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VOL. 64, NO. 1 FALL 2014
UARTERLY
TECHNOLOGY AND THE FOURTH AMENDMENT: HISTORY AND APPLICATION OF PRINCIPLES OF DECISION IN LIGHT OF NEW MEANS OF SURVEILLANCE David M. Fuqua and Christopher M. Stevens
TURNING NEW GUNS ON OLD TARGETS: CLASS ACTIONS AGAINST INSURANCE COMPANIES Wystan Ackerman
MEDIATION IN THE UNITED STATES CIRCUIT COURTS OF APPEALS: A SURVEY Craig A. Marvinney
LIABILITY FOR SUDDEN MECHANICAL FAILURE ON THE HIGHWAY: THE “WHEEL OFF” CASE Robert A. Biggs, III
ON COLOR BACKGROUND
ON WHITE BACKGROUND
Q
FEDERATION OF DEFENSE & CORPORATE COUNSEL
PUBLICATIONS CHAIRBRUCE D. CELEBREZZESedgwick LLP San Francisco, [email protected]
FDCC QUARTERLY-EDITORSUSAN M. POPIK38 Woodhill DriveRedwood City, CA [email protected] Fax
EDITOR-WEBSITEDAVID M. FUQUAFuqua Campbell, PALittle Rock, [email protected]
EDITOR-FLYERGREGORY A. WITKEPatterson Law FirmDes Moines, [email protected]
DIRECTORSROBERT L. CHRISTIEChristie Law Group, PLCCSeattle, WA [email protected]
EDWARD J. CURRIE, JR.Currie Johnson Griffin Gaines & Myers PAJackson, MS [email protected]
ANDREW B. DOWNSBullivant Houser Bailey, PCSan Francisco, CA [email protected]
MICHAEL T. GLASCOTTGoldberg Segalla, LLPBuffalo, NY [email protected]
HOWARD M. MERTENPartridge, Snow & HahnProvidence, [email protected]
LESLIE C. PACKEREllis & Winters, LLPRaleigh, [email protected]
BRETT J. PRESTONHill Ward & Henderson PATampa, FL [email protected]
TODD A. ROBERTSRopers, Majeski, Kohn BentleyRedwood City, CA [email protected]
W. MICHAEL SCOTTCrownQuest Operating, LLCMidland, [email protected]
SENIOR DIRECTORSBRUCE D. CELEBREZZESedgwick LLP San Francisco, [email protected]
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FDCC OFFICERSPRESIDENTTIMOTHY A. PRATT Boston Scientifc Corporation Natick, MA 508-650-8616 [email protected]
PRESIDENT-ELECTVICTORIA H. ROBERTSMeadowbrook Insurance Group Scottsdale, [email protected]
SECRETARY-TREASURERSTEVEN E. FARRAR Smith Moore Leatherwood LLP Greenville, SC [email protected]
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FDCC HISTORIANSTEPHEN P. PATENorton Rose Fulbright Houston, [email protected]
CLE COORDINATORFRANCIE BERG3714 22nd Avenue SouthMinneapolis, MN, [email protected]
Fall 2014 Volume 64, Number 1
Contents
QUARTERLYFDCC
Cite as: 64 FED’N DEF. & CORP. COUNS. Q. ___ (2014).The Federation of Defense & Corporate Counsel Quarterly is published quarterly by the Federation of Defense & Corporate Counsel, Inc., 11812 North 56th Street, Tampa, FL 33617. Readers may download articles appearing in the FDCC Quarterly from the FDCC website for their personal use; however, reproduction of more than one copy of an article is not permitted without the express written permission of the FDCC and the author.
Copyright, 2014, by the Federation of Defense & Corporate Counsel, Inc.
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Technology and the Fourth Amendment: History and Application of Principles of Decision in Light of New Means of Surveillance David M. Fuqua and Christopher M. Stevens ...............................................................2
Turning New Guns on Old Targets: Class Actions Against Insurance Companies Wystan Ackerman .......................................................................................................26
Mediation in the United States Circuit Courts of Appeals: A Survey Craig A. Marvinney .....................................................................................................53
Liability for Sudden Mechanical Failure on the Highway: The “Wheel Off” Case Robert A. Biggs, III .....................................................................................................68
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Technology and the Fourth Amendment: History and Application of Principles
of Decision in Light of New Means of Surveillance†
David M. FuquaChristopher M. Stevens
I.Introduction
In August 2012, New York City Mayor Michael Bloomberg unveiled a new police sur-veillance technology known as the “Domain Awareness System” (DAS).1 DAS, developed in partnership with Microsoft, will aggregate and analyze video streams from about 3,000 closed-circuit television cameras, images from license-plate readers and traffic cameras, and data from public and private databases.2 The system allows investigators instant ac-cess to arrest records, 911 calls associated with a suspect, and related crimes occurring in a particular area, and even enables them to track where a car associated with a suspect is located and has been in the past.3 “What you’re seeing is what the private sector has used for a long time,” Bloomberg said at the unveiling.4 “If you walk around with a cell phone,
† Submitted by the authors on behalf of the FDCC Civil Rights and Public Entity Liability Section. 1 Chris Dolmetsch & Henry Goldman, New York, Microsoft Unveils New Crime Tracking System, Bloomberg News (Aug. 8, 2012), http://www.bloomberg.com/news/2012-08-08/new-york-microsoft-unveil-joint-crime-tracking-system.html. 2 Id. 3 Id. 4 NYPD’s ‘Domain Awareness’ Surveillance System, Built by Microsoft, Unveiled by Bloomberg, Huffing-ton Post (Aug. 9, 2012), http://www.huffingtonpost.com/2012/08/09/nypd-domain-awareness-surveillance-system-built-microsoft_n_1759976.html.
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5 Id. 6 Dolmetsch & Goldman, supra note 1. 7 Corey McKenna, Virtual Alabama Facilitates Data Sharing Among State and Local Agencies, Emergency Mgmt. (July 24, 2009), http://www.emergencymgmt.com/disaster/Virtual-Alabama-Facilitates-Data.html.
David M. Fuqua practices law in Little Rock, Arkansas and is a partner in the firm of Fuqua Campbell, P.A., where he specializes in employment, civil rights, and commercial litigation. He is a graduate of the University of Arkansas School of Law (1980), with honors. David is a member of the Federation of Defense & Corporate Counsel, the American Board of Trial Advocates, and DRI. He served two terms on the Board of Governors of the Arkansas Bar Association and is a tenured member of the Association’s House of Delegates. David chaired the Arkansas Supreme Court task force on electronic discovery rules and the Court’s task force that
drafted Administrative Order 21, establishing the rules for electronic filing in that state. He currently serves on the Automation Committee of the Arkansas Supreme Court.
the cell phone company knows where you are. . . . We’re not your mom and pop’s police department anymore.”5 Bloomberg also said that selling the system to other cities may al-low New York to “recoup all of our expenses over a period of time and maybe even make a few bucks.”6
It is easy to see the appeal of surveillance technologies like New York’s DAS and Vir-tual Alabama—a Google-developed system similar to DAS that also gathers and examines information from a variety of databases.7 Disaster response, criminal investigations, pros-ecution rates, and anti-terrorism efforts can all benefit from these types of technologies. On the other hand, citizens can reasonably fear that the government’s use of these technologies will run roughshod over civil liberties and eventually lead to an Orwellian dystopia. Digital technologies have revolutionized society just in the last few decades, and courts are not the only ones struggling to keep up. Review of Fourth Amendment case law from the early and mid-twentieth century shows that courts have often played catch-up to revolutionary technologies. This article tracks the development of the Fourth Amendment from ratification to the present, and it will show that the Amendment’s jurisprudential development is spurred not only by the government’s use of new technologies to investigate the lives of individuals but also by the way that social behavior has changed in response to new technologies. This article will also address the most recent developments in Fourth Amendment case law.
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II.History of the Fourth Amendment
The history of the Fourth Amendment can be divided into two mostly distinct narratives: the first, taking place in the second half of the eighteenth century, chronicles the formation and adoption of the Amendment’s text; the second, beginning in the twentieth century and continuing until today, traces the cases and commentaries that began to accumulate at first in response to the growth of federal law enforcement and then, at a rapid rate, in response to the development of new technologies. Before the 1920s, the Supreme Court rarely de-cided Fourth Amendment cases. When it did, the Court typically focused on the meaning of “searches,” analogizing to the historical example of home invasions in colonial America to guide its analysis. With the proliferation of automobiles and telephones in the first half of the twentieth century, and then later with the rapid development of law-enforcement tools like telephoto lenses, parabolic microphones, wireless-communication devices, aerial-surveillance vehicles, and thermal imaging devices, the limitations of a comparison to the physical search employed by eighteenth-century British customs officials soon became apparent.
A. 1750 to 1791 The Fourth Amendment was ratified in 1791. The widely publicized abuses by British officials at that time played no small part in “the colonists in the New World [considering] a right against unreasonable searches and seizures to be one of the important rights held against government.”8 But as William Cuddihy details in The Fourth Amendment: Origins and Original Meaning, 602-1791, the ideas underlying the Amendment were formed over centuries and not just in the years immediately preceding ratification.9 Cuddihy writes that
Chris Stevens is a Little Rock native. He attended Hendrix College for his undergraduate education and completed his legal studies at the University of Arkansas in Fayetteville. During law school, Chris clerked for Arkansas Supreme Court Justice Robert Brown. Chris began practicing law in 2012. His primary areas of practice are civil rights litigation, commercial law, and employment law.
8 Orin S. Kerr, The Curious History of Fourth Amendment Searches, Sup. Ct. Rev. (Sept. 30, 2013), available at http://ssrn.com/abstract=2154611. 9 William J. Cuddihy, The Fourth Amendment: Origins and Original Meaning, 602-1791, at 734 (2009).
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10 Id. at 771.11 Id. at 356-65.12 William Cuddihy & B. Carmon Hardy, A Man’s House Was Not His Castle: Origins of the Fourth Amendment to the United States Constitution, 37 Wm. & Mary Q. 385 (1980).13 Cuddihy, supra note 9, at 365.14 Id. at 356.15 Id. at 363.16 Id. at 513-14.17 Id. at 413, 661, 748-49.18 Id. at 749.19 Id. at 740.
the “preponderant motivation behind the [Fourth Amendment]”—the rejection of general warrants in favor of specific warrants—originated in Britain in the late 1600s with legal commentators such as Henry Care, William Hawkins, Giles Jacob, and Sir Matthew Hale.10 General warrants do not limit searches to previously identified people, things, or locations, and the significant increase in the use of general warrants from 1730 to 1760 in Massachusetts, in particular, led to widespread discontent and revolt in the colony.11 Colonial officials pos-sessed such broad authority and were subject to such a minimal degree of judicial oversight that in the mid-eighteenth century “a man’s house was even less of a legal castle in America than in England.”12
The Excise Act of 1754 empowered tax collectors to conduct general searches and “required everyone to maintain an account of his family’s annual consumption [of spirits] and swear to its veracity if the local excise officer asked.”13 Colonial critics protested that the act, and especially its interrogation clause, infringed on “the constitution, Magna Carta, natural rights, and ‘that Security which every man enjoys in his own House.’”14 Addition-ally, colonial opposition to writs of assistance (court orders allowing customs officials to “enter and search all places”) reached a boiling point by 1760. The death of King George II in 1760 was a significant factor in this regard, as writs of assistance were effective for the entire length of a monarch’s reign and then six months after the end of the reign.15 In the months following the death of King George II, new applications met resistance. Colonial judges in Maryland and South Carolina “ignored rather than refused requests for the writs,” and in Rhode Island the Superior Court delayed its consideration of applications for the writs “on grounds that two of its members were absent.”16
But general warrants and general searches were not the only “search and seizure” concerns of the colonists. By 1791, a consensus in colonial America had also developed in opposition to nocturnal searches, which had “remained the norm” until the 1690s;17 to no-knock entries;18 and to specific warrants that identified multiple locations to be searched.19
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Other doctrines, such as probable cause and search incident to arrest,20 which are now firmly entrenched in Fourth Amendment jurisprudence, were still developing in 1791. According to Cuddihy, the Fourth Amendment contains “a depth and complexity that transcend[s]” the text; “[t]he amendment expressed not a single idea but a family of ideas whose identity and dimensions developed in historical context.”21 Although the authors of the Fourth Amend-ment were concerned with prohibiting general warrants and general searches, Cuddihy writes that “[p]rivacy was the bedrock concern of the amendment, not general warrants.”22
B. 1919 to Present The first Supreme Court case to interpret the meaning of the word “search” in the Fourth Amendment was decided almost a century after ratification of the amendment. In Boyd v. United States, decided in 1886, the Supreme Court considered whether “a search and seizure [was] equivalent [to] a compulsory production of a man’s private papers.”23 After United States customs officials charged Boyd with fraudulently importing thirty-five cases of plate glass into the port of New York, the government moved to seize the glass as forfeited to the United States.24 The government also demanded that Boyd produce an invoice concerning a prior shipment of plate glass.25 Boyd argued that compulsory production of his private papers was an unreasonable search under the Fourth Amendment, and the Court agreed, compar-ing the government’s actions to that of revenue officers in colonial America “issuing writs of assistance . . . empowering them . . . to search suspected places for smuggled goods.”26 While admitting that the search in Boyd was not as “aggravating” as historical incidents of search and seizure, the Court made clear it would not willingly tolerate any erosion of the Fourth Amendment: “It may be that it is the obnoxious thing in its mildest and least repul-sive form; but illegitimate and unconstitutional practices get their first footing in that way, namely, by silent approaches and slight deviations from legal modes of procedure.”27 The best prevention, according to the Supreme Court in 1886, would be to “liberally construe[]” the amendment.28 The importance of the interests protected by the Fourth Amendment was made clear in Boyd.
20 Id. at 578, 771 (noting that the doctrine of probable cause “never occasioned the intensity or depth of thought, adjudication, and legislation” that was associated with general warrants).21 Id. at 770.22 Id. at 766.23 116 U.S. 616, 622-23 (1886).24 Id. at 617-18.25 Id.26 Id. at 625.27 Id. at 635.28 Id.
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Why, then, were so few Fourth Amendment cases decided prior to the twentieth century? One reason is that there was no automatic right to appeal federal criminal convictions until 1889, and even then the right was limited to appeals in cases in which a death sentence had been imposed.29 A related reason is that the Fourth Amendment prohibitions initially applied only to the federal government. In the eighteenth and nineteenth centuries, states were free to develop their own doctrines of search-and-seizure law.30 The ratification of the Fourteenth Amendment in 1886, along with its incorporation doctrine, provided a basis for the Supreme Court to apply the Fourth Amendment to the states in 1949,31 but the teeth of the Fourth Amendment—the exclusionary rule—did not apply to the states until 1961.32 The majority of law enforcement activity has always taken place at the state level, but the difference in degree was much larger prior to the twentieth century. This combination—the lack of federal criminal investigations implicating the Fourth Amendment and a lack of an automatic right to appeal—was a potent reason that Fourth Amendment jurisprudence remained underdeveloped until the twentieth century. The dynamics of federal law enforcement changed dramatically in the twentieth century. The first important change was precipitated by ratification of the Eighteenth Amendment and adoption of its enabling legislation, the National Prohibition Act, in 1919, which “prohibited” the “manufacture, sale, [and] transportation of intoxicating liquors within . . . the United States.”33 Although intemperance was a concern throughout the previous century, crusad-ing clergymen and organized lobbyists such as the Anti-Saloon League convinced many Americans by 1919 that the vice was spreading “with the rapidity and power of a tempest,” and that America “was fast becoming a nation of drunkards.”34 Although it was thought at the time that prohibition would lower crime rates and increase workers’ productivity, the
29 Act of February 6, 1889, ch. 113, § 6, 25 Stat. 656. There was no general right to appeal federal criminal convictions until 1911. Act of March 3, 1911, ch. 231, § 240, 36 Stat. 1157 (1911).30 See Weeks v. United States, 232 U.S. 383, 398 (1914) (noting that the Fourth Amendment did not apply to the local investigators who participated in the search of Weeks’s home).31 Wolf v. Colorado, 338 U.S. 25 (1949).32 In Mapp v. Ohio, 367 U.S. 643 (1961), the Supreme Court extended the exclusionary rule—which prohibits evidence collected or analyzed in violation of the defendant’s constitutional rights from being used at trial—to state courts. The exclusionary rule has received a large amount of criticism over the years, the most famous of which was authored by Judge Benjamin Cardozo, then of the New York Court of Ap-peals: “The criminal is to go free because the constable has blundered.” People v. Defore, 150 N.E. 585, 587 (N.Y. 1926). 33 U.S. Const. amend. XVIII, § 1 (repealed 1933). Forty-six states ultimately ratified the Eighteenth Amendment; only Rhode Island and Connecticut refused to do so.34 W.J. Rorabaugh, The Alcoholic Republic: An American Tradition 5 (1981).
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consensus today is that prohibition was an unmitigated failure on many fronts. A study of over thirty major cities during the years 1920 and 1921 found that the number of crimes increased by twenty-four percent35
The rise in crime during the prohibition era led to an increase in federal criminal in-vestigations, which in turn led to an increase in the number of Fourth Amendment cases decided by the Supreme Court. One such case was United States v. Lee, in which the Court held that government officials who shined a searchlight on a boat at night to reveal cases of liquor on deck did not perform a “search” within the meaning of the Fourth Amendment.36 Although a searchlight is not the type of technology likely to stretch the textual bounds of the Fourth Amendment, the conduct at issue was plainly different than the often-referred-to historical example of a physical intrusion of a home by a British customs official in 1760. The Court found it useful to compare the search in Lee to a search enhanced by eighteenth century technology: “Such use of a searchlight is comparable to the use of a marine glass or a field glass. It is not prohibited by the Constitution.”37
In 1927 (the year Lee was decided), the Supreme Court had yet to be confronted with a Fourth Amendment case involving a technology that could truly be said to extend beyond the contemplation of the Framers. But in the following year certiorari was granted in Olmstead v. United States, presenting the Court with a novel challenge: “whether the use of evidence of private telephone conversations, between the defendants and others, intercepted by means of wire tapping, is a violation of the Fourth [Amendment].”38 Olmstead was “[t]he last major Supreme Court decision concerning prohibition enforcement” and “in many ways the most controversial and significant.”39 The Court split fiercely five-to-four. Chief Justice William Howard Taft, “whose crusade for stricter enforcement of prohibition reached its zenith in [Olmstead],”40 authored the majority opinion. Justices Oliver Wendell Holmes, Louis Brandeis, Pierce Butler, and Harlan Stone each wrote separate dissents. The defendant was Roy Olmstead, who in 1920 was “the youngest and most charismatic lieutenant in the Seattle police department.”41 Olmstead also built a vast smuggling opera-tion importing Canadian liquor into Washington State and became known as the “king of the rumrunners.”42 Olmstead was well liked by the public because “[h]e never corrupted his
35 Charles Hanson Towne, The Rise and Fall of Prohibition: The Human Side of What the Eigh-teenth Amendment Has Done to the United States 159-62 (1923).36 274 U.S. 559, 563 (1927).37 Id.38 Olmstead v. United States, 19 F.2d 842 (9th Cir. 1927), cert. granted, 276 U.S. 609, 609-10 (1928).39 David E. Kyvig, Repealing National Prohibition 34 (2d ed. 2000).40 Id. 41 Robert Post, Federalism, Positive Law, and the Emergence of the American Administrative State: Pro-hibition in the Taft Court Era, 48 Wm. & Mary L. Rev. 1, 139 (2006).42 Id.
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merchandise” and “never allowed his employees to arm themselves, lecturing them sternly that no amount of money was worth a human life.”43
Olmstead was convicted in 1925 with evidence gathered by wiretaps inserted into telephone wires “in the streets near the houses.”44 Although wiretapping was “the principal method used [by federal prohibition agents] to catch [prohibition] offenders,”45 wiretapping was actually outlawed in Washington and twenty-five other states.46 Olmstead was even aware that he was being wiretapped by federal agents; when the prohibition bureau’s free-lance wiretapper offered to sell Olmstead transcripts of his conversations, Olmstead “replied that he knew something about the rules of evidence, that such a transcript could never be used in court against him, that wire tapping was against state law, and that [the wiretapper] could go to hell.”47
The narrow holding of Olmstead is that wiretapping did not constitute a search or sei-zure under the Fourth Amendment.48 Taft’s majority opinion in Olmstead begins with an explanation that “[t]he well known historical purpose of the Fourth Amendment . . . was to prevent the use of governmental force to search a man’s house, his person, his papers and his effects.” Because the wiretapping technology allowed government officials to gather evidence without appropriating Olmstead’s house, his person, or any of his papers or effects, the majority concluded that the Fourth Amendment “does not forbid what was done here. There was no searching.”49 The wires tapped by federal agents “were not part of [Olmstead’s] house or office any more than are the highways along which they are stretched.”50
43 Norman H. Clark, The Dry Years: Prohibition and Social Change in Washington 166 (1965).44 Olmstead v. United States, 277 U.S. 438, 457 (1928).45 Jacob W. Landynski, Search and Seizure and the Supreme Court: A Study in Constitutional Interpretation 87 (1966).46 Olmstead, 277 U.S. at 479 n.13 (Brandeis, J., dissenting).47 Clark, supra note 43, at 168.48 Olmstead, 277 U.S. at 464-69 (1928).49 Id. at 464.50 Id. at 465. As detailed by Robert Post, dean and professor of law at Yale University, Justice Taft “had just been through a difficult personal situation.” Post, supra note 41, at 143 n.477. Taft’s son Charles was involved in the prosecution of the notorious bootlegger George Remus, who was charged with murder after “he shot his wife in plain daylight as she was driving to the court to divorce him.” Id. Remus claimed temporary insanity due to the fact that his wife had cuckolded him with a federal prohibition investigator while he was in prison serving time for prohibition offenses. Id. During the trial, Remus threatened Charles several times, even telling Charles in open court, “It has been the pleasure of this defendant to appear before [Chief Justice Taft], but the specimen as given by this offshoot of that great renowned character is pitiful. . . . [M]an, if I had you in the corridor I would wreck you physically.” Id.Taft received word during the trial that Remus “was looking for a weapon to use it on Charlie.” Id. He wrote to his brother Horace, “We seem to be surrounded by bootlegging atmospheres. . . . Remus is a bad man and I rather think a dangerous man. The bootlegging seems to develop an indifference to murder and to make people think that murder can be committed with immunity.” Id.
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The most famous of the four dissents in Olmstead was that of Louis Brandeis, who years earlier had argued for a “right to privacy.”51 Like Taft’s majority opinion, Brandeis’s dissent also contains a description of the historical context of the Fourth Amendment, although Brandeis begins on a much grander level: “The makers of our Constitution undertook to secure conditions favorable to the pursuit of happiness.”52 In this vein, “[t]hey sought to protect Americans in their beliefs, their thoughts, their emotions, and their sensations. They conferred as against the Government, the right to be let alone—the most comprehensive of rights and the right most valued by civilized men.”53 Brandeis then turned to a chief concern of his and a concern held by many others at that time:
The progress of science in furnishing the Government with means of espionage is not likely to stop with wire-tapping. Ways may some day be developed by which the Government, without removing papers from secret drawers, can reproduce them in court, and by which it will be enabled to expose to a jury the most intimate occurrences of the home. Advances in the psychic and related sciences may bring means of exploring unexpressed beliefs, thoughts and emotions. “That places the liberty of every man in the hands of every petty officer” was said by James Otis of much lesser intrusions than these.54
Brandeis’s dissent acknowledged that social and legal norms change, and that often a major reason for this change is the advancement of technology. The primary Fourth Amend-ment concern of Americans of the 1920s and 1930s may still have been physical intrusions by government agents, but they increasingly had reason to be concerned about nonphysical intrusions as well. The Bell Company began telling Americans in the 1920s that “Your voice is you”; and AT&T first told potential customers to “Reach out and touch someone” in the 1930s.55 The specter of government agents listening in on intimate conversations loomed large after Olmstead. Brandeis’s vigorous protest of government wiretapping would prove longer lasting than Taft’s affirmation. In response to significant criticism of the Olmstead decision, Congress passed the Federal Communications Act of 1934, providing that “no person not being au-
51 Samuel D. Warren & Louis D. Brandeis, The Right to Privacy, 4 Harv. L. Rev. 193, 195-96 (1890) (“Re-cent inventions and business methods call attention to the next step which must be taken for the protection of the person. . . . Instantaneous photographs and newspaper enterprise have invaded the sacred precincts of private and domestic life; and numerous mechanical devices threaten to make good the prediction that ‘what is whispered in the closet shall be proclaimed from the house-tops.’”).52 Olmstead, 277 U.S. at 478 (Brandeis, J., dissenting).53 Id. 54 Id. at 474.55 John H. Lienhard, Engines of our Ingenuity: Episode 1487: Telephone Use (Houston Public Radio broadcast), available at http://www.uh.edu/engines/epi1487.htm.
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thorized by the sender shall intercept any communication or divulge or publish the [content of the communication].”56 On December 25, 1935, Franklin D. Roosevelt granted Olmstead a full presidential pardon, restoring him all of his constitutional rights, and remitting the $8,000 in fines and $2,288 in court costs that Olmstead had incurred.57 And finally, almost forty years later, Olmstead was overruled. Katz v. United States,58 the 1967 Supreme Court case that overruled Olmstead and for-mulated a new Fourth Amendment search doctrine, has been called “the king of Supreme Court surveillance cases”59 and the “lodestar”60 in determining whether electronic surveil-lance is a search. The petitioner, Charles Katz, was convicted of transmitting wagering information by telephone from Los Angeles to Miami and Boston, in violation of federal law.61 The basis for the conviction was Katz’s end of several telephone conversations that federal agents recorded using electronic listening devices.62 The devices were attached to the top of two public telephone booths, which Katz used to place his calls.63 Under Olmstead’s holding, the government’s actions in Katz would not have implicated the Fourth Amendment. Nothing of substance was confiscated. No search of Katz’s home, person, papers, or effects took place. The telephone booths from which Katz made his bets were open to the public. The microphones attached to the telephone booths did not even physically penetrate the interior of the booths—they were taped to the top of the booths. But the Supreme Court, in an opinion authored by Potter Stewart, reversed course and held that the government agents had performed a search within the meaning of the Fourth Amendment because the agents “violated the privacy upon which [Katz] justifiably relied when using the telephone booth.”64
56 47 U.S.C. § 605 (1934); see also Daniel J. Solove et al., Privacy, Information, and Technology 83 (2006). Section 605 was limited to wire communications only; eavesdropping on non-wire communica-tions (e.g., bugging) was not prohibited by the act. Id.57 Peter Winn, Katz and the Origins of the “Reasonable Expectation of Privacy” Test, 40 McGeorge L. Rev. 1, 2 n.6 (2009).58 389 U.S. 347 (1967).59 Peter P. Swire, Katz Is Dead. Long Live Katz, 102 Mich. L. Rev. 904, 904 (2004).60 Smith v. Maryland, 442 U.S. 735, 739 (1979).61 Katz, 389 U.S. at 348.62 Id.63 Id.64 Id. at 353.
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While the concern in Olmstead was the ability of new technologies to penetrate tradi-tionally private places, Katz reflected on a different technology-related phenomenon—the way social behavior had evolved in response to new technologies.65 In the most famous line from Katz, the Court recognized that “the Fourth Amendment protects people, not places.”66 The new focus on people meant that the Fourth Amendment would thereafter be sensitive to changes in people’s behavior. In 1967, Charles Katz was able to “justifiably rely” that a public telephone booth would be a private space because social behavior dictated such. “No less than an individual in a business office, in a friend’s apartment, or in a taxicab, a person in a telephone booth may rely upon the protection of the Fourth Amendment. One who occupies it, shuts the door behind him, and pays the toll that permits him to place a call is surely entitled to assume that the words he utters into the mouthpiece will not be broadcast to the world.”67 The Court would come to apply the “reasonable expectation of privacy” test to define the contours of Fourth Amendment protection.68 The test is found in Justice Harlan’s con-curring opinion in Katz. It requires both a subjective and objective expectation of privacy, although as many have pointed out, the “defendant’s subjective expectation of privacy is almost never relevant to the constitutionality of government action.”69 The Katz test has drawn explicit criticism from many, including several current Supreme Court justices. Justice Scalia has remarked that the reasonableness of an expectation of pri-vacy bears an “uncanny resemblance” to what the Supreme Court considers reasonable.70 And Justice Alito has pointed out one important variable in the test:
[T]he Katz test rests on the assumption that this hypothetical reasonable person has a well-developed and stable set of privacy expectations. But technology can change those expectations. Dramatic technological change may lead to periods in which popular expectations are in flux and may ultimately produce significant changes in popular attitudes. New technology may provide increased convenience or security at the expense of privacy, and many people may find the tradeoff worthwhile. And even if the public does not welcome the diminution of privacy that new technology entails, they may eventually reconcile themselves to this development as inevitable.71
65 See id. (noting “the vital role that the public telephone has come to play in private communication”).66 Id. at 351.67 Id. at 352.68 See, e.g., California v. Ciraolo, 476 U.S. 207, 214 (1986).69 Orin S. Kerr, Search and Seizure: Past, Present, and Future, Oxford Encyclopedia of Legal History (2006), available at http://ssrn.com/abstract=757846.70 Minnesota v. Carter, 525 U.S. 83, 97 (1998) (Scalia, J., concurring).71 United States v. Jones, 132 S. Ct. 945, 962 (2012) (Alito, J., concurring).
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III.Twenty-First Century Concerns
A. Telephones Throughout the twentieth century, phones were a thorn in the side of courts attempting to interpret the Fourth Amendment. So far, the twenty-first century has proven no different. The present concern is not exactly that of Olmstead or Katz—i.e., that government agents may be listening in on real-time conversations. Instead, the present concern is that mobile smart phones allow individuals to carry enormous amounts of personal information with them wherever they go. As one commentator has described the situation: “I am one minor traffic stop away from allowing a police officer to arrest me and then, possibly, scour through the unabridged portfolio of my life”:
Whenever and wherever I drive my car, I carry a gargantuan album of pictures of friends and me taken at parties, graduations, bar mitzvahs, and rallies I have at-tended this millennium. I also lug around a detailed record of my travels, a log of my relationship announcements, and a diary of thoughts on subjects from sports to politics to Pez dispensers. Plus, I never travel without a complete address book of several hundred friends, co-workers, classmates, former flames, former students, former friends, shady acquaintances, and college landlords, all annotated with their photos, whereabouts, connections to all other friends, and a transcript of messages between each of those people and me.72
The commentator is not just referring to what is stored in the memory of his phone, which may be limited to “just” 30 or 60 gigabytes. He is also of course referring to his Facebook profile and could likely say the same about the e-mails and text messages accessible through his phone. From a Fourth Amendment point of view, the phone continues to vex state and federal courts.
1. Search Incident to Arrest and Other Fourth Amendment Exceptions As was the case with the public telephone booth in the 1960s, the prevalence of the smart phone has shifted public norms to the point where previously firm Fourth Amendment case law has become unsettled. Briefly, there are four noteworthy exceptions where a search within the meaning of the Fourth Amendment may be performed without a warrant: (1) a search of a person incident to a lawful arrest;73 (2) a search of a vehicle incident to a lawful
72 Junichi P. Semitsu, Arresting Development: Facebook Searches and the Information Super Highway Patrol, 65 Ark. L. Rev. 99, 100-01 (2012).73 See, e.g., United States v. Robinson, 414 U.S. 218, 234 (1973).
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arrest;74 (3) an inventory search;75 and (4) a search under exigent circumstances.76 Each of these exceptions was established at a time when it was unimaginable for an individual to carry the amount of personal information contained on most smart phones today. The “incident to arrest” exception authorizes law enforcement to conduct a warrantless, but contemporaneous, search of the arrestee and the area within the arrestee’s immediate control.77 In United States v. Robinson, the Supreme Court extended the doctrine to closed containers.78 The arresting officer in Robinson uncovered heroin concealed in a box of cigarettes originally held in a man’s coat pocket.79 While the reason for the arrest—driving with a revoked license—was unrelated to the heroin found on the man, the Court upheld the warrantless search as constitutional.80 “The intent and practical effect of Robinson was to create a bright-line rule that authorized the opening of any closed containers on an arrestee’s person.”81 Similarly, a search of the arrestee’s vehicle may occur without a warrant because “cir-cumstances unique to the vehicle context justify a search incident to a lawful arrest.”82 This doctrine was recently tweaked in Arizona v. Gant, a 2009 case that involved an arrest for driving on a suspended license and a search while the arrestee was handcuffed in a squad car.83 The Court held the search of the vehicle to be unlawful because Gant no longer pre-sented a danger to the officers at the time of the search, and the officers had no reason to search the automobile for evidence that Gant was driving on a suspended license.84 Like the search of a person incident to arrest, the search of a vehicle incident to arrest may include a search of closed containers in the vehicle, although a vehicle’s trunk is often off limits.85
74 See, e.g., New York v. Belton, 453 U.S. 454, 461 (1981).75 See, e.g., South Dakota v. Opperman, 428 U.S. 364, 375-76 (1976).76 See, e.g., United States v. Santana, 427 U.S. 38, 43 (1976).77 Chimel v. California, 395 U.S. 752, 763 (1969).78 Robinson, 414 U.S. at 235-36.79 Id. at 220-23.80 Id. at 235-36.81 Semitsu, supra note 72, at 104.82 Arizona v. Gant, 556 U.S. 332, 343 (2009).83 Id. at 338.84 Id. at 351.85 New York v. Belton, 453 U.S. 454, 456-61 (1981) (defining a “container” as “any object capable of holding another object”).
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86 Colorado v. Bertine, 479 U.S. 367, 370-71 (1987); id. at 382 (Marshall, J., dissenting).87 Warden v. Hayden, 387 U.S. 294, 299 (1967).88 Semitsu, supra note 72, at 113.89 See, e.g., United States v. Finley, 477 F.3d 250, 260 (5th Cir. 2007); see also Semitsu, supra note 72, at 115-16.90 Semitsu, supra note 72, at 115.91 Orin S. Kerr, Foreword: Accounting for Technological Change, 36 Harv. J.L. & Pub. Pol’y 403, 405 (2013).92 Ohio v. Smith, 920 N.E.2d 949 (Ohio 2009).93 Id. at 954. In New York v. Belton, 453 U.S. 454, 460 (1981), the United States Supreme Court held that law enforcement officers may search any “containers” in the passenger compartment of an automobile within reach of the arrestee. The Court further explained: “Such a container may, of course, be searched whether it is open or closed, since the justification for the search is not that the arrestee has no privacy interest in the container, but that the lawful custodial arrest justifies the infringement of any privacy interest the arrestee may have.” Id. at 461.94 920 N.E.2d at 954.
An inventory search is performed on either a person taken into custody or an impounded vehicle, and is meant to safeguard the owner’s property, protect law enforcement against claims of missing property, and avoid potential danger.86 Exigent circumstances justify a warrantless search when evidence is at risk of being destroyed, individuals could be harmed, or an officer is in “hot pursuit.”87
The Supreme Court has not yet considered whether any of these Fourth Amendment exceptions also applies to smart phones. But several lower courts have entertained challenges to the validity of a cell phone search. One 2012 study found that out of sixty-three such cases decided after Gant, fifty-five (or 87.3%) resulted in the search being upheld.88 Many courts have upheld a search of a cell phone by analogizing the cell phone to a closed container.89 Only two of the eight cases where the search was declared invalid resulted in a broad ruling against cell phone searches.90 One constitutional scholar believes that the type of search authorized by Robinson and Gant “allows a search much more vast than it allowed in 1973. Searching a person no longer means just searching pockets for wallets or cigarettes. It now means searching through computers that can contain millions of pages worth of personal information. . . . Thanks to changing technology and its widespread adoption, searching a person meant one thing in 1973 and means something quite different today.”91
In a 2009 case, the Ohio Supreme Court distinguished cell phones from containers and overturned a conviction based largely on evidence gathered from a warrantless search of a cell phone incident to an arrest.92 The Ohio court noted that the Supreme Court’s use of the term “container” in New York v. Belton implied that “the container must actually have a physical object in it.”93 The court went on to discuss the difference between a cell phone in 2009 and the idea of containers when Belton was decided in 1981.94 After commenting
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95 Id.96 United States v. Miller, 425 U.S. 435, 443 (1976); see also Smith v. Maryland, 442 U.S. 735, 744 (1979).97 World Bank, Internet Users as Percentage of Population (last updated Jan. 10, 2014), https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=it_net_user_p2&idim=country:USA&dl=en&hl=en&q=internet%20usage%20statistics.98 Maeve Duggan & Lee Rainie, Cell Phone Activities 2012, Pew Research Internet Project (Nov. 25, 2012), available at http://www.pewinternet.org/2012/11/25/cell-phone-activities-2012/.99 Id.100 Miller, 425 U.S. at 442 (1976) (quoting Katz, 389 U.S. at 351).101 Id. at 442-43.102 Id.
on the “continuing rapid advancements in cell phone technology,” the court concluded that cell phones and laptop computers do not fit within the category of containers contemplated by the Supreme Court in Belton: “[T]heir ability to store large amounts of private data gives their users a reasonable and justifiable expectation of a higher level of privacy in the information they contain.”95
2. Search of Information Possessed by Third Party Intermediaries The third-party doctrine, established by the Supreme Court in the late 1970s, provides that “the Fourth Amendment does not prohibit the obtaining of information revealed to a third party and conveyed by [the third party] to Government authorities, even if the information is revealed on the assumption that . . . the confidence placed in the third party will not be betrayed.”96 In an age when the vast majority of individuals readily divulge private informa-tion to third-party service providers—in 2012, 81% of Americans used the Internet,97 85% used cell phones,98 and 80% sent and received text messages99—the potentially troublesome nature of the third-party doctrine on Fourth Amendment rights is difficult to understate. The origins of the third-party doctrine can be traced to the statement in Katz that “[w]hat a person knowingly exposes to the public . . . is not a subject of Fourth Amendment protection.”100 That language was seized upon in United States v. Miller to find no reasonable expectation of privacy in bank records and therefore no Fourth Amendment protection from a government search of the records.101 The Miller Court noted that bank records “contain only information voluntarily conveyed to the banks and exposed to their employees in the ordinary course of business” and also that “[t]he depositor takes the risk, in revealing his affairs to another, that the information will be conveyed by that person to the Government . . . even if the information is revealed on the assumption that it will be used only for a limited purpose and the confidence placed in the third party will not be betrayed.”102
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103 442 U.S. 735, 736 (1979).104 Id. at 741.105 Id. at 742-45.106 See, e.g., Rehberg v. Paulk, 611 F.3d 828 (11th Cir. 2010) (summarizing case law finding no expectation of privacy in subscriber information).107 130 S. Ct. 2619, 2625-26 (2010).108 Id.109 Id.110 Id. at 2629, 2632-33.
In Smith v. Maryland, the Supreme Court considered whether a telephone user had a legitimate expectation of privacy in the phone numbers he had dialed.103 The Court noted that the information being searched in Smith—phone numbers—was different from the information gathered in Katz—phone conversations—and that the government’s search in Smith “d[id] not acquire the contents of communications.”104 The Court held that there is no reasonable expectation of privacy in the numbers a telephone user dials: “[I]t is too much to believe that telephone subscribers . . . harbor any general expectation that the numbers they dial will remain secret. . . . [Smith] voluntarily conveyed numerical information to the telephone company and ‘exposed’ that information to its equipment in the ordinary course of business.”105
The application of the third-party doctrine to information sent and received over the Internet has proved particularly troublesome so far. Pushed to its extreme, the third-party doctrine could preclude Fourth Amendment protection from government scrutiny of any information in the hands of third parties, regardless of whether the third party wants to reveal the information. This means that any information sent or received, which is stored on a third-party server, could potentially be searched without a warrant. Lower courts addressing this issue have consistently found no reasonable expectation of privacy in Internet subscriber information,106 but the issue of expectations regarding the content of digital communications has received different treatment thus far. A 2010 case, City of Ontario v. Quon, presented the Supreme Court with its first shot at the issue. In Quon, a California municipal police department investigated the content of its employees’ text messages after becoming concerned about the excessive number of messages being sent and received.107 Arch Wireless, the service provider, sent the police department transcripts of the text messages, which revealed that one of the department’s police officers had sent and received sexually explicit messages.108 The department disciplined the officer.109 The Court, wary of “risk[ing] error by elaborating too fully on the Fourth Amendment im-plications of emerging technology before its role in society has become clear,” ultimately rested its holding not on the Fourth Amendment reasonable expectation of privacy standard, but on the nature of the employer-employee relationship.110
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Although the Supreme Court avoided the issue in Quon, the Ninth Circuit had held below that “users do have a reasonable expectation of privacy in the content of their text messages vis-a-vis the service provider.”111 The Court of Appeals for the Sixth Circuit also directly confronted the issue when it found that “a subscriber enjoys a reasonable expecta-tion of privacy in the contents of emails that are stored with, or sent or received through, a commercial ISP,” and that the government could only obtain such information with a warrant.112 It is less certain that the content/noncontent distinction will apply to electronic communications other than emails and text messages;113 wall posts on Facebook, for example, do not follow the traditional two-way communication structure of phone conversations as emails and text messages often do. Before they are deleted, a user’s wall posts may be vis-ible to any member of the public, to the user’s entire group of friends, or to only a select group of individuals, depending on the user’s privacy settings. Just as telephones altered social behavior in the twentieth century, “social media promise to change the face of social relationships at least as drastically.”114
B. Government Surveillance Technologies In 2012, Congress passed a federal law authorizing the Federal Aviation Administration to “develop a comprehensive plan to safely accelerate the integration of civil unmanned aircraft systems [i.e., drones] into the national airspace system.”115 The law also made it easier for city police departments and emergency services to use drones.116 Businesses and individuals will be allowed to use drones for a variety of commercial endeavors—from selling real estate and dusting crops, to monitoring oil spills and wildlife, even shooting Hollywood films.117 In February 2013, Charlottesville, Virginia, became the first city in the country to restrict the use of unmanned aerial vehicles.118 Charlottesville police may still use drones for search-
111 Quon v. Arch Wireless Operating Co., 529 F.3d 892, 905 (9th Cir. 2008), rev’d and remanded sub nom. City of Ontario v. Quon, 130 S. Ct. 2619 (2010).112 United States v. Warshak, 631 F.3d 266, 288 (6th Cir. 2010) (internal quotation marks omitted).113 See Katherine J. Strandburg, Home, Home on the Web and Other Fourth Amendment Implications of Technosocial Change, 70 Md. L. Rev. 614, 679-80 (2011).114 Id. at 655.115 FAA Modernization and Reform Act of 2012, H.R. 658, 112th Cong. (2d Sess. 2012).116 Id.117 Nick Wingfield & Somini Sengupta, Drones Set Sights on U.S. Skies, N.Y. Times, Feb. 17, 2012, avail-able at http://www.nytimes.com/2012/02/18/technology/drones-with-an-eye-on-the-public-cleared-to-fly.html?pagewanted=all&_r=0.118 Somini Sengupta, Rise of Drones in U.S. Drives Efforts to Limit Police Use, N.Y. Times, Feb. 15, 2013, available at http://www.nytimes.com/2013/02/16/technology/rise-of-drones-in-us-spurs-efforts-to-limit-uses.html.
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and-rescue efforts, but they are prohibited from using drones to acquire evidence for use in criminal cases.119 In that same month, the Seattle Police Department agreed, in the face of public protests, to return its two still-unused drones to the manufacturer.120 Other cities, such as Oakland, California, have entertained vigorous debate about the use of drones by criminal investigators.121
The rapid integration of digital technologies into the daily lives of individuals has caused some to proclaim that “[w]e are living in an age of surveillance.”122 Surveillance has been defined as “the focused, systematic and routine attention to personal details for purposes of influence, management, protection or direction”;123 and “new technologies, from surveil-lance cameras and web bugs to thermal scanners and GPS transponders,”124 have attracted the attention of both surveillance-minded police departments and privacy watchdogs all over the country. Two Supreme Court cases that nicely bookended the first decade of the twenty-first century illustrate the tension between the advantages that surveillance technolo-gies can provide to police departments and the potential these technologies have to erode Fourth Amendment protections for all individuals. In a 2001 case, Kyllo v. United States, the Supreme Court considered the constitutionality of using a “thermal imager” to measure heat radiating out of a building.125 The investigation in question took place in 1991 in Florence, Oregon, at the home of Danny Lee Kyllo, where officers suspected Kyllo was growing marijuana.126 To confirm their suspicions, the officers pointed a Thermovision 210—essentially a video camera that detects infrared radiation not visible to the naked eye—at the outer wall of Kyllo’s home to confirm that Kyllo was using high-intensity lights typical for cultivating marijuana indoors.127 The Thermovision showed that the roof over the garage was warmer than the rest of the home.128 The officers used the information gained from the Thermovision to obtain a federal warrant to search Kyllo’s home.129
119 Id.120 Id.121 Id.122 Neil M. Richards, The Dangers of Surveillance, 126 Harv. L. Rev. 1934, 1936 (2013).123 David Lyon, Surveillance Studies: An overview 14 (2007).124 Richards, supra note 122, at 1936.125 533 U.S. 27 (2001).126 Id. at 29-31.127 Id.; see also David A. Sklansky, Back to the Future: Kyllo, Katz, and Common Law, 72 Miss. L.J. 143, 148-49 (2002).128 Id.129 Id.
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The district court and the Ninth Circuit both upheld the search because it did not disclose any “intimate details” of Kyllo’s home.130 In so holding, the Ninth Circuit relied on Dow Chemical Co. v. United States, in which the Supreme Court upheld the high-magnification aerial surveillance of an industrial facility.131 Although the Supreme Court suggested in Dow that “surveillance of private property by using highly sophisticated surveillance equipment not generally available to the public . . . might be constitutionally proscribed without a warrant,” the Court concluded that the search at issue “[was] not so revealing of intimate details as to raise constitutional concerns.”132
Justice Scalia, writing for the majority in Kyllo, distinguished Dow Chemical on the ground that the object of the search in Dow was of an industrial facility, “which does not share the Fourth Amendment sanctity of the home.”133 “In the home,” Scalia noted, “all details are intimate details.”134 Scalia also recalled his earlier criticism of the Katz “reason-able expectation of privacy” test before finally offering a slight “refinement” to that test:
The Katz test . . . has often been criticized as circular, and hence subjective and unpredictable. While it may be difficult to refine Katz when the search of areas such as telephone booths, automobiles, or even the curtilage and uncovered portions of residences are at issue, in the case of the search of the interior of homes—the prototypical and hence most commonly litigated area of protected privacy—there is a ready criterion, with roots deep in the common law, of the minimal expectation of privacy that exists, and that is acknowledged to be reasonable.135
The “ready criterion” that Scalia applied to the facts of Kyllo was a standard that “existed when the Fourth Amendment was adopted”: “We think that obtaining by sense-enhancing technology any information regarding the interior of the home that could not otherwise have been obtained without physical intrusion into a constitutionally protected area constitutes a search—at least where (as here) the technology in question is not in general public use.”136 In other words, when courts are confronted with a technology-enhanced investigation, they should look to whether the technology allows the user to, in effect, physically intrude into the home. If it does, then it is a search—unless the technology in question is in general public use.
130 Sklansky, supra note 127, at 171.131 476 U.S. 227 (1986).132 Id. at 238.133 Kyllo, 533 U.S. at 37.134 Id. (emphasis in original).135 Id. at 34 (emphasis in original).136 Id.
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The dissenting opinion in Kyllo seized on the last clause of the holding, pointing out that “the contours of [the] new rule are uncertain because its protection apparently dissipates as soon as the relevant technology is ‘in general public use.’”137 The dissent also called the rule “perverse” because “the threat to privacy will grow, rather than recede, as the use of intrusive equipment becomes more readily available.”138 Despite these concerns, Kyllo is still the leading case on government surveillance of homes. If Kyllo’s reference to nineteenth-century home invasions seems like an anomaly in the context of twenty-first century technology such as the Thermovision 210, the Supreme Court’s 2012 decision in United States v. Jones139 made it clear that such historical references were now a matter of course in Fourth Amendment search cases. In Jones, the Court was faced with the question whether attaching a global positioning system (GPS) device to an individual’s vehicle and monitoring that vehicle’s movement on public streets for twenty-eight days was a search within the meaning of the Fourth Amendment. The Court held that it was, with Justice Scalia again authoring the majority opinion.140
The discussion comprising the holding in Jones is very different from the discussions found in the two concurring opinions in the case. Like the majority opinion in Kyllo, the Jones majority focused on a traditional framework. First, Scalia found that Jones’s vehicle was an “effect” within the meaning of the Fourth Amendment.141 Second, Scalia identified a pre-Katz view of the Fourth Amendment: “[O]ur Fourth Amendment jurisprudence was tied to common-law trespass, at least until the latter half of the 20th century. . . . Our later cases, of course, have deviated from that exclusively property-based approach.”142 Scalia cited Olmstead for the first proposition and Katz for the second, but explained that “the Katz reasonable-expectation-of-privacy test has been added to, not substituted for, the common-law trespassory test.”143 Jones’s holding is that the government’s “[physical occupation of] private property for the purpose of obtaining information” is a search under the common law trespass test.144
137 Id. at 47 (Stevens, J., dissenting). In fact, the Fifth Circuit observed six years prior to Kyllo that “[ther-mal-imaging] technology is ‘off the shelf,’ having been in general use for fifteen years.” United States v. Ishmael, 48 F.3d 850, 856 n.6 (5th Cir. 1995).138 Id.139 132 S. Ct. 945 (2012).140 Id.141 Id. at 949.142 Id. at 949-50.143 Id. at 952 (emphasis in original).144 Id. at 949.
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Many expressed dissatisfaction with the holding in Jones. “Jones is a recycling of twentieth century arguments about property versus privacy that do not adequately confront the issues in the digital age,” announced one commentator.145 Justice Alito, in a concurring opinion, called the majority opinion “unwise,” “highly artificial,” and “a [strain on] the language of the Fourth Amendment,” with “little if any support in current Fourth Amend-ment case law.”146
The concurring opinions in Jones seemed eager to move beyond GPS monitoring and explore the broader issues of government use of surveillance technology. Justice Sotomayor noted that physical intrusions are “now unnecessary to many forms of surveillance” and that the government could achieve what it achieved in Jones “by enlisting factory- or owner-installed vehicle tracking devices or GPS-enabled smartphones.”147 Sotomayor agreed with Alito that technological advances affect “the Katz test by shaping the evolution of societal pri-vacy expectations.”148 When applying the Katz test to government tracking of an individual’s movements, she would consider “whether people reasonably expect that their movements will be recorded and aggregated in a manner that enables the Government to ascertain, more or less at will, their political and religious beliefs, sexual habits, and so on.”149 Alito listed several new devices “that permit the monitoring of a person’s movements”: closed-circuit television video monitoring, automatic toll collection systems, roadside assistance programs “that permit a central station to ascertain a car’s location at any time,” and, “perhaps most significant,” smart phones equipped with GPS.150 “The availability and use of these and other new devices will continue to shape the average person’s expectations about the privacy of his or her daily movements.”151
IV.Conclusion
Given society’s increasing reliance on technology, including smart phones and other Internet-connected devices, it is fair to say that the Supreme Court is not done grappling with the implications of advancing technology. It is possible that the solution is not to be found in the Fourth Amendment at all. Orin Kerr, professor of law at George Washington
145 Thomas K. Clancy, United States v. Jones: Fourth Amendment Applicability in the 21st Century, 10 Ohio St. J. Crim. L. 303 (2012).146 Jones, 132 S. Ct. at 958 (Alito, J., concurring).147 Id. at 955 (Sotomayor, J., concurring).148 Id. 149 Id. at 956.150 Id. at 963.151 Id.
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University Law School, has argued that legislative action is a more appropriate solution than simply refining Fourth Amendment case law.152 Legislatures, according to Kerr, are better equipped to keep up with technological change, more adept at understanding complex new technologies, and can more efficiently create comprehensive and clear rules.153 Kerr concludes that “courts should recognize their institutional limitations and remain cautious until the relevant technology and its applications stabilize.”154 Of course, Kerr’s proposal for judicial deference was met with its share of criticism.155
Meanwhile, courts continue to confront a wide range of technological challenges to Fourth Amendment case law. In the first few months of 2013, the Supreme Court decided two dog-sniffing cases, one involving a sniff of a vehicle and the other a sniff of a home.156 Katz’s “people not places” rhetoric took a bit of a hit when the latter sniff was declared to be a search while the former was not.157 In one of the cases, the use of police dogs was compared to the use of sense-enhancing technologies: “Detective Bartelt’s dog was not your neighbor’s pet . . . . [The detective’s dog is] to the poodle down the street as high-powered binoculars are to a piece of plain glass.”158 In June 2013, the Supreme Court held that law
152 Orin S. Kerr, The Fourth Amendment and New Technologies: Constitutional Myths and the Case for Caution, 102 Mich. L. Rev. 801 (2004).153 Id. at 859-60.154 Id. at 808.155 See, e.g., Daniel J. Solove, Fourth Amendment’s Codification and Professor Kerr’s Misguided Call for Judicial Deference, 74 Fordham L. Rev. 747, 777 (2005) (arguing that the Fourth Amendment’s current dualist regime, in which the Fourth Amendment is adapted by both the judicial and legislative branches, demands that courts “take a larger role in the process to ensure that the statutes embody basic Fourth Amendment principles”).156 Florida v. Jardines, 133 S. Ct. 1409 (2013); Florida v. Harris, 133 S. Ct. 1050 (2013).157 In Florida v. Harris, the Court unanimously decided that no search had occurred where a Florida police officer walked his drug-sniffing dog around a man’s truck after the truck was stopped for having expired tags. 133 S. Ct. at 1058-1059. The Court set up a “reasonably prudent person” test, which allows a review of all of the facts about a dog’s alert to see if a prudent person would think that a search would turn up evidence of illegal drugs. Id. at 1058. According to Justice Kagan, the author of the opinion, “A sniff is up to snuff when it meets that test.” Id..Florida v. Jardines, on the other hand, drew a five-four split among the justices. 133 S. Ct. 1409. The majority held that a dog sniff at the front door of a house where the police suspected drugs were being grown constitutes a search for purposes of the Fourth Amendment. Id. Justice Scalia authored the majority opinion, and he relied on the common law trespass standard that he applied in United States v. Jones, 132 S. Ct. 945 (2012) (see supra notes 137-46 & accompanying text), to find that the officer’s use of a dog on the front porch of a home was a trespass and thus a search under the Fourth Amendment.158 Jardines, 133 S. Ct. at 1418 (Kagan, J., concurring).
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enforcement officers who make an arrest supported by probable cause are entitled to take and analyze a cheek swab of the arrestee’s DNA.159 Even more recently, in April 2014, the Supreme Court heard arguments in two cases where the question is whether officers must obtain a search warrant to examine the contents of a cell phone seized during an arrest.160 These recent cases represent significant developments, but history suggests that the develop-ment of Fourth Amendment jurisprudence will not stop any time soon.
POSTSCRIPT
As this article was going to press, the United States Supreme Court decided Riley v. California, a significant opinion addressing whether law enforcement officers may, without a warrant, search digital information on a smartphone seized from an arrestee.161 Answer-ing that question in the negative, the Court held that an arresting officer must get a warrant before searching a smartphone seized incident to an arrest.162
The touchstone for the Supreme Court’s analysis in Riley was United States v. Robin-son, the 1973 opinion in which the Court held that officers did not need a warrant to search inside a pack of cigarettes they found in the coat pocket of a man arrested for driving on a revoked license.163 Based on Robinson, the government argued in Riley that a search of data stored on a cell phone is “materially indistinguishable” from a search of physical items found in a container on an arrestee.164 The Supreme Court rejected this argument, writing “[t]hat is like saying a ride on horseback is materially indistinguishable from a flight to the moon.”165 According to the Supreme Court, the Robinson rationale cannot be extended to the search of a smartphone. Digital data stored on a cell phone poses no threat of harm to an arresting officer.166 And despite a somewhat extensive discussion of remote-wiping and encryption technologies, the Supreme Court concluded there was no significant possibility that evidence in the smartphone would be destroyed while the officers held the phone pend-ing an application for a search warrant.167
159 Maryland v. King, 133 S.Ct. 1958 (2013).160 Riley v. California, No. 13-132 (argued Apr. 29, 2014); United States v. Wurie, No. 13-212 (argued Apr. 29, 2014); see Postscript, infra notes 161-168 and accompanying text.161 Nos. 13-132, 13-212, 2014 WL 2864483, *4 (U.S. June 25, 2014).162 2014 WL 2864483, at *9.163 414 U.S. 218 (1973); see supra notes 78-80 & accompanying text.164 Riley, 2014 WL 2864483, *13.165 Id.166 Id. at *10.167 Id. at *10-11.
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The final section of the majority opinion, authored by Chief Justice Roberts, and a substantial portion of the concurring opinion, by Justice Alito, were devoted to discussing colonial search-and-seizure precedent. As Chief Justice Roberts wrote:
Our cases have recognized that the Fourth Amendment was the founding genera-tion’s response to the reviled “general warrants” and “writs of assistance” of the colonial era, which allowed British officers to rummage through homes in an unre-strained search for evidence of criminal activity. . . . The fact that technology now allows an individual to carry [the “privacies of life”] in his hand does not make the information any less worthy of the protection for which the Founders fought. Our answer to the question of what police must do before searching a cell phone seized incident to an arrest is accordingly simple—get a warrant.168
Given the uncertainty created by technological encroachment on individual privacy and the specter of greater encroachment to come, it is reassuring that the Court holds technology to account under Fourth Amendment principles. Whether the issue is a searchlight, a tele-phone, a wiretap, a thermal-imaging device, a canine, or a smartphone, Fourth Amendment jurisprudence balances society’s need for security against the right of persons to be secure in their persons, things, and private thoughts.
168 Id. at *20.
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Turning New Guns on Old Targets: Class Actions Against Insurance Companies†
Wystan Ackerman
This article provides an overview of recent developments in class action litigation against insurance companies. Part I focuses on recent class action jurisprudence in four discrete areas: property insurance, automobile insurance, life insurance, and subrogation. Part II contains a detailed discussion of several decisions from the United States Supreme Court’s October 2012 Term and their potential impact on insurance class actions. As will be seen, while insurers have had substantial success in defeating class actions over the last few years, there are a few significant unfavorable decisions and areas of continuing potential concern for the industry.
I.Recent Developments in Insurance Class Actions
A. Property Insurance Class Actions For a number of years, plaintiffs’ attorneys have brought class actions seeking to recover for general contractor fees, known as general contractor overhead and profit, or “O&P.” In these cases, plaintiffs’ attorneys typically take the position that there is or should be a “three trade rule” under which insurers must always include general contractor overhead and profit
† Submitted by the author on behalf of the FDCC Class Action and Multidistrict Litigation Section.
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1 85 So. 3d 355 (Ala. 2011). 2 Id. at 384. 3 79 So. 3d 987 (La. 2011).
if there are three or more “trades” involved in the loss. In the most recent appellate deci-sion, National Security Fire & Casualty Company v. DeWitt,1 the Alabama Supreme Court surveyed the law across the country on this issue and agreed with the strong majority view that class certification was improper. As the court explained:
Although this case will involve issues that are common to all class members, it is highly likely that it will also involve individualized evidence regarding whether it was reasonably foreseeable that the services of a general contractor would be necessary in each of [the putative class members’] claims.2
Another significant recent decision is the Louisiana Supreme Court’s opinion in Oubre v. Louisiana Citizens Fair Plan,3 which involved a Louisiana statute requiring an insurer to initiate loss adjustment within thirty days after notice of a catastrophic loss (fourteen days
Wystan Ackerman is a partner at Robinson & Cole, LLP in Hartford, Connecticut. He chairs the firm’s Class Action Team and is a member of the Appellate Team. He has defended class actions in a variety of substantive areas and industries, includ-ing insurance, products liability, financial services, consumer contracts, and securities. Mr. Ackerman writes the blog www.insuranceclassactions.com, and regularly serves as national counsel for insurance companies in class actions, complex coverage litigation, and appeals. Mr. Ackerman’s appellate experience includes successfully petitioning the U.S. Supreme Court to grant certiorari, and serving as co-counsel on the
merits, in Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345 (2013), involving the Class Action Fairness Act. He has also litigated appeals in the First, Second, Third, Fourth, Fifth, Eighth, and Eleventh Circuit Courts of Appeal, and in various state appellate and supreme courts. Mr. Ackerman has been listed as a Second Circuit Litigation Star in Benchmark Ap-pellate (2013) and as a Future Star in Benchmark Litigation (2013). Mr. Ackerman received his B.A., summa cum laude, from Bowdoin College, and his J.D. from Columbia Law School, where he was a James Kent Scholar. Mr. Ackerman is currently serving as the Vice-Chair of the Appellate Law Section of the Federation of Defense & Corporate Counsel, is an active member of the Class Action and Multidistrict Litigation Section, and is a frequent speaker at FDCC meetings.
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for noncatastrophe claims). The statutory penalty for failing to comply with this require-ment is “an amount not to exceed two times the damages sustained or five thousand dollars, whichever is greater.”4 The plaintiffs claimed, and were ultimately able to prove, that the insurer violated the statute with respect to thousands of Hurricane Katrina and Rita claims. According to the Louisiana Supreme Court majority, violation of the statute subjects an insurer to an automatic, mandatory penalty;5 and because no lesser amount of damages was proven, the court upheld a penalty of $5,000 on each individual putative class member’s claim.6
There have also been significant class action rulings at the trial court level. For example, in a case involving an Arizona-only class concerning the scope of covered repairs for losses resulting from leaking polybutylene (PB) plumbing,7 the insurer sought to decertify the class in light of Wal-Mart Stores, Inc. v. Dukes.8 In a report, the magistrate judge recommended denial of the motion, concluding that the Wal-Mart commonality standard was satisfied because the central question—whether leaking PB plumbing must always be replaced in its entirety—was a question common to all members of the class and could be resolved with an answer common to all class members.9 In better news for insurers, the Eastern District of Tennessee dismissed a putative class action alleging the insurer improperly calculated actual cash value by failing to account for contractor’s overhead and profit and excluding certain items that would be reimbursed only when the cost was actually incurred.10 Despite these allegations, the plaintiffs “failed to set forth a plausible claim that they received insufficient funds from State Farm to repair their property,” and their complaint was therefore dismissed.11 To the extent they are not already parties to them, property insurers will be closely monitoring a collection of putative class actions in Arkansas involving calculation of actual cash value. In those cases, the plaintiffs allege that when ACV is calculated as replacement cost less depreciation, insurers should not be allowed to apply depreciation to the labor
4 La. Rev. Stat. § 22:1220(C) (recodified at La. Rev. Stat. § 22:1973). 5 Oubre, 79 So. 3d at 1000. 6 Id. at 1006. According to the court, “when damages are not proven, the greater of the two enumerated amounts, i.e., two times the damages sustained or five thousand dollars, is five thousand dollars.” Id. at 1001. 7 See Guadiana v. State Farm Fire & Cas. Co., No. 07–326–TUC–FRZ, 2011 WL 1211327 (D. Ariz. Mar. 31, 2011). 8 131 S. Ct. 2541 (2011). 9 Guadiana v. State Farm Fire & Cas. Co., No. CIV 07–326 TUC FRZ, 2014 WL 977671, *5 (D. Ariz. Mar. 13, 2014). The insurer also sought decertification on the ground that damages could not be calculated on a classwide basis, thus precluding commonality under Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). The magistrate judge concluded that Comcast was inapposite and declined to “revisit[] the court’s prior damages inquiry.” Guadiana, 2014 WL 977671 at *7. 10 Stiers v. State Farm Ins., No. 3:11–CV–437, 2012 WL 2405982 (E.D. Tenn. June 25, 2012). 11 Id. at *1.
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12 No. 2:12-cv-02173-PKH, 2013 WL 1876660 (W.D. Ark. May 3, 2013). 13 Id. at *3. 14 Adams v. Cameron Mut. Ins. Co., ___ S.W.3d ___, 2013 WL 6118510, *6-7 (Ark. Nov. 21, 2013) (emphasis added). 15 55 P.3d 1017 (Okla. 2002). 16 Id. at 1022 (Boudreau, J., dissenting). 17 No. 1-08-CV-129624 (Cal. Super. Ct. Mar. 18, 2013). 18 See Cal. Ins. Code § 2051(b); Cal. Code Regs. tit. 10, § 2695.9(f).
component of the replacement cost. In one such case, Adams v. Cameron Mutual Insurance Co.,12 the Western District of Arkansas concluded that decisions in Oklahoma, Texas, and Florida supported the insurer’s position that depreciation of labor costs is permissible, but found there was a lack of pertinent guidance in Arkansas law. Accordingly, the court certi-fied the following potentially dispositive issue to the Arkansas Supreme Court:
Whether an insurer, in determining the “actual cash value” of a covered loss under an indemnity insurance policy, may depreciate the costs of labor when the term “actual cash value” is not specifically defined in the policy?13
The Arkansas Supreme Court accepted the certified question and held in late 2013 that “the costs of labor may not be depreciated when determining the actual cash value of a covered loss under an indemnity insurance policy that does not define the term ‘actual cash value.’”14 The court found the policy ambiguous, relying heavily on the dissenting opinion in Redcorn v. State Farm Fire & Casualty Co.,15 in which the dissenters rejected the conten-tion that labor costs were depreciable:
Labor . . . is not logically depreciable. Does labor lose value due to wear and tear? Does labor lose value over time? What is the typical depreciable life of labor? Is there a statistical table that delineates how labor loses value over time? I think the logical answers are no, no, it is not depreciable, and no. The very idea of depreciat-ing the value of labor is illogical.16
In the wake of the Arkansas Supreme Court’s decision, numerous putative class actions were filed raising the same issue, almost all of which have been removed to the Arkansas federal courts and are in their early stages. As yet, there have been no rulings on class cer-tification. In California, a trial court has granted class certification in Doan v. State Farm General Insurance Co., another case focusing on an insurer’s depreciation practices.17 In that case, the plaintiffs allege that State Farm failed to comply with a California statute and regula-tion that require an insurer to consider the actual condition of specific items of property, in addition to their age, in determining depreciation.18 Instead, plaintiffs allege, State Farm
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adjusters use a depreciation guide that measures depreciation based on age alone, without taking condition into account. Plaintiffs further allege that State Farm does not ask insureds about the condition of their personal property items. In its ruling on class certification, the trial court found that certification of an injunctive relief class was appropriate because “Defendant does not adequately address Plaintiffs’ show-ing that insureds are not provided with a written explanation of how Defendant calculates depreciations for purposes of [the governing regulation], which requires that the basis for any depreciation adjustment ‘be fully explained to the claimant in writing.’”19 With respect to the proposed damages class, the court found that State Farm did not make an attempt to seek information about the physical condition of contents items. The court found it significant that, extrapolating from a small sample of claim files, the plaintiff’s expert concluded that somewhere between sixty-five and ninety-two percent of claim files would have some items that were depreciated based solely on the depreciation guide.20 In response to State Farm’s argument that class treatment was inappropriate because individualized inquiries would be necessary to determine the proper depreciation on individual items, the court ruled that the plaintiffs could recover only for items that were depreciated solely based on the depreciation guide (and, if this turned out to be unworkable, the class could be decertified later). The court also certified a class with respect to the plaintiffs’ bad faith claims, explaining only that “[a]ssuming commonality on the use of the Depreciation Guide, the issue of bad faith would flow from it.”21 The court further concluded that State Farm had failed to pres-ent specific evidence that individualized defenses would predominate. This case has been stayed pending the outcome of an inquiry being conducted by the California Department of Insurance regarding State Farm’s depreciation practices. As Doan and Adams v. Cameron Mutual demonstrate, class actions focusing on depre-ciation are an important emerging area worth watching in property insurance class actions.
B. Automobile Insurance Class Actions In the auto insurance arena, there have been several notable appellate decisions over the last few years. Of particular import is the Eighth Circuit’s decision in Halvorson v. Auto-Owners Insurance Co.,22 which was significant in imposing a standing requirement on all class members. That case arose out of Auto-Owners’ use of third-party bill reviewers who determined pricing for particular medical services within a geographic area and “flagged” submitted charges that exceeded the eightieth percentile of charges in the area. Although Auto-Owners asserted that adjusters had discretion to pay more, there was testimony that adjusters were expected to limit amounts paid to the eightieth percentile. On these facts, the district court certified a putative class of defendants’ policyholders in North Dakota who
19 Doan, slip op. at 13. 20 Id. at 14. 21 Id. 22 718 F.3d 773 (8th Cir. 2013).
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submitted claims for medical expenses under “medical payments” (med-pay) or “personal injury protection” (PIP) coverage23 but who received less than the submitted amount after a percentile-based review of their claim.24 According to the district court, whether the bill review process complied with the insurance policies was a predominant common question justifying class treatment.25
The Eighth Circuit reversed. Although the commonality requirement was satisfied based on the common question of “whether the routine and relatively rigid use of the 80th percentile cutoff for claims breached the contract or constituted bad faith,”26 the predominance require-ment was not satisfied. Applying Comcast Corp. v. Behrend,27 the Halvorson court ruled that “individual inquiries regarding what is ‘usual and customary’ for each class member will predominate over whether Auto-Owners’s process was reasonable and ‘overwhelm questions common to the class.’”28
Moreover, the court explained, “[a] district court may not certify a class . . . if it contains members who lack standing.”29 In this case, some members of the putative class would not have standing because, for example, “[i]f a health-care provider accepted Auto-Owners’s payment at the 80th percentile as payment in full (or if Auto-Owners settled the dispute without involving the plaintiff), the plaintiff was not injured.”30
Halvorson is of potentially broad significance in defending insurance class actions. It is frequently the case that the putative class is defined in a manner that would encompass people who were not injured, or would not want—and might even be disadvantaged by—the requested relief. In many cases, it will be impossible for the plaintiff to redefine the class in a manner that would include only people who were injured (or who would want the requested relief) because such a class would not be ascertainable without individualized inquiries into each class member’s circumstances and preferences. That can be a powerful line of argument in defending these cases, and one that is sometimes overlooked, or not framed in terms of standing.
23 In states that have adopted “no fault” auto insurance schemes, drivers typically must purchase either PIP or med-pay coverage. PIP coverage provides for payment of medical expenses, lost wages, funeral expenses, and other accident-related losses incurred by the insured or occupants of the insured’s vehicle, regardless of fault. Med-pay coverage is more limited in that it typically reimburses only medical and fu-neral expenses. See generally State Farm Mut. Auto. Ins. Co. v. Swearingen, 590 So. 2d 506, 506-07 (Fla. Dist. Ct. App. 1991). 24 Halvorson, 718 F.3d at 775-77. 25 Id. at 777. 26 Id. at 780 n.2. 27 133 S. Ct. 1426 (2013); see infra text accompanying notes 110-125. 28 718 F.3d at 779. 29 Id. at 779-80 (internal quotes omitted). 30 Id. at 779.
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The Eighth Circuit’s holding in Halvorson could also be applied outside the auto insur-ance context, such as in a property insurance class action, where some putative class members received sufficient payments to repair their property regardless of the claims practice alleged to be improper. Similarly, this holding could be useful in defending a class action involving underwriting, where some putative class members may have received the coverage they desired despite the allegedly improper underwriting protocol. The Colorado Supreme Court issued a significant decision in State Farm Mutual Au-tomobile Insurance Co. v. Reyher,31 one of many putative class actions involving insurers’ use of databases to evaluate the reasonableness of medical bills on auto insurance claims. The Colorado Supreme Court held that the trial court had properly denied class certification, reversing a decision by the Colorado Court of Appeals. Notably, the court agreed with the U.S. Supreme Court’s decision in Wal-Mart in explaining how a trial court can properly consider merits issues when they overlap with class issues. Here, the trial court acted within its discretion in denying certification on the ground that “proof at trial would be predomi-nantly individual” where, “after rigorously analyzing Plaintiffs’ class-wide proof, namely the nature of State Farm’s claim review process, the trial court was satisfied that State Farm did not have a class-wide practice of relying solely on the database.”32 The Washington Supreme Court upheld class certification in Moeller v. Farmers Insur-ance Co. of Washington,33 one of several class actions alleging that collision coverage pay-ments must include not only the cost to repair the insured vehicle but also any diminution in the vehicle’s value as a result of having been in an accident. The central issue in dispute in Moeller was whether the plaintiff could prove liability and damages for the putative class as a whole through mathematical modeling, without showing the fact or amount of each putative class member’s diminution in value loss. In a 5-4 decision, the majority seemed to sidestep that issue, rejecting an argument that the plaintiff had conceded that some class members had suffered no loss, and focusing instead on the abuse of discretion standard for reviewing a class certification ruling. Noting that the trial court had conducted a lengthy evidentiary hearing and that the result was not “unreasonable or untenable,” the majority found no abuse of discretion and therefore no basis for overturning that ruling.34 A dissenting opinion reasoned that “the trial plan effectively converts the damages element of [plaintiff’s] claim into an affirmative defense. This impermissibly shifts the burden to prove damages from the plaintiffs to the defendant. This offends due process.”35
31 266 P.3d 383 (Colo. 2011). 32 Id. at 390. 33 267 P.3d 998 (Wash. 2011). 34 Id. at 1006. 35 Id. at 1012 (Alexander, J., dissenting).
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In Ortega v. Topa Insurance Co.,36 the California Court of Appeal affirmed a decision striking the class allegations on the pleadings in a putative class action challenging the use of non-original equipment manufacturer (non-OEM) parts to repair damaged automobiles. The court held that common issues did not predominate on the face of the allegations both because each putative class member would have to prove that the particular non-OEM parts involved in his or her repair were inferior, and because the question of whether and when a putative class member received notice that non-OEM parts were used would require an individual inquiry.37 Other putative class actions have been filed against auto insurers based on policy provisions entitling insureds to compensation for assisting the insurer in investigating and defending lawsuits against the insured. Plaintiffs have alleged that insurers should be pro-actively seeking out these claims and paying them even when the insured has not requested reimbursement. In Albert v. Erie Insurance Exchange,38 the court rejected such a challenge. In that case, the auto policy provided that the insurer would pay for “reasonable expenses anyone we protect may incur at our request to help us investigate or defend a claim or suit. This includes up to $100 a day for actual loss of earnings.”39 The trial court granted the defendant’s motion to dismiss the complaint based on the plaintiff’s failure to allege that she made any request for reimbursement under this provision. It appears the plaintiff did not want to make that allegation because it would be detrimental to pursuit of a class action (perhaps on the assumption that many insureds do not request reimbursement under this coverage, and those who do request it likely receive it). In a 2-1 decision, the Pennsylvania Superior Court affirmed, holding that the insurance policy did not require Erie to advise the insureds of the terms of the policy, which they had read and signed. The court also relied on a policy provision requiring the insured to notify the insurer or its agent “when a loss happens,” concluding that this provision required an insured to make a claim for the reimbursement of litigation expenses.40 In analyzing the issue, the court cited with approval the Ohio Supreme Court’s decision in a similar case, Kincaid v. Erie Insurance Co.,41 in which the court rejected the argument that the insurer had an obligation to advise the insured about the availability of this coverage when it hired counsel to defend the insured. The Albert court found no basis for bad faith
36 141 Cal. Rptr. 3d 771 (Ct. App. 2012). 37 Id. at 782-84. 38 65 A.3d 923 (Pa. Super. Ct. 2013). 39 Id. at 925-26. 40 Id. at 928. 41 944 N.E.2d 207 (Ohio 2010).
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liability where there was no duty to inform the insured about the policy provision, and no duty to provide reimbursement without a request.42 Although appellate courts in both Ohio and Pennsylvania have now ruled in favor of insurers on this issue, insurers should continue to monitor developments in this area and to review their own policy language since there is no assurance a court in another jurisdiction would not come to a different conclusion. At the trial court level, another significant decision is Folks v. State Farm Mutual Auto-mobile Insurance Co.,43 which denied class certification in part because of a voluntary pay-ment program implemented by State Farm to redress the practice challenged in the lawsuit. The use of this type of voluntary relief program is an emerging technique for defending insurance class actions where appropriate.
C. Life Insurance Class Actions In class actions involving life insurance policies, one of the hottest issues in recent years has been the use of “retained asset accounts.” Under such an arrangement, rather than paying a lump-sum death benefit to the beneficiary, the insurer “creates an interest-bearing account for the beneficiary and sends her a checkbook that can be used to draw down the funds, in part or in whole, at any time.”44 Such an account was at issue in Phillips v. Prudential Insur-ance Co. of America, where the insurance policy provided that the insured “may choose to have any death benefit paid in a single sum or under one of the optional modes of settlement described below,” including the retained asset account (and several other options).45 The insured never selected a payment method. After the insured’s death, the beneficiary (the plaintiff) was provided with a claim form that gave her the opportunity to select a payment method and stated that, if she did not select one, benefits would be paid through a retained asset account (known as the Alliance Account). The plaintiff returned the form without making a selection.
42 Albert, 65 A.3d at 929, 931. The dissent noted that the motion was improperly granted as to the breach of contract and declaratory judgment claims since the policy was silent with respect to the mechanism for requesting reimbursement. Moreover, to the extent the policy required the insured to provide notice to the insurer “[w]hen there is an accident or loss,” the dissent concluded that a claim for reimbursement of litigation expenses would not be an “accident” or a “loss,” and thus this policy provision was inapplicable. Id. at 931-32 (Colville, J., dissenting). 43 281 F.R.D. 608 (D. Colo. 2012). 44 Phillips v. Prudential Ins. Co. of Am., 714 F.3d 1017, 1019 (7th Cir. 2013). 45 Id. at 1020.
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The Seventh Circuit affirmed dismissal of the putative class action, holding there was no actionable breach of contract:
Prudential’s establishment of the Alliance Account as the default option, and its enrolling Phillips in an Alliance Account rather than providing her a lump-sum benefit payment, did not breach the insurance policy. The policy allowed Phillips to choose any available payment method—those listed in the Settlement Options brochure, those listed in the policy, or those, like the Alliance Account option, that Prudential “may have available at the time the proceeds become payable”—and by leaving the two lines blank on the Claim Form, Phillips chose to enroll in the Alliance Account option. . . .
. . . .
. . . Contrary to Phillips’s suggestion, the policy did not make lump-sum pay-ment the default payment method, such that Prudential was required to pay Phillips a lump sum unless she told them otherwise; the policy entitled her to “choose” how she would be paid, and she did just that.46
In reaching its decision, the Seventh Circuit distinguished the First Circuit’s opinion in Mogel v. UNUM Life Insurance Co. of America,47 which ruled in favor of the plaintiff in a case involving a similar issue, but involved an ERISA claim and different policy language. Another significant recent appellate decision regarding retained asset accounts is the Third Circuit’s decision in Edmonson v. Lincoln National Life Insurance Co.48 That case involved a group life insurance plan governed by ERISA, and a policy that provided that benefits “be paid immediately after the Company receives complete proof of claim.”49 The plaintiff alleged that the insurer breached its fiduciary duty of loyalty under ERISA when it paid the claim through a retained asset account and invested the funds for its own benefit. The district court granted summary judgment on the ground that the insurer was not acting as a fiduciary at the relevant time.50 The Third Circuit affirmed, but on different grounds. It held that the insurer was acting as a fiduciary when it chose to pay the plaintiff’s claim through the retained asset account, but that the insurer did not breach its fiduciary duty.51 The court explained that the insurer’s selection of the payment method was an act of plan administra-
46 Id. at 1021-22. 47 547 F.3d 23 (1st Cir. 2008). 48 725 F.3d 406 (3d Cir. 2013). 49 Id. at 411. 50 Id. 51 Id. at 421.
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tion or management, and also involved exercising discretionary authority or control over plan assets, and therefore the insurer was acting as a fiduciary under ERISA.52 The insurer did not breach its fiduciary duty, however, because the account was established to pay the plaintiff benefits, and the insurer “did not directly gain any financial benefit from this deci-sion.”53 The fact that the insurer might earn a profit if the insured chose to leave money in the account did not constitute a breach of fiduciary duty.54 The court further explained that ERISA does not mandate a particular method of payment of benefits, and that the insurer did not cause the plaintiff’s injury because she could have immediately withdrawn the funds from the account.55 The court also found that the insurer had discretion because the policy was silent regarding the method of payment, and that, once the account was set up, the assets were no longer plan assets and the insurer and plaintiff were in an ordinary debtor-creditor relationship.56
In another series of class actions, the plaintiffs allege that life insurance companies should be required to perform searches of the Social Security Death Master File database to ascertain whether unclaimed death benefits may in fact be payable.57 In Andrews v. Na-tionwide Mutual Insurance Co.,58 one of the first appellate decisions on this issue, the Ohio Court of Appeals upheld a trial court’s decision dismissing the complaint for failure to state a claim upon which relief could be granted. In Andrews, the plaintiffs brought a putative class action alleging that Nationwide breached the duty of good faith and fair dealing under life insurance policies by failing to take reasonable steps to ascertain whether insureds had died and death benefits were due but unclaimed. The trial court dismissed on two grounds:the plaintiffs lacked standing, and the claims were barred by the plain language of the poli-cies. For example, one of the policies stated:
52 Id. at 422-23. 53 Id. at 423. 54 Id. 55 Id. at 423-24. 56 Id. at 425, 429; see also Vander Luitgaren v. Sun Life Assur. Co. of Canada, 2013 WL 4058916, *4-5 (D. Mass. Aug. 9, 2013) (agreeing with Edmonson). In Edmonson, one judge dissented and would have held that the plaintiff lacked standing because she failed to show that, if she had been paid in a lump sum, she would have invested the money and earned a return equivalent to that earned by the insurer for its own benefit. Id. at 431 (Jordan, J., dissenting). 57 This same argument has also been the focus of regulatory action by some insurance departments. See Feingold v. John Hancock Life Ins. Co., ___ F.3d ___, 2014 WL 2186595 (1st Cir. May 27, 2014) (affirm-ing dismissal of putative class action on grounds that plaintiff was not a third-party beneficiary of insurer’s agreement with regulatory authority and Illinois unclaimed property statute did not require insurer to perform searches of death master file). 58 No. 97891, 2012 WL 5289946 (Ohio Ct. App. Oct. 25, 2012).
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We agree to pay the Death Proceeds to the Beneficiary upon receiving proof that the Insured has died while this Policy is in force and before the Maturity Date.
* * *
[Nationwide] will pay the Death proceeds to the Beneficiary after we receive at our Home Office proof of death satisfactory to us and such other information as we reasonably require.59
On appeal, the Ohio Court of Appeals assumed the plaintiffs had standing but affirmed the dismissal based on the policy language. Noting that the language was mandated by Ohio statute, the court reasoned that “[t]he terms ‘receipt’ and ‘receiving’ demonstrate Nation-wide’s passive role in establishing an insured party’s proof of death; they do not connote an obligation to procure such information.”60 Accordingly, “a finding obligating Nationwide to solicit or gather information pertaining to an insured’s death would be contrary to the terms contained in the insurance policy.”61 In so holding, the court rejected the plaintiffs’ contention that because death is inevitable, the duty of good faith and fair dealing requires proactive action by a life insurer; to the contrary, “[w]hile we understand that the death of an insured party is an inevitable fact, we are not persuaded that such certainty places an additional duty on Nationwide beyond what is expressed in the life insurance contracts, and appellants provide no case law to support such a proposition.”62 Moreover, the court held, “[i]n the absence of legislative or administrative regulatory action, we will not import ad-ditional unspoken duties and obligations onto Nationwide that will conflict with the parties’ contracted terms.”63 Another significant area of life insurance class action litigation involves changes to cost of insurance (COI) charges. A significant decision favorable to insurers is Norem v. Lincoln Benefit Life Co.,64 which focused on a policy provision stating that “[t]he cost of insurance rate is based on the insured’s sex, issue age, policy year, and payment class.”65 The plaintiff argued that the insurer breached the policy by considering factors other than sex, age, policy year, and payment class in setting COI rates, including expected policy lapse rates, agent commissions, and anticipated death benefit costs.66 Focusing on the words “based on,” the
59 Id. at *4 (emphasis in original). 60 Id. 61 Id. 62 Id. at *5. 63 Id. 64 737 F.3d 1145 (7th Cir. 2013). 65 Id. at 1147 n.2. 66 Id. at 1148.
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insurer argued that it could include other factors as long as the factors listed in the policy were a significant part of the calculation. The district court agreed and granted summary judgment. The Seventh Circuit affirmed.67 Although noting that lower courts had disagreed on this issue in other COI litigation, the court concluded that “no one would suppose that a cake recipe ‘based on’ flour, sugar, and eggs must be limited only to those ingredients. Thus, neither the dictionary definitions nor common understanding of the phrase ‘based on’ suggest that Lincoln Benefit is prohibited from considering factors beyond sex, issue age, policy year, and payment class when calculating its COI rates.”68 The court also noted that it would be incorrect to interpret the policy in a manner that would not expect an insurer to make a profit.69
In another class action involving COI rates (but different policy language), the court reached an outcome much less favorable to insurers, enjoining the insurer from implementing a COI rate increase. That case, Yue v. Conseco Life Insurance Co.,70 arose out of life insur-ance products sold by Conseco Life that became a particularly bad deal for the company when there were fewer policy terminations than anticipated, as a consequence of which the expected death benefits were projected to result in substantial losses. The policy had the following provision allowing a change in COI charges:
Current monthly cost of insurance rates will be determined by the Company based on its expectation as to future mortality experience. Any change in such rates will apply uniformly to all members of the same age, sex, and premium class.71
Conseco first tried to rely on this language to impose a future rate increase starting in the 21st year of policies, which would rein in its projected losses, but not result in any profits. The court rejected that approach, ruling on summary judgment that the policy provision allowed only immediate, “current” rate changes, not future changes, and that the phrase “expectation as to future mortality experience” meant “expectation of the rate of mortality,” not “the expected amount of death benefits.”72 Conseco then sought to implement immediate and substantial rate increases for the vast majority of policyholders. If, for example, the mortality rate for a particular class of policyholders was 47.466 per 1000 policyholders, the rate would become $47.466 per $1000 of coverage. These rate increases were implemented notwithstanding that morality rates for the vast majority of policyholders had decreased.
67 Id. 68 Id. at 1150. 69 Id. at 1154-55. 70 282 F.R.D. 469 (C.D. Cal. 2012). 71 Id. at 472. 72 Id. (internal quotes omitted; emphasis added).
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73 The court also indicated it would consider certifying a class of policyholders who had surrendered their policies if an appropriate representative of that proposed class joined the suit. Id. at 475, 478. 74 See Fed. R. Civ. P. 23(b)(2). 75 Yue, 282 F.R.D. at 479. 76 Id. at 481. 77 Id. at 483 (emphasis added).
In response to this second attempted rate increase, the court certified a class of those policyholders who had not surrendered their policies.73 The court concluded that certification was proper under Rule 23(b)(2)74 because the class was seeking only injunctive and declara-tory relief preventing implementation of the rate increase and because “[a]ny monetary relief sought by the class, such as the return of any additional COI charges deducted after the rate increase, would be incidental to the equitable relief sought by Plaintiff.”75 The court went on to grant a preliminary injunction. It found a likelihood of success on the merits because it concluded that the COI provision likely did not allow a rate increase where it was the insurer’s expected losses, not actuarial mortality rates, that were increas-ing. The court explained that “in order to ‘base’ COI rates on expected mortality rates, Conseco must consider the relationship between current and past expected mortality rates and determine how those rates have changed.”76
Of particular significance was the court’s finding on imminent irreparable injury:
The Court finds that without a preliminary injunction, policyholders are likely to suffer imminent irreparable harm. It is common knowledge that people purchase insurance policies for “security” and “peace of mind.” In the context of life insur-ance, the “security” being purchased is the knowledge that the policies’ designated beneficiaries will be left with some degree of financial support when the insured passes away. When policyholders face large, unanticipated increases in charges, the “peace of mind” they paid for is irreparably lost—instead, they are left with stress, anxiety, and uncertainty regarding the state of their life insurance.77
The potentially broad implications of this statement are hard to overstate. Outside the realm of bad faith claims, which were not involved here, the fact that a contract was entered into for “security” and “peace of mind” is typically not even relevant to an analysis of claims arising under that contract, much less the basis for granting a preliminary injunction. There are many situations in which “security” and “peace of mind” are factors in consumer rela-tionships with businesses. In any event, it is not at all clear why the kind of loss the court describes is not one that money damages can compensate, since the beneficiaries are only entitled to money, i.e., the policy proceeds, and those can be paid later, with interest.
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78 The “made whole” (or “make whole”) doctrine “provides generally that an insurance company cannot exercise its right of subrogation until its insured has been fully compensated or ‘made whole.’” Jones v. Nationwide Prop. & Cas. Ins. Co., 32 A.3d 1261, 1263 (Pa. 2011). 79 Id. 80 Id. at 1271. 81 Id. at 1272. 82 No. 8:12–cv–897–T–30TBM, 2012 WL 3156596 (M.D. Fla. Aug. 3, 2012). 83 See supra note 23. 84 Vandenbrink, 2012 WL 3156596 at *3. 85 Id.
D. Subrogation Class Actions A significant new focus of class action litigation against insurers over the last few years has been subrogation practices, specifically the “made whole” doctrine. Under that doctrine, an insurance company is not entitled to any third party funds recovered in subrogation, in certain circumstances, until its insured has been fully compensated or “made whole” from the wrongdoer or another source.78 The Pennsylvania Supreme Court affirmed the dismissal of one of these putative class actions in Jones v. Nationwide Property & Casualty Insurance Co., which involved a chal-lenge to an auto insurer’s practice of reimbursing its insured’s deductible payment, on a pro rata basis only, from funds obtained in the insurer’s subrogation action against the third party tortfeasor.79 The Pennsylvania Supreme Court rejected the claim as a matter of law. According to the court, the result advocated by the insured—requiring the insured to recover the entire deductible before the insurer could recover anything from its subrogation action—would “in essence creat[e] a no-deductible policy, in the limited circumstances of cases involving subrogation recoveries,” in violation of Pennsylvania’s Motor Vehicle Financial Responsi-bility Law.80 Moreover, the court stated, such a result “would force the insurer essentially to cover the risk of the deductible where the insured has not paid premiums to cover that risk.”81 In Vandenbrink v. State Farm Mutual Automobile Insurance Co.,82 plaintiffs filed a putative class action challenging their insurer’s attempt to subrogate med-pay payments83 following the insureds’ direct settlement with third party tortfeasors when the insureds were not made whole. The federal district court struck the class allegations on the pleadings, rul-ing that class treatment was facially improper because “the threshold inquiry is whether the Plaintiffs were made whole through their settlements,”84 and this would require individual inquiries into “the damages incurred by an individual plaintiff, the amount of the settlement, and the portion of the settlement that actually was for medical payments.”85
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86 981 N.Y.S.2d 634 (Table), 2013 WL 5966053 (Sup. Ct. 2013). The author represented defendants American International Group, Inc. and New Hampshire Insurance Co. in this case. 87 Id. at *3 (brackets in original) (quoting Winkelmann v. Excelsior Ins. Co., 626 N.Y.S.2d 994, 995 (1995)). 88 Id. at *4 (quoting Winkelmann, 626 N.Y.S.2d at 996). 89 Id. 90 133 S. Ct. 1345 (2013). See infra text accompanying notes 96-109. 91 133 S. Ct. 1426 (2013). See infra text accompanying notes 110-125.
Erlich v. American International Group, Inc.86 was a putative class action challenging an insurer’s ability to retain the full proceeds of a subrogation action against a third party tortfeasor when the insured had recovered the full value of the policy, but not its uninsured losses (i.e., the unreimbursed portion of the deductible and depreciation holdback). The trial court granted the insurers’ motions to dismiss, ruling that, under controlling New York authority, “‘an insurer who has paid its insured the full amount due under a [policy], but less than the insured’s loss, may proceed against the third-party tortfeasor responsible for the loss before the insured has been made whole by the tortfeasor.’”87 According to the court, the insurer’s subrogation rights are limited only when “the sources of recovery ultimately available are inadequate to fully compensate the insured for its losses . . . .”88 In further support of its ruling, the court explained that “[t]he policyholder cannot sit on its rights, allowing its claims against the tortfeasor to become time barred, and then sue its insurer for a portion of the subrogation settlement. That is fundamentally unfair, and contravenes the subrogation framework and public policy repeatedly articulated by the Court of Appeals.”89
II.2012-2013 U.S. Supreme Court Class Action Decisions;
Implications for Insurance Cases
The U.S. Supreme Court decided six class action cases during its October 2012 term that have the potential to significantly impact class action litigation in the insurance arena:
• Standard Fire Ins. Co. v. Knowles, interpreting the Class Action Fairness Act of 2005, held that a named plaintiff cannot avoid federal jurisdiction by stipulating to an amount in controversy below the $5 million threshold for federal jurisdic-tion.90
• Addressing Rule 23(b)’s predominance requirement, Comcast Corp. v. Behrend held that damages must be susceptible to classwide proof, and reiterated both the “rigorous analysis” requirement for class certification and the rule requiring consideration of the merits when merits issues overlap with class certification issues.91
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• Amgen Inc. v. Connecticut Retirement Plans & Trust Funds focused primarily on issues unique to securities class actions, but also addressed the circumstances under which the merits may be considered in deciding class certification.92
• In Genesis Healthcare Corp. v. Symczyk,93 the Court sidestepped the question of whether a defendant can defeat a collective action by making an offer of judgment on a named plaintiff’s claim, but provided helpful analysis for cases in which a named plaintiff’s claim is subject to arbitration or appraisal.
• In American Express Co. v. Italian Colors Restaurant,94 the Court held that an arbitration clause prohibiting class action arbitrations is enforceable even when the cost of arbitrating a federal statutory claim on an individual basis exceeds the potential recovery.
• In Oxford Health Plans LLC v. Sutter, the Court held that an arbitrator did not exceed his authority in deciding that a contract provided for class arbitration (i.e., a class action arbitration proceeding).95
Each of these cases, and its potential impact on insurance cases, is discussed below.
A. Standard Fire Insurance Co. v. Knowles Standard Fire Insurance Co. v. Knowles96 was one of a series of class actions brought in the Miller County, Arkansas Circuit Court focusing on when general contractor fees are owed on claims for property damage under homeowners insurance policies. In order to avoid removal under the Class Action Fairness Act of 2005 (CAFA),97 the plaintiff stipulated that he would not seek more than $5 million in the aggregate on behalf of the class. After Standard Fire removed the case to federal court, the plaintiff moved to remand to state court on the ground the amount in controversy did not exceed the required $5 million. Although agree-ing that, absent the stipulation, the amount in controversy was slightly above the $5 million jurisdictional threshold, the district court remanded the case in light of the stipulation.98 The Eighth Circuit denied Standard Fire’s petition for permission to file an interlocutory appeal under CAFA.99
92 133 S. Ct. 1184 (2013). See infra text accompanying notes 126-131. 93 133 S. Ct. 1523 (2013). See infra text accompanying notes 132-145. 94 133 S. Ct. 2304 (2013). See infra text accompanying notes 146-157. 95 133 S. Ct. 2064 (2013). See infra text accompanying notes 158-162. 96 133 S. Ct. 1345 (2013). The author represented The Standard Fire Insurance Company in this case. 97 See 28 U.S.C. § 1332(d). 98 Knowles, 133 S. Ct. at 1348. 99 Knowles v. Standard Fire Ins. Co., 2012 WL 3828891 (8th Cir. 2012).
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The United States Supreme Court held unanimously that “[t]he District Court . . . wrongly concluded that Knowles’ precertification stipulation could overcome its finding that the CAFA jurisdictional threshold had been met.”100 Relying on its 2011 decision in Smith v. Bayer Corp.,101 the Court explained that “a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified”:102
Because his precertification stipulation does not bind anyone but himself, Knowles has not reduced the value of the putative class members’ claims. For jurisdictional purposes, our inquiry is limited to examining the case “as of the time it was filed in state court.” At that point, Knowles lacked the authority to concede the amount-in-controversy issue for the absent class members.103
The Court also cited with approval and quoted from the Seventh Circuit’s opinion in Back Doctors Ltd. v. Metropolitan Property & Casualty Insurance Co.,104 which noted that a class representative has a “fiduciary duty not to ‘throw away what could be a major component of the class’s recovery’” (e.g., in Back Doctors, by disavowing a present intention to seek punitive damages that might exceed the jurisdictional threshold).105 The Supreme Court also reasoned that allowing the plaintiff to use a stipulation to avoid CAFA jurisdiction would “run directly counter to CAFA’s primary objective: ensuring ‘Fed-eral court consideration of interstate cases of national importance.’”106 Plaintiff’s improper tactic “would also have the effect of allowing the subdivision of a $100 million action into 21 just-below-$5-million state-court actions simply by including nonbinding stipulations; such an outcome would squarely conflict with the statute’s objective.”107 As a further indication of the Supreme Court’s views on the use of tactics designed to avoid federal jurisdiction under CAFA, at oral argument, Chief Justice Roberts asked the plaintiff’s counsel whether it would be proper under CAFA for a named plaintiff to limit the proposed class to persons whose last names begin with the letters A through K. The plaintiff’s counsel responded that such a “legal strategy” would be “perfectly appropriate.” Justice Breyer, who ultimately authored the Court’s unanimous opinion, commented that
100 Knowles, 133 S. Ct. at 1349. 101 131 S. Ct. 2368, 2380 (2011).102 Knowles, 133 S. Ct. at 1349. 103 Id. (citation omitted). 104 637 F.3d 827 (7th Cir. 2011).105 Knowles, 133 S. Ct. at 1349 (quoting Back Doctors, 637 F.3d at 830). 106 Id. at 1350.107 Id.
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“that’s the same question” as presented in Knowles, and that, such a tactic, if permitted, would be a “loophole” that “swallows up all of Congress’s statute . . . .”108 Moreover, Justice Ginsburg twice questioned the propriety of Knowles’ decision to limit the claims to a two-year class period rather than the full five-year period available under the governing statute of limitations, in an apparent attempt to limit the amount in controversy.109 This suggests that these types of tactics may also be improper under the Knowles decision. The decision in Knowles is particularly important for insurers seeking to secure federal jurisdiction under CAFA, especially where the case is pending in a state court that has be-come a “magnet jurisdiction” for plaintiffs’ lawyers.
B. Comcast Corp. v. Behrend Comcast Corp. v. Behrend110 presented the question of whether a class action can be certified in federal court without admissible evidence that damages are susceptible to proof on a classwide basis. The Court’s answer was that, in applying Rule 23(b)(3)’s predominance requirement, the plaintiffs had failed to satisfy their obligation to establish that damages were susceptible to classwide proof. Comcast is an antitrust case in which the plaintiffs alleged that Comcast, by acquir-ing competitor firms in the greater Philadelphia area, improperly enabled itself to charge higher prices. Although the district court certified the class on the theory that Comcast deterred “overbuilders” (i.e., companies that would compete in areas where Comcast was already operating),111 the plaintiffs’ expert’s damages calculations were not confined to the “overbuilder” theory but also took into account three other theories the district court had rejected for purposes of class certification. This failure to limit the damages calculation to the “overbuilder” theory ultimately was the death knell when the case reached the Supreme Court. Justice Scalia wrote the opinion for a 5-4 majority that included Chief Justice Roberts and Justices Kennedy, Thomas, and Alito. The Court reiterated that a “rigorous analysis” of class certification requirements is necessary, and that “[s]uch an analysis will frequently entail overlap with the merits of the plaintiff’s underlying claim.”112 This rigorous analysis extends not only to class certification requirements under Rule 23(a), but also to those under
108 Transcript of Oral Argument at 29-31, Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345 (No. 11-1450), available at http://www.supremecourt.gov/oral_arguments/argument_transcripts/11-1450.pdf.109 Id. at 16, 47.110 133 S. Ct. 1426 (2013).111 Id. at 1430-31. 112 Id. at 1432 (internal quotes omitted).
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Rule 23(b).113 Because the latter is an “adventuresome innovation” designed for cases where class treatment “is not as clearly called for,” the court has a particular “duty to take a ‘close look’ at whether common questions predominate over individual ones.”114 The Court found that the plaintiffs’ “model falls far short of establishing that damages are capable of measurement on a classwide basis,” and that “[q]uestions of individual dam-age calculations will inevitably overwhelm questions common to the class.”115 The Court further explained that “a model purporting to serve as evidence of damages in [a] class action must measure only those damages attributable to [the] theory” on which the class was certified.116 “If the model does not even attempt to do that, it cannot possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 23(b)(3).”117 The Court rejected the Third Circuit’s view that a more detailed calculation of damages was a merits issue not appropriate for resolution at class certification; to the contrary, “that reasoning flatly contradicts our cases requiring a determination that Rule 23 is satisfied, even when that requires inquiry into the merits of the claim.”118 The dissent, authored jointly by Justices Ginsburg and Breyer and joined by Justices So-tomayor and Kagan, argued that the Court should have dismissed certiorari as improvidently granted.119 When it granted certiorari, the Court had reformulated the question presented in a manner that “shifted the focus of the dispute from the District Court’s Rule 23(b)(3) analysis to its attention (or lack thereof) to the admissibility of expert testimony” under Fed. R. Evid. 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc.120 In fact, Comcast had never filed a Daubert motion and thus forfeited any objection to the expert’s damages calculations at the certification stage. Moreover, according to the dissent, the majority opinion “should not be read to require, as a prerequisite to certification, that damages attributable to a classwide injury be measurable ‘on a class-wide basis.’”121 Rather, “[t]he Court’s ruling is good for this day and case only. In the mine run of cases, it remains the ‘black letter rule’ that a class may obtain certification under Rule 23(b)(3) when liability questions common to the class predominate over damages questions unique to class members.”122
113 Id.114 Id. This largely reiterates what the Court said in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551-52 (2011), except that the Court did not reach Rule 23(b) issues in Wal-Mart. 115 Comcast, 133 S. Ct. at 1433. 116 Id. 117 Id. 118 Id.119 Id. at 1435 (Ginsburg & Breyer, JJ., dissenting).120 509 U.S. 579 (1993).121 Comcast, 133 S. Ct. at 1436.122 Id. at 1437.
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It is important to note that Justice Scalia’s majority opinion contains no such limitation and does not suggest any agreement with the dissent on this point. Rather, the majority opinion appears to require that plaintiffs proffer admissible evidence to prove damages on a classwide basis as a prerequisite to class certification. While plaintiffs’ lawyers have cited the dissent in attempting to limit the reach of the majority opinion, most lower courts have not been inclined to read the opinion so narrowly. An example in the insurance context is Wheeler v. United Services Automobile Ass’n,123 which involved whether an insurance policy complied with a regulatory requirement enabling an insurer to limit its liability for attorney fees under Alaska law. The plaintiff contended that the statute required an award of attorney fees calculated as a percentage of the claimant’s actual damages from a personal injury. The court concluded that “to calculate damages, the Court would be required—for each of the 136-plus proposed class members—to con-duct a separate evidentiary proceeding for that class member to determine the cause(s) of each member’s accident and the amount of damages suffered by each of them.”124 Because “[t]he individual questions of fact implicated in the determination of damages for the pro-posed class” would thus “‘inevitably overwhelm’ the common questions of law and fact,” the proposed class did not satisfy Rule 23(b)(3)’s predominance requirement, and class certification was denied.125
C. Amgen Inc. v. Connecticut Retirement Plans & Trust Funds Amgen Inc. v. Connecticut Retirement Plans & Trust Funds126 was a 6-3 decision in which the Court held that, in a securities fraud class action under Section 10(b) and Rule 10b-5,127 the plaintiff need not prove materiality as a prerequisite to class certification. Justice Ginsburg’s opinion for the Court reasoned that: (1) materiality is an objective question and a common question that can be proven with classwide evidence; and (2) regardless of how the issue of materiality is decided, it will not prevent common issues from predominating under Rule 23(b)(3). This is because if materiality can be proven, that proof will be accom-plished with classwide evidence; and if materiality cannot be proven, the named plaintiffs’ individual claims will necessarily fail, and the case will end.128 In reaching this result, the Court also clarified the extent to which an inquiry on the merits is appropriate in deciding class certification:
123 No. 3:11-cv-00018-SLG, 2013 WL 4525312 (D. Alaska Aug. 27, 2013).124 Id. at *5.125 Id.126 133 S. Ct. 1184 (2013).127 Securities Exchange Act of 1934 § 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b–5.128 Amgen, 133 S. Ct. at 1195-96.
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Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage. Merits questions may be considered to the extent—but only to the extent—that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied.129
Amgen raises some interesting questions for insurance class actions. In those cases, the question whether certain elements can be proven with classwide evidence or will require individual adjudication will be hotly contested, while other questions concededly could be established (or defeated) with common evidence. Amgen will require the district courts and the parties to focus on issues that potentially “give rise to any prospect of individual ques-tions overwhelming common ones . . . .”130 But given that every plaintiffs’ lawyer who files a class action believes he or she can prove everything with common evidence, how will that play out? Where will courts draw the line? And what will happen when the defendant disputes the admissibility of the classwide evidence? These important questions remain to be answered. Amgen also may have an impact on the timing of discovery in class actions. It often makes sense to phase discovery so the parties focus on discovery pertinent to class certification is-sues until class certification is decided, and then conduct merits discovery thereafter. District courts sometimes struggle with where to draw the line. Amgen now provides a potential framework to aid in that line-drawing—i.e., discovery should be allowed if it (1) relates to a question that is the subject of a reasonable debate over whether it can be established with classwide evidence, or (2) relates to a question on which all claims (individual and class) would necessarily fail if the “common” evidence does not persuade the finder of fact. It is also significant that the Court noted that the defendant’s contention that materiality could not be established would be “properly addressed at trial or in a ruling on a summary-judgment motion.”131 When a key dispute in a putative class action focuses on materiality or another similar element of a cause of action, and a defendant is concerned that the issue will not be appropriate for resolution on a class certification motion in light of Amgen, one approach may be to move for summary judgment on that issue early in the case, before class certification. If the plaintiff objects to resolution of the summary judgment motion at that time, the defendant will have to convince the district court that taking up such a motion makes good sense as a matter of case management. In many instances it does. After all, why should the parties and the court go through class certification proceedings if there is a key threshold issue that can be resolved on summary judgment and would defeat the entire case? If the issue requires discovery, however, that discovery could not be postponed, so this would need to be considered in formulating any plan for phased discovery.
129 Id. at 1194-95.130 Id. at 1199. 131 Id. at 1197.
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D. Genesis Healthcare Corp. v. Symczyk Genesis Healthcare Corp. v. Symczyk132 was a collective action under the Fair Labor Standards Act (FLSA)133 in which the Court addressed the circumstances under which a collective action is justiciable when the named plaintiff’s individual claim becomes moot. The Court relied on class action jurisprudence in deciding this issue, and the result could apply to class actions as well as FLSA collective actions (which are largely equivalent to “opt in” class actions). Upon answering the complaint, the Genesis Healthcare defendants served a Rule 68 offer of judgment that would have provided complete relief to the named plaintiff. After the plaintiff failed to respond to the offer, the defendants successfully moved to dismiss for lack of subject matter jurisdiction. The Third Circuit reversed, concluding that, although the offer of judgment rendered the plaintiff’s individual claims moot, the plaintiff could still seek “conditional certification” under the FLSA. In the court’s analysis, because the offer of judgment was an improper attempt to “pick off” the representative plaintiff, the motion for conditional certification of a collective action would relate back to the filing of the complaint.134 In a 5-4 decision authored by Justice Thomas, the Supreme Court held that the case was not justiciable.135 Assuming (without deciding) that the offer of judgment mooted the plaintiff’s individual claim,136 the Court concluded that “the mere presence of collective-action allegations in the complaint cannot save the suit from mootness once the individual claim is satisfied.”137 While noting that FLSA collective actions are different from class actions, the Court nonetheless reviewed its prior class action decisions in this area. These prior decisions had held that a class action does not become moot when the named plaintiff’s individual claim becomes moot after a class is certified or after certification is denied and while that ruling is being appealed. The Court also addressed its prior authority holding that an “inherently transitory” claim asserted in a class action can sometimes be pursued after the named plain-tiff’s claim has become moot—for example, where “the claims raised are ‘so inherently transitory that the trial court will not have even enough time to rule on a motion for class certification before the proposed representative’s individual interest expires.’”138 The Court
132 133 S. Ct. 1523 (2013).133 29 U.S.C. §§ 201-209.134 Genesis Healthcare, 133 S. Ct. at 1527-28.135 Id. at 1528-29. 136 Because this question was effectively conceded in the proceedings below and not raised by the plaintiff in the certiorari briefing, it was not properly before the Court. Id.137 Id. at 1529.138 Id. at 1530-31 (quoting County of Riverside v. McLaughlin, 500 U.S. 44, 52 (1991)).
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found this line of case law inapposite because “this doctrine has invariably focused on the fleeting nature of the challenged conduct giving rise to the claim, not on the defendant’s litigation strategy.”139 In a strongly-worded dissent, Justice Kagan, joined by Justices Ginsburg, Breyer, and Sotomayor, concluded that the named plaintiff’s individual claim should not be mooted by the Rule 68 offer of judgment. Justice Kagan wrote: “Feel free to relegate the majority’s decision to the furthest reaches of your mind: The situation it addresses should never again arise.”140 Because it did not decide the issue, Genesis Healthcare sheds no light on whether an unaccepted offer of judgment offering full relief to the named plaintiffs can be used to render the case moot and effectively preclude a class action. Subsequent to the Supreme Court’s decision, however, the Seventh Circuit reaffirmed its prior ruling that such an offer made prior to the filing of a motion for class certification can render a case moot.141 By contrast, the Ninth Circuit adopted the position articulated by the dissent in holding that “an unac-cepted Rule 68 offer that would fully satisfy a plaintiff’s claim is insufficient to render the claim moot.”142 While recognizing that “a court may have ‘discretion to halt a lawsuit by entering judgment for the plaintiff when the defendant unconditionally surrenders and only the plaintiff’s obstinacy or madness prevents her from accepting total victory,” the Ninth Circuit ruled that the case before it presented no such circumstance.143
Although not having had occasion to weigh in on the issue after Genesis Healthcare, prior to that decision, the Third and Tenth Circuits also held that an unaccepted offer of judgment affording complete relief to the named plaintiff does not render the putative class claims moot, but rather the motion for class certification relates back to the filing of the complaint.144 The Fifth Circuit reached a similar result in an FLSA case.145 While the question of whether an offer of judgment can be used to moot a class action remains undecided, Genesis Healthcare likely will be helpful to insurers in at least one sce-nario: where the named plaintiff’s claim has been resolved by arbitration or appraisal prior to class certification, but the named plaintiff seeks to pursue claims on behalf of a putative class. In that circumstance, Genesis Healthcare should establish that the named plaintiff cannot pursue such putative class claims.
139 Id. at 1531.140 Id. at 1533 (Kagan, J., dissenting).141 McMahon v. LVNV Funding, LLC, Nos. 12-3504, 13-2030, 2014 WL 929358 (7th Cir. Mar. 11, 2014). 142 Diaz v. First Am. Home Buyers Protection Corp., 732 F.3d 948, 950 (9th Cir. 2013). 143 Id. at 955.144 See Weiss v. Regal Collections, 385 F.3d 337, 348 (3d Cir. 2004); Lucero v. Bureau of Collection Re-covery, Inc., 639 F.3d 1239, 1250 (10th Cir. 2011). The Ninth Circuit had previously held the same. See Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1091-92 (9th Cir. 2011).145 See Sandoz v. Cingular Wireless LLC, 553 F.3d 913, 920 (5th Cir. 2008).
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E. American Express Co. v. Italian Colors Restaurant American Express Co. v. Italian Colors Restaurant146 addressed whether an arbitration clause prohibiting class action arbitrations is enforceable when the cost of arbitrating a federal statutory claim on an individual basis exceeds the potential recovery. The plaintiffs were merchants who brought a putative antitrust class action against Amex, alleging that it exercised monopoly power with respect to charge cards (where the full bill must be paid every month) to force merchants to accept Amex credit cards at higher fees than those charged for other credit cards. The agreement between Amex and the merchants required all disputes to be resolved by arbitration and contained a “class action waiver” provision stating that “[t]here shall be no right or authority for any Claims to be arbitrated on a class action basis.”147 The merchants asserted that the class action waiver was unenforceable be-cause the cost of an individual arbitration, requiring an economic expert report that would cost “at least several hundred thousand dollars,” would far exceed the maximum potential individual recovery ($38,549, including treble damages).148 Justice Scalia’s relatively short majority opinion (joined by Chief Justice Roberts and Justices Kennedy, Thomas, and Alito) concluded that: (1) “the antitrust laws do not guar-antee an affordable procedural path to the vindication of every claim”;149 (2) Rule 23 does not “establish an entitlement to class proceedings for the vindication of statutory rights”;150 (3) “the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy”;151 and (4) the Court’s prior decision in AT&T Mobility LLC v. Concepcion152 had “specifically rejected the argument that class arbitration was necessary to prosecute claims ‘that might otherwise slip through the legal system.’”153 Justice Kagan dissented, joined by Justices Ginsburg and Breyer.154 According to the dissenters, under the “effective vindication” exception previously articulated by the Court,155 the class action waiver was invalid because there was no effective means of pursuing the
146 133 S. Ct. 2304 (2013).147 Id. at 2308.148 Id. 149 Id. at 2309.150 Id.151 Id. at 2311 (emphasis in original).152 131 S. Ct. 1740 (2011).153 American Express, 133 S. Ct. at 2312. Justice Thomas also wrote a concurring opinion reiterating his view that, under the plain language of the Federal Arbitration Act, only a defense to the formation of an arbitration agreement (such as fraud or duress) can prevent enforcement of the arbitration agreement. Id. at 2312-13 (Thomas, J., concurring).154 Id. at 2313 (Kagan, J., dissenting). 155 See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 (1985).
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antitrust claims in arbitration.156 The dissent hinted, however, that the class action waiver might have been permissible if the arbitration clause had allowed joinder or consolidation of multiple claims, sharing of expert reports between arbitrations (which apparently was precluded by a confidentiality provision in the arbitration agreement), or shifting of costs if the merchants prevailed.157 At the most basic, technical level, this case is unlikely to have a direct impact on insurance class actions involving claims or underwriting issues, because those are governed by state law, and American Express focuses on arbitrations of federal statutory claims. The greater potential impact of the decision is its strong affirmation of the basic principles of AT&T Mobility (which addressed federal preemption, under the FAA, of state laws invalidating class action waivers), and the corresponding potential for a decrease in class actions against other industries. If there are fewer employment class actions, and fewer class actions against other target defendants such as banks, credit card companies, and product manufacturers, then the plaintiffs’ class action bar will either abandon this work (which seems unlikely), or focus their energies on industries that have not widely adopted arbitration. If insurance remains one of those industries, it could become a bigger target for these refocused efforts. While insurers have used arbitration and appraisal for many years in limited contexts, they have not sought to expand the use of arbitration following American Express and AT&T Mobility. This is likely because of the regulatory obstacles and practical difficulties of ex-panding the use of arbitration in insurance disputes.
F. Oxford Health Plans LLC v. Sutter The Court’s second arbitration decision in the 2012 Term, Oxford Health Plans LLC v. Sutter,158 addressed the scope of an arbitrator’s powers in deciding whether a contract allowed a class arbitration proceeding. An arbitrator had concluded that the arbitration provision in the governing contract between Oxford and certain physicians implicitly allowed class treatment, even though the arbitration provision failed to expressly address that subject. In a short opinion authored by Justice Kagan, the Court held that the arbitrator had not exceeded his powers under section 10(a)(4) of the Federal Arbitration Act, because the parties had agreed the arbitrator would decide whether the contract authorized class arbitration and he did so based on an interpretation of the arbitration provision. The Court explained that sec-tion 10(a)(4) “permits courts to vacate an arbitral decision only when the arbitrator strayed from his delegated task of interpreting a contract, not when he performed that task poorly.”159 “So long as the arbitrator was ‘arguably construing’ the contract—which this one was—a court may not correct his mistakes under § 10(a)(4). The potential for those mistakes is the
156 American Express, 133 S. Ct. at 2313. 157 Id. at 2316.158 133 S. Ct. 2064 (2013).159 Id. at 2070.
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price of agreeing to arbitration. . . . The arbitrator’s construction holds, however good, bad or ugly.”160 Footnote 2 of the opinion is particularly important. It explains that the Court “would face a different issue if Oxford had argued below that the availability of class arbitration is a so-called ‘question of arbitrability,’” which a court may review “de novo absent ‘clear[] and unmistakeabl[e]’ evidence that the parties wanted an arbitrator to resolve the dispute.”161 Given this signal from the Court, it is reasonable to assume that defendants will point to this language as a basis for challenging arbitrability in future cases. Also significant was Justice Alito’s concurring opinion, joined by Justice Thomas, ex-plaining that absent class members should not be bound by the outcome of a class arbitration if they never agreed to a class arbitration procedure.162 This suggests that a majority of the Court might well not allow class arbitrations, based either on arbitrability or on the grounds articulated by Justice Alito. So how does this impact insurance class actions? Because the insurance industry has not moved to expand the use of arbitration clauses in recent years, arbitration remains in relatively limited use—typically it applies to uninsured/underinsured motorist auto insurance claims in some jurisdictions. If class arbitration were sought, an insurer would likely have a strong argument with respect to arbitrability and the nonbinding effect of such a procedure on absent class members.
III.Conclusion
Notwithstanding recent trends in class action law favorable to defendants, including recent U.S. Supreme Court decisions, the insurance industry likely will continue to be a significant target for class actions. This is both because plaintiffs’ attorneys have continued to have some (albeit limited) success in insurance cases and, perhaps more importantly, because recent decisions endorsing arbitration clauses with class action waiver provisions will shift plaintiffs’ focus towards industries, such as insurance, that have not implemented such waivers. Insurers will need to remain vigilant to avoid class exposure, particularly when it comes to ensuring compliance with new statutes and regulations, and ensuring that policy language is consistent with company practices.
160 Id. at 2070-71 (citation omitted).161 Id. at 2068 n.2 162 Id. at 2071 (Alito, J., concurring).
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Mediation in the United States Circuit Courts of Appeals: A Survey†
Craig A. Marvinney
I.Introduction
The advent of alternative dispute resolution (ADR) mechanisms in the United States federal court system in the late twentieth century has had a number of salutary effects, in-cluding significantly decreasing civil docket loads across the country and allowing courts to reduce backlogs that, in some instances, had plagued the courts for decades. To this extent, ADR has been welcomed by courts and litigants alike. The effect of ADR becomes even more apparent at the higher level, the United States Circuit Courts of Appeals. This is so for two reasons. First, the reduction in the number of civil cases being tried to verdict means that even fewer cases are heard in the courts of appeals. Second, and unknown to many lawyers, most U.S. Courts of Appeals have active mediation programs of one sort or another, and these serve to reduce further the number of cases being decided on the merits.1
As at the trial level, mediation at the appellate level has a number of potential benefits. Successful appellate mediation reduces litigants’ costs by eliminating the expensive appellate briefing and oral argument process. It allows parties to re-engage in settlement and case reso-lution dialogue with the benefit of hindsight gained from a trial and resulting court decision
† Submitted by the author on behalf of the FDCC Alternative Dispute Resolution Section. 1 For instance, the Sixth Circuit’s Pre-Argument Conference Program, instituted in 1981, reported as early as 1988 that 49% of eligible cases submitted to the program settled prior to submission on the merits, an increase of 18% over the number of cases that settled without the program. See James B. Eaglin, The Pre-Argument Conference Program in the Sixth Circuit Court of Appeals 5-6 & n.8 (Fed. Jud. Ctr. 1990) [hereinafter Eaglin Report], available at http://www.fjc.gov/public/pdf.nsf/lookup/preargcon.pdf/$file/preargcon.pdf.
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2 This includes the eleven “numbered” circuits, plus the District of Columbia and Federal Circuit Courts of Appeals. The article does not address mediation programs in the non-“circuit” courts or boards of ap-peals, such as the U.S. Court of Military Appeals, the Court of Appeals for Veterans Claims, the Board of Trademark and Patent Appeals (as formerly designated), or the Patent Trial and Appeal Board.
Craig Marvinney is a Partner in the law firm Walter & Haver-field in Cleveland, Ohio. He has first-chair trial experience in all aspects of jury and bench litigation, MDL practice, ap-pellate practice and administrative hearings, and mediations and arbitrations. His complex litigation work includes phar-maceutical and medical device cases; insurance coverage, commercial, and business disputes; and trademark, copyright and patent matters. Mr. Marvinney has appeared on behalf of clients in most US states, and engages in cross-border practice and dispute resolution in the US and Canada. He has served as a Federal Mediator for over 21 years and teaches as an
Adjunct Professor at Case Western Reserve University School of Law. Mr. Marvinney is an active member of the Federation of Defense & Corporate Counsel, currently serving as ADR Section Chair. He is a past Chair of the FDCC’s Website Committee and a long-time faculty member of the FDCC’s Litigation Management College and Graduate Program. He frequently speaks to professional groups on trial techniques, ADR, intellectual property mat-ters, and a variety of other topics. Active in his community, Mr. Marvinney currently serves on the Board of Directors of the Case Western Reserve University Alumni Association, and most recently served as two-term President of the Catholic Diocese of Cleveland’s Lawyers Guild. He has drafted legislation for the Ohio General Assembly, chaired his local Planning Commission and chaired a five year Master Plan Task Force for his city.
or jury verdict—favorable or unfavorable. It eliminates the uncertainty inherent in the appeal process. And it avoids the often extended delay attendant upon disposition of an appeal. Despite these benefits and the near-universal adoption of mediation programs in the courts of appeals, litigants and their attorneys are often without critical information con-cerning mediation in the U.S. Circuit Courts of Appeals: when and where it is available, whether it is mandatory, how to go about arranging for it, or even whether their case may be eligible for it. This article seeks to address that problem. Part II of the article provides an overview of the federal appellate mediation programs, including the authority under which these programs are created and administered and general observations about the existing programs. Part III provides detailed information, on a circuit-by-circuit basis, of the civil mediation programs in the thirteen U.S. Circuit Courts of Appeals.2
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IIFederal Appellate Mediation: The Basics
Mediation in the U.S. Circuit Courts of Appeals is not specifically authorized by statute, but rather by Rule 33 of the Federal Rules of Appellate Procedure. Since 1994, the Rule has stated:
The court may direct the attorneys—and, when appropriate, the parties—to partici-pate in one or more conferences to address any matter that may aid in disposing of the proceedings, including simplifying the issues and discussing settlement. A judge or other person designated by the court may preside over the conference, which may be conducted in person or by telephone. Before a settlement conference, the attorneys must consult with their clients and obtain as much authority as feasible to settle the case. The court may, as a result of the conference, enter an order con-trolling the course of the proceedings or implementing any settlement agreement.3
In addition, the individual circuit courts may, and often do, have local rules that cover the “conference” (i.e., mediation) process in greater detail and specificity. While the various circuit Rule 33 programs have numerous objectives and features, the primary purpose of the circuit conference programs is settlement. Evaluation of a given case in a respective court’s conference program is ordinarily mandatory; and once mediation is deemed appropriate by the court or its designated “conference attorney,” counsel for the parties, and sometimes the parties themselves, must appear (in person or telephonically, depending on the court’s rules). The mediator has a different title in different courts, and is variously referred to as a “Rule 33 Attorney,” a “Conference Attorney,” or “Settlement Counsel.”4 Ordinarily, the mediator is an employee of the court or a retired judge from that court or a district court from within the circuit. Only rarely do circuits use active judicial officers as mediators. The Federal and D.C. Circuits allow private volunteer attorney-mediators, preapproved and vet-ted by the court, to participate.5 Substantive communications in the mediation are uniformly treated as confidential.6 In most cases, the mediator provides a brief report of nonconfidential mediation information and results to the circuit clerk’s office following the mediation, whether successful or not. If a case is resolved, most circuit mediation programs require the parties’ counsel to file a joint stipulation of dismissal.
3 Fed. R. App. P. 33. 4 For convenience, this article uses the term “mediator” unless a specific usage requires a different term. Likewise, although the mediation itself is often referred to as a “conference” or a “pre-argument confer-ence,” this article uses the term “mediation.” 5 See infra Parts III.L, III.M. 6 See, e.g., infra Part III.A (1st Cir.), III.B (2d Cir.) III.C (3d Cir.), III.G (7th Cir.), and III.L (Fed. Cir.).
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7 See infra text accompanying Part III.H. 8 See infra text accompanying Part III.L. 9 Many factors militate against the success of voluntary programs. While in-depth discussion of these issues is beyond the scope of this article, they are associated primarily with the mindset of litigants and their attorneys, including the emboldening of the prevailing party by a victory and the losing party’s fear of being viewed as “weak” by seeking mediation. 10 For more detailed information about the mediation or conference process in the United States Circuit Courts of Appeals generally, see Robert J. Niemic, Mediation & Conference Programs in the Federal Courts of Appeals, A Sourcebook for Judges and Lawyers (Fed. Jud. Ctr. 2d ed. 2006), available at http://www.fjc.gov/public/pdf.nsf/lookup/MediCon2.pdf/$file/MediCon2.pdf. The author thanks Mr. Niemic and acknowledges his work as a prime source for this article.11 28 U.S.C. §§ 41, 44, 48.12 See Niemic, supra note 10, at 4, Table 1.13 Unless otherwise indicated, these details are contained in the local rule or order identified as providing authority for the particular circuit’s mediation program.
Although each circuit has instituted a formal mediation program in one form or an-other, they are not all equally successful. The mediation program in the Eighth Circuit is currently suspended and is not likely to be reinstated in the short term future.7 The future of the Federal Circuit’s program is likewise tenuous, arguably due to funding issues and disputes over how many clerks each judge is allotted.8 The somewhat lackluster statistical performance of these two programs as compared to those of the remaining majority of the circuit programs appears to be that participation in these two programs is voluntary, rather than mandatory.9 On this overview note, then, we turn now to the circuit programs themselves.10
III.Circuit-by-Circuit Survey of Appellate Mediation Programs
The following survey lists, for each circuit, the state(s) or related jurisdictions covered by the court; the number of judges assigned to the circuit; and the site(s) of the court’s regular sessions.11 In addition, it provides the year the court’s mediation program was implemented12 and identifies the local rule or order that, in conjunction with Rule 33 of the Federal Rules of Appellate Procedure, constitutes the authority for the program. Finally, it provides details concerning the mechanics of each circuit’s program.13
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A. First Circuit Court of Appeals Jurisdictions: Maine, Massachusetts, New Hampshire, Puerto Rico, Rhode Island Judges: 6 Location: Boston, MA Program Implemented: 1992 Authority: First Cir. L.R. 33.0
The First Circuit’s program is known as the Civil Appeals Management Plan (CAMP). All civil appeals, with few exceptions, are subject to CAMP, and eligibility is determined by information gleaned from the Docketing Statement that must be filed within fourteen days of the date a case is docketed with the court. The program is administered by Settlement Counsel, who usually request that attorneys submit copies of all relevant orders, memoranda, opinions, and other relevant documents before attending the conference. Activities in the case are not stayed during the pendency of CAMP proceedings. All substantial discussions are held confidentially either by telephone or in person. There is no charge for the conference. The court may also order parties to participate, depending on the case. Conferences may last three hours or more. CAMP offices are located in Boston for cases arising from district courts within the four states within the circuit, and in Hato Rey/San Juan, Puerto Rico for matters arising in that country.14
B. Second Circuit Court of Appeals Jurisdictions: Connecticut, New York, Vermont Judges: 13 Location: New York, NY Program Implemented: 1974 Authority: Second Cir. L.R. 33.1
The Second Circuit was the first among the circuits to institute a CAMP program. This program requires appellants to complete L.R. Form C-A, the Civil Appeal Pre-Argument Statement, within ten days of docketing the appeal. The program is mandated for all civil appeals with few exceptions. Approximately one-half of all conferences are conducted in-person at the Manhattan-based federal courthouse in New York City. The rest are conducted by telephone. Written statements are not required as a matter of course. Conferences are set for ninety minute intervals. No fees are charged by the court. The court rarely grants exceptions to the ordinary court calendar while a matter pends in the CAMP.15
14 For further information, see Settlement Program, U.S. Ct. App. for the First Cir., http://www.ca1.uscourts.gov/settlement-program (last visited Apr. 18, 2014).15 Niemic, supra note 10, at 23-30. For further information, see Mediation (CAMP) FAQ, U.S. Ct. App. for the Second Cir. (Nov. 27, 2013), http://www.ca2.uscourts.gov/staff_attorneys/mediation_faq.html.
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C. Third Circuit Court of Appeals Jurisdictions: Delaware, New Jersey, Pennsylvania, Virgin Islands Judges: 14 Location: Philadelphia, PA Program Implemented: 1995 Authority: Third Cir. L.R. 33
The Third Circuit Court of Appeals runs an Appellate Mediation Program (AMP). No fees are charged for participating in the program. Once the AMP Director determines that a civil case is to be set for mediation, mediation is mandatory for the attorneys and the parties. AMP conferences are usually held in the federal courthouse in Philadelphia, Pennsylva-nia. In special circumstances, however, the court mediators may travel off site for in-person mediation. AMP mediation sessions typically last two to three hours.16
D. Fourth Circuit Court of Appeals Jurisdictions: Maryland, North Carolina, South Carolina, Virginia, West Virginia Judges: 15 Location: Richmond, VA; Asheville, NC Program Implemented: 1994 Authority: Fourth Cir. L.R. 33
The Fourth Circuit’s Mediation Program is administered by the Clerk’s Office. The Office of Circuit Mediator determines which civil cases are eligible based on docketing informa-tion provided at the outset of an appeal. Once in the program, participation is mandatory for attorneys and parties. Confidentiality in the mediation process is a serious concern for the court.17 More than ninety-five percent of mediations are conducted by telephone. In-person conferences, if held, take place in Beaufort, South Carolina; Charlottesville, Virginia; or Durham, North Carolina, depending on the location of the parties and their counsel.18 Parties and counsel may expect the initial conference to last an hour or more.19
16 Niemic, supra note 10, at 34. For further information, see Mediation: Frequently Asked Questions, U.S. Ct. App. for the Third Cir., http://www.ca3.uscourts.gov/mediation_faq (last visited Apr. 18, 2014). See generally Edward R. Becker, Appellate Mediation in the Third Circuit—Program Operations: Nuts, Bolts, and Practice Tips, 47 Villanova L. Rev. 1055 (2002). See also Tom Salzer, An Interview with Joe Torregrossa, Director and Senior Mediator for the Third Circuit Appellate Mediation Program, 14 Arb. & Med’n 2, 5 (Summer 2009), available at https://www.pabar.org/public/committees/dispreso/pubs/newslet-ters/adr%20summer%2009.pdf.17 See In Re Anonymous, 283 F.3d 627 (4th Cir. 2002). 18 For further information, see Mediation, U.S. Ct. App. for the Fourth Cir., http://www.ca4.uscourts.gov/mediation (last visited Apr. 18, 2014).19 Niemic, supra note 10, at 41.
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E. Fifth Circuit Court of Appeals Jurisdictions: District of the Canal Zone, Louisiana, Mississippi, Texas Judges: 17 Location: New Orleans, LA; Fort Worth, TX; Jackson, MS Program Implemented:1996 Authority: General Order Governing the Appellate Conference Program (3/27/2000)
The Fifth Circuit Court of Appeals’ Appellate Conference Program is not authorized by a local rule, but by the court’s General Order Governing the Appellate Conference Program, effective March 27, 2000 (“the General Order”). The General Order is readily available on the court’s website.20 The program applies only to civil cases in which all parties are repre-sented by counsel. Eligible cases are selected by the Program Office during the jurisdictional review process upon a case’s docketing. Participation in selected cases is mandatory for lead counsel. Written mediation statements are not required. The initial conference with counsel is held telephonically and can last up to two hours. If a further in-person conference is necessary, it will ordinarily take place at the Conference Attorney’s office in New Orleans, Louisiana and will last as long as necessary. When the settlement discussions are making progress, the court may order extensions of the briefing process, although such extensions are not favored.21 Reports of the conference are maintained within the Office of Conference Attorney for use in preparing statistical reports on the overall program success.22
F. Sixth Circuit Court of Appeals Jurisdictions: Kentucky, Michigan, Ohio, Tennessee Judges: 16 Location: Cincinnati, OH Program Implemented:1981 Authority: Sixth Cir. L. R. 33 (formerly L.R. 18 and Internal Operating Procedure 33)23
The Sixth Circuit’s Pre-Argument Conference Program has been discussed at length in legal literature, including particularly the program’s genesis.24 An extensive evaluation of
20 See General Order Governing the Appellate Conference Program (5th Cir. 2000), available at http://www.ca5.uscourts.gov/clerk/docs/order.pdf.21 5th Cir. L.R. 31.4.22 For further information, see Practitioner’s Guide to the U.S. Court of Appeals for the Fifth Circuit 39 (Dec. 2013), U.S. Ct. App. for the Fifth Cir., http://www.ca5.uscourts.gov/clerk/docs/pracguide.pdf.23 With amendments to the Sixth Circuit’s Local Rules in 1998 and 2012, the court did away with any applicable mediation-related I.O.Ps, an “extra” set of somewhat complementary or parallel rules unique to Sixth Circuit practice.24 See Robert Rack, Jr., Pre-Argument Conferences in the Sixth Circuit Court of Appeals, 15 U. Tol. L. Rev. 921 (1984).
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the program, based on a 1987-88 study, is detailed in James B. Eaglin’s 1990 report, which includes an impressive array of statistics and tables showing the effectiveness of the Pre-Argument Conference Program in the court.25
The program’s stability and particular success is in many ways attributable to the work of Robert Rack, Jr., who directed the program from its inception in 1981 until 2010, when he was succeeded by Paul Calico as Chief Circuit Mediator.26 More than 1,000 cases per year are referred to the court’s mediation program, over eighty-three percent of the court’s average annual eligible caseload. The program usually requires in-person conferences only for cases within a fifty mile radius of the court in Cincinnati, Ohio. Occasionally, when large numbers of people from one city are involved, the mediation will be held in that city. The remaining conferences, which constitute over ninety percent, are conducted by telephone. According to the Chief Circuit Mediator, the success rate for telephonic mediations is about equal to that of in-person mediations.27
Most mediations require a confidential mediation statement from each party. Lead at-torneys are required to participate in the initial conference, which can take up to two hours.28
G. Seventh Circuit Court of Appeals29 Jurisdictions: Illinois, Indiana, Wisconsin Judges: 11 Location: Chicago, IL Program Implemented:1994 Authority: Seventh Cir. L.R. 33
In the Seventh Circuit, all civil appeals in which the parties are represented by counsel are eligible to participate in the court’s Settlement Conference Program.30 As with most
25 Eaglin Report, supra note 1.26 Pierre Bergeron, Mediation at the Sixth Circuit: An Interview with Chief Circuit Mediator Paul Calico, Sixth Circuit Appellate Blog (June 21, 2012) [hereinafter Calico Interview], http://www.sixthcircuitap-pellateblog.com/interviews/mediation-at-the-sixth-circuit-an-interview-with-chief-circuit-mediator-paul-calico/.27 Id.; Niemic, supra note 10, at 55.28 For further information, see Office of the Circuit Mediators, U.S. Ct. App. for the Sixth Cir., www.ca6.uscourts.gov/internet/mediation/index.htm (last visited Apr. 18, 2014).29 See Niemic, supra note 10, at 7 n.8. The Seventh Circuit had a preargument settlement program on a relatively informal basis from 1972 until well into the 1980s. See Jerry Goldman, The Seventh Circuit Preappeal Program: An Evaluation 42-43 (Fed. Jud. Ctr. May 1982), available at http://www.fjc.gov/public/pdf.nsf/lookup/7tpreapp.pdf/$file/7tpreapp.pdf.30 The program has been actively promoted by the program’s Senior Conference Attorney, Joel N. Shapiro. See Joel N. Shapiro, Mediation in the Seventh Circuit Court of Appeals, 32 S. Ill. U. L.J. 569 (2008).
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circuits, the mediators are employees of the court, specifically trained by and located within the Settlement Conference Program Office.31
Chicago-based litigants typically attend in-person conferences at the federal courthouse in Chicago. However, because most appeals within the circuit arise outside of the Chicago metropolitan area, the majority of conferences (60%) are held by telephone.32 Initial media-tion sessions typically last two to three hours. Participation in the program is free.33
H. Eighth Circuit Court of Appeals Jurisdictions: Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, South Dakota Judges:11 Locations: St. Louis, MO; Kansas City, MO; Omaha, NE; St. Paul, MN Program Implemented:1981 Authority: Eighth Cir. L.R. 3B, 33A; Eighth Cir. Internal Operating Procedure I.C.2
The Eighth Circuit Court of Appeals discontinued its Settlement Program in 2012 fol-lowing the death of its long-time director, John H. Martin.34 Mr. Martin’s death, combined with the overall cost of the program, the court’s efficiency in moving its docket,35 and the ready availability of private mediation services, led the court to put its program into hiatus for the foreseeable future.36
While the program operated, most conferences were handled telephonically. Any in- person conferences were held in Little Rock, Arkansas; St. Louis, Missouri; and St. Paul, Minnesota. Participation in the program was strictly voluntary. There was no charge for participation in the program.
31 For an extensive discussion of the staff mediator model, and of mediator evaluation and training, see Robert J. Rack, Jr., Thoughts of a Chief Circuit Mediator on Federal Court-Annexed Mediation, 17 Ohio St. J. on Dispute Resolution 609 (2002); Shapiro, supra note 30, at 575 n.16.32 Shapiro, supra note 30, at 573.33 For further information, see The Settlement Conference Program (Feb. 2013), U.S. Ct. App. for the Seventh Cir., http://www.ca7.uscourts.gov/conf_aty/Green_Sheet.pdf.34 Interview with Michael E. Gans, Clerk of Courts, Eighth Circuit Court of Appeals (July 12, 2013).35 Id. The Eighth Circuit has one of the two most current dockets in the United States, it is reported, with only some 1,400 cases pending—the equivalent of a five-month docket. From among this fast moving caseload, only some 30-40 cases were settling annually via the Settlement Program. This relatively low number suggested to the court a need to suspend the program to evaluate the impact of discontinuing the program altogether. Id. The program may well not be reinstated in the near future.36 As a result, Eighth Circuit practitioners wishing to mediate their appeals will necessarily have to develop creative strategies for getting their cases into mediation without signaling weakness to their adversaries.
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I. Ninth Circuit Court of Appeals Jurisdictions: Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, Oregon, Washington Judges: 29 Location: Los Angeles, CA; Portland, OR; Seattle, WA Program Implemented:1984 Authority: Ninth Cir. L.R. 33-1
Eligibility for participation in the Ninth Circuit’s Mediation Program is based on a Me-diation Questionnaire the parties must complete within seven days of docketing an appeal. Once a case is selected for inclusion, the court holds a Settlement Assessment Conference, in which lead counsel must participate. This initial telephone conference usually lasts only thirty minutes. During the conference, the mediator and counsel discuss whether further mediation will be useful or not, following which the case may or may not be included in the Mediation Program itself. Some cases are also referred to mediation by the judicial panel overseeing a case after oral argument. This is rare among the federal circuits. Counsel for a party may also request mediation if the case is not initially included in the program. The circuit currently has nine mediators on staff. Ordinarily mediators are assigned at random. If the case is venued in Washington state or arises out of the Bonneville Power Administration or out of certain decisions of the Federal Energy Regulatory Commission, specific mediators are assigned. The mediators are otherwise all based in San Francisco, California. Some seventy percent of mediation conferences take place telephonically.37 Circuit mediators will travel to other cities within the circuit as needs may require. As with other circuits, there is no fee for the court’s mediation services.38
J. Tenth Circuit Court of Appeals Jurisdictions: Colorado, Kansas, New Mexico, Oklahoma, Utah, Wyoming Judges: 12 Locations: Denver, CO; Wichita, KS; Oklahoma City, OK Program Implemented: 1991 Authority: Tenth Cir. L.R. 33.1
Within ten days after docketing an appeal in the Tenth Circuit, appellants must file a docketing statement, which is reviewed by the Circuit Mediation Office for eligibility in the Circuit Mediation program. The Mediation Office has three full time attorney-mediators on staff.
37 Niemic, supra note 10, at 80. 38 For further information, see Alex Kozinski, Mediation: A Message from the Chief Judge, U.S. Ct. App. for the Ninth Cir., http://www.ca9.uscourts.gov/mediation/ (last visited Apr. 18, 2014).
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Once a case is deemed appropriate for mediation, participation by the parties is man-datory. There is no specific mandate for a brief or written mediation statement. The initial conference can be held in person or by telephone and usually lasts approximately two hours. As in other circuits, statements and comments made during the mediation are confidential.39 The circuit court materials make a strong point to note that, even though participation is mandatory, settlement is not, and no party is penalized for failing to settle. In cases not selected for mediation via the Circuit Mediation Office, appellant’s counsel must initiate a settlement conference with opposing counsel no later than thirty days after filing the last brief in the case.40
While some ninety-five percent of mediation conferences in the circuit are telephonic, in-person conferences are ordinarily held in the court’s seat, Denver, Colorado. Occasionally an in-person mediation may be held in a different city for reasons associated with a given case. Again, there is no fee for mediation.41
K. Eleventh Circuit Court of Appeals Jurisdictions: Alabama, Florida, Georgia Judges: 12 Locations: Atlanta, GA; Jacksonville, FL; Montgomery, AL Program Implemented:1992 Authority: Eleventh Cir. L.R. 33-1
The Eleventh Circuit Court of Appeals conducts mediation services through the Kin-nard Mediation Center (previously the Circuit Mediation Office).42 Circuit employees act as the assigned attorney-mediators. Of the six mediators, three are in Atlanta, Georgia; two are in Miami, Florida; and one is in Tampa, Florida. Since October 2006, the court allows substitution of private mediators upon agreement of all parties, at the parties’ expense and subject to the court’s “Private Mediator Procedures for Mediation of Appeals.”43 Mediations using the court’s personnel are accomplished without charge to the litigants. Confidential Mediation Statements must be sent to the Kinnard Mediation Center before the mediation. Participation in mediation does not affect the dates otherwise calendared by
39 For the requirements of confidentiality and how it is enforced, see Clark v. Stapleton Corp., 957 F.2d 745 (10th Cir. 1992).40 10th Cir. L.R. 33.2.41 For further information, see Practitioner’s Guide to the United States Court of Appeals for the Tenth Circuit (9th rev. April 2014), U.S. Ct. App. for the Tenth Cir., http://www.ca10.uscourts.gov/sites/default/files/clerk/NEW%20FINAL%20VERSION%20Pracitioners%20Guide%204-18-2014.pdf. 42 The Circuit Mediation Office changed its name to the Kinnard Mediation Center in 2001 to honor the circuit’s first Chief Circuit Mediator, Stephen O. Kinnard, for his contributions to making mediation a “fundamental component of the Eleventh Circuit’s appeals process.” Niemic, supra note 10, at 93 n.16.43 See 11th Cir. L.R. 33-1(g).
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the court for a given case. Even so, the local rules actually have established a “Brief Exten-sion Coordinator” at the Kinnard Mediation Center, and the court does not look unfavorably on extensions that fit within the parameters of the specific extension rule.44 Unless lead counsel are located in one of the three cities where the circuit mediators have offices (Atlanta, Miami or Tampa), the initial conferences are ordinarily conducted via telephone and may last for up to two hours.45
L. Court of Appeals for the Federal Circuit Jurisdictions: All federal judicial districts Judges: 12 Location: Washington, D.C.; and any other location where a circuit court of appeals sits Program Implemented: 2005 Authority: Fed. Cir. per curiam Order (8/1/05)
For many years, the Court of Appeals for the Federal Circuit permitted private or informal settlement discussions and mediations, but did not establish a formal mediation program.46 Evidently, this was because of a dispute with Congress over the number of ap-pellate law clerks funded per judge. For over nine years in the 1990s, the Federal Circuit judges argued that, because they have to oversee patent and intellectual property appeals, they should be allotted three law clerks each, rather than the two law clerks that Congress typically funds for court of appeals judges.47 As long as that dispute persisted, the circuit judges were not inclined to use the available funding for a formalized mediation program. The Federal Circuit judges also suggested that intellectual property cases, and particularly patent cases, were ill-suited for mediation due to their complexity.48
Finally, in October, 2005, the Federal Circuit became the last of the United States Circuit Courts of Appeals to adopt a formal mediation program. The Appellate Mediation Program will be periodically assessed and evaluated to determine whether the court will revise the program, continue it further, or discontinue it entirely. Eligibility to participate in the program is based on a variety of factors, including a review of the notice of appeal, the trial court’s docket sheet, the lower court’s decision, the appellate docketing statement, and the parties’ briefs. Once a matter is selected for participation in
44 See Mediation in the Eleventh Circuit Court of Appeals (rev. Mar. 2014), Kinnard Med’n Ctr., http://www.ca11.uscourts.gov/documents/pdfs/KMC-MEDIATION-PROGRAMS.pdf (last visited Apr. 18, 2014).45 For further information, see id.46 See Niemic, supra note 10, at 4, Table 1, note a (noting the Federal Circuit’s informal “settlement pro-gram” extant from 1989-2005).47 See Gilbert J. Ginsburg, The Case for a Mediation Program in the Federal Circuit, 50 Am. U. L. Rev. 1379, 1390-91 (2001). 48 See Kevin R. Casey, Time for Mandatory Mediation at Federal Circuit, Stradley Ronan IP Law Bull. (Mar. 2005), http://www.stradley.com/articles.php?action=view&id=146.
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the program, lead counsel must participate in at least an initial telephonic conference. The initial conferences are conducted by private mediators who volunteer their time and who are selected from a roster of participating attorney-mediators maintained by the court. As a result of December 2013 amendments to the Mediation Guidelines, the mandatory aspect of the program has been substantially strengthened for cases selected for participation in the program.49 For cases not selected, the program is voluntary, and counsel may jointly request that a case be included in the program.50 In addition to the Guidelines, the circuit has adopted a number of mediation-related forms, including the Docketing Statement, a confidential Mediator Report form, a Confidential Mediator Survey for parties, the Mediator’s list, a Mediator Application, and a Confidential Joint Request for mediation.51 With a few exceptions, most cases in which the parties are represented by counsel are eligible to participate in the program.52
The court’s preference is that cases be mediated within ninety days of referral to the program and not more than 150 days. Mediations can take place at the courthouse or office of the mediator. No provision exists for referral to mediation by a judicial officer. Cases mediated by court employees incur no fees, while those mediated by private attorneys re-quire the parties to pay the mediator’s fees. Mediators are immune from subpoenas issued to obtain information from or about the mediation sessions.53
According to the Circuit Mediation Office Statistics, for calendar years 2007-2012, the overall settlement rate for cases selected for mediation varied from forty-two percent to fifty-four percent.54 The Federal Circuit continues to evaluate the relative value and expense
49 See Appellate Mediation Program Guidelines (Effective December 6, 2013), U.S. Ct. App. for the Federal Cir., http://www.cafc.uscourts.gov/mediation/guidelines.html.50 Id.51 See U.S. Ct. App., Fed. Cir., Mediation: Forms, http://www.cafc.uscourts.gov/mediation/forms.html.52 The exceptions include matters appealed from the International Trade Commission, ex parte actions aris-ing from the U.S. Patent & Trademark Office, certain duty or anti-dumping cases, Secretary of Veteran’s Affairs rulemaking matters, and legacy cases from the Temporary Emergency Court of Appeals. See Niemic, supra note 10, at 110.53 For further information, see Appellate Mediation Program Guidelines, supra note 49.54 See Circuit Mediation Office Statistics 2007 Calendar Year, U.S. Ct. App. for the Eleventh Cir., http://www.cafc.uscourts.gov/images/stories/the-court/statistics/mediationstats_december_31_07.pdf; Circuit Mediation Office Statistics 2008 Calendar Year, U.S. Ct. App. for the Eleventh Cir., http://www.cafc.us-courts.gov/images/stories/the-court/statistics/mediationstats_CY_08.pdf; Circuit Mediation Office Statistics 2009 Calendar Year, U.S. Ct. App. for the Eleventh Cir., http://www.cafc.uscourts.gov/images/stories/the-court/statistics/mediationstats_CY_09.pdf; Circuit Mediation Office Statistics 2010 Calendar Year, U.S. Ct. App. for the Eleventh Cir., http://www.cafc.uscourts.gov/images/stories/mediationstats_Year_2010.pdf; Circuit Mediation Office Statistics 2011 Calendar Year, U.S. Ct. App. for the Eleventh Cir., http://www.cafc.uscourts.gov/images/stories/mediation/fy_2011.pdf; Circuit Mediation Office Statistics 2012 Calendar Year, U.S. Ct. App. for the Eleventh Cir., http://www.cafc.uscourts.gov/images/stories/the-court/statistics/mediationstats_Year_2012.pdf.
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55 35 U.S.C. §102(a)(2).56 Niemic, supra note 10, at 105-06. 57 For further information, see Appellate Mediation Program, U.S. Ct. App. for the D.C. Cir., http://www.cadc.uscourts.gov/internet/home.nsf/Content/Stub+-+Appellate+Mediation+Program (last visited Apr. 18, 2014).
of maintaining its formal program, the newest among the circuits. One major unknown at this point is the impact of the new patent reform “first to file” rules set forth in the 2011 America Invents Act55 on the circuit’s caseload and number of mediated cases. Regardless, given current funding dilemmas, it is entirely possible that without substantial objection from the D.C. bar and other litigant representatives, the Federal Circuit may discontinue its formal mediation program entirely, and go the way of the current Eighth Circuit Court of Appeals.
M. Court of Appeals for the District of Columbia Circuit Jurisdictions: District of Columbia Judges: 11 Location: Washington, D.C. Program Implemented: 1987 Authority: D.C. Cir. per curiam Order Establishing the Appellate Mediation Program (11/29/88)
Mediations in the Court of Appeals for the D.C. Circuit are conducted pursuant to the court’s Appellate Mediation Program. The mediators are volunteer attorneys from the district who are trained by professional mediator trainers, whether they be experienced litigators, professors, or other senior members of the bar. While parties may request mediation, the Circuit Executive’s office ordinarily selects cases eligible for participation in the program from the Docketing Statement filed at the outset of a case. The appellate process is not slowed by participation in mediation. The parties are expected to provide ten page position papers to the mediator. The media-tion can take place telephonically if the parties and mediator agree; otherwise, it is conducted in person at the federal courthouse in Washington, D.C. or at the mediator’s offices. The initial mediation session can last several hours. Lead attorneys must participate, and the parties themselves are strongly urged to attend.56 There are no fees for the process.57
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58 Mediation FAQ, U.S. Ct. App. for the 10th Cir., https://www.ca10.uscourts.gov/cmo/mediation-faq.
III.Conclusion
The mediation programs established in the vast majority of the circuit courts of appeals work well to reduce the caseload burdens on their respective courts and to resolve litigants’ cases without the zero-sum game that often plagues appeals through briefing, argument, and decision. This appears to be due in large measure to the mandatory aspects of those programs. The failure to institute similar mandatory programs has led to the demise of the Eighth Circuit’s program, at least for the foreseeable future. And while questions regarding the continuing viability of the Federal Circuit’s program may have been temporarily laid to rest by recent amendments to that circuit’s Mediation Guidelines, ongoing funding issues still suggest the program’s long-term existence may be in doubt. Excepting the Eighth and Federal Circuits, mandatory mediation programs appear to be here to stay in the circuit courts of appeals. Thus, to best represent their clients’ interests in those courts, practitioners must be familiar not only with the rules governing appellate procedure, but also with the rules governing mediation practice. As the Tenth Circuit “Me-diation FAQ” aptly notes, while “decisions regarding settlement are . . . voluntary,” partici-pation in the mediation process is not.58 Counsel must therefore be prepared to participate meaningfully in mediation should their case end up in a mandated mediation program.
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Liability for Sudden MechanicalFailure on the Highway:The “Wheel Off” Case†
Robert A. Biggs, III
I.Introduction
The purpose of this article is to provide a reference for the defense attorney retained to defend a trucking company in a personal injury action caused by a sudden mechanical failure of its equipment on the highway. It focuses on the category of cases involving wheel separation—commonly referred to as “wheel off ” accidents—because of the prevalence and catastrophic nature of this type of case. This article is designed to provide the practitioner with a road map for identifying issues relevant to wheel off cases. To that end, it addresses the common causes of such accidents; methods of proof of liability for such accidents, including federal regulations relevant to the standard of care and the role of the negligence per se and res ipsa loquitur doctrines; and the application of the sudden emergency defense doctrine as a means of defeating such liability. It concludes with a multijurisdictional survey of federal and state wheel off cases that illustrate how courts have addressed the major legal theories, the quantum and nature of proof required to establish liability, and the defenses available in such cases.
† Submitted by the author on behalf of the FDCC Transportation Section.
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1 NTSB Safety Recommendation H-92-102 [hereinafter Recommendation H-92-102], available at http://www.ntsb.gov/doclib/recletters/1992/H92_102.pdf. 2 Id. at 2. 3 Id. In support, the report cited maintenance records from one of the country’s largest carriers, which revealed that undertightening of fasteners accounted for 65% of the wheel separations, while only 20% resulted from overtightening. Id. 4 Id. 5 Id.
Robert A. Biggs, III is a member of the Jackson, Mississippi Law Firm of Biggs, Ingram & Solop, PLLC, and has special-ized for 38 years in representing corporate and insurance clients in trial in all state and federal courts. Upon gradua-tion from the Ole Miss Law School, Mr. Biggs served as law clerk to the Chief Judge of the Fifth Circuit. He is a former President of the Mississippi Defense Lawyers Association, a Mid-South Super Lawyer, and a Fellow in the Litigation Council of America, and has been selected by Best Lawyers in the areas of Insurance and Personal Injury Litigation. Mr. Biggs is an active member of the Federation of Defense & Corporate Counsel.
II.Nature of the Problem
On October 23, 1992, the National Safety Transportation Board (NTSB) issued Safety Bulletin H-92-102 as a direct result of a “spate of five truck-wheel runoff accidents” across the country that resulted in seven fatalities.1 In addressing the probable contributing factors to heavy truck-wheel separation accidents, the Bulletin noted:
1. “Wheel failures involving broken studs, lugs, or loose nuts most frequently result from the improper tightening of the nuts or failure to retighten the nuts after initial seating of the fasteners.”2
2. Most wheel separations were caused by the undertightening of fasteners.3
3. According to “numerous sources,” the failure to follow proper maintenance practices was the primary cause of improper tightening of wheel fasteners.4
4. Maintenance manuals provided to installers by truck and wheel manufacturers were not uniform in content or presentation with respect to “deficiencies and practices that could affect the tightness of fasteners.”5
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The NTSB concluded its advisory Bulletin by recommending that wheel and truck manufacturers develop and disseminate “to all involved in heavy-truck maintenance” a comprehensive service manual addressing the cited deficiencies and establishing uniform procedures, followed by “an intensive training effort through manufacturers, carriers, media, truck stops, and repair facilities to highlight the need to follow recommended practices for mounting wheels.”6
Prior to disseminating Safety Bulletin H-92-102, the NTSB had issued a Comprehensive Special Investigation Report dated September 15, 1992.7 Section 4 of that report, entitled “Wheel Separation Causes and Potential Solutions,” included a comprehensive assessment and evaluation of medium/heavy truck wheel separations.8 Among other findings, the Report stated:
1. “[M]aintenance problems appear to stem from several causes; the two major ones are the failure by maintenance personnel to follow recommended procedures and lack of uniformity in carrier and/or manufacturer’s maintenance guidelines.”9
2. “Nuts on spoke and disc wheels must be tightened in a crisscross pattern. . . . Manufacturers . . . recommend that service personnel initially tighten the nuts using a hand wrench until the nuts are snug and then, following the same criss-cross pattern, use a torque wrench to tighten the nuts to the desired torque.”10
3. “Hub, stud and spoke wheel manufacturers frequently have different torquing requirements and, as a result, most manuals have an advisory statement to consult wheel field service representatives if torquing requirements conflict.”11
4. “[L]arge disc wheels generally require from 400 to 550 ft-lb of torque; maximum torque varies between 500 and 550 ft-lb.”12
5. “[A]ir impact wrenches, rather than torque wrenches, are usually used in the field. . . . Some air wrenches can deliver almost three times the required torque. . . . [O]vertightening can overstress studs and damage threads.”13
6 Id. at 3. 7 NTSB Special Investigative Report, SIR-92/04, Medium/Heavy Truck Wheel Separations (Sept. 15, 1992). 8 Id. at 30. 9 Id. at 31.10 Id. at 33.11 Id.12 Id.13 Id. at 35.
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14 Id. at 32.15 See infra text accompanying notes 30-38.16 See infra text accompanying notes 39-45.17 Hairston v. Alexander Tank & Equip. Co., 311 S.E.2d 559, 565 (N.C. 1984); Kitchen v. Cal Gas Co., 821 P.2d 458, 461 (Utah Ct. App. 1991).18 W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 39 (5th ed. 1984); accord Nichols v. Int’l Paper Co., 644 S.W.2d 583, 585 (Ark. 1983); Moss v. Wagner, 190 N.E.2d 305, 307 (Ill. 1963); Hertz Corp. v. Goza, 306 So. 2d 657, 659 (Miss. 1974).
6. “[Manufacturers] recommend a 50- to 100-mile inspection after any maintenance that involves removing the wheels. . . . During the initial trip and the first trip following the mounting of a new wheel, parts seat and nuts become loose.”14
Unsurprisingly, when wheels come off a commercial truck traveling at a high rate of speed, a likely result is catastrophic injury to the motoring or pedestrian public. Wheel separation may occur for a variety of reasons, including metal fatigue, product failure, implementation of improper mounting procedures, a failure of periodic maintenance, or the failure to perform an adequate daily inspection of the vehicle. In proving the defendant’s negligence, establishing the proximate cause of such a failure may often prove challenging. Because of what some courts and commentators have characterized as the “unusual nature” of the “wheel off” genre of cases, the doctrines of negligence per se15 and res ipsa loquitur16 have been effectively applied to assist injured plaintiffs in meeting their burden of proof in such cases.
III.Proving Negligence
Except in cases of admitted liability, a plaintiff pursuing a wheel off case has the same burden as in any other case to establish the essential elements of negligence: a legal duty or standard of care, a breach or violation of that duty, and a showing by a preponderance of the evidence that the breach or violation proximately caused the harm.17 A leading treatise has stated the rule as follows:
The mere fact that an accident or injury has occurred, with nothing more, is not evidence of negligence on the part of anyone . . . . [W]hat is required is evidence, which means some form of proof; and it must be evidence from which reasonable men may conclude that, upon the whole, it is more likely that the event was caused by negligence than it was not.18
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A. Standard of Care and Breach Fundamental to proof of negligence in any wheel off case is demonstrating that an applicable standard of care has been violated. Establishing standard of care and breach is often complicated, requiring careful attention not only to the maintenance and inspection records of the vehicle itself but also to federal regulations governing inspection and repair of vehicles and their component parts. The Federal Motor Carrier Safety Administration has promulgated safety regulations defining standards for commercial vehicle equipment, including inspection, maintenance, and repair.19 These Federal Motor Carrier Safety Regulations, or FMCSRs, establish minimum standards for the trucking industry. Internal maintenance programs often prescribe more stringent requirements, ultimately imposing higher standards for compliance. Adherence to maintenance standards and the formulation of the standard of care in any given case may ultimately become the subject of expert opinion testimony.20
1. Federal Regulations Governing Tires and Wheels Specific regulations govern both the requirements for and sufficiency of component part equipment. Part 393 of Title 49 of the Code of Federal Regulations, entitled “Parts & Accessories Necessary for Safe Operations,” covers requirements for many different types of equipment and should be consulted when a specific component system is suspected of causing an accident.21 Vehicle tires are subject to the requirements of 49 C.F.R. § 393.75, which states:
(a) No motor vehicle shall be operated on any tire that (1) has body ply or belt material exposed through the tread or sidewall, (2) has any tread or sidewall separation, (3) is flat or has an audible leak, or (4) has a cut to the extent that the ply or belt material is exposed.
(b) Any tire on the front wheels of a bus, truck, or truck tractor shall have a tread groove pattern depth of at least 4/32 of an inch when measured at any point on a major tread groove. The measurements shall not be made where tie bars, humps, or fillets are located.
(c) Except as provided in paragraph (b) of this section, tires shall have a tread groove pattern depth of at least 2/32 of an inch when measured in a major tread groove. The measurement shall not be made where tie bars, humps, or fillets are located.22
19 See, e.g., 49 C.F.R. § 392.1 et sq.20 Smith v. Liberty Chrysler-Plymouth-Dodge, Inc., 647 S.E.2d 315, 318 (Ga. App. 2007); Langston v. Kidder, 670 So. 2d 1, 2 (Miss. 1995).21 49 C.F.R. §§ 393.1-.209.22 Id. § 393.75.
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Specific requirements for “wheels” are specifically provided in 49 C.F.R. § 393.205. That regulation states:
(a) Wheels and rims shall not be cracked or broken.
(b) Stud or bolt holes on the wheels shall not be elongated (out of round).
(c) Nuts or bolts shall not be missing or loose.23
2. Federal Regulations Governing Inspection, Repair, and Maintenance In addition to specific requirements for equipment, the FMCSRs contain directives and standards for inspection, repair, and maintenance. These standards, codified at 49 C.F.R. § 396.1, impose a broad duty of inspection and maintenance:
Every motor carrier, its officers, drivers, agents, representatives, and employees directly concerned with the inspection or maintenance of commercial motor vehicles must be knowledgeable of and comply with the rules of this part . . . .
This broad, general duty is amplified by several other regulations that impose specific duties of inspection, repair, and maintenance on both drivers and owners. For example:
• 49 C.F.R. § 396.3 requires that “every motor carrier shall systematically inspect, repair and maintain, or cause to be systematically inspected, repaired, and main-tained, all motor vehicles subject to its control.” The regulation also requires that “all parts and accessories shall be in safe and proper operating condition at all times.”24
• 49 C.F.R. § 396.11 requires covered drivers to complete at the end of each day an inspection report that “identif[ies] the vehicle and list[s] any defect or deficiency . . . which would affect the safety of the operation of the vehicle or result in a mechanical breakdown.25
• 49 C.F.R. § 396.13 requires that, before each trip, a driver must review the last vehicle inspection report and be satisfied that the vehicle is in safe operating condition.26
• 49 C.F.R. § 396.17 requires periodic owner-operator inspection of the vehicle in accordance with the terms of the regulation.27
23 Id. § 393.205.24 Id. § 396.3(a).25 Id. § 396.11.26 Id. § 396.13.27 Id. § 396.17.
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• 49 C.F.R. § 396.21 details the specific requirements for the content of a written inspection report and requires that the original or a copy of the report be retained by the motor carrier for a period of fourteen months from the date of the report.28
B. Causation The precise cause for a wheel disengagement may prove difficult from a forensic stand-point. Among the difficulties confronted in doing so are:
(1) obtaining historical records establishing repairs and maintenance of the vehicle;
(2) determining whether company maintenance and inspection standards were vio-lated and, if so, whether any such violations proximately caused or contributed to the wheel disengagement;
(3) determining whether violations of minimal inspection and maintenance standards under governing FMCSRs were proximate or contributing causes of the wheel off.
A variety of consultants and experts may be necessary to assist in determining the likely cause of the accident and countering plaintiff’s proof at trial. These may include a metallur-gist, a truck design engineer, an accident reconstructionist, and a certified mechanic. Where potential violation of FMCSRs is at issue, it may also be necessary to retain an expert fully conversant with the regulations. Because most wheel off accidents have been statistically determined to be caused by the undertorquing or overtorquing of lug nuts,29 causation analysis often focuses on whether proper procedures were followed in the mounting of the tire. In undertaking that analysis, the following questions should be asked:
1. What does a forensic examination of the wheel and its component parts reveal?
2. Who mounted the tire?
3. Was that individual sufficiently trained in proper mounting procedure?
4. What equipment was used in the wheel mounting process?
5. Was a torque wrench or impact wrench used to tighten the lug nuts?
6. Was the torque wrench properly calibrated?
7. Did the individual(s) mounting the tire apply the correct amount of torque in tightening the lug nuts in accordance with established company rules or manu-facturer’s recommendations?
28 Id. § 396.21.29 See id. §§ 393.1-.209 and supra text accompanying notes 2-5.
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8. How many miles had the vehicle traveled since the last scheduled maintenance?
9. When was the last time the truck underwent a repair that required a set of tires to be removed to access the repair area?
10. Did the trucking company delegate responsibility for maintenance to a third party vendor or was the maintenance done in-house with company employees?
11. Were the lug nuts checked within fifty to one hundred miles of initial tightening and retorqued to specifications?
12. Were loose lug nuts detectable by the driver during his or her pre-trip inspection (e.g., by visible rust streaks or other evidence of looseness)?
13. Who was the last individual to put a lug wrench on the lug nuts?
IV.Applicability of Negligence Per Se
The doctrine of negligence per se is frequently raised in cases involving alleged violations of specific statutes. Violations of federal regulations, including FMSCRs, have also been held to provide a basis for a negligence per se instruction when the requisite elements of proof have been established.30 To take advantage of the doctrine, plaintiff must demonstrate three things: (1) that the plaintiff belongs to a class that the regulation was intended to protect; (2) that the plaintiff’s injury is of the type the regulation was designed to prevent; and (3) that the violation of the regulation was the proximate cause of the plaintiff’s injury.31 The court in Omega Contracting, Inc. v. Torres32 provides some useful analysis for when alleged violations of FMCSRs cannot be raised to support negligence per se in the context of a wheel off case. In that case, a tractor-trailer rig whose tire separated from the tractor unit allegedly caused a wreck involving multiple tractor-trailer rigs. Torres, one of the injured parties, sued the driver of the rig and his employer for negligence.33 The trial
30 See, e.g., Wallace v. Ener, 521 F.2d 215, 219 (5th Cir. 1975) (violations of 49 C.F.R. §§ 392.22 and 393.95); Brandes v. Burbank, 613 F.2d 658, 664 (7th Cir. 1980) (violation of 49 C.F.R. § 392.22); Strong v. Freeman Truck Line, Inc., 456 So. 2d 698, 706 (Miss. 1984) (violations of 49 C.F.R. §§ 391.21 and 392.22). See also Arthur v. Flota Mercante Gran Centro Americana S.A., 487 F.2d 561, 563 (5th Cir. 1973) (violation of federal safety regulation requiring hand rail on ladder steps); Teal v. E. I. DuPont de Nemours & Co., 728 F.2d 799, 802 (6th Cir. 1984) (violation of OSHA regulations).31 Brazier v. Phoenix Group Mgmt., 633 S.E.2d 354, 358 (Ga. App. 2006); Estate of Hazelton ex rel. Hester v. Cain, 950 So. 2d 231, 235 (Miss. Ct. App. 2007); Whaley v. Perkins, 197 S.W.3d 665, 672 (Tenn. 2006); Omega Contracting, Inc. v. Torres, 191 S.W.3d 828, 840 (Tex. App. 2006); Raymaker v. Am. Family Mut. Ins. Co., 718 N.W.2d 154, 159 (Wis. App. 2006).32 191 S.W.3d 828 (Tex. App. 2006).33 Id. at 835.
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court instructed on negligence per se based on specific violations of FMCSRs relating to inspection and maintenance of commercial vehicles, including the failure to comply with FMCSRs codified in 49 C.F.R. §§ 393.205, 396.3(a), and 396.13.34 Torres recovered a judg-ment of nearly $500,000. The Texas court of appeals reversed, specifically holding that the trial court erred in basing a negligence per se instruction on 49 C.F.R. § 393.205, which merely states that “nuts or bolts shall not be missing or loose.”35 According to the court:
[The] requirement that lug nuts shall not be “loose” does not put the public on notice by clearly defining the required conduct because the regulations do not define the word “loose” nor specify any particular amount of torque. . . . In this context, the word “loose” is vague and not susceptible of precise meaning. It does not put the public—or in this case the owners, operators, and drivers of commercial vehicles—on notice of what conduct is prohibited or required. Torres is correct in observing that we must give “loose” its ordinary definition of “not rigidly fastened or securely fastened,” but that definition does not make the regulation any more precise. We hold that section 393.205(c)’s requirement that nuts shall not be loose is not an appropriate standard for applying negligence per se.36
Equally unavailing was Torres’s attempt to base his negligence per se claim on sections 393.3(a) and 396.13, which codify the requirements that vehicles be in “safe operating condition”:37
[S]ections 396.3 and 396.13 simply require a motor carrier to maintain motor vehicles “in safe and proper operating conditions” and a driver to “[b]e satisfied that a motor vehicle is in safe operating condition.” Determining what is or is not safe in these circumstances bears practically no difference from what is or is not reasonable. We hold that sections 396.3 and 396.13 are not appropriate bases for a negligence per se instruction. The trial court erred by submitting these instructions to the jury.38
34 Id. at 838-39.35 See supra text accompanying note 23.36 Omega Contracting, 191 S.W.3d at 840-41.37 Id. at 843.38 Id. at 840-41 (citations omitted).
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V.Applicability of Res Ipsa Loquitur
Res ipsa loquitur is a Latin phrase meaning “the thing speaks for itself.”39 As the doctrine is often defined:
[W]here the thing is shown to be under the management of the defendant or his servants, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of explanation by the defendants, that the accident arose from lack of care.40
The factual predicates for invoking the doctrine, then, are that (1) plaintiff’s injury was proximately caused by an agency or instrumentality under the defendant’s exclusive control; and (2) the incident causing the injury is one that ordinarily does not occur in the absence of negligence.41 When applied, res ipsa loquitur allows a plaintiff to prove the defendant’s negligence by circumstantial evidence “when the direct evidence concerning the cause of the injury is primarily within the knowledge and control of the defendant.”42 The doctrine thus relieves the plaintiff of the requirement of proving specific acts of negligence and permits the jury to infer negligence from the fact of the accident itself.43 The effect is to shift the burden of proof to the defendant to offer an explanation and evidence to rebut the inference of neg-ligence. Whether the doctrine applies in a given situation is usually a question of law that is determined on a case-by-case basis.44 “In general,” however, “a wheel detachment is a hornbook res ipsa loquitur situation.”45
39 W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 39, at 243 (5th ed. 1984).40 Id. at 244; see Neace v. Laimans, 951 F.2d 139, 141 (7th Cir. 1991).41 Harless v. Ewing, 469 P.2d 520, 523 (N.M. Ct. App. 1970).42 Neace v. Laimans, 951 F.2d 139, 141 (7th Cir. 1991).43 Covey v. W. Tank Lines, Inc., 218 P.2d 322, 328 (Wash. 1950).44 Curtis v. Lein, 239 P.3d 1078, 1082 (Wash. 2010); Pacheco v. Ames, 69 P.3d 324, 327 (Wash. 2003).45 Neace v. Laimans, 951 F.2d at 141; see Cheung v. Ryder Truck Rental, Inc., 595 So. 2d 82, 84 (Fla. Dist. Ct. App. 1992); Guerra v. W.J. Young Constr. Co., 165 So. 2d 882, 885 (La. Ct. App. 1964); Holten v. Parker, 224 N.W.2d 139, 142 (Minn. 1974); Apuzzio v. J. Fede Trucking, Inc., 809 A.2d 812, 816 (N.J. Super. Ct. App. Div. 2002); Swiney v. Malone Freight Lines, 545 S.W.2d 112, 115 (Tenn. Ct. App. 1976); D’Amico v. Conguista, 167 P.2d 157, 162 (Wash. 1946).
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VI.The “Sudden Mechanical Failure” Defense
As in any other case, the defendant’s negligence in a wheel off case may be proven by direct or circumstantial evidence.46 Once the plaintiff makes out a prima facie case of negligence, it is incumbent on the defendant to present evidence that it was not negligent in the inspection and maintenance of its vehicle. A trucking company cannot be held liable for a sudden unanticipated—i.e., unforeseeable—failure of its equipment during operation of its truck. Resolution of this issue is typically a question of fact for the jury.47
Defendants can also avoid liability in appropriate cases by raising the “sudden emer-gency” doctrine.” This doctrine relates to the standard of care and, when applicable, relieves a defendant of liability by countering a finding of negligence when the defendant acts ap-propriately within the context of the emergency situation with which he or she is confronted:
The emergency doctrine provides that “when an actor is faced with a sudden and unexpected circumstance which leaves little or no time for thought, deliberation or consideration, or causes the actor to be reasonably so disturbed that the actor must make a speedy decision without weighing alternative courses of conduct, the actor may not be negligent if the actions taken are reasonable and prudent in the emergency context.”48
The “sudden mechanical defect or failure” doctrine, a variation of the sudden emergency doctrine, may also be relevant in wheel off cases. As one court has described these related doctrines:
[T]hey both refer to a standard of care applicable to allegedly negligent conduct in the operation of a motor vehicle in the face of unexpected circumstances. . . . [I]n many instances the “mechanical defect or failure” doctrine is a sub-species of the “sud-den emergency” doctrine. That is, a “mechanical defect or failure” can generate the “sudden emergency” circumstances under which the driver’s conduct is evaluated.49
46 Mays v. Ciba-Geigy Corp., 661 P.2d 348, 359 (Kan. 1983); Texas Sling Co. v. Emanuel, 431 S.W.2d 538, 545 (Tex. 1968).47 See England v. United States, 405 F.2d 862, 863 (5th Cir. 1968); Bentley v. Clisso, 89 F.3d 832, 835 (6th Cir. 1996); Truemper v. Bowman, 307 N.E. 735, 738 (Ill. 1974); In re Cross’ Estate, 352 P.2d 427, 431 (Kan. 1960); Mangual v. Berezinsky, 53 A.3d 664, 673 (N.J. 2012); Dickard v. Merritt, 182 S.E.2d 886, 889 (S.C. 1971); Simmons v. Adams, 121 S.E.2d 379, 382 (Va. 1961).48 Ardila v. Cox, 931 N.Y.S.2d 120, 122 (App. Div. 2011).49 Salter v. Westra, 904 F.2d 1517, 1521 (11th Cir. 1990) (emphasis in original) (applying Alabama law).
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These doctrines typically do not apply, however, “to claims of negligence premised solely on the maintenance and care of a vehicle.”50 That is, if the inquiry relates to the condition of the vehicle, rather than the driver’s operation of the vehicle under exigent circumstances, defendant will not be able to rely on these doctrines.
VII.Conclusion
Wheel off cases present unique problems for the defense practitioner. The proper evalua-tion and successful defense of these cases requires a thorough understanding of the mechani-cal parts of a wheel, the proper methodology for wheel mounting and inspection, relevant legal theories and defenses available in such cases, and the statutes and safety regulations governing wheel inspection and maintenance. Armed with this knowledge, however, defense counsel will be well positioned to provide his or her client the best possible outcome.
50 Id.
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“Wheel Off” CasesA Multijurisdictional Survey
ALABAMA
• Ex parte Crabtree Industrial Waste, Inc., 728 So. 2d 155 (Ala. 1988): Wheel came off moving truck causing injuries to plaintiff. The evidence indicated that no one knew the cause of the accident. The Alabama Supreme Court held the lower court erred in applying the doctrine of res ipsa loquitur because the truck had been repaired three days earlier and the defendants thus did not have full management and control of the truck during the relevant period of time.
• Salter v. Westra, 904 F.2d 1517 (11th Cir. 1990) (applying Alabama law): Wheels separated from truck, which rolled upon embankment and hit construction worker. Defendant raised the defense of “sudden emergency” and “mechanical failure or defect.” Jury verdict finding defense inapplicable upheld since the cause of the accident was poor maintenance and failure to detect loose lug nuts on inspection.
DELAWARE
• Drejka v. Hitchens Tire Service Inc., 15 A.3d 1221 (Del. 2010): A wheel came off a concrete truck without warning as a result of stripped lug nuts and struck a car, causing permanent injuries to the occupant. Judgment for the defendant affirmed because there was no proof of improper inspection or that an inspection would have shown that the lug nuts were stripped.
IDAHO
• Carrillor v. Boise Tire Co., 274 P.3d 1256 (Idaho 2012): Jury verdict for plain-tiff. Sudden wrongful death resulting from right rear wheel separation expert testimony that lug nuts overtorqued, causing broken studs.
MINNESOTA
• Beier v. International Harvester Co., 178 N.W.2d 618 (Minn. 1970): Right rear dual wheels sheered off when the lugs became loose. Court directed verdict for defendants – adequate warning in routine mounting manual dismissed. Court also found evidence that the defendant was negligent in failing to undertake to tighten the lug bolts during the 10,000 mile checkup.
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• Holten v. Parker, 224 N.W.2d 139 (Minn. 1974): Left rear wheel disengaged when lug nuts released and bolt was found snapped off, causing truck to cross centerline and injury car occupant. Appellate court held that the trial court erred in instructing jury of doctrine on “unavoidable accident” and that the jury should have been given a res ipsa loquitur instruction.
MISSOURI
• Golian v. Stanley, 334 S.W.2d 88 (Mo. 1960): A jury’s award of damages was affirmed when wheel suddenly came off vehicle. Doctrine of res ipsa loquitur was properly applied inasmuch as wheel coming off a vehicle is an unusual occurrence.
NEBRASKA
• Kabasinskas v. Haskin, 2011 WL 2118641 (D. Neb. May 27, 2011) (applying Nebraska law): Wrongful death caused when two wheels fell off left rear tandem axle of a tractor-trailer rig on interstate highway. Daubert challenges to opinion testimony regarding causation under 702 F.R.E. were sustained.
NEW JERSEY
• Apuzzio v. J. Fede Trucking, Inc., 809 A.2d 812 (N.J. Super. Ct. App. Div. 2002): Res ipsa loquitur doctrine held applicable to prove negligence where tractor-trailer traveling on interstate highway lost wheels, which crossed median and hit automobile traveling in opposite direction.
OREGON
• Hoover v. Montgomery Ward & Co., 528 P.2d 76 (Or. 1974): Negligence and strict liability action for loss of wheel causing accident and injuries to the plaintiff. The plaintiff alleged negligence based on defendant’s in failure to tighten the lug nuts to the lug bolts on the wheel and failure to inspect the wheel to ascertain if it was properly attached. The court refused to expand the definition of “dangerously defective product” within the theory of strict liability to include the negligent installation of a nondefective product.
MINNESOTA (Continued)
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SOUTH CAROLINA
• Claytor v. General Motors Corp., 286 S.E.2d 129 (S.C. 1982): Manufacturer sued on strict product liability theory after wheel separated from 1975 Oldsmobile. Court found no liability for product defect but found that damage to the lug bolts and subsequent wheel separation were proximately caused by the mechanic’s improper application of torque.
TEXAS
• Pontello v. Quartz & Dugas, Inc., 534 S.W.2d 386 (Tex. Civ. App. 1976): Ap-pellate court affirmed a jury verdict for the defendant on issue of negligence where right rear tire wheel came off truck and truck came to stop blocking both lanes and oncoming car struck it. Expert testimony was advanced indicating lug bolts were improperly tightened. The Court reasoned that there was no evidence presented as to how long this condition existed.
• Omega Contracting, Inc. v. Torres, 191 S.W.3d 828 (Tex. App. 2006): Eighteen-wheeler wheels weighing 150 – 200 pounds each separated and crossed center line, causing accident and death of one victim and major injuries to another. Evidence established that wheels fell off because the lug nuts were not securely tightened when the wheels were installed. Significant discussion of standard of care established under FMCSR and the application of negligence per se regarding alleged violations of specific regulations found in 49 C.F.R. §§ 393.205, 3496.3, and 396.13 regarding defective equipment, and the duty to inspect.
The Federation of Insurance Counsel was organized in 1936 for the purpose of bringing together insurance attorneys and company representatives in order to assist in establishing a standard efficiency and competency in rendering legal service to insurance companies, and to disseminate information on insurance legal topics to its membership. In 1985, the name was changed to Federation of Insurance and Corporate Counsel, thereby reflecting the changing character of the law practice of its members and the increased role of corporate counsel in the defense of claims. In 2001, the name was again changed to Federation of Defense & Corporate Counsel to further reflect changes in the character of the law practice of its members.
The FEDERATION OF DEFENSE & CORPORATE COUNSEL QUARTERLY, published quarterly through the office of publication by the Federation of Defense & Corporate Counsel, Inc., 11812 North 56th Street, Tampa, FL 33617.
Manuscripts and correspondence relating to the submission of articles for possible publication should be sent to the Editor-in-Chief, Susan M. Popik, 38 Woodhill Drive, Redwood City, CA 94061 or emailed to [email protected]. All other correspondence should be directed to the Executive Director.
The FDCC is pleased to provide electronic access to Quarterly articles from 1997 to present at its Internet website, www.thefederation.org.
