The Factual Basis For An Expert’s Opinion May Not Need To Be Perfect: Andler v. Clear Channel

By Colter Paulson on March 1, 2012 Posted in Recent Cases

In Andler v. Clear Channel Broadcasting, Inc., the Sixth Circuit held yesterday that lower earnings in the two years prior to her injury were not determinative of the amount the plaintiff would earn in the future. The plaintiff was injured after stepping into a hole in a campground, and claimed damages for a loss of future earning capacity against the campground’s owner. A jury awarded her $200,000, but that award was reversed on appeal on other grounds. At the second trial, the district court excluded the plaintiff’s expert testimony about loss of earning capacity as overly speculative, and the jury awarded just $10,000.

The Sixth Circuit reversed again, holding that the expert testimony was not unreasonably speculative. The expert based his future earnings calculations on average salary that was higher than the plaintiff’s actual pre-injury salary because she had not been working full-time prior to her injury. The panel found this was reasonable because she was temporarily working at the lower-paid job to be close to her young children, and planned to change jobs when her children were older. She also had training for full time jobs that paid much better. The Court concluded that the “factual basis” for the expert’s pre-injury earning capacity calculation “may not be particularly strong, but ‘it is not proper for the Court to exclude expert testimony ‘merely because the factual bases for an expert’s opinion are weak.’”

We have previously covered the recent trend in the Sixth Circuit to limit speculative expert testimony (for example, see here, here, here, and here). This fact-driven case does not reverse that trend, but serves as a reminder that the evaluation of expert opinion is often case-specific.

Sixth Circuit Nixes Car Rental Class Action

By Squire Patton Boggs on March 1, 2012 Posted in Uncategorized

Frustration at a car rental company proved inadequate to maintain a class action, the Sixth Circuit held yesterday in Salling v Budget Rent-a-Car Systems. The plaintiff, steamed by a $13.99 refueling charge, brought a putative class action premised on fraud and unjust enrichment theories. Budget successfully removed to federal court pursuant to the Class Action Fairness Act, and the district court eventually granted summary judgment. Budget ultimately prevailed on appeal based on the voluntary payment doctrine – meaning that the plaintiff voluntarily paid the fee rather than disputing the fee when he returned the car.

Two points of interest spring from this opinion. First, the Court ultimately addressed Budget’s argument even though it did not raise the issue below until its reply brief on summary judgment. While the Court frowned upon that, it decided that judicial economy dictated addressing the argument. But this is another reminder about error preservation at the trial court. Second, while this dispute may seem mundane or even silly, giving the voluntary payment doctrine teeth can have real consequences in consumer-based litigation. It will remain to be seen how both the Circuit and the district courts apply this, for it may emerge as a viable defense in an array of consumer cases.

Sixth Circuit bounces anti-trust appeal of Blue Cross/Blue Shield

By Squire Patton Boggs on February 27, 2012 Posted in Uncategorized

We previously reported on an appeal taken by Blue Cross/Blue Shield of Michigan regarding an antitrust suit brought by the State of Michigan seeking to enjoin Blue Cross from the use of most favored nation clauses in contracts with Michigan hospitals. We noted that Blue Cross had appealed the denial of its motion to dismiss, which prompted questions about whether the appeal would survive a challenge to appellate jurisdiction. The Sixth Circuit apparently shared the concern, as it recently dismissed the appeal for lack of jurisdiction in a relatively brief order.

Although Blue Cross sought to salvage the appeal by relying on the collateral order doctrine, the Sixth Circuit had previously rejected an argument for the applicability of the collateral order doctrine based on the denial of a state action defense Huron Valley Hospital, Inc. v. City of Pontiac, 792 F2d 563 (6th Circuit 1986). The Sixth Circuit concluded it was bound by Huron Valley and therefore dismissed the appeal. It remains to be seen whether Blue Cross will seek rehearing en banc, which would be the only way to overturn the Huron Valley result. Clearly the case is very significant to Blue Cross and other related insurers, so certainly an en banc petition is probable. What will remain to be seen is how interested the Sixth Circuit is in this issue of appellate jurisdiction.

What to Expect During Oral Argument

By Colter Paulson on February 24, 2012 Posted in News and Analysis

Last August, we discussed recent procedural changes surrounding oral argument in the Sixth Circuit. In an effort to shed more light on the topic of oral argument in the Sixth Circuit in general, we recently observed three days of oral argument. We attended 18 oral arguments presented before various panels that, taken together, were composed of 7 Sixth Circuit judges and 2 visiting district judges.

After observing the Court over this three-day period, we have compiled various tips for what to expect during oral argument at the Sixth Circuit:

Anticipate a “hot bench”. Each Circuit has a unique style and frequency of questioning parties. Consistent with our own experiences, judges at the Sixth Circuit did not listen passively to oral argument. The panels we observed asked an average of 37 questions in each case. Both appellants and appellees were actively engaged in questioning throughout oral argument. Judges posed an average of 18 questions towards the appellant and directed an average of 14 questions towards the appellee. Appellees should therefore be just as prepared for questioning as appellants. We also found that during rebuttal (which lasted 2-5 minutes), appellants were asked an average of 5 questions. The importance and frequency of these questions demonstrated the importance of the rebuttal for appellants.

Know your audience. In an effort to ingratiate himself with the panel, one attorney from Michigan began his oral argument by remarking that unlike most Michigan attorneys, he enjoys visiting Ohio. Unfortunately for him, only one of the judges was from Ohio (and one was from Michigan) – and the panel obviously did not think much of his comments. The attorney lost any momentum he hoped to gain before beginning his argument. Even if an attorney does not know the relevant cases authored by each judge, he should at least look at the oral argument calendar (which is posted weeks ahead of the argument) to see who will be on the panel.

Know your caselaw. Oral argument can make or break a close case, and so important to come to court well-prepared. In some arguments we observed, attorneys were unaware of recent Sixth Circuit cases and were unable to respond to judges’ questions about their impact on the appeal. The judges also became frustrated when attorneys attempted to bolster their arguments with irrelevant cases. One judge warned an attorney that his argument’s “allegations” needed to be replaced with “real facts.” Though this preparation should be obvious, a surprising proportion of attorneys arrived at court ill-prepared for questions on important facts and cases.

In the upcoming months, we will be posting additional entries addressing the practice of oral argument in the Sixth Circuit. These posts will identify matters such as the various ways in which judges use questioning during oral argument, and how the manner in which judges question attorneys may reveal the eventual outcome of the case.

Thanks again goes to Lauren Henderson, a law clerk at Squire Sanders, for her work in researching and writing this post.

Court Parts Company with Sister Circuits on Presumptions at Pleading Stage of ERISA Suits

By Squire Patton Boggs on February 23, 2012 Posted in Recent Cases

In a case echoing from the high-profile automobile bankruptcies of recent years, a panel of the Sixth Circuit recently considered Rule 12(b)(6) dismissal of a class action alleging breach of fiduciary duty under ERISA as to two retirement plans for certain General Motors employees. In Pfeil v. State Street Bank & Tr. Co. (6th Cir., No. 10-2302, Feb. 22, 2012) (PDF), plan participants sued the retirement plans’ fiduciary, State Street Bank and Trust, alleging that State Street wrongly failed to recognize in July 2008 that GM was bound for bankruptcy and therefore failed to timely divest the plans’ holdings in GM stock. In reversing the district court’s dismissal of the lawsuit, the Court also expressly ruled on whether a “presumption of reasonableness” should be applied in the context of dismissal, ultimately arriving at a different conclusion than several of its sister circuits.

At issue in Pfeil were two specific forms of ERISA plans known as Employee Stock Ownership Plans (ESOPs). These ESOPs were defined contribution 401(k) profit-sharing plans that allegedly invested between $1.45 billion and $1.9 billion in plan assets in GM stock during the class period. The ESOPs required their fiduciary, State Street, to determine, pursuant to reliable public information, whether a serious question existed as to GM’s short-term viability as a going concern without resort to bankruptcy; where State Street made such a determination, the plans required State Street to divest holdings in GM stock. The plaintiffs alleged that various public reports about GM’s infirmities were available sufficient by July 2008 to have caused State Street to conclude that GM was headed toward bankruptcy and to divest the stock. In fact, State Street did reach such a conclusion and sold GM stock in the spring of 2009, and GM filed its bankruptcy petition on June 1, 2009. The district court dismissed under Rule 12, concluding that the plaintiffs had failed to plausibly allege that State Street’s putative breach had proximately caused losses to the ESOPs.

Writing for a unanimous panel that included Circuit Judges Martin and Griffin, District Judge S. Thomas Anderson of the Western District of Tennessee reversed the district court. The Court relied significantly upon a prior decision of the Sixth Circuit, Kuper v. Iovenko, 66 F.3d 1447 (6th Cir. 1995), which held that an ESOP fiduciary’s decision to remain invested in employer securities is presumed to be reasonable. But whereas Kuper had been decided in the context of trial briefs and a stipulated record, in Pfeil the district court had applied the presumption in the context of dismissal. The Court “recognize[d] that many district courts in this Circuit have confronted the issue and reached conflicting decisions,” and so it “t[ook] this opportunity to address whether a plaintiff must plead enough facts to overcome the Kuper presumption in order to survive a motion to dismiss” — ultimately concluding that the presumption of reasonableness in Kuper did not apply at dismissal.

In doing so, the Court recognized that several of its sister circuits had concluded otherwise. In Edgar v. Evaya, 503 F.3d 430 (3d Cir. 2007), the Third Circuit affirmed a dismissal premised upon a presumption of reasonableness, and the Second Circuit followed suit in In re Citigroup ERISA Litig., 662 F.3d 128 (2d Cir. 2011). The Court further noted that the Fifth and Ninth Circuits have adopted a rebuttal standard in cases involving presumption of reasonableness, though they had not reached the specific question of applicability to dismissal. The Court parted ways with its sister circuits, noting that “we have not adopted a specific rebuttal standard that requires proof that the company faced a ‘dire situation,’ something short of ‘the brink of bankruptcy’ or an ‘impending collapse.'” Instead, the Sixth Circuit applies the standard in Kuper, in which a plaintiff must prove that “‘a prudent fiduciary acting under similar circumstances would have made a different investment decision'” (quoting Kuper). Because the Kuper standard was “not as narrowly defined” as those of its sister circuits, the Court found those circuits’ contrary decisions to be “distinguishable.”

It remains to be seen whether this circuit split will attract the attention of the Supreme Court, which has addressed a number of pleading cases in recent years. If not, the ultimate impact of Pfeil may not be felt for several years, until the ruling works its way through the Circuit’s previously fractured district courts.

Sixth Circuit Reverses Million Dollar Copyright Judgment

By Squire Patton Boggs on February 23, 2012 Posted in Uncategorized

Nashville is both the hotbed for country music and now, apparently, copyright litigation. In the most recent decision of significance from the Middle District of Tennessee on copyright issues, Roger Miller Music Inc.; Mary A. Miller. v. Sony/ ATV Publishing, LLC. the Sixth Circuit reversed a nearly $1M copyright infringement award concerning song royalties. The court framed the “interstitial” issue of copyright law as whether the songwriter’s assignment of copyright rights was effective. The Sixth Circuit ultimately agreed with Sony (the assignee) that the songwriter only need to survive until the time at which the renewal application was filed. If the author dies prior to renewal, ownership of the renewal copyright passes to the statutory successors regardless of other assignments. While the court confessed that the Copyright Act utilized “convoluted syntax,” it nevertheless concluded that the statutory language supported Sony’s argument, which meant that it had the rights to the relevant songs via assignment even though the author died prior to the renewal. The application proved sufficient to protect Sony’s rights.

As we have previously reported, some other copyright decisions are making their way up to the Sixth Circuit (also from Nashville), and it will be interesting to see how the court’s jurisprudence on this issue evolves as more of these cases flow through the pipeline.

Sixth Circuit Clarifies Recent FLSA Regulation Change

By Squire Patton Boggs on February 22, 2012 Posted in Recent Cases

When Plaintiff John Orton’s employer stopped paying his annual base salary, he brought suit under the Fair Labor Standards Act seeking unpaid wages and expenses. Dismissing Mr. Orton’s claims under the FLSA, the district court found that the employer’s failure to pay him did not convert his position from salary based to hourly, stressing that “administrative employees are exempt from coverage within the meaning of the FLSA based on the salary that they were owed under their employment agreements and not based on the compensation that they actually received.”

Under Section 213(a)(1) of the FLSA, an employee is exempt if they are employed in a “bona fide executive, administrative, or professional capacity,” as defined by the Secretary of Labor. For each of these three functions, the Secretary of Labor has promulgated rules regarding when an employee qualifies as exempt. For each rule, the defendant must satisfy three “tests” to qualify: (1) a duties test; (2) a salary-level test; and (3) a salary-based test. This appeal focuses exclusively on the salary-based test outlined at 29 C.F.R. § 541.602.

The Sixth Circuit reversed and remanded the matter, finding the lower court had applied an outdated rule of law. Instead, the Sixth Circuit clarified that the 2004 amendment to the regulations governing the salary-based test changed the test to “focus on pay received,” rather than the terms of the employment agreement. The Sixth Circuit clarified that the question was not what the employee was owed under the employment agreement; rather, it was what compensation the employee had actually received.

Likewise, the Sixth Circuit noted that an improper deduction alone will not necessarily render an employee non-exempt; rather, “[a]n employer who makes improper deductions from salary shall lose the exemption if the facts demonstrate that the employer did not intend to pay employees on a salary basis.” 29 C.F.R. § 541.603(a) (2004). Intention is demonstrated by an actual practice of making improper deductions; however, isolated or inadvertent deductions will not result in loss of the exemption, if the employer reimburses the employee for such improper deductions.

In addition, the Sixth Circuit found that the district court had neglected to place the burden of establishing the exemption on the defendants, who were required to show that the employee: (1) received a predetermined amount under 29 C.F.R. 541.602(a); or if not, (2) that the failure to pay the employee the predetermined amount was either proper under Section 541.602(a) or under one of the delineated exemption in subsection (b). Based on these errors, the court reversed the dismissal of Mr. Orton’s FLSA claim and remanded the case for further proceedings.

Supreme Court reverses Sixth Circuit in habeas case

By Squire Patton Boggs on February 22, 2012 Posted in Uncategorized

Yesterday, the Supreme Court, in a 6-3 decision, reversed the Sixth Circuit in a criminal habeas case concerning the scope of Miranda protections. Howes, Warden v. Fields. The case involved the question of whether a prisoner who is being interviewed regarding other potential crimes was entitled to Mirandaprotections. The Sixth Circuit had previously affirmed the grant of habeas relief because the defendant had not been given Mirandawarnings druing a lengthy interrogation prior to his confession. The Supreme Court rejected this approach, particularly the “categorical” rule that the Sixth Circuit had adopted that the questioning of a prisoner is always custodial when the prisoner is removed from the prison population and questioned about events that occurred outside the prison. This case follows on the heels of another recent Supreme Court reversal of a Sixth Circuit habeas decision that we covered in Bobby v. Dixon.

Contentious Trademark Cases Heading to Sixth Circuit

By Squire Patton Boggs on February 14, 2012 Posted in Recent Cases

In the past few weeks, two contentious trademark disputes have been appealed to the Sixth Circuit. In the first, L.F.P.IP. Inc., et al. v. Hustler Cincinnati, Inc., et al., Hustler Cincinnati and Jimmy Flynt, the brother and former business associate of Larry Flynt, appealed the Southern District of Ohio’s entry of a permanent injunction prohibiting the unauthorized use of the mark “Hustler” in conjunction with the sale of sexually-oriented products.

In its lengthy opinion, the district court held that a license to use a trademark need not be oral or written, but can be implied by the objective conduct of the parties (in this case, the payment of purported license fees by Jimmy to Larry). The district court then reaffirmed the doctrine of license estoppel when it held that Jimmy was estopped from claiming any rights to the mark when he had previously entered into an implied license agreement for its use and thereby acknowledged that the mark was owned by Larry.

Finally, the court rejected Jimmy’s claim that the “Hustler” trademark was a “naked” trademark (no pun intended, honestly), due to his brother’s failure to control its use and the resultant diminution in the mark’s value. The court found that the defense of “nakedness” was unavailable to licensees like Jimmy because, to hold otherwise, the licensee would benefit from his own misuse of the trademark to the detriment of the mark and its licensor.

The other trademark-related case heading to the Sixth Circuit is American University of Antigua College of Medicine v. Woodward. In Woodward, the Eastern District of Michigan evaluated whether the defendant student’s use of the plaintiff’s name and almost identical website violated the plaintiff’s rights under the Lanham Act, the Anticybersquatting Consumer Protection Act of 1999 (“ACPA”), the Family Educational Rights and Privacy Act of 1974, and Michigan’s defamation laws.

The court summarily rejected the plaintiff’s claims under the Lanham Act and the ACPA because the speech at issue was not intended to sell goods or services or otherwise result in a profit, as required to state a claim under those statutes. Likewise, the court rejected the plaintiff’s Family Educational Rights and Privacy Act claim on the basis that the statute does not create a private right of action. The court ultimately granted relief to the plaintiff on several defamation claims which were partly established by the requests for admission issued to the defendant and deemed admitted by the court when they were not timely answered.

Arbitration dispute headed for Sixth Circuit

By Squire Patton Boggs on February 14, 2012 Posted in Case Updates

In Rodriguez v Tropical Smoothie Franchise Development the Southern District of Ohio recently enforced an arbitration agreement in the franchise context. The Plaintiff sought to avoid arbitration by arguing both procedural and substantive unconscionability, and the court found that Florida law governed. Although the court rejected a series of arguments regarding procedural unconscionability, including unequal bargaining power, the court was persuaded that substantive unconscionabilityexisted. To reach this result, the court noted that the plaintiff had argued, and the Defendant did not dispute, that the arbitration would cost between $20,000-40,000 and the Plaintiff lacked such funds to cover the costs. The arbitration agreement also required that the costs be paid up front, and the court held, based on the totality of circumstance that substantive unconscionabilty was present. Notwithstanding reaching that finding, the court found that the absence of procedural unconscionability was fatal to the overall unconscionability analysis. As a result, the court granted the motion to compel arbitration.

Although this case could present some interesting issues for the Sixth Circuit on unconscionability, particularly based on the Sixth Circuit’s recent decisions on the cost of arbitration, it remains to be seen whether the court will ultimately have jurisdiction over this dispute. The Defendant evidently moved to dismiss the proceedings, and the district court granted that motion but at the same time indicated that it was staying the case. Under the Federal Arbitration Act, a decision staying a matter pending arbitration is generally not appealable, whereas an order dismissing a case pending arbitration is. It does not appear that the parties framed that issue precisely for the court, and therefore the Sixth Circuit will be left to sort through the jurisdictional issue. We will continue to keep an eye on this case and see if the court accepts jurisdiction and addresses the merits of the case.