The Prison Mailbox Rule: How to Send Mail in Jail

BACKGROUND

Federal Rule of Appellate Procedure 4 outlines the time restrictions for filing a notice of appeal. However, the original rule was not very clear on how prisoners would file if they were already behind bars. Prisoners face unique challenges due to their confinement, as they cannot travel to the courthouse themselves to file paperwork. Further, they do not have access to the United States Postal Service to mail and track progress, so they must rely on the prison mail system instead. Specifically, pro se prisoners (representing themselves) are at a disadvantage when exercising their right to file a notice of appeal.

The Supreme Court grappled with this question in Houston v. Lack (1988), and answered by formulating the prison mailbox rule, stating that filings by pro se prisoners are complete when the prisoner delivers the notice to prison authorities for mailing. After the Houston case, Rule 4 was amended in 1993 to better incorporate the prison mailbox rule. Since then, different circuits have interpreted the prison mailbox rule and come to some starkly different conclusions.

THE ISSUE

In formulating the prison mailbox rule, the Houston Court specified the struggles of “pro se prisoner[s]” in filing paperwork. So, does this rule, where a prisoner’s notice of appeal is filed when he hands it to prison officials to be mailed, apply to all prisoners, including those represented by counsel (broad interpretation), or only to pro se prisoners (narrow interpretation)?

THE SPLIT

In February 2021, Cretacci v. Call came before the U.S. Court of Appeals for the Sixth Circuit, challenging the scope of the prison mailbox rule. This case called for an interpretation of the rule posited by Houston. The Sixth Circuit joined the majority of its sister circuits (the Fifth, Eighth, Tenth, and Eleventh Circuits) by interpreting the prison mailbox rule narrowly and holding that it doesn’t apply to inmates already represented by counsel but instead only applies to pro se prisoners. In contrast, the Fourth and Seventh Circuits have applied the rule broadly to include inmates that are represented by counsel.

The Fifth, Sixth, Eighth, Tenth, and Eleventh Circuits: Narrow Interpretation

In Cretacci v. Call (2021), Blake Cretacci was held as a pretrial detainee in the Coffee County, Tennessee prison system in 2016. Cretacci alleged that during his time in the system, he was the victim of numerous constitutional violations. Cretacci secured an attorney to file a complaint, but the attorney did not realize that they could not practice until the night before the statute of limitations lapsed. Therefore, the attorney could not represent Cretacci in the applicable jurisdiction, so Cretacci gave the prison authorities the paperwork that same evening pro se, following the prison mailbox rule, so that it could meet the statute of limitations. The court later received the filing, and the attorney was able to get admitted pro hac vice so that he could represent Cretacci during the proceeding. 

The court held that Cretacci’s claims of excessive force and failure to distribute supplies were time-barred since the statute of limitations had lapsed. Further, Cretacci could not use the prison mailbox rule since he did have representation at the time. The court went on to say that the pro se requirement of the prison mailbox rule applied in all civil cases. The Sixth Circuit reasoned that Houston should only apply to pro se prisoners due to their unique challenges in filing legal documents. The court explained that “if a prisoner does not need to use the prison mail system, and instead relies on counsel to file a pleading on his or her behalf, the prison is no longer responsible for any delays and the rationale of the prison mailbox rule does not apply.” The court ended its analysis by distinguishing the case at bar from the opposing circuits by stating that Appellate Rule 4(c) did not govern.  

The Eighth Circuit was one of the first circuits to address the prison mailbox rule in Burgs v. Johnson County (1996). In Burgs, an inmate filed a notice of appeal pro se while simultaneously requesting an appointment of counsel. First, the court appointed the same counsel that the inmate had during the lower court proceedings. Next, the court held that since the inmate had counsel at an earlier point in the case, the prison mailbox rule did not apply since the inmate could have reasonably relied on the attorney to file a timely notice of appeal. Specifically, the court said that the prison mailbox rule is limited to pro se prisoners only, since “the moment at which pro se prisoners necessarily lose control over and contact with their notices of appeal is at delivery to prison authorities, not receipt by the clerk.”

In 2002, the Fifth Circuit engaged with the prisoner mailbox rule in Cousin v. Lensing (2002). Cousin was a prisoner who attempted to file a notice of appeal after the time required, but the court refused to apply the prison mailbox rule to these filings since the prisoner did have an attorney when they filed the notice. The court reasoned that the mailbox rule only allows leniency in time for pro se prisoners since they face unique difficulties in filing pleadings. The court continued, saying that this rationale does not extend to represented prisoners since they do not need this leniency and do not face the same challenges.

The same year, the Tenth Circuit also encountered the prison mailbox rule in United States v. Rodriguez-Aguirre (2002). In this case, a prison argued that his counsel was ineffective and that this might impact the timing of his filing of appeals under the prison mailbox rule. However, the Tenth Circuit held that there was not enough proof that any ineffective assistance of counsel caused the failure to timely file. Therefore, the prison mailbox rule does not apply to represented prisoners. The court reasoned that the Houston rule served a narrow purpose: to acknowledge the delays caused by the prison mail system.

The Eleventh Circuit, through its per curiam decision in United States v. Camilo (2017), agreed with its sister circuits that the prison mailbox rule should be construed narrowly. In Camilo, a prisoner argued that the sentencing documents he had filed pro se should be subject to the prison mailbox rule even though he had representation at other stages of litigation.  The court stressed that the prison mailbox rule was designed to help prisoners who were strictly limited to communicating through the prison staff and postal service. Thus, represented prisoners have other means of communication.

The Fourth and Seventh Circuits: Broad Interpretation

The Fourth Circuit first encountered the prison mailbox rule in United States v. Moore (1994). In this case, a prisoner was represented by the federal public defender’s office and filed a notice of appeal. The inmate gave the paperwork to prison operators, but it arrived at the district court two days late, so the court dismissed the claim. The Fourth Circuit applied the prison mailbox rule to this situation. The court stated that the prison mailbox rule could not discriminate based on the representation status of prisoners.

The court noted that the prison mailbox rule was designed to correct disadvantages that prisoners have in filing documents due to restrictions on their freedom and did not offend any notion of fairness. The court went on to say that Houston should not be interpreted so narrowly as to exclude represented prisoners since there was “no good reason” to do so. The court noted that even though represented prisoners can rely on their counsel to file documents and act on their behalf, the court did recognize that prisoners might still face restrictions and limitations on how frequently they can see their attorneys.

The Seventh Circuit most recently answered the prison mailbox rule in 2004, in United States v. Craig (2004). Here, a prisoner stated that he had changed his mind while in jail and decided last minute to file an appeal. He then filed the notice pro se under the prison mailbox rule, as he did not think that he had counsel to represent him. The government challenged the prison’s change of heart as time-barred and further argued that the prison mailbox rule did not apply to represented prisoners anyway.

Although the court dismissed this specific case, they also explicitly disagreed with the government’s argument about the prison mailbox rule. The court reasoned that although Houston initially defined the rule, it had been codified through amendments to Federal Rule of Appellate Procedure 4. The court turned to Rule 4(c)(1), observing that it “requires a prisoner to use a legal-mail system if the prison has one.” So, this rule governs, and the court couldn’t “pencil ‘unrepresented’ or any extra word into the text of Rule 4(c), which as written is neither incoherent nor absurd.”

LOOKING FORWARD

While Cretacci represents the most recent encounter with the prison mailbox rule, the issue is relatively common and reveals a lack of clarity in the law. This rule affects many defendants and the ease with which these defendants can file appeals, so it is important from both fairness and procedural standpoint that the rules are clear and equally applied. Therefore, it seems likely that the prison mailbox rule will continue to be challenged in the courts. It is unclear at this point whether Cretacci will appeal the Sixth Circuit’s decision, but the Supreme Court may eventually have to clarify the law, whether it be through case law or another amendment of the Federal Rules of Appellate Procedure to resolve this circuit split.

Fed Up with Autodials: Litigation or Arbitration?

BACKGROUND

Congress passed the Telephone Consumer Protection Act (TCPA) in 1991 to restrict the emerging practice of telemarketing. Telemarketing is the often-unsolicited practice of autodialing individuals to market various products or services in the form of a pre-recorded, automated voice message, and is the subject of frequent consumer complaints. The TCPA imposes limits on telemarketing, including restrictions on times call may be made and maintaining an active do-not-call list; these limits may only be avoided by written consent from the consumer.

ISSUE

Under a wireless services contract that binds consumers to arbitrate any disputes with the providing company and its affiliates, may a satellite television company that became an affiliate of a wireless services provider several years after the signing of such contract compel arbitration when a consumer brings a suit under the Telephone Consumer Protection Act?

THE SPLIT

 In 2020, the Seventh and Fourth Circuit Courts of Appeals both heard cases on the arbitrability of “infinite arbitration clauses” of contracts, a term created by legal scholar David Horton to describe arbitration agreements that use “infinite” language to bind parties to arbitration. Such language attempts to widen the scope of arbitrable disputes as much as possible to those arising anytime and anywhere, regardless of whether such disputes arose from any relationship between the contracting parties. As a result, judges have had to decide how literally to interpret such provisions.

The Ninth Circuit

In 2018, Jeremy Revitch filed a lawsuit against DirecTV for alleged violations of the TCPA after the company repeatedly called him with automated messages advertising cable services. Revitch had never been in contact with DirecTV, had never given consent for such phone calls, and after enduring considerable frustration with the autodialing, attempted to bring a class-action lawsuit against the company on behalf of all similarly-situated consumers.

DirecTV filed a motion to compel arbitration. The company had discovered that in his 2011 contract with wireless services provider AT&T, Revitch had agreed to mandatory arbitration for any disputes arising out of his relationship with AT&T, and with any of AT&T’s “affiliates”. DirecTV had been acquired by AT&T, Inc. in 2015, becoming, along with AT&T Mobility, a subsidiary of that company, making DirecTV and AT&T Mobility, in DirecTV’s affiliates.

Revitch initiated his class-action claim against DirecTV in the United States District Court for the Northern District of California; the district court denied DirecTV’s motion to compel arbitration, holding that the contract between Revitch and AT&T “did not reflect an intent to arbitrate the claim that Revitch asserts against DIRECTV”. DirecTV appealed the ruling to the Ninth Circuit.

Under the Federal Arbitration Act, federal courts do not have the discretion to determine the arbitrability of claims. Federal judges are “limited to determining (1) whether a valid agreement to arbitrate exists, and if it does, (2) whether the agreement encompasses the dispute at issue”, writes Circuit Judge Diarmuid O’Scannlain in Revitch v. DIRECTV, LLC (2020), quoting an earlier case. A judge may only hold that an arbitration clause is not enforceable if the answer to either of these questions is no.

To answer the first question, Judge O’Scannlain turned to California state contract law, relying on a presumption against absurd results to answer in the negative. The California Civil Code stipulates, in §§1636 and 1638 respectively, that contracts are to be interpreted “so as to give effect to the mutual intentions of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful”, and that “the language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity”. The court said that Revitch could not reasonably have expected that, when he was signing a cell phone services contract with AT&T, that he was entering into an agreement to arbitrate any disputes he may have with any company that affiliates with AT&T years into the future, and as a result, DirecTV is not a party to the contract between Revitch and AT&T.

The Court expressly acknowledged that their decision in Revitch creates a circuit split with the Fourth Circuit:

“[W]e are aware that with our decision today, we are opening a circuit split on this difficult issue: Can anything less than the most explicit “infinite language” in a consumer services agreement bind the consumer to arbitrate any and all disputes with (yet-unknown) corporate entities that might later become affiliated with the service provider—even when neither the entity nor the dispute bear any material relation to the services provided under the initial agreement?”

The dissent in Revitch argued that the canon against absurd results is not appropriate here, and that the plain language of the agreement between Revitch and AT&T dictates that Revitch must arbitrate his claim against DirecTV:

“Nothing in the arbitration clause or in the dictionary definition of the word ‘affiliate’ confers any type of temporal scope to the term so that ‘affiliates’ should be read to refer only to present affiliates. DirecTV is therefore an affiliate within the explicit language of the arbitration clause.”

The Fourth Circuit

The facts in the Fourth Circuit decision of Mey v. DIRECTV, LLC are similar to those in Revitch and, indeed, both cases share the same defendant. In Mey, Diana Mey sued DirecTV for violation of the TCPA when the company solicited Mey by repeatedly calling her cell phone, even though her phone number was listed on the National Do Not Call Registry. DirecTV moved to arbitrate the case because of an arbitration provision Mey signed when entering into a cellular services contract with AT&T.

The Fourth Circuit held that, since DirecTV is unambiguously an affiliate of AT&T, and that the arbitration clause gave no indication that the term “affiliate” had temporal limitations, Mey had signed a contract to arbitrate her disputes with DirecTV. The court pointed to the language of the contract to argue that there were no temporal limitations. For example, the contract used terms such as “successors” and “assigns” in addition to “affiliate”, and the arbitration clause provided for the arbitrability of “claims that may arise after the termination of this [cellular services] Agreement.” The arbitration clause also provided  that “all disputes and claims between us” were to be arbitrated, implying that the contract was intended to cast as wide a net as possible.

In so holding, the Fourth Circuit, similarly to the dissent in Revitch, rejected the idea that the arbitration with DirecTV was an “absurd result” of the contract interpretation. Circuit Judge Rushing, author of the opinion, stated:

“In light of the expansive text of the arbitration agreement, the categories of claims it specifically includes, and the parties’ instruction to interpret its provisions broadly, we must conclude that it is “‘susceptible of an interpretation'” that covers Mey’s TCPA claims… The text of the agreement arguably contemplates arbitration of Mey’s claims, and any ambiguity about whether those claims are included “must be resolved in favor of arbitration.” Indeed, “the presumption in favor of arbitrability is particularly applicable when the arbitration clause is broadly worded,” as it is here.”

LOOKING FORWARD

Revitch voluntarily dismissed his complaints against DirecTV without prejudice. In the case of Mey v. DIRECTV, LLC, the Fourth Circuit remanded the case to the District Court for the Northern District of West Virginia. Because Mey’s attorneys had not argued that the pertinent arbitration clause was “unconscionably overbroad” before her case was appealed to the Fourth Circuit, that issue was left to be litigated again when the case was remanded. The District Court once again denied DirecTV’s arbitration claim. As it currently stands, Mey is able to challenge DirecTV in court rather than through arbitration.

Nonetheless, the issue of infinite arbitration clauses and their interpretability is likely to persist. The dissent in Revitch and the internal disagreements in the Fourth Circuit illustrate that there is not judicial consensus on whether entities like DirecTV may enforce arbitration provisions in which their connection to the underlying agreement is tenuous. Further, corporations are likely to continue the use of infinite arbitration clauses because they perceive that arbitration decisions are less likely to be friendly to consumer suits. As long as contracts continue to contain infinite arbitration clauses, there is likely to be litigation over the enforceability of those clauses.

For further reading, see: https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=9691&context=penn_law_review

DOES THE HEALTH AND HUMAN SERVICE’S RULE BANNING ABORTION REFERALS UNDER TITLE X VIOLATE THE ADMINISTRATIVE PROCEDURE ACT?

BACKGROUND

In 1970, Congress enacted Title X of the Public Health Service Act “to promote public health and welfare by expanding, improving, and better coordinating the family planning services and population research activities of the Federal Government[.]” Under the act, the Secretary of the Department of Health and Human Services (HHS) is “authorized to make grants to and enter into contracts with public or nonprofit private entities to assist in the establishment and operation of voluntary family planning projects which shall offer a broad range of acceptable and effective family planning methods and services (including natural family planning methods, infertility services, and services for adolescents).” The Act specifically states that “none of the funds appropriated under this subchapter shall be used in programs where abortion is a method of family planning.”

Over the past 50 years, HHS has interpreted this specific provision in different ways. In 1972, HHS interpreted this section as “not only as prohibiting the provision of abortion but also prohibiting Title X projects from in any way promoting or encouraging abortion as a method of family planning.” 53 Fed. Reg. 2922-01, 2923. In 1981, HHS went a step further and included “nondirective” counseling upon request for information on abortions, foster care, and other options. 53 Fed. Reg. at 2923. The interpretation of this subsection has changed several times through different administrations. Under the Trump administration, in 2018, HHS promulgated a rule that “a title X project may not perform, promote, refer for, or support abortion as a method of family planning, nor take any other affirmative action to assist a patient to secure such an abortion.” The rule further states that a pregnant woman must be referred to a health care provider for prenatal care and a physician may not refer the patient for an abortion, even if that is the patient’s desire.

THE ISSUE

Under Title X of the Public Health Service Act, did the Department of Health and Human Services have authority to promulgate a Final Rule banning service providers who receive federal money from referring patients for abortions?

THE SPLIT

The Fourth and Ninth Circuits have interpreted the subsection regarding the provision prohibiting abortion as a means of family planning. The Fourth Circuit claims that HHS was arbitrary and capricious in its rulemaking thus violating the Administrative Procedure Act (APA), while the Ninth Circuit upheld the Final Rule.

The Fourth Circuit

The Mayor and City Council of Baltimore filed suit against Alex Azar II, Secretary of HHS, alleging that the Final Rule violated the APA. In Chevron v. Natural Resources Defense Council (1984), the Supreme Court established a two-step test to determine if an agency should be given deference in a rulemaking. The first step is to determine whether the statute under which the rule was promulgated is ambiguous. The second step is to determine if the agency acted in an arbitrary and capricious manner in promulgating the rule and if the agency interpreted the statute in a reasonable manner. The Fourth Circuit, en banc, in Mayor & City Council of Baltimore v. Azar (2020), held that the Final Rule was arbitrary and capricious because HHS “inadequately explained its decision ‘to disagree with comments by every major medical organization regarding the Final Rule’s contravention of medical ethics’ . . . and inadequately considered the ‘likely costs and benefits of the physical separation requirement.’” The court asserted that HHS failed to consider all of the nation’s major medical organizations concerns when promulgating the rule. Further, the court found that the agency was “arbitrary and capricious because ‘the administrative record reflects comments estimating the likely cost of the requirement far exceeds HHS’s estimate of $30,000.’” Moreover, the court determined that the rule is unlawful as it violates the “nondirective” counseling requirement in Title X programs because mandating prenatal care is a form of “directive” counseling. Lastly, the court held that the rule interfered with physician-patient communications.

The Ninth Circuit

Contrary to the Fourth Circuit’s holding, the Ninth Circuit upheld the Final Rule promulgated by HHS. In State of California v. Azar (2020), the court distinguished between counseling and referrals. The court held that providers “‘may discuss abortion’ so long as ‘the counselor neither refers for, nor encourages, abortion’” thus, the “nondirective” counseling provision was not violated. Furthermore, the court asserted that the agency was reasonable in its interpretation of Title X and was not arbitrary and capricious in promulgating the rule. Under Chevron step two, the court deferred to the “agency’s expertise in identifying the appropriate course of action.”

LOOKING FORWARD

The Final Rule promulgated by HHS under the Trump administration is an attempt by the administration to limit a woman’s right to abortion. Title X mainly serves low-income families and people of color. According to Planned Parenthood, 21% of Title X recipients identify as African American or Black and nearly 32% identify as Latino. The Final Rule will most adversely impact these populations. In cases where there is a circuit split, the Supreme Court often becomes the deciding factor. The Supreme Court will be the final word in whether HHS’s rule was promulgated in a valid manner if they decide to hear the case. The Trump administration filed a petition for writ of certiorari to the Supreme Court in Azar v. Mayor & City Council of Baltimore, but the case has not yet been listed for conference. Only time will tell if the Supreme Court will hear this case. Additionally, with the new administration taking office, the case may be become mute if the rule is rescinded or is amended to allow abortion referrals.

 

 

Knock-knock, “Open up it’s the Poli… Housekeeping!”

BACKGROUND

The Fourth Amendment states “the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

There are some limited exceptions to the warrant requirement, like “exigent circumstances,” where a reasonable law enforcement officer would believe a warrantless search and seizure is necessary—for example to prevent physical harm, destruction of evidence, or a suspect’s escape. The Supreme Court, in Cady v. Dombrowski (1973), recognized a “community caretaking” exception to the Fourth Amendment warrant requirement, which acknowledges that police officers carry out “community caretaking functions, totally divorced from the detection, investigation, or acquisition of evidence relating to the violation of a criminal statute.” When established, the exception was designed only for warrantless searches of motor vehicles to aid those in distress, combat actual hazards, prevent potential hazards from materializing and provide services to preserve and protect public safety. United States v. Rodriguez-Morales (1st Cir. 1991). Since Cady, courts have expanded the “community caretaking” exception.

THE ISSUE

Does the “community caretaking” exception to the Fourth Amendment’s warrant requirement extend beyond the context of motor vehicles to the home?

THE SPLIT

The Third, Seventh, Ninth Circuits, and likely the Tenth Circuit have held that the “community caretaking” exception does not extend to the home. The First, Fifth, and Eighth Circuits have extended the “community caretaking” exception beyond the motor vehicle context, justifying, under certain circumstances, a warrantless entry into an individual’s home.

The Third, Seventh, and Ninth Circuits – Does Not Extend to the Home

The Ninth Circuit established its view on how far the exception established in Cady applies in United States v. Erickson(1993). In Erickson, a police officer investigating a suspected burglary, pulled back plastic from an open window in a basement, revealing numerous marijuana plants. The officer then proceeded to obtain a warrant and arrest the homeowner. The court held that even if the officer was performing a community caretaking function at the time, that alone cannot justify the warrantless search prior to obtaining the warrant. The court concluded “Cady clearly turned on the ‘constitutional difference’ between searching a house and searching an automobile.”

The Third Circuit in Ray v. Township of Warren (2010) similarly concluded that the “community caretaking” exception established in Cady “expressly distinguished automobile searches from searches of a home.” In Ray, police officers, fearing that a child in a home may be in danger, entered the home without a warrant. The court held that the “community caretaking” exception does not override the warrant requirement of the Fourth Amendment in the context of the home.

The Seventh Circuit, in Sutterfield v. City of Milwaukee (2014) also declined to extend the “community caretaking” exception to the home. Here, police officers forcibly entered the home of a potentially suicidal individual to effectuate an emergency detention for a mental health evaluation. Officers detained the homeowner, performed a protective sweep of the home, and seized a firearm that was inside a locked CD case. Guided by its earlier decision in United States v. Pichany (1982), the Seventh Circuit decided that the exception “extended only to automobiles temporarily in police custody.” The court, however, held that the entry and subsequent sweep were justified by the “exigent circumstances” exception. The search of the CD case was unlawful because the gun was not in plain view and the search was based on a hunch.

The Tenth Circuit is less clear, but appears to agree.  In  United States v. Bute (1994), which concerned a commercial building and garage, the Tenth Circuit concluded that the “community caretaking” exception to the Fourth Amendment warrant requirement is “applicable only in cases involving automobile searches.” Thus, the Tenth Circuit most likely would not have extended the exception to the home had one been the subject of the case.

Sixth Circuit holdings are mixed. The Sixth Circuit in United States v. Rohrig (1996) recognized that warrantless entry into the home may be permissible when police officers are acting as community caretakers to stop a significant noise nuisance. The question remained as to whether this is permissible under the “exigent circumstances” or “community caretaking” exception. However, in United States v. Williams (2003), the Sixth Circuit concluded that Rohrig did not extend the “community caretaking” exception into the home, stating “we doubt that community caretaking will generally justify warrantless entries into private homes.”

The First, Fifth, and Eighth CircuitsExtends to the Home

The Eighth Circuit in United States v. Quezada (2006) did not exactly conclude that the “community caretaking” exception extends to the home, but that “a police officer may enter a residence without a warrant as a community caretaker where the officer has a reasonable belief that an emergency exists requiring his or her attention.” This standard is more like a modified exigent circumstances test, which lowers the threshold for exigency when the officer is acting as a community caretaker.

The Sixth Circuit appears to agree with the Eighth. In United States v. Rohrig (1996), the Sixth Circuit recognized that warrantless entry into the home may be permissible when police officers are acting as community caretakers to stop a significant noise nuisance. The question remained as to whether this is permissible under the “exigent circumstances” or “community caretaking” exception. However, in United States v. Williams (2003), the Sixth Circuit concluded that Rohrigdid not extend the “community caretaking” exception into the home, stating “we doubt that community caretaking will generally justify warrantless entries into private homes.”

The Fifth Circuit in United States v. York (1990) extended the “community caretaking” exception to the home. Here, the guests of a home feared for their safety, requesting the assistance of deputies so they could collect their belongings and vacate. The deputies entered without a warrant, and later contacted the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) about firearms seen in plain view. The court applied a reasonable foreseeability standard in determining whether a search/seizure is lawful. The court concluded that the community caretaking function of the police here was reasonably foreseeable.

The First Circuit in Caniglia v. Strom (2020) similarly extended the “community caretaking” exception to the home, but instead applied a three-part test. Here, after a domestic dispute, police believed it was reasonable to seize the appellant homeowner’s firearms, fearing that he could be in danger should the guns remain in the home. The court held that the core purpose of the “community caretaking” exception should not be limited to the motor vehicle context, and under the right circumstances may be extended to the home. The court determined that for the “community caretaking” exception to be lawful the court must consider (1) if there is an objectively reasonable basis for believing the individual is suicidal or otherwise poses an imminent risk of harm to himself or others; (2) if there is an objectively reasonable basis for thinking that the individual may use firearms seized in the immediate future for harming himself or others; and (3) if the entry into the home is appropriate when “tailored to the seizure of firearms in furtherance of police officers’ community caretaking responsibilities.”

These approaches are to some degree inconsistent, applying different tests and examining different conditions to determine if warrantless entry into the home is justified under the “community caretaking” doctrine. What they do show, however, is that under the right circumstances, such entry may be justified.

LOOKING FORWARD

The U.S. Supreme Court granted certiorari in Caniglia v. Strom on November 20, 2020. Not only will this case provide clarity to state and federal law enforcement on the extent to which police may intrude into the home, but this case may also shine a light on how the new Court will decide individual liberty issues going forward. An evolution of the “community caretaking” exception may be viewed by some as a blank check to police to evade the warrant requirement in order to serve the community’s interest. Others may argue that the “community caretaking” exception is faithful to the Fourth Amendment because it gives “police elbow room to take appropriate action when unforeseen circumstances present some transient hazard that requires immediate attention, [which] should not be limited to the motor vehicle context.” While some cases find that the “community caretaking” exception is limited solely to the motor vehicle context, others have allowed warrantless entry in contexts that are neither homes nor cars. For further reading, see Stop Hammering Fourth Amendment Rights: Reshaping the Community Caretaking Exception with the Physical Intrusion Standard, 97 Marq. L. Rev. 123 (2013).

Private Foreign Arbitration: Can U.S. Federal Courts Compel Discovery?

BACKGROUND

Section 1782 of Title 28 defines the “scope of discovery that foreign litigants may seek in the United States for use in foreign proceedings.” Specifically, Section 1782(a) authorizes the district court to compel discovery “for use in a proceeding in a foreign or international tribunal.” 

The Supreme Court encountered a Section 1782(a) dispute in the case of Intel Corp. v. Advanced Micro Devices, Inc. (2004). The Court held that Section 1782(a) “authorizes, but does not require discovery assistance,” and the Court decided to “leave it to the courts below to ensure an airing adequate to determine what, if any, assistance is appropriate.” The Court in Intel, however, only considered whether Section 1782(a) discovery would apply to public foreign tribunals; where it concluded that it would. The Court remained silent on whether Section 1782(a) discovery would also apply to private foreign arbitration, leading to the current division among the Circuit Courts. 

THE ISSUE

Is the definition of “foreign or international tribunal” under 28 U.S.C. 1782(a) limited only to state-sponsored public tribunals; or does the definition include discovery for private foreign tribunals as well? In other words, can district court judges compel discovery for private foreign arbitration?

THE SPLIT

The Seventh Circuit recently joined the Second and Fifth Circuits by adopting a narrow interpretation of “foreign or international tribunal” to only include public tribunals and exclude private ones. These circuits conclude that compelling discovery in private foreign disputes would undermine the speedy and cost-effective nature of the arbitration process. In recent years, however, the Fourth and Sixth Circuits have disagreed, opting for a broad interpretation of Section 1782(a). These circuits posit that the purpose of the Section 1782(a) is to foster international cooperation through discovery processes and conclude that district courts should have the discretion to apply Section 1782(a) to all foreign tribunals, both public and private. 

The Second, Fifth, and Seventh Circuits

In September 2020, the Seventh Circuit joined the Second and Fifth Circuits in affirming a narrow interpretation of Section 1782(a). In Servotronics, Inc. v. Rolls-Royce PLC (2020), (“Servotronics II”), the court held that Section 1782(a) “did not authorize the district court to compel discovery for use in a private foreign arbitration.” There was a separate case arising from the same arbitration that came before the Fourth Circuit in March 2020 and is discussed below. In Servotronics II, Rolls-Royce had manufactured an engine for a Boeing aircraft and incorporated a Servotronics valve in the design. The airplane was then destroyed in a fire during testing, and Rolls-Royce settled with Boeing for the loss of the plane. Subsequently, Rolls-Royce, a UK-based corporation, sought indemnification from Servotronics, which was based in the United States. The two companies had a long-term agreement that mandated binding arbitration in a London-based private tribunal called the Chartered Institute of Arbiters (“CIArb”). Servotronics then applied for a Section 1782(a) discovery request that would compel Boeing to produce documents that would be used in the London arbitration. The district court judge ultimately denied this discovery request, finding for Rolls-Royce and Boeing.

In interpreting Section 1782(a), the Seventh Circuit affirmed the district court ruling, stating that “foreign or international tribunal” should be defined as “a governmental, administrative, or quasi-governmental tribunal operating pursuant to the foreign country’s practice and procedure.” This definition would consequently exclude any private foreign arbitrations. The Seventh Circuit rejected the Fourth and Sixth Circuit’s broad definition of “foreign and international tribunals,” which included private arbitration. The Seventh Circuit noted that if the ambiguity of the word “tribunal” was interpreted broadly, this could expand the ability of federal courts to compel discovery in foreign arbitration past what is normally allowed in domestic arbitration. 

In January 1999, the Second Circuit was one of the first to confront an issue concerning Section 1782(a) in NBC v. Bear Stearns & Co. (1999). In NBC, the plaintiff, US-based news corporation NBC was involved in a Mexican arbitration with Mexican television broadcasting company Azteca, of which Bear Sterns was an investor. In interpreting Section 1782(a), the Second Circuit noted that “although the phrase ‘foreign or international tribunal’ does not unambiguously exclude private arbitral panels, neither does it unambiguously include them.” The court then concluded that the phrase, considered in the context of statutory and legislative history, is limited to public foreign arbitration and not private tribunals. Two months after the Second Circuit’s decision in NBC, the Fifth Circuit adopted this narrow interpretation of Section 1782(a) in Republic of Kazakhstan v. Biedermann Int’l (1999). The Fifth Circuit held that the statute was “not intended to authorize resort to United States federal courts to assist discovery in private international arbitrations.” The court highlighted the concern that allowing for discovery in private arbitrations would “complicate and undermine” the entire international arbitration process. 

The Fourth and Sixth Circuits

The Fourth and Sixth Circuits have both held that a broad definition of Section 1782(a) is more appropriate. In March 2020, the Fourth Circuit analyzed the scope of 1782(a) in the Servotronics, Inc. v. Boeing Co. (2020), (“Servotronics I”), a case arising from the same arbitration dispute that would later come before the Seventh Circuit. The Fourth Circuit came to a very different result than the Seventh Circuit, reasoning that the “district court functions effectively as a surrogate for a foreign tribunal by taking testimony and statements for use in the foreign proceeding” under Section 1782(a). The Fourth Circuit concluded that the application of Section 1782(a) should be determined by district courts and not parties, so the district courts should possess the ability to compel discovery for private foreign arbitrations. 

The Fourth Circuit’s decision in Servotronics I aligns with the Sixth Circuit’s September 2019 decision in Abdul Latif Jameel Transportation Co. v. FedEx Corp. (2019). In Abdul, the Sixth Circuit held that the word “tribunal” should be interpreted broadly and the “district court’s authority to compel discovery for use in foreign litigation extends to private foreign arbitrations.” The court stressed that the Supreme Court decision in Intel made the application of Section 1782(a) discretionary, and the broad interpretation would be best for giving this discretion to the district courts. 

LOOKING FORWARD

At this point, Rolls-Royce stated that it intended to file a petition for writ of certiorari to the Supreme Court. Whether or not the Servotronics case moves forward, the Court should review the interpretation of Section 1782(a) at some point, resolving the confusion left by Intel. If the Supreme Court opted for a broad interpretation of Section 1782(a), as given by the Fourth and Sixth Circuits, there would likely be a substantial increase in discovery for foreign private arbitrations, increasing costly litigation and further burdening the courts. 

Additionally, there is a pending case, HRC-Hainan Holding Co., LLC v. Yihan Hu (2020), before the Ninth Circuit that concerns a Section 1782(a) dispute involving discovery into a Chinese in vitro fertilization project that is before a Chinese arbitration commission. So, it will also be interesting to see what the Ninth Circuit decides and whether a decision, in this case, comes before a Supreme Court ruling on this issue.

 

When Unsubscribe Doesn’t Work: How Should We Define Autodialers in the Age of Cell Phones?

BACKGROUND

In 1991, Congress passed the Telephone Consumer Protection Act (TCPA) in an effort to curb unsolicited robocalls. Section 227(a)(1) of the TCPA defines an automatic telephone dialing system (ATDS) as “equipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” Section 227(b)(1)(B) prohibits the use of ATDS devices to contact any residential telephone “without the prior express consent of the called party.” 47 U.S.C. § 227.

THE ISSUE

Under the TCPA, is the definition of an ATDS  limited to only those devices that both produce phone numbers using a random or sequential number generator and automatically dial those numbers; or does the definition encompass a broader scope of devices that can still store and automatically dial phone numbers, but do not use random number generators?

THE SPLIT

The Sixth, Second, and Ninth Circuits have adopted a broad interpretation of the language of the TCPA. These three circuits believe that the broad definition will ensure companies that use autodialers to harass individuals will be held accountable for their actions. The Third, Seventh, Eleventh, and D.C. Circuits have disagreed and instead interpret the TCPA narrowly. One of the main justifications posited by these circuits is that a broad definition would cover too many modern electronic devices never intended by Congress when it enacted the TCPA.

Broad Interpretation

In July 2020, the Sixth Circuit joined the Second and Ninth Circuits in affirming a broad interpretation of the TCPA definition of autodialers. In Allan v. Pa. Higher Educ. Assistance Agency (2020), the court ruled that the TCPA definition includes devices that do not use random or sequential number generators. In Allan, the plaintiff took out a student loan from the Pennsylvania Higher Education Assistance Agency (PHEAA) and in doing so, consented to future calls regarding her loan. The plaintiff later requested that she not be called. After requesting to be taken off the phone list, the plaintiff and her cosigner were called a combined 353 times with automated messages. The PHEAA used a system called Avaya, which stored phone numbers and could automatically dial them to send automated messages. Avaya did not use a random or sequential number generator to create the phone numbers to call. The plaintiff sued the PHEAA alleging that the automated phone calls she did not consent to were in violation of the TCPA.

In interpreting the TCPA, the Sixth Circuit in Allan ultimately held in favor of the plaintiff, stating that “the autodialer ban applies to stored-number systems.” Even though the Avaya system did not use a random number generator, it still fell within the type of device making the type of phone calls from which the TCPA was designed to protect. The court rejected the Seventh and Eleventh Circuit’s narrow definition of an autodialing system that requires the use of random or sequential number generators, noting that such a narrow definition would unreasonably defang the TCPA by allowing companies to use one device to randomly generate the phone numbers and a second device to call the numbers. According to the Sixth Circuit, a narrow definition would thus create a loophole for companies to escape prosecution under the TCPA.

In April 2020, the Second Circuit held similarly in Duran v. La Boom Disco, Inc. (2020). In Duran, the plaintiff sued the defendant for sending over 100 text messages through a computer program. In interpreting the meaning of the TCPA, the court contemplated both a broad and narrow definition of an autodialer, but ultimately reasoned that “in order for a program to qualify as an ATDS, the phone numbers it calls must be either stored in any way or produced using a random-or sequential-number-generator.” In other words, to be an ATDS, a program does not have to meet both criteria. Finally, the Ninth Circuit adopted a broad interpretation of an autodialer in 2018 in Marks v. Crunch San Diego, LLC when it reasoned that the definition of an ATDS includes devices with the capacity to dial stored phone numbers automatically, regardless of the existence of random number generators.

Narrow Interpretation

The Third, Seventh, Eleventh, and D.C. Circuits have all held that a narrow definition of an autodialer is more appropriate. In February 2020, the Seventh Circuit held for the defendant in Gadelhak v. AT&T Services(2020). The court reasoned that the capacity to generate random or sequential numbers is essential to the TCPA definition, and because an AT&T text messaging program did not use a random number generator, the TCPA did not apply. The Third Circuit held similarly in Dominguez v. Yahoo, Inc (2018), where the court ruled in the defendant’s favor because the plaintiff was unable to prove that an automated email and SMS program had the “capacity to function as an autodialer by generating random or sequential” numbers.

The D.C. and Eleventh Circuits both adopted the same narrow definition of an autodialer, but also brought up an interesting policy argument in support of their interpretation. In ACA Int’l v. FCC (2018), the D.C. Circuit posited that a broad definition that allows for any device that can store and automatically call a phone number would be unreasonable because it would include just about every modern cellphone. The Court worried that a broad interpretation would mean that “every smartphone user violates federal law whenever she makes a call or sends a text message without advance consent.” The Eleventh Circuit shared a similar worry in Glasser v. Hilton Grand Vacations Co., LLC (2020) when it said that “it’s hard to think of a phone that does not have the capacity to automatically dial telephone numbers stored in a list[.]”

Interestingly, the Sixth Circuit in Allan offered a counter to the D.C. and Eleventh Circuits’ cell-phone argument. The Sixth Circuit determined that just because a device has the capacity to store and dial phone numbers automatically, it is not automatically an autodialer under the TCPA. The court claimed that to be prosecuted under the TCPA, the device must not only possess the requisite qualities, it must be physically utilized as an autodialer as well. Using the Sixth Circuit explanation, a cell phone would not count as an autodialer unless someone purposefully programmed it to be used as one.

LOOKING FORWARD

The Supreme Court is scheduled to hear oral arguments in Facebook, Inc. v. Duguid in December 2020. In its petition for a writ of certiorari, Facebook is asking the Court to clarify which definition of the TCPA ought to apply. If the Supreme Court adopts the broader definition of the Second, Sixth, and Ninth Circuits, there could be interesting implications for essentially all modern cell phones. If all cell phones are found to qualify under the TCPA, we could see new legislation in Congress further limiting the scope of the TCPA.

More Harm Than Good? Considering Pleading Standards in ERISA Duty-of-Prudence Litigation

BACKGROUND

The Employment Retirement Income and Security Act (ERISA) was passed in 1974 to regulate private pension plans. Among other things, ERISA establishes standards of conduct for retirement plan fiduciaries (those who hold a legal relationship of trust with the plan participants), including a duty of prudence.

Wells Fargo’s fraudulent scheme to open fake customer accounts has been well documented and robustly litigated. In addition to consumers and regulators, Wells Fargo has faced legal pressure from many of its own employees. Specifically, Wells Fargo employees brought action against the company for alleged breach of the duty of prudence under ERISA in the management of the company’s 401k retirement plan. Plaintiffs argue that, in failing to disclose the ongoing fraud, Wells Fargo had artificially inflated the value of its own stock and thus the value of the employee retirement accounts which were invested in the company stock.

ISSUE

Could a reasonably prudent fiduciary, who is required under ERISA to manage their plans with “care, skill, prudence, and diligence” under 29 U.S.C. § 1104(a)(1)(B) have concluded that earlier disclosure of fraud would have been more beneficial than harmful to the employees’ stock plan?

THE SPLIT

            The relevant standard for duty of prudence in this case comes from the Supreme Court decision in Fifth Third Bancorp v. Dudenhoefer (2014). In that case, the Supreme Court created a high pleading standard for plaintiffs alleging a breach of duty of prudence under ERISA when such duty comes into conflict with securities law.

The  Fifth, Sixth, and Ninth Circuits

            In Martone v. Robb (5th Cir. 2018), a former employee of Whole Foods sued the company over a breach of duty of prudence when the company plan fiduciaries continued to invest in the company stock, which was alleged to be “artificially inflated due to a widespread overpricing scheme.” In dismissing the plaintiff’s claim, the Fifth Circuit held that the plaintiff could not successfully argue that disclosing the overpricing scheme would not have resulted in more harm than good to the company’s retirement plan.

            The Sixth and Ninth Circuits came to similar conclusions in, respectively, Graham v. Fearon (6th Cir. 2018) and Laffen v. Hewlett-Packard Company (9th Cir. 2018). In Graham, participants in the Eaton Corporation’s retirement plan alleged a breach of duty of prudence when the plan fiduciary bought and held Eaton stock while the company was engaging in fraud. The Sixth Circuit applied Dudenhoefer and affirmed the district court’s grant of defendant’s motion to dismiss. The court wrote

            Applying [Dudenhoefer’s] pleading standard to the facts alleged in Plaintiff’s Complaint, we conclude that the district court properly determined the Complaint does not propose an alternative course of action so clearly beneficial that a prudent fiduciary could not conclude that it would be more likely to harm the fund than to help it.

            The Ninth Circuit Court also applied Dudenhoefer’s pleading standard in Laffen, stating that “[A] prudent fiduciary in the same circumstances as Defendants-Appellees could view Laffen’s proposed alternative course of action as likely to cause more harm than good without first conducting a proper investigation.”

The Second Circuit

            The Second Circuit Court of Appeals has held otherwise. In Jander v. Retirement Plans Committee of IBM (2nd Cir. 2018), plaintiffs sued plan fiduciaries at IBM for breach of duty of prudence when the fiduciaries bought and held IBM stock when a particular division of the company was overvalued. The U.S. District Court for the Southern District of New York dismissed the plaintiff’s claim, but the Second Circuit reversed. The plaintiff in Jander argued that the defendant plan fiduciary could have disclosed the overvaluation earlier along with regular SEC reporting, and the Second Circuit accepted that argument. Applying Dudenhoefer, the Second Circuit determined that a fiduciary could plausibly find that early disclosure of the division overvaluation would be more beneficial than harmful to the plan:

[K]eeping in mind that the standard is plausibility – not likelihood or certainty – we conclude that Jander has sufficiently pleaded that no prudent fiduciary in the Plan defendants’ position could have concluded that earlier disclosure would do more harm than good. We therefore hold that Jander has stated a claim for violation for ERISA’s duty of prudence.

The Eighth Circuit

            The Eighth Circuit’s holding in Allen v. Wells Fargo & Co. is consistent with past holdings of the Fifth, Sixth, and Ninth Circuits. In Allen, and in Dudenhoefer, the plaintiff’s complaint states that the plan fiduciary did not act prudently in light of critical inside information. At the court noted in Dudenhoefer,

To state a claim for breach of the duty of prudence on the basis of inside information, a plaintiff must plausibly allege an alternative action that the defendant could have taken that would have been consistent with the securities laws and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.

            In Allen, Francesca Allen, among other plaintiffs, brought a suit against Wells Fargo that was ultimately dismissed by the United States District Court for the District of Minnesota for failure to state a claim. Allen appealed, and the Eighth Circuit Court of Appeals affirmed that Allen did not meet the pleading standards set forth in Dudenhoefer. In other words, the Eighth Circuit determined that Allen could not plausibly argue that disclosing the fraudulent activity would be more beneficial than harmful to the company retirement plan (or at least not more likely to harm than help). If Wells Fargo had disclosed such information, the company stock would almost certainly have plummeted and wiped out the wealth of plan participants.

Looking Forward

            Allen has not yet filed a petition for writ of certiorari, and it is not clear that she will. The Supreme Court did issue a per curiam opinion in Jander in January 2020, but the case was vacated and remanded on other grounds than those argued in the Second Circuit. When remanded, the Second Circuit decided the case the same as they had before. On November 9, 2020, the Supreme Court denied certiorari on the question of whether allegations that the harm of an inevitable disclosure of alleged fraud increases over time satisfies the “more harm than good” standard in Dudenhoefer. Thus, the Court declined the opportunity to lower the bar slightly for plaintiffs to bring imprudence claims.

 

Further Reading

For further reading, see: https://columbialawreview.org/content/the-duty-to-inform-in-the-post-dudenhoeffer-world-of-erisa/.

Sue Me Once, Shame on You; Sue Me Twice, Pay My Attorney’s Fees?

BACKGROUND

When a plaintiff voluntarily dismisses an action and then refiles it in federal court, “the court may,” under Rule 41(d)(1), “order the plaintiff to pay all or part of the costs of that previous action…” The goal of the rule is to deter plaintiffs from forum shopping.

Court fees, printing costs, costs to procure transcripts, and compensation for court-appointed interpreters have typically been considered costs that can be recovered under Rule 41(d)(1). But these costs often pale in comparison to the fees that defendants pay to their attorneys.

THE ISSUE

Under Rule 41(d)(1), can a court order a plaintiff to pay attorney’s fees?

THE SPLIT

Circuits have taken three different approaches to resolving this issue. The Sixth Circuit has held that attorney’s fees are not recoverable under the rule. The Second, Eighth, and Tenth Circuits have upheld awards of attorney’s fees under Rule 41(d) regardless of the underlying suit. And the Fourth, Fifth, and Seventh Circuits only allow for recovery of attorney’s fees when the statute under which the suit is brought allows a successful defendant to recover them.

The Sixth Circuit

In Rogers v. Wal-Mart Stores, Inc., the Sixth Circuit held that attorney’s fees could not be awarded under Rule 41(d) for a “simple” reason: “the rule does not explicitly provide for them.” The court reasoned that “the law generally recognizes a difference between the terms ‘costs’ and ‘attorney fees,’” and that “where Congress has intended to provide for an award of attorney fees, it has usually stated as much.”

The Sixth Circuit concluded that Rule 41(d) does not “evince an intent to provide” attorney’s fees, applying the Supreme Court’s test from Key Tronic Corp. v. U.S. for determining whether a statute authorizes awarding attorney’s fees when it does not do so explicitly. In reaching this conclusion, the court reviewed other parts of the Federal Rules of Civil Procedure (“FRCP”) that allow for the recovery of costs. Costs and attorney’s fees are listed as separate elements that can be recovered in rules 30(g)(2), 37(a)(4), 37(c), and 56(g), and thus, an interpretation of Rule 41(d) allowing the awarding of attorney’s fees would render words in other parts of the federal rules surplusage, the court reasoned. It also pointed to 28 U.S.C. § 1920, which lists costs that can be recovered under Rule 54(d) and does not include attorney’s fees, as evidence that “cost” was not intended to encompass attorney’s fees under the federal rules.

The Second, Eighth, and Tenth Circuits

In 2018, the Second Circuit addressed the issue in Horowitz v. 148 South Emerson Associates LLC. Like the Sixth Circuit, the Second Circuit concluded that neither Rule 41(d) nor the FRCP in general were explicit in including attorney’s fees as a part of costs.

But the Second Circuit concluded that Rule 41(d) did “evince an intent to provide” attorney’s fees. The purpose of Rule 41(d), the court reasoned, is “to serve as a deterrent to forum shopping and vexatious litigation,” and this purpose would be “greatly limited” if Rule 41(d) did not provide for attorney’s fees because oftentimes attorney’s fees account for a significant proportion of a defendant’s total cost. If attorney’s fees could not be awarded to the defendant in Horowitz, for example, the only costs that could be awarded under Rule 41(d) would be a $15 delivery fee and a $60.48 transcript fee. The court was “unconvinced such small payments would effectively deter litigants . . . from forum shopping or otherwise embarking on a course of vexatious litigation.”

While the Eighth and Tenth Circuits considered the issue before the Second Circuit did, neither directly addressed the issue of whether “costs” included attorney’s fees. In Meredith v. Stovall (2000), the Tenth Circuit held that “under the language of Rule 41(d), the decision whether to impose costs and attorney’s fees is within the discretion of the trial court.” And in Evans v. Safeway Stores, Inc (1980), the Eighth Circuit issued an unpublished decision concluding that the district court did not abuse its discretion in awarding attorney’s fees.

The Fourth, Fifth, and Seventh Circuits

The Seventh Circuit addressed this issue in Esposito v. Piatrowski (2000). The court extended the rationale of the Supreme Court’s decision in Marek v. Chesney (1985) in which the Court analyzed whether Rule 68, which also allows the recovery of costs without specifying further, allows for the recovery of attorney’s fees. In Marek, the Court held that “Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute” because the Advisory Committee was aware of the many statutes that allowed for recovery of attorney’s fees in particular cases, and therefore “given the importance of ‘costs’ to the Rule, it is very unlikely that this omission was mere oversight.”

The Seventh Circuit adopted this rationale for interpreting “costs” in Rule 41(d): “Like Rule 68, Rule 41(d) refers to ‘costs,’ but fails to define the term, and furthermore, neither the rule nor the Advisory Committee Notes address the question of whether attorney’s fees may be included in an award of costs. Because Rule 41(d) does not refer to costs any differently than does 28 U.S.C. § 1920, which provides the statutory specification of allowable costs [under rule 54(d)], fees may be included as costs only where the underlying statute so provides.”

The Seventh Circuit ruled, therefore, that attorney’s fees were only recoverable when a prevailing defendant could recover in the initial suit. In Esposito, the suit was a civil rights action arising under 42 U.S.C. § 1983. Because the initial suit had not been “frivolous, unreasonable, or groundless,” a requirement for the recovery of attorney’s fees by a successful defendant in an action under Section 1983, the court held that the statute under which the action arose did not allow recovery of attorney’s fees by the defendant.

In Andrews v. America’s Living Centers, LLC (2016), the Fourth Circuit adopted the Seventh Circuit’s rationale in an action arising under the Fair Labor Standards Act. It explained that the Seventh Circuit’s rule in Esposito “strikes the right balance between upholding the American Rule and furthering the goal of Rule 41(d) to deter forum shopping and vexatious litigation on the part of the plaintiff.” But, as in Esposito, because the plaintiff’s initial suit “was not undertaken in bad faith, vexatiously, wantonly, or for oppressive reasons,” the standard for recovery of attorney’s fees by a prevailing defendant under the FLSA, attorney’s fees were not recoverable. The Fifth Circuit adopted the same rule in Portillo v. Cunningham the following year.

LOOKING FORWARD

Because of the rarity of the situation, the question of whether attorney’s fees can be awarded under Rule 41(d) is one that is unlikely to be resolved soon. Even so, it is a question that affects the extent to which plaintiffs are incentivized to refile their cases in federal courts. It is also one that reflects a broader difference in methods between circuits in determining whether a cost-awarding provision in the FRCP allows for attorney’s fees, and therefore, it is an issue that may develop as courts address similar fee-shifting clauses.

Further Reading: Does Rule 41(d) Authorize an Award of Attorney’s Fees? by Edward X. Clinton Jr.

What Not to Do While Robbing A Bank (Alternatively: How to Get Away with Abduction)

BACKGROUND

The Federal Sentencing Guidelines offer judges parameters by which to calculate sentencing based on the severity of the crime and the defendant’s criminal history. The Guidelines aim to assign fair, relatively consistent sentences across the country.

The Guidelines include enhancements, which are provisions that increase the length of a sentence for a particular crime. A robbery, as a base offense, is a level twenty. However, the robbery guideline enhances the base offense level by four if any person was abducted to facilitate commission of the offense or to facilitate escape. The guidelines commentary defines “abducted” to mean a person was forced to accompany an offender to a different location. What constitutes a different location is up for debate.

ISSUE

Under the Sentencing Guidelines, does a defendant “abduct” a victim during a robbery by making them move to another room within the same building?

THE SPLIT

Rather than a two-way split, the various positions taken by circuits seem to fit into three categories. The Sixth, Seventh and Eleventh Circuits all concur that different rooms within the same store do not qualify as “different locations” under the enhancement. The Fourth and Fifth Circuits disagree. The Third and Tenth Circuit fall somewhere in-between, having adopted a novel three-prong test to make such a determination.

Sixth, Seventh, and Eleventh Circuits

In 2019, the Sixth Circuit became the latest to join the split in United States v. Hill. In this case, the robbers forced employees within a cellphone store to move from the sales area to the back room in order to tie them up. The district court applied the four-level “abduction” enhancement, which increased the defendant’s sentence by approximately two years.

When the defendant appealed his sentence, the Sixth Circuit overturned the enhancement. The court held that “the phrase ‘different location’ is best read to refer to a place different from the store that is being robbed. And a store’s back room does not qualify as a ‘different location’ from the store.” The court provided multiple reasons for their finding.

Amongst them, the court explained that ordinary speakers rarely specify the exact location within a store that was robbed, but rather generalize one location. For example, in common speech, one does not detail that the sales area of a store or vault at the bank was robbed, but rather simply state that a store or bank was robbed. Additionally, the court expressed that if the Sentencing Commission meant for such a short movement to count, it had no reason to add the phrase “different location.” Moreover, the example in the Guidelines commentary is of a robber forcing a bank teller into a getaway car—a location different than the store itself.

The Eleventh Circuit in 2013 reached the same conclusion in United States v. Whatley. The circuit provided further reasoning that “different location” must be read in light of “abduction,” explaining that a normal speaker “would conclude that [the robber] had taken the [employees] hostage during the commission of the . . . robberies but would not describe those employees as having been abducted or kidnapped.”

Similarly, in 2010, the Seventh Circuit held in United States v. Eubanks that dragging a store employee about six feet from back room to front room of a store was not abduction, stating that “[t]o find otherwise would virtually ensure that any movement of a victim from one room to another within the same building, without any other aggravating circumstances, would result in an abduction enhancement.” However, the court did note that each finding was a fact specific determination. The Sixth Circuit has agreed and held the same limitation applies.

Fourth and Fifth Circuits

In 2017, the Fifth Circuit joined the Fourth in finding that different areas within the same store do qualify as a “different location” and thus require an enhancement. In United States v. Buck, a robber forced store employees from the front of the store to the back. In upholding the abduction enhancement, the Court stated that the term “different location” must be interpreted with flexibility. The Court wrote: “we are satisfied that the conspirators forcing [employees] to move from the front of the stores to the backs was sufficient to make the abduction enhancement applicable.”

In United States v. Osborne, the Fourth Circuit also deemed the pharmacy section and the store area of a Walgreens to be discrete locations. Like the Eleventh Circuit, the court looked to ordinary language, but it reached a different conclusion: “It is in ordinary parlance to say that the pharmacy section and the store area are ‘different locations’ within the Walgreens building. This is especially true in view of the fact that the pharmacy section and the store area are divided by a counter, as well as a secured door intended to be passable only by authorized persons via keypad.”

Third and Tenth Circuits

The Third Circuit has taken a unique approach by creating a three-prong test to make a determination of whether to apply the robbery enhancement. In United States v. Reynos, the Court closely examined the language of the enhancement and engineered three predicates accordingly:

First, the robbery victims must be forced to move from their original position; such force being sufficient to permit a reasonable person an inference that he or she is not at liberty to refuse. Second, the victims must accompany the offender to that new location. Third, the relocation of the robbery victims must have been to further either the commission of the crime or the offender’s escape.

Following this test, the Court concluded that an abduction occurred where a robber, wielding a pistol, forced pizza shop employees from where they were hiding in the restaurant bathroom to the cash register area—a distance of approximately thirty-four feet—so that they could assist him in opening the cash register.

In 2017, the Tenth Circuit adopted this test as well in United States v. Archuleta. Though the test is meant to be a neutral arbitrator, it tends to favor using the enhancement.   

LOOKING FORWARD

The broad inconsistencies among the circuits frustrate the very purpose of the Federal Sentencing Guidelines. Varying interpretations continue to result in sentencing discrepancies across the country and are not limited to just the robbery enhancement. It has become clear that sentencing disparities due to the complexity of the Federal Sentencing Guidelines, coupled with judicial discretion, need to be addressed. While the Supreme Court could take up and address each incongruity, this solution would be inefficient and result in many defendants spending a disproportionate amount of time in prison. Rather, it may be time for a complete overhaul of the guidelines and fundamental criminal sentencing reform.

In the meantime, defendants may want to take note of what not to do during a robbery. 

 

 

 

 

Blocking the Work-Around: SLUSA’s Preemption of State Law Securities Class Actions

BACKGROUND

Due to an increasing volume of private securities fraud litigation being filed in the 1980’s and early 1990’s, Congress feared that plaintiffs were bringing abusive securities claims. Despite little chance of winning on the merits, these plaintiffs would often force defendants to settle due to the expensive nature of discovery in securities litigation. In 1995, Congress passed the Private Securities Litigation Reform Act (“PSLRA”). The Act raised the barrier for private federal securities fraud litigation, putting in place stringent new pleading standards for these lawsuits. Under the PSLRA, plaintiffs would need to provide evidence of fraud before any pretrial discovery took place.  In an effort to circumvent the new federal PSLRA standards, plaintiffs began bringing more securities fraud claims under state law.

To prevent these plaintiffs from avoiding the new pleading standards, Congress then passed the Securities Litigation Uniform Standards Act (“SLUSA”) in 1998. SLUSA precludes claimants from filing class actions that (1) consist of more than fifty prospective members; (2) assert state law claims; (3) involve a nationally listed security; and (4) allege a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security. The result is that private federal securities fraud claims can be pursued as a state law individual action or a federal securities fraud class action, but a plaintiff cannot pursue such claims as a state law class action.

However, Congress did not explicitly define which claims include misrepresentation or omission of material fact. In particular, it is unclear whether claims for breach of contract and breach of fiduciary duties, which are typically brought as state law claims, are treated as alleging misrepresentation or omission of material fact.

THE ISSUE

Does SLUSA preempt class action claims alleging a state law breach of contract and/or fiduciary duty in connection with the purchase or sale of a covered security?

THE SPLIT

The stances taken by the circuits do not fit into a simple binary. Each circuit with precedent on the issue has taken the approach that there are times that SLUSA does preempt these claims, but other times it does not. However, the circuits can be divided into three categories as to where the line has been drawn on preemption.

Sixth Circuit

            The Sixth Circuit has taken a literalist approach to this issue, where the court asks whether the complaint includes allegations of misrepresentation or omission. However, the Sixth Circuit has also instructed district courts to dismiss claims where the plaintiff has omitted allegations of misrepresentation or omission through artful pleading. So under Sixth Circuit precedent, any explicit or implicit allegation of misrepresentation or omission of material fact in a state law class action claim in connection with the purchase or sale of a covered security is sufficient to be preempted by SLUSA.

            In Segal v. Fifth Third Bank, N.A., the plaintiff brought state law class action claims for breach of fiduciary and breach of contract. The plaintiffs accused Fifth Third Bank of investing fiduciary assets in proprietary Fifth Third mutual funds rather than superior funds operated by the Bank’s competitors and providing standardized, largely automated management of the assets after promising individualized management. In the Amended Complaint, the plaintiff stated: “None of the causes of action stated herein are based upon any misrepresentation or failure to disclose material facts of plaintiff.” However, the Sixth Circuit upheld dismissal of the complaint, stating that SLUSA’s preemption does not depend on whether the complaint makes material or dependent allegations of misrepresentation, but “whether the complaint includes these types of allegations, pure and simple.” Additionally, the court made it clear that the question of preemption is dependent on “whether the complaint covers the prohibited theories, no matter what words are used (or disclaimed) in explaining them.”

Second, Third, and Ninth Circuits

            Under the precedent of the Second, Third, and Ninth Circuits, a class action claim for breach of contract and/or fiduciary duty is barred by SLUSA only if the claim requires proof of a misrepresentation or omission of material fact. These courts look to whether any misrepresentation or omission serves as the factual predicate of the state law claim.

            In Freeman Investments, L.P. v. Pacific Line Ins. Co., the plaintiffs alleged the defendant had breached their contracts and its duty of good faith and fair dealing by charging policyholders an excessive “cost of insurance.” The district court dismissed the complaint since it included allegations of systematic concealment and deceit involving hidden fees. However, the Ninth Circuit reversed the dismissal, holding that SLUSA preemption should depend on what the plaintiffs would be required to show to prove their claim. For the claims brought forth by the plaintiffs here, they need not show that the defendant misrepresented the cost of insurance or omitted critical details—they only need to persuade the court that their reading of the contract terms is the proper interpretation. A similar approach was taken by the Second Circuit in In re Kingate Management Ltd. Litigation and the Third Circuit in LaSala v. Bordier et Cie.

Seventh Circuit

            Lastly, the Seventh Circuit decided two cases in 2017, Goldberg v. Bank of America, N.A. and Holtz v. JPMorgan Chase Bank, N.A., where the court took a different approach than any other circuit. The court held that if a claim could be pursued under federal securities law, then it is preempted by SLUSA even if it also could be pursued under state contract or fiduciary law. The court elaborated that allowing plaintiffs to work around securities law by bringing state law contract or fiduciary duty claims would render SLUSA ineffectual. This approach has been the subject of significant criticism from commentators, as well as Judge Hamilton’s dissent in Goldberg, for taking SLUSA’s statutory purpose too far.

LOOKING FORWARD

            In his dissent in Goldberg, Judge Hamilton articulates his belief that only the Supreme Court can settle the circuit split on SLUSA preemption. While the Court may certainly choose to take a case to interpret SLUSA in a way that would resolve the differences between the circuits, the split may more effectively be resolved where it began—Congress. While relying on Congress to act may not be the most reliable option, a section defining the scope of SLUSA preemption could work its way into a much larger bill. After all, securities litigation is on the rise again, and Congress may be interested in helping to clarify an ambiguity that may affect many of these lawsuits.