$79.5 million punitive damage award against Philip Morris returns to the U.S. Supreme Court

The U.S. Supreme Court has agreed to review for the third time the $79.5 million in punitive damages that a Multnomah County jury awarded in a tobacco products liability case.  The court today accepted review in Williams v. Philip Morris USA, following the Oregon Supreme Court's decision earlier this year to affirm the punitives award of 97 times compensatory damages.  The state court reached that result by citing a state law defect in a proposed jury instruction on punitive damages, thereby avoiding the question of the instruction's compliance with the federal constitutional standards for due process. 

The U.S. Supreme Court today agreed to review only whether the state court was prohibited from, in effect, ignoring its directive to apply the federal constitutional standard.  It will not address whether the punitive damages are excessive under the Due Process Clause.

See the petition for writ of certiorari here , our coverage of the most recent state court ruling here, and the SCOTUS Blog report on the case here.

Oregon Court of Appeals OKs contract claim despite delayed business registration

Under Oregon statutory law, at 648.135(1), a person operating under an assumed business name cannot file suit on behalf of that business unless the assumed name is registered with the state.  The Oregon Court of Appeals held last week that, even if a party lacked standing to sue because its business name was unregistered, its filing of a registration while the lawsuit is pending can cure the defect.

In Pacific Coast Recovery Service, Inc. v. Janice Jean Johnston, a collection agency appealed from a judgment of dismissal, arguing that the trial court erred in holding that the collection agency lacked standing to maintain an action for breach of contract.  The trial court had determined that, because the collection agency's assignor -- the business that had retained the agency to collect the debt -- had not registered its assumed business name under ORS 648.007 at the time the action was filed, the collection agency was precluded from pursuing its lawsuit. 

In reversing the trial court, the Court of Appeals held that, because the collection agency's assignor had registered by the time the trial court ruled on the motion to dismiss, the asserted lack of standing had been "cured" before the trial court granted the motion to dismiss.  The statutory "cure" will not, however, help plaintiffs where the statute of limitations has expired before registration of the assumed business name.  In those circumstances, according to the Court of Appeals, the action will be barred.

Court dismisses antitrust complaint, then allows discovery

In 2007 the US Supreme Court raised the standards for pleading a federal antitrust claim, holding in Bell Atlantic v. Twombly that plaintiff must plead sufficient facts to suggest an illegal agreement in restraint of trade.  The Ninth Circuit last week agreed to dismiss an antitrust complaint for failing to meet that pleading standard.  What's interesting about the case, Kendall v. Visa USA, Inc., is what happened in the trial court:  the plaintiffs had been allowed to take depositions of defense witnesses after their complaint had been dismissed. 

According to the Ninth Circuit opinion, the district court judge dismissed the initial complaint for failure to plead adequate facts, but agreed that plaintiffs could conduct discovery before filing an amended complaint.  Because the amended complaint continued to be deficient, the court dismissed it without leave to amend.  This case turns the usual litigation process on its head:  a complaint must typically be in place before discovery can begin.  If discovery after dismissal becomes the norm in antitrust cases, expect many disputes over how much discovery defendants must make available to plaintiffs.

See our earlier coverage of the Supreme Court's Twombly opinion here.

New commentary on appeals of class action certification

An article titled Class Certification and Interlocutory Review:  Rule 23(f) in the Courts, by blog contributor Lori Irish Bauman, appears in the most recent issue of the Journal of Appellate Practice and Process. The article critiques the federal circuit courts' application of Federal Rule of Civil Procedure 23(f), which provides for appellate review of class action certification decisions.  It appears in Volume 9, Issue 1 of the Journal, published last week. 

The same issue of the Journal of Appellate Practice and Process includes a study of best practices in 13 state appellate courts, including the Oregon Court of Appeals.

The table of contents for the current issue appears here.  Journal articles are available through Lexis and Westlaw.

Evidence of immigration status allowed on claim for future wage loss under Washington law

In a case of first impression, Washington Court of Appeals, Division I, held yesterday that a plaintiff's immigration status may be admissible where plaintiff claims damages for future wage loss.

The case, Salas v. Hi-Tech Erectors, involved an injured worker's claims against a scaffold supplier for damages caused when the worker slipped from a scaffold ladder at a construction site.  Plaintiff entered the United States on a valid visa, which had since expired, and he had applied for citizenship.  Plaintiff sought to exclude evidence of his immigration status at trial.  The trial court found that if he chose to pursue his claim for impairment of future income, his status as a non-legal resident would be allowed as probative as to the extent of the future impairment.  The Court of Appeals affirmed, stating "we conclude that evidence of a party's illegal immigration status should generally be allowed only when the defendant is prepared to show relevant evidence that the plaintiff, because of that status, is unlikely to remain in this country throughout the period of claimed lost future income."

In the opinion the court discussed differing holdings from several other states.  Look for this and related immigration status issues in other appellate court cases across the country.

Don’t forget to confer before filing a motion in Oregon state court

While it can be easy to overlook the conferral requirement in Uniform Trial Court Rule (UTCR) 5.010, a recent opinion by the Oregon Court of Appeals underscores the importance of communicating with opposing counsel before filing a motion.  UTCR 5.010 requires attorneys to make a good faith effort to confer with the other party before filing most motions under ORCP 21, 23 and 36-46.  In Anderson v. State Farm Mutual Company, the Oregon Court of Appeals made it clear that this requirement is not to be taken lightly.  The defendant in Anderson successfully moved to dismiss an action under ORCP 21 A(3). On appeal, the court held that the requirements of UTCR 5.010 were mandatory, and overturned the trial court’s dismissal because the defendant had failed to confer. The court also held that futility was not an excuse—a party is required to make a good faith effort to confer with the other side even if that party believes that doing so would be futile.

Flawed jury instruction leads Oregon Supreme Court to affirm punitive damages

The 10-year saga of Williams v. Philip Morris, Inc. yields this lesson for Oregon litigators:  keep your jury instructions short.  After remand of the cigarette products liability case by the U.S. Supreme Court, the Oregon Supreme Court last Thursday rejected a jury instruction proposed by Philip Morris, and on that basis affirmed a $79.5 million punitive damages award.  While the lengthy jury instruction may have accurately stated federal law on punitive damages, it misstated Oregon law.

Last year the U.S. Supreme Court, applying federal Due Process law on punitives, issued an opinion signaling that the jury instruction should not have been rejected by the trial court.  But the Oregon Supreme Court has now found that a different section of the three-and-a-half page jury instruction did not accurately recite Oregon's punitive damages law.  Because a jury instruction can be rejected if any part of it is invalid, the trial court did not err in refusing the Philip Morris instruction.  According to Justice Michael Gillette, "asking the court to give a multiple-page instruction . . . involves a significant danger that the proffered instruction will be erroneous in some aspects."  If the instruction had recited only federal law, the Oregon Supreme Court may have found error in refusing to give the instruction, resulting in reversal of the judgment.

See our earlier coverage of the case here.

Oregon trial courts prepare for electronic filing

Oregon's move to "electronic courthouses" (a goal of the 2006 State of the Courts report) continues, with a series of proposed Uniform Trial Court Rules allowing electronic filing and service of circuit court documents.  Proposed UTCR Chapter 21 is among the new and amended rules recently recommended by the UTCR committee.  The electronic filing protocols used in the United States District Court in Oregon are the model on which Chapter 21 is based.  According to the UTCR committee, the proposed rules are a first step toward implementing e-filing on a trial basis in certain counties. 

The UTCR Committee is accepting comments on the rules through April 2008.

Oregon state courts adopt filing fee for motions

Litigation is about to get a little more expensive in Oregon.  Starting  February 1, a filing fee must accompany certain motions and responses to motions in state court.  The fees -- $50 for motions and $35 for responses -- apply to filings including Rule 21 motions to dismiss, summary judgment motions, and motions to compel discovery. 

House Bill 2331, passed in 2007, authorized these new fees.  A committee appointed by Chief Justice Paul DeMuniz determined that the motions subject to the fees are less likely to be used by pro se parties, and tend to require significant judge time. 

See a complete list of motions subject to the fees and more details at the Oregon Judicial Department web site.

Christmas presents for civil procedure fans

A couple of recent appellate decisions may be the type that only civil procedure nerds could love.  But they offer important lessons about how to handle the beginning and the ending of litigation.

Yesterday the Ninth Circuit, in PAE Government Services, Inc. v. MPRI, Inc., addressed whether a plaintiff can be penalized for alleging facts in an amended complaint that contradict the original complaint.  The district court judge found the amended allegations to be "sham pleadings," striking them and dismissing the complaint.  The Ninth Circuit panel reversed, stating "there is nothing in the Federal Rules of Civil Procedure to prevent a party from filing successive pleading that make inconsistent or even contradictory allegations."  While a bad faith filing could result in Rule 11 sanctions, no such sanctions are allowed unless the party is given an opportunity to respond.  Because the district court did not invoke Rule 11's procedural safeguards, it had no grounds to strike the pleading.

And last week the Oregon Court of Appeals took a hard look at one of the last steps in litigation - designating the record on appeal following a trial.  In Ferguson v. Nelson, plaintiffs contended that the trial court erred when it declined to give various proposed jury instructions.  Reversal based on failure to give a jury instruction "is warranted only if the requested instruction both accurately states the law in question and is supported by the evidence when viewed in the light most favorable to the party requesting the instruction," the Court of Appeals stated.  Plaintiffs had failed to designate most of the trial testimony when asking the court to prepare the record on appeal, making it impossible for the Court of Appeals to determine whether the evidence supported the requested instructions.  On that basis, the court refused to consider whether the instructions were erroneous, and it affirmed the judgment for defendant.

Washington Supreme Court refuses to extend eviction time limits

When a residential tenant fails to pay rent in Washington, the landlord is entitled to file an unlawful detainer action for forfeiture of the lease, but only after giving notice to the tenant to pay rent or vacate the premises within three days - or four days if served by mail.  RCW 59.12.040.  Last Thursday the Washington Supreme Court held that the statutory three-day notice period is not extended by Civil Rule 6(a), which calculates time periods of less than seven days by excluding weekends and holidays.

In Christensen v. Ellsworth, the landlord on a Friday (which was also the Fourth of July holiday) mailed notice to the tenant to pay rent or vacate.  Having received no response from the tenant, the landlord then served the summons and complaint for unlawful detainer after four calendar days, on a Wednesday.  The tenant later argued that the landlord had served the summons and complaint too soon, because the computation of the statutory period should have excluded the weekend under Civil Rule 6(a).  The Supreme Court held that the three-day notice provision - or four-day in this case, due to service by mail - is substantive law not subject to the procedural court rules. As such, the court concluded that Civil Rule 6(a) does not apply to a three-day notice in an unlawful detainer proceeding, and the tenant was properly evicted.

Oregon Supreme Court briefs are now the web

Briefs filed with the Oregon Supreme Court are now available on the internet, via links at the calendar page on the court's web site.  See those links here.  Relatedly, a new court rule requires parties to submit briefs to the Supreme Court both on paper and electronically. 

'I thought YOU were taking care of it': Setting aside a default judgment

A business that fails to respond promptly to a summons and complaint can find itself liable for a default judgment.  An opinion issued last week by the Oregon Court of Appeals shows how important it is for companies to adopt internal procedures for handling and responding to a complaint in a timely fashion.

Rule 71 of the Oregon Rules of Civil Procedure allows a court to set aside a default judgment if the default resulted from "mistake, inadvertence, surprise, or excusable neglect."  The Court of Appeals  refused to undo a $250,000 default judgment despite the corporate defendant's claim that its failure to defend itself was a result of excusable neglect.

In Knox v. GenX Clothing, Inc., a customer sued defendant clothing store over defendant's handling of an alleged shoplifting incident.  Corporate executives never hired a lawyer to defend the case, and the court entered a default judgment.  Defendant asked the Court of Appeals to set aside the judgment due to a miscommunication within the company and the executives' lack of understanding of the legal system.  The court agreed with plaintiff that the testimony regarding a miscommunication was not credible, and that ignorance of legal process does not excuse a failure to act. 

Judge Robert Wollheim, writing for the court, noted that if a corporate defendant has in place a procedure for handling a summons and complaint, and if that internal procedure goes awry, then the judgment may be set aside based on excusable neglect.  But having no internal procedure in place leaves a business unlikely to succeed in avoiding a default judgment.

Class action by blind users of Target Corp's website is allowed to proceed

In a potential blow to companies doing business on the Internet, a federal judge in California certified a class action on behalf of blind users of the discount retailer Target Corp's website.  The lawsuit alleges that Target's site is inaccessible to the blind, in violation of anti-discrimination laws.  A copy of yesterday's Order can be found here.

Oregon court filing fees change September 1

Starting September 1, many circuit and appellate court filing fees will change.  The changes reflect, among other things, a temporary surcharge that the legislature imposed to fund an evaluation of court facilities.  The Oregon courts' web site recommends checking on the correct fee amounts before filing with any state court.

The Oregon Court of Appeals' internal practices are on the web

The Oregon Court of Appeals recently released an update of its Internal Practices Guidelines.   According to a statement by Chief Justice David Brewer, "to save printing costs, avoid reliance on outdated materials, and more quickly circulate updates," the guidelines will be distributed primarily via the court's web site.

Also new on that site are the results of a March survey of the bench and bar on the quality of the Court of Appeals' work.  The results are overwhelmingly positive.  For example, 80.4% of respondents agreed that "the Court of Appeals' written opinions reflect thoughtful and fair evaluation of the parties' arguments." The lowest score -- with 63.1% agreement -- came in response to the statement that the court handles its caseload in an expeditious manner. 

Washington Supreme Court: Arbitration awards do not collect pre-judgment interest from the date of the award

Today Washington's Supreme Court ruled that arbitration awards are not 'liquidated' until reduced to judgment and are therefore not subject to pre-judgment interest from the date of award.  In Washington Dep't of Corrections v. Fluor Daniel Inc., Fluor Daniels argued that it was entitled to pre-judgment interest from the date an arbiration award was entered in its favor to the date the award was reduced to judgment.  The Court disagreed, analogizing arbitration awards to jury awards that can be modified prior to being reduced to judgment.  The Court was careful to point out that it did not address whether the underlying damages had been liquidated and subject to pre-judgment interest.

Justice Sanders issued a dissenting opinion.

Supreme Court addresses antitrust pleading rules in Twombly

Monday's antitrust ruling from the U.S. Supreme Court makes it easier for courts to toss out cases at the pleading stage.  Litigators know that, under federal "notice pleading" standards, a complaint need not include an extensive recital of facts; a pleading that simply puts defendant on notice of the nature of the claims is sufficient.  Bell Atlantic Corp. v. Twombly appears to impose a different standard for pleading a Sherman Act Section 1 combination in restraint of trade.  It states that plaintiff must plead enough facts to plausibly suggest an actual unlawful agreement between the defendants.  Such a standard is necessary, according to Justice Souter, to avoid expensive discovery on a claim that lacks merit.

Like the Weyerhaeuser case decided earlier this term, Twombly makes the road that much rougher for antitrust plaintiffs.   

See other law blog coverage of the case here and here.

Marketing agreement may be a RICO violation, Ninth Circuit holds

Courts must resist the impulse to narrowly interpret the standards for civil RICO liability.  That's the message an en banc panel of the Ninth Circuit sent on Friday, as it reinstated a case in which the plaintiffs claimed that a marketing agreement between Microsoft and Best Buy formed the basis for a RICO claim.  Odom v. Microsoft Corp. concerns allegations of a marketing arrangement under which Best Buy gave its customers CDs for trial subscriptions to the MSN service.  Plaintiffs alleged that customers were charged for the MSN subscriptions without their consent, and that because the activity involved wire fraud it constituted a civil violation of the Racketeer Influenced and Corrupt Organizations Act. 

Parsing the technical language of the RICO statute, the court held that, to state a viable claim, plaintiff need not plead that an "associated-in-fact enterprise" has an ascertainable structure separate from its "pattern of racketeering activity."  The court consequently reversed the lower court's dismissal of the complaint.  The court acknowledged a split among the circuits on this pleading issue, but asserted that it's bound by U.S. Supreme Court precedent to read the statute broadly in order "to effectuate its remedial purpose."

See other law blog coverage of the case at How Appealing, Legal Pad, and Blawgletter.

Court of Appeals upholds mandatory arbitration in employment contract

This week the Oregon Court of Appeals reversed the trial court's finding of unconscionability and upheld a mandatory arbitration clause in an employment contract, sending an employee's discrimination and other claims to an arbitrator instead of a jury.  Upon initial employment with the defendant, plaintiff signed an agreement to arbitrate all disputes rather than file suit in civil court.  Both federal and Oregon law favor arbitration, but the enforceability of any arbitration agreement in Oregon is governed by Oregon contract law.  "Unconscionability" is one defense to the enforcement of contracts in Oregon.  The test for "unconscionability" has two parts, one procedural and the other substantive.  A contract is procedurally unconscionable, and therefore not enforceable, if there is "oppression" or "surprise" in the "conditions of contract formation," but unequal bargaining power alone is insufficient for a finding of procedural unconscionability.  A contract is substantively unconscionable if the "terms" of the contract are "unreasonably" one-sided, such that their "effect" makes the parties' respective obligations "so unbalanced as to be unconscionable."

The Court reviewed the terms of the arbitration ageement in light of the foregoing, and held that the agreement was enforceable, sending the case back to be litigated in the agreed-upon arbitration forum.  In doing so, the Court noted that the agreement did not unfairly impair the employee's rights because it provided for the same law as would have applied in court, and for many of the same procedures followed by the courts.  Further, the agreeement did not impose restrictions on the type or amount of recovery that could be awarded by the arbitrator; did not exclude punitive damages or attorney fees; did not impose unreasonable limits on discovery or admissible evidence; and did not impose tight deadlines on the filing of claims.  To read the entire opinion in Motsinger v. Lithia Rose-FT, Inc., click here.

Ignore USDC Local Rules at your peril

   Last week the Ninth Circuit affirmed a million-dollar default judgment against three parties who failed to adhere to some basic local court rules.  In Employee Painters' Trust v. Ethan Enterprises, Inc., filed in the Western District of Washington, two pro se defendants failed to update their mailing addresses with the court in violation of a local rule.  When plaintiffs could not serve those defendants at the addresses on file with the court, the District Court properly entered default.  (The District of Oregon Local Rule 83.12 similarly states that if mail is undeliverable at a last known address, and a party or attorney fails to provide an updated address, the court may enter default or dismiss the action.)

And the third defendant, a corporation, failed to retain replacement counsel when its attorney withdrew, in violation of another local rule.  It, too, was subject to a default judgment as a result.

Ninth Circuit tightens crime-fraud exception

The attorney-client privilege is not as iron-clad as some clients would like to believe.  Communications between a lawyer and client can be subject to discovery and used as evidence under the "crime-fraud exception," which eliminates the privilege for communications made in furtherance of a client's criminal or fraudulent scheme.

The on-going Napster copyright litigation has now spawned a Ninth Circuit opinion that makes it a bit more difficult to destroy the privilege via the crime-fraud exception.  Yesterday in In re Napster, Inc. Copyright Litigation, the court observed that the procedures for applying the crime-fraud exception in the federal courts are "surprisingly unclear."  The court sought to bring clarity the process, holding that (1) both the party seeking discovery of the communications and the party seeking to preserve the privilege must be allowed to present relevant evidence to the trial court, and (2) the burden of proof on the party seeking discovery is preponderance of the evidence.  Formerly, courts had held that the party seeking to enforce the privilege had no right to present evidence on the subject, and that the burden on the moving party was a hard-to-define "prima facie" test.

The copyright plaintiffs had claimed that Bertelsmann AG had made a "sham" loan to Napster, and sought to obtain attorney-client communications relating to that loan under the crime-fraud exception.  The Ninth Circuit held that plaintiffs failed to prove that the exception applied to what was apparently a routine business transaction.

See other law blog discussion of the case here and here.

An advance payment extends the tort statute of limitations, the Oregon Supreme Court holds

Earlier this month the Oregon Supreme Court gave a broad reading to ORS 12.155, which suspends the statute of limitations on a tort claim when a "person" makes an advance payment on that claim, unless the person making the payment also gives written notice of the date that the statute of limitations expires.  While the Court of Appeals held that ORS 12.155 tolls the statute of limitations only when an insurer makes an advance payment, the Supreme Court reversed, holding that an advance payment by any person can extend the limitations period. 

In Hamilton v. Paynter, plaintiff alleged that she was injured when a forklift owned by defendants rear-ended her vehicle.  She claimed that defendants several months later made a $1,000 "partial payment" for the injuries she suffered, but did not give her written notice of the date the statute of limitations would expire on her claim.  She filed suit more than two years after the accident, which defendants claimed was beyond the limitations period.  The court disavowed earlier case law suggesting that only a payment by an insurer can toll the statute of limitations.  Because the defendants made an advance payment but failed to give notice of the limitations period, the statute of limitations was tolled and the claim was timely.

Oregon Supreme Court holds asbestos claim not barred by statute of limitations

Oregon Plaintiffs Lawrence and Patricia Keller may proceed to trial in their asbestos injury cases thanks to the Oregon Supreme Court's recent interpretation of the "discovery rule" in the Oregon statute of limitations.

The Kellers brought suit against various defendants alleging that Lawrence Keller was injured from exposure to asbestos.  The defendants moved to dismiss the suit, arguing that the statute of limitations had run on the claims.  Oregon's asbestos statute of limitations, ORS 30.907(1), provides that:  "A product liability civil action for damages resulting from asbestos-related disease shall be commenced not later that two years after the date on which the plaintiff first discovered, or in the exercise of reasonable care should have discovered, the disease and the cause thereof." 

Lawrence Keller had worked as a mechanic in a muffler shop where he allegedly was exposed to asbestos.  He later developed respiratory ailments and, from the mid-1980s to the mid-1990s, saw various doctors who told him that his exposure to asbestos was a possible cause of his problems.  More than two years before he filed his civil suit in 2000, he filed both workers compensation and social security disability claims in which he alleged that he suffered from his prior exposure to asbestos.

Nonetheless, in a unanimous opinion, the Oregon Supreme Court last week held that a reasonable juror could find that Mr. Keller did not discover his asbestos-related condition until a doctor diagnosed it.  That diagnosis came, for the first time, within the two-year limitations period.  The Court further held that knowledge of his condition and its cause should not be imputed to him while he engaged in a reasonable inquiry and was told by his doctors that the cause of his condition was uncertain.  You can read the opinion here:  Opinion.

Class Action Status Denied in Vioxx Cases

Federal Judge Eldon Fallon, who oversees the thousands of federal Vioxx painkiller cases facing drug maker Merck & Co., denied the plaintiffs' request to certify the personal injury and wrongful death cases as class actions.  Plaintiffs allege that Vioxx increases the risk of heart attacks and other ailments, and Merck pulled Vioxx from the market in 2004.  Judge Fallon determined that the individual differences among the many plaintiffs and their specific medical histories made any class adjudication unmanageable.  The ruling deprives the plaintiffs of leverage to negotiate a comprehensive settlement, as the cases must now proceed on an individual, and more costly, basis.  Merck has vowed not to settle, but to try all cases individually.  Judge Fallon's order can be found here:  Order

Appeals Court Stays Tobacco Sanctions

Without issuing a written opinion, the United States Circuit Court of Appeals for the District of Columbia, on October 31, 2006, stayed a trial court ruling which would have required the big tobacco companies to refrain from using "light," "low tar," and similar phrases in their advertising of so called "light" cigarettes.  In addition to the advertising sanctions, trial court Judge Gladys Kessler's underlying order would have required the tobacco companies to make costly corrective public statements about the harmful effects of smoking cigarettes.  In the absence of the stay, the companies would have had to comply with the prohibition on advertising phrases and taken the other corrective measures by January 1.  The stay by the appeals court allows the tobacco companies to avoid spending millions of dollars complying with the order while they try to convince the appeals court to reverse Judge Kessler's ruling altogether.

On-line auction seller is subject to personal jurisdiction in a distant state, court holds

Can an eBay seller be hauled into court in a distant state by a disappointed buyer?  The answer is yes, at least if defendant uses the on-line auction site as his primary commercial marketing method.  That was the conclusion reached recently by a federal district court judge in the Eastern District of Michigan.  The Michigan plaintiff was the successful bidder on two paintings defendant offered for sale.  Defendant accepted the purchase price but never shipped the paintings, and later offered a refund.  Plaintiff demanded the paintings or their fair market value.  Even though the seller conducted no business operations in Michigan, the court held he was subject to suit there.  Relevant contacts with Michigan included a series of emails and phone calls between the parties, and defendant's acceptance of payment from Michigan.  But most significantly, the seller's extensive use of the internet as his sole marketing channel meant that he should have expected to be subject to suit outside of his home state.
Dedvukaj v. Maloney, 2006 WL 2520347 (ED Mich 2006).

Oregon establishes a "commercial court" specially for business disputes

Thanks to a pilot program that became effective on October 1, parties to business litigation in Oregon can now receive specialized treatment in their own "commercial court."  The novel program operates under the auspices of the Lane County Circuit Court.  The commercial court is designed to handle complex disputes that would be burdensome to the regular court docket.  According to the program's Operating Statement, the commercial court will provide judges and litigants with mechanisms for "fair, efficient and expeditious management of commercial and business litigation." 
The court's features include assignment of each case to a judge with special expertise for all proceedings, and the posting of written decisions in commercial cases on the court's web site.  Parties whose cases are assigned to the court must agree to participate in early alternative dispute resolution efforts, and to make an effort to conduct limited-issue discovery for the purpose of early dispositive motions or settlement. 
Cases pending outside of Lane County may under certain circumstances be transferred to the program by a motion for change of venue.
At a conference yesterday sponsored by the Oregon Law Institute, new Chief Justice Paul J. De Muniz described the commercial court program as one of his initiatives to ensure that Oregon has a competent judicial system on which the business community and the public at large can rely.

Ninth Circuit to allow cites to unpublished opinions

The Ninth Circuit Court of Appeals will soon drop its longstanding prohibition against citation of unpublished opinions.  Proposed Circuit Rule 36-3 parallels proposed Federal Rule of Appellate Procedure 32.1, which provides for the first time that the circuits may not prohibit or restrict the citation of unpublished opinions. Both rules are expected to become effective December 1, 2006.  Circuit Rule 36-3 will allow lawyers to cite unpublished Ninth Circuit opinions -- but only those opinions issued on or after January 1, 2007.  The Ninth Circuit is one of four circuits that has until now banned citation to its unpublished cases.  Advocates should now be able to tap into a large pool of case law: according to estimates, some 80 percent of federal appellate cases nationwide are disposed of by unpublished opinions and orders.

Tobacco Class Action "Light" Certified

US District Judge Jack Weinstein certified a class action comprised of tens of millions of smokers of "light" cigarettes going back more than thirty years.  Unlike other unsuccessful tobacco class actions in which the plaintiffs seek damages for personal injuries and death, in this suit the plaintiffs seek damages based on the difference in value between the cigarettes they purchased and the allegedly safer cigarettes they thought they purchased.  The suit alleges that the tobacco companies perpetrated a fraud of massive scale on the American public when it marketed "light" cigarettes as a safer alternative, when it knew that "light" cigarettes in fact were no safer than the others.  Presumably, the plaintiffs believe they can prove that they would have paid less for the "light" cigarettes if they had known the health risks were the same, or, put another way, that the "light" cigarettes had more value to them.  They contend that surveys indicate that the vast majority of "light" cigarette smokers chose the products for health reasons.  Defendants contend that individual smokers choose their cigarettes for reasons so numerous that class action status is not appropriate.  While Judge Weinstein expressed skepticism about the plaintiffs' damages theory, he nonetheless concluded that the case should proceed to trial (set for January) as a class action.  Damages are estimated to be about $200 billion, and potentially tripled to $600 billion because the case was filed under the RICO statute.  An appeal of the class certification order is sure to follow.  A copy of the 540 page opinion and order can be found here.

Class Action Smokers Denied "Medical Monitoring" and Treatment Costs

The Oregon Court of Appeals dismissed plaintiff's negligence claim in this Oregon state court putative class action on the basis that plaintiff alleged no present injury, but merely the costs of on-going "medical monitoring" and cessation treatment.  The case is:  Lowe v. Philip Morris USA, Inc., et al.

In this case of first impression in Oregon, the plaintiff smoked for several years, and her attempts to quit smoking failed.  Plaintiff did not allege lung cancer or any other physical injury from smoking cigarettes.  The Court noted that plaintiff's complaint rested on allegations of the need for monitoring and treatment "to redress the mere possibility of future harm."  The complaint "fail[ed] to include an allegation of actual, present harm of any sort, much less the physical harm that ordinarily is required to state a claim for negligence."  The only two exceptions to the physical harm requirement under Oregon law--economic loss and infliction of emotional distress--did not apply because, in the case of "economic loss," there was no "heightened duty of care" owed by the defendants, and, in the case of emotional distress, there likewise was no heightened duty, no "intentional conduct," and no physical impact.  Accordingly, plaintiff was unable to state an ordinary negligence claim.  On the other hand, the court left for another day, "whether a negligence claim predicated on different allegations as to the risk of future harm and the certainty of the need for treatment is cognizable under Oregon law," emphasizing that plaintiff alleged only a mere possibility of future harm.

New E-Discovery Rules Coming to a Federal Court Near You

Soon, Federal Rule of Civil Procedure ("FRCP") 26 will be amended to further address the parties' obligations for discovery of electronically stored information.  Essentially, the new Rule does three things:  (1) it specifies "electronically stored information" as discoverable under the initial disclosure requirements of FRCP 26(a)(1); (2) it distinguishes "readily accessible" electronically stored information (which must be produced without a showing of good cause) from such information which is not readily accessible "because of undue burden or cost"; and (3) it requires the parties to confer under FRCP 26(f) "as soon as practicable and in any event at least 21 days before a scheduling conference is held or a scheduling order is due . . . to discuss any issues relating to preserving discoverable information, and to develop a proposed discovery plan [which should deal with] * * * any issues relating to disclosure or discovery of electronically stored information, including the form or forms in which it should be produced." 

The pertinent sections with the new language are as follows:

"Rule 26. General Provisions Governing Discovery; Duty of Disclosure

(a) Required Disclosures; Methods to Discover Additional Matter.

(1) Initial Disclosures. Except in categories of proceedings specified in Rule 26(a)(1)(E), or to the extent otherwise stipulated or directed by order, a party must, without awaiting a discovery request, provide to other parties:

* * * * *

(B) a copy of, or a description by category and location of, all documents, electronically stored information, and tangible things that are in the possession, custody, or control of the party and that the disclosing party may use to support its claims or defenses, unless solely for impeachment;

* * * * *

(b) Discovery Scope and Limits. Unless otherwise limited by order of the court in accordance with these rules, the scope of discovery is as follows:

* * * * *

(2) Limitations.

* * * * *

(B) A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. On motion to compel discovery or for a protective order, the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C). The court may specify conditions for the discovery.

* * * * *

(f) Conference of Parties; Planning for Discovery. Except in categories of proceedings exempted from initial disclosure under Rule 26(a)(1)(E) or when otherwise ordered, the parties must, as soon as practicable and in any event at least 21 days before a scheduling conference is held or a scheduling order is due under Rule 16(b), confer to consider the nature and basis of their claims and defenses and the possibilities for a prompt settlement or resolution of the case, to make or arrange for the disclosures required by Rule 26(a)(1), to discuss any issues relating to preserving discoverable information, and to develop a proposed discovery plan that indicates the parties' views and proposals concerning:

* * * * * *

(3) any issues relating to disclosure or discovery of electronically stored information, including the form or forms in which it should be produced[.]"

Unless Congress acts between now and then, the new rules will apply to cases filed after December 1, 2006, and to any other pending cases if "just and practicable." 

Now, more than ever, parties in litigation--and those anticipating litigation--will need to promptly establish a "litigation hold" on discoverable matter, including all "electronically stored information," as well as a policy to ensure no such information is destroyed or lost.

Proposal to split the Ninth Circuit moves to the Senate Judiciary Committee

The decades-long controversy over whether to divide the federal Ninth Circuit Court of Appeals is expected to move to a hearing before the Senate Judiciary Committee after the August recess.   
The pending proposal, S. 1845, would create a new Twelfth Circuit comprising Alaska, Arizona, Idaho, Montana, Nevada, Oregon and Washington.  California, Hawaii and the Pacific Islands would remain in the Ninth Circuit. 
The long-simmering dispute over the split has gained a higher profile now that Senate Judiciary Committee Chair Arlen Specter has come out in favor of it.
Supporters of the split invoke concerns about ideology -- that a split would alleviate the perceived liberalness of the Ninth Circuit -- and judicial administration -- that with some 50 judges the circuit is just too large to be manageable.  The current bill would address the case backlog at least in part by adding five new judgeships to the reconstituted Ninth Circuit.   But as for political concerns, opponents say a Ninth Circuit dominated by California is not likely to have a different ideological bent. 
For more discussion of the history of, and policies underlying, proposals to split the circuit, see my Oregon State Bar Bulletin article on the topic.

Prompt Response to Discovery Requests Required to Preserve Privilege

Document discovery, particularly in complex business cases, is time-consuming, oftentimes tedious, and generally expensive.  Procrastinating in the face of discovery requests, however, may result in the unintended waiver of the attorney-client privilege.

In Burlington Northern and Santa Fe Ry. Co. v. U.S. Dist. Ct. for Dist. of Mont., 408 F3d 1142 (9th Cir 2005), the Ninth Circuit held that failure to produce a detailed privilege log within the 30-day time period for responding and objecting to document requests constituted a waiver of the attorney-client privilege.  The court did not make the 30-day period a bright line rule, although it did recognize that serving a proper privilege log within that time cannot result in a waiver.  The court said that timeliness determinations must be made on a case-by-case basis, analyzing 1) the degree to which the assertion of the privilege is detailed enough to allow opposing counsel and the court to evaluate the assertion of privilege; 2) timeliness of the objection and production of a detailed log; and 3) the scope of the document production and or other circumstances that make responding difficult (or, for that matter, make it easier).

Why care?  Waiver of the attorney-client privilege can have a devastating impact on litigation.  This is another example of an ounce of prevention being preferable to a pound of cure.  Parties to complex litigation need to recognize that prompt compilation and analysis of requested documents is a high priority, not something to be ignored or delayed.

Blog as persuasive authority in the Ninth Circuit?

A judge on the Ninth Circuit Court of Appeals has ventured into new territory, finding persuasive authority in the blogosphere.  On Monday Judge Diarmuid O'Scannlain of Oregon, dissenting from a denial of rehearing en banc in a First Amendment case, cited a blog post on The Volokh Conspiracy  as support for his position.  That blog post criticized the three-judge panel's decision in the same case from April of this year.

Pebble Beach case limits Internet personal jurisdiction

The owner of the Pebble Beach bed and breakfast in southern England won't have to defend himself in California against a trademark infringement claim by -- who else -- Pebble Beach golf course.  That's the result the Ninth Circuit reached yesterday in Pebble Beach Co. v. Caddy. For nearly a decade courts have struggled with whether a party can be haled into a court far from home simply as a result of its presence on the Internet.  In this case, the court easily concluded that operating a web site at www.pebblebeach-uk.com wasn't sufficient to create personal jurisdiction halfway across the world.

Supreme Court to review Oregon antitrust case

Last week the U.S. Supreme Court agreed to review two antitrust cases -- one from the Second Circuit and the other from right here in Oregon. 

The Oregon case, Ross-Simmons Hardwood Lumber Co., Inc. v. Weyerhaeuser Co., will join Northwest Stationers v. Pacific Stationery in the pantheon of Supreme Court antitrust cases originating in our corner of the world. 

Ross-Simmons addresses the rarely-litigated issue of an illegal monopsony -- also called a buyer-side monopoly, where a single buyer purchases most or all of the output of many suppliers.  Plaintiff in that case, owner of a small saw mill, prevailed on a claim that Weyerhaeuser illegally used its monopsony power to bid up the purchase price of alder logs to supply its sawmills, driving out competing sawmills that could not afford to pay the high input prices.  The challenged activity has been called "predatory bidding" -- the flip side of predatory pricing, which the Supreme Court has most recently addressed in Brooke Group Ltd v. Brown & Williamson Tobacco Co.

One element of the case is noteworthy:  District Judge Panner and the Ninth Circuit concluded that the supply market for alder sawlogs is inelastic, meaning that when Weyerhaeuser bid up the price for logs, there was no source of additional supply.  As a consequence, new suppliers could not enter the market, add to the supply, and bring down the price to levels that competing sawmills could afford.  It was the limited supply of sawlogs that enabled Weyerhaeuser to carry out its scheme to eliminate competing sawmills.

The holding in Ross-Simmons suggests that large purchasers must now monitor the elasticity of the input market when increasing their purchases, so as to determine the potential effect of a rise in input prices.  The Solicitor General, in urging the Supreme Court to accept review, said such an inquiry is fraught with ambiguity and uncertainty, and fails to advance the need for easy-to-administer rules on pricing behavior.