Happy Thanksgiving!!
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I wish to thank all of my readers and express my hope that each of you have many things for which you are truly thankful this year. Be safe and enjoy.
Mr. Thorogood Is Not Going Away - Yet
The "Stainless Steel Dryer That Wasn't" Saga Continues
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On Monday, the Supreme Court granted certiorari in Thorogood v. Sears, Roebuck, vacated the judgment, and remanded for reconsideration in light of Smith v. Bayer. The remand will be Mr. Thorogood's fourth appearance before the Court. In October, 2008, the Court reversed a class certification order (opinion and intheiropinion). In February of last year, it affirmed the dismissal of the case as moot (opinion and intheiropinion). In November of last year, it reversed and remanded to the district court for the entry of an order barring the continued prosecution of a mirror class action in a California court (opinion and intheiropinion). Two weeks ago, the Supreme Court decided Smith. In Smith, a federal court denied a class certification motion and later enjoined a state court proceeding by a different plaintiff seeking class certification in a case with similar allegations. The Supreme Court reversed, holding that the case did not fit within the relitigation exception to the Anti-Injunction Act.
The cases are distinguishable. For example, both Thorogood cases are in federal court and would apply the same Rule 23 analysis - not so in Smith. And the Thorogood panel was familiar with the issues raised in Smith and did not think it necessary to await the Supreme Court's ruling.
I anxiously await the next chapter of this compelling saga.
Kelley Drye Adds LA Office, Entertainment And Media Capabilities
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The "Simon Cowell" Of The Circuits?
The "Stainless Steel Dryer That Wasn't" Saga Continues
The Seventh Circuit Court of Appeals has issued three opinions in Thorogood v. Sears, Roebuck and Company, an action brought on behalf of a class allegedly harmed because Sears marketed a "stainless steel" clothes dryer that was not 100% stainless steel. It reversed the district court's certification order (opinion and intheiropinion), it affirmed the dismissal of the case as moot after Sears made an offer of judgment that exceeded the plaintiff's possible individual damages (opinion and intheiropinion), and it recently reversed and remanded to the district court for the entry of an injunction under the All Writs Act barring the continued prosecution of a mirror class action in California (opinion and intheiropinion). In its All Writs opinion, the panel made some fairly strong comments about potential for abuse in class actions, including a characterization of counsels' tactics as "close to settlement extortion." Class counsel took exception to several of the panel's remarks in its petition for rehearing and for rehearing en banc, at one point characterizing the panel as the "Simon Cowell of the Circuits.” The panel voted to deny the petition, and no judge requested a vote on rehearing en banc. But the "over the top" accusations in the petition prompted a six page response from the panel instead of the more typical one-liner. The panel stood quite firm on the merits, pointed out the many instances where class counsel actually ignored the points made in the opinion, and repeated and expanded upon the potentials for abuse inherent in class action litigation. The bottom line is that the Seventh Circuit believes the stainless steel dryer class action litigation is a classic example of class action abuse. Only time will tell if class counsel accepts the message.
Isn't Judge Williams Right?
On October 15, a panel of the Seventh Circuit ruled that Illinois’ mandatory “brief period of silence” in public schools statute was constitutional (opinion and intheiropinion). In order to reach that conclusion, the panel (Judges Ripple and Manion – Judge Williams dissented) had to conclude that the statute had a secular purpose – that is, that the Illinois legislature really intended to require a brief moment of silence every morning in every Illinois public school to calm the students. Really? Does anyone believe that?
Judge Williams in dissent said “let’s call a spade a spade – statutes like these are about prayer in schools.” Isn’t she right? There are thousands of public schools in Illinois – large and small, rural and urban – serving millions of students of varied ages, intelligences, and socio-economic backgrounds. For the past forty years, every Illinois public school teacher has had the statutory right to observe a moment of silence if he or she thought it would help calm the students. According to the majority opinion, one reason for making the period of silence mandatory was that not enough teachers were taking advantage of the opportunity. If the true purpose of the moment was to quiet students, it makes sense that some teachers in some classrooms saw no need for the moment and others did. However, if the true purpose is to make sure that every student has an opportunity to pray, a teacher’s or school district's failure to cooperate would be a concern.
In Wallace, the Supreme Court found Alabama’s moment of silence unconstitutional. But apparently the record there was replete with references to the legislators’ intent that the moment be a moment of prayer. Maybe our Illinois legislators learned a little something from their Alabama counterparts and were able to pass the statute without being so obvious about their collective intent.
Can This Be Correct?
In its August 24 opinion in Rexam Beverage Can Co. v. Bolger, the Court affirmed an award of attorney’s fees based on a lease provision. The lease paragraph at issue was not a “prevailing party” fee-shifting provision but rather a pretty standard lessee indemnification provision. In it, the lessee agreed to indemnify lessor against all claims “by or in behalf of any person” arising from the occupation, use, etc. of the premises arising during the term of the lease – and against all cost and attorney fees incurred “in or about any such claim.” The Court applied this provision to award attorneys’ fees to the lessor in a suit brought by the lessor to require the lessee to make certain repairs to the premises before returning possession to the lessor. The Court rejected arguments that the provision only applied to third party claims and that it required the lessor to prevail on its claims.
Can this be correct? Although the lessor did prevail on part of its claim for repairs, the Court held that the plain and unambiguous language of the lease did not exclude claims between the parties and did not require success. What if the lessor brought an action for repairs and lost? Under the Court’s analysis, the lessee would have to pay the lessor’s attorneys’ fees. In fact, under the Court’s analysis, the lessee could never prevail in an action against the lessor because it indemnified the lessor against “all actions.”
It seems obvious that the reason the provision does not have a “prevailing party” or success requirement is because it is not meant to address actions between the parties. The lessee is required to indemnify the lessor, including fees, in any action by a third party, whether or not the lessor prevails. The lessor is basically saying: “If I get sued, you will handle it.” The problem is that the language of the lease does not specifically address the issue. The Court has, in the past, refused to read contracts in a way that would create a commercially unreasonable result – it should have done so here as well, in my opinion. (See here for a recent article on the New York courts’ treatment of the issue.)
The Court also affirmed the fee award under a second lease provision dealing with correcting events of default. Therefore, the case would have turned out the same had it rejected the indemnification argument - all the more reason not to go there.
In My Opinion: Making A Federal Case Out Of It
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I am not a bankruptcy lawyer. Can anyone explain either side's thinking in the recent In re: Meyer decision (intheiropinion post here). The Trustee wanted $973.60 from an income tax refund turned over to the estate. Meyer thought she only needed to turn over $349.91. Yet the difference ($623.69) was the subject of litigation in the bankruptcy court, district court, and Seventh Circuit Court of Appeals. Even if the $600 was only one of several issues before the lower courts, it appears to have been the only issue in the Seventh Circuit. The Court frequently criticizes lawyers for bringing matters of such little monetary significance to the Court - here it did not do so at argument or in the opinion
- Did the Trustee's lawyers and Meyer's lawyers both get compensated by the bankruptcy estate?
- How is it in the best interest of a creditor to have that kind of fight over $600?
- Even if the issue itself is important and in need of a resolution, why resolve it here?
- Was someone else funding the litgation in order to get a resolution?
- What am I missing?
In My Opinion: Does The Chief Judge Do The New York Times Crossword Puzzle?
When was the last time you used "hugger-mugger" in a sentence? Do you even know what it means? I did not until last week's Thursday New York Times crossword puzzle. In the puzzle, "hugger-mugger" was used as a clue (at 12 Down) for "sly." In an opinion released yesterday morning, Chief Judge Easterbrook, in writing for a panel that reversed a criminal conviction, wrote (on page 11): "If Indonesia had not so recently been subject to an arms embargo, then hugger-mugger alone might permit a jury to infer knowledge that a license was required." It appears Chief Judge Easterbrook is invoking a definition different from sly - probably more in the nature of "confusion." Maybe its just a coincidence, particularly given the very different meaning, but he did also write, in 1996: "[A] newspaper deprived of access to the New York Times crosswords puzzles can find others, even if the Times has the best known one." Paddock Publications v. The Chicago Tribune, 103 F. 3d 42 (7th Cir. 1996). Anyway, it is a fun word and I am glad it made its way into an opinion.
