Header graphic for print

6th Circuit Appellate Blog


Sixth Circuit Holds Ban On Gun Possession After Commitment To Mental Institution Violates Second Amendment

Posted in News and Analysis, Recent Cases, Supreme Court

In Tyler v. Hillsdale Cnty. Sheriff’s Dep’t, a case sure to draw attention nationwide, the Sixth Circuit held today that “’a prohibition on the possession of firearms by a person “who has been committed to a mental institution,’ . . . violates the Second Amendment.”

The court held that the the plaintiff, who “[t]wenty-eight years ago. . . was involuntarily committed for less than one month after allegedly undergoing an emotionally devastating divorce” could not  constitutionally be barred for life from possessing a firearm.

Arguably the most noteworthy aspect of the decision is that the Sixth Circuit applied strict scrutiny to the law, acknowledging that it was “join[ing] a . .. minority view,” and citing only dissents and concurrences in support of its “emergent” position.  The Court catalogued but rejected precedent from nine other circuits applying “heightened” or intermediate scrutiny.

The Court acknowledged that it was the first court of appeals to “sustain[] a Second Amendment challenge to a federal firearms regulation since Heller was decided.  The provision in question, 18 U.S.C. 922(g)(4), bars anyone “adjudicated as a mental defective” or “who has been committed to a mental institution” from possessing firearms for life.  This is just one of a laundry list of bans in Section 922(g), which also bans firearm possession by misdemeanor domestic violence offenders, fugitives, and drug users, as well as other classes.

The Court held that, although Heller approved prohibitions on gun possession by the mentally ill, this did not extend to prohibitions on gun possession by those merely “ever previously mentally institutionalized.”  The 73 year old plaintiff, Clifford Tyler, had been involuntarily committed 28 years prior, for less than one month, allegedly due to suicide risk.  A 2012 psychological evaluation attributed the commitment to a “brief reactive depressive episode” and concluded that there was no evidence of mental illness.  In dictum, the Court reluctantly “suppose[d],” that, based on Heller, Section 922(g)(4) was constitutional as to those “adjudicated as a mental defective.”

The Court determined that strict scrutiny was appropriate. It held—alone and in opposition to nine other circuits—that strict scrutiny should be presumed when a “fundamental right” was at stake, and only “downgraded” to intermediate scrutiny for an “expressly indicated” reason.  The Court also noted that the Heller majority rejected Justice Breyer’s dissent advocating intermediate scrutiny.  Finally, the Court stated flatly that “intermediate scrutiny . . . has no basis in the Constitution.” The Court also attempted to downplay the significance of this choice by describing the choice between intermediate and strict scrutiny as “more important in theory than in practice” and predicting that the choice would not affect the outcomes of similar challenges before other courts.  Judge Gibbons, writing to concur, expressed “substantial doubts” about the decision to apply strict scrutiny and pointed out that it was unnecessary to decide the appropriate degree of scrutiny because the claim would have been viable under intermediate scrutiny also.

Applying strict scrutiny, the Court held that Section 922(g) furthered a compelling interest, but that it was too broad.  Although it approved the portion of Section 922(g)(4) that prohibited those “adjudicated-as-a-mental-defective” from possessing firearms, it held that the broader class of “persons previously committed to a mental institution” was not sufficiently dangerous.  For the latter conclusion, the Court relied on Congress’s decision to establish criteria for optional state “relief-from-disabilities-program[s] for individuals subject to § 922(g)(4)’s prohibition.”  The Court read that as a “conce[ssion]” by Congress that “the previously institutionalized are not sufficiently dangerous, as a class, that it is necessary to deprive all class members of firearms.”

This is just a brief recap of the main points. There is much more to say about the Court’s analysis, its many dicta—the opinion discusses similar prohibitions on firearm possession by illegal aliens, domestic violence offenders, persons under 21, subjects of domestic restraining orders, and drug users and addicts—and the many potential ramifications of this decision.  Although it is most obviously a Second Amendment decision, its critical analysis of sweeping generalizations regarding mental illness and institutionalization could easily resonate more broadly, making it easier, for example, to challenge policies that bar people with certain mental health histories from government jobs.

Needless to say, the cert petition for this case practically writes itself.  We will continue exploring both the Court’s reasoning and the potential effects of this decision in future posts.

Sixth Circuit Follows The Majority Of Circuits In Holding That Informal Warnings Do Not Satisfy Rule 11’s Safe Harbor Provision

Posted in Recent Cases

Until last Friday, the question of whether an informal warning letter satisfied Rule 11’s safe harbor provision was unsettled in the Sixth Circuit.   In Penn, LLC, et al. v. Prosper Business Development Corporation, et al. (6th Cir. Case No. 14-3108) (PDF), the Sixth Circuit panel followed the Second, Fifth, Eighth, Ninth, and Tenth Circuits in holding that an informal warning in the form of a letter without service of a separate Rule 11 motion does not trigger the 21-day safe harbor period provision under the rule.  The lone Circuit espousing a contrary position is the Seventh Circuit.

The 21-day safe harbor provision in Rule 11(c)(2) of the Federal Rules of Civil Procedures states in relevant part:

A motion for sanctions must be made separately from any other motion and must describe the specific conduct that allegedly violates Rule 11(b).  The motion must be served under Rule 5, but it must not be filed or be presented to the court if the challenged paper, claim, defense, contention, or denial is withdrawn or appropriately corrected within 21 days after service or within another time the court sets. . . .

After plaintiffs sued defendants and defendant’s law firm in Penn, the defendant law firm served plaintiffs’ firm with a letter on December 6, 2010 that purported to satisfy “the obligations of . . . Fed. R. Civ. P. 11” and threatened to seek sanctions “if the captioned matter [was] not dismissed before the first answer date of December 20, 2010.”  Plaintiffs’ law firm rejected the allegations of impropriety and stood by its complaint.  On May 27, 2011, the district court granted the defendant law firm’s motion to dismiss all the claims against it.  Nearly two weeks later, on June 8, 2011, the defendant law firm served plaintiffs’ law firm with a proposed motion for Rule 11 sanctions.  The plaintiffs’ firm opposed the motion by arguing, among other things, that the defendant law firm’s service of a copy of the motion post-dismissal failed to comply with Rule 11’s safe harbor provision, thus making sanctions unavailable.  The defendant law firm countered that its December 6, 2010 letter satisfied the rule.  The district court ended up denying the motion on the merits by holding that the allegations in the complaint were not so deficient to necessitate sanctions.  The district court bypassed the Rule 11 safe harbor issue, calling it “somewhat unsettled.”

On appeal, the Sixth Circuit affirmed by holding that the defendant law firm’s December 6, 2011 letter failed to satisfy Rule 11’s safe harbor provision.  In an opinion written by Judge Cook, the panel made clear that Rule 11 “specifically requires formal service of a motion.”  The panel also highlighted policy grounds that supported its decision, noting that Rule 11’s safe harbor provision was designed “to reduce Rule 11’s volume, formalize appropriate due process considerations of sanctions litigation, and diminish the rule’s chilling effect.”  The panel stated that “[p]ermitting litigants to substitute warning letters, or other types of informal notice, for a motion timely served pursuant to Rule 5 undermines these goals.”  The panel observed that “[w]hereas a properly served motion unambiguously alerts the recipient that he must withdraw his contention within twenty-one days or defend it against the arguments raised in that motion, a letter prompts the recipient to guess at his opponent’s seriousness.”

Penn is a good case illustrating how the Sixth Circuit is free to affirm a judgment on any basis supported by the record.  While the district court in this case had denied the defendant firm’s Rule 11 motion on the merits, the Sixth Circuit affirmed on an alternative procedural ground, which was much narrower and based solely on the application of legal propositions to the undisputed facts.  

Notably, the panel also declined to follow three of the Sixth Circuit’s unpublished decisions establishing that a warning letter satisfies Rule 11’s safe harbor provisions.  The panel stated that “these unpublished decisions neither bind us nor persuade us to forsake the benefit to bench and bar afforded by requiring strict compliance with Rule 11’s clear text.”

The bottom line is that there finally is clarity in the Sixth Circuit on Rule 11’s safe harbor.

SCOTUS To Decide Whether Order Denying Plan Confirmation Is “Final,” Appealable

Posted in News and Analysis, Recent Cases, Supreme Court

The Supreme Court granted cert last Friday in the case of Bullard v. Hyde Park Savings Bank, in which the First Circuit held that an order denying confirmation of a reorganization plan is not a “final judgment” and therefore not appealable.  The First Circuit’s decision agreed with five other circuits, including the Sixth Circuit, and disagreed with three others, broadening a circuit split we have previously discussed.

The Sixth Circuit addressed this issue sua sponte in In re Lindsey (which we discussed here) in 2013, dismissing the debtor’s appeal for lack of jurisdiction.  In a unanimous ruling, on which the First Circuit relied heavily in Bullard, the Sixth Circuit reasoned that the rejection of a reorganization plan is not final because  “[f]ar more than a few ministerial tasks remain to be done after such a decision.”  The Sixth Circuit just reaffirmed its dedication to this jurisdictional principle (even in the bankruptcy context) last week, in In re Bradley, where it dismissed the appeal of a BAP determination on the issue of dischargeability because the BAP had remanded for a determination of damages, explaining that “accept[ing] new evidence and issu[ing] additional findings of fact and conclusions of law on damages” were more than ministerial tasks.  The court raised the issue of jurisdiction sua sponte in Bradley as well, demonstrating a proactive approach.

It will be interesting to see whether the Supreme Court agrees with the petitioner in Bullard that  “finality in bankruptcy is a broader concept than finality in ordinary civil litigation,” or with the Sixth Circuit that there is “no good reason to have ‘final’ mean one thing in the former cases and another in the latter.”

Sixth Circuit Reviews the Contours of Jurisdiction in Declaratory Judgments

Posted in Recent Cases

Earlier this week, the Sixth Circuit upheld a Michigan district court’s decision that a commercial general-liability insurance policy did not cover a short-term worker injured at a farmer’s market in Michigan. Judge Stranch’s opinion for the court, however, is most interesting for its lengthy discussion of the contours of declaratory judgment actions in the circuit.

Western World Insurance Co. v. Hoey began tragically when a short-term worker hired by Hoey to run a hay wagon on his farm became a paraplegic as a result of an accident with the wagon. The worker sued Hoey for negligence, and Hoey and the worker both sought a state court declaratory judgment that the worker was covered under Hoey’s general liability policy from Western World. Western World sought a declaratory judgment to the opposite effect in federal court in Michigan, removed Hoey’s initial suit, consolidated the two, and obtained a favorable judgment in federal court, denying insurance coverage of the accident.

In affirming both the district court’s exercise of jurisdiction over the declaratory judgment action and its construction of the insurance policy, the court first noted that the Declaratory Judgment Act grants district courts “unique and substantial discretion in deciding whether to declare the rights of litigants.” With a dose of humility, the opinion went on to note the district court’s advantage in construing the five factors (and three subfactors) weighed when deciding to exercise jurisdiction over a declaratory judgment action, noting that ultimately the decision comes down to a balancing among efficiency, fairness, and federalism. After analyzing each of the factors individually, the court “stepped back” to “view the case as a whole,” and gave deference to the district court’s decision to decide “whether Western World was on the hook for Hoey’s legal fees and potential liability,” that “Western World was [not] playing procedural games,” and that it could resolve the declaratory action “without interfering in [the underlying] tort suit or taking on difficult questions of state law.”

The court noted that a different district court might have decided the case differently—but such is the nature of discretionary jurisdictional decisions. Given the deferential abuse of discretion standard on appeal and the district court’s carful weighing of the jurisdictional factors, the case clearly warranted affirmance. The court also pointed out when district courts clearly should not take jurisdiction over declaratory judgment actions in the circuit, as when they involve “novel, unsettled, or complex issues of state law.” However, practitioners in the circuit should also take note of the court’s final advice that declaratory actions are not to be used merely for “procedural fencing” by obtaining a favorable res judicata result in a race to the courthouse, or if the desired declaration is “frivolous or purely advisory.”

Sixth Circuit Affirms Exclusion of Damages Expert

Posted in Recent Cases

The Sixth Circuit continued its string of Daubert decisions with ASK Chemicals v. Computer Packages, Inc.  The only issue in the case was the amount of damages caused by the untimely expiration of a patent owned by ASK Chemicals after Computer Packages failed to pay the maintenance fees in Japan.  The opinion affirms the district court’s finding that the future profit calculations of the defendant’s expert were speculative and unreliable because they relied heavily on an old marketing plan that was far removed from the current market situation.  It states that calculating lost profits would require evidence of the size of the current Japanese market for this product, the company’s market penetration, as well as the company’s sales volume and the costs of production.  In the absence of this data, lost profits could not be determined “to a reasonable certainty,” and so Judge Boggs’ opinion also finds that the district court correctly granted summary judgment to the defendant.

In concurrence, Judge Clay writes that the majority took too hard a line on the proof necessary to sustain a claim for lost damages under Ohio law, but agrees that the plaintiff failed to support its estimates about the size of the Japanese market for the product with any data.

Sixth Circuit Does Not (Yet) Adopt “Transparently Plain” Exception To Reliance-On-Counsel Defense In Bankruptcy

Posted in News and Analysis, Recent Cases

In In re Eifler, issued yesterday, the Sixth Circuit passed up an opportunity to join the First and Fifth Circuits in adopting a “transparently plain” exception to the reliance-on-counsel defense by which a bankrupt debtor can demonstrate a lack of fraudulent intent. To qualify for the defense, a debtor must demonstrate “(1) full disclosure of all pertinent facts to counsel, and (2) good faith reliance on counsel’s advice.“  The First Circuit has adopted an exception to the defense, holding that reliance on counsel will not shield a debtor when the need to disclose is “transparently plain.”  See In re Mascolo, 505 F.2d 274, 277 & n. 4 (1st Cir. 1974).  The Fifth Circuit has essentially adopted the exception by blessing it in dictum.  See In re Sholdra, 249 F. 3d 380, 383 (5th Cir. 2001).

In In re Eifler, the district court had relied on this “transparently plain” exception to reject the debtor’s claim that he made and/or failed to disclose certain accounts and transfers because he was relying on the advice of counsel.  The Sixth Circuit affirmed the district court as to both fraudulent statements and transfers, but on an alternate ground, holding that the debtor had not disclosed the pertinent facts to his counsel as required for the defense.  The court did not substantively discuss the “transparently plain” exception.

Although the Sixth Circuit did not address the doctrine in this case, at least one other bankruptcy court in the circuit has applied the exception, see, e.g., In re Colvin, 288 B.R. 477, 483 (Bankr. E.D. Mich. 2003) and there appear to be no lower courts in the Sixth Circuit who have rejected it.  Although the “transparently plain” exception has not been frequently applied (a Lexis search of the phrase reveals only 38 hits, some of which are not relevant), it appears to have a small toehold in the Sixth Circuit and remains an open question.

Sixth Circuit Unwinds Case Over Lack of Federal Jurisdiction

Posted in News and Analysis, Recent Cases

In Jarrett-Cooper v. United Airlines, Inc., a travel agent and clients sued United Airlines after the airline failed to honor tickets that had been purchased on behalf of their clients.  The plaintiffs commenced litigation in state court, prompting United to remove to a federal forum.  Although the plaintiffs sought $53,000 in damages, United removed the case on diversity grounds based on the value of the injunctive relief that United claimed would exceed the $75,000 threshold.  United claimed that the injunctive relief would require it to completely revise its procedures and computer systems on a nationwide basis.  The plaintiffs disputed this contention, insisting that all United would have to do is correct the accounts on their computer system related to specifically to them. The district court agreed with United and exercised jurisdiction over the case.

On appeal, the Sixth Circuit reversed.  Because the parties agreed that the plaintiffs’ damages were insufficient to meet the amount-in-controversy requirement, United’s only option for securing diversity jurisdiction was based on the value of the injunctive order.   According to the Court, United’s vision of what would be required if an injunction were granted was unrealistic and overly broad.  Deeming United’s injunction fix as “speculative” the Court found the amount-in-controversy requirement not satisfied based on United’s inability to demonstrate “the logical connection between its speculative amount and the actual controversy.”

While this opinion is brief and unpublished, it does serve as a good reminder to a litigants desiring to remove to a federal forum.  While many parties may prefer a federal forum, the result here is in no one’s interest – litigation to the end of a case, only to have to begin anew in state court.  Therefore, great care should be taken when trying to secure a federal forum based on the value of proposed injunctive relief.   In other words, don’t inflate the prospect of the injunction beyond realistic confines.

Groundbreaking Sixth Circuit Decision Affirms Shutdown Of Fraudulent Tax Prep Franchise, But Not Its Loan Provider

Posted in News and Analysis, Recent Cases

In United States v. ITS Financial, LLC, the Sixth Circuit affirmed the district court’s injunction against a fraudulent tax preparation franchise, but not the franchise’s loan provider (a separate company belonging to the same owner).

Defendants’ “business model” consisted in large part of “luring low-income customers by advertising tax refund anticipation loans that were rarely awarded and sometimes not in fact available . . . .  convinc[ing] them to let ITS file their tax returns . . . [or] fil[ing]their tax returns without permission, using information obtained in the loan application,” while charging “deceptive and exorbitant fees.”   The returns were filed using pay stubs rather than W-2’s, which routinely resulted in understating customers’ tax liability.

After finding widespread non-compliance with a stipulated preliminary injunction that directed defendants to eliminate pay stub returns, stop charging certain fees and offer refund-anticipation loans only through third parties, the district court enjoined ITS Financial (the tax preparation franchise) and Tax Tree (the loan provider) from ““[o]perating, or being involved with in any way, any work or business relating in any way to preparation of tax returns” under Section 7402 of the Internal Revenue Code, which permits injunctions “as may be necessary or appropriate for the enforcement of the internal revenue laws.”  The Sixth Circuit affirmed, notwithstanding Defendants’ contention—which the court did not dispute—that “[w]hile previous cases have specifically enjoined preparers from preparing taxes and giving advice to customers, no case has ever barred a franchisor or other company from working in the tax industry generally.”

The court affirmed the injunction as to ITS Financial, holding that it saw “no reason that a franchisor should be allowed to continue where its franchisee could not.”  The court rejected Defendants’ argument that such an injunction was only available under Section 7407, which allows the court to enjoin a party from “acting as a tax preparer” after “continual[] or repeated[]” misbehavior, explaining that Section 7402(a), provides “a broad grant of authority,” especially to address “wrongdoing that is extreme in both magnitude and multitude,” and was appropriate here, where the Defendant was a franchise and not a tax preparer itself.  The court noted that ITS Financial’s “violative conduct extended beyond direct preparation of taxes” and that its structure as a franchise resulted in “violations . . . even more serious and harmful than those that can be perpetrated by a lone tax preparer.”  In response to Defendants’ argument that the injunction was vague and might include harmless activities like the sale of office supplies, the court quipped that Defendants “know well what relates to tax preparation,” and that the “district court was entitled to expect that the injunction would be interpreted with a modicum of common sense.”

As to Tax Tree, the court found it “difficult to ascertain what specifically justifies the injunction.” Because Tax Tree was not a tax preparer, the court held the district court erred in holding that Tax Tree violated Section 6695(f) of the Revenue Code, which fines tax preparers for endorsing clients’ refund checks.  However, the court allowed that there might be other valid reasons to enjoin Tax Tree and remanded for the district court to determine whether there was any other basis.

The bottom line seems to be that, in the Sixth Circuit, a broad Section 7402 injunction will be upheld when there is sufficiently broad misconduct, and “delegat[ing] to . . . franchisees” will not “insulate” the parent franchise.  Although the decision was unpublished and therefore technically not binding, it will likely be followed within the circuit.  It will be interesting to see whether other circuits follow suit.

Oops: A $13 Million Lesson On The Importance Of Preserving Challenges For Appeal

Posted in News and Analysis, Recent Cases

Earlier this week, in a case that attracted media attention, the Sixth Circuit unanimously affirmed a $13.2 million jury verdict in favor of David Ayers, who spent 12 years in prison based on a state-court murder conviction after detectives used a fellow inmate to extract statements from Ayers in violation of his Sixth Amendment right to counsel.  In Ayers v. City of Cleveland, the court reviewed only one of defendants’ challenges on the merits, holding that they had forfeited the others.  The court declined to reach the merits of challenges regarding the sufficiency of the evidence on two claims and the key issue of qualified immunity, which limits the liability of government officers in discretionary functions—such as police officers—to only those instances where their actions violate law that was “clearly established” by the Supreme Court or, at the very least, the relevant circuit court.

Defendants irrevocably lost their opportunity to appeal the issue of qualified immunity when they failed to move for judgment as a matter of law on that issue under Federal Rule of Civil Procedure 50(a) before the case was submitted to the jury.  Although they had made an oral Rule 50(a) motion, the court held that the oral motion did not give notice of the qualified immunity defense by mentioning any of the key phrases associated with it.  The court noted that, even if defendants had made a Rule 50(b) motion on qualified immunity after the verdict, it would have been too late because the 50(a) motion is essential, citing Sykes v. Anderson.  The fact that defendants had made the argument during summary judgment was not enough to preserve the challenge for appeal either.

As we have previously discussed, qualified immunity is an exception to the general rule that denials of summary judgment are unappealable, but the exception only applies when the denial turns on a question of pure law.  In this case, the district court held that issues of fact had precluded a grant of summary judgment, so the exception was likely not applicable.  But even if the district court had been wrong, defendants would have lost their opportunity for interlocutory appeal also, because they filed their notice of appeal 39 days after the denial of summary judgment (9 days too late).

As to their challenge on sufficiency of the evidence, defendants made a Rule 50(a) motion, but failed to follow through with a Rule 50(b) motion pressing that same challenge after the verdict.

This case illustrates that it is never too early to start thinking about appeal.  Especially in a high-stakes case, appellate counsel should be involved from the very beginning, monitoring the case’s progress and making sure that every possible challenge is preserved.  Nobody can guarantee a win on appeal, but counsel ought to at least be able to ensure the court will be able to address the merits.

Sixth Circuit Hears Pair of En Banc Cases

Posted in News and Analysis, Recent Cases

Yesterday, the Sixth Circuit held its traditional en banc setting in December.  Two cases were on the docket, a habeas case and an employment case.

The first case up, the habeas case Hill v. Curtin, involved the denial of a request by a criminal defendant to represent himself at trial.  This sparked active questioning concerning the contours of the right to self-representation.  Interestingly, one of the judges asked questions relating to an amicus brief that had been filed in the case.  We have previously reported on the impact an amicus brief can have at the Sixth Circuit, and at least this amicus brief attracted the attention of the judges.

The second case  up was EEOC v. Ford, the significant telecommuting decision that we previously reported on. This case attracted nationwide attention based on the potential scope of telecommuting obligations.  However, the argument in the case yesterday seemed more fixated on the facts than any broad policy pronouncements.  Much of the debate between counsel and the judges centered on factual details that impacted the propriety of summary judgment.  It remains to be seen whether those issues will drive the en banc court’s determination.  Two members of the Court did not participate in the second case, presumably for recusal reasons.