Sunday, March 30, 2008

W.Va. Supreme Court holds plainitff's lawyer entitled to attorney fees in addition to accepted offer of judgment

In Croft v. TBR, Inc., No. 33504 (W.Va. Supr. Ct., Mar. 18, 2008), the West Virginia Supreme Court again held that a plaintiff's lawyer who accepted three offers of judgment to settle a case was entitled to his reasonable attorney fees, as well.

In Croft, the defendant made the following offer of judgment:
Pursuant to the provisions of Rule 68 of the West Virginia Rules of Civil Procedure (2006), the defendants, TBR, Inc., d/b/a TJ’s Sports Garden and Restaurant, and Tashe Jovanni Radevski, and Shane Kulpa, hereby allow judgment to be taken against them by the plaintiff, [Plaintiff’s Name], for full satisfaction and dismissal of all claims which have been and/or could have been asserted by plaintiff and any other person or entity in this civil action, including any subrogation claims/liens had by any person or entity for payments made to or on behalf of plaintiff, in the total amount of Thirteen Thousand Dollars and No Cents ($13,000.00), to be paid on defendants’ behalf by Erie Insurance Property and Casualty Company.

This offer of judgment is made for the purposes specified in Rule 68 and is not to be construed either as an admission that the defendants are liable in this action, or that plaintiff has sustained any damages. According to Rule 68(c), if this offer is not accepted within ten days after the service of the offer, it shall be deemed withdrawn. Should plaintiff not accept defendants’ offer herein within the expiration of the ten day period, and should the judgment finally obtained by plaintiff against defendants not exceed Thirteen Thousand Dollars and No Cents ($13,000.00), defendants will, pursuant to Rule 68(c), seek an Order from the Court requiring plaintiff to pay all costs incurred in the defense of this case subsequent to the date of this offer.
So, what's wrong with that, you might ask? It doesn't explicitly address attorney fees.

The Plaintiffs in this case accepted the offer of judgment, then promptly filed a motion for attorney fees and costs in circuit court. The circuit court denied the motion on the basis that the language in the offers of judgment specifically referring to “[a]ll claims that have been or could be asserted,” is broad enough to include attorney’s fees and costs.

On appeal, the Supreme Court reversed. It referred back to footnote 8 of its opinion in Shafer v. Kings Tire Service, Inc., 215 W.Va. 169, 597 S.E.2d 302(2004) in which it noted that "unless the [Rule 68] offer [of judgment] explicitly includes attorney's fees, the courts construe the offer to be silent as to attorney's fees if fees are not explicitly included, thereby necessitating an attorney's fee award beyond the sum included in the offer."

A trap for the unwary.

The Court remanded the case for the imposition of attorney's fees and costs.

Thus, if you are a defendant, make darn certain your offer of judgment under Rule 68(a) explicitly provides that the amount of the offer is inclusive of costs and attorney fees.

Fourth Circuit knocks plaintiff's SOX off

In 2-1 decision, the Fourth Circuit ruled that a Wyeth Inc. employee who claimed he was discharged for complaining that Wyeth was behind schedule on training required by FDA regulations failed to present sufficent evidence to support a Sarbanes-Oxley Act ("SOX") whistleblower suit. Livingston v. Wyeth Inc., No. 06-1939 (4th Cir. Mar. 24, 2008).

Livingston complained to Wyeth’s management about Wyeth’s inability to implement on schedule a training program, supposing therefore that local employees would likely misrepresent or cover up the deficiencies in progress to internal compliance auditors and to the FDA. The training program was designed to train employees in good manufacturing practices, and its implementation was required by FDA regulations.

Livingston asserted that in making his complaints, he reasonably believed that Wyeth’s potential conduct in misrepresenting or covering up the deficiencies in timely implementation of the program would constitute violations of the Securities Exchange Act of 1934, and therefore that his conduct was protected under the Sarbanes-Oxley Act.

Affirming summary judgment in favor of Wyeth, the majority concluded that the plaintiff had no evidence that any Wyeth employee intended to misrepresent or conceal information, and no basis for a reasonable belief that the company was violating federal securities laws.

Under SOX, a plaintiff is required to show a subjectively and objectivly reasonable belief that company actions were presently violating the law. According to the majority, he could not do so. Judge Niemyer called Livingston's evidence a "chain of speculation" that was "simply too long to support a claim that Wyeth in fact covered up anything and made misrepresentations to the FDA or was in the process of doing so, as is required to support a violation of the securities laws."

Judge Michael, who dissented, found that Livingston had stated a claim. He wrote that although "an employee’s belief is unreasonable (and unprotected) if it is based entirely on unsupported conjecture about hypothetical future events" it is reasonable if it "relate[s] to activity that a reasonable person could conclude is or is about to become a violation." He believed Livingston was entitled to a trial because he claimed that he had been threatened with retaliation if he refused to join in a cover up of Wyeth's failure to comply with federal law.

Monday, March 10, 2008

Fourth Circuit rules removal petitions need not be more specific than complaints in alleging grounds for diversity jurisdiction

In Ellenburg v. Spartan Motors Chassis, Inc., No. 06-1864 (4th Cir. Mar. 10, 2008) (PDF), a three judge panel of the Fourth Circuit held unanimously that a district court should not have remanded a case sua sponte where the removal petition failed to allege facts supporting diversity jurisdiction.

The basic facts of the case were that the defendant filed a notice of removal alleging diversity jurisdiction in the following manner:
The value of the matter in dispute in this case, upon information and belief, exceeds the sum of Seventy Five Thousand and No/100 ($75,000.00) Dollars, exclusive of interest and costs, as it appears from the allegations contained in Plaintiff’s Complaint. Defendants’ counsel believes in good faith that the amount in controversy in this case meets and exceeds the $75,000 limit required for diversity jurisdiction.

In addition, the Plaintiff claims entitlement to punitive damages. Consequently, this action is one over which the District Court of the United States has original jurisdiction pursuant to 28 U.S.C. § 1332.
Pretty typical, right? Six days later, the district court sua sponte entered an order remanding the case to state court, concluding that the notice of removal’s allegation that the value of the matter in controversy exceeded the sum of $75,000 was "inadequate to establish" the jurisdictional amount, because it failed to "allege facts adequate to establish" the amount.

The defendant filed a Rule 59(e) motion, and attached an affidavit supporting that the case was worth well over $300,000, but the district court refused to consider the evidence and denied the motion. Defendant appealed.

On appeal, the Fourth Circuit reversed, holding:

(1) that a court of appeals can review such an order despite 28 U.S.C. § 1447 where the remand order is based on a procedural defect in the removal petition that was never raised by the plaintiff and not on lack of subject matter jurisdiction;

(2) that "a district court is prohibited from remanding a case sua sponte
based on a procedural defect absent a motion to do so from a party"; and

(3) that it was inappropriate for the district court to have required a removing party’s notice of removal to meet a higher pleading standard than the one imposed on a plaintiff in drafting an initial complaint:
[J]ust as a plaintiff’s complaint sufficiently establishes diversity jurisdiction if it alleges that the parties are of diverse citizenship and that "[t]he matter in controversy exceeds, exclusive of interest and costs, the sum specified by 28 U.S.C. § 1332," see Fed. R. Civ. P. 84; Fed. R. Civ. P. app. Form 2(a), so too does a removing party’s notice of removal sufficiently establish jurisdictional grounds for removal by making jurisdictional allegations in the same manner.
The Court added that, "[o]f course, on a challenge of jurisdictional allegations, '[t]he party seeking removal bears the burden of demonstrating that removal jurisdiction is proper.' Blackwater, 460 F.3d at 583. But this burden is no greater than is required to establish federal jurisdiction as alleged in a complaint."