Sixth Circuit Appellate Blog

Michigan Company Appeals Decision Dismissing Claims Against Democratic Republic of the Congo Due to Sovereign Immunity

John Fisher — Tue, 15 May 2012 14:39:44 -0500

On May 11, 2012, Triple A International, Inc., a Michigan corporation, appealed the decision of the Eastern District of Michigan dismissing Triple A’s claims to collect on a debt allegedly owed to it by the Democratic Republic of the Congo. Triple A Int'l, Inc. v. The Democratic Republic of Congo, Case No. 10-15137. In 1993, the DRC (known then as Zaire) contracted with Triple A to obtain certain military supplies. Triple A, which had offices in both Michigan and the DRC, worked from its Michigan office to find a supplier for the goods. Triple A ultimately located a supplier for the goods in South Korea and arranged for the goods to be purchased by the DRC for just over $14 million. After Triple A allegedly met all of its obligations under the contract, the DRC failed to make payment for the goods. Triple A sued in Michigan District Court, and the DRC sought dismissal of the action asserting that the DRC was protected by sovereign immunity under the Foreign Sovereign Immunities Act.

Under the FSIA, a foreign state is presumed to have immunity unless an exception applies. In this case, Triple A argued that the “commercial activity” exception applied because its action against the DRC was “based upon a commercial activity carried on in the United States by a foreign state.” In evaluating whether the exception applied, the court focused on several facts: (1) negotiations between Triple A and the DRC were exclusively held in the DRC; (2) the DRC did not conduct any activities in the United States in connection with its relationship with Triple A; (3) nothing in the contract required that any of the work be done in the United States; and (4) the goods were made and shipped from South Korea, not the United States. Triple A performed some of its contractual obligations from its office in Michigan, but “there is no indication that the DRC sought this U.S.-based performance, or placed any importance on the likelihood that Plaintiff might undertake some of its contractual duties from its Michigan office.”

The court concluded that Triple A’s decision to perform some of the contract in the United States was largely “happenstance or Plaintiff’s own choice or convenience, rather than a result of the DRC’s deliberate engagement in commercial activity having ‘substantial contact’ with the United States.” In order to fall under a FSIA exception, there must have been contact beyond that arising simply because of Triple A’s U.S. residence. The court reasoned that the DRC selected a company with an office in the DRC, made payment to a local bank in DRC currency, and sent correspondence to Triple A’s DRC office that was written in the DRC’s official language, French. The court held that these facts were not sufficient to find “commercial activity carried on by [the DRC] and . . . substantial contact with the United States.” The court also found that there was an insufficient nexus between the DRC’s contacts with the United States and the actual claims in the case.

How Important Are Standards of Review?

Colter Paulson — Tue, 15 May 2012 09:53:17 -0500

Appellate lawyers think about arguments in terms of the applicable standard of review, as that is the lens the court will use to evaluate an appeal. There are four main standards of review:

Under “de novo” review, an appellate court decides an appeal without any deference to the lower court’s decision.
Review for “clear error” grants significant deference to the district court’s decision. It requires the appellate court to have a “definite and firm conviction that a mistake has been committed.”
“Sufficient evidence” review asks whether a reasonable person could accept the available evidence as adequate to support the decision.
“Abuse of discretion” nearly defines itself. The standard description is that it applies where “the district court has made a clear error of judgment, or has applied an incorrect legal standard.”

These standards often seem to run together – which is not helped by the use of “clear error” in the definition of abuse of discretion. And well-reasoned district court opinions will receive substantial deference regardless of the standard. Judge Posner has suggested that there are really just two standards of review: plenary (de novo) and deferential (everything else). But do standards of review actually influence the results in appeals?

Judges are certainly aware of the standard in every case, and usually cite the relevant standard at the beginning of opinions. But if a judge believes that a case was wrongly decided, there will be a dozen ways to write an opinion that accommodates the right standard of review. Opinions are, after all, usually written after the result has been decided. Scholars are skeptical about whether standards of review have any meaning at all, and statistical studies in state courts in Texas and California have shown that significant changes in the standard of review often fail to have any effect on reversal rates.

We looked at this question in the Sixth Circuit, using a combination of broad searches through the last five years of cases on Lexis, and a case-by-case analysis of three months’ worth of decisions. We found that appeals that were decided “de novo” were nearly 20% more likely to be reversed than those under the more deferential standards. Case reviewed for abuse of discretion were the most likely to be affirmed, followed by clear error and sufficiency of the evidence. Our results support the view that the standard of review matters, at least in the Sixth Circuit.

EXCLUSIVE VIDEO INTERVIEW WITH GENERAL WILLIAM. K. SUTER, U.S. SUPREME COURT CLERK

Steve Delchin — Sun, 13 May 2012 23:23:33 -0500

Last month in Toledo, Ohio, I had the privilege of conducting an exclusive video interview with General William K. Suter, Clerk of Court of the Supreme Court of the United States. You can watch my video interview below.

General Suter was at The Toledo Club on April 20 as part of a luncheon and swearing-in ceremony for admission to the Bar of the U.S. Supreme Court. The event was co-hosted by the Federal Bar Association and the Toledo Bar Association. Saber VanDetta and I had the honor of being featured speakers on appellate ethics and professionalism at a Supreme Court CLE that was held following General Suter’s speech at the swearing-in ceremony. Our presentation covered some of the topics that I explored in a blog post several months ago.

“The swearing-in ceremony officiated by General Suter last month in Toledo was a memorable event, particularly for the 35 individuals who are now the newest members of the U.S. Supreme Court Bar,” says Diana M. Thimming, President of the Federal Bar Association – Northern District of Ohio Chapter. “This represents the fourth time in the past ten years that General Suter has conducted this wonderful ceremony with the FBA Northern District of Ohio Chapter,” adds James W. Satola, former President of the FBA Northern District of Ohio Chapter and current FBA Circuit Vice President for the Sixth Circuit. “I have been privileged to be the movant at each one, representing over 300 new admissions to the Supreme Court Bar. Having General Suter preside over such an event is a great experience, both for the newly admitted Bar Members and for those of us involved in organizing the event.”

Watch my video interview below to discover General Suter’s views on the biggest mistakes that lawyers make at oral argument and the most commonly held misconceptions about the U.S. Supreme Court. You may be surprised by what you hear. During the interview, General Suter also offers insights on what the legal profession should do to promote higher levels of excellence, professionalism, and ethical awareness among its members. Finally, watch the video to find out about General Suter’s personal relationship with none other than the King of Rock ‘n’ Roll, Elvis Presley. General Suter shares some interesting inside stories about Elvis, including what Elvis was really like.

Sixth Circuit Upholds Trademark Protection of Maker's Mark Signature Red Dripping-Wax Seal

Carlee Hobbs Toth — Fri, 11 May 2012 13:41:59 -0500

In an opinion rich with the history of bourbon, the Sixth Circuit held that Maker’s Mark’s signature trade dress element of its trademark, the red dripping-wax seal, was due protection. Maker’s Mark has used the red dripping-wax seal since 1958, and in 1980 registered a trademark of its trade dress. In 2001, Jose Cuervo’s began selling its premium tequila, “Reserva de la Familia” with a red dripping wax seal similar to the Maker’s Mark red dripping-wax seal. Maker’s Mark sued Cuervo in 2003, claiming trademark infringement and dilution. The district court found that Cuervo had infringed on Maker’s Mark’s valid trademark of the red dripping-wax seal and enjoined Cuervo from using red dripping-wax on the cap of its bottles. The district court denied Maker’s Mark’s claim for damages but awarded Maker’s Mark some of its costs.

On appeal, the Sixth Circuit upheld the district court’s finding that the red dripping-wax seal was not aesthetically functional, and therefore a valid trademark. Declining to adopt a test for the aesthetic functionality doctrine, the Sixth Circuit held that the red dripping-wax seal was not functional because other comparable alternatives existed for Cuervo.

The Sixth Circuit then upheld the district court’s factual findings and its balancing of those findings pursuant to Frisch’s Rests., Inc. v. Elby’s Big Boy, Inc., 670 F.2d 642 (6th Cir. 1982). Cuervo appealed only three of the factors: the strength of the trademark, similarity, and actual confusion. The Sixth Circuit found no error: Maker’s Mark red dripping-wax seal was an extremely strong mark due to its unique design and the company’s marketing efforts, and the lack of evidence of actual confusion with the “Reserva de la Familia” was non-determinative. Reviewing the court’s balancing of the Frisch's factors de novo, the Court concluded that there was a likelihood of confusion between the products and that Cuervo had infringed upon the trademark. The Sixth Circuit also upheld the district court’s award of costs to Maker’s Mark as the prevailing party.

Perhaps more important than the legal discussion, the opinion's interesting narrative about the history of bourbon will surely be of interest to all bourbon connoisseurs (or at least those of us who read F.3d).

When Is a Defendant Not a Defendant? Sixth Circuit Decides Important CAFA Removal Case

Amy Cadle Hocevar — Thu, 10 May 2012 09:41:58 -0500

The Sixth Circuit yesterday answered this question, holding that under the Class Action Fairness Act of 2005 ("CAFA"), a third-party defendant is not a "defendant" permitted to remove an underlying state court action to federal court. In re Mortgage Electronic Registration Systems, Case No. 12-501 (PDF). In reaching this conclusion, the Court joined the Fourth, Seventh and Ninth Circuits in concluding that CAFA does not change the general rule of removal that counterclaim or third-party defendants do not have a right of removal.

This decision serves as a good refresher of the differences between removal in and out of the class action context. CAFA eliminates three constrictions on removal that are present in cases not under the Act: (1) the one-year general limit on removal of a case after the commencement of the state court action; (2) the rule that a "home-state" defendant may not remove the case; and (3) the requirement that all of the defendants must consent to the removal.

It also sets forth the technical requirements for appealing an order of a district court granting or denying a motion to remand a class action. While a district court's order remanding a case to state court for lack of subject-matter jurisdiction or defects in removal procedures is not appealable outside of the class action context, it is in the class action context so long as application for leave to appeal is made "not more than 10 days after entry of the order." Furthermore, if the Circuit Court accepts the appeal, it must generally render its decision within 60 days of when the Court decides to grant the petition for permission to appeal.

Recent article questions the value of oral argument

Pierre Bergeron — Wed, 09 May 2012 10:37:46 -0500

In a recent article by Adam Liptak in the New York Times, he noted that several commenters have questioned the value of oral argument at the U.S. Supreme Court. Needless to say, this matter is not confined to the Supreme Court, as we recently reported concerning the Sixth Circuit's evolving thinking on the question of oral argument. The comments referenced in Mr. Liptak's article echo what numerous Sixth Circuit judges have said publicly at conferences and CLEs about how influential oral argument actually is (ie, that it rarely determines the outcome), and regardless of one's views of oral argument, this reinforces yet again the paramount importance of briefing in the appellate process. It should be said, however, that no one needs to write the obituary on oral argument just yet. Generally speaking, judges do find oral argument helpful in a large percentage of cases even if it does not ultimately influence the outcome. It may help shape the contours of the opinion or offer refinements on issues that might have otherwise escaped the Court's attention. So while the days of automatic oral argument may well be over, it still represents an integral part of the appellate process, and one that should not be overlooked by counsel.

Sixth Circuit upholds $59 million tax deduction

Pierre Bergeron — Tue, 08 May 2012 09:57:13 -0500

In American Financial Group v. United States, the Sixth Circuit recently rejected an IRS appeal seeking a determination that a $59 million deduction taken by an insurance company was inappropriate. The appeal ultimately turned on an actuarial guideline issued by the National Association of Insurance Commissioners concerning how insurance companies should handle accounting questions connected to annuities. Without subjecting the reader to the intricacies of the relevant tax law (which I confess not to understand), much of the appeal turned on what the word "prescribe" meant in the relevant statute. The Court surveyed a number of sources, including the dictionary and the legislative history offered by the IRS. On balance, the Court seemed less enthused about the legislative history (or at least the IRS' snippets of it) than the pragmatic interpretation of "prescribed" in the relevant context. Relying on a plain language interpretation, the Court upheld the deduction.

We had also reported recently on the use and importance of amicus briefs at the Sixth Circuit, in posts here and here. In this opinion, because the case turned in some measure on guidance from the National Association of Insurance Commissioners, the Court specifically noted the position taken by the association in an amicus brief filed before it. The amicus brief was drafted by Aneca Lasley (of Squire Sanders' Columbus office). Consistent with our analysis in the prior posts, this case appeared to be tailor-made for one in which an amicus could have an influential role.

Dirty laundry: Sixth Circuit affirms class certification in washing machine litigation

Pierre Bergeron — Fri, 04 May 2012 10:41:28 -0500

Yesterday, the Sixth Circuit affirmed class certification in an interlocutory appeal under Rule 23(f) in an MDL concerning alleged design defects in certain front-load washing machines produced by Whirlpool, In re: Whirpool Corporation Front-Loading Washing Products Liability Litigation. The case involves washing machines that allegedly became susceptible to mold and mildew which allegedly led to damages of the putative class.

Relying heavily on the Supreme Court's recent decision Wal-Mart Stores, Inc. v. Dukes 131 Supreme Court 2541 (2011), the Sixth Circuit walked through the various class action requirements and concluded that the district court did not abuse its discretion in certifying the class. The Court initially wrestled with the question of how to consider the merits at the class certification stage. Clarifying its prior precedent through the lens of Dukes, the Sixth Circuit held that "courts may inquire preliminarily into the merits of a suit to determine if class certification is proper, although courts need not resolve all factual disputes on the merits before deciding if class certification is warranted." The Court accordingly rejected the defendant's argument that the district court had forsaken the rigorous analysis required for class certification by refusing to consider the merits of the claims.

Another interesting aspect of the Court's decision is its conclusion that the class may be certified even if certain class members have not actually suffered injury. Rejecting the defendant's argument, the Court held "the class plaintiffs may be able to show that each class member was injured at the point of sale upon paying a premium price for the [washing machine] as designed, even if the washing machines purchased by some class members have not developed the mold problem." It will be interesting to see how this portion of the Court's decision is applied by district courts wrestling with class certification decisions.

"Can We Appeal That Now?" - Discretionary Interlocutory Appeals at the Sixth Circuit

Bruce Khula — Fri, 04 May 2012 10:09:06 -0500

An often repeated question by litigants to their attorneys is whether an adverse ruling by the district court is subject to immediate appeal. The answer to that question is, of course, highly circumstantial. Depending on how their case is procedurally situated, in addition to the underlying substantive issues in some instances, litigants may or may not have a right to seek interlocutory appeal. But even assuming that such a right exists, the necessary -- and inevitable -- companion question is: will interlocutory appeal prove efficacious?

With this latter question particularly in mind, the Sixth Circuit Appellate Blog has reviewed available data from the Sixth Circuit, and the results are eye-opening. This study is based on examination of docket entries filed in 2008-11, and subdivided according to the basis for appeal: 1) Discretionary interlocutory appeals certified by the district court under 28 U.S.C. § 1292(b) ("1292(b) Appeals"); 2) Discretionary class action appeals under Federal Rule of Civil Procedure 23(f) ("23(f) Appeals"); 3) Discretionary appeals specific to the Class Action Fairness Act, 28 U.S.C. § 1453(c) ("CAFA Appeals"); 4) Direct bankruptcy appeals to the Court of Appeals under 28 U.S.C. § 158(d) ("Direct Bankruptcy Appeals"); and 5) Various other avenues for interlocutory appeal, a catch-all category that includes qualified immunity rulings, Rule 54(b) judgments, collateral orders, Rule 5 petitions, and pro se petitions to appeal ("Other Interlocutory Appeals").

This Blog undertook a previous, more limited examination of discretionary appellate review under Section 1292(b), but the findings in the present, more sweeping study provide statistically significant differences between the various types of interlocutory appeals.

The number of interlocutory appeals filed at the Sixth Circuit proved remarkably constant over the four-year period of this Blog's study: 37 in 2011, 2010 and 2008, and 35 in 2009. In addition, although the data for prior years is much more limited, the average number of interlocutory appeals filed annually from 2001 to 2007 was 33, with a high of 47 petitions filed in 2007 and a low of 24 filed in 2005. Such stability over the course of the last decade is particularly notable given the fact that CAFA was enacted in 2005, yet the number of overall interlocutory appeals has not significantly expanded in subsequent years.

Far and away the two most prevalent interlocutory appeals to the Sixth Circuit are 1292(b) Appeals and 23(f) Appeals. Taken together, such appeals amounted to 70% of all interlocutory appeals in 2011, 81% in 2010, 71% in 2009 and 62% in 2008. And while there was approximate numeric parity between these two types of appellate appeals in 2011 and 2008, Rule 23(f) Appeals were statistically more frequent in 2009-10 and, during the entire four-year study period, outpaced 1292(b) Appeals: 61 petitions compared to 43 petitions. The other types of appeals made up the remainder of interlocutory petitions filed, with Direct Bankruptcy Appeals being the least filed of all.

Just as the composition of interlocutory petitions brought to the Sixth Circuit therefore varies by type, the fate of such petitions is mixed. During the entire study period, a total of 146 petitions were filed, 65 of which were granted (45%), 63 were denied (43%), and 18 remained pending or were withdrawn (12%). If the 2011 data is excluded -- since over 43% of the petitions remained pending at the time of the study -- the data for 2008-10 reveals that 52% of interlocutory petitions were granted, 46% denied, and 2% were withdrawn. Considered in aggregate, then, around half of all interlocutory petitions have been ruled upon favorably by the Sixth Circuit -- a more robust grant rate than this Blog had expected to discover.

Perhaps not surprisingly, though, a litigant's success in having an interlocutory petition granted varies strongly by the category of appeal. Litigants who sought Direct Bankruptcy Appeals, though few in absolute numbers, enjoyed the greatest degree of success: over 70% of such petitions were granted. At the other end of the spectrum lay the assorted Other Interlocutory Appeals; litigants bringing such appeals had their petitions denied 85% of the time. Class action appeals -- proceeding under both Rule 23(f) and Section 1453(c) -- enjoyed a success rate corresponding with the average in the paragraph above: between 46-50%, with CAFA Appeals (50% granted) enjoying a slight advantage over Rule 23(f) Appeals (46% granted).

In some ways, the data for 1292(b) Appeals proved the most surprising. When the entire four-year period was considered, litigants bringing these basic, discretionary appeals saw their petitions granted 51% of the time. Yet, this data must be relied upon cautiously, for fully 19% of the 1292(b) petitions in 2011 remained pending at the time this study was conducted. When only the years 2008-10 are considered, the grant rate for 1292(b) Appeals jumps significantly to 72%. This Blog was very surprised by that figure, and it remains unclear whether such a high success rate is representative of 1292(b) Appeals or, instead, whether the 2008-10 period is an outlier.

Obviously, the likelihood of the Sixth Circuit granting any given interlocutory petition depends on a variety of factors that cannot be captured by the above statistics. Such factors certainly include the merits of the appeal, the quality of lawyering, and the quality, persuasiveness and standard of review governing the underlying district court ruling, perhaps along with the novelty or complexity of the issue at bar. Even so, the statistics provide bases for a generic litigant to be both hopeful and sober about his chances when considering whether to seek interlocutory appeal -- for this data strongly suggests that the Sixth Circuit can be counted on to conduct an open-minded, yet searching, appraisal of interlocutory petitions brought before it.

Sixth Circuit Reverses Dismissal Against Pro Se FDCPA Plaintiffs

Trevor Covey — Thu, 03 May 2012 20:42:22 -0500

In Lisa Bridge v. Ocwen Federal Bank, the Sixth Circuit reversed a dismissal in a FDCPA case brought by pro se plaintiffs regarding their mortgage.

Lisa Bridge, the only person listed on her mortgage, owed monthly payments to Aames Capital Corporation. Her bank, Firstar, refused to honor her April mortgage check. Thereafter, Lisa ordered Firstar issue an “official check” to Aames, but Firstar refused to honor that check as well. Aames then notified Lisa that she was in default and assessed a late fee. Firstar ultimately honored a second “official” check and, additionally, Lisa’s personal check. Therefore, Lisa satisfied April’s payment and paid May’s in advance.

In the meantime, Aames assigned the mortgage to Ocwen, which the Bridges alleged is a division of Deutsche Bank. Ocwen began “dunning” both Lisa and her husband William (who is not listed on the mortgage). Ocwen repeatedly called the Bridges, despite cease and desist requests made to the federal “Do Not Call” directory; threatened foreclosure; assessed monthly late fees; and reported negative information to credit reporting agencies. Further, Ocwen apparently retained a law firm, which sent a foreclosure threat by mail. Plaintiffs Lisa and her husband William Bridge sued Oscwen and Deutsche and related parties under the Fair Debt Collection Practices Act (“FDCPA”). The district court dismissed the Complaint, holding that defendants did not fall within the Act’s definition of “debt collector.”

On appeal, the Sixth Circuit reversed, holding that the Bridges alleged facts sufficient to satisfy the statutory definition of debt collector under the FDCPA (15 U.S.C. § 1692(a)(6)), which requires—in addition to persistent collection efforts intended to harass, oppress, or abuse—that the defendant seek collection of debts “owed or due or asserted to be owed or due another” and utilize interstate commerce in collection efforts. Furthermore, the Court rejected as “disingenuous” and “exemplary of an unsettling trend in FDCPA claims” Ocwen’s argument that plaintiffs’ position that the mortgage was not in default relieves Ocwen of liability under the Act. Although the FDCPA does exclude from the definition of debt collector efforts related solely to a debt which is not in default at the time it is obtained, the Sixth Circuit held that defendants could not “have it both ways”—for years demanding payment on a defaulted mortgage then, for purposes of avoiding liability, denying the mortgage was in default to begin with.

The Court held that “the definition of debt collector pursuant to §1692(a)(6)(F)(iii) includes any non-originating debtor holder that either acquired the debt in default or has treated the debt as if it were in default at the time of acquisition.” This holding, the Court noted, is supported both by the language of the FDCPA itself, which uses the word “asserted to be owed or due another,” and the legislative history suggesting that Congress meant to enact a sweeping reform to a “widespread problem.” These holdings were also applicable to William Bridge because Congress intended to protect family members “who do not owe money, but may be deliberately harassed.” Judge Clay concurred in the judgment regarding one of the defendants, but effectively dissented as to the thrust of the majority’s opinion.