A collection of significant and strange cases decided by the federal courts of appeals this week. Each summary delivered in a minute or less: ten cases, ten minutes. On the docket this week was the False Claims Act, Facebook, cy pres awards, and tax avoiders.
1. Eleventh Circuit extends Excessive Fines Clause to certain False Claims Act suits.
If a private entity defrauds the federal government, the False Claims Act (FCA) allows an individual to file suit on the federal government’s behalf (known as a qui tam action). The government may intervene, but it does not have to. Violators of the FCA face fines and treble damages. Courts have long recognized that if the federal government intervenes and successfully prosecutes an FCA qui tam action, the fine cannot be “excessive” under the Eighth Amendment. But what about when the government doesn’t intervene? Does the Excessive Fines Clause apply to non-intervened FCA qui tam actions? Yes, says an Eleventh Circuit panel, though the panel notes that neither the Supreme Court nor any other federal circuit court has previously answered this question. Judges Newsom and Jordan, concurring: We give too much deference to Congress on the meaning of “excessive”. Judge Tjoflat, concurring/dissenting in part: The majority adopts a poor test for deciding whether a civil fine is excessive.
2. Eighth Circuit rejects change of jurisdiction in Tyson Foods negligence suit.
Tyson Foods operates several meat production and packaging plants throughout the United States, including one in the town of Waterloo, IA. In March and April 2020 about 1,000 workers (36%) at the Waterloo facility contracted COVID-19. Some died. Plant managers, well aware of the rising tide of infections, allegedly placed bets on how high the number would get. Relatives of the deceased workers sued Tyson Foods in state court for negligence and misrepresentation. Tyson Foods sought to remove to federal court, claiming it acted “under the direction of” the federal government. Eighth Circuit panel: We disagree. That a private company merely follows federal law is not enough to say the company acts at the federal government’s behest. Case remanded to state court.
3. Tenth Circuit applies SCOTUS personal jurisdiction precedent against robocall company.
We all hate the scam calls about our car’s “extended warranty”. Alexander Hood, a Colorado resident, did God’s work and figured out that one of the companies making such calls is Florida-based America Auto Care, LLC. Mr. Hood brought a class action against the company in federal court. The company moved to dismiss for lack of specific personal jurisdiction. District court (in 2020): Agreed, suit dismissed. Tenth Circuit panel: Reversed and remanded, thanks to the Supreme Court’s March 2021 decision in Ford Motor Co. v. Montana Eighth Judicial Dist. Court.
4. Fifth Circuit guts assertion that Facebook is a government agent.
In a case in which a Corpus Christi man was indicted after discussing sexual escapades with a fifteen-year-old on Facebook, a Fifth Circuit panel rejected the man’s claim that Facebook/Meta/whatever is a government agent. The Fifth Circuit is still wary of adopting a formal government-agent test, though.
5. Ninth Circuit judge calls for reconsidering cy pres awards.
In the late 2000s Google’s Street View program collected passwords and documents of millions of Americans via their wi-fi. Though accidental, Google’s collection of such data was still illegal. Google faced class actions representing some sixty million people. After a decade of litigation the parties settled. They agreed on injunctive relief, cy pres awards to various internet privacy groups, and attorneys’ fees, among other things. A Ninth Circuit panel rejected a welter of claims that the settlement was invalid. Judge Bade, concurring: I have fundamental concerns about the fairness of cy pres awards. I am not alone; several scholars are skeptical that awards to uninjured third parties really benefit injured class members. It’s time to reconsider the practice of cy pres awards.
6. Third Circuit rules for labor unions in racketeering lawsuit.
A group of assisted living centers in New England sued four labor unions representing employees at such centers. The centers argued the unions’ actions, which they say included vandalism, fraud, sabotage of medical records, and threats of economic loss, amounted to extortion and violated the federal racketeering statute. A district court rejected the allegations and granted summary judgment to the unions. Third Circuit panel: The district court’s reasoned opinion got it right. Judge Jordan, dissenting: There are genuine disputes of material fact here. This case should’ve gone to trial.
7. Second Circuit rules an art gallery’s lost profits are not damaged physical property under insurance policy.
Guy Hepner runs an art gallery and dealership in New York City. Like many businesses, his had to transition fully to online sales during the COVID-19 pandemic. He sought to recoup the lost profits under his insurance policy, but his insurance provider denied his request. Since the policy covers damage only to physical property and Hepner’s profits aren’t physical property, the insurer reasoned, Hepner is not entitled to coverage. Hepner sued. Second Circuit panel: The insurer’s reasoning is sound. Case dismissed.
8. D.C. Circuit dismisses challenge to Amtrak’s arbitration requirement.
Amtrak, the federal railroad service, imposes a mandatory arbitration requirement on all passengers and ticket purchasers. Robert Weissman, president of Public Citizen, a progressive nonprofit, sued Amtrak to invalidate the arbitration requirement. Amtrak: Mr. Weissman lacks standing, for we have never invoked the arbitration requirement against him. Mr. Weissman: I have standing because I can’t purchase a ticket without “strip[ping] [myself] of the ability to determine . . . the level of risk to accept when deciding whether to enter into a commercial transaction.” D.C. Circuit panel: Uh, no. Mr. Weissman has not plausibly alleged any current or imminent injury-in-fact, so he lacks standing. Suit dismissed. Judge Silberman, concurring: Mr. Weissman’s argument is quite bad but deserves “credit for ingenuity.”
9. D.C. Circuit gives wings to pilot’s dispute with FAA.
Before becoming a certified commercial airline pilot, Charles Erwin sought treatment for alcohol dependence. As part of his pilot’s certification Mr. Erwin undergoes random alcohol tests by the Federal Aviation Administration (FAA) several times a year. He passed with flying results for months. One afternoon he eats a pulled pork sandwich at a Tennessee restaurant. The next morning he submits to an FAA alcohol test. He fails it. The next day he voluntarily takes two more alcohol tests, both of which he passes. Bewildered, he phones the restaurant and asks about his meal. Turns out the restaurant cooks its pulled pork in beer, but the menu doesn’t advertise it. Meanwhile, the FAA revokes Mr. Erwin’s certification to fly. Mr. Erwin asks the FAA to reconsider and submits his negative tests, the restaurant’s full explanation, and several supporting documents from medical examiners and scholars. The FAA denies his request. It states curtly that his supporting documents are “not sufficient to reverse” the FAA’s decision. D.C. Circuit panel: That’s not an adequate explanation. Try again.
10. Seventh Circuit issues show-cause order for counsel in clients’ tax avoidance scheme.
For years an Illinois couple deposited income in a life insurance policy held in trust. But wait! The trust was a sham. Its “insurers” were shell corporations in Bermuda and the Cook Islands. The IRS suspected a ruse and issued a delinquency notice. The couple then sawed off the branch on which it sat: They challenged the delinquency in court. Doing so involved discovery, which required the couple to disclose their tax records. Those records revealed the couple failed to report nearly $15 million in income in a manner that, to the IRS, looks like your quintessential example of civil fraud. To do justice to Judge Sykes, we quote part of his opinion for a unanimous Seventh Circuit panel: “We affirm. The [couple’s] rambling brief spans 78 pages yet somehow develops only two coherent arguments remotely related to the [lower] court’s decision. And those two arguments are baseless: the [couple] stipulated them away in the [lower] court. We therefore order John E. Rogers, the [couple’s] attorney, to show cause why he should not be sanctioned under Rule 38 for filing this frivolous appeal.”
An in en banc news:
The Tenth Circuit, voting 5:2, won’t reconsider a panel’s holding that someone born in American Samoa is not ipso facto a U.S. citizen under the Fourteenth Amendment. The dissent of Judges Bacharach and Moritz, which features eleven maps and tables, argues the panel majority gave inadequate treatment to the meaning of the Citizenship Clause. The only other federal appellate court to consider the question was a D.C. Circuit panel, which held the same in 2015.