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

The Sauter Estate filed a complaint in the Southern District of New York against Citigroup, Banamex and Banamex U.S.A., seeking information pertaining to Sauter’s accounts. The Estate's amended complaint added Grupo as a defendant and added a claim for Racketeer Influenced and Corrupt Organizations Act Infractions, 18 U.S.C. 1961-1968. After defendants moved to dismiss, the Estate filed a notice of voluntary withdrawal under Federal Rule of Civil Procedure 41(a)(1)(A)(i). The defendants unsuccessfully moved to vacate that notice and to dismiss with prejudice and requested sanctions under 28 U.S.C. 1927 and the court’s “inherent powers to impose sanctions as a deterrent against continued vexatious litigation." The court noted that the Federal Rules provide safeguards in case the plaintiff commences a second action, including ordering plaintiff to pay all of defendants’ costs and fees in the dismissed action, Fed. R. Civ. P. 41(a)(1)(B)(d). The Estate subsequently filed a complaint in the Delaware District Court, naming only Citigroup. Citigroup moved for costs, including attorneys’ fees, under Rule 41(d). The district court granted the motion for costs but concluded that because the plain language of Rule 41(d) does not provide for an award of attorneys’ fees. The Third Circuit affirmed. Attorneys’ fees may only be awarded as “costs” under Rule 41(d) when the substantive statute under which the lawsuit was filed defines costs to include attorneys’ fees; no such statute is involved here. View "Garza v. Citigroup Inc" on Justia Law

Represented by Folkenflik, Plaintiffs, victims of Bressman’s manipulation of stock prices, brought civil securities fraud and RICO claims against Bressman and others. Bressman filed for Chapter 11 bankruptcy. Plaintiffs then filed the adversary complaint. The civil securities fraud and RICO claims continued against Bressman’s co-defendants. In 1998, some of those claims were settled for $6,250,000. Folkenflik received the funds. The approved Settlement Agreement included a confidentiality order. Months later, Plaintiffs sought a default judgment against Bressman. Folkenflik submitted an affidavit that indicated that the damages totaled $5,195,081, provided a comprehensive account of the underlying proceedings, but did not mention the settlement. The bankruptcy court entered a default judgment against Bressman. Plaintiffs later sought RICO damages and attorneys’ fees, again not mentioning the settlement. The bankruptcy court entered a RICO judgment for treble damages: $15,585,243 plus $910,855.93 in attorneys’ fees. More than 10 years later, Folkenflik learned that Bressman might receive $10 million, and filed ex parte applications on behalf of Plaintiffs to appoint a receiver to search for and seize Bressman’s assets. Searches and seizures were executed. Flolkenflik did not disclose the settlement and made misleading representations to the courts and Bressman’s attorney. When the courts learned about the settlement, the orders were vacated and the seized materials returned. The bankruptcy court found that Folkenflik’s conduct constituted fraud on the court, vacated the default judgment, and dismissed the adversary complaint with prejudice. The Third Circuit affirmed. Bressman’s motion was not barred by laches. Folkenflik’s failure to disclose the settlement constituted intentional fraud. Even if he believed that the confidentiality order prohibited him from disclosing the existence of the Agreement, he could have so stated in his affidavit and asked the courts for guidance. View "In re: Bressman" on Justia Law

Plaintiffs are parents of children with disabilities who were enrolled at the Charter School, which did not consistently satisfy its Individuals with Disabilities Education Act (IDEA) obligations to provide the children with a “free appropriate public education,” 20 U.S.C. 1412(a)(1)(A). In 2014, the School entered with Plaintiffs into settlement agreements. The School was to fund compensatory education for each child and contribute toward Plaintiffs’ attorneys’ fees. The School permanently closed in December 2014 and never met its obligations under the agreements. Plaintiffs filed administrative due process complaints with the Pennsylvania Department of Education, alleging that the Department should provide compensatory education. The hearing officer dismissed the complaints. Plaintiffs then sued the School and the Department, seeking reversal of the administrative decisions dismissing their claims, remand, and attorneys' fees and costs. Aside from the requested award of fees and costs, Plaintiffs obtained all of the relief they sought. On remand, Plaintiffs and the Department agreed on the number of hours of compensatory education. Plaintiffs unsuccessfully sought attorneys’ fees. The Third Circuit reversed, rejecting the district court’s reasoning that the Plaintiffs received only interlocutory procedural relief and were not prevailing parties. Success on a claim for procedural relief can constitute “a victory ‘on the merits’ that confer[s] ‘prevailing party’ status.” View "H. E. v. Walter D. Palmer Leadership Learning Partners Charter School" on Justia Law

Plaintiffs were among a class of individuals working in two separate part-time capacities for Lackawanna County. The County apparently tracked and paid these employees for each of their individual jobs, but in 2011 became aware that it had failed to aggregate the hours in both jobs, resulting in a failure to pay the overtime rate for hours beyond 40 hours per pay period. Lackawanna County conceded basic overtime violations under the Fair Labor Standards Act, 29 U.S.C. 207(a)(1). At trial, the plaintiffs presented inadequate evidence on “willfulness,” so that the court entered a directed verdict on that issue. A finding of willfulness expands the limitations period for claims under the Act, in effect permitting a plaintiff to receive a larger award. The Third Circuit affirmed. The evidence did not suggest the County was subjectively aware of the FLSA problem at the time of the violations, at least with respect to the plaintiffs. A lack of evidence going to good faith is not the same as evidence in support of intentionality. The court also affirmed an award of attorneys’ fees at an hourly rate of $250. View "Souryavong v. County of Lackawanna" on Justia Law

E.R.'s parents and Ridley School District disputed Ridley’s obligations under the Individuals with Disabilities Education Act (IDEA), 20 U.S.C. 1400-1482, “individualized education program” (IEP) requirement. An IEP may require the child to be placed in a private school with reimbursement from the school district. E.R.’s parents enrolled her in a private school and sought reimbursement. The hearing officer agreed with E.R.’s parents, rendering E.R.’s private-school placement her “then-current educational placement.” The Third Circuit reversed the hearing officer. E.R.’s parents did not pursue their IEP-related claims but asked Ridley to reimburse them for their private-school expenses between the 2009 administrative decision and the 2012 conclusion of the appeal Ridley declined. E.R.’s parents sued under the IDEA’s “stay put” provision, 20 U.S.C. 1415(j), seeking reimbursement through final resolution of the dispute. The Third Circuit affirmed the district court’s reimbursement order. Ridley’s certiorari petition to the Supreme Court was denied in 2015; Ridley then reimbursed E.R.’s parents. They sought attorneys’ fees under 20 U.S.C. 1415(i)(3)(B)(i). The Third Circuit reversed denial of the motion. A fee award is available to parents who, after unsuccessfully challenging a school district’s proposed educational placement for their child, later obtain a court order requiring the district to reimburse them for the costs of the child’s “stay put” placement—the “then-current educational placement” in which the Act permitted the child to remain while administrative and judicial proceedings were pending. View "M. R. v. Ridley School District" on Justia Law

In 2004, Trzaska became the head of L’Oréal ’s regional patent team. Rules of Professional Conduct (RPC) bar attorneys from filing frivolous or bad-faith patent applications. L’Oréal established quotas for patent applications. Management stated that, if the team failed to meet that quota, “there would be consequences which would negatively impact their careers and/or continued employment.” L’Oréal also adopted an initiative that resulted in fewer invention disclosures submitted to the team for vetting. With competing policies—one requiring a minimum of applications and one effectively reducing the invention disclosures being evaluated— Trzaska’s team did not believe it could meet the quota without filing applications for products that it did not in good faith believe were patentable. Trzaska told management that his team would not do so. L’Oréal offered Trzaska severance packages, with the alternative of “get back to work.” After he rejected both severance packages, L’Oréal fired Trzaska. Trzaska sued for wrongful retaliatory discharge under the Conscientious Employee Protection Act, N.J. Stat. 34:19-1, which protects an employee from retaliatory termination following his refusal to participate in illegal activity at the employer's request, including practices that the employee believes contravene public policy. The district court dismissed. The Third Circuit reversed, stating that the allegations were not “skin deep.” The basis of the claim is not L’Oréal’s violation of the RPCs; it is the instruction that would result in the employees' disregard of their RPC duties and violate a public policy mandate. View "Trzaska v. LOreal USA Inc." on Justia Law

While Kwasny was managing partner at a now-dissolved law firm, the firm established a 401(k) profit-sharing plan for its employees. Kwasny was named as a trustee and fiduciary of the plan. Between September 2007 and November 2009, the plan sustained losses of $40,416.302 because plan contributions withdrawn from employees’ paychecks were commingled with the firm’s assets and were not deposited into the plan. In 2011, the Secretary of Labor received a substantiated complaint from a plan member; investigated; and filed suit to recover the lost funds, remove Kwasny as trustee and fiduciary of the plan, and enjoin Kwasny from acting as a plan fiduciary in the future. The Third Circuit affirmed summary judgment in favor of the Secretary, remanding for determination of whether the judgment should be offset by a previous Pennsylvania state court default judgment entered against Kwasny for the same misdirected employee contributions. The court rejected arguments based on res judicata and on the statute of limitations. There is no genuine issue of disputed fact regarding Kwasny’s violation of the Employee Retirement and Income Security Act. View "Secretary United States Department of Labor v. Kwasny" on Justia Law

In 1998, McKernan was convicted of first-degree murder in the death of his former roommate, Gibson. McKernan admitted to hitting Gibson with a bat but claimed that it was self-defense and that Gibson’s injuries arose from Gibson hitting his head on the curb. During McKernan’s bench trial, after the Commonwealth had rested but before the defense had started its case-in-chief, the judge called the victim’s mother, his brother, the prosecutor, and defense counsel, into her robing room. McKernan was not present. The meeting was transcribed. The judge discussed online criticism of her decisions, including statements on the Gibsons’ website, and stated that she “want[ed] to make sure that you folks are happy with me.” Defense counsel did not object. The judge and Gibson’s brother agreed that the judge could “redline” the website. After conferring with McKernan, defense counsel told the judge and prosecutor that his client had “concerns” because “he thinks that you may be constrained to lean over backwards,” but advised McKernan to continue before the judge. After exhausting state remedies, McKernan filed an unsuccessful federal habeas petition. The Third Circuit reversed the denial of relief, finding that the state courts unreasonably applied Supreme Court precedent as to whether McKernan’s trial counsel was ineffective for failing to seek and for advising McKernan not to seek the judge’s recusal. View "McKernan v. Superintendent Smithfield SCI" on Justia Law

Doe was president and “sole proprietor” of Company A, but a 2008 document purports to memorialize Doe’s sale of all shares to Company B for $10,000. Numerous filings and tax documents suggested that Doe maintained control and ownership of Company A after the transfer. Multiple individuals have sued Doe and his businesses in state courts. Doe and the companies were investigated by a federal grand jury. The government obtained access to Doe’s email. Doe filed an interlocutory appeal to prevent its disclosure. While the appeal was pending, the district court granted permission to present the email to the grand jury, finding that although the email was protected by the work product privilege, the crime-fraud exception applied; in 2016, the grand jury returned an indictment, charging conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act, conspiracy, mail fraud, wire fraud, and money laundering. The Third Circuit initially dismissed an interlocutory appeal, but, on rehearing, reversed, concluding that, while the grand jury investigation continues, it retains jurisdiction, and that the crime-fraud exception did not apply. The court stripped an attorney’s work product of confidentiality based on evidence suggesting only that the client had thought about using that product to facilitate fraud, not that the client had actually done so. An actual act to further the fraud is required before attorney work product loses its confidentiality. View "In re: Grand Jury Matter #3" on Justia Law

In 2004, buyers contracted to buy an island off of St. Thomas and a St. Thomas launch for $21,000,000 and $2,500,000. The sellers’ attorney, D’Amour, also owned the escrow company involved in the transaction. The buyers deposited $1,000,000. They later paid another $500,000 to extend the closing date. The deposits were nonrefundable. After another extension, the buyers had not paid the purchase price; the sellers had not conveyed marketable title. D’Amour sent the buyers a notice of default; they demanded refunds. The buyers sued; the sellers filed counterclaims. The district court granted summary judgment to the buyers on a conversion claim against D’Amour for $500,000. A jury awarded one buyer, Taylor, $1,500,000 in contract damages from the sellers and $46,000 for fraudulent misrepresentation by D’Amour. The jury awarded the sellers $339,516.76 from the other buyers for misrepresenting their ability to purchase the properties; the court granted judgment as a matter of law, finding the tort claims barred by the gist of the action doctrine. The court reduced Taylor’s contract damages award to $0, but upheld the fraudulent misrepresentation verdict against D’Amour The Third Circuit concluded that all parties failed to perform under the contracts and denied all damages, but concluded that Taylor was entitled to restitution from the sellers ($1,500,000). On remand, the district court awarded prejudgment interest at rates of three and six percent; declined to award attorney’s fees to Taylor, citing Taylor’s “role in breaching the contract” and the complexity of the case; and concluded that D’Amour was not entitled to attorney’s fees . The Third Circuit affirmed, except the award of prejudgment interest at a rate other than the statutorily provided 9 percent. View "Addie v. Kjaer" on Justia Law