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Sixth Circuit Considers Class Action Waiver

By Pierre Bergeron on Posted in News and Analysis, Supreme Court

Class action waivers have garnered significant attention in the arbitration context over recent years, including several cases that have reached the Supreme Court on this and related issues.  Earlier this week, in Lowry v. JPMorgan Chase Bank, the Sixth Circuit considered the effect of a class action waiver in an arbitration clause.  The plaintiff in that case signed an agreement with Chase that contained a broad arbitration clause, including a class action waiver.  Nevertheless, he brought a lawsuit against Chase on behalf of a putative class claiming violation of antitrust laws and related state law.  In response to Chase’s motion to compel arbitration, the district court granted the motion but denied the motion to dismiss class claims, submitting all of the claims to arbitration.  On appeal, Chase argued that the class claims were not arbitrable because of the clear class action waiver.  The Sixth Circuit, however, disagreed, relying on the broad delegation clause that delegated to the arbitrator authority to decide arbitrability.  Therefore, even though the plaintiff signed a clear class action waiver, the Court held that it was up to the arbitrator to determine how to interpret the contract.

Although this is an unpublished opinion, it attains new significance in light of the decision issued the day before by the  U.S. Supreme Court in Oxford Health Plans LLC v. Sutter.  In that case, the Court refused to disturb an arbitrator’s award determining that a case could proceed on a class action basis.  The case underscores the difficulty of overturning arbitrator decisions, even if they are simply wrong.

When these two cases are considered together, it poses a number of issues for parties desiring arbitration of disputes and how those arbitration clauses should be drafted.  It also raises questions concerning whether parties should include broad delegation clauses in their arbitration agreement (which have gained favor in recent years) and risk that an arbitrator might determine (contrary to the language in the agreement) that a claim could proceed on a class basis.   As the Supreme Court recently determined, such a holding will be difficult to overturn through judicial review. But the Supreme Court did not consider a clear class action waiver in Oxford, so it remains to be seen how or whether its analysis might change if confronted with that scenario.

Sixth Circuit Holds That A Defendant’s Incomplete Offer of Judgment Under Civil Rule 68 Does Not Moot Case

By Steve Delchin on Posted in News and Analysis, Recent Cases

In a noteworthy decision earlier today involving the mootness doctrine and the scope of Rule 68 of the Federal Rules of Civil Procedure, the Sixth Circuit held that an offer of judgment does not moot a plaintiff’s claims where the defendant fails to offer the “entire demand” or “full relief” requested by the plaintiff.  See Hrivnak v. NCO Portfolio Management, Inc. (6th Cir., Case No. 11-3142) (PDF). 

The Hrivnak case arose when Christopher Hrivnak brought suit in Ohio state court against several debt management companies and a law firm under the Fair Collection Practices Act, 15 U.S.C. §§ 1692-1692p, and Ohio’s consumer protection law, Ohio Rev. Code §§1345.01-.99, 4165.01-04.  Hrivnak claimed that the defendants violated the law when they dunned him on several credit card debts.  In addition to seeking class relief, Hrivnak requested statutory, compensatory, and punitive damages “exceeding $25,000,” in addition to injunctive and declaratory relief.  Two days after the case was removed, the defendants made an offer of judgment to Hrivnak under Federal Civil Rule 68 providing for $7,000 in damages, plus reasonable costs and attorneys’ fees.  The defendants argued that their offer mooted the case because it satisfied all of Hrivnak’s claims, but the district court rejected this argument and allowed Hrivnak’s claims to proceed. 

The Sixth Circuit permitted an interlocutory appeal to address the mootness issue.  In a unanimous panel opinion written by Judge Sutton, the Sixth Circuit affirmed.  The panel rejected the defendants’ argument that they had offered to satisfy all of Hrivnak’s demands.  As Judge Sutton noted, “[a]n offer limited to the relief the defendant believes is appropriate does not suffice.  The question is whether the defendant is willing to meet the plaintiff on his terms.”  Here, Hrivnak had asked for more than $25,000, plus reasonable attorney’s fees and injunctive and declaratory relief.  Yet the defendants had only offered him $7,000, plus costs and attorney’s fees.  As Judge Sutton stated, “Reasonable though the defendants’ offer may have been (and may still prove to be), the disparity between what they offered and what the plaintiff sought generally will preclude a finding of mootness.  Just so here.”

Because of the defendants’ Rule 68 offer in this case, it is possible that Hrivnak may be hit with costs incurred if he fails to recover more than $7,000 on the merits.  Rule 68 provides that “[i]f the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.”  Fed. R. Civ. P. 68(d).  The rule thus creates a strong incentive for parties to give serious consideration to offers of judgment.  But it is clear that incomplete offers will not deprive the court of subject matter jurisdiction.

Judge Gibbons to Headline Judges’ Night Dinner

By Pierre Bergeron on Posted in News and Analysis

This Wednesday, June 12, the Cincinnati/Northern Kentucky chapter of the Federal Bar Association will once again host the Annual Judges’ Night Dinner.  If you are interested, further details about the dinner are available here.  Judge Gibbons will be the speaker at this year’s dinner, which generally coincides with the Sixth Circuit’s en banc hearing in June.  Most of the Sixth Circuit judges and many of the local federal judges attend, making this one of the marquee events for the Sixth Circuit.

The Ultimate Guide to En Banc Practice in the Sixth Circuit: What You Need to Know

By Steve Delchin on Posted in En Banc Watch, News and Analysis, Supreme Court

Nearly two years ago, Amy Hocevar and I posted a video on our blog discussing the “ins and outs” of seeking en banc review of panel decisions in the Sixth Circuit and highlighting the various pitfalls to avoid.  Our presentation was very well-received, as witnessed by the frequent phone calls and emails seeking advice on whether a particular client should file an en banc petition.  Inevitably, clients want to know how likely it is that the Sixth Circuit will grant en banc review.  If you’re considering whether to file an en banc petition in the Sixth Circuit, here is what you need to know.

Basic Standards for Seeking En Banc Review

Rule 35 of the Federal Rules of Appellate Procedure (“F.R.A.P.”) is the general rule that governs en banc determination.  Although many parties file en banc petitions, very few petitions are granted, and that is the result of the very high threshold that must be satisfied.  Rule 35(a) provides that en banc hearing is not favored and ordinarily will not be ordered unless (1) en banc consideration is necessary to secure or maintain uniformity of the court’s decisions; or (2) the proceeding involves a question of exceptional importance.  Rule 35(b), in turn, provides that an en banc petition must begin with a statement that either (1) the panel decision conflicts with a decision of the U.S. Supreme Court or of the Sixth Circuit such that en banc review is necessary to ensure uniformity, or (2) the proceeding involves a question of exceptional importance—for example, where the proceeding involves an issue on which the panel decision conflicts with the authoritative decisions of other Circuit Courts that have addressed the issue.

Additionally, Sixth Circuit Rule 35 (which parallels Federal Appellate Rule 35) emphasizes the extraordinary nature of a petition for rehearing.  It specifically provides that an en banc petition is an extraordinary procedure intended to bring to the attention of the entire court a precedent-setting error of exceptional public importance or an opinion that directly conflicts with Supreme Court or Sixth Circuit precedent.  What this means is that error correction (of fact or law) is not a matter for rehearing en banc (though it could be a matter for a panel rehearing, which is governed by Rule 40).

As Sixth Circuit Judge Karen Moore emphasized in her oft-cited dissent in Bell v. Bell, 512 F.3d 223, 250 (6th Cir. 2008), a panel “getting it wrong” does not qualify as a matter exceptional public importance.  In addition, as Judge Sutton has explained, there are institutional reasons for limiting en banc review because the process entails a majority of circuit judges sitting in judgment of two or three of their colleagues.  Judge Sutton observed that saving en banc review for “the rarest of cases . . . reflects a sound, collegial attitude.”  Mitts v. Bagley (Case No. 05-4420, 6th Cir. Dec. 3, 2010) (Sutton, J., concurring) (citation omitted).  Ultimately, then, the focus of an effective en banc petition should not be simply convincing a majority of the active judges that an issue was wrongly decided.  It must do more.

The irony, though, is that if your case is exceptionally exceptionally important, it is possible that the Sixth Circuit may simply pass on rehearing en banc and let the U.S. Supreme Court weigh in.  As Judge Sutton wrote in concurrence in Mitts: “Sometimes there is nothing wrong with letting the United States Supreme Court decide whether a decision is correct and, if not, whether it is worthy of correction.”  Mitts v. Bagley (Case No. 05-4420, 6th Cir. Dec. 3, 2010) (Sutton, J., concurring) (citation omitted).

On the other side of the spectrum, consider whether it makes sense to go directly from the district court to the en banc court and skip the three-judge panel altogether.   This would be the case if your legal argument is directly foreclosed by a prior panel decision.  (Remember that under 6th Cir. Rule 206(c), a three-judge panel cannot overrule the decision of another panel.).  Under F.R.A.P. 35(c), a petition that an appeal be heard initially en banc must be filed by the date when the appellee’s brief is due.

Practitioner’s Points – Effective En Banc Practice

If you do decide to file an en banc petition, keep in mind these basic practitioner’s points:

(1) An en banc petition must be filed within 14 days after entry of judgment (except in a civil case where the U.S. is a party, in which case the time is 45 days after entry of judgment).  See F.R.A.P. 35(c) and 40(a)(1).  (Query: Does the 45-day rule apply in consolidated appeals where the U.S. is a party in only one of the appeals?)

(2) The page limit for a petition for en banc hearing (or panel rehearing) is 15 pages.  See F.R.A.P. 35(b)(2).  For purposes of the page limit, if a party files both a petition for panel rehearing and a petition for rehearing en banc, they are considered a single document, even if they are filed separately.  See F.R.A.P. 35(b)(3).

(3) Note that opposing parties are not entitled to file a response to an en banc petition unless the court orders a response.  See F.R.A.P. 35(e).

(4) Given that en banc consideration of a case is an extraordinary measure, the filing of an en banc petition is not a prerequisite to the filing of a cert petition.  See 6. Cir. Rule 35(b).

(5) When filing your en banc petition, you must attach a copy of the opinion and final order sought to be reviewed.  The Sixth Circuit ordinarily will not consider a petition that does not conform to this rule.  See 6. Cir. Rule 35(a).

(6) If a rehearing en banc is granted, three things automatically happen: (1) the previous opinion and judgment of the court is vacated, (2) the mandate is stayed, and (3) the case is restored to the Court’s docket as a pending appeal.

Conclusion And Takeaway Point

So there you have it: your guide to en banc practice in the Sixth Circuit.  The takeaway point from all this is that review of a panel decision by the full court en banc is extremely rare.  It truly is an extraordinary measure.  Perhaps not surprisingly, the Sixth Circuit has been trending toward fewer and fewer en banc cases each year, as highlighted by Pierre Bergeron’s numerous posts on the dwindling number of Sixth Circuit en banc cases.  Statistically speaking, parties may have a greater shot at having the U.S. Supreme Court grant their cert petition (the odds are around 1%) than the Sixth Circuit granting their petition for rehearing en banc.  Now you know.

Next: Find out all about panel rehearing in the Sixth Circuit.

En Banc Petition in Crack/Cocaine Appeal

By Colter Paulson on Posted in Recent Cases

The Sixth Circuit’s decision in United States v. Blewett that the new lower minimum thresholds for crack offenses applies retroactively to otherwise-final sentences under the Equal Protection Clause for incarcerated offenders has attracted lots of attention.  As reported at the Sentencing Law & Policy blog, the government is seeking en banc review of the decision, arguing that the decision conflicts with prior Sixth Circuit decisions as well as every other circuit to address the issue (a copy of the petition is here).

Given the circuit’s recent history with the crack/cocaine disparity (see here), this will be an interesting petition to watch.

En Banc Case On RICO And Workers Compensation

By Colter Paulson on Posted in En Banc Watch, Recent Cases

Correcting an earlier post, there will an en banc sitting on Wednesday, June 13, 2013, when the Sixth Circuit will hear arguments in Jackson v. Segwick Claims Management Serv.  The case asks if Michigan’s worker compensation laws provide the exclusive remedy for injured workers, or whether injured workers can sue under RICO for an alleged conspiracy to file false medical reports to cut off workers compensation benefits.  The case has attracted significant attention from amicus parties on both sides of the issue.  View the original panel decision.

Sixth Circuit Breathes New Life Into Royalty Spat

By Pierre Bergeron on Posted in Recent Cases

In Lutz v. Chesapeake Appalachia, the Sixth Circuit considered a putative class action complaint brought for breach of contract and other related claims concerning alleged breaches of mineral leases.  The district court had dismissed the contractual claims based on Ohio’s statute of limitations, and that was the only basis of the plaintiffs’ appeal, as they abandoned the other grounds at issue.  The Sixth Circuit, in an opinion by Judge Griffin, engaged in a lengthy analysis of Ohio’s statute of limitations and its application in the lease royalty context.

The Court began by considering whether the breach of contract claim for underpayment of natural gas royalties accrued when the contracts were initially breached or whether the contracts for monthly lease payments were divisible, such that the statute of limitations would run from each separate breach.  The Court began by rejecting the notion that plaintiffs’ argument amounted to a continuous violation claim, and instead framed the issue as a question of divisibility of the contract.  The Court ultimately concluded that the contracts were divisible such that the statute of limitations ran from each separate breach, and it reached this conclusion based on two principles.  First, Ohio courts had endorsed the principle of divisibility of contracts in other contexts.  Second, the Court turned to authority outside Ohio in the gas, oil, and mineral leasing contexts that also found such contracts to be divisible or severable.  But this conclusion only salvaged part of plaintiffs’ claim, rather than the entirety of it.  As a result, the Sixth Circuit had to consider both the discovery rule and related tolling concepts.

Although the plaintiffs argued for a more liberal interpretation of the discovery rule, the Sixth Circuit essentially rejected that argument.  The Court placed great weight on the legislative history behind Ohio’s statute of limitations which did not definitively answer the question, but indicated that Ohio courts would be reluctant to apply the discovery rule in commercial transaction cases.  But even though the discovery rule did not aid the plaintiffs, the Court found that they had adequately alleged the necessary predicates for the invocation of equitable tolling. As a result, the plaintiffs secured reversal on that point as well.

Given recent developments in natural resource exploration in Ohio, royalty disputes are sure to follow.  The Sixth Circuit’s opinion in this case will provide significant guidance in this area as future parties assess litigation options and the potential for statute of limitation defenses.  And, while this case revolves around Ohio law, given the apparent paucity of cases in this area (judging from the Court’s citation to outside authority) it almost certain that this opinion will be influential on other states’ law within the Circuit.

Sixth Circuit Revives Securities Class Action

By Colter Paulson on Posted in Recent Cases

Creating a split with the Second and Ninth Circuits, the Sixth Circuit has held that Section 11 of the Securities Act, 15 U.S.C. § 77k, which creates liability for false statements in registration statements, provides for strict liability and so does not require allegations of knowledge of falsity.  The panel in Ind. State Dist. Council v. Omnicare, Inc. rejected the other circuits’ reliance on Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083 (1991), because that case dealt with Section 14(a), which requires scienter.  Because the Supreme Court has already said that Section 11 creates strict liability, the panel held that the analysis in Virginia Bankshares on Section 14(a) did not apply.  The Court found that the plaintiffs had adequately pled a cause of action for stock inflation under Section 11, but otherwise affirmed the district court’s dismissal.  See here for an earlier appeal in the same case.

It will be interesting to see whether the Supreme Court agrees to resolve the circuit split (assuming Omnicare seeks certiorari).

 

 

Pair of Criminal Cases from Sixth Circuit Gather Headlines

By Pierre Bergeron on Posted in En Banc Watch, Recent Cases, Supreme Court

Yesterday, a pair of criminal cases emanating from the Sixth Circuit received headlines.  In McQuiggin v. Perkins, the Supreme Court reviewed another habeas case from the Sixth Circuit concerning the actual innocence exception to AEDPA.  Although the Supreme Court vacated and remanded the Sixth Circuit’s decision applying the actual innocence exception to the statute of limitations, in many respects, it affirmed the ruling of the Sixth Circuit.  The 5-4 majority, in an opinion by Justice Ginsberg, held that AEDPA’s statute of limitations can be overcome by a showing of actual innocence.  At the same time, the Supreme Court took pains to emphasize the narrowness of its holding, and it ultimately remanded to the Sixth Circuit to apply the standard as it had articulated it.  Justice Scalia, writing for the dissenters, vigorously attacked the majority’s reasoning, at one point describing it as a “statutory-construction blooper reel.” 

The other case was handed down by the Sixth Circuit yesterday, and it was an en banc federal death penalty case.  Federal death penalty cases are certainly rare, and this one produced a very splintered opinion.  In United States v. Gabrion, the en banc majority, in an opinion by Judge Kethledge, upheld the imposition of the federal death penalty for an individual who was convicted of murder on federal property.  Although the crime did occur in a  national forest, it was only 227 feet inside the boundaries of the forest, which was situated in Michigan (Michigan does not recognize the death penalty).  The Court ultimately determined that the district court had properly excluded evidence from the penalty phase of the trial concerning Michigan’s non-recognition of the death penalty against Eighth Amendment challenges.  The Court also discussed in detail, and rejected, challenges to the composition of the jury.  Judge Moore, writing on behalf of herself and three other judges, dissented.  Judge Moore criticized the majority’s conclusion excluding the evidence of the location of the crime and also disagreed with certain conclusions concerning the composition of the jury panel.

The decision in Gabrion was issued nearly a year after the en banc hearing last June.  Interestingly, there does not appear to be any en banc hearing set for this June’s oral argument calendar.  Traditionally, the Sixth Circuit hears en banc cases twice a year, at the June hearing and the December hearing.  The lack of any en banc case scheduled for the June sitting highlights a trend that we have previously noted regarding the growing infrequency of en banc grants at the Sixth Circuit.

Another Supreme Court Habeas Reversal

By Colter Paulson on Posted in Recent Cases

In Metrish v. Lancaster, a unanimous Supreme Court reversed the Sixth Circuit’s decision that Michigan courts violated due process when they took away a defendant’s diminished-capacity defense before his second trial, after having allowed it in his first trial.  The Supreme Court held that relief was unavailable under the Antiterrorism and Effective Death Penalty Act because it has never recognized a due process right to avoid the application of intervening state-law decisions between trials.

See here for further coverage of the circuit’s record in habeas cases before the Supreme Court.