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

Plaintiffs installed shingles manufactured by Owens Corning (debtor). They discovered leaks in 2009; shingles had cracked. Each sent warranty claims, which were rejected. They filed a class action alleging fraud, negligence, strict liability, and breach of warranty. In 2000, the debtors had filed Chapter 11 bankruptcy petitions; the Bankruptcy Court set a claims bar date in 2002 and approved a notice that appeared in multiple publications. Notices of the confirmation hearing for the Plan, in 2006, included generic notice to unknown claimants. At the time they filed the class action plaintiffs did not hold “claims” under 11 U.S.C. 1101. The Third Circuit subsequently established a rule that a claim arises when an individual is exposed pre-petition to a product or other conduct giving rise to an injury, which underlies a right to payment under the Bankruptcy Code. Based on that holding, the district court held that plaintiffs’ claims were discharged. The Third Circuit affirmed in part and remanded, agreeing that plaintiffs had “claims.” Both were “exposed” to the product before confirmation of the plan. Plaintiffs were not afforded due process by published notice, however, because they could not have known they had claims at the time of confirmation. View "Wright v. Owens Corning" on Justia Law

Plaintiffs, a putative nationwide class of third-party payors and a putative nationwide class of individual patient-consumers who paid for prescriptions, sued pharmaceutical manufacturers alleging that they paid for oncology and hepatitis drugs that were ineffective or unsafe for the off-label uses for which they were prescribed and that defendants pursued illegal marketing campaigns to persuade physicians to prescribe the drugs for those uses. While physicians are not prohibited from prescribing drugs for off-label uses, manufacturers are generally prohibited by the Federal Food, Drug and Cosmetic Act, 21 U.S.C. 301, from manufacturing, marketing, or selling for off-label use. Defendant had pled guilty to a criminal charge brought by the FDA and agreed to pay fine of $180 million and to pay $255 million to resolve civil claims that it defrauded Medicare, Medicaid, and the VA. The district court dismissed, for lack of standing, claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961, the New Jersey RICO statute, N.J.S. 2C:41-1, and other state statutory and common law causes of action. The Third Circuit affirmed, finding that plaintiffs failed to establish a causal connection between the alleged misconduct and the alleged harm. View "In Re: Schering Plough Corp." on Justia Law

The company and its affiliates filed for Chapter 11 bankruptcy and sought to resolve asbestos-related liability through the creation of a personal-injury trust under 11 U.S.C. 524(g). As part of its reorganization plan, it sought to transfer rights under insurance liability policies to the trust. The Insurers had provided liability policies to the debtors prior to bankruptcy and objected that the transfer violated the policies' anti-assignment provisions. The bankruptcy and district courts held that 11 U.S.C. 1123(a)(5)(B) preempts those provisions. The Third Circuit affirmed. Section 524 trusts are the only national statutory scheme available to resolve asbestos litigation through a quasi-administrative process. The plain language of 11 U.S.C. 1123(a) evinces clear intent for a preemptive scope that includes transfer of property to a 524 trust; that preemption reaches private contracts enforced by state common law. View "In Re: Fed-Mogul Global, Inc." on Justia Law

Assistant managers at Rite Aid stores in Maryland and Ohio joined a nationwide opt-in action in a Pennsylvania federal court, seeking back pay for misclassification of assistant managers as overtime-exempt (Fair Labor Standards Act, 29 U.S.C. 216(b)). One of them (Fisher) then initiated an F.R.C.P. 23(b)(3) class action lawsuit in the District of Maryland, seeking damages for alleged misclassification under Maryland laws. Following dismissal without prejudice under the "first-filed" rule, Fisher refiled in Pennsylvania, asserting diversity jurisdiction. Another plaintiff initiated a class action in the District of Northern Ohio seeking damages for alleged misclassification under the Ohio Act, asserting diversity jurisdiction. The case was transferred to Pennsylvania based on the forum selection clause in the employment contract. The Pennsylvania district court dismissed, holding that state law is not preempted, but that Rule 23 opt-out class actions based on state laws paralleling the FLSA are incompatible with the opt-in procedure under the FLSA, which was designed to prevent litigation through representative action. The Third Circuit affirmed with respect to preemption, but reversed with respect to inherent incompatibility. View "Knepper v. Rite Aid Corp." on Justia Law

Synapse provides customers with promotional rate or free magazine subscriptions, obtains their credit card information, and, when the promotion expires, provides notice, then bills a subscription to the credit card, if the customer does not cancel. Former customers claimed that the automatic renewal notices amounted to a deceptive business practice. The district court denied certification of a Rule 23(b)(2) injunctive relief class. The Third Circuit affirmed. None of the plaintiffs are current Synapse customers, so they lack standing to seek the remedy they are pursuing on behalf of the class. View "McNair v. Synapse Grp., Inc" on Justia Law

Plaintiffs alleged that De Beers coordinated worldwide sales of diamonds by executing agreements with competitors, setting production limits, restricting resale within regions, and directing marketing, and was able to control quantity and prices by regimenting sales to preferred wholesalers. Plaintiffs claimed violations of antitrust, consumer protection, and unjust enrichment laws, and unfair business practices and false advertising. De Beers initially refused to appear, asserting lack of personal jurisdiction, but entered into a settlement with indirect purchasers that included a stipulated injunction. De Beers agreed to jurisdiction for the purpose of fulfilling terms of the settlement and enforcement of the injunction. The district court entered an order, approving the settlement and certifying a class of Indirect Purchasers in order to distribute the settlement fund and enforce the injunction. De Beers then entered into an agreement with direct purchasers that paralleled the Indirect Purchaser Settlement. The Third Circuit remanded the certification of two nationwide settlement classes as inconsistent with the predominance inquiry mandated by FRCP 23(b)(3), but, on rehearing, vacated its order. The court then affirmed the class certifications, rejecting a claim that the court was required to ensure that each class member possesses a colorable legal claim. The settlement was fair, reasonable, and adequate. View "Sullivan v. DB Inv., Inc." on Justia Law

Defendant is a payroll processing firm that collects information about its customers' employees, which may include names, addresses, social security numbers, dates of birth, and bank account information. In 2009, defendant suffered a security breach. It is not known whether the hacker read, copied, or understood the data. Defendant sent letters to the potential identity theft victims and arranged to provide the potentially affected individuals with one year of free credit monitoring and identity theft protection. Plaintiffs, employees of a former customer filed a class action, which was dismissed for lack of standing and failure to state a claim. The Third Circuit affirmed. Allegations of hypothetical, future injury do not establish standing under the "actual case of controversy" requirement of Article III. View "Reilly v. Ceridian Corp." on Justia Law

A registered nurse initiated a collective action on behalf of herself and all similarly situated individuals, alleging defendants violated the Fair Labor Standards Act, 29 U.S.C. 207 and 216(b), when they implemented a policy subjecting the pay of certain employees to an automatic meal break deduction whether or not they performed compensable work during breaks. Defendants made an offer of judgment under Fed. R. Civ. P. 68 in the amount of "$7,500.00 in alleged unpaid wages, plus attorneys' fees, costs and expenses as determined by the Court." The district court dismissed for lack of subject matter jurisdiction. The Third Circuit reversed, first noting that the FLSA does not contain conditional class certification language. The court nonetheless applied the "relation back doctrine," which allows a district court to retain jurisdiction over a matter that would appear moot after expiration of a named plaintiff's individual claims, to prevent use of a Rule 68 offer as a "sword."

Named plaintiffs are residents of a residential area of about 2000 people. Defendants, chemical companies, operated a facility one mile north of the area. Plaintiffs allege that defendants dumped wastewater into a lagoon that seeped into an aquifer where it degraded into vinyl chloride, a carcinogen. The district court denied certification of a class seeking medical monitoring for village residents exposed to airborne vinyl chloride between 1968 and 2002, and a liability-only issue class seeking compensation for property damage from the exposure. The Third Circuit affirmed. The district court acted within its discretion in finding plaintiffs would be unable to prove a concentration of vinyl chloride that would create a significant risk of contracting a serious latent disease for all class members. A single injunction or declaratory judgment could not provide relief to each member of the class, due to individual issues unrelated to the monetary nature of the claim. Each person's work, travel, and recreational habits may have affected their level of exposure. Certification of a liability-only issue class could unfairly impact defendants and absent class members.

This case was remanded from the U.S. Supreme Court. Appellants Keith Litman and Robert Watchel asked the Third Circuit to reverse a district court order that compelled them to arbitrate their contract dispute with Cellco Partnership (d/b/a Verizon Wireless) on an individual rather than class-wide basis. In an unpublished opinion, the Third Circuit vacated the district court order because a recent Third Circuit precedent bound the Court to conclude that class arbitration should have been available to Appellants. Verizon responded by seeking a stay of the mandate and seeking review by the Supreme Court. Having reviewed the supplemental briefing and applicable legal authority, the Third Circuit concluded that the applicable law at issue that required the availability of classwide arbitration created a scheme inconsistent with the Federal Arbitration Act. Accordingly, the Court affirmed the district court’s order compelling individual arbitration in accordance with the terms of the individual Appellants’ contracts with Verizon.