Claims and Bad Faith Law Blog

Insurance Claims and Bad Faith Law -- Author's Note: Commercial Advertising Not Authorized; Unseal the Evidence.

    **Florida Insurance Bad Faith Expert - Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.** 

    It has been a long time since the testimony of many witnesses remain under seal from hearings held by the majority in the last previous Congress.  It is time to unwrap the transcripts and make them public to the people who paid for it all:  The taxpayers of the United States.

    Unseal the testimony.  Reveal the evidence.  As was said by Mr. Justice Brandeis long ago and remains true today, "Sunlight is the best disinfectant."

Dennis Wall is currently at work on his fifth book.  Based on his investigations into publicly available evidence in actual court files, it will address how concealed evidence and secret settlements take our money, foreclose on our homes, and change our lives.

 

PAYDAY LOAN RULE PROPOSED DELAY.

HAPPY ST. PATRICK'S DAY!  On Saturday, March 16, 2019 I left these Comments on the CFPB's proposed new rule which would stay the 2017 Payday Loan Final Rule from taking effect.  The last day to leave YOUR Comments on this particular proposed new rule is Monday, March 18, 2019.

The CFPB has proposed a separate rule to repeal and replace the Payday Loan Rule.  Leave your Comments on that proposed rule by May 15, 2019.  It is Docket No. CFPB-2019-0006-0001 on https://www.regulations.gov.

 

March 16, 2019

 

Consumer Financial Protection Bureau

Online at:  https://www.regulations.gov

 

Re:    Payday, Vehicle Title, and Certain High-Cost Installment Loans;

          Delay of Compliance Date proposed rule.

          Docket No. CFPB-2019-0007

          RIN 3170-AA95

 

To the Director of the Consumer Financial Protection Bureau:

 

The Payday Loan Final Rule took effect on January 16, 2018.

          Your proposed postponement of its operative date was the subject of a "statement" which the CFPB did not issue until January 16, 2018.  A proposed rule for postponement of the Payday Loan Final Rule's operative date was published in the Federal Register more than a year after that, on February 14, 2019.

          Parenthetically, the CFPB also published a proposed rule on February 14, 2019, to repeal and replace the Payday Loan "addressing reconsideration of certain provisions" which you "published separately in this issue of the Federal Register."  84 F.R. at 4298.

 

1. As a matter of settled law, the Administrative Procedure Act does not permit an agency to effectively repeal a final rule simply by postponing its operative date. Therefore your proposed rule to postpone the operative date of the Payday Loan Final Rule is prohibited by the APA.

 

"The APA does not permit an agency to 'guide a future rule through the rulemaking process, promulgate a final rule, and then effectively repeal it, simply by indefinitely postponing its operative date.''  California v. U.S. Bureau of Land Mgt., 277 F. Supp. 3d 1106, 1121 (N.D. Cal. 2017), dismissed by agreement after mediation, 2018 WL 2735410 (9th Cir., March 15, 2018) (Corrigan, Circuit Mediator).  For the reason that the Administrative Procedure Act prohibits the postponement you have proposed in the subject rule, the CFPB's proposed stay rule is void.

 

2. The CFPB's claim to "discretion" does not preempt the Administrative Procedure Act and the serial claims of current Federal agencies to "proposed compliance date delays" are all subject to the APA including this one.

 

The CFPB's proposed new rule relies on "discretion" as its "Legal Authority" for what the CFPB calls "proposed compliance date delay."  There is no such discretion and what the CFPB is doing here is subject to the Administrative Procedure Act.

          The proposed new rule relies for its "Legal Authority" for its claim to "discretion," on Section 1031 of the Dodd-Frank Act "and each of the other legal authorities" cited in the CFPB's 2017 Final Rule.  If the "other legal authorities" actually existed that are now broadly claimed to support discretion in the CFPB's proposed new rule, now is the time to tell them.  See Bauer v. DeVos, 325 F. Supp. 3d 74, 108-09 (D.D.C. 2018) ("The arbitrary and capricious standard of the APA, however, requires that agencies 'provide an explanation that will enable the court to evaluate the agency's rationale at the time of decision.'").  If the authorities are not stated by the CFPB in its proposed new rule, then for purposes of the APA they do not exist.

          Section 1031 of the Dodd-Frank Act specifically provides as follows regarding rulemaking:

SEC. 1031. PROHIBITING UNFAIR, DECEPTIVE, OR ABUSIVE ACTS OR PRACTICES.

(a) IN GENERAL.—The Bureau may take any action authorized under subtitle E to prevent a covered person or service provider from committing or engaging in an unfair, deceptive, or abusive act or practice under Federal law in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.

 (b) RULEMAKING.—The Bureau may prescribe rules applicable to a covered person or service provider identifying as unlawful, unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. Rules under this section may include requirements for the purpose of preventing such acts or practices.

 

There is absolutely nothing about this statutory authorization to make rules that affords any agency "discretion" about changing the date for compliance with a previously issued Final Rule.

         The CFPB's invocation of the above-quoted Section 1031 illustrates the major point that the CFPB, as a creation of Congress, has limited authority.  An agency has only the authority conferred by Congress, and the powers necessarily implied from that authority.  Delaying the date for compliance with an established Final Rule is not among the powers necessarily implied from the rulemaking authority conferred upon the CFPB in Section 1031, quoted above.

        Since the CFPB lacks the "discretion" it claims as its Legal Authority to issue the subject proposed new stay rule, the subject proposed new stay rule is void and of no effect.

        More specifically, the recurring issue of "proposed compliance date delay" is an issue subject to the Administrative Procedure Act.  Internet searches have revealed what appears to be a serial use of this phrase in new rules proposed by agencies of the current Federal Government, all seemingly contained in attempts to delay or repeal pre-existing Final Rules, as here.

        To date, I was able to find one proposed rules change dated before 2017.  In 2003, the Office of Comptroller of the Currency claimed, without authority, that it would change the compliance date on a previously issued Final Rule.  An unchallenged OCC rule is not precedent.  Parenthetically, the OCC did not even bother to invent uncited "Legal Authority" to support its proposed power grab in its proposed rules change in 2003.

 

3.  The CFPB's proposed postponement rule is arbitrary and capricious because it clearly was not written to stay pending litigation but instead it was plainly written to stay the rules pending reconsideration. This is impermissible under the APA and so the CFPB's proposed stay or postponement rule is void.

 

Although the CFPB's proposed stay rule does not say it, presumably the CFPB is relying on the stay authority found in 5 U.S.C.A. § 705.  As you know, 5 USCA § 705 provides for a stay pending judicial review, but it requires a finding "that justice so requires[.]"  The CFPB's subject proposed stay rule is arbitrary and capricious because it plainly does not relate to a stay pending litigation but instead it clearly recites that it was written to stay the rules pending reconsideration of the 2017 Final Rule.

         The subject proposed rule does not even say that a stay pending litigation is the reason why the proposed stay rule was written.

         The subject proposed stay rule cannot provide for a stay pending judicial review under Section 705 because the litigation in question mentioned by the CFPB in its proposed stay rule, Community Fin. Serv's Ass'n of Am., Ltd. v. Consumer Fin. Prot. Bureau, (W.D. Tex. Case No. 1:18-cv-00295-LY), has been stayed as the CFPB mentioned.  84 F.R. at 4298 n.5, referencing Docket No. 29, the Court's Order filed on June 12, 2018 reciting in part that "this action is STAYED pending further order of the court."   The same Court entered a later order concluding "that the stay of litigation in this action ordered June 12, 2018, should be continued in full force and effect."  That Court's stay of litigation is still in full force and effect, unchanged by any further order after a review of the Clerk's electronic docket.

        That Court also purportedly stayed the effective date of the 2017 Payday Loan Final Rule.  Community Fin. Serv's Ass'n of Am., Ltd. v. Consumer Fin. Prot. Bureau, Dkt. No. 53, Order, filed November 6, 2018 (W.D. Tex. Case No. 1:18-cv-00295-LY).

          For all these reasons, the CFPB's proposed stay rule is arbitrary and capricious and therefore void and of no effect:

While there is no prohibition against having more than one justification for invoking Section 705, provided that one of them meets the statutory requirements, [the agency defendants] must show that they properly invoked the statutorily required ground of "pending judicial review."  Defendants have not done so here.

California v. U.S. Bureau of Land Mgt., 277 F. Supp. 3d at 1122.

 

 

4. The CFPB's proposed stay rule is arbitrary and capricious because (1) costs of compliance are an insufficient basis for a stay of an agency's final rule, and (2) "more immediate compliance dates" required by States does not give any reason to postpone the Federal Government's Payday Loan Final Rule.

 

Alternatively and cumulatively, the CFPB's proposed stay rule is arbitrary and capricious because it only takes into account the costs to the industry of complying with the Rule and completely ignores the benefits that would result from compliance.  California v. U.S. Bureau of Land Mgt., 277 F. Supp. 3d at 1122.

         The CFPB's proposed stay rule does not even set out a finding by the agency that justice requires the stay.  Instead, in the proposed rule the CFPB offers two asserted reasons for a stay.  The first reason is cost to the industry of compliance with the already-established final rule.  Costs of compliance are an insufficient basis for a stay of an agency's final rule.  In addition to the   California v. U.S. Bureau of Land Management decision which has already been mentioned, see, e.g., Bauer v. DeVos, 325 F. Supp. 3d at 107-08:  "The mere fact that parties would avoid the costs of complying with the existing regulations, however, is plainly insufficient to support a § 705 stay."

        The CFPB's second asserted reason for the proposed stay rule is that some States have adopted similar requirements under State law which have "more immediate compliance dates."  84 F.R. at 4299.  This is not a good reason, either, for a stay of the Federal Government's rule with a later compliance date.

        In sum, the proposed stay rule is really a reflection of an agency's change in position due to a change in the people in power.    An unacknowledged and unexplained inconsistency "is the hallmark of arbitrary and capricious decision-making."  Bauer v. DeVos, 325 F. Supp. 3d at 109. 

Conclusion.

For each and all of the foregoing reasons, whether taken separately or together, the CFPB's subject proposed stay rule is arbitrary and capricious.  As such, it is prohibited by the Administrative Procedure Act as was the case in earlier challenged iterations of much the same type of recent "rulemaking" by other Federal agencies, which Federal Courts have struck down. 

        Thank you for your consideration.

Sincerely,

Dennis Wall

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DUTY TO DEFEND ARBITRATION? YES, IN THIS CASE.

In Gemini Ins. Co. v. Constrx Ltd., NO. 14-00355 DKW-RLP, 2018 WL 7508264 (D. Haw. September 24, 2018), the Court determined that a commercial general liability carrier owed a duty under its liability insurance policy to defend its policyholder in an arbitration.  The reason?  The policyholder could be subjected to liability and the liability policy had to provide defense coverage as a result.  Simple as that, the Court ruled in effect.

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HERE THERE'S POTENTIAL LIABILITY, SO HERE THERE'S DEFINITELY LIABILITY COVERAGE.

In Metropolitan Prop. & Cas. Ins. Co. v. Auto-Owners Mut. Ins. Co., ___ N.W.2d ___, No. 18-0129, 2019 WL 1086599 (Iowa March 8, 2019), two liability insurance carriers covered two at-least-nominally separate insureds.

One carrier issued what was described by the Court as a CGL policy to a limited liability company that owned a farmhouse.

The other carrier issued a homeowner's policy to at least one of the co-founders of the LLC.  The co-founder was also apparently insured under the CGL policy as an officer of the LLC.

A loaded rifle was left at the farmhouse for several months.  As loaded rifles will do, it accidentally discharged into a human being, killing him.

The Homeowner's carrier and the individual insured together "settled the death claim for $900,000 and sued the CGL insurer for reimbursement. The case proceeded to a bench trial, and the district court entered judgment against the CGL insurer for $450,000, rejecting various coverage defenses."  Metropolitan Prop. & Cas. Ins. Co. v. Auto-Owners Mut. Ins. Co., ___ N.W.2d ___, No. 18-0129, 2019 WL 1086599, at *1 (Iowa March 8, 2019).  On appeal to the Supreme Court of Iowa (bypassing the Iowa intermediate appellate court for some reason known only in Iowa perhaps), the Supreme Court of Iowa affirmed.

The Supreme Court looked at the coverage dispute this way:

    The principal fighting issue is whether the LLC, as owner of the farmhouse, had potential liability under a premises liability theory for a dangerous condition (the loaded, unsecured rifle left on a bed for several months). On our review, we conclude the district court correctly interpreted the CGL insurance contract, and its factual findings on potential liability and the reasonableness of the settlement are supported by substantial evidence. For the reasons explained below, we affirm the district court judgment.

Metropolitan Prop. & Cas. Ins. Co. v. Auto-Owners Mut. Ins. Co., ___ N.W.2d ___, No. 18-0129, 2019 WL 1086599, at *1 (Iowa March 8, 2019).  That view of things naturally disposed of the CGL carrier's appeal.  Where as here liability coverage follows potential liability, the likely result is pretty clear.

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BAD FAITH IN THE NEW YORK ORGANIZATION?

Because Aon did business with Donald J. Trump and the Trump Organization, it was served with a 9-page subpoena on March 4, 2019.  The return date on the subpoena is March 19.

The subpoena was served by the New York State Department of Financial Services.  It requested documents from the insurance broker, Aon, going back 10 years, including:

• "copies of all communications between Aon and Mr. Trump and the Trump organization"
• "all internal Aon documents relating to Mr. Trump and the company"
• "[records of] compensation for the current and former Aon employees who handled the Trump Organization account," including "information about their incentives, bonus payments or commissions."
• "[S]imilar contracts and agreements between Aon and Mr. Trump."

See William K. Rashbaum and Ben Protess, Trump Businesses Draw Scrutiny From New York Over Insurance Policies, New York Times, Wednesday, March 6, 2019, p. A16 (the New York Times may require a subscription for access to the online version, https://www.nytimes.com/2019/03/05/nyregion/trump-aon-risk-services-subpoena.html).

This subpoena sounds an awful lot like the document requests I have dealt with for over 40 years in Insurance Bad Faith cases.

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ET TU MALA FIDES, WILBUR?

Two Federal Judges in two different Federal Courts, one in California and the other in New York, have held trials about Secretary of Commerce Wilbur Ross's attempts to add a citizenship question to the 2020 Census and thereafter to conceal his reasons for doing so.

In both cases, the District Judges found that Mr. Ross acted in bad faith.  The Federal Judge in California went further than the Federal Judge in New York did and found a violation of the United States Constitution as well as misrepresentation.  In both cases, the evidence established that Mr. Ross's excuses were made "in bad faith" and that he knew all along that putting a citizenship question on the 2020 Census would result in a census undercount, particularly among Latinos who are after all unlikely to vote for Mr. Ross's president or party:

    Commerce Secretary Wilbur Ross acted in “bad faith,” broke several laws and violated the constitutional underpinning of representative democracy when he added a citizenship question to the 2020 Census, a federal judge ruled Wednesday.  

[T]he 126-page ruling by U.S. District Judge Richard Seeborg in San Francisco went further than a similar decision on Jan. 15 by Judge Jesse Furman in New York.

Fred Barbash, Wilbur Ross Broke Law, Violated Constitution in Census Decision, Judge Rules, Washington Post Online, posted Wednesday, March 6, 2019 (the Washington Post may require a subscription for access online).

Et tu mala fides, Wilbur?

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STIPULATED PROTECTIVE ORDERS ARE OFTEN PILLS TOO BIG TO TAKE.

Unspecified claims against Bayer and other defendants, presumably other pharmaceutical companies, were filed in the United States District Court for the Northern District of California.  From there, the claims were put into Multi-District Litigation and assigned to the Southern District of Illinois, before they were sent back to the Northern District of California.

Whew.

You can tell that whatever the claims may be that this is a big case.   It is big both for the plaintiffs and for Bayer and the other defendants.  The plaintiffs' attorneys in this case come from many places in the country:  Oakland; St. Louis; Englewood, Colorado (which is near Denver); New York City; Redwood City, California; San Francisco, and San Mateo, California.

In an unusual twist the defendants' attorneys in this case hail from fewer cities:  San Francisco, St. Louis, Denver, and Chicago.

The case is Galinis v. Bayer Corp., No. 09-cv-04980-SI, 2019 WL 1024403 (N.D. Cal. March 4, 2019).

Now that the stage has been set, here's why the Galinis case is of interest to us.  The defendant Bayer filed two motions to exclude expert witness testimony that it had done something wrong, and a motion for summary judgment against a claim that it had failed to warn about the alleged bad consequences of one of its pharmaceutical products, i.e., drugs.

In opposition to these motions, the plaintiffs filed what the Federal Court in California calls "opposition documents (briefs and supporting declarations and exhibits) under seal."  Galinis v. Bayer Corp., No. 09-cv-04980-SI, 2019 WL 1024403, at *1 (N.D. Cal. March 4, 2019).

The defendant Bayer's motions and the plaintiffs' "opposition documents" were all filed when the case was pending in the Southern District of Illinois.

When this case was transferred back to the Northern District of California after that, the Federal Judge in California ruled that the parties would have to either unseal all the materials or file a motion to seal them that complies with the Local Rules of the Northern District of California.  This is the first of two reasons why this case is of interest:  Rules of Civil Procedure govern the determination of cases where they are pending, regardless of where they came from, whether from Multi-District Litigation or from Illinois.

The plaintiffs then filed a motion to seal all or some of their "opposition documents."  (Even the California Judge was not certain whether the plaintiffs were referring to all or some of these materials and, if they were referring only to some, which ones.)  The plaintiffs based their motion to seal in part on a stipulated protective order that they had entered into with Bayer and the other defendants.  The plaintiffs followed that stipulated protective order and marked some of their documents as "CONFIDENTIAL" and some as "HIGHLY CONFIDENTIAL."  That is apparently all that the stipulated protective order required in order for the plaintiffs to try to file their materials under seal.

That brings us to a second reason that this case is of importance to us:  The Court held that even when the parties agree to a stipulated protective order, that by itself is not enough to seal the record of Court proceedings.  To put it another way, the parties may agree to seal a Court File but only the Court can actually seal a Court File.

The plaintiffs' motion to seal did not comply with Civil Local Rule 79-5, purely and simply, and so their motion to seal was denied.   Galinis v. Bayer Corp., No. 09-cv-04980-SI, 2019 WL 1024403, at *2 (N.D. Cal. March 4, 2019).

To summarize, there are at least two lessons to be learned from this case:  (1) Rules of Civil Procedure govern the determination of cases in the places where they are pending, regardless of where they came from, whether from Multi-District Litigation which has its own made-up rules, or from a place like the Southern District of Illinois which also has its own rules, and (2) a stipulated protective order, which of course is contractually  agreed to by the parties, is not alone enough to seal the record of Court proceedings.

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BY ANY NAME, "SUBJECTIVE BAD FAITH" WOULD SMELL THE SAME.

In Lanard Toys Ltd. v. Dolgencorp LLC, NO. 3:15-CV-849-J-34PDB, 2019 WL 1003134 (M.D. Fla. March 1, 2019) (Barksdale, USMJ), the Court denied a defendant's request either for dismissal of the case with prejudice or alternatively for sanctions.  The defendant's motion appealed to the Court's "inherent powers."

In this case, the question of exercising the Court's inherent powers to sanction attorneys involved the standard of proof of "subjective bad faith."  The Court held in this case that it saw the attorneys' record conduct the same way, whether under a high standard of clear and convincing proof or under a lower standard more or less based on the circumstances:

Many courts require clear and convincing evidence of subjective bad faith.  [Citations omitted.]  There does not appear to be binding precedent in the Eleventh Circuit on that standard.  [Citation omitted.]  The Eleventh Circuit has held, however, that dismissal of a case is “warranted only upon a clear record of delay or willful contempt and a finding that lesser sanctions would not suffice.” Mingo v. Sugar Cane Growers Co-op of Fla., 864 F.2d 101, 102 (11th Cir. 1989) (internal quotation marks omitted) (emphasis in original).

    Here, the result would be the same whether the clear-and-convincing standard or the lesser preponderance standard applies.

Lanard Toys Ltd. v. Dolgencorp LLC, NO. 3:15-CV-849-J-34PDB, 2019 WL 1003134, at *2 n. 3 (M.D. Fla. March 1, 2019).

Nonetheless, on this record and in this case, the Court declined the opportunity to dismiss as well as the opportunity to sanction:

          Here, the circumstances described by the defendants—and uncontested or largely uncontested by Lanard—show carelessness (or maybe even professional incompetence) resulting from many documents, many markings under the protective order, different lawyers practicing in different states in different cases (this case and the bankruptcy case), and an apparent absence of protocol effective against improper disclosures. But the defendants do not show the subjective bad faith or egregious conduct required for the Court to take the unusual step of exercising inherent authority to sanction the lawyers. Dismissal of the entire case with prejudice would be particularly inappropriate under the circumstances presented.

Lanard Toys Ltd. v. Dolgencorp LLC, NO. 3:15-CV-849-J-34PDB, 2019 WL 1003134, at *2 (M.D. Fla. March 1, 2019).

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FILED RATE BARS CLAIMS, UNTIL IT DOESN'T.

A purchaser of electricity foolishly entered into a contract whereby the supplier of electricity could charge an initial rate lower than its filed rates, i.e., lower than the rates filed with the relevant regulatory authority that approved a filed rate.

After the initial rate period expired, the contract provided that the supplier could charge higher rates.  After the initial rate period expired, the supplier in fact charged higher rates.

The purchaser sued.  It asserted several grounds.  On one of them, that the supplier allegedly breached its implied duty of good faith and fair dealing, a panel of the Second Circuit held that there was no bad faith as a matter of law.  The parties contracted for an initial rate that was lower than the filed rate that the supplier was allowed to charge.  That meant there was no breach of the implied covenant of good faith and fair dealing, according to the panel deciding Connecticut law.  Richards v. Direct Energy Serv's, LLC, 915 F.3d 88, 98-100 (2d Cir. 2019).

Their reasoning as to the supplier's higher rates after the initial rate period expired is, with all due respect, circular at best.  The panel ruled that in its view the supplier obviously exercised its discretion in good faith to charge higher rates.  They pointed to evidence that other suppliers charged those high rates, and rejected the evidence that the higher rates were higher than the approved rates that the supplier could charge if it had followed the regulator's rulings.

Seriously.  That's what they said.

On remaining counts, the same panel unhesitatingly applied the filed rate as a defense to the supplier's liability for its charges.

So, in this Second Circuit panel's view, there was no filed rate, until there was.  Regardless of the filed rate, there was no bad faith here, they said.

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IDENTIFYING TRADE SECRETS AT OUTSET, MEANT SUCCESSFULLY PROTECTING REAMS LATER.

In Bombardier Inc. v. Mitsubishi Aircraft Corp., NO. C18-1543JLR, 2019 WL 858777, at *5 (W.D. Wash. February 22, 2019), Bombardier wanted the Court to protect certain categories of documents from disclosure.  Bombardier started by identifying its trade secrets, thereafter asking the Federal District Court to match the categories of documents to the trade secrets it had already identified in general terms from the beginning of the case:

[A]t this stage, Bombardier has identified its trade secrets with enough specificity that the court can determine if the disputed documents are related. In its complaint, Bombardier described technical, business, scientific, technical, economic, and engineering information that relate to its design, development, testing, evaluation, certification, and commercialization processes for its aircraft. (See generally Compl.)  According to Bombardier, “[t]his whole process—design, certification, production—is the heart of each [aircraft manufacturing] company’s competitive advantage.” (Id. ¶ 33.) Bombardier has cited numerous documents that relate to these processes, which Bombardier alleges certain defendants took while still employed at Bombardier and brought to AeroTEC, MITAC, and MITAC America. (Compl. ¶¶ 60-69.) And Bombardier has described in detail how the information in these allegedly stolen documents could assist AeroTEC, MITAC America, and MITAC in certifying its own aircraft. (Id.) In short, Bombardier has sufficiently described its alleged trade secrets for the court to determine if the disputed documents relate to them and should therefore be filed under seal.

(Emphasis added.)  Those who have documents to seal, let them seal, if they can, by following a path like the one that Bombardier has successfully taken in this case.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

POLICY AND THE FACTS TAKE AWAY "ANTI-CONCURRENT CAUSE" EXCLUSION.

In Citizens Prop. Ins. Corp. v. Salkey, 260 So.3d 371 (Fla. 2d DCA 2018) [PAGE NUMBERS NOT PROVIDED BY WESTLAW AT THE TIME THAT THIS ARTICLE IS POSTED HERE], a homeowners insurance policy imposed an "anti-concurrent cause" exclusion, and then took the ACCC away in an endorsement for sinkhole coverage.  That made the issue of "concurrent cause" ripe for resolution by the jury in the underlying case, a Florida appeals court held:

    Citizens argues that its policy contains language sufficient to avoid application of the concurrent-cause doctrine in two places. First, Citizens argues that the earth movement exclusion contained in the policy explicitly contains anti-concurrent cause language:

1.  We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.

....

b.  Earth Movement and Settlement, meaning:

....

(3) mine subsidence;

....

i.  Loss caused by “sinkhole.”

However, the sinkhole endorsement purchased by the Salkeys expressly provides as follows:

The GENERAL EXCLUSIONS – Earth Movement and Settlement exclusion 1.b. does not apply with respect to coverage provided by this endorsement.

....

The GENERAL EXCLUSIONS – Loss caused by Sinkhole exclusion 1.i. does not apply with respect to coverage provided by this endorsement.

    Accordingly, because the plain language of the sinkhole endorsement explicitly states that the anti-concurrent cause language found in section 1 of the policy does not apply to sinkhole claims, the anti-concurrent cause provision found in section 1 does not apply in the instant case so as to avoid application of the concurrent-cause doctrine.

The jury in that case found that there was at least one concurrent cause, and so it was proper to instruct the jury accordingly, the appellate court held:

    Therefore, applying [Florida law established by the Florida Supreme Court in Sebo v. American Home Assur. Co., 208 So. 3d 694 (Fla. 2016)] to the instant case, we conclude that the trial court properly instructed the jury on the concurrent-cause doctrine, requiring it to determine if at least one of the concurrent causes was covered under the insurance policy.

Nonetheless, because the jury instructions in that case were confusing, the appellate court reversed the trial court's judgment entered on the jury's verdict for the policyholder, and remanded for a new trial.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

GENERICS FORCIBLY REPLACING BRAND PRESCRIPTIONS, LIKE IT OR NOT.

Another agency of the current Federal Government is taking actions to dismantle consumer protections with a new Administrative State.  This time it is the Centers for Medicare and Medicaid Services (CMS), located in the Department of Health and Human Services (HHS).  They propose to substitute generic drugs for brand drugs when consumers fill their doctors' prescriptions.  Their proposal was only posted on January 24, 2019 and, in a relatively short period for Comments, the deadline for leaving a Comment including in opposition to these new-Federal Government proposals, is Tuesday, February 19, 2019.

Here are the complete Comments I left on https://www.regulations.gov on Sunday, February 17, 2019 in opposition to these particular proposals.

February 17, 2019

To:       The Centers for Medicare and Medicaid Services (CMS),

          Department of Health and Human Services (HHS).

          https://www.regulations.gov

 

Re:    Proposed Changes to ACA Benefits and Payments Parameters for 2020.

          CMS-9926-P

To CMS, HHS:

These Comments are regarding your proposed addition to Regulations in 45 CFR, new proposed §§ 147.106(e)(5) and 148.122(g)(5), and wherever else the same proposed changes discussed in these Comments may be found in your proposals.  Your proposed new regulations §§ 147.106(e)(5) and 148.122(g)(5) are published in 84 F.R. at pp. 313-314.

You advise in 84 F.R. at p. 234 that your proposed new § 147.106(e)(5), for example, would allow issuers of drug plans in all three markets -- individual, small group, and large group -- to allow changes to a formulary.  (Although you do not define the term in your proposals, I understand from general usage by CMS/HHS that "formulary" in this context means a list of prescription drugs covered by a plan, a/k/a a drug list.)

The new additions you propose to existing law would be to allow issuers of plans covering prescription drugs to remove the equivalent of brand drugs from the formulary, i.e., from the plan of prescription drugs that are covered by the issuer.  See, e.g., 84 F.R. at 234.

There are at least three obstacles to implementing these proposed new regulations as law.  The three I would like to address in these Comments are (1) that the proposed new regulations are not a reasonable approach to the availability of prescription drugs to consumers who pay for prescription drug plans, or formularies; (2) that the proposed new regulations are a windfall to the issuers of plans covering prescription drugs, at the expense of consumer choice, and (3) that the term, "generic equivalent," is new and undefined, without so much as a reference I can find to the Federal Food and Drug Administration's process of testing and approving generic drugs for use by consumers.

First, the proposed new regulations are not a reasonable approach to the availability of prescription drugs to consumers who pay for prescription drug plans, or formularies.  The goal of adding generic medical equivalents to prescription drug plans, or drug lists, could reasonably be accomplished without mentioning the removal of brand drugs from the formulary at all.

The real effect of proposed new regulations like §§ 147.106(e)(5) and 148.122(g)(5) is not to permit the addition of generic equivalent drugs to an issuer's list of covered drugs, but rather to permit the issuer to remove brand drugs from the issuer's list.

That in itself is an unreasonable change to the law and, moreover, it is not authorized by the enabling Congressional legislation in the first place.  The clear purpose of the enabling statute was to foster consumer choice, not to limit consumer options, especially when it comes to prescription drugs.

That ties in to the second objection addressed in these Comments.  The proposed new regulations, such as for example §§ 147.106(e)(5) and 148.122(g)(5), are an undeserved windfall for the makers of generic drugs, and at the expense of consumer choice.  Lists of covered drugs are of course lists contained in plans for coverage of drugs.  These plans are paid for by consumers in whole or in part including by the payment of deductibles and co-pays, and often paid for as well by a share of the premiums charged for coverage under these plans.  Consumers have paid for the right to have their physicians and medicalcare providers prescribe drugs and to fill these prescriptions with brand drugs at the option or choice of the consumer, and not by the choice either of the pharmaceutical manufacturer or the issuer.  For this reason as well, the proposed new regulations, including §§ 147.106(e)(5) and 148.122(g)(5), should not and cannot be adopted.

The third and final objection to proposed new regulations §§ 147.106(e)(5) and 148.122(g)(5) which will be addressed in these Comments is the undefined use of the phrase, "generic equivalent."  This phrase is found in the proposed new authority to be conferred upon issuers to "add a generic equivalent to a formulary[.]"  See, e.g., proposed new regulation § 147.106(e)(5), 84 F.R. at p. 314, and proposed new regulation § 148.122(g)(5), also in 84 F.R. at p. 314.

The phrase used in this new proposed regulation is not limited to "medically equivalent."  (Emphasis added.)  Nor is it limited by reference, so far as I can find, to FDA-generic-approved medicines.  Without such limitations, the proposed new authority to replace brand drugs on drug lists with "a generic equivalent" is overly broad and so it is meaningless.  It would, for example, allow issuers and generic drug manufacturers to buy their way onto drug lists to add drugs that their own proprietary  'research' and support has 'determined' to be "a generic equivalent," without limitation to generic medicines already approved by the FDA.   For this reason as well, the proposed new regulations, including §§ 147.106(e)(5) and 148.122(g)(5), provide no limiting guidelines and so are void and of no effect.  They cannot validly be promulgated.

For each and all of these reasons, whether taken separately or together, the proposed new regulations, including §§ 147.106(e)(5) and 148.122(g)(5), cannot validly be promulgated as administrative regulations and, moreover, they are void and of no effect as new law.

Sincerely,

Dennis J. Wall

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INSURANCE BAD FAITH STATUTES:

ARE UNFAIR AND DECEPTIVE ACTS AND PRACTICES ENOUGH ANY MORE?

Did you ever wonder what will become of Insurance Bad Faith Statutes if people asserting claims under those statutes would be required to plead and prove "actual injury" because of the alleged statutory violations?

That's one lawyer's way of asking whether there is anything left of Insurance Bad Faith Statutes in an age that requires a judge to agree that there is "actual injury" in every claim.

I have wondered about this, and I wrote about it in a new Section of my 2018 Supplements, Section 3:28.50, titled "Injury in Fact":  What Happens to Bad Faith Statutes? 2018 Supplement, Volume 1, of Litigation and Prevention of Insurer Bad Faith (Thomson Reuters Third Edition).

I am making it available to you on my website for you to reprint, at no cost to you, with the permission of the publisher.  Republished there with the permission of the author and Thomson Reuters.  No further republication or reproduction of this material may be made without the express written permission of the publisher.

Enjoy the research and expand on it!  Let me know what you find, if you can.  I am going to expand on the research on this subject myself in my 2019 Supplements! 

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COVERAGE LAWSUIT AFTER LIMITATIONS PERIOD, AND NO PROMPT NOTICE EITHER ...

... add up to summary judgment for a homeowner's carrier.  But actually either of the policyholder's violations of the insurance contract would have sufficed in this Connecticut case.

In Discuillo v. Allstate Ins. Co., NO. 3:17-CV-234 (KAD), 2019 WL 499255 (D. Conn. February 8, 2019), a Connecticut homeowner sustained her alleged loss in February 2015.

She advised her homeowner's insurance carrier of the loss fourteen months later, in April 2016.

She filed suit after the 18 months limitations period provided in her homeowner's policy, in January 2017.

The Federal Judge took the easy question first and entered summary judgment for the carrier because the contractual limitations period had clearly been violated in this case.  Discuillo v. Allstate Ins. Co., NO. 3:17-CV-234 (KAD), 2019 WL 499255, at *2 (D. Conn. February 8, 2019). 

Then the Federal Judge addressed the lack of "prompt notice" issue.  This was a little more difficult to deal with because after all, what is "prompt notice" of a loss under a homeowner's policy can be subject to interpretation.  In this case, notice was clearly delayed for 14 months.  The undisputed lack of "prompt notice" clearly prejudiced the carrier in this case because it was also undisputed that it was deprived of an adequate  opportunity to inspect the property so as to determine the cause of the loss by the time notice was given.  The Federal Judge entered summary judgment against the policyholder on this additional ground as well.  Discuillo v. Allstate Ins. Co., NO. 3:17-CV-234 (KAD), 2019 WL 499255, at *3-*4 (D. Conn. February 8, 2019).

Suit limitations provisions tend to be applied more often in the decided case law than "prompt notice" policy provisions.  But in some cases either provision will suffice to adjudicate a coverage claim without needing to reach the substance of the claim.

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THE LATEST AMENDED STIPULATED PROTECTIVE ORDER IN MICROSOFT'S (LATEST) CASE.

In the latest case against Microsoft, a United States Magistrate Judge signed the parties' First Amended Stipulated Protective Order obviously written for concealment.  The case is Uniloc 2017 LLC v. Microsoft Corp., NO. 8:18-CV-02053-AG (JDEx), 2019 WL 451345 (C.D. Cal. February 5, 2019).

In this stipulated amended protective order, the parties stipulated and the Magistrate Judge agreed that:

    Discovery in this action is likely to involve confidential, proprietary, or private information requiring special protection from public disclosure and from use for any purpose other than this litigation. Thus, the Court enters this Protective Order. This Order does not confer blanket protections on all disclosures or responses to discovery, and the protection it gives from public disclosure and use extends only to the specific material entitled to confidential treatment under the applicable legal principles.

Uniloc 2017 LLC v. Microsoft Corp., NO. 8:18-CV-02053-AG (JDEx), 2019 WL 451345, at *1 (C.D. Cal. February 5, 2019) (emphasis added). 

Never before has "from use for any purpose other than this litigation" been an accepted reason for a protective order.  It simply has never appeared among the list of "the applicable legal principles."  Until now.

Now, in this Microsoft case, it has.  By stipulation.  And by the official order of a magistrate judge.  Whether this will actually stand as precedent or not, by the clear terms of this stipulated order, nobody outside of this Microsoft case can ever so much as see this stuff:

A receiving party may use designated material only for this litigation.

Uniloc 2017 LLC v. Microsoft Corp., NO. 8:18-CV-02053-AG (JDEx), 2019 WL 451345, ¶ 4.1, at p. *2 (C.D. Cal. February 5, 2019).  The public cannot see it.  Other lawyers and other parties and in fact anyone outside of this Microsoft litigation cannot see it.

All because of a new legal invention crafted by the stipulation in Microsoft's latest case, and signed by a magistrate judge into law:  because "private information" is likely to be discovered and so must be protected "from use for any purpose other than this litigation."  (Emphasis added.)

Baseless in law, perhaps, but as written that seems pretty absolute.  It was intended to be.  Do you think differently?

There may be other features of this stipulated order worth seeing the light of day, and if so, I will try to point them out in future articles.

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WIND 2019: THE 20th ANNUAL CONFERENCE ENRICHES THE DISCUSSION.

Photograph by Dennis J. Wall.

The Annual Conference of the Windstorm Insurance Network, or WIND, turned 20 this year.  The 20th Anniversary WIND Annual Conference was held at Walt Disney World.  Some 1,200 people attended.  The Annual Conference attendees, like the members of WIND, are professionals in the property insurance claim process.  At the WIND Annual Conference they present the policyholder sides and the insurance company sides of major property insurance issues.

WIND picks its speakers and its session topics through the work of its Speakers Committee.  This group of about ten people has the charge of staying on top of speakers and current issues for the Annual Conference and, from what I saw myself this year, they do their job well.

For example, one current issue or "hot topic" of discussion in property insurance circles is clearly what explains the handling of catastrophe claims resulting from the 2017 Hurricanes and other catastrophes then and since.  As one presenter explained, first of all we had not had a catastrophe for a number of years.

Taking Hurricanes in Florida as an example, the last major Hurricanes to hit Florida came in 2004 and 2005, named Charlie, Frances, Ivan and Jeanne in 2004, and named Katrina and Wilma in 2005.  So it had been awhile before Hurricanes Harvey, Irma and Maria struck Texas, Florida, and Puerto Rico the hardest, in 2017.

All panelists were in agreement on the central ingredient for success in handling catastrophe claims (as well as other kinds of claims):  Communication.  If you say that you are going to call the policyholder every Friday to update her on the status of her claim, for example, then make the telephone call that you said that you would make, even if all you have to tell her that week is that there is nothing new but that you will call again when there's been a development.

Notice is a big issue in recent Catastrophe Claims handling.  Panelists conjectured about the reasons for the increase in such issues in recent years.  One suggestion was that higher deductibles may be contributing to late notice to insurance companies, because policyholders with the higher deductibles may conclude that the claim could not reasonably exceed the amounts of their deductibles, but of course the amounts of the claims resulting from catastrophes usually present a second catastrophe, the first being the loss itself, and the second being the amount of indemnity that is required as a result of the loss.

Tying into the idea of high deductibles generally being a cause of late notice, other presenters suggested that late notice of claims after recent catastrophes may have been caused at least in part by the implementation of high Hurricane deductibles.  Many of the high Hurricane deductibles, they pointed out, took effect just before Hurricane Harvey in 2017.

Another suggestion came out of the nature of the catastrophes such as Hurricane Irma, in which the catastrophe claims were apparently largely based on wind-driven rain which causes damage that does not show up until later.

Countering these suggestions was the basic and simple notion that it doesn't cost anything to report a claim (not even the cost of a stamp, I might add, since the advent of Fax and email, although keeping a paper copy of a letter put in the mail is still probably a very sure way of incontestably giving notice).

Another current issue is the evidentiary effect, if any, of insurance companies' pre-catastrophe inspection reports.

Managed repair was a popular topic.  Once coverage is accepted by an insurance company for even a part of the loss -- such as coverage for repair of the damaged property -- then, according to the discussion at another panel, the policyholder would have the right to an appraisal, even in a repair situation.

Whatever the state of coverage that might exist in that situation, once again the idea is current and under discussion by those involved in property insurance claims and will come as no surprise to the attendees of this year's 20th Anniversary WIND Annual Conference.

Photograph by Dennis J. Wall.

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WIND 2019: THE 20th ANNUAL CONFERENCE CONTINUES THE CONVERSATION.

Photograph by Dennis J. Wall

WIND, which stands in for Windstorm Insurance Network, blew into Walt Disney World for its 20th Annual Conference recently.  WIND has grown from an initial membership of some 350 people into a roll call of about 1,300.  They come from 36 States, and from other countries including Singapore, France, and Germany. 

About 1,200 people attended the Annual Conference in 2019.  WIND members and the people who tend to attend the Annual Conference as well, are all professionals representing policyholder and insurance company sides of property insurance disputes, in basic and simple terms.

The sessions I attended this year generally proved the WIND format, which is not unique to WIND but works everywhere it is used to present insurance issues as far as I can see:  A panel of four presenters, for example, would have one policyholder lawyer, one policyholder public adjuster, one insurance company representative or independent adjuster, and one defense attorney to present points of view.

The panel presenting Commercial Policies and Claims followed this model.  Like every other session I attended, the panel that presented this topic emphasized the long-standing truth that the insurance policy is the starting point for the answer to every insurance coverage question.

Whether presenters said that "the insurance policy is king," or compared purchasing a policy to going to the store where what you come out with depends on what you get, the central idea behind every issue is always what the policy says.

Besides expressing eternal truths, as it were, the panelists at WIND raised cutting-edge questions in property insurance for all participants to consider.  An example of current questions is whether there is coverage under property insurance policies for experts' assistance to policyholders in adjusting or presenting claims under their policies?  The suggestion was raised that perhaps good arguments in favor of coverage for that assistance would be available under coverage for Adjustment Expenses, whatever the coverage might be called in a given policy.

Another suggestion was that perhaps there is such coverage available under Extra Expense coverage.  Whatever the source of coverage there might be for that particular expense, the idea is new and current and will come as no surprise to the attendees of this year's 20th Anniversary WIND Annual Conference.

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LAST IN THE SERIES: "USE RESTRICTION" AND SUMMARIZING THE SERIES.

This is the last of our continuing series of articles taking a look at the presumption of public access to Court files.  In recent articles we have been looking at the examples of secrecy on display, as it were, in recent Multi-District Litigation lawsuits (MDLs) involving General Motors and Volkswagen.  In this final article, we will bring the series to a close with our look at the Volkswagen "pollution defeat device" MDL.  Our special focus will be trained on the secrecy involved in this huge lawsuit, secrecy that is built into multi-district litigation and similar huge lawsuits.  To a great extent secrecy is a major reason such lawsuits exist in the first place.

 

"Use Restriction":  In other cases, standard blanket secrecy orders purport to prohibit disclosure to others, who may be identified, by category but never by name, or maybe not at all.  The use restriction in the VW order was written to go one step further.  It is a "Restriction on Disclosure in Actions Outside U.S." and in particular to "legal counsel[.]"^[1]

By way of contrast, in many other cases, a stipulated protective order will specifically say who will never be given concealed material.  When material is designated as not subject to public disclosure in a given case, the agreed order may be written so as to single out in particular lawyers representing other plaintiffs in other cases against the same or similar defendants.

Here, in the stipulated protective order in the VW MDL, we get to see the flip side of that coin.  In the VW MDL order, the approach was taken to list every kind of person who can see the otherwise publicly undisclosed information.  That list in the stipulated secrecy order in the VW MDL simply does not include lawyers involved in the representation of other clients in other cases.  Parenthetically, it also does not include requests for public information under the Freedom of Information Act, or "FOIA."^[2]

These more or less unique provisions may reflect the international marketing of Volkswagens.  Describing the set of people who can see the concealed information is infinitely simpler than trying to describe all the different proceedings and the people involved in them all over the world who cannot see the information.  Denying access under the Freedom of Information Act, if valid, will prevent or at least slow down the availability of that information for other proceedings of any type across the planet.

Sealing the materials a judge uses to make a ruling.  The VW order clearly provides that any "Protected Material" under the agreed order that "is used in any court proceeding ... shall not lose its protected status through such use."^[3]  Once again, as we have already seen in earlier sections, in particular in section 2:20 regarding insurance companies, many courts treat materials used by a judge to make her ruling as presumptively open to the public by the very fact that the judge based her ruling on it, so that the public should see it too.

The Crucial Feature of agreed Umbrella Secrecy Orders:  Agreed blanket secrecy orders prevent disclosure of the evidence without the requirement that a judge determines whether there is good cause for the nondisclosure.  The VW order shares this feature with standard Umbrella Orders, unlike it must be said, the GM order which does require proof of good cause for the "Confidential" or "Highly Confidential" marking.^[4]  

The VW order is the same as the GM order, however, with respect to what the lawyers mark as "Confidential" or "Highly Confidential."  What the lawyers mark with those designations will be "Confidential" or "Highly Confidential," even after the particular case is over.  The lawyers only need to do their marking "in good faith" of all the evidence they "reasonably believe to be" either Confidential or Highly Confidential.

What the lawyers may choose to mark "Confidential" in the VW MDL seems anchored on things "that qualify for protection under Federal Rule of Civil Procedure 26(c)."  So far, so good, but the permissions to the lawyers and parties to designate things "Confidential" and so withhold them from the public do not end there.

The VW stipulated secrecy order changes the Rules by adding that nothing in this agreed order precludes any party from "seeking additional protections not currently contemplated by this Order to be applied to any particular document or category of documents," which of course includes Confidential Information.^[5]

Exactly what are the "additional protections"?  The order does not say, and it does not offer a clue.  What the "additional protections" to keep evidence Confidential may be, remains to be determined by the lawyers and their clients in that case.

Both the GM stipulated secrecy order in New York and the VW agreed secrecy order in California provide that if the lawyers were wrong in concealing evidence from the public as Confidential or Highly Confidential, that is no problem once again -- even if a Court declares that the evidence in question should be opened to the public, it will still be protected so long as the lawyers marked the evidence with the words, "Confidential" or "Highly Confidential."^[6]

An old standby:  "Non-public information."   Similar words and phrases are used throughout the secrecy documents in many cases and in a lot of situations.  The VW MDL secrecy order refers, for example, to concealing information simply because someone claims that it is "non-public information"^[7] as in the Wells Fargo settlements of cross-selling accusations that we encountered in section 2:21.  These agreed secrecy orders are not alone in using the term.  That same term, "non-public information," is also used and is also not defined, in the Nondisclosure Agreements apparently introduced to employees in the White House since on or about January 20, 2017.^[8]

Summary of the effects of stipulated umbrella protective orders on litigation of catastrophe claims and of insurance coverage claims for natural and man-made disasters.  State court actions may provide more transparent lawsuits than federal courts.  The United States Constitution provides the presumption followed by many federal courts to allow the public access to court files, yet federal procedures not only authorize but encourage concealed evidence and secret settlements.

            Some of the procedures followed in federal courts that encourage concealed evidence and secret settlements include judicial approval of secret class action settlements, and multi-district litigations or MDLs.  Judicial certification of classes for the purpose of settlement, and MDLs by their very nature, are designed and constructed to encourage settlements.  Both class action settlements and MDLs are by their nature large cases which put tremendous pressures on individual plaintiffs by a few very large, usually corporate defendants.

            We have discussed numerous examples in the immediately preceding sections of this Chapter of how the judicial system, and particularly the federal judicial system, encourages and approves concealed evidence and secret settlements, including the GM ignition defect MDL and the VW defeat-device MDL.

            The intention behind the recent previous sections of this Chapter has been to illustrate the difference between concealing evidence and making the evidence publicly available for the public to see.  In order to achieve this result uniformly throughout federal courts and state courts alike, it is now clear that changes are necessary.  First and foremost, the behavior of judges needs changing.  No new rules are needed.  What is needed instead is to enforce the rules that exist, particularly the requirement that protective orders and sealing orders depend on a showing of good cause from the party or parties requesting the secrecy.

 

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[1] This is § 7.5, at page 11 in Pretrial Order No. 12:  Stipulated Protective Order, Doc. No. 1255, filed on February 25, 2016 in In re:  Volkswagen "Clean Diesel" case.

[2] The distribution list' simply does not include lawyers involved in the representation of other clients in other cases:  §§ 7.2 and 7.3, on pp. 9-11, in id., titled, respectively, "Restrictions on Use of Confidential Information" and "Restrictions on Use of Highly Confidential Information."

            The concealed information cannot be obtained with FOIA requests:  § 12.4, p. 16, in id.

 

[3] § 13.4.2, at p. 18, in id.

 

[4]See  GM Order No. 10, filed 09.10.14, ¶ 4, at p. 6.

 

[5] VW Pretrial Order No. 12:  Stipulated Protective Order, § 2.9, filed on February 25, 2016,  pp. 3-4.

 

[6] Designating evidence as "Confidential" or "Highly Confidential," which the lawyer "reasonably believes," in "good faith":  It is enough to quote one of the two secrecy orders, because in substance they are identical.  To quote the VW secrecy order, VW Pretrial Order No. 12:  Stipulated Protective Order, §§ 2.3, 2.6, 2.9, 2.18, and ¶ 5, at pp. 3-4, and 5-8, filed on February 25, 2016:

If counsel for the Producing Party agrees or if the Court orders that Discovery Material initially redacted shall not be subject to redaction or shall receive alternative treatment, and the Discovery Material is subsequently produced in unredacted form, then that unredacted Discovery Material shall continue to receive the protections and treatment afforded to documents bearing the confidentiality designation assigned to it by the Producing Party.

The quotation is from  id., § 11.1, p. 14, in a paragraph titled, "11. REDACTIONS ALLOWED."  (Underlining in original.)  The corresponding GM secrecy order's provision is in ¶ 3(d) at page 5, GM Order No. 10, filed 09.10.14.  Although the wording is slightly different when the two provisions are compared side-by-side, the substance is virtually identical.  Clearly whoever wrote the VW order filed in February 2016 in a Court in California read the GM order that was filed in a Court in New York a year-and-a-half earlier in September 2014, and changed the words in order "to protect the innocent," you might say..

 

[7] VW Pretrial Order No. 12:  Stipulated Protective Order, § 12.7, at p. 13, filed on February 25, 2016.

 

[8] Cf. Ruth Marcus, "Trump Had Senior Staff Sign Nondisclosure Agreements.  They're Supposed to Last Beyond His Presidency" (Washington Post Online, posted March 18, 2018) (quoting from a reported draft nondisclosure agreement implemented by the current Administration at the White House, as to "'confidential' information, defined as 'all nonpublic information ....'" (emphasis added).)  The author was clear that she was in possession of only a draft nondisclosure agreement, and so she was not quoting any other version of the document, if any.

 

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THE VW MDL: ANOTHER STIPULATED PROTECTIVE ORDER.

This is the second of three articles that will end our continuing series taking a look at the recent Multi-District Litigation lawsuits (MDLs) involving General Motors and Volkswagen.  In this installment and in the next article, which will be the concluding article in this series, we will bring the series to a close by taking a look at the Volkswagen "pollution defeat device" MDL.  Our special focus will be trained on the secrecy involved in this huge lawsuit, secrecy that is built into multi-district litigation and similar huge lawsuits.  To a great extent secrecy is a major reason such lawsuits exist in the first place.

 

THE VW MDL:  ANOTHER STIPULATED PROTECTIVE ORDER.

Compared to the time it took for the lawyers to propose and the Judge to sign the stipulated secrecy order in the GM MDL, which was filed within 3 months after the lawsuit was filed, the stipulated secrecy order in the VW MDL was proposed and signed by the Judge within 3 days after the finalized Complaint was filed.  The finalized Complaint was filed on a Monday.  The stipulated secrecy order was signed and filed the Thursday after that.^[1]

In contrast to the umbrella secrecy order in the GM MDL, there is no mention in the VW order that the U.S. Constitution raises a presumption that the public shall have access to court files.  But comparing the two orders shows that they clearly share the same motivation in avoiding expense at the time the orders were entered.  In both cases, they could see the storm coming unless they mutually agreed to avoid it.^[2]  The VW blanket secrecy order also borrows many of the same words found in previous agreements for Umbrella Orders.

Shifting the burden of proof to the party requesting disclosure and away from the party trying to keep the evidence a secret.  Like the standard blanket protective orders that we have seen previously, the VW secrecy order shifts the burden of proving that evidence should be disclosed completely to the party seeking disclosure of information, and away from the party trying to conceal it.  In further departures from the Manual for Complex Litigation, Fourth, and in particular from the model Confidentiality Order published in it by the Federal Judicial Center for the benefit of judges and lawyers, the things that must be proven are also changed significantly.  While the model Confidentiality Order does not use the words, "good cause," it does provide instead that any application to the Court for additional materials to be kept confidential besides those marked by the lawyers, "shall only be granted for reasons shown and for extraordinary grounds."^[3]  A side-by-side comparison reveals that the GM order does not follow the model Confidentiality Order.^[4]  However, the order in the GM MDL mentions a seeming requirement of "good cause" to keep the evidence concealed.^[5]  The VW order does not follow the Federal Judicial Center's model Confidentiality Order, either, nor does the VW order even mention the words, "good cause."

The party challenging the designation of certain evidence in the VW case as Confidential or Highly Confidential had to ask the Court "for an order withdrawing the designation."  But the agreement itself gives little or no incentive to most parties who might challenge the designation.

There are two main uses of evidence in any case before trial:  at hearings and in depositions where witnesses give testimony.  The VW MDL agreement covers both uses with respect to "Protected Material" (evidence marked "Confidential" or "Highly Confidential" by the lawyers, in sum and in substance).

With respect to Protected Material evidence that might be used at a hearing before trial, the parties agreed to give each other notice of their intent to use that evidence at the upcoming hearing and that the use of that evidence at the hearing would be regulated by their agreement or by Order of the Court.^[6]  Basically, as long as a party agreed to jump these hurdles it could use the Protected Material evidence at a hearing in the VW MDL before trial.  Parenthetically, the secrecy agreement did not apply to use of this evidence at trial, but the lawyers and their clients reserved the right to make more agreements.

The lawyers also included the express possibility that, to continue to protect the evidence at hearings that they had previously designated as Protected, they might have to agree to ban the public from the court hearings; they agreed that they might even have to ask the Court "to close the courtroom."^[7]

With respect to the use of Protected Material evidence during the testimony of witnesses before trial, including during depositions, the parties in the VW MDL agreed that the Protected Material could be shown to a witness who either signed a Nondisclosure Agreement that the lawyers wrote, or who refused to sign an NDA but who would not be allowed to "retain" copies of the evidence.  (Most witnesses are not given copies of the evidence to keep after their depositions are over anyway.)

Deposition transcripts involving testimony about Protected Material evidence are effectively sealed in the VW MDL.  They "may not be disclosed to anyone" as to the Protected Material " except as permitted under this secrecy agreement-order.^[8]

Since the agreement that resulted in the secrecy order basically allows all parties to use the evidence in that case in any event, the chances that any of them will become a "challenging party" are very small.   This once again shows clearly the intent behind the concealment:  Other people involved in other lawsuits besides this one must not be shown the same evidence that the limited number of people involved in this lawsuit can see.

Here are the makings of another man-made disaster.  The question is not really about whether the parties and their lawyers involved in the case can see the evidence.  The question is about keeping evidence concealed and settlements secret with respect to everyone else, including the public.

As a result, agreed secrecy orders like the one used in the VW MDL cloak concealment with a presumption of confidentiality.  Everything marked confidential will remain confidential unless and until anyone asking for disclosure including the judge all follow the steps outlined in this agreed order.

In addition, the facts to be proven are unstated as to what would be enough to draw the curtain of concealment away from evidence that lawyers have marked Confidential or Highly Confidential.  Although the facts to be proven in order to convince the Court to withdraw the designation are not stated in the stipulation, one set of facts is not mentioned at all.  As in many if not all such stipulated secrecy orders, there is no requirement to show "good cause," as would be required by the Rules of Civil Procedure that would apply in any other case.

TOMORROW:  THE "Use Restriction."

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[1] By "finalized" Complaint, I mean the Complaint which was the last one filed, so far.  It happens to be called a CCCA Complaint, which the plaintiffs' lead attorneys wrote to identify the plaintiffs' Consolidated Consumer Class Action Complaint.

            It took only from Monday when the finalized Complaint was filed until the next Thursday before the stipulated umbrella secrecy order was signed and filed: Plaintiffs' Notice of Motion, Motion, and Memorandum in Support of Final Approval of the 2.0-Liter TDI Consumer and Reseller Dealer Class Action Complaint, at 6-7, Doc. No. 1784, filed August 26, 2016, in In re:  Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation (N.D. Cal. Case No. MDL 2672 CRB (JSC)); Pretrial Order No. 12:  Stipulated Protective Order, Doc. No. 1255, filed February 25, 2016 in id.

 

[2] See Plaintiffs' Notice at 7, Doc. No. 1784, filed August 26, 2016  in In re:  Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation (N.D. Cal. Case No. MDL 2672 CRB (JSC)).

 

[3] Section 40.27, ¶ (d), at page 752 in Manual for Complex Litigation, Fourth.  The Manual contains a lengthy discussion in Section 11.432 of "Limited Disclosure/Protective Orders," at pp. 64-69.

 

[4] Compare Order No. 10, titled in brackets,  "[Protecting Confidentiality and Privileged Materials]," Doc. No. 294, filed September 10, 2014, in In re:  General Motors LLC Ignition Switch Litigation (S.D.N.Y. Case Nos. 14-MD-2543 and 14-MC-2543) with Section 40.27, titled "Confidentiality Order," page 752 in Manual for Complex Litigation, Fourth. 

 

[5] ¶ 4, "Challenges to Confidentiality Designations," at page 6, in Order No. 10, Doc. No. 294, filed September 10, 2014, in In re:  General Motors LLC Ignition Switch Litigation (S.D.N.Y. Case Nos. 14-MD-2543 and 14-MC-2543).

 

[6] See § 13.4.1, at p. 17 in Pretrial Order No. 12:  Stipulated Protective Order, Doc. No. 1255, filed on February 25, 2016 in In re:  Volkswagen "Clean Diesel" case.

 

[7] See § 13.4.2, at page 18 in Pretrial Order No. 12:  Stipulated Protective Order, Doc. No. 1255, filed on February 25, 2016 in In re:  Volkswagen "Clean Diesel" case.

 

[8] See § 7.2.8, at page 10 in Pretrial Order No. 12:  Stipulated Protective Order, Doc. No. 1255, filed on February 25, 2016 in In re:  Volkswagen "Clean Diesel" case.

 

TOMORROW THIS SERIES CONCLUDES WITH:  THE "Use Restriction."

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

THE VOLKSWAGEN "DEFEAT DEVICES" ENORMOUS MDL CLAIMS.

This is the beginning of a triolgy of articles that will end our continuing series taking a look at the recent Multi-District Litigation lawsuits (MDLs) involving General Motors and Volkswagen.  In this installment and in the next two articles after this one, we will bring the series to a close by taking a look at the Volkswagen "pollution defeat device" MDL.  Our special focus will be trained on the secrecy involved in this huge lawsuit, secrecy that is built into multi-district litigation and similar huge lawsuits.  To a great extent secrecy is a major reason such lawsuits exist in the first place.

The VW defeat device MDL comes from a family of similar claims.  At the time the VW defeat device MDL was put together, there were other large lawsuits aggregating or combining many claims of many people against other car manufacturers besides Volkswagen.  These include:

• Defeat device claims against Fiat Chrysler which mimicked VW's defeat devices, alternatively labeled as "illegal engine-control software" claims alleged by the United States concerning Fiat Chrysler Automobiles;
• Claims for inflated mileage against Hyundai and Kia;
• A class-action lawsuit against General Motors over alleged programming designed to cheat diesel emissions tests for pollution on some lines of pickup trucks; and
• Demands from the Federal Trade Commission in the first months of 2017 for the "policies, practices and procedures" used by a finance company regarding "technologies to track the location of borrowers' vehicles in case they need to repossess them," including "installing devices that enable them to remotely disable a car's ignition after a borrower misses a payment."^[1]

It is worth mentioning here that in a multidistrict litigation lawsuit against Hyundai and Kia, consisting apparently of plaintiffs who did not settle their claims with Hyundai and Kia the first time around, there are some 566 entries for pleadings and orders on the docket, and that many of the materials filed in the case concern sealing the evidence.  I reviewed all 566 entries and although I may have missed one or more, it appeared that the trial judge granted every motion to seal that was ever filed in that case.^[2]  

    

TOMORROW:  THE VW MDL: ANOTHER STIPULATED PROTECTIVE ORDER.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

 

[1] Fiat Chrysler Defeat Device claims:  The United States and the State of California sued Fiat Chrysler over defeat devices that basically mimicked VW's defeat devices.  The suits were settled in January 2019 with the Federal Government and the State of California for a combined total of some $330 Million in lieu of civil penalties alone (figures mine), on top of an additional maximum estimate of $185 Million in recall costs.  See Neal E. Boudette, How Fiat Chrysler Overtook the Pack, New York Times, p. B3, January 15, 2019; Neal E. Boudette, Fiat Chrysler's Penalties Reflect Limits of Diesel, New York Times, p. B5, January 11, 2019.

"Illegal engine-control software" claims alleged by the United States against Fiat Chrysler Automobiles:  See Neal E. Boudette, "Business Day Section / U.S. Sues Fiat Chrysler, Accusing It of Using Software to Pass Emissions Tests" (New York Times Online, May 23, 2017), available at https://nyti.ms/2qSYYuH.

 

Hyundai, Kia inflated mileage claims:  After settling regulators' claims for $100 million, Hyundai Motor America and its related corporation Kia Motors America settled for an additional $400 million most of a lawsuit that was brought based on allegations of inflated fuel economy claims for their cars.  See, e.g., Jerry Hirsch, "Hyundai, Kia Reach $400-Million Settlement Over Inflated MPG Claims" (Los Angeles Times Online, December 23, 2013), available at http://articles.latimes.com/print/2013/dec/23/autos/la-fi-hy-hyundai-kia-settle-mpg-lawsuit-20131223.  It was reported four days after the lawsuit settlement was announced, or on December 27, 2013, that the president and CEO of Hyundai Motors America was stepping down and would be replaced when his contract ended on December 31, 2013.  Ronald D. White, "Hyundai Motor America Chief John Krafcik to Step Down" (Los Angeles Times Online, December 27, 2013), available at  http://articles.latimes.com/print/2013/dec/27/business/la-fi-hyundai-chief-resigning-20131228.

A class-action lawsuit against General Motors over alleged programming designed to cheat diesel emissions tests:  See Neal E. Boudette, "G.M. Accused in Lawsuit of Deceit on Diesel Truck Emissions" (New York Times Online, May 25, 2017).

Demands from the Federal Trade Commission in the first months of 2017 for the "policies, practices and procedures" used by a finance company:  See Michael Corkery and Jessica Silver-Greenberg, "DealBook / Federal Agency Begins Inquiry Into Auto Lenders' Use of GPS Tracking" (New York Times Online, February 19, 2017), available at https://nyti.ms/2lwZFaA.

 

[2] See Jerry Hirsch, "Hyundai, Kia Sued Again Over Inflated Mileage Claims" (Los Angeles Times Online, November 8, 2012), available at http://articles.latimes.com/print/2012/nov/08/business/la-fi-mo-autos-hyundai-fuel-economy-lawsuit-20121108.

Since an appellate court decision on January 23, 2018, that MDL continues still.  The appellate court reversed the trial judge's approval of settlement in that case and sent it back for further proceedings.  In re Hyundai and Kia Fuel Economy Litigation, 881 F.3d 679 (9th Cir. 2018), rehearing en banc granted (vacated as precedent in the Ninth Circuit pending rehearing en banc), 897 F.3d 1003 (9th Cir. 2018). 

 

TOMORROW:  THE VW MDL: ANOTHER STIPULATED PROTECTIVE ORDER.

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NEW COMMENTS DEADLINE ON SEX DISCRIMINATION IN EDUCATION! PLUS SUMMARY.

The Federal Government just extended its deadline for comments on its proposed Sex Harassment in Education regulations until January 30, 2019!  Take this as a good sign and leave your comments now at www.regulations.gov.  If the people speak, then even the current Administrative State has to listen by law.  Speak up, leave your comments on Sex Harassment in Education now!

We have been looking at comments since January 25, 2019 through articles posted from time to time since then down through today, January 28, 2019 on Claims and Issues Blog and on Claims and Bad Faith Law Blog.  To summarize them all for ease of reference, we have reviewed comments that:

1. The Department of Education does not have authority to change the statutes Congress voted into law which is what the Department proposes to do with these changes,
2. The proposed new standard of liability which would be imposed on a claimant in order to make a case for sex discrimination in education is so hard to meet that it is inconsistent with the Congressional prohibition in the first place,
3. Not only the Department of Education, but all Federal agencies need to have every tool in their toolkits that they have now in order to enforce the Congressional prohibition on sex discrimination, including in the rare case as it happens, of seeking damages from sexual harassers in education,
4. Keeping the law in place that concerns "religious organizations with contrary religious tenets" having to say how prohibiting sex discrimination is inconsistent with their "religious tenets," instead of letting them keep quiet about this including for example letting them keep quiet during the entire time that they are recruiting students and also not even requiring them to speak before they extend admissions offers, presumably until they get sued if they ever do, and
5. Last but certainly not least, a host of issues with the Department's newly invented Formal Grievance Procedures.

Parenthetically, what is with these people that they have to invent their own justice systems and not use the Courts?  President George W. Bush set up tribunals in Guantanamo from scratch, rather than try the inmates in Federal Courts in public.   Now the Department of Education wants to set up its own tribunals rather than have sexual harassment in education tried in the Courts.  Why don't they want the public to know what they are up to in these cases?  Oh, wait ....

So, make them make it public!  Take advantage of the extra time this extended deadline gives, and leave your comments on Docket ID ED-2018-OCR-0064 at www.regulations.gov.

If you don't do this, who will?

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

SEX HARASSMENT TRIALS IN EDUCATION ... WHY NOT IN FEDERAL COURTS?

The following article is a combination of comments I left on www.regulations.gov earlier today.  Leave your own comments too!  The Docket ID is on this article, immediately below, and GOOD NEWS!  The Federal Government has just extended the deadline for comments to January 30, 2019!   Take this as a good sign and leave your comments now!

 

January 28, 2019

Department of Education

www.regulations.gov

 

RE:    Comment to Docket ID ED-2018-OCR-0064

          RIN 1870-AA14

To the Department of Education:

This concerns your proposed changes to Title IX regulations that were published in the Federal Register at 83 F.R. 61462-61499.  Your stated authority for them is "20 U.S.C. 1681 et seq., unless otherwise noted."  83 F.R. at 61495.  These particular comments address the Formal Grievance Procedure you have introduced in your new 34 C.F.R. § 106.45, published in 83 F.R. at 61497-99.  There are a number of problems with this new Formal Grievance Procedure.

Your new Section 106.45(a) provides that "[a] recipient's treatment of the respondent may also constitute discrimination on the basis of sex under Title IX."  83 F.R. at 61497.  However I am not aware of any Court that has ever declared that to be the correct interpretation of Title IX.  To the extent that you introduce this idea in your proposed new regulation, it is contrary to the expressed purpose of Title IX.  Section 1681 is the beginning section of Title 20, United States Code, otherwise known as Title IX.  Section 1681 sets the standard for discrimination in education on the basis of sex.  Subsection (a) could not be more clear:  "No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance[.]"  This language clearly does not include your proposed education tribunals conducting your new Formal Grievance Procedures.  It is therefore contrary to the statute passed by Congress and, although the law can be changed by vote in Congress, this proposed rewrite of the law cannot be lawfully enacted by a mere administrative agency such as the Department of Education.  Your proposal in this regard is void and cannot be enacted.

You propose a new regulation that "credibility determinations may not be based on a person's status as a complainant, respondent, or witness" in 106.45(b)(1)(ii), published in 83 F.R. at 61497.  Credibility determinations, as you call them, are made all the time in Court by judges and juries based on the bias of the person presenting the evidence.  You did not provide any evidence to support this change.  This change is contrary to the Administrative Procedure Act for that reason and, on its face, it is contrary to law.  It cannot lawfully be enacted and should be withdrawn.

Your proposed new 106.45(b)(iii) requires that certain personnel at academic institutions be given training in "how to conduct an investigation and grievance process, including hearings," among other things.  Yet you do not prescribe what the training will entail nor who is supposed to provide it.  For example, you do not state whether providers of this training will be required to have experience in presenting evidence or conducting hearings in other administrative proceedings.  This proposal too is contrary to the Administrative Procedure Act for that reason and, on its face, it is contrary to law.  It too cannot lawfully be enacted and should be withdrawn.

You propose a new regulatory requirement that academic institutions conducting a Formal Grievance Procedure must give the alleged sex perpetrator "sufficient time to prepare a response before any initial interview."  § 106.45(b)(2)(B), published in 83 F.R. at 61498 (emphasis added).  This is wrong (and unauthorized) policy-making and bad administrative procedure on your part.  As highlighted by the italicized language, your concern is not with the fundamental fairness of any required hearing, but instead you are fixated on the initial interview.  No person accused of misconduct in any other setting is given advance notice that they are going to be investigated for their alleged misconduct.  The alleged perpetrator may elect to be silent or to assert Constitutional rights of one kind or another, or anything in between, but no person accused of misconduct has ever been given rights to prepare for the initial interview of the investigation against her or him.  Your proposal to the contrary in this regard is not supported by any evidence in any case.  This proposal too is contrary to the Administrative Procedure Act for that reason and, on its face, it is contrary to law.  It cannot lawfully be enacted and should be withdrawn.

You propose that your new Formal Grievance Procedures must "provide for a live hearing" for institutions of higher education.  § 106.45(b)(3)(vii), published in 83 F.R. at 61498.  Your proposal does not clarify to institutions of higher education what if any procedures they must provide in the course of their providing for the "live hearing" that your regulation would now require.  Your regulatory guidance is absent in this regard, including to advise institutions of higher education whether any part or proceeding of this "live hearing" is to be kept secret, or whether "live" includes the keeping of a record of the proceedings, or whether these administrative proceedings that would now require a "live hearing" import the Federal Rules of Evidence or any other rules of evidence, to mention only a few examples among many.  This proposal is unauthorized, and it is contrary to law, and should not be enacted.  It should be withdrawn.

You propose that your new Formal Grievance Procedures must "provide for a live hearing" for institutions of higher education.  § 106.45(b)(3)(vii), published in 83 F.R. at 61498.  Your proposal does not clarify to institutions of higher education what if any essential procedures they must follow in the course of their providing for the new "live hearing."  Your regulatory guidance is absent in this regard, including to advise institutions of higher education whether any part or proceeding of this "live hearing" is to be kept secret, or whether "live" includes the keeping of a record of the proceedings, or whether these administrative proceedings that would now require a "live hearing" import the Federal Rules of Evidence or any other rules of evidence, to mention only a few examples among many.  This proposal is unauthorized, and it is contrary to law, and should not be enacted. 

Your proposals regarding new treatment of "evidence of the complainant's sexual behavior or predisposition," also published in § 107.45(b)(3)(vii), are unfounded, unsupported by evidence, and contrary to law.  In particular, "sexual predisposition" is not a valid category of evidence in any judicial or administrative proceedings at this time.  You do not present any evidence to support your rewrite of this category of evidence.  This is bad public policy because the law has always focused on whether an act has taken place and not on whether the person who allegedly committed the act was predisposed to commit it.  This particular proposal also suffers from inequality itself for you did not also make it apply to evidence of the alleged sex perpetrator's "sexual predisposition" to sexually harass other people.  Your proposals in this regard are again contrary to the Administrative Procedure Act, are again substantively contrary to law, are contrary to law applied to facts, are unauthorized, and void.  They should not be enacted.

A judge does not have to explain the basis of her or his rulings on evidence, yet once again also in your new § 106.45(b)(3)(vii), you would require "[t]he decision-maker" at your live Formal Grievance Procedures hearing to "explain to the party's advisor asking cross-examination questions any decision to exclude questions as not relevant."   Your proposal in this regard is contrary to substantive law.  Further, you provide no evidence in support of your proposed change, which is in violation of the Administrative Procedures Act.  The change you propose in this regard is void and should not be enacted.

Your proposed change in the standard of evidence applicable to Title IX proceedings misses the mark completely.  The standard of evidence you propose should apply to Title IX proceedings to determine only whether a person is being excluded from participation in or being denied the benefits of or being subjected to discrimination under any education program or activity receiving Federal financial assistance, "on the basis of sex[.]"  20 U.S.C.A. § 1681(a).  You are not authorized to propose a shifting standard of evidence for determining Title IX claims based on whether the recipient uses the preponderance of the evidence standard, or not, "for conduct code violations that do not involve sexual harassment but carry the same maximum disciplinary sanction."  That is however what you propose to do in your new 34 C.F.R. § 106.45(b)(4), 83 F.R. at 61499.  University "code violations" are simply not your concern.  Your concern is strictly with Title IX claims.  Your proposals in question are not authorized and contrary to law.  They should not be enacted.

Similarly, your proposed § 106.45(b)(4)(ii)(C) & (D), 83 F.R. at 61499, would require the academic institution to make a written determination including findings of fact, and conclusions "regarding the application of the recipient's code of conduct to the facts[.]"  (Emphasis added.)  To say again, whether the recipient's code of conduct applies is not your concern.  To say it another way, you are not authorized to impose requirements on a recipient based on its own code of conduct.  Your authority is strictly restricted to the application of Title IX to the facts.  You recognized this yourself in your new 34 C.F.R. § 106.45(a) when you stated at the outset that you were addressing sexual harassment that "may constitute discrimination on the basis of sex under Title IX."  Your proposals that follow including in § 106.45(b)(4)(ii)(C) & (D), 83 F.R. at 61499, are again contrary to the Administrative Procedure Act, are again substantively contrary to law, are contrary to law applied to facts, are unauthorized, are void, and should not be enacted. 

Thank you for your consideration.

Sincerely Yours,

Dennis J. Wall

The Federal Government has just extended the comments deadline through January 30, 2019!  I urge you to leave your own comments on www.regulations.gov.  The Docket Number that the Government wants us to use is at the top of this post.  These comments will be made available today both to the readers of Claims and Issues Blog and to the readers of Claims and Bad Faith Law Blog.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

PUTTING "RELIGIOUS OBJECTIONS" TO SEXUAL HARASSMENT OUT IN THE OPEN.

I left the following comments on www.regulations.gov earlier today concerning the proposal of the Department of Education to enable sexual harassment in education without fear of the Department asking for damages to enforce the law.  You can leave your own comments at any time between now and the end of the deadline on Monday, January 28, 2019.  If you speak up and leave a comment, then by law even the current Federal administrative state is required to hear you.  I urge you to make your voice heard!

January 27, 2019

Department of Education

www.regulations.gov

 

RE:    Comment to Docket ID ED-2018-OCR-0064

          RIN 1870-AA14

 

To the Department of Education:

This concerns your proposed changes to Title IX regulations that were published in the Federal Register at 83 F.R. 61462-61499.  You claim the authority to make these proposals as "20 U.S.C. 1681 et seq., unless otherwise noted."  83 F.R. at 61495.  This comment addresses in particular your proposal to delete existing subsection (b) from 34 C.F.R. § 106.12, published in 83 F.R. at 61496.

Although I have not found any reference to it in your proposed changes, the statute which authorizes religious organization exemptions is 20 U.S.C.A. § 1681(a)(3):

(3) Educational institutions of religious organizations with contrary religious tenets

this section shall not apply to an educational institution which is controlled by a religious organization if the application of this subsection would not be consistent with the religious tenets of such organization;...

Although the statute does not speak to how the Department or any other Federal agency is to know in advance whether "the application of this subsection would not be consistent with the religious tenets" of any "educational institution which is controlled by a religious organization," the existing regulations do speak to that issue.  Advance knowledge of an organization's "religious tenets" claim can be determinative of whether Federal enforcers of Title IX's mandate will file or proceed with a Title IX enforcement action.

The regulation you want to eliminate is the regulation which provides that advance knowledge.  It is 34 C.F.R. § 106.12(b).  Subsection (b) provides in full as follows at the present time:

(b) Exemption. An educational institution which wishes to claim the exemption set forth in paragraph (a) of this section, shall do so by submitting in writing to the Assistant Secretary a statement by the highest ranking official of the institution, identifying the provisions of this part which conflict with a specific tenet of the religious organization.

In contrast to the obviously desirable result of preventing unwarranted Title IX enforcement actions to be filed by a Federal agency, thus reducing the respondents' costs and time necessary to defend enforcement actions which might otherwise be unnecessary, you recite that the current regulation is "confusing or burdensome[.]"  83 F.R. at 61482.  This assertion is absurd, in the face of the obviously desirable results that are likely if not certain to follow from the current regulation.  No law should be made including regulatory law which leads to an absurd result.  For this reason alone, your proposed change to 34 C.F.R. § 106.12(b) should be withdrawn or if not withdrawn, should be struck down by the Courts.

Further, you do not support your proposed changes with evidence either that the current regulation "impose[s] confusing or burdensome requirements" or that your proposed elimination of the current regulation would eliminate those unevidenced "confusing or burdensome requirements[.]"  For that reason, i.e., your failure to comply with the Administrative Procedures Act in this regard, your proposed change to 34 C.F.R. § 106.12(b) should be withdrawn or if not withdrawn, should be struck down by the Courts.

Moreover, it does not seem on the face of it that a letter to the Assistant Secretary would ever justifiably be characterized as either "confusing" or "burdensome."  That outcome is inconceivable and, in any case, is not supported by facts.  For this reason alone, your proposed change to 34 C.F.R. § 106.12(b) should be withdrawn or if not withdrawn, should be struck down by the Courts.

Finally, you are mistaken in your seeming belief that the current regulation specifies when an organization needs to make a written statement of the organization's "religious tenets."  The existing regulation does not speak to when.  It speaks to how.  The claim must be "in writing."  For example, the claim cannot be made verbally.  The claim must be made in writing.

The written claim must also identify "a specific tenet of the religious organization."  For example, a written claim based on nothing more than a claim to religious liberty without identifying a specific tenet of the religious organization, would not seem to be nearly enough to assert the "religious tenets" claim.

Nothing about these current requirements of the existing regulation appear to be "confusing" as understood by reasonable persons.  Nothing about them reasonably appears to be "burdensome," either.

For all of these reasons, whether taken separately or together, your proposed change to 34 C.F.R. § 106.12(b) should be withdrawn or if not withdrawn, should be struck down by the Courts.

Thank you for your consideration.

Sincerely Yours,

Dennis J. Wall

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.  Copies of these comments are being published on Sunday, January 27, 2019 both on Claims and Issues Blog, and on Claims and Bad Faith Law Blog.

SEXUAL HARASSMENT SHOULD CARRY A HEAVY PRICE, IF PERMITTED. PERIOD.

I left the following comment on www.regulations.gov earlier today concerning the proposal of the Department of Education to enable sexual harassment in education without fear of the Department asking for damages to enforce the law.  You can leave your own comment at any time between now and the end of the deadline on Monday, January 28, 2019.  If you speak up and leave a comment, then by law even the current Federal administrative state is required to hear you.  I urge you to make your voice heard!

January 27, 2019

Department of Education

www.regulations.gov

RE:    Comment to Docket ID ED-2018-OCR-0064

          RIN 1870-AA14

To the Department of Education:

This concerns your proposed changes to Title IX regulations that were published in the Federal Register at 83 F.R. 61462-61499.  You claim the authority to make these proposals as "20 U.S.C. 1681 et seq., unless otherwise noted."  83 F.R. at page 61495.  In particular, this comment addresses your proposed changes to Section 106.3 of the regulations, titled Available Remedies, also published in 83 F.R. at page 61495.

Your proposed changes to Section 106.3 of the regulations are not sustainable as a matter of law and as a matter of law applied to fact. 

First, your proposed changes to Section 106.3 would prohibit the "Assistant Secretary" of the Department of Education (i.e., "the Department") from seeking damages in any proceeding to enforce Title IX.  The purpose for which Congress enacted this statute is clear on its face. 

Section 1681, the beginning section of Title 20, sets the standard for discrimination in education on the basis of sex.  Subsection (a) of 20 U.S.C.A. § could not be more clear:  "No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance[.]"

There is nothing in the language chosen by Congress to effectuate its purpose that leads to the conclusions you propose as law in your changed Section 106.3, including taking away one of the powers of the Federal Government agencies, which is to seek damages in an appropriate case in order to compel enforcement of the Congressional mandate.  For this reason, your proposed changes to Section 106.3 are not supported either by law or by the law applied to any facts, and they should not be enacted.

Second, as you are aware the Federal Courts are currently instructed to defer to the interpretation given by Federal agencies to the statutes they are called upon to administer.  Your recently suggested interpretation, that Title IX does not allow your Department to seek damages in any proceeding to enforce Title IX, is contrary to the interpretation taken by the Federal Government since Title IX was first enacted nearly 50 years ago.  The existing interpretation is like the statute itself:  If Congress has not affirmatively spoken, one way or the other, about the recovery of damages as a tool in the administrative process of enforcing the mandate of Title IX, then the Department should remain silent itself and not interfere with Congress's own interpretation.  In other words, it is a job for Congress and the Courts, not the Department of Education.

If anything, 50 years of existing interpretation should be given judicial deference over your opportunistically recent one.  For this reason, your proposals to change Section 106.3 of the regulations should be rejected.

Third, your proposals in all of these proposed regulation changes which you published in 83 F.R. from page 61462 through 61499 inclusive, are internally inconsistent.  Your proposed changes would change the standard of liability to "actual knowledge" coupled with "deliberate indifference" in any administrative action brought to enforce the law.   However at the same time you would purport to take away the Department's ability to seek damages.  This is internally inconsistent.  It is also inconsistent with and contrary to the purpose of Title IX, which is quoted above from the statute itself in 20 U.S.C.A. § 1681(a).  For this reason, your proposed changes, including your proposals to change Section 106.3 of the regulations should be rejected as contrary to law and as contrary to law applied to the facts.

For all of these reasons, whether taken separately or together, your proposed changes to Title IX and its existing attendant regulations should not be enacted.  They should each and all be withdrawn or, if not withdrawn, then they should each and all be rejected as contrary to the law and contrary to the law applied to facts.

Thank you for your consideration.

Sincerely Yours,

Dennis J. Wall

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

RESIST THE CURRENT ADMINISTRATIVE STATE. COMMENT AGAINST PROPOSALS THAT MAKE DISCRIMINATION EASIER.

They shouldn't be permitted to change laws when they don't have the votes in Congress or in the Courts.

 The current administrative state is trying to change the law without Congress and without the Courts.  A good example is any and all of the Department of Education's current proposals to dismantle the law against discrimination in education programs or activities that receive assistance from your Federal tax dollars.

The law is Title IX.  The proposals are published at 83 Federal Register pages 61462-61499.  Monday, January 28, 2019 is the deadline to leave your comment opposing them.

Many people are intimidated when they think about leaving a comment on a Federal agency proposal.  I was intimidated myself before I left my first comment.  The thought of it can stop you from doing it.  Don't let it.

By law, even the current occupiers of the Federal administrative agencies are required to consider everybody's comments before they impose their rules and regulations in final form.  If they don't, then the Courts will make them, at least so far.

So, for these particular proposals here is some information to show you how simple it is to leave your comments:

1. The place to leave your comments electronically is at regulations.gov.
2. Somewhere on your comments refer to these numbers: Docket ID ED-2018-OCR-0064 and, just to be on the safe side, also refer to RIN 1870-AA14.
3. That's it. If they ignore you after that, they intend to.

I will post some of my own comments here so that you can have something to go by.  But do not let my comments get in your way, either.  Remember that my comments, for good or ill as they say, will be comments that are made by a lawyer for that is what I am.  It is enough to say that you are against certain proposals because for example they make it easier to discriminate in education programs that are paid for with your money.  To again be on the safe side, this time take the advice of the Federal Government and mention the specific section or sections of the proposed regulations that your comments address.  But if you don't, you know what?  The Federal Government is the one making the proposals in the first place, not you.  If the Feds can't figure it out, they shouldn't be proposing changes to the law.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.  A version of this article was published previously on Claims and Issues Blog.

CONCEALMENT EVEN AFTER DISCLOSURE IN THE GM "IGNITION DEFECT" MDL.

This is the fourth in a series of articles taking a look at the recent Multi-District Litigation lawsuits (MDLs) involving General Motors and Volkswagen.  In the last previous article and in this installment, we will continue to take a look first at the General Motors "ignition defect" MDL.  Our special focus will be on the secrecy involved in these huge MDLs, secrecy that is built into such lawsuits as an integral part of them.  To a great extent secrecy is a major reason such lawsuits exist in the first place.

 

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Concealment even after disclosure.   The lawyers in the catastrophic GM MDL case proposed and the judge agreed to another seemingly new provision in the GM MDL blanket secrecy order that would address the possibility of evidence mis-marked for concealment.  The lawyers and the judge provided that if Confidential or Highly Confidential information was disclosed without being designated for concealment, then the party producing it could thereafter "claim or designate" confidentiality, and the party receiving the information "must immediately return" it and all copies of it to the producing party and make no use of such information.  In other words, the judge would never actually have to see it and the lawyers would never have to submit it to the judge to look at.^[1] 

By its own terms the MDL Court's jurisdiction to enforce this Consent Order would never end.  The MDL Court would be the sole arbiter forever without end of whether parties and strangers to this litigation complied with this Order.^[2]

          To summarize, regardless of whether or not it had the purpose of concealing catastrophic defects that have allegedly killed people and injured others so badly that some of the people who allege injuries are now quadriplegics who lost the use of their arms and legs, and some others are paraplegics who lost the use of their lower bodies including both of their legs, the GM MDL case has had the effect of concealing the evidence of what allegedly caused those things.  This is not an unfortunate byproduct of stipulated umbrella secrecy orders like Order No. 10 on file in the GM MDL case.  It is the intended result of those consent orders.

 

NEXT:  THE VOLKSWAGEN "DEFEAT DEVICE" ENORMOUS MDL CLAIMS.

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[1] GM  Order:  In re General Motors LLC Ignition Switch Litigation, Order No. 10, Doc. No. 294, filed 09.10.14 (S.D.N.Y. MDL Number 14-MD-2543):

"Presumption of public access" and GM's "bulk production of millions of pages of documents":  unnumbered paragraph immediately following the title of this Order, "having consented thereto"; both unnumbered "WHEREAS" paragraphs;

"Sensitive information":  ¶ 2 at page 3;

"Lawyers determine in the first place": ¶ 3(c), "Marking," p. 4., pp. 3-4;

"Disappearing ink provision":  ¶ 3(d), "Redaction," at p. 5;

"Designating information as 'Confidential' or 'Highly Confidential' later on at any time" and "Disclosure shall not waive confidential status of such information":  ¶ 3(f), "Errors," p. 6;

            "Challenge one another's 'Confidential' and 'Highly Confidential' designations at any time" and "Good cause" expanded beyond what the law previously authorized:  ¶ 4 (emphasis added), "Challenges to Confidentiality Designations"; at p. 5;

"Use restriction":  ¶¶ 5, "Access to Confidential Information," 6, "Access to Highly Confidential Information," pp. 7-10, and 7(a), "Use of Confidential and Highly Confidential Information/ Restricted to This Proceeding and Related Litigation," p. 10; and

"Return and destroy provision":  ¶ 8 (emphasis added), "Return of Discovery Materials," p. 12.

It bears repeating that this Consent Order is titled, "Protecting Confidentiality and Privileged Materials."

 

[2] See In re General Motors LLC Ignition Switch Litigation, Order No. 10, Doc. No. 294, ¶ 14, "Protective Order Remains In [sic] Force," filed 09.10.14 (S.D.N.Y. MDL Number 14-MD-2543).

The Consent Order in this MDL originally provided that any party could disclose "a potential safety defect" to a government agency.  Id., ¶ 7(a), located in "Use of Confidential and Highly Confidential Information" paragraph, at page 10.    In another Consent Order some two years later, this provision was amended by consent of Defendants and Lead Counsel for plaintiffs once again, to add that GM would also be allowed to assist in "identifying, reporting or resolving any potential safety issue," without any stated limitation to assisting a government agency.  In re General Motors LLC Ignition Switch Litigation, Order No. 103, Doc. No. 2901, filed 05.27.16 (S.D.N.Y. MDL Number 14-MD-2543).  This addition on May 27, 2016 undoubtedly reflects the March 11, 2016 National Highway Traffic Safety Administration ("NHTSA") statement two months earlier that NHTSA's clearly preferred such exceptions to the use of blanket stipulated protective orders. NHTSA influenced more than the lawyers in the GM ignition switch defect litigation, however.  The federal Consumer Product Safety Commission virtually copied the preferences announced by NHTSA on March 11, 2016 when the CPSC released its own preferences for allowing disclosure to the CPSC in secrecy orders and in secrecy provisions in settlement agreements.  See Arthur Bryant, "U.S. Consumer Product Safety Commission Seeks to Limit Court Secrecy" (posted on The Legal Examiner blog on December 12, 2016).

Two additional 'protections' were added by the MDL Consent Order No. 10 in September 2014.  Not only would originally redacted evidence that was marked "Highly Confidential" and that became unredacted by the parties' consent or by Court order still be protected as Highly Confidential nonetheless under paragraph 3(d), "Redaction," on pages 4-5, if in particular any piece of disclosed evidence was "claimed" to be subject either to the attorney client privilege or to the protection that courts give to the work product of attorneys, then its disclosure in this MDL case would not forfeit the privilege or the protection in any other case, federal or state.  Id., ¶ 9(a), "No Waiver by Disclosure," pp. 12-13.

 

NEXT:  THE VOLKSWAGEN "DEFEAT DEVICE" ENORMOUS MDL CLAIMS.

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THE STAGGERING GENERAL MOTORS "IGNITION DEFECT" MDL CLAIMS.

This is the third in a series of articles taking a look at the recent Multi-District Litigation lawsuits (MDLs) involving General Motors and Volkswagen.  In the next two installments in this series, we will take a look first at the General Motors "ignition defect" MDL.  Our special focus will be the secrecy involved in these huge MDLs, secrecy that is built into such lawsuits as an integral part of them.  To a great extent secrecy is a major reason such lawsuits exist in the first place.

 

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There is a stipulated protective order, an umbrella secrecy order, in the GM ignition defect MDL.  To be sure, it does not bear either of those names in the Court file.  But it has all the marks of an agreed umbrella secrecy order.

One of the first things that GM did in the new MDL was request confidentiality.  Three months after the MDL case was opened and a judge was assigned to it, GM's lawyers and the lawyers representing people suing GM agreed that the evidence against GM in that litigation should be kept confidential.

The federal judge overseeing the GM MDL wrote that Lead Counsel for the people suing GM "consented" to the confidentiality order three months after the first pleading or exhibit was entered on the docket. 

The order in GM's ignition defect MDL began with a recitation in favor of the presumption of public access to court proceedings.  The court in that case acknowledged that it alone has the duty to authorize information in a court file to be sealed from public view.  Then the order changed direction in some old ways, often with new additions.

Lawyers determine "Confidential Information" in the first place.  Lead Counsel in Multi-District Litigation cases are clothed with the necessary authority to make decisions that bind the other lawyers and the parties.  So it was in the GM ignition defect MDL.  So it is with respect to all of the catastrophe claims in any MDL.

The blanket secrecy order in the GM MDL ruled, by agreement of Lead Counsel in the case, that the lawyers in the case would determine in the first place whether particular materials fall within the order's protection.  Once again, "Confidential Information" is expansively defined far beyond what the law has usually authorized.

Due to GM's announced intent to produce "millions of pages of documents" in bulk, the judge ordered among other things that evidence discovered by the parties shall be kept secret as "Confidential Information" or as "Highly Confidential Information."  In a departure from the standard umbrella secrecy orders discussed in previous articles in this series, and in a departure from the model Sample Confidentiality Order written by judges for lawyers in the Manual for Complex Litigation, Fourth edition, confidential information in the GM order broadly included "sensitive information."  Parenthetically, this agreement to conceal "sensitive information" would find an echo two years later in a nondisclosure agreement required by at least one Member of Congress from interns.^[1]

Returning to procedures used in standard umbrella secrecy orders, including those we have seen in previous sections, the GM secrecy order provided that the lawyers would use these markings for each document for which they had a "reasonable belief" that the documents were "Confidential" or "Highly Confidential."   Once again, this is similar to the "Confidential" and "Highly Confidential" provisions in umbrella secrecy orders we have seen in earlier sections in this Chapter leading up to this section.

Parenthetically, lawyers often argue for blanket secrecy orders concealing everything in advance because it is too time-consuming and expensive to argue that individual documents should be kept secret.^[2]  However, apparently they have the time to mark every document "Confidential" and that expense, in their eyes, is justifiable.

"Return and destroy provision."  With a return and destroy provision in a blanket secrecy order, any party receiving discovery would either return it to the disclosing party, or simply destroy the evidence.  This is an obvious reaction to the admonition in 2004 by the Federal Judicial Center in the Manual for Complex Litigation, Fourth, that under the provisions used at that time and earlier, "[r]estrictions on use in other litigation may not provide complete protection."^[3]

The GM order had a return and destroy provision, but the lawyers who wrote it did more than just copy from one of the orders we have seen earlier in past sections of this Chapter.  For the catastrophe claims in the GM case, the Consent Order further provided that any party terminating its involvement in the multi-district case -- and settlement is certainly one way for a party to "terminate" its involvement -- would be required either to destroy Confidential Information or Highly Confidential Information, or return it to the party from which it came.  And more.

The GM order added something new.  Any "person or entity having custody or control of recordings, notes, memoranda, summaries or other written materials, and all copies thereof, related to or containing discovery materials" of this kind, the GM order said, would be required to provide the producing party with an affidavit that they did their best to destroy the Information or return it to the producing party.   The new addition in the GM order was that the authors of the evidence not only wanted their information back but they wanted someone else's as well.  The order required not only the evidence in question to be returned or destroyed at the conclusion of the case, but also all notes anyone took about the evidence after they received it as well.

"Good cause" kept alive.  The GM agreed secrecy order provided that the party objecting to concealment could file a motion with the Court "for an order withdrawing the designation as to the specific designation on which the Parties could not agree."  If the objecting party filed a motion to disclose a document or part of a document, then the party that marked it Confidential or Highly Confidential "shall have the burden of proving that 'good cause' exists for the designation at issue and that the material is entitled to protection," but not under the law or the Rules.  The good-cause-burden would be to prove entitlement to concealment "as Confidential or Highly Confidential Information under applicable law," meaning that the parties' agreement had already expanded the law's capacity to conceal to previously unauthorized "other confidential, non-public information," including any person's notes about the information, whether made by a lawyer, a paralegal, a party, or anyone else.

The GM Agreed Secrecy Order's New and Revised "Confidential" and "Highly Confidential" provisions.  Then the Consent Order changed direction again.  If the lawyers were mistaken, no problem.  Under their Consent Order in this GM MDL, even if they did not designate information as "Confidential" or "Highly Confidential," they could still designate anything "Confidential" or "Highly Confidential" later on at any time, and they could also challenge one another's "Confidential" and "Highly Confidential" designations at any time. 

The "disappearing ink provision."   Further, if the lawyers were mistaken in blacking out information or if the Court ruled that those materials should not have been blacked out and redacted, in that event this Consent Order added a very unusual blessing to the parties and their lawyers.  If the evidence should not have been redacted, but was redacted and even though a judge ruled that it should not have been blacked out and ordered that it be disclosed instead, then the disclosed information shall still "bear the legend 'Highly Confidential' and shall continue to receive the protections and treatment" of Highly Confidential documents.  In other words, even if a document which the lawyers marked "Highly Confidential" was disclosed because a judge ordered it disclosed, this language appears to require that the marked document would still be "Highly Confidential" anyway.

It might be helpful to think of this as the "disappearing ink" protection.  Even after the information is disclosed, it will disappear.

This is not a matter of inadvertent production of privileged documents.  It is routine for confidentiality orders to provide that inadvertent or unintentional disclosure of confidential documents or information, or disclosure of them to a judge in chambers for her review, shall not generally be deemed a waiver of any claims of confidentiality.   The model Confidentiality Order proposed in the Manual for Complex Litigation, Fourth contains such a provision, for example.^[4]  Rules of Civil Procedure generally allow for the unintentionally disclosed information to be sequestered until a judge allows it to be disclosed once a party makes the claim of privilege and notifies the receiving party that the information was unintentionally disclosed.^[5]  That is not the situation addressed by the GM ignition defect MDL secrecy order "disappearing ink" provision, however.

I am confident in the belief that I have not seen all of the stipulated umbrella protective orders that lawyers have written and judges have ever signed, but I have seen many.  I have never seen any part of an agreement or an order to compare to the disappearing ink provision in the GM MDL litigation.

Except in the VW MDL litigation.  I will return to this subject later.

 

NEXT:  CONCEALMENT EVEN AFTER DISCLOSURE IN THE GM "IGNITION DEFECT" MDL.

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[1] The model Sample Confidentiality Order written by judges for lawyers in the Manual for Complex Litigation, Fourth edition:  § 40.27, "Confidentiality Order," ¶ (c), at page 752, in Manual for Complex Litigation, Fourth (2004).

            The nondisclosure agreement for interns used in at least one Congressional office in the Spring of 2018:  Rachel Wolfe, Exclusive:  Congress Requires Many Unpaid Interns to Sign Nondisclosure Agreements, Vox, posted on March 5, 2018).

 

[2] The matters that should be specifically set forth in "[a]pplications for umbrella orders, usually presented to the court by stipulation of the parties," are set out by the Federal Judicial Center in Section 11.432, "Limited Disclosure/Protective Orders," at pp. 65-66, in the Manual for Complex Litigation, Fourth.

 

[3] § 11.432, "Limited Disclosure/Protective Orders," p. 65 n.138 in Manual for Complex Litigation, Fourth.

 

[4] § 40.27, "Confidentiality Order," ¶ (b), at page 752, in Manual for Complex Litigation, Fourth (2004).

 

[5] See, e.g., Fed. R. Civ. P. 26(b)(5)(B); Fla. R. Civ. P. 1.285.

 

NEXT:  CONCEALMENT EVEN AFTER DISCLOSURE IN THE GM "IGNITION DEFECT" MDL.

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GENERAL MOTORS AND VOLKSWAGEN MULTIDISTRICT LITIGATION LAWSUITS: WHY AND WHAT.

This is the second in a series of articles taking a look at the recent Multi-District Litigation lawsuits (MDLs) involving General Motors and Volkswagen.  In future installments in this series, we will take a look first at the General Motors "ignition defect" MDL, and then at the Volkswagen "pollution defeat device" MDL.  Our special focus will be trained on the secrecy involved in these huge lawsuits, secrecy that is built into such lawsuits as an integral part of them.  To a great extent secrecy is a major reason such lawsuits exist in the first place.

    1.  GENERAL MOTORS.

The General Motors ignition defect MDL came about in this way.  There were a number of claims that General Motors^[1] was responsible for deaths and injuries resulting from an ignition defect.  A federal agency, the National Highway Traffic Safety Administration, investigated the alleged ignition defects.  Lawsuits were also filed in which people sought damages for wrongful death and for bodily injuries.

In response, GM announced a settlement fund to be administered by Kenneth Feinberg, the person who administered an earlier settlement fund set up by BP after the Deepwater Horizon disaster.  Although GM's Final Protocol for how it set up the settlement fund was silent about confidentiality requirements, Mr. Feinberg reportedly said that people who participated in GM's settlement fund would not be required to sign confidentiality agreements.^[2]

On the other hand, GM announced that each claimant successfully pursuing a claim against GM's settlement fund would be required to give GM a release.  Thus it was reasonable to expect that GM would insist on confidentiality agreements before it paid money to settle claims.

The "Final Protocol" setting out the standards for GM's "Compensation of Certain Death and Physical Injury Claims Pertaining to the GM Ignition Switch Recall," dated June 30, 2014, understandably recited that anyone accepting GM's settlement funds from this program would have to provide GM with a release.^[3]

 

    2.  VOLKSWAGEN

Volkswagen used software to make around 11 Million diesel cars appear to have cleaner emissions in government testing facilities than they actually gave off on the road.  The software VW invented made its diesel cars start running in a different way once they were put into pollution tests, from the way that they actually did on the road.

            On the road, VW diesel cars gave off more nitrogen oxide than laws allowed.  Nitrogen oxide is one of the causes of smog, breathing problems, and early deaths.  It would eventually take up to some $30 Billion for VW to buy its way out of the many claims that resulted.  VW has reportedly since recovered most of the share price and profits that plummeted right after the pollution-defeat-device allegations emerged.^[4]

            There were so many claims against VW that it is hard to keep track of them.  Perhaps the surest way to describe them all, and how they were combined into one huge MDL, is to set out a general chronology or timeframe of the most significant claims in terms of their ultimate impact on our searches for concealed evidence and secret settlements.^[5]  The following chronology is a timeframe of the most significant catastrophe claims in the disaster that resulted from the VW diesel "defeat device."

            2013-2014:  During these two years, students and faculty from the University of West Virginia got a grant of some $70,000.00 from the International Council on Clean Transportation.  Their task was to road-test certain diesel vehicles on California highways.  The reason for the road tests was that although the diesel vehicles generally passed pollution testing when it was performed by regulators on their equipment indoors, there were reports that the same types of vehicles spewed foul odors and irritants when on the road.

            2014:  The California Air Resources Board or "CARB" began testing the VW diesel vehicles itself after the WVU issued its report in 2014.  The WVU researchers' report reflected a mysterious but glaring difference between the vehicles passing pollution tests performed indoors by regulators like CARB, and the same kinds of VW diesel vehicles giving off pollutants in measurably large amounts that violated California's pollution laws when the cars were driven on the road.

            CARB began discussions with Volkswagen in 2014 about this glaring difference.  VW had many explanations which changed over time.  VW even offered to recall the diesel vehicles under its own plan.  Finally, on September 3, 2015, after more than a year of talks, Volkswagen admitted to the CARB regulators that VW had gamed the tests from the beginning.  VW had built the diesel vehicles to defeat pollution tests rather than building vehicles that would not pollute.

            September 2015:  The first of many lawsuits was filed against Volkswagen on account of the "defeat device" diesel vehicles, which were designed and built with software to defeat pollution tests until VW sold the vehicles and released them onto the streets.

            The first lawsuit was a class action.  It was consolidated into one multi-district litigation ("MDL") with as many as 1,157 other class actions and other kinds of actions against VW.  Ultimately, the MDL would include various makes and models of VW cars, some with 2.0 liter diesel engines and some with 3.0 liter diesel engines, and claims asserted by consumers, dealerships, and others.

            On February 22, 2016 the plaintiffs filed "a 719-page Consolidated Consumer Class Action Complaint" in their MDL against VW.^[6]  Within three to four months, the MDL would settle.

            June, 2016:  Various announcements tell of a settlement for $570 Million of "consumer deception claims against Volkswagen, " made by "over 45 jurisdictions," and of the same settlement, apparently, but reportedly for "a $603 million agreement" with VW and 46 jurisdictions "that covered 2-liter engines."^[7]

            On October 25, 2016 the MDL Court entered its Order Granting Final Approval of a "Consumer and Reseller Dealership Class Action Settlement" over claims arising from the defeat devices in 2.0 liter engine VW cars.

            A word at this point about the amounts paid for these fines, penalties and damages settlements.  The settlement agreements are confusing and vague.  By design, it is hard to figure out from these documents what are the amounts of the fines, penalties, and damages settlements that the defendants are supposed to be paying.  These documents break out many actions Volkswagen agreed to take as a part of these agreements, and they often assigned arbitrary values to the performance of the obligations that VW agreed to take on, such as various recalls of various things, repurchase of certain makes and models, payments based on mileage on each individual vehicle, and so on.  Sometimes the settlement agreements did not even reflect any effort to assign any value in any amount to particular obligations at all.

            The words used in these settlement agreements collectively made it very understandable that many individual people asked to report what amount of money VW was going to pay would each be forced to make their own best guess.^[8]   Media reports announced that the settlements involved VW paying $14.7 Billion. 

            Given the many settlements and agreements that the defeat devices spawned regarding so many different pieces of the puzzle such as 2.0 liter engines, 3.0 liter engines, certain makes and models of cars, vehicles with various mileage, and so on, it is understandably confusing and extraordinarily difficult to estimate how much Volkswagen has agreed to "pay" over its failed defeat devices schemes.  It is also difficult to pin down a figure for the number of vehicles involved.

            The numbers variously reported by newspapers and other media outlets have ranged across a wide spectrum.  The reports seem to have increased over time to settle down on commonly accepted figures, as illustrated by even a few of the reports:

• "$20 Billion" for 600,000 diesel vehicles reported in January 2017;
• "More than $20 Billion" for "nearly 600,000 vehicles" reported in March and in April 2017;
• "$22 Billion" for 500,000 diesel vehicles in the United States, reported in May 2017, and republished in January 2019;
• "Up to $25 Billion" for 580,000 U.S. vehicles reported in March 2017; and
• "$30 Billion" for 11 Million vehicles reported in March, 2018.

            These sums and settlements are not to be confused with reports of other settlement events, such as the Federal Government's Press Release in April 2018 announcing that Federal Regulators had settled with Wells Fargo for $1 Billion in fines and penalties over force-placed auto insurance and mortgage practices,^[9] a settlement that drew some criticism as more or less a sham;^[10] and in another settlement, that Wells agreed to settle with "shareholders"^[11] or with "investors"^[12] for $480 Million in May 2018, and equally unrelated claims in August 2018 that Wells Fargo foreclosed on "hundreds" of homeowners due to allegedly faulty software such that Wells Fargo compelled itself to "set aside $8 million to compensate customers affected by the glitch."^[13] 

            For comparison purposes, the GM faulty ignition switch claims involved resulted in over 100 people dead and most of these catastrophe claims resulted in a settlement amount of $2 Billion.  Allegedly defective Takata airbags in cars resulted in a settlement of $1Billion.^[14]

NEXT:  THE STAGGERING GENERAL MOTORS "IGNITION DEFECT" MDL CLAIMS.

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[1] Long before these claims were made, General Motors Corporation in 2009 had already been split between a newly reorganized "new" GM, financed in large part by federal bailout funds, and the "old" GM which was liable in essence for risks from GM's business before there was a "new" GM.  See Bill Vlasic and Neal E. Boudette, "Shell of Old G.M. Surfaces in Court Fight Over Ignition Flaw" (New York Times Online, August 17, 2017), posted at https://nyti.ms/2vlpJEs.

[2] "Those who accept settlements, Feinberg says, will not be required to sign confidentiality agreements."  Jeff Gilbert, "GM Compensation Fund Expected to Pay Out Billions to Victims" (published online by CBS Detroit on June 30, 2014).

[3] GM Ignition Compensation Claims Resolution Facility FINAL PROTOCOL for Compensation of Certain Death and Physical Injury Claims Pertaining to the GM Ignition Switch Recall, June 30, 2014, § VIII, RELEASE, OFFSETS AND LIENS, ¶ A. Release, at 13 (all emphasis in original).

[4] "Volkswagen used software" and "nitrogen oxide" and "recovered most of its share price and profits":  Bloomberg Businessweek television report broadcast on Saturday, March 31, 2018.

[5] Throughout the footnotes showing the sources behind this chronology, I will try to include the developments including other proceedings that were brought against VW on account of the pollution defeat devices, but which did not have as much impact on concealed evidence and secret settlements as the developments listed chronologically in the text at this point.

[6]  2013-2014 and the West Virginia University tests, 2014 and the California Air Resources Board or "CARB," and VW's September 3, 2015 admission:  Jack Ewing, "Inside VW's Campaign of Trickery" (New York Times Online, May 6, 2017), available at https://nyti.ms/2pg43ss.

September 2015   The first action was a class action.  It was consolidated into one multi-district litigation ("MDL"):  See, e.g., In re:  Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation, Order Granting Final Approval of 2.0 Liter TDI Consumer and Reseller Dealership Class Action Settlement, Doc. No. 2102, ¶ 1 at pp. 2-3, filed 10.25.16 (N.D. Cal. MDL No. 2672 CRB (JSC)) [hereinafter "10.25.16 Order"]; Id., Plaintiffs' Notice of Motion, Motion, and Memorandum, Doc. No. 1784, pp. 6-7, filed 08.26.16 [hereinafter "Plaintiffs' 08.26.16 Notice"]; Jack Ewing and Neal Boudette, "Business Day / As VW Pleads Guilty in U.S. Over Diesel Scandal, Trouble Looms in Europe" (New York Times Online, March 10, 2017), available at https://nyti.ms/2mtMneV; Jenny Gesley, "The Volkswagen Litigations" (Library of Congress blog "In Custodia Legis," October 27, 2016).

Also in September 2015 the U.S. Environmental Protection Agency began taking steps to request the U.S. Department of Justice to sue VW, and the Federal Trade Commission filed its own administrative complaint, all the while "California and other state attorneys general announced investigations or filed lawsuits, and many other domestic and foreign government entities launched criminal and civil investigations of Volkswagen and related individuals and entities around the world."

On February 22, 2016 the plaintiffs filed "a 719-page Consolidated Consumer Class Action Complaint" in their MDL against VW:  Plaintiffs' 08.26.16 Notice at 6.

[7] In the Summer of 2016:  Ten States file "environmental lawsuits" against VW on account of VW's "defeat device" software in 3.0 liter diesel engines in certain makes and models of VW cars.  See, e.g., "Volkswagen to Pay Over $157m to Settle Emissions Claims by 10 States" (Associated Press copyrighted story published in The Boston Globe on March 31, 2017); Press Release, New York Attorney General, A.G. Schneiderman Announces Volkswagen to Pay New York $32.5 Million -- Marking First-Ever NY State Environmental Enforcement Penalty Against an Automaker for Emissions Violations (March 30, 2017) (describing the lawsuits ultimately joined by 10 States as "the environmental lawsuits").

June, 2016:   New York Attorney General March 30, 2017 Press Release; Associated Press March 31, 2017 report.

[8] Would each be forced to make their own best guess:   See the 10.25.16 Order, for example.

In January, 2017:  Criminal charges are brought against six Volkswagen executives as a result of the diesel defeat devices.  On the same day that the charges are brought against the six individuals, Volkswagen the corporation pled guilty "to charges of conspiracy to commit wire fraud and to violate the Clean Air Act, customs violations and obstruction of justice."  VW agreed to pay $4.3 Billion "in criminal and civil penalties" as a result of the federal government's "investigation" into VW's diesel defeat devices.  "It was the first time the company has pleaded guilty to criminal conduct in any court in the world," a company spokesperson reportedly said.  It is later revealed that VW's guilty plea and agreement to pay $4.3 Billion in penalties to U.S. authorities was based on an internal investigation VW performed after retaining a law firm to perform the investigation, and German authorities reportedly questioned "the credibility of the company's efforts to uncover wrongdoing in its ranks."  For  January, 2017  Criminal charges are brought:  See Nick Carey and David Shepardson, "Volkswagen Pleads Guilty in U.S. Court in Diesel Emissions Scandal" (Reuters, March 10, 2017); Hiroko Tabuchi, Jack Ewing, and Matt Apuzzo, "Business Day / 6 Volkswagen Executives Charged as Company Pleads Guilty in Emissions Case" (New York Times Online, January 11, 2017), available at https://nyti.ms/2jwcePe.

For it is later revealed: See Jack Ewing and Bill Vlasic, "Business Day / German Authorities Raid U.S. Law Firm Leading Volkswagen's Emissions Inquiry" (New York Times Online, March 16, 2017), available at https://nyti.ms/2m6ChC1.

In March, 2017:  VW agrees to pay $157 Million to a group of 10 states to settle the "environmental lawsuits" filed against VW in the Summer of 2016.  These lawsuits were filed by the 10 states over defeat device software installed by VW in certain vehicles with 3.0 liter diesel engines.  Associated Press March 31, 2017 report; New York Attorney General March 30, 2017 Press Release.  VW's settlement agreement with the 10 states is Exhibit 1, Doc. No. 3114-1, filed on March 30, 2017 in the VW defeat device MDL in the Northern District of California.

[9] See, e.g., Matthew Goldstein, Wells Fargo Pays $1 Billion to Federal Regulators, New York Times Online, April 20, 2018, available at https://www.nytimes.com/2018/04/20/business/wells-fargo-cfpb-penalty-regulators.html?action=click&module=RelatedCoverage&pgtype=Article&region=Footer; Donna Borak, Wells Fargo Fined $1 Billion for Insurance and Mortgage Abuses, CNN Money, April 20, 2018; Allison Zieve, Wells Fargo Fined $1 Billion for Insurance and Mortgage Abuses, Public Citizen / Consumer Law & Policy Blog, April 20, 2018 (linking to the CNN Money report immediately above).

[10] See, e.g., Jeff Sovern, What Are We to Make of the CFPB's Billion Dollar Wells Fine?, Public Citizen / Consumer Law & Policy Blog, April 20, 2018.

[11] Shareholders:   See Stacy Cowley, Wells Fargo Agrees to Settle With Shareholders for $480 Million, New York Times Online, May 4, 2018, available at https://www.nytimes.com/2018/05/04/business/wells-fargo-shareholder-suit-phony-accounts.html?action=click&module=RelatedCoverage&pgtype=Article&region=Footer.

[12] Investors:  See James F. Peltz, Business / Wells Fargo Agrees to Pay $480 Million to Settle Securities-Fraud Lawsuit Over Fake Accounts, Los Angeles Times Online, May 4, 2018.

[13] Jackie Wattles, Wells Fargo Says Hundreds of Customers Lost Homes After Computer Glitch, CNN Money, August 5, 2018, available at https://money.cnn.com/2018/08/04/news/companies/wells-fargo-mortgage-modification/index.html.

[14] See, e.g., Bloomberg Businessweek (television) report broadcast on Saturday, March 31, 2018; Nick Carey and David Shepardson, March 10, 2017 Reuters Report; Jack Ewing, May 6, 2017 New York Times report; Jack Ewing and Neal E. Boudette, March 10, 2017 New York Times report; Hiroko Tabuchi, Jack Ewing, and Matt Apuzzo, January 11, 2017 New York Times report; Bill Vlasic, April 21, 2017 New York Times Report; Associated Press March 31, 2017 report.

For comparison purposes:  These comparison figures were reported by Jack Ewing in his May 6, 2017 New York Times reporting.

 

NEXT:  THE STAGGERING GENERAL MOTORS "IGNITION DEFECT" MDL CLAIMS.

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PREDICATE TO MULTI-DISTRICT LITIGATION, GENERAL MOTORS, AND VOLKSWAGEN.

This is the first installment of a series of articles taking a look at the recent Multi-District Litigation lawsuits (MDLs) involving General Motors and Volkswagen.  This installment sets the background and describes how MDLs came to be, how they are used by the courts, the lawyers and the parties, their clients especially to conceal documents, testimony, and information from the public.

In future installments in this series, we will take a look first at the General Motors "ignition defect" MDL, and then at the Volkswagen "pollution defeat device" MDL.  Our special focus will be trained on the secrecy involved in these huge lawsuits, secrecy that is built into such lawsuits as an integral part of them.  To a great extent secrecy is a major reason such lawsuits exist in the first place.

 

Too Big to Sue:  GM and VW.  

General Motors and Volkswagen may be too big to sue.  The "new" General Motors has recently been outfitted with subsidies from the federal government.  As for Volkswagen, in his work on Capital in the modern world Thomas Piketty pointed out almost as an afterthought that Volkswagen is "the leading automobile manufacturer in Europe and the world."^[1]

            In recent years, a large number of different lawsuits against GM and VW were all put into one large lawsuit for GM, and a separate large lawsuit for VW, called "multi-district litigations" or MDLs.  Multi-district litigation requires explanation.  MDLs were originally authorized in order to enable courts and judges to resolve certain civil disputes.  Multi-district Litigation is obviously a ready-made vessel for catastrophe claims.

            As time has passed in the interim, MDLs may have also been used in ways that unnecessarily ignore the presumption of public access to court files.  Even at its best, multi-district litigation is like seeing through a glass darkly.  "[E]ven the final results can be opaque to outsiders."^[2]

            The explanation given here is a brief description of a complex subject.  In simple terms, an MDL is one place for all lawsuits on the same subject.  An MDL is ordered where many similar lawsuits have been filed against the same defendant or group of defendants in multiple states and courts.  The rationale behind ordering an MDL is that judicial economy and consistent results may be achieved by having one court consider and determine various pretrial motions and matters.

            However, it is clear that the defendants' interests dominate when an MDL is ordered.  It is the parties that are sued in these large cases that avoid inconsistent results, not so much the people who sue them and are understandably concerned with the outcome only in their own case.  The defendants' litigation expenses in MDLs are greatly reduced from what the expenses would otherwise be to defend dozens or even hundreds of lawsuits scattered across the country.  MDLs involve defendants who can be sued in "too many places."^[3]

            On the other hand, the people who are suing the defendants in these large MDLs suddenly have been saddled with expenses they did not necessarily anticipate that are required to prosecute any large lawsuit, or at least their lawyers have been saddled with these expenses to the extent that they cannot or do not pass them on to their clients.

            The courts for their part are reluctant to adjudicate mass disputes.  This reluctance has not yet stopped the disputes themselves.  The mass disputes keep coming.  There is no limit on catastrophes.

THEY'RE all TOO BIG TO SUE IN MULTIDISTRICT LITIGATION, BUT THEY'RE THERE TO SETTLE.

Defendants and judges in particular are looking for alternatives to trial especially in the huge cases that are on the multi-district litigation docket.  They have been looking for alternatives to trying lawsuits for quite a long time, actually.  MDLs originated 50 years ago in response to a wave of antitrust lawsuits against electrical equipment manufacturers.  Clearly in response to litigation over natural and man-made disasters, the original concept of multi-district litigation was to combine many lawsuits into one huge lawsuit for "pretrial proceedings."   The pretrial discovery in common in these huge cases basically inquires into what evidence the various parties possess.  The discovery can then at least theoretically be conducted in one case, the MDL, on an economical, nationwide basis.^[4]

         For purposes of concealed evidence and secret settlements, it is important to know that the MDL did not exist before judges and lawyers invented it.  Legislators did not hold hearings on it, academics did not write about it very much at the time, and no Rules Committee in any jurisdiction has ever attempted to write Rules to govern it.  Large corporations accused of nationwide wrongs and their lawyers, many of whom keep popping up from jurisdiction to jurisdiction across the nation to defend the same defendants, were left free to write their own rules with the agreement of lawyers from smaller law firms with individual clients who were allegedly the victims in these cases.

        The Federal Judicial Center has tried to fill the void with a manual written by judges for other judges and for lawyers, the Manual for Complex Litigation, Fourth, but as we shall see, they do not even follow their own model secrecy orders.

         Regardless of its origins, the MDL today makes it hard to sue large defendants.  The cases that end up in MDLs today stand out first for the total number of MDLs they are put into.    Excluding the large numbers of specialized cases filed by prisoners and Social Security applicants, the number of MDLs has ballooned from about 16% of all federal court cases in 2002, to over 50% of the federal courts' dockets today.^[5]

        As of March, 2017, some 233 MDLs were pending in the federal courts.  The legal standard for all these MDLs is the same.  Established by federal statute, an MDL can be made from active civil cases that contain "one or more common questions of fact" and have been filed in different federal judicial districts.  According to the federal statute that authorizes MDLs -- but which does not do anything else besides authorize them, such as declare the rules that MDLs should go by -- cases like these can be vacuumed up, so to speak, into one big lawsuit called an MDL "for coordinated or consolidated pretrial proceedings[.]"^[6]  Limiting MDLs to "pretrial proceedings" is telling in ways that the authors of the statutory language probably never intended.

         It bears repeating that no rules have been written specifically to govern MDLs.  MDL procedures are proposed by the parties, especially by the larger parties that naturally drive the MDL.  The proposals of these larger parties are adopted with some regularity by mutual agreement with the other parties in the MDL.  It has been said that the "creation" of an MDL under the federal statute is the only part of an MDL that is not based on consent of the parties.^[7]

 

End of the first installment, the Predicate to MDLs.  NEXT:  GENERAL MOTORS AND VOLKSWAGEN MULTI-DISTRICT LITIGATION:  WHY, AND WHAT THEY HAVE IN COMMON.

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[1]  Thomas Piketty, Capital in the Twenty-First Century, trans. Arthur Goldhammer (Cambridge, MA and London:  Belknap Press of Harvard University Press, 2014), 143.

 

 

[2] E.g., Abbe R. Gluck, "Unorthodox Civil Procedure:  Modern Multidistrict Litigation's Place in the Textbook Understandings of Procedure," 165 U. Pa. L. Rev. 1669, 1692-93 (2017).  See Alexandra D. Lahav, "A Primer on Bellwether Trials," at 7 n.20 (Essay, Aug. 4, 2017), Rev. Litig. 37 (forthcoming 2017), available at SSRN:  https: //ssrn.com/abstract=3013402  (combining mediations and tactics such as in bellwether trials in MDLs, the problem is that such procedures are not public and lack many benefits of trials).

 

 

[3] Abbe R. Gluck, "Unorthodox Civil Procedure," 165 U. Pa. L. Rev. at 1682 (emphasis in original).  See in addition the language of Section 1407 itself, the MDL referral statute found at 28 U.S.C.A. § 1407; Abbe R. Gluck, "Unorthodox Civil Procedure," 165 U. Pa. L. Rev. at 1698.

 

 

[4] MDLs began with a raft of antitrust lawsuits against electrical equipment manufacturers:   Stephen B. Burbank, "The MDL Court and Case Management in Historical Perspective" at 1, 2 (April 28, 2017 Paper submitted to GWU Conference titled "Multi-district Litigation Roundtable" for an April 28, 2017 Panel Discussion on "Case Management Strategies by Transferee Judges"), available at https://www.law.gwu.edu/sites/www.law.gwu.edu/files/downloads/MDL.GWU.pdf; Abbe R. Gluck, "Unorthodox Civil Procedure" 1671-72.

          The original concept was common discovery on an economical, nationwide basis:   Jay Tidmarsh, "The MDL as De Facto Opt-In Class Action" at 1, 6 (Undated paper submitted to George Washington University Law School. Conference titled "Multi-district Litigation Roundtable" for an April 27, 2017 Panel Discussion on "MDL Panel Decision Making"), available at https://www.law.gwu.edu/sites/www.law.gwu.edu/files/downloads/Tidmarsh-MDL-Paper.pdf.

 

 

[5] MDLs are one such alternative:  Jotwell; "The Settler-in-Chief," by Jay Tidmarsh reviewing Adam Zimmerman, "Presidential Settlements," 163 U. Pa. L. Rev. ___ (forthcoming 2015), available at SSRN, https://courtslaw.jotwell.com/the-settler-in-chief/.

            From 16% in 2002 to over 50% now:  See, e.g., Elizabeth Chamblee Burch, "Monopolies in Multidistrict Litigation," 70 Vand. L. Rev. 67, 72 (2017); John Rabiej, "Two Proposals to Improve How Courts Manage 'Mega-MDLs,'" at 4 (Undated Essay submitted to GWU Conference titled "Multi-district Litigation Roundtable" for an April 28, 2017 Panel Discussion on "Alternatives to MDL Practice"), available at https://www.law.gwu.edu/sites/www.law.gwu.edu/files/downloads/rabiej.mdlpaper.pdf.  Mr. Rabiej defined "mega-MDLs" in his essay as those with 900 cases or more.

 

[6] 233 pending MDLs in March, 2017:  Abbe Gluck, "Unorthodox Civil Procedure," 165 U. Pa. L. Rev. at 1679.

            The statute:  28 USCA § 1407.

[7] No Rules specifically written for MDLs:  Abbe R. Gluck, "Unorthodox Civil Procedure," 165 U. Pa. L. Rev. at 1675, 1688; see John Rabiej, "Two Proposals to Improve How Courts Manage 'Mega-MDLs,'" at 1.

            Has been said "creation" of MDL only aspect of MDLs that is not based on consent:  Abbe R. Gluck, "Unorthodox Civil Procedure," 165 U. Pa. L. Rev. at 1700.  Cf. Jay Tidmarsh, "The MDL as De Facto Opt-In Class Action" at 5 (comparing role of consent in opt-in class actions with MDLs).

            Overall:  See Elizabeth Chamblee Burch and Margaret S. Williams, "Repeat Players in Multidistrict Litigation:  The Social Network," 102 Cornell L. Rev. 1445, 1455-59 (2017).

 

End of the first installment, the Predicate to MDLs.  NEXT:  GENERAL MOTORS AND VOLKSWAGEN MULTI-DISTRICT LITIGATION:  WHY, AND WHAT THEY HAVE IN COMMON.

Please Read the Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

 

 

 

 

PRESUMPTION OF PUBLIC ACCESS TO COURT FILES: ALIVE IN 2019?

There is a strong presumption of public access to Court files.  The origins of the presumption are both the common law and the First Amendment to the United States Constitution.[1]  The Constitutional presumption of public access to Court files is independent of the common law.[2]  This presumption is or should be at work in catastsrophe claims in particular, but nowhere does it face greater challenges.

            Both presumptions of public access to Court files, whether based upon the common law or upon the First Amendment, apply with particular strength in the case of judicial records.  For example, the presumption is very strong that judicial records relating to summary judgment should remain open and accessible to the public.  This is because these proceedings adjudicate the relative rights of the parties and, in the case of summary judgment proceedings in particular, often serve as substitutes for trials.[3] 

            The idea that the public pays for judicial proceedings is central to both presumptions of public access to the records of judicial proceedings.  "The parties are hereby advised that '[a]s an undertaking funded by the people of the United States, [this court's] decision will be publicly published to decide both the matter at hand, and also guide other entities on the law.'"[4]  To put it another way:

    The court is aware of the cost to the parties and in some ways the cost to the truth-finding process that comes with proceeding in an open forum.  But the public nature of [the] forum in which the parties have chosen to air their dispute and the manner of operation needed for the forum to maintain its legitimacy and integrity extract certain costs from the litigants that come before it.  But for very limited circumstances, the publicity of an adjudication is one of those costs.  The parties have not met the heavy burdens needed to permit this court to operate in secret.[5]

          Whether based on the common law or on the First Amendment, the presumption of public access to Court files is not absolute.[6]  "The presumption of public access may be rebutted."[7]

          Properly rebutting the presumption of public access may depend largely on whether a given case involves issues important to the public.  An example is a case presenting "information bearing on defects and safety concerns with products."[8]  Cases involving claims for damages allegedly caused by catastrophes and disasters, whether the disasters are natural or man-made, clearly contain within them issues important to the public.

          So do cases involving insurance coverage for natural and man-made disasters, because it has been held that many issues present in ordinary insurance cases, while not perhaps "garden-variety," involve "claims-handling" practices and often involve claims of insurance bad faith as well.  "Public importance" has effectively been equated with "the potential to impact concretely the legal rights of other carriers and/or insureds not before the court."[9]

          This is the overall standard that one court has applied to an insurance case to determine whether that case contains issues of such importance to the public, that the public should be allowed to know them and the documents, testimony, and information that relate to those issues.  The insurance carrier sought to seal and to keep a seal on its files and deposition testimony of its representatives.  The insured involved in the case manufactured and sold clothing that protected coal miners including their ability to breathe.  The insured sued its umbrella commercial CGL carrier in that case for alleged wrongful denial of coverage and bad-faith claims handling practices, among other things.

The District Court denied the insurance company's motion to seal, holding under the circumstances of that case as follows:

    Finally, the information plaintiff seeks to maintain under seal is of public importance to defendant, its fellow carriers, the underlying claimants with unresolved claims and future claimants. The parties' dispute encompasses numerous issues of public importance, including plaintiff's claims-handling role, what constitutes proper exhaustion, the burden of proving the judgments or settled claims fall within the grant of coverage, the trigger of coverage for each type of dust/substance exposure involved, whether general administrative expenses in coordinating a national defense may be apportioned and proportionally allocated as a form of ultimate net loss covered under the policy and so forth. Other carriers and all current and future claimants have a significant interest in knowing (1) the types of litigation and settlement practices that will be deemed to be acceptable and give rise to indemnification under the standard terms in the policy and (2) the range and type of evidence and information as well as the legal arguments and precedents that a court will consider and find important in resolving these disputes. These entities and individuals are members of the public and have the potential to have their rights affected by the resolution of the issues forming the parties' dispute. That interest cannot be summarily discounted in the name of protecting the plaintiff's ability to minimize its financial exposure from the debacle created by its past products.[10]

            The burden is on the party seeking to overcome the presumption of access to show the interests in secrecy at stake that arguably outweigh the presumption.  It has been held that showing "a clearly defined and serious injury" equals the showing of "good cause" needed to overcome the presumption.[11]  The burden is to show that disclosure will cause "a clearly defined and serious injury" and to show it with specificity.  The showing cannot succeed, it has been held, if it is "bereft of specific examples."[12]

            In general terms, the presumption of access is not ordinarily overcome regarding "information that is used by a party to shelter itself from additional liability and litigation[.]"[13]  In other words, the possibility or even likelihood that documents, testimony, and information revealed in one lawsuit may be shared with lawyers and parties in other lawsuits is not a good reason to conceal them from the public:

 With increasing frequency, defendants, as well as other insurers, are finding themselves embroiled in litigation over whether there is coverage for property damage as a result of environmental harm. The courts have emphatically held that a protective order cannot be issued simply because it may be detrimental to the movant in other lawsuits.[14]

 

[1] E.g., Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1066, 1070 (3d Cir. 1984); Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 559 (W.D. Pa. 2014).

[2] E.g., In re Cendant Corp. (Goldstein v. Forbes), 260 F.3d 183, 198 n.13 (3d Cir. 2001);  Republic of Philippines v. Westinghouse Elec. Corp., 949 F.2d 653, 659 (3d Cir. 1991) (dicta; Third Circuit's analysis in this case was expressly confined to the common law).

[3]  E.g., Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1135-36 (9th Cir. 2003); Rushford v. New Yorker Mag., 846 F.2d 249, 252 (4th Cir. 1998).

[4] Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., No. 09-290, 2013 WL 1336204, at *11 (W.D. Pa. March 29, 2013).  Accord, Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 587 (W.D. Pa. 2014).  Cf. Newman v. Graddick, 696 F.2d 796, 801 (11th Cir. 1986) ("In addition, open proceedings may be imperative if the public is to learn about the crucial legal issues that help shape modern society.  Informed public opinion is critical to effective self-governance.").

[5] Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 587 (W.D. Pa. 2014).

[6] E.g., Bank of America Nat'l Trust & Sav's Ass'n v. Hotel Rittenhouse Assoc's, 800 F.2d 339, 344 (3d Cir. 1986); Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 560 (W.D. Pa. 2014).

[7] In re Cendant (Goldstein v. Forbes), 260 F.3d 183, 194 (3d Cir. 2001).

[8] Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 561 (W.D. Pa. 2014).

[9] Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 566-67 (W.D. Pa. 2014) (emphasis added).                                                   

[10] Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 581 (W.D. Pa. 2014).

[11] E.g., Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1071 (3d Cir. 1984) (emphasis added); Mine Safety Appliances Co. v. North River Ins. Co., 73 F. Supp. 3d 544, 560 (W.D. Pa. 2014).

[12] In re Cendant (Goldstein v. Forbes), 260 F.3d 183, 194 (3d Cir. 2001).

[13] Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1137 (9th Cir. 2003).  To the same effect, e.g. :  Wauchop v. Domino's Pizza, Inc., 138 F.R.D. 539, 547 (N.D. Ind. 1991) ("The risk—or in this case, the certainty—that the party receiving the discovery will share it with others does not alone constitute good cause for a protective order."); Nestle Foods Corp. v. Aetna Cas. & Sur. Co., 129 F.R.D. 483, 486 (D.N.J. 1990) (stating that "if the basis for defendants' motion is to prevent information from being disseminated to other potential litigants, then defendants' application [for a Rule 26(c) protective order] must fail").

[14] Nestle Foods Corp. v. Aetna Cas. & Sur. Co., 129 F.R.D. 483, 486 (D.N.J. 1990).

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MORTGAGE FRAUD CONTINUES. OTHERWISE FEDERAL LAYOFFS CONTINUE TOO. SOMETIMES.

Photograph Courtesy of New York Public Library Collection.

The secretary of the treasury has forced a fraction of the Internal Revenue Service employees, who had been laid off, to return to work and process papers for the mortgage industry.

So as not to actually break the law in plain sight, the Federal Government is paying these people with so-called "user fees," i.e., donations paid by the mortgage industry to do the work.

This was arranged by the Mortgage Bankers Association.  The MBA worked with the treasury department by asking the current Federal Government to recall the Federal employees to process the papers which the MBA needed to process mortgage money, er, mortgage applications.

The head of the Mortgage Bankers Association and de facto treasury secretary honestly declared that "I'd like to take some credit.  Our direct request got rapid results."  Quoted in Lisa Rein and Jeff Stein, "Could You Make These Guys Essential?":  Mortgage Industry Gets Shutdown Relief After Appeal to Senior Treasury Officials, Washington Post Online, Friday, January 11, 2019.

This is no surprise.  The current occupier of the title of Secretary of the Treasury made much of his money from mortgages and foreclosures before entering the current Administration.

Reportedly, some observers of these arrangements question how it is legal to use Federal employees to benefit not the American public but one discrete group of private businesses.  Other observers despair that no-one who has standing to object, will object and therefore they see no remedy to the situation.

Well, let's take a look at that.

The situation as you might call it is bad faith.  A few people are forced to give up their labor, because through no fault of their own they are employed by the Federal Government during the current Administration, which calls them back to work in order to help a few businesses continue to make money (and prolong the shutdown because the shutdown will not feel so bad, obviously).   These IRS employees are being instructed to serve the interests of a few in the name of public service. 

This is happening while other people are told not to come back to work and in some cases they will not be paid.  Ever.

Is a mandatory injunction available?  Would their unions have standing to represent thousands of what we are told is the current laid off Federal workforce of 800,000 people?  (A figure that will soon grow even higher.)  The idea of a mandatory injunction might be that the rest of the hundreds of thousands of Federal workers who are not getting paid and who have also been told not to report for work, should also be brought back to work and paid.

If arrangements are made by the Federal Government that benefit some furloughed Federal workers but not others who are in the same boat, shouldn't the Federal Government lawfully be required to also arrange for these other people to be recalled back to work by the same Federal Government that told them not to come to work in the first place?  And arrange to pay them also?

That brings in another idea.  The Federal Government of all people is supposed to provide equal protection of the laws.  Equal protection clearly demands that people be treated equally.  Federal workers are people and as such, they too deserve to be treated equally.

Regardless of whether their work does or does not make money for private interests.

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