#CivProSunday

In a qui tam suit, a plaintiff sues on behalf of the government in the role of a relator and receives a share of any damages awarded to the government. Typically the government also has the right to intervene in the suit. But what happens if the relators decide they don’t want to press forward with the lawsuit and the Government hasn’t stepped in? The Fifth Circuit recently held that a relator can voluntarily dismiss a claim with prejudice—but the trial court can limit that prejudice to the relator.

A group of allergists filed a qui tam suit against a company that operates remote allergy centers, claiming that the company had unlawfully billed government healthcare providers. The federal government chose not to intervene. After three years of delays and opening filings the allergists decided they wanted out and filed a motion to dismiss their claims with prejudice. But the allergists also asked that any order dismissing the case be without prejudice to the federal government. The trial court agreed, the allergy-center company appealed, and the Fifth Circuit affirmed.

The Fifth Circuit noted that “whether the non-intervening Government may be dismissed without prejudice when relators voluntarily dismiss themselves with prejudice” had not been answered in that circuit. Because “[i]ts answer implicates the fundamental relationship between a relator and the Government in qui tam actions . . . we begin with first principles and build from there.”

First, it was already “well-settled that a final judgment on the merits of a relator’s claim will have a binding effect on even the non-intervening Government.” But “when the case’s outcome is decided by the relator’s voluntary decision to quit, courts tend not to bind the Government to that decision automatically.” And the Fifth Circuit had already held that when the relator loses on a motion to dismiss, that decision won’t bind the Government “if the dismissal is for reasons not tied to the underlying legal merit” of the claim.

With these rules in mind, the Fifth Circuit held that the relators could withdraw their claim without prejudicing the Government. The relators decided to quit the case based simply on the relators’ private interests, not the merits: The relators “sought to abandon their claims because they no longer wished to participate in the litigation.” So “[t]he Government—even one that chooses not to intervene—should not be bound by this decision . . . .” The Fifth Circuit went on to hold that the trial court’s order was not an abuse of discretion and affirmed.

Read the Fifth Circuit’s opinion here.

Article III of the federal constitution limits federal-court jurisdiction to “cases [and] controversies,” and there can’t be a case or controversy without concrete harm. A plaintiff must have standing. The Sixth Circuit recently issued an opinion reminding us that Plaintiffs who bring class-action claims under Rule 23 must show their own standing—even if the absent class members would have concrete injury.

The case was about gas-station credit holds. When you buy gas at a gas station you usually have to swipe your credit card before you can get any gas from the pump. When you swipe your card the gas station puts a temporary hold on your card that freezes a set amount of credit as payable to the gas station. After you pump your gas the station posts the actual amount to charge and releases the temporary hold.

A group of gas-station customers filed class-action suits against the gas stations, alleging that the stations had unlawfully held too much credit frozen for too long after selling gas. The trial court found that the customers lacked standing and dismissed the case. The Sixth Circuit affirmed.

The Sixth Circuit began by rehearsing the well-known basics of standing, including “concrete” injury and reviewing the Plaintiffs’ allegations. The Plaintiffs had alleged that the large holds had temporarily denied them access to the frozen credit. But “[n]owhere in Plaintiffs’ pleadings or briefs do Plaintiffs articulate what is ‘real’ about the harm arising from Defendants’ temporary preauthorization holds.”

The named Plaintiffs practically conceded they suffered no concrete harm, while arguing that “it is likely – and even probable – that the loss of credit occasioned by such holds has indeed resulted in [concrete] deprivations for other unnamed Class members.” But a named class member can’t rely on an absent class member’s injury to get standing. The Sixth Circuit concluded that “[t]he district court was therefore correct to dismiss Plaintiffs’ actions for want of standing.”

Read the Sixth Circuit’s opinion here.

Federal Rule of Civil Procedure 41(a) allows a plaintiff to voluntarily dismiss its claims, either before a responsive pleading has been filed, or with the court’s permission. But Rule 41 also allows the trial court to impose conditions on an order dismissing a case. So what happens if a plaintiff decides a case isn’t worth pressing but can’t get a dismissal order without meeting an unexpected—and expensive—condition first?

Paysys International, a payment software company, sued Atos IT Services for breaching a licensing agreement’s territorial restrictions. Three years later, Paysys had lost on twelve of its thirteen claims. Paysys decided the last claim wasn’t worth the price of litigation and moved for a voluntary dismissal without prejudice under Rule 41(a). Atos told the trial court it would agree to the motion but only if the court awarded Atos attorneys’ fees under the licensing agreement.

The trial court granted Paysys’s motion, ordered Paysys to pay attorneys’ fees—and denied Paysys’s request to allow the company to withdraw the motion instead of paying. Paysys appealed and the Second Circuit reversed.

The Second Circuit held that a plaintiff has the right to withdraw a motion for voluntary dismissal if the trial court grants the motion but imposes conditions. The Court of Appeals noted that “Rule 41(a) permits voluntary dismissals of cases, regardless of whether they might otherwise have sufficient merit to be litigated to trial.” That’s because the point of the Rule is cost-efficient litigation. So the Rule allows a plaintiff to dismiss a claim when it decides the costs of litigating the case outweigh the likely benefit. “[I]t is efficient to incentivize that party to dismiss its case (on terms that will not prejudice the defendant), rather than remain in court, wasting our resources and those of the opposing party.”

If the trial court’s order changes that cost-benefit analysis, the plaintiff should be allowed to change its mind. Here the trial court’s order allowed Paysys to dismiss its last claim but only at a price that Paysys hadn’t counted on. The Second Circuit reversed the trial court’s order and remanded the case to give Paysys “a reasonable period of time in which to make [the] decision” whether to withdraw its motion.

Read the Second Circuit’s decision here.

Title 28 United States Code Section 1291 gives U.S. Courts of Appeal “jurisdiction of appeals from all final decisions of the district courts of the United States . . . .” But as we saw a few weeks ago, this means that Courts of Appeal review judgments, not the logical steps leading to those judgments. So a challenge to a subsidiary finding is almost certainly a bad challenge. Now the First Circuit has issued an opinion neatly showing what happens when an appellant challenges the district court’s dicta.

A Ugandan civil-rights group sued Scott Lively under the Alien Tort Statute, pressing common-law claims for negligence and civil conspiracy. Lively moved for summary judgment, which the district court granted. But then Lively appealed to the First Circuit, objecting to what the Court of Appeals described as “a series of unflattering statements in [the district court’s] dispositive opinion.” The First Circuit affirmed.

Because Lively’s appeal simply grumbled at the district court’s dicta, the First Circuit did not have jurisdiction. The First Circuit began by noting that “[n]one of [the district court’s] statements . . . have any bearing on the analytical foundation of the dispositive order or impact the result. The statements are, therefore, dicta and, as such, they lack any binding or preclusive effect.” Courts of Appeals “review ‘judgments, not statements in opinions.’” “A necessary corollary of this proposition is that ‘a winner cannot appeal a judgment merely because there are passages in the court’s opinion that displease him.’”

“[F]ederal courts of appeals have no roving writ to review . . . a district court’s word choices . . . .” Here, Lively had gotten the judgment he asked for. Lively just didn’t like some of things the district court wrote in the opinion explaining the judgment. But  “Lively’s embarrassment in the face of the district court’s unflattering comments, without more, cannot suffice to manufacture appellate jurisdiction where none exists.”

Read the First Circuit’s opinion here.

Federal Courts can only hear cases based on federal law or when the parties are from different states. But when a federal-law claim is based on the same facts as a state-law claim a District Court has supplemental jurisdiction to hear the state-law claim. The Second Circuit recently considered a noteworthy case where the District Court refused to exercise this supplemental jurisdiction over state-law claims after dismissing federal-law claims—without hearing from the parties.

A group of laundromat workers sued their employers for allegedly breaking the federal Fair Labor Standards Act and New York state labor law. After two years of discovery and summary judgment proceedings the case was set to go to a three-day trial. But shortly before the final pretrial conference the workers filed a letter noting that they would only pursue their state law claims.

The district court, without briefing, announced it would not exercise supplemental jurisdiction over the state-law claims, cancelled the trial, and dismissed the workers’ claims. The workers appealed, and the Second Circuit reversed.

The Second Circuit began with the fact that the District Court had dismissed the case without giving either party the opportunity to be heard. “An opportunity to be heard prior to dismissing a case is not a mere formality . . . ‘No principle is more fundamental to our system of judicial administration than that a person is entitled to notice before adverse judicial action is taken against him.’” “Sua sponte dismissals without notice and an opportunity to be heard ‘deviate from the traditions of the adversarial system’. . . .”

If the District Court had ordered briefing, it might have learned why the workers had decided to focus on their state-law claims: While the case was going through discovery and briefing the Second Circuit held that a plaintiff can’t recover liquidated damages under both the Fair Labor Standards Act and New York state labor law. Without briefing, “[t]he plaintiffs could have explained whether they were trying to streamline the issues for the jury” by focusing on the state law claims. Since the District Court heard no briefing from the parties, the District Court’s grounds for dismissing the claims was “inherently speculative.” That was an abuse of discretion.

The Second Circuit finished its opinion by writing: “Litigants come to court to have their problems solved. . . . After all, as the very first Rule of Civil Procedure provides, procedure in the district courts is meant ‘to secure the just, speedy, and inexpensive determination of every action and proceeding.’”

Read the Second Circuit’s opinion here.