Articles Posted in Civil Procedure

The Real Estate Settlement Procedures Act (RESPA) creates a cause of action for “borrower[s],” 12 U.S.C. 2605(f). Tara and Nathan Keen got a loan and took out a mortgage when they bought their house. Both of them signed the mortgage; only Nathan signed the loan. The pair later divorced. Nathan gave Keen full title to the house. He died shortly afterward. Although Tara was not legally obligated to make payments on the loan after Nathan died, she made payments anyway so she could keep the house. She later ran into financial trouble, fell behind on those payments, and contacted the loan servicer, Ocwen. After unsuccessful negotiations, Ocwen proceeded with foreclosure. The house was sold to a third-party buyer, Helson. Soon after foreclosure, Tara sued both Ocwen and Helson, alleging that Ocwen violated the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. 2601, which requires that loan servicers take certain steps when a borrower asks for options to avoid foreclosure. Tara alleged that Ocwen failed to properly review her requests before it foreclosed on her house. The Sixth Circuit affirmed the dismissal of Keen’s RESPA claims. RESPA’s cause of action extends only to “borrower[s].” Keen was not a “borrower” because she was never personally obligated under the loan agreement. View "Keen v. Helson" on Justia Law

Knox-Bender suffered injuries from a car accident. She sought medical treatment at Methodist Healthcare. Methodist billed her $8,000 for the treatment. Payments to Methodist were made on Knox-Bender’s behalf by her employer-sponsored healthcare plan, her automobile insurance plan, and her husband’s healthcare plan. Knox-Bender says that the insurance plans had already agreed with Methodist on the price of her care. She claims that, despite this agreement, Methodist overcharged her and that this was common practice for Methodist. She and a putative class of other patients, sued in Tennessee state court. During discovery, Methodist learned that Knox-Bender’s husband’s healthcare plan was an ERISA plan, 29 U.S.C.1001(b) that covered $100 of her $8,000 bill. Methodist removed the case to federal court claiming complete preemption under ERISA. The district court denied Knox-Bender’s motion to remand and entered judgment in favor of Methodist. The Sixth Circuit reversed. The complete preemption of state law claims under ERISA is “a narrow exception to the well-pleaded complaint rule.” Methodist has not met its burden to show that Knox-Bender’s complaint fits within that narrow exception. Since Knox-Bender has not alleged a denial of benefits under her husband’s ERISA plan, ERISA does not completely preempt her claim. Even if Methodist had shown that Knox-Bender alleged a denial of benefits, it would also have show that Knox-Bender complained only of duties breached under ERISA, not any independent legal duty. View "K.B. v. Methodist Healthcare - Memphis Hospitals" on Justia Law

After four years of perpetual delays, Prime obtained a sixth trial date to vindicate its claims that Larson and her late husband had cheated it out of hundreds of thousands of dollars. The scam involved fraudulent agreements to finance insurance premiums. The day before trial, after red-flag warnings that the district court would entertain no further extensions, Larson moved for a continuance. Her last-minute motion came with an unsigned doctor’s note, the letterhead of which did not match its signature block. Larson did not show up for trial the next day. The district court found that her motion fell “within a pattern of delaying tactics,” including exaggerated medical excuses, disputes with her attorneys, and abuse of the bankruptcy process. The court denied Larson’s motion, struck her answer, granted Prime a default judgment, and awarded it $964,530.48. The Sixth Circuit affirmed, noting that due process does not require that the defendant in every civil case actually have a hearing on the merits and it was Larson who, through her conduct during this case, deprived herself of her “day in court.” View "Prime Rate Premium Financial Corp., Inc. v. Larson" on Justia Law

Louisiana-Pacific produces “engineered-wood” building siding—wood treated with zinc borate, a preservative that poisons termites; Hardie sells fiber-cement siding. To demonstrate the superiority of its fiber cement, Hardie initiated an advertising campaign called “No Wood Is Good,” proclaiming that customers ought to realize that all wood siding—however “engineered”—is vulnerable to damage by pests. Its marketing materials included digitally-altered images and video of a woodpecker perched in a hole in Louisiana-Pacific’s siding with nearby text boasting both that “Pests Love It,” and that engineered wood is “[s]ubject to damage caused by woodpeckers, termites, and other pests.” Louisiana-Pacific sued Hardie, alleging false advertising, and moved for a preliminary injunction. The Sixth Circuit affirmed the denial of the motion. Louisiana-Pacific failed to show that it would likely succeed in proving the advertisement unambiguously false under the Lanham Act and the Tennessee Consumer Protection Act. View "Louisiana-Pacific Corp. v. James Hardie Building Products, Inc." on Justia Law

Three women allege that Memphis failed to submit for testing the sexual assault kits (SAKs) prepared after their sexual assaults. They allege that Memphis possessed over 15,000 SAKS that it failed to submit for testing, resulting in spoliation, and sought to certify a class of women whose kits Memphis failed to test. The district court dismissed with prejudice all of Plaintiffs’ claims except those under the Equal Protection Clause. Two years of discovery apparently cost Memphis over $1 million. Discovery revealed that the SAKs of two plaintiffs were tested soon after their assaults. The third plaintiff’s SAK was submitted for testing 10 years after her 2003 assault. The district court granted Memphis summary judgment as to two plaintiffs and struck the class allegations, finding that no amount of additional discovery would allow Plaintiffs to sufficiently demonstrate commonality. The Sixth Circuit reversed. Plaintiffs were moderately diligent in pursuing discovery, although somewhat blameworthy in relying on the city’s representations that discovery would be forthcoming. Memphis unreasonably delayed producing discovery material and additional discovery might have changed the outcome. Expenditures of time and money alone do not justify terminating discovery where a plaintiff has been diligent and may still discover information that could establish a genuine issue of material fact. View "Doe v. City of Memphis" on Justia Law

About 1,300 public entities sued manufacturers, distributors, and retailers of prescription opiate drugs to recover the costs of health problems caused by the opioid crisis. Plaintiffs subpoenaed the U.S. Drug Enforcement Agency’s ARCOS database, a “comprehensive drug reporting system which monitors the flow of DEA controlled substances from their point of manufacture through commercial distribution channels to point of sale or distribution at the dispensing/retail level.” The district court noted that the ARCOS data “are not pure investigatory records compiled for law enforcement purposes, [but] simply business records of defendants; . . . the database does not include any additional DEA analysis or work-product” and concluded that Plaintiffs’ request was reasonable. The court permitted pleadings and other documents to be filed under seal or with redactions, refused a request to disclose the ARCOS data to the media, and entered a protective order. The Sixth Circuit vacated. The district court never made a finding that Defendants or the DEA made “a particular and specific demonstration of fact” justifying the Protective Order. The court expressed concern that the district court may have wanted the threat of public disclosure to motivate settlement discussions. On remand, the court may consider why pieces of ARCOS data related to specific ongoing investigations should not be disclosed but cannot enter a blanket, wholesale ban on disclosure pursuant to state public records requests. No modified protective order may specify that the ARCOS data be destroyed or returned to the DEA at the conclusion of litigation. The court must reconsider each pleading filed under seal or with redactions and make specific determinations as to the necessity of nondisclosure. View "In re National Prescription Opiate Litigation" on Justia Law

Becker, a Missouri citizen, wanted to buy the St. Louis Ashley Power Plant. Through a Missouri corporation, SL, he secured financing from Power Investments, a Nevada corporation with one member, Miller, who lives and practices law in Kentucky. Power loaned SL $300,000. Becker called, texted, and emailed Miller extensively, seeking funds and making allegedly false assurances. Becker (through another Missouri entity, Ashley) signed a purchase agreement. The sale fell apart. Power bought Becker’s interest in Ashley, assuming the obligation of the power-plant deal. Power now owns the plant. Miller sued in Kentucky, alleging fraudulent misrepresentation and unjust enrichment. Becker sued in Missouri, alleging breach of contract and fraudulent conveyance. Becker successfully moved to dismiss the Kentucky case for lack of personal jurisdiction. The Sixth Circuit reversed. Becker “transact[ed] . . . business” and made “a telephone solicitation” within the meaning of Kentucky's long-arm statute. Under the Due Process Clause, a state can exercise jurisdiction over an out-of-state defendant only if that defendant has “minimum contacts” with the state sufficient to accord with “traditional notions of fair play and substantial justice.” This case turns on specific jurisdiction, based on the “affiliation between the forum and the underlying controversy.” Becker initiated the relationship. He communicated with Miller extensively; Becker’s alleged misrepresentations in these communications constitute the core of Miller’s fraud claims. Becker “purposefully avail[ed] himself of the privilege of acting in [Kentucky] or causing a consequence” there. View "Power Investments, LLC v. SL EC, LLC" on Justia Law

In 2005-2006, Thompson was sued by employees and one business he hired to assist in locating a long-sunken ship and recovering its treasures. The district court entered a preliminary injunction instructing Thompson not to sell, encumber, transfer or diminish in value any gold coins he had in his possession. If the coins were not in Thompson’s possession, Thompson was to submit a declaration under oath describing the parties to whom the coins were transferred and any consideration. Thompson transferred the coins to a third-party trust and failed to provide the required information. The court scheduled a “show cause” hearing. When Thompson failed to appear, having absconded to Florida, an arrest warrant issued. Thompson, charged under 18 U.S.C. 401(3), entered into plea agreement, agreeing to assist in identifying and recovering assets. The court ordered Thompson to “submit to a debtor’s examination,” consistent with that agreement. Thompson appeared for the examination; the civil parties and receiver contended that Thompson refused to provide sufficient answers, then invoked his Fifth Amendment privilege. At a second court-ordered examination, Thompson appeared but refused to answer any questions. After a civil show-cause hearing combined with criminal-contempt sentencing, the court sentenced Thompson to two years of imprisonment for criminal contempt, held Thompson in civil contempt and ordered Thompson to “be incarcerated indefinitely until you comply.” After 18 months of incarceration for civil contempt, Thompson sought to terminate his civil-contempt sanctions, citing the recalcitrant-witness statute, 28 U.S.C. 1826(a), which limits confinement to 18 months. The Sixth Circuit affirmed the denial of Thompson’s motion. Because Thompson was required both to testify and to help recover assets by taking non-testimonial actions, section 1826 did not apply. View "United States v. Thompson" on Justia Law

The American Jobs Creation Act of 2004 authorized the IRS to gather information about tax shelters, 26 U.S.C. 6707A. The IRS requires taxpayers and certain third parties to submit records pertaining to “reportable transaction[s]” as defined by IRS regulations, subject to significant penalties. A “material advisor” who provides material aid to a taxpayer in carrying out reportable transactions and who derives a threshold amount of gross income from that aid, faces similar penalties. A material advisor who fails to maintain a list of taxpayers that he aided in carrying out reportable transactions faces a $10,000 per day penalty. Notice 2016-66 identified “micro-captive transactions” as “transactions of interest,” a subset of reportable transactions that have “a potential for tax avoidance or evasion,” but stated that the IRS “lack[s] sufficient information” to distinguish between those that are lawful and those that are unlawful. Plaintiff, a material advisor to taxpayers engaging in micro-captive transactions, challenged the Notice under the Administrative Procedure Act, 5 U.S.C. 500, and the Congressional Review Act, 5 U.S.C. 801, arguing that it was a legislative rule that required notice-and-comment rulemaking, was arbitrary, and required submission for congressional review. The Sixth Circuit affirmed the dismissal of the complaint as barred by the Anti-Injunction Act, 26 U.S.C. 7421(a) and the tax exception to the Declaratory Judgment Act, 28 U.S.C. 2201, which divest federal district courts of jurisdiction over suits “for the purpose of restraining the assessment or collection of any tax.” The court noted that the IRS does “not have a great history of complying with APA procedures.” View "CIC Services., LLC v. Internal Revenue Service" on Justia Law

Schier represented Capital in a state court suit filed by Longhorn. Capital was hit with a $5-million judgment and landed in bankruptcy. Its Chapter 7 proceedings stayed the Longhorn litigation with post-trial motions pending. Longhorn filed a bankruptcy claim. When Schier filed a claim for Capital’s unpaid legal fees, the bankruptcy trustee countered with a malpractice suit against Schier, which eventually settled. Schier agreed to pay the estate $600,000 and to withdraw its attorney’s fees claim. The bankruptcy court approved this settlement. Schier withdrew its claim. When the trustee filed a final report, Schier alleged that Capital’s right to appeal Longhorn’s state-court judgment qualified as an “asset” that the trustee should have administered or abandoned. The bankruptcy court overruled Schier’s objection, reasoning that Schier should have raised this issue while Schier had a pending fees request and was a “creditor” with “standing.” The district court dismissed an appeal, stating that “[i]n order to have standing to appeal a bankruptcy court order, an appellant must have been directly and adversely affected pecuniarily by the order,” a more demanding standard than Article III standing. The Sixth Circuit affirmed, noting the Supreme Court’s 2014 “Lexmark” decision, which jettisoned the label “prudential standing.” Citing “the post-Lexmark uncertainty about various standing concepts,” the court held that Schier lacked the type of standing that Lexmark did not affect: Article III standing. View "In re Capital Contracting Co." on Justia Law