Just when you thought it was safe to go back in the water, the Supreme Court of the United States (SCOTUS) is again poised to change direction in its jurisprudence.
The October 2017 SCOTUS term ended in June 2018 with the retirement of Justice Anthony Kennedy. A new justice is expected to impact issues that many hold dear, including choice, marriage, and health care. Of course, these are all important issues, but our purpose in this annual review is to discuss the impacts of Supreme Court decisions on our roles as claims professionals, such as whether relied upon civil procedure defenses are upheld, analyzing the impact on our ability to litigate, the contours of substantive claims we deal with frequently, and examining how lower courts and administrative agencies may apply such decisions.
Timeliness Is Next to Godliness
When is a time limit really a time limit? When it’s a jurisdictional time limit.
Untimeliness of filing can provide defense counsel a basis to dismiss problematic claims. On occasion, several different requirements may apply to a timeliness issue. This is the case in Hamer v. Neighborhood Housing Services of Chicago, where the plaintiff complied with the lower court’s extension of time to file an appeal, but the appellate court determined that untimeliness deprived the court of jurisdiction. Justice Ginsburg informs us that a limitation qualifies as jurisdictional only if Congress sets the time.
Plaintiff Charmaine Hamer sued in federal court, alleging violations of the Age Discrimination in Employment Act (ADEA). The district court entered summary judgment on behalf of the defendants. Two relevant provisions address the subsequently filed notice of appeal: 28 U.S.C. Sect. 2107(a) and Federal Rule of Appellate Procedure 4(a)(5)(C).
First, 28 U.S.C. Sect. 2107(a) provides that a notice of appeal must be filed within 30 days of the entry of a judgment, but that a party may file for an extension of that deadline within 30 days of the original expired timeline and may be granted upon a showing of excusable neglect or good cause.
Everything seemed to be in good order for the plaintiff. The district court entered judgment on Sept. 14, 2015. Hamer requested an extension on Oct. 8, 2015, within the time provided for in the federal statute. The district court granted that request on Oct. 9, 2015, extending the time for filing a notice of appeal to Dec. 14, 2015. Hamer filed such a notice of appeal on Dec. 11, 2015, within the granted extension.
But wait. Federal Rules of Appellate Procedure (FRAP) 4(a)(5)(C) similarly provides for an extension based on excusable neglect or good cause. However, no such extension “may exceed 30 days after the prescribed time or 14 days after the date when the order granting the motion is entered, whichever is later.” That is, the court granted a two-month extension under the federal statute, but the civil rule confines such extensions to 30 days after the original deadline expired, which would then be Nov. 14, 2015, not Dec. 14, 2015. The Seventh Circuit determined that the civil rule deprived it of jurisdiction and dismissed.
SCOTUS noted the important distinction between a timing prescription imposed by Congress in a statute (a jurisdictional matter), and a rule of civil procedure (a “claims-processing rule”). Failure to comply with jurisdictional time prescription deprives the court of authority over the case. But FRAP 4(a)(5)(C) is not jurisdictional as it was not created from Congressional direction. The Seventh Circuit should not have treated the civil rule as jurisdictional, and SCOTUS remanded the matter back for further proceedings.
A Little Bit Consolidated
Claims professionals may want to appeal an individual action within a consolidated matter immediately, rather than await resolution of all claims by all parties within the consolidated matter. The Court considered the separate identity of actions subject to consolidation under Federal Rules of Civil Procedure (FRCP) 42(a) and the impact on the appealability in Hall v. Hall. Essentially, consolidation under FRCP 42(a)(1) is a matter of convenience and economy of administration, not a metaphysical merger of multiple suits into one single suit. Thus, separate actions within a consolidated matter may be appealed even if other actions within the consolidated matter are still in the lower court.
As a result of a family feud, siblings Elsa Hall and Samuel Hall had separate lawsuits against one another. Their mother, Ethlyn Hall, sued her son, Samuel, for unlawfully converting funds. She sued her son in her individual capacity and as trustee of an inter vivos trust. When she died, daughter Elsa replaced Ethlyn. Elsa brought no claims in her individual capacity, only as representative and successor trustee to Ethlyn. Samuel counterclaimed against these claims. This comprised one lawsuit—the “trust” claims.
Samuel also filed a separate action against Elsa in her individual capacity for interfering in his relationship with Mom. This comprised a second lawsuit, the “individual” claims. Samuel later moved to consolidate the trust claims and the individual claims and they were tried together.
The jury found for Samuel in the trust claims against him, and in the individual claims he made against Elsa. The court granted Elsa’s motion for a new trial on Samuel’s individual claims against her. But Elsa also filed a notice of appeal as to the trust claims against Samuel. Could she do that? Could she seek appeal in one of the “separate” matters consolidated for trial? Or were all matters consolidated into one so that all must be subject to final judgment before any appeal?
The Court decided that the trust action and the individual action did not lose their separate character upon consolidation and that Elsa could appeal the trust claim while the individual claim proceeded in a separate new trial. Any resulting practical problems are for the Federal Rules Advisory Committees to take up; the meaning of “final decision” is to come from rulemaking, not judicial decision.
Anti-Stacking for Class Actions
Equitable tolling already exists for individual members of a putative class. If class certification is denied, then the individual putative class members may bring new suit as individuals, or may intervene as individual plaintiffs in the now non-class action regardless of the limitations period. This promotes efficiency and economy of litigation by encouraging individuals to resolve the class certification question early.
However, in China Agritech v. Resh, SCOTUS refused to extend equitable tolling to subsequent class actions. Such tolling could result in an infinite limitations period, which does not encourage efficiency and economy of litigation.
In China Agritech, an original set of plaintiffs sought class action status for claims of violation of the Securities Exchange Act of 1934. The court denied class certification, the original plaintiffs settled, and the original action was dismissed.
Thereafter, a second set of plaintiffs filed similar claims and also sought class status. This second complaint was still filed timely under the applicable limitations period. Again, the lower court denied class certification, and, again, the matter settled and was dismissed.
Michael Resh filed a third class action after the limitations period had passed. The lower court dismissed this class complaint as untimely, holding that the prior actions did not toll the statute of limitations as to further class actions.
SCOTUS agreed. Under Resh’s theory of equitable tolling, each putative class would toll the limitations period for the next putative class. A class action would toll the limitations for the next class action, which tolls the limitations period for the next class action—the limitations period could conceivably never end, and it could go on without ever actually receiving class certification. However, such equitable tolling is still available to putative class members who file an individual claim or join an existing suit after class certification is denied.
The Meaning of Tolling
Plaintiffs frequently bring federal and state claims in a single federal court action. The federal supplemental jurisdiction statute, 28 U.S.C. Sect. 1367 authorizes a federal court to consider related state claims when appropriate jurisdiction-conferring claims are before the federal court. The statute also provides a time period allowing the plaintiff to refile in state court if the jurisdiction-conferring claims are resolved but the accompanying state claims are not. That statute provides, “[T]he period of limitation for any [supplemental state claims]…shall be tolled while the claim is pending [in federal court] and for a period of 30 days after it is dismissed unless State law provides for a longer tolling period.”
In Artis v. District of Columbia, the Court examined whether “tolled” means that the limitations period does not run during pendency of the federal action, or if it merely provides a 30-day grace period for refiling upon dismissal.
Stephanie Artis brought state and federal employment claims in federal court and the court dismissed the federal claims on summary judgment. Artis refiled her state-based claims in state court 59 days later. The state court dismissed the state-based claims as untimely, because the applicable statute of limitations would have expired during the pendency of Artis’ claim in federal court, and she did not refile in state court within 30 days of the federal court dismissal, a “grace period” reading.
SCOTUS rejected this reading. The Court concluded that the supplemental jurisdiction statute stops the limitations period from running at all during the pendency of the federal lawsuit, and then tacks on another 30 days upon dismissal of the federal claims. While it seems a simple text-based resolution, the Artis dissenters see the issue as a Constitutional violation, imposing on a state’s sovereign power to decide when claims would be heard in its courts. This view was pushed very forcefully by Justice Gorsuch, and it will be interesting to see how this larger picture plays out as the Court is reshaped once again next term.
An Epic Battle
In substance, no decision was more directly impactful to claims professionals than Epic Systems Corp. v. Lewis, which upheld the rights of employers to include class arbitration waivers in their employment agreements and force individualized proceedings for employment disputes. That decision is discussed elsewhere—most notably in the July 2018 issue of CLM Magazine—but another aspect of the decision is its place in the increasing disdain and downright hostility to deference under Chevron v. N.R.D.C.
Under Chevron, courts defer to an administrative agency’s interpretation of a statute where the statute is ambiguous and the agency interpretation is reasonable. Without that deference, courts would exercise increased authority over federal regulatory activity and agencies would have less power and authority. For claims professionals, if lower courts see no need or direction to defer to agency interpretations, then it could result in decreased predictability and increased conflict among jurisdictions. Decreased predictability usually means increased risk.
Although the Court stated in Epic that “no party has asked us to reconsider Chevron deference,” it was one of several decisions during the term wherein the Court concluded that the statute being interpreted was actually unambiguous and, thus, there was no need to analyze whether the agency’s interpretation was reasonable.
This was taken a step further in Pereira v. Sessions, an immigration case that would not otherwise be on our claims radar. Justice Kennedy wrote a concurrence stating that “it seems necessary and appropriate to reconsider, in an appropriate case, the premises that underlie Chevron and how courts have implemented that decision.”
Will the justice succeeding Justice Kennedy heed this call to reconsider Chevron? Or simply follow the current trend to isolate the application of Chevron by determining that no ambiguity exists to trigger such deference? We look forward to examining the jurisprudence of the October 2018 term.
SCOTUS Watch
Analyzing the opinions of the Court and
its impact on claims professionals
By Karen Kalzer
Just when you thought it was safe to go back in the water, the Supreme Court of the United States (SCOTUS) is again poised to change direction in its jurisprudence.
The October 2017 SCOTUS term ended in June 2018 with the retirement of Justice Anthony Kennedy. A new justice is expected to impact issues that many hold dear, including choice, marriage, and health care. Of course, these are all important issues, but our purpose in this annual review is to discuss the impacts of Supreme Court decisions on our roles as claims professionals, such as whether relied upon civil procedure defenses are upheld, analyzing the impact on our ability to litigate, the contours of substantive claims we deal with frequently, and examining how lower courts and administrative agencies may apply such decisions.
Timeliness Is Next to Godliness
When is a time limit really a time limit? When it’s a jurisdictional time limit.
Untimeliness of filing can provide defense counsel a basis to dismiss problematic claims. On occasion, several different requirements may apply to a timeliness issue. This is the case in Hamer v. Neighborhood Housing Services of Chicago, where the plaintiff complied with the lower court’s extension of time to file an appeal, but the appellate court determined that untimeliness deprived the court of jurisdiction. Justice Ginsburg informs us that a limitation qualifies as jurisdictional only if Congress sets the time.
Plaintiff Charmaine Hamer sued in federal court, alleging violations of the Age Discrimination in Employment Act (ADEA). The district court entered summary judgment on behalf of the defendants. Two relevant provisions address the subsequently filed notice of appeal: 28 U.S.C. Sect. 2107(a) and Federal Rule of Appellate Procedure 4(a)(5)(C).
First, 28 U.S.C. Sect. 2107(a) provides that a notice of appeal must be filed within 30 days of the entry of a judgment, but that a party may file for an extension of that deadline within 30 days of the original expired timeline and may be granted upon a showing of excusable neglect or good cause.
Everything seemed to be in good order for the plaintiff. The district court entered judgment on Sept. 14, 2015. Hamer requested an extension on Oct. 8, 2015, within the time provided for in the federal statute. The district court granted that request on Oct. 9, 2015, extending the time for filing a notice of appeal to Dec. 14, 2015. Hamer filed such a notice of appeal on Dec. 11, 2015, within the granted extension.
But wait. Federal Rules of Appellate Procedure (FRAP) 4(a)(5)(C) similarly provides for an extension based on excusable neglect or good cause. However, no such extension “may exceed 30 days after the prescribed time or 14 days after the date when the order granting the motion is entered, whichever is later.” That is, the court granted a two-month extension under the federal statute, but the civil rule confines such extensions to 30 days after the original deadline expired, which would then be Nov. 14, 2015, not Dec. 14, 2015. The Seventh Circuit determined that the civil rule deprived it of jurisdiction and dismissed.
SCOTUS noted the important distinction between a timing prescription imposed by Congress in a statute (a jurisdictional matter), and a rule of civil procedure (a “claims-processing rule”). Failure to comply with jurisdictional time prescription deprives the court of authority over the case. But FRAP 4(a)(5)(C) is not jurisdictional as it was not created from Congressional direction. The Seventh Circuit should not have treated the civil rule as jurisdictional, and SCOTUS remanded the matter back for further proceedings.
a Little Bit Consolidated
Claims professionals may want to appeal an individual action within a consolidated matter immediately, rather than await resolution of all claims by all parties within the consolidated matter. The Court considered the separate identity of actions subject to consolidation under Federal Rules of Civil Procedure (FRCP) 42(a) and the impact on the appealability in Hall v. Hall. Essentially, consolidation under FRCP 42(a)(1) is a matter of convenience and economy of administration, not a metaphysical merger of multiple suits into one single suit. Thus, separate actions within a consolidated matter may be appealed even if other actions within the consolidated matter are still in the lower court.
As a result of a family feud, siblings Elsa Hall and Samuel Hall had separate lawsuits against one another. Their mother, Ethlyn Hall, sued her son, Samuel, for unlawfully converting funds. She sued her son in her individual capacity and as trustee of an inter vivos trust. When she died, daughter Elsa replaced Ethlyn. Elsa brought no claims in her individual capacity, only as representative and successor trustee to Ethlyn. Samuel counterclaimed against these claims. This comprised one lawsuit—the “trust” claims.
Samuel also filed a separate action against Elsa in her individual capacity for interfering in his relationship with Mom. This comprised a second lawsuit, the “individual” claims. Samuel later moved to consolidate the trust claims and the individual claims and they were tried together.
The jury found for Samuel in the trust claims against him, and in the individual claims he made against Elsa. The court granted Elsa’s motion for a new trial on Samuel’s individual claims against her. But Elsa also filed a notice of appeal as to the trust claims against Samuel. Could she do that? Could she seek appeal in one of the “separate” matters consolidated for trial? Or were all matters consolidated into one so that all must be subject to final judgment before any appeal?
The Court decided that the trust action and the individual action did not lose their separate character upon consolidation and that Elsa could appeal the trust claim while the individual claim proceeded in a separate new trial. Any resulting practical problems are for the Federal Rules Advisory Committees to take up; the meaning of “final decision” is to come from rulemaking, not judicial decision.
Anti-Stacking for
Class Actions
Equitable tolling already exists for individual members of a putative class. If class certification is denied, then the individual putative class members may bring new suit as individuals, or may intervene as individual plaintiffs in the now non-class action regardless of the limitations period. This promotes efficiency and economy of litigation by encouraging individuals to resolve the class certification question early.
However, in China Agritech v. Resh, SCOTUS refused to extend equitable tolling to subsequent class actions. Such tolling could result in an infinite limitations period, which does not encourage efficiency and economy of litigation.
In China Agritech, an original set of plaintiffs sought class action status for claims of violation of the Securities Exchange Act of 1934. The court denied class certification, the original plaintiffs settled, and the original action was dismissed.
Thereafter, a second set of plaintiffs filed similar claims and also sought class status. This second complaint was still filed timely under the applicable limitations period. Again, the lower court denied class certification, and, again, the matter settled and was dismissed.
Michael Resh filed a third class action after the limitations period had passed. The lower court dismissed this class complaint as untimely, holding that the prior actions did not toll the statute of limitations as to further class actions.
SCOTUS agreed. Under Resh’s theory of equitable tolling, each putative class would toll the limitations period for the next putative class. A class action would toll the limitations for the next class action, which tolls the limitations period for the next class action—the limitations period could conceivably never end, and it could go on without ever actually receiving class certification. However, such equitable tolling is still available to putative class members who file an individual claim or join an existing suit after class certification is denied.
The Meaning of Tolling
Plaintiffs frequently bring federal and state claims in a single federal court action. The federal supplemental jurisdiction statute, 28 U.S.C. Sect. 1367 authorizes a federal court to consider related state claims when appropriate jurisdiction-conferring claims are before the federal court. The statute also provides a time period allowing the plaintiff to refile in state court if the jurisdiction-conferring claims are resolved but the accompanying state claims are not. That statute provides, “[T]he period of limitation for any [supplemental state claims]…shall be tolled while the claim is pending [in federal court] and for a period of 30 days after it is dismissed unless State law provides for a longer tolling period.”
In Artis v. District of Columbia, the Court examined whether “tolled” means that the limitations period does not run during pendency of the federal action, or if it merely provides a 30-day grace period for refiling upon dismissal.
Stephanie Artis brought state and federal employment claims in federal court and the court dismissed the federal claims on summary judgment. Artis refiled her state-based claims in state court 59 days later. The state court dismissed the state-based claims as untimely, because the applicable statute of limitations would have expired during the pendency of Artis’ claim in federal court, and she did not refile in state court within 30 days of the federal court dismissal, a “grace period” reading.
SCOTUS rejected this reading. The Court concluded that the supplemental jurisdiction statute stops the limitations period from running at all during the pendency of the federal lawsuit, and then tacks on another 30 days upon dismissal of the federal claims. While it seems a simple text-based resolution, the Artis dissenters see the issue as a Constitutional violation, imposing on a state’s sovereign power to decide when claims would be heard in its courts. This view was pushed very forcefully by Justice Gorsuch, and it will be interesting to see how this larger picture plays out as the Court is reshaped once again next term.
An Epic Battle
In substance, no decision was more directly impactful to claims professionals than Epic Systems Corp. v. Lewis, which upheld the rights of employers to include class arbitration waivers in their employment agreements and force individualized proceedings for employment disputes. That decision is discussed elsewhere—most notably in the July 2018 issue of CLM Magazine—but another aspect of the decision is its place in the increasing disdain and downright hostility to deference under Chevron v. N.R.D.C.
Under Chevron, courts defer to an administrative agency’s interpretation of a statute where the statute is ambiguous and the agency interpretation is reasonable. Without that deference, courts would exercise increased authority over federal regulatory activity and agencies would have less power and authority. For claims professionals, if lower courts see no need or direction to defer to agency interpretations, then it could result in decreased predictability and increased conflict among jurisdictions. Decreased predictability usually means increased risk.
Although the Court stated in Epic that “no party has asked us to reconsider Chevron deference,” it was one of several decisions during the term wherein the Court concluded that the statute being interpreted was actually unambiguous and, thus, there was no need to analyze whether the agency’s interpretation was reasonable.
This was taken a step further in Pereira v. Sessions, an immigration case that would not otherwise be on our claims radar. Justice Kennedy wrote a concurrence stating that “it seems necessary and appropriate to reconsider, in an appropriate case, the premises that underlie Chevron and how courts have implemented that decision.”
Will the justice succeeding Justice Kennedy heed this call to reconsider Chevron? Or simply follow the current trend to isolate the application of Chevron by determining that no ambiguity exists to trigger such deference? We look forward to examining the jurisprudence of the October 2018 term.