On January 30, 2017, the House Judiciary Committee received two bills that could have a significant impact on litigators and their clients. One bill seeks to impose mandatory penalties on lawyers, law firms, and parties who file frivolous lawsuits. The other bill seeks to prevent fraudulent joinder of parties and prevent plaintiffs from adding defendants solely for the purpose of destroying federal jurisdiction, only to drop those defendants later.
The Lawsuit Abuse and Reduction Act, H.R. 720, would amend FRCP 11 to require judges to sanction attorneys, law firms, or parties who file frivolous pleadings. The mandatory sanction under the new rule would require parties to pay costs and attorneys’ fees. The rule would also give the court broad discretion to impose a variety of other sanctions, including striking pleadings, dismissing the lawsuit, and requiring that a party pay a penalty to the court. Further, the amendment would eliminate a party’s ability to avoid sanctions by voluntarily withdrawing claims within 21 days. The House Judiciary Committee already voted 17-6 in favor of H.R. 720. If it is passed, it will likely cause a substantial decrease in lawyers asserting frivolous claims, as they will have to consider the possibility of mandatory sanctions.
The Innocent Party Protection Act, H.R. 725, seeks to prevent small businesses from being subject to fraudulent joinder. The bill seeks to protect these small businesses by allowing judges more discretion to see through an attorneys’ motives for naming a party and dismiss a party that was fraudulently joined in a lawsuit. The House Judiciary Committee already voted 17-4 in favor of H.R. 725. If it is passed, it may help protect small businesses from the hardship caused by paying attorneys’ fees in a lawsuit in which the business should have never been involved in the first place.
Last week the Oregon Court of Appeals filled a gap in state law on long-arm personal jurisdiction. In Swank v. Terex Utilities, Inc., the court’s focus was ORCP 4D, which provides grounds for personal jurisdiction when an injury within the state arises from an act or omission outside the state. In Swank, plaintiff was injured when a crane owned by his employer collapsed. Plaintiff claimed that out-of-state defendant Manitex was negligent in conducting a retrofit campaign to address a known defect in the crane. Manitex disputed that it was subject to personal jurisdiction in Oregon.
To support long-arm jurisdiction, ORCP 4D provides that, in addition to the in-state injury, there must be evidence that the defendant had some contact with the state. That contact can include defendant’s solicitation or service activities under ORCP 4D(1), or use within the state of products manufactured or serviced by defendant under ORCP 4D(2).
Addressing an issue of first impression, the Court of Appeals held that there must be a link between the injury to plaintiff and defendant’s direct contacts with the state. Judge Armstrong, writing for the court, stated that to comport with due process standards, plaintiff’s claim “must arise out of or relate to at least one of the defendant’s in-forum contacts” listed in ORCP 4D(1) and (2).
Accordingly, defendant’s general sales and solicitations to customers in Oregon did not support personal jurisdiction because the personal injury to plaintiff did not arise from those contacts. However, plaintiff’s claim did relate to and arise from defendant’s efforts to retrofit the defective cranes in Oregon. On that basis, defendant was subject to personal jurisdiction.
The Oregon Court of Appeals last week reinforced the broad scope of Oregon's law stating that "mediation communications" are inadmissible in subsequent proceedings.
In Yoshida's Inc. v. Dunn Carney Allen Higgins & Tongue, the issue was whether emails related to a mediation could be admitted into evidence in a separate legal malpractice case. The client in the malpractice case contended that the defendant lawyer had failed to provide a timely notice to terminate an equipment and software lease, resulting in an automatic renewal of the lease. The client hired a different lawyer to resolve the matter with the lessor, and in a mediation the client agreed to pay a sum of money to terminate the lease and purchase the equipment and software from the lessor. In the trial of the subsequent malpractice case, the trial court admitted into evidence emails associated with the mediation. Defendant lawyer contended that the emails showed that the client suffered no damages as a result of the alleged negligence. A jury entered a verdict in favor of the defendant lawyer.
The Court of Appeals held that it was reversible error to admit the emails. ORS 36.222 states that "mediation communications" -- meaning all communications make in the course of or in connection with a mediation -- are not admissible in any subsequent proceeding, and on that basis the trial court had erred.
The Ninth Circuit Court of Appeals last week handed a trademark victory to Pom Wonderful, reversing a district court decision denying its request for an injunction against competitor Pur Beverages.
Pom Wonderful, maker of the popular POM pomegranate juice drinks, requested a preliminary injunction to bar the defendant from using the word “pŏm” for its pomegranate flavored energy drinks, as seen below.
The district court denied the request, stating that Pom Wonderful did not establish a likelihood of confusion between the marks.
On review, the Ninth Circuit focused on the Sleekcraft factors for likelihood of confusion. Regarding the physical similarities of the marks, the Ninth Circuit found far more in common between the marks than not. “Balancing the marks’ many visual similarities, perfect aural similarity, and perfect semantic similarity more heavily than the marks’ visual dissimilarities – as we must – the similarity factor weighs heavily in Pom Wonderful’s favor.” Furthermore, when considering this factor, strong marks are given greater weight than weak marks. As such, the district court clearly erred by giving more weight to the marks’ differences than their similarities.
The district court also erred in its “brick-and-mortar” trade channels analysis. “Because Pom Wonderful and Pur sell highly similar products in supermarkets located across the country, the marketing channel convergence factor weighs in Pom Wonderful’s favor. The district court clearly erred in . . . requiring Pom Wonderful to prove that its beverages were sold in the very same brick-and-mortar stores as Pur’s ‘pŏm’ beverage.” Though a perfect overlap of retailer locations increases likelihood of consumer confusion, its absence does not undermine the convergence of the marketing channels.
Finally, the district court mistakenly weighed the remaining factors – actual confusion, defendant’s intent, and product expansion –against Pom Wonderful. The absence of any evidence supporting these factors is to be considered merely neutral in a likelihood of confusion analysis.
In weighing the totality of the factors, the Ninth Circuit review revealed that five of the Sleekcraft factors weighed in favor of Pom Wonderful, none weighed in favor of Pur Beverages, and three factors were neutral. Since the district court’s errors created a ripple effect, influencing its decision regarding the remaining preliminary injunction requirements, the Ninth Circuit reversed and remanded.
The Oregon Constitution and Oregon Rule of Civil Procedure 59G(2) both state that "in civil cases three-fourths of the jury may render a verdict." The "same nine" rule requires that, if the questions presented to a jury are interdependent -- such as questions addressing the elements of a single claim -- the same nine out of 12 jurors must agree on every question. Separate and independent questions are not subject to the same nine rule.
Last week the Oregon Supreme Court elaborated on the rule, holding that the same nine jurors need not agree on the amounts of economic and noneconomic damages from the same injury when rendering a verdict.
In Kennedy v. Wheeler, defendant admitted liability for negligence in a personal injury action, and a 12-person jury set economic and noneconomic damages. A jury poll showed that, while 10 jurors agreed on the amount of economic damages and 9 agreed on the amount of noneconomic damages, only 8 jurors agreed on both sums. Defendant objected to the verdict and moved for a new trial, citing the same nine rule.
On review, the Supreme Court stated that the test for applying the same nine rule is whether verdict is logically consistent despite the differing votes. In Kennedy, the verdict did not violate the requirement of a verdict by three-fourths of the jury because there is no logical inconsistency when the same nine jurors do not agree on the amounts of each type of damages.
Addressing an issue of first impression, the Oregon Court of Appeals today held that the inconvenient-forum doctrine, or forum non conveniens, is available as a basis to dismiss a lawsuit in state court. In Espinoza v. Evergreen Helicopters, Inc., the trial court dismissed a wrongful death action arising from a helicopter crash in Peru, applying the inconvenient-forum doctrine. On appeal, plaintiffs contended that Oregon courts lack discretion to decline to exercise jurisdiction.
Judge Rex Armstrong, writing for the court, surveyed Oregon case law and determined that courts have inherent power to decline jurisdiction, including based on the inconvenient-forum doctrine. To obtain dismissal on that basis, a defendant bears the burden of demonstrating that an alternative forum is available and adequate, and that considerations of convenience and justice so outweigh the plaintiff's choice of forum that the action should be dismissed. The court remanded the case to the trial court for application of the new test.
Last week the Oregon Court of Appeals reinforced the challenges facing parties seeking prejudgment interest. In Davis v. F.W. Financial Services, Inc., defendant asserted a counterclaim for conversion of funds, and sought interest accruing on that sum of money through the date of judgment.
According to the court, a claim for prejudgment interest is properly pleaded when the claimant alleges the exact amount due and the dates during which the claimant was deprived of the funds. While the defendant in Davis did allege in its counterclaim the exact amount converted by plaintiff, defendant was denied prejudgment interest because it incorrectly stated the date on which the conversion began. The court reached that result even though the plaintiffs themselves had properly stated in their complaint the date on which they took control of the funds. Because defendant "pleaded only legally erroneous dates" it was not entitled to prejudgment interest.
The Oregon Supreme Court earlier this month refined its test for personal jurisdiction, rejecting thirty-year-old precedent and adopting a flexible approach consistent with more recent U.S. Supreme Court case law.
Robinson v. Harley-Davidson Motor Co. focuses on the test courts use to determine whether a lawsuit arises from or is related to the out-of-state defendant's contacts with the forum. In Robinson, plaintiff was a resident of Oregon who purchased a motorcycle in Oregon, had the motorcycled serviced by defendant dealership in Idaho, and was injured in Wyoming due to defendant's allegedly negligent repair. Plaintiff sued defendant in Oregon, and defendant sought to dismiss on the ground that it was not subject to personal jurisdiction in an Oregon court.
Plaintiff argued for specific jurisdiction, claiming that defendant was subject to suit because it engaged in activity in Oregon and the claim arose from or related to that activity. While the defendant dealership had no physical presence in Oregon, its contacts with the state included selling a limited number of products to Oregon residents through its interactive web site, advertising in publications distributed in Oregon, and selling products to Oregon residents who visit its Idaho location.
In 1982 the Oregon Supreme Court held in State ex rel. Michelin v. Wells that a court may exercise personal jurisdiction when at least one of the defendant's contacts with the forum state is substantively relevant to the cause of action. The court in Robinson acknowledged that this so-called "substantive relevance" test has been rejected by certain federal courts as "mechanical and rigid" and not consistent with more recent U.S. Supreme Court opinions on personal jurisdiction. The court accordingly disavowed Michelin, and stated that litigation arises from and relates to the defendant's activity in the forum if the activity (1) is a but-for cause of the litigation and (2) provides a basis for a determination that the litigation was foreseeable.
Applying this test, the supreme court concluded that defendant's contacts in Oregon were not such that it was reasonably foreseeable that it would be sued in Oregon as a result of work performed in Idaho. On that basis the court affirmed dismissal of the claim against the dealership.
Courts considering motions to certify a class action can't shy away from considering the merits, if doing so is necessary to determine whether the class meets the requirements of FRCP 23(a). That was the conclusion reached last week by the US Supreme Court in Comcast Corp. v. Behrend.
In Comcast, the plaintiffs sought to certify a class of Comcast cable television customers in the Philadelphia area. Plaintiffs claimed an antitrust violation arising out of Comcast's acquisition of competitor cable providers. In order to certify a class action under FRCP 23(a), plaintiffs were required to show, among other things,that damages were measurable on a classwide basis through a common methodology. In agreeing to certify the class, the Third Circuit Court of Appeals refused to entertain certain of defendant's arguments about the plaintiffs' damages model because those arguments had a bearing on the merits of plaintiffs' claim.
Justice Scalia, writing for the majority, stated that the inability of plaintiff's expert to tie the above-market prices to the alleged antitrust violations made the case improper for class certification. The Third Circuit's refusal to address that issue because it touched on the merits was improper.
The Oregon Court of Appeals last week affirmed a jury award of $100,000 in punitive damages in a case where compensatory damages were $500. The Court applied the standards set forth by the Oregon Supreme Court last year in Hamlin v. Hampton Lumber Mills, Inc., finding that the defendant engaged in sufficiently reprehensible behavior to justify punitive damages 200 times compensatory damages.
In Lithia Medford LM, Inc. v. Yovan, defendant purchased an automobile from plaintiff, and soon thereafter found a discrepancy between the mileage on the odometer and the actual mileage. Following an extended dispute over how to resolve the issue, plaintiff sued to rescind the sale due to mutual mistake. Defendant counterclaimed for violation of the Oregon Unlawful Debt Collections Practices Act. The trial court reduced the jury's award of $100,000 in punitive damages to $2,000, to bring it in line with the modest amount of compensatory damages.
Hearing the case en banc, the Court of Appeals split on whether the trial court properly reduced the punitives award to a single-digit multiple of the compensatory damages. Judge Nakamoto, writing for the majority, stated that the consumer had proven that the car dealer "repeatedly used deceptive and abusive tactics against a financially vulnerable consumer to enhance its financial interests." The court also pointed to the dealer's "arrogant presentation to the jury of its position that it had done nothing wrong" to justify retaining the jury's punitive damages award. These facts supported the 200-1 ratio of punitive to compensatory damages.
Judge Wollheim, writing for the minority, advocated for reducing the punitives to $25,000, which is comparable to the statutory penalties available under the Unlawful Debt Collections Practices Act.
See our discussion of Hamlin, and its analysis of punitive damages in cases in which compensatory damages are small, here.