SCOTUS: Unaccepted Settlement Offers Don’t Moot Class Actions

Panorama_of_United_States_Supreme_Court_Building_at_Dusk

Today, the Supreme Court of the United States ruled that unaccepted offers of settlement under Federal Rule of Civil Procedure 68 do not moot a named plaintiff’s claims in a putative class action. In Campbell-Ewald Co. v. Gomez, Justice Ginsburg, writing for the 5-4 majority, held that “an unaccepted settlement offer has no force. Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists.”

The majority opinion adopts the reasoning from Justice Kagan’s superbly-written dissent in Genesis HealthCare Corp. v. Symczyk, which all Courts of Appeals have adopted post-Genesis. (If you’ve not read Kagan’s dissent in Genesis, do so now. You’ll be hard pressed to find better legal writing.) Here’s the money quote from Genesis:

When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief. An unaccepted settlement offer— like any unaccepted contract offer—is a legal nullity, with no operative effect. As every first-year law student learns, the recipient’s rejection of an offer ‘leaves the matter as if no offer had ever been made.’ Nothing in Rule 68 alters that basic principle; to the contrary, that rule specifies that ‘[a]n unaccepted offer is considered withdrawn.’ So assuming the case was live before—because the plaintiff had a stake and the court could grant relief—the litigation carries on, unmooted.

Thus, SCOTUS has now made clear that because a named plaintiff’s individual claim cannot be mooted by an expired settlement offer, “that claim would retain vitality during the time involved in determining whether the case could proceed on behalf of a class. While a class lacks independent status until certified,…a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.”

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Supreme Court Gives Power Back to Trial Courts in Patent Cases

A great post from our friends at the Bose Intellectual Property Blog about a significant Supreme Court case that brings patent appeals in line with the appellate standards governing non-patent cases.

Bose Intellectual Property Blog

The Supreme Court today issued a 7-2 decision which should go a long way to reduce almost automatic appeals in patent cases. The Federal Circuit appeals court was created to handle all patent appeals. The Roberts Court has been telling the Federal Circuit again and again that most of the moving parts in a patent lawsuit are just like what federal trial court judges decide in non-patent cases. They did it again today in Teva Pharmaceuticals USA v. Sandoz.

Patents must be written in words, and a major hurdle in patent disputes is deciding what they mean. The parties tell the court what they think the words mean, and they usually have strong disagreements on a few key terms. This stage of the lawsuit is called claim construction, and experts often testify about how the words are understood in the specialized area where the patent is useful, or art. It…

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Happy 2015 from the Bose Litigation Blog!

To all our friends and readers, we wish you a happy, healthy, and prosperous 2015!

2015 New Year celebration

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Brian Jones Presents at IndyBar’s “Discoverability of Social Media” Seminar

Today, Brian Jones of Bose McKinney & Evans LLP and Elizabeth Lally of Rubin & Levin, LLP, discussed the “Discoverability of Social Media” at the Indianapolis Bar Association’s headquarters in Indianapolis. Here is a pdf of the presentation:

Be sure to share with all your friends–even those who keep posting those incriminating “duck-face” selfies…

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This Message Will Self-Destruct: Confide, Snapchat, and How New Self-Destructing Messaging Services Could Alter the Discovery Landscape

Bose Law and Technology Blog

Self-destructing messages used to be found only in spy shows like “Mission Impossible.” But new messaging apps like teen-favorite Snapchat and the newly released Confide have brought the concept of self-destructing messages into the mainstream. Each of these apps has, at its core, the goal of making sure that the pictures or text you want to communicate are visible to the recipient for only a certain period of time. After that, they’re gone and cannot be retrieved.

If you haven’t used apps like these before, here’s what they do. Snapchat allows you to take pictures and send them to recipients who can only view them for a time period that you determine, and then they’re gone. They’re not stored on your device in any way (unless, of course, you manage to take a screenshot while the picture is on the screen, which is not easy to do since you have to…

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Laurin and Huang comment on the changing landscape of determining venue

Check out page 9 of this week’s Indiana Lawyer for a guest column by Bose McKinney & Evans attorneys Sam Laurin and John Huang on the changing landscape of determining venue.

The text of the article is below.

The Changing Landscape of Determining Venue

Following the United States Supreme Court’s decision in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), many federal circuit courts have held that a valid forum-selection clause renders venue “improper” in a forum other than the one designated by contract.  This term the United States Supreme Court will address whether forum-selection clauses in contracts warrant dismissal or transfer of a case filed in an appropriate federal venue but in contravention of the forum-selection clauses.  In many circuits forum-selection clauses are routinely enforced through motions to dismiss or transfer venue under Federal Rule of Civil Procedure 12(b) (3) and 28 U.S.C. § 1406.  The Third, Fifth, and Sixth Circuits, however, follow a contrary rule that has its origins in the United States Supreme Court’s decision in Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988).  This rule states that when forum-selection clauses designate a specific federal forum, the clauses are enforced through motions to transfer under 28 U.S.C. § 1404(a).  Under this view, courts which review these motions undertake a discretionary, balancing-of-conveniences analysis.

To resolve this circuit split and to clarify Stewart, the Court has granted certiorari in a case entitled Atlantic Marine Construction Co. v. USDC WD TX, Docket No. 12-929 (“Atlantic Marine”).  In Atlantic Marine, a general contractor (Atlantic Marine Construction Co.) and a subcontractor (J-Crew Management, Inc.) entered into a subcontractor agreement for a construction project in Texas.  The subcontract contained a forum-selection clause requiring litigation in Virginia.  The subcontractor sued the general contractor in Texas federal district court for failing to make payments under the subcontract.  The general contractor responded by seeking dismissal or transfer based on the subcontract’s forum-selection clause.  Both the Texas federal district court and the Fifth Circuit Court of Appeal refused to grant dismissal or transfer the case to a Virginia court, reasoning that (1) Stewart mandated federal courts apply Section 1404(a) balancing-of-conveniences analysis to forum-selection clauses; and (2) the general contractor failed to meet its burden of showing that the interest of justice or the convenience of the parties and their witnesses weighed in favor of transfer under Section 1404(a).  In re Atlantic Marine Const. Co., Inc., 701 F.3d 736, 737, 739, 743 (5th Cir. 2012).

Judge Haynes filed a special concurrence and argued that because 28 U.S.C. § 1391 (the general federal venue statute) does not mandate venue in a particular forum in federal cases, the parties’ bargained for forum-selection clauses designate the correct forum.  Therefore, alternative venues are “wrong”, triggering the routine application of Rule 12(b) (3) and Section 1406 to dismiss or transfer venue.  Id. at 745.  Judge Haynes also noted that “negotiation of a forum-selection clause involves various economic decisions and often requires a party to make concessions in exchange for the assurance that potential litigation will occur in a pre-determined venue.  Companies . . . that conduct business throughout a broad geographical area rely on forum-selection clauses to ensure that they can anticipate business costs and avoid litigation in a plethora of possible venues.”  Id. at 748.  Finally, Judge Haynes asserted that the Fifth Circuit’s majority opinion misread Stewart, and suggested that the “parties request review of today’s decision by the United States Supreme Court.”  Id. at 745-747, 749.  The parties did just that and the Supreme Court agreed to hear the case.

The Supreme Court heard oral arguments in the case on October 9, 2013.  Atlantic Marine took the position that the courts should enforce forum-selection clauses as written and only apply the Section 1404 balancing-of-conveniences analysis in Stewart when one of the parties waives its objection to proper venue or in “exceptional circumstances” where “public interest required something other than the contract clause.” (Transcript, p. 6, l. 5-18).  J-Crew took the contrary position that the correct venue was the courts where the dispute took place, and that Stewart required these courts to apply a balancing-of-conveniences analysis under Section 1404(a) in reviewing forum-selection clauses that designate an alternative forum.

The Justices’ comments during oral argument signaled their approval of Atlantic Marine’s position.  In response to J-Crew’s argument that venue was proper in the Texas district court because that is “where we performed our work, where the project is located, where all the witnesses reside, and virtually all of the evidence is located,” Justice Kagan stated, “But, Mr. Allensworth, where you agreed not to bring it . . . this was a negotiated contract . . . You have to live with your contract.”  (Transcript, p. 26, l. 17-23; p. 27, l. 4-5, 12-13).  Justice Scalia agreed, stating that “it seems to me terribly unfair” to not enforce the forum-selection clause that the parties agreed to.  Id. at 46, l. 1-11.  Justices Alito, Kagan, and Sotomayor were unconvinced by the Texas district court’s “interests of justice” analysis under Section 1404(a), stating that the “interests of justice that the district court weighed almost all boiled down to the interests of your client [J-Crew]” and did not constitute “public interests” such as the integrity of the judicial system.  Id. at 28, l. 1-4, 11-13; Id. at 34, l. 2-18; Id. at 47, l. 22-25; Id. at 48, l. 2-3.  Chief Justice Roberts echoed Judge Haynes’s reasoning below, arguing that discretionary 1404(a) analysis would “be throwing a significant wrench into the process” of companies doing business nationwide by creating uncertainty in dispute resolution fora.  Id. at 35, l. 6-24.

One issue that may not be resolved by the Supreme Court’s pending decision are cases brought under the Miller Act, 40 U.S.C. §§ 3131, ­et. seq.  Unlike Atlantic Marine, where venue in Texas was discretionary, the Miller Act requires an action to be filed in the federal district court where the construction project was located (40 U.S.C. §3133(b) (3)(B)).  Lower courts are split on whether a forum-selection clause overrides the Miller Act’s mandatory venue requirements. Compare United States ex. rel. Brown Minneapolis Tank Co. v. Kinley Const. Co., 816 F.Supp.2d 1139 (D. New Mexico 2011) with In re Fireman’s Fund Companies, 588 F.2d. 93 (5th Cir. 1979).

Indiana Trial Rule 75 governs venue for cases filed in state court and by analogy Trial Rule 75 comports with Atlantic Marine’s view. A complaint can be filed in any county in Indiana, but if it is not filed in a county of preferred venue, it must be transferred to a county of preferred venue upon timely motion.  Sunburst Chemical LLC v. Acorn Distributors, Inc., 922 N.E.2d 652, 653 (Ind. Ct. App 2010).  In Sunburst, the plaintiff sued two defendants in Marion County based on a contract that provided that the defendants agreed that “jurisdiction” for any claim was Marion County.  Without the contract provision, preferred venue would have only been Allen County.  The Indiana Court of Appeals held that the contract provision allowed the plaintiff to sue the defendants in Marion County.  Id. at 654.

The Court’s decision in Atlantic Marine Construction Co. v. USDC WD TX should clarify the landscape of venue and will likely hold that district courts shall not engage in a balancing of conveniences analysis when there is a freely negotiated forum-selection clause.

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Happy Fourth of July from the Bose Litigation Group

On behalf of all of us in the Litigation Group at Bose McKinney & Evans LLP, I’d like to wish all of you a Happy Fourth of July.

Oh, and Happy Birthday America!

Fireworks Show

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