Blawgletter®

Notice of Dismissal Automatic, Third Circuit Holds

Can you dismiss a complaint simply by filing a notice even after the court has granted a motion to dismiss?  Yes, the Third Circuit held today -- at least where the defendants haven't answered, the plaintiffs haven't dismissed a similar case before, and the district court's order granting dismissal also allowed the plaintiffs a chance to replead and didn't convert a motion to dismiss to a motion for summary judgment.  The court explained that in those circumstances Rule 41(a)(1)(A)(i) operates to effect dismissal automatically upon the filing of a notice.  In re Bath and Kitchen Fixtures Antitrust Litig., No. 07-1520 (3d Cir. July 28, 2008).

Happy Monday!

CAFA Doesn't Trump Removal Bar in Securities Act, Ninth Circuit Holds

The Ninth Circuit concluded today that the Class Action Fairness Act of 2005 doesn't override a prohibition in the Securities Act of 1933 against removal of securities actions from state court. 

Section 22(a) of the depression-era statute provides that "no case arising under this subchapter and brought in any State court of competent jurisdiction shall be removed to any court of the United States."  15 U.S.C. 77v(a).  CAFA confers a species of federal diversity of citizenship jurisdiction over securities class actions involving at least $5 million in controversy.  28 U.S.C. 1332(d)(2).  Another section allows removal of cases that fall within the grant of jurisdiction.  28 U.S.C. 1453(b).

In affirming remand of the case to Los Angeles County Superior Court, the Ninth Circuit held that the specificity of the Securities Act ban on removal overrode the more general allowance of removal in CAFA.  Luther v. Countrywide Home Loans Servicing LP, No. 08-55865 (9th Cir. July 17, 2008).

MDL Panel to Hear Transfer Motions July 31

The Judicial Panel on Multidistrict Litigation will convene in the city by the bay on July 31.  Their task?  To do the important business of "centralizing" complex cases before individual federal judges so they can handle pretrial proceedings.

The Panel's Notice of Hearing Session reads like a baedeker for the latest corporate disasters.  The list for the San Francisco gathering includes, among other notables:

• Aftermarket Filters Antitrust,
• Municipal Mortgage & Equity, LLC, Securities and Derivative,
• Bear Stearns Securities, Derivative, and ERISA,
• Bisphenol-A (BPA) Polycarbonate Plastic Products Liability,
• "Cabotage", and
• Countrywide Mortgage Lending Practices.

Blawgletter counts at least three that relate to the credit mess.  Sign of the times -- and more to come, we wager.

Our feed bets on nice weather.

Fifth Circuit Upholds Rejection of Late Opt-Out from Enron Settlement Class

The White Rabbit was always late for a very important date.

As all the world knows, a settlement class member who wants to opt out must timely tell the court of opt-outer's desire for exclusion.  But what happens if the settlement notice that the class member receives doesn't specify the opt-out deadline but the member could've figured it out anyway?  Should the court allow more time for opting out?

The Fifth Circuit said no this week to several Canadian companies (which we'll call "Silvercreek") that tardily tried to exclude themselves from a $69 million settlement with Bank of America in a piece of the sprawling Enron securities litigation.  Silvercreek admitted getting a copy of the district court's order that preliminarily approved the settlement and directed the sending of notice to class members.  The order established March 28, 2005 as the deadline for filing "objections" to the settlement and April 11 as the date for the "[f]inal approval hearing".  But it left a blank in the space for the opt-out deadline.  The court nevertheless directed the claims administrator to identify March 28 as the end date for opting out in the electronic and paper notices it would post on a litigation website and mail to class members. 

Silvercreek said nothing about objecting to the settlement or opting out until April 27 -- 16 days after the final approval hearing -- when it requested more time.  The district court demurred.  The Fifth Circuit affirmed, holding that Silvercreek failed to justify its tardiness with a showing of "excusable neglect".  Even if Silvercreek never got a notice specifying an opt-out deadline, the court concluded, it could and should have learned of the March 28 cut-off with a little investigation.  And anybody with a lick of sense, the court suggested, ought to have figured that the deadline must precede the April 11 final approval hearing.  A request for opt out more than two weeks after the hearing thus came too late. Silvercreek Mgmt. Inc. v. Banc of America Securities LLC, No. 06-20026 (5th Cir. July 7, 2008).

Tempus fugit.

Illinois Brick Bats Car Lessees' Claims, Per First Circuit

The First Circuit today turned back another antitrust case arising from car manufacturers' efforts to suppress -- so the plaintiffs alleged -- importing cheap vehicles from Canada into the United States. A previous decision in the same multi-district litigation held that the unlikelihood of continuing misconduct by the manufacturers mooted a claim for injunctive relief. Post here.

Today's ruling extended the Illinois Brick rule -- which gets its name from Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) -- to antitrust conspiracy victims who leased something (specifically, an automobile). Illinois Brick limits antitrust standing to direct purchasers of the relevant product or service. Because the plaintiffs didn't buy straight from the manufacturers (and also didn't allege that the car dealers conspired with the manufacturers), their status as indirect purchasers deprived them of standing and required dismissal of the case. In re New Motor Vehicles Canadian Export Antitrust Litig. , No. 07-1990 (1st Cir. June 30, 2008).

Assignees Have Standing to Sue, Supreme Court Holds

If you use one of these to place a 1-800 call, the carrier that connects you owes "dial-around" compensation to the payphone owner.

A 5-4 Supreme Court held today that assignees have standing to sue even if they don't stand to gain financially from a favorable outcome.  Sprint Communications Co., L.P. v. APCC Services, Inc., No. 07-552 (U.S. June 23, 2008).

The case involved claims to recover compensation from long-distance carriers for "dial-around" services that payphone operators provided to payphone customers.  The operators assigned their claims to "aggregators" for purposes of collection.  The aggregators in turn promised to remit the proceeds of their collection efforts to the operators, who agreed to pay the aggregators for their services.  The district court refused to dismiss the claims for lack of standing, and the D.C. Circuit affirmed.

The Court rejected the petitioners' arguments for denying the aggregators Article III standing and "prudential" standing.  Chief Justice Roberts and Justices Alito, Scalia, and Thomas dissented.

Milberg Settles Criminal Charges for $75MM

The former Milberg Weiss Bershad Hynes & Lerach firm agreed to pay $75 million to resolve criminal charges against it.  NYT article here.

Seventh Circuit Holds "Less" Doesn't Mean "More"

The court rejected an argument it considered hogwash.

The Seventh Circuit today declined an invitation to correct, judicially, a glaring mistake by Congress.

The appeal involved an attempt to undo a remand of a class action to state court.  The defendant, Vertrue, removed it under the Class Action Fairness Act, but the district court remanded it on the ground that it didn't satisfy the more than $5 million amount in controversy requirement.  Vertrue petitioned the Seventh Circuit for leave to appeal under CAFA section 1453(c)(1). 

But its lawyer waited to file until April 18, the seventh day (excluding the weekend) after the April 8 entry of the remand order.  Why does that matter?  Well, Blawgletter will tell you.

Section 1453(c)(1) says that "a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not less than 7 days after entry of the order."  Note the "not less than 7 days" part.

Spivey asked the court to dismiss the petition on the ground that Vertrue missed the deadline.  But, as the court pointed out, "April 18 is 'not less than 7 days' -- in other words, is more than 6 days -- after April 8."  Spivey v. Vertrue, Inc., No. 08-8009, slip op. at 2 (7th Cir. June 11, 2008).  And yet Spivey persisted, citing a bunch of sister circuit decisions holding that "not less than" really means "not more than".  Chief Judge Easterbrook would have none of it:

Spivey's argument rests not on the statutory text but on the proposition that the law cannot mean what it says. . . . That Congress has written a deadline imprecisely, or even perversely, is not a sufficient reason to disregard the enacted language. . . . Turning 'less' into 'more' would be a feat more closely associated with mutating commandments on the barn's wall in Animal Farm than with sincere interpretation.

Id. at 4.  And so the court accepted the appeal.  Reversed.  Ordered remand to the state court because Spivey didn't rebut Verture's affidavit putting the amount in controversy at $7 million.

Some statutes are more equal than others.

"Backlog" Securities Case Revives in Ninth Circuit

The Ninth Circuit -- per Chief Judge Alex Kozinski -- yesterday upheld a class action complaint alleging securities fraud.  The opinion aptly described the feat as "something much harder now than in days gone by."  Whiting v. Applied Signal Technology, Inc., No. 06-15454 (9th Cir. June 5, 2008).

The complaint alleged that Applied Signal kept reporting a big "backlog" even after its biggest customer, the federal government, ordered it to quit work under four separate contracts.  The stop-work orders cut ongoing revenues by 25 percent and portended cancellation of the contracts.  But Applied didn't disclose the orders and even continued to report the work under the rubric of "uncompleted portions of existing contracts".  When the truth outed, Applied's stock took a 16 percent tumble.

Our feed wishes you a happy Friday.

New Jersey Supreme Court Dumps Vioxx Medical Monitoring Claim

The Supreme Court of New Jersey today ordered dismissal of claims that sought, on behalf of a class of people who took pain-killer Vioxx, recovery for the cost of monitoring them for signs of injury.  The Court said:

We hold that the definition of harm under our Products Liability Law (PLA), N.J.S.A. 2A:58C-1 to -11, does not include the remedy of medical monitoring when no manifest injury is alleged.  We also hold that the PLA is the sole source of remedy for plaintiffs' defective product claim; therefore, the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -106, does not provide an alternative remedy.

Sinclair v. Merck & Co., Inc. , No. A-117 (N.J. June 4, 2008).

Our feed monitors stuff all the time.