a California-centric collection of comments and resources about complex litigation and class action practice
Show two should be in the can by early afternoon on Sunday, March 24, 2013. With any luck, I will have it online later in that evening, ready for downloading wherever finer podcasts are found.
I was concerned when United States v. Cotterman was originally decided by the Ninth Circuit in 2011. In that decision, the panel held that personal property, such as laptops and other digital storage devices, could be transported to a secondary site for a thorough inspection, even with no reason for suspicion. En banc review was granted in 2012. On March 8, 2013, in United States v. Cotterman (9th Cir. 2013), the Court, en banc, modified that terrible holding.
The Court observed:
Every day more than a million people cross American borders, from the physical borders with Mexico and Canada to functional borders at airports such as Los Angeles (LAX), Honolulu (HNL), New York (JFK, LGA), and Chicago (ORD, MDW). As denizens of a digital world, they carry with them laptop computers, iPhones, iPads, iPods, Kindles, Nooks, Surfaces, tablets, Blackberries, cell phones, digital cameras, and more. These devices often contain private and sensitive information ranging from personal, financial, and medical data to corporate trade secrets. And, in the case of Howard Cotterman, child pornography.
Slip op., at 5-6. Framing the issue, the Court continued:
Although courts have long recognized that border searches constitute a “historically recognized exception to the Fourth Amendment’s general principle that a warrant be obtained,” United States v. Ramsey, 431 U.S. 606, 621 (1977), reasonableness remains the touchstone for a warrantless search. Even at the border, we have rejected an “anything goes” approach. See United States v. Seljan, 547 F.3d 993, 1000 (9th Cir. 2008) (en banc).
Slip op., at 7. The Court recognized that a search of electronic devices must be reasonable, even at the border, given the character of digital information:
Electronic devices often retain sensitive and confidential information far beyond the perceived point of erasure, notably in the form of browsing histories and records of deleted files. This quality makes it impractical, if not impossible, for individuals to make meaningful decisions regarding what digital content to expose to the scrutiny that accompanies international travel. A person’s digital life ought not be hijacked simply by crossing a border. When packing traditional luggage, one is accustomed to deciding what papers to take and what to leave behind. When carrying a laptop, tablet or other device, however, removing files unnecessary to an impending trip is an impractical solution given the volume and often intermingled nature of the files. It is also a time-consuming task that may not even effectively erase the files.
Slip op., at 22. "This is not to say that simply because electronic devices house sensitive, private information they are off limits at the border. The relevant inquiry, as always, is one of reasonableness. But that reasonableness determination must account for differences in property." Slip op., at 24.
In this case, the majority concluded that, under the circumstances of the case, the search was reasonable. Regardless, I am encouraged that, as of now, the mere use of a password to protect data does not provide a reasonable basis for detailed inspection of a computer.
To celebrate surviving 5 years (holy smokes!) of blogging here at The Complex Litigator, I have rolled out a new look and feel to this site (now live), put the pipes in place to offer MCLE credit for the Class Re-Action Podcast, and generally tinkered quite a bit behind the scenes.
The second episode of Class Re-Action will be recording March 24th and available some time that evening for direct download, for streaming, and through the iTunes and XBox stores. I will get the MCLE store up and running shortly. The podcast will remain free; you will have the option of purchasing MCLE credit for a show that you have listened to at your discretion. The sales are intended to offset the substantial cost of getting the Class Re-Action podcast off the ground with recording equipment and the ongoing costs of providing guests with higher quality (recording quality) microphones for better sound control. I think it will be more like a tip jar than a commercially viable endeavor. I just want to come close to break-even.
I will have more announcements related to this auspicious event, but I just received my notification today that the Class Re-Action Podcast, Episode 1, has been approved for MCLE credit. The short version is that I have been preparing to move this blog to the newer Squarespace v6 platform to accommodate my ability to offer MCLE credits through the blog. I will soon be switching to the new platform, and the look will change a bit when I do implement the switch.
I am informed that, beginning June 2013, there will be NO court reporters for civil matters in the Los Angeles Superior Court. Part-time court reporters will be laid off, and all full-time court reporters in civil will transfer to the criminal courts.
How much longer will we allow the two funded branches of government to continue down this path? This is not constitutional. Also, please be advised that I am not interested in hearing that California doesn't have enough money to correctly fund the Courts. We have plenty of money. The federal government has plenty of money (the highest tax receipts in history this year). Lots of money. Money everywhere. It's how they SPEND that money. Rather, it is how WE spend that money, since we own the bums running things off the cliff for us. That's the problem - how the money is spent. If the constitution of this state is to be treated like a bird cage liner, then it is no wonder that the institutions built upon it all look like crap now.
I wonder how much longer we will be able to retain the best of our judges.
The long-running saga of Wang v. Chinese Daily News, Inc. took its latest turn today, when the Ninth Circuit, on remand from the United States Supreme Court, issued the most decision in Wang v. Chinese Daily News, Inc. (9th Cir. Mar. 4, 2013). The Ninth Circuit reversed various aspects of the District Court's certification order after applying Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) to the District Court's decision.
First, the Court vacated the District Court's Rule 23(a)(2) analysis and directed the District Court to conduct the rigorous analysis required by Wal-Mart:
We vacate the district court’s Rule 23(a)(2) commonality finding and remand for reconsideration in light of Wal-Mart. On remand, the district court must determine whether the claims of the proposed class “depend upon a common contention . . . of such a nature that it is capable of classwide resolution — which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” Wal-Mart, 131 S. Ct. at 2551. Plaintiffs must show “significant proof that [CDN] operated under a general policy of [violating California labor laws].” Ellis, 657 F.3d at 983 (quoting Wal-Mart, 131 S. Ct. at 2553 (alteration omitted)). However, plaintiffs need not show that every question in the case, or even a preponderance of questions, is capable of classwide resolution. So long as there is “even a single common question,” a would-be class can satisfy the commonality requirement of Rule 23(a)(2).
Slip op., at 10.
Next, the Court quickly concluded that the monetary relief sought by the plaintiffs was not "incidental." The Court reversed the District Court's order certifying the class under Rule 23(b)(2).
Finally, the Court remanded for further consideration as to whether certification was warranted under Rule 23(b)(3):
For two reasons, we remand to the district court for reconsideration of the propriety of class certification under Rule 23(b)(3). First, the district court’s conclusion that common questions predominate in this case rested on the fact, considered largely in isolation, that plaintiffs are challenging CDN’s uniform policy of classifying all reporters and account executives as exempt employees. See Wang, 231 F.R.D. at 612–13. In two recent decisions, we criticized the nature of the district court’s Rule 23(b)(3) predominance inquiry in this case. See In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 958–59 (9th Cir. 2009); Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 944–48 & n.14 (9th Cir. 2009). We observed that the district court in this case “essentially create[d] a presumption that class certification is proper when an employer’s internal exemption policies are applied uniformly to the employees.” In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d at 958. We wrote that such a presumption “disregards the existence of other potential individual issues that may make class treatment difficult if not impossible.” Id. The main concern of the predominance inquiry under Rule 23(b)(3) is “the balance between individual and common issues.” Id. at 959. “[A] district court abuses its discretion in relying on an internal uniform exemption policy to the near exclusion of other factors relevant to the predominance inquiry.” Vinole, 571 F.3d at 946.
Slip op., at 13. The Court also noted that Brinker impacted the analysis of meal period claims and required evaluation by the District Court.
In Kuxhausen v. BMW Financial Services (9th Cir. Feb. 25, 2013), the Ninth Circuit circuit granted leave to appeal a District Court's Order granting a motion to remand on the ground that removal was untimely under CAFA. The case was originally filed on August 30, 2011, alleging various claims arising from Retail Installment Sales Contracts issued through one BMW dealership. On February 9, 2012, the plaintiff amended to include a proposed class of all California-BMW purchasers affected by the same alleged RISC non-disclosures. BMW removed on March 9, 2012. The District Court granted a motion to remand on the ground that the motion to remand under CAFA was untimely.
The Court examined each element that must be established for CAFA jursidiction, focusing on the amount in controversy and the timing of the pleading that disclosd the amount:
In Harris, a non-CAFA case, the plaintiffs made a similar demand. They argued that the defendant “should have looked in its files within the first thirty days” to discover that a named defendant whose presence in the suit frustrated complete diversity of citizenship had died, and therefore should have recognized that the case was immediately removable under 28 U.S.C. § 1332(a). Harris, 425 F.3d at 696. Preferring a clear rule, and unwilling to embroil the courts in inquires “into the subjective knowledge of [a] defendant,” we declined to hold that materials outside the complaint start the thirty-day clock. Id. at 695 (quoting Lovern v. Gen. Motors Corp., 121 F.3d 160, 162 (4th Cir. 1997)). Applying that principle here, we conclude that BMW was not obligated to supply information which Kuxhausen had omitted.
However, that does not fully resolve whether the amount in controversy was “stated by the initial pleading.” 28 U.S.C. § 1446(b). The district court also was influenced by the fact that for a 200 member class, the average contract price per vehicle needed only to exceed $25,000 in order to put greater than five million dollars in controversy. Presumably, it thought that sum was a plausible-enough guess for a case involving German luxury automobiles, perhaps doubly so since Kuxhausen’s individual vehicle contract was more than twice that amount. The fact remains, however, that we “don’t charge defendants with notice of removability until they’ve received a paper that gives them enough information to remove.” Durham, 445 F.3d at 1251. This principle helps avoid a “Catch–22” for defendants desirous of a federal forum. By leaving the window for removal open, it forces plaintiffs to assume the costs associated with their own indeterminate pleadings. That is only fair after all, because—even under CAFA—“the burden is on the party removing the case from state court to show the exercise of federal jurisdiction is appropriate.” Lewis v. Verizon Commc’ns, Inc., 627 F.3d 395, 399 (9th Cir. 2010). Thus, because nothing in Kuxhausen’s complaint “indicate[d] that the amount demanded by each putative class member exceed[ed] $25,000,” it fell short of triggering the removal clock under Section 1446(b). Carvalho, 629 F.3d at 886.
Slip op., at 10-11. In this same discussion, the Court also held that the timing trigger of the 30-day removal period and a defendant's ability to go beyond the pleadings to show CAFA jurisdiction are not linked. A defendant is not obligated to establish what is not included in the pleadings.
When the Ninth Circuit decided, Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), the immediate reaction from the commentator class was to conclude that it was a substantial setback for plaintiffs and a "pro-defense" decision. However, a recent decision of the Ninth Circuit suggests that, possibly, a black-and-white reading of Mazza could be inaccurate. In AT&T Mobility LLC v. AU Optronics Corp. (Feb. 14, 2013), the Ninth Circuit considered whether the District Court erred when it dismissed California anti-competition state law claims based on purchases that occurred outside California. The Court concluded that, to the extent conspiratorial conduct was sufficiently connected to California, the application of California law would be neither arbitrary nor fundamentally unfair.
The Court explained that allegations of a conspiracy to price fix, occurring in California, were sufficient to render the allegations constitutionally sound:
Nor would the application of California law impermissibly undermine the policies of other states, as Defendants contend. Because the Due Process Clause does nothing but circumscribe the universe of state laws that can be constitutionally applied to a given case, we “need not . . . balance the competing interests of California and [other states].” United Farm Workers of Am., AFL-CIO v. Ariz. Agric. Emp’t Relations Bd., 669 F.2d 1249, 1256 (9th Cir. 1982); see also Allstate, 449 U.S. at 308 n.10 (“[T]he Court has since abandoned the weighing-of-interests requirement.”). Objections based on the interests of other states are more properly raised under a choice of law analysis, or potentially under a challenge predicated on some other provision of the U.S. Constitution. Defendants raised no such arguments before the district court.
Slip op., at 15.
The question, then, is whether the focus on the conspiracy situated in California would change the analysis of Mazza, which turned on the issue of where consumers received allegedly misleading advertisements. California can certainly articulate a sound basis for its interest in deterring price-fixing conspiracies occurring within its borders.
The fraud-on-the-market theory, first accepted by the U.S. Supreme Court in Basic Inc. v. Levinson, 485 U. S. 224 (1988), and recently endorsed in Erica P. John Fund, Inc. v. Halliburton Co., 563 U. S. ___ (2011), presumes that the price of a security traded in an efficient market will reflect all publicly available information about a company. With that presumption, a buyer of the security may be presumed to have relied on that information in purchasing the security, including misrepresentations in public communications. In Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds (Feb. 27, 2013), the U.S. Supreme Court took up the question of whether, at the certification stage, materiality must be proven. Affirming the Ninth Circuit, the majority concluded that materiality need not be proven at the certification stage.
Summarizing the holding of the Court, Justice Ginsburg wrote:
While Connecticut Retirement certainly must prove materiality to prevail on the merits, we hold that such proof is not a prerequisite to class certification. Rule 23(b)(3) requires a showing that questions common to the class predominate, not that those questions will be answered, on the merits, in favor of the class. Because materiality is judged according to an objective standard, the materiality of Amgen’s alleged misrepresentations and omissions is a question common to all members of the class Connecticut Retirement would represent. The alleged misrepresentations and omissions, whether material or immaterial, would be so equally for all investors composing the class. As vital, the plaintiff class’s inability to prove materiality would not result in individual questions predominating. Instead, a failure of proof on the issue of materiality would end the case, given that materiality is an essential element of the class members’ securities fraud claims. As to materiality, therefore, the class is entirely cohesive: It will prevail or fail in unison. In no event will the individual circumstances of particular class members bear on the inquiry.
Essentially, Amgen, also the dissenters from today’s decision, would have us put the cart before the horse. To gain certification under Rule 23(b)(3), Amgen and the dissenters urge, Connecticut Retirement must first establish that it will win the fray. But the office of a Rule 23(b)(3) certification ruling is not to adjudicate the case; rather, it is to select the “metho[d]” best suited to adjudication of the controversy “fairly and efficiently.”
Slip op., at 2-3. With the heavy tide of anti-class decisions emanating from the U.S. Supreme Court of late, this is an important reminder that certification analysis focuses on common questions, not proof.
A story first made the rounds quietly in November of last year about a proposed ethics rule that is just broad enough and vague enough that it can be used as a tool by AOC to punish any judge with the gumption to criticize decisions of the AOC. That rule has passed, unsurprisingly (Note: when you see a news report that something entirely likely to occur is "unexpected," that should tip you off to the agenda of the reporter, not that the event was "unexpected"). It was entirely expected that it would pass. It was proposed to stifle dissent by using the costs associated with an ethics inquiry to shut down free speech.
We have two simultaneous problems in California's judicial branch of government, a constitutional and co-equal branch. First, the judicial branch is catastrophically underfunded. The Los Angeles Superior Court should not be shutting down courtrooms. A member of the bench who shall remain nameless told me that with the coming courtroom closures in Los Angeles, the average caseload that is currently running somewhere between 550 and 600 cases per judge will jump by about 150 cases per courtroom. What sort of justice will anyone receive under those conditions?
Second, the AOC has ballooned into a bloated bureaucracy that serves itself. Why did the AOC mushroom from 100 employees to well over 1,000 employees inside of a decade? Fixing this bloat would save some money. Getting rid of the endless boondoggle of the unicorn known as CCMS saved some money, but it doesn't close the gap between current funding levels and what those levels should be at to have courts in each county that can manage the caseloads they face. I don't know the right caseload for a civil trial court, but it isn't 550 case, and it surely isn't 700 cases. You'd probably receive real attention and a better measure of justice if those caseloads were more like 250-300 cases per courtroom.
I condemn the current and past legislatures for allowing this to happen. I condemn AOC for succumbing to corruption and administrative bloat (I refer to the allegation of embezzlement in the alleged amount of $100,000 that was not reported or charged as an example of that).
So to the massive audience of Legislators reading this and waiting for my go-signal, here it is: Fix the funding shortfall (who cares if you have to cancel a high speed train to do it - this is a co-equal branch of government we're talking about) and root out the administrative bloat (in other words, start insisting upon the firing of AOC staff until you have half the number you started at and then reassess, and then get rid of some more).
By the way, if someone handed me half the amount of money that was wasted on CCMS, I could have a Statewide court system database up and running in a few years, with enough left for me to retire on in a castle that I would have constructed out of rare marble on my own private island.
The Complex Litigator reports on developments in related areas of class action and complex litigation. It is a resource for legal professionals to use as a tool for examining different viewpoints related to changing legal precedent. H. Scott Leviant is the editor-in-chief and primary author of The Complex Litigator.
