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Sixth Circuit Issues Split Arbitration Decision

Posted in News and Analysis, Recent Cases

Yesterday, the Sixth Circuit tried to bring some clarity to the role of res  judicata in arbitration proceedings.  W. J. O’Neil Company v. Shepley, Bullfinch, Richardson & Abbott, Inc.  In a construction project gone awry, the W.J. O’Neil Company sued its construction manager in state court but the parties ended up in arbitration.  The two defendants in this case did not have a direct contract with O’Neil but also ended up in the arbitration on indemnity claims.   In the arbitration, however, O’Neil did not assert claims against the defendants in this action, and it ultimately prevailed in the case against the construction manager.  After the arbitration, O’Neil set its sights on the defendants.   Although the district court dismissed the case based on res judicata, the Sixth Circuit, in a divided decision, reversed.

The Court began by wrestling with whether Michigan or federal law governed the res judicata analysis, acknowledging, “the issue is underdeveloped and murky when it involves an unreviewed arbitration award.”  In the end, the Sixth Circuit elected not to resolve the thorny choice of law question based on general agreement between the parties that federal and Michigan law were largely uniform.

The Court then explained that it was aware of no circuit that had held that an unreviewed arbitration award bars later litigation of a claim not subject to the arbitration.  Because the arbitrator’s authority derives from the contract, “it makes little sense to allow an arbitration proceeding or award to preclude a claim the arbitrator had no authority to decide.”  As a result, the Court concluded that “res judicata yields where the claims sought to be precluded were not subject to the arbitration.”  The majority then turned to an analysis of the contractual relationship between the parties and found the lack of the contract between O’Neil and the defendants significant to its determination that any claims between those parties were non-arbitrable.  It reached its finding notwithstanding the fact that all of the parties were involved in the previous arbitration; according to the majority, simply because the parties were all there that did not compel O’Neil to raise claims against the defendants.

Judge McKeague dissented, emphasizing some of the practical realities of the problem created by O’Neil’s failure to bring claims in the arbitration.  He emphasized the length and complexity of the hearings and that O’Neil and the defendants were actively hostile to each other in the arbitration.  He also would have found a contractual basis for the arbitration because the contract between O’Neil and the arbitration defendant had a “flow-through” provision that operated to bind the present defendants.

As this case illustrates, arbitration preclusion rules are not always a portrait of clarity.  This opinion has significance because of its efforts to clarify some of these issues within the Circuit.  It also provides a good road map for parties arbitrating claims and evaluating potential res judicata implications.

 

Sixth Circuit Hands Down Pair of Significant Criminal Opinions: En Banc Decision and Amish Haircutting

Posted in News and Analysis, Recent Cases

This week, the Sixth Circuit issued a pair of significant criminal decisions.  In the first, U.S. v. Mateen , the Court issued its en banc decision in this criminal sentencing case concerning offenses against a minor.  We initially reported on the en banc hearing here.  The en banc decision was unanimous (with Judge Clay concurring) and per curiam (an unusual disposition for an en banc decision).  What was also interesting about the result was that the Court was unanimous notwithstanding the fact that the panel result was divided.  That means that all of the judges were able to coalesce around the result in this case notwithstanding previous differences of opinion.  The en banc Court vacated the judgment and remanded to the district court for resentencing, after a disposition on the grammatical “rule of the last antecedent.”

The case that may attract more attention, however, is the Court’s opinion from yesterday in U.S. v. Miller , more commonly known as the Amish haircutting case.  The case involved assaults in certain Amish communities that were ultimately prosecuted as hate crimes.  After several individuals were convicted, they appealed, and the Sixth Circuit, in a divided opinion, reversed.  There is a very interesting Commerce Clause issue posed by this case, but the majority ended up not addressing it based on its reversal premised on the jury instructions.  The Court found that an intervening U.S. Supreme Court decision, Burrage v. U.S., 134 S. Ct. 881 (2014), rendered the instructions given by the district court erroneous.  In light of the Supreme Court’s decision, the victim’s protected characteristic must be a but-for cause behind the defendants’ decision to act.  While the government sought to salvage the trial result based on harmless error, the majority was not persuaded.  Acknowledging that some religious discord undoubtedly influenced the assaults, the Court nevertheless explained “untangling the role of religion, family, personality and other issues in the assaults was the point of the trial.”  Judge Sargus (sitting by designation from the Southern District of Ohio) dissented, criticizing the majority’s interpretation of the statute.  This case received national attention, and it is now headed back for another trial.  Stay tuned.

Acknowledging Its Own Error, Sixth Circuit Tries To Provide Clarity On Notices of Appeal

Posted in News and Analysis, Recent Cases

If you ever have become confused regarding the timing and procedures related to notices of appeal, you are in good company.  Last week, the Sixth Circuit freely acknowledged that a motions panel of the Court reached a decision on this issue that is directly at odds with binding Circuit precedent.  Wallace v. Fedex Corporation.  Notwithstanding this blatant error, the Court could find no way to remedy the error at this point.  Confused?  Let’s try to explain it.

The underlying case involves a fairly unremarkable FMLA claim that ended up prompting several years of litigation.  Ultimately, the individual plaintiff prevailed in part after trial and received a judgment of $173,000 (later remitted to $90,000).  After trial, both sides filed competing motions for new trial, with FedEx also moving for judgment of the matter of law.  The trial court initially denied the plaintiff’s Rule 59 motion in December 2010, but did not rule on FedEx’s motion until March 2011.  The plaintiff filed her notice of appeal in April 2011, seeking to challenge not only aspects of the ruling related to FedEx, but also the earlier rulings in December 2010 and earlier.  However, the Sixth Circuit clerk’s office issued a show cause order as to why the appeal for the decisions in 2010 should not be dismissed.  The plaintiff, who was pro se at the time, did not offer much of an explanation, and accordingly a motions panel dismissed her appeal in part, reasoning that because FedEx’s post-judgment motion was not timely filed (there was an extension granted), that motion did not stay the clock for the notice of appeal.  This decision, however, according to this panel, “directly conflict with a prior published decision of this Court.”  That prior decision, National Ecological Foundation v. Alexander, 496 F3d 466 (6th Cir. 2007), “is directly on point, and it is the law of the Circuit, meaning that it binds all subsequent panels.”  But what to do given the motions panel prior contrary ruling?  The Court acknowledged that motions panel determinations are not “strictly binding upon subsequent panels” because they are generally interlocutory in nature.  However, later panels cannot simply disregard motion panel decisions:  “If a litigant wishes to challenge a motion panel’s decision on a dispositive motion, the proper course of action is to request panel rehearing or rehearing en banc.”   Wading through the procedural morass here, the Court held “unfortunately for Wallace, however, the  motion panel’s clear error is not – in and of itself – enough to warrant us reopening her appeal three years later.”  Although this ruling “appears harsh” the Court found that the plaintiff did not adequately contest the show cause order (even though she was pro se at the time), never sought rehearing, and the procedural quagmire was not of FedEx’s making.  As a result, the Court felt itself unable to “revisit the motions panel’s erroneous three year old decision.”

This case really illustrates some of the difficulties incumbent in applying the timing rules in connection with notices of appeal.  The root of the problem in this case appeared to be at the extension of time of the Rule 50/59 motion that FedEx received (making its eventual motion untimely).  While that issue addresses part of  the problem, another problematic development was the district court’s failure to resolve all of the post-judgment motions at the same time, which certainly can create litigant confusion.  If there is a lesson to take away from this particular case, it is to reinforce the basic notion that one should always be extra conservative in calculating deadlines for notices of appeal!

 

Beware To The Verbose: Potential Cut To Brief Word Count Looms

Posted in News and Analysis

Although judges typically admonish lawyers to be succinct, I suspect there are few of us out there who would say that they’ve never had a problem fitting a federal appellate brief within the 14,000 word limit.  That may soon become an even bigger challenge, as the rules committee is currently contemplating cutting the word limit from 14,000 words to 12,500 words.  How Appealing  contains this report on the contemplated rule change, and the actual commentary regarding the rule change is available here.  With the 14,000 word limit, you can usually prepare a brief of about 62 pages.  Scaling that back to 12,500 words would translate into roughly a 55 page brief.  This change, if it is adopted, could have dramatic consequences at the Sixth Circuit, which is notoriously stingy in granting requests for expanded briefing.  In fact, there is effectively an unwritten rule at the circuit that the Court will never grant parties the right to exceed the 14,000 word limit.  Other circuits are slightly more flexible than that (although, be careful what you ask for, reading an 80-90 page brief can be a challenge).  So the question that would remain to be seen is whether the Sixth Circuit would start being more flexible in terms of granting expansions of the page limit if the rules cut the length back to 12,500.  I suspect the answer is probably no, and the rule change accordingly force counsel to make the extra effort to streamline their briefs and cut out extraneous details.  In the majority of cases, this is probably fine, but some complex cases or a record-intensive cases would certainly be a challenge to cram into 12,500 words.  For all who are interested in this rule change, comments are being accepted through February 2015, and you should certainly let your voice be heard.

Sixth Circuit Dismisses Challenge To Mining Regulations

Posted in News and Analysis, Recent Cases

In National Mining Association v. Secretary of Labor , the Sixth Circuit evaluated consolidated challenges to the promulgation of a new pattern of violations regulation by the Mine Safety and Health Administration and the Secretary of Labor.  However, the Court never reached the merits of the challenge because it concluded that it lacked subject matter jurisdiction.  The Mine Act sets forth a somewhat complicated scheme for judicial review of various regulations.  This confusion prompted different results between DC federal courts and the Sixth Circuit on the question of jurisdiction.

According to the Sixth Circuit, the Mine Act vests jurisdiction in the federal appellate courts in only two situations: (1) a party cited for violation of the Mine Act may challenge the citation before the agency and then seek judicial review in the appropriate United States Court of Appeals; and (2) any person adversely affected by a mandatory health or safety standard may likewise challenge the standard in the appropriate federal appellate court.  The petitioners, relying on authority from a DC district court (as amplified by subsequent cases following it) argued that the federal appellate courts may review all substantive rule making pursuant to the Mine Act.  In reviewing this authority, the Sixth Circuit essentially concluded that those courts did not fairly address the question of broader appellate jurisdiction or did so in relatively loose dicta.  Because the regulation at issue was not a mandatory health or safety standard, the Sixth Circuit accordingly concluded that it lacked jurisdiction.

In light of that finding, it begs the question of whether a federal district court would have jurisdiction.  The Secretary took the position that the federal district court may not have jurisdiction, but the petitioners requested, in the alternative, transfer of the case to an appropriate federal district court under 28 U.S.C. § 1631.  However, because there was no clarity as to which district court the matter should be transferred to (in addition to the lack of clarity as to whether the federal district court would have jurisdiction at all) the Sixth Circuit declined an invitation to transfer.

This opinion certainly is a cautionary tale about challenges to agency regulations where the path for judicial review is not a portrait of clarity.  The Sixth Circuit compared this regime to that under the Occupational Safe and Health Act, and parties seeking judicial review under either act should certainly carefully review both the statutory structure as well as this opinion.

 

Caffeine Crash: Sixth Circuit Upholds Contempt Ruling in Energy Drink Spat

Posted in News and Analysis, Recent Cases

In Innovation Ventures, LLC v. N2G Distributing, Inc., the Sixth Circuit affirmed a trademark infringement judgment in favor of the producer of the Five Hour Energy product, as well as the subsequent order by the district court holding the defendant in contempt for violating the permanent injunction entered after the trial.  The dispute involves an effort to protect the trademark of the Five Hour Energy drink, which is a key player in the burgeoning energy drink market.  The defendants had produced a similar product with a label that arguably looked similar to that of the Five Hour Energy drink, prompting the lawsuit.  The Sixth Circuit began by considering whether the Court should order a new trial on the Lanham Act claims to overturn the jury verdict.  Applying a deferential standard of review, the Sixth Circuit found no basis to disturb the jury’s verdict.  The jury heard ample evidence to support the plaintiff’s claim that a likelihood of confusion exists between the products, which the Court surveyed.

After upholding the jury’s verdict, the Court turned to the contempt order issued post-verdict when the district court concluded that the defendant had violated the injunction to prevent further trademark infringement.  The Court first considered the applicability of the so-called “Safe Distance Rule,” which is an equitable principle developed in the context of permanent injunctions to protect intellectual property.  It essentially operates to prevent known infringers from using trademarks whose use by non-infringers would not necessarily be actionable, providing “a useful tool in crafting and enforcing permanent injunctions.”  This obviates the need for the district court to retry the entire range of issues that may relevant in an infringement action for each small variation the defendant might make to the enjoined mark.  The Court held: “the Safe Distance Rule is thus a well-accepted part of the court’s remedial toolkit.”  The defendants pointed to an earlier Sixth Circuit case, Taubman Co. v. Webfeats, 319 F.3d 770 (6th Cir. 2003) to argue that the Sixth Circuit looked with disfavor on using the Safe Distance Rule in Lanham Act cases.  But the Court described the relevant portion of Taubman as dicta and emphasized that the Court had not held that the Safe Distance Rule could not be applied in this context.  It also pointed out that “no other circuit has questioned the continuing viability of the Safe Distance Rule.”  In effect, the Sixth Circuit limited Taubman to its facts.  It then found that the district court properly invoked the Safe Distance Rule as it determined that the modified products were similar to the protected mark.

This case provides a good overview of the remedial structure of the Lanham Act and steps that parties can take in the face of willful, and repeated, infringement.  The Sixth Circuit’s embracing of the Safe Distance Rule can be viewed as a sign that the rule will remain a significant enforcement tool available to district courts in these circumstances.

 

 

Noting Sixth Circuit Trend, District Court Admits “Human Factors” Expert Testimony In Products Liability Class Action

Posted in News and Analysis, Recent Cases

We have posted in the past about how, since 2010, the Sixth Circuit has been far more likely to reverse an exclusion of Daubert testimony than a district court’s decision to admit such testimony (although admittedly the sample size is small).  And about two weeks ago, we posted on an additional reversal of a district court’s decision to exclude Daubert testimony, where the Court did not allow contradictory testimony by the injured plaintiff to sway its determination as to the expert’s reliability.  This is consistent with our earlier observation that “a district court’s discretion is broader when allowing testimony than when excluding it,” and that “the Sixth Circuit believes that fact-finders, with the assistance of thoughtful cross-examination, are more than capable of weighing the substance and credibility of an expert and his or her opinion.”  (Of course, the district court must still ensure that the expert satisfies the basic Daubert criteria – just throwing up your hands and saying “it’s all coming in” is as sure a ticket to reversal as improper exclusion.).

It is apparent that district courts are paying attention to the Daubert climate at the appellate level.  Noting the Circuit’s overall trend in a footnote citing our February blog post, the Northern District of Ohio recently admitted testimony from all three challenged experts in a products liability class action (one plaintiff’s expert and two defense experts).  Among the three was a “human factors expert” whose testimony had previously been excluded in at least one other case and who had been retained “to address psychological issues in human attention and information processing” and to opine on how disclosure of the alleged concealed product defect would have affected customers’ decisions about purchasing or leasing the vehicles in question. As the Sixth Circuit’s Daubert jurisprudence continues to evolve, it will be interesting to see how these decisions are interpreted (assuming, of course, that they ultimately get tested at the appellate level).

Sixth Circuit In National Media Spotlight Following Last Week’s Marathon Oral Arguments In Same-Sex Marriage Appeals

Posted in News and Analysis, Recent Cases, Supreme Court

During the last five days, a media spotlight has been cast on the Sixth Circuit as legal pundits and observers try to dissect last Wednesday’s oral arguments in the same-sex marriage appeals before the Court.  The three-judge panel which heard the appeals included Judges Martha Craig Daughtrey of Tennessee, Jeffrey Sutton of Columbus, and Deborah Cook of Akron.  They devoted three straight hours of oral argument to the appeals.

Judge Sutton was the most active judge on the panel, and his questions were thoughtful and balanced.  He asked critical questions of both sides.  On the one hand, Judge Sutton repeatedly questioned why same-sex marriages supporters are focused on the judiciary rather than the legislature.  “I would have thought the best way to get respect and dignity is through the democratic process,”  Sutton said.  “Nothing happens as quickly as we’d like it. . . . I’m not 100% sure it’s the better route for the gay rights community,” he added.  On the other hand, Judge Sutton suggested that the arguments offered by the state in support of same-sex marriage bans were weak, and that they would be hard to defend if they were reviewed under a heightened standard of review. 

Judge Daughtrey also engaged in some spirited exchanges during oral arguments.  When Michigan’s lawyer argued that the judiciary should not tamper with deeply rooted notions of traditional marriage, Judge Daughtrey shot back that bans on interracial marriage also were deeply enshrined in American law before the U.S. Supreme Court struck them down as unconstitutional.  “That was the law across a huge swath of the Southern states,’ Daughtery said.  In contrast, Judge Cook was relatively quiet during oral argument.

Reports in several major media outlets suggest that the Sixth Circuit’s decisions remain a toss-up, with the overall panel leaning toward a rejection of the constitutional arguments for same-sex marriage.  But don’t take the media’s word for it.  An audio link to the Sixth Circuit’s oral arguments can be found here.

A couple of observations:  First, if the Sixth Circuit rules in favor of the states, its decision will create a circuit split with the Fourth and Tenth Circuits, both of which have overturned same-sex marriage bans.  Second, as Judge Sutton recognized at the close of oral arguments, the Sixth Circuit will not be the last word in the same-sex marriage battles.  The U.S. Supreme Court almost certainly will hear the legal challenge, regardless of whether the Sixth Circuit creates a circuit split.  Third, given the high-profile nature of these appeals, expect prompt decisions from the Sixth Circuit, with opinions in as little as two months.  We’ll, of course, be right there to cover the latest developments at the Sixth Circuit. 

 

Does Your ERISA Benefit Denial Letter Limit Time To File Suit? Maybe Not!

Posted in News and Analysis, Recent Cases

A divided panel of the Sixth Circuit held yesterday in Moyer v. Met. Life Ins. Co. that an employee was entitled to bring suit against after the contractual limitations period in his ERISA-governed long term disability plan had expired, because the claim administrator failed to include the time limit for judicial review in the benefit revocation letter itself.  The majority held that, without the limitations period, the letter was “not in substantial compliance with  29 U.S.C. § 1133,” even though it included notice of the employee’s right to judicial review and the limitations period was stated in other plan documents which were available to participants upon request.

The Court said that the “purpose” of § 1133 was “that the claimant be notified of the reasons for the denial of the claim and have a fair opportunity for review,” and interpreted this to apply to judicial review (quoting Kent v. United of Omaha Life Ins. Co., 96 F.3d 803, 806 (6th Cir. 1996)).  The majority rejected the narrower reading of § 1133 as protecting only the right to review by a plan fiduciary, citing authority from the First Circuit and dicta from the Fourth and Fifth (unpublished) Circuits in support of its interpretation.  Although a layperson reading the bare statute would likely favor the narrower reading, the majority pointed out that the statute demands that its mandate be carried out “[i]n accordance with regulations of the Secretary,” and that 29 C.F.R. § 2560.503-1 requires benefit denial letters to provide a “description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action . . . following an adverse benefit determination.”

Judge Cook dissented, primarily on the ground that the employee “rested his argument” on another statute in the district court and on appeal, and “neither mention[ed] the legal requirements for claim-denial letters not cite[d] § 1133 or its implementing regulation, 29 C.F.R. § 2560.503-1.”  Judge Cook did not take a position on the proper reading of the statute, but noted that the statute’s interpretation “presents a more difficult issue than the majority acknowledges,” and deplored that the decision was being made without briefing, “short-circuiting the adversarial process.”

ERISA administrators should take note and make sure to include the applicable contractual limitations period in benefit denial letters.  For those who have missed the boat and are already facing this issue outside the Sixth Circuit, Judge Cook’s dissent—which distinguished some of the authority cited in the majority opinion and cited persuasive authority favoring the narrower reading—might be a good starting point for further research.