Sixth Circuit Grants En Banc Review

On Friday, the Sixth Circuit voted to rehear Detroit Free Press, Inc. v. USDOJ (Free Press II) en banc. As we have noted here and here, the Sixth Circuit has been reluctant recently to grant en banc review. As with any grant of en banc review, the previous judgments of the court are vacated and the case is restored to the docket. The Sixth Circuit historically hears en banc cases at two sittings each year, in June and December; however, the argument has not been scheduled yet.

In 1996, the Sixth Circuit decided Detroit Free Press v. United States Department of Justice, 73 F.3d 93 (1996) (Free Press I). The Sixth Circuit held that “the Freedom of Information Act requires government agencies to honor requests for the booking photographs of criminal defendants who have appeared in court during ongoing proceedings.” Constrained by the holding in Free Press I, the Sixth Circuit, through a per curium opinion, granted summary judgment to the Detroit Free Press in Free Press II.  However, the court “urge[d] the full court to reconsider the merits of Free Press I.”

Given the recent reluctance to grant en banc review, the Sixth Circuit’s decision to rehear Free Press II demonstrates the significance of issue. The majority of the Sixth Circuit’s opinion in Free Press II was dedicated to discussing the factors that merit reversing the holding in Free Press I., and it appears that a majority of the judges in the Sixth Circuit agree that the issue is one that demands a closer review. We will monitor this case’s progression through the docket and will offer updates as they come.

The High Standard For Interlocutory Appeals And The Darvocet MDL

We have been watching the Darvocet multi-district litigation (MDL 2226) for some time, most notably the Sixth Circuit’s decision to dismiss 67 of 68 cases alleging misbranding by drug manufacturers.  After that decision, plaintiffs’ counsel began filing new cases in California state court.  The defendants removed the cases to federal court and then obtained a transfer of the cases into the Darvocet MDL in the Eastern District of Kentucky.  The MDL court remanded the case back to California, but certified the remand issue for an interlocutory appeal under 28 U.S.C. § 1292(b) because keeping the case in Kentucky would “subject the [] cases to this Court’s dispositive rulings”—in other words, the cases would be dismissed without the remand.  (Section 1292(b) requires that an appeal “materially advance the ultimate termination of the litigation.”)

Defendants filed two appeals, one under 1292(b) and the other under the collateral order doctrine.  The Sixth Circuit dismissed the collateral order doctrine appeal sua sponte, which was not unexpected because there was nothing exceptional or particularly consequential about the issue.  The Court’s decision on the 1292(b) appeal was more surprising and a little enigmatic:  “we are not persuaded that an immediate appeal is likely to materially advance the ultimate termination of these cases.”

What does this statement mean?  There little question that the case would be at an end without a remand—even the plaintiffs conceded that the Kentucky MDL court would likely dismiss their cases.  In that sense, the outcome of the appeal could be dispositive.  But that was not enough for the panel, which may have believed that the ten-month delay to resolve an arcane remand issue was not really advancing the litigation, especially if the court affirmed on the remand issue.  The panel may also have been uncomfortable with allowing a discretionary 1292(b) appeal to be used to keep a case in a favorable forum, rather than advancing the merits.

We have previously written that discretionary appeals, especially under 1292(b), should involve issues that are “fundamentally important” to the “the outcome of the litigation.”  Both of these dismissal orders emphasize the extraordinary and exceptional requirements for a discretionary appeal.

(Hat tip to Law360 for the 1292(b) order.)

Sixth Circuit Differentiates Trade Secrets and Confidential Information

On Tuesday, in an unpublished opinion, the Sixth Circuit addressed the relationship between trade secrets, contractually protected confidential information, and general skills and knowledge. The Sixth Circuit reversed the district court’s ruling and held that not all contractually protected confidential information is either a trade secret or general knowledge or skill. Rather, confidential information can be contracted for; it exists independent of trade secrets and general knowledge and, while there can be overlap between confidential information and trade secrets, an overlap does not necessarily exist.

In Orthofix, Inc. v. Hunter, Orthofix, a medical device company, brought suit against Hunter, a former sales representative with Orthofix. During his time with Orthofix, Hunter received information relating to the practices of the area doctors, including schedules, prescribing habits, and preferred brands. In 2012, Hunter left Orthofix to join DonJoy Orthopedics, a competitor operating in the area. In an attempt to avoid conflict with the non-compete provision that was part of his Orthofix contract, Hunter did not continue selling to his Orthofix customers and instead introduced his former customers to other DonJoy representatives. Orthofix filed a claim against Hunter for, among other things, misappropriation of trade secrets and breach of contract for violating the non-disclosure and non-compete provisions of Hunter’s employment agreement. The district court found for Hunter on both issues.

Hunter argued Texas law, which both parties agreed governed the non-disclosure agreement, required information subject to a non-disclosure provision to be secret.  Reviewing the issue de novo, the Sixth Circuit noted that both Texas courts and federal courts applying Texas law have given effect to non-disclosure provisions regardless of whether the information covered achieved trade-secret status. Orthofix articulated that information covered by Hunter’s non-disclosure could constitute confidential information, but not be classified as a trade secret. The Sixth Circuit also agreed with Orthofix that the information that Hunter gave to other DonJoy representative fell within the definition of confidential information contained in the employment agreement. Using these points as support, the Sixth Circuit reversed the district court’s ruling in favor of Hunter and remanded the case for an assessment of damages caused to Orthofix. This case thus demonstrates the importance of protecting confidential information by contract, and helps illustrate how such provisions can be enforced.

Sixth Circuit Resurrects Inadequate Training Lawsuit Against Private Prison Contractor

Earlier this month, in Shadrick v. Hopkins Cnty., a divided panel of the Sixth Circuit reversed the district court’s grant of summary judgment in favor of a private for-profit corporation hired to provide services to Kentucky inmates, holding that the mother of an inmate who died from an untreated MRSA infection after three days of incarceration had presented viable claims against the contractor under both state and federal law.  The prisoner disclosed his MRSA infection at the time of admission and the contractor had a written “MRSA policy” that provided a detailed protocol for nurses to follow, but the written policy was not followed by the nurses.

The district court had rejected plaintiff’s § 1983 claim, based on the Eighth Amendment’s prohibition against “unnecessarily and wantonly inflicting pain on” inmates “through deliberate indifference to [their] medical needs,” despite evidence that defendant’s nurses had not only violated key policies, but had never reviewed them.  The district court reasoned that there was no evidence that the nurses’ violations were “due to inadequate training,” and no evidence that any lack of training was due to the contractor’s deliberate indifference.

The Sixth Circuit disagreed with both conclusions, emphasizing the following as evidence that training was inadequate (1-3) and the inadequacy was due to deliberate indifference (4-5):

  1. No “ongoing training program” for nurses.
  2. Nurses’ inability to identify or discuss the contractor’s written policies.
  3. Nurses’ “undocumented policy and custom” of providing medical care only upon inmate request, in violation of written policies.
  4. No employee or officer considered him/herself responsible for the nurses’ training.
  5. After the inmate’s death, there was no investigation, discipline, or additional training.

Dissenting, Judge Griffin acknowledged that the “training of these particular personnel may have been inadequate,” but found insufficient evidence of deliberate indifference by the contractor because the contractor had promulgated policies and conducted some training.  He explained, “if the underlying harm was caused by employees’ deviation from [the contractor’s] policies, then . . . the harm is the fault of the individual employees and is not attributable to the governmental entity.” To find deliberate indifference under such circumstances, Judge Griffin would have required evidence that the contractor had “actual or constructive notice that its nurses were deficiently trained in violation of the Constitution.” However, the majority held this requirement was inapplicable when the risk of constitutional violations due to inadequate training was sufficiently “obvious.”

Private prison contractors often find themselves in a gray area legally: treated like a government entity for some purposes (for example, liable for constitutional violations under § 1983), but not always for others (such as immunity).  This case provides an opportunity for such contractors to take stock of their own internal procedures, as well as their employees’ actual practices.  In terms of preventative measures, the Sixth Circuit’s recent decision demonstrates that merely having written policies in place is only a first step.  Ideally, there should be ongoing training to reinforce the policies,  periodic verification of employees’ familiarity and compliance with the policies, and a focal point higher up in the hierarchy with explicit responsibility for the foregoing measures.  If an incident does occur, it should be immediately investigated and any policy violations should be met by appropriate discipline and/or additional training.  As the Sixth Circuit noted, the conduct of employees “both before and after” an incident is relevant. With privatization of prisons and prison services on the rise, it will be interesting to see how case law in the Sixth Circuit evolves.

Daubert in the Sixth Circuit

In February of 2014, we posted an analysis of the Sixth Circuit’s dealings with Daubert claims dating back to 2010. Over that four year period, the Sixth Circuit reversed fives cases on the basis of the district court’s application of Daubert v. Merrell Dow Pharmaceuticals. In four of the five reversed cases, the Sixth Circuit reversed the district court’s exclusion of expert testimony; suggesting that a district court’s discretion might be broader when allowing testimony than when excluding it (although the sample size was admittedly small).

Over a year and a half later, it is useful to review the Sixth Circuit’s handling of Daubert issues to see how the Circuit’s guidance has been internalized by the district courts. A sample of appeals that featured a challenge to a district court’s application of the Daubert standard yielded nine results between June 1, 2014 and November 12, 2015. Of those nine cases, only three were from this year. Interestingly, five of the cases dealt with a challenge to the district court’s exclusion of expert testimony, three cases contained challenges to both the exclusion and inclusion of testimony, and only one dealt with a challenge to the inclusion of testimony.

The Sixth Circuit only reversed the district court’s decision in one case, Lee v. Smith & Wesson Corp., the oldest of the nine cases. Consistent with our finding in 2014, the Sixth Circuit reversed the district court’s decision to exclude expert testimony. In Lee, the district court excluded the testimony of the plaintiff’s expert because there were inconsistencies between the expert’s recreation of the events in question and the plaintiff’s testimony. However, in its analysis, the Sixth Circuit explained that “expert testimony is not inadmissible simply because it contradicts eyewitness testimony.”

While the past year and a half has not been as dramatic a time for Daubert jurisprudence, the Sixth Circuit still continues to monitor the application of Daubert, particularly in “battle of the expert” cases. But often the Daubert application avoids hard and fast rules and is more of a case by case determination. We will continue to monitor any changes in the development of the Daubert jurisprudence.

Prudent Process Usually Means Prudent Investment

In February of 2012, the Sixth Circuit issued an opinion in Pfeil, et al. v. State Street Bank & Trust Co. reversing a district court’s dismissal of the case. The plaintiff in Pfeil, an employee at General Motors, brought suit against the fiduciary of a certain pension plan at GM known as an Employee Stock Ownership Plan (ESOP). The plaintiff claimed that the fiduciary violated their duty to act prudently in the management of the ESOP because the bank continued to purchase GM stock for the plan in 2008 and 2009 despite the financial struggles of GM. The district court dismissed the case stating that there is a presumption of prudence attached to the actions of the fiduciary. The Sixth Circuit reversed, finding that the presumption did not apply before the summary judgment stage of the case. Shortly after the Sixth Circuits decision in 2012, the Supreme Court granted certiorari in Dudenhoefer v. Fifth Third Bancorp, another Sixth Circuit case with similar facts, and eliminated the “presumption of prudence” altogether.

On Tuesday, the Sixth Circuit issued a divided opinion in Pfeil, et al. v. State Street Bank & Trust Co. upholding the district court’s grant of summary judgment in favor of State Street Bank. The case came back to the Sixth Circuit after the plaintiffs had been certified as a class consisting of all members in the GM ESOP between July of 2008 and March of 2009. As a result of the Supreme Courts holding in Dudenhoefer, the Sixth Circuit was unable to rely on the presumption of prudence to analyze the reasonableness of the bank’s decision to continue to purchase GM stock for the employee ESOP. However, the Sixth Circuit noted that an appeal of summary judgment could be review de novo, allowing the Court to affirm the judgment of the district court on any grounds supported by the record.

The majority applied the “prudent-process” standard to determine if the fiduciary, “at the time they engaged in the challenged transactions, employed [] appropriate methods to investigate the merits of the investment and to structure the investment.” Essential to this analysis was the concept of the Modern Portfolio Theory (MPT), which assumes that an organized securities market, like the market on which GM share are traded, is efficient enough that it is reasonable to assume that the security price on the market includes all information that is known or is knowable about the future prospects of the security. Following the example of the Supreme Court, the Sixth Circuit found that, while a presumption of prudence is no longer permissible, it is prudent to rely on market prices of securities barring some special circumstance. Because State Street Bank had performed internal investigations into the prudence of purchasing additional GM shares, and the plaintiffs had not presented sufficient evidence to challenge the defendant’s approach, the actions of the fiduciary were sufficiently prudent. The Sixth Circuit noted that the prudence of State Street Bank’s decision must be judged at the time the decisions were made, not in hindsight based on the performance of the investments.

Judge White dissented, stating that what is prudent for one type of investor may be imprudent for another. The dissent argued that the nature of the investment, namely a pension plan for employees, required additional attention by the fiduciary than a standard investment portfolio.

It appears clear from the opinion in Pfeil that the Sixth Circuit remains wary of interfering with the actions of investment groups simply because a different investment would have yielded stronger returns. In something resembling the business judgment rule, the Sixth Circuit stuck to the position that, as long as the methods used to analyze an investment are prudent, so too is the investment itself.

Visiting Judges in the Sixth Circuit

On more than one occasion, we have discussed the Sixth Circuits use of visiting judges. Specifically, we have noted the Sixth Circuit’s heavy reliance on visiting judges. While the Sixth Circuit’s use has decreased, the percentage of cases heard by visiting judges continues to exceed almost all other circuit courts.

In the review of case participation in U.S. Courts of Appeals for the twelve months ending June 30, 2015, the Sixth Circuit alone accounts for nearly 30% of all cases in which a visiting judge was present. While the number of Sixth Circuit cases in which a visiting judge has participated has dropped to just over 11%, down from 14.4% this time in 2013, the only court that uses visiting judges more frequently is the First Circuit, which had a visiting judge participate in over 17% of its cases. However, the percentage does not tell the entire story, because visiting judges in the First Circuit only heard 460 cases last year, compared to the 981 heard by Sixth Circuit visiting judges. Together, the First, Sixth, and Ninth Circuits accounted for over 70% of all cases involving visiting judges.

As we have remarked in previous posts, the assistance of visiting judges has broader impact than simply helping a short-staffed court manage a significant caseload. The effects of visiting judges can have a “cross-fertilization” effect on circuits, causing a significant exchange of information between the various circuit courts. Additionally, it has been suggested that the visiting judge program brings intangible benefits including increased collegiality among the judges (particularly between district and circuit judges). However, the program has been criticized for the over-use of district court judges as visiting judges, a practice that some suggest can mitigate the positive impact of the program.

Regardless of the debate about the use of visiting judges, they have long been a fixture at the Sixth Circuit.  Around 2000, the Sixth Circuit had only eight active judges (out of 16 allotted) because the Senate was not confirming anyone.  The Sixth Circuit thus had to rely on visiting judges to help manage the docket.  Since that time, while the number of active judges have increased and the number of visiting judges have decreased, visiting judges continue to play an important role at the Circuit. This suggests that Sixth Circuit judges view visiting judges as a positive influence on the Court and its jurisprudence.

Spokeo, Standing, and the Sixth Circuit

On Monday, the Supreme Court heard oral argument in Spokeo, Inc. v. Robins, an important standing case.  Although Spokeo itself is up from the Ninth Circuit, it bears noting that the Ninth Circuit’s opinion looks to, and relies upon, Sixth Circuit Article III jurisprudence, a backdrop that’s important to keep in mind for Sixth Circuit courts and practitioners as they study and apply the Supreme Court’s ultimate decision.

Spokeo involves the Fair Credit Reporting Act, a statutory scheme that includes a cause of action for plaintiffs to seek statutory damages in lieu of any actual damages to redress “willful” violations of the statute.  The issue is whether the plaintiff has standing (as conferred by Congress) to bring such a claim where the only “injury” alleged is a violation of the statute.  Resolving that question in the affirmative, the Ninth Circuit looked to Sixth Circuit jurisprudence and, specifically, the Sixth Circuit’s opinion in Beaudry v. TeleCheck Servs.  In Beaudry, the Sixth Circuit explained that Congress’s power to confer standing to redress violations of a newly created statutory right (where the only “injury-in-fact” is a violation of that right) is only subject to two Constitutional limitations:  (1) the plaintiff has to be among the injured in that the plaintiff’s statutory rights were actually violated and (2) the underlying harm that Congress elevates to a legally cognizable injury must be individual rather than collective.

We attended Monday’s oral argument and it is clear from the positions advanced by the parties and the Solicitor General’s office, as well as the questions raised by the Justices, that there are a myriad of possibilities for how the Supreme Court could ultimately decide the case.  But while it’s impossible to predict what the Supreme Court will actually do, the subtleties of its ultimate decision are worth some careful thought by courts and practitioners in the Sixth Circuit as they apply Spokeo’s nuance against the backdrop that gave rise to it.

Sixth Circuit Clarifies Standard for Interlocutory Appeal Under 1292(b)

In Little v. Louisville Gas & Electric Co., decided with a companion case, the Sixth Circuit offered some pointers on discretionary interlocutory review under 28 U.S.C. 1292(b). The district court had declined to dismiss state claims as preempted but independently dismissed most of plaintiffs’ federal claims.  In certifying under 1292(b), the court certified “that portion” of its order denying the preemption of the state law claims. After the Sixth Circuit accepted the appeal, the plaintiffs sought to challenge the dismissal of the federal claims.

The Court rejected this effort, concluding that, within the context of 1292(b), the word “order” “refers to a specific direction or command from the district court, not to the document or opinion in which the court explains that direction or command.” Thus, even though the district court resolved both the state and federal claims in the same written opinion, the Court’s jurisdiction was limited by the certification decision made by the district court and accepted by the Sixth Circuit. Although the Sixth Circuit recognized that it could consider other questions presented by a certified order, that exception did not aid Plaintiffs here because there were multiple distinct “orders” in the same document. The Court expressed concern about allowing a multitude of issues to be injected into a 1292(b) appeal, which could defeat the purpose of the statute. In support of its conclusion, the Court pointed to guidance from the Tenth and Fifth Circuits.

The practice pointer here is that “order” does not mean what most lawyers might think it does. Therefore, you must be careful when seeking 1292(b) certification to ensure that you are adequately encompassing the questions on which you want review – and appropriately identifying the “order.” And if you are on the other side of a petition, consider whether to cross-petition – which the Sixth Circuit suggested plaintiffs should have done here to preserve their right to immediate appeal.  (See here and here for some other pointers on 1292(b) certification.)

Sixth Circuit Sides with Third Circuit on Preemption Issue

In an opinion issued yesterday, the Sixth Circuit concluded that the Clean Air Act does not preempt common law claims brought against an emitter that are based on the law of the state in which the emitter operates. Merrick, et al. v. Diageo Americas Supply. The court’s holding is consistent with the Third Circuit’s holding in a case that raised substantially the same issue.

The process to distill and age whiskey that is used by Diageo American Supply produces ethanol emissions. The Clean Air Act, passed in an effort to combat the threat of air pollution, provides for federal baseline pollution standards, but leaves individual implementation and enforcement up to the states. The Clean Air Act leaves the states the authority to pass standards that are stricter than the federal standard and does not restrict the right of “any person… to seek enforcement of any emission standard or limitation or to seek any other relief.”

Based on an investigation performed by the Louisville Metro Air Pollution Control District (the District) and the complaints of 27 residents living near Diageo’s facilities, the District issued a notice of Violation letter to Diageo. While this notice was being resolved, a group of local residents filed a class action complaint against Diageo. The plaintiffs sought compensatory and punitive damages from Diageo to abate the company’s ethanol emissions. The district court denied Diageo’s argument that the plaintiffs’ claims were preempted by the Clean Air Act, but certified its ruling for interlocutory appeal under 28 U.S.C. 1292(b).

The Sixth Circuit noted that states reserve the right to adopt common law standards that apply to emissions because the “states’ rights saving clause” of the Clean Air Act saves “any requirement respecting control or abatement of air pollution” from preemption. The Sixth Circuit found support for its conclusion that common law standards are contemplated by the phrase “any requirement” within the Supreme Court’s analysis of the issue in Cipollone v. Liggett Grp., Inc., where the High Court found that the phrase “sweeps broadly and… easily encompasses obligations that take the form of common law rules.” The Sixth Circuit goes on to note that it was not Congress’ purpose to preempt state law claims like the ones made by the plaintiffs.

Diageo pointed to a case from the Fourth Circuit where the court held that the Clean Air Act did preempt state common law claims. The Sixth Circuit, however, followed both the Third Circuit and the Iowa Supreme Court and found that the Clean Air Act does not preempt “claims brought by plaintiffs under the common law of the source state.” The Sixth Circuit distinguished the Fourth Circuit case by pointing out that the plaintiffs in that instance had brought claims under the state common law of states other than the state that was the source of the emissions.