Decided: May 24, 2016
The Fourth Circuit affirmed the district court’s order granting Appellees’ motion to dismiss Kerr’s civil action pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).
After practicing law for more than fifteen years, Kerr enrolled in Marshall University’s Master of Arts in Teaching (“MAT”) program to obtain a West Virginia teaching license. A student-teaching practicum is a required component of the MAT program. In the fall of 2013, Kerr was a student in this practicum course. A few weeks before the end of the semester, however, Kerr left her student-teaching post in protest over differences with her supervising teacher. Kerr was unable to resolve these differences with the Marshall administration and did not return to her student-teaching post. She was not awarded credit for the course, and she received neither her MAT nor her teaching license as a result. On March 14, 2014, after unsuccessfully pursuing reconsideration through Marshall’s internal grade-appeals process, Kerr filed a complaint in the Southern District of West Virginia. Appellees moved to dismiss Kerr’s action. The district court referred the motion to a magistrate judge for the submission of proposed findings and recommendations. The magistrate judge recommended that the district court grant Appellees’ motion to dismiss in its entirety. The district court granted Appellees’ motion to dismiss.
Kerr claimed on appeal that the district court erred by submitting her claim to a magistrate judge for proposed findings and recommendations, that the Marshall University Board of Governors (“MUBG”) was not entitled to sovereign immunity, and that her complaint plausibly alleged each of her seven claims. 28 U.S.C. § 636(b) permits a district court to assign any pretrial matter to a magistrate judge. In arriving at its decision, the district court properly conducted an exhaustive review of the magistrate judge’s findings. Therefore, the district court properly referred Appellees’ motion to dismiss to a magistrate judge, and the referral and review process did not prejudice Kerr in any way. Kerr alleged that her equal protection rights were violated on the basis of her sexual orientation. However, in her complaint, Kerr made no mention of Title IX as a basis for liability or relief, or as an exception to sovereign immunity. The district court also properly found that Kerr did not plausibly allege each of her seven claims in her complaint.
Accordingly, the Court affirmed the district court’s order by concluding that the district court properly determined both that sovereign immunity bars Kerr’s claim against the MUBG, and that the allegations in Kerr’s pro se complaint against the other Appellees failed to state a claim upon which relief can be granted.
Katie E. Lowery
Decided: May 9, 2016
The Fourth Circuit affirmed in part, vacated in part, and remanded by the court for further proceedings.
Gordon Goines was experiencing difficulties with his cable service. Goines was informed by the cable company that his neighbor was splicing into his cable service and that he should report the theft. Goines proceeded to the police station near his house and reported the theft. Goines suffers from cerebellar ataxia, a neurological condition that causes him difficulties with his speech, balance and certain fine motor functions. The disorder does not affect Goines’ cognitive functioning, and he has no mental health issues. The officers that Goines spoke too regarding his cable service suspected he had mental health problems and asked him if he “wanted to talk to someone” to which Goines responded yes. The officers proceeded to handcuff Goines and involuntarily take him to a mental health institute where he was stripsearched and evaluated by mental health staff. Goines thereafter brought this action under 42 U.S.C. § 1983, alleging that he was unlawfully seized without probable cause in violation of the Fourth and Fourteenth Amendments. The district court dismissed his complaint in its entirety based on Fed. R. Civ. P. 12(b)(6). This appeal followed.
The Fourth Circuit affirmed the district court’s judgment as to the charges against the mental-health evaluator and her employer, but vacated the charges as to the police officers since the complaint was sufficient to survive a motion to dismiss as to those charges. First, the Fourth Circuit determined that the district court erred in treating the allegations of the incident report as true. The Fourth Circuit determined that Goines did not adopt the incident report as true simply by relying on the report for some of the facts alleged in his complaint. Because there was no reliance on the report’s truthfulness, the district court erred in treating as true the factual statements contained in the incident report. The Fourth Circuit then determined that the officers had no probable cause for an emergency mental health detention and Goines’ complaint therefore alleges a constitutional violation. The Fourth Circuit next determined that probable cause did exist for the mental health evaluation because Goines accepted the information set out in the screening report for purposes of his claim. Because probable cause did exist, the complaint failed to allege a constitutional violation against the mental-health evaluator and her employer. The Fourth Circuit therefore affirmed the district court’s dismissal of Goines’ claims against the mental-health evaluator and her employer.
Accordingly, the Fourth Circuit affirmed the judgment of the district court in part, vacated in part and remanded the issue for further proceedings.
Michael W. Rabb
Decided: June 28, 2016
The Fourth Circuit vacated, reversed, and remanded for further proceedings.
In June 2010, Plaintiff, Stella Andrews, filed a lawsuit under the Fair Labor Standards Act (FLSA). Defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) on July 29, 2010. Andrews responded by stating she would submit an Amended Complaint setting forth her allegations in more detail if the court permitted it. The magistrate judge stated that Andrews request was not proper and she had missed the 21-day deadline to amend her complaint. Andrews filed a motion for leave to amend with a proposed amended complaint on October 19, 2010, one day before the hearing on the motion to dismiss. At the hearing on the motion to dismiss, the magistrate judge stated there were three options for the parties: “(1) he could rule on the motion to dismiss, recommending that the district court dismiss the case; (2) he could rule on the motion for leave to amend; (3) or Andrews ‘c[ould] just stand up and say, I want to take a dismissal . . . plaintiff can be free to file another complaint.’” Andrews decided to take a voluntary dismissal and on November 3, 2010, she filed her second complaint. Defendants moved to stay the second action and for costs under Rule 41(d), seeking $23,437.75 for attorneys’ fees and other expenses. Defendants were awarded fees relating to the motion to dismiss and the district court affirmed the award stating, “Andrews’ conduct amounted to vexatious litigation, for which fees could be recovered.” On appeal to the Fourth Circuit in 2013, the court dismissed Andrews’ appeal as interlocutory and unappealable. The district court then awarded Defendants $13, 403.75 in attorneys’ fees; Andrews appealed the award without paying the costs. Andrews’ case was then dismissed for nonpayment. The Fourth Circuit granted Andrews’s motion for voluntary dismissal and the district court dismissed Andrews’s second action for nonpayment. Andrews appealed.
On appeal, the Court began its analysis by determining whether and under what circumstances attorneys’ fees could be awarded under Rule 41(d). Rule 41(d) stated if a plaintiff took a voluntary dismissal and then refilled an action based on the same claim; the court “(1) may order the plaintiff to pay all or part of the costs of that previous action; and (2) may stay the proceedings until the plaintiff has complied.” Rule 41(d) is in place to avoid forum shopping and vexatious litigation but attorneys’ fees are not explicitly permitted. The Court recognized the split of authority on whether Rule 41(d) included the award of attorneys’ fees. The Court relied on the analysis and conclusion of the Seventh Circuit in Esposito v. Piatrowski, 223 F.3d 497, 501 (7th Cir. 2000) which held “‘a party may recover reasonable attorneys’ fees as part of its ‘costs’ under Rule 41(d) only where the underlying statute defines costs to include attorneys’ fees.’” The Court also stated attorneys’ fees were permitted if the court “makes a specific finding that the plaintiff has acted ‘in bad faith, vexatiously, wantonly, or for oppressive reasons,’ a well-established exception to the American Rule.”
The Court concluded awarding attorneys’ fees to Defendants was not permitted under the FLSA, “which provides that when a plaintiff prevails a court ‘shall . . . allow a reasonable attorney’s fee to be paid by the defendant.’” The Court then determined whether Andrews’ behavior warranted attorneys’ fees to be awarded. The magistrate judge stated Andrews’ voluntarily taking a dismissal “‘delayed the resolution of this case, increased the costs of defending this action, and wasted the judicial resources of the Court.’” The district court concluded Andrews acted vexatiously by taking the voluntary dismissal to avoid a negative ruling on the motion to dismiss while trying “‘to get it right.’” The Court disagreed recalling vexatious’ meaning of “‘“without reasonable or probable cause or excuse.”’” The Court concluded Andrews’ behavior was not vexatious because Andrews followed the district court’s option to dismiss the first lawsuit and refile after amending the complaint. The Court also noted Andrews refilled the lawsuit the very same day as taking the voluntary dismissal; “this fact is insufficient evidence of vexation.” Andrews’ complaints were also not “‘virtually identical’” with the second complaint being more detailed in the allegations; therefore, not warranting Andrews’ conduct being labeled vexatious. Therefore, the Court concluded Defendants were not entitled to attorneys’ fees because the FLSA does not provide attorneys’ fees for defendants but rather prevailing plaintiffs and Andrews’s conduct was not vexatious in order to permit attorneys’ fees.
Accordingly, the Court vacated, reversed, and remanded for further proceedings.
Alicia E. Morris
Decided: March 31, 2016
The Fourth Circuit affirmed the district court’s ruling.
In 2008, the plaintiff, Brian Yates, was driving on a highway in North Charleston, South Carolina. His brother and mother were following him in another vehicle. Yates drove past two police cruisers when one of the cruisers driven by the defendant, Blair Terry, pulled out and began to follow Yates. Yates pulled over and Terry approached and asked Yates for his driver’s license. The plaintiff responded he did not have his license but did have military identification. Terry opened Yates’ door and forced Yates out of the car. Around this time, Yates’ mother and brother arrived at the gas station. Yates was forced to place his hands on the car and Terry informed Yates that he was under arrest. Yates inquiry for the basis of the arrest was left unexplained by Terry. Terry began to deploy his taser in “probe mode” causing Yates to fall to the ground. Yates’ brother asked why Terry tased Yates and Terry responded by threatening to call for back up. Terry tased Yates while Yates was still on the ground two more times which caused Yate’s mother to pass out. Other officers arrived and placed Yates into handcuffs. Yates was charged with excessive noise violation, no license in possession, and disorderly conduct. In 2011, Yates filed this action in state court alleging multiple state and federal claims against the defendant. The suit was moved to federal court and defendant made a motion for summary judgment, which was granted in part except against Terry in his individual capacity for use of excessive force. Eventually in 2015, the parties filed a stipulation of dismissal as to all claims except for the 42 U.S.C. § 1983 claim for excessive force against Terry. This appeal followed.
The court first determined if Terry was entitled to qualified immunity using a two-step inquiry set forth by the Supreme Court in Saucier v. Katz. The first step is to determine if the facts establish that the officer violated a constitutional right. The second step determines whether that constitutional right was clearly established. The Fourth Amendment bars police officers from using excessive force and courts evaluate a claim of excessive force based on an “objective reasonableness” standard. The court must balance the nature and quality of the intrusion to the individual’s Fourth Amendment interests against the countervailing governmental interests at stake. To do this the court can use the three factors from Graham v. Connor. The factors are the severity of the crime, whether the suspect poses an immediate threat to the safety of the officers or others, and whether he is actively resisting arrest or attempting to evade arrest by flight. The court determined that a minor traffic violation is not a severe crime. Yates was unarmed and complied with Terry’s instructions before Terry began to use his taser so the evidence does not support an inference that Yates was a danger to Terry or anyone else. Yates was not attempting to flee from Terry and he never attempted to get up after he fell to the ground by Terry’s first taser application. The Graham analysis shows that Terry was not being objectionable reasonable and thus Yates’ fourth amendment constitutional rights were violated. The court determined that it was clearly established that a police officer was not entitled to use disproportionate force by repeatedly tasing a nonviolent misdemeanant who presented no threat to the safety of the officer or the public and who was compliant and not actively resisting arrest or fleeing. Based on Yates’ constitutional right being violated and it being clearly established at the time of Terry’s actions, the district court’s denial of Terry’s motion for summary judgment based on qualified immunity is affirmed.
Decided: April 14, 2016
The Fourth Circuit affirmed the district court’s ruling.
In June 2008, Amiel Cueto sued American Bank and ten other defendants alleging that they fraudulently failed to fund his $8 million sale of real property, causing the deal to collapse. American Bank asserted the suit was frivolous because it had nothing to do with the Illinois transaction; it is based in Maryland. The complaint and summons were served on American Bank’s agent, CT Corporation on June 18, 2008. The papers were transmitted to American Bank’s CFO; however, the CFO had left the employment of American Bank. In late July 2008, an American Bank subsidiary discovered the papers and forwarded them to American Bank’s local lawyer but the lawyer claimed to never receive them. Cueto obtained a default judgment for a total of $98,544,734.65 after American Bank failed to respond. American Bank received the court papers when Cueto began his efforts to collect on the default judgment a mere six months later. American Bank’s insurance broker notified St. Paul Insurance in February 2009. American Bank’s general counsel called St. Paul Insurance’s claims counsel to see if American Bank would be covered for this incident and the claims counsel replied “yes.” However, the claims counsel prepared documents stating that St. Paul reserved the right to deny coverage due to late notice. On April 15, 2009, St. Paul Insurance denied coverage due to a lack of timely notice.
American Bank retained counsel in St. Louis, Missouri and then in Chicago to appeal the default judgment. American Bank retained these counsels to have the default judgment overturned instead of accepting Cueto’s settlement before notifying St. Paul Insurance of the lawsuit. The Illinois state appellate court vacated the default judgment and dismissed the Cueto suit. The appeal cost American Bank $1.8 million in legal fees. St. Paul Insurance commenced this action for a declaratory judgment that it had no duty to provide coverage to American Bank because of untimely notice. In an amended complaint, St. Paul Insurance stated that American Bank breached its duty under the policy to defend the suit upon being served. American Bank advanced theories on waiver and estoppel. The district court granted St. Paul Insurance’s summary judgment motion and denied American Bank’s motion, concluding that American Bank breached its duty by providing late notice and St. Paul Insurance suffered prejudice as a result.
On appeal, American Bank argued that it provided timely notice to St. Paul Insurance; that it complied with its duty to defend; and that material factual disputes remained with respect to its waiver, estoppel, and bad faith claims. American Bank stated it provided timely notice because it provided notice when it had actual knowledge of the suit. However, the policy stated, “the requirement to give notice is triggered not by ‘actual knowledge’ or a claim, but by ‘service of a complaint’ upon the insured.” Therefore, American Bank’s duty to notify St. Paul Insurance was triggered when it’s agent was served with the papers. The Court noted, “internal ‘corporate screw-ups’ provide no basis to excuse American Bank’s failure to give St. Paul Insurance timely notice of the Cueto suit after being validly served with process.” American Bank’s notice was not timely because it notified St. Paul Insurance eight months after being served, this was not “as soon as practicable.” The Court stated the untimely notice prejudiced St. Paul Insurance because it “denied St. Paul Insurance the opportunity to participate in the selection of counsel, to speak with counsel, and to discuss credible defense strategies for dismissing Cueto’s suit before the default judgment.” Therefore, St. Paul Insurance was within its powers when it denied coverage to American Bank for the Cueto suit.
Accordingly, the Court affirmed the judgment of the district court.
Alicia E. Morris
Decided: April 8, 2016
The Fourth Circuit affirmed the district court’s granting of summary judgment to the Board.
Throughout his years at Aberdeen High School in Harford County, Maryland, disabled student S.B. was subject to severe student-on-student bullying, including homophobic insults, sexual harassment, and physical threats. S.B. or his parents reported most of these incidents to the school, and every reported incident was investigated by the school. In response to nearly every case, the school disciplined the offenders, and in the first half of 2013, S.B was assigned a paraeducator to accompany S.B. during the school day, help ensure his safety, and act as an objective witness to any incidents of harassment. Around the same time, the school took several actions against S.B.’s stepfather, T.L., who as a teacher and athletic director at the school, including disallowing T.L. completion of his master’s degree practicum on-site at the school, not providing T.L. with tickets to a student-athlete banquet, and not selecting T.L. to teach the school’s summer physical education class in 2013 despite T.L. having taught it the past three years. As a result, a complaint was filed against the Board of Education of Harford County alleging the Board had violated § 504 of the Rehabilitation Act and the Americans with Disabilities Act through disability-based discrimination against S.B. in failing to prevent the student-on-student bullying and retaliation against T.L. when he advocated on behalf of S.B. Following discovery, the district court granted summary judgment to the Board in April 2014.
In analyzing S.B. claim of discrimination, the Court noted that the district court properly applied the deliberate indifference standard established by Davis v. Monroe County Board of Education, which requires S.B. show, among other things, that the student-on-student harassment was based on his disability and the school knew of and was deliberately indifferent to the disability-based harassment. Further, the Court agreed with the district court’s analysis that regardless of the basis of the harassment S.B. faced, there is no evidence suggesting the Board was deliberately indifferent to it. In fact, the evidence conclusively showed the opposite, and instead of acting with indifference, the school investigated each reported incident, punished offenders in almost every case, and even assigned a paraeducator to accompany S.B. during the school day.
Similarly, the Court also agreed with the district court’s finding that T.L. failed to show a causal connection between the adverse actions against T.L. and his advocacy on behalf of S.B, which no one disputed was a protected activity for the purposes of a retaliation claim under the framework for a prima facie case of retaliation prescribed in McDonnell Douglas Corp. v. Green. Although the Court believed that the school’s decision to not select T.L. to teach the summer class he had previously taught for three years constituted a materially adverse action, T.L. failed to show anything more than a temporal proximity between that action and his protected activity, which by itself is insufficient to defeat a summary judgment claim once the school principal offered a convincing, non-retaliatory explanation for the action.
Accordingly, the Court affirmed the judgment of the district court.
Decided: March 8, 2016
The Fourth Circuit vacated and remanded the district court’s ruling.
The dispute in this case arises out of a contract signed by the United Mine Workers of America (“the Union”) and Peabody Coal Company. An arbitration clause in the contract provided that a “Jobs Monitor” would resolve any disputes involving the contract and that the decisions would be “final and binding on all parties” to the dispute. After Peabody Holding initiated a spinoff and formed a new entity, the Union alerted the Companies they were still bound by the initial contract. The entities claimed the spinoff ended their obligations. The dispute was submitted to the Jobs Monitor and the parties decided to bifurcate the issues to first resolve the questions of liability. The Jobs Monitor ruled in favor of the Union.
Appellants Peabody Holding Company, LLC and Black Beauty Coal Company, LLC seek to vacate the arbitrator’s decision against them by filing a declaratory judgment action. The Union filed a counterclaim to enforce the decision and dismiss the Companies’ complaint by arguing the judicial review of the Job’s Monitor’s decision was not proper until arbitration was complete. The district court denied the Union’s motion to dismiss due to disagreement as to the nature of the complete arbitration rule but granted the Union’s motion for summary judgment by enforcing the arbitrator’s decision as to the liability decision.
The issue in case calls for a straightforward application of the complete arbitration rule, which provides that a federal court should refrain from reviewing an arbitrator’s decision until all facets of the dispute have been decided. Here, the labor arbitrator first decided the liability questions but retained jurisdiction to decide remedial questions at a later date. The Companies argue, however, that the complete arbitration rule should not apply because the parties decided to bifurcate their dispute into separate liability and remedial proceedings, therefore allowing judicial review of the labor arbitrator’s liability decision.
The Court ruled that bifurcation of the issues does not change the fact that the parties agreed to submit the entire dispute to arbitration. Because arbitration plays a critical role in our nation’s system of labor relations and the arbitration provision was freely and contractually entered into, the Court held that a federal court should withhold review of the arbitrator’s decision until the remedial questions have been ruled on as well.
Accordingly, the Court vacated the district court’s ruling and remanded to the arbitrator for further proceedings.
Decided: April 26, 2016
The Fourth Circuit denied Respondent’s petition for review and granted Petitioner’s cross-petition for enforcement of its order.
Nestle Dreyers (Dreyers), an ice cream factory stationed in California, employed two types of workers, production staff who focused on the production of the ice cream, and maintenance staff who focused on the maintenance of the machinery used to produce the ice cream. These groups of workers share many similarities; however, they also maintain several distinctions from each other. In 2011, the International Union of Operating Engineers Local 501, AFL-CIO (the Union) filed a petition with the National Labor Relations Board (the Board) seeking to represent the maintenance employees of the factory. Dreyers objected to the proposed unit, arguing that it should also include the production employees. The Board’s Regional Director approved the maintenance-only unit over Dreyer’s objections and denied Dreyer’s request for review. After the maintenance employees voted in favor of joining the Union, Dreyers refused to participate in collective bargaining with the Union. In response, the Union filed an unfair-labor-practices charge with the Board. The Board granted summary judgment to the Union and Dreyers filed this appeal.
The National Labor Relations Act (NLRA) requires the Board to determine the unit appropriate for the purposes of collective bargaining. In making its determination, the Board exercises “the widest possible discretion” and may approve any appropriate unit; it need not identify and select the single most appropriate unit. Therefore, a challenger to a Board’s unit determination has the burden of proving that the bargaining unit selected by the Board is “utterly inappropriate.” However, the NLRA does prohibit the Board from blindly deferring to a union’s proposed unit. In order to follow the NLRA, the Board has traditionally employ a several-factor test that ultimately asks whether “employees in the requested unit share a sufficient community of interest to be included in the same unit.”
The Fourth Circuit upheld the Board’s determination and concluded that, after a thorough analysis of the facts, the Board correctly applied the relevant community-of-factors test in determining not only that the maintenance employees share a community of interest amongst themselves, but also that the maintenance employees formed a distinct group from production employees. The Union applied the test correctly in determining that the maintenance employees were distinct from the production employees because they formed their own department, had different job classifications, had different skills, and performed different functions from production employees. Moreover, maintenance employees had more technical knowledge than the production employees and were required to have more experience than the production employees.
Accepting the Board’s determination that the exclusion of the production employees from the maintenance employees’ union and that the Union applied the correct framework in determining whether or not to exclude the production employees, the Fourth Circuit denied Dreyer’s petition for review and granted the Board’s cross-petition for enforcement of its prior order.
Decided: April 27, 2016
The Fourth Circuit granted the petition.
Francisco Mena is a native and citizen of the Dominican Republic who was admitted to the United States as a lawful permanent resident. An immigration judge (IJ) ordered the plaintiff’s removal based on his two convictions of crimes involving moral turpitude not arising out of the same criminal scheme. During Mena’s immigration proceedings, Mena applied for cancellation of removal, a form of relief that is available to aliens who have not been convicted of an “aggravated felony” based on 8 U.S.C. §1229b(a)(3). The Immigration and Nationality Act (INA) states an aggravated felony is a theft offense with a term of imprisonment of at least one year. Mena had a prior conviction for violation of 18 U.S.C. § 659, which creates four offenses, each set out in a separate paragraph. The first paragraph relates to the illegal taking by embezzlement or theft of certain property that has moved in interstate or foreign commerce. The second paragraph relates to purchases, receipt, or possession of property that was embezzled or stolen. Mena was convicted under this second paragraph and was sentenced to a 60-month imprisonment term. The IJ concluded that Mena’s conviction under § 659 is an aggravated felony, and therefore the IJ pretermitted Mena’s cancellation of removal application. The Board of Immigration Appeals (BIA) dismissed Mena’s appeal as it viewed § U.S.C. § 1101(a)(43)(G) to contain two types of offenses that qualify as an INA aggravated felony: theft offense and receipt of stolen property which is contained in the parenthetical appended to the term “theft offense.” The plaintiff filed a petition to the Fourth Circuit to review the BIA’s decision.
The court used a categorical approach to determine if Mena’s prior conviction qualified as an INA aggravated felony. The prior conviction constitutes an aggravated felony if it has the same elements as the generic INA crime but, if the statute of conviction sweeps more broadly and criminalizes more conduct than the generic federal crime, the prior conviction cannot count as an aggravated felony. The court looked at its earlier opinion in Soliman v. Gonzales where it stated a theft offense requires the essential element of the taking of property without consent. Mena’s argument was that his conviction under the second paragraph of § 659 for receipt of embezzled property, and the crime of embezzlement involves a taking of property with the owner’s consent and therefore, is not a “theft offense” under the categorical approach. The BIA found Soliman inapplicable because it the aggravated felony statute contains not only “theft offenses” but also “the receipt of stolen property” which has different elements than theft offenses and does not require taking property without consent. The BIA based this distinction on its prior opinion in In re Cardiel-Guerrero where the BIA observed extorted property falls within the generic meaning of “receipt of stolen property” under § 1101(a)(43)(G). The BIA also relied on a survey of state theft statues that supported BIA’s view that receipt of embezzled property is included in the generic definition of a “theft offense” under § 1101(a)(43)(G). The court disagreed with BIA and stated that embezzlement involves property that came into the wrongdoer’s hands with the owner’s consent. Accordingly, the court said that a conviction for receipt of an embezzled property under § 659 does not fall within § 1101(a)(43)(G)’s theft offense definition. Therefore, Mena’s crime sweeps more broadly than a § 1101(a)(43)(G) theft offense, and is not an INA aggravated felony under the categorical approach. Mena’s conviction under the second paragraph of § 659 is not a “theft offense” (including receipt of stolen property) under § 1101(a)(43)(G). Therefore, the court granted Mena’s petition for review and remanded the case for further proceedings.
Judge Wilkinson dissented from the majority opinion because the judge considered embezzlement to be included as theft under the generic language of § 1101(a)(43)(G).
Decided: April 19, 2016
The Fourth Circuit reversed the district court’s dismissal of the plaintiff’s Title IX claim and vacated and remanded its denial of plaintiff’s motion for a preliminary injunction.
Plaintiff was promised and subsequently denied access to the boy’s restroom as his school in Gloucester County after he informed the school that he is a transgender male. As a result, plaintiff brought suit against the Gloucester County School Board under Title IX and sought a preliminary injunction to allow him to use the boy’s restroom. The district court dismissed the case and denied the injunction. The plaintiff appealed both decisions and asked the Court to assign the case to a different judge on remand based on the judge’s comments during the district hearing.
The Court identified the primary question at issue as being whether Title IX requires schools to provide transgender students access to restrooms based on their gender identity. Section 34 C.F.R. 106.33, a regulation implementing Title IX, permits the provision of separate restrooms on the basis of sex. The Department of Education’s Office for Civil Rights interpreted how 34 C.F.R. § 106.33 should be applied to transgender individuals. The Office stated that “[w]hen a school elects to separate or treat students differently on the basis of sex . . . a school generally must treat transgender students consistent with their gender identity.” The Court found that the district court erred when it chose not to provide the Office’s interpretation of the regulation with appropriate deference under Auer v. Robbins, 519 U.S. 452 (1997). The court determined Auer deference was appropriate because it determined that § 106.33 was ambiguous as it applied to transgender individuals and the agency’s interpretation of the regulation was not plainly erroneous.
Next, the Court addressed the district court’s decision to deny the plaintiff’s motion for an injunction. The district court denied the motion based on reasoning that it would not be unduly burdensome for the plaintiff to use unisex bathrooms. The Court found this decision was based on “erroneous legal principals” because it evaluated the plaintiff’s evidence against a stricter evidentiary standard than is warranted for a preliminary injunction. Accordingly, the Court reversed and remanded the motion to be evaluated under appropriate evidentiary standards.
Finally, the Court did not reassign the case to a new judge on remand because it did not find any evidence indicating the judge’s conduct violated the required standard under United States v. Guglielmi, 929 F.2d 1001, 1007 (4th Cir. 1991).
Decided: April 19, 2016
The Fourth Circuit affirmed the district court’s dismissal of plaintiffs’ and plaintiff-intervenor’s complaints, as the Committee lacked standing to bring the suit.
The Republican Party of Virginia (the “Party”) is governed pursuant to its Plan of Organization (the “Plan”). According to the Plan, Legislative District Committees (“LDCs”) are unincorporated associations designated pursuant to the Plan that “determine whether candidates for Legislative District public office shall be nominated by Mass Meeting, Party Canvass, Convention or Primary, where permitted to do so under Virginia Law.” The 24th Senatorial District Republican Committee of Virginia is the LDC responsible for determining the method of nomination for candidates seeking the Republican nomination for the 24th Senatorial District for the Virginia General Assembly. In December 2014, the Committee exercised its authority under the Plan and adopted a resolution designating a convention as the method of nominating the Republican candidate for the 24th Senate District seat in the 2015 election. On February 23, 2015, incumbent state senator Emmett Hanger relied on the authority granted him by the Incumbent Protection Act and designated a primary as the method of nomination. The Committee subsequently filed suit against the members of the Virginia State Board of Elections and the Virginia Department of Elections seeking declaratory and injunctive relief. The Committee’s complaint alleged that the Act infringes on its First Amendment right to freedom of association by preventing it from determining the method of nomination in contravention of the terms of the Plan. Defendants filed a motion to dismiss, which the district court granted, holding that the plaintiffs failed to meet their burden to establish standing.
The record before the district court was sufficient to decide the jurisdictional question. Not only did the record contain the complete Party Plan, the district court undertook a thorough and exacting review of it. Moreover, the Committee and the Commonwealth both clearly represented to the district court that there were no issues of disputed fact. Therefore, because the proper construction of the Plan is a question of law and the record before the district court was sufficient, the Court concluded that jurisdictional discovery was not necessary. Whether the Committee has standing depends on whether its alleged injury was the result of the Act or a lawful and voluntary decision on behalf of the Party. The Court held that the Party limited its authority to determine unilaterally the method of nomination through its adopting of the Party Plan, which reads, “The Legislative District Committee shall determine whether candidates for Legislative District public office shall be nominated by Mass Meeting, Party Canvass, Convention or Primary, where permitted to do so under Virginia Law.” If the Party had intended to preserve its ability to unilaterally choose the method of nomination for legislative districts, it could have done so. Thus, the Plan delegates to the Committee the authority to determine the nomination method unless Virginia law otherwise limits that authority. Where Virginia law sets forth an alternative method of nomination, the Plan does not give the Committee the authority to supersede or challenge that determination.
The Fourth Circuit therefore affirmed the district court’s holding that the Committee lacked standing to bring the suit.
Katie E. Lowery
Decided: March 21, 2016
The Fourth Circuit reversed the district court’s ruling and remanded the case for further proceedings.
In March 2014, Jane Doe #1, through her next friends and guardians Ben and Kelly Houndersheldt, filed a complaint against Matt Blair (“Blair”) and Res-Care, Inc. (“Res-Care”). In July 2014, Res-Care removed the case to federal court, asserting subject matter jurisdiction based on diversity of citizenship. In the removal notice, Res-Care asserted that Jane Doe #1 was a Virginia resident, Blair was a West Virginia resident and that it was incorporated in Kentucky. The notice did not allege, however, the state in which Res-Care had its principal place of business. In January 2015, the district court sua sponte remanded the case to state court on the basis that diversity jurisdiction was lacking due to the absence of some assertion as to Res-Care’s principal place of business. Blair then, joined with Res-Care, filed a motion under Federal Rules of Civil Procedure 59(e) and 60 to alter or amend and for reconsideration. Blair noted that no party challenged the court’s jurisdiction and that the parties determined that Res-Care’s principal place of business was Louisville, Kentucky. Plaintiffs did not oppose this motion. The district court denied the motion and Res-Care and Blair timely appealed to the Fourth Circuit.
The Fourth Circuit began by determining whether it has jurisdiction to review the district court’s remand order. The Court determined that a sua sponte remand order for lack of subject matter jurisdiction may be issued at any time and is not reviewable under Title 28 U.S.C. §1447(d). The Court also determined that a remand order based on a defect other than lack of subject matter jurisdiction must be effected by granting a timely filed motion. Furthermore, the Court determined if such an order is entered without a motion, it does not bar review. Therefore, the Court determined that its jurisdiction to review the remand order depended on whether the order was based on lack of subject matter jurisdiction or a procedural defect. The court then reasoned, based on decisions from three other circuits, that failure to establish a party’s citizenship at the time of removal was a procedural defect, not a jurisdictional defect. By examining the substantive reasoning behind the order, the Court determined that the district court’s order was based on a procedural defect. Therefore, the Court reasoned that the district court’s order fell outside the scope of Title 28 U.S.C. §1447(c) and thus could be reviewed. Furthermore, the Court reasoned that because the district court’s order fell outside the scope of §1447(c), the district court lacked the authority to order remand. Due to the district court’s lack of statutory authority, the Fourth Circuit reversed the district court’s remand order and remanded this case to district court for further proceedings. Additionally, the Court granted Res-Care’s motion to amend its removal notice pursuant to 28 U.S.C §1653.
Accordingly, the Court reversed the judgment of the district court and remanded the case for further proceedings.
Michael W. Rabb
Decided: April 25, 2016
The Fourth Circuit reversed and remanded the district court’s dismissal.
Pursuant to the legalization of gambling in Maryland and a November 2012 referendum that authorized casinos to begin operating table games, such as blackjack, poker and craps, on April 11, 2013, PPE Casino Resorts Maryland, LLC (“the Casino”) planned to open about 150 table games at Maryland Live!, the casino they owned and operated in Hanover, Maryland. Knowing that it needed to hire and train nearly 830 dealers to operate the planned tables, the Casino developed a required training program called “dealer school,” and began advertising employment opportunities for table game dealers. Claudia Harbourt, Michael Lukoski, and Ursula Pocknett (collectively “the Plaintiffs”), were among those extensively interviewed and ultimately selected to attend the “dealer school.” However, only Lukoski attended the “dealer school” for the entire twelve weeks and worked as a dealer at the Casino. Harbourt and Pocknett were not paid at all, but Lukoski received minimum wage of $7.25 per hour, for the last two days of “dealer school.” In 2014, the Plaintiffs filed suit claiming that the Casino had violated the Fair Labor Standards Act (“FLSA”), as well as various Maryland wage laws, but the district court granted the Casino’s motion to dismiss for failure to state a claim upon which relief can be granted.
Under the FLSA, employers must pay employees minimum hourly wage for all hours worked. As the Court notes, the Supreme Court has interpreted “work” as any physical or mental exertion required by and primarily for the benefit of the employer and his business. In the only Fourth Circuit case to address the issue, McLaughlin v. Ensley, the Court relied on the Supreme Court’s decision in Wailing v. Portland Terminal Co. that a trainee could be considered an “employee” for purposes of the FLSA, and held that whether or not a trainee constitutes an employee depends on whether the trainee or the employer is the “primary beneficiary” of the training.
When looking at the present case, the Court decided that examination of the Plaintiffs’ complaint alone could not resolve the question as to who primarily received the benefit of the training, and pointed out various facts alleged by the Plaintiff that could lead a reasonable fact finder to the conclusion that the Casino was the primary beneficiary. For instance, based on the alleged fact that, as a result of the “dealer camp,” the Casino had a trained workforce of over 800 dealers ready to operate the table games on the day they became legal, a fact finder could find that the Casino received a substantial and immediately benefit for the training. Also, the Casino advertising that the training program was associated with a community college when, as the Plaintiffs allege, no such association existed could demonstrate to a fact finder that the Casino developed the “dealer school” in order to avoid paying the minimum wage. Accordingly, the Court held that the Plaintiffs alleged sufficient facts to raise question as to whether or not, for the purposes of the FLSA, the trainees constitute employees who performed work, and therefore reversed and remanded the district court’s decision.
Decided: March 7, 2016
The Fourth Circuit affirmed the judgments of the district court.
Beginning in 1997, plaintiffs were victims of a massive, South Carolina-centered Ponzi scheme as a result of fraudulent loans secured by the victim’s stock. Borrowers would offer stock as collateral in exchange for a loan equaling up to 90% of the stock’s value from a company called Derivium. Unbeknownst to the borrowers, Derivium was using the borrower’s stock in high-risk venture capital investments that eventually failed. Derivium was thus unable to pay the borrowers back their investment. Derivium went bankrupt in 2005 and victims of the fraud began commencing actions against it that eventually resulted in a favorable $150 million judgment.
There are two separate appeals in this case that were consolidated by the Fourth Circuit for this ruling. These appeals stem from Alan M. Grayson, AMG Trust & Grayson Consulting, Inc. (“Plaintiffs”), who brought suit against several others who they claim also participated in the scheme. The Plaintiffs first brought suit against Vision International People Group, P.L. (“Vision”), a cypress-based company, which the district court dismissed for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). The Plaintiffs brought a second set of claims against Randolph Anderson, Patrick Kelley and Total Eclipse International Ltd. (“Defendants”), which was dismissed on a motion for judgment as a matter of law at trial by the district court on the grounds that the cause of action was not recognized by South Carolina courts.
In regards to the first suit against Vision, the Plaintiffs argued that the district court erred in not conducting an evidentiary hearing to review the conflicting evidence. The Plaintiffs further argued that the district court erred by requiring them to meet a higher standard by imposing a preponderance of the evidence standard in demonstrating jurisdiction. They argued that the standard should be a prima facie showing of jurisdiction viewed in the light most favorable to the plaintiffs. The court determined that there was no deficiency in the process the district court undertook in evaluating the motion. The district court did hold a hearing, and no party ever claimed the record was inadequate, that relevant evidence was missing, or that it was unable to fairly present its position. Furthermore, the court determined that the Plaintiffs ultimately had to establish facts supporting jurisdiction over Vision by preponderance of the evidence. The court also affirmed the decision of the district court on the “merits” of the Fed. R. Civ. P. 12(b)(2) motion. The court held that Vision lacked the necessary contacts and activities to bring it within the realm of personal jurisdiction. Furthermore, the court held that the officers of Vision involved in the scheme were doing so out of the scope of their employment with no connection to Vision.
In regards to the second suit filed against Defendants, the Plaintiffs argued that the district court erred in holding as a matter of law that the causes of action that were brought did not exist under South Carolina law. Plaintiffs argue that the South Carolina Supreme Court established these common law claims in Connelly v. State Co. The court held that this reading of Connelly was incorrect. The court reasoned that the language that Plaintiffs rely on as establishing these common law claims was not in the Supreme Court’s opinion, but in trial court’s opinion and was not adopted in its holding. The court concluded that it was unable to find any South Carolina cases that held that aiding and abetting common law fraud would constitute a cause of action in South Carolina.
Accordingly, the court affirmed the judgment of the district court.
Michael W. Rabb
Decided: February 19, 2016
The Fourth Circuit affirmed the district court’s ruling.
In 2002, plaintiff Perdue Foods became concerned about potential consumer confusion between its trademark, “Perdue”, and that of defendant BRF, an international food company headquartered in Brazil that supplied poultry to Perdue. BRF sells poultry under the trademark “Perdix.” In 2003, Perdue and BRF negotiated a Worldwide Coexistence Agreement (“Agreement”) that stated that Perdue would abandon use of its trademark in Brazil and BRG would abandon use of a version of its trademark worldwide. The agreement contained a Maryland choice of law clause. In 2014, Perdue brought this action in the District Court of Maryland alleging that BRF breached the agreement by failing to abandon existing trademark registration in some countries and filing new trademark applications in others. The district court granted BRF’s motion to dismiss the suit pursuant to Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction.
Perdue argued only that the court had specific personal jurisdiction not general so the court only used a specific jurisdiction analysis. The court held that it had to consider several factors in this analysis: 1) whether the defendant purposely availed itself of the privilege of conducting activities in the state, 2) whether the plaintiff’s claims arose out of those activities directed at the state, and 3) whether the exercise of personal jurisdiction would be constitutionally reasonable. The court reasoned that Perdue failed to prove the first prong of the test because BRF did not purposely avail itself of the privilege of doing business in Maryland. The court analyzed several factors in making this determination such as whether the defendant maintains agents in the state, owns property in the state, and engaged in significant or long-term business activities in the state. The court determined that Perdue provided little evidence in support of these factors and that the only substantial evidence in favor of personal jurisdiction was the choice of law clause. Therefore, the court held that the district court did not have personal jurisdiction over BRF.
Accordingly, the court affirmed the judgment of the district court.
Michael W. Rabb
Decided: February 2, 2016
The Fourth Circuit found that the arbitration agreement in dispute was unenforceable, reversed the district court’s order compelling arbitration, and remanded.
This case stemmed from a complaint that the plaintiffs had against Western Sky, an online lender owned by a member of the Cheyenne River Sioux Tribe, who operated Western Sky from the Cheyenne River Indian Reservation and issued payday loans to consumers. Such payday loans violated several state and federal lending laws, and several suits were brought against them, including this one, forcing them to stop issuing new loans. In this case, Western Sky transferred the loan to another entity, who in turn transferred the loan to another entity, who named Delbert (who is not a tribe member) as the servicing agent. The plaintiffs filed a class action suit against Delbert, claiming that Delbert’s notices and phone calls violated the Fair Debt Collection Practices Act and the Telephone Consumer Protection act, and Hayes also sought “declaratory relief to the effect that the loan agreements forum selection and arbitration provisions were unenforceable.” Specifically, the loan agreement provided that the loan was subject to the “exclusive laws and jurisdiction of the Cheyenne River Sioux Tribe,” and also stated that state and federal laws didn’t apply. Furthermore, the arbitration agreement provided that any dispute would be resolved by binding arbitration, which would be conducted by the Cheyenne River Sioux Tribal Nation, and that the borrower could choose a specific organization to administer the arbitration. Delbert filed a motion to dismiss, and the district court agreed that Delbert could enforce the arbitration agreement, and ordered arbitration. This appeal follows.
The Fourth Circuit began by identifying that even though it reviews an order compelling arbitration de novo, there is a strong federal policy in favor of enforcing arbitration agreements. The Court then looks at the fact that in order for an arbitrator to resolve a dispute, the arbitration agreement itself must be valid, and revoking an arbitration agreement must be on grounds that specifically stem from the arbitration agreement itself, and not just the contract as a whole. The plaintiffs argued that the Tribe has no representatives for arbitration, nor does the Tribe even recognize arbitration, and that furthermore there are no actual “consumer dispute rules” alluded to in the agreement, making it unenforceable. However, Delbert argued that the new provisions provided for arbitration from organizations like AAA and JAMS saved the arbitration agreement. The Court found, however, that the arbitration agreement failed because “it purports to renounces wholesale the application of any federal law to the plaintiffs’ federal claims,” federal law that would apply to Delbert since he’s not a member of the Tribe. Although the Court acknowledges that parties may structure arbitration agreements as they choose, the Court also maintained that such ability does not allow a “substantive waiver of federally protected civil rights,” and the Court found that such a waiver was found in this particular arbitration agreement. For these reasons, the Fourth Circuit reversed and remanded.
Decided: February 1, 2016
In a case about torture during Somalia’s military dictatorship, the Fourth Circuit held that the federal courts did not have jurisdiction over the Alien Tort Statute (ATS) claims in the case. The Fourth Circuit also held that the defendant was not immune from suit for the Torture Victim Protection Act (TVPA) claims based on his official status. On this basis, the Fourth Circuit affirmed the District Court’s holding dismissing the ATS claims, and allowing the TVPA claims to proceed.
In December, 1987, Warfaa was kidnapped from his home in Somalia by Somali National Army (SNA) soldiers, and detained on suspicion of supporting an opposition group. Over the next three months, at the direction of Ali, who was then a colonel in the SNA, Warfaa was beaten, interrogated, tortured, shot, and left for dead. In March, 1988, Warfaa bribed his guards to release him. He continues to reside in Somalia. In December, 1990, Ali emigrated to Canada, but was deported for human rights abuses, and came to the United States. The United States began deportation proceedings, but Ali left voluntarily in 1994. In 1996, Ali returned to the United States on a spouse visa, and continues to live here.
In 2004, Warfaa and another plaintiff filed suit against Ali in the Eastern District of Virginia, chose to dismiss the complaint, and refiled again two years later. For much of the next eight years, the case was stayed. Twice the stay was to allow the U.S. Department of State to comment on the case’s impact on foreign policy. The case was also stayed to await the Supreme Court’s decision in Kiobel v. Royal Dutch Petroleum Co.. In April, 2014, the Court lifted the stay, and Warfaa filed an amended complaint alleging six counts under the ATS, of which two also qualified as TVPA claims. Ali moved to dismiss the claims. The District Court dismissed the ATS claims, finding under Kiobel that the claims did not relate closely enough to the United States for the court to have jurisdiction. The Court allowed the TVPA claims to proceed, finding that Ali could not claim immunity for official acts when those acts went against the norms of jus cogens. Both Ali and Warfaa appealed.
The Fourth Circuit first found that the court did not have jurisdiction over the ATS claims. The Court noted that there is a presumption against ATS jurisdiction over acts occurring abroad unless, under Kiobel, those acts are closely enough tied to the United States to overcome the presumption. Here, the Court noted, the alleged incidents took place abroad, and did not involve U.S. citizens or the U.S. government. Ali’s residency in the United States did not create enough of a relationship with the U.S. for there to be ATS jurisdiction.
The Fourth Circuit then found that Ali was not immune under the TVPA for his official acts. Ali had urged the Court to overrule its prior holding in Yousuf v. Samantar, finding that there is no immunity for official acts which violate jus cogens norms. The Fourth Circuit, however, noted that it was bound by the decision of another panel of the Court until the issue was considered en banc. On this basis, the Fourth Circuit affirmed the District Court’s decision dismissing Warfaa’s ATS claims and allowing his TVPA claims.
Judge Gregory wrote a separate concurring/dissenting opinion in which he dissented with respect to the ATS claims. He noted that the Kiobel case and other subsequent cases involved corporate defendants while the instant claim involved an individual defendant who resided in the United States. Further, Judge Gregory noted that Ali specifically sought residence in the United States, and had, at various points, received military training in the United States. On this basis, Judge Gregory felt that there was enough connection with the United States to create jurisdiction under the ATS. Finally, Judge Gregory noted that it was troubling that, under the majority’s holding, a U.S. resident could escape ATS liability for acts committed abroad that would certainly have been judicially pursued if they had been committed in the United States.
Katherine H. Flynn
Decided: January 29, 2016
The Fourth Circuit agreed that the district court did not have jurisdiction over the claims and affirmed.
This case stemmed from a qui tam action under the FCA that Mark Radcliffe (“Radcliffe”), a former district sales manager for Purdue Pharma (“Purdue”), filed against Purdue, alleging that Purdue improperly labeled the drug OxyContin as having a higher pain potency, which in turn led doctors to prescribe it instead of the less expensive MS Contin. After bringing an action in 2010 that was dismissed and certiorari was dismissed in the Supreme Court, Radcliffe’s wife, joined by another employee filed this qui tam action. The district court dismissed on res judicata grounds, the 4th circuit remanded, and on remand, the district court dismissed the complaint. This appeal followed.
The Fourth Circuit began by examining the provisions in the FCA that permitted qui tam actions, and how the “public disclosure bar,” which states that courts can’t have jurisdiction over an “action under this section based upon the pre-2010 public disclose of the allegations or transactions in a criminal, civil, or administrative hearing unless the action is brought by the Attorney General or the person bringing the action is the original source of the information.” The Fourth Circuit then noted that it interpreted the phrase “based upon” to preclude actions “only where the relator has actually derived from a public disclosure the allegations upon which his qui tam action is based.” Although the plaintiffs argued that their allegations are not derived from a public disclosure, because they came by their knowledge of Radcliffe’s allegations from nonpublic sources, the court found that they did have knowledge from public sources. They compared the case at hand to the Siller case, and found that, unlike in that case, the plaintiffs learned of their knowledge of the case specifically due to their attorney’s involvement in Radcliffe’s prior action. Although they didn’t learn directly from public disclosures, their claims are based on the knowledge their attorney gained while representing Radcliffe, much like in the Doe case. Furthermore, the Court pointed out that the statutory purpose of the public disclosure bar supported the dismissal of the case. Therefore, the Fourth Circuit affirmed.
Decided: July 13, 2015
The Fourth Circuit held that the recent Supreme Court jurisprudence is clear that the defendant’s motion constitutes a mixed Federal Rules of Civil Procedure 60(b) and 28 U.S.C. § 2253(c)(1)(B) and remanded to the district court to allow the defendant the opportunity to decide whether to abandon his improper claim or to proceed with a successive habeas petition.
In 2004, Immigration and Customs Enforcement (ICE) began investigating McRae’s codefendant, Rodney Green, after becoming suspicious of drug trafficking. The ICE Agent learned that learned that Green and McRae had traveled to Jamaica along with other women, Spears, Bailey, and Harris. The women were stopped at Charlotte Douglas International Airport and customs agents seized cocaine and marijuana. Bailey identified McRae, and he was later arrested and charged with four drug charges in February 2005. After a three-day trial in September, McRae was convicted of all charges and was sentenced to 210 months imprisonment.
McRae filed a petition in 2008 under 28 U.S.C § 2255 to vacate the sentence claiming ineffective assistance of counsel at trial and prosecutorial misconduct. Later without holding an evidentiary hearing, the district court granted the government’s motion for summary judgment and the Fourth Circuit determined that McRae could not appeal absent a Certificate of Appealability (COA). After unsuccessfully filing petitions for rehearing and a writ of certiorari, he filed a motion entitled “Motion for Relief from Judgment 60(b)(1)(3)(6).” In his motion he alleged five errors in the district court’s § 2255 proceedings: 1) the district court falsely stated that the court had not mentioned counsel’s failure to move to suppress when denying counsel’s motion for voir dire; 2) the district court mistakenly stated that McRae admitted to knowing Bailey; 3) the district court did not consider every statement made by McRae in determining whether his counsel was ineffective for failing to move to suppress; 4) the district court mistakenly attributed one of the ICE Agent’s testimony that McRae knew his rights; and 5) the district court misquoted the ICE Agent as telling McRae an attorney would be appointed for him if he could not afford one. McRae’s Rule 60(b) motion for lack of subject-matter jurisdiction was dismissed and the court held that the motion was a successive § 2255 motion for which he failed to obtain preauthorization under 28 U.S.C. § 2244(b)(3), and declining to issue a COA. The issue for the Fourth Circuit is whether McRae’s appeal of the district courts dismissal of his Rule 60(b) motion as an unauthorized § 2255 motion is subject to the COA requirement.
McRae argues that the district court erred in treating his motion as a successive habeas petition rather than a mixed Rule 60(b)/§ 2255 motion, and that this Court may review the district court’s determination without first issuing a COA. In a habeas proceeding, a Rule 60(b) motion which attacks “the substance of the federal court’s resolution of a claim on the merits” is not a true Rule 60(b) motion, but instead a successive habeas petition. Gonzales v. Crosby, 545 U.S. 524, 531-32 (2005). The district court does not allow a successive habeas petition to be filed without preauthorization from a court of appeals. The court of appeals may issue a COA only if the applicant has made a substantial showing of the denial of a constitutional right. However, a Rule 60(b) motion that attacks a defect in the habeas proceedings is a true Rule 60(b) motion and is not subject to the preauthorization agreement.
The Fourth Circuit held that there was no need to decide whether it needed to issue a COA before determining whether the district court erred in dismissing McRae’s purported Rule 60(b) motion as an unauthorized successive habeas petition. Both parties agree that the district court erred in dismissing McRae’s motion as an impermissible successive § 2255 petition. McRae argues, and the government agrees, that his first, second, fourth, and fifth claims are properly categorized as Rule 60(b) claims. However, the government contends that 1) McRae’s Rule 60(b) claims were untimely, and 2) he failed to make the requisite showing of extraordinary circumstances.
Under the Federal Rules of Civil Procedure, Rule 60(b) motions must be made no more than a year after the entry of judgment or order of the date of the proceeding. McRae filed his motion nearly 18 months after the district court denied the § 2255 motion. Therefore, the government argues that the motion is barred. However, McRae argues that this decision should be made by the district court so he has the opportunity to come forward with evidence that might justify the application of equitable tolling or otherwise establish the motion should not be time-barred. Therefore, the Fourth Circuit determined that the proper action was to remand the case back to the district court.
Dissenting, Justice Motz determined it was inappropriate for the majority to hold that a habeas petitioner need not obtain a COA before appealing a district court’s order denying a Rule 60(b) motion as an improper successive habeas petition. Justice Motz believed that this holding was contradictive to binding circuit precedent which requires the dismissal of this appeal.
Austin T. Reed
Decided: July 6, 2015
The Fourth Circuit held that the district court was correct in declining to vacate challenged aspects of an arbitration award. The arbitrator only awarded punitive damages for violations of the Credit Repair Organizations Act (CROA), and the arbitrator determined the amount of attorneys’ fees and costs requested by the plaintiffs was unreasonable. The plaintiffs argue that by reaching these terms, the arbitrator disregarded the law and exceeded his scope of authority under the Federal Arbitration Act (FAA).
Between 1998 and 2003, the plaintiffs entered into several contracts to participate in a debt management program with Genus Credit Management Corporation (Genus). Genus contracted with Amerix Corporation and its affiliates to perform certain functions for Genus. The relevant contracts included an arbitration clause. Even though Genus represented itself to be a non-profit corporation providing debt relief free of charge, Genus accepted many “voluntary contributions” from the plaintiffs and participating creditors. In 2004, the plaintiffs filed a class action suit against Genus and other defendants alleging a conspiracy to violate state and federal law. The District Court for the District of Maryland dismissed the case, holding that the arbitration provision required the plaintiffs to arbitrate their claims. During the arbitration, the plaintiffs’ claims included alleged violations of the CROA, the Racketeer Influenced and Corrupt Organizations Act (RICO), and the Maryland Consumer Protections Act (MCPA). Some of the original defendants entered into class-wide settlements with the plaintiffs. The arbitrator approved these settlements and awarded $2.6 million in attorneys’ fees. After the settlement, the only remaining defendants included Amerix, its affiliates, and Dancel (Amerix’s founder).
Following extensive hearings, the arbitrator issued a final arbitration award granting the plaintiffs only partial relief of their claims. The arbitrator concluded that the defendants were “credit repair organizations” under the CROA and had failed to make certain disclosures to consumers required under the Act. In determining the amount of compensatory damages to award the plaintiffs, the plaintiffs sought compensation for certain class members under the CROA’s actual damage provision. Under the CROA, actual damages include “any amount paid by the person to the credit repair organization.” 15 U.S.C. § 1679g(a)(1)(B). The arbitrator concluded that the voluntary contributions of the plaintiffs were not “amounts paid” because a large amount of these class members did not make any voluntary contributions in exchange for credit repair services; therefore, the arbitrator declined to award actual damages. The arbitrator did award punitive damages to the plaintiffs because the plaintiffs should have received certain disclosures. Finally, the arbitrator determined the request for more money in attorneys’ fees was unreasonable due to deficiencies in the attorneys’ billing process. The district court concluded that the arbitrator’s decisions were proper.
Under the FAA, an arbitration award can be set aside when: (1) there was corruption in procuring the award; (2) there was partiality or corruption on the part of the arbitrator; (3) the arbitrator was guilty of misconduct in refusing to postpone a hearing; or (4) the arbitrator exceeded his or her powers that a mutual, final, and definite award upon the subject matter submitted was not made. 9 U.S.C. § 10. Judicial review of an arbitration award in federal court is extremely limited and should not be overturned just because the district court believes the arbitrators misinterpreted the law. The plaintiffs argue that these principles do not govern the present case because the arbitrator considered the remedies created by statute, rather than the rights established by contract. The Fourth Circuit determined that this argument had no merit and proceeded to review the case under its extremely limited power.
The plaintiffs argue that the district court erred by refusing to vacate the arbitration award because the arbitrator manifestly disregarded the law. The manifest disregard standard requires that a plaintiff show that: (1) the legal principle in dispute is clearly defined and not subject to reasonable debate and (2) the arbitrator refused to apply that legal principle. Wachovia Sec., LLC v. Brand, 671 F.3d 472, 483 (4th Cir. 2012). The Fourth Circuit concluded that the plaintiffs failed to satisfy their burden of proving the arbitrator manifestly disregarded the law when determining not to award actual damages. The plaintiff’s argument does nothing more than challenges the arbitrator’s interpretation of the applicable law. At no point did the arbitrator’s interpretation fall beyond the point of reasonable debate. Additionally, the Fourth Circuit determined that the arbitrator correctly observed the deficiencies in the attorneys’ billing methods, and he had the authority to disallow the fee in its entirety. Finally, the Fourth Circuit held that the arbitrator did not exceed the scope of his contractually delegated authority under the FAA. Therefore, the judgment of the district court was affirmed.
Austin T. Reed
Decided: June 17, 2015
The Fourth Circuit affirmed the district court’s dismissal of the action as moot because Plaintiff failed to offer additional basis for standing, and also denied Plaintiff motion seeking leave to amend its First Amended Complaint.
Plaintiff, South Carolina Coastal Conservation League (the “League”) is a non-profit corporation with a mission to protect the natural environment of the South Carolina coastal plain. The League brought the instant case against various parties to stop what it “fears will be significant degradation to the 485 acres of freshwater and wetlands and its conversion to saltwater wetlands.” Defendant South Coast Mitigation Group, LLC (“South Coast”), owns the tract of land at issue. South Coast wishes to allow its entire 700-acre tract, of which the 485 acres of freshwater and wetlands are a part of, to become a functioning tidal marsh integrated with the Savannah River. The U.S. Army Corps of Engineers’ (the “Corps”) concluded that there would be no significant impact from South Coast’s project proposal based on the Corps’ environmental assessment of the project. The League fears that unless the project is stopped, saline water from the Savannah River will intrude onto the Embanked Tract and cause conversion of the freshwater wetlands to saltwater wetlands, therefore harming its members’ use and enjoyment of the Lower Savannah River ecosystem. South Coast conducted tests between January 2014 and February 2014 regarding the salinity of the water. The League also submitted affidavits of three wetland experts.
The district court found the League’s claims to be moot based on a change in facts because the water in the Embanked Tract already contained more saline than the water the League was trying to prevent from entering the Embanked Tract. Therefore, no meaningful relief could be provided for the League’s feared harm of the wetlands on the Embanked Tract turning from freshwater wetlands to saltwater wetlands.
The Fourth Circuit agreed with the district court and found that the League had provided no evidence to challenge the salinity readings relied upon by the district court in making its mootness determination.
Accordingly, the Court affirmed the district court’s judgment.
Decided: April 23, 2015
The Fourth Circuit held that the imposition of all expenses in an ex parte proceeding, regardless of whether a plaintiff wins or loses, does not involve “fee shifting” that would implicate the American Rule but instead an unconditional compensatory charge imposed on a dissatisfied applicant who elects to engage the Patent and Trademark Office (PTO) in a district court proceeding.
This appeal stemmed from the district court granting the Director of the PTO’s request and ordering Shammas to pay the PTO a total of $36,320.49 in expenses, including the salary expenses of the PTO attorneys and a paralegal who were required to defend the Director. In June 2009, Shammas applied for a federal trademark for the mark “PROBIOTIC” to be used regarding the fertilizer products produced by his company. The trademark-examining attorney for the PTO denied Shammas’ application in an ex parte proceeding because the term was “generic and descriptive.” The Trademark Trial and Appeal Board affirmed this decision. Instead of appealing to the Federal Circuit, Shammas elected to bring this action against the PTO in district court, allowable under 15 U.S.C. § 1071(b)(1). The district court granted the PTO’s motion for summary judgment and ordered Shammas to pay the $36,320.49 in expenses that the PTO incurred in the proceeding. Shammas opposed this motion, claiming that the PTO was in essence claiming attorney’s fees and that § 1071(b)(3) did not, in authorizing the recovery of all expenses in the proceeding, explicitly provide for the shifting of attorney’s fees as would be required to overcome the American Rule. The district court granted the PTO’s motion in its entirety, reasoning that the terms “all expenses” clearly seem to include attorney’s fees.
Shammas’ main argument is the American Rule, which states that “the prevailing party may not recover attorneys’ fees as costs or otherwise.” Shammas argued “a district court may not read a federal statute to authorize attorney-fee-shifting unless the statute makes Congress’ intention clear by expressly referring to attorney’s fees.” Shammas’ argument depended on the assumption that if § 1071(b)(3) were to be construed to include attorney’s fees, it would constitute a fee-shifting statute that would need to refer explicitly to attorney’s fees in order to overcome the presumption of the American Rule.
The Fourth Circuit determined that this assumption was incorrect under the circumstances of this case. A statute that requires the payment of attorney’s fees without regard to a party’s success is not a fee shifting statute that operates “against the backdrop of the American Rule.” It is clear that § 1071(b)(3) is not a fee-shifting statute that is held to the American Rule. This statute, instead, imposes expenses on the ex parte plaintiff, “whether the final decision is in favor of such party or not,” rather than imposing expenses based on whether the PTO prevails.
Further, the reading that § 1071(b)(3) imposes a unilateral, compensatory fee, including attorney’s fees, on every ex parte applicant who elects to engage the resources of the PTO when bringing an action in district court, whether the applicant succeeds or fails, is confirmed by the statute’s structure and legislative history. This is mainly due to the higher costs of the district court having to review this case de novo. Shammas had the option of appealing the decision directly to the Federal Circuit, but he chose to commence a de novo civil action in the federal district court. By requiring the dissatisfied applicant to pay “all of the expenses of the proceeding,” whether successful or unsuccessful, Congress clearly intended to reduce the financial costs of the PTO in defending such a proceeding. Due to this specific purpose, it makes sense for all of the expenses to include the attorney and paralegal fees. Additionally, the statute’s legislative history shows that § 1071(b)(3) was intended to be a funding provision, created to relieve the PTO of the financial burden that results from the applicant’s decision to pursue the more expensive de novo review of the district court.
Therefore, the Fourth Circuit affirmed the decision of the district court. In his dissent, Judge King stated that § 1071(b)(3) makes no reference to attorney’s fees and does not accurately reflect Congress’ intention to authorize these awards. The American Rule is a well-settled tradition that should not have been disregarded. Judge King concluded his dissent by saying that “Absent explicit statutory language authorizing attorney’s fees awards, the courts can only speculate on whether the phrase ‘all the expenses of the proceeding’ includes the PTO’s attorney’s fees. Against the backdrop of the American Rule, however, the courts are not entitled to make educated guesses.”
Austin T. Reed
Decided: April 21, 2015
The Fourth Circuit held that bringing an action by filing a complaint, rather than filing an application by motion under the Federal Arbitration Act, is the proper way for a party to an arbitration under the Multiemployer Pension Plan Amendments Act of 1980 (“MPAA”) to seek to have an arbitration award modified or vacated. On this basis, the Fourth Circuit reversed the district court’s dismissal of the Freight Drivers and Helpers Local Union No. 557 Pension Fund’s (“Pension Fund”) claim against Penske, and remanded to the district court.
Between 2001 and 2004, Penske Truck Leasing transferred ownership of a subsidiary, Leaseway Motorcar Transport Company, to a third party in which Penske Truck Leasing retained a minority interest. Leaseway stopped making contributions to the Pension Fund, which responded by assessing withdrawal liability against Penske Truck Leasing and affiliate Penske Logistics LLC. The Penske Companies did not pay the liability, and the parties entered arbitration as provided for by the MPAA. The arbitrator ultimately dismissed Pension Fund’s claim, finding that the Penske Companies were exempt from liability under an exception for trucking industry funds. Pension Fund filed a complaint alleging that the trucking industry exception had been misapplied, and brought suit as “‘Freight Drivers and Helpers Local Union No. 557 Pension Fund, by its Trustee, William Alexander’” v. “‘Penske Logistics LLC [and] Penske Truck Leasing Co., LP.’” The Penske Companies filed a motion to dismiss on the basis that Pension Fund did not have standing because it attempted to sue through one trustee, rather than through its four person Board of Trustees. The district court granted Penske’s motion, and allowed Pension Fund 21 days to amend its complaint. Pension Fund filed an amended complaint within the 21 day period, bringing suit through its Board of Trustees. The Penske Companies filed a second motion to dismiss, arguing that a challenge to an arbitration award under the MPAA must be brought through a motion in accordance with the FAA rather than through a complaint. Penske further argued that, even if Pension Fund’s amended complaint was a motion, it was untimely because more than 30 days had passed since the arbitration award, and it also failed to comply with local rules requiring a motion to be accompanied by a memorandum. The district court granted Penske’s motion to dismiss, finding that the MPAA provides that arbitration proceedings should be conducted in accordance with the FAA, and the FAA requires parties wishing to vacate an arbitration award to do so by bringing a motion. The district court, however, treated Penske’s complaint as a motion, but found it deficient for untimeliness, since under the Federal Rules of Civil Procedure, a motion cannot relate back to the original filing date as a complaint can, and for not containing a memorandum. The district court denied Pension Fund’s motion for reconsideration, and Pension Fund appealed to the Fourth Circuit.
The Fourth Circuit first found that the MPAA requires that a party to an arbitration challenge the arbitration award through filing a complaint, rather than by filing a motion. The court argued that the plain meaning of the MPAA statutes, language surrounding those statutes, and parallel procedure under the statute for collecting withdrawal liability where there was no arbitration all suggest that a complaint is the proper form for challenging an arbitration award under the MPAA. The court also found that the House Committee Report on the MPAA bolstered the argument that a complaint was the proper form for challenging an award. The court also noted that even the district court here, reviewing the original complaint and motion to dismiss, analyzed the MPAA as requiring a civil action or complaint to review an arbitration award. The court further found, on the basis of statutory and regulatory language, and case law, that there is a distinction between arbitrations under the MPAA, which must be conducted in accord with the FAA, and review of arbitration awards under the MPAA, which are to be commenced under MPAA rules by filing a complaint. Having concluded that filing a complaint is the proper method to gain review of an arbitration award under the MPAA, the court then held that Pension Fund’s amended complaint was timely, because it related back, under Federal Rule of Civil Procedure 15, to Pension Fund’s original complaint. The court reasoned that in Pension Fund’s amended complaint, Pension Fund remained the named party, and both the conduct challenged and the claim against Penske remained the same. Thus, Pension Fund’s amended complaint could relate back to the filing date of the original complaint, which was within 30 days of the arbitration award. The Fourth Circuit thus found that Pension Fund’s amended complaint was timely. On this basis, the Fourth Circuit reversed the district court’s dismissal of Pension Fund’s claim, and remanded to the district court.
Katherine H. Flynn
Decided: March 25, 2015
The Fourth Circuit affirmed the district court’s ruling that it had federal jurisdiction over the plaintiff’s state-law claims and that the plaintiff failed to allege sufficient facts to set forth a claim for relief.
The plaintiff, Robert Johnson (“Johnson”), is a prison guard in Bishopville, SC. He was shot multiple times in his home after a prisoner at the prison Johnson works ordered the attack by using a contraband cell phone. The plaintiff sued several cellular phone service providers and owners of cell phone towers, alleging that the defendants were liable for Johnson’s injuries because they knew their services were facilitating the use of illegal cell phones by prison inmates and yet failed to take action.
First, the Court addressed the district courts finding that it had federal jurisdiction over Johnson’s state-law claims. The Court found that although the plaintiff’s state claims were not completely preempted by the Federal Communications Act, the district court nevertheless properly exercised jurisdiction on the basis of diversity of citizenship of the parties. Despite the lack of complete diversity, the Court held that the trial court had properly retained subject matter jurisdiction, per the fraudulent joinder doctrine. The fraudulent joinder doctrine applied because the Court found there was “no possibility” that the plaintiff would be able to establish a cause of action against the two non-diverse defendants in state court.
Finally, the Court determined that the trial court correctly held that the plaintiff’s claims failed to state a claim as a matter of law. According to the Court, the plaintiff’s claims were merely speculative in nature and failed to allege sufficient facts to set forth a plausible claim for relief. The Court noted that the complaint, in its current state, resembled a “prohibited fishing expedition.” However, the Court reiterated that the complaint was dismissed without prejudice. Therefore, the Johnsons were free to amend their complaint if they acquired additional information supportive of their non-preempted claims. Accordingly, the Court affirmed the district court’s order.
Decided: August 19, 2014
The Fourth Circuit held that the district court abused its discretion when it certified five class action suits. The Court vacated the lower court’s decision and remanded for reconsideration.
The appellees are five separate classes that believed that the appellants, producers of coal-bed methane (CBM), withheld CBM royalties from the classes of appellees that claimed ownership of the CBM and underpaid royalties to the classes that had lease agreements with the appellants. The district court certified the five classes and their claims; the appellants petitioned the Court to review on an interlocutory basis the decision granting class certification.
The Federal Rules of Civil Procedure (F.R.C.P.) require that a prospective class satisfy the following conditions: (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of representation. Rule 23(a). The Court also noted that an implicit requirement of F.R.C.P. Rule 23 is that “the members of a proposed class be ‘readily identifiable.’” Hammond v. Powell, 462 F.2d 1053, 1055 (4th Cir. 1972). The district court did not address the potential difficulty of identifying class members who may have acquired ownership after the initial compilation of CBD ownership twenty years prior to the current claim. Accordingly, the Court instructed that on remand the “district court should reconsider the ascertainability issues posed by the ownership classes.” The Court also reasoned that the commonality element was not clearly met and would require further inquiry because the deeds that conveyed property rights at issue contained varying language.
In addition to meeting the four requirements of F.R.C.P. Rule 23(a), “the class action must also fall within one of the three categories enumerated in Rule 23(b).” Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 423 (4th Cir. 2003). The district court certified the royalty underpayment claims under F.R.C.P. Rule 23(b)(3), which requires a showing of predominance and superiority. The Court reasoned that while the appellants used common practices, it was unclear whether the common conduct was sufficient to ensure the litigation would focus on a predominant common issue, rather than individual issues. Thus, the Court concluded that the district court’s analysis “lacked the requisite rigor to ensure the requirements of F.R.C.P. Rule 23 were satisfied by any of the certified classes,” and remanded the case.
Amanda K. Reasoner
Decided: September 24, 2014
The Fourth Circuit held that decisions on applications for discovery filed under 28 U.S.C. § 1782 are immediately appealable, and affirmed the district court’s order requiring that Appellants produce the requested documents.
This appeal stemmed from a multi-billion-dollar judgment rendered in Ecuador against Chevron Corporation (“Chevron”) for claims that Chevron’s operations caused substantial environmental damage in Ecuador. Chevron alleged that Ecuadorian plaintiffs and their lawyers, Steven Donziger (“Donziger”) and Aaron and Daria Page (“Page”), fraudulently obtained the multi-billion-dollar judgment. To obtain evidence of the fraudulent behavior, Chevron sought discovery of documents in several American courts. Chevron made the discovery requests under 28 U.S.C. § 1782, which provides that federal district courts may order persons to give testimony or produce documents for use in a foreign or international proceeding. Specifically, Chevron sought to compel attorneys Donziger and Page to produce certain documents. The Second Circuit concluded that Donziger made an unsubstantiated privilege claim. Specifically, that court concluded that Donzinger had waived any privileges he may have had, and ordered him to produce the documents. Similarly, Page refused to turn over adequate responses, and Chevron asked the District Court of Maryland to compel production, arguing that Page had inappropriately asserted privilege over some of the responsive documents. The District Court of Maryland granted Chevron’s motion to compel.
After determining that the § 1782 order constituted a final order, the Fourth Circuit concluded that it had subject matter jurisdiction to hear an immediate appeal from the District Court’s order. The Court ultimately concluded that Page’s claims failed on the merits. First, the Court rejected Page’s argument that the Donzinger Waiver should not have defeated his privilege claims. The Court noted that the doctrine of comity compelled the Court to affirm the application of the waiver in the Maryland proceeding to the documents in Page’s possession because a contrary ruling would cause the courts to “step on each other’s toes.” Furthermore, the Court emphasized that the District Court had two other independent bases to permit discovery of the documents that Page had asserted privilege from disclosure: (1) Page’s involvement in the alleged fraudulent judgment invoked the crime-fraud exception to the asserted privilege; and, (2) various voluntary disclosures defeated the privileges asserted and effectively created a subject-matter waiver. Accordingly, the Court affirmed the District Court’s order.
Decided: August 15, 2014
The Fourth Circuit held that Appellant, Crane Co. (“Crane”) was not entitled an opportunity to assert another basis for federal jurisdiction after the district court remanded its case to Maryland state court when Appellee, James Joyner (“Joyner”), amended his complaint to eliminate the claim underlying Crane’s federal defense, and concluded that Crane’s attempt to amend its notice was untimely.
Joyner filed suit against Crane in Maryland state court alleging that Crane manufactured and supplied asbestos-containing valves and gaskets to the Navy, on whose ships Joyner worked. Crane removed the case to federal court pursuant to 28 U.S.C. § 1442(a)(1), averring that it would assert a federal contractor defense because it supplied the valves in conformance with military specifications. Crane’s notice of removal, however, did not explicitly assert the defense as it related to the gaskets, but only as it related to the valves. Joyner then amended his complain to eliminate the claims related to the valves, and thus eliminated the claims underlying Crane’s federal defense. Joyner also requested that the case be remanded to state court, which the district court allowed. Crane contested Joyner’s motion, arguing that Joyner manipulated his complaint to avoid federal jurisdiction; that Federal Rule of Civil Procedure (F.R.C.P.) 15 did not permit such a calculated amendment; and, that it could assert its federal defense in relation to the gaskets. The district court rejected Crane’s arguments, and remanded the claims to Maryland state court.
As an initial matter, the Fourth Circuit noted that, contrary to Joyner’s contentions, it had jurisdiction over the appeal pursuant to § 1442(a)(1). The Court then rejected Crane’s claim that Joyner’s disclaimer of damages on the valves was a legal nullity. The Court noted: “[a]s we have no reason to believe that the state court will fail to hold Joyner to this disclaimer, it effectively precludes any defense based on valves alone.” The Court also rejected Crane’s argument that Joyner’s amendment should be disallowed as a “manipulative tactic”, and concluded that such manipulation is not prohibited.
Accepting the disclaimer’s effect, the Court addressed whether Crane could assert any other grounds of federal subject matter jurisdiction. Crane suggested that it should have an opportunity to amend its notice of removal. The Court, however, noted that “where the amendment is something more than a minor technical correction”, courts generally require that the amendment must be filed within the thirty day removal period. The Court emphasized that Crane made a strategic decision in open court to not include the gaskets as a ground for removal. The Court noted that parties are generally held “to that sort of strategic decision,” and that Crane’s case presented no reason to depart from the general rule.
Decided: August 15, 2014
The Fourth Circuit affirmed the district court’s judgment.
Appellant, a debt collection service, persistently made repeated collection demands to Appellee regarding on a debt that she incurred in 2008. Appellee paid the outstanding debt in full within one month of receiving the first collection letter from Appellant. However, in the following months, Appellant continued to send Appellee demand letters that falsely stated that the already paid debt remained due, and threating to report the debt to credit bureaus as past due. Appellee filed suit alleging that Appellant violated the Fair Debt Collection Practices Act (“FDCPA”). The district court granted Appellee’s motion for judgment as a matter of law (“JMOL”) regarding the FDCPA claims, and allowed the state claims to go to the jury, which found in favor of Appellee and awarded her $37,501.00. Appellant filed a timely appeal.
The Fourth Circuit stated that one of the FDCPA’s primary purposes is to make it unlawful for a debt collector to make any deceptive or false statements while conducting their collection activities. See 15 U.S.C. § 1692e. A debt collector that violates the FDCPA is liable for actual damages, costs, reasonable attorneys’ fees, and potential statutory damages. See 15 U.S.C. § 1692(k)(a)(1), (a)(2)(A), & (a)(3). The Fourth Circuit rejected the Appellant’s argument that it was not liable for any false or deceptive statements made because the Appellee failed to dispute the debt in writing within thirty days of receiving the initial collection letter. The Court stated that nothing in the FDCPA’s text suggested that the ability to state a claim under § 1692e depends on a debtor first disputing the validity of the debt in compliance with § 1692g. Further, the express language and remedial purpose of the FDCPA confirm that a debtor is not required to dispute the debt before bringing a § 1692e claim. The Fourth Circuit also affirmed the district court’s decision granting Appellee’s JMOL motion because the Appellant’s collection letter served as a threat to communicate credit information, which it knew or should have know was false, as well as using deceptive means to collect the debt. Further, the Fourth Circuit affirmed the district court’s determination that Appellant violated the disclosure requirements of Federal Rules of Civil Procedure (F.R.C.P.) 26(a) and (e). The Fourth Circuit also affirmed the decision to exclude evidence related to Appellant’s bona fide error defense because Appellant failed to provide any justification for its late disclosures after twenty months of initial litigation.
Alysja S. Garansi
Decided: July 1, 2014
The Fourth Circuit vacated the district court’s dismissal order and remanded the case to state court for failure to state a federal question sufficient for removal and federal jurisdiction. See 28 U.S.C. §§ 1331, 1441(a).
Flying Pigs, LLC (“Flying Pigs”) commenced this action to enforce an equitable lien against trademarks and associated goodwill, which RRAJ Franchising, LLC (“RRAJ”) now owns. In 2010, Flying Pigs was awarded a default judgment of $567,000 for rental payments owed by Chelda, Inc. (“Chelda”), its delinquent commercial tenant. Chelda and Ham’s Restaurants, Inc. (“Ham’s”) executed a twenty-year lease with Flying Pigs, but Ham’s filed for Chapter 11 bankruptcy. Thus, Flying Pigs may only recover from Chelda. In attempt to satisfy this judgment, Flying Pigs sought and was awarded an equitable lien against two federally registered trademarks, and their associated goodwill. Flying Pigs registered notice of the lien with the United States Patent and Trademark Office (“PTO”). Chelda registered the trademarks, but Ham’s used them exclusively. The bankruptcy court approved the sale of Ham’s assets to RCR, but the Bank of North Carolina (“BNC”) filed suit against RCR and Chelda on the morning of the sale’s closing. BNC claimed to hold a perfected security interest in Chelda’s personal property, and asserted that Chelda was the actual owner of a large number of the assets that RCR allegedly purchased in the bankruptcy proceeding. The bankruptcy court proceeded with the sale to RCR, and eventually BNC, Chelda, and RCR settled their claims. In light of the settlement, the PTO recorded an assignment of the intellectual property from Chelda to RCR; BNC released its security interest in the intellectual property; and RCR assigned the intellectual property to RRAJ, its sister entity
Flying Pigs originally filed in state court, in Lenoir County, for foreclosure of its equitable lien against the intellectual property through a judicial sale, and to enjoin RRAJ from any further use of the intellectual property while operating Ham’s restaurants. RRAJ removed the case to federal court claiming that a dispute over the Federal Lanham Act was embedded within the complaint. RRAJ then moved for dismissal by claiming that the lawsuit with BNC, which was settled and Flying Pigs was not a party to, prevented the foreclosure action through principles of res judicata. Flying Pigs moved to remand the suit to state court for lack of federal jurisdiction. The district court denied the remand and granted RRAJ’s motion to dismiss on the basis of res judicata. Flying Pigs appealed.
The Fourth Circuit stated that for removal to be proper a district court must have original jurisdiction. 28 U.S.C. § 1331. Here, the Court noted that the dispute arose under an action created by state law, and therefore reasoned that the action must implicate a “significant” federal issue. See Grable & Sons Metal Prod., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 312 (2005). The Court reemphasized its prior statement that “a plaintiff’s right to relief for a given claim necessarily depends on a question of federal law only when every legal theory supporting the claim requires the resolution of a federal issue.” See Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 816 (4th Cir. 2004) (en banc). The Court concluded that this dispute was merely a foreclosure action, which does not implicate a significant federal issue or meet the requirements of Grable. Thus, the Court noted that under principles of comity it is bound to respect the state court lawsuit and remand the case.
Samantha R. Wilder
Decided: July 25, 2014
The Fourth Circuit denied Nucor’s petition for interlocutory review of the district court’s refusal to decertify a class in a class action lawsuit as untimely.
The Fourth Circuit previously vacated and remanded the district court’s denial of the motion for class certification in this lawsuit claiming racial discrimination. In light of that order, the district court certified two classes, one involving disparate treatment and impact, and one involving a hostile work environment, in 2011. The district court denied Nucor’s motion to reconsider the certification order, but partially granted Nucor’s second motion for decertification in 2012. The hostile work environment class remained intact. Nucor then filed a third motion for decertification of the hostile work environment class in light of Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013), which the district court denied. Nucor filed an interlocutory appeal challenging the district court’s refusal to decertify the hostile work environment class.
The Court stated that Federal Rule of Civil Procedure (F.R.C.P.) 23(f) allows it to review decisions, which grant or deny class certification. The Court recognized “[a]n appeal from a certification order must be filed within fourteen days of the order.” Pashby v. Delia, 709 F.3d 307, 318 (4th Cir. 2013). The Court noted that the clock beings as soon as the original order is entered. The Court then joined the Third, Fifth, Seventh, and Eleventh Circuits by holding that “the time for appeal will not reset when a court rules on certification motions filed subsequent to the original ruling so long as the later rulings do not alter the original ruling.” See In re DC Water & Sewer Auth., 561 F.3d 494, 496 (D.C.Cir. 2009). Thus, the Court found that Nucor’s petition was untimely, and reasoned that the district court’s post-certification orders failed to alter the status of the hostile work environment class. Therefore, the district court’s orders were not orders that granted or denied certification as to that class, and the latest date that Nucor could have appealed the certification of that class passed over three years ago.
Samantha R. Wilder
Decided: July 21, 2014
The Fourth Circuit affirmed the district court’s judgment as to Officers Ojaniit and Esposito, and dismissed the appeal as to Officer Ledford.
The Appellant initiated a civil action against officers of the Charlotte-Mecklenburg Police Department under 42 U.S.C. § 1983 and North Carolina law, after his release from prison in early 2010. The Appellant alleged that the police department fabricated evidence that led to his arrest, convictions, and subsequent incarceration. In support of his claims, Appellant’s relied on two allegedly falsified reports. The officers moved for a Federal Rule of Civil Procedure (F.R.C.P.) 12(c) judgment on the pleadings. The district court granted all three motions, although the magistrate’s report recommended that the Appellant’s claims against Ledford be dismissed, and the motions by Ojaniit and Esposito be denied. The district court stated that the officers were entitled to qualified immunity, and Appellant failed to state a § 1983 claim on which relief could be granted against Ojaniit or Esposito. The Appellant then filed a timely appeal.
The Fourth Circuit stated that the Appellant’s attempt to revive his claim against Officer Ledford failed because he unequivocally stated to the district court that he did not object to the magistrate’s recommendation that Ledford’s F.R.C.P. Rule 12(c) motion be granted. Thus, Appellant’s failure to file an objection to the magistrate’s report waived his right to appeal on that issue. The Court stated that it applied a F.R.C.P. Rule 12(b)(6) standard to determine the district court’s grant of F.R.C.P. Rule 12(c) judgments to Ojaniit and Esposito. The Appellant failed to state a claim on which relief could be granted under § 1983 because the facts alleged did not assert a violation of a constitutional right. The Fourth Circuit stated that fabrication of evidence alone is insufficient to support a claim for a due process violation, and that the Appellant must plead facts that demonstrate that his loss of liberty directly resulted from the fabrication. Further, the Court agreed that there was not a “sufficiently strong [causal nexus]” that led to a conclusion that Esposito’s allegedly fabricated statement and Ojaniit’s fabricated statement were the but-for proximate cause of the Appellant’s convictions, nor were the convictions a foreseeable consequence of the alleged fabrication. The Appellant’s Fourth Amendment claim failed to meet the materiality requirement, in that, even after removing the fabricated evidence, there was still sufficient probable cause to arrest the Appellant. Appellant’s conspiracy claim also failed because he did not state a claim for deprivation of a constitutional right. Additionally, Appellant’s state law claims fell short because he failed to present probable cause and adequately plead the essential elements for his these claims. Thus, the Fourth Circuit affirmed the district court’s judgment as to Officers Ojaniit and Esposito, and dismissed the appeal as to Officer Ledford.
Alysja S. Garansi
Decided: July 14, 2014
The Fourth Circuit affirmed the district court’s denial of Chesapeake Bay Foundation’s, Incorporated (“CBF”), untimely motion to intervene as a defendant.
Plaintiff sued the Environmental Protection Agency (“EPA”) seeking declaratory relief in connection with EPA’s administrative enforcement proceedings. In the latter stages of Alt’s litigation, Appellant, CBF, motioned to intervene as a defendant. The district court denied CBF’s intervention motion as untimely, which CBF appealed.
After a second modified scheduling order, the district court ordered that all plaintiffs file any summary judgment motions by a specified date. The next day, CBF first appeared in the litigation, and asserted its right to intervene pursuant to Federal Rule of Civil Procedure (F.R.C.P.) 24(a), and, alternatively, sought permission to intervene under F.R.C.P. Rule 24(b). The district court denied CBF’s motion to intervene solely on the grounds that CBF’s motion was filed untimely, and would, “by [its] very nature . . . unduly delay the adjudication of the original parties’ rights.”
On appeal, the Fourth Circuit stated that “[i]n order to properly determine whether a motion to intervene in a civil action is sufficiently timely, a trial court in this Circuit is obliged to assess three factors: first, how far the underlying suit has progressed; second, the prejudice any resulting delay might cause the other parties; and third, why the movant was tardy in filing its motion.” On the first factor, the Court observed that when CBF motioned to intervene, the proceedings below were already at relatively advanced stage of the proceedings. On the second factor of prejudice, the Court deferred to the district court, and found no reason to disagree. Considering the third factor, the Court found no abuse of discretion by the district court when CBF acknowledged that it closely monitored the case, and made the strategic decision not to intervene in the earlier stages of litigation because CBF believed that the case would be dismissed and needed to conserve its limited resources.
Grace D. Faulkenberry
Decided: June 23, 2014
The Fourth Circuit affirmed the district court’s clarifying order, and determined that the district court properly construed Federal Rules of Civil Procedure (F.R.C.P.) 60(a) when it found that the late notice of appeal had no impact on Appellant’s malpractice claim.
The Fourth Circuit construed the proper scope of F.R.C.P. Rule 60(a), which authorizes district courts to correct mistakes in judgments and orders. The Appellant, Sartin, hired the Appellee, McNair Law Firm, to represent him in a legal malpractice suit, and commenced this action when the Appellee filed a notice to appeal two days late. Appellant claimed that the Appellee’s failure to file a timely notice of appeal was a proximate cause of his failure to recover attorneys’ fees in the malpractice suit against him. The Court concluded that the Appellant suffered no injury because of the late notice of appeal, inasmuch as the district court in the earlier action properly employed F.R.C.P. Rule 60(a) to clarify its sanctions orders. Therefore, the Appellant would not have succeeded on his appeal of that order, even had the notice of appeal been timely filed.
Decided: June 23, 2014
The Fourth Circuit affirmed the district court’s decision to dismiss Mike Ahumada’s False Claims Act (FCA) claim on behalf of the United States against the defendants, National Industries for the Severely Handicapped (NISH), Green Bay Packaging (Green Bay), International Paper Company (IPC), and Smurfit-Stone Container (Smurfit), for lack of subject-matter jurisdiction. The Court also affirmed the district court’s decision to dismiss Ahumada’s FCA claim against defendant Weyerhaeuser because Ahumada failed to plead his claim with particularity, as required by Federal Rule of Civil Procedure (F.R.C.P.) 9(b).
Ahumada worked for the National Center for Employment of the Disabled (NCED) over a six-month period in 2004. NCED produced and sold products to the U.S. Government in accordance with the Javits-Wagner-O’Day Act (the Act), which was created to promote the employment of disabled people. NISH ensured that participating businesses, such as NCED, actually followed the Act’s rules. In late 2005, The Oregonian and El Paso Times published articles that alleged NCED suppliers IPC, Green Bay, Smurfit, and Weyerhaeuser (the Suppliers) helped NCED violate this Act. The Suppliers allegedly helped NCED violate the Act by selling to NCED finished products, despite the Act’s mandate that NCED manufacture the products on its own. Allegedly, the Suppliers also intentionally overcharged NCED in order to get rebates that were then paid to their management. NCED, and its CEO, settled with the Government, and Ahumada pursued his FCA claims against NISH and the Suppliers separately.
The Court reasoned that the district court lacked subject-matter jurisdiction to hear Ahumada’s claims against NISH and all of the Suppliers except Weyerhaeuser because of the FCA’s public-disclosure bar. The “public-disclosure bar provide[s] that ‘[n]o court shall have jurisdiction over an action under [the FCA] based upon the public disclosure of allegations or transactions . . . unless . . . the person bringing the action is an original source of the information.’” However, a FCA claim can overcome the public disclosure bar if the plaintiff is the “original source” of the public disclosure. A plaintiff is the original source if he: (1) has “direct and independent knowledge” of the publicly disclosed allegations; and (2) “voluntarily provided the information to the Government before filing [the] action.”
The Court reasoned that Ahumada was unable to prove his direct and independent knowledge of the publicly disclosed allegations against defendants NISH, Green Bay, and Smurfit by way of his employment at NCED because he had been terminated by NCED when the illegal activity took place. Further, the majority of his allegations against the three Suppliers cited testimony from an earlier trial, which “strongly suggest[ed] that this public disclosure was in fact the source of Ahumada’s knowledge.”
In regard to Ahumada’s FCA claim against IPC, he failed to prove how he had direct knowledge that IPC “unquestionably knew”—the necessary scienter element of an FCA claim—that NCED was violating the Act. The transactions between NCED and IPC, without more, were not enough to prove IPC’s scienter, and Ahumada was unable to provide specific details except that “someone” told him IPC knew NCED was violating the Act.
Finally, the Court reasoned that the district court had subject-matter jurisdiction to hear Ahumada’s FCA claim against Weyerhaeuser because Ahumada satisfied the original source exception to the public disclosure bar by showing that he personally witnessed, and confirmed, illegal transactions between NCED and Weyerhaeuser, and that he voluntarily provided this information to the Government prior to filing suit. However, Ahumada’s claim still failed to satisfy F.R.C.P. 9(b)’s particularity requirement because it did not “allege ‘the who, what, when, where and how of the alleged fraud.’” His claim that Weyerhaeuser sold pre-manufactured products to NCED was not particular enough, without more, to support an FCA claim. Neither was his allegation that Weyerhaeuser “provided [NCED with] inflated invoices” for its products. Therefore, the district court had properly dismissed Ahumada’s claims against Weyerhaeuser, as well as the other defendants.
James Bull Sterling
Decided: June 23, 2014
The Fourth Circuit held that it lacked jurisdiction to review a district court’s order that remanded a case to state court.
Gilbert Bynum, a Norfolk Southern Railway employee, was injured on the job when he tripped over debris that had accumulated alongside the railroad tracks. Bynum applied for, and was awarded, workers’ compensation benefits as provided under the Federal Longshore and Harbor Workers’ Compensation Act (LHWCA). Bynum also filed a lawsuit in state court under the Federal Employers Liability Act (FELA), which alleged negligence on the part of Norfolk Southern. Norfolk Southern removed the case to federal court contending that (1) because Bynum recovered under LHWCA he was barred from recovery under FELA and (2) whether Bynum’s injury was covered by the LHWCA was a federal question that should not be answered by state courts. Bynum filed, and the district granted, a motion to remand to state court on the basis that Congress expressly eliminated the federal court’s jurisdiction over the LHWCA.
Under 28 U.S.C. § 1447, appellate courts are generally prohibited from reviewing the merits of a district court’s remand order. While the prohibition on appellate review has been limited in some ways, case law establishes that appellate courts may not review a remand that was ordered on the basis of either (1) lack of subject matter jurisdiction or (2) a defect in removal that was raised within thirty days after the notice of removal was filed. Ellenburg v. Spartan Motor Chassis, Inc., 519 F.3d 192, 196 (4th Cir. 2008). The Court reasoned that Norfolk Southern’s failure to comply with the statutory removal requirements, i.e. removing a FELA claim to federal court in contravention of the statutory bar to removal of FELA claims, constituted a defect and, therefore, the Court lacked jurisdiction to review the remand on appeal.
Amanda K. Reasoner
Decided: June 6, 2014
The Fourth Circuit held that it lacked jurisdiction to consider Appellees’ and Appellant’s interlocutory appeals and, thus, dismissed the appeals.
Appellees previously worked as security investigators in Appellant GEICO’s Claims Department, and investigated suspected fraudulent claims. Appellant classifies its security investigators as exempt from the Fair Labor Standards Act’s (FLSA) overtime pay protections, and Appellees filed suit in 2010 seeking recovery of the overtime pay they were allegedly owed, and that Appellant wrongfully withheld in violation of the FLSA, and New York state law. The district court rejected Appellant’s classification of Appellees as exempt under the “administrative function” exemption, and granted Appellees’ motion for partial summary judgment. The district court entered an order, which it described as a “final judgment,” that contained a formula for calculating the back pay owed to Appellees. The Order also stated that the district court retained jurisdiction to resolve or oversee any issue concerning the back pay remedy. Appellant appealed the Order, and Appellees cross-appealed the district court’s remedy rulings.
The Fourth Circuit stated that its appellate jurisdiction, with limited exceptions, extends only to reviewing any final decisions rendered by the district courts. 28 U.S.C. § 1291. A final decision is one that ends litigation on its merits, and leaves only the execution of a judgment for the court. A judgment on liability where the damages are not fixed is not a final judgment, as an assessment of damages consists of part of a claim on the merits, and must be determined for a final judgment. Further, the label given to an order by a district court does not determine whether an order is final. The Fourth Circuit found that although the district court decided many of the issues determinative of the amount of damages Appellees are entitled to, the district court’s order was not final because it did not determine all of the facts necessary to be able to compute Appellees’ damages, nor did it determine how its back pay formula applies to the facts of the case. The Court noted that a number of factual or legal issues could potentially arise that may affect the amount of damages, as evidenced by the district court’s retention of jurisdiction should any disputes arise between the parties in calculating Appellees’ damages. Thus, the district court had to accomplish more than merely enforcing its judgment, and its judgment was not final. The Fourth Circuit, therefore, concluded it did not have a final decision to review, and had no choice but to dismiss the parties’ appeals.
Alysja S. Garansi
Decided: April 29, 2014
The Fourth Circuit held that the warranty companies could not proceed in federal court because the claims required the joinder of necessary and indispensable parties under the Federal Rules of Civil Procedure (F.R.C.P.) 19, which eliminated diversity jurisdiction.
Hanna entered into a contract with Clark Lamp II (Lamp) and Innovative Design & Construction, LLC (Innovative) to have a home built. Lamp gave Hanna a Builder’s Warranty, with no authorization or indication in this agreement that Lamp would enroll the new house in a warranty offered by a third party. Before closing, Lamp and Innovative enrolled the house into a 2-10 Home Owners Warranty (2-10 Warranty) with third party warranty companies, which included an arbitration clause. The 2-10 Warranty was issued pursuant to a builder application of home enrollment that Hanna allegedly signed with the builder. However, Hanna claims no such document was signed, and the record contains no application for enrollment. Though Hanna found out about the 2-10 Warranty before closing on the house, Hanna claims no knowledge of the arbitration clause until after closing. Believing the house had some defects, Hanna notified the builders, who then filed a claim with the third party warranty companies. Unsatisfied with the warranty companies and the claims adjusters, Hanna filed suit in state court against the builders, warranty companies, and claims adjusters for state law claims, including tort claims. Hanna argued that the arbitration clause was unenforceable on state law grounds; the warranty companies sought enforcement of the arbitration clause in federal court based on diversity jurisdiction. The builders were not joined as parties. Hanna filed for dismissal because the entire controversy included non-diverse parties. Alternatively, Hanna argued for dismissal because the builders were non-diverse parties who were necessary and indispensable parties which the warranty companies failed to join under F.R.C.P. Rule 19. The warranty companies were foreign parties; however, Hanna shared state citizenship with Lamp, Innovative, and at least three other builders.
The warranty companies argued that the parties were diverse and that, under the Federal Arbitration Act (FAA) and Moses H. Cone Memorial Hosp. v. Mercury Construction Corp., 460 U.S. 1 (1983), the co-defendants in the state court action need not be joined in this action. The district court abstained based on the factors in Colorado River Conservation District v. U.S., 424 U.S. 800 (1976), and determined that there was no reason the petitioners’ could not pursue their rights in the state court system, nor that the arbitration decision could be decided only in federal court. The lower court dismissed without addressing subject matter jurisdiction. The warranty companies appealed.
The Fourth Circuit did not reach the issues of abstention or enforceability because the district court lacked subject matter jurisdiction. A party must demonstrate that the court has jurisdiction because federal courts are courts of limited jurisdiction through Article III of the Constitution, or Congressional statute. The warranty companies argued federal jurisdiction under both 28 U.S.C. § 1332 (diversity) and 9 U.S.C. § 4 (FAA). The Court rejected the warranty companies’ argument that § 4 of the FAA created federal jurisdiction because § 4 only applies when there is diverse citizenship or an independent basis for federal jurisdiction. Thus, jurisdiction could only be found if the citizenship of each plaintiff differs from each defendant under 28 U.S.C. § 1332.
F.R.C.P. Rule 19 sets forth a two-part test to determine whether a party is “necessary” and “indispensable”: (1) “whether a party is necessary to a proceeding because of its relationship to the matter” and (2) if the party is necessary, but would destroy complete diversity, the court must then decide “whether the proceeding can continue in that party’s absence.” The court should use this test pragmatically, taking into account the possible prejudice to all parties. Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102 (1968); Owens-Illinois, Inc. v. Meade, 186 F.3d 435 (4th Cir. 1999).
A party is necessary if the non-joined party “claims an interest relating to the subject of the action” and the non-joined party’s absence would interfere with its “ability to protect the interest”, F.R.C.P. 19(a)(1)(B)(i), or that absence would “leave an existing party subject to substantial risk of incurring…inconsistent obligations because of the interest,” F.R.C.P. 19(a)(1)(B)(ii). The Court concluded that the builders were necessary parties because of the potentially prejudicial outcomes under either standard. Under Rule 19(a)(1)(B(i), the builders have a direct pecuniary interest, and are actively contesting their liability in state court for tort claims. Though joint tortfeasors are not automatically necessary parties, the builders’ interest extended beyond the possible tort liability to a natural interest in any interpretation of the contract terms. Furthermore, the builders are critical to determining the enforceability of the arbitration clause. F.R.C.P. Rule 19(a)(1)(B)(ii) protects against inconsistent obligations for the non-joined party. The state court and the federal court may both have to determine whether the arbitration clause is enforceable because the builders are already in front of the state court. The more efficient approach would be to allow the state court to determine the enforceability of the arbitration clause along with Hanna’s other state law claims. F.R.C.P. Rule 19(a)(1)(A) also requires the builders to be present for the determination of the arbitration clause due to the importance of all defendants being bound by a common judgment.
After considering the possible prejudice to the parties, the Court also determined that the builders were indispensable to the litigation based on the four factors in F.R.C.P. Rule 19(b). First, the risk of prejudice is high since the builders would not be arguing their own interests; Hanna has a strong interest in having all of her claims addressed with all the defendants before one tribunal. Second, parallel proceedings would likely be prejudicial because the courts would not have sufficient protective measures to avoid confusion. Third, the results could lead to incomplete, inconsistent, and inefficient rulings, which are not in the interest of the courts or the public. Fourth, all parties would have an adequate remedy for their claims in the state courts. Furthermore, the FAA is not a separate source of subject matter jurisdiction despite its strong public policy to enforce arbitration agreements, and the Court found no clear reason why an arbitration clause must be enforced in federal court over state court.
Verona Sheleena Rios
Decided: April 16, 2014
The Fourth Circuit held that the district court order that sealed litigation records violated the public’s right to access under the First Amendment, and that the district court abused its discretion by allowing the company to proceed under a pseudonym. Ultimately, the Court vacated the district court’s intervention denial and remanded the decision.
The plaintiff, Company Doe, filed suit under the Administrative Procedure Act seeking to enjoin the U.S. Consumer Product Safety Commission (CPSC) from publishing a “report of harm.” The report alleged that a product that was manufactured, and sold, by Company Doe’s was related to the death of an infant. Company Doe requested that the district court allow it to proceed under a pseudonym, and that the proceedings be sealed. The district court granted both, and as the Fourth Circuit noted, “[r]egrettably . . . allowed the entire litigation to proceed . . . behind closed doors.” The district court ultimately ruled in favor of Company Doe on the merits also, issuing a permanent injunction that barred the CPSC from publishing the alleged report.
Following the judgment, the court released an opinion “with sweeping redactions.” The CPSC did not appeal the decision. Rather, three consumer advocacy groups (collectively Consumer Groups) filed a post-judgment motion to intervene for the purposes of appealing both conditions. The district court, however, did not rule on the motion until the period to appeal the underlying judgment expired. Consumer Groups noted their appeal of the district court’s sealing and pseudonymity orders as well as the court’s “constructive denial” of the motion to intervene. Consumer Groups filed their appeal, and three months later the district court denied the motion to intervene.
The Fourth Circuit vacated the court’s order denying intervention and concluded that the consumer groups had standing to appeal even though they “were neither parties to, nor intervenors in, the underlying case . . . because they [met] the requirements for nonparty appellate standing and have independent Article III standing to challenge the sealing . . . orders.” The Consumer Groups also succeeded on the merits. The Court noted the difficult balancing act involved: weighing Company Doe’s interest in sealing the bulk of the court record against the First Amendment Interest of the CPSC and Consumer Groups. The Fourth Circuit ultimately held that the seal of the records violated the public’s right of access under the First Amendment. Accordingly, the Court remanded the case to the district court and ordered that all documents be unsealed, unredacted, and made available to the consumer groups and the public. The Court also concluded that the district court abused its discretion by allowing Company Doe to litigate under a pseudonym.
Decided: May 15, 2014
The Fourth Circuit affirmed the district court’s civil commitment of the defendant to the custody of the United States Attorney General when the district court found that he was a sexually dangerous person under the Adam Walsh Child Protection and Safety Act of 2006 (“the Act)”, 18 U.S.C. § 4248(a).
Under the Act, the government may civilly commit “sexually dangerous” inmates at the end of their federal prison sentence by filing a certification to this effect with the clerk of court in the district where the inmate is held. Procedurally, this filing stays the inmate’s release until an evidentiary hearing may be held, and the government proves its case by clear and convincing evidence. The Act requires that (1) the person has previously “engaged or attempted to engage in . . . child molestation” 18 U.S.C. § 4247(a)(5); (2) the person currently “suffers from a serious mental illness, abnormality, or disorder” 18 U.S.C. § 4247(a)(6); and (3) “the government is required to show that the defendant, as a result of the illness, abnormality, or disorder, ‘would have serious difficulty in refraining from . . .child molestation if released’” 18 U.S.C. § 4247(a)(6). The Act also sets forth procedural guarantees for each defendant, which include: the right to counsel, the right to testify, right to present evidence, right to subpoena witnesses, the right to confront witnesses, and the right to cross-examine those witnesses. 18 U.S.C. § 4247(d).
On January 6, 2011, the government filed a certification that the defendant, Jose Perez (“Perez”), was a sexually dangerous person under the Act because Perez’s twenty-year federal sentence for transportation of a minor in foreign commerce with intent to engage in criminal sexual activity, 18 U.S.C. § 2423(a), and importation of an alien for immoral purposes, 8 U.S.C. § 1328, had almost expired. The district court denied Perez’s motion to dismiss, and held an evidentiary hearing. After electing to appear pro se, Perez failed to participate or appear for the evidentiary hearing because he believed it to be unlawful; the hearing continued in his absence. During the evidentiary hearing, the government presented three forensic psychologists’ expert testimony that relied on individual evaluations of Perez, and his criminal history that involved multiple sexual encounters with minors. Specifically, Perez’s criminal history includes an incident in September 1970, two incidents in May 1982, an incident in March 1983, and the two incidents in September 1993 that led to his twenty-year sentence. After reviewing the data, all three experts diagnosed Perez with pedophilia, and agreed that he met the other statutory requirements. Thus, the district court found that Perez qualified as a sexually dangerous person under the Act. On appeal, Perez claims that the district court lacked personal jurisdiction over him when the government failed to serve him with a summons pursuant to Federal Rules of Civil Procedure (F.R.C.P.) 4. Perez also claims that the district court clearly erred when it found that he was a sexually dangerous person under the Act.
After generally noting that the F.R.C.P. apply to civil commitment hearings, the Fourth Circuit found that the procedural requirements in the Act, which require that a copy of the certificate be sent to the defendant, 18 U.S.C. § 4248(a), displaced the Rule 4 summons requirement. The Court reasoned that the primary functions of service of process were unnecessary in light of the statutory proceeding requirements under the Act. Then, the Court reviewed the district court’s record for a “definite and firm conviction that a mistake has been committed,” United States v. Hall, 664 F.3d 456, 462 (4th Cir. 2012), on its finding that Perez was a sexually dangerous person. The Court found no clear error, and upheld the district court’s order, and commended its careful review of evidence. Finally, the Court quickly dismissed Perez’s constitutional arguments that the Act deprived him of equal protection under the Fifth and Fourteenth Amendments and imposed an unconstitutional criminal punishment by reiterating its previous decision in United States v. Timms, 664 F.3d 436, 449, 455 (4th Cir. 2012).
Samantha R. Wilder
Decided: May 5, 2014
In this appeal, the Court held that the district court properly granted summary judgment for the plaintiff’s 42 U.S.C. § 1983 and gross negligence claims because the plaintiff did not meet the burden of proof required for a § 1983 claim, and the plaintiff did not present facts evidencing the requisite level of negligence required for a gross negligence claim. The Court also held that the exclusion of the plaintiff’s expert witness was proper because the plaintiff did not disclose the expert’s written report by the agreed-upon deadline, and thus was in violation of the Pre-Trial Order and Federal Rule of Civil Procedure (F.R.C.P.) 26(a)(2). Furthermore, the Court held that the district court’s denial of a motion to amend the complaint was proper because plaintiff filed for motion to amend after the statute of limitations had expired and the requested amendment, to join additional defendants, did not relate back to the claim.
Appellant brought this action against the defendant, Montgomery, after another patient at Central State Hospital murdered her son. She filed three claims: grossly negligent supervision, gross negligence under the Virginia Wrongful Death Act, and a 42 U.S.C. § 1983 claim for supervisory liability. The district court struck Appellant’s expert witness because he was disclosed in an untimely fashion; denied Appellant’s second motion to amend her complaint to add two defendants because such amendment would be futile; and, finally, concluded there was insufficient evidence to support the claims against Montgomery, who was an assistant director in charge of administrative matters at the time of her son’s death.
In affirming summary judgment of the negligence claims, the Court reviewed the record and found the appellant failed to provide sufficient evidence to meet the elements outlined in 42 U.S.C. § 1983, and as provided by Virginia state law for the common law gross negligence claims. The Court reviewed the district court’s ruling for abuse of discretion regarding the exclusion of the expert witness and, according to F.R.C.P. Rule 37(c)(1) and Fourth Circuit case law, found that excluding the expert witness was an appropriate sanction for the plaintiff’s failure to disclose the expert’s report. In determining whether an amended complaint related back, the Court looked to F.R.C.P. Rule 15(c)(1). The Court found that the proposed added defendants did not know or could not have known about the action within the time period set forth in F.R.C.P. Rule 4(m).
Decided: April 30, 2014
The Fourth Circuit held that the district court correctly denied Colgate Palmolive Company’s (Colgate) motion for vacatur seeking to strike the order remanding the case to state court.
Two plaintiffs filed separate lawsuits against multiple companies, including Colgate, alleging that the companies’ products exposed the plaintiffs to asbestos. On the basis of diversity jurisdiction, Colgate removed both cases to federal court. At this juncture, the only viable claim identified was against Colgate for a specific line of cosmetic products. As the other defendants were nondiverse companies and there existed the possibility that after further discovery the plaintiffs could recover against the nondiverse defendants, the district court granted the plaintiffs’ motion to remand the cases to state court. However, on remand, the plaintiffs moved to consolidate their cases, now alleging that the only source of both plaintiffs’ asbestos exposure was Colgate’s line of products. Colgate, seeking to strike the court’s remand to state court, argued that plaintiffs’ misrepresentations justify an exception to the general rule that federal courts are precluded from reviewing an order to remand a case, previously removed to federal court, to state court.
The federal removal statute precludes federal courts from reviewing remands to state court for lack of subject matter or defects in the removal procedure. The Court was unpersuaded by Colgate’s argument that an exception should exist when remand was based on a party’s misrepresentation. The Court found no indication in the federal removal statute that Congress intended the prohibition to apply only when the parties acted with integrity. Colgate also argued that its motion seeking vacatur of the remand did not require “review” of the order to remand the case to state court. Rather Colgate sought vacatur as a sanction for the plaintiffs’ misrepresentations. Because Colgate’s motion would necessarily involve review of the remand and Congress did not create the exception that Colgate argued should apply, the Court held that the district court correctly denied Colgate’s motion for vacatur.
-Amanda K. Reasoner
Decided: March 13, 2014
The Fourth Circuit held that Dr. Jon H. Oberg (Dr. Oberg), a relator for the United States, sufficiently alleged that the Pennsylvania Higher Education Assistance Agency (PHEAA) is a person for purposes of the False Claims Act (FCA), 31 U.S.C. §§ 3729 et seq.; that Dr. Oberg sufficiently alleged that the Vermont Student Assistance Corporation (VSAC) is a person under the FCA; and that the Arkansas Student Loan Authority (ASLA) is an arm of the state and therefore not subject to FCA suits. The Fourth Circuit therefore affirmed the judgment of the United States District Court for the Eastern District of Virginia in part, vacated it in part, and remanded the case.
According to Dr. Oberg, the PHEAA, the VSAC, and the ASLA (collectively, the appellees) “defrauded the Department of Education by submitting false claims for Special Allowance Payments” (SAPs), a federal subsidy for the interest on student loans. Dr. Oberg contented that the actions of the appellees constituted violations of the FCA, under which “any person” who, inter alia, “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” to certain government officials may be held liable. 31 U.S.C. § 3729(a)(1)(A). While the FCA does not define person, the Supreme Court held in a 2000 opinion that, while states and state agencies are not persons under the FCA, the FCA presumptively covers corporations. Vermont Agency of Natural Resources v. United States, ex rel. Stevens, 529 U.S. 765. In a previous appeal by Dr. Oberg, the Fourth Circuit held that, with regard to state-created corporations, courts should apply the Eleventh Amendment arm of the state analysis to determine whether such corporations may be held liable under the FCA. United States ex rel. Oberg v. Kentucky Higher Education Student Loan Corporation, 681 F. 3d 575. Because the district court dismissed Dr. Oberg’s complaint without conducting the arm of the state analysis, the Fourth Circuit vacated the judgment of the district court and remanded the case. On remand, the district court found that the appellees were arms of their respective states. The district court therefore granted the appellees’ motions to dismiss, and Dr. Oberg appealed.
The Fourth Circuit noted that, in the FCA context, the arm of the state analysis involves a statutory question rather than an affirmative defense. The Fourth Circuit then applied a nonexclusive four-factor test to determine whether each corporation is an arm of the state. Under this test, the Fourth Circuit considered whether judgments against the corporations would be paid by the state; the level of autonomy the corporations exercise; whether the corporations are primarily involved with state or non-state concerns, such as local or out-of-state operations; and the treatment of the corporations under the laws of their respective states. With regard to the PHEAA, the Fourth Circuit found that Pennsylvania is not liable for judgments against the PHEAA from either a legal or a functional perspective; that, when considering “all reasonable inferences in favor of the plaintiff,” the autonomy factor also weighed against arm of the state status; that the PHEAA’s focus on the “legitimate state concern” of providing financial aid services weighed toward arm of the state status; and that the PHEAA’s treatment under Pennsylvania law also weighed in favor of arm of the state status. The Fourth Circuit concluded that, despite the indications to the contrary, Dr. Oberg sufficiently alleged that the PHEAA is a person.
With regard to the VSAC, the Fourth Circuit found that Vermont’s liability for judgments against the VSAC is unclear—but that, construing the facts “in the light most favorable to the plaintiff,” the liability factor counseled against arm of the state status; that the VSAC’s level of autonomy “also present[ed] a close question”—but that, “draw[ing] all reasonable inferences in favor of the plaintiff,” the autonomy factor weighed against arm of the state status; that the VSAC’s financial statements indicated a focus on state educational concerns; and that Vermont law provides that, inter alia, the VSAC “shall be an instrumentality of the state,” Vt. Stat. Ann. tit. 16, § 2823(a). The Fourth Circuit concluded that, despite the indications to the contrary, Dr. Oberg sufficiently alleged that the VSAC is a person.
With regard to the ASLA, the Fourth Circuit found that Arkansas would pay for judgments against the ASLA under state law; that the ASLA “operates with little autonomy from Arkansas despite its corporate powers”; that Dr. Oberg did not allege any facts “indicating that ASLA is not primarily involved with the state concern of helping to finance higher education for Arkansas residents”; and that the ASLA is an arm of the state under Arkansas law. The Fourth Circuit therefore concluded that the ASLA is an arm of the state.
Decided: March 7, 2014
The Fourth Circuit held that the United States District Court for the District of Maryland properly dismissed the plaintiff shareholders’ claims against Municipal Mortgage & Equity (MuniMae) and certain directors and officers of MuniMae (collectively, the MuniMae defendants) under the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. § 78u-4, as the plaintiffs did not adequately plead scienter in their action under § 10(b) of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. § 78j(b); that the plaintiffs’ claim under § 11 of the Securities Act of 1933 (Securities Act), 15 U.S.C. § 77k(a), was time-barred by the three-year statute of repose in § 13 of the Securities Act, 15 U.S.C. § 77m; and that named plaintiff Charles W. Dammeyer (Dammeyer) did not sufficiently allege standing to bring a claim under § 12(a)(2) of the Securities Act, 15 U.S.C. § 77l(a)(2). The Fourth Circuit therefore affirmed the judgment of the district court.
During the putative class period—spanning from May 3, 2004, to January 29, 2008—MuniMae “was one of the nation’s largest syndicators of low-income housing tax credits” (LIHTCs). MuniMae organized certain LIHTC investment partnerships (LIHTC Funds) to pool LIHTCs and sell them to investors. During the putative class period, MuniMae typically served as the general partner of these LIHTC Funds. MuniMae mainly considered its LIHTC Funds to be off balance sheet entities before 2003. In 2003, “the Financial Accounting Standards Board adopted Financial Accounting Standards Board Interpretation No. 46R” (FIN 46R), addressing the reporting requirements for off balance sheet entities therein. FIN 46R created a new category of off balance sheet entity, the Variable Interest Entity (VIE); pursuant to FIN 46R, a company that is the “primary beneficiary” of a VIE must consolidate the VIE’s assets and liabilities onto its financial statements. MuniMae first reported compliance with FIN 46R in the first quarter of 2004 and continued to assert compliance in its financial filings with the Securities and Exchange Commission through mid-2006. MuniMae also conducted a secondary public offering (SPO) in February 2005. In March 2006, MuniMae revealed that it was restating certain financial statements that involved financial reporting errors unrelated to FIN 46R. In September 2006, MuniMae announced another restatement (the second restatement). While MuniMae initially did not tell investors that the second restatement would deal with FIN 46R compliance issues, it later revealed that it had yet to “reach a conclusion regarding the extent of the [second] restatement.” In January 2007, MuniMae disclosed that the second restatement would deal with accounting errors involving FIN 46R; MuniMae stated that it would “be required to consolidate substantially all of the [LIHTC] equity funds it has interests in.” In a November 2007 teleconference with investors, MuniMae officers declined to estimate the second restatement’s cost—though they admitted that the cost would be substantial. In January 2008, MuniMae announced cuts to its quarterly dividend, attributing the cuts to, inter alia, the cost of the second restatement. However, MuniMae also asserted that it did “not believe the results of the restatement w[ould] materially change the previously recorded cash balances of the Company and its subsidiaries.” MuniMae’s share price dropped precipitously in late January. In a conference call on January 29, MuniMae gave investors more details about the second restatement—including details about the second restatement’s massive scope. In April 2008, MuniMae revealed that it had spent over $54 million on the second restatement.
After shareholders brought multiple lawsuits against the MuniMae defendants and the 2005 SPO’s lead underwriters, their suits were consolidated for pretrial proceedings; the shareholders then filed a class action complaint. They brought claims under the Exchange Act and the Securities Act, alleging that the MuniMae defendants committed securities fraud through false representations of MuniMae’s compliance with FIN 46R and concealment of the second restatement’s cost. With regard to the plaintiffs’ claims under § 10(b) of the Exchange Act, the district court held that—under the PSLRA’s heightened pleading standards—the plaintiffs’ amended complaint did not sufficiently plead scienter. The district court also found the plaintiffs’ claim under § 11 of the Securities Act time-barred by the Act’s statute of repose; furthermore, the district court found that Dammeyer—“the only named plaintiff asserting Securities Act claims with respect to the SPO”—did not have standing to bring a claim under § 12(a)(2) of the Securities Act. The district court therefore dismissed these claims, and the plaintiffs appealed.
With regard to the plaintiffs’ claims under § 10(b) of the Exchange Act, the Fourth Circuit concluded that, under the PSLRA’s heightened pleading standards, the inference that the MuniMae defendants acted with intent or severe recklessness—which the plaintiffs aimed to establish through the statements of three confidential witnesses, the presence of certain red flags, allegations of insider trading, and general business motivations for committing fraud—was not at least as compelling as the opposing inference that the MuniMae defendants acted innocently or negligently. The Fourth Circuit also considered the disclosures made by the MuniMae defendants during the class period when making this comparative inquiry. With regard to the plaintiffs’ claims under § 11 of the Securities Act, the Fourth Circuit found that the date upon which the securities in the SPO were “bona fide offered to the public” was the effective date of MuniMae’s registration statement—January 14, 2005. Because the plaintiffs brought their § 11 action more than three years after this date, the Fourth Circuit found their claim time-barred by the statute of repose. Lastly, with regard to the claim under § 12(a)(2) of the Securities Act, the Fourth Circuit found that the “pursuant and/or traceable to” language in the amended complaint to be conclusory; furthermore, the Fourth Circuit found that this language was not accompanied with sufficient supportive facts to support a plausible inference of standing.
– Stephen Sutherland
Decided: March 6, 2014
The Fourth Circuit, finding that the district court lacked the information necessary to dismiss Appellants’ claims, vacated the district court’s decision granting summary judgment in favor of Appellee and remanded for further proceedings.
Fifty-eight individuals, the majority of whom are United States military personnel (Servicemembers), brought various state tort and contract claims against KBR, Inc.; Kellog Brown & Root LLC; Kellog Brown & Root Services, Inc.; and Halliburton (collectively, KBR). The Army contracted with KBR to provide waste disposal and water treatment services on military bases in Iraq and Afghanistan. Unfortunately, according to the Servicemembers, they suffered injuries as a result of KBR’s waste disposal and water treatment practices, which allegedly breached the contract.
The Servicemembers contended that KBR violated the waste management and water disposal components of the contract by failing to properly handle and incinerate waste and by providing contaminated water to military forces. The Judicial Panel on Multidistrict Litigation transferred all of the cases to the District of Maryland for consolidated pretrial proceedings. KBR then filed a motion to dismiss for lack of subject matter jurisdiction, arguing that (1) the Servicemembers’ claims are nonjusticiable under the political question doctrine; (2) KBR is entitled to derivative sovereign immunity based on the discretionary function exception to the federal government’s waiver of immunity in the Federal Tort Claims Act (FTCA); and (3) the FTCA’s combatant activities exception preempts the state tort laws underlying the Servicemembers’ claims. The district court denied the motion to dismiss without prejudice, concluding that it did not have enough information to decided the issue. And, due to its concern about unleashing “the full fury of unlimited discovery” on government contractors operating in war zones, the court asked the parties to submit a joint discovery plan for limited jurisdictional discovery.
The district court, subsequently, stayed the proceedings in light of the Fourth Circuit’s pending decision in Al-Quraishi v. L-3 Services, Inc. Following the resolution of those appeals, the district court granted KBR’s renewed motion to dismiss, holding that the political question doctrine, derivative sovereign immunity, and the combatant activities exception each provided a basis on which to dismiss the Servicemembers’ claims. This appeal followed.
On appeal, the Fourth Circuit first addressed whether the district court erred in dismissing Appellants’ complaint on the basis of the political question doctrine. In addressing this issue, the court performed its analysis using only the Taylor test, which is made up of two factors— (1) the “Military Control” factor; and (2) the “National Defense Interests” factor—either one of which, if satisfied, would render the Servicemembers’ claims nonjusticiable. For purposes of the “Military Control” factor the court observed it must consider the extent to which KBR was under the military’s control. With respect to this factor, although it noted that evidence showed that the military exercised some level of oversight over KBR’s burn pit and water treatment activities, the court held more evidence was needed to determine whether KBR or the military ultimately chose how to carry out the relevant operations. With respect to the “National Defense Interests” factor, the court found that KBR’s causation defense does not require evaluation of the military’s decision making unless (1) the military caused the Servicemembers’ injuries, at least in part, and (2) the Servicemembers invoke a proportional-liability system that allocates liability based on fault. Thus, this factor did not necessarily counsel in favor of nonjusticiability. The court, therefore, concluded that the political question doctrine did not render the Servicemembers’ claims nonjusticiable at this time.
Next, the Fourth Circuit addressed whether the district court erred in finding KBR was entitled to derivative sovereign immunity under the FTCA’s discretionary function exception. At issue was whether the government authorized KBR’s actions. As the court observed, that inquiry required the court to determine whether KBR exceeded its authority under the contract. However, at this point in the litigation, the court determined the record lacked sufficient evidence to make that determination and, therefore, held that the district court erred in granting KBR’s summary judgment motion on the basis of derivative sovereign immunity.
Lastly, the Fourth Circuit reversed the district court’s ruling that the Servicemembers’ state tort law claims were preempted under the FTCA’s combatant activities exception. The court acknowledged, however, that KBR did engage in combatant activities under the court’s analysis. With respect to the remaining inquiry, though, while it was evident that the military controlled KBR to some degree, the extent to which KBR was integrated into the military chain of command could not be determined without further discovery. Accordingly, the court vacated the district court’s decision to dismiss the Servicemembers’ claims and remanded for further proceedings.
– W. Ryan Nichols
Decided: February 25, 2014
The Fourth Circuit Court of Appeals affirmed the district court’s judgment enjoining the defendant from participating in deceptive Internet advertising practices and holding her jointly and severally liable for equitable monetary consumer redress.
The Federal Trade Commission (the “Commission”) sued Innovative Marketing, Inc. (“IMI”), and several of its high-level executives and founders, including Kristy Ross (“Ross”), for running a deceptive Internet “scareware” scheme in violation of the prohibition on deceptive advertising in Section 5 (a) of the Federal Trade Commission Act. The defendants operated a massive, Internet-based scheme that tricked consumers into purchasing computer security software, referred to as “scareware.”
On appeal, Ross challenged the district court’s judgment on four bases: (1) the court’s authority to award consumer redress; (2) the legal standard the court applied in finding individual liability under the Federal Trade Commission Act; (3) the court’s prejudicial evidentiary rulings, and (4) the soundness of the district court’s factual findings.
First, Ross contended that the district court did not have the authority to award consumer redress—a money judgment—under the Federal Trade Commission Act. The Act authorizes the Commission to sue in federal district court so that “in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction.” However, although the statute’s text does not expressly authorize the award of consumer redress, precedent dictates otherwise. The Supreme Court in Porter v. Warner Holding Co. held that Congress’ invocation of the federal district court’s equitable jurisdiction brings with it the full “power to decide all relevant matters in dispute and to award complete relief even though the decree includes that which might be conferred by a court of law.” Here, by authorizing the district court to issue a permanent injunction in the Federal Trade Commission Act, Congress presumably authorized the district court to exercise the full measure of its equitable jurisdiction. Accordingly, absent some countervailing indication sufficient to rebut the presumption, the court had sufficient statutory power to award “complete relief,” including monetary consumer redress, which is a form of equitable relief. Congress does not need to use the magic words, “other order” to invoke the full injunctive powers of the district court.
Second, Ross challenged the legal standard for finding individual liability under the Federal Trade Commission Act. The district court held that there was individual liability if the Commission proves that the individual (1) participated directly in the deceptive practices or had authority to control them, and (2) had knowledge of the deceptive conduct, which could be actual knowledge, reckless indifference to the truth, or an awareness of a high probability of fraud combined with intentionally avoiding the truth (i.e., willful blindness). Ross proposed a standard that requires proof of an individual’s (1) “authority to control the specific practices alleged to be deceptive,” coupled with a (2) “failure to act within such control authority while aware of apparent fraud.” The Fourth Circuit adopted the district court’s standard, recognizing that Ross’ proposal would effectively leave the Commission with the “futile gesture” of obtaining “an order directed to the lifeless entity of a corporation while exempting from its operation the living individuals who were responsible for the illegal practices” in the first place.
Third, Ross mounted three evidentiary challenges. First, she contended that the district court improperly precluded her expert from testifying bout how “the advertisements linkable to Ross’ responsibilities’ were non-deceptive.” However, because the individual liability standard does not require a specific link from Ross to particular deceptive advertisements and instead looks to whether she had authority to control the corporate entity’s practices, the expert’s testimony was immaterial, and thus irrelevant, to the issue reserved for trial. Second, Ross challenged the admission of a 2004 to 2006 profit and loss statement that the district court relied on to calculate the amount of consumer redress. Ross’ co-defendant submitted an affidavit with this profit and loss summary. The Fourth Circuit recognized that although the district court admitted the profit and loss statement under the residual exception to the rule against hearsay, it may affirm on the basis of any ground supported by the record. The Fourth Circuit concluded the statement was admissible as an adoptive admission by Ross. Ross expressly adopted her co-defendant’s affidavit in her own affidavit. Third, Ross contended that the district court improperly admitted hearsay evidence: an email from a co-defendant to a payment processor, listing Skype numbers and titles for a group of high-level company executives. Ross’ telephone number is listed on the email, as is her title, “Vice President.” While it is true that the proponent for admission of a co-conspirator’s out-of-court statement “must demonstrate the existence of the conspiracy by evidence extrinsic to the hearsay statement,” that requirement was satisfied in this case. Moreover, the email was a quintessential example of a statement made “in furtherance” of the conspiracy because its role was to maintain the logistics of the conspiracy and “identify names and roles” of members of the deceptive advertising endeavor.
Fourth, Ross contended that the district court erred in finding that she had “control” of the company, participated in any deceptive acts, and had knowledge of the deceptive advertisements. The Fourth Circuit concluded Ross had “control,” based on her affidavit, in which she swore she was a high-level business official with “product optimization” duties, and based on evidence that other employees requested her authority to approve certain advertisements. The Fourth Circuit also concluded Ross “directly participated in the deceptive marketing scheme.” She directed the design of particular advertisements, as memorialized in chat logs between her and other employees. Ross was a contact person for the purchase of advertising space for IMI, and there was evidence that she had the authority to discipline staff and developers when the work did not meet her standards. Finally, the Fourth Circuit concluded Ross had actual knowledge or was at least recklessly indifferent or willfully blind to the deceptive marketing scheme. There was evidence that she edited and reviewed the content of multiple advertisements and, at one point, ordered the removal of the word “advertisement” from a set of ads. Also, Ross was on notice of multiple complaints about IMI’s advertisements, including that they would cause customers to automatically download unwanted IMI products.
– Sarah Bishop
Decided: January 28, 2014
The Fourth Circuit held that the United States District Court for the District of Maryland did not abuse its discretion by denying Shirley Gross’s (Gross) request to amend her complaint, and that the district court did not commit error by finding Gross’s state law tort causes of action to be preempted by the Federal Food, Drug, and Cosmetics Act (FDCA), 21 U.S.C. §§ 301 et seq. The Fourth Circuit therefore affirmed the judgment of the district court.
Gross was prescribed the drug Reglan in 2006. Reglan, a brand of metoclopramide, is “used to treat gastroesophageal reflux disease and other ailments.” Gross also took a generic metoclopramide produced by PLIVA USA, Inc. (PLIVA) for ten months. Gross developed permanent injuries as a result of her long-term use of metoclopramide. In January 2010, Gross sued PLIVA and certain manufacturers of brand name Reglan, alleging “state law claims of negligence, breach of warranty, fraud and misrepresentation, strict liability, and failure to warn. In November 2010, the district court dismissed Gross’s claims against the brand name producers; in April 2011, the district court stayed the proceedings against PLIVA pending the decision of the Supreme Court in PLIVA, Inc. v. Mensing, 131 S. Ct. 2567. The district court lifted the stay after the Supreme Court issued its decision in Mensing. PLIVA then filed motion for judgment on the pleadings, arguing that under Mensing, the FDCA preempted Gross’s claims. In her response to this motion, Gross asked the district court for leave to amend her complaint, seeking to make allegations “that PLIVA violated a state law duty by failing to update its warnings to include changes made by brand name manufacturers in 2004.” The district court granted PLIVA’s motion in November 2011 and denied Gross’s request to amend her complaint. Gross then filed a motion to alter or amend the judgment; the district court denied the motion in January 2012. Gross died during the pendency of the present action, and Arthur L. Drager (Drager) continued the case as a personal representative for her estate. On appeal, Drager argued that the district court abused its discretion by denying Gross’s request to amend her complaint; Drager further contended that the district court committed error by finding Gross’s state law tort causes of action to be preempted by the FDCA.
With regard to the district court’s denial of Gross’s request to amend her complaint, the Fourth Circuit noted that Gross never actually filed a motion to amend or a proposed amended complaint. With regard to Drager’s contentions regarding Gross’s state tort claims, the Fourth Circuit noted that, under Mensing and Mutual Pharmaceutical Co., Inc. v. Bartlett, 133 S. Ct. 2471, manufacturers of generic drugs cannot—under the FDCA—unilaterally change their labeling, change their product formulations, be required to leave the market, or accept liability for state torts. The Fourth Circuit then found that the district court’s failure to conduct a full preemption analysis did not constitute reversible error. With regard to Gross’s negligence claims, the Fourth Circuit found it questionable as to whether Maryland recognizes “specific causes of action for negligent testing, inspection, and [post-market] surveillance”—and that, even if Maryland recognizes a general duty to protect consumers from injuries resulting from negligent marketing and sales, a manufacturer of generic drugs with a product that is unreasonably dangerous as sold could not satisfy the general duty without taking one of the four prohibited actions from Mensing and Bartlett. With regard to Gross’s strict liability claims, the Fourth Circuit found that Drager’s arguments were based on the “stop selling” rationale prohibited by Bartlett; the Fourth Circuit also found the difference between the state law method of assessing the unreasonableness of a products’ danger at issue in Bartlett (risk utility) and at issue under Maryland law (consumer expectations) immaterial. Next, the Fourth Circuit found that PLIVA breached the implied warranty of merchantability and the implied warranty of fitness for a particular purpose by selling metoclopramide—but that PLIVA’s only method of avoiding liability for breach of these warranties was leaving the market. Furthermore, while Drager contended that breach of express warranty is a violation of contract law—and therefore not preempted by the FDCA—the Fourth Circuit noted that “the content of generic drug manufacturers’ product descriptions and other assertions is mandated by federal law,” and found that PLIVA could only avoid liability for breaching this warranty by exiting the market. Lastly, with regard to Gross’s allegations regarding negligent misrepresentation and fraudulent concealment of safety information, the Fourth Circuit found that—assuming PLIVA made false or misleading representations—PLIVA’s only recourse would be to exit the market or accept state tort liability.
– Stephen Sutherland
Decided: January 27, 2014
The Fourth Circuit held that it was without jurisdiction to consider a coal operator’s petition for review following the Federal Mine Safety and Health Review Commission’s (the “Commission”) decision to temporarily reinstate a coal miner.
Russell Ratliff (“Ratliff”) filed a discrimination complaint with the Secretary of Labor (“Secretary”), alleging that Cobra Natural Resources, LLC (“Cobra”) discharged him after he voiced safety concerns with respect to Cobra’s mining operation; thus violating the Mine Safety and Health Act of 1977’s (“the Mine Act”) whistleblower provision. In accordance with the Mine Act, after receiving Ratliff’s discrimination complaint, the Secretary determined it was not “frivolously brought” and applied to the Commission for an order temporarily reinstating Ratliff’s employment. Cobra, however, disagreed with the Secretary’s finding and requested a hearing before an ALJ, contending that Ratliff’s complaint was frivolous and also asserting a tolling defense. A coal operator’s temporary reinstatement obligation can be “tolled” by the occurrence of certain events, such as a subsequent reduction-in-force that would have included the miner.
At the hearing, the ALJ agreed with the Secretary that Ratliff’s discrimination complaint was not frivolously brought and also rejected Cobra’s tolling contention, concluding that Cobra had failed to show that work was not available to Ratliff because of an asserted multi-employee layoff. As a result, Ratliff was immediately reinstated with the same hours of work, rate of pay, and benefits received. Cobra next sought Commission review. The Commission affirmed the ALJ’s decision. Cobra then filed this petition for review, summarily asserting jurisdiction under the collateral order doctrine and contending that the Commission erroneously denied Cobra’s tolling defense.
On appeal, the Fourth Circuit found that it was without jurisdiction to consider Cobra’s petition for review. In doing so, it noted that the Mine Act authorizes “any person adversely affected or aggrieved by an order of the Commission” to seek review in the appropriate court of appeals. Importantly, although the Act uses the term “order” rather than “final order,” the Court recognized that only final Commission orders are entitled to review. Thus, the issue before the Court was whether the Commission’s decision granting temporary reinstatement was immediately appealable by Cobra under the collateral order doctrine.
Having explained the issue before it, and having noted the limited persuasive effect of sister circuit court decisions on the issue, the Court assessed each requirement of the collateral order doctrine. Analyzing the first requirement: that a putatively appealable order conclusively determine a disputed question, the Court held that, because an order of temporary reinstatement remains subject to modification during the pendency of a coal miner’s discrimination complaint, it fails to satisfy this initial requirement. Next, the Court held that, because the considerations involved in the temporary reinstatement process are deeply enmeshed with the same issues comprising the miner’s underlying discrimination claim, it plainly failed the collateral order doctrine’s “separate” requirement. Lastly, the Court addressed the doctrines third requirement: that the order be “effectively unreviewable on appeal from a final judgment.” Again, the Court held that this requirement was not met because Cobra’s implicated interest was primarily economic in nature. In so holding, the Court noted that a coal operator’s financial interest in avoiding wage payments to a reinstated miner who returns to his job in the coal mines pales in comparison to those interests that have been deemed sufficiently important to give rise to collateral order jurisdiction.
– W. Ryan Nichols
Decided: January 7, 2014
The Fourth Circuit held (1) that the United States District Court for the Southern District of West Virginia properly denied Roger and Judy Hoschar’s (collectively, the appellants) motion to remand, as federal jurisdiction was proper due to complete diversity between the parties; and (2) that the district court properly granted summary judgment to Appalachian Power Company (APCO) because—under West Virginia law—there was no genuine issue of material fact regarding APCO’s actual or constructive knowledge of certain health risks associated with accumulations of bird excrement on the precipitators of its coal-fired power plant. The Fourth Circuit therefore affirmed the judgment of the district court.
APCO owns the Philip Sporn power plant (Sporn), located in West Virginia. Sporn, a coal-fired power plant, has five precipitators that “remove granular ash particles (fly ash) from the gasses produced by burning coal.” APCO hired Industrial Contractors, Inc. (ICI) to perform maintenance at Sporn—including welding on the precipitators to prevent fly ash leakage. Roger Hoschar (Mr. Hoschar), a boilermaker employed by ICI, worked exclusively at Sporn from March 2006 to March 2007. Usually, Mr. Hoschar’s duties consisted of hanging from a suspended platform and welding corroded parts of the ducts on the Unit 5 precipitator (Unit 5). Before welding, Mr. Hoschar had to remove debris that had agglomerated in the steel channels—including bird excrement. ICI terminated Mr. Hoschar in March 2007. In March 2009, Mr. Hoschar’s doctor discovered a mass on his right lung; after part of Mr. Hoschar’s lung was removed, a biopsy revealed that the mass was histoplasmosis—“an infectious disease caused by inhaling the spores of a naturally occurring soil-based fungus . . . .” While Mr. Hoschar was performing maintenance at Sporn, the Occupational Safety and Health Administration website contained a page titled “Respiratory Protection: Hazard Recognition”; this page referenced a publication by the National Institute for Occupational Safety and Health (NIOSH) called “Histoplasmosis: Protecting Workers at Risk” (the NIOSH publication). The NIOSH publication asserted that the relevant fungus “seems to grow best in soils having a high nitrogen content, especially those enriched with bird manure or bat droppings” and stated that the fungus “can be carried on the wings, feet, and beaks of birds and infect soil under roosting sites or manure accumulations inside or outside buildings.”
The appellants sued APCO and ICI for negligence in a West Virginia state court. They sought damages for Mr. Hoschar’s histoplasmosis infection, alleging that he contracted the disease after inhaling contaminated dust while removing the bird manure and fly ash from Unit 5’s steel channels. APCO removed the action to federal district court under 28 U.S.C. § 1332, stating that its principal place of business is in Columbus, Ohio, and that there was complete diversity among the parties. The appellants filed a motion to remand the lawsuit to state court, asserting that complete diversity did not exist because APCO’s principal place of business is in Charleston, West Virginia. The district court found that APCO’s principal place of business is in Columbus, Ohio, and therefore denied the appellants’ motion to remand. After the discovery period, ICI and APCO filed separate summary judgment motions, both of which were granted by the district court. The appellants subsequently settled with ICI; however, the appellants also appealed the district court’s denial of their motion to remand to state court, as well as the court’s grant of summary judgment in favor of APCO.
The Fourth Circuit found that—consistent with Hertz Corp. v. Friend, 559 U.S. 77, and Central West Virginia Energy Co. v. Mountain State Carbon, LLC, 636 F.3d 101—APCO’s “nerve center” is in Columbus, Ohio. The Fourth Circuit noted that, inter alia, “APCO’s entire Board of Directors is located in Columbus,” as are twenty-two of its twenty-seven corporate officers—including its CEO, CFO, Secretary, and Treasurer; that the corporate officers in Columbus make significant decisions and make corporate policy “such that they direct, control, and coordinate APCO’s activities”; that only five of the twenty-seven corporate officers are based in Charleston; and that the Charleston officers simply conducted “day-to-day operations and public interface” rather than the corporate direction, control, and coordination indicative of a nerve center. The Fourth Circuit rejected the appellants’ asserted difference between “ultimate” control and “actual” control, finding that these two terms are synonymous under Hertz—“provided that ultimate control amounts to directing, controlling, and coordinating the corporation’s activities.” The Fourth Circuit also found that APCO’s references to Charleston as its “headquarters” was merely a misnomer, and that the actual nerve center activities occur in Columbus. With regard to the district court’s grant of APCO’s summary judgment motion, the Fourth Circuit noted that there was no evidence that APCO employees knew the relevant fungus was present at Sporn. Furthermore, with regard to constructive knowledge, the Fourth Circuit noted that APCO did not have reason to be award of the NIOSH publication.
Lastly, though the appellants argued that the question of APCO’s knowledge was inherently a factual determination for the jury, the Fourth Circuit noted that the knowledge determination pertained to “whether a legal duty was owed to Mr. Hoschar in the first place”—and that the appellants failed to present evidence creating a genuine issue of material fact in this regard.
– Stephen Sutherland
Decided: December 19, 2013
The Fourth Circuit held that the United States District Court for the Northern District of West Virginia erred by aggregating the unnamed members of a proposed but uncertified class of defendant appraisers for purposes of the “at least 1 defendant” requirement, 28 U.S.C. § 1332(d)(4)(A), of the local controversy exception to the Class Action Fairness Act (CAFA). The Fourth Circuit therefore vacated the decision of the district court and remanded the case.
Phillip Alig, Sara J. Alig, Roxanne Shea, and Daniel V. Shea (the plaintiffs) filed a lawsuit in West Virginia state court against Quicken Loans (Quicken), Title Source, Inc., and a class of defendant appraisers represented by Appraisals Unlimited, Inc., Dewey V. Guida, and Richard Hyett (the defendant appraisers). The plaintiffs brought their suit “both individually and on behalf of a class of West Virginia citizens.” They alleged, inter alia, that the defendant appraisers—including the named appraisers and the unnamed class of appraisers—were complicit in a scheme of unlawful loans originating in West Virginia. Quicken filed a notice of removal in the district court, stating that the court had jurisdiction under CAFA. The plaintiffs then filed a motion to remand based on the local controversy exception to CAFA, 28 U.S.C. § 1332(d)(4)(A). The district court remanded the case to state court, and Quicken appealed. On appeal, Quicken argued that the district court should not have aggregated the defendant appraisers in determining whether they satisfied the “at least 1 defendant” requirement of the local controversy exception.
The Fourth Circuit disagreed with Quicken, finding that the term at least “permits a reading that more than one defendant could satisfy the stated criteria.” The court also held that disallowing such aggregation would produce an absurd result and would be contrary to clearly expressed congressional intent. Thus, the Fourth Circuit concluded that the district court properly aggregated the named defendant appraisers. However, the Fourth Circuit noted that the district court also aggregated the unnamed defendant appraisers—who, as members of a proposed but uncertified class, were not parties to the litigation. The Fourth Circuit therefore remanded the case so the district court could determine whether the named defendant appraisers satisfied the “at least 1 defendant” element of the local controversy exception.
– Stephen Sutherland
Decided: December 12, 2013
The Fourth Circuit Court of Appeals vacated the district court’s dismissal of Plaintiffs’ action under the False Claims Act (the “FCA”) against Purdue Pharma L.P. and Purdue Pharma, Inc. (together “Purdue”). The Fourth Circuit held that the district court erred by giving preclusive effect to United States ex rel. Radcliffe v. Purdue Pharma L.P. and, therefore, for dismissing their action on res judicata grounds.
Prior to Plaintiffs’ claim, Mark Radcliffe, the husband of Plaintiff Angela Radcliffe, filed a FCA action against Purdue (“Qui Tam I”). Radcliffe was a district sales manager for Purdue, laid off as part of a reduction in force in June 2005. He subsequently executed a general release (“the Release”) of all claims against Purdue in order to receive an enhanced severance package. The Fourth Circuit affirmed the district court’s with-prejudice dismissal of Qui Tam I in Radcliffe, concluding that the Release barred Radcliffe’s FCA claims. After Radcliffe, Steven May and Angela Radcliffe (the “Relators”) commenced this FCA action against Purdue (“Qui Tam II”) setting forth allegations nearly identical to those advanced by Mark Radcliffe in Qui Tam I. On appeal, the Relators argued that the district court erred by giving preclusive effect to Radcliffe and dismissing their action on res judicata grounds.
According to the Fourth Circuit, whether res judicata precludes a subsequent action turns on the existence of three factors: (1) a final judgment on the merits in a prior suit; (2) an identity of the cause of action in both the earlier and the later suit; and (3) an identity of parties or their privies in the two suits. The Fourth Circuit concluded that Radcliffe was a “judgment on the merits,” and not merely a “jurisdictional dismissal,” as argued by the Relators. The Relators claimed that the dismissal in Radcliffe was premised on a determination that Mark Radcliffe lacked standing to pursue the FCA claims. However, the Fourth Circuit concluded that it had dismissed not because Radcliffe lacked standing, but because he had waived it through execution of the Release. The FCA statutorily vests private citizens with standing and, therefore, Radcliffe had the “right” to bring an FCA action before he signed the Release, wherein he waived, rather than lost, that right. However, even after finding Radcliffe was a “judgment on the merits,” the Fourth Circuit nonetheless agreed with the Relators that the district court improperly gave Radcliffe preclusive effect. In cases where the earlier action was dismissed in accordance with a release or other settlement, the traditional res judicata inquiry is modified– the principles of res judicata apply to the matters specified in the settlement agreement, rather than the original complaint. Settlement agreements operate on contract principles, and thus the preclusive effect of a settlement agreement should be measured by the intent of the parties. The Fourth Circuit explained that the Release executed by Mark Radcliffe in Qui Tam I was personal to him and addressed only his rights and the claims that he might assert against Purdue. Neither the Relators nor the government were parties to or intended beneficiaries of the Release. Therefore, the Release could not serve as a defense to any claims that the Relators might assert against Purdue and the judgment enforcing the Release cannot bar such claims.
Purdue and the government then argued that the district court’s dismissal could be affirmed because the action is prohibited by the FCA’s “public disclosure” bar. To address that argument, the Fourth Circuit first determined which version of the statute applied to this case. Here, the Plaintiffs’ complaint was filed after the 2010 amendments to the public-disclosure bar. However, it concerned conduct that occurred between 1996 and 2005, before the 2010 amendments. Ordinarily, courts will assess the legal effect of conduct under the law that existed when the conduct took place. Although there is a presumption against retroactive legislation, it is limited to statutes “that would have genuinely retroactive effect.” Therefore, the Fourth Circuit explained that changes in jurisdictional and procedural rules, which take away no substantive right, are often applied to pending cases. However, those new rules apply because they do not have an impermissible retroactive effect, not because the complaint was filed before the statute was amended. The Fourth Circuit ultimately determined that it does not matter that Plaintiffs’ complaint was filed after the FCA was amended, so long as the application of the 2010 amendments would have an impermissible retroactive effect. Here, the amendments create a jurisdictional change, but it is one that would have an impermissible retroactive effect. Therefore, the Fourth Circuit held that the amended version of the statute should not apply. Under the prior version of the statute, the public-disclosure bar operated to divest the district court of subject-matter jurisdiction. Under the amended version, which deleted the unambiguous jurisdiction-removing language, the public-disclosure bar is no longer a jurisdiction-removing provision. In addition, the 2010 amendments significantly narrowed the class of disclosures that can trigger the public-disclosure bar, while at the same time expanding the number of private plaintiffs entitled to bring qui tam actions. Finally, the 2010 amendments also changed the required connection between Plaintiff’s claims and the qualifying public disclosure. As amended, the public-disclosure bar no longer requires actual knowledge of the public disclosure, but instead applies “if substantially the same allegations or transactions were publicly disclosed.” Because the Relators allege that they did not derive their knowledge of Purdue’s fraud from any public disclosure, their claims are viable under the pre-amendment version of the FCA, but not under the amended version. Therefore, the 2010 amendments would significantly imperil the Relators’ right to assert their claims against Purdue, and would deprive Purdue of the previously available jurisdictional defense; the Fourth Circuit concluded they had retroactive effect. The Fourth Circuit concluded that 2010 version of the public-disclosure bar could not be applied in this case, notwithstanding the fact that the complaint was filed after the effective date of the amendments.
Having concluded that the pre-2010 version applies, the Fourth Circuit then addressed whether the public-disclosure bar required dismissal of the action. The pre-amendment version provides that “no court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions” in various hearings, reports, investigations, audits, and news media. The Fourth Circuit has interpreted the “based upon” language as barring only those actions where the relator’s knowledge of the fraud alleged was actually derived from the public disclosure itself. Whether a relator derived his knowledge of the fraud from a public disclosure is a jurisdictional fact to be resolved by the district court. Therefore, the Fourth Circuit remanded the case to the district court for discovery and other proceedings as necessary to resolve the issues related to the applicability of the public-disclosure bar.
Finally, the Fourth Circuit rejected two additional arguments made by Purdue for sustaining the district court’s dismissal of this action. The Fourth Circuit concluded that, because the Relators have not had the opportunity to amend their complaint, it would be improper to rely on any Rule 9 deficiencies to affirm the district court’s dismissal. The Fourth Circuit also concluded that the FCA’s “first to file” bar did not require dismissal. The first-to-file bar applies only if the first-filed action was still pending when the subsequent action as commenced. Here, Qui Tam I was no longer pending at the time this action was commenced, thus making the first-to-file-bar inapplicable.
– Sarah Bishop
Filed: December 10, 2013
The Fourth Circuit Court of Appeals reversed the district court’s denial of defendant’s federal habeas corpus petition based on Gray v. Pearson. In Gray, the Fourth Circuit held that a federal habeas petitioner was entitled to independent counsel to pursue the ineffectiveness of state habeas counsel in order to raise procedurally barred “ineffective-assistance-of-trial-counsel” claims in the happenstance that the petitioner is represented by the same counsel in both federal and state habeas proceedings.
While federal habeas proceedings were pending in Gray, the Supreme Court issued Martinez v. Ryan, which announced that, for states like Virginia – where a petitioner can only raise an ineffective assistance claim on collateral review – federal habeas counsel can investigate and pursue the ineffectiveness of state habeas counsel in an effort to overcome the default of procedurally barred ineffective-assistance-of-trial counsel claims. In accordance with Martinez, the Fourth Circuit in Gray held that the petitioner was entitled to independent counsel in his federal habeas proceedings. In fact, it was decided that qualified and independent counsel was ethically required. Therefore, the Fourth Circuit held that a district court must grant the motion for appointment of counsel without regard to whether the underlying motion identifies a “substantial” ineffective assistance claim under Martinez.
– Sarah Bishop
Decided: November 15, 2013
The Fourth Circuit held that “for purposes of the nominal party exception to the rule of unanimity governing removal,” contractor G.R. Hammonds, Inc. (Hammonds) was a nominal party in a contribution suit between insurers, and Hammonds’ consent was therefore unnecessary to the removal of the suit to federal court. Thus, the Fourth Circuit affirmed the holding of the United States District Court for the District of South Carolina.
Between 1995 and 2009, several insurance companies insured Hammonds for overlapping or subsequent periods. These companies included Hartford Fire Insurance Company (Hartford), Harleysville Mutual Insurance Company (Harleysville), and Assurance Company of America (Zurich). Hammonds performed allegedly defective roofing work on a project in Charleston, South Carolina (Concord West Project), between 1998 and 2001. After homeowners and their association sued Hammonds in state court (Concord West Action), Hartford, Harleysville, and Zurich agreed to split the costs of a million-dollar settlement by paying a third each—subject to the right to resolve the proper allocation through arbitration or litigation. Harleysville then filed a declaratory judgment action in the United States District Court for the Eastern District of North Carolina (North Carolina Action), seeking a declaration of the rights and obligations of Hammonds’ various insurers with regard to the damages incurred during Hammonds’ Concord West Project, as well as Hammonds’ allegedly defective work on other projects. Several days later, Hartford filed an action for declaratory judgment in a South Carolina state court (South Carolina Action), naming Hammonds and Hammonds’ other insurers as defendants; Hartford sought a declaration of each insurer’s share of the Concord West Action settlement, as well as equitable contribution from the other insurers in the event that the court found Hartford to have overpaid its share. Harleysville removed the action to federal court. The other defendant insurers consented to removal; however, Hammonds did not consent or object. After removing the action, Harleysville filed a motion to dismiss, stating that the South Carolina Action duplicated the parallel North Carolina Action. Hartford moved to remand, noting that Hammonds did not join in or consent to the notice of removal. After finding that Hammonds was a nominal party, the district court dismissed the South Carolina Action under the first-to-file rule. Hartford appealed the dismissal of this action.
Noting that it had “never defined a nominal party for purposes of the nominal party exception to the rule of unanimity necessary for removal,” the Fourth Circuit focused the practical inquiry on “whether the suit can be resolved without affecting the non-consenting nominal defendant in any reasonably foreseeable way.” The Fourth Circuit noted that Hartford could not reasonably argue that Hammonds would be affected by the case’s outcome: Hartford did not seek a monetary judgment against Hammonds, and it did not seek non-declaratory injunctive relief—nor did any of the parties in the North Carolina Action. Furthermore, Hammonds’ absence from the suit would not render the final judgment unfair to any of the parties. The Fourth Circuit also noted the unlikelihood of a potential “whipsaw” effect that would deprive Hartford of due relief.
– Stephen Sutherland
Decided: November 5, 2013
The Fourth Circuit held that the United States District Court for the Eastern District of Virginia did not abuse its discretion by dismissing Project Management Company’s (PMC) case against DynCorp International LLC (DynCorp) as a sanction for discovery malfeasance. The Fourth Circuit therefore affirmed the judgment of the district court.
After contracting with the State Department to aid in the development of Iraq’s civilian police force, DynCorp made a subcontract with PMC for operations and maintenance support between August 1, 2008 and February 17, 2009. PMC executed the subcontract through Hussein Fawaz (Fawaz), its Managing Director and purported part owner of the company. Under the subcontract, PMC Project Manager Greg Byers (Byers) was PMC’s point of contact with DynCorp. The subcontract stated that, in response to invoices from PMC, DynCorp would tender payments through wire transfers to a PMC account at Kuwait Gulf Bank (Kuwait Account). Furthermore, the subcontract stated that “[n]o oral statement of any person shall modify or otherwise affect the terms, conditions, or specifications stated in [the] [s]ubcontract.” After beginning performance, PMC listed payment instructions on the face of each invoice; the instructions were consistent with the terms of the subcontract. However, in December 2009, the PMC invoices started directing DynCorp to pay PMC through a different bank account: an account at the National Bank of Kuwait (Lebanon) held in the name of Fawaz (Lebanon Account). Fawaz, Byers, and another PMC employee confirmed the change in instructions. DynCorp eventually terminated the subcontract due to issues with PMC’s performance. After termination, DynCorp learned that Fawaz was not a part owner of PMC. DynCorp also learned that PMC’s actual owners included Rabea Al-Muhanna (Al-Muhanna); according to PMC, Al-Muhanna had sole authority over PMC’s financial affairs.
On January 25, 2012, PMC sued DynCorp in federal court, alleging that DynCorp breached the subcontract by transferring money to the Lebanon Account instead of the Kuwait Account. The parties agreed to complete discovery by April 13, 2012, and the district court set the trial date on August 15, 2012. During the discovery period, DynCorp discovered that at least some of the money it deposited into the Lebanon Account was used to pay PMC’s obligations. DynCorp subsequently asked the district court to impose sanctions under the court’s inherent authority to issue sanctions for abuses of the judicial process, per United States v. Shaffer Equipment Co., 11 F.3d 450. DynCorp claimed that PMC concealed documents that demonstrated PMC’s acquiescence to the use of the Lebanon Account; stated that PMC made a late production of documents demonstrating PMC’s acquiescence to the use of the Lebanon Account, and did so only after DynCorp received documents from a third party indicating that PMC used the Lebanon Account; and asserted that the late-produced documents demonstrated that PMC’s Rule 30(b)(6) representatives—Al-Muhanna and Philip Zacharia (Zacharia)—gave false or misleading testimony and that PMC gave false interrogatory answers. DynCorp asked the district court to dismiss the case. The district court granted DynCorp’s motion for sanctions but declined to dismiss the case; rather, the district court ordered that, inter alia, PMC produce its Rule 30(b)(6) representatives for additional depositions before August 11, 2012. PMC then filed for a protective order, seeking to shield Zacharia from production for deposition and seeking relief from having to produce Al-Muhanna before August 13, 2012—two days before the trial. DynCorp again asked the district court to dismiss the case under its inherent authority; the district court declined to do so, but instead ordered PMC to produce the Rule 30(b)(6) representatives by August 13, 2012. PMC produced Al-Muhanna and Zacharia for deposition on August 13; however, it also told DynCorp that these witnesses were no longer its Rule 30(6)(b) representatives, and offered a new Rule 30(b)(6) representative. PMC also produced additional, previously undisclosed documents—some of which were written in Arabic.
DynCorp submitted a supplemental memorandum asking the court to strike PMC’s claim of damages or, alternatively, to dismiss the case. The district court reevaluated PMC’s conduct under the Shaffer Equipment standard. The court detailed PMC’s discovery abuses, finding that, inter alia, PMC improperly withheld documents, the withheld documents contradicted Al-Muhanna’s deposition testimony, and that PMC gave a false answer to an interrogatory. The district court concluded that PMC was highly culpable, that DynCorp was significantly prejudiced, and that the previous sanctions did not remedy the prejudice to DynCorp. The district court then dismissed the case with prejudice. PMC appealed, arguing that, inter alia, (1) Al-Muhanna did not provide false testimony; (2) the district court improperly considered its false interrogatory response, as DynCorp did not raise this issue as a reason for sanctions; (3) the district court’s culpability finding was not supported by substantial evidence; (4) DynCorp and the judicial process did not suffer prejudice, as DynCorp received all the relevant documents before the date of the trial; and (5) lesser sanctions could have remedied the prejudice and that public policy warranted a decision on the merits.
The Fourth Circuit first noted that the district court considered all six of the Shaffer Equipment factors, and the district court found that each factor weighed in favor of the case’s dismissal. With regard to PMC’s first argument, the Fourth Circuit noted the support in the record for the conclusion that Al-Muhanna testified falsely. With regard to the second argument, the Fourth Circuit noted that district courts are not limited to the parties’ arguments when exercising the inherent authority to impose sanctions under Shaffer Equipment. With regard to the third argument, the Fourth Circuit referred back to the support in the record for a finding of culpability. The Fourth Circuit noted that PMC failed to support its fourth argument with citation, and that PMC produced many documents after the end of the discovery period. Lastly, with regard to PMC’s fifth argument, the Fourth Circuit recognized “the need to preserve the integrity of the judicial process in order to retain the confidence that the process works to uncover the truth,” and noted that the district court’s lesser sanctions did not alleviate the prejudice.
– Stephen Sutherland
Decided: October 21, 2013
The Fourth Circuit held that, because prisoner James G. Blakely (Blakely) previously brought more than three federal lawsuits that were expressly dismissed at summary judgment as frivolous, malicious, or for failure to state a claim, Blakely could not proceed in forma pauperis in his present lawsuit. The Fourth Circuit therefore denied Blakely’s motion for reconsideration.
Blakely, an inmate at Lee Correctional Institution in South Carolina, brought numerous lawsuits in federal and state court while incarcerated—including four federal lawsuits that were dismissed at summary judgment (the summary judgment dismissals). In 2010, Blakely filed a § 1983 action against certain South Carolina officials (the defendants). The defendants removed the case to federal court. A magistrate judge deemed Blakely’s claims meritless, and the United States District Court for the District of South Carolina subsequently granted summary judgment in the defendants’ favor and dismissed the lawsuit. On appeal to the Fourth Circuit, Blakely applied to proceed in forma pauperis. The Fourth Circuit initially denied Blakely’s request; Blakely then moved for reconsideration.
The Fourth Circuit noted that, under the “three-strikes” statute of the Prisoner Litigation Reform Act, 28 U.S.C. § 1915(g), a prisoner who had previously brought more than three lawsuits that were dismissed as frivolous, as malicious, or for failure to state a claim generally cannot proceed in forma pauperis. While Blakely argued that dismissals at summary judgment did not count as “strikes” under § 1915(g), the Fourth Circuit found the procedural posture of the case indeterminate: rather, the Fourth Circuit concluded that a summary judgment dismissal that states, on its face, that the dismissed case was a frivolous one, a malicious one, or one that failed to state a claim constitutes a strike. The Fourth Circuit noted that all four of the summary judgment dismissals explicitly dismissed a case for one of these reasons. Thus, the Fourth Circuit counted Blakely’s previously dismissed cases against him for purposes of the three-strikes statute.
– Stephen Sutherland
Decided: October 30, 2013
The Fourth Circuit dismissed a complaint for lack of subject matter jurisdiction finding that, absent a federal tariff, federal courts have no subject matter jurisdiction over a motor carrier’s breach of contract claim against a shipper for unpaid freight charges.
Plaintiffs, a group of motor carriers (“Carriers”), had agreements through Salem Logistics Traffic Services, LLC (“Salem”) to transport furniture for Klaussner Furniture Industries (“Klaussner”) throughout the United States. Salem coordinated all shipping logistics for Klaussner. Klaussner provided a fee to Salem for its services and Salem, in turn, agreed to pay all Carriers directly. After initially making payment, Salem defaulted on its obligation to pay the Carriers and went out of business. The Carriers filed suit against Klaussner under the Interstate Commerce Commission Termination Act (“ICCTA”) to recover the unpaid freight charges. The District Court found that Klaussner was not liable for the unpaid freight charges. Salem appealed.
On appeal, Klaussner, the prevailing party at the district court, for the first time argued that the district court lacked subject matter jurisdiction over the dispute. The Carriers responded that federal courts had jurisdiction over their claim under the ICCTA. In the alternative, Carriers argued that, even if the ICCTA did not provide a federal cause of action, the federal courts should create a federal cause of action because the ICCTA preempted state law breach of contract claims. The Fourth Circuit disagreed with the Carriers on both counts and found that the federal courts lacked subject matter jurisdiction.
First, the court held that the ICCTA did not provide a federal cause of action. The court explained that historically, Congress regulated all motor carriers to file a tariff with the Interstate Commerce Commission that included their price. Any disputes over price were adjudicated through a federally created administrative body. In 1995, however, Congress deregulated the motor carrier industry by passing the ICCTA, which removed the tariff requirement for most shipping contracts, and instead allowed the free market to set the prices for shipping. Congress retained some regulation over motor carriers by requiring compliance with federal licensing, employment, safety, and accessibility requirements. The court found that merely allowing private negotiation of shipping rates under the ICCTA, replacing the tariff requirement, was not enough to create a federal private cause of action under the ICCTA. The court contrasted that provision with another provision in the ICCTA that explicitly provided federal jurisdiction for a claim seeking compensation for goods damaged in shipping. Additionally, the court found the ICCTA’s regulation of billing and collection practices insufficient to create federal jurisdiction because the regulations does not impose any obligations concerning rates.
Second, the court held that the ICCTA did not preempt the Carrier’s state law breach of contract claim. The court explained that the ICCTA’s preemption clause was taken directly from the Airline Deregulation Act (“ADA”). The Supreme Court’s interpreted the ADA to recognize an exception to preemption for routine breach of contract claims against airlines. Given the Supreme Court’s interpretation of the same provision under the ADA, the Fourth Circuit held that the ICCTA did not preempt ordinary breach of contract claims. Furthermore, the court emphasized that the resolution of the claim required the interpretation of no federal statute or regulation. Therefore, the court concluded that it lacked subject matter jurisdiction and dismissed the suit.
– Wesley B. Lambert
Decided: September 18, 2013
The Fourth Circuit affirmed in part and reversed in part the district court’s order granting summary judgment against six plaintiffs in their action against the Sheriff of the City of Hampton, Virginia for his alleged retaliation against them in violation of their First Amendment rights. The Fourth Circuit also remanded the case for trial with respect to some of the claims.
B. J. Roberts, the Sheriff for the City of Hampton, was up for re-election in November 2009 and had been challenged in his reelection bid by Jim Adams, who had worked in the Sheriff’s Office for 16 years and had attained the rank of the third most senior officer. Notwithstanding laws and regulations prohibiting the use of state equipment or resources for political activities, Sheriff Roberts used his office and the employees he controlled to further his reelection efforts. Sheriff Robert won reelection in November 2009 and subsequently reappointed 147 of his 159 full-time employees. The six plaintiffs, all former employees of the Hampton Sheriff’s Office (“the Sheriff’s Office”), were not reappointed to their positions. The plaintiffs filed suit in federal court against Sheriff Roberts, in his individual and official capacity, alleging that he violated their First Amendment right to free association when he refused to reappoint them because they failed to support his reelection bid. In addition, four of the plaintiffs alleged that the Sheriff violated their First Amendment right to free speech when he refused to reappoint them because of various speeches they made in support of his opponent’s campaign. The plaintiffs sought compensation for lost back pay and reinstatement in their former positions. Sheriff Roberts moved for summary judgment and the district court granted it.
With respect to the free speech claims, the district court concluded that the plaintiffs all failed to allege that they engage in expressive speech. Regarding the association claims, the district court concluded that the plaintiffs had failed to establish a causal relationship between their support of Adams’s campaign and their non-reappointment. Finally, the district court held that, even assuming that the sheriff did violate the plaintiffs’ First Amendment rights, he was entitled to qualified immunity on the individual capacity claims and Eleventh Amendment immunity on the official capacity claims.
On appeal, the Fourth Circuit concluded that, with respect to the free association claims, some of plaintiffs at least created a genuine factual dispute regarding whether the sheriff violated their rights; however, three of the plaintiffs did not. The Court made a distinction based on the positions of the plaintiffs finding that the claims made by the uniformed jailers, that held the title of Sheriff’s deputies, had to be subjected to a Jenkins’s analysis. This required looking at the duties of the deputies in question and determining if political loyalty was appropriate requirement for the effective performance of their public employment as deputies. Based on the formal job descriptions provided, the Court held that the plaintiffs in this case did not exercise the “significant discretion” that North Carolina deputies normally exercise. Therefore, the Sheriff, at this point in the proceedings, had not established that the jailers’ arrest duties were “sufficiently significant” that they would affect whether their political allegiance to the share was an appropriate requirement for their effective performance of their jobs. With regards to the causation analysis for the free association claims, the Court concluded that the three jailers had at least created genuine factual disputes as to whether their lack of political allegiance to the Sheriff was a substantial basis for the decision not to reappoint them. On the other hand, the three non-deputy administrative employees could not establish a causal relationship between their non-reappointment and their lack of political allegiance to the Sheriff and the Court affirmed summary judgment with respect to their claims.
The Court next turned to the merits of the free-speech claims. Again, the Court agreed that the uniform jailers at least created general factual disputes regarding whether the Sheriff violated their free speech rights, but the non-sworn administrative employee did not. In its analysis the Fourth Circuit first addressed whether the conduct that the employees maintained led to their non-reappointment constituted speech at all. The Court held that “liking” the Adams’s campaign page on Facebook or posting a comment on the page qualified as speech and was also a form of symbolic expression. The Court reasoned that clicking the “like” button on a campaign page is similar to placing a political candidate’s yard sign in a front yard. The Court also held that statements made by an employee at the polling place also constituted speech. Next, the Court quickly addressed whether the employees were speaking as a private citizen on a matter of public concern and found that employees’ conduct satisfied this element. The Court concluded that the employees’ interest in expressing support for his candidate outweighed the Sheriff’s interest in providing effective services to the public. Finally, as was the case with the free association claims, the Court found that the uniform jailers created a factual dispute regarding whether their speech was the cause for their non-reappointment.
The Fourth Circuit then addressed the Sheriff’s immunity defenses. With respect to the Eleventh Amendment immunity, the Court agreed with the plaintiffs that this immunity does not bar claims advanced against the Sheriff in his official capacity, to the extent that the plaintiffs were seeking the remedy of reinstatement because that relief was prospective in nature. Regarding the qualified immunity defense, the Court held that the Sheriff was entitled to qualified immunity concerning the uniformed jailers claims because, following his election, the sheriff could have believed he had the right to choose not to reappoint his sworn deputies for political reasons. The Court reasoned that the Fourth Circuit’s decision in Jenkins sent “very mixed signals.” As a result, the Court concluded that the Sheriff could have believed that he was authorized to terminate any of his deputies for political reasons. Therefore, the district court properly ruled that the Sheriff was entitled to qualified immunity with regards to the plaintiffs’ claims seeking money damages against the Sheriff in his individual capacity.
– John G. Tamasitis
Decided: August 7, 2013
The Fourth Circuit Court of Appeals affirmed the district court order abstaining from exercising jurisdiction under the Colorado River doctrine in a case brought against Defendants.
In June 2004, Maryland residents filed a putative class action (“the Koch” action) against Defendants in Maryland state court, which was ultimately remanded to the Harford County Circuit Court. The complaint alleged several state law causes of action for the contamination of their properties by gasoline and the gasoline additive methyl tertiary-butyl (“MTBE”) from an Exxon station that Hicks operated. In February 2010, the state-court judge granted Plaintiffs’ request for class certification, but then decertified the class in June 2011. In October 2011, the state-court judge asked the Koch Plaintiffs to file a new action for the former class members so that he could consolidate it with the existing one and thereby adjudicate the claims of the named plaintiffs in Koch as well as the former class members. In November 2011, more than 750 former class members filed a new action (the “Ackerman” action) in the Harford County Circuit Court, alleging the same facts and state law claims as Koch. The court delayed issuing a consolidation order, during which time Defendants removed Ackerman from state court and the Koch Plaintiffs amended their state-court complaint to add the Ackerman plaintiffs. Koch was not removed. The Ackerman Plaintiffs also filed a motion in federal court seeking to remand the case to state court and requesting that the district court abstain under the Colorado River doctrine, which permits federal courts, under exceptional circumstances, to refrain from exercising jurisdiction in deference to pending, parallel state proceedings. The district court denied the remand motion, but granted the motion to abstain. The Defendants appealed, arguing that the district court erred by granting the Plaintiffs’ motion to abstain.
On appeal, the Fourth Circuit asserted that the threshold question under a Colorado River inquiry is whether the pending state and federal suits are parallel. Here, the Defendants challenged the district court’s threshold determination that the Koch action was parallel to Ackerman. Federal courts may decline to exercise their jurisdiction where denying a federal forum would clearly serve an important countervailing interest. At issue in this case is the form of abstention approved by the Court in Colorado River– abstention in favor of ongoing, parallel state proceedings in cases where “considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation” clearly favor abstention. The Fourth Circuit provided that state and federal actions are parallel “if substantially the same parties litigate substantially the same issues in different forums.” The Defendants conceded that the Koch action as amended was parallel to the Ackerman action, but not the Ackerman action and the pre-amendment Koch action. The Defendants argued that the amendment itself was void ab initio by operation of 28 U.S.C. 1446(d) and the “expressly authorized” exception to the Anti-Injunction Act, 28 U.S.C. § 2283. Under § 1446(d), removing defendants must promptly provide written notice of the removal to opposing parties and to the state court. After notice is provided, “the State court shall proceed no further unless and until the case is remanded.” The Fourth Circuit Court of Appeals agreed with the Defendants that the statute deprives the state court of further jurisdiction over the removed case and that any post-removal actions taken by the state court in the removed case action are void ab initio. However, 1446(d) speaks only in terms of the removed case and, therefore, deprives the state court of jurisdiction and restricts the state court’s actions only as to the removed case. Therefore, 1446(d) did not render the December 1 amendment of the Koch action void.
The Fourth Circuit Court also found that its conclusion did not change when the Anti-Injunction Act was added to the mix. Here, the Fourth Circuit Court found that the primary purposes of amending Koch was not a fraudulent effort to defeat federal jurisdiction and, therefore, an injunction was not permissible. Even if it were, the Fourth Circuit held that it would not exercise its discretion to enjoin the Koch amendment because enjoining would undermine the important goal of preserving an effective dual system of federal and state courts. The determination that the Koch amendment was not void effective ended the inquiry into parallelism and the court’s decision to abstain. Accordingly, because the action now pending in state court was the Koch action as amended to include the Ackerman plaintiffs, the district court properly concluded that the actions are parallel for purposes of Colorado River abstention.
– Sarah Bishop
Decided: July 22, 2013
The Fourth Circuit held that the district court lacked subject matter jurisdiction to consider a petition brought by a detained ship and its owner for release because the United States Coast Guard’s decision to detain the ship was subject to agency discretion alone. Therefore, the decision to detain was not appealable to the district court.
The United States Coast Guard (“Coast Guard”), acting through the Department of Homeland Security, detained the Antonis G. Pappadakis (“the ship”), a bulk cargo carrier owned by Angelex, Ltd. (“Angelex”) at port in Norfolk, Virginia under suspicion that the ship had likely been discharging pollution and failed to keep adequate records under federal and international law. After several days of negotiation, the Coast Guard agreed to release the ship upon the posting of a $2.5 million bond and complying with a number of non-monetary obligations to ensure the cooperation of crewmembers and officials in its ongoing investigation. Angelex refused to pay the required $2.5 million bond and filed a petition in the Eastern District of Virginia seeking release of the ship or imposition of an appropriate bond for release. The district court asserted jurisdiction based on the Administrative Procedure Act (“APA”), or, in the alternative, admiralty jurisdiction. The district court granted the petition, finding that the bond was excessive and exceeded the Coast Guard’s authority, and set a new bond at $1.5 million. The United States of America, the Coast Guard, and the United States Customs and Border Protection Agency (collectively the “Government”) appealed the district court’s order on the grounds that the district court lacked subject matter jurisdiction to consider Angelex’s petition.
The Fourth Circuit held that the district court lacked subject matter jurisdiction to hear Angelex’s petition under both the APA and admiralty jurisdiction. The APA allows a court to set aside agency action that are found to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.” The APA provides to exceptions to judicial review of agency action: (1) where the “statute precludes judicial review,” or (2) “when agency action is committed to agency discretion.” In the present case, the Fourth Circuit found that the Coast Guard’s decision to detain the ship was a decision that fell within the latter exception, and was thus, not reviewable. Under the applicable law, the Coast Guard has the authority to determine the amount of the bond required to avoid detainment, or it may determine that it will not accept a bond at all. Thus, the Coast Guard has near complete discretion and the court may not question the reasonableness of the Coast Guard’s decision. In fact, the Fourth Circuit described the Coast Guard’s discretion to deny departure clearance as “limitless.”
The Fourth Circuit further held that the court could not hear the case under admiralty jurisdiction. The district court determined that the withholding of the ship was “tantamount to an arrest of the ship,” which is a dispute that falls within the court’s admiralty jurisdiction. The Fourth Circuit disagreed, finding that the denial of departure clearance was not sufficiently analogous to “arrest of the ship” to confer admiralty jurisdiction. The court also held that the denial of departure clearance was not sufficiently similar to an admiralty lien to confer jurisdiction. Therefore, the court found that the Coast Guard’s decision to detain the ship was squarely within its congressionally conferred discretion and was not subject to review in the district court.
– Wesley B. Lambert
Decided: July 12, 2013
Finding that the district court did not err in finding Mohammad Saaili Shibin (“Shibin”) guilty of all 15 charges relating to his involvement in the piracy and ransom of two ships on the high seas, the Fourth Circuit affirmed.
On May 8, 2010, the Marida Maruerite (“Marida”), a German Merchant ship was seized by Somali pirates on the high seas and transported to Somalia. While docked in Somalia, Shibin boarded the vessel and, over the course of seven months, participated in ransom negotiations and torture of the crew. In December 2010, Shibin completed a five million dollar ransom deal for the Marida’s crew. Several months later, the Quest, an American sailing vessel was also hijacked by a group of Somali pirates and four Americans were taken hostage. While en route to Somalia, the US Navy learned of the hijacked ship and established radio communications with the pirates. Through the course of the communications, the pirates represented that Shibin was the individual with the authority to negotiate and provided the Navy with his cell phone number. On February 22, 2011, as the Quest was nearing Somalia waters, the Navy advised the pirates to stop. When they did not comply, the Navy attempted to cut the Quest off, prompting the pirates to initiate hostilities. As Navy vessels began to close in, but before they reached the Quest, the pirates killed all four American hostages on board. Thereafter, on April 4, 2011, acting in cooperation with local authorities, the FBI arrested Shibin in Somalia. While in custody in Somalia, with the assistance of an interpreter, FBI agents questioned Shibin several times over three days. It was confirmed that his cell phone number matched the number provided to the Navy during communications with the Quest hijackers. Shibin admitted involvement in the Marida ransom negotiations, but denied any involvement in the Quest hijacking despite admitting to conducting various searches on his cell phone related to the Quest hijacking and its crew. Searches of Shibin’s bank records and phone records uncovered a sizable amount of damning evidence indicating his involvement in the Quest hijacking. In April 2011, after obtaining custody of Shibin, the FBI transported him to the Oceana Naval Air Station in Virginia Beach, Virginia, where he was “found” for jurisdictional purposes. Shibin was indicted on 15 counts relating to his involvement in the two piracies. Counts 1 through 6 (the “Marida Charges”), were based on his involvement in the Marida piracy, and counts 7 through 15, were based on his involvement in the Quest piracy and killing of the American hostages. Following a ten-day trial, Shibin was convicted on all counts. This appeal followed.
On appeal, Shibin contended that the district court erred by refusing (1) to dismiss the piracy charges on the ground that Shibin himself did not act on the high seas and therefore the court lacked subject-matter jurisdiction; (2) to dismiss all counts for lack of personal jurisdiction because he was forcibly seized in Somalia and involuntarily removed to the U.S.; (3) to dismiss certain alleged “non-piracy charges” contained within the Marida Charges—charges 2 through 6—because “universal jurisdiction” did not extend to justify the U.S. government’s prosecution of those crimes; and (4) to exclude FBI Agent Kevin Coughlin’s testimony about prior statements made by a Somali-speaking witness through an interpreter because the interpreter was not present in court.
Rejecting Shibin’s first contention, the Fourth Circuit affirmed Shibin’s piracy convictions because the court found he intentionally facilitated two piracies on the high seas, even though his conduct took place in Somalia and its territorial waters. Next, the court rejected Shibin’s second contention, and found that, although Shibin was brought into the U.S. involuntarily, the personal jurisdiction requirement, as contained in 18 U.S.C. §§ 1651, 1203, and 2280, was satisfied. In so concluding, the court noted that generally, under the Ker-Frisbie doctrine, the manner in which the defendant is captured and brought to court is generally irrelevant to the court’s personal jurisdiction over him. The court next rejected Shibin’s third argument, finding that counts 2 through 6 were based on a statute that Congress validly applied to extraterritorial conduct rather than “universal jurisdiction.” Lastly, the court addressed Shibin’s contention that the district court abused its discretion in allowing Agent Coughlin to testify regarding statements made by a Somali interpreter during the interrogations of a Shibin witness, Salad Ali, because the interpreter was an out of court declarant. Finding that (1) Agent Coughlin’s statements were admissible testimony of prior inconsistent statements made by Salad Ali and (2) that the absence of the interpreter did not render the statements inadmissible as hearsay because the interpreter was not the declarant, but only a language conduit, the Fourth Circuit held that the district court did not commit plain error in its evidentiary ruling.
-W. Ryan Nichols
Decided: July 12, 2013
The Fourth Circuit dismissed the appeal of Pfizer Inc., Roerig, and Greenstone, LLC (“Appellants”), finding that the court lacked jurisdiction to review the district court’s decision to remand the case to state trial court in West Virginia.
Nineteen families (“Families”) brought products liability and negligence claims against Appellants alleging that the prescription anti-depressant “Zoloft” caused birth defects when the mother ingested Zoloft during pregnancy. Pursuant to West Virginia Rule of Civil Procedure 3(a), the clerk of court docketed each family separately, resulting in nineteen distinct actions. Although they did not share a civil action number, the Families were allowed to file a single complaint. Believing that nineteen separate actions existed, Appellants removed eighteen of the Families into federal court on the basis of diversity of citizenship, leaving one non-diverse Family at the state court level. The Families challenged the removal, arguing that they were part of a single case, and that the Appellants could not split the claims for diversity jurisdiction purposes. The district court examined the purpose of Rule 3(a) and held that the Rule was not intended to create multiple distinct cases for the purposes of determining diversity of citizenship. The district court then disposed of Appellants’ alternative argument that the non-diverse Family was fraudulently joined. The court found that at the claims were “logically related” to those of the other Families and that the claims shared “common questions of law or fact.” The district court then granted the Families’ motion to remand the case to the state court of West Virginia. Appellants appealed the court’s decision to remand.
On appeal, the Fourth Circuit first established the narrow circumstances when a court may review a district court’s decision to remand. The court explained that review of a remand order is barred if it falls within the scope of 28 U.S.C. § 1447(c), which gives the district court authority to remand on the basis of lack of subject matter jurisdiction or any “other defect” in removal. Appellants argued that the district court’s decision to consider the citizenship of “nonparties” fell beyond the scope of § 1447(c), giving the Fourth Circuit the ability to hear the case. The court disagreed, finding that the district court’s decision to remand the case was firmly based on a lack of subject matter jurisdiction. The court stated that it could not review rulings that “are simply the necessary legal underpinning to the court’s determination that the case was not properly removed.” Moreover, the court dismissed Appellants’ alternative argument that an exception applied that allowed the court to review a “collateral decision that is severable from the remand order.” The court found that the district court’s determination that the non-diverse Family was actually a party was not a “collateral decision” that was severable from the determination of a lack of subject matter jurisdiction. The court said that a review in this case would “overstrain” the exception and “open up for review any legal or factual analysis that a district court takes to determine whether to remand an action.” Therefore, the Fourth Circuit dismissed the appeal.
– Wesley B. Lambert
Greater Baltimore Center for Pregnancy Concerns, Inc. v. Mayor and City Council of Baltimore, Nos. 11-1111, 11-1185 (en banc)
Decided: July 3, 2013
A majority of the Fourth Circuit, sitting en banc, vacated the judgment of the district court, which granted summary judgment to Plaintiffs Greater Baltimore Center for Pregnancy Concerns, Inc., St. Bridgid’s Roman Catholic Congregation and its Archbishop and permanently enjoined the enforcement of a City of Baltimore Ordinance. The Ordinance at issued required limited-service pregnancy centers to post disclaimers that the center does not provide or make referrals for abortions or certain birth-control services. The Plaintiffs argued that the Ordinance was facially invalid under the Free Speech Clause of the First Amendment. The decision, according to the majority, was based on what it deemed was a summary judgment decision “laden with error, in that the court denied the defendants essential discovery and otherwise disregarded basic rules of civil procedure.” In addition, the majority affirmed the district court’s ruling that the St. Bridgid’s Roman Catholic Congregation, Inc. lacked standing to be co-plaintiffs with the Greater Baltimore Center for Pregnancy Concerns.
The Ordinance at issue was passed by the City of Baltimore City Council (“the City”) in November 2009 and required pregnancy centers that did not offer abortions or birth control to display signs that indicated as such and post them in a conspicuous place in the center’s waiting room or other waiting area. The City offered a rationale that such centers had provided misleading information and the City had a vested interest in protecting the public health by ensuring honest advertising of services and that the limited-service pregnancy centers pose a threat to the public health. The Ordinance vests enforcement power with the City Health Commissioner who can issue violation notices and if the center fails to comply with the notice, the Commissioner can issue a civil citation. The Commissioner is also given the authority to pursue criminal or civil remedies against the violating center. The constitutionality of the Ordinance was challenged by the Greater Baltimore Center for Pregnancy Concerns (the “Center”), which qualifies under the Ordinance as a limited-service pregnancy center, and the St. Bridgid’s Roman Catholic Congregation and its Archbishop. The plaintiffs shared religious beliefs that caused them to oppose abortion and certain forms of birth control and their Complaint alleged that the Ordinance violated their First Amendment rights of free speech, free assembly, and the free exercise of religion, plus the Fourteenth Amendment’s guarantee of equal protection and Maryland’s statutory “conscience clause.”
According to the majority, before the City had answered the Complaint, while still having four days left to do so, the plaintiffs filed a motion for partial summary judgment under FRCP 56. The plaintiffs asserted that the strict scrutiny standard applies and cannot be satisfied because the Ordinance fosters “viewpoint discrimination” against “pro-life pregnancy centers” and compels those centers to engage in government-mandated speech. A few days later, the City filed a motion to dismiss the Complaint pursuant to FRCP 12(b)(6) or, in the alternative, to dismiss the claims of St. Brigid’s and the Archbishop for lack of standing. After the district court issued a Scheduling Order, the plaintiffs filed a response to the City’s motion to dismiss and the City submitted a reply concerning its dismissal motion, combined with a response of plaintiffs’ motion for summary judgment. The City asserted in its response to plaintiffs’ motion for summary judgment that the summary judgment request was premature and that it needed more time to engage in further discovery to fully develop its claims and rebut the plaintiffs’ assertions.
At a motions hearing, the plaintiffs argued that there challenge to the Ordinance was a “facial challenge” and, as such, no further discovery was needed. The district court agreed that further discovery was unnecessary for a facial review of the Ordinance, though it allowed the City to enter the Ordinance’s entire legislative record into evidence. The district court promised the City that discovery would be authorized before the court engaged in any “as-applied” analysis of the Ordinance. After review of the record, the court issued its summary judgment decision and permanent injunction without allowing the City any further discovery. In its decision, the district court determined that because the City had submitted materials beyond the plaintiffs’ Complaint – i.e., the legislative record – it was correct to treat the City’s motion to dismiss as a cross motion for summary judgment and it rejected the City’s arguments that rational basis scrutiny should apply because the Ordinance was directed at misleading commercial speech. In applying the strict scrutiny standard, the district court had no issue striking down the Ordinance as unconstitutional on First Amendment grounds. Notably, the district court also ruled early in its decision that St. Brigid’s and the Archbishop lacked standing to be co-plaintiffs in the case because they could not make the required showing of “the existence of concrete and particularized injury in fact.”
First, the Fourth Circuit summarily agreed with the district court that St. Bridgid’s and the Archbishop lacked standing to be co-plaintiffs. Next, and more importantly, a majority of the Fourth Circuit vacated the district court’s decision on largely procedural grounds. The court pointed to several procedural mistakes made by the district court as the court, in the words of the majority, “rushed to summary judgment.” The court found serious errors with the district court’s denial to the City of necessary discovery, its refusal to view in the City’s favor the evidence presented, and its “verboten factual findings, many premised on nothing more than its own supposition.” The majority of its decision was focused on the district court’s refusal to afford adequate discovery to the City and rejected the district court’s theory that because it was ruling on a facial challenge to the Ordinance, then greater discovery was not warranted. The majority also held that the district court “flouted the well-known and time-tested summary judgment standard” when it did not afford all justifiable inferences in the City’s favor, especially with respect to the City’s commercial speech and rational basis theory and that the court engaged in findings based on its own assumptions about the facts. As a result, the Fourth Circuit vacated the district court’s grant of summary judgment and the permanent injunction against enforcement of the Ordinance and remanded the case back to the district court for further proceedings in line with the Federal Rules of Civil Procedure.
– John G. Tamasitis
Decided: July 5, 2013
The Fourth Circuit affirmed the judgment of the Department of Labor (“DOL”) Benefits Review Board (the “Board”) awarding automatic survivors’ benefits to miners’ dependents when the miner, at the time of death, was eligible to receive benefits under the Black Lung Benefits Act (“BLBA”), even though each claimant previously sought such benefits in unsuccessful prior claims.
In 2010, the Patient Protection and Affordable Care Act (“ACA”) reinstated the BLBA’s automatic survivors’ benefits for claims filed after Jan. 1, 2005, that were pending on or after the ACA’s Mar. 23, 2010 enactment date. Accordingly, survivors no longer need to show that the miner’s death was caused by pneumoconiosis (“Black Lung”); they need only show the miner was eligible for BLBA benefits at the time of his death. Respondent survivors in this action both applied for and were denied survivors’ benefits under the BLBA before the ACA amendment. Both Respondents filed subsequent claims after Jan. 1, 2005 which were either pending during the ACA amendment or filed after the amendment. Though neither claimant alleged new factual evidence since the denial of their original claims, Administrative Law Judges granted each survivors’ benefits, and in each case the Board affirmed.
The Fourth Circuit considered de novo whether a final decision denying benefits on a prior claim bars a survivor from receiving benefits through a subsequent claim where there have been no new factual developments. The Fourth Circuit found that the survivors’ subsequent claims do not implicate res judicata because entitlement under the amended BLBA does not require relitigation of the prior findings that the miners’ deaths were not due to Black Lung. The court determined that Congress created a “new condition of entitlement” which in turn created a “new cause of action” for purposes of res judicata. The Fourth Circuit went on to note that res judicata does not bar claims that did not exist at the time of the prior litigation. While acknowledging that new causes of action arise typically due to new factual development, the court stated that changes in the law can create the same effect. The Fourth circuit differentiated the Respondents’ previous and subsequent claims; the former turned on whether the deceased miners died of Black Lung and the latter turned on the entirely unrelated factual issue of whether the deceased miners were eligible for black lung benefits at the time of their deaths.
– E. Leary McKenzie
Decided: June 27, 2013
The Fourth Circuit held that the District Court for the Western District of North Carolina failed to properly analyze the Appellant’s claims under the First Amendment standing framework and therefore vacated its order dismissing the Appellant’s complaint, and remanded for consideration on the merits.
Early in 2009 the Appellant (“Cooksey”) was diagnosed with Type II diabetes and advised, by licensed dietitians, to maintain a diet low in fat and high in carbohydrates. However, after forming his independent conclusion, Cooksey began following the inverse diet, commonly referred to as the “Paleolithic diet.” Soon thereafter, according to Cooksey, he lost 78 pounds, his blood sugar normalized and he was able to stop using insulin as well as other diabetic medications. In January 2010, Cooksey launched a website, www.diabetes-warrior.net, wherein he discussed his lifestyle changes and various topics concerning diets and meal plans. The website contained a disclaimer noting that Cooksey was not a licensed medical professional or dietician. Relevant to this appeal, the website had three main components: (1) an advice column, wherein he answered visitor’s questions; (2) a free “Personal Dietary Monitoring;” and (3) a fee-based “Diabetes Support Life-Coaching” service. Following a nutritional seminar for diabetics in which Cooksey expressed his opinion that a Paleolithic diet is best for diabetics, someone reported him to the North Carolina Board of Dietetics/Nutrition (“State Board” or “Board”). Cooksey was subsequently contacted by the Executive Director of the State Board and informed that his website was under investigation for the unlicensed practice of dietetics/nutrition in violation of the North Carolina’s Dietetics/Nutrition Practice Act (the “Act”). Although reluctantly, Cooksey complied with the directors requests that several changes be made to the website, including eliminating the fee-based diabetic support service because he feared potential civil and criminal penalties under the Act. Several weeks later, Cooksey received a letter from the Executive Director informing him that, as a result of the changes made, the website was in substantial compliance with the act; therefore the complaint filed was being closed. Importantly however, Cooksey was informed that the Board reserved the right to continue to monitor the situation. On May 29, 2012, seeking a declaration that the Act and attendant regulations were unconstitutional, Cooksey filed suit, alleging violations of his First Amendment rights. The district court, citing a failure to demonstrate an injury-in-fact, dismissed the suit for lack of standing. This appeal followed.
On appeal, the Fourth Circuit found that, because the injury-in-fact element in First Amendment cases is commonly satisfied by a sufficient showing of self-censorship, Cooksey made a sufficient showing that he had experienced an objectively reasonable chilling effect of his speech due to the actions of the State Board. Additionally, citing the Executive Director’s communication that she had the “statutory authority” to seek an injunction against him, the court found that the Board’s actions would be likely to deter a person of ordinary firmness from the exercise of First Amendment rights. Thus the court had “no trouble deciding that Cooksey’s speech was sufficiently chilled by the actions of the State Board to show a First Amendment injury-in-fact.” Further, because Cooksey was subject to a credible threat of prosecution under the Act, the court found this provided another independent basis for a sufficient showing of injury. Next, the court addressed the Board’s contention that the First Amendment standing principles did not apply because the Act is a professional regulation that does not abridge the freedom of speech protected under the First Amendment. The court however declined to consider this contention at the standing stage, as any determination would have improperly went to the merits of the case. Lastly, the court found that, because Cooksey desires a clarification of the conduct that he can engage in without the threat of penalty under the Act, his claims are ripe. Therefore, the Fourth Circuit remanded the case back to the Western District of North Carolina for consideration on the merits.
– W. Ryan Nichols
Carpenters Pension Fund of Baltimore, Maryland v. Maryland Department of Health and Mental Hygiene, 12-1480
Decided: June 26, 2013
The Fourth Circuit Court of Appeals reversed and remanded with instructions to quash the writ of garnishment filed by the Carpenters Pension Fund of Baltimore, Maryland (“the Fund”) against the Maryland Department of Mental Health and Mental Hygiene (the “Department”). The court concluded that a federal proceeding that seeks to attach the property of a state to satisfy a debt, whether styled as a garnishment action or an analogous common law writ, violates the Eleventh Amendment.
In May 2007, the Fund filed suit against Tao Construction Company, Inc. (“Tao”) alleging deficient employer contributions. Tao failed to answer and the district court entered a default judgment against Tao. The Fund filed an enforcement action to collect on the judgment. When the Fund could not locate any assets owed by Tao, it discovered that Tao’s CEO had contracted with the Department to perform construction work. The district court issued a writ of garnishment against the Department for amounts due to Tao. The Department moved to quash the writ on grounds of sovereign immunity and Maryland public policy.
The Fourth Circuit of Appeals addressed whether the jurisdictional shield of the Eleventh Amendment insulates a state from a writ of garnishment under Federal Rule of Civil Procedure 69(a). Because the Eleventh Amendment gives the states immunity from “suit,” the court first considered whether a writ of garnishment constituted a “suit” against the state. The court followed the test in the Supreme Court case Central Virginia Community College v. Katz, and examined whether the procedural means and substantive end of the instant writ of garnishment involve the compulsory exercise of federal jurisdiction over the state of Maryland. The procedural inquiry measures the degree of coercion exercised by the federal court in compelling the state to attend. The substantive inquiry measures whether the proceeding demands something from the state by the institution of process in a court of justice. In this case, the garnishment proceeding procedurally resembled a conventional “suit.” It was essentially a suit by the debtor against the garnishee for the use and benefit of the attaching creditor. A garnishee who fails to file an answer to the writ risks default judgment. A proceeding that encumbers the property of a sovereign unless it participates amounts to, what the Fourth Circuit deemend, unconstitutional “coercion exercised by the federal court in compelling the state to attend.” It is immaterial that the Department was in fact indebted to Tao because the Eleventh Amendment is a matter of jurisdiction, not liability. Therefore, the court concluded the garnishment action was a “suit” in the procedural sense.
The court also found that the garnishment action satisfies the substantive criteria of a “suit” because it demanded recovery from the state treasury. Courts have upheld this principle to prevent the disruption on government functions that would attend the garnishment of public funds held in the Treasury. Even though the relevant cases mostly concern the immunity of the federal government from post-judgment attachment, the court found no reason why a state should not enjoy this immunity as well. The court also rejected the Fund’s characterization of its garnishment action as an in rem proceeding. The court also went on to say that the characterization was immaterial, so long as the action was ultimately seeking recovery from the Maryland treasury. Therefore, the court concluded the garnishment action was also a suit in the substantive sense. Because the garnishment action was a “suit” under the Eleventh Amendment, the Department was entitled to sovereign immunity. Therefore, the court quashed the Fund’s writ of garnishment.
– Sarah Bishop
Decided: June 20, 2013
The Fourth Circuit, holding that the doctrine of res judicata did not bar the Plaintiffs from pursing their claims under the Foreign Sovereign Immunities Act (the “FSIA”), reversed and remanded the decision of District Court for the Eastern District of Virginia.
In 2004, following the October 12, 2000 bombing of the U.S.S. Cole, carried out by Al Qaeda operatives, the families of the victims (the “Plaintiffs”) filed suit against the Republic of Sudan (“Sudan”) under the Death on the High Seas Act (“DOHSA”). In Rux v. Republic of Sudan, the district court found Sudan liable and ordered it to pay damages. Thereafter, Congress passed the National Defense Authorization Act for Fiscal Year 2008 (the “NDAA”). Most relevant to this appeal was NDAA § 1083. Section 1083(a) enacted a private cause of action under 28 U.S.C. § 1605A for certain torts committed by foreign states. Additionally, with respect to pending or decided cases, Section 1083(c) details the circumstances where retroactive application of the newly enacted private cause of action is appropriate. In 2010, the Plaintiffs, joined by four others not party to the 2004 Rux complaint, commenced a new action against Sudan invoking Section 1605A’s private cause of action. Concluding that the doctrine of res judicata precluded the Plaintiffs’ claims, the district court found that there was “no question” that this case arose out of the same transaction as that at issue in Rux and therefore denied the Plaintiffs’ motion for default judgment. Plaintiffs appealed.
On appeal, the Fourth Circuit first addressed the Plaintiffs’ contention that the district court mistakenly applied the limitations period under NDAA § 1083(c). Noting that the various provisions of Section 1083(c) govern how to apply Section 1605A retroactively to pending and previous actions, the court agreed with the Plaintiffs, holding that Section 1083(c) was inapplicable because the Plaintiffs filed this new action directly under Section 1605A. Next, the court turned to consider the res judicata doctrine. First, considering whether the district court erred in considering res judicata sua sponte, the court found that the case presented a “special circumstance,” consistent with Supreme Court precedent; therefore, the district court did not abuse its discretion by considering res judicata sua sponte. Finally, the court considered the district court’s application of the res judicata doctrine. Recognizing that the application of res judicata turns on the existence of three factors, one of which is an identity of the cause of action in both the earlier and the later suit, the Fourth Circuit held that the Plaintiffs’ claims under Section 1605A were not barred. In so holding, the court cited three independent reasons for its conclusion that the earlier and later suits did not share the same identity: (1) the change in statutory law along with substantial public policy concerns at issue in terrorism cases brought under Section 1605A justify an exception; (2) one of the “core values” of the res judicata doctrine—freeing people from the uncertain prospect of litigation—would be ill served in this case by barring the Plaintiffs’ claims, particularly where Sudan failed to appear in the terrorism action filed against it; and (3) applying the res judicata doctrine to claims brought under Section 1605A would effectively shield state sponsors of terrorism and would undermine the congressional purpose for enacting Section 1605A in the first place. Accordingly, the court reversed and remanded to the district court for further proceedings.
-W. Ryan Nichols
Decided: May 22, 2013
Following a complex and extended procedural history, the Fourth Circuit concluded that the Commonwealth of Virginia failed to satisfy the terms of the U.S. District Court for the Eastern District of Virginia’s conditional writ, an operative retry-or-release directive. The Court of Appeals next held that the district court abused its discretion in barring the reprosecution of the petitioner, Justin Wolfe. As such, the Fourth Circuit vacated the district court’s Order Enforcing Judgment and remanded with instructions that the lower court enter a substitute order.
In 2002, a jury in Prince William County, Virginia, found Wolfe guilty of the capital murder of Danny Petrole, of using a firearm in the commission of a felony, and of conspiring to distribute marijuana. According to the Prosecution, Wolfe allegedly hired his friend and fellow drug dealer, Owen Barber, to murder Petrole. Barber, the only witness to testify concerning the “for hire” element, entered into a plea deal in exchange for his testimony. Wolfe was eventually sentenced to death for his murder conviction and received a combined sentence of 33 years for his drug and firearm convictions. Wolfe appealed, and while Wolfe’s petition was pending, Barber executed an affidavit repudiating his trial testimony and exculpating Wolfe from the murder-for-hire scheme. Barber subsequently sought to recant the statements in his exculpatory affidavit, insisting he testified truthfully at trial and had falsified the prior affidavit. Consequently, the district court dismissed Wolfe’s petition. Wolfe timely appealed that dismissal, and the court vacated in part and remanded for further proceedings. On remand, the district court determined Wolfe was entitled to an evidentiary hearing. At this hearing, Barber testified, exculpated Wolfe, and his testimony was credited by the court. The court ruled that the prosecutors in Wolfe’s trial had contravened his Fourteenth Amendment due process rights by failing to disclose favorable and material evidence and alling Barber to testify, despite having information indicating his testimony was false. Therefore, the court granted habeas corpus relief to Wolfe. His “conviction and sentence” were vacated. Wolfe thereafter moved to clarify whether the relief granted on his capital murder conviction also encompassed his firearm and drug convictions. The court issued a Relief Order, explaining that Wolfe was entitled to a new trial on all of the original charges, and it accorded the Commonwealth the option of either providing Wolfe with a new trial, or releasing him unconditionally from custody within 120 days. The Commonwealth appealed, and in Wolfe II the court affirmed the judgment of the district court.
On the same day the court’s Wolfe II mandate issued, Wolfe was transferred from the Sussex State Prison to the Prince William County Adult Detention Center, for a status hearing that set the date for his bond hearing. The following day, the Commonwealth’s attorney and several investigating officers interviewed Barber. In the interview, recorded without Barber’s knowledge, the agents suggested that because his testimony in the federal habeas proceedings was inconsistent with his trial testimony, he had breached his plea agreement and could face reinstatement of his original capital murder charge. In the meantime, a Prince William County grand jury returned new indictments against Wolfe, charging him with six additional offenses in addition to the original charges. Based primarily on the Barber interview, Wolfe filed a motion to dismiss in the circuit court, contending that the prosecutors had engaged in “gross prosecutorial misconduct” because they threatened Barber with the death penalty. The district court subsequently entered its Order Enforcing Judgment, concluding that the Commonwealth had not satisfied either compliance option specified in the Relief Order. Specifically, Wolfe had not been released unconditionally and he had not been retried within 120 days of the Relief Order. Concerning the Barber interview, the lower court determined that “extraordinary circumstances” had been shown warranting a bar to Wolfe’s retrial. The court found that the Barber interview “incurably frustrated the entire purpose” of the federal habeas corpus proceedings, and “permanently crystalized” the constitutional violations infecting Wolfe’s trial, causing Barber to be legally unavailable to testify in a retrial. Consequently, the district court ordered Wolfe’s release within ten days and barred the Commonwealth from reprosecution. The Commonwealth appealed.
Thus, the Fourth Circuit faced two grave issues: whether the Commonwealth complied with the Relief Order, and if so, whether the district court abused its discretion in barring Wolfe’s retrial. The Court of Appeals first held that the district court did not abuse its discretion in ruling that the Commonwealth neglected to satisfy either compliance option. The Commonwealth had a choice: it could either provide Wolfe with a new trial or unconditionally release him from custody. The Commonwealth maintained that since Wolfe’s 2012 bond hearing, his status was that of a pretrial defendant who had been denied bond. The Fourth Circuit, however, disagreed, holding that “releasing Petitioner from the custody of the Virginia Department of Corrections to Prince William County for the purposes of retrial did not constitute releasing Petitioner ‘unconditionally from custody.’” The Commonwealth’s other option for compliance with the Relief Order was to provide Wolfe with a new trial “within 120 days of the date of the Order.” The Commonwealth maintained that as long as proceedings had been commenced it had satisfied its obligation. In the alternative, they suggested that the 120-day retrial period did not begin to run until the issuance of the mandate in Wolfe II. Both contentions were rejected. First, the Fourth Circuit determined that the retrial had to be completed within the 120 day time limit. Second, concerning whether the retrial period ran from the issuance of the mandate, the court explained that the stay pending the Commonwealth’s appeal paused or halted the 120-day deadline imposed by the Court to provide Wolfe a new trial. When that stay was lifted, the deadline clock resumed where it left off when the stay was granted and there were 36 days remaining. The court agreed with the Commonwealth’s complaint that the completion of a retrial of a complex death penalty case within thirty-six days was a practical impossibility; however, they could have, and did not, seek either a clarification or an extension.
The Commonwealth next contended that the district court abused its discretion in barring Wolfe’s retrial. The Fourth Circuit agreed, asserting that preventing the retrial of a state criminal case is the “strongest of medicine” and should be utilized sparingly. The Court held that such limited and narrow circumstances were not present; therefore, the district court abused its discretion in barring Wolfe’s retrial. According to the court, any scenario presenting circumstances sufficiently extraordinary to warrant federal interference with a State’s reprosecution of a successful § 2254 petitioner will be extremely rare, and will ordinarily be limited to situations where a recognized constitutional error cannot be remedied by a new trial. Here, the constitutional claims for which Wolfe was awarded habeas corpus relief were readily capable of being remedied in a new trial.
-Kara S. Grevey
Decided: May 24, 2013
The Fourth Circuit held that the United States District Court for the Eastern District of Virginia properly stayed the appellants’ action in light of a parallel state lawsuit filed earlier by the appellees, finding that the appellants’ action was based on “procedural gamesmanship.”
HomeAway, Inc. operates websites facilitating the rental of private residences by vacationers who choose such residences over hotel rooms. HomeAway’s websites post rental advertisements by homeowners who wish to be contacted for reservations. However, many localities have discovered that, whether out of ignorance or intentional evasion, homeowners often fail to pay local taxes assessed on room rentals. Eye Street Solutions LLC (“Eye Street”) developed computer software to combat this problem: The software purportedly identifies homeowners who fail to pay taxes after renting their homes. Eye Street licensed its software to VRCompliance LLC, which conducts investigations for localities such as the Colorado Association of Ski Towns (“CAST”). HomeAway, in the belief that the Eye Street software was impermissibly accessing its websites, wrote a letter to CAST and Eye Street on December 10, 2010, telling CAST members to stop using the software and alleging violations of state and federal law. HomeAway wrote another round of letters to CAST, Eye Street, and VRCompliance on September 29, 2011, and filed suit against these parties on October 3 in the District Court of Travis County, Texas. Eye Street made no attempt to remove the Texas suit to federal court; instead, Eye Street filed a separate action against HomeAway and its subsidiaries on October 6 in the U.S. District Court for the Eastern District of Virginia, stating claims for both declaratory and non-declaratory relief. HomeAway moved to either dismiss this action for improper venue or transfer it to the relevant federal district court in Texas. The district court stayed the action pending the resolution of the Texas suit, and Eye Street appealed, challenging the stay.
The Fourth Circuit noted that the parties heavily debated the proper standard governing stays of “mixed actions”—that is, actions involving declaratory and non-declaratory claims. On the one hand, Colorado River Water Conservation District v. United States, 424 U.S. 800, aims to ensure that parties have access to a federal forum when this forum is available, allowing stays only in “exceptional circumstances”; on the other hand, Brillhart v. Excess Insurance Co. of America, 316 U.S. 491, and Wilton v. Seven Falls Co., 515 U.S. 277, give district courts broad discretion to stay declaratory actions pending resolution of parallel state proceedings. However, the Fourth Circuit held that a stay was warranted in this case, regardless of the standard used. The court found that, by filing a new action in the Virginia district court instead of trying to remove HomeAway’s suit to a federal court in Texas, Eye Street had engaged in “procedural gamesmanship”—in other words, Eye Street had attempted to gain advantage in the suit by shopping for a strategically favorable forum. Furthermore, HomeAway indicated it would not resist removal of its lawsuit. Thus, the Fourth Circuit found the concerns underlying the stricter Colorado River standard to be ameliorated here, as Eye Street could have simply removed the original suit to federal court in Texas. The Fourth Circuit also found that the district court, which proceeded under the Brillhart/Wilton framework, properly weighed the factors relevant to this standard due to Eye Street’s “procedural gamesmanship,” however, the district court could have properly proceeded under Colorado River as well.
Decided: May 29, 2013
Affirming the District Court for the Eastern District of Virginia, the Fourth Circuit held that petitioners had standing to challenge the constitutionality of a residency requirement for petitions and also held that the residency requirement is unconstitutional.
The Libertarian Party of Virginia (LPVA) circulated petitions in Virginia with the hope to collect enough signatures to place its national candidate for President of the United States on the ballot in November 2012. Virginia law requires 10,000 signatures from qualified Virginia voters, with at least 400 signatures from each of Virginia’s eleven congressional districts. Virginia law also requires the candidate personally or a Virginia resident who can vote to witness the signatures. In May 2012, the LPVA and Darryl Bonner, a Pennsylvania Libertarian and professional petition circulator, filed suit seeking injunctive and declarative relief alleging that the “witness residency requirement impermissibly burdens their rights to free speech and free association under the First Amendment.” The Virginia State Board of Elections (Board) contested the standing of the LPVA and Bonner. The district court rejected the Board’s standing argument and declared the witness residency requirement unconstitutional. The Board appealed.
The Fourth Circuit addressed the standing issue first. The Court held that the encumbrance on the LVPA’s ability to circulate petitions constitutes an injury in fact for standing purposes. The Court also examined standing for Bonner. The Board challenged Bonner’s standing because he was currently injured and thus would not be able to petition signatures; Bonner was suffering from a right knee injury which had “scotched his immediate plans to circulate petitions for the LPVA.” The Court stated that his legal injury “related more closely to his asserted injury than does his physical infirmity,” the residency requirement would impair his ability to petition in 2016, and he still could have sat on a street corner and petitioned people for signatures. Thus, the Fourth Circuit held that both LPVA and Bonner had standing to challenge the residency requirement.
The Fourth Circuit then addressed the merits of the LPVA’s and Bonner’s argument. The Court followed other circuits by applying strict scrutiny analysis to petitioning restrictions like the residency requirement. The Board argued its compelling interest was in preventing election fraud, which the Court and the parties agreed was a compelling interest. The Board argued that the “integrity of the petitioning process depends on ‘state election officials access to the one person who can attest to the authenticity of potentially thousands of signatures, . . . access made more difficult, perhaps, if the witness resides beyond the subpoena power of the state.” The LVPA and Bonner argued that the Board could make out-of-state witnesses sign a binding legal agreement to comply with any civil or criminal subpoena the Board may issue. The Court agreed that this was a less intrusive alternative, and the Board introduced no meaningful evidence to rebut this alternative. Thus, the Fourth Circuit held that the witness residency requirement is unconstitutional.
Jeffrey K. Gurney
Date Decided: May 3, 2013
The Fourth Circuit affirmed the district court’s dismissal of a complaint against four banks located outside the United States for lack of personal jurisdiction.
Plaintiff John Doe, a Virginia resident, purchased prescription drugs online from a business called “Canadian Pharmacy” with his Visa debit card. After not receiving the drugs, Doe tried to contact Canadian Pharmacy with no success. After several unsuccessful attempts to get in tough with Canadian Pharmacy, plaintiff canceled the transaction at his bank and the bank issued the plaintiff a new debit card. Once he cancelled the order, Doe alleges that Canadian Pharmacy inundated him with spam email. A second plaintiff, engaged in the business to track and combat spam emails, joined the action. Plaintiffs collectively filed a complaint against two “pharmacists” that run Canadian Pharmacy and six foreign banks, alleging that all defendants participated in a global conspiracy to sell illegal prescription drugs and violated various state and federal computer crimes laws. Plaintiffs argue that by processing the pharmacists’ transaction on the Visa network, the banks are coconspirators in a global prescription-drug conspiracy. The district court dismissed all banks for lack of jurisdiction, finding that the plaintiffs failed to establish the requisite “minimum contacts” with Virginia to satisfy the Due Process Clause.
On appeal, the plaintiffs first argued that the district court erred in dismissing the claim for lack of personal jurisdiction because the banks were part of a “global conspiracy,” and thus the minimum contacts of the pharmacists, subjecting them to personal jurisdiction in Virginia, were sufficient to subject the banks to personal jurisdiction in Virginia. The Fourth Circuit disagreed. Plaintiffs acknowledged that they could not link Doe’s particular purchase to any one of the defendant banks nor could they link any of the banks with the spam email solicitations. The court found that the banks’ involvement was speculative, and did not constitute sufficient minimum contacts to satisfy the Due Process Clause for the court to exercise jurisdiction. The Fourth Circuit concluded that none of the banks directed business to Virginia or aimed commercial efforts at Virginia. Moreover, even if the banks had actually processed Doe’s prescription drug transaction through the international Visa network, that transaction was too remote to subject the bank to jurisdiction. Plaintiffs also argued that personal jurisdiction was appropriate under Federal Rule of Civil Procedure 4(k)(2), allowing a court to exercise jurisdiction in cases “arising under federal law when the defendant is not subject to personal jurisdiction in a state court but has contacts with the United States as a whole.” The Fourth Circuit again disagreed, emphasizing that the banks’ minimal and indeterminate role in the drug transaction was not enough to satisfy the Due Process Clause.
– Wesley B. Lambert
Decided: May 1, 2013
Reversing and remanding the decision of the United States District Court for the District of Maryland, the Fourth Circuit Court of Appeals held that the district court erred in failing to apply the heightened deference owed to a citizen plaintiff seeking suit in her home forum, as is necessary in a proper forum non conveniens inquiry. The Fourth Circuit also ruled that when conducting the private and public factor analysis relevant to forum non conveniens, the fear and emotional trauma of the plaintiff may be considered in certain situations.
On the evening of September 20th, 2008, Albert DiFederico was serving as a civilian contractor for the State Department in Pakistan. A large dump truck containing explosives tried unsuccessfully to ram through the gate barrier of the Marriott Islamabad Hotel. Though initially ineffective, the truck’s driver proceeded to detonate an explosion inside the cab of the vehicle that eventually ignited the explosives in the back of the truck. A large blast ensued and a fire engulfed the Marriott, killing 56 and wounding over 250, including DiFrederico. His widow and their three sons brought a wrongful death action and survivorship claim alleging that Marriott International (“Marriott”) was liable for its failure to adequately secure its franchise hotel. The DiFedericos brought their suit in the forum of Marriott’s principal place of business, the District of Maryland. The district court granted Marriott’s motion to dismiss on the basis of forum non conveniens, finding that Pakistan was an available, adequate, and far more convenient forum to hear the case.
At the time of the suit, Pakistan’s one year statute of limitations on the claim had run. An expired statute of limitations is usually dispositive in a forum non conveniens analysis; however, an exception exists where it can be shown the plaintiff made a deliberate and tactical decision to run the statute of limitations for the purpose of avoiding dismissal in her preferred forum. (Compania Naviera, 569 F.3d at 202-03). Because the district court failed to point to any evidence substantiating its determination that the DiFedericos made a deliberate and tactical decision to let the statute of limitations run in Pakistan to avoid dismissal, the Fourth Circuit held it was error to conclude the Pakistani forum was available. The Fourth Circuit then reviewed the district court’s analysis of the public and private factors relevant to a forum non conveniens analysis, noting that a citizen plaintiff’s choice of forum is entitled to even greater deference when the plaintiff chooses her “home forum.” The court found that the district court’s failure to consider this heightened standard when conducting its analysis was an abuse of discretion. The appellants’ main argument for convenience and justice was the avoidance of fear and emotional trauma associated with pursuing their case in Pakistan. The Fourth Circuit adopted the Second Circuit’s reasoning in Guidi, finding that the fear and emotional trauma involved in travel for a trial concerning such a politically charged event would give rise to myriad logistical complexities and expenses. The court noted that fear and emotional trauma should be given less consideration if a plaintiff’s fear has no relationship to the events giving rise to the claim, if the level of security threat present is low, and if an alternate, third forum is available. The Fourth Circuit additionally found that the district court mistakenly analyzed several other public and private factors, including the location of the sources of proof, the availability of compulsory process for attendance of unwilling witnesses, and the difficulty in applying foreign law.
-Kara S. Grevey
Decided: April 29, 2013
Affirming the United States District Court for the Eastern District of North Carolina, the Fourth Circuit held that the federal taxation-of-costs statute, 28 U.S.C. § 1920, allowed E. & J. Gallo Winery (“Gallo”) to recover discovery expenses for the limited purposes of converting electronically stored information (“ESI”) to non-editable formats and burning the ESI onto discs, thus prohibiting a more extensive recovery for ESI processing expenses. The Fourth Circuit also ruled that these processing charges did not constitute taxable “fees for exemplification” under this statute.
In 2005, the winery Bodegas Esmeralda designated The Country Vintner of North Carolina, LLC (“Country Vintner”) the exclusive North Carolina wholesaler of a certain Argentinian wine. In 2009, however, Gallo began supplying this wine to North Carolina wholesalers, not including Country Vintner. Country Vintner sued Gallo under the North Carolina Wine Distribution Agreements Act and the North Carolina Unfair and Deceptive Trade Practices Act. Gallo prevailed on these claims and subsequently filed a bill of costs in the district court, aiming to recover $111,047.75 from Country Vintner for expenses involving the processing and production of ESI. Gallo’s expenses included the cost of decompressing container files, extracting metadata, converting documents to a TIFF or PDF format, burning images onto a CD or DVD, and various other ESI-related expenses. The district court determined that § 1920(4), under which a prevailing party may recover “[f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case[,]” allowed Gallo to recover expenses for copying or duplicating the ESI, but not for the underlying ESI processing. Gallo appealed, arguing that some of its ESI processing expenses could be considered “costs of making copies” and “fees for exemplification” under § 1920(4).
The Fourth Circuit first discussed the history of § 1920, noting that, in 2002, a committee of the Judicial Conference of the United States rejected a proposal to extend this statute’s reach to ESI processing expenses. After rejecting Country Vintner’s assertion that § 1920(4) only covers the costs of materials in dispositive motions or materials produced at trial, the Fourth Circuit considered Gallo’s contention that its ESI processing constitutes “making copies” under this provision. The court construed “making copies” to mean “producing imitations or reproductions of original works.” The court also noted that, according to the Supreme Court, the provisions of § 1920 are “modest in scope” and “limited to relatively minor, incidental expenses.” The court then adopted the Third Circuit’s reasoning in Race Tires America, Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158, concluding that while the act of actually copying ESI is taxable, the underlying process leading up to such copying is not. Thus, Gallo could recover the costs of converting files to TIFF and PDF formats, and for burning these files onto CDs—but not the costs of the underlying ESI processing. The Fourth Circuit also found that Gallo’s ESI processing expenses were not “[f]ees for exemplification” under § 1920(4), as these expenses did not involve authentication of public records or demonstrative aids.
– Stephen Sutherland
Decided: April 26, 2013
The Fourth Circuit granted South Carolina’s petition for review and remanded the case to allow the Secretary of the U.S. Department of Education (“USDOE”) to provide South Carolina with notice and an opportunity for a hearing before making a final decision on South Carolina’s waiver for reducing its financial support for special education below the preceding fiscal year in order to receive federal funding under the Individuals with Disabilities Education Act (“IDEA”).
IDEA provides for grants of federal funding to States for the education of disabled children. In order to be eligible, States cannot reduce the amount of its own funding for special education below the amount that was provided by the State the previous year. If a State fails to meet this “maintenance-of-effort” condition, as it has been defined, then the Secretary of USDOE has to reduce the level of federal funding for subsequent years by the amount of the shortfall. In 2011, South Carolina requested a wavier of its “maintenance-of-effort condition” under the IDEA for approximately $67.4 million for the fiscal year ending in 2010. The Secretary of USDOE granted a partial waiver and denied it “to the extent of $36.2 million.” South Carolina then sought a hearing on the decision, but was advised by the USDOE that IDEA does not provide for such a hearing because such a hearing was only limited to situations where the USDOE rejected eligibility of a State for funding or the withholding of funds – neither of which occurred here. South Carolina then filed a petition for review to the Fourth Circuit challenging the denial of the request for a full waiver and requesting a full hearing. The USDOE filed a motion to dismiss and asserted that the Fourth Circuit did not have jurisdiction to consider the petition because the waiver determination was “a final agency action” and “subject to review only in the district court” pursuant to the Administrative Procedure Act (APA).
The Fourth Circuit first addressed the issue of whether it had jurisdiction to consider the petition. South Carolina argued that IDEA’s provisions allows a State to file a petition for review in the court of appeals when the State is arguing an issue with respect to eligibility of the State to receive funding under IDEA. The USDOE asserted that South Carolina was challenging was a USDOE action that did not involve an issue of “eligibility,” but rather death with an issue regarding South Carolina’s “compliance” under the statute. The court held that the language of the statute indicates that conditions on eligibility deal with forward-looking consequences of fund reductions, whereas a condition of non-compliance requires an evaluation of past performance. In this case, the court held that South Carolina’s petition for review of a full waiver of the “maintenance-of-effort” is an “action with respect to eligibility” because it results in the loss of future funding. The court further asserted that a State does not have to be found “completely” ineligible for funding for the court to have jurisdiction. It is enough that the action was based on a partial reduction of funding based on a failure to satisfy an eligibility condition like the “maintenance-of-effort” condition. The court next turned to whether South Carolina was entitled to notice and an opportunity for a hearing. On this second issue, the USDOE again argued that South Carolina’s waiver request was not an eligibility determination and did not involve a withholding and, as such, the statute did not require notice and a hearing. Based largely on its prior reasoning, the court held that the partial denial of the maintenance-of-effort waiver does constitute an eligibility action and, therefore, South Carolina is entitled to notice and a hearing. The court’s logic focused on the fact that “[w]hen the USDOE decided that South Carolina was only entitled to partial wavier . . . it made a determination that the ‘State was not eligible’ for the funding it otherwise would have received.” Therefore, South Carolina was entitled to notice and a hearing.
– John G. Tamasitis
Decided: April 25, 2013
Affirming the United States District Court for the Eastern District of Virginia, the Fourth Circuit held that it did not have subject-matter jurisdiction to review the National Geospatial-Intelligence Agency’s (“NGA”) security clearance decision.
In January of 2010, after obtaining the necessary top-secret security clearance, Hegab began working for the NGA—a member of the U.S. Intelligence Community and a Department of Defense Combat Support Agency—as a financial/budget analyst. Soon thereafter, Hegab notified the NGA that, following his security clearance investigation, he married Nusairat. Thus prompting the NGA to reinvestigate their initial decision. On November 2, 2010, Hegab was notified that a preliminary decision had been made to revoke his security clearance effective November 18, 2010. On January 7, 2011, he was placed on unpaid administrative leave. The proposed revocation was based on information about Nusairat, as well as earlier information provided during Hegab’s initial investigation. Specifically, the NGA provided Hegab with a Statement of Reasons listing seven facts on which their decision was based. In a detailed response to the NGA’s file supporting their decision, Hegab attempted to explain the evidence. Nonetheless, on March 4, 2011 a final decision was issued revoking his security clearance. The decision informed Hegab that, while his response had mitigated some of the NGA’s concerns, it failed to mitigate his wife’s current affiliation with one or more groups organized largely around their non-United States origin and/or their advocacy of or involvement in foreign political issues; thus raising the potential for conflicts of interest. Subsequently, Hegab unsuccessfully appealed the decision to the NGA Personnel Security Appeals Board. Seeking review of the Board’s decision, this action was commenced against the NGA and its Director, Letitia Long, in her official capacity. In six counts, Hegab alleged that his constitutional rights were violated. However, the District Court found that, though framed as constitutional violations, Hegab’s claims went to the merits of the NGA’s decision to revoke his security clearance. Therefore, the District court dismissed for lack of subject-matter jurisdiction.
On appeal, the Fourth Circuit was faced with the issue of where to draw the line between the political question of reviewing the merits of a security clearance decision and the judicial question of whether an Executive Branch agency violated an individual’s constitutional rights when revoking or denying said individuals security clearance. Harkening to separation of powers concerns, the court noted that federal courts are generally without subject-matter jurisdiction to review an agency’s security clearance decision. However, the court went on to say that, where an individual presents a colorable claim that his constitutional rights have been violated by an agency’s security clearance decision, judicial review might be available although the courts have not yet resolved this question. Nonetheless, in affirming the District Court, the Fourth Circuit concluded that it was unnecessary to decide where to draw the line in this case because Hegab’s conclusory constitutional claims were merely unsuccessful attempts to challenge the merits of the NGA’s decision. In so holding, the court emphasized the fact that Hegab did not allege any facts to support a claim that anyone at the NGA held the hypothesized bias; rather, the alleged bias was the speculative product of an ambivalent allegation in the complaint that the NGA security staff either failed to take the time or effort to review the available information or were biased against Islam.
– W. Ryan Nichols
Decided: April 15, 2013
The Fourth Circuit affirmed the district court’s dismissal of plaintiffs’ complaint under the Administrative Procedures Act (APA) for lack of subject matter jurisdiction because the U.S. Army Corps of Engineers (“Corps”) failed to take “final agency action” that is subject to judicial review under the APA. The Fourth Circuit also affirmed the dismissal of plaintiff’s breach of contract action, finding that the letters at issue did not create a contract that would justify the exercise of admiralty jurisdiction.
In the 1980s and 1990s, the Corps advanced proposals to widen and deepen the 37-mile channel in Cape Fear that allows access to the deep-water port in Wilmington, North Carolina. Before beginning construction in 2000, the Corps discovered rock at the bottom of the channel, requiring the Corps to revise its original harbor project. Plaintiff contended that the revisions would cause ecological damage to its beaches. After exchanging letters, the Corps adopted a plan agreeable to the plaintiff. The plan included semi-yearly maintenance programs designed to replenish sand on the plaintiff’s beaches. The Corps completed the harbor project in 2002. In the winter of 2011, the Corps informed the plaintiff that it had to curtail the maintenance program for budgetary reasons. Plaintiff filed a complaint against the Corps alleging breach of the maintenance plan, seeking specific performance. The district court dismissed the complaint for lack of subject-matter jurisdiction, holding that the claims under the APA were not “final agency action” that was subject judicial review, and that the court lacked admiralty jurisdiction over the remaining claims. Plaintiff appealed on both counts.
On appeal, plaintiff first argued that its APA claims constitute “final agency action” subject to judicial review either as “physical activities in the field,” or, in the alternative, as a reviewable “failure to act.” The Fourth Circuit disagreed, holding that performance of the maintenance plan failed to meet the definition of “agency action,” much less “final agency action” under the APA. The court determined that “agency action” under the APA concerns project approval rather than the project performance, which the plaintiff challenged in this case. Additionally, the Corps’ performance in maintaining the plaintiff’s beaches could not be “agency action” because it was ongoing and not “circumscribed and discrete” as required by the APA. The court said that injecting itself into the Corps’ maintenance plan would place itself into “the role of monitoring whether the Corps had complied with vague, undefined corrective measures,” which was far from a discrete agency action. Furthermore, even assuming that the Corps’ maintenance plan constituted agency action, the court held that it still failed to rise to the level of “final agency action,” finding that the final action occurred when the Corps approved the plan in 2000, and not when the Corps implemented the maintenance plan. Similarly, the court held that the failure to comply with the maintenance plan was not a reviewable “failure to act” because failing to perform the maintenance plan did not equate to a failure to take a discrete “agency action.” The court found that the plan was only a projection of its performance, and thus, not a binding commitment to the plaintiff.
Plaintiff also argued on appeal that the district court erred in holding that it did not have admiralty jurisdiction over the contract that the plaintiff alleges was created in the the letters between itself and the Corp. The Fourth Circuit disagreed, finding that the alleged contract concerned the maintenance of beaches, rather than the required “maritime commerce” that gives rise to admiralty jurisdiction. While the harbor project as a whole constituted “maritime commerce,” the letters expressed concerns about the preservation of the plaintiff’s recreational and aesthetic interests. Moreover, the court reiterated its earlier holding that the letters did not create binding commitments on the Corps that gave rise to an enforceable contract.
– Wesley B. Lambert
Decided April 12, 2013
The Fourth Circuit Court of Appeals affirmed the district court’s dismissal of the plaintiff’s claims challenging sections 9.1–900 et seq. and 18.2-370.5 of the Virginia Code, as well as the policy of the Spotsylvania County School Board (“the Board”) for implementing the Code, on the basis that the claims were not justiciable.
The plaintiff, Jane Doe (“Doe”), had a sexual relationship with a minor child who was a student under her supervision. For this Doe was convicted in 1993 of the felony of having carnal knowledge of a minor, without the use of force. Under the Virginia Code at that time, Doe was required to publicly register as a sex offender, but could after a certain period of time petition a Virginia circuit court for removal from the Registry. However, in 2008, an amendment reclassified Doe’s conviction as a “sexually violent offense.” Sexually violent offenders cannot petition for removal from the Registry and, therefore, remain on it for life. In addition, sexually violent offenders are forbidden from accessing any school property without a successful petition from both (1) a circuit court and (2) a school board or owner of a private daycare. Therefore, under this classification, Doe must first successfully petition a school to access any school property, specifically that of her eleven-year-old stepson and two biological children nearing school age. Without a petition, Doe cannot attend parent-teacher conferences or other school functions, nor can she drop off or pick up her kids from school. Doe contended that this would force her to home school the children. Although she did not actually attempt to petition the school, Doe challenged this requirement on the basis that she could not acquire such a petition without revealing her identity and thereby tarnishing her family’s reputation.
Rather than petitioning either a circuit court or the school board, Doe instead brought a complaint against the Superintendent of the Department and the Board, alleging violations of her substantive due process, procedural due process, associational, and free exercise rights. Most notably, Doe alleged that the defendants infringed upon her fundamental right to raise and educate her children and that the Board violated her right to procedural due process by failing to provide her with a procedure by which she may anonymously petition to enter school property. She petitioned the court to declare the reclassification and, therefore, its registration and petition requirements unconstitutional and to order the Board to implement an anonymous petition procedure.
The Court of Appeals reviewed de novo the district court’s dismissal of Doe’s claims for lack of ripeness and standing. To have Article III standing, Doe must have an (1) actual injury, (2) that is traceable to the conduct, and (3) likely to be redressed. Because Doe has not yet attempted to petition, the court found that the injury arising from the Board’s lack of an anonymous procedure was only hypothetical, rather than “actual or imminent.” The court did, however, recognize an actual injury to Doe as a result of the Superintendent’s making her reclassification publicly available in the Registry without affording her a challenging procedure. Therefore, the court did find the requisite injury for standing in Doe’s procedural due process claim against the Superintendent but not in her substantive due process claim against the Board. The court then addressed the standing requirements of traceability and redressability. Both prongs become problematic when third persons not party to the litigation must act in order for an injury to arise or be cured. Because the Virginia statute allows for third parties to grant her permission to enter the school properties, the court found that Doe could not establish either prong. Doe’s right to access school property depends on the school, rather than the court. Where she has not petitioned the school, which is the entity with final authority over the matter, the court’s relief might not redress Doe’s injury. Regarding the claim against the Board for lack of an anonymous petition procedure, the court also declined to find redressability. Even if such a procedure were implemented, the statute still requires court approval for a successful petition and, therefore, the Court of Appeals declined to find redressability where relief was dependent on an additional party. However, the court did recognize traceability and redressability where Doe’s injury was the reclassification itself.
The court then addressed the ripeness requirement, which is determined by balancing the fitness of the issues for judicial decision with the hardship to the parties of withholding court consideration. Because Doe had not yet petitioned, the court found that the issues were not fit for judicial decision. The court also found that the Virginia law would not cause her undue hardship. However, again the court did recognize ripeness of Doe’s procedural due process claim, where her injury arose from the reclassification itself, rather than a speculative petition process. But, even though the court recognized standing and ripeness of Doe’s procedural due process claim, it did not withstand Federal Rule of Civil Procedure 12(b)(6). The court cited to the Supreme Court’s holding in Conn. Dep’t of Pub. Safety v. Doe requiring the registry information for all sex offenders to be publicly disclosed- whether the offenders have been proven dangerous or not.
– Sarah Bishop
Decided: April 11, 2013
The Fourth Circuit affirmed the decision of the district court and held that (1) the employees’ union had adequately consented to the notice of removal of the action to federal court; (2) that temporary employees who brought the action failed to state a claim for relief; and (3) the district court did not err granting a motion to strike the temporary employees’ motion for reconsideration.
Five current or former Temporary Employees of the Board of Education of Prince George’s County, Maryland (the “School Board”) filed a class action complaint in state court against the School Board and the employees’ labor union (the “Union) asserting employee-compensation claims. The Temporary Employees claimed that, even though a collective bargaining agreement (“CBA”) excluded “temporary employees” from the “bargaining unit,” they nonetheless should have been entitled to benefits of an arbitration award. The arbitration award at issue was based on a grievance filed by the Union against the School Board. The Union asserted that the School Board’s practice of hiring temporary or substitute employees and retaining them in the same position for more than 60 days was in violation of the CBA. The arbitrator decided the School Board’s conduct did, in fact, violate the CBA and issued a decision that directed, inter alia, the Union and School Board to reach a settlement agreement. Under the settlement agreement, the School Board agreed to pay over $1 million in back-pay and agreed to hire an additional number of full-time “bargaining unit employees.” The Temporary Employees subsequently filed a class action seeking a declaratory judgment that the arbitration award applied to their class as well as the permanent employees. They also claimed that the Union “breached its duty of fair representation by fraudulently misleading” the Temporary Employees about the arbitration decision and accepting a payoff from the School Board. The Temporary Employees also asserted that, based on being employed by the School Board for more than 60 days in the same position, should be considered third-party beneficiaries under the CBA and therefore entitled to the same compensation and benefits as full time employees.
The School Board filed a notice of removal, pursuant to 28 U.S.C. § 1441, in which they stated that the Union had been consulted and consented to the removal of the action to federal court. Shortly after the case was removed, the Union filed a motion to dismiss the complaint for failure to state a claim. The Temporary Employees opposed the motion to dismiss and filed a motion to remand the case back to state court. They argued that the Union’s should have been required to file its own notice of removal and, as a result, the removal was “defective.” The motion to remand was denied by the district court and it also dismissed all claims under Rule 12(b)(6). The Temporary Employees then filed notice of appeal and, several weeks later, filed a motion in the district court requesting reconsideration on the order dismissing the complaint. The School Board filed a motion to strike the motion for reconsideration on the grounds that it was untimely. The district court granted the School Board’s motion to strike. On appeal, the Temporary Employees asserted, inter alia, (1) that the Union’s consent to removal was inadequate; (2) that the district court incorrectly concluded the Union did not owe the temporary employees a duty of fair representation and they were not entitled to the arbitration award; (3) that the district court erred in dismissing the claim for breach of the CBA under the “third-party beneficiary theory”; and (4) that the district court abused its discretion by striking its motion for reconsideration.
First, the Fourth Circuit tackled the challenge to the removal petition. The court noted that it had not yet addressed the precise issue of what constituted adequate notice of removal for multiple defendants. The Temporary Employees asserted that because the Union had not signed the notice of removal nor did it file its own notice in a timely manner or provide written consent to the School Board’s notice, the removal was defective and should be remanded back to state court. The court admitted that the text of 28 U.S.C. § 1446, which provides the requirements for removal, “does not address how a case involving multiple defendants is to be removed or how the defendants must coordinate removal, if coordination is required.” Based on Supreme Court precedent, the only requirement was that of “unanimous consent” which requires all defendants to consent to removal. However, binding precedent had yet to specify, “how [multiple] defendants are to give their ‘consent’ to removal.” According to the court, some circuits have adopted a “formal approach” that requires a signature from all defendants to constitute a proper petition for removal. Other circuits have adopted a “less formal process” which is akin to what the defendants in this case did. The Fourth Circuit adopted the “less formal process” and concluded that, “a notice of removal signed and filed by an attorney for one defendant representing unambiguously that the other defendants consent to the removal satisfies the requirement of unanimous consent for purposes of removal.” Next the Fourth Circuit took up the Temporary Employees’ allegation that the Union breached its “duty of fair representation.” The Fourth Circuit affirmed the district court’s decision to dismiss the claim because it agreed with the lower court that the Union owed no duty to the Temporary Employees because the arbitrator’s decision limited the award only to “permanent employees” and expressly rejected including temporary employees who were not identified in the CBA as being part of the “bargaining unit.” In addition, the Fourth Circuit upheld the district court’s dismissal of the Temporary Employees’ “third-party beneficiaries” theory. The court again relied on the expressed language in the CBA that excluded Temporary Employees from the bargaining unit and, as a result, rejected the theory as against the plain language of the CBA. Finally, the Fourth Circuit agreed with the district court and affirmed its decision to grant the School Board’s motion to strike the motion to reconsider the court’s order dismissing the complaint. Though the district court did not provide any rationale for its decision on this issue, the Fourth Circuit surmised that it could have been decided based upon the fact that the Temporary Employees’ motion was filed after the 28-day period as governed by Rule 59(e) and, “more importantly,” the Temporary Employees did not advance a new argument that would require the district court to alter its judgment.
– John G. Tamasitis
Decided: March 25, 2013
The Fourth Circuit Court of Appeals affirmed the district court’s dismissal of Washington Gas Light Company’s (Washington Gas) claim and grant of summary judgment in favor of Prince George’s County (the County). The Court held dismissal of a mandatory referral claim was proper under the abstention rules of Burford and that summary judgment was proper because the two laws alleged did not preempt county zoning ordinances.
Washington Gas operates a natural gas substation in Prince George’s County, Maryland. In 2004, Washington Gas sought to expand the substation to include liquefied natural gas storage. Washington Gas requested approval for the expansion from the County, which denied it based on recently enacted county zoning plans that prohibited industrial use in the area of the substation. After the denial, Washington Gas filed a federal action against the County seeking a declaration that the County erroneously denied the company permission to proceed under Maryland’s mandatory referral statute; a declaration that the National Gas Pipeline Safety Act (PSA), Natural Gas Act (NGA), and state law preempt county zoning regulations; and, finally, an injunction prohibiting enforcement of the zoning plans. In an order dated February 9, 2009, the district court first dismissed the mandatory referral claim for failure to state a claim upon which relief could be granted and on Burford abstention grounds. The court stated that the mandatory referral law did not provide a state law cause of action or federal question, and federal adjudication of the issue would frustrate state efforts to establish coherent policies regarding zoning. On March 9, 2012, the district court granted summary judgment on the preemption claims and thus denied the request for an injunction. The court concluded that the PSA only applied to safety standards, so the County Zoning Plans were not preempted. Also, the NGA does not preempt because Washington Gas is a local distributor exempt from NGA regulation. Washington Gas appealed the dismissal based on Burford and the ruling that the PSA and NGFA do not preempt county zoning laws.
The Fourth Circuit first stated that Burford abstention is allowed where the federal forum would frustrate and intrude on a state’s complex administrative system. Maryland’s mandatory referral statute allowed for certain privately owned utilities to be exempt from zoning, but the County had ruled this did not apply to Washington Gas. Plaintiff argued the question was one of straightforward statutory construction. The Fourth Circuit disagreed, pointing out that it certified a question regarding the language in the statute to the Maryland Court of Appeals previously. The Court held that abstention is proper where plaintiffs’ federal claims stem solely from construction of state or local land use or zoning law, not involving the constitutional validity of the same and absent exceptional circumstances. When turning to preemption, the Court noted that the PSA seeks to prevent harm from underground pipelines, and that the PSA preempts state laws with regards to safety. However, the county zoning plans are not safety regulations. Furthermore, since Washington Gas could comply with both the PSA and zoning laws, the PSA does not preempt. Finally, the Court looked to provisions of the NGA that stated gas companies that deal in interstate commerce are subject to the NGA, while local distributors are subject to local regulations. Even though Washington Gas technically provides service to customers in numerous states, the NGA allows the Federal Energy Regulatory Commission to make a determination about companies whose service areas straddle stat lines. Here, the FERC had determined that Washington Gas was still a local provider. Therefore, Washington Gas is subject to local, not federal, regulation.
Decided: March 18, 2013
The Fourth Circuit Court of Appeals reversed the dismissal of a qui tam action that the district court held was barred by the statute of limitations and the first-to-file bar under the False Claims Act (“FCA”). Carter brought a qui tam action against Halliburton Company, KBR, Inc., Kellogg, Brown, & Root Services, Inc. (collectively “KBR”) for alleged fraudulent billing of the United States for services provided to the military serving in Iraq. KBR provided logistical support to the United States military in Iraq under a government contract; Carter worked for KBR in a water purification unit. Carter alleged that no water purification took place for over four months when KBR represented it was and was billing the government during that time, and further, that employees were instructed to submit time sheets for 12 hour days, 7 days per week when that time was not actually worked. Carter’s action was originally filed February 1, 2006; the complex procedural history of his complaint involved his lawsuit being dismissed twice and this action was re-filed on June 2, 2011. The district court held his action was barred by the statute of limitations, but Carter alleged, and the Fourth Circuit agreed, that the Wartime Suspension of Limitations Act (“WLSA”) tolled the statute of limitations.
Under the WSLA, the running of the statute of limitations is tolled for actions involving fraud against the United States until three years after the termination of hostilities as proclaimed by the President. The question presented to the court was what the term “at war” means for the purposes of the WSLA. The Fourth Circuit determined that the term does not require a declaration of war, and the “at war” status ceases at the time of a Presidential proclamation. Therefore, the WLSA governs the relevant time period in this action. Next, the Court interpreted the term “offense” in the WLSA to include civil actions like this one and rejected KBR’s argument that it applies only to criminal cases. The Court also concluded that the WLSA does apply only to cases that are brought by a relator, and not to cases where the United States is a party as KBR alleged.
Next, the Court considered whether Carter’s action was barred by the first-to-file rule under the FCA. The Court adopted the “material elements” test which states that a later suit is barred if it is based upon “the same material elements of fraud” as the earlier suit even if the allegations include somewhat different details. The two other lawsuits that barred Carter’s suit were both dismissed; therefore, those lawsuits cannot have a preclusive effect on Carter’s suit. KBR argued in the alternative that the Court should affirm the dismissal on the alternative ground of the public disclosure bar. The FCA’s public disclosure bar removes subject matter jurisdiction for FCA claims that are based upon matters that have been disclosed publicly unless the relator was the original source of the allegations. The Court declined to address this issue for the first time on appeal. The case was reversed and remanded to the district court.
Judge Wynn wrote separately in concurrence to respond to the dissent and emphasize the reasoning why the Court held that the WLSA applied to the instant case. Judge Agee wrote separately concurring in part and dissenting in part. Judge Agee agreed with the majority that the first-to-file bar did not bar this case, but did not agree that the WLSA applied to toll the statute of limitations.
-Jennifer B. Routh
Decided: March 15, 2013
In this case, a daycare center located in the City of Fredericksburg, Virginia, filed a lawsuit against the city after the city council had denied the center’s application to extend its daycare program to disabled children. The plaintiff asserted a number of claims arising under federal law, but the U.S. District Court granted the defendant’s motion to dismiss the complaint. Following this dismissal, the plaintiff filed a “Motion for Leave to File Amended Complaint” under Federal Rule of Civil Procedure 15. The district court denied this motion without undertaking any Rule 15 analysis to determine whether to accept an amended complaint.
On appeal, the Fourth Circuit held that the district court had properly denied the plaintiff’s motion to amend their complaint. The court stated: “We have repeatedly held that a motion to amend filed after a judgment of dismissal has been entered cannot be considered until the judgment is vacated.” Because the plaintiff had waited until after its complaint had been dismissed by a final judgment to file its motion, there was no longer an existing complaint able to be amended. Thus, Rule 15’s liberal standard for allowing pleading amendment was inapplicable. Instead, at this point, the plaintiff’s options were either to appeal the decision to dismiss or to move to open or vacate the judgment under Federal Rule of Procedure 60(b)—none of which had been done.
-John C. Bruton, III
Decided: March 14, 2013
The Fourth Circuit Court of Appeals reverse the district court’s ruling that vacated a jury verdict in favor of Georgia-Pacific and awarded judgment to Von Drehle based on a preclusion defense. The Court found the district court was in error because Von Drehle waived the preclusion defenses and the district court erred by considering the defenses sua sponte.
The original dispute in this appeal was a contributory trademark infringement case brought by Georgia-Pacific in 2005 involving its automatic paper towel dispensers and the paper towels used in those dispensers. The Fourth Circuit originally heard an appeal from the district court’s granting of summary judgment for Von Drehle. See Georgia-Pacific Consumer Products, LP v. Von Drehle Corp., 618 F.3d 441 (4th Cir. 2010). In August of 2010, The Fourth Circuit remanded the case for a jury determination of whether Von Drehle was liable for contributory copyright infringement. Three months after the Fourth Circuit’s decision, Von Drehle sought to amend its answer to include the affirmative defenses of claim and issue preclusion. These defenses were based on the supposedly preclusive effect of a federal district court in Arkansas’s ruling in favor of a Von Drehle distributor. More than 480 days had elapsed since the Arkansas court’s ruling and Von Drehle’s motion to amend. The district court denied the request to amend, ruling that Von Drehle did not assert the defenses in a timely matter, and that the change was prejudicial to Georgia-Pacific. At trial, the jury issued a verdict in favor of Georgia-Pacific. The district court then ordered a judgment vacating the judgment and awarding judgment in Von Drehle’s favor, based on the preclusive effect of the Arkansas ruling. Georgia-Pacific appealed from that judgment.
The Fourth Circuit ruled that the district court erred in vacating the jury verdict and by applying the preclusive defenses sua sponte. The Court noted that issue and claim preclusion are affirmative defenses that must be plead or they will be waived. Even if the defenses are not available at the outset of litigation, a party can waive them if they wait too long to assert them. Von Drehle did not raise these defenses at the first reasonable opportunity and allowed three significant opportunities conclude before asserting them: the time between the Arkansas decision and the grant of summary judgment, the 12 month period that the 4th Circuit maintained jurisdiction in the original appeal, and the three months from the Court’s decision and Von Drehle’s motion. Also, the district court should not have applied the defenses sua sponte, because this is only allowed in “special circumstances.” One such special circumstance is when a certain defense is not known to a court during trial. Here, this was not the case and Von Drehle did not prove any other special circumstances.
-Jonathan M. Riddle
Decided: March 5, 2013
Thirteen North Carolina residents brought suit after a statutory change imposing stricter eligibility requirements for in-home personal care services (“PCS”) eliminated their access to in-home PCS. The residents (“the PCS recipients”) contended that the new restrictions on the PCS program violated the Social Security Act, the Americans with Disabilities Act, and the Rehabilitation Act. Additionally, the PCS recipients alleged that the boilerplate termination letters they received did not meet the Fourteenth Amendment’s due process requirements. The district court granted the PCS recipients’ motion for a preliminary injunction and motion for class certification. Delia, Acting Secretary of the North Carolina Department of Health and Human Services (“DHHS”), appealed.
On appeal, DHHS contends that: (1) the district court lacked subject matter jurisdiction; (2) the district court erred in granting the motion for class certification; (3) the injunction qualifies as a mandatory preliminary injunction which necessitates a heightened standard of review; (4) the PCS recipients failed to make a case for a preliminary injunction; and (5) the district court’s order does not satisfy Rule 65 of the FRCP. The Court of Appeals found that a preliminary injunction was appropriate in this case, but that the district court’s order failed to comply with Rule 65. As such, the Court remanded the case to allow the district court to revise the order.
The Court of Appeals rejected DHHS’ first contention—that the controversy is moot and not ripe for review such that the district court lacked subject matter jurisdiction—finding that it lacked merit. Next, the Court addressed DHHS’ argument regarding class certification, noting that, pursuant to 28 U.S.C. § 1292(a)(1), it could not review the district court’s class certification decision on appeal unless the class certification issue was inextricably bound up with the injunction. The Court found that the class certification was distinct from the preliminary injunction, and thus the issue was not properly before the Court on appeal. The Court also rejected DHHS’ argument that the injunction qualifies as a mandatory preliminary injunction—which necessitates a heightened standard of review—finding that when the PCS recipients filed their motion for a preliminary injunction, the injunction sought to prohibit implementation of the new policy regarding in-home PCS, and thus was prohibitory rather than mandatory.
The Court of Appeals then turned to DHHS’ argument that the preliminary injunction was improperly granted. The Court found that the district court misapplied the Winter factors, but nonetheless affirmed the court’s judgment in favor of the PCS recipients on the issue, applying a different line of reasoning to find that the pubic interest prong of the Winter test was satisfied. The Court then addressed DHHS’ final argument and agreed that the district court’s order failed to comply with Rule 65. However, the Court decided to remand the case without vacating the order, instead allowing the district court to revise the order to such that it complies with Rule 65.
In summary, the Court of Appeals found that a preliminary injunction was appropriate, but that the district court’s order failed to comply with Rule 65. As such, the Court remanded the case to allow the district court to revise the order.
Judge Agee, in dissent, found the district court’s grant of a preliminary injunction to be an abuse of discretion and would have vacated the district court’s order and remanded for further proceedings.
– Kassandra Moore
Decided: January 11, 2013
The Fourth Circuit Court of Appeals affirmed the decision of the district court to dismiss relator’s action under the False Claims Act. The court of appeals found that the district court did not abuse its discretion.
Noah Nathan (Relator) is a sales manager for Takeda Pharmaceuticals (Takeda) and brought this action against his employer under the False Claims Act. Relator claimed that certain types of drugs that have not been approved by the Food and Drug Administration (FDA) are not reimbursable under federal health insurance programs. Relator claimed that since these drugs were not reimbursable, presenting a claim for payment for these drugs was a violation of the False Claims Act. The Act prohibits anyone from knowingly “caus[ing] to be presented” to the government false claims for payment or approval. The district court dismissed the case on two grounds: (1) the complaint did not allege the “presentment” of a false claim to the government for payment; and (2) the complaint also failed to adequately allege causation.
The court of appeals held that the Relator did not meet the pleading standards of Rule 9(b) of the Federal Rules of Civil Procedure. Rule 9(b) requires a False Claims Act plaintiff to provide “some indicia of reliability” that an actual false claim was presented to the government. The court of appeals found that the Relator did not provide evidence of any false claims being submitted to the government but only general allegations. The False Claims Act requires more specific allegations than those given by the Relator. Since the Relator’s amended complaint was speculative, the motion to dismiss granted by the district court was affirmed.
Decided: December 17, 2012
This case is arises from the Duke lacrosse scandal involving false rape charges made against members of the 2005-2006 lacrosse team. Three groups of plaintiffs brought suit against the City of Durham alleging various causes of action stemming from the alleged mishandling of the rape charges; the City and its officials asserted various immunities from suit and moved to dismiss or for summary judgment as to all claims asserted against them. The district court granted those motions in part and denied in part; the Fourth Circuit Court of Appeals affirmed in part, dismissed in part, reversed in part, and remanded for further proceedings.
On March 13-14, 2006, many members of the Duke lacrosse team attended a party at the home of team member David Evans, Daniel Flannery, and Matthew Zach. One of the hosts hired two exotic dancers who performed from 12 a.m. until 12:04 a.m. One of the dancers, Mangum, claimed that she had been raped by as many as five men after performing at a bachelor party. Over the course of the evening and over the next several days, Mangum provided many inconsistent versions of her alleged rape. Despite a lack of credible evidence, the investigation was continued by City of Durham Officers Gottlieb and Himan. When District Attorney Michael Nifong took over the case, and directed Gottlieb and Himan in the investigation, Nifong realized the weakness of the case and responded, “You know, we’re f*cked.” However, the investigation continued. Nifong pursued and obtained indictments against Collin Finnerty and Reade Seligmann for first-degree rape, first-degree sex offense, and kidnapping. Nifong intentionally misstated and misrepresented material facts related to the investigation; Nifong was later disbarred for his conduct during the Mangum investigation and prosecution. A fuller account of the facts and timeline related to this investigation are available in the full opinion.
One group of plaintiffs asserted a malicious prosecution claim against Officers Gottlieb and Himan; the district court denied the officers’ motions to dismiss because the plaintiffs were arrested pursuant to an indictment obtained by the intentional or reckless creation of false or misleading evidence used before the grand jury that was necessary to a finding of probable cause. The Fourth Circuit held that an independent act of a prosecutor or grand jury can break the causal chain and the fact that the prosecutor misled the grand jury does not render police officer liable. Alternatively, the plaintiffs argued that the officers conspired with Nifong to conceal and fabricate evidence, and they unduly pressured Nifong to seek the indictment. However, the Fourth Circuit rejected this theory on the basis that it is contrary to the purpose of qualified immunity that police officers could be held liable for working with a prosecutor on an investigation. The court held that “a prosecutor’s independent decision to seek an indictment breaks the causal chain unless the officer has misled or unduly pressured the prosecutor.” The court reversed the district court’s denial of the officers’ motions to dismiss the malicious prosecution claims against them.
The other two groups of plaintiffs alleged § 1983 claims against the officers based on asserted unlawful seizures of evidence pursuant to a state non-testimonial order (NTO). The plaintiffs claimed that the NTO flowed from dishonest conduct by the officers in their supporting affidavits. The district court denied the officers’ motion to dismiss these claims. The Fourth Circuit reversed the dismissal because even with false statements in their affidavits the plaintiffs could not demonstrate that the statements were material or necessary to the authorization of the search. Ryan McFayden individually also asserted a § 1983 claim for the allegedly unlawful search and seizure of his apartment and car. However, his individual claim failed as well because the affidavit, without the false statements, still provided adequate support for the search warrant.
Based on the § 1983 claims, the plaintiffs asserted supervisory liability against City supervisory officials. The district court denied the City and its officials’ motions to dismiss these claims. The Fourth Circuit reversed the district court. The claims require a predicate constitutional violation and because the court held that the plaintiffs failed to state §1983 claims they also failed to state supervisory liability claims.
The plaintiffs also asserted state common-law tort claims against the City. The City moved for summary judgment on the basis of governmental immunity, and the district court denied the motion for summary judgment. The plaintiffs argued that there was a genuine issue of material fact regarding whether the City had waived its immunity by purchasing liability insurance, but the Fourth Circuit disagreed and reversed the district court’s denial of the motion for summary judgment.
The plaintiffs asserted state common-law tort claims against the police officers. The district court denied the motion to dismiss a claim for malicious prosecution brought against Officers Himan and Gottlieb, but granted a motion to dismiss brought against another officer named Addison. The Fourth Circuit reversed the district court’s judgment regarding Officer Addison and affirmed the court’s judgment regarding Officers Himan and Gottlieb concluding the plaintiffs had stated a claim for malicious prosecution.
The Fourth Circuit reversed the district court’s denial of the officers’ motion to dismiss a common-law obstruction of justice claim because there is no precedent recognizing an obstruction of justice claim against a police officer for his actions relating to a criminal proceeding. Finally, the City asked the Fourth Circuit to exercise pendant appellate jurisdiction over the district court’s denial of the City’s motions to dismiss all three sets of plaintiffs’ state constitutional claims. However, the Fourth Circuit held that neither rationale required for pendant appellate jurisdiction was present and declined to exercise jurisdiction.
Judge Wilkinson wrote separately to concur and emphasize his concern about the overreach of the plaintiffs’ complaints and the slow pace of the litigation due to the number of causes of action and defendants. While emphasizing that the plaintiffs were innocent of criminal wrongdoing, Judge Wilkinson expressed concern that, in a civil context, the plaintiffs were pulling individuals into a coercive proceeding when they have no business being there similar to their plight as criminal defendants.
Judge Gregory wrote separately concurring in part and dissenting in part. Judge Gregory would have dismissed all state common law claims against all individual defendants based on the North Carolina doctrine of official immunity.
-Jennifer B. Routh
Decided: November 30, 2012
Jonathan Blitz, his wife Marla Tuchinsky, and their minor child EB (“Plaintiffs”) challenged the district court’s dismissal of their complaint for lack of subject matter jurisdiction. The Plaintiffs’ complaint challenged the use of advanced imaging technology (“AIT”) scanners and pat-downs at airport screening checkpoints. According to the district court, § 46110 of Title 49 vests exclusive jurisdiction to an appropriate court of appeals for challenges to “orders” issued by the Administrator of TSA. The Plaintiffs argued that the district court erred in dismissing their complaint because the TSA’s standard operating procedures (“SOP”) for checkpoint screening— which includes AIT scanners and passenger pat-downs— does not constitute an “order” under §46110. In the alternative, the Plaintiffs argued that §46110’s conferral of exclusive jurisdiction to a court of appeals is unconstitutional. The Court of Appeals rejected the Plaintiffs’ arguments and affirmed the district court’s dismissal of the Complaint.
In a 2010 declaration, TSA Administrator Pistole explained that the use of AITscanners constituted checkpoint screening SOP at all airports. The declaration also explained that a passenger choosing to opt out of an AIT scan must undergo a pat-down as a part of that checkpoint screening SOP. According to the Plaintiffs’ Complaint, Plaintiff Tuchinsky opted out of AIT screenings on two occasions at the Raleigh-Durham International Airport. Tuchinsky claimed that she was then subjected to pat-downs that were highly invasive and humiliating. On February 7, 2011, the Defendants moved to dismiss the Complaint under Rule 12(b)(1), arguing that the district court lacked subject matter jurisdiction. The Defendants maintained that the checkpoint screening SOP constituted an “order” issued by the TSA Administrator. The district court agreed and dismissed the Plaintiffs’ Complaint. This appeal followed.
On appeal, the Plaintiffs argued that the application of §46110 only applies to orders issued by the TSA Administrator after the completion of adjudicatory proceedings where affected persons have been accorded an opportunity to participate. Therefore, under the Plaintiffs’ narrow viewpoint of §46110, the checkpoint screening SOP would not constitute an “order.” However, the Court of Appeals rejected the Plaintiffs’ argument. The court noted that none of the other circuits had adopted such a narrow view of § 46110 and that the Plaintiffs’ interpretation of §46110 would violate the plain language of the statute and controlling precedent. Finally, the court also rejected the Plaintiffs’ constitutional claims. The court noted that “agency decisions are commonly subject to such jurisdiction channeling provisions, and final agency actions are generally reviewed in the courts of appeals.”
Decided: November 21, 2012
Jimmy Martin and Lucky Strike, LLC (appellants) brought an action in the district court to enjoin the enforcement of S.C. Code Ann. §§ 12-21-2710 and 12-21-2712, which prohibit certain “device[s] pertaining to games of chance.” They then appealed the district court’s grant of summary judgment, advancing two theories: that §2710 is void for vagueness and thus violates the Fourteenth Amendment, and that, under the holding of Ex Parte Young, § 2710 is violative of their right to equal protection under the Fourteenth Amendment. The appellate court rejected these arguments and upheld the district court’s ruling.
The court first addressed the appellants’ due process argument, noting that a statute is unconstitutionally vague under the Due Process Clause if it “fails to provide a person of ordinary intelligence fair notice of what is prohibited, or is so standardless that it authorizes or encourages seriously discriminatory enforcement.” Since gambling does not implicate a constitutionally protected right, the court framed the inquiry as whether § 2710 is invalid “in all of its applications,” focusing specifically on the statute’s blanket prohibition against possessing any “device pertaining to games of chances of whatever name or kind.” In light of several South Carolina Supreme Court cases that have provided clarity to this particular phrase, the court found that the use of the term “games of chance” has a plainly legitimate sweep and more than conceivable application such that it is not unconstitutionally vague. The court also noted that inconsistent enforcement and judicial rulings on the statute may indicate a difference of opinion amongst judges or law enforcement, but does not make the statute unconstitutionally vague.
The court then addressed the appellants’ argument that § 2710 violates the Equal Protection Clause because they are forced to risk criminal prosecution, imprisonment, fines, and forfeiture to gain a determination as to whether a proposed game is legal under the statute. The appellants urged the application of the holding in Ex Parte Young that a state cannot force a party to risk severe penalties to obtain a judicial determination if that determination involves a complicated or technical question of fact. The court found that Young was not applicable because § 2710’s scope and validity is sufficiently clear; determining whether the statute applies to a particular game does not involve the kind of intensive investigation and technical analysis implicated in Young. Furthermore, the court found that the risks are too attenuated for proper application of Young since the historical record of enforcement of § 2710 reveals that the appellants would not face the type of dire criminal prosecution involved in Young if they put a game into operation that turned out to be illegal.
In summary, the court affirmed the judgment of the lower court finding that § 2710 is neither unconstitutionally vague nor violative of the Equal Protection Clause.
– Kassandra Moore
AU Optronics Corp. v. South Carolina, No. 11-254, and LG Display Co., Ltd. v. South Carolina, No. 11-255
Decided: October 25, 2012
In addressing AU Optronics and LG Display’s (together “Defendants”) separate appeals of the District Court of South Carolina’s decisions to remand their cases to South Carolina state court, the Fourth Circuit adopted the “whole-case approach” to resolve the jurisdictional question at issue in the case. Applying this approach to determine whether federal jurisdiction existed in each case, the Court found that “the nature and effect” of both actions “demonstrate[d] that South Carolina is a real party in interest,” and that the State’s claims of restitution did not alter the State’s status as a real party to the action. Thus, because the Court determined that individual South Carolina citizens who would benefit from any restitution award did “not need to be considered in the diversity analysis of the State’s claims,” it held that minimal diversity was not established for the Class Action Fairness Act of 2005 (“CAFA”) purposes and affirmed the District Court’s decision to remand both cases to state court.
This case originated when South Carolina brought “nearly identical lawsuits” in state court alleging that the Defendants, both manufacturers of LCD panels, had engaged in a price-fixing conspiracy. The State sought relief provided under several state statutes, as well as restitution on behalf of South Carolina citizens, as provided in the South Carolina Unfair Trade Practices Act (“SCUTPA”). After the Defendants removed their individual cases to the District Court of South Carolina, the State moved to remand the cases to state court. The District Court determined “that South Carolina was properly pursuing these parens patriae lawsuits under its own antitrust and unfair trade practices laws” and remanded both cases to state court. The Defendants then individually petitioned the Fourth Circuit for permission to pursue appeals under CAFA. The Defendants each argued that federal jurisdiction existed because their cases qualified as mass actions under CAFA.
On appeal, the Fourth Circuit focused on the minimal diversity requirement needed to establish a mass action under CAFA. (The Court did not address CAFA’s numerosity or amount-in-controversy requirements). Ultimately, the Court focused on determining whether South Carolina was a real or nominal party. The Defendants argued that South Carolina was merely a nominal party and that, because the real parties in interest were the citizens of South Carolina, diversity was established. The Defendants argued that the Court should apply the “claim-by-claim” approach under which individual South Carolina citizens would qualify as real parties in interest to the restitution claim, thus establishing diversity of citizenship for the entire case.
The Court expressly rejected the “claim-by-claim” approach and adopted the “whole-case approach” recently adopted by the Fifth and Ninth Circuits. Accordingly, the court refused to “dissect the complaint and decide whether the state is the beneficiary of each basis for relief.” Instead, the Court “consider[ed] the complaint in its entirety and decide[d] from the nature and substance of its allegations what interest the state possesses in the lawsuit as a whole.” While acknowledging that individual South Carolina citizens stood to benefit from an award of restitution, the Court found that any restitution award was incidental to the State’s overriding interests and to the substance of the proceedings.” Thus, the Court concluded that the State could properly pursue its actions as parens patriae actions in state court.
Decided: October 18, 2012
Wilson Medical Center (“WMC”) appealed the Eastern District of North Carolina’s amended order and judgment entered on August 8, 2011, nunc pro tunc March 1, 2011. On appeal, the Court of Appeals vacated the district court’s amended order and judgment because the nunc pro tunc entry supplied an order that was in fact not previously made.
On December 10, 2008, Dr. Rose Glynne filed various federal and state law claims against WMC and several other defendants. During discovery, Glynne dismissed all her federal claims and all defendants except WMC. Since diversity jurisdiction was lacking, the district court refused to exercise supplemental jurisdiction and dismissed the federal suit in by a March 1, 2011 order (the “March Order”). The March Order allowed Glynne to refile her claims in in state court, but during the time that she was litigating her federal suit, the limitations period for the state claims expired. Nevertheless, a federal statute allowed Glynne 30 days from the date of the March Order to file her state claims. However, Glynne did not file her state court complaint until April 7, 2011. On May 13, 2011, WMC moved to dismiss Glynne’s state court complaint on the ground that Glynne did not file within the statutorily prescribed 30 day window. On May 26, 2011, Glynn filed a motion asking the district court, for the first time, to amend the March Order to allow her 40 days from March 1 to file in state court. On June 8, 2011, Glynne amended her motion and again asked the district court for 40 days from March 1 to file her complaint. On August 4, 2011, the district court entered an amended order and judgment that was the same in all respects to the March Order except that it allowed Glynne 60 days from March 1 to file her state claims. The amended order and judgment were entered “nunc pro tunc,” meaning that they were effective at the date of the March Order (March 1, 2011).
The Court of Appeals explained that the purpose of an entry nunc pro tunc is to correct mistakes or omissions in the record so as to reflect events that actually took place. The court also noted that an entry nunc pro tunc has traditionally been limited to correcting clerical or record keeping errors. In Glynne’s case, since nothing in the record indicated that the district court had in fact extended the limitations period under the March Order, the court held that the district court erred in entering the amended order and judgment.
– Graham Mitchell
Decided: August 8, 2012
Michael Dwayne Durham was indicted by a Virginia grand jury on three counts of selling drugs and was later arrested and jailed for several months. The indictment of Durham resulted from the investigative work of David L. Horner, a police officer serving on a regional drug task force. Horner’s investigation had primarily relied upon a confidential informant who had purchased the drugs from Durham. The problem with the State’s case against Durham, however, was that the actual perpetrator of the crimes was a man named Michael David Durham. Michael Dwayne Durham—the suspect in custody and who the Virginia authorities had located in Memphis, Tennessee and transported to Virginia—had absolutely nothing to do with the drug transactions and had not lived in Virginia in over a decade. After the prosecutor realized the mistaken identity and dropped the charges, Durham brought a civil lawsuit against Horner, alleging his federal constitutional rights had been violated under 42 U.S.C. § 1983 and that he had been maliciously prosecuted under state law. The district court granted summary judgment for the defendant on the basis of his qualified immunity as a law enforcement agent.
On appeal, the Fourth Circuit upheld the district court’s ruling. The court applied its two-step approach for determining whether a police officer’s qualified immunity defense could be defeated: “first whether a constitutional violation occurred and second whether the right violated was clearly established.” The majority opinion, written by Judge King, found that no constitutional violation had taken place because Durham’s arrest and prosecution had been supported by probable cause. The court stated that “an indictment, fair upon its face, returned by a properly constituted grand jury, conclusively determines the existence of probable cause.” In addition, the court found that there was sufficient evidence for a reasonable police officer to believe that the Durham who was arrested was the same Durham who was actually conducting the drug deals. Such incriminating evidence included: the falsely accused Durham had a local address as a result of previously living in the area; he had a Tennessee driver’s license and the drug dealer had a Tennessee license plate; and Durham had two past convictions for drug-related incidents.
In dissent, Judge Wynn argued that summary judgment was inappropriate because there was a genuine dispute of fact as to whether Horner acted reasonably in confirming the accuracy of the name supplied by his informant. Judge Wynn also took issue with the majority’s discussion of the law on qualified immunity. According to Judge Wynn, the United States Supreme Court had already rejected the proposition that a grand jury indictment that is proper on its face conclusively establishes probable cause.
-John C. Bruton, III
Decided: July 25, 2012
The Fourth Circuit granted defendant Temitope Akinsade’s petition for writ of error coram nobis and vacated his conviction, finding that the district court’s admonishment during its Rule 11 proceeding was insufficient to correct Akinsade’s attorney’s mistake and additionally finding the attorney’s mistake to be a “but for” cause of Akinsade’s decision to enter a guilty plea. This case arose when immigration officials arrested Akinsade nine years after he entered a guilty plea based on his attorney’s advice that such plea could not result in his deportation from the United States. While the district court judge reviewed the ramifications of Akinsade’s plea with Akinsade during a Rule 11 hearing, including the possibility of deportation, Akinsade relied on his attorney’s assurances in proceeding with his guilty plea.
After his arrest, and under threat of deportation, Akinsade filed a petition for writ of error coram nobis in federal district court, arguing that his Sixth Amendment rights were violated due to his attorney’s errant advice. The district court denied Akinsade’s petition, finding that the attorney’s affirmative misrepresentations to Akinsade amounted to constitutionally deficient assistance of counsel, but concluding that Akinsade was not prejudiced.
The Fourth Circuit disagreed with the district court’s reasoning and determined that Akinsade met the four requirements needed to seek the relief provided by a writ of error coram nobis. Specifically, the Court found that (1) Akinsade could not seek relief under typical remedies, (2) valid reasons existed for Akinsade’s failure to attack his conviction at an earlier time, (3) the risk of deportation amounted to an adverse consequence sufficient to satisfy the case or controversy requirement of Article III, and (4) the attorney’s “misadvice” was an error of the “most fundamental character” such that coram nobis relief was required to achieve justice. Additionally, in rendering its decision, the Court clarified a district court’s obligations during Rule 11 proceedings and found that when faced with a claim of ineffective assistance of counsel, a district court’s admonishment must correct attorneys’ deficient performances in order to overcome any prejudice to the defendants. Therefore, because the Court found that the district court’s admonishment did not correct the particular “misadvice” given by the attorney in this case, and because the Court found the “misadvice” to be a “but for” cause of Akinsade’s decision to enter his guilty plea, it concluded that the misadvice prejudiced Akinsade in a manner necessitating coram nobis relief.
– Allison Hite
Decided: July 9, 2012
The court of appeals affirmed the lower court’s exercise of personal and subject matter jurisdiction, and it’s authority to remand the remaining nonarbitrable claims to state court.
In 1925, Congress enacted the Federal Arbitration Act, which protects the enforceability of domestic arbitration agreements. The Convention of the Recognition and Enforcement of Foreign Arbitral Awards, adopted in 1958, ensures that courts enforce agreements to arbitrate in foreign tribunals, and awards granted by such tribunals. In 1945, Congress enacted the McCarran-Ferguson Act, which essentially authorizes reverse preemption of generally applicable federal laws by state laws enacted for the purpose of insurance regulation.
In the present case, ESAB Group contends that, pursuant to the McCarran-Ferguson Act, South Carolina law reverse preempts federal law in the area of commercial arbitration of insurance disputes. Thus, the issue before the court is whether the McCarran-Ferguson Act applies, such that state law can reverse preempt federal law and invalidate a foreign arbitration agreement.
In the underlying suit, ESAB Group faced numerous products liability suits stemming from personal injuries allegedly caused by its welding products. Several of ESAB Group’s insurers, including Zurich Insurance, refused coverage, and ESAB brought suit in South Carolina state court. The insurers removed the case to federal court pursuant to the Convention Act’s grant of removal jurisdiction. ESAB Group disputed the district court’s exercise of subject matter jurisdiction, and Zurich Insurance disputed the district court’s exercise of personal jurisdiction.
The district court found that it had jurisdiction over the subject matter and the parties to the action, and subsequently enforced the underlying arbitration agreements. Since the court referred to arbitration all claims providing a basis for subject matter jurisdiction, the court remanded the remaining claims to state court. On appeal, ESAB Group disputes the district court’s exercise of subject matter jurisdiction, and Zurich Insurance disputes the district court’s exercise of personal jurisdiction and its authority to remand the nonarbitrable claims to state court.
The Court of Appeals first considered whether the federal courts have jurisdiction over the present action or whether, as ESAB Group contends, South Carolina law reverse preempts federal law and eliminates the basis for jurisdiction. The court held that, because the Supreme Court made has made it clear that the McCarran-Ferguson Act is limited to domestic affairs, the Convention Act falls outside of its scope. Thus, the district court’s exercise of subject matter jurisdiction was proper. Furthermore, the court held that, because the relevant Zurich policies contain valid arbitration clauses that are subject to the Convention Act, the district court properly compelled arbitration of ESAB Group’s claims under those policies. The Court, applying a three-part test to determine if the exercise of specific jurisdiction over Zurich comported with due process, affirmed the district court’s exercise of personal jurisdiction. Finally, the court of appeals, noting that while a district court may be compelled to stay nonarbitrable issues within an otherwise arbitrable claim, there is no like requirement that the court exercise supplemental jurisdiction over nonarbitrable claims where all claims within the court’s original jurisdiction have been sent to arbitration, held that the district court had the authority to decline to exercise jurisdiction over the nonarbitrable claims and to remand those claims to state court.
Judge Wilkinson concurred, listing several additional reasons supporting the majority opinion.
– Kassandra Moore
Decided: July 5, 2012
A group of hourly-wage employees of Perdue Farms, Inc. (Perdue) filed a civil conspiracy action under 18 U.S.C. § 1962(d) of the Racketeer Influenced and Corrupt Organizations Act (RICO). The plaintiffs alleged that corporate managers of Perdue, human resources staff, and plant managers conspired to hire aliens not authorized to work in the United States to reduce labor costs, which caused the depression of wages paid to hourly-wage employees. Defendants individually violated 8 U.S.C. § 1324 in “bringing in and harboring certain aliens,” specifically knowingly hiring ten or more unauthorized aliens. Each of the defendants allegedly hired hundreds of such workers with actual knowledge that they were unauthorized for employment. The complaint alleged that the defendants violated 18 U.S.C. § 1546(b)(1)-(3) by using false identification documents and fraudulently attesting to the validity of such in the completion of government forms. The district court dismissed the action with prejudice, holding that plaintiffs failed to allege a civil conspiracy claim on which relief could be granted. The plaintiffs filed a timely appeal.
A district court’s dismissal of an action under Rule 12(b)(6) is reviewed de novo. Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), require that complaints in civil actions be alleged with greater specificity. First, a court must accept as true all factual allegations contained in a complaint, but does not have to accord such deference to legal conclusions. The recital of elements of a cause of action supported only by conclusory statements is not sufficient to survive a 12(b)(6) motion. Second, to survive such a motion, a complaint must state a “plausible claim for relief.” Iqbal, 556 U.S. at 678. This requires that the complaint allege sufficient facts to establish the elements of the claim, crossing “the line from conceivable to plausible.” Twombly, 550 U.S. at 570.
The district court concluded that the plaintiffs’ amended complaint contained deficiencies that were fatal to the prosecution of the action. First, the complaint failed to plead with sufficient particularity the existence of a conspiracy among the defendants. Second, the amended complaint lacked sufficient facts supporting either alleged RICO predicate act. Finally, the court concluded that the entire theory on which the amended complaint was based was barred by intracorporate immunity.
The plaintiffs alleged that the defendants violated 18 U.S.C. 1962(d) by conspiring to violate 18 U.S.C. § 1962(c), which prohibits conducing the affairs of an enterprise through a pattern of racketeering activity. An act of racketeering under RICO is referred to as a “predicate act.” While private litigants may recover from racketeering injuries under 18 U.S.C. 1964(c), their injuries must flow from the predicate acts. Because the plaintiffs only allege two predicate acts, their failure to plead sufficient facts to establish the elements of either would require dismissal.
The first predicate act alleged is the knowing act of hiring multiple unauthorized aliens. This predicate act has been analyzed in similar contexts by two other circuits: Edwards v. Prime, Inc., 602 F.3d 1276 (11th Cir. 2010), and Commercial Cleaning Servs., L.L.C. v. Colin Serv. Sys., Inc., 271 F.3d 374 (2d Cir. 2011). These cases explain that, in order to satisfy the illegal hiring requirements, a defendant must hire ten or more aliens within a 12-month period with actual knowledge that they are not authorized to work in the United States. Edwards, 602 F.3d at 1292–93. Additionally, the defendants must have actual knowledge that the unauthorized aliens were brought into the country in violation of 8 U.S.C. § 1324(a). Id. at 1293; Commercial Cleaning Servs., 271 F.3d at 387. The second element is crucial and distinguishes 8 U.S.C. § 1324(a)(3), the RICO predicate, from 8 U.S.C. § 1324(a)(1), which penalizes hiring unauthorized aliens without knowledge that they were brought into the country illegally. The district court found that plaintiffs failed to identify any employee known to be an unauthorized alien and made only conclusory allegations regarding how they unauthorized aliens were brought into the United States. While the plaintiffs did not need to identify particular unauthorized aliens, plaintiffs failed to provide factual support concerning whether the defendants had actual knowledge of the unauthorized aliens’ entry into the United States. Only two allegations bear on illegal entrance into the United States: that the defendants had actual knowledge that the workers “had been brought into the country with the assistance of others on their illicit journey across the U.S.-Mexico border” and that a specific hiring clerk worked directly with coyotes and runners to obtain employment for illegal aliens. These allegations are insufficient to establish a violation of the illegal hiring predicate.
Plaintiffs argued that the use of “judicial experience and common sense,” as authorized by Iqbal, 556 U.S. at 679, would lead to the conclusion that the aliens were brought into the United States within the meaning of 8 U.S.C. § 1324(a)(3)(B)(ii) because it is not plausible that they walked across the border and to a Perdue location on their own. Once aliens arrive in the United States, any assistance they received from other parties is immaterial to the illegal hiring predicate. While judicial experience and common sense may suggest that unauthorized aliens did not travel to Maryland or elsewhere entirely on foot, it is not obvious that such aliens allegedly employed at Perdue’s facilities were brought into the United States by others. Accordingly, the facts do not sufficiently allege a violation of the illegal hiring predicate.
The second predicate act alleged the fraudulent use and false attestation of documents in violation of 18 U.S.C. § 1546(b). The district court concluded the allegations were insufficient for two reasons: the plaintiffs failed to identify any single unauthorized employee and failed to state sufficient facts to support their claims. As mentioned above, the plaintiffs’ failure to identify any of the unauthorized aliens involved is not fatal to their amended complaint. However, because plaintiffs have not alleged facts establishing that they suffered an injury proximately caused by the defendants’ violation of the false attestation predicate, their claim also fails with regard to this predicate act. While a mere violation of 18 U.S.C. § 1962(d) is all that is required to establish criminal liability, a plaintiff may recover in an action for civil conspiracy only upon establishing injury caused by an act that is itself tortious. Beck v. Prupis, 529 U.S. 494, 501–02, 501 n. 6 (2000). In this case, the plaintiffs had to allege facts establishing that a violation of the false attestation predicate proximately caused the plaintiffs’ injury. Based on this requirement, the defendants’ acts did not cause the injury alleged by the plaintiffs because the wage depression alleged is not directly linked to any violation of the false attestation predicate.
The compensable injury resulting from a violation of 18 U.S.C. § 1962(c) is the harm caused by the predicate acts, which must be the “but for” and proximate causes of the injury. The fraudulent use of identification documents and false attestations are crimes against the government of the United Sates and do not directly impact plaintiffs’ wage levels.
Accordingly, the plaintiffs failed to allege a plausible violation of either RICO predicate act, thus the plaintiffs failed to establish a claim supporting their allegation under 18 U.S.C. § 1962(d) of a conspiracy to violate 18 U.S.C. § 1962(c). The district court’s judgment is affirmed.
Decided: June 27, 2012
The Fourth Circuit affirmed the district court’s dismissal of a complaint brought by a group of local fire and rescue departments (“LFRDs”) and former administrative employees against Montgomery County, Maryland, the County Council, and county officials. The plaintiffs alleged that the defendants had eliminated part of their funding in retaliation for the plaintiffs’ opposition to legislation supported by the defendants.
This case arose out of budgetary decisions made in response to budget cuts passed by the County Council that included cuts to LFRDs. The County had supported “ambulance fee” legislation which was defeated by voters and left the County without $14.1 million in funding that the bill was anticipated to bring in annually. The plaintiffs had actively campaigned against this legislation and alleged that because of their opposition to the bill, the County acted to cut their budget.
The Fourth Circuit disagreed with the plaintiffs’ arguments, affirming the district court’s dismissal of each of their claims. First, the court held that the district court properly dismissed the plaintiffs’ claims under the First Amendment, Article 40 of the Maryland Declaration of Rights (“Article 40 is ‘co-extensive’ with the First Amendment”), and § 1983. The court reasoned that the defendants’ actions were legislative in nature and were made across the board and not suffered by the plaintiffs alone. The court found that the budget was facially valid, and it relied on United States v. O’Brien, 391 U.S. 367 (1968), in refusing to inquire into the allegedly unconstitutional motive behind the County’s budget.
The Fourth Circuit further found that the County Executive and Fire Chief, both named as defendants in the plaintiffs’ complaint, were shielded by legislative immunity based on Bogan v. Scott-Harris, 523 U.S. 44 (1998), where the Supreme Court stated that “[l]ocal legislators are entitled to absolute immunity from § 1983 liability for their legislative activities.” The Fourth Circuit reiterated determinations from previous cases that extended this immunity to officials outside of the legislative branch when performing legislative functions, such as the defendants in this case. Because these two individual defendants took action associated with the “budgetmaking process,” a legislative act, they were entitled to legislative immunity.
Finally, because Maryland law specifically provides that employees of LFRDs are not County employees, the Fourth Circuit affirmed the district court’s determination that the plaintiffs, as employees of the LFRDs, were barred from bringing an abusive discharge claim under Maryland law which only recognizes a cause of action between an at will employee against an employer. The Fourth Circuit additionally reasoned that because the LFRDs themselves eliminated the administrative positions and terminated the individual employees, as opposed to the County which merely reduced the LFRDs’ budget, the plaintiffs’ claim for abusive discharge could not be sustained.
– Allison Hite
Decided: June 18, 2012
The Fourth Circuit Court of Appeals held that four corporate entities created by four states, were not “state agencies,” and were therefore subject to suit under the False Claims Act (“FCA”) for allegedly defrauding the U.S. Department of Education.
Dr. Oberg asserts that the appellees knowingly made fraudulent claims to the U.S. Department of Education by inflating their loan portfolios eligible for Special Allowance Payments (“SAP”). The case was dismissed by the district court agreeing with the appellees that the entities were not “state agencies” and therefore not eligible for suit under the FCA. According to the Supreme Court in Vermont Agency of Nat. Resources v. U.S. ex rel. Stevens, state agencies are not eligible for suit under the False Claims Act because the definition of a person eligible for suit does not include the sovereign. 529 U.S. 765 (2000). However, the presumption regarding corporations is the opposite; in Cook County v. U.S. ex rel. Chandler, the Supreme Court held that a municipal corporation was eligible for suit. 528 U.S. 119 (2003). The Fourth Circuit articulated the appropriate inquiry is “whether appellees are truly subject to sufficient state control to render them a part of the state, and not a “person” for FCA purposes.”
The Fourth Circuit adopted the reasoning of the 9th and 5th circuits in concluding that the arm-of-the-state analysis used in the Eleventh Amendment context is the legal framework for this inquiry. The Fourth Circuit articulated four non-exclusive factors for the arm-of-the-state analysis to draw the line between “a State-created entity functioning independently of the State from a State-created entity functioning as an arm of the State or its alter ego.” The case was remanded for determination using the arm-of-the-state framework to determine whether it was eligible for suit under the FCA.
Decided: January 25, 2012
Sherry Walker appealed the district court’s holding that her common law tort claims against Medtronic, Inc. are preempted by the Medical Device Amendments of 1976 (“MDA”). The Fourth Circuit affirmed. Walker conceded that the device in question, the SynchroMed pump, was designed, manufactured, and distributed in compliance with the terms of its premarket approval given by the Food and Drug Administration (“FDA”) as required under the MDA. Because Walker’s common law claims sought to impose requirements above and beyond those imposed by the FDA, her claims were expressly preempted by the MDA.
-Sara I. Salehi
Decided: January 23, 2012
Willie Bullock brought a claim against the Secretary of the U.S. Department of Homeland Security, alleging violations of Title VII and related state law, in a North Carolina state court. The Secretary removed the case to federal court under 28 U.S.C. § 1442(a)(1) as a suit against a federal officer in her official capacity, and then filed a motion to dismiss for lack of subject matter jurisdiction. The district court granted the Secretary’s motion, finding that Title VII preempted Bullock’s state law claims and that, with respect to Title VII, the United States had not consented to be sued in state court. Because the state court lacked subject matter jurisdiction, so too did the federal court under the doctrine of derivative jurisdiction. Bullock appealed, and the Fourth Circuit affirmed the district court’s decision. Judge Gregory dissented, noting that a private sector litigant may file a Title VII claim in state court and that 42 U.S.C. § 2000e-16(c) allows a federal employee to file a civil action in the same manner as private sector employees. Judge Gregory reasoned that the state court had jurisdiction over Bullock’s Title VII claim and that therefore, the federal court properly assumed jurisdiction under the doctrine of derivative jurisdiction.
-Sara I. Salehi
Decided: January 17, 2012
Timothy Hennis, an enlisted Army soldier, was tried and convicted in civilian court for rape and triple murder in 1986 and was sentenced to death. His conviction was later reversed by the state Supreme Court and, on remand, Hennis was acquitted of all charges. Now free, Hennis sought to continue his Army career; on June 12, 1989 he received a discharge from the service and reenlisted one day later on June 13. In 2004, he retired.
A 2006 cold case review of the murders found Hennis’ DNA inside one of the victims and the Army recalled Hennis to active duty to stand trial via court-martial. Hennis filed for dismissal, arguing that the military did not have jurisdiction pursuant to the Hirshberg Rule that states a soldier could not be tried by court-martial for an offense that occurred in a previous enlistment, even if the person thereafter reenlisted. Hirshberg v. Cooke, 336 U.S. 210 (1949). The Army, however, argued that the Clardy Exception, whereby the military retains jurisdiction of offenses from an earlier enlistment if the soldier’s discharge occurred prior to the expiration of his service contract and for the specific purpose of immediate reenlistment. United States v. Clardy, 13 M.J. 308 (C.M.A. 1982). The district court dismissed Hennis’ habeas petition without prejudice, choosing to abstain from deciding the issue while the court-martial was in progress: so-called Councilman Abstention.
The Fourth Circuit affirmed the district court’s abstention. Without deciding whether the abstention is mandatory or discretionary, the court noted that the district judge weighed balancing factors about whether to apply the doctrine and would not overturn that judge’s discretion to abstain prior to an exhaustion of remedies through military channels. Councilman Abstention is, at its core, based on principles of comity and, finding that Hennis had not exhausted his other remedies, the Fourth Circuit affirmed the district’s habeas dismissal.
-C. Alexander Cable
Decided: January 11, 2012
Margaret Warren sued the law firm of Sessoms & Rogers, P.A. and attorney Lee C. Rogers alleging that they violated the Fair Debt Collection Practices Act (FDCPA). Prior to any discovery, the defendants made Warren an offer of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure. When Warren did not accept the offer, the defendants then moved to dismiss the action. They contended that the offer of judgment mooted Warren’s case and, in the alternative, that her complaint failed to state a claim upon which relief could be granted. The district court dismissed the complaint, concluding Warren’s allegations failed to show a material violation of the Act or that defendants knowingly and willfully violated the Act. Warren appealed to the Fourth Circuit Court of Appeals. Although the Fourth Circuit agreed with the district court that the offer of judgment did not moot Warren’s case; it reversed the district court’s dismissal of Warren’s complaint and held that Warren’s amended complaint did allege violations of 15 U.S.C. §§ 1629c(a)(2) and 1692e(11). Thus, the Fourth Circuit reversed and remanded to the district court for further proceedings.
-Sara I. Salehi
Decided: January 11, 2012
Hope Lee-Thomas, an employee of the Prince George’s County Public School Board, alleged that the Board violated the Americans with Disabilities Act by failing to reasonably accommodate her hearing disability. The Board contends that the district court erred in deferring to the decision of the Court of Appeals of Maryland in Board of Education of Baltimore County v. Zimmer-Rubert on the question of whether the immunity provision state, which effectuated a waiver of a county board of education’s Eleventh Amendment immunity for all claims in the amount of $100,000 or less, waived the State’s Eleventh Amendment immunity. The Board posits that no such deference is owed because the question is one of federal law, on which the decisions of the Supreme Court of the United States are controlling. The Fourth Circuit Court of Appeals determined that, although federal courts must apply federal law as embodied in Supreme Court precedent, when a state’s highest court has applied federal law and determined that a state statute effects a waiver of Eleventh Amendment immunity, the federal courts must accord deference to that state court decision. Therefore, the Fourth Circuit affirmed, and held that the district court properly deferred to the decision of the Court of Appeals of Maryland.
-Sara I. Salehi
Decided Dec. 29, 2011
Wye Oak entered into a contract with Iraq’s Ministry of Defense (IMOD) for refurbishing, selling, or disposing of used military equipment. After a period of alleged nonpayment, Wye Oak sued the nation of Iraq for breach of contract, claiming roughly $24 million in damages. Iraq moved to dismiss for, inter alia, lack of jurisdiction first under the Foreign Sovereign Immunities Act and later for insufficient pleading—arguing that IMOD was actually a separate legal entity than the Republic of Iraq and that Iraq had no contract with Wye Oak. The district court denied the motion to dismiss and transferred the case to the D.C. Circuit; nonetheless, Iraq filed an interlocutory appeal to the Fourth Circuit that stayed proceedings in that court.
The Fourth Circuit affirmed the denial of dismissal. First, it noted that though Iraqi law treats the Republic and IMOD as separate legal persons, it is the FSIA, not the foreign law that determines whether the Act will apply in U.S. courts. The court then found that IMOD was a political subdivision and not merely an agent or instrumentality of Iraq. Thus, they are “legally one and the same” for purposes of the FSIA. Second, the court held that IMOD, and therefore Iraq, were not protected by the FSIA because of the “commercial activities exception.” Specifically: “A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case . . . in which the action is based . . . upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere.” 28 U.S.C. § 1605(a).
Judge Shedd filed a dissenting opinion arguing that the Fourth Circuit should not have jurisdiction to hear the appeal once the case was transferred to another circuit. Indeed, the general rule is that once a case is transferred, the circuit court loses jurisdiction to hear appeals from the court below absent the exception found in TechnoSteel, LLC v. Beers Const. Co., 271 F.3d 151 (4th Cir. 2001). Here, Judge Shedd argued that TechnoSteel was inapplicable because since each court has a duty to assess its own subject matter jurisdiction of any pending action before it, it was not necessary for the Fourth Circuit to decide the interlocutory appeal determination of jurisdiction before allowing the D.C. court to take up the matter.
-C. Alexander Cable
Decided Dec. 23, 2011
Hillary Kunda brought suit against her former employer, C.R. Bard, Inc., alleging that Bard violated Maryland law when, at the time of her termination, it failed to pay her for unvested shares earned through the company’s long-term profit sharing plan. She argued that despite a New Jersey choice-of-law provision in the plan agreement, Maryland law applies to the contract because the Maryland Wage Payment and Collection Law (“MWPCL”) constitutes a fundamental Maryland public policy. The Fourth Circuit Court of Appeals affirmed dismissal of Kunda’s claim under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim on which relief may be granted. The court held that MWPCL is not a fundamental public policy of Maryland and that therefore, New Jersey law applies, and under New Jersey law the unvested shares are not wages. Furthermore, even if Maryland law did apply, the unvested shares are not wages under the MWPCL and thus were never owed to Kunda.
-Sara I. Salehi
Decided: Dec. 8, 2011
CGM, LLC, a billing agent for competitive local exchange carriers, brought a declaratory judgment action against BellSouth Telecommunications, Inc., an incumbent local exchange carrier. CGM claimed that BellSouth offered long-term promotional discounts to its own customers but it failed, in violation of the Telecommunications Act of 1996 and rules implementing it, to pass the full value of those discounts on to CGM’s client competitive local exchange carriers. The Fourth Circuit Court of Appeals affirmed dismissal of the case on the grounds that CGM has no statutory standing under the 1996 Act or an inapplicable statute from the Federal Telecommunications Act of 1934. Statutory standing is essentially a question of statutory construction. The court held that because the statute’s resale duties exist only as embodied in interconnection agreements, and because CGM has no interconnection agreement with BellSouth and did not bring the suit pursuant to any interconnection agreement, CGM has no rights and BellSouth has no duties under the statute. Further, the Declaratory Judgments Act is remedial only and therefore does not extend federal courts’ jurisdiction or confer standing on CGM.
-Sara I. Salehi
Decided: Sept. 21, 2011
Peter Taylor, a United States Marine stationed in Iraq, was injured when attempting to repair a vehicle “tank ramp” at his base near Fallujah. The main generator for the tank ramp had malfunctioned so Taylor and fellow Marines disabled the primary generator while installing a secondary power source. Meanwhile, Kellogg Brown & Root (KBR) technicians, having been informed that several Marines were working on the gearbox, turned the power back on to the main generator causing severe injuries to Taylor from electrocution. Taylor subsequently sued for negligence. After moving to dismiss for lack of subject matter jurisdiction under the political question doctrine and the “combat activities” exception to the Federal Tort Claims Act (FTCA), KBR informed the district court it would raise a defense of contributory negligence. After limited jurisdictional discovery, the district court granted KBR’s motion to dismiss on both grounds. The district court found that litigating the contributory negligence defense would require the court to decide whether the Marines’ actions were reasonable, venturing into political questions reserved for other branches of government.
The Fourth Circuit affirmed the dismissal under the political question doctrine, citing several factors from Baker v. Carr, 369 U.S. 186, 217 (1962) (“First, an assessment of whether there has been ‘a textually demonstrable constitutional commitment of the issue to a coordinate political department’; [s]econd, whether there is ‘a lack of judicially discoverable and manageable standards for resolving [the question]’; and [f]ourth, whether there is an apparent impossibility of a court’s independent resolution of the question ‘without expressing lack of the respect due to coordinate branches of government.’”). The court held that litigating the contributory negligence defense would inevitably cause the court to question military decisions regarding the base’s tank ramp and the power sources provided for it. These questions are command decisions reserved for the military and not subject to scrutiny by civilian courts. Thus, dismissal was necessary under the political question doctrine.
Finally, because the court dismissed the claim as a nonjusticiable political question, the district court’s ruling that the “combat activities” exception of the FTCA applied was rendered moot as “little more than an advisory opinion on a constitutional question.”
Judge Niemeyer concurred and wrote separately to agree with Judge Shedd’s concurring opinion. Judge Niemeyer agreed that the political question doctrine applied to dismiss the case, but that the claim was also federally preempted.
Judge Shedd concurred in the judgment but was not convinced that the case would “inevitably be drawn into a reconsideration of military decisions.” He therefore did not think the political question doctrine applied. However, citing Al Shimari and Al-Quraishi decided the same day, he argued the “combat activities” exception to the FTCA applied and the action was preempted and subject to dismissal on those grounds because the tort claim infringed on uniquely federal interests.
Decided: Sept. 14, 2011
Villa St. Catherine, Inc., a tax-exempt religious organization, operates a nursing-care facility in Emmitsburg, Maryland. St. Catherine is maintained in accordance with the principles of the Roman Catholic Church. St. Catherine employed Lori Kennedy, a member of the Church of the Brethren, from 1994 to 2007 as a geriatric nursing assistant. As a matter of religious principle, Kennedy wears modest attire that includes long dresses and skirts, and a cover for her hair. During Kennedy’s employment, the Assistant Director of Nursing Services informed Kennedy that her attire was inappropriate for a Catholic facility and that it made residents and their family members feel uncomfortable. Kennedy responded that her clothing was a function of her religious beliefs and that she would not change it. Kennedy was terminated in May 2007.
Kennedy filed a complaint under Title VII against St. Catherine, alleging that it engaged in religious discrimination and retaliation against her. St. Catherine moved for summary judgment, contending it was exempt from Title VII’s reach as to claims of religious discrimination under the plain language of 42 U.S.C. § 2000e-1(a), the religious organization exemption. The district court agreed that Kennedy’s discriminatory discharge claim was barred, but concluded that her religious harassment and retaliation claims were cognizable under Title VII. Noting the potential broad-reaching effect of the district court’s ruling, St. Catherine filed a request for an interlocutory appeal, which the district court granted. The Fourth Circuit agreed with St. Catherine that the plain language of § 2000e-1(a) makes clear that Title VII does not apply to claims for religious harassment and retaliation against religious organizations, and reversed the district court’s decision.
The Fourth Circuit interpreted the language of the religious organization exemption to bar claims against religious organizations for discharge, harassment, and retaliation, by noting that Congress exempted religious organizations from the entire subchapter of Title VII with respect to “employment” of persons of a “particular religion.” The exemption reflected a policy decision by Congress that the rights of religious organizations to be free from government intervention outweigh the government interest in eliminating religious discrimination by religious organizations.
The court also noted that it had authority to hear the interlocutory appeal because the district court’s order “involves a controlling question of law as to which there is a substantial ground for difference of opinion” and “immediate appeal . . . may materially advance the ultimate termination of litigation,” as required in 42 U.S.C. § 1292(b). Further, the facts of the case are undisputed, and remanding a case that lacks any substantial merit for further proceedings would waste judicial resources.
-Sara I. Salehi
Decided Sept. 8, 2011
When President Obama signed the Patient Protection and Affordable Care Act (“Act”), also known as “Obamacare,” into law, the state of Virginia responded by passing the Virginia Health Care Freedom Act (“VHCFA”) stating that, with exceptions, no resident of Virginia would be required to maintain individual health insurance. Though the contested portion of the federal Act, the so-called “individual mandate,” only applied to persons and did not directly affect the state of Virginia, Attorney General Cuccinelli argued the state nonetheless had standing to sue based on the incongruity between state and federal laws, arguing that the Act infringed on Virginia’s sovereign power. The district court agreed, finding standing and declaring the individual mandate unconstitutional.
The Fourth Circuit vacated without reaching the merits of the Act itself because it held that Virginia did not have standing to challenge the law. In order to demonstrate standing, a party must show “(1) it has ‘suffered an injury in fact’; (2) there exists a ‘causal connection between the injury and the conduct complained of’; and (3) a favorable judicial ruling will ‘likely’ redress that injury.” Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992). The court held that Virginia suffered no injury because the VHCFA was not an exercise of sovereign power, only a declaration serving as an attempt to immunize its citizens from what it viewed as an unfavorable federal law. Adopting Virginia’s view of standing, the court noted, would allow states to sue the federal government anytime a disagreeable law is passed merely by passing its own contrary state law. As such, the case was vacated with instructions for the district court to dismiss for lack of standing.
-C. Alexander Cable
Decided: Sept. 6, 2011
On September 16, 2008, Synutra issued a recall of its U-Smart infant formula. The formula, produced and consumed exclusively in China, was contaminated with melamine and potentially harmful to children in utero. The Chinese government set up a compensation fund for the children and families affected by the contaminated formula but some families chose to forgo this remedy and sue directly in Chinese courts. As time passed, and though the Supreme People’s Court expressed its readiness to handle the claims, reports mounted that local and provincial authorities were thwarting the suits, seeking to suppress what they saw as a movement toward “social unrest.” Eventually, several plaintiffs decided to sue Synutra in the District of Maryland, the defendant’s principal place of business. Finding China an adequate and available forum, the district court dismissed the complaint for forum non conveniens.
A dismissal for forum non conveniens is evaluated on an abuse of discretion standard. However, the Supreme Court in Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981) laid down three factors when deciding the motion: (1) the alternative forum’s availability, (2) adequacy, and (3) convenience in light of public and private interests. The burden is on the party seeking dismissal to show another forum is more appropriate. Synutra satisfied the first element, availability, by demonstrating that the plaintiffs had not run afoul any statutes of limitation and that the company would not contest service of process in China. The remedies available in China were held adequate because the judicial courts had shown an ability to handle contaminated formula cases, even if they discouraged them. Also, the plaintiffs were still able to access the compensation fund. Remedies in other forums do not have to be judicial, nor must they be as beneficial as what may be available to plaintiffs in United States courts. Finally, the Fourth Circuit held that the primary consideration in a forum non conveniens analysis is convenience. As such, the availability of evidence and witnesses in the locus of injury were more important to achieving judicial public and private interests than where corporate decisions were ultimately made. Since all three factors pointed toward China being the proper forum for recourse, the court affirmed dismissal based on forum non conveniens.
-C. Alexander Cable