The Lawletter Vol 38 No 1

Anne Hemenway, Senior Attorney, National Legal Research Group

Many considerations come into play before an entity or individual files for bankruptcy relief.  Included among them is the careful consideration the potential debtor must give to other nonbankruptcy claims or lawsuits to which it is, or may be in the future, a party.  If it goes forward as a debtor, it must avoid the pitfall of having the doctrine of judicial estoppel preclude it from seeking future relief in a nonbankruptcy court.

Judicial estoppel is an equitable doctrine applied at the discretion of the court.  New Hampshire v. Maine, 532 U.S. 742 (2001).  The primary purpose of the doctrine of judicial estoppel is to protect the integrity of the judicial process and to guard the judicial process against improper use.  Milton H. Greene Archives, Inc. v. Marilyn Monroe, LLC, 692 F.3d 983, 993 (9th Cir. 2012) (the doctrine is invoked because of "general considerations of the orderly administration of justice and regard for the dignity of judicial proceedings and to protect against a litigant playing fast and loose with the courts" (internal quotation marks omitted)).  The fundamental requirement for the application of judicial estoppel is that the party against whom estoppel is asserted must be assuming a position of fact inconsistent with a stance that that party has taken in prior litigation.  Bland v. Doubletree Hotel Downtown, Civ. No. 3:09CV272, 2010 WL 723805 (E.D. Va. Mar. 2, 2010).  Judicial estoppel is most often applied where in its schedules the debtor has failed to disclose assets or contingent assets to the bankruptcy court but then later pursues a known claim in state court.  In re Knight-Celotex, LLC, 695 F.3d 714 (7th Cir. 2012); Guay v. Burack, 677 F.3d 10 (1st Cir. 2012).

The specific elements of judicial estoppel are (1) the party to be estopped must be advancing an assertion that is inconsistent with a position taken during previous litigation; (2) the position must be one of fact instead of law; (3) the prior position must have been accepted by the court in the first proceeding; and (4) the party to be estopped must have acted intentionally and not inadvertently.  Love v. Tyson Foods, Inc., 677 F.3d 258 (8th Cir. 2012). Importantly, judicial estoppel requires that the party adopting the inconsistent positions must have acted with some intent in doing so.

In Bland, the court held that judicial estoppel applied where the debtor had failed to properly disclose a claim in her bankruptcy proceedings.  Even though the debtor had actually amended her petition to include the claim against the defendant hotel, she stated that the claim's value was only one dollar.  The court stated:

While the Court would be receptive to the conclusion that Bland neglected to initially include the Doubletree claim in the bankruptcy proceeding as a result of inadvertence where she amended her petition upon supposedly learning for the first time of the necessity for doing so, the Court cannot ignore or discount the undisputed fact that she valued the claim at such a negligible amount while seeking a bounty in this litigation.  The Court simply cannot tolerate such purposeful action.

2010 WL 723805, at *5.  The court held that the debtor's later Title VII claim against her employer was barred under the doctrine of judicial estoppel because of her failure to disclose the contingent or unliquidated claim in her bankruptcy case and because her actions were not inadvertent.

The Lawletter Vol 38 No 1

Steve Friedman, Senior Attorney, National Legal Research Group

Truth be told, being pulled over by the police is not one of my favorite activities. When I am pulled over, however, I am respectful of the officer and his authority. Do I have a legal right to mouth off to the police?  Certainly.  See City of Houston v. Hill, 482 U.S. 451, 461-63 (1987) ("The First Amendment protects a significant amount of verbal criticism and challenge directed at police officers."; in fact, that "is one of the principal characteristics by which we distinguish a free nation from a police state").  Would talking back to the officer help my situation?  No—just ask Eddie Ford.  See Ford v. City of Yakima, 706 F.3d 1188 (9th Cir. 2013).

As Ford was driving to work late one night, listening to music, he noticed a police car approaching rapidly from behind him. After he tried and failed to get out of the way of the police car, Ford abruptly stepped out of his vehicle at a traffic light and asked Officer Urlacher, the driver of the police car, why Ford was being followed so closely.  Officer Urlacher told Ford to get back in his car and go.  As the parties drove through the intersection, Officer Urlacher turned on his cruiser's lights and pulled Ford over.  During the traffic stop, Ford let it be known that he believed that the traffic stop had been racially motivated.  A verbal exchange ensued, with Officer Urlacher essentially informing Ford that if he would stop talking and cooperate, he might just be issued a ticket for violating the municipal noise ordinance but that if he kept running his mouth and "copping" an attitude, he would be going to jail.  Officer Urlacher was persuaded by a backup officer who had arrived on the scene to take Ford to jail.

While en route to the booking facility, Ford invoked his right to free speech, to which Officer Urlacher responded by asserting his right to arrest Ford.  Significantly, however, Officer Urlacher elaborated on his motivation for the action, commenting to Ford, "You talked yourself—your mouth and your attitude talked you into jail."  See id. at 1191.  Although Ford was prosecuted for violating the municipal noise ordinance, he was ultimately acquitted of the charged offense. 

Ford then commenced a civil lawsuit against Officer Urlacher and the City of Yakima, alleging First Amendment retaliation by their booking and jailing him following his verbal criticism of Officer Urlacher.

The Ninth Circuit reversed the district court's grant of summary judgment in favor of the defendants and remanded the case so that Ford's claims could proceed to trial.  Initially, the appellate court observed that Ford's speech, criticizing the police for what he felt was a racially motivated traffic stop, fell "squarely within the protective umbrella of the First Amendment."  Id. at 1193.  Under Ninth Circuit law, even where probable cause existed for an arrest, the arrest is nevertheless categorically unconstitutional if retaliation was a but-for cause of the arrest and the officer's actions would chill a reasonable person's First Amendment activities.  Viewing the evidence in the light most favorable to Ford, a rational jury could find that both such elements were satisfied in this case.

Tim Snider, Senior Attorney, National Legal Research Group

It has been established that an excessive award of punitive damages may violate due process. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417 (2003). To aid the lower courts in determining whether an award of punitive damages may be so excessive as to violate due process, the Supreme Court has announced punitive damages "guideposts." The Court, however, has never held that the punitive damages guideposts are applicable in the context of statutory damages. Among the statutes that authorize the recovery of statutory damages is the Copyright Act, 17 U.S.C. § 504(c). The recovery of statutory damages is authorized in cases of infringement, because proof of actual damages can be very difficult.

An illustrative case is Capitol Records, Inc. v. Thomas-Rasset, 692 F.3d 899 (8th Cir. 2012). There, the defendant used a computer file-sharing program to download and share copyrighted musical performances without the consent of the copyright owners. Using a forensic service, the owners located and identified the defendant as the person who had initiated the unauthorized copying and file-sharing of the recordings. At trial, the plaintiffs were awarded substantial statutory damages in an amount that was well within the limits of damages authorized by the statute. A prevailing copyright-infringement plaintiff can elect to recover either actual damages or statutory damages. In Capitol Records, the plaintiff elected to recover statutory damages. The defendant argued that the district court should apply a standard of due process to the award of statutory damages analogous to awards of punitive damages.

The Lawletter Vol 37 No 12

Dora Vivaz, Senior Attorney, National Legal Research Group

Initially, under the civil rights laws the Equal Employment Opportunity Commission ("EEOC") was not itself empowered to bring suit. In 1972, the law was amended to provide for suits brought directly by the EEOC, but only after an investigation; a determination of reasonable cause; and an attempt to resolve the matter by informal methods of conference, conciliation, and persuasion. 42 U.S.C. § 2000e(5)(b). Since that time, the courts have been in agreement that a conciliation attempt is at least a condition precedent to suit by the EEOC. See, e.g., EEOC v. Radiator Specialty Co., 610 F.2d 178, 183 (4th Cir. 1979). However, as the court noted in a recent case, the circuits appear to be split as to the standard that should govern the court's inquiry into whether the conciliation obligation has been satisfied. EEOC v. St. Alexius Med. Ctr., No. 12 C 7646, 2012 WL 6590625, at *1-3 (N.D. Ill. Dec. 18, 2012).

In an early decision, the Tenth Circuit noted that the statutory language is mandatory and concluded that it was inconceivable that anything less than good-faith efforts is required. EEOC v. Zia Co., 582 F.2d 527, 532-33 (10th Cir. 1978). By the same token, it found that the court need not examine the details of offers and counteroffers between the parties. Although the court quoted language from the Conference Report on the law, which indicated that it was contemplated that the EEOC would "continue to make every effort to conciliate" and that it would file suit only "if conciliation proves to be impossible," id. at 533 (quoting 118 Cong. Rec. H1861 (Mar. 8, 1972)), the standard the court seemed to impose was simply a showing of "some effort" to conciliate and of "notice of the breakdown" of the effort. Id. at 532-33. The Sixth Circuit put forth a similar standard, adding that the EEOC is under no duty to pursue further conciliation if an employer rejects its offer. EEOC v. Keco Indus., 748 F.2d 1097, 1101-02 (6th Cir. 1984).

Both the Eleventh and Fifth Circuits have imposed a somewhat more specific and more stringent standard, requiring the EEOC to (1) outline for the employer the reasonable cause for its belief that the law has been violated; (2) offer the employer an opportunity for voluntary compliance; and (3) respond to the employer in a reasonable and flexible manner. EEOC v. Asplundh Tree Expert Co., 340 F.3d 1256, 1259 (11th Cir. 2003); EEOC v. Klingler Elec. Corp., 636 F.2d 104, 107 (5th Cir. 1981). These courts have found that the underlying question is the reasonableness and responsiveness of the EEOC, considering all the circumstances. The Fifth Circuit, in contrast to the Tenth and Sixth Circuits, specifically concluded that the court is required to make a thorough inquiry into the facts of the conciliation efforts in order to properly evaluate whether the EEOC has satisfied its duty.

December 4, 2012

John Stone, Senior Attorney, National Legal Research Group

Severe psychological disorders that plagued Josephine led to a stormy relationship between her and her employer, the California Department of Transportation ("Caltrans").  Caltrans wanted to terminate Josephine, and, according to her, it passed her over in promotions and harassed her because of her mental disability. These matters were resolved by a settlement that put her on disability retirement status, with the option of seeking reinstatement to active employment. When Josephine took that step, litigation ensued in which Caltrans contended that despite her "praiseworthy" attempts to get well, her disorders left her unable to perform duties as an accounting officer.

After her state court challenge to an administrative decision in favor of Caltrans failed, Josephine sued the responsible state officials in federal court. These claims failed as well, and in ways that suggest that state employees may sometimes need to resort to state law remedies, where they are available, to get full relief for alleged disability discrimination. Okwu v. McKim, 682 F.3d 841 (9th Cir. 2012). The reasons for dismissal of Josephine's federal claims were mostly legal rather than stemming from the facts of her particular case.

Josephine's claim under Title I of the Americans with Disabilities Act ("ADA"), which covers employment discrimination, was properly dismissed because the U.S. Supreme Court has ruled that when Congress enacted that provision, it did not intend to abrogate the States' Eleventh Amendment immunity. See Univ. of Ala. Bd. of Trs. v. Garrett, 531 U.S. 356, 360 (2001). The Court in Garrett stated that the legislative record of the ADA failed to show that Congress had identified a pattern of irrational state discrimination in employment against the disabled and that the record thus did not support abrogation of the States' Eleventh Amendment immunity from suits for money damages under Title I of the ADA; in any event, said the Court, the rights and remedies created by the ADA against the States raised concerns as to "congruence and proportionality," supporting the determination that Congress did not validly abrogate the States' immunity.

With no claim directly available to her under Title I of the ADA, Josephine's next theory was based on asserting the substantive rights provided by that statute in a claim brought under the broad civil rights statute, 42 U.S.C. § 1983. Section 1983 is more commonly used to obtain redress for violation of federal constitutional rights, but in some cases it can be the remedial vehicle for violation of federal statutory rights. Not so here. This claim collapsed under the principle that Congress's inclusion of a comprehensive remedial scheme, such as is set forth in Title I of the ADA, precludes any attempt to bootstrap a claim under that provision in a separate § 1983 cause of action. This is the required result, even though the State's immunity foreclosed a direct action under Title I of the ADA to get the benefits of that "comprehensive remedial scheme."  The Supreme Court's decision in Garrett, which "defanged" the Title I scheme for state employees, did nothing to change the legislative intent to preclude asserting Title I rights by means of  § 1983. As the Okwu court put it, "We are not free to interpret § 1983 in a way that provides a substitute remedy that Congress never provided." 682 F.3d at 846.

The Lawletter Vol 37 No 8

Tim Snider, Senior Attorney, National Legal Research Group

The litigation involving liability resulting from damage caused by Hurricane Katrina to New Orleans and its environs in 2005 has taken an unexpected turn.  More than 400 plaintiffs sued in federal court to recover for Katrina‑related damages, many naming the federal Government as a defendant.  Seven plaintiffs from that number went to trial.  The court found that neither the Flood Control Act of 1928 ("FCA"), 33 U.S.C. § 702, nor the discretionary‑function exception ("DFE") to the Federal Tort Claims Act ("FTCA"), 28 U.S.C. § 2680(a), immunized the Government from suit.  In re Katrina Canal Breaches Consol. Litig., 533 F. Supp. 2d 615 (E.D. La. 2008).  After 19 days of trial, the court found that three plaintiffs had proven the Government's full liability and four had not. Another group of plaintiffs had their cases dismissed on the Government's motion, the court having found both immunities applicable.  Still a different group are now preparing for trial of their own case against the Government.

The Lawletter Vol 37 No 8

Dora Vivaz, Senior Attorney, National Legal Research Group

A hot topic in politics as well as in the courts these days is the extent to which same-sex couples may be treated differently from heterosexual couples.  While much of the focus has been on the right to marry, there have been other questions, distinct from the marriage issue, such as rights to government, employment, or other benefits offered to otherwise similarly situated couples but withheld from same-sex couples.  Not surprisingly, the decisions have not been uniform, even within the same circuit.

The Lawletter Vol 37 No 6

Paul Ferrer, Senior Attorney, National Legal Research Group

We have written often in The Lawletter about what is now required for a plaintiff to plead claims in federal court that will survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) in light of the Supreme Court's decisions in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009).  But do the heightened pleading standards formulated in Twombly and Iqbal also apply to affirmative defenses asserted by the defendant against those claims?  That issue has split the federal courts that have addressed it.

Part of the Supreme Court's rationale for adopting the more exacting "plausibility" standard for reviewing the sufficiency of a plaintiff's complaint was found in the language of Rule 8(a)(2), which requires "[a] pleading that states a claim for relief" to contain, among other things, "a short and plain statement of the claim showing that the pleader is entitled to relief[.]"  Fed. R. Civ. P. 8(a)(2) (emphasis added); see Iqbal, 556 U.S. at 679 ("But where the well‑pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has allegedCbut it has not 'show[n]'C'that the pleader is entitled to relief.'" (quoting Fed. R. Civ. P. 8(a)(2))).  By contrast, the portion of Rule 8 dealing with defenses generally requires only that a party, in responding to a pleading, "state in short and plain terms its defenses to each claim asserted against it[.]"  Fed. R. Civ. P. 8(b)(1).  Likewise, Rule 8(c), which deals specifically with affirmative defenses, requires the party to "affirmatively state any avoidance or affirmative defense[.]"  Fed. R. Civ. P. 8(c)(1).

Some of the district courts have relied, in part, on the differences in the language of these subsections in holding that the Twombly/Iqbal standard does not apply to the pleading of affirmative defenses.  See, e.g., Falley v. Friends Univ., 787 F. Supp. 2d 1255, 1258 (D. Kan. 2011) (finding these differences "significant," in that the "showing" requirement in subsection (a) does not appear in subsections (b) and (c) governing defenses).  These courts have also considered that the issue arises in the context of a motion to strike an "insufficient defense" under Rule 12(f), see id. at 1257, and such motions are "highly disfavored" because they are often used by the movant "simply as a dilatory tactic," FTC v. Hope Now Modifications, LLC, No. 09-1204, 2011 WL 883202, at *1 (D.N.J. Mar. 20, 2011) (internal quotation marks omitted).  In addition, another one of the considerations underlying the adoption of a higher pleading standard for complaintsCnot subjecting a defendant to discovery in favor of "a plaintiff armed with nothing more than conclusions," Iqbal, 556 U.S. at 679Cdoes not apply to a defendant who is "already subjected to discovery."  Hope Now, 2011 WL 883202, at *3.