The Eleventh Circuit recently determined that the consent of absent class members is not required under 28 U.S.C. § 636(c) for a federal magistrate judge to enter a final judgment in a class action.

In Day v. Persels & Associates, LLC, the named plaintiff and the defendants consented to have a magistrate judge conduct all proceedings and enter a final judgment. The parties ultimately settled and, over the objections of certain class members, the magistrate judge certified the class, approved the settlement and entered a final judgment. On appeal, the Eleventh Circuit rejected the objectors' argument that the magistrate judge lacked subject matter jurisdiction to enter a final judgment because absent class members did not consent to proceed before a magistrate judge, and concluded that only named class members must consent.

The Eleventh Circuit reconciled its holding with the US Supreme Court's decision in Standard Fire Insurance Co. v. Knowles, which held that a named plaintiff's pre-certification stipulation does not bind absent class members. Like Knowles, the Day plaintiff's pre-certification consent to proceed before a magistrate judge was not binding on the absent class members (at least, not until the class was certified and judgment was entered). The absent class members could have avoided being bound by the magistrate judge's final judgment by moving to intervene in the district court to become named parties in the suit and withholding their consent to proceed before the magistrate judge. (No. 12-11887, (11th Cir. Sept. 10, 2013).)

See Legal Update, Eleventh Circuit: Absent Class Members' Consent to Proceed Before Magistrate Not Required for more on this decision.

See Practice Note, Settling Class Actions: Process and Procedure for more on class action settlements.

The doctrine of wrongful concealment may defeat a claim preclusion defense, according to a recent decision by the Sixth Circuit. In its holding, the Sixth Circuit also expressed skepticism about whether a plaintiff asserting wrongful concealment must plead its due diligence in uncovering the alleged fraud.

The plaintiffs in Venture Global Engineering, LLC v. Satyam Computer Services, Ltd. asserted violations of the federal Racketeer Influenced and Corrupt Organizations Act (RICO) and various common law fraud claims. The district court dismissed the action on claim preclusion grounds, concluding that the plaintiffs should have raised their arguments in an earlier 2005 arbitration between the parties. The district court found that the wrongful concealment exception to claim preclusion was not applicable because the plaintiffs failed to plausibly allege due diligence in attempting to discover the defendant's fraud.

The Sixth Circuit reversed, holding that the plaintiffs adequately pled the existence of wrongful concealment, namely that:

The Sixth Circuit did not rule on the issue of whether the plaintiffs also needed to separately allege due diligence in attempting to discover the fraud because the plaintiffs' allegations plausibly suggested that a reasonable person in their position would not have suspected the defendant's systemic fraud, given the defendant's intricate cover-up efforts to hide its scheme. Accordingly, the plaintiffs were reasonable in not suspecting the fraud and had no duty to inquire into the fraud before discovering it. (No. 12-2200, (6th Cir. Sept. 13, 2013).)

See Legal Update, Sixth Circuit: Wrongful Concealment Defeats Claim Preclusion Defense for more on this decision.

A motion for coordination in state court may not be sufficient for federal jurisdiction under the Class Action Fairness Act (CAFA) unless the motion explicitly requests a joint trial. In a case of first impression, the Ninth Circuit recently held that removal was improper because the plaintiffs' petition for coordination under California Code of Civil Procedure Section 404 did not constitute a proposal to be tried jointly under CAFA.

In Romo v. Teva Pharmaceuticals USA, Inc., the Ninth Circuit affirmed the district court's decision, which held that there was no federal jurisdiction under CAFA, and remanded the case to state court. Noting that removal statutes are strictly construed against removal and that a proposal to try claims jointly must come from the plaintiffs, the Ninth Circuit concluded that, based on the totality of the circumstances, CAFA's jurisdictional requirements were not met. The memorandum in support of the plaintiffs' petition for coordination clearly focused on pre-trial matters and, accordingly, "stopped far short of proposing a joint trial."

The Ninth Circuit distinguished the Seventh Circuit's opinion in In re Abbott Laboratories, Inc. on the grounds that Abbott involved a different procedure, consolidation, and that the Abbott plaintiffs explicitly requested consolidation of the cases through trial and not solely for pre-trial proceedings. (No. 13-56310, (9th Cir. Sept. 24, 2013).)

See Legal Update, Ninth Circuit: No CAFA Removal Where Plaintiffs' Petition for Coordination Did Not Explicitly Request Joint Trial for more on this decision.

See Practice Notes, Removal: Overview and Class Action Fairness Act of 2005 (CAFA): Overview for more on the removal process and CAFA's jurisdictional requirements.

In a case of first impression, the Sixth Circuit held that a district court's order dismissing all of the claims raised by some of the plaintiffs in a consolidated complaint filed after a multidistrict transfer was not a final order because it left claims by other plaintiffs intact, and therefore was not immediately appealable.

Accordingly, the Sixth Circuit agreed with the district court's denial of those plaintiffs' requests to enter a final judgment under Federal Rule of Civil Procedure (FRCP) 54(b) or certify an interlocutory appeal under 28 U.S.C. § 1292.

In In re Refrigerant Compressors Antitrust Litigation, the Sixth Circuit rejected the plaintiffs' argument that the consolidated complaint was merely an administrative document with no legal force. It emphasized that its holding was based on the plaintiffs' decision to file a legally operative consolidated complaint. The Sixth Circuit determined that the consolidated complaint was legally operative based on:

(No. 13-1608, (6th Cir. Sept. 25, 2013).)

After a multidistrict transfer, plaintiffs who want to file a consolidated complaint as only an administrative summary, and not for legal effect, should clearly label the amended pleading as an administrative summary to avoid confusion and make their intentions clear.

See Legal Update, Sixth Circuit: Order Dismissing Some Claims After Multidistrict Transfer Not Immediately Appealable for more on this decision.

See Practice Note, Product Liability Multidistrict Litigation for more on the multidistrict transfer process and the consequences of consolidation.

A recent Tenth Circuit decision reinforces the consensus that there is no antitrust duty to deal, and highlights the difficulty in establishing the exception to this rule set out in Aspen Skiing Co. v. Aspen Highlands Skiing Corp.

In Novell, Inc. v. Microsoft Corp., the Tenth Circuit held that Microsoft had no duty to deal with its competitor with respect to software development for personal computers. In 1994, Microsoft decided to share the intellectual property (IP) used in its operating system (OS) software with independent software vendors (ISVs), including Novell. Microsoft soon reversed course and notified the ISVs that they should not rely on the previously-released IP and that it may not function correctly with Microsoft's new OS.

Novell sued under Section 2 of the Sherman Act, alleging, among other things, that Microsoft:

The Tenth Circuit held that Microsoft did not have a duty to deal with Novell and its actions did not violate Section 2 of the Sherman Act. The court noted that the Tenth Circuit and US Supreme Court agree that Section 2 protects competition, not competitors, and that a monopolist owes no duty to deal with competitors, even if the refusal to deal may occasionally signal anticompetitive conduct.

Additionally, the court stated that Novell satisfied the first requirement of the Aspen exception test, but not the second. While there was a preexisting, voluntary and profitable course of dealing between the parties, there was no evidence that Microsoft's discontinuation of the relationship was intended to irrationally sacrifice short-term profits to harm competition. Therefore, the exception did not apply. (No. 12-4143, (10th Cir. Sept. 23, 2013).)

See Legal Update, Tenth Circuit Affirms Microsoft's Antitrust Win Over Novell for more on this decision.

See Practice Note, Section 2 of the Sherman Act: Overview for more on Section 2 of the Sherman Act.

For the second time in less than a year, the Department of Justice (DOJ) has asked a court to appoint an external compliance monitor in a litigated price-fixing case. This growing trend showcases the DOJ's aggressive stance towards companies that choose to litigate price-fixing charges instead of entering guilty pleas.

Having previously found that Apple, Inc. violated Section 1 of the Sherman Act, the Southern District of New York (SDNY) recently entered a permanent injunction against Apple that, among other things:

(U.S. v. Apple, Inc., No. 12-2826, (S.D.N.Y. Sept. 5, 2013).)

Apple has filed an appeal of the injunction.

See Legal Updates, District Court Enters Injunction Against Apple in E-books Case and Court Rules Against Apple in E-books Case for more on the Apple e-books case.

See Antitrust Compliance Toolkit for resources to help counsel conduct an antitrust audit and implement a compliance program.

A US court may confirm a foreign arbitration award even if a competent authority in the foreign jurisdiction nullified the award, particularly if the foreign decision violates basic notions of justice.

In Corporación Mexicana de Mantenimiento Integral v. Pemex-Exploración y Producción, the SDNY concluded that it had discretion, although narrow, under the Panama Convention and the Federal Arbitration Act (FAA) to refuse to recognize an arbitration award that the Mexican high court held to be invalid. The SDNY decided to confirm the $400 million arbitration award to the plaintiff because the subsequent Mexican court's decision to vacate the award was unfair and violated basic notions of justice. In confirming the award, the SDNY emphasized that:

(No. 10-civ-206, (S.D.N.Y. Aug. 27, 2013).)

See Legal Update, SDNY Confirms $400 Million Arbitration Award Set Aside by Foreign Court for more on this decision.

See Practice Note, International Litigation: Recognition and Enforcement of Foreign (Non-US) Judgments and Arbitration Awards for more on enforcement in the US of a foreign judgment or arbitration award.

The Second Circuit has established that evidence must be abundantly clear to vacate an award on the ground of an arbitrator's corruption under Section 10(a)(2) of the FAA. This is the same standard for vacating an award based on an arbitrator's partiality under Section 10(a)(2) or based on the use of corrupt, fraudulent or undue means to obtain an award under Section 10(a)(1).

In Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, the parties submitted their dispute to an arbitration panel consisting of one arbitrator designated by each party and a third, neutral arbitrator appointed together by the parties. The panel issued an award in favor of the plaintiff, and the defendants filed a motion for vacatur based on, among other things, Section 10(a)(2) of the FAA. The only relevant and reliable evidence in support of the motion was from an impartial witness who overheard firsthand the "neutral" arbitrator promise the plaintiff a favorable ruling.

The Second Circuit affirmed the district court's decision denying the defendants' motion, concluding that the evidence presented did not rise to the level of bias or corruption necessary to vacate an arbitration award under Section 10(a)(2) because the allegations of partiality were too remote and speculative. The defendants therefore failed to meet their high burden of proof under the clear and convincing standard. Additionally, the Second Circuit affirmed the district court's decision to deny vacatur under Section 10(a)(3) of the FAA and the defendants' motion for reconsideration of the vacatur denial. (No. 12-3247-cv, (2d Cir. Aug. 30, 2013).)

See Legal Update, Second Circuit: Corruption Must be "Abundantly Clear" to Vacate an Award under FAA Section 10(a)(2) for more on this decision.

See Practice Note, Enforcing Arbitration Awards in the US for more on the grounds on which enforcement may be challenged.

A recent decision from a New York trial court raises the possibility that going private transactions may be subject to less scrutiny in New York than in Delaware.

In In re Kenneth Cole Productions, Inc. Shareholder Litigation, the court dismissed a challenge to a going private transaction, holding that the board of the target company was entitled to the presumptions of the business judgment rule, even though the buyer:

This decision is a notable example of a how a New York court reached a similar conclusion to what would be expected in Delaware under the same circumstances. However, the Delaware Court of Chancery might have taken a different path to reach that conclusion by using the framework set out in its In re MFW Shareholders Litigation decision.

Given that the transaction in this case was entered into with a controlling shareholder, the starting assumption under Delaware law would have been that the standard of entire fairness should apply, unless it can be rebutted. The New York court, by contrast, did not explicitly consider the entire fairness standard at all. Instead, it reviewed the directors' actions with the presumptions of the business judgment rule once it found the directors on the special committee to have been independent and not acting in their own interest. (No. 650571-2012, (N.Y. Sup. Ct. Sept. 3, 2013).)

See Legal Update, In re Kenneth Cole: New York Court Dismisses Challenge to Going Private Transaction for more on this decision.

See Legal Update, In re MFW: Delaware Court of Chancery Applies Business Judgment Rule to Controlling Stockholder Transaction and Practice Note, Going Private Transactions: Overview for more on the entire fairness standard of review.

A party may recover attorneys' fees under ERISA if its conduct triggers judicial action that serves as a "catalyst" for voluntary dismissal, according to the Second Circuit in Scarangella v. Group Health, Inc. The case clarifies the US Supreme Court's decision in Hardt v. Reliance Standard Life Ins. Co., which held that a party need not qualify as a "prevailing party" to be eligible for attorneys' fees under ERISA and that obtaining "some degree of success on the merits" is sufficient. Post-Scarangella, in the Second Circuit, a party does not need to secure complete victory at trial or through dispositive motion practice to recover attorneys' fees in ERISA actions.

In Scarangella, the plaintiff sued Group Health Insurance (GHI) and Village Fuel, the ERISA plan administrator, in connection with a benefits denial under the plaintiff's health plan. GHI and Village Fuel cross-claimed against each other, seeking restitution, among other things, and filed cross-motions for summary judgment.

The district court dismissed the parties' restitution claims as impermissible under ERISA but otherwise denied summary judgment. GHI then settled with the plaintiff and voluntarily dismissed its remaining cross-claims against Village Fuel. The district court denied Village Fuel's motion to recover its attorneys' fees from GHI.

The Second Circuit vacated the district court's decision denying the fee request, holding that:

(No. 12-2750-cv, (2d Cir. Sept. 10, 2013).)

See Legal Update, Second Circuit: Catalyst Theory May Support Attorneys' Fee Award under ERISA for more on this decision.

See Practice Note, Preexisting Condition Exclusions and Rescissions under Health Care Reform for information on when a group health plan can rescind an individual's coverage.

A recent Second Circuit decision reinforces the applicability of make-whole provisions under New York law, while highlighting the importance of careful drafting.

In U.S. Bank Trust National Ass'n v. American Airlines, Inc. (In re AMR Corp.), the Second Circuit affirmed the SDNY bankruptcy court's decision approving the debtor's motion to enter into a postpetition secured financing transaction and use the proceeds to repay $1.3 billion in prepetition debt, without paying a make-whole premium to the loan trustee. The Second Circuit interpreted the applicable indentures according to their plain meaning, which were explicit and unambiguous that no make-whole premium would be due on repayment of the debt after automatic acceleration caused by a voluntary bankruptcy filing.

The Second Circuit rejected the loan trustee's arguments for payment of the make-whole amount, including the arguments that the lender must elect acceleration under New York law and that the default and acceleration provisions at issue constitute unenforceable ipso facto clauses. However, the Second Circuit did not resolve the question of whether make-whole premiums are generally enforceable in bankruptcy because its decision was based only on its interpretation of the specific contractual provisions before it. (Nos. 13-1204-cv, 13-1207-cv, 13-1208-cv, (2d Cir. Sept. 12, 2013).)

See Legal Updates, In re AMR: Second Circuit Affirms Rejection of Make-whole Claim for Repayment of Accelerated Debt and US Bank Trust National Ass'n v. American Airlines: Bankruptcy Court Relies on Language of Indentures to Reject Make-whole Claim for more on this case.

See Practice Note, Treatment of Make-whole and No-call Provisions in Bankruptcy and Chemtura Roadmap: Analysis of Make-whole and No-call Provisions in Bankruptcy for more on make-whole provisions in bankruptcy.

Parties entering into patent assignment agreements, or other IP agreements, that allow a party to share in a damages recovery should consider specifically identifying all forms of recoverable consideration in the event of a settlement or suit.

In Jang v. Boston Scientific Scimed, Inc., a patent assignment agreement provided that the assignee (BSC) was required to share profits from the patents with the assignor (Jang), as well as any damages recovered from third-party infringers. In 2010, BSC entered into a settlement agreement with Cordis Corporation to resolve an infringement suit brought by Cordis and BSC's counterclaim for infringement. The settlement involved a payment from BSC to Cordis, representing the net difference in the amount of each party's claimed damages and offsetting in full the amount payable by Cordis to BSC. Each party also granted the other licenses on certain patents.

Jang sued after BSC denied that the settlement constituted a recovery of damages that must be shared with Jang under the terms of the assignment agreement. The Third Circuit, in a split opinion reversing the district court's grant of judgment on the pleadings for BSC, held that:

(No. 12-3434, (3d Cir. Sept. 5, 2013).)

See Legal Update, Boston Scientific Can't Shut Patent Assignor Out of His Share of Cordis Damages Payment: Third Circuit for more on this decision.

See Practice Note, Patent Infringement Claims and Defenses for information on claims and defenses in patent infringement litigation.

A recent Federal Circuit decision demonstrates the court's continuing struggle to apply workable standards for determining the patent subject matter eligibility of computer-aided system and method claims.

In Accenture Global Services, GmbH v. Guidewire Software, Inc., the Federal Circuit, in a split decision, affirmed the district court's grant of summary judgment to Guidewire Software, the alleged infringer, holding that all claims of Accenture's patent directed to a computer-aided system were invalid under 35 U.S.C. § 101 because they recited patent-ineligible subject matter. The district court found that both the patent's system and method claims were ineligible because they failed to include any limitations restricting the claims to specific applications of underlying abstract ideas.

Accenture appealed only the eligibility of the system claims. The Federal Circuit followed the two-step process for analyzing patent eligibility under CLS Bank International v. Alice Corp., as guided by the US Supreme Court's decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc. Relying on the plurality opinion in CLS Bank, the Federal Circuit concluded that the patent's system and method claims must rise or fall together. Nevertheless, it analyzed the system claims both independently and in comparison with the invalidated method claims, and held that the system claims were invalid because they:

(No. 11-1486, (Fed. Cir. Sept. 5, 2013).)

See Legal Update, Federal Circuit Continues to Struggle With Patent Eligibility in Accenture Case for more on this decision.

See Practice Note, In Dispute: CLS Bank International v. Alice Corporation for more on the CLS Bank litigation.

A recent SDNY decision provides insight into the circumstances where employee conduct may disqualify an online service provider from safe harbor protection under Section 512(c) of the Digital Millennium Copyright Act (DMCA). The safe harbor may be unavailable where a service provider's employees:

In Capitol Records, LLC v. Vimeo, LLC, the plaintiffs brought an infringement action based on videos containing copyrighted music that were uploaded to the defendant's website. The SDNY denied the defendant's motion for summary judgment on 55 of 199 uploaded videos, finding triable questions of fact on whether:

Additionally, the SDNY found that the safe harbor protection did not extend to pre-1972 sound recordings. (Nos. 09-civ-10101, 09-civ-10105, (S.D.N.Y. Sept. 18, 2013).)

See Legal Update, Employee Interaction with Infringing Content May Disqualify a Service Provider from DMCA Safe Harbor: SDNY for more on this decision.

See Practice Note, Digital Millennium Copyright Act (DMCA): Safe Harbors for Online Service Providers for more on the DMCA's safe harbor provisions.

Employers involved in collective action litigation under the Fair Labor Standards Act (FLSA) may have the opportunity to obtain dismissal of the action on jurisdictional grounds, should the named plaintiffs seek voluntary dismissal of their claims to force an appeal of a decertification order (or a similar district court order).

In Camesi v. University of Pittsburgh Medical Center, the Third Circuit dismissed a consolidated appeal of two proposed FLSA collective actions for lack of jurisdiction. Both actions had received conditional certification and, after similarly situated plaintiffs opted in, the district courts denied final certification. To seek appellate review, the named plaintiffs voluntarily dismissed their claims under FRCP 41, attempting to convert the interlocutory decertification order into a final, appealable order. The Third Circuit held that:

However, the Third Circuit refused to decide the broader issue of whether, as compared to class actions under FRCP 23, plaintiffs who bring collective actions under the FLSA but no longer have individual claims are able to retain a justiciable interest in the litigation in a representative capacity following conditional certification. (Nos. 12-1446, 12-1903, (3d Cir. Sept. 4, 2013).)

See Legal Update, FLSA Collective Action Dismissed for Lack of Jurisdiction: Third Circuit for more on this decision.

See Practice Note, Defending Wage and Hour Collective Actions for information on issues employers face in defending wage and hour collective actions brought under FLSA Section 16(b).

The First Circuit recently clarified that the "escalator principle" and "reasonable certainty" test governing reinstatement claims under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) apply to non-automatic, discretionary promotions. The escalator principle provides that an employee is entitled to reemployment in the job position that he would have attained with reasonable certainty if not for an absence due to military service.

In Rivera-Meléndez v. Pfizer Pharmaceuticals, LLC, the First Circuit vacated the district court's judgment granting the employer's summary judgment motion for nearly all of the employee's USERRA claims. The district court declined the employee's request for reinstatement to a more senior supervisory position following his return from active duty military service in part because the position was not an automatic promotion but, instead, involved employer discretion. The First Circuit held that the district court:

The First Circuit remanded the motion to the district court for consideration in light of the correct legal standard. (No. 12-1023, (1st Cir. Sept. 20, 2013).)

See Legal Update, USERRA "Escalator Principle" and "Reasonable Certainty" Test Clarified: First Circuit for more on this decision.

See Employment Laws Concerning Veterans Toolkit for a collection of resources to help employers comply with federal and state employment laws concerning veterans, including USERRA.

A National Labor Relations Board (NLRB) regional director lacked authority to seek injunctive relief based on an employer's unfair labor practices because the NLRB was not properly constituted when the underlying complaint was issued and the Acting General Counsel, on whose authority the regional director petitioned the court, was not validly appointed under the Federal Vacancies Reform Act, says the Western District of Washington.

In Hooks v. Kitsap Tenant Support Services, Inc., the district court adopted the reasoning of the Third and Fourth Circuits, holding that President Obama invalidly appointed NLRB members when the Senate was not in recess. The court further held that:

(No. 13-5470, (W.D. Wash. Aug. 13, 2013).)

Although these arguments have not yet gained traction in the courts, employers involved in NLRB litigation may try to alert courts to the Hooks opinion and preserve arguments that the NLRB lacked authority to perform various functions because it lacked a properly appointed quorum and its Acting General Counsel was not properly appointed.

See Legal Update, NLRB Regional Director Had No Authority to Issue Complaint when Board Lacked Quorum and Acting General Counsel Was Not Validly Appointed: W.D. Wa. for more on this decision.

See National Labor Relations Board Unfair Labor Practice Case Flowchart for an outline of the process that parties face in bringing, or responding to, an unfair labor practice charge at the NLRB.