In a unanimous decision, the Supreme Court affirmed both the lower court and Federal Circuit decisions rejecting Bowman’s patent exhaustion defense relating to his harvesting of second generation soybean seeds featuring Monsanto’s patented genetic trait.

Monsanto invented and patented a genetic alteration that allows soybean seeds to survive exposure to a certain herbicide.  Monsanto sold its patented seeds to farmers, subject to a licensing agreement that only allows farmers to plant the seed for a single growing season.  Thereafter, farmers have to purchase the patented seeds anew each year for planting.  While farmers may sell the crop for consumption or processing, they are not allowed to save any of the harvested soybeans for replanting.

Bowman, a farmer, purchased seeds from an authorized Monsanto affiliate, subject to the aforementioned license for his primary soybean crop.  However, in order to save money on a later season crop, Bowman purchased soybeans intended for consumption or processing from a grain elevator and replanted them, in the hopes that some contained the genetic trait of Monsanto’s patented seeds.  After spraying the late season crop with the herbicide, some of the seeds survived, confirming Bowman’s suspicions.  Bowman then harvested this second crop and replanted the resulting seeds with Monsanto’s patented genetic trait for eight subsequent late season plantings.  Monsanto sued Bowman for patent infringement.

Bowman raised the defense of patent exhaustion, arguing that the prior authorized sale of the soybeans from a farmer to the grain elevator exhausted Monsanto’s patent rights to control what Bowman did with the soybeans and their seeds thereafter.  The Federal Circuit, however, rejected this argument, holding that he had “created a newly infringing article” by replanting the progeny of Monsanto’s genetically altered seeds. 

On appeal, the Supreme Court affirmed, holding that “the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission.”  The Court confirmed its prior holding in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 625 (2008) that under the doctrine, “the initial authorized sale of a patented item terminates all patent rights to that item,” and reiterated that “the exhaustion doctrine is limited to the ‘particular item’ sold.” 

The Court also rejected Bowman’s arguments that he was only doing what farmers have done with seeds for years and that the soybeans’ natural ability to self-replicate or “sprout,” like any other seed, is what “made” the additional soybean replicas – not Bowman.  The Court held that Bowman’s actions in planting the seeds, spraying them with herbicide, and thereafter repeatedly harvesting them exerted control of the reproduction, constituting infringement.

Finally, the Court noted that its decision in this case is limited to the facts at hand, leaving open any further questions regarding the applicability of patent exhaustion to other self-replicating technologies. 


With the recent uncertainty over Section 101 patent eligibility requirements, one might ponder the interplay between Section 101 and self-replicating technologies. This is especially true considering last Friday’s, evenly-split Federal Circuit decision affirming that certain system, method, and media claims directed to computer software for minimizing risk in financial trades were patent ineligible (see CLS Bank International v. Alice Corporation Pty. Ltd., 2011-1301 (Fed. Cir., May 10, 2013).  But at the risk of causing even more tension over the issue, consider whether the progeny of Monsanto’s seeds should be susceptible to a Section 101 challenge. 

Specifically, should the “natural law” exception to patent eligible subject matter apply to any progeny seed carrying Monsanto’s genetic trait?  See e.g. Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012) (holding that claims directed to a method for measuring the dosage of medication in patients fell under “natural law” and were thus patent ineligible).  In theory, Monsanto’s invention altering the genetics of the seed should be limited to just that – the alteration and subsequent first production of that very seed altered by humans.  Thereafter, the seed’s ability to self-replicate is a natural occurrence – the seed now exists in nature, forever able to replicate with all its genetic traits without further human alteration/intervention (think Bowman’s sprout argument) – a replication process that normally no one would argue is patentable.

The Court’s decision in Monsanto, however, seems to put to rest any such possibility, dismissing Bowman’s attempt to raise the issue as an unsuccessful “blame the seed” argument.  The Court further acknowledged the importance of incentivizing innovation in the field by protecting such technology.  Nevertheless, others inventing self-replicating technologies should be cognizant of the Court’s statement limiting its decision to the specific facts presented in Monsanto (though only related to the issue of exhaustion) in light of the apparent expansion of Section 101 applicability.

In the meantime, perhaps Monsanto will consider inventing seeds that do not self-replicate in such a manner (seedless grapes, anyone?). 


The Supreme Court’s recent decisions regarding intellectual property exhaustion, including Monsanto and an unrelated copyright case, shed light on the Court’s March 25, 2013 denial of a petition for certiorari requesting the Court address the extraterritorial reach of the patent exhaustion doctrine. 

In Ninestar Tech. Co. Ltd. v. ITC, 667 F.3d 1373 (Fed. Cir. 2012), cert. denied 133 S.Ct. 1656 (2013), alleged infringer Ninestar purchased used/spent Epson ink cartridges in China, refilled them with ink, and then shipped them to the U.S. for resale.  The ITC found Ninestar’s practice to be infringing upon Epson’s patents relating to the ink cartridges.

On appeal to the Federal Circuit, Ninestar asserted the defense of patent exhaustion, arguing that its purchase of the cartridges, even if overseas, exhausted Epson’s U.S. patent rights.  The Federal Circuit, however, rejected the defense, applying Federal Circuit precedent that patent exhaustion does not apply to foreign sales of patented goods.  Ninestar petitioned the high court seeking reversal and an expansion of the patent exhaustion doctrine extraterritorially. 

While awaiting a decision on Ninestar’s petition, however, the Supreme Court issued a decision explicitly expanding the doctrine of first sale/exhaustion with respect to copyrights outside U.S. boundaries in Kirtsaeng v. John Wiley & Sons, Inc., 133 S.Ct. 1351 (2013).  Kirtsaeng, a foreign student studying in the U.S., arranged for family members in Thailand to purchase English-language textbooks and ship them to him in the U.S. for resale.  The foreign printed textbooks were much cheaper, and Kirtsaeng’s sale of the books at U.S. prices resulted in profit.  The publisher of the books sued, asserting copyright infringement.

On appeal, Kirtsaeng successfully relied on the first sale doctrine, arguing that his family members’ authorized purchases of the textbooks exhausted any U.S. copyright restriction on their resale, use, and other enjoyment of the books.  Agreeing with Kirtsaeng, the Supreme Court explicitly held that neither Congress nor the common law expressed any intent that the first sale doctrine should not apply to foreign sales of copyrighted works.

Based on Kirtsaeng, many believed the Supreme Court might grant Ninestar’s petition to address the similar issue of whether patent exhaustion applies to sales or purchases made outside the U.S., or that the Court might at least remand the case in light of Kirstaeng.  But a mere six days after the release of its decision in Kirtsaeng, the Supreme Court denied Ninestar’s petition outright.

Comparing the facts in Ninestar to Monsanto and Kirtsaeng, however, perhaps the Court was hinting that patent exhaustion was not the correct issue presented.  Specifically, Ninestar’s purchase of the spent Epson cartridges and subsequent refilling of those cartridges before resale likely removed the products from any protection under the patent exhaustion or first sale doctrines.  The refurbished cartridges were thus no longer the “particular item” (see above discussion) sold by Epson and initially purchased by Ninestar.  In effect, Ninestar’s practice created a new instance of infringement, just like Bowman’s harvesting and reproduction of seeds constituted new infringement, or unauthorized copying of Monsanto’s patented seeds.  In contrast, Kirtsaeng’s U.S. sales were mere resale of the same “particular items” initially purchased – Kirtsaeng did not run to Kinko’s/Fed Ex, so to speak, and make numerous unauthorized copies of the textbooks to sell.

Accordingly, though the issue of whether patent exhaustion reaches beyond the boundaries of the U.S. still lingers, what appears to be clear is that exhaustion will not save one from infringement liability where the accused instrumentality is not the “particular item” initially purchased. 


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No good deed goes unpunished when it comes to the United States Environmental Protection Agency’s (“U.S. EPA”) efforts to regulate climate change.  Rather, U.S. EPA’s authority to regulate climate change (e.g. greenhouse gas emissions or “GHGs”) is currently being challenged by some States, while other States are simultaneously threatening to sue U.S. EPA for failing to act to address climate change.

Since the United States Supreme Court’s decision in Massachusetts v. EPA, 127 S. Ct. 1438 (2007) holding that U.S. EPA could regulate GHG emissions under the Clean Air Act, various States and industrial groups have challenged U.S. EPA’s subsequent attempts to regulate GHGs.  Most recently, on April 19, 2013, the Attorney General of Texas supported by 11 other state attorney generals, filed a petition for writ of certiorari to the United States Supreme Court claiming that U.S. EPA overreached its authority by regulating GHGs, and requested that the Court overrule its decision in Massachusetts v. EPA on the basis of the “absurd” and detrimental economic consequences of regulating GHGs under the Clean Air Act.

Ironically, on April 17, 2013, 10 different states, the District of Columbia and the City of New York jointly sent U.S. EPA a Clean Air Act Notice of Intent to Sue for U.S. EPA’s failure to promulgate rules on new power plant emissions by the regulatory deadline (the “Notice”).  Under the Clean Air Act, U.S. EPA was required to finalize the New Source Performance Standards for fossil fuel power plants and petroleum refineries by April 13, 2013.  These are contentious standards that have been the subject of millions of public comments, as they effectively bar the construction of new coal fired power plants without prohibitively expensive control technologies.  The States’ intention in filing the Notice is to force U.S. EPA to issue/finalize these rules through court order, or through an agreement with U.S. EPA.

Thus, U.S. EPA now finds itself fighting a two fronted war both trying to defend its action and inaction at the same time.  Given these conflicting positions, U.S. EPA would be justified in feeling that it just can’t win when it comes to climate change, and it appears that the more aggressive states may be the ones that start to drive change in this arena.

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Recently, the U.S. District Court for the Western District of Louisiana issued the Benoit v. Neustrom opinion. 2013 U.S. Dist. LEXIS 55971 (decided April 17, 2013). Here, the parties sought approval that CMS' future interest could be fully satisfied by funding an MSA for less than full value of the Claimant's future medicals. The parties agreed to resolve a liability claim for a gross amount of $100,000. Defendant had an MSA allocation prepared, which concluded that the Claimant would be expected to incur between $277,758.62 to $333,267.02 in future injury-related care otherwise covered by Medicare. Additionally, Medicare had made conditional payments on the Claimant’s behalf totaling $2,777.88. 

The Court, having previous experience addressing MSA related questions, looked to the 11th Circuit decision in Bradley v. Sebelius for guidance. 621 F.3d 1330 (11th Cir. 2010).  Bradley was an allocation case under the MSP with respect to conditional payments, holding that CMS must respect a judicial allocation based on the merits of the case. Applying the logic that CMS’ recovery can be fully satisfied by identifying that portion of an award which is intended to compensate a Claimant for medical expenses (past and future), the Court agreed with the parties in that an MSA did not need to be fully funded to satisfy Medicare’s interest.  It did, however, disagree with respect to the dollar amount of the MSA. 

Instead of following a strict pro rata approach advocated by the Claimant, the Court instead calculated a ratio of the net settlement proceeds (after costs of procurement and conditional payments by CMS had been subtracted from the gross award of $100,000) against the mean MSA figure. That ratio of 18.2% was then applied to the net proceeds, leading the Court to conclude that an MSA totaling $10,138 would be an appropriate amount with which to satisfy Medicare’s future interest.

This case is yet another example in 2013 (building on recent cases such as Early and Sterrett) depicting that MSA issues cannot be ignored simply because the claim being resolved is a liability claim instead of a workers’ compensation claim.  While the issue must be addressed, the opinions also display that a more sophisticated methodology must be applied which takes into account the inherent differences between liability and workers’ compensation claims.  As such, MSAs in the liability context should rarely be funded for the full value of a claimant’s overall future costs of care otherwise covered by Medicare (as the claimant did not recovery 100 cents on the dollar for such damages).  In applying the allocation logic previously utilized in Bradley for conditional payments, the Court has provided a reasonable and logical path for parties to follow in the short term, with CMS anticipated to provide guidance in 2013 in the form of a Notice of Proposed Rulemaking.  

The DRI MSP Task Force will continue to follow these developments and provide you with practical means for incorporating this guidance into your practice.
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The U.S. Supreme Court decided in Genesis Healthcare Corp. v. Symczyk, 569 U.S. ___ (2013), that a sufficient Rule 68 Offer of Judgment issued to a lone plaintiff in an FLSA collective action prior conditional class certification and joinder of opt-in plaintiffs moots the entire claim – even if the plaintiff rejects the Offer.  The 5-4 opinion overruled the Third Circuit Court of Appeal, which held that such a mechanism frustrated the purpose of the FLSA’s collective action provision by allowing a defendant to “pick off” the named plaintiff prior to the conditional certification stage.

Procedural History

The underlying case involved a nurse suing for overtime violations under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq., when her employer automatically deducted 30 minutes from her work day for a mandatory meal period even when she worked through it.  Symczyk sued on behalf of herself and all those similarly situated. Concurrently with its answer, Genesis served a Rule 68 offer of judgment for $7,500 plus reasonable attorney’s fees, costs and expenses to be determined by the Court, an amount which fully satisfied Symczyk’s damages and included a reasonable attorney’s fee.  Plaintiff did not accept the offer during the prescribed 10-day time period, and a motion to dismiss the case for lack of subject matter jurisdiction followed.  The District Court granted the motion, holding that the employer’s offer of judgment fully satisfied plaintiff’s individual claim and thus mooted the lawsuit because no other class members had opted in. 
On appeal, the Third Circuit reversed.  Symczyk v. Genesis Healthcare Corp., 656 F. 3d 189 (3d Cir. 2011).  The appellate court agreed that plaintiff’s individual claim was moot, but not the collective action.  The Third Circuit held that calculated attempts to pick off named plaintiffs with Rule 68 offers of judgment before conditional certification could short circuit the process and thereby frustrate the goals of collective actions.  The case was remanded to permit Symczyk to seek conditional class certification, which would relate back to the date of filing of the Complaint for statute of limitations purposes.  

Supreme Court Opinion

The U.S. Supreme Court reversed.  Justice Clarence Thomas, writing for the majority, held that straightforward “case or controversy” principles governed the Court’s decision.  Justice Thomas first addressed plaintiff’s argument that her individual claim was not moot because she did not accept the offer of judgment.  The majority held that plaintiff’s argument was not properly before the Court, as the Third Circuit affirmed the trial court on this point and no cross-petition to the Supreme Court was filed.  Accordingly, the only issue before the Court was whether the collective action survived in light of the lack of any remaining plaintiffs.  Distinguishing several decisions based on Federal Rule 23 class actions, the Court held that no individuals other than plaintiff had a stake in the litigation at the time of the offer of judgment.  The majority similarly rejected arguments relating to the purpose of the FLSA’s collective action provision.

Speaking for the minority, Justice Elena Kagan wrote a sarcastic but effective opinion, stepping through the door left open by the majority’s refusal to address the question of whether plaintiff’s refusal to accept the offer of judgment mooted her claim.  The dissent questioned how an unaccepted offer of judgment could be deemed a satisfied claim, especially since the plaintiff took nothing in the action. 

The key question following Symczyk is its scope.  Specifically, will it be read to apply only where the employee fails to argue that their individual claim is not moot?  In a footnote, Justice Thomas noted four appellate opinions that either declared the individual claims moot in similar circumstances or authorized lower courts to enter judgment for the plaintiff where an offer of judgment provided complete relief.  See Weiss v. Regal Collections, 385 F. 3d 337, 340 (3d Cir. 2004); Griese v. Household Bank (Ill.), N.A., 176 F. 3d 1012, 1015 (7th Cir. 1999); O’Brien v. Ed Donnelly Enters., Inc., 575 F. 3d 567, 575 (6th Cir. 2009); McCauley v. Trans Union, LLC, 402 F. 3d 340, 342 (2d Cir. 2005).  Symczyk’s impact in these circuits is significant.  In other circuits, the impact will largely depend on how each circuit resolves the mootness argument.  

If other circuits join the position that a sufficient offer of judgment moots an individual claim, Symczyk provides a strategic pawn in putative FLSA collective actions previously rejected by multiple courts.  Employers immediately could pick off the named plaintiff and thwart the collective action process, forcing the plaintiff’s attorney either to 1) accept an attorney’s fee on a single claim and move on; 2) attempt to locate a new named plaintiff to file a new suit against the employer; or 3) make a broader strategical adjustment, such as to file suit exclusively under state wage and hour laws which typically mirror the FLSA, and utilize state law class action procedures. 
Advising the Client

Employment attorneys should be cautious in advising their corporate clients about Symcyzk’s impact.  The majority’s failure to address whether Symcyzk’s individual claim was moot leaves lower courts free to address the individual mootness issue on pre-Symcyzk precedent.  Even if a motion to dismiss is successful, a fellow employee’s claim may follow close behind.   Still, there appears to be little downside serving a Rule 68 Offer of Judgment.  Of course, clients should be advised that if the offer is accepted, a judgment will be entered against it. 
Spencer Silverglate is the Managing Partner and co-founder of Clarke Silverglate, P.A., in Miami, Florida, with an active trial practice specializing in employment and commercial litigation.  Craig Salner is a Partner at Clarke Silverglate, also specializing in employment and commercial litigation.
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On April 16, 2013, the U.S. Supreme Court issued its decision in US Airways, Inc. v. McCutchen (No. 11–1285), deciding the issue of whether equitable defenses, such as the principle of unjust enrichment, can override the reimbursement provision of a health benefits plan established under the Employee Retirement Income Security Act (ERISA). Specifically at issue in the case was §502(a)(3) of ERISA, which authorizes health-plan fiduciaries to bring a civil action to obtain appropriate equitable relief to enforce the terms of a plan. The Court held that such equitable defenses cannot override the clear terms of a plan.

The case arose from a dispute over a health benefit plan provision that required participants to reimburse the plan for medical expenses where the expenses were incurred as a result of the fault of a third party and the participant was able to obtain a recovery from the third party. After a participant in the health plan suffered injuries in a car accident, the plan paid medical expenses in the amount of $66,866. The participant then sued the driver and recovered $110,000 ($40,000 of which went to attorney’s fees). The employer, as a fiduciary of the health plan, then sued the participant under §502(a)(3) seeking reimbursement. In response, the employee asserted various equitable defenses to reduce the plan’s recovery, including unjust enrichment, and also argued that the plan was required to share in the attorney’s fees and costs incurred in obtaining the tort recovery.

The case eventually reached the Third Circuit Court of Appeals, which ruled that in a §502(a)(3) suit and regardless of the terms of an ERISA plan, a court must apply any “equitable doctrines and defenses” that traditionally limited the relief requested. The Third Circuit held that “the principle of unjust enrichment,” for example, overrides a plan’s reimbursement clause if and when they come into conflict. The court also held that the plan was required to share in the participant’s attorney’s fees and costs under the common fund doctrine.

The U.S. Supreme Court held that equitable defenses cannot override the clear terms of an ERISA plan. According to the Court, attempting to enforce the employer’s plan— “the modern-day equivalent of an ‘equitable lien by agreement’”—“means holding the parties to their mutual promises” and “declining to apply rules…at odds with the parties’ expressed commitments.” Because the health plan effectively disclaimed the application of unjust enrichment or other equitable defenses, the Court ruled that the participant could not rely on equitable defenses to defeat “the plan’s clear terms” and thereby reduce the plan’s recovery. However, the Court went on to find that the health plan was silent on the issue of whether it was obligated to share in the attorney’s fees and costs incurred in obtaining the tort recovery. As a result of this silence, the Court held that the common fund doctrine would provide the default rule, requiring the plan to reduce its reimbursement recovery by a pro rata share of the fees and costs incurred in the tort action. 

The McCutchen decision reinforces the importance of ERISA plan documents and the fact that plan terms override otherwise applicable equitable principles. It provides important guidance not only for those who litigate these types of cases, but also for those who draft the plans in the first place.
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Wednesday's United States Supreme Court opinion in Kiobel v. Royal Dutch Petroleum Co. et al., 569 U.S. ___ (2013), has confirmed that the Alien Tort Statute (ATS) has a limited scope and cannot open the doors of United States courts to lawsuits based on ordinary torts committed by companies outside the territorial confines of the United States.  Although the Court did not meaningfully address the issue of corporate liability, its narrow holding all but guarantees that ATS will not become an issue in lawsuits against corporate clients in products cases.

At first blush, Kiobel does not appear to be the type of case that would interest product liability lawyers.  It involved Nigerian nationals who had obtained asylum in the United States suing foreign corporations that has allegedly aided and abetted the government of Nigeria in committing abuses against its citizens including, among others, extrajudicial killings, crimes against humanity, and torture.  It goes without saying that "crimes against humanity" are topics that are generally outside the pale of the average civil defense attorney's resume.
Representing clients in a global marketplace, however, often necessarily means representing clients who have potential exposure to liability abroad.  Although your client may not be accused of crimes against humanity, the prospect of a German client with an American office being sued in America for building a product in Guatemala that injured someone in Japan is still daunting.  Because ATS has a somewhat broad purpose:  to permit federal courts to recognize "certain causes of action based on sufficiently definite norms of international law,"  569 U.S. ___ (2013), it is conceivable that a clever plaintiffs' attorney would argue that principles of negligence or product liability were "sufficiently definite norms" of international law to warrant jurisdiction.

Whether that argument would be successful is doubtful.  But the Second Circuit, whose opinion the Supreme Court reviewed, had a simple, comforting answer for corporate clients:  ATS does not apply to corporations.  The hypothetical Japanese plaintiff simply could not sue a corporate defendant in America to recover for her injuries.  There would be no need to litigate if the lawsuit involved "sufficiently definite norms of international law." 

Wednesday, the Supreme Court skirted the issue of corporate liability, but announced a rule that should provide a similar degree of certainty to corporate clients.  Its decision did not turn on the corporate status of the defendant, but whether ATS applies extraterritorially.  The Court concluded that it does not. 

Writing for the majority, Chief Justice Roberts concluded that ATS was not intended to bring into the United States Courts claims involving torts committed against foreign subjects outside the territorial confines of the United States.  The majority noted that, historically, ATS had been used only rarely since its 18th century enactment, and historically used only to address claims that a person had violated the law of nations:  violating safe conduct, infringing on the rights of ambassadors, and piracy.  Therefore, it held that to warrant jurisdiction under ATS, a plaintiff's claim must "touch and concern the territory of the United States . . . with sufficient force to displace the presumption against extraterritorial application." 

No justice dissented from the majority opinion, and even the most critical concurrence—by Justice Breyer, joined by Justices Ginsburg, Sotomayor, and Kagan—tended to confirm that corporate clients will not, in the ordinary course of litigation, be faced with jurisdiction based on ATS.  The concurrence advocated reading ATS as permitting jurisdiction over extraterritorial torts when "the defendant's conduct substantially and adversely affects an important American national interest," emphasizing the importance of the United States not becoming a safe harbor for "a torturer or other common enemy of mankind."

In short, although the "easy" ATS answer is now gone, the average corporate client has little to fear from ATS.  Negligence and products liability—while serious allegations—are hardly the stuff from which allegations of being a "common enemy of mankind" are made.     

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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Class Action Deemed to Be Improperly Certified by Lower Courts

CHICAGO – (March 27, 2013) The Supreme Court this morning reversed the judgment of the Third Circuit Court of Appeals in the case of Comcast v. Behrend, an opinion in alignment with the position of DRI – Voice of the Defense Bar in its amicus brief filed in August of last year. The majority held that the class action in Comcast v. Behrend was improperly certified under Rule 23(b)(3). 

In this case, subscribers sued Comcast Corp. and various Comcast subsidiaries, alleging that Comcast monopolized Philadelphia’s cable market and excluded competition in violation of federal antitrust laws. To constitute a class, plaintiffs proffered an expert damages model that purported to prove each class member’s damages by evidence common to all. Comcast responded that the plaintiffs’ model was incapable of calculating damages for the class because it was based on several erroneous assumptions about the asserted claims, and indeed that common proof of damages is impossible given significant differences among the class members. The district court nonetheless certified the class.

Comcast sought review in the Third Circuit Court of Appeals, which affirmed the certification order after expressly declining to consider Comcast’s contentions. While the Third Circuit acknowledged that, “[t]o satisfy . . . the predominance requirement, Plaintiffs must establish that the alleged damages are capable of measurement on a class-wide basis using common proof,” it nonetheless insisted that “[w]e have not reached the stage of determining on the merits whether the methodology [offered by Plaintiffs] is a just and reasonable inference or speculative.” The court concluded that Comcast’s “attacks on the merits of the methodology” have “no place in the class certification inquiry.” 

In his dissent, Judge Jordan stated in part, “not only have Plaintiffs failed to show that damages can be proven using evidence common to the class, they have failed to show . . . that damages can be proven using any evidence whatsoever—common or otherwise.” 

The Supreme Court held that the Third Circuit erred in refusing to decide whether the plaintiff class’s proposed damages model could show damages on a class-wide basis. Under proper standards, the model was inadequate and the class should not have been certified. The vote was 5–4 with Justices Breyer, Ginsburg, Sotomayor and Kagan dissenting.

Citing the Federal Judicial Center’s Reference Manual on Scientific Evidence, the majority held that “’The first step in a damages study is the translation of the legal theory of the harmful event into an analysis of the economic impact of that event.’ The District Court and the Court of Appeals ignored that first step entirely.”

The Third Circuit’s approach to class certification would have allowed plaintiffs to obtain certification without showing a reasonable likelihood that they will be able to prove their class-wide claims (predominately) by common evidence. This would have significantly lowered class plaintiffs’ burden under Rule 23 and resulted in the certification of many more non-meritorious class actions.
Brief author Jonathan F. Cohn of Sidley Austin LLP, Washington DC, is available for interview or for expert comment through DRI’s Communications Office.
For the full text of the brief, click here.

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On March 20 the U.S. Supreme Court held that the anti-lien provision of the federal Medicaid Act preempts a state’s right to take any portion of a Medicaid beneficiary’s tort judgment or settlement not designated as payment for medical care.  The Court’s ruling in Wos v. E.M.A., effectively blocks North Carolina’s efforts to recover up to one-third of any damages a Medicaid beneficiary recovers from a third party, as reimbursement for the state’s Medicaid coverage of the beneficiary’s medical treatment. Wos v. E.M.A., U.S. Supreme Court No. 12-98, issued March 20, 2013 (Slip Opinion).

The case involves a child — E.M.A. — who was born with serious birth defects which will prevent her from being able to work or live independently.  North Carolina’s Medicaid program funds part of E.M.A.’s medical care. E.M.A.’s parents settled a medical malpractice lawsuit related to her birth for $2.8 million dollars, even though expert witnesses estimated that total damages in the case exceeded $42 million dollars.  The amount of the final settlement was determined in part by the treating physician and hospital’s insurance policy limits.

Notably, the settlement agreement itself did not specify whether portions of the $2.8 million proceeds were allocated for medical or non-medical damages. The trial court approved the settlement, but placed one-third of the recovery into escrow pending a determination of how much E.M.A.’s parents were required to reimburse North Carolina’s Medicaid program for the cost of her treatment, under state law. The state had informed E.M.A.’s parents that it had spent $1.9 million on E.M.A.’s medical care, and that it would seek to recover that amount, up to one-third of the total recovery of any settlement or judgment of the malpractice claim, in accordance with state law.

E.M.A. and her parents then brought suit in federal court, claiming that the state’s law pertaining to its reimbursement rights violated the federal Medicaid statute.
In today’s decision, the Supreme Court ruled that North Carolina’s law is preempted to the extent that it permits the state to “take a portion of a Medicaid beneficiary’s tort judgment or settlement not designated for medical care.”  Wos at 2. The Court held that North Carolina’s law directly conflicts with the federal statute and “must give way.” Id.

The Court’s opinion states that North Carolina’s law was preempted because the state law lacks any limiting principle, and provides no mechanism for determining whether its allocation of up to one-third of the total recovery is reasonable. Id.

Justice Kennedy delivered the Court’s opinion.

Stay tuned for more detailed updates on how this decision affects the interplay between the federal Medicaid statute and state Medicaid programs.

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Our Role as Lawyers in the Aftermath

Posted on December 19, 2012 03:37 by Stacy Moon

As parents, or friends of parents, the last weekend has been exceptionally difficult.  Friends have debated whether to tell their children what happened in Newtown, Connecticut, and, if so, how to explain what happened.  Many of us likely have friends calling for greater gun control, and others calling for greater access to guns for protection, all referencing the Second Amendment.  I, personally, have a difficult time with both sides of the issue.   On the one hand, I do not understand why a civilian needs an automatic or assault weapon.  On the other hand, the founding fathers put the right to bear arms in the Second Amendment, even before protecting the right against unreasonable search and seizure.  And the answer to my question can be answered by the question, "Why do you have to be able to say something offensive?" Some reenacting weapons are considered assault rifles because they have sniper scopes too. I know any number of responsible and irresponsible gun owners who take weapons into entirely inappropriate circumstances, but legally. Then again, it took three seconds to reload a rifle in 1787, when the constitution was written.  The issue of original intent versus modern circumstances is one that occurs in all constitutional issues, but seems to be more intense in these discussions of gun control, or not, and gun safety.  In short, the questions and issues are numberless, and a discussion covering all of them is coming.  We will be asked questions by friends because we are lawyers.  And we will not necessarily have all of the answers.

However, because we are attorneys, we will be asked our thoughts regarding the Second Amendment; gun control; gun access; gun safety; and other issues related to forceful treatment of mental health.  And we, as attorneys, will have varied opinions and varied strength of opinions.  But, the one thing we are uniquely qualified to do, by virtue of our training and professionalism, is steer the conversation to a respectful tone, with reasoned opinions.  We can ensure that all sides are heard, rationally.  We can ensure that the discussion is held without unchallenged hyperbole.  We are in possibly the best position to analyze the data that all sides will be throwing at us, to find flaws, and strengths, in the various arguments, and to present them, calmly and professionally to other people.

We, as lawyers, will not have, and should not think we have, all the answers.  But we can and should ensure that the upcoming discussions recognize the legitimacy of the various points of view and are held rationally, without rancor.
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In a major decision concerning privilege waiver, the Illinois Supreme Court, in Center Partners, LTD v. Growth Head GP, LLC, ruled that the subject matter waiver doctrine does not apply to privileged communications disclosed in an extrajudicial context.  The Court’s decision, which can be accessed here, answered a question of first impression in Illinois and will serve as influential authority when other states consider the scope of subject matter waiver.

Question at Issue
The precise question before the Court was whether, as a matter of law, the subject matter waiver doctrine applies to the disclosure of privileged information made outside of a litigation or judicial setting (an extrajudicial setting).

Illinois Supreme Court
Where a privileged communication is voluntarily disclosed, the subject matter waiver doctrine extends this waiver to all other communications pertaining to the same subject matter.  The purpose of the doctrine is to prevent a party from selectively disclosing favorable information while simultaneously withholding unfavorable information under the cloak of privilege. The question in Center Partners was whether the subject matter doctrine, and its underlying purpose, should apply in non-litigation contexts.

Facts of Case
The Center Partners case involved a complicated business transaction.  In short, three companies negotiated the purchase of Rodamco North America, N.V., including the General Partner of one of Rodamco’s holdings.  During the purchase negotiations, the purchasing entities and their lawyers exchanged privileged information concerning the legal implications of the transaction, rights and obligations of the parties to the transaction, and legal concerns and conclusions about the structure of a new partnership agreement.  A couple of years after the transaction was complete, a group of minority limited partners sued for breach of contractual and fiduciary duties, and sought all communications actually disclosed between the purchasing entities and all privileged, non-disclosed communications concerning the same subject matter.

Court’s Ruling
In an issue of first impression in Illinois, the Court ruled that the subject matter waiver doctrine does not apply where privileged communications are disclosed in an extrajudicial setting. The Court based its decision in large part on the doctrine’s underlying purpose.  The purpose is to prevent a party from using an evidentiary privilege offensively (sword) to disclose favorable information and later defensively (shield) to withhold unfavorable information pertaining to the same subject matter.

The Court reasoned that, outside the litigation context, parties generally do not decide to disclose privileged information for sword and shield purposes.  In many non-litigation settings, such as business transactions, parties disclose privileged information before litigation is initiated or even contemplated.  And expanding the subject matter waiver doctrine to non-litigation contexts would produce a perverse result: parties may “leave attorneys out of commercial negotiations for fear that their inclusion would later force wholesale disclosure of confidential information.” Consequently, the Court found that the purpose of the subject matter waiver doctrine is simply not served by expanding it to non-litigation contexts.

The Court placed one limitation on its ruling.  It stated that, if a disclosure is made during a business negotiation to gain a later tactical advantage in anticipated litigation, then the subject matter waiver doctrine would still apply if such a disclosure is later used by the disclosing party at any point during the litigation to gain a tactical advantage.

PoP Analysis
Most states have not addressed the issue whether the subject matter waiver doctrine applies in extrajudicial contexts, and this area of evidentiary privileges needs more development.  The Illinois Supreme Court’s decision in Center Partners is based on sound reasoning and will likely serve as persuasive authority when the issue arises in other states.  And while the decision was made in the non-litigation context of business transactions, it will likely serve as persuasive authority for disclosures made in other non-litigation contexts such as disclosures made during settlement negotiations, government investigations, regulatory compliance filings, or for public relations/media purposes.  For a more detailed analysis of these issues, see an earlier PoP post recommending an IADC article by Andrew Kopon and M.C. Sungaila.

The original post by Todd Presnell was published on December 3 and can be found here
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