By an 8 to 7 vote (with Judges Kethledge and McKeague recusing themselves), the Sixth Circuit ruled that Proposal 2 violates the “political structure doctrine” of the Fourteen Amendment. This blog observed at the time that the en banc ruling may “offer the Supreme Court an opportunity to revisit a doctrine not at issue in [the Supreme Court's current affirmative action case, Fisher v. University of Texas at Austin (No. 11-345)] and which the High Court has not addressed for 30 years.” It appears that the Supreme Court is going to take up that offer in Schuette v. Coalition to Defend Affirmative Action (No. 12-682), and the Sixth Circuit Appellate Blog will keep a keen eye on developments before the High Court.