Admiralty Defendant Still May Demand Jury Based On Counterclaims

A plaintiff bringing a case that satisfies the requirements for both admiralty and diversity jurisdiction can elect to proceed on either basis, the primary difference being that a jury generally is not available if plaintiff files a libel in admiralty rather than an ordinary civil complaint. See In re: Chimenti, 79 F.3d 534, 537 (6th Cir. 1996). A plaintiff might want to exclude a jury for strategic reasons, and therefore could elect the admiralty route.

However, In re: Lockheed Martin Corp., No. 06-1344, 2007 WL 2793112 (4th Cir. Sept. 27, 2007), illustrates that a defendant can frustrate that election by bringing a declaratory judgment counterclaim and filing a jury demand. In Lockheed Martin, plaintiff successfully moved to strike defen­dant’s jury demand, arguing that the declaratory judgment claim was merely the “flipside” of plaintiff’s affirmative claims, and that defendant should not be permitted an end-run around plaintiff’s admiralty strategy. Defendant filed a mandamus petition.

Noting a split in the circuits, the appellate court held that 28 U.S.C. § 1333 and Fed.R.Civ.P. 9(h) permitted a defendant to bring proper non-admiralty counterclaims and to have them tried to a jury. The court granted the writ of mandamus.

Plaintiff's Own Withdrawal Of Federal Claim Ends Jurisdiction Over State Claim

In addition to claims that fall within specific federal subject-matter jurisdiction, federal courts also are permitted to hear state-law claims pled as part of the same case. See 28 U.S.C. § 1367 (the doctrine of supplemental jurisdiction).

It is well-established that if a defendant successfully moves to dismiss all of the claims for which federal jurisdiction exists, leaving only claims based on state law, the district court has the discretion to dismiss the state-law claims (which the plaintiff then might be able to assert in state court). District courts frequently do just that. See, e.g., Sanchez & Daniels v. Koresko, No. 07-1228, 2007 WL 2757761 (7th Cir. Sept. 24, 2007) (district court properly terminated case after dismissing all claims over which it had original jurisdiction).

The Eleventh Circuit recently considered a case in which the termination of all federal claims occurred by plaintiff’s voluntary amendment of the complaint. In contrast to the discretionary standard applicable after granting of a Rule 12 motion, in Pintando v Miami-Dade Housing Agency, 501 F.3d 1241 (11th Cir. Sept. 25, 2007), the court found that when a party voluntarily withdraws all claims over which the district court had original jurisdiction, the judge is required to dismiss the case. Analogizing to Rockwell Int’l Corp. v. Unites States, 127 S. Ct. 1397 (2007) [covered in a previous post], the court held that the withdrawal of allegations in an amended complaint which had formed the basis of federal jurisdiction defeats jurisdiction altogether, and the case cannot continue in federal court.

Thus, if confronted with a situation like this one, a district court may grant a motion for leave to amend, and then must immediately dismiss the case for lack of federal jurisdiction.

Second Circuit Now Requires Parties Jointly To Affirmatively Request Oral Argument

The Second Circuit Court of Appeals has adopted an interim rule, effective August 27, 2007, that imposes a new, ‘opt-in’ procedure for oral argument. It does not appear that any other circuit has adopted such a requirement.

Under Fed.R.Civ.App. 34, oral argument is required unless the court finds that certain conditions are satisfied such that oral argument can be dispensed with and the case decided solely on the briefs. The Rule also specifies that a court “may require by local rule a statement explaining why oral argument should, or need not, be permitted.”

In a new twist on that rule, the Second Circuit’s Interim Local Rule 34 requires the parties to file a joint statement indicating whether they seek oral argument or agree to submit the case on the briefs. If the parties disagree, that must also be indicated. The joint statement is due within 14 days after the due date for the last brief. Any party failing to file the statement will be deemed not to seek oral argument.

The court allowed a one-month comment period, which expires September 27, 2007, and is running simultaneously with the adoption of the rule itself. There does not seem to have been much publicity about this, and because it is a unique and counter-intuitive change (going from an opt-out system to an opt-in system), the new rule seems like a trap for the unwary.

“Original Source” Rule Disqualifying Some Claims Does Not Bar Remaining Claims

I recently reported on the U.S. Supreme Court’s consideration of the jurisdictional nature of the “original source” rule in the False Claims Act. See Rockwell Int’l Corp. v. United States, 127 S. Ct. 1397 (2007), discussed here. The Tenth Circuit recently faced a similar issue.

In United States ex rel. Boother v. Sun Healthcare Group, Inc., 496 F.3d 1169 (10th Cir. Aug. 7, 2007), the Tenth Circuit considered whether a relator bringing a qui tam action alleging several counts could proceed even if some of the counts lacked jurisdiction due to the “original source” rule. The court held as a matter of first impression that a deficiency in one claim does not preclude jurisdiction over all other claims joined in the same lawsuit.

The district court had dismissed the case after finding a jurisdictional defect in three claims. However, following the model of Rockwell Int’l Corp., the appellate court remanded the case for an independent jurisdictional analysis of each of the remaining claims.

Mandamus Granted Against Enforcement of Web-Only Amendments To Contract

The Ninth Circuit has addressed as a matter of first impression at the appellate level the question of whether a court should enforce amendments to a contract where the only notice of the changed terms consisted of the amending party posting the revised contract on its website. The court took the case on mandamus and granted the writ, effectively reversing the district court's decision to enforce.

In Douglas v. U.S. Dist. Ct. for the Central Dist. of California, 495 F.3d 1062 (July 18, 2007) (per curiam), plaintiff Douglas had contracted for long distance telephone service. Subsequently, the provider purported to amend the contract to add provisions unfavorable to Douglas, such as additional service charges, a choice-of-law provision applying New York law, a clause requiring disputes to be arbitrated and a waiver of class actions. The new contract was posted to the company's billing website but Douglas alleged that the company never informed its customers of the changes. Only someone who happened to check the posted contract and compared it to a prior one they had saved would have known of the amendments.

After becoming aware of the changes, Douglas filed a class action in federal court. The company moved to compel arbitration, pursuant to the arbitration clause whose addition to the contract was itself in dispute. The district court gave effect to the amendments and granted the motion. Douglas filed a petition for mandamus because he recognized that no ordinary appellate jurisdiction exists over orders compelling arbitration under the Federal Arbitration Act.

Applying its five-factor test for mandamus petitions, the Ninth Circuit found that the prerequisites for issuance of the writ had been met. Most importantly, the district court's ruling was "clearly erroneous as a matter of law" because a party simply cannot amend a contract without its counter-party's agreement, and it is elemental that such agreement requires knowledge by the counter-party. The appellate court held:

"Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side. FN: Nor would a party known when to check the website for possible changes to the contract terms without being notified that the contract has been changed and how. Douglas would have had to check the contract every day for possible changes. Without notice, an examination would be fairly cumbersome, as Douglas would have had to compare every word of the posted contract with his existing contract in order to detect whether it had changed."

The court distinguished other cases of web-based contractual updates because in each such case the poster had given some form of notice to the counter-party. Moreover, the court found that even if notice of the changes were properly given, the changes probably would not have been enforceable substantively.

The court also found that other mandamus factors were satisfied. Factors amphasizing the absence of remedy on appeal had been met becuase if Douglas were forced to arbitrate he would have had no means to ensure that he could continue as class representative. This case also satisfied the factor favoring mandamus where a district court order raises an issue of law of first impression or raises new and important problems. The Ninth Circuit viewed this case as raising for the first time an issue that would affect a multitude of situations arising from the common practice of communicating with customers through websites.

Remand After Allowing Addition Of Non-diverse Plaintiff Is Not Reviewable

The flood of recent opinions emphasizing that Congress wanted parties to follow remanded cases back into their respective state courts -- rather than spending any time on appealing remands -- continues. Here is a report about a new Second Circuit case on that topic.

Section 1447(e) was added to the Judicial Code in 1988 specifically to allow remand of diversity cases where a non-diverse defendant is added later:

“If after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court.” (28 U.S.C. § 1447(e).)

Price v. J&H Marsh & McLennan, Inc., 493 F.3d 55 (2d Cir. July 6, 2007), analyzed the operation of 28 U.S.C. § 1447(e) under a slightly different scenario -- where the plaintiffs sought to join an additional plaintiff rather than an additional defendant.

After the district court had allowed the additional plaintiff to be added, and remanded the case as a result, defendant appealed. Plaintiffs moved to dismiss the appeal as falling within the scope of the prohibition against appellate review under 28 U.S.C. § 1447(d). Defendant argued that § 1447(d) did not apply because the remand was based on a post-removal event, i.e., the addition of a new plaintiff.

Unfortunately for defendant, while the motion was pending the Supreme Court decided Powerex Corp. v. Reliant Energy Services, Inc., 127 S. Ct. 2411 (U.S. June 18, 2007) (discussed in a previous post). The Second Circuit read Powerex as a complete rejection of the “post-removal event” doctrine, and therefore viewed the appeal as barred. It also held that the collateral order doctrine provided no basis for appellate jurisdiction either.

The Price case has the effect of revising 28 U.S.C. § 1447(e) to cover additional plaintiffs as well as defendants.

Eighth Circuit Examines Circuit Split In Approaches To Foreign Antisuit Injunctions

In Goss Int’l Corp. v. Man Roland Druckmaschinen Aktiengesellschaft, 491 F.3d 355 (8th Cir. June 18, 2007), the district court enjoined a Japanese company within its jurisdiction from pursuing certain claims in Japanese courts. On appeal, the Eighth Circuit reversed the injunction as outside the scope of permissible grounds.

In considering the merits, in a matter of first impression for that jurisdiction, the court examined a split in the over the level of deference that should be afforded to international comity in determining whether a foreign antisuit injunction should issue. Under the “conservative” approach, adopted in the First, Second, Third, Sixth and D.C. Circuits, the movant must demonstrate both that the contemplated action in a foreign jurisdiction would prevent U.S. jurisdiction of threaten a vital U.S. policy, and that the domestic interests outweigh concerns of international comity. In contract, the “liberal” approach, adopted in the Fifth and Ninth Circuits and referenced with approval by the Seventh Circuit, only modest emphasis is to be placed on international comity, and an injunction may be issued when necessary to prevent duplicative and vexatious foreign litigation and to avoid inconsistent judgments.

The Eighth Circuit concluded that the “conservative” approach had the better argument, and particularly emphasized the importance of international comity in the new globalized economy.

Propriety of Strategic Pre-Service Removal in Diversity Will Not Be Tested In Appellate Courts

The Seventh Circuit has just issued a ruling dismissing an appeal from a remand order for lack of jurisdiction. In so doing, the court was forced to hold off deciding a very interesting dispute over removal jurisdiction, which it concluded that Congress excluded from appellate jurisdiction. The ruling follows closely on the heels of an additional district court decision that noted the issue was on appeal.

The underlying issue concerned the "forum defendant" removal rule under 28 U.S.C. § 1441(b). That rule provides that even though diversity jurisdiction may be satisfied because of different citizenship, so it could have been commenced in federal court, a case is still not removable unless "none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." The controversy raised in the appeal concerned the proper interpretation of the "properly joined and served" language.

In Holmstrom v. Harad, No. 05 C 2714, 2005 WL 1950672 (N.D. Ill. Aug. 11, 2005), a New Jersey shareholder brought a putative derivative action on behalf of Home Depot, Inc., a Delaware company, in Illinois state court against 28 officers and directors, two of whom are Illinois citizens. Before plaintiff actually served any of the defendants, one of them (an Ohio citizen) removed the case to the Northern District of Illinois. Plaintiff moved to remand on the ground that removal ran afoul of the forum defendant rule because two of the defendants are citizens of the forum state. The removing defendant responded that the rule was fully satisfied given that neither of the Illinois defendants had yet been "properly joined and served."

The district court granted the motion. It found only one other case on point, Recognition Communications, Inc. v. American Automobile Association, No. Civ. A. 3:97-CV-0945-P, 1998 WL 119528 (N.D. Tex. Mar. 5, 1998), and it agreed with that court's reasoning. It concluded that although the literal language of the rule favors the removing defendant in this scenario, Congress did not intend that a fast-acting defendant should have an end-run through strategic pre-service removal. Rather, Congress created the forum defendant rule to protect defendants from plaintiffs who listed among multiple defendants a resident of the forum state they did not intend to pursue but merely named to defeat removal.

The defendant appealed the remand order to the Seventh Circuit. While that case was being briefed and argued, the same scenario occurred in the district court in another case. In Vivas v. Boeing Co., 486 F.Supp. 2d 726 (N.D. Ill. Mar. 12, 2007), plaintiffs sued Boeing in Illinois state court in connection with a plane crash in another country. Although Boeing was an Illinois citizen, it removed the case before it or any other defendant had been served, as it is permitted to do under 28 U.S.C. § 1446(b). The district court, relying on Holmstrom (which it noted was on appeal), refused to allow Boeing to use the fact that one may file a notice of removal before formal service to defeat the "properly joined and served" language of 28 U.S.C. § 1441(b), and it granted plaintiffs' motion to remand.

When the Seventh Circuit ultimately ruled in Holmstrom v. Harad, 492 F.3d 833 (7th Cir. July 3, 2007), it did not speak to the merits of the district courts' refusal to apply 28 U.S.C. § 1441(b) literally. Following an exhaustive analysis of the legislative history and development of that statute across multiple versions, it concluded that the 1996 amendments made clear that Congress intended to exclude from appellate review any remand order that was based on a defect in removal. The court determined that a remand order based on "failure to comply with the forum defendant rule is a defect in removal subject to § 1447(d)’s jurisdictional bar."

If the Seventh Circuit's reasoning prevails, it will be up to the district courts to establish the common law of whether strategic pre-service removal can be used to avoid the forum defendant rule.

Second Circuit Adopts Local Rule Regarding Non-Precedential ("Unpublished") Opinions

On December 1, 2006, the Federal Rules of Appellate Procedure were amended to add Rule 32.1, which adopted a uniform standard permitting the citation of all judicial dispositions on or after January 1, 2007. The rule had the effect of requiring some courts of appeal to revise their rules to eliminate prohibitions against citing so-called “unpublished” opinions.

In a recent example of meeting the new requirement, on June 26, 2007, the Second Circuit adopted a final version of amended Local Rule 32.1, setting specific requirements for the issuance and citation of such opinions, which the court termed “summary orders.” The court commentary explained its purposes in issuing summary orders, and noted that although such orders are not precedential it “does not mean that the court considers itself free to rule differently in similar cases.”

U.S. Supreme Court Raises Pleading Bar For Securities Fraud

When Congress enacted the Private Securities Litigation Reform Act of 1995 (“PSLRA”), it appeared to resolve a circuit split regarding the threshold required for pleading a securities fraud cause of action. The courts of appeal agreed that securities fraud required scienter, but disagreed over whether a plaintiff must allege more than the conclusion that scienter existed. Congress adopted the most stringent approach, as expressed by the Second Circuit, that a plaintiff must “state with particularity facts giving rise to a strong inference that the defendant acted with the requisite state of mind,” 15 U.S.C. § 78u-4(b)(1). However, Congress did not codify the Second Circuit’s jurisprudence concerning the meaning of the term “strong inference,” and as a result courts diverged regarding the construction of that term.

In resolving that split in Tellabs, Inc. v. Makor Issues & Rights, Ltd., 127 S. Ct. 2499 (June 21, 2007), the U.S. Supreme Court said its task was “to prescribe a workable construction of the ‘strong inference’ standard, a reading geared to the PSLRA’s twin goals: to curb frivolous, lawyer-driven litigation, while preserving investors’ ability to recover on meritorious claims.” Its solution was to require a three-step process: (1) accept all factual allegations as true; (2) consider the complaint in its entirety plus documents incorporated into the complaint by reference or available through judicial notice; and (3) determine the plausible opposing inferences regarding scienter and dismiss the complaint unless “a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged.” The Court rejected the argument that weighing competing inferences impinged upon the jury’s role, finding that Congress had the power to establish any special pleading requirements, as it had done in the PSLRA.

Tellabs does not represent a further application of the new fact-pleading rules emerging under Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (May 21, 2007) (see previous post), because it involved interpretation of heightened pleading requirements specifically codified into statute, rather than the federal rules of civil procedure or common law.

U.S. Supreme Court Rejects “Post-Removal Event” Theory for Appealing Remands

The U.S. Supreme Court has given a strict reading to 28 U.S.C. § 1447(d) to bar appellate consideration of the substance of most remand orders, rejecting an exception that had developed in some of the circuits.

In Powerex Corp. v. Reliant Energy Services, Inc., 127 S. Ct. 2411 (U.S. June 18, 2007), one of the defendants removed the case based on the theory that it was a “foreign state” for purposes of the Foreign Sovereign Immunities Act (“FSIA”) and 28 U.S.C. § 1441(d) (which permits foreign states under the FSIA to remove). Plaintiffs successfully moved to remand, challenging whether that defendant really was a “foreign state.” Defendant appealed the remand order, and all parties and the Ninth Circuit apparently agreed that appellate jurisdiction existed because the bar to appeal of remand orders contained in 28 U.S.C. § 1447(d) only applied to remands based on a defect in subject-matter jurisdiction at the time of removal. Here, several other removing defendants had proper grounds to remove the whole case that were not part of the FSIA ruling, so the original removal was not defective.

After the Ninth Circuit reached the merits and affirmed, the Supreme Court granted certiorari but dismissed the case for lack of appellate jurisdiction. It held that there was no textual support in the statute for allowing appellate review of removals that were initially proper, and found that Congress specifically intended to bar review of remands even if based on defects in subject-matter jurisdiction that developed later. The Court found that the only task for an appellate court in this type of case is to determine whether the remand was colorably based on a defect in subject-matter jurisdiction, in which case it must dismiss the appeal.

Third Circuit Finds One Panel May Overrule Another When Predicting State Rulings

In Jaworowski v. Ciasulli, 490 F.3d 331 (3d Cir. June 18, 2007), a panel of the Third Circuit took the unusual step of overruling a prior decision of the same court. It acknowledged that ordinarily the only way for the court to overrule its own precedent is for the court to act en banc, but it found that an exception exists for cases based on diversity jurisdiction in which the court predicts how a state’s highest court would decide an issue.

The panel said that in such circumstances an appellate court should be free to reexamine the validity of a previous prediction in light of subsequent decisions of the state’s highest court. It concluded that, although the New Jersey Supreme Court still had not decided the particular matter at issue, there were sufficient new decisions to reveal a “change in the legal landscape” and a clear direction for the Third Circuit to follow to change its prediction.

Federal District Court Examines Evidentiary Issues Concerning Electronic Records

The Chief Magistrate Judge of the federal court in Maryland has issued an important opinion analyzing a myriad of evidentiary issues that parties using electronic documents face in summary judgment and trial situations.

In Lorraine v. Markel American Ins. Co., 241 F.R.D. 534 (D. Md. May 4, 2007), the court denied the parties’ cross-motions for summary judgment on the grounds that courts may only consider on summary judgment those materials that are in the form of admissible evidence, and the electronic evidence offered here was not shown to be admissible. In analyzing the motions, the court published a lengthy opinion studying in detail a variety of means to satisfy federal evidentiary requirements for the admission of electronically stored information (“ESI”).

Of particular interest is the court’s discussion of the need to properly authenticate various forms of ESI, which the movants did not even attempt to do, thereby causing what the court termed “self-inflicted wounds.”

Compliance With Detailed Regulations Does Not Give Rise To Removal Jurisdiction

In a unanimous opinion, Watson v. Philip Morris Cos., Inc., 127 S. Ct. 2301 (June 11, 2007), the Supreme Court rejected application of the “Federal Officer” removal statute to private parties other than govern­ment contractors.

Plaintiffs had filed a state-court class action claiming that Philip Morris violated Arkansas unfair business practice laws in selling so-called “light” cigarettes. Philip Morris removed, citing 28 U.S.C. § 1442(a)(1), which permits removal by any officer of the United States “or any person acting under that officer.” The district court and the Eight Circuit agreed that in following the FTC’s detailed instructions governing cigarette testing and tar/nicotine disclosures in advertising, defendants were “acting under” the agency’s orders for purposes of the removal statute.

However, the Supreme Court found that Congress did not intend to encompass private parties whom a federal regulatory agency directs, supervises, and monitors, even if very closely and in considerable detail. In the Court’s view, such activities amount to nothing more than regulation and compliance, as opposed to “acting under” the direction of a federal officer, and mere com­pliance with regulations does not open the door to federal jurisdiction. It distinguished cases in which removal was permitted by private government contractors, finding that such cases involve helping federal officers fulfill tasks that the government otherwise would have to perform itself.

New York Declines To Extend “Continuous Representation Doctrine” To Auditor

In a matter of first impression, New York’s highest court has held that the statute of limitations applicable to accounting malpractice actions was not tolled under the “continuous representation doctrine” where the parties’ course of dealing was to enter into a separate contract for each year’s annual audit. Williamson v. PricewaterhouseCoopers LLP, 9 N.Y.3d 1, 872 N.E.2d 842, 840 N.Y.S.3d 730 (June 7, 2007).

The court noted that the “continuous representation doctrine” originated in its medical and legal malpractice jurisprudence, and was based on the fact that such actions accrue when the malpractice is committed and not when the client discovers it. Concerned that a cause of action might expire while the plaintiff was still receiving treatment or advice related to the conditions produced by the earlier wrongful acts and omissions, the court developed the doctrine to allow tolling of the statute of limitations for as long as “the course of treatment which includes the wrongful acts or omissions has run continuously and is related to the same original condition or complaint.”

In Williamson, the court held that the doctrine was not available under the circumstances present, but it did not appear to reject its application to accountants altogether. Rather, it emphasized that the doctrine requires a “mutual understanding” between the parties that the relationship with the client would be ongoing, and that no such understanding was present here.

Sixth Circuit Finds State Law Governs Forum Selection Clauses In Diversity Actions

A recent series of transactions involving a company called Norvergence, which entered into contracts promising delivery of telecommunications services, has led to an interesting split among the courts. The Norvergence contracts contained a “floating” forum selection clause under which the choice of law and forum were subject to immediate change if Norvergence assigned the contract. Apparently, Norvergence had a practice of immediately assign­ing contracts to finance companies without customers’ prior knowledge and then not delivering services, which has led to litigation all over the country.

In a Seventh Circuit case, the court held that the floating forum selection clause was enforceable either under federal law or Illinois law, and therefore the court did not need to decide which law controlled. IFC Credit Corp. v. Aliano Bros. Gen. Contractors, 437 F.3d 606 (7th Cir. 2006). However, in Preferred Capital, Inc. v. Sarasota Kennel Club, Inc., 489 F.3d 303 (6th Cir. May 29, 2007), the Sixth Circuit had to contend with the fact that both it and the Ohio Supreme Court had reached opposite conclusions -- the state court found the clause unenforceable as against public policy while the Sixth Circuit had previously upheld the very same clause -- and therefore it had to decide as a matter of first impression whose law should govern a forum selection clause in a diversity case when that clause was the sole basis for personal jurisdiction.

Splitting from the Seventh Circuit, the court analogized to the law of personal jurisdiction and concluded that the law of the forum state should control. It affirmed the finding that the clause was unenforceable and therefore that the Ohio federal court was without jurisdiction.

New U.S. Supreme Court Pleading Standard In Antitrust Case Has Wide Implications

Under existing precedent, a plaintiff claiming violation of Sherman Act § 1 must prove not only that defendant businesses acted in parallel, but also that such conduct was the product of an agreement, combination or con­spiracy. In Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (U.S. May 21, 2007), the Supreme Court analyzed the pleading requirements for such a claim, and concluded that it is insufficient to allege specific parallel anti­competi­tive conduct but describe the underlying agreement merely in conclusory terms.

Finding that Fed. R. Civ. P. 8(a)’s requirement of “a short and plain statement of the claim showing that the pleader is entitled to relief” still must put the defendant on notice of what the claim is “and the grounds upon which it rests,” the Court held that beyond mere legal conclusions enough facts also must be pled “to raise a right to relief above the speculative level” because parallel conduct alone does not imply the existence of illegal conspiracy. In this particular case, the Court concluded that the plaintiff failed to allege the required contract as anything more than a mere conclusion.

Bell Atlantic Corp. v. Twombly carries important implications beyond the antitrust context because of its departure from the traditional notion that, except as provided in Fed. R. Civ. P. 9(b), federal rules require only notice pleading rather than fact pleading. The Court now interprets Fed. R. Civ. P. 8 and Conley v. Gibson, 355 U.S. 41 (1957), as requiring defendants to be put on notice through a certain amount of fact pleading, although the precise degree of fact pleading apparently remains to be explored through further case law.

Federal Courts May Rule On Forum Motions Without First Determining Jurisdiction

Before considering dispositive motions going to the merits of the case, federal courts typically must be satisfied that they have subject-matter and personal jurisdiction.

In Sinochem Int’l Co. Ltd. v. Malaysia Int’l Shipping Corp., 127 S. Ct. 1184 (U.S. Mar. 5, 2007), the Supreme Court confirmed that the same considerations do not apply to a motion to dismiss based on forum non conveniens because such a motion is not a disposition on the merits. Such motions do not entail the court’s assumption of any substantive law-declaring power; therefore, there is no requirement that the court first undertake the discovery necessary to ascertain that it has either subject-matter or personal juris­diction. Here, the Supreme Court characterized the international dispute at issue as being a textbook case for immediate dismissal because the jurisdictional issues would be difficult to determine and the forum non conveniens considerations weighed heavily in favor of dismissal.

U.S. Supreme Court Holds False Claims Act “Original Source” Rule Is Jurisdictional

In Rockwell Int’l Corp. v. United States, 127 S. Ct. 1397 (U.S. Mar. 27, 2007), the Supreme Court noted that the False Claims Act, 31 U.S.C. §§ 3729, et seq., eliminated federal court jurisdiction over qui tam actions brought by a private party “relator” based upon the public disclosure of allegations reported in the news media unless such party is “an original source of the information.” In this case, a former Rockwell engineer named James Stone brought a qui tam action alleging that Rockwell knowingly employed a defective system for disposing of toxic waste, and the Government intervened. Ultimately the case proceeded to trial and the jury found in part for Stone, and the lower courts affirmed.

The Supreme Court reversed for lack of jurisdiction, finding that Stone was not the “original source” of the information upon which the claims were based. The Court held that where claims are brought based on publicly disclosed information, a relator’s status as the original source of that information is jurisdictional and must be considered de novo even where, as argued here, the defendant conceded the issue. Here, Stone had informed Rockwell that its system was faulty due to a defective piping system, but the final pretrial order (which superseded the pleadings), and all the proofs at trial, concerned an entirely different defect. Because Stone had no independent knowledge of the defect that actually was at stake, the district court lacked jurisdiction over the matter.

California’s Unfair Competition Law Now Requires Representative Claimant To Have Injury And Meet Class Action Prerequisites

In 2004, the voters of California approved Proposition 64 to amend the Unfair Competition Law (Bus. & Prof. Code §§ 17200, et al.) (“UCL”). Until that time, the statute permitted individuals to act as private attorneys general to bring lawsuits for alleged unfair competition on behalf of others even if the plaintiffs themselves had not suffered loss of money or property. Because the traditional requirements for class actions and individual standing did not have to be met, the UCL had been the subject of controversy. Proposition 64 added the requirements that the representative have suffered injury in fact, and that the action “complies with Code of Civil Procedure Section 382.”

In Amalgamated Transit Union, Local 1756 v. Superior Court, 55 Cal. Rptr. 3d 585 (Cal. App. (2d Dist.) Feb. 28, 2007, modified Mar. 22, 2007), the court held that that despite the lack of any express language in proposition 64 concerning class actions, the reference to § 382 was meant to engraft onto the Unfair Competition Law the requirement that any representative action proceed as a class action and satisfy traditional certification requirements.

[Note that on June 20, 2007, the California Supreme Court granted review, superceding this opinion. Amalgamated Transit Union, Local 1756 v. Superior Court, 161 P.3d 1, 61 Cal.Rptr.3d 459 (Cal. June 20, 2007).]