Sixth Circuit Oral Argument Statistics

In the 12 months ended June 30, 2015, the Sixth Circuit terminated 4,858 cases. Of the total cases terminated, 3,515 were terminated on the merits, meaning that they were terminated either through consolidation with another case, after the submission of the parties’ briefs, or after oral argument. A review of the judicial statistics surrounding the termination of the cases in the Sixth Circuit will provide an insightful look at the life span of cases before the court.

For all federal circuit courts, only about 19% of all cases terminated on the merits reached the oral argument stage. This number is slightly lower in the Sixth Circuit; only about 17% of cases are terminated after oral arguments. Conversely, nearly 79% of cases in the Sixth Circuit that are terminated on the merits are terminated after submission of the parties’ briefs. The discrepancy between methods of termination can largely be attributed to the fact that a large number of appeals are criminal appeals and approximately 80% of all criminal appeals are terminated after submission of the parties’ briefs in both the Sixth Circuit and in the circuit courts overall.

Removing all other types of cases, the frequency at which private civil cases reach oral argument across all circuits is over 41%, higher than any other type of case. Similarly, within the Sixth Circuit, nearly 41% of all private civil cases terminated on the merits were terminated after oral arguments.

Breaking down the facts even further, we wanted to know how frequently private civil cases reach oral argument as compared to all other types of cases. To do this, we compared the number of private civil cases terminated on the merits after oral argument to the total number of cases terminated after oral argument. This comparison revealed that, while the federal circuit court average is approximately 43.8% of oral arguments involve civil cases, nearly 54% of oral arguments in the Sixth Circuit are civil cases. The Sixth Circuit’s percentage of civil cases reaching oral argument was higher than any other circuit in the country.

As the Circuit has pared back oral arguments, it is becoming increasingly important to try to distinguish your case in order to receive a nod for oral argument. These statistics should shed some light on the overall process and enable counsel (and clients) to make informed decisions.

Plan Not In “Good Faith” When Impairment of Class’s Interests Is Contrived

Under the Bankruptcy Code, a reorganization plan may be approved if (1) proposed in “good faith” under  § 1129(a)(3), and (2) accepted by at least one class of creditors whose interests are impaired by the plan, see 11 U.S.C. § 1129(a)(10). In Village Green I, GP v. Fed. Nat’l Mortgage Assoc., the Sixth Circuit affirmed the district court’s reversal of a bankruptcy court’s plan approval, holding that a reorganization plan is not proposed in good faith when it impairs a particular class’s claims “transparently [as] an artifice” to fulfill the second requirement.

In Village Green, the debtor owed $8.6 million on a mortgage to a single lender, and $2400 to its attorney and accountant (“minor” claimants). The debtor proposed a reorganization plan that unquestionably impaired the first creditor’s very large interest, specifying a slow pace of repayment and removing protections from the loan agreement. The plan also provided that the minor claims would be paid over 60 days in two equal payments. The lender rejected the plan, while the attorney and accountant (constituting a “class” by themselves) accepted the plan.  The Sixth Circuit rejected the lender’s argument that the minor claimants’ interests were not truly “impaired” by the 60-day delay in payment, choosing instead to read Section 1129(a)(10) literally to include any impairment, no matter how minor.  However, the court pointed out that there was no rational economic justification for the 60-day delay in paying the minor claimants and that the minor claimants were “closely allied with” the debtor, indicating that the impairment of their interests was not proposed in good faith, but solely to secure approval of the plan as a whole.

Debtors should take note: the Sixth Circuit reading of “impairment” might be generous, but the court is ready and willing to use the “good faith” requirement to weed out reorganization plans that rely on token impairments to “circumvent[] the purposes of § 1129(a)(10).”

The Shadow of Yard-Man

As we discussed previously, the Supreme Court recently abrogated the Sixth Circuit’s longstanding decision in International Union, United Auto, Aerospace, & Agricultural Implement Workers of Am. v. Yard-Man, Inc., 716 F. 2d 1476 (1983). The Yard-Man standard required that the court assume that, absent language to the contrary, collective bargaining agreements (CBAs) intended to vest retirees with lifetime benefits. In M&G Polymers USA v. Tackett, the Supreme Court found that the Yard-Man standard was inconsistent with the ordinary principals of contract law. Tackett was recently back before the Sixth Circuit for the first application of the revised CBA interpretation standard.

In Tackett, the retirees of M&G Polymers argued that the benefits contained in their CBA vested for the entirety of their lifetime. Originally, the Sixth Circuit determined that, applying Yard-Man, there was an intent to vest the retiree’s with lifetime benefits under the language of the CBA. On remand from the Supreme Court, M&G argued to the Sixth Circuit that the evidence presented at the trial court level was unnecessarily narrow because the parties were restricted by the district court’s application of Yard-Man. M&G argued that had they been able to present additional evidence to support their conclusion that there was no intent to vest retiree’s with lifetime benefits, the district court would have decided the case differently.

The Sixth Circuit noted that the Supreme Court’s decision prevented the presumption that the absence of specific language regarding the duration of the retiree’s benefits evidences that the benefits were not to vest in retirees, nor can the court presume that a general durational clause says everything about the intent to vest. The effect of the Supreme Court decision, in the eyes of the Sixth Circuit, was to eliminate any presumption of the intent to vest, meaning that the interpretation of a CBA will be based purely on the language of the document and extrinsic evidence that can be presented by the parties.

The Sixth Circuit ultimately decided that, even with regard to issues that were considered independent of Yard-Man, there was sufficient confusion about whether the district court or the parties were influenced by Yard-Man. As such, the Sixth Circuit found that the issues had been decided “in the shadow of Yard-Man” and sent the case back to the district court to consider additional evidence. As we noted after the Supreme Court decision, now that Yard-Man has been abrogated, issues surrounding CBA interpretation will need to be revisited for the first time in nearly 30 years.

The Effect of the Amicus Brief

We have, on multiple occasions, addressed the significance (or insignificance) of the amicus curiae or “friend of the court” brief. Our previous discussion here, here, and here have largely revealed that, while the briefs are submitted in many of the headline-grabbing cases, the effects of the briefs written and submitted by the amici are often hard to evaluate.

Additionally, there is not singular source for the briefs that are filed. The Sixth Circuit and Supreme Court, particularly before a controversial or significant case is heard, are inundated with amicus curiae briefs from a variety of parties including unions, professional associations, academic institutions, important individuals in a particular field, or any level of governmental body.  However, despite the impressive frequency and diversity of amicus briefs, it often proves more challenging to share a unique perspective beyond the position of the parties.

To reevaluate the practical implication of these briefs, we conducted a survey of 2015 Sixth Circuit cases that used the word “amicus curiae,” “amici,” or “amicus brief.” Somewhat distinguishable from our previous analysis, which spanned several years and only discovered 10 cases, our 2015 search yielded 52 cases where at least one amicus brief was filed. After a deeper investigation, we discovered that 8 of the cases only contained a discussion of an amicus brief filed in a case from a previous year and, while this is instructive in demonstrating that some amicus briefs have enough influence to have legal staying power, these cases were not helpful for our 2015 research. Of the 44 remaining, applicable cases, the Sixth Circuit only discussed or even referenced the position of an amici in 5 cases; only 1 of those was discussed by the Court in a positive light. Thus, in most cases, the Sixth Circuit does not expressly mention the amicus brief.

So why does the Court not discuss the amicus positions with greater regularity? A common problem is that the amici often parrot the briefs of the appellee and appellant. The court has, on many occasions, made it clear that the role of amicus brief are, at least in part, to “[draw] the court’s attention to law that might otherwise escape consideration.” If the law is fully discussed in the parties’ briefs, the amicus briefs serve little purpose other than to reiterate.

Of course, it is impossible to evaluate whether amicus briefs that weren’t cited actually impacted the decisional calculus of the Court. But if you are considering drafting (or soliciting) an amicus brief, it is important to keep in mind that the amicus brief should really share a unique perspective rather than reiterate the position of the parties. Often, stepping back and giving the court a broader perspective on a particular issue can be useful. The court certainly wants to understand how a particular decision might impact the next case, and amicus parties can effectively convey such matters.

The Rule Of Lenity And Chevron Deference

Courtesy of Judges Boggs and Sutton, the recent immigration appeal Esquivel-Quintana v. Lynch (No. 15-3101) provides an excellent view of a developing doctrine.  Courts grant Chevron deference to reasonable agency interpretations of ambiguous civil statutes, but do not defer to agency interpretations of criminal statutes.  But what about statutes that have both criminal and civil applications?

Judge Boggs, writing for the majority, and Judge Sutton, writing separately, both describe the “emerging” doctrine that Chevron deference should not apply to statutes with both civil and criminal applications, and that the rule of lenity –that ambiguity in a criminal statute must be resolved in the defendant’s favor – should apply instead.  Judge Sutton argues persuasively that granting deference over dual-use criminal statutes would give the Department of Justice “explicit (executive) power to enforce the criminal laws, an implied (legislative) power to fill policy gaps in ambiguous criminal statutes, and an implied (judicial) power to interpret ambiguous criminal laws.”

The majority, however, feel that their hands are tied by a footnote in Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515 U.S. 687, 703–04 (1995), which deferred to an agency interpretation of a statute that also carried criminal penalties.  Judge Boggs notes that the Supreme Court has “begun to distance itself” from Babbit, but states that the court is compelled to follow it until that decision is actually overturned.  Judge Sutton views the Babbitt footnote as dicta, would have applied the rule of lenity to favor the defendant.

While this issue of statutory interpretation may not make headlines, Chevron deference often makes the difference between winning (or not) against the government.  This issue might be a sleeper for the Supreme Court.

All contract Provisions Contribute to the Intent of the Parties

We all know that courts want to read contracts as a whole to effectuate the intent of the parties.  This case provides a textbook illustration of the principle.

In a case arising from the bankruptcy and technology context, Cyber challenged the district court’s interpretation of its contractual agreements with Priva. The dispositive question was whether certain technology fell within the scope of Pro Marketing’s undisputed first-priority lien. Upon reviewing the language of the security agreement, the Sixth Circuit discovered that Priva offered Pro Market an interest in “all types or items of personal property owned by [Priva], whether now owned or hereafter arising or acquired.” As such, the Sixth Circuit reasoned that if Priva ever owed an interest in the  technology, such interest would be included in the collateral, and Pro Marketing would have priority. Cyber argued that the License Agreement with Priva stated that any “updates, modifications, or improvements [to the SKSIC technology]… shall be property of [Cyber].” Through Cyber’s interpretation, the technology and any rights associated with it never belonged to Priva and were, therefore, never included in the collateral of the security agreement with Pro Marketing.

The Sixth Circuit held that Cyber rested on an erroneous reading of the Licensing Agreement and that the plain language of the agreement stated that Priva would assign its rights in modification to the technology. If Cyber’s interpretation were accurate, this provision would be superfluous because Privia would not be able to assign the rights in modifications if Priva never had rights in modifications in the first place. The Sixth Circuit held that Cyber’s interpretation would read meaning out of that provision of the Licensing Agreement and, therefore, Cyber’s interpretation was improper. Because there was a moment in time where Priva had rights in the technology, such rights were included in the collateral of the security agreement with Pro Marketing. Therefore, Pro Marketing had a superior claim to the technology.

Not only does this case reaffirm the importance of secured rights in collateral as opposed to unsecured rights, the Sixth Circuit’s interpretation serves as a reminder that courts will, whenever possible, read contracts to give effect to all of the contract’s terms. An interpretation of an agreement that renders one or more provisions of the agreement pointless will be looked upon less favorably than an interpretation that gives a fair and practical effect to all terms. Agreements, especially sophisticated business to business agreements, must be drafted with this in mind and must be narrowly tailored to satisfy the party’s intentions.

Re-examination of Employment Cases & Summary Judgment Trends in the Sixth Circuit

Just over a year ago, we examined the propensity of the Sixth Circuit to uphold district courts’ decisions to grant summary judgment for employers in cases tagged as “Labor & Employment” cases. As can be seen in our 2014 review, the Sixth Circuit upheld 60% of summary judgment decisions in favor of the employer. We have recreated the search by collecting Sixth Circuit cases from 2015 that fell under the “Labor and Employment” classification and ended in district court with some level of summary judgment for the employer.

The survey of 2015 cases revealed a sharp increase in the number of summary judgment decisions that were upheld by the Sixth Circuit. In just over 80% of the cases that we uncovered using our search method, the Sixth Circuit affirmed summary judgment for defendant employers. Another 7% of cases were “affirmed in part, reversed in part.” However, there was a complete reversal of the employer’s summary judgment victory in district court in only about 13% of the cases reviewed.

As was the case in our 2014 analysis, this search also allowed us to gain an understanding of which statutes were the most frequently litigated in these employment cases. Most prominently, at least one-third of employment cases from 2015 involved a discrimination claim of some sort; this result was also noted in our 2014 review. Contrary to our 2014 review, where ADA was the most frequently litigated statute by a large margin, our review of 2015 employment cases showed that ADA claims and FMLA claim are raised at virtually the same rate followed very closely by ADEA claims. While the variation among the statutes is not significant, an appreciation for which statutes tend to be used most frequently by plaintiffs is important for a complete understanding of the labor and employment landscape.

Assuming that the affirmance rate for summary judgment in the Sixth Circuit has remained steady at 90%, our finding of an 80% affirmance rate for employer’s summary judgment victories is more in line with the overall rate than last year’s observed rate of 60%. Two important points can be gleaned from this information. First, the increase from 60% affirmance in 2014 to 80% in 2015 demonstrates the difficulty employees face when overcoming a summary judgment ruling in a lower court. The second takeaway is that, despite the increase, the rate at which summary judgment is affirmed is still lower than the overall affirmance rate. This should indicate to employers and their counsel that, despite being awarded summary judgment in district court, the Sixth Circuit is carefully reviewing summary judgment appeals in Labor and Employment cases. As we advised in 2014, employers must be sure that they carefully craft the arguments needed to convince the court that summary judgment was properly awarded.

Tax Code Interpretation Presents an Issue for Congress, Not the Courts

The Sixth Circuit tackled a complex question involving the interpretation and application of Internal Revenue Code Section 1256 as it applies to so-called “major-minor” currency transactions. The term “major-minor” is a reference to the fact that a currency is considered “major” if positions in it are traded through regulated futures contracts and a currency is “minor” if there is not a regulated futures contract for the currency.

In Wright, et al. v. Comm’r of Internal Revenue, Petitioners Terry and Cheryl Wright engaged in a major-minor currency transaction in which they purchased a call option (an option to buy a currency for a specified price) on the Euro, a major currency, and a call option on the Danish Krone, a minor currency, from Beckenham Trading Company. Simultaneously, the Wrights sold a Euro put option (the option to sell a currency for a specified price) and a Krone put option to Beckenham. While the transaction is complex, it is only essential to know that the call and put on the Euro and the Krone were for identical values and had mirroring terms. In this way, if the Euro appreciated in value, the call would increase in value and the put would decrease in value in the same amount, thus assuring gain on one and a loss on the other.

At the end of the year, the Wrights assigned the euro put and the Krone put (each valued at approximately $33 million) to a charity and sold the euro call and repurchased the krone call from Beckenham. Through this transaction, and others not relevant to the issue, the Wrights reported almost $3 million dollars of short term capital loss which they used to reduce their capital gains from about $3.4 million to $454,477. Upon filing their tax returns, the IRS issued a notice of deficiency for over $600,000 and assessed penalties for a substantial understatement of tax. In tax court, the relevant issue was whether the euro put option was a “foreign currency contract” as defined by Section 1256(g)(2)(A)(i) of the Internal Revenue Code. The Tax Court found that the euro put was not a foreign currency contract, reasoning that the definition requires that foreign currency contracts contain a mandate that the contract be settled. Because a put option gave the Wrights the right to execute the option (resulting in settlement), but not an obligation to do so, the put option was not a foreign currency contract. The result of this decision was that the Wrights could not recognize a short-term capital loss on the option.

On appeal, the Sixth Circuit recognized that the Tax Court’s reasoning was supported by sound tax policy, namely that artificially creating capital loss while simultaneously negating virtually any economic risk, cut against the clear intent of the drafters of Section 1256. However, when interpreting the tax code, the plain language of the code section must be ascertained; if it is clear, there is no other analysis needed. The Sixth Circuit found that the plain language of Section 1256, which defines a foreign currency contract as a contract “which requires delivery of, or settlement of which depends on the value of a foreign currency…” was clear in that it only requires that, if a settlement does occur, the settlement must be based on the value of a foreign currency. The Sixth Circuit noted that the comma following “delivery of” within the definition of foreign currency contract “establishes that the word ‘requires’ does not apply to the settlement prong [of the definition.]” The settlement of the euro put option, had it occurred, would have been based on the value of the euro; however, the obligation to settle the put option “may never arise if the holder does not execute its rights under the option[.]”

Despite the fact that the Sixth Circuit found “no conceivable tax policy that supports this interpretation of the plain language of Section 1256,” the Sixth Circuit decided that “[t]he fact that tax policy does not appear to support allowance of the Wrights’ claimed loss is not sufficient to reform statutory language[.]” The Sixth Circuit has made it clear that if this tax outcome is to be prevented, Congress will have to amend the Code.

Sixth Circuit Decision in Class Certification Appeals

Because of the significant size of the jury verdicts or, more likely, the settlements of class actions, questions of class certification carry significant weight. However, it is not just monetary consideration that makes class actions so important. One element of aggregate litigation that is most frequently discussed is the due process considerations that need to be made. Class actions may mask distinctions between class members that makes defending the claim more challenging. Because of these pressing considerations, the decision and reasoning to allow or deny certification of a class of plaintiffs, based on the criteria of Rule 23 of the Federal Rules of Civil Procedure, is tremendously important.

A survey of Sixth Circuit cases from 2015 revealed only 10 appeals of district court decisions involving class certification. The cases uncovered through this survey included cases involving post-judgment appeals and Rule 23(f) petitions. Of the 10 cases that dealt with questions of class certification presented to the Sixth Circuit, the Sixth Circuit denied five 23(f) petitions, denying the petitioners’ right to appeal the district court’s decision. Of the remaining five cases, two district court decisions were affirmed; two district court decisions were reversed; and one district court decision was vacated, remanded, and then denied permission to be appealed.

Circuit courts have considerable discretion when determining how to handle appeals of class certification decisions, particularly because the Sixth Circuit allows Rule 23(f) appeals infrequently.  As we enter the new year, we will continue to monitor the Sixth Circuit for important class litigation and will provide updates as soon as possible.

Previous discussions of the Sixth Circuit’s class certification or interlocutory appeals can be found here, here, here and here.

Divided Sixth Circuit Finds Employer Bound by Collective Bargaining Agreements without a Signature

On December 29th, the Sixth Circuit issued a 2-1 decision holding that an employer could be bound by a collective bargaining agreement (“CBA”) even if the employer did not sign the CBA or expressly authorize someone else to sign on the employers behalf. The Court explained that its holding is in line with Sixth Circuit decisions in previous cases such as Nat’l Leadburners Health & Welfare Fund v. O.G. Kelley & Co., as well as case law from the Fifth Circuit (NLRB v. Beckham, Inc.) and the Second Circuit (Trustees of U.I.U. Health & Welfare Fund v. N.Y. Flame Proofing Co.).

In Bd. of Trs. Local 392, et al. v. B&B Mech. Servs., five multi-employer fringe benefit funds (“the Funds”) of the Plumbers, Pipe Fitters, and Mechanical Equipment Service, Local Union 392 (“the Union”) brought suit against B&B Mechanical Services (“B&B”), an Ohio commercial plumbing contractor, for failure to pay required employer contributions. The Funds were seeking more than $130,000 in unpaid contributions from B&B that were required under the CBA with the Union between January of 2009 and December of 2010. B&B claimed that they had never signed the CBA and, therefore, were not bound by the requirements of it. B&B maintained that the contributions that the corporation had been making to the Funds from 2002 – 2008 and 2011 – 2012 were purely voluntary. The district court granted summary judgment in favor of B&B and the Union appealed.

Upon review, the Sixth Circuit determined that it was an uncontested fact that, at all times during the applicable period, B&B was both a member of the Mechanical Contractors Association (“MCA”), an organization that serves as the multi-employer bargaining representative in contract negotiations with the Union, and receiving funds from the Union’s Equality and Stabilization Program, a program that subsidized the cost of hiring union members under the CBA. This two factors helped drive the Sixth Circuit’s decision that, “during the ten years between 2002 and 2012, B&B conducted itself as if it were bound by the CBAs negotiated between MCA and the Union.” Despite the fact that B&B neither signed nor authorized MCA to sign the CBA, the Sixth Circuit determined that the corporation was still bound by the CBA because MCA represented all of its members when MCA negotiated the CBA with the Union. Additionally, the majority explained that the applicable section of the Taft-Hartley Act (29 U.S.C. § 186(c)(5)(B)) has been interpreted by the Sixth Circuit as imposing no requirement that a corporation independently sign the CBA in order to be bound by a written agreement to make contributions to a fund.

In dissent, Judge Gibbons criticized the majority’s resolution of these issues as a matter of law.  Rather, she would have found factual issues concerning whether B&B was bound by the written documents in question: “it remains an open question whether B&B intended to be bound or was ever in fact bound to the CBA.”