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Eh Nonymous

"We [] invite plaintiffs to file... an appropriate request for reimbursement." Hee hee. Thanks for pointing that out, Evan.

Ted! Where are you? We have federal judges pointing out frivolous, costly, time-wasting abuses of procedure by sleazy trial attorneys! Surely, just because it's by defense counsel, shouldn't disqualify it from being highlighted on Overlawyered!

Ted

The statute provides for reimbursement. Hundreds of losing removal motions a year result in the payment of attorneys' fees under 1447(c). Not news.

Still, I'll have a Point of Law post on this case up later this week; as Easterbrook notes, the underlying class action is entirely bogus. This case can do nothing to help consumers; it's a pure wealth transfer from consumers and manufacturers to attorneys, with the concomitant adverse effects on the economy.

Evan, your link is munged; you have to link to the case page, because the 7th's opinion pages are generated only temporarily.

Aaron

Ted:
You oversimplify the issue. Under 28 U.S.C. § 1447(c), a federal district court “may” order payment of attorneys’ fees and expenses incurred as a result of the removal to federal court of a case originally filed in state court, removed to federal court, and then remanded back to state court. The statute provides no explicit guidance as to when a district court should order payment of such fees and expenses.

The Seventh Circuit reads 1447(c) as a fee shifting statute and has stated that a plaintiff is presumptively entitled to fees. See Garbie v. DaimlerChrysler Corp., 211 F.3d 407 (7th Cir.2000). However, other circuits do not follow this approach. See Martin v. Franklin Capitol Corp., 393 F.3d 1143 (10th Cir. 2004.) cert. granted 4/25/05

Regardless of 1447(c) defendants routinely abuse the removal process tying up cases in federal court for months or years and causing a delay for which the plaintiffs simply cannot be compensated.

Out of curiosity, did you discuss Lander and Berkowitz, P.C. v. Transfirst Health Servs. Inc., ____ F.Supp.2d ____, Case No. 05-527-RWS, 2005 WL 1457910 (E.D.Mo. May 19, 2005), the case where the defendants put forth an argument that is the height of frivolity. (See Evan's post here: http://www.legalunderground.com/2005/05/schoolhouse_roc.html). Interestingly, the district judge there refused to award fees.


Evan

Ted: As a lawyer who has won a scad of removal motions--most of them I've filed, in fact--I can say that federal courts rarely grant sanctions against the removing party. I agree that my own epxerience is merely anecdotal; I don't have any studies to back me up. But Judge Easterbrook "inviting" the plaintiffs' lawyers to apply for sanctions? I disagree with you there--that is news.

The reason I win most of the removal motions isn't because of my great lawyering, by the way. It's because the cases were removed to federal court even though there was no federal subject-matter jurisdiction to keep them there. That said, I don't fault the defendants for removing, necessarily. As I've always said, who am I to stand in the way of a defense lawyer's trying to make a decent living?

I'll fix the link. ("Munged"--it sounds like a word out of JK Rowling's legal dictionary.)

Ted

Aaron, thanks for the cite. I missed the cert grant. And I was out of the country when Evan posted about Lander. Lander-style removals are, at worst, a transient issue, because there are only so many February 17 class actions out there, and we won't see any in 2006. As I discussed in the comments to another post, it's a problem of defensive lawyering.

That said, I don't see how it's possible for a removal to tie up a case for "years." And it's as least as accurate to say that plaintiffs cause the delay by filing remand motions. There's no reason to be afraid of a federal court if the plaintiff's case is meritorious. But many plaintiffs prefer to gerrymander their way into state court through fraudulent joinder or sandbagging on damages to avoid the federal restrictions on the use of junk science or jury questioning, and you have to expect defendants to attempt to protect themselves against this abuse.

Evan, in the Seventh Circuit, a 1447(c) order is not a "sanctions" order. It's not news, because the news was in Garbie, supra (which is much much harsher about the defendants' tactics), or Tenner v. Zurek, 168 F.3d 328, 329-30 (7th Cir. 1999). When the Supreme Court hears the Martin argument, I'll address the question then.

I'm pleased to see noone disagrees with my assessment of the underlying class action. Which leads to the question why it's still pending in state court two years after it was originally filed.

Mike

Bashman gets credit for teaching me this. To link to the slip op, right-click and then "save link as." That will give you this (non-temp) link:
http://www.ca7.uscourts.gov/fdocs/docs.fwx?submit=showbr&shofile=05-8017_008.pdf

Evan

Ted: Sanctions or fee-shifting, my view is the same. The fact is, the district judges still think of 1447(c) awards as sanctions, which is why they do not award them very often. With that said, when I'm arguing the point next time in the 7th Circuit (like, tommorow), I'll be sure to cite the fee-shifting decisions more prominently. Sometimes, even federal judges need a little educating from lawyers.

Aaron

Ted: Let me give you a specific example. I am sure that you are aware of the Vioxx litigation. On October 21, 2004 several plaintiffs filed a class action against Merck in St. Clair County, IL seeking to recover their Purchase price for Vioxx. Plaintiffs stipulated that this amount was less than $75K per class member.

Merck removed the case on November 24, 2004. Merck's arguments were bogus. In fact, numerous district judges found that Merck arguments were wholly without merit.

In the Northern District of Illinois, Judge Shadur, after considering each of the arguments advanced by Merck, found that “each potential predicate for diversity jurisdiction advanced by Merck does not survive scrutiny.” Ivory v. Merck & Co., Inc., 341 F.Supp.2d 1054 (N.D. Ill. Oct. 26, 2004).

In the Southern District of Indiana, Judge Tinder also found diversity jurisdiction lacking after considering the same arguments and remanded Kantner v. Merck & Co., Inc., 2005 WL 277688 (S.D. Ind. Jan. 26 2005).

In the Eastern District of Kentucky, Judge Hood also rejected these arguments and wrote:
"First, Defendant argues that Plaintiffs' disclaimer of damages over $75,000 is unavailing. Second, Defendant argues that Plaintiffs' complaint "at least implicitly seeks classwide medical monitoring that would far exceed the jurisdictional minimum in start-up costs alone." (Def.'s Opp. to Pls.' Mot. to Remand at 6-7.) Third, Defendant argues that Plaintiffs' claims for compensatory damages, punitive damages, and attorney's fees exceed the $75,000 threshold. Finally, Defendant contends that Plaintiffs' complaint "contains an implicit request for disgorgement that should be aggregated for purposes of determining the amount in controversy." (Id.) The Court rejects each of these arguments and finds that remand is appropriate for the reasons described below." Ratliff v. Merck & Co., Inc., ___ F.Supp.2d ____, 2005 WL 549055 (E.D.Ky. March 3, 2005).

In the Southern District, Judges Herndon and Murphy have both found that Merck’s arguments did not support federal jurisdiction. See Caruso v. Merck & Co., Inc., 04-cv-759-GPM (S.D.Ill. Dec. 21, 2004); Gori v. Merck & Co., Inc., 04-cv-868-DRH (S.D.Ill. Feb. 28, 2005); Amisch v. Merck & Co., Inc., 04-cv-847-DRH (S.D.Ill. March 11, 2005).

Plaintiffs in the instant case moved to remand on December 11, 2004. Merck responded on January 13, 2005. Plaintiffs replied on February 2, 2005.

On April 12, 2005, Plaintiffs filed a motion for expedited ruling.

On July 6, 2005 the case was transferred by the MDL Panel to the E.D. La.

Now, because the transferee court in a MDL applies the law of the circuit in which it sits, the Remand must be completely re-briefed and because the E.D. La. judge has decided that he will deal with all of the remand motions at one time (some unknown time in the future) this case will be tied up in a court without jurisdiction for "years."

TO address your second point, there are indead problems with Federal Court and it is idiotic to pretend that their aren’t. See, e.g., Posner, How I Approach the Decision of an ERISA Case,NYU Review of Employee Benefits and Executive Compensation 2002, ch. 14 ("[F]ederal judges tend to be less plaintiff-oriented than state judges"); Todd v. Societe Bic, S.A., 21 F.3d 1402, 1412 (7th Cir.1994)("When we are faced with opposing plausible interpretations of state law, we generally choose the narrower interpretation which restricts liability, rather than the more expansive interpretation which creates substantially more liability.") Birchler v. Gehl Co., 88 F.3d 518, 521 (7th Cir.1996)("When confronted with a state law question that could go either way, the federal courts usually choose the narrower interpretation that restricts liability."); Afram Export Corp. v. Metallurgiki Halyps, S.A., 772 F.2d 1358, 1370 (7th Cir.1985)("Innovative state law claims should be brought in state court.").

However, even faced with the clear advantage a defendant has in federal court, I generally don’t have a problem with federal court.

But not having a problem is not the issue. I don’t get to confer jurisdiction on a federal court - Congress has to do it. Federal jurisdiction does not exist over this action so the federal court CANNOT adjudicate this case. Thus anything the federal court does is a waste of time.

Eh Nonymous

Aaron: forcefully put. Thanks for saying what we plaintiffs' lawyers were thinking.

Ted: if a class action is frivolous, it will be frivolous today and tomorrow and next year. The difference is, if a defendant eagerly decided to waive jurisdictional objections, waived objections as to class certification (which you can't do, judges must be independently convinced that the prerequisites of FRCP 23 or equivalent are met), eagerly responded to the _substance_ of the complaint, and lost, it'd be malpractice city.

Worse than that, since we're talking about true frivolous claims here and so it's a claim that CANNOT PLAUSIBLY BE DEFENDED, the defense counsel would have to stop charging their clients as soon as the sanctions against plaintiffs and their counsel were done being appealed.

That is, it would prematurely end the litigation, before billing quotas were met.

Class actions are indeed a flawed and a dirty business, at times, but not solely because of some plaintiffs' counsel's greed. Sometimes you have, can you imagine, non-frivolous claims for real injuries due to real violations of duties under real statutes with actual remedies, and causation is not frivolous. In that case, ethical defense is usually damage-control, and more in the line of settlement negotiation and zealously defending the (guilty, guilty, guilty- i mean, Liable) defendant. But would you want to bet that none of those are ever frivolously removed and remanded, too?

Eh Nonymous

correction for clarity: when I say frivolous claim, and then say that means it can't be "defended," I mean that when plaintiffs' counsel stands up to argue the merits of the claim against a 12(b)(6)-type motion, and is laughed out of the courthouse, that it's frivolous. There's no moral or intellectual defense possible of the merits of the case.

Not that you can't defend against a frivolous claim. In fact, _one should_, because a stern defense should work, and that would prove that plaintiffs won't and therefore can't make a living by suing frivolously. And there's fee-shifting. And yes, I know, Bet The Company litigation is scary. Tough. If businesspeople can't take risk, they should do something secure... like go to law school.

Jeff

Let's make it interesting. If businesspeople are required to "Bet the Company" and their employees' jobs, what do plaintiffs and their counsel put at risk? How about instead of loser pays, loser is put to death? It has the makings of a great TV series.

Evan

Jeff: The plaintiffs' counsel puts their business at risk, but that probably won't sway you much. I am intrigued, however, by how the discussion of class actions always focuses on the way big business is disadvantaged. Few people ever think about what big business gains from class actions: a company gets to fix up its screw-ups in one fell swoop, getting a release from every class member in a single action. Now, that's not true in every case, but it's definitely part of the theory of class actions, and it's why class actions aren't going away any time soon--big business wouldn't allow it.

On the other hand, I agree with you that "loser is put to death" would make our legal system much more dramatic. Personally, though, I'd retire.

Aaron

I don't believe that I have ever read of a company going out of business because of a class action verdict. Anyone else?

In fact, using stock price as a measure, the company that "bet it all" and lost the worst (Philip Morris in Price) is doing better than ever. (March '03 <$30; Now >$65)

Evan

Aaron: Good point. In fact, as I wrote about here, a "bet the company" class action is one that a sensible lawyer wouldn't even file.

Ted

I don't believe that I have ever read of a company going out of business because of a class action verdict. Anyone else?

See, e.g., In the Matter of A.G. Financial Service Center, Inc., which Point of Law documented on Feb. 18.

Philip Morris would have gone bankrupt in response to the $10.1 billion judgment if exceptions to Illinois bond requirements had not been made. The share price has increased because the market has come to believe that the Illinois Supreme Court will do the right thing and reverse the judgment.

Merck properly removed the class actions. Some judges disagree. Pre-CAFA remands aren't appealable, so Merck doesn't have any opportunity to correct these errors.

Saying "Federal judges tend to be less plaintiff-oriented than state judges" is incomplete if you wish to demonstrate that federal courts are an unfair forum; after all, state judges might well be (and empirical evidence indicates, are) too plaintiff-oriented; out-of-state defendants fare much worse in state courts with judges elected in partisan elections than in-state defendants do, which is precisely the type of bias Alexander Hamilton warned about in Federalist Paper No. 80.

E.N. is sadly naive if he thinks that a class action will have no traction in a state court just because it's meritless. How many years did it take for the Illinois Supreme Court to throw out Avery? How many millions of dollars will Philip Morris never see again because they've tied up a huge hunk of cash on an appeals bond in Madison County?

And yes, I know, Bet The Company litigation is scary. Tough. If businesspeople can't take risk, they should do something secure... like go to law school.

And that will guarantee our country's economic well-being when every risk-averse American decides that the litigation climate in this country is such that they're better off going to law school rather than producing wealth, or creating jobs, or providing health care.

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