Last week, the Division One of the Arizona Court of Appeals issued an opinion that removes two major barriers to lawsuits against pharmaceutical manufacturers: it recognized that state consumer fraud statutes can be applied against these defendants; and, under the Uniform Contribution Among Tortfeasors Act, abolished the learned intermediary doctrine. This opinion has the potential to radically alter pharmaceutical and medical device litigation in Arizona.

In Watts, the plaintiff, Amanda Watts, sued Medicis, a pharmaceutical manufacturer, claiming that Solodyn, a prescription acne medication, caused her lupus.  She alleged strict liability based on a failure to warn and also raised a claim under Arizona’s Consumer Fraud Act (CFA), contending that Medicis knowingly provided false and misleading warning information. Medicis moved to dismiss the claim, arguing that the Consumer Fraud Act does not apply to pharmaceuticals and also that the learned intermediary doctrine barred her product liability claim. The trial court granted the motion.

The court of appeals reversed. After resolving jurisdictional issues in Watts’s favor, the court turned first to the CFA Rejecting Medicis’s claim that pharmaceuticals are not “merchandise,” and therefore, fall outside the scope of the CFS, the court noted that prescription drugs are “often advertised and sold to consumers in a manner similar to other consumer goods, implicating the need for the protection of the CFA.”  Because Watts had alleged that the Solodyn’s labeling and promotional materials had “affirmatively and falsely” misrepresented the drug’s safety and that she relied on those statements, the court found that she had stated a claim.

Perhaps the larger sea change came with the court’s rejection of the learned intermediary doctrine, which shields a manufacturer from liability for failure to warn when it provides a proper warning to the specialized class of people who are authorized to sell, install, or provide the product. Noting that the Arizona Supreme Court has never formally adopted, the court analyzed it in the context of the Uniform Contribution Among Tortfeasors Act (UCATA). It concluded that UCATA, which abolishes joint and several liability is inconsistent with the learned intermediary doctrine. Looking to the Arizona Supreme Court’s State Farm Ins. Co. v. Premier Manufactured Systems, 217 Ariz. 222, 172 P.3d 410 (2007), which reiterated that Arizona law prevents “a partially responsible defendant from being held liable for the damages by his co-defendant,” the court rejected the learned intermediary doctrine. It concluded “that protecting a prescription drug manufacturer from possible liability for its own actions in distributing a product, simply because another participant in the chain of distribution is also expected to act, is inconsistent with UCATA.”

Importantly, the learned intermediary doctrine is abolished in total, not just with respect to pharmaceuticals. The practical consequences of the Watts decision are still unknown. Juries may well re-affirm what the learned intermediary doctrine always assumed—that doctors and other learned intermediaries alone must be responsible for failing to communicate the warnings that they receive—or they could open a new avenue of liability for manufacturers who can no longer rely on doctors’ and other intermediaries’ duties to warn consumers.  

William F. Auther is the managing partner of the Phoenix, Arizona office of Bowman and Brooke, LLP, where he has an active trial practice in product liability and business litigation.  Amanda Heitz is an associate at Bowman and Brooke.

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As a precondition to participating in the Arizona Health Care Cost Containment System (AHCCCS), Arizona’s Medicaid program, health care providers execute an agreement that they will comply with federal law. Federal law provides that Medicaid providers must accept the Medicaid payment as payment in full for all services rendered. Nevertheless Arizona statutes entitle AHCCCS providers to liens and the ability to collect from third-parties for customary charges for services. In the case of patients whose injuries resulted from a tort, Arizona statutes permitted AHCCCS providers to make up any difference between the Medicaid paid amount and their “customary charges” by a lien against the patient’s tort recovery. 

AHCCCS patients challenged the legality of this system in a class action lawsuit. The patients, some of whom had executed accord and satisfaction agreements to release the AHCCCS liens for a reduced amount, sought declaratory relief that the liens were invalid and unenforceable and an order requiring the hospitals to return any funds paid to release the liens. The superior court granted the hospital’s motion to dismiss the claim.

A unanimous panel of the Arizona Court of Appeals, in Abbott v. Banner, reversed on federal preemption grounds. Recognizing that federal courts “have uniformly interpreted [] federal statute and regulation as precluding a provider from balance-billing a patient for the difference between what the provider normally charges for services and what the provider is paid through Medicaid,” the Court held that this prohibition applies equally to liens on settlement funds from a personal injury lawsuit. ¶ 13. Accordingly, it concluded that the Arizona statutes providing such liens in favor of AHCCCS providers are preempted.

In addition to its obvious implications for tort plaintiffs whose medical care was covered under AHCCCS, this decision is also likely to have a significant impact in settlement negotiations. At least in the case of AHCCCS plaintiffs, the parties will have the ability to discuss hard medical damages as a sum certain rather than a variable amount. As a practical matter, both plaintiffs and defendants understand that medical liens can be settled for less than face value and take this into account as they negotiate (indeed, many plaintiffs in Abbott did negotiate their liens). But the existence of a medical lien introduces uncertainty. When the parties are not sure whether a $1,000,000 lien can be settled for 10 cents on the dollar or 75 cents on the dollar, they may miss a realistic opportunity for settlement for fear of paying too much or not receiving enough. Likewise, eliminating liens removes the possibility of gamesmanship where one party knows the amount necessary to settle the lien, but tries to persuade the other party that the amount is higher or lower as a bargaining tactic to secure a higher or lower settlement amount. 

William F. Auther is the managing partner of the Phoenix, Arizona office of Bowman and Brooke, LLP, where he has an active trial practice in product liability and business litigation.  Amanda Heitz is an associate at Bowman and Brooke.  

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Diversity (or the lack thereof) in ADR

Posted on February 24, 2015 06:08 by Anandhi S. Rajan

I recently read an excellent article called “Why Bringing Diversity to ADR is a Necessity” by David H. Burt and Laura A. Kaster, which appeared in the October 2013 issue of the Association of Corporate Counsel’s publication, ACC Docket.  This article was of particular interest to me since I have been a mediator with BAY Mediation in Atlanta, GA since September 2013 and I am a woman of color.  It has not been lost on me that in my practice locality mediators who are diverse are few and far between and most cases are still mediated by the “tried and true” bunch of mediators at the few mediation outfits in town. 

This article drives home the point that just as corporate retention of outside counsel has required a deliberate and conscious push by corporations to ensure outside counsel reflect the diverse customer base of many corporations in this country, neutrals who are selected to mediate such disputes should likewise be reflective of the diverse population of this country.  The article discusses some ways in which this inequity can be addressed.  Traditionally, the way in which mediators/arbitrators have been selected has been left up to the outside counsel handling the litigation file, which may be responsible for perpetuating homogeneity in the selection process.  The article tackles three ways in which this may be addressed.  First, ADR providers should increase their neutral panels by recruiting more qualified women, racial minorities, and other diverse neutrals to serve on their panels.  Second, neutrals should be identified based upon the diversity characteristics they can bring to the table.  Third, private law firms should enhance the value associated with their partners and associates serving as neutrals/arbitrators so that more private practitioners embrace ADR as a possible career avenue.

In the context of employment cases, the value of diversity in the neutral/arbitrator cannot be overstated since often the thrust of the employee’s claim is centered on claims of unfair treatment based on their protected status.  So, a neutral who may share that same protected status with the claimant/litigant may serve to advance the prospect of resolution.  While there is no one solution which will fit all to address this issue, outside counsel can make a conscious effort and commitment to seek out and utilize diverse neutrals/arbitrators to resolve their matters, as appropriate, all the while meeting the diversity initiatives of the corporate interests they serve.

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Recent food labeling class actions suggest that plaintiffs’ counsel are broadening the scope of these types of claims.  Of course, we are familiar with the more typical food labeling class actions, such as those challenging “all natural” labels or disputing whether a food product complies with federal law when noting it has “no added sugar.” Those traditional claims focus on the ingredients.  The recent complaints mentioned in this article, however, suggest that class counsel may now focus on subjective statements regarding the processes used to make foods or beverages.

Social Responsibility Statements.

Jablonowski v. Chiquita Brands, Inc., No. 3:15-cv-00262 (S.D. Cal.), is a complaint filed by the well-known class action firm of Hagens Berman Sobol Shapiro LLP.  It alleges that Chiquita falsely advertises on its website that it requires ecologically friendly farming practices.  In “truth,” a Guatemalan company from which Chiquita buys hundreds of millions of pounds of bananas each year allegedly has horrible environmental practices.  That complaint largely relies on research by an environmental organization called Water & Sanitation Health Inc., which apparently traveled to Guatemala to observe and document practices there.  Notably, that complaint does not base its allegations on labeling statements actually found on the bananas.  Rather, it contends that the familiar Chiquita blue label indicates that the bananas meet Chiquita’s “strict standards,” which implicitly includes environmental responsibility.  According to the complaint, Chiquita knows that the Guatemalan company it buys bananas from does not adhere to sound environmental practices.  The complaint also points to statements on Chiquita’s website about environmental responsibility and contends that the named plaintiff relied on those statements.

Some observations come to mind after reviewing this complaint.  First, although Hagens Berman certainly is a legitimate player in the class action field, it must recognize this case has little chance of being certified as a class action.  The Chiquita blue label does not say anything about environmental practices.  Moreover, even the complaint admits that the named plaintiff had to visit Chiquita’s website to read about its environmental commitment.  Thus, it is impossible to suggest that every purchaser was exposed to the “misleading” statements merely by reviewing the product label.  Instead, it would require the added step—wholly removed from buying the product—of visiting the website and reading information about environmental commitment.  

Other difficulties should include the near impossibility of establishing injury/damages.  This plaintiff should have to prove that the Chiquita label misled a substantial percentage of consumers about environmental practices and that the misrepresentation somehow led to a price premium for Chiquita bananas.  This is in contrast to any price premium attributable to advertising or brand recognition. Last, the notion that the blue label signifies that the produce complies with Chiquita’s “strict standards” really amounts to little more than puffery, which typically is not actionable.

Having said this, clients should be aware that the plaintiffs’ class action bar is looking at these types of environmental responsibility or social responsibility statements as targets for consumer class actions.  While this particular suit seems more akin to a publicity stunt than litigation that plaintiffs’ counsel hopes will produce monetary returns, it almost invariably will not be the last claim based on social responsibility statements.  If your clients’ product labels contain such statements, you may want to examine the bases for those statements with your clients.  

Craftsmanship Statements.

Another recent development is litigation regarding the “handmade” nature of various spirits. The most recent case seems to be Welk v. Beam Suntory Import Co., No. 15-cv-0328 (S.D. Cal.).  That plaintiff filed his putative class action on February 17, but similar cases challenging the “handmade” nature of Maker’s Mark bourbon and Tito’s vodka emerged toward the end of 2014.  These lawsuits allege that the manufacturers deceived the public because their products are made using machines, as opposed to entirely by hand.  These claims are more traditional than the Chiquita banana lawsuit because they rely on statements on each label of the product. They also point to undefined phrases (e.g., “handmade” or “hand crafted”), just like the “all natural” litigation. Like the banana litigation, however, these liquor claims point to the process to make the product rather than the ingredients. In the Chiquita case, the issue was whether the process was environmentally friendly. Here, it is whether the process is “handmade.”    

As in more traditional food labeling class actions, these “handmade” plaintiffs should face some serious obstacles. First, establishing damages or any way to measure them seems quite difficult. They should need to establish that Jim Beam is a more expensive bourbon than a comparable brand because of the “handmade” statement. As anyone who has purchased liquor can attest, however, product pricing varies greatly based on advertising, ingredients, brand reputation, and a host of other factors.  It should be very difficult to identify a sound methodology to isolate any supposed price premium attributable to the “handmade” statement (which is not prominent on the label) from other factors. We have also seen the implicit ascertainability requirement play a more prominent role in food/beverage labeling class actions in California courts lately; it should likewise be a valid defense to these latest processing claims.    

A second difficulty is establishing that the “handmade” statement misleads a substantial portion of the consuming public. Even more so than with “all natural” label allegations, trying to establish that a named plaintiff’s understanding of “handmade” accurately represents the general public’s understanding seems nearly impossible. Do consumers purchasing a mass-market beverage truly believe that only human hands were involved in the process?  Facing these difficulties, I suspect these plaintiffs will try to settle early for nuisance values and, perhaps, labeling changes.  

Despite the difficulties that these latest claims face, they also provide a reason for clients and their counsel to reexamine labels for statements regarding the processes used in making products. While many of the defenses in more traditional food labeling class actions will apply to these latest claims, the defendants should have more arrows in their quivers to attack these allegations.

James Smith is a partner in the Phoenix office of Bryan Cave LLP.  He is a member of the firm’s Class & Derivative Actions Client Service Group and the Food and Beverage Team.  

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Nursing Home Staff Falsification of Records

Posted on February 18, 2015 03:32 by Alan R. Jampol

A frequent legal issue faced by nursing facilities is whether it had sufficient staff on hand to care for patients, and whether staff provided care as required by law. As a result, careful record keeping of patient care is necessary, and required, to ensure not only that care given is recorded, but to protect the facility from claims of negligence. Most nursing facilities require staff to not only take careful notes as treatment occurs, but to create weekly summaries of patients’ conditions and events. However, a problem arises when nursing staff are too busy to comply with this requirement. At times, the charting fails to occur at all, or worse, nursing staff create false records.

Often times the duty of creating a weekly summary is assigned to the night shift nurses. Unfortunately, sometimes staff is too busy with patient care to complete their paperwork, which may result in a failure to draft a weekly summary. This results in a patient’s chart containing only entries for care, rather than a summary of the week’s events. The significance of this failure is that it evidences the nurse’s failure to meaningfully review and summarize the patient’s chart. Such a weekly review requires the nurse to take note of the overall care plan of a patient, and any issues or signs that might point to a need to amend the patient’s care plan.

Worse still is the case where a reviewing nurse fails to review and create a weekly summary, and creates a false summary without a legitimate review of the chart. This can result in improper treatment of a patient, as well as a failure in staff to recognize significant issues or stay abreast of recent changes. The weekly summary is an important tool to care givers, and in fact, those providing care of aware of its importance and necessity to providing appropriate care. And such, a failure to maintain a weekly summary or falsification of the summary can evidence of conscious disregard of patient’s needs and of the facility’s duties.

A larger problem occurs when nursing staff not only fail to maintain the weekly summary, but fail to make any treatment notes as required each time a patient is checked on and/or treated. Falsification in this regard can easily be proven, where nursing staff recorded as having provided treatment can be demonstrated through time cards to not have been on duty. Falsification can occur by staff, realizing their failures, and attempting to cover up for themselves. However, more and more frequently such falsification is being committed by administrators who fear costly lawsuits.

While California has a zero-tolerance stance on falsification of records, and such falsification of a medical record is a misdemeanor in California, staff is rarely charged because falsification can be difficult to prove and time consuming to identify. Nonetheless, nursing facilities need to take great care in ensuring its staff is properly maintaining patients’ records to protect against claims of negligence.

In taking a stance against falsification of records, facilities should be aware of the more frequent instances in which it occurs: 1) by overworked or short staffed employees lacking sufficient time to complete paperwork; and 2) to cover up bad outcomes and limit liability. The most important thing a nursing facility can do to help prevent these circumstances is ensure it has sufficient staff on hand to provide proper care to all its patients. Facilities should also hold training sessions to educate staff members regarding record keeping requirements and techniques, as well as falsification of records. Not only should staff be aware that falsification will not be tolerated and of its criminal consequences, but they should also be trained regarding how to recognize falsification by other staff members.

This blog was first posted on Jampol Zimet LLP Insurance Defense Blog. Click here to read the original entry. 

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Leave it to a lawyer (President Bill Clinton) to explain that the answer to a potentially incriminating question “depends on what the meaning of the word ‘is’ is.”  And leave it to nine lawyers (the Justices of the U.S. Supreme Court) to explain that the outcomes of two recently decided  cases depend on  the  statutory meanings of  “decision” and “law”—two seemingly ordinary words that are etched into every lawyer’s vocabulary.

In T-Mobile South, LLC v . City of Roswell, Georgia, No. 13-975 (decided Jan. 14, 2015), the Supreme Court addressed the question of “whether, and in what form, localities must provide reasons when they deny telecommunication companies’ applications to construct cell phone towers.” Slip op. at 1.  The federal Telecommunications Act provides that “[a]ny decision by a State of local government or instrumentality thereof to deny a request to place, construct, or modify personal wireless service facilities shall be in writing and supported by substantial evidence contained in a written record.”  47 U.S.C. § 332(c)(7)(B)(iii) (emphasis added).  Following a public hearing, the Roswell City Council voted to deny T-Mobile South’s application to erect a 108-foot tall cell phone tower disguised as an artificial pine tree.  At the hearing, T-Mobile South testified in support of its application, but City Council members expressed their concerns about  locating the tower in a residential area. Two days later, the City’s Planning and Zoning Division sent a letter to T-Mobile South advising that the application had been denied, but providing no reasons for the denial. Instead, the  letter stated that minutes of the public hearing could be obtained from the City Clerk.  Those minutes were not available for another 26 days.  Slip op. at 2-4. 

T-Mobile South filed suit, alleging that the City had failed to comply with the requirements of § 332(c)(7)(B)(iii).  A federal district court granted summary judgment, holding that the City violated the Act by failing to provide a written decision that stated the reasons for the denial of the application. The Eleventh Circuit reversed, and the Supreme Court granted review.     

The Court held that the Telecommunications Act “requires localities to provide reasons when they deny applications to build cell phone towers,” id. at 6, but that nothing in the Act “imposes any requirement that the reasons be given in any particular form . . . so long as the locality’s reasons are stated clearly enough to enable judicial review.”  Id. at 9.  In particular, the Court rejected T-Mobile South’s argument “that the word ‘decision’ in the statute—the thing that must be ‘in writing’—connotes a written document that itself provides all the reasons for a given judgment.”  Id. at 12.  Instead the Court indicated that the detailed minutes of the City Council’s meeting provided a “written record” of the reasons for the denial, although not soon enough to satisfy the statute’s requirements.  Id. at 14. 

Interestingly, the Court suggested that the word “decision” is not a “term of art,” and for that reason, can have different meanings in different statutes.  See id.  at 12 n.5.  Indeed, one week after deciding T-Mobile, the Court indicated in Gelboim v. Bank of America Corp., No. 13-1174 (decided Jan. 21, 2015), that the phrase “final decision” in 28 U.S.C. § 1291 (vesting federal courts of appeals with jurisdiction over “all final decisions of the district courts”) should be accorded “a practical rather than a technical construction.”  Gelboim, slip op. at 2 (internal quotation marks omitted).

* * * * 

In Department of Homeland Security v. MacLean, No. 13-894 (decided Jan. 21, 2015), the Supreme Court addressed the meaning of “law.”  A federal air marshal was fired on the ground that he had publicly disclosed “certain sensitive security information”—information about cancelled air marshal missions—in violation of Transportation Security Administration (TSA) regulations.  He filed suit seeking “whistleblower” protection under 5 U.S.C. § 2302(b)(8)(A), which protects “an employee who discloses information revealing ‘any violation of any law, rule, or regulation,’ or ‘a substantial and specific danger to public health or safety.’”  Slip op. at 1.   There is an exception in § 2302(b)(8)(A), however, “for disclosures that are ‘specifically prohibited by law.’”  Ibid. (emphasis added). 

The plaintiff air marshal did not dispute that his disclosure was prohibited by TSA regulations.  TSA argued that as a result, the statutory exception for disclosures “specifically prohibited by law” deprived the plaintiff of whistleblower protection.  But does “law” include regulations for purposes of the statutory exception?  The Supreme Court addressed the question of “whether a disclosure that is specifically prohibited by regulation is also ‘specifically prohibited by law under Section 2302(b)(8)(A).”  Id. at 6.  The Court held that “[t]he answer  is no” because “[t]hroughout Section 2302, Congress repeatedly used the phrase “law, rule, or regulation,” but did not do so in the statutory whistleblower-protection exception, where “it used the word ‘law’ standing alone.” Id. at 7.  The Court explained “[t]hat is significant because Congress generally acts intentionally when it uses particular language in one section of a statute but omits it in another,” especially when that  occurs “in close proximity” and/or one of the phrases or words is used repeatedly.  Ibid.  Thus, the Court held that “the TSA’s regulations do not qualify as ‘law’ for purposes of Section 2302(b)(8)(A).”  Id. at 11.

* * * * *

The overarching take-away message from these decisions is that meaning of seemingly ordinary words or commonplace legal terms may depend on their statutory context.   Lawyers who draft legislative language, as well as those of us who argue what legislative language means, should take heed.         

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Risks and the Practice of Law

Posted on February 5, 2015 06:27 by Steve Crislip

Getting out of bed involves “risk” which is sometimes described as exposure to some possibility of loss, injury, or other unwelcome circumstance (Oxford English Dictionary). We accept and deal with all manner of risk on a daily basis and the common law standard of not properly addressing such risks was the reasonable man concept as to what was negligent conduct.

We all purposefully take some risks with things like food at the company picnic and investments (standard printed language from all brokers is:“Past performance does not guarantee future results.”). It is all just part of life, but we are always advised to manage our risk and avoid things like known health risks, home and personal security risks, and other known and predictable root causes. Therein lies the foundation of the insurance industry made famous in the small Edward Lloyd’s Coffee Shop (1648-1713) in London when ships and their cargo were “insured” against the risk of loss, later leading to the London insurance market.

So, in the modern world of International Standards (ISO 31000), we seek to take the effect of uncertainty on objectives and use coordinated and economic application of resources to minimize, monitor and control the probability of unfortunate events. Enough: It is what your Momma told you when she said to watch where you were going and pay attention to what you are doing. Without something like ISO, that was Mother’s Risk Management.

Translated to the world of hard-working lawyers with too little time, it is now necessary for you and your firm to start paying more attention to yourself and your own legal risk. The phrase “the cobbler’s children have no shoes” is used to describe the phenomenon when professionals are too busy with their work and clients to look after those close to them [lawyer with no will; the contractor whose house is unfinished; the accountant who was late filing her return].

Most lawyers have the good sense to have errors and omissions coverage, or malpractice coverage, but that is not the real answer. The solution is not to get to that point, which will be costly and painful regardless of the coverage. Risk management in the form of legal loss prevention is the medicine you should take and accept as a business practice. In other words, get the family some shoes.

Intapp, a legal software provider,, sponsored a 2014 Law Firm Risk Survey and inquired of the biggest firms. Some 96 U.S. firms responded on various issues posed. Risks in all size law firms change often and they were interested in seeing these changes since their 2012 survey. They made several observations from their key findings:

-More than half the responding firms were using centralized process to identify and protect HIPAA protected health information.
-Half were planning to upgrade their conflicts software in next 12 18 months in response to those continuing challenges.
-Major concerns of the respondents were conflicts and information security.
-About half reported client audits of the law firm’s security and risk procedures.
-Law firms seemed to have more stringent process for new business than for new matters from existing clients.
-More than half had an organized central arrangement to check conflicts.

Contact: for detailed results.

My purpose in this month’s column is to get more lawyers interested in their own protection against risk in their very own practice.  It is a variation of the biblical proverb: “Physician heal thyself.” When you have the opportunity to control the predictable and likely, you should do so. Treat the time spent with your own loss prevention as productive time, worthy of investment to prevent claims. Admittedly it is hard to measure success in this area, but if you avoid one claim or one deductible, you have actually made money.  Whether you chose a central group, or one person, start this year with a plan to manage your legal risk.

This blog was originally posted on February 3 on Lawyering for Lawyers blog. Click here to read the original entry. 

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Anyone involved in defense of multidistrict litigation (“MDL”) should read the Supreme Court’s January 21, 2015 decision in Gelboim v. Bank of America Corp., No. 13-1174.  The Court held that the 30-day clock for appealing a final decision dismissing an individual action from an MDL begins to run when the judgment or order of dismissal is entered in that individual action.  Writing for a unanimous Court, Justice Ginsberg explained that “[c]ases consolidated for MDL pretrial proceedings ordinarily retain their separate identities, so an order disposing of one of the discrete cases in its entirety should qualify under [28 U.S.C.] § 1291 as an appealable final decision.”  Slip op. at 6-7.  Since the Court has indicated that filing a timely notice of appeal in accordance with Federal Rule of Appellate Procedure 4 is “jurisdictional,” id. at 8, a plaintiff whose suit is dismissed from an MDL and fails to appeal within the 30-day period established by Rule 4 (unless the time to appeal is extended or reopened by the district court) would lose the right to appeal.      

The Complaint in the Gelboim suit asserted a single claim, which was for a federal antitrust violation.  Gelboim was one of about 60 cases alleging that certain banks had violated antitrust laws.  The suits were transferred under 28 U.S.C. § 1407 (“Multidistrict litigation”) to the U.S. District Court for the Southern District of New York for coordinated or consolidated pretrial proceedings.  Unlike Gelboim, the Complaints in the other cases asserted differently based types of federal and state claims in addition to a federal antitrust claim.  See id. at 5.  The district court subsequently dismissed the Gelboim suit on the ground that the plaintiffs had suffered no antitrust injury. The Gelboim plaintiffs appealed to the Second Circuit, which dismissed their appeal on the theory that no appeal from an MDL can be filed unless and until there is an order disposing of  “‘all claims in the consolidated action.’”  Ibid. (emphasis added). 

The Supreme Court rejected that view.  It explained that “Section 1407 refers to individual ‘actions’ which may be transferred to a single district court, not to any monolithic multidistrict ‘action’ created by transfer.”  Id.  at 7.  The Court indicated that the “view that in a § 1407 consolidation, no appeal of right accrues until the consolidation ends would leave plaintiffs like Gelboim . . . in a quandary about the proper timing of their appeals.”  Id. at 8.   Instead, “[t]he sensible solution to the appeal-clock trigger” issue is to commence the 30-day period for filing a notice of appeal when an individual case in an MDL is dismissed in its entirety.  Id. at 9. According to the Court, this conclusion is “evident” since “[w]hen pretrial consolidation concludes, there may be no occasion for the entry of any judgment” in the remaining cases.  Id. at 8, 9.  As a result, “plaintiffs whose actions have been dismissed with prejudice” cannot await “termination of pretrial proceedings in all consolidated cases” to appeal.  Id. at 8.  

The Court also indicated that the Rule 4 period for filing a notice of appeal begins to run when a district court managing an MDL enters final judgment under Federal Rule of Civil Procedure 54(b) as to certain claims in a multi-claim suit.  Id. at 9-10.  Rule 54(b) is “aimed to augment, not diminish, appeal opportunity.” Id. at 3.

In light of the Supreme Court’s lucid holding in Gelboim, MDL plaintiffs whose suits are dismissed no longer can claim uncertainty about when to appeal.      


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Selma – The Screenwriter’s Dilemma

Posted on February 3, 2015 03:30 by Seth F. Kirby

The movie Selma, which chronicles Dr. Martin Luther King Jr.’s 1965 voting rights campaign, has received critical acclaim and an Oscar nomination for best picture.  It has also generated controversy due to the Academy’s failure to nominate its lead actor and director for awards, which in the eyes of some is indicative of racial bias in Hollywood. Interestingly, another potential controversy hidden within the film has apparently been avoided through the careful consideration of the film’s director and screen writer.  Their actions will certainly receive the thanks of the film’s insurers, but historical accuracy has been sacrificed to avoid copyright claims.

Dr. King’s speeches are protected by copyrights held by his estate.  In 2009, the estate licensed the speeches and the rights to his life story to Stephen Spielberg’s DreamWorks production company for use in a picture to be produced by Mr. Spielberg.  Due, in part to this licensing agreement, and in part to a reluctance to seek permission from the King family for right to use the speeches, Selma’s director sought to find a way around the problem.  The solution was simply to rewrite Dr. King’s speeches in an attempt to avoid copyright infringement.  By way of example, in the film Dr. King speaks at a funeral and asks “who murdered Jimmie Lee Jackson?” His actual question was “who killed him?” Separately, Dr. King’s impassioned plea to “give us the ballot” was changed to “give us the vote.”  I am pretty sure that such minor alterations would not have saved me from a charge of plagiarism in my high school English class, but it is presently viewed as a sufficient change to avoid the ire of the King family.

Assuming that the film production maintained some form of liability insurance, which is almost guaranteed, it may afford the film protection from claims of copyright infringement.  While film production liability policies are somewhat unique, standard commercial general liability polices provide coverage for copyright infringement claims under “Coverage Part B,” which provides coverage for certain alleged “Personal and Advertising Injuries.” Under such policies, coverage is provided for negligent infringement of a copyright, but excluded for knowing/intentional violations. The workaround used in Selma presents a coverage dilemma.  The screenwriter was aware of the copyright and the potential that that the film would infringe on the protection yet he attempted to avoid a violation and may have subjectively believed that his alterations were enough to avoid a claim. Is his objective belief enough to avoid the application of the policy exclusion, or would coverage be voided if the words used violate the copyright?

Hopefully, the film will avoid generating any claims associated with Dr. King’s copyrights and no one will be forced to wrestle with this coverage question or related defenses of fair use.  It is a shame that Dr. King’s actual words were not used in the movie.  In an age when our knowledge of history is reduced to what we see on film, Dr. King’s oratory has been purposefully altered, thereby shaping our memory and potentially diminishing the power of his words.  I hope that Mr. Spielberg has better success in historical accuracy in his project. “I possess a desire” just doesn’t have the same impact.

This blog was originally posted on January 30 on Freeman Mathis & Gary, LLP, Law Blogline. Click here to read the original entry. 

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Alleged “patent troll” strikes out for second time in its efforts to have the Vermont Attorney General’s “unfair patent enforcement” lawsuit adjudicated in federal court.

In May 2013 the State of Vermont sued MPHJ Technology Investments, LLC for alleged consumer fraud arising from its numerous “cease and desist” letters sent to Vermont business and non-profit entities, claiming patent infringement and demanding licensing fees.  Since then, the parties have been disputing which court system the case should be heard in.  The Vermont federal court has, once again, “remanded” the case against MPHJ back to Vermont state court.

Vermont initially sued MPHJ in state court.  MPHJ “removed” the case to federal court, arguing that the case was about patent law and therefore belonged in federal court.  The federal court “remanded” the case back to state court, agreeing with the State that the case was not about MPHJ’s patents or about patent law, but only about the legality of MPHJ’s campaign of sending cease and desist letters into Vermont.

In its most recent attempt to obtain federal jurisdiction, MPHJ argued that, after the State filed its original Complaint against MPHJ, Vermont passed its “Bad Faith Assertions of Patent Infringement” law (i.e., the “anti patent troll” law) and that the interim enactment of this law gave MPHJ new grounds for federal court jurisdiction.  In response, the State and the federal court disagreed, pointing out that the State never attempted to incorporate that new law into its Complaint in this case.

Indeed, it is not clear that there would be federal jurisdiction even if the State had incorporated the new anti-troll law into its Complaint.  The Jan. 12, 2015 order from federal judge William Sessions concludes that this lawsuit is a matter for state (and not federal) court because the State’s case is not about the validity of MPHJ’s patents (which would give rise to federal court jurisdiction), but, instead, only about the legality of MPHJ’s activities in seeking to get Vermont businesses and non-profits to pay it licensing fees under Vermont consumer protection laws.  As it did the first time (and lost), MPHJ might attempt to appeal this most recent order to the federal appeals court.

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