By Kevin M. Hogan and Sean C. McPhee, originally published in The Daily Record on Tuesday, October 16, 2018.
Western District Case Notes
Personal Jurisdiction and Amendment of Pleadings
In Jackson v. Bank of America, N.A., No. 16-CV-787-FPG-HBS (May 25, 2018), a putative class action against a mortgage loan servicer, plaintiffs sought leave to amend their complaint to add another set of lead plaintiffs from Illinois, so as to promote judicial economy by avoiding the need to file an identical case in Illinois. In opposition, defendant argued that the amendment would be futile because the Court lacks personal jurisdiction over the Illinois plaintiffs’ claims. Specifically, defendant argued first that general jurisdiction was lacking because it is not incorporated under the laws of New York and does not have its principal place of business here. Defendant next argued that, because the conduct giving rise to the non-residents’ claims occurred outside of New York, specific jurisdiction also was lacking. Noting that an amendment to a pleading will be futile if the proposed claim cannot withstand a motion to dismiss under Rule 12(b)(6), the Court first found that general jurisdiction was absent because, although defendant has “some physical presence” in New York, its activities here do not present an “exceptional case” warranting departure from the rule that a defendant must be “at home” in the forum in order for the Court to exercise general jurisdiction over it. Next, the Court found that it lacked specific jurisdiction because there was no affiliation between the forum and the controversy underlying the Illinois plaintiffs’ claims. As a result, the proposed amendment would be futile, and the motion to amend was denied.
In Perez v. Foremost Insurance Company, et al., No. 17-CV-997-WMS (June 4, 2018), plaintiff was injured in an apartment owned by defendant and, following a bench trial in state court, was awarded $75,000 in damages and $1,951.51 in costs and disbursements. When defendant’s carrier denied coverage, plaintiff commenced a declaratory judgment action against the carrier. The carrier removed the declaratory judgment action to federal court, where plaintiff then moved to remand back to state court on grounds that the matter in controversy did not exceed $75,000, exclusive of interests and costs, and that the rule of the unanimity was not satisfied because the defendant insured, who also was named as a nominal defendant, did not consent to the removal. The Court first held that the amount in controversy exceeded the $75,000 threshold. The disbursements and costs that are excluded by statute from the calculation of the jurisdictional amount in controversy do not include the costs and interest that had been awarded in the underlying state action and were now sought to be recovered from the carrier. The Court also found that the rule of unanimity was satisfied because the insured, while plaintiff’s adversary in the underlying state case, was aligned with plaintiff rather than the carrier, because any recovery by plaintiff against the carrier would inure to the benefit of both plaintiff and the insured. As a result, the Court realigned the insured as a nominal plaintiff, making the insured’s failure to consent to removal irrelevant.
In Black v. Covidien, PLC, No. 17-CV-6085-FPG (July 2, 2018), after a failure to warn claim involving an allegedly defective medical device was dismissed because plaintiff failed to identify what warnings should have been given to her and her physician, plaintiff filed an amended complaint that identified a specific risk posed by the implant that defendant did not disclose to her or her doctor and that, had the risk been disclosed, would have persuaded her not to proceed with the implantation. Defendant moved again to dismiss the failure to warn claim on grounds that the amended complaint still failed to identify any warning that was provided and was defective. Plaintiff cross-moved for sanctions under Rule 11, contending that defendants misrepresented the contents of the amended complaint and unreasonably refused to withdraw their motion to dismiss. The Court denied the motion, finding that the failure to disclose a risk was sufficient to satisfy Rule 12(b)(6) with respect to a failure to warn claim. The Court also denied the Rule 11 motion. Rule 11 requires a party to serve a motion for sanctions on the other party before filing it, and to provide that other party with 21 days to withdraw the challenged paper, only after which, if no action is taken, the motion can be filed and relief from the Court sought. In this case, however, plaintiff had requested that defendants withdraw their motion to dismiss via an email. According to the Court, such an informal warning without service of a separate Rule 11 motion was not sufficient to trigger the 21 day safe harbor and, therefore, the request for sanctions could not be considered.
Modification of Preliminary Injunction and Attorney Withdrawal
In FTC v. Vantage Point Services, LLC, No. 15-CV-6-WMS-HKS (May 8, 2018), defendants filed a motion seeking to modify a preliminary injunction that was previously entered, and allow for the release of funds needed to pay their attorneys’ fees. In the alternative, defendants’ attorneys sought to be relieved from further service in the matter. Turning first to the request to modify the injunction, the Court observed that it was required to consider whether defendants had other funds available to pay their attorneys. And, because defendants failed to provide a full (and current) financial disclosure, the Court was unable to make that determination, requiring denial of that aspect of the motion. As for defendants’ attorneys’ request to withdraw from representation, the Court noted that “[n]on-payment of legal fees, without more, is not usually a sufficient basis to permit an attorney to withdraw from representation.” The Court then drew a distinction between mere nonpayment and deliberate disregard of financial obligations, and found that this was not a situation where defendants were able, but refused, to pay their attorneys’ fees. Moreover, because defendants’ attorneys were aware of the asset freeze when they agreed to undertake representation, and in light of the prejudice that would result at this stage of the litigation, this aspect of the motion also was denied.
In Dingelday v. VMI-EPE-Holland B.V. et. al., No. 15-CV-916-RJA-LGF (May 8, 2018), a products liability case, plaintiff sought the deposition of defendant’s representative under Rule 30(b)(6). When defendants insisted the deposition take place in the Netherlands at the witness’s place of business, plaintiff moved under Rule 37 to compel that the deposition be conducted in Buffalo. Noting it had discretion to determine the deposition’s location after considering such factors as cost, convenience and litigation efficiency, the Court denied the motion and, consistent with the general rule, ordered the deposition to take place at the witness’s place of business. The Court observed that the defendant’s presence in the forum was not voluntary, and plaintiff chose this district over the Netherlands. The Court rejected plaintiff’s contention that the basis for long-arm jurisdiction — defendant’s sale of the defective machine in the local venue — was not sufficient to overcome the presumption favoring the witness’s principal place of business as deposition location. The Court also determined that the costs would be similar for both sides, the disruption to the witness and defendants’ business operations would be significant, plaintiff’s counsel would not need access to his expert to effectively depose the witness, and video-conference technology could ameliorate some of plaintiff’s concerns.
Fair Debt Collection Practices Act
In Centerbar v. Esser James & Assoc’s, LLC, No. 16-CV-896-LJV (July 10, 2018), plaintiff claimed that defendant violated the Fair Debt Collection Practices Act by attempting to collect a debt through the threat of forcible recovery. Defendant failed to appear and a default judgment for statutory damages, attorneys’ fees, and costs was entered. Because plaintiff also sought actual damages for anxiety and stress that aggravated her pre-existing post traumatic stress disorder, however, an evidentiary hearing was necessary. At the hearing, plaintiff testified that she only received four or five calls over a period of five months, that she did not incur any out-of-pocket expenses, and that she did not seek additional counseling services for her PTSD. Nonetheless, the Court found that plaintiff had suffered an emotional injury because her recovery from PTSD was set back, and awarded $20,000 in actual damages. The Court then awarded additional costs of $750.83 to reimburse the expense her attorney incurred to travel to Buffalo for the hearing. Finally, while plaintiff’s attorney sought a supplemental award of attorneys’ fees, the Court noted that the amount specifically requested was less than the amount itemized in the attorney’s application. Therefore, because the Court did “not want to shortchange counsel based on mathematical errors,” the attorney was given an opportunity to submit a corrected fee request.
Kevin M. Hogan is the Managing Partner at Phillips Lytle LLP. He concentrates his practice in litigation, intellectual property and environmental law. He can be reached at email@example.com or (716) 847-8331. Sean C. McPhee is a partner with Phillips Lytle LLP where he focuses his practice on civil litigation, primarily in the area of commercial litigation. He can be reached at firstname.lastname@example.org or (716) 504-5749.