Justia U.S. 3rd Circuit Court of Appeals Opinion Summaries

Articles Posted in Civil Procedure
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A yacht owned by Raiders ran aground. Raiders had insured the vessel with GLI, which denied coverage stating the yacht’s fire-extinguishing equipment had not been timely recertified or inspected notwithstanding that the vessel’s damage was not caused by fire. GLI sought a declaratory judgment that Raiders’ alleged failure to recertify or inspect its fire-suppression equipment rendered the policy void from its inception. Raiders responded with five counterclaims, including three extra-contractual counterclaims arising under Pennsylvania law for breach of fiduciary duty, insurance bad faith, and breach of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law.Concluding the policy’s choice-of-law provision mandated the application of New York law and precluded Raiders’ Pennsylvania law-based counterclaims, the district court dismissed those claims. The court rejected Raiders’ argument that applying New York law would contravene Pennsylvania public policy, thereby making the choice-of-law provision unenforceable under Supreme Court precedent (Bremen (1972)), which held that under federal admiralty law a forum-selection provision is unenforceable “if enforcement would contravene a strong public policy of the forum in which suit is brought.” The Third Circuit vacated. Bremen’s framework extends to the choice-of-law provision at issue; the district court needed to consider whether Pennsylvania has a strong public policy that would be thwarted by applying New York law. View "Great Lakes Insurance SE v. Raiders Retreat Realty Co LLC" on Justia Law

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PPG, a Pittsburgh company, developed a new kind of plastic for airplane windows, “Opticor™ A former PPG employee, Rukavina, agreed to share proprietary information concerning Opticor with TMG, a China-based manufacturer. TMG contacted the PPG subcontractor that made Opticor window molds, asking it to manufacture the same molds, attaching photographs and drawings from a proprietary report. The subcontractor alerted PPG, which notified the FBI, which executed warrants to search Rukavina’s email account and residence. Rukavina was charged with criminal theft of trade secrets.PPG filed a civil action against TMG, under RICO, 18 U.S.C. 1962(c)-(d) and Pennsylvania law. TMG did not respond to the complaint, nor did it answer requests for admissions. More than a year after TMG should have appeared the clerk entered a default. PPG asserted actual damages of $9,909,687.31. Four months later, TMG appeared and unsuccessfully moved to set aside the default. The court held that PPG had sufficiently established TMG’s liability and was entitled to treble damages, an injunction, and attorneys’ fees, costs, and expenses. The court found that $8,805,929 of the claimed actual damages were supported by sufficient evidence and entered judgment for $26,417,787.The Third Circuit affirmed. TMG effectively conceded the complaint’s allegations. Under the Uniform Trade Secrets Act, it can be appropriate to measure unjust enrichment from a misappropriated trade secret by looking at development costs that were avoided but would have been incurred if not for the misappropriation. The district court carefully analyzed such evidence; its methodology and conclusion are sound. View "PPG Industries Inc v. Jiangsu Tie Mao Glass Co Ltd" on Justia Law

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ESML filed for Chapter 11 bankruptcy. Chippewa funded ESML’s exit from bankruptcy. The plan and confirmation order discharged all claims against ESML arising before the plan’s effective date and enjoined actions against ESML and Chippewa by holders of those claims. The Court retained jurisdiction over matters arising under the Bankruptcy Code or arising in or related to the Chapter 11 cases or plan. ESML emerged from bankruptcy as Mesabi. During the bankruptcy case, Chippewa sought to acquire ESML. Its affiliate, ERPI, agreed to engage Riley as its exclusive financial advisor. Riley would receive a “Restructuring Fee” if ERPI successfully acquired ESML. One day before the plan’s effective date, Riley, ERPI, and Chippewa entered an amendment that purported to bind ERPI, Chippewa, and the post-effective date Mesabi. After a debt financing transaction closed, Riley sought payment from Chippewa and Mesabi of a $16 million "success fee." Mesabi refused to pay, Riley filed suit and a FINRA arbitration. Mesabi filed a Bankruptcy Court adversary complaint, maintaining the fee had been discharged.The Bankruptcy Court dismissed the adversary proceeding for lack of jurisdiction. The Third Circuit reversed. The Bankruptcy Court had jurisdiction to interpret and enforce the discharge and injunction provisions of its plan and confirmation order. This matter falls within the category of “core proceedings.” Executing the relevant amendment a day before the plan’s effective date may hint that Chippewa and ERPI tried to circumvent the bankruptcy process. View "Mesabi Metallics Co. LLC v. B. Riley FBR Inc." on Justia Law

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The consumers had rental applications denied based on inaccurate consumer reports generated by a consumer reporting agency, RealPage, which would not correct the reports unless the consumers obtained proof of the error from its sources. The identity of RealPage’s sources was not included in the disclosures to the consumers, despite their requests for their files. The consumers sued under the Fair Credit Reporting Act, 15 U.S.C. 1681, to disclose on request “[a]ll information in the consumer’s file at the time of the request” and “[t]he sources of th[at] information,” seeking damages and attorneys’ fees for themselves and on behalf of a purported class and subclass.The district court denied their Rule 23(b)(3) motion for class certification, citing the Rule’s predominance and superiority requirements and finding that their proposed class and subclass were not ascertainable. The Third Circuit vacated. The district court based its predominance analysis on a misinterpretation of Section 1681g(a), erroneously concluding that individualized proof would be needed to distinguish requests for “reports” from those for “files.” The court also misapplied ascertainability precedents. The consumers have standing, having made the requisite showing of the omission of information to which they claim entitlement, “adverse effects” that flow from the omission, and the requisite nexus to the protected “concrete interest.” View "Kelly v. RealPage Inc" on Justia Law

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Attorneys Blume, Cozen, and Madonia were involved in the sale to The Institutes of LLCs owned by the Shareholders. Blume also served on the board of directors and as General Counsel for one of the LLCs, assisting the Shareholders in making business decisions. Unbeknownst to the Shareholders, Cozen represented The Institutes in several matters, including negotiating the price for their transaction. After the deal closed, the Shareholders allegedly determined that they had sold the LLCs at a price substantially below their fair market value and that the attorneys had wrongfully secured a favorable outcome for The Institutes by using confidential client information.Shareholder Potter sued in the Shareholders' names, claiming breach of fiduciary duty and professional malpractice, although he identified the harm as “the difference in the true value of the [LLCs] and the purchase price” that was to be paid to the LLCs themselves. The lawyers argued that under the “shareholder standing rule,” the individuals did not have the legal right to bring the entities' claims in their own names. The district court dismissed the complaint for lack of jurisdiction, stating that the Shareholders “lack[ed] Article III standing." The Third Circuit vacated. The third-party standing rule is merely prudential, not constitutional and jurisdictional, and is properly considered under Rule 12(b)(6), not Rule 12(b)(1). There are different considerations in deciding a motion to dismiss under Rule 12(b)(6) that could produce a different outcome in this case. View "Potter v. Cozen & O'Connor" on Justia Law

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In its North Carolina bankruptcy proceedings, Bestwall wanted access to data owned by 10 trusts created to process asbestos-related claims against other companies. Bestwall was facing asbestos liability and wanted the data in order to calculate a settlement trust authorized by 11 U.S.C. 524(g). The data is held by the trusts’ claims processing agent, located in Delaware, which opposed Bestwall’s request. The Bankruptcy Court authorized the issuance of subpoenas. Once Bestwall served those subpoenas, the trusts asked the District Court for the District of Delaware to quash the subpoenas, repeating the same arguments that had been made in the Bankruptcy Court. Asbestos claimants whose information was in the database also joined in the motion to quash. The district court quashed the subpoenas.The Third Circuit reversed and remanded with instructions to enforce the subpoenas as originally ordered. Allowing litigants to invoke issue preclusion on a motion to quash is also consistent with the doctrine’s “dual purposes” of “protect[ing] litigants from the burden of relitigating an identical issue with the same party or his privy” and “promot[ing] judicial economy by preventing needless litigation.” Bestwall may invoke collateral estoppel as a counter to arguments previously litigated in the North Carolina Bankruptcy Court. View "In re: Bestwall LLC" on Justia Law

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Delaware and Hoboken, New Jersey each sued the oil companies in state court for state-law torts. By “produc[ing], marketing, and s[e]l[ling] fossil fuels,” they claimed, the oil companies worsened climate change. They sought damages for the environmental harm they had suffered and injunctions to stop future harm. The oil companies removed the cases to federal district courts. The suits’ broad focus on “global climate change,” the companies reasoned, “demand[ed] resolution by a federal court under federal law.”. They argued the tort claims arose under federal law, either because they were inherently federal, not state claims, or they raised substantive federal issues; the suits related to producing oil on the Outer Continental Shelf; and the oil companies were acting under federal officers.The Third Circuit affirmed the remands of the cases to state courts, noting that four other circuits have refused to allow the oil companies to remove similar state tort suits to federal court. These lawsuits neither are inherently federal nor raise substantial federal issues that belong in federal court. Oil production on the Outer Continental Shelf is too many steps removed from the burning of fuels that causes climate change. Delaware and Hoboken are not suing over actions that the companies were directed to take by federal officers. View "City of Hoboken v. Chevron Corp" on Justia Law

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R&C, run by two employees, entered an agreement to haul equipment for American Wind. The agreement’s arbitration clause provides: any claim, dispute or controversy including, but not limited to the interpretation of any federal statutory or regulatory provisions purported to be encompassed by this Agreement; or the enforcement of any statutory rights emanating or relating to this Agreement shall be resolved on an individual basis (and not as part of a class action) exclusively between Contractor and Carrier by final and binding arbitration.R&C alleges that American Wind failed to make agreed-upon detention payments, resulting in a cash shortfall, forcing R&C to sell its trucks. R&C continued to haul equipment for American Wind but on behalf of the trucks’ new owner. R&C filed suit, alleging breach of contract and contending that the arbitration clause was unenforceable because R&C is a transportation worker operating under a contract of employment, exempt from the Federal Arbitration Act (FAA). R&C also argued that the arbitration provision was unconscionable. After R&C refused to arbitrate, the case was dismissed for failure to prosecute. The Third Circuit affirmed, noting that R&C had not sought interlocutory review of the order compelling arbitration, as permitted by the FAA. The interlocutory order was not part of the final order, so the court concluded it lacked jurisdiction to review it. View "R & C Oilfield Services LLC v. American Wind Transport Group, LLC" on Justia Law

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Fischer, a Pennsylvania resident and former FedEx security specialist, brought a collective action under the Fair Labor Standards Act (FLSA) in the Eastern District of Pennsylvania. Fischer alleged FedEx misclassified her and other security specialists as exempt from the FLSA’s overtime rule and underpaid them. Two former FedEx employees, Saunders, from Maryland, and Rakowsky, from New York, submitted notices of consent, seeking to join Fischer’s collective action. Saunders and Rakowsky both worked for FedEx in their home states but, other than FedEx’s allegedly uniform nationwide employment practices, have no connection to Pennsylvania related to their claims. The district court did not allow these opt-in plaintiffs to join the suit, reasoning that, as would be true for a state court, the district court lacked specific personal jurisdiction over FedEx with respect to their’ claims.On interlocutory appeal, the Third Circuit noted a division among the circuits and held that in an FLSA collective action in federal court where the court lacks general personal jurisdiction over the defendant, all opt-in plaintiffs must establish specific personal jurisdiction over the defendant with respect to their individual claims. In this way, the specific personal jurisdiction analysis for an FLSA collective action in federal court operates the same as it would for an FLSA collective action, or any other traditional in personam suit, in state court. The out-of-state opt-in plaintiffs here cannot demonstrate their claims arise out of or relate to FedEx’s contacts with Pennsylvania. View "Fischer v. Federal Express Corp" on Justia Law

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Attorney Avenatti rose to public prominence in 2018 by representing “Stormy Daniels,” with whom then-President Trump had allegedly had an extra-marital affair. His subsequent arrest received extensive media coverage, including by Fox News and its individual employees. Avenatti sued Fox and several individuals in Delaware Superior Court. His initial complain described allegedly defamatory statements made by Hunt but did not name Hunt as a Defendant.Days later, Fox removed the case to federal court claiming complete diversity. Avenatti filed an amended complaint in the district court. Because the amended complaint was entered within 21 days, Avenatti did not require leave of court or the opposing parties, Fed. R. Civ. P. 15(a)(1)(A). The amended complaint named Hunt—a California resident, as was Avenatti—as a Defendant and alleged that Hunt had published an article online about Avenatti’s arrest which included the same defamatory accusations previously attributed to the other Defendants. Avenatti moved to remand the case back to state court, citing Hunt’s shared California citizenship as destroying diversity.The Third Circuit affirmed the district court’s denial of the remand motion, citing the court’s discretionary authority under Rule 21 to drop Hunt from the litigation to restore complete diversity. The court employed “an open-ended balancing test" for considering post-removal amendments that add nondiverse parties and found that Hunt had been joined to defeat diversity and Avenatti would not be prejudiced by Hunt’s excision. View "Avenatti v. Fox News Network LLC" on Justia Law

Posted in: Civil Procedure