Decided: March 2, 2016
The Fourth Circuit reversed and remanded the district court’s ruling.
Appellant Kent Stahle was diagnosed with leukemia and alleges that appellee CTS Corporation (CTS) was negligent in dumping toxic chemicals from an Asheville manufacturing plant into a local stream. Stahle argues that through exposure to the contaminated stream water during his childhood at property located downstream from the plant, the toxic chemicals eventually caused his leukemia. The district court dismissed Stahle’s complaint, holding that the 10-year statute of repose in Section 1-52(16) barred his action. At issue in this appeal is the scope of 1-52(16), which is commonly referred to as North Carolina’s Discovery Rule. The statute tolls the running of the statute of limitations for torts resulting in “latent injuries” although such actions remain subject to the 10-year statute of repose provision.
Federal jurisdiction in this matter rests in diversity, so the governing state law is applied. Because the Supreme Court of North Carolina had not explicitly ruled on the applicability of the statute of repose to disease claims, the Fourth Circuit instead must analyze the previous relevant case law decided by the Supreme Court of North Carolina to anticipate how it would rule. Consequently, the Fourth Circuit understood that under North Carolina law a disease is not a “latent injury,” and concluded that the Supreme Court of North Carolina would not find the 10-year statute of repose applicable to Stahle’s claim.
Specifically, the previous case law expressed a distinction between latent injury claims and those including disease due to the characteristics of disease as a general phenomenon. Unlike a latent injury, the legal injury and awareness of a disease occur simultaneously at diagnosis. The case law also specified that disease claims are not to be included within the statute of repose unless the Legislature expressly includes it.
The Supreme Court of North Carolina has explained that when the language of a statute is clear and without ambiguity, it’s plain meaning is applied. CTS argued that 1-52(16) is facially unambiguous and therefore applied to Stahle’s disease claims. This argument eventually supported the district court’s holding. However, while North Carolina courts are guided by the principle of “plain meaning,” the district court focused narrowly on the isolated text of subsection 16 to determine its plain meaning, while the Supreme Court of North Carolina “does not read segments of a statute in isolation.” The Fourth Circuit analyzed the overall scheme of North Carolina’s statutory limitations and repose statutes and determined that 1-52(16) appears plainly to apply to only some-but not all- personal injury claims, which supports the decision that a disease is not a latent injury. The appellee’s argument was further weakened by the fact that previous case law had held 1-52(16) to be ambiguous on its face.
Because the Supreme Court of North Carolina considers Section 1-52(16) only applicable to certain latent injuries, and because disease is not a latent injury, the Fourth Circuit held the statute of repose in Section 1-52(16) inapplicable to Stahle’s claim.
Accordingly, the Court reversed and remanded the district court’s ruling.
Decided: February 25, 2016
The Fourth Circuit concluded that the district court correctly dismissed the case for lack of subject matter jurisdiction, therefore affirming the judgment of the district court.
Petitioner, Jonathan Pornomo filed a wrongful death claim under the Federal Tort Claims Act (“FTCA”) after his mother was killed on May 31, 2011, when a bus driver fell asleep at the wheel and allowed the bus to go off the road and into an embankment. The accident occurred during a 10-day extension period that the bus company had been given after receiving an “unsatisfactory” safety rating by the Federal Motor Carrier Safety Administration (“FMCSA”) approximately seven weeks prior to the incident. Based on the law at the time of the accident, a commercial motor carrier who received an “unsatisfactory” rating did not have to cease operation immediately, but instead received a 45-day provisional period—in which they could request an upgrade of its rating by submitting a written description to FMCSA of corrective actions taken—before the rating becomes final. In 2011, the regulation also provided that “if the motor carrier has submitted evidence that corrective actions have been taken…and the FMCSA cannot make a final determination with the 45-day period, the period before the proposed safety rating becomes final may be extended for up to 10 days at the discretion of the FMCSA.” 49 C.F.R. § 385.17(f) (2011).
On May 11, the bus company submitted a Request for Change to Proposed Safety Rating. The following day the FMCSA concluded that the bus company had failed to provide adequate evidence that it had corrected all of the safety violations. As a result, the FMCSA decided to conduct a follow up compliance review, whereby they would provide additional time—10 days—to conduct the follow-up compliance review. The Petitioner alleged that FMCSA had been negligent in issuing the 10-day extension. Arguing that the 10-day extension was a discretionary act shielded from suit under the discretionary function exception to the FTCA, the United States filed a motion to dismiss for lack of subject matter jurisdiction. The district court found that the plain language of 49 C.F.R. § 385.17(f) afforded the agency discretion to provide an extension, therefore the court granted the United States’ motion.
On appeal, Petitioner contends that the district court erred in holding that the extension was a discretionary act. To determine if the discretionary function exception did in fact apply, the Court applied a two-prong test first looking at whether the conduct at issue involved “an element of judgement or choice” by the employee. Berkovitz v. United States, 486 U.S. 531, 536 (1988). Then the Court looked at whether the judgment, “[was] of the kind that the discretionary function exception was designed to shield” in that the judgement relates to a governmental action or decision “based on considerations of public policy. Id. at 536-37; Suter v. United States, 441 F.3d 306, 310-11 (4th Cir. 2006). The court determined that the FMCSA’s 10-day extension met the requirements of the first prong and thus could not form the basis of an FTCA claim. FMCSA was exercising discretion within the meaning of the FTCA. The fact that the FMSCA may have taken “calculated risks” did not matter because the discretionary function exception applies whether the discretion involved be abused, or even erroneous. Furthermore, the Court recognized that Petitioner’s argument was essentially a challenge to the validity of 49 C.F.R. § 385.17(f), and as such, could not be the basis of an FTCA claim. However, even if Petitioner could challenge the validity of the regulation, FMCSA’s decision to promulgate 49 C.F.R. § 385.17(f), would be shielded by the discretionary function exception—meeting the second prong of the test.
Accordingly, the Court affirmed the judgment of the district court.
Aleia M. Hornsby
Decided: January 14, 2016
The Fourth Circuit affirmed the district court on all issues.
This case arose from a lawsuit that Donna Cisson (“Cisson”) filed against C.R. Bard, Inc. (“Bard”), after she received a transvaginal mesh and suffered complications from the surgery. Her suit was added to others that had been filed against Bard, and the jury found for Cisson on the design defect and failure to warn claims and for Bard on the consortium claims. Bard appealed.
The Fourth Circuit begins by first examining Bard’s abuse of discretion claim concerning the district court’s decision to exclude Bard’s evidence that it had complied with the FDA’s 510(k) process. The Court affirmed the ruling based on Federal Rule of Evidence 403. It looked to Georgia’s “risk-utility” test, stating that the “probative value of that evidence must depend on the extent to which the regulatory framework safeguards consumer safety.” The Court then determined that the weight of other courts’ opinions on this issue favored finding that the evidence Bard proffered had little evidentiary value, and concluded that the district court had not abused its discretion by excluding the evidence of the 501(k) clearance, because the district court had found that introducing such evidence would have resulted in “very substantial dangers of misleading the jury and confusing the issues.” The Court next turned to the issue of whether the district court erred when it “overruled Bard’s hearsay objections to the admission of a MSDS pertaining to polypropylene.” Although the Court reversed the district court’s rulings about the hearsay exceptions, it affirmed the decision to admit the evidence as non-hearsay. Cisson argued that the MSDS was used to show that Phillips made the warning statement and that Bard received it. The Court then turned to the issue of whether the district court erred in its instruction to the jury on causation. The Court found that the district court’s instruction met the appropriate standard, that it was “accurate on the law and did not confuse or mislead the jury,” and that there was ample evidence for the jury to base its causation finding. The district court defined the burden of proof for proximate cause as a preponderance of the evidence in accordance with Georgia’s pattern jury instruction, and the Court found that Bard did not submit any evidence that this standard was incorrect. Furthermore, the Court found that Cisson presented ample evidence that supported a jury finding that the design defect in the mesh caused her injuries, including numerous expert and non-expert testimonies. Next, Bard argued that the damages award in this case were constitutionally excessive. The Court looked at the three guideposts that the Supreme had set forth for reviewing the constitutionality of punitive damages awards, and noted that Bard challenged based entirely on the second guidepost, because the punitive award was seven times the compensatory award. The Court, however, found that it was not constitutionally excessive, and declined to adopt a bright-line ratio rule.
Finally, the Court examined Cisson’s cross-appeal that challenged the district court’s ruling that a Georgia split-recovery statute did not violate the Takings Clause of the Fifth Amendment to the United States Constitution. However, the Court found that Cisson failed to provide proper support for her theory that she had a vested property interest in the entire punitive damages award. Therefore, the Fourth Circuit affirmed the district court on all issues raised in the appeal.
Decided: December 29, 2015
The Fourth Circuit affirmed in part and remanded in part.
This case stemmed from Joshua Rich’s (“Rich”) attack in a recreation area while serving a fifty-seven year sentence. He sued for the prison officials’ negligence under the Federal Tort Claims Act, alleging that they failed to protect him from the attack by failing to pat down all inmates before the attack. The district court granted the government’s motion to dismiss due to lack of subject matter jurisdiction due to the discretionary function exception. This appeal followed.
The Fourth Circuit began by determining that the standard of review in this case was de novo for lack of subject matter jurisdiction, and abuse of discretion for denial of jurisdictional discovery. The Court first examines the discretionary function exception, noting that courts apply a two-pronged test. They then applied that test to determine if the discretionary function applied in this case, specifically, if “the challenged governmental conduct involves an element of judgment or choice and, if so, whether that judgment was based on considerations of public policy.” The Court looked at the regulations governing the system (“CIM”) that monitors certain inmates, especially those that need to be separated from others. The Court notes that 28 C.F.R. § 524.72(d) provides that those inmates “may” require separation, but that no specific action is required; officials are instead supposed to consider several factors and use their own judgment to determine if inmates need to be separated. Because they exercise broad discretion, the Court concluded that the first prong of the test was satisfied. The Court then turned to the second prong of the test. Because this is a novel issue for the Court, they looked to other circuits for guidance, and in doing so, agreed that the discretionary functions exception applied in this case.
As to Rich’s argument that he was entitled to discovery, the Court held that the discretionary function exception would still apply “to the decision of the officials regarding prisoner placement,” so the district court did not abuse its discretion when it refused to allow Rich discovery. However, on the issue of whether the district court properly denied discovery regarding Rich’s allegations that the officials did not search his attackers properly, the Court said that those facts are “intertwined” with the “disputed jurisdictional facts.” Because Rich alleged that no pat downs occurred, and because the Court said that even if pat-downs had occurred, there still needed to be a determination if those pat-downs comported with the guidelines in the manual, the Court found that Rich should have been allowed discovery on that issue. Finally, the Court held that Rich may have been able to establish jurisdiction, because the exception would not have applied if the officials’ conduct had been “marked by individual carelessness or laziness.” Therefore, the Fourth Circuit affirmed the application of the discretionary function exception, but vacated the judgment with respect to the pat downs and remanded.
Decided: August 18, 2015
The Fourth Circuit affirmed in part, reversed in part, vacated in part, and remanded.
This case was an appeal from summary judgement in which plaintiff, the Federal Deposit Insurance Corporation as Receiver for Cooperative Bank (“FDIC-R”) brought an action against officers and directors of Cooperative Bank (“Bank”), alleging negligence, gross negligence, and breach of financial duties that resulted in the Bank’s failure. The claims arose out of events surrounding FDIC’s annual reviews of the Bank from 2006 to 2008, wherein the Bank scored poorly each year, leading to a Cease and Desist order in 2009, and when the Bank was unable to fulfill its obligations under the Order, the Bank was closed, and FDIC-R filed a complaint against the Bank, seeking damages against the named officers and directors (“officers”) of the Bank for negligence, gross negligence, and breach of their fiduciary duties in approving certain loans in 2007 and 2008. The named officers and directors moved to dismiss the claims on the grounds that North Carolina law does not allow for negligence claims against officers and that, even if it did, the business judgment rule would shield them from negligence and breach of fiduciary claims. The district court denied their motions to dismiss, and after discovery, both parties filed for summary judgment. The district court granted summary judgment for the officers because FDIC-R failed to provide any evidence that would strip the officers of the protection of the business judgment rule, and FDIC-R appealed.
The Fourth Circuit began its analysis by setting forth that the proper review of summary judgment is de novo. The Court first addressed FDIC-R’s contention that the district court incorrectly interpreted the business judgment rule, and while the Court found that the lower court correctly interpreted the rule, it incorrectly applied that rule. The Court examined director liability first, and determined that unless there is a genuine issue of material fact that the directors breached their duty of good faith, they are protected under an exculpatory provision in the Banks’ articles of incorporation, and the Court found that there was no genuine issue of material fact. The Court affirmed that part of the judgment. The Court next examined officer liability, noting that the articles of incorporation do not cover officers and thus must be examined through the business judgment rule. The Court noted that the business judgment rule can be rebutted if FDIC-R presents sufficient evidence, and determined that in this case, FDIC-R presented sufficient evidence to rebut the presumption, and that they did not act in accordance with general business practices. Specifically, FDIC-R presented the affidavit of Brian Kelley, an independent banking consultant, who stated that the Bank’s practices of approving loans over the telephone, often without first receiving the documents, were inconsistent with other banking institutions, and that furthermore, the Bank had not complied with its obligations to correct the problems brought up in its yearly evaluations. The Court therefore vacated summary judgment on the claims of ordinary negligence and breach of fiduciary duties of the officers. The Court then turned to the gross negligence claims, disagreeing with FDIC-R’s argument that North Carolina law does not require intentional wrongdoing for a claim of gross negligence. After examining the case law, the Court found that North Carolina, in enacting its gross negligence statute, only abrogated the common law definition of gross negligence in cases where the plaintiff seeks punitive damages. Since the FDIC-R was not seeking punitive damages, the common law definition, and not the statutory definition, of gross negligence applied, and so FDIC-R was required to show that there was a genuine issue of material fact that the officers and directors’ conduct amounted to “wanton conduct done with conscious or reckless disregard for the rights and safety of others.” However, the Court concluded that the FDIC-R had not provided sufficient evidence to fulfill the definition, and affirmed the district court on this claim. Finally, the Court addressed the officers and directors’ claims that summary judgment could be entered on alternative grounds that the district court did not address. The Fourth Circuit quickly dispensed with those arguments. The Court therefore affirmed in part, reversed in part, vacated in part, and remanded those parts of the case that were not affirmed.
Decided: June 29, 2015
The Fourth Circuit affirmed the judgment of the magistrate judge, holding that he correctly granted summary judgement to the Scottsdale Insurance Company and denied summary judgment to Marks and Johnson.
This case arose as an appeal from an award of summary judgement to Scottsdale Insurance Company following an original suit in which Plaintiff-Appellant Danny Ray Marks, Jr. (“Marks”) sued Plaintiff Timothy B. Johnson (“Johnson”) and the Northumberland Hunt Club (“Club”) for negligence in connection with Marks’ shooting accident, and Scottsdale denied coverage to Johnson. Scottsdale had issued a policy to the Club, covering both it and its members, but only to the extent of “member liability for the Club’s activities or activities members perform on the Club’s behalf.” The key question for consideration was whether Johnson, who was a member of the Club, was an “insured” under the policy for purposes of the original suit. Marks filed two complaints, one against Johnson and the Club for negligence in the shooting accident, and one against Scottsdale seeking, under Virginia law, that Scottsdale had a duty following the insurance policy on behalf of Johnson to defend the suit and indemnify Johnson because Johnson’s shooting was considered one of the Club’s activities. The case was removed to federal court based on diversity jurisdiction, and Scottsdale filed a counterclaim saying that it did not have a duty to defend Johnson in the suit because the policy does not cover Club members for purely personal activities. A magistrate judge heard the two cross-motions for summary judgment and ruled on Scottsdale’s behalf.
In deciding this question, the Fourth Circuit first established that it would review the case de novo and, because there was diversity jurisdiction in this case, determined that Virginia law would control. Thus, under Virginia law, the court was to construe the insurance policy using ordinary contract interpretation rules, and set out those rules. The court then examined the policy itself, and decided that the policy was not ambiguous and therefore should not be construed in Johnson’s favor. Specifically, the court said that the members were covered only “with respect to their liability for the Club’s own corporate activities, not with respect to anything they may do during or in connection with Club activities,” and that member activities are only covered when they are “undertaken at the request or for the benefit of the Club.” After determining the extent of the policy, the court then looked at whether Scottsdale had a duty to defend Johnson based on Marks’ complaint. However, after looking at the complaint, the court concluded that it did not claim to hold Johnson vicariously liable for the Club’s activities nor did it claim to hold Johnson liable for member activities on the Club’s behalf, and instead rest solely on “the recreational pursuits indulged in by Club members,” claims that were insufficient to trigger the policy. The Fourth Circuit therefore affirmed the magistrate judge’s decision.
Decided: June 22, 2015
The Fourth Circuit affirmed the district court’s dismissal of Robol’s claim.
This case was an appeal from the district court’s dismissal of Richard T. Robol and Robol Law Office, LLC’s (“Robol”) in rem admiralty action to recover a salvage award on the basis that he had provided voluntary assistance when he turned over files pertaining to the salvage of the S.S. Central America, and that he had encouraged Milton T. Butterworth, Jr., (“Butterworth”) to do the same. The district court, however, dismissed his claim for failure to state a claim because Robol, as the former attorney of the Columbus-America Discovery Group (“Columbus-America”) and the Recovery Limited Partnership (“Recovery Limited”), was obligated under the rules of professional responsibility and under court order to return the files and did not act voluntarily, which defeated his salvage award claim. This appeal followed.
The Fourth Circuit first examined Robol’s contentions that his turning over of the files was voluntary. Robol’s claim turned on whether or not his actions were voluntary because a salvage award was for people “by whose voluntary assistance a ship at sea or her cargo or both have been saved in whole or in part from impending sea peril, or in recovering such property from actual peril or loss, as in cases of shipwreck, derelict, or recapture.” Although Robol argued that the district court’s failure to take his allegations as true when ruling on a Rule 12(b)(6) motion, the Court determined that his allegation of voluntariness was merely a legal argument that the district court appropriately resolved as a matter of law. Specifically, because of the existence of an attorney-client relationship between Robol and Columbus-America, Robol had a duty to turn over the documents under the Virginia Rules of Professional Conduct and was preventing from exercising liens on the documents dues to Columbus-America’s failure to pay. The Court also dismissed Robol’s contention that the district court reached beyond the claim in deciding that Robol’s actions were not voluntary, stating that the district court properly considered that Robol had been the attorney on record for Columbus-America and courts are permitted to consider matters of public record when deciding motions to dismiss. Robol himself admitted in his opposition to the motion to dismiss that he had been the attorney on record, and also that some of the documents that he turned over were “the property of his clients in which he had asserted a retaining lien,” so the district court did not fail to follow 12(b)(6) ruling procedures. The Court then examined the merits of Robol’s contention that turning over the documents was voluntary, but ultimately concluded that his actions were not voluntary.
First, the Court established that Robol’s retaining lien was prohibited under the modern rules of professional conduct under both Virginia and Ohio rules, particularly when to assert a retaining lien would cause foreseeable prejudice to the client. Here, Robol admitted that the documents he turned over saved Recovery Limited “in excess of $600,000,” and the Court concluded that it would have been prejudicial indeed for Robol to refuse to turn over the documents and force Recovery Limited to recreate the information found in the documents. Robol also argued that he owned the documents and not his clients because EZRA’s failure to pay rent for the storage of the documents invoked a default under the lease and the subsequent failure on EZRA’s part to retrieve the documents constituted an abandonment of the documents. However, the Court pointed out that there was no applicable Ohio law that permitted this, and that repossession through failure of the tenant to pay was not included in the lease. Furthermore, in an action in Ohio court, Robol admitted that the documents belonged to his clients and in response to the receivership order stated that the documents were his clients, and therefore he did not turn the documents over voluntarily. Similarly, his claim that he convinced Butterworth to turn over files entitled him to a salvage award also failed, according to the Court, because Butterworth was under legal obligation to turn them over, and Robol’s conduct was merely a “collateral push” to comply. The Court therefore affirmed the district court’s decision.
Decided: June 19, 2015
The Fourth Circuit determined that marketing statements that accurately describe the findings of duly qualified and reasonable scientific experts are not literally false; and therefore, there was no violation of consumer protection laws in different states.
This appeal stemmed from the district court’s dismissal of the plaintiffs’ claim alleging that GNC and Rite Aid violated the consumer protection laws of various states by marketing certain supplements as promoting joint health. Plaintiffs purchased a variety of joint health supplements produced by GNC and Rite Aid. GNC sells this product under the brand name TriFlex, and Rite Aid sells a similar product produced by GNC. GNC is obligated to indemnify Rite Aid for any claims regarding these products. These supplements contain the compounds glucosamine hydrochloride and chondroitin as well as other ingredients including beneficial herbs. The TriFlex and Rite Aid products represent that the supplements “promote joint mobility & flexibility.” Additionally, the product label states that it was “[c]linically studied” and the results were presented in a chart on the supplement bottle.
Several plaintiffs purchased these products in a number of different states and brought suit because they allege that the products are incapable of providing the advertised joint health benefits, and that they would not have purchased these products but for the companies’ false advertising. Specifically, plaintiffs allege that the representations on the packaging qualifies as false because the majority of scientific evidence indicates that glucosamine and chondroitin are ineffective at treating the symptoms of osteoarthritis.
In order to have a viable claim under the different state consumer protection statutes, the plaintiffs must plead facts in which it can be inferred that the representations made on the packaging of the products were false, misleading, or deceptive. A plaintiff is required to show either (a) that the representation is literally false or (b) that the representation is literally true but nevertheless misleading. See Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997). A plaintiff arguing that a representation is misleading must show extrinsic evidence of actual consumer confusion. See Scotts Co. v. United Indus. Corp., 315 F.3d 264, 272-73 (4th Cir. 2002). However, if it is assumed to be false, it is assumed that the representation is also misleading. Id. In this case, plaintiffs only alleged that the representations were false, and at no time did plaintiffs argue that the representations were literally true but misleading. Therefore, the Fourth Circuit determined whether the representations were literally false.
The Fourth Circuit held that the plaintiffs failed to allege that the representations were literally false. Plaintiffs did not allege that all scientists agree that the chemical compounds are ineffective at providing the promised joint health benefits. Instead, plaintiffs alleged that the vast weight of evidence shows that it was not beneficial. The Fourth Circuit determined that when “litigants concede that some reasonable and duly qualified scientific experts agree with a scientific proposition, they cannot also argue that the proposition is ‘literally false.’” Therefore, in order to state a false advertising claim on a theory that false representations have been made, plaintiffs must allege that all reasonable experts in the field agree that the representations are false.
Austin T. Reed
Decided: April 30, 2015
The Fourth Circuit held that there was a genuine issue of material fact as to whether Norfolk Southern Railway Company (“Norfolk”) was the cause of Harris’s injuries, and on that basis, the court reversed the district court’s grant of summary judgment to Harris on the issue of liability. The Fourth Circuit also held that the level of misconduct Harris alleged the railway had engaged in did not reach the level required under West Virginia law for punitive damages, and thereby affirmed the district court’s grant of summary judgment against Harris on the issue of punitive damages.
On July 21, 2009, Harris was working on the second floor of a Cobra Natural Resources (“Cobra”) coal-loading plant in West Virginia when Norfolk employees backed an empty set of Norfolk freight cars over the Norfolk railroad track which ran under the Cobra plant. Though no one was aware, 35 feet from the plant, the track was corroded and cracked, and had been for “months or years before,” such that the rail had come apart. This damage to the track caused several freight cars to derail and hit the Cobra plant’s support beams, causing the collapse of the loadout in which Harris sustained injuries. Harris sued in state court, alleging negligence against Norfolk, and seeking compensatory and punitive damages. Norfolk removed the case to federal court, and Harris and Norfolk both filed for summary judgment. The district court found as a matter of law that Norfolk violated its duty to inspect the track, since the track was always covered with coal, dirt and debris, and that the railway knew or should have known of the damage to the track. The district court thus granted summary judgment to Harris on the issue of liability, but granted summary judgment against him on the issue of punitive damages, finding insufficient evidence to sustain the award of such damages. A district court jury subsequently awarded Harris nearly three million dollars, and Norfolk moved unsuccessfully for a new trial or remittitur. Norfolk and Harris both appealed to the Fourth Circuit.
The Fourth Circuit began its analysis by noting that the Federal Railway Safety Act and the Track Safety Standards promulgated by the Secretary of Transportation created a duty for Norfolk to inspect the tracks, and provided some limited guidance on how the inspections should be completed. The court then found that the district court erred in granting summary judgment to Harris on the issue of liability. The court found, based on statutory and regulatory language and policy considerations, that Norfolk had a duty to address track defects of which it knew, or should have known. The court further found that, based on regulatory language, practicalities, and policy considerations, the regulations did not require Norfolk to visually inspect every inch of track structure, but did give Norfolk an obligation to make a reasonable visual inspection of the tracks under all the circumstances. The court found that Norfolk breached this duty when it failed for months and years to look at any embedded portion of the track, despite the fact that the track was so covered in coal and debris that an inspection made on foot or from a vehicle would not have allowed inspectors to see the rail beneath the rail head. Despite Norfolk’s breach of duty, the court found that the evidence that Norfolk’s breach was the proximate cause of the derailment, and thus of Harris’s injuries, was not so one-sided that summary judgment should have been granted for Harris on the issue of liability. The court further found that, under West Virginia law, punitive damages are reserved for cases of extreme negligence, and the evidence in the instant case did not support such a finding, or the resulting punitive damages. As a result, the Fourth Circuit reversed the district court’s grant of summary judgment to Harris on the issue of liability, affirmed the district court’s grant of summary judgment against Harris on the issue of punitive damages, and remanded to the district court for further proceedings.
Katherine H. Flynn
Decided: April 3, 2015
The Fourth Circuit affirmed the ruling of the district court to grant SSA Security, Inc. summary judgment on the Homeowners’ negligence-based claims and under Md. Code Ann. § 19-501 (“Maryland Security Guards Act”) because the common law doctrine of respondeat superior does not expand to security companies.
The appellants (“Homeowners”) consist of 30 victims of one of the largest residential arsons in Maryland. The Homeowners alleged that one of SSA Security, Inc.’s security guards was responsible for the arson.
After affirming the grant of summary judgment on the Homeowners’ negligence-based claims, the Fourth Circuit certified to the Court of Appeals of Maryland the question of whether, based on the Maryland Security Guards Act, an employer may be responsible for off-duty criminal acts that an employee planned while he or she was on duty. The Court of Appeals of Maryland responded in the negative. Next, the Fourth Circuit analyzed the Maryland Security Guards Act using the canons of statutory interpretation and concluded that § 19-501 has the same meaning as Maryland’s common law doctrine of respondeat superior. Subsequently, the Homeowners did not challenge the district court’s analysis under the common law and conceded the issue. Accordingly, the Fourth Circuit affirmed the grant of summary judgment in favor of SSA Security, Inc.
Decided: April 14, 2014
The Fourth Circuit held that the home-buyers were not entitled to recover damages for emotional distress based on SSA Security, Inc.’s (SSA), a security guard company, alleged conduct; that SSA was not liable for the home-buyers’ emotional injuries based on its employees’ alleged conduct; and that the certification of a question on the scope of the Maryland Security Guards Act was warranted.
African American plaintiffs (“Plaintiffs”) brought suit against SSA under various negligence-based claims, and a claim premised on a provision of the Maryland Security Guards Act claiming damages for emotional distress resulting from an arson conspiracy. Two SSA employees carried out a conspiracy to set ablaze homes that Plaintiffs contracted to purchase, but had not yet purchased at the time of the arson.
The Fourth Circuit determined that under Maryland law, a plaintiff ordinarily cannot recover for emotional injury caused by witnessing, or learning, of negligently inflicted injury to the plaintiffs’ property. However, plaintiffs would be able to recover damages for emotional injury if they could show that (1) their personal safety was in jeopardy, or (2) if SSA’s hiring of the employees was inspired by fraud, malice, or like motives. Plaintiffs were unable to show that SSA had prior notice of their emotional injuries and, thus, the Court held that Plaintiffs could not recover for these injuries. Also, the Court determined that plaintiffs’ emotional injuries were not a foreseeable result of SSA’s hiring of the security guards. Thus, SSA was not liable for damages.
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 vacated the decision of the district court granting summary judgment in favor of the defendants on the basis that the plaintiff, Jamie Meyers, assumed a risk that he would be struck by a tractor-trailer while working above an open lane of traffic and because Meyers was contributorily negligent. The case was, therefore, remanded for trial.
This case stems from a collision that occurred when Meyers was working in a utility bucket positioned above an unblocked lane of traffic and a tractor-trailer operated by Michael Lamer struck the bucket. As a result of the collision, Meyers was ejected and suffered injuries to his back and lower body. At the time of the collision, Meyers was performing work for Rommel Engineering & Construction, Inc. (“Rommel”), a company that contracts with the State of Maryland to maintain traffic signals. Meyers’ task that day was to replace the traffic signals at the intersection of Maryland Route 5 and Maryland Route 249. In order to do so, Meyers had to be in a boom-supported bucket positioned above the intersection. Eric Hatfield, who was also employed by Rommel, accompanied Meyers that day as Meyers’ groundsman, tasked with keeping a lookout for oncoming traffic and alerting Meyers when any vehicle approached that might require him to increase his clearance.
The set up for that job required Meyers and Hatfield to park their respective trucks along the shoulder of Route 5. Hatfield’s truck had a light board that displayed blinking lights to signal “caution,” as well as flashing strobe lights, both of which were activated. Meyer’s truck also had flashing strobe lights. Additionally, Meyers and Hatfield placed warning signs along the shoulder of Route 5 to indicate that work was being performed ahead and that drivers should proceed with caution. In the 100 feet immediately before the intersection, Meyers and Hatfield placed cones along the line separating their vehicle travel lane from the should of Route 5, where their trucks were parked. Notably, Hatfield and Meyers did not close the lane of travel adjacent to the shoulder or use flagmen with signs to allow traffic to pass only intermittently. The parties and their experts disputed whether these failures were consistent with the standard of care for the industry.
The collision giving rise to the underlying lawsuit occurred when a tractor-trailer owned by Carrol County Foods, LLC, and operated by Lamer (together, “Appellees”) collided with Meyers’ bucket. Deposition testimony revealed that Meyers informed Hatfield that he had to turn his back to the northbound lane of traffic on Route 5 to perform his work and that Hatfield responded, “[N]o problem, I got you.” Meanwhile, Lamer was on his cell phone as he approached the intersection where Meyers was working and did not notice the caution signs placed along the shoulder of the road leading to the intersection. He did, however, see Meyers’ bucket but erroneously thought that there was enough ground clearance for him to safely pass under the bucket. As a result, Meyer’s was ejected from the bucket. And, although he was wearing a safety harness, he nevertheless suffered injuries to his back and lower body. Meyers filed suit against Appellees in Maryland state court. Appellees, however, removed the action to the district court based on diversity. Following discovery, both parties moved for summary judgment. The district court granted Appellees’ motion, reasoning that Meyers assumed a risk that he would be struck by a tractor-trailer while working above an open lane of traffic and because Meyers was contributorily negligent. This appeal followed.
On appeal, the Fourth Circuit first addressed Meyers contention that the assumption-of-risk doctrine does not apply to him because he was a worker engaged in work-related tasks in the roadway. The court agreed, citing Maryland case law holding that the doctrine does not apply to “persons such as workers in the street … if they are in the course of the normal pursuit of their duties.” The court did so even though Meyers failed to challenge the applicability of the assumption-of-risk defense below stating, “it is the fundamental province of this Court to decide cases correctly, even if that means considering arguments raised for the first time on appeal.”
Next, the Fourth Circuit held that the district court erred in granting summary judgment on the basis that Meyers was contributorily negligent. In so holding, the court noted that the real issue was not whether Meyers could have done more to protect himself, but rather whether an ordinarily prudent person under the same or similar circumstances would have turned his back to continue working, as Meyers did. After framing the issue as such, the court noted that Meyers and Hatfield had worked together for years and the record lacked any indication that Hatfield had previously failed to warn Meyers to adjust the height of the bucket or that collisions with tractor-trailers commonly occur when a worker is in a bucket and has an assistant on the ground keeping watch for approaching vehicles. The Fourth Circuit, therefore, vacated the district court’s ruling and remanded for trial.
-W. Ryan Nichols
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 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: January 3, 2014
The Fourth Circuit concluded that a coal miner’s wife was not entitled to benefits under the Black Lung Benefits Act (“BLBA”) dating back to 1997 because the Elk Run Coal Company did not commit fraud on the court by failing to disclose advantageous evidence to a coal miner at his 1997 BLBA benefits proceedings.
Gary Fox worked as a coal miner at the Elk Run Coal Company (“Elk Run”) in West Virginia for more than 30 years before dying from pneumoconiosis (also known as Black Lung Disease) in 2009. In 1997, x-rays revealed that Fox had an unidentified mass in his right lung. In 1998, a pathologist obtained surgical samples of the mass. Fox filed for benefits under the BLBA, asserting that the mass in his right lung was pneumoconiosis he sustained from working in mines. The Director of the United States Department of Labor’s Office of Workers’ Compensation (“Director”) determined that Fox was entitled to benefits under the BLBA. Elk Run then moved for an evidentiary hearing before an Administrative Law Judge (“ALJ”) to contest the Director’s finding. Elk Run solicited opinions from numerous pathologists, two of which determined that Fox likely suffered from pneumoconiosis. At the evidentiary hearing before the ALJ, Elk Run presented findings of several pathologists, but did not provide the two reports favorable to Fox. Fox appeared pro se at the hearing, only presenting his personal testimony in support of his case. The ALJ denied benefits. Fox did not appeal.
In 2006, Fox retained counsel and filed a new claim under the BLBA. Once again, the Director found that Fox was entitled to benefits under the BLBA and Elk Run requested an evidentiary hearing before an ALJ. This time, Fox’s attorney conducted intensive discovery. Elk Run admitted liability for Fox’s 2006 claims and disclosed numerous documents, including the pathology reports supporting Fox’s 1997 claim. Fox then moved to set aside the previous judgment, arguing that Elk Run committed fraud on the court that justified awarding benefits dating back to Fox’s original 1997 petition for benefits. The ALJ agreed and awarded benefits dating back to January 1997. On appeal, the Benefits Review Board disagreed, finding that Elk Run’s failure to disclose the reports did not rise to the level of fraud on the court. Fox then appealed to the Fourth Circuit.
The Fourth Circuit affirmed, holding that Elk Run’s conduct did not constitute fraud on the court. The court emphasized that fraud on the court was a high bar that required showing conduct on one party’s “deliberately planned and carefully executed scheme that severely undermined the integrity of the judicial process.” Such a finding requires more than ordinary fraud, such as “bribery of a judge or juror, or improper influence exerted on the court by an attorney, in which the integrity of the court and its ability to function impartially is directly impinged.” In the present case, Fox had the opportunity at the first ALJ hearing to cross-examine witnesses and present his own evidence, yet he declined to do so. He did not hire counsel to represent him in the first proceeding, even though the ALJ advised Fox of the desirability of doing so and the BLBA’s allowed for the recovery of attorneys’ fees. In the subsequent proceeding, Fox’s attorney easily discovered the favorable pathology report. While Fox most likely would have won with proper counsel, Elk Run was under no obligation to present unfavorable evidence at the ALJ hearing. Thus, the Fourth Circuit held that Elk Run’s decision not to disclose the unfavorable reports at the first proceeding did not rise to the level of fraud on the court.
– Wesley B. Lambert
Decided: December 19, 2013
The Fourth Circuit held that private parties have standing in civil suits under the False Claims Act (“FCA”) to seek redress on behalf of federal government interests, and ordered the trial court to impose $24 million in FCA penalties against the defendants.
The Department of Defense (“DOD”), in its effort to provide its armed forces and civilian personnel with their household goods across the Atlantic, instituted the International Though Government Bill of Lading Program to govern transoceanic moves and the Direct Procurement Method (“DPM”) to contract for transport strictly in Europe. The DOD’s Military Traffic Management Command (the “MTMC”) administered both methodologies. The MTMC solicited domestic vendors to bid on one or more “through rates” for moving household goods along shipping channels. The successful bidders contracted with the MTMC to supply door-to-door service. Subcontractors, including Gosselin World Wide Moving (“Gosselin”), provided services in connection with the European segment, and the prices quoted by those subcontractors were taken into account by the freight forwarders. In 2000, Gosselin and a number of its industry peers met and agreed to charge a non-negotiable minimum price for these local services. Pursuant to that agreement, Gosselin was awarded a contract after colluding with its fellow bidders to artificially inflate the submitted bids.
Despite the efforts of Gosselin and its cohorts, freight forwarder Covan International (“Covan”) was awarded a contract in Summer 2001. In order to increase the likelihood of obtaining business in those channels, other freight forwarders with which Gosselin had a continuing relationship would have been compelled to match Covan’s through rate. Instead, Gosselin threatened to withdraw financing from Covan in another business venture. Consequently, Covan cancelled its bid, and Gosselin spread the word that the freight forwarders should match only the second-lowest bid on the Covan channels during the second phase of bidding. The previous scenario was duplicated one year later when Cartwright International Van Lines (“Cartwright”) submitted the low bid on twelve Germany-U.S. channels. For it’s actions in connection with that, Gosselin was convicted of federal criminal offenses in 2005.
The above-described acts gave rise to the underlying civil actions premised on the False Claims Act (“FCA). Pursuant to the FCA, Kurt Bunk (“Bunk”) brought this action in the government’s name in 2002, asserting claims arising from the DPM scheme. Also in 2002, Ray Ammons (“Ammons”) brought a similar suit in the same capacity in the Eastern District of Missouri. In 2007, the Ammons matter was transferred and consolidated with the Bunk Proceeding. The United States intervened in substitution of Ammons. By its February 2012 order, the district court assessed a single penalty in the sum of $5,500 in favor of the United States, as to a single portion of its FCA claim; finding Gosselin immune under the Shipping Act, decreed judgment for Gosselin on the remainder of the FCA claim; granted judgment as to liability with respect to a single FCA claim alleged by Bunk against Gosselin in the second action; but denied recovery of civil penalties on that claim because such penalty would violate the Eighth Amendment.
On appeal, Gosselin first argued that Bunk, as a relator seeking solely civil penalties, lacked standing. The Fourth Circuit rejected this contention and held that relators seeking solely civil penalties are entitled to sue because denying the recovery on the ground that the relator cannot pursue penalties alone would be to deny the United States due recompense, or, in the alternative, to deprive the government of its choice to forgo intervention.
The primary issue before the court was whether the district court erred in determining that, concerning 9,136 false invoices at the heart of Bunk’s claim, any award under the FCA must necessarily exceed more than $50 million. Because the district court ruled that such an assessment would contravene the Eighth Amendment’s Excessive Fines Clause, it awarded nothing. The Fourth Circuit, however, reversed and remanded for entry of Bunk’s requested award of $24 million. In so doing, the court noted that the discretion accorded to the government and a relator to accept reduced penalties within constitutional limits avoids injustice. And, in this case, it found that $24 million appropriately reflected the gravity of Gosselin’s offenses and provided the appropriate deterrent effect going forward.
Lastly, the court addressed the issue of whether the district court properly declared Gosselin immune under the Shipping Act. Relying on the preclusive effect of its prior judgment in the criminal proceeding, the Fourth Circuit reversed, holding that Gosselin was not entitled to immunity under the Act and therefore remanded this issue for further proceedings.
– W. Ryan Nichols
Decided: November 22, 2013
The Fourth Circuit affirmed the district court’s judgment in favor of the plaintiff on the liability aspect of the negligence claim, but remanded for further proceedings with respect to damages.
Darryl Wayne Turner, age 17, died from cardiac arrest after a confrontation with police in which he was struck in the chest by electrical current emitted from a device commonly known as a “taser,” manufactured by TASER International, Inc. (TI). Turner was an employee of a Food Lion supermarket located in Charlotte, North Carolina. On March 20, 2008, Turner engaged in several acts of misconduct and the store manager terminated Turner’s employment for insubordination. However, when Turner refused to leave the store, his supervisor placed a telephone call to a 911 operator and requested police assistance. Turner acted aggressively throughout the entire incident and threw an umbrella and pushed a store display off a counter; however, he did not make physical contact with anyone during the dispute. Charlotte Mecklenburg Police Department (CMPD) Officer Jerry Dawson arrived at the scene and instructed Turner to “calm down,” but Turner continued behaving in an aggressive manner. Officer Dawson aimed the taser’s red “laser” dot at Turner’s chest and, when Turner stepped toward Officer Dawson, deployed the taser on Turner. After two darts struck Turner, he stayed on his feet and walked toward the store’s exit. As a result, Officer Dawson held down the taser’s trigger until Turner eventually collapsed, and then discharged the taser for an additional five seconds once Turner had fallen to the ground. When paramedics arrived, Turner was experiencing ventricular fibrillation and was unresponsive. After being taken to a hospital, Turner was pronounced dead.
From the introduction of the X26 taser in 2003, through the events at issue in this case, TI instructed taser users that the electrical current emitted by the X26 taser had no effect on heart rhythm. This information was used in training CMPD officers, including Officer Dawson. TI also provided visual depictions of the taser’s darts being fired at the middle of a person’s chest; therefore, Officer Dawson and other officers were trained to aim the taser at a suspect’s chest. TI’s primary warning was included as part of its Training Bulletin, issued in June 2006, in which it cautioned that prolonged exposure to the electrical discharge may impair breathing and respiration. Notably, this TI Training Bulletin discussed only the potential for respiratory harm, rather than the risk of severe cardiac problems. Shortly after the TI issued the 2005 Training Bulletin, two TI-funded studies revealed that the taser’s electrical pulses could capture cardiac rhythms, potentially leading to ventricular fibrillation. However, TI did not alter its training materials to warn users.
Turner’s estate initiated a negligence action against TI, primarily based on its failure to warn and, on appeal, TI raised four primary arguments. First, TI argued that the district court erred in barring TI’s contributory negligence defense. However, North Carolina’s Section 99B-4(3) requires that the claimant have “used” the product before the defense of contributory negligence can arise. In addition, every North Carolina product liability case addressing contributory negligence, whether under the current or former version of Section 99B-4(3), has involved a claimant’s actual use of the allegedly defective product. Finally, the Fourth Circuit observed that application of the contributory negligence doctrine under the present circumstances would absolve TI of its responsibility to provide adequate warnings to persons using TI’s tasers, and effectively would grant TI immunity from suit in North Carolina negligence actions that are based on police use of a taser on a suspect resisting arrest.
Second, TI argued that the district court erred in failing to direct a verdict in TI’s favor because the evidence purportedly failed to establish that an appropriate warning about the dangers of the X26 taser would have caused Officer Dawson to use the taser in a different manner. However, the Fourth Circuit held that there was sufficient evidence from which the jury could have concluded that Officer Dawson would have used the X26 taser in a different manner had TI provided an adequate warning concerning the dangers of firing the taser to make contact near a person’s heart. Officer Dawson testified that he read Taser’s training materials, received information about the taser’s safety during a “refresher” training course, and received instructions from CMPD trainers to aim the taser at a suspect’s chest.
Third, TI argued that the district court erred in failing to award judgment in TI’s favor on the basis of product misuse. TI contented that Officer Dawson misused the X26 device by employing it on Turner for 37 continuous seconds and that such misuse was contrary to the instructions and warnings provided by TI. However, the Fourth Circuit concluded that the jury had ample grounds on which to find that the warning was not “adequate.”
Finally, TI argued that the district court’s remittitur decision resulted in an excessive award that was not supported by the evidence. Because Fontenot failed to present any evidence showing that Turner’s services, care, and companionship had a value approaching $1000-$2000 per week, per parent and because there was no testimony concerning whether, and for what duration, Turner’s parents reasonably expected Turner to continue providing services such as babysitting his younger siblings and assisting with household chores, Fontenot essentially invited the jury and the district court to engage in the type of “pure conjecture” that North Carolina courts have prohibited.
– Sarah Bishop
Decided: November 20, 2013
The Fourth Circuit = affirmed the district court’s grant of summary judgment in favor of the defendant, the United States Coast Guard (“USCG”), in a personal injury and wrongful death action. The Fourth Circuit held that the Coast Guard did not breach a duty of care in attempting to rescue Susan Turner and her husband, Roger Turner, Jr. and, therefore, that the Coast Guard was not liable for Mrs. Turner’s injuries or Mr. Turner’s death.
On July 4, 2007, Mrs. Turner and her husband (collectively, the “Turners”) left home on their private 20-foot long motorboat, intending to watch holiday fireworks. Before leaving, Mr. Turner told his father that the Turners would be going to one of three possible locations. After leaving a party on the Perquimans River, Mrs. Turner fell overboard, nearly one and half miles offshore. At some point thereafter, Mr. Turner also entered the water. The Turners’ boat stayed afloat, drifting downriver. When the Turners did not return home by 9:30 p.m., Mr. Turner’s father called 911. The USCG decided that, due to the number of potential locations and the current deployment of search assets on a confirmed emergency mission (a missing jet ski), the USCG would not initiate an active search for the Turners’ overdue boat at that time. Instead, the USCG would begin making radio calls and would inquire with local marinas later that morning. When the USCG discovered the Turners’ empty boat on the morning of July 5, it launched an air and sea search. During the night of July 4 and into the morning of July 5, Mrs. Turner tread water for nearly 12 hours, surviving by clinging to crab pot buoys. The USCG, despite extensive search efforts, did not find Mr. Turner; his body washed ashore two days later.
On appeal, Ms. Turner first argued that the Coast Guard breached a duty of care in attempting to rescue the Turners. The USCG’s enabling statute, 14 U.S.C. § 88, authorizes the USCG to undertake rescue efforts, but does not impose any affirmative duty to commence such rescue operations. However, pursuant to the Good Samaritan doctrine, once the Coast Guard undertakes a rescue operation, it must act with reasonable care. The Court held that this doctrine sets a high bar to impose liability on a rescuer: the evidence must show that the rescuer failed to exercise reasonable care in a way that worsened the position of the victim. The Turners did not show that the USCG’s actions worsened their position. The thrust of the plaintiff’s case was that the USCG should have done something to alleviate the Turners’ predicament sooner; however, the USCG was under no obligation to do so. Nor did the USCG’s actions worsen the Turners’ position by inducing reliance on the part of either the Turners or a third party. Because the Turners themselves never spoke with the Coast Guard, they could not have relied on representations by the USCG.
Second, Mrs. Turner demanded sanctions premised on the USCG’s alleged deliberate spoliation of evidence, which the court denied. A party seeking sanctions based on the spoliation of evidence must establish that the alleged spoliator had a duty to preserve material evidence. Here, Mrs. Turner said that the USCG wrongfully destroyed audio recordings of telephone calls to the Coast Guard by recycling them and recording over them. The Court found, however, that Mrs. Turner did nothing to trigger a duty to preserve evidence on the part of the USCG. She did not send the USCG a document preservation letter, or any other correspondence threatening litigation.
Third, Mrs. Turner challenged the propriety of USCG’s responses to Turner’s Freedom of Information (“FOIA”) request. A valid FOIA claim requires three components: the agency must have (1) improperly (2) withheld (3) agency records. Here, Mrs. Turner argued that the USCG’s failure to retain voice tapes and emails should stand as proof that the USCG’s search for such responsive documents was inadequate. However, the lack of responsive documents does not signal a failure to search.
Finally, Mrs. Turner argued that the district court deprived her of due process by permitting the USCG to file its summary judgment motion more than 12 months after the deadline for filing dispositive motions. However, the district court gave Mrs. Turner the opportunity to file a brief in opposition to USCG’s motion for summary judgment, and Mrs. Turner did so. Therefore, her due process rights were not violated.
– Sarah Bishop
Decided: November 20, 2013
The Fourth Circuit affirmed the district court, holding that, under North Carolina law, the plaintiff’s negligence claim failed because she was unable to establish that the Army owed her a duty, under the circumstances, to protect her from sexual assault.
On December 13, 2009, Aaron Pernell (“Pernell”), a member of the Army, unlawfully entered Maria Durden’s (“Durden”) home while inebriated, and raped her in front of her children. The record revealed that Pernell struggled emotionally and began using drugs and abusing alcohol upon returning to Ford Bragg following his deployment to Iraq. On several occasions, Pernell told his commanding officer and a fellow soldier that he was abusing alcohol and desired to kill himself and eleven current and former members of his unit. In September of 2009, Pernell burglarized a home in Fayetteville, North Carolina and assaulted the home’s occupants with a pellet gun. Civilian law enforcement arrested him and he was detained from September 11 to October 2, 2009. Upon his return to Fort Bragg, the Army began proceedings to administratively separate him. Here, each side disagreed over certain restrictions placed on Pernell following his release from jail. Durden insisted the army placed significant restrictions on him in order to protect the public from danger and his commanding officers were aware the restrictions were not properly followed. The government, however, disagreed. Following Durden’s rape in December 2009, Pernell became a suspect in January 2010 and ultimately consented to giving a DNA sample that identified him as the assailant. At this time, Pernell was also identified as being involved in burglaries and sexual assaults that occurred in 2008 and 2009 in Fayetteville. A mental health evaluation was then performed. It determined that Pernell posed a medium risk of harm to himself and others. Following the evaluation, according the government, the Army for the first time placed barracks restrictions and ordered that he be monitored at all times.
In December 2010, Pernell was convicted of raping Durden in a general court-martial proceeding. He was sentenced to fifty years imprisonment and dishonorably discharged from the Army. Subsequently, alleging negligence by the Army, Durden sued the government pursuant to the Federal Tort Claims Act (“FTCA”). The district court, however, granted the government’s motion to dismiss for lack of subject matter jurisdiction and, alternatively, for failure to state a claim. Specifically, that the Army did not breach any duty owed to Durden under North Carolina law and that Durden’s complaint was barred by the FTCA’s intentional-tort exception. This appeal followed.
On appeal, the Fourth Circuit held that, even assuming that Durden’s allegations were true, the complaint still failed to establish that the Army breached a duty to her under North Carolina law. The court so held despite the district court’s “technically incorrect statement” purporting to dismiss Durden’s complaint for lack of subject matter jurisdiction because the district court considered the negligence issue as though it were the basis of a motion to dismiss for failure to state a claim that had been converted into a motion for summary judgment. In so doing, the court rejected Durden’s three theories that the Amry owed a duty to her under North Carolina law. The three theories alleged included: a theory based on the Army’s relationship with Durden as the landlord of Fort Bragg; a theory based on a special relationship creating a responsibility to take affirmative action for the aid or protection of another; and a theory based on the undertaking to render services to another, subjecting such person to liability to the third person for injuries resulting from his failure to exercise reasonable care in such undertaking. Next, the court rejected Durden’s contention that the district court abused its discretion by transforming the 12(b)(1) motion into a judgment on the merits without the opportunity for discovery. In doing so, the court noted that, even assuming Durden’s discovery requests were granted, her theories of negligence would still fall short of the Army being liable for her injuries.
Lastly, the Fourth Circuit addressed the district court’s alternative basis for dismissing Durden’s complaint: that the fact that the Army gained knowledge of Pernell’s allegedly violent propensity via his government employment was enough to nullify Durden’s claims pursuant to the FTCA’s intentional-tort exception. The court held that the district court erred in its dismissal on this alternative basis, noting that mere knowledge of a tortfeasor’s propensity for violence or criminal history gained as a result of the tortfeasor’s status as a government employee does not, per se, nullify an FTCA claim.
-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
Decided: May 24, 2013
The Fourth Circuit affirmed the United States District Court for the Distrct of Maryland’s decision to dismiss the complaint under Federal Rule of Civil Procedure (FRCP) 12(b)(6) by Painter’s Mill Grille, LLC (“Painter’s Mill Grille”), the owner and operator of the restaurant, and its principals in an action against the restaurant’s landlord.
Painter’s Mill Grille operated a restaurant known as Cibo’s Bar & Grill. The premises were leased from a company identified as 100 Painters Mill. The lease began in 2002 and provided that Painter’s Mill Grille could not assign the leasehold without 100 Painters Mill’s consent. According to the facts, Painter’s Mill Grille continually failed to make rent payments that resulted in 100 Painters Mill obtaining multiple judgments. In October 2008, Painter’s Mill Grille entered into an agreement with another company who had agreed to purchase Painter’s Mill Grille’s interest in the restaurant; however the deal was never completed. Painter’s Mill Grille and its principals subsequently filed a complaint against 100 Painters Mill’s parent company and three attorney-employees of the company for damages. Their complaint alleged that the defendants’ actions, which they argued were racially motivated, interfered with the business and with the contract between Painter’s Mill Grille and its potential buyer. The complaint alleged that throughout the course of the lease the restaurants clientele’s racial make-up changes and became predominantly African-American. The plaintiffs asserted that as the racial make-up changed, the defendants became increasingly hostile towards the plaintiffs. Moreover, the plaintiffs alleged that 100 Painters Mill, inter alia, “arbitrarily charged rent, common area maintenance fees, and attorneys’ fees and that it unreasonably refused to allow the restaurant to use the patio and to install proper signage to advertise the business.” As a result of this “constant harassment,” Painter’s Mill Grille decided to sell its restaurant and entered into an agreement with another company to purchase the business. Painter’s Mill Grille asserted that this conduct resulted in a breach of the contract with 100 Painters Mill. Plaintiffs made multiple claims including seven counts alleging violations of 42 U.S.C. §§ 1981, 1982, 1985(3), and Maryland state claims for tortious interference with contracts and economic relationships. The defendants filed a motion to dismiss for failure to state a claim under FRCP 12(b)(6). The district court dismissed with prejudice all claims against 100 Painters Mill’s employees holding that they were acting within the scope of their legal relationship with the company and were not individually liable. The district court also dismissed Painter’s Mill Grille’s owner and principals as improper plaintiffs. The court also dismissed without prejudice the plaintiffs’ claims of racial discrimination holding that it failed to plausibly allege enough facts to show that defendants were liable under the applicable statutes. The district court dismissed the § 1985(3) conspiracy claim with prejudice by relying on the fact that “agents of a corporation who are acting in that capacity cannot conspire with each other or with their corporate principal.” Finally, with regards to the state law claims, the district court dismissed the tortuous interference with contract claims with prejudice and dismissed, without prejudice, the claim of tortious interference with economic relationships on the ground that plaintiffs failed to allege specific wrongful acts committed by the defendants. The plaintiffs filed an appeal. The defendants moved to dismiss the appeal under the theory that it was an interlocutory appeal because the district court had dismissed several of plaintiffs’ claims without prejudice. The plaintiffs argued that by electing to stand on the complaint rather than to amend it, an appeal is not considered interlocutory and become immediately appealable.
First, the Fourth Circuit held that the district court was correct in dismissing the owner and principals of Painter’s Mill Grille as plaintiffs and holding that only Painter’s Mill Grille itself could be a proper plaintiff. The Fourth Circuit relied on the principals of corporate and agency law to highlight the fact that the owner and principals elected to incorporate their business as a limited liability company (“LLC”) and, in doing so, were exposed to no personal liability under the LLC’s contracts. As a result, plaintiffs’ claims under §§ 1981 and 1982 had to be dismissed because the plaintiffs could not identify injuries that flowed directly from a motivated breach of their own personal contractual relationships with the defendant. Rather, their claims flowed directly from the LLC’s contractual relationship with the defendant. With regards to the principals’ conspiracy claim under § 1985(3), the court held that they were based on the alleged violations of the §§ 1981 and 1982 claims and, as such, had to fail as well. Finally, also with respect the principals, the court held that, for similar reasons, the plaintiffs did not have valid claims under state law for tortious interference with their contract and economic relationships when they were not individual parties to the contract.
The court next turned to the LLC’s claims. First, the court addressed Painter’s Mill Grille’s claim for interference with a contract based on racial animus under § 1981. The Fourth Circuit held that Painter’s Mill Grille’s complaint only contained “conclusory and speculative allegations” and failed to set forth facts that would support a plausible claim. Similarly, the court held that Painter’s Mill Grille’s § 1982 claim failed because they failed to present any facts as to “how Painter’s Mill Grille was driven out of business.” Next, the Fourth Circuit took up Painter’s Mill Grille’s claim that the defendants interfered with the LLC’s contractual right to sell the restaurant and assign its leasehold. Here, the court stated that the initial allegation that defendants withheld consent could possibly state a claim and that the complaint did, in fact, allege the defendants interfered with the LLC’s contract to sell the restaurant, with racial animus, by unreasonably withholding its consent. However, the court found that Painter’s Mill Grille had “abandoned this basis for its § 1981 claim” by representing to the court, both in its brief and at oral arguments, that the landlord actually did give its consent for the lease assignment prior to the meeting in question. The Fourth Circuit also held that the district court was correct in dismissing Painter’s Mill Grille’s claim of conspiracy to deprive it of equal protection under § 1985(3) under the intracorporate conspiracy doctrine. The court’s analysis under the doctrine found that both exceptions to the doctrine that a corporation cannot conspire with its agents when its agents acted in furtherance of the corporation were inapplicable. In addition, the court held that the three state law claims for tortious interference with contract and economic relationships had to fail the same way their federal counterparts did. Finally, the Fourth Circuit upheld the district court’s decision to deny the plaintiffs’ request for leave to amend their complaint because the plaintiffs elected to stand on their original complaint in order to appeal and could not challenge their own election.
– John G. Tamasitis
Decided on: March 21, 2013
Glynn brought a False Claims Act retaliation action, alleging that Defendant Impact Science & Technology (IST) and its parent company, EDO Corporation (EDO), fired Glynn because he reported IST to the government for what he believed to be fraudulent conduct. The Fourth Circuit agreed with the district court that Glynn was not engaged in activity that qualified him for protection under the FCA and affirmed the grant of summary judgment to the defendants.
IST hired Glynn as an engineer in 2004 to work in a department that produced devices that jammed frequencies used to detonate IEDs often employed in Afghanistan and Iraq. In May 2006, Glynn was told to conduct testing on a module to see if they performed adequately at 85 degrees Celsius. Glynn passed the modules despite the fact that they did not meet the threshold. After further testing, IST placed a corrective component into the units still in stock, but did not recall 800 units in the field. Glynn asked that the units be recalled, but his superiors did not comply. On September 13, 2006, Glynn contacted AUSA Philip Halpern and said he thought IST was shipping goods that would put the troops in jeopardy. Several days later, Glynn told a superior that he had reported to officials, and that manager alerted others. IST decided to terminate Glynn’s employment on October 13, and officially terminated him on December 14. Glynn sued for unlawful retaliation. The district court granted the defendants’ motion for summary judgment and Glynn appealed.
The FCA is designed to discourage contractor fraud against the federal government and includes an anti-retaliation provision to protect whistleblowers. Pursuant to Zahodnick v. Int’l Bus. Mach. Corp., 135 F.3d 911, 914 (4th Cir. 1997), an employee bringing a retaliation claim under the FCA must prove that: (1) he engaged in “protected activity” by acting in furtherance of a qui tam suit; (2) his employer knew of these acts; and (3) his employer took adverse action against him as a result of those acts. The district court found that Glynn failed to satisfy all three elements, which provided the basis for its grant of summary judgment to the defendants. The Fourth Circuit disposes of the case on the first element. Glynn puts forth three theories under which he argues that he was engaged in a protected activity: (1) he investigated and opposed IST’s provision of defective devices to the government customer; (2) he investigated and opposed IST’s false certification of compliance with the contract; and (3) he initiated government investigations of IST’s fraudulent conduct. The Fourth Circuit held that none of these actions raised a possibility of a viable FCA action and were not protected. Accordingly, the Fourth Circuit upheld the district court’s decision to grant summary judgment in favor of defendants.
Decided: December 19, 2012
The Fourth Circuit Court of Appeals affirmed the judgment of the district court and dismissed Mrs. Butler’s action for wrongful death and loss of consortium under the Federal Tort Claims Act (“FTCA”).
On January 29, 2004 Mr. Butler, a veteran, was examined by a physician at a VA center in Durham, North Carolina. It was discovered that Mr. Butler would need to undergo surgery for a vascular condition. After surgery Mr. Butler was paralyzed from the chest down, and his left leg was later amputated. On March 15, 2005, Mr. Butler died from sepsis. In April of 2005, Mrs. Butler filed a claim for dependency and indemnity compensation benefits with the VA. The VA later decided that Mrs. Butler was entitled to an award of benefits. In June of 2010, Mrs. Butler filed a complaint under the FTCA alleging wrongful death and loss of consortium. Mrs. Butler did not present an expert witness at trial because she believed this to be unnecessary given the binding effects of the VA’s Rating Decision on the district court. The district court granted summary judgment to the Government because under North Carolina law an expert witness is necessary to establish the standard of care in a medical malpractice action.
On appeal Mrs. Butler argued that the findings in the VA’s Rating Decision established all of the necessary elements to prove negligence and causation against the Government. Mrs. Butler relied on 38 U.S.C. § 511 and contended that the language should be construed as a bar to any court to reach a conclusion contrary to the Rating Decision. The Ninth Circuit decided a case similar to the one at issue here. It decided that FTCA liability was not established by a VA’s Rating Decision. The Fourth Circuit adopts the Ninth Circuit’s holding that the “questions” of law and fact to be given conclusive effect under § 511(a), and to be subject to no further review by a court, are only those which would affect the provision of the benefits awarded by the VA. Since adjudication of Mrs. Butler’s FTCA claim would not affect the validity of her VA benefits award, the court of appeals concluded that the district court did not err in its decision.
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: July 26, 2012
This case addressed whether an employee’s authorized access of a computer or information on a computer could form the basis of a violation of the Computer Fraud and Abuse Act of 1986 (CFAA). The Fourth Circuit held that, though the defendants may have misappropriated information, WEC’s inability to allege any unauthorized access of a computer or information on a computer failed to give rise to a violation of the CFAA. Because WEC failed to state a claim for which the CFAA can grant relief, the district court’s dismissal of the claim was affirmed.
The CFAA permits parties who suffer damages to bring a civil action for compensatory damages, injunctive relief, or equitable relief pursuant to 18 U.S.C. § 1030(g). Miller worked as the Project Director for WEC until he suddenly resigned in April 2010. Shortly thereafter, Miller made a presentation to a potential WEC customer on behalf of WEC’s competitor, Arc. WEC contends that Miller and his assistant, Kelley, acting at Arc’s direction, improperly downloaded proprietary information, such as pricing terms, pending projects, and the technical capabilities of WEC, in violation of the CFAA. WEC sued Miller, Kelley, and Arc, alleging nine state-law causes of action and a violation of the CFAA. WEC argued that Miller and Kelley breached their fiduciary duties to WEC and therefore either (1) lost all authorization to access the confidential information at issue or (2) exceeded their authorization. Miller, Kelley, and Arc moved for dismissal pursuant to Fed. R. Civ. P. 12(b)(6) The district court granted the motion on the grounds that WEC did not establish a violation of company policies relevant to access and therefore failed to establish liability under the CFAA.
The Fourth Circuit assessed the scope of “without authorization” and “exceeds authorized access,” noting two different approaches. In Int’l Airport Ctrs., LLC v. Citrin, 440 F.3d 418, 420–21 (7th Cir. 2006), the Seventh Circuit held that “when an employee accesses a computer or information on a computer to further interests that are adverse to his employer, he violates his duty of loyalty, thereby terminating his agency relationship and losing any authority he has to access the computer or any information on it.” District courts within the Fourth Circuit have followed the Ninth Circuit’s approach, which interprets the terms literally and narrowly, limiting the application to situations where an individual accesses a computer or information without permission. United States v. Nosal, 676 F.3d 854, 863 (9th Cir. 2012) (en banc); LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1134–35 (9th Cir. 2009). The Fourth Circuit rejected the approaches of the Seventh and Ninth Circuits and instead concluded that “an employee is authorized to access a computer when his employer approves or sanctions his admission to that computer,” but exceeds authorized access “when he has approval to access a computer, but uses his access to obtain or alter information that falls outside of the bounds of his approved access.” Notably, this interpretation did not extend to the improper use of validly accessed information. WEC failed to establish that Miller and Kelley accessed a computer or information on a computer without authorization, though they may have misappropriated information for an improper use. Accordingly, there was no CFAA violation and Arc cannot be held liable. The district court’s judgment of dismissal was affirmed.
Decided: July 11, 2012
On appeal, Albert C. Burgess, Jr., challenges his convictions and sentences for two felonies involving the receipt and possession of child pornography, as well as an award of restitution for losses suffered by a child victim portrayed in the material in Burgess’ possession. The Court of Appeals affirmed Burgess’ convictions and all aspects of his sentences except the amount of restitution ordered by the district court. As to the restitution, the majority followed the D.C. Circuit in holding that the child pornography statute incorporates the tort requirement of proximate causation to support an award of compensatory damages to a victim and a defendant is liable only for harm he proximately caused.
Federal authorities linked Burgess to a website that offered child pornography to customers using payment information he supplied online. During a search of his home, authorities found a personal computer and compact discs containing hundreds of video recordings and thousands of images of child pornography. Burgess was arrested and charged under North Carolina state law. While in custody, he was informed of his Miranda rights and confessed to an officer that he viewed child pornography frequently and knew of trafficking operations. While in state custody, a federal grand jury indicted Burgess of knowingly possessing child pornography and knowingly receiving child pornography via computer. A jury convicted him of both counts, and the district court imposed an award of $305,219.86 in restitution on behalf of “Vicky,” a child victim portrayed in the materials seized from Burgess.
The Court of Appeals found Burgess’ arguments against his two convictions and sentencing to be without merit. Among other things, Burgess argued that the length of his pretrial detention violated his right to a speedy trial, an argument the Court of Appeals disposed of because he was not taken into federal custody until after he was indicted by a grand jury. Burgess’ strongest contention was that the district court erred in ordering that he pay restitution because the court did not determine that his conduct proximately caused harm to the victim. The Court of Appeals noted that although several circuits had considered the issue, none had adopted the general causation argument and allowed liability to be imposed on one defendant for all of a victim’s injuries, regardless of how attenuated the connection to that defendant. While some circuits chose to read one subsection of the statute requiring proximate cause to apply to the remainder of the statute, the Fourth Circuit declined that line of reasoning, instead following the plurality that have applied general tort principles to require proximate causation for an award of compensatory damages. The Court of Appeals held that Burgess was only responsible for losses sustained by Vicky that he proximately caused. On remand to the district court for a determination of proximate causation, the Court of Appeals further held that joint and several liability was not applicable to Burgess and instead the district court should employ the concept of aggregate harm to ascertain the appropriate amount of restitution.
Judge Gregory wrote an opinion concurring in the judgment, but disagreeing with the majority’s determination that joint and several liability was inapplicable to Burgess, as his interpretation of the statute requires the court to order Burgess to pay all of the losses he proximately caused and for any injuries indivisible from those that he proximately caused.
-Nora Anne Bennani
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.