District Courts Have Lots of Discretion Over Whether to Exercise Supplemental Jurisdiction

(info) — Mon, 20 Feb 2012 15:59:19 -0600

February 20, 2012

Last week, the Seventh Circuit issued a decision in RWJ Mgmt. Co., Inc. v. BP Products N. Amer., Inc., ___ F.3d ___ (7th Cir. 2012), Cause No. 11-1268, that surprised me. At issue was the level of discretion that district courts have when deciding to exercise supplemental jurisdiction. It turns out that they have a lot.

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In July 2009, two owner-operators of BP-franchise gasoline stations sued BP in Illinois state court, asserting both state and federal claims. The plaintiffs' state law claims were under both Indiana and Illinois law. The case was removed to federal court based on the court's federal question jurisdiction.

Over the next 15 months, the district court held 35 hearings, issued 45 orders, and considered 70 motions. The parties compiled 21 volumes of discovery material. Along the way the judge held that one of the plaintiffs had violated discovery rules and several court orders, but withheld judgment on the specific sanction. A two-week trial was scheduled to begin on January 18, 2011.

At a pretrial hearing on January 7, 2011, the plaintiffs informed the court that they would not be pursuing their federal claim after all. The district court dismissed that claim. On January 12, the district court issued a short, tentative order regarding the parties' summary judgment motions, reserving a final ruling until trial. That same day, the Court noted that all federal claims had been dismissed and asked the parties if there was a reason to keep the case in federal court. BP argued that there were, but the next day (two business days before trial) the district court relinquished jurisdiction and remanded the case to state court. BP appealed.

On appeal, the Court emphasized that the district court has broad discretion over whether it should exercise supplemental jurisdiction and that there is a presumption in favor of remand. Despite the facts described above, the Court affirmed the district court's decision.

This case focuses entirely on considerations of judicial economy and potential duplication of judicial effort. BP contends that the district court invested so much time superintending this litigation that the presumption in favor of relinquishment has been overcome. The district court is the best judge of that; our review examines only whether the court made "a considered determination of whether it should hear the claims." Miller v. Herman, 600 F.3d 726, 738 (7th Cir. 2010). Here, the judge considered the relevant factors and determined that her work on the case was not so enmeshed in substantive issues of state law that the presumption in favor of remand should be set aside. That decision makes sense—-especially where, as here, the claims remaining in the case include complex common-law business torts and claims for violation of state statutory franchise law.

BP attempted at argue that the district court had been enmeshed in the merits of the case, but the Court disagreed, noting that most of the court's activity had been related to discovery and that the only substantive decision was a tentative ruling on the motions for summary judgment. this pretrial activity (including the pending motion for sanctions) did not overcome the presumption of remanding the case to state court.

The Court's description of the facts indicates that it may believe that the plaintiffs' actions in this case smack of gamesmanship. Therefore, this case shows both the amount of discretion that the Court gives to district courts on this issue and the strength of the presumption in favor of remand.

Lessons:

There is a presumption against exercising supplemental jurisdiction if federal claims are dismissed.
A district court's decision to remand a case if the federal claims are resolved will be affirmed if the district court makes a considered determination of whether it should hear the claims.

Brad A. Catlin
Price Waicukauski & Riley, LLC
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District Court Erred When Reducing a Prevailing Party's Attorney Fee Award

(info) — Mon, 20 Feb 2012 10:55:09 -0600

February 20, 2012

Last week, the Seventh Circuit addressed some of the issues that come into play when a statute authorizes the award of attorney's fees in Johnson v. GDF, Inc., ___ F.3d ___ (7th Cir. 2012), Case No. 11-1934. This case is particularly helpful on these issues because it found that the district court abused its discretion on these issues.

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Johnson was the named plaintiff who brought a class action in state court against his employer for overtime wage violations. Class certification in that case was ultimately denied and the matter proceeded towards trial. Meanwhile, Johnson filed a lawsuit in federal court, which asserted that he was fired in retaliation for filing the state court action.

While the state court action was proceeding towards trial, the employer offered to settle both lawsuits for $25,000. Johnson rejected the offer. The state suit was resolved by a consent judgment a month later and the employer paid Johnson $4,328.77 in overtime wages plus interest and attorney's fees.

Meanwhile, the federal lawsuit continued without any additional settlement talks. Moreover, the employer did not make a Rule 68(a) offer of judgment, not even one limited to the issue of liability. The case proceeded to a three-day trial, after which the jury returned a verdict for Johnson, which awarded both compensatory and punitive damages. After the district court denied post-trial motions by both parties, both parties appealed. The parties then mediated their dispute and, after the employer agreed to pay Johnson more money, the appeals were dismissed.

As the prevailing party, Johnson was entitled to attorney's fees, so his counsel made a fee application for $112,566.87. The employer disputed the amount of these fees for multiple reasons. A magistrate judge heard the fee dispute and recommended a total award of fees and costs in the amount of $1.864.20. The district court accepted the recommendation and Johnson appealed.

On appeal, the Court found that the district court abused its discretion when it concluded that all but 4 of 190 billed hours were unnecessary. When concluding that the district court erred, the Court found that both the fact that the employer did not admit liability and that the case went to trial were of critical importance.

GDF knew (approximately) what it was up against and proceeded to trial, without an offer of judgment or any concession of liability. GDF tested its luck and lost. Now it must pay for the attorney hours reasonably required to see the case through trial, to appeal, and for the collection of fees.

The Court also criticized the district court's decision to reduce the hourly rate charged by Johnson's attorney to the maximum rate that this attorney had been awarded in a case in which his hourly rate had been challenged.

In considering the next best evidence [of a reasonable hourly rate], the district court disregarded Rossiello's third-party affidavits because the affiants declared that they do not bill at different rates for FLSA and Title VII cases. The district court decided that billing rates for FLSA and Title VII cases must be diffe rent-—other Northern District of Illinois judges have said that FLSA cases are less complex than Title VII cases and we've mentioned this observation too. Small v. Richard Wolf Med. Instruments Corp., 264 F.3d 702, 707-08 (7th Cir. 2001). Rossiello, however, is entitled to the prevailing market rate for his services. It was an abuse of discretion for the district court to decide that the market must distinguish between FLSA and Title VII cases. Either it does or it doesn't, but it is not the court's job to say that it should. If the market does distinguish FLSA and Title VII retaliation cases, then, presumably, defendants could submit affidavits saying so. It is not enough to say that courts have distinguished these types of cases (much less, straight overtime cases like Small) and, therefore, any affidavits to the contrary will be unpersuasive.

Once the affidavits were set aside, the district court considered evidence of Rossiello's fee awards in similar cases. The court concluded that Rossiello did not establish "that he was ever awarded a $600 rate in any FLSA case where his fee was challenged." The highest challenged rate he had recovered was $375, so the court decided that was reasonable and what he should receive in this case. But as we reemphasized in Pickett (another case involving Rossiello, incidentally), "[n]othing in the case law requires that a party show that the hourly rate they have requested has previously been disputed and upheld . ... Indeed, a previous attorneys' fee award is useful for establishing a reasonable market rate for similar work whether it is disputed or not." It was therefore an abuse of discretion for the district court to set Rossiello's rate by considering only cases where his fees were challenged.

Finally, the district court erred by not awarding Johnson his trial costs.

Ultimately, this case shows that when defending against a claim for attorney's fees, the wisest course of action will me to amass evidence regarding the prevailing market rate, rather than focusing your factfinding on the particular counsel requesting fees. The employer in this case appears to have made a strategic error by amassing evidence regarding Johnson's counsel, why ignoring other issue, such as whether there is a different market rate for FLSA and Title VII retaliation claims.

Lessons:

A court should not reduce an attorney fee application merely because it believes a case should have been settled.
A court cannot assume without evidence that the market must distinguish between the market rate for two different types of litigation.

Brad A. Catlin
Price Waicukauski & Riley, LLC
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Termination Letter Does Not Terminate Contract

(info) — Mon, 20 Feb 2012 10:21:10 -0600

February 20, 2012

In a memorandum decision, uncitable as authority under App. R. 65(D), the Indiana Court of Appeals emphasized that a letter which allegedly terminates a contract must actually say that it is terminating the contract in order to do so. For tis reason alone, City of Fort Wayne v. Town of Huntertown, Cause No. 02A05-1107-MI-384, teaches us a lesson.

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Fort Wayne entered into a contract with Huntertown to treat Huntertown's sewage in 1985. The contract allowed either part to terminate the contract by providing written notice of the desire to terminate the contract. In 2002, Fort Wayne sent a letter to Huntertown indicating that Fort Wayne wished "to open negotiations on the exact terms of the agreement that governs our relationship." However, that letter did not specifically state that Fort Wayne was terminating the contract. In 2009, Fort Wayne informed Huntertown that it considered the contract terminated because of the 2002 letter.

Huntertown filed a complaint for declaratory judgment, arguing that Fort Wayne's 2002 letter did not constitute sufficient notice of Fort Wayne's intent to terminate the contract. After cross-motions for summary judgment were filed, the trial court granted judgment to Huntertown. Fort Wayne appealed.

On appeal, the Court agreed with the trial court.

[The] letter indicated Fort Wayne's desire to continue-—not terminate—-its relationship with Huntertown. More specifically, as set forth above, the letter explicitly stated that it is "formal notice" of Fort Wayne's request to Huntertown to open negotiations on the exact terms of the agreement that governs the parties' continuing relationship. Most significantly, the 2002 letter did not indicate a desire to terminate the Agreement in the absence of a new agreement. Moreover, there is no showing that it made a continuation of the parties’ relationship contingent upon the negotiation of a new contract.

We cannot say that simply expressing a desire to begin negotiations on a new contract is synonymous with terminating an existing contract. Had Fort Wayne desired to actually terminate the Agreement, it should have expressly indicated as such. And by its plain language, the intent of the 2002 letter is to invite Huntertown to negotiate terms going forward. ...

By requesting future negotiations and not expressly stating an intention to terminate, Fort Wayne could have its cake and eat it too. If the parties' negotiations failed to result in a satisfactory new agreement, the former Agreement would remain in effect and the relationship would continue. Given the statements made in the 2002 letter, it is obvious that Fort Wayne preferred continuation of the relationship with Huntertown to no relationship at all. Put another way, we cannot say that the equivocal expressions communicated in the 2002 Letter satisfied the contractual requirements for termination under section 2 of the Agreement.

The lesson here is plain. If a contract provides for written notification of termination of the contract, then the written notice should "provide express, clear, direct and unequivocal notice" of the intent to terminate the contract. Anything less may be insufficient to extract your client from the agreement.

Lesson:

A written notice to terminate a contract must provide express, clear, direct and unequivocal notice of the intent to terminate the contract.

Brad A. Catlin
Price Waicukauski & Riley, LLC
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Immunity for Detaining Mentally Ill Can Precede Filing of Paperwork

(info) — Mon, 20 Feb 2012 09:44:07 -0600

February 20, 2012

In Berryhill v. Parkview Hosp., ___ N.E.2d ___ (Ind. Ct. App. 2012), Cause No. 02A04-1108-SC-400, the Indiana Court of Appeals appears to have answered a question of first impression when dealing with a hospital's immunity when dealing with the mentally ill. The case appears to be important outside of this limited context, as it indicated the manner in which the Court of Appeals will interpret statutes that provide immunity to persons or organizations for particular activities.

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In this case, Berryhill had suffered a stroke and had brain surgery. At some point after this, he got into a fight with his wife over the television remote. The couple's son persuaded Berryhill to go to the hospital. Berryhill told the triage nurse that he was there because his wife thought that he was "nuts" and wanted to commit him to the "psycho ward." Doctors began to perform tests on Berryhill.

After being at the hospital for about 2 hours, Berryhill became very aggressive and demanded to go home. His doctor was concerned that he may hurt himself or others, so security officers were called to place Berryhill in a secure room, where Berryhill was given a sedative.

At some point after this, but on the same day, Berryhill's wife signed an application for emergency detention, which the trial court granted. Berryhill was discharged two days later.

Berryhill brought an action against the hospital, asserting false imprisonment. After a bench trial, the trial court found in favor of the hospital, so Berryhill appealed.

The primary issue on appeal was whether the hospital was immune under IC 12-26-2-6. That statute provides immunity to people who participate in a detention proceeding or assist in the detention of an individual alleged to have a mental illness. Berryhill argued that this statute did not apply to his attempt to leave the hospital because his wife did not sign the application for emergency detention until after he was detained against his will. The Court disagreed.

Reduced to its essence, Indiana Code Section 12-26-5-1(a) says that "[a]n individual may be detained in a facility for not more than seventy-two (72) hours ... if a written application for detention is filed with the facility." (Emphasis added.) Notably, the statute does not say that an individual may not be detained until after a written application for detention is filed. Indeed, the statute does not specify when the written application must be filed. In this case, the application for detention was based primarily on the very behavior that led to Berryhill being restrained by Parkview's security guards. We cannot conclude that the legislature intended to leave healthcare facilities and their employees powerless to detain individuals who are mentally ill and either dangerous or gravely disabled before an application for detention is filed. As such, without deciding precisely when Berryhill was detained for purposes of Indiana Code Section 12-26-5-1, we conclude that the security guards "act[ed] according to" Indiana Code Article 12-26, which governs the voluntary and involuntary treatment of mentally ill individuals, and "assist[ed] in the detention, care, and treatment of an individual alleged … to have a mental illness" for purposes of Indiana Code Section 12-26-2-6(a).

I find the jurisprudential aspects of this decision more interesting than the decision itself, as this case offers insight into how the Indiana Court of Appeal will interpret statutes governing immunity. The Court made no reference to the concept that statutes in derogation of the common law should be strictly construed. Instead, it relied on the statutory canons that statutes must be applied in a logical manner consistent with the underlying goals and policy of the statute.

This method of analysis is likely to broaden the scope of statutes that grant immunity to various entities in Indiana. Indiana's litigators must take this into account when assessing the strength of their clients' claims, if a statutory immunity could be involved.

Lesson:

A person can be immune for detaining a person who is allegedly mentally ill, even if the paperwork authorizing that detention is not filed until after the detention.

Brad A. Catlin
Price Waicukauski & Riley, LLC
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A Nonparty Is Not Entitled to a Change of Judge in Contempt Proceedings

(info) — Thu, 09 Feb 2012 21:19:06 -0600

February 9, 2012

In In re the Paternity of N.T., ___ N.E.2d ___ (Ind. Ct. App. 2012), Cause No. 09A02-1108-JP-693, the trial court began contempt proceedings against a child's mother and stepfather because they hid the child from the father for over four years. The stepfather had not previously been a party tot he proceedings and moved for a change of judge after he was served with the application for contempt. The trial court granted that motion and the father appealed.

On appeal, the Court held that courts have the inherent power to hold nonparties in contempt and that doing so does not make them parties to the proceeding. As only parties are entitled to a change of judge under Trial Rule 76, the trial court erred when granting the stepfather's motion.

Lesson:

A nonparty is not entitled to a change of judge merely because contempt proceedings have been brought against that nonparty.

Brad A. Catlin
Price Waicukauski & Riley, LLC
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You Can't Get Sanctions If You Don't Follow the Rules

(info) — Thu, 09 Feb 2012 20:51:30 -0600

February 9, 2012

In Heinen v. Northrup Grumman Corp., ___ F.3d ___ (7th Cir. 2012), Cause No. 10-3408, one of the main issues on appeal was what was the plaintiff's state of citizenship. The defendant's notice of removal asserted that the plaintiff was a "resident" and, therefore, a "citizen" of Massachusetts. However, citizenship depends on domicile, not residence. When the Seventh Circuit raised this issue at oral argument, "counsel for both sides were surprised to learn that 'citizenship' for the purpose of 28 U.S.C. § 1332 depends on domicile rather than residence." Ultimately, the notice of removal was amended and it was demonstrated that the plaintiff was domiciled in Massachusetts.

Ultimately, the Seventh Circuit found the appeal to be frivolous on its merits, but it refused to award the requested sanctions.

Northrop contends that the appeal is frivolous—-which it is—-and asks for sanctions. The request is in Northrop's appellate brief. But Fed. R. App. P. 38 provides that a litigant seeking sanctions must request them in a "separately filed motion". And this court is not inclined to award sanctions in favor of a party that cannot be bothered to follow the rules itself. Morgan, Lewis & Bockius, LLP, which represents Northrop, should be able to tell the difference between residence and domicile, and should not have any difficulty complying with Rule 38.

Northrup's lawyers can at least take solace in this, the Court did not name them in the opinion.

Brad A. Catlin
Price Waicukauski & Riley, LLC
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Restrictive Covenants Are Enforceable, Even if They Could Not Be in a Zoning Ordinance

(info) — Wed, 08 Feb 2012 21:29:52 -0600

February 8, 2012

The Indiana Court of Appeals was presented with an interesting issue in Benjamin Crossing Homeowners' Assoc., Inc. v. Heide, ___ N.E.2d ___ (Ind. Ct. App. 2012), Cause No. 79A04-1103-PL-185. The question was whether a homeowner's association could enforce a restrictive covenant that the plan commission could not. The answer in a word? Yes.

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The plaintiffs in this case were two women who operated licensed day care facilities from their homes in a Tippecanoe County subdivision. When the subdivision was being established, a declaration was recorded and approved by the county. That declaration prohibited the operation so any trade or business within the subdivision. When the declaration was approved, it could be enforced as a zoning ordinance.

The plaintiffs filed a complaint, which asserted that the restrictive covenants could not be enforced against them as they were contrary to state law. The law in question prohibited a zoning ordinance from excluding a child care home from a residential area because it was a business. The homeowners' association filed a counterclaim seeking to enforce the restrictive covenant. The trial court dismissed the plaintiffs' claims, but granted summary judgment to the plaintiffs on the counterclaim. The homeowners' association appealed.

On appeal, the Court recognized that the restrictive covenants had become a zoning ordinance when approved by the county and, therefore, could not be enforced by the county. However, this did not effect the homeowners' association's ability to enforce the restrictive covenants. The Court held that the statute did not suggest "that the legislature intended a local plan commission's adoption of a zoning ordinance to nullify the right of property owners to enforce covenants in common law subdivisions."

In sum, we decline to hold that the County's approval of a PUD obviates the underlying contract right of the property owners, through the Homeowners' Association, to enforce the restrictive covenants against operation of a home day care in Benjamin Crossing. The restrictive covenant exists independent of the ordinance and may be enforced by the Association pursuant to the terms of the Declaration. Thus, the trial court erred when it concluded that Section 36-7-4-1108 prohibits the Association from enforcing the restrictive covenant banning the operation of businesses in residences in Benjamin Crossing.

The key to the Court's decision is its conclusion that the statute did not indicate that it intended to apply to restrictive covenants. Once this premise was accepted, the Court's ultimate conclusion was clear.

Lessons:

A court will not find that a statute abrogates the common law unless the statute unmistakably does so.
Restrictive covenants can prohibit conduct that zoning ordinances are not allowed to prohibit.

Brad A. Catlin
Price Waicukauski & Riley, LLC
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How to Waive a Continuing Objection

(info) — Wed, 08 Feb 2012 20:52:32 -0600

February 8, 2012

The Indiana Court of Appeals issued a recent decision that provides a textbook example of how to waive a properly made continuing objection. In Nowling v. State of Indiana, ___ N.E.2d ___ (Ind. Ct. App. 2012), Cause No. 31A01-1010-CR-552, a criminal defendant was allowed to enter a continuing objection regarding admission of his statements to police officers based upon the Fifth Amendment and Miranda. After this, the State moved to enter an exhibit bearing on this topic, to which defense counsel explicitly stated, "No objection. Thank you."

After being convicted, the defendant challenged the admissibility of the exhibit. The Court held that the defendant waived his continuing objection to this exhibit by stating that he had "no objection," rather than "no objection other than the continuing objection." Don't make this same mistake.

Brad A. Catlin
Price Waicukauski & Riley, LLC
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Fact Witnesses Cannot Give Expert Opinions

(info) — Wed, 08 Feb 2012 20:39:29 -0600

February 8, 2012

The title of this post makes the 7th Circuit's recent decision in Tribble v. Evangelides, ___ F.3d ___ (7th Cir. 2012), Cause No. 10-3262, sound almost prosaic. However, all is not what it appears to be. What actually happened in this case is quite interesting.

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In 2006, Tribble was arrested by two police officers for drinking in a public way and a search incident to his arrest turned up a herion packet and a baggie of crack cocaine, cauing drug possession charges to be added. The drinking charge was dismissed by the prosecutor. At a preliminary hearing, the judge concluded that there was no probable cause for the drug charges and the remaining charges were dismissed.

Tribble subsequently filed a suit against the officers, claiming that they violated his rights by arresting him without probable cause. At trial, Tribble planned to introduce evidence that the state court judge concluded at the preliminary hearing that there was no probable cause. The defense planned to call a law student who had questioned one of the officers at the hearing under the supervision of a prosecutor to testify that "these charges are traditionally thrown out" in that court. The district court refused to allow this testimony and barred any evidence about why the state court judge reached the conclusion he did.

A week before trial, the defendants were allowed to replace the law student on the witness list with the prosecutor because the law student was unavailable to testify. Notably, the prosecutor was listed as a fact witness, not an expert witness.

At trial, the prosecutor testified that many of the drug charges in the state trial court involving low gram weight were thrown out on probable cause grounds, regardless of their merits, and that Tribble's charges involved low gram weights. The district court overruled Tribble's objections, holding that the prosecutor never offered an opinion. According to the district court, "[she] testified as to her experience on the narcotics call in the state court, offering factual statements based on her personal observations." The jury returned a defense verdict.

Tribble appealed and the 7th Circuit held that the trial court erred in multiple ways. First, it erred by concluding that the prosecutor did not offer an opinion.

It is true that "the distinction between fact and opinion is, at best, one of degree," Beech Aircraft Corp. v. Rainey, 488 U.S. 153, 168 (1988) (citing treatises), but the lead-up to the challenged testimony made it clear that Ebersole was being asked to summarize her experiences in Branch 50 and draw conclusions about how, in general, she believed it operated. Broad generalizations and abstract conclusions are textbook examples of opinion testimony. That should have prompted the district court to consider whether her testimony was admissible under FRE 701 as lay opinion or had to pass the more rigorous standards of FRE 702. See Beech Aircraft Corp., 488 U.S. at 168.

Not only was the prosecutor's testimony an opinion; it was an expert opinion because it was "a prosecutor's-eye view" of how that state court worked. This led to the district court's second error--allowing this testimony despite the fact that the prosecutor had only been disclosed as a fact witness, rather than an expert witness. As this testimony "was critical to [the defendants'] theory of the case," it was prejudicial to allow it. This was not helped by what the Court called the "willfulness in defendants' failure to disclose Ebersole as an expert."

They knew that they wanted to elicit exactly the testimony that they did-—it was the subject of a pretrial ruling against them—-but, nevertheless, they did not disclose Ebersole as an expert. That would have been impossible, of course, without asking the court to revisit its ruling in limine. But that could have been done. Instead defendants pressed their luck at trial and, temporarily at least, got away with it.

This case highlights the problems associated with sharp practice. As the Court pointed out, the defendants tried to get around the district court's in limine ruling without actually challenging it outright. While the district court allowed them to get away with it, the Seventh Circuit was not so lenient. This means that all of the parties must spend the time and resources on another trial--expenses which would have been unnecessary had defense counsel not engaged in those same sharp practices.

Lessons:

Broad generalizations and abstract conclusions are examples of opinion testimony.
An opinion is not a lay opinion if an untrained layman could not make if perceiving the same acts or events.

Brad A. Catlin
Price Waicukauski & Riley, LLC
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Non-Doctors Can Give Expert Opinions on Medical Causation

(info) — Sun, 05 Feb 2012 22:08:54 -0600

February 5, 2012

Last week, the Indiana Supreme Court decided a pair of cases using the same principal; a non-medical expert can give an opinion on medical causation. While the Court's decisions in Bennett v. Richmond, ___ N.E.2d ___ (Ind. 2012), and Person v. Shipley, ___ N.E.2d ___ (Ind. 2012), support this principal, they do not describe the scope of this principal, leaving those answers to further litigation.

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Lessons:

A trial court may allow non-medical experts to give opinions on medical causation if the expert otherwise meets the qualifications of Evid. R. 702.

Brad A. Catlin
Price Waicukauski & Riley, LLC
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