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Posts Tagged ‘United States Supreme Court’

U.S. Supreme Court Finds General Discovery Rule Inapplicable to the SOL for FDCPA Violations

Posted on: January 16th, 2020

By: Nicole L. Graham

In Klemm v. Rotkiske, No. 18-328, 589 U.S. ____ (2019), the United State Supreme Court unanimously agreed there is no blanket discovery rule that, as a matter of statutory interpretation, applies to all cases arising under the Fair Debt Collection Practices Act (“FDCPA”).  The majority held that the plain text of 15 U.S.C. §1692k(d) unambiguously states the date of the violation starts the clock on the one-year limitations period.  The Court declined Rotkiske’s request to read into the statute a provision that limitations period begins to run on the date on which the violation occurs or the date of discovery of such violation.  Justice Thomas, writing for the majority, found it clear from the face of the text that “[t]he FDCPA limitations period begins to run from the date the alleged FDCPA violation actually happened.”  Accordingly, the limitations period for an FDCPA claim arising from the filing of a collection action complaint begins to run from the date the action is filed and not from the date the debtor is served the complaint.  Similarly, the limitations period for an FDCPA claim based on a debt collection notice begins to run from the date of the notice and not from the date the notice is received.

The Court did, however, leave the door open to the possible application of an equitable “fraud-specific discovery rule.”  The Court declined to decide whether the text of 15 U.S.C. §1692k(d) permits the application of equitable doctrines because Rotkiske failed to preserve the issue before the Third Circuit and failed to raise the issue in his petition for certiorari.

Justice Sotomayor issued a concurring opinion to note that the Court’s decision does not prevent parties from invoking an equitable “fraud-specific discovery rule.”  Justice Ginsburg, the lone dissenter, felt Rotkiske preserved the equitable “fraud-specific discovery rule” argument in his petition for certiorari, and found the allegations of the complaint should suffice under the equitable “fraud-specific discovery rule” to permit adjudication of Rotkiske’s claim on the merits.

Because the question of the applicability of equitable exceptions to the FDCPA’s statute of limitations remains unresolved, it would not be surprising to see the issue before the Supreme Court again soon.

If you have any questions or would like more information, please contact Nicole Graham at [email protected].

In the Driver’s Seat: Supreme Court Hears Oral Arguments in Kansas v. Glover

Posted on: November 11th, 2019

By: Rachael Slimmon

On November 4, the United States Supreme Court held oral arguments in the case of Kansas v. Glover.  The Court examined whether a police officer may conduct a traffic stop solely because the vehicle’s registered owner has a suspended license.  The case started in 2016, when a Kansas police officer ran the license plate on Charles Glover’s truck.  Mr. Glover had a suspended license, so the officer pulled over the truck.  At trial, the parties stipulated that the officer assumed the owner was the driver, and the officer did not testify.

The Fourth Amendment of the Constitution forbids “unreasonable searches and seizures.”  For traffic stops, longstanding precedent requires that police officers have “reasonable suspicion” of a crime before they can pull over a vehicle and conduct a traffic stop.

The Justices, particularly Justice Gorsuch, gave conflicting indications about their views during oral arguments.  Justice Gorsuch first appeared concerned that the officer did not testify about his training and experience.  Gorsuch indicated that this lack of officer testimony meant there were no facts behind the officer’s assumption that a vehicle owner is the vehicle driver, and no facts from which to draw reasonable suspicion.  Later, however, Justice Gorsuch opined that requiring an officer to testify and say “magic words” about his training and experience would be formalistic and unhelpful.  Many of the Justices also seemed to disagree whether it was common sense to assume that a vehicle’s owner is the driver, with Justice Breyer appearing most willing to accept that assumption.

Mr. Glover’s attorney proposed multiple options for officers to gain additional evidence before pulling a car over: visually checking to see if the driver is similar in age and gender to the vehicle owner, following the car to wait for another traffic violation, and using statistical studies.  Multiple Justices questioned the wisdom and practicality of these other measures.

If the Court finds the traffic stop unconstitutional, Kansas v. Glover could impose minor or significant changes to law enforcement practices.  Justice Alito summed up the main issue: “What you are proposing is either a trivial decision or a revolutionary decision. It’s a trivial decision if all who’s lacking here is a statement [of the officer’s training and experience] … It’s a revolutionary decision if in every case involving reasonable suspicion there has to be a statistical showing or an examination of all” the additional evidence that Mr. Glover’s attorney proposed.

If you have any questions or would like more information, please contact Rachael Slimmon at [email protected].

United States Supreme Court to Decide Whether Georgia Law can be Copyrighted

Posted on: July 15th, 2019

By: Jason Kamp

The United States Supreme Court recently agreed to decide whether the annotations contained in the Official Code of Georgia Annotated (OCGA.) can be copyrighted by the state of Georgia, granting certiorari in State of Georgia, et al. v. Public.Resource.org, Inc., Case No. 18-1150 (S. Ct. June 24, 2019).

As explained by the 11th Circuit Court of Appeals, “In most states the ‘official’ code is comprised of statutory text alone, and all agree that a state’s codification cannot be copyrighted because the authorship is ultimately attributable to the People. Conversely, all agree that annotations created by a private party generally can be copyrighted because the annotations are an original work created by a private publisher. But the annotations in the OCGA are not exactly like either of these two types of works. Rather, they fall somewhere in between — their legal effect and ultimate authorship more indeterminate.” State of Georgia, et al. v. Public.Resource.org, Inc., 906 F.3d 1229, 1232 (11th Cir. 2018).

Unlike most official state codes, Georgia’s official code is annotated with non-statutory text.  This text includes summaries of judicial decisions, editor’s notes, research references, notes on law review articles, summaries of Attorney General opinions and other materials.  “The Code itself makes clear that these annotations are a part of the official Code, stating that the statutory portions of the Code ‘shall be merged with annotations… and [are] published by authority of the state …and when so published [are to] be known and may be cited as the ‘Official Code of Georgia Annotated.’ O.C.G.A. § 1-1-1.”  Id. at 1233.

The annotations are developed by a private party, LexisNexis, according to a contract with the State of Georgia. This contract specifies the type of annotations that appear with the statutory text and requires that LexisNexis present the content in a specific manner.  A state commission supervises the work LexisNexus performs and holds final editorial control. The Georgia legislature then adopts the annotations as their own, merging them with the statutory text in a process similar to passing the underlying laws. The State of Georgia holds the copyrights to the annotations LexisNexus creates.

Litigation over the copyrighted annotations began when a non-profit organization purchased and scanned all 186 printed volumes of the Official Code of Georgia Annotated and posted them to its free website.  The state sued and won in the district court.  Late last year the 11th Circuit Court of Appeals reversed, holding Georgia’s official code annotations are sufficiently “law-like” to be considered a work created by the state and outside the realm of copyrightable material.

The United State Supreme Court does not grant cert to affirm a lower court’s decision nearly as often as it does to reverse.  However, this case resides at the tension point between two American values: equal access to democratic institutions and private property rights.  Perhaps the Court merely wants to weigh in.

If you have questions or would like more information, please contact Jason Kamp at [email protected].

Federal Securities Laws: Has the 9th Circuit Gone Rogue Again?

Posted on: February 4th, 2019

By: John Goselin

On January 4, 2019, the United States Supreme Court decided to hear an appeal from the Ninth Circuit’s April 20, 2018 decision in Varjabedian v. Emulex Corporation, 888 F.3d 399 (9th Cir. 2018). The Supreme Court is hearing this case to resolve a circuit split regarding whether a claim under Section 14(e) of the Securities Exchange Act of 1934 requires the plaintiff to plead a strong inference that the defendants acted with scienter (i.e. intent to defraud) or whether Section 14(e) merely requires an allegation that the defendants were negligent. Section 14(e) is a provision of the Securities Exchange Act of 1934 that prohibits a company involved in a tender offer from making a material misstatement or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading or to engage in any fraudulent, deceptive or manipulative acts or practices in connection with a tender offer.

Prior to the 9th Circuit’s April 20, 2018 opinion, no Circuit split had existed. Over the course of the forty-five preceding years, the Second, Third, Fifth, Sixth and Eleventh Circuits had uniformly held that Section 14(e) required a plaintiff to plead scienter when stating a claim pursuant to Section 14(e). Despite four and half decades of consensus, the 9th Circuit concluded that every Circuit Court to address this particular issue previously had simply gotten it wrong and that if the Supreme Court considered the issue, the Supreme Court would conclude that Section 14(e) only required the plaintiff to plead negligence.

Until recently, plaintiffs had historically chosen to challenge tender offers in state court, most often Delaware state court, pursuant to state law disclosure obligations. Challenging tender offers is big business as almost every tender offer conducted results in multiple state court class action lawsuits seeking injunctions to halt the tender offers until so-called disclosure deficiencies are rectified. The cases are high profile, high risk and involve significant legal defense costs that D&O carriers often end up paying pursuant to the provisions of D&O insurance policies.  The plaintiff’s lawyers have historically been successful in playing the role of the troll under the bridge collecting hefty tolls (a.k.a legal fees) for “improving” disclosures in tender offers as the tender offer participants seek to avoid the risk of a potential injunction that could halt the tender offer.

Recently, however, the Delaware state courts where the majority of these cases have been pursued have been clamping down on these “disclosure claims” making the state court forum less lucrative for the plaintiff’s bar. Hence, the plaintiff’s bar has been turning increasingly to Section 14(e) of the Securities Exchange Act of 1934 as an alternative cause of action in a federal forum in an effort to continue collecting their attorney fee tolls. The problem, however, is that if Section 14(e) requires the plaintiff to plead “scienter” and the plaintiff wants to bring a class action to put maximum pressure on the company, the plaintiff would have to comply with the heightened pleading requirements of the Private Securities Litigation Reform Act of 1995 and plead facts, not conclusory statements, sufficient to support a “strong inference” of scienter. The plaintiff’s bar would very much like to avoid this particular pleading, and burden of proof, hurdle.

So, the 9th Circuit’s decision adopting a mere negligence standard is a very big deal creating a window through which the plaintiff’s bar hopes to continue their troll under the bridge strategy at least out West and provides the plaintiff’s bar a new opportunity to challenge the prior holdings in the other Circuit Courts. The Supreme Court, however, has taken the opportunity to decide the issue and will either shut this particular door quickly or swing it wide open by deciding the issue of negligence or scienter for Section 14(e) claims.  Every securities lawyer in America will be watching closely.

If you have any questions or would like more information, please contact John Goselin at [email protected].

The Supreme Court Weighs in on Arbitrability, But Questions Remain

Posted on: January 31st, 2019

By: Ted Peters

As reflected in a prior article, the United States Supreme Court recently agreed to take another look at the issue of arbitrability. In the case of Henry Schein, Inc. v. Archer & White Sales, Inc., the Fifth Circuit concluded that the court, and not an arbitrator, had the power to decide the threshold issue of arbitrability. In its ruling, the circuit court embraced the “wholly groundless” argument, concluding that submission of the dispute to the arbitrator was unnecessary because the assertion of arbitrability was “wholly groundless.” This decision underscored the ongoing split of authority among the lower courts wherein some courts, but not all, recognize the “wholly groundless” exception. On appeal, the appellants sought to have the Supreme Court reject the exception as inconsistent with the Federal Arbitration Act (“FAA”), the purpose of which is “to ensure that private agreements to arbitrate are enforced according to their terms.”

On January 8, 2019, newly appointed Justice Kavanaugh delivered the opinion of the court vacating and remanding the Firth Circuit’s decision. Writing for a unanimous court, Kavanaugh determined that the “wholly groundless” exception to the general rule that courts must enforce contracts that delegate arbitrability questions to an arbitrator is inconsistent with the FAA and Supreme Court precedent. Not surprisingly, the opinion revisited a number of prior cases in which the Court repeatedly held that the “agreement to arbitrate a gateway issue is simply an additional… agreement the party seeking arbitration asks the federal court to enforce, and the [FAA] operates on this additional arbitration agreement just as it does on any other.” (Opinion at p. 4, quoting Rent-A-Center, 561 U.S. 63, 70 (2010)). Kavanaugh noted that the Court had frequently rejected the argument that a claim of frivolity can derail the parties’ agreement to vest questions of arbitrability with an arbitrator and not a court. Citing Steelworkers v. American Mfg. Co., 363 U.S. 564, 568 (1960), Kavanaugh stated: “A court has ‘no business weighing the merits of the grievance’ because the ‘agreement is to submit all grievances to arbitration, not merely those which the court will deem meritorious.’”

On January 15, 2019, the Court issued a ruling in yet another case involving arbitration, New Prime Inc. v. Oliveira. Justice Gorsuch delivered the opinion of the court. In an 8-0 decision (Kavanaugh took no part in the consideration or decision of the case), the high court affirmed the First Circuit’s determination that a court should determine whether the Federal Arbitration Act’s Section 1 exclusion for disputes involving the “contracts of employment” of certain transportation workers applies before ordering arbitration. Unlike Henry Schein, which addressed the delegation of “gateway” questions of arbitrability, New Prime Inc. involved the judicial assessment of a statutorily based objection to arbitration.

But wait… there’s (one) more: Lamps Plus Inc. v. Varela, Dkt. No. 17-988. That case, argued on October 29, 2018, addresses whether the FAA forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements. An opinion is expected at any time.

Coming full circle, it is fairly clear that the high court seems to remain firm in its embrace of arbitration agreements without permitting judicial meddling, provided there is “clear and unmistakable evidence” that the parties affirmatively agree to delegate the decision of arbitrability to the arbitrator. (Henry Schein at p. 6, citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944). Yet, at the same time, the Justices appear receptive to judicial involvement as long as there is a reasonable statutory basis for it.

The takeaway? Parties to arbitration agreements should rest confident in their ability to affirmatively delegate disputes to arbitration provided that the statutory framework upon which arbitration is based leaves no basis for judicial tinkering. This may provide solace for some, but for many it leaves unanswered questions along with the risks and costs associated with uncertainty.

If you have questions or would like more information, please contact Ted Peters at [email protected].