District of Connecticut Bench-Bar Conference October 26, 2018 8:30 a.m. – 4:30 p.m. St. Clements Castle Portland, CT CT Bar Institute Inc. CT: 4.75 CLE Credits (3.25 General; 1.5 Ethics) NY: 5.0 CLE Credits (3.5 AOP; 1.5 Ethics) No representation or warranty is made as to the accuracy of these materials. Readers should check primary sources where appropriate and use the traditional legal research techniques to make sure that the information has not been affected or changed by recent developments. Page 1 of 112
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Lawyers’ Principles of Professionalism As a lawyer I must strive to make our system of justice work fairly and efficiently. In order to carry out that responsibility, not only will I comply with the letter and spirit of the disciplinary standards applicable to all lawyers, but I will also conduct myself in accordance with the following Principles of Professionalism when dealing with my client, opposing parties, their counsel, the courts and the general public.
Civility and courtesy are the hallmarks of professionalism and should not be equated with weakness; I will endeavor to be courteous and civil, both in oral and in written communications;
I will not knowingly make statements of fact or of law that are untrue;
I will agree to reasonable requests for extensions of time or for waiver of procedural formalities when the legitimate interests of my client will not be adversely affected;
I will refrain from causing unreasonable delays;
I will endeavor to consult with opposing counsel before scheduling depositions and meetings and before rescheduling hearings, and I will cooperate with opposing counsel when scheduling changes are requested;
When scheduled hearings or depositions have to be canceled, I will notify opposing counsel, and if appropriate, the court (or other tribunal) as early as possible;
Before dates for hearings or trials are set, or if that is not feasible, immediately after such dates have been set, I will attempt to verify the availability of key participants and witnesses so that I can promptly notify the court (or other tribunal) and opposing counsel of any likely problem in that regard;
I will refrain from utilizing litigation or any other course of conduct to harass the opposing party;
I will refrain from engaging in excessive and abusive discovery, and I will comply with all reasonable discovery requests;
In depositions and other proceedings, and in negotiations, I will conduct myself with dignity, avoid making groundless objections and refrain from engaging I acts of rudeness or disrespect;
I will not serve motions and pleadings on the other party or counsel at such time or in such manner as will unfairly limit the other party’s opportunity to respond;
In business transactions I will not quarrel over matters of form or style, but will concentrate on matters of substance and content;
I will be a vigorous and zealous advocate on behalf of my client, while recognizing, as an officer of the court, that excessive zeal may be detrimental to my client’s interests as well as to the proper functioning of our system of justice;
While I must consider my client’s decision concerning the objectives of the representation, I nevertheless will counsel my client that a willingness to initiate or engage in settlement discussions is consistent with zealous and effective representation;
Where consistent with my client's interests, I will communicate with opposing counsel in an effort to avoid litigation and to resolve litigation that has actually commenced;
I will withdraw voluntarily claims or defense when it becomes apparent that they do not have merit or are superfluous;
I will not file frivolous motions;
I will make every effort to agree with other counsel, as early as possible, on a voluntary exchange of information and on a plan for discovery;
I will attempt to resolve, by agreement, my objections to matters contained in my opponent's pleadings and discovery requests;
In civil matters, I will stipulate to facts as to which there is no genuine dispute;
I will endeavor to be punctual in attending court hearings, conferences, meetings and depositions;
I will at all times be candid with the court and its personnel;
I will remember that, in addition to commitment to my client's cause, my responsibilities as a lawyer include a devotion to the public good;
I will endeavor to keep myself current in the areas in which I practice and when necessary, will associate with, or refer my client to, counsel knowledgeable in another field of practice;
I will be mindful of the fact that, as a member of a self-regulating profession, it is incumbent on me to report violations by fellow lawyers as required by the Rules of Professional Conduct;
I will be mindful of the need to protect the image of the legal profession in the eyes of the public and will be so guided when considering methods and content of advertising;
I will be mindful that the law is a learned profession and that among its desirable goals are devotion to public service, improvement of administration of justice, and the contribution of uncompensated time and civic influence on behalf of those persons who cannot afford adequate legal assistance;
I will endeavor to ensure that all persons, regardless of race, age, gender, disability, national origin, religion, sexual orientation, color, or creed receive fair and equal treatment under the law, and will always conduct myself in such a way as to promote equality and justice for all.
It is understood that nothing in these Principles shall be deemed to supersede, supplement or in any way amend the Rules of Professional Conduct, alter existing standards of conduct against which lawyer conduct might be judged or become a basis for the imposition of civil liability of any kind.
--Adopted by the Connecticut Bar Association House of Delegates on June 6, 1994
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Table of Contents Agenda ................................................................................................................................................................................... 4
Archer and White Sales, Inc. v. Henry Schein, Inc. .......................................................................................................... 13
United States of America v. Terance Martez Gamble ....................................................................................................... 22
In re Google Referrer Header Privacy Litigation ............................................................................................................. 24
Dominic Oliveira v. New Prime Inc. ................................................................................................................................. 38
State of Indiana v. Tyson Timbs ........................................................................................................................................ 59
Frank Varela v. Lamp Plus, Inc. ....................................................................................................................................... 66
Financial and Ethical Aspects of Litigation Funding
Miller UK Ltd. V. Caterpillar, Inc. ................................................................................................................................... 69
Immigrant Family Separation Cases: What Were They About and What is the Next Wave of Litigation?
Ms. L. v. U.S. Immigration and Customs Enforcement ..................................................................................................... 97
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District of Connecticut Bench-Bar Conference
October 26, 2018
St. Clements Castle, Portland, Connecticut
AGENDA
8:00 – 8:45 Continental Breakfast and Registration
8:45 – 9:00 Welcome and Introduction – Honorable Victor A. Bolden, Chair of the Conference, and Robert M. Frost and Kristen L. Zaehringer, Federal Practice Section Co-Chairs
9:00 – 9:15 Honorable Stefan R. Underhill, Chief Judge of the United States District Court for the District of Connecticut, speaking on the state of the district
9:15 – 10:45 Panel Discussion – The Supreme Court and Its Docket, Circa 2018-19
A Survey of Cases Scheduled for the 2018-19 Term and Discussion of Recent Confirmations Panelists:
Beth S. Brinkmann, Partner, Covington & Burling LLP, Washington Judith Resnik, Arthur Liman Professor of Law, Yale Law School, New Haven
10:45 – 11:00 Coffee Break
11:00 – 12:30 Panel Discussion – Financial and Ethical Aspects of Litigation Funding Moderator:
Adam S. Mocciolo, Partner, Pullman & Comley LLC, Bridgeport
Panelists: Ken Epstein, Investment Manager & Legal Counsel, Bentham IMF, New York Hon. Allan L. Gropper (Ret.), Adjunct Professor of Law, Fordham University, New York Nicholas F. Kajon, Partner, Stevens & Lee, New York Edward Reilly, Principal, Themis Legal Capital, New York
12:30 – 2:00 Lunch Presentation by the Judges of the District Court of awards for pro bono work and court service Recognition of the Honorable Janet C. Hall for her dedication and service as Chief Judge for the
District of Connecticut (2013-2018)
2:00 – 3:30 Panel Discussion – Immigrant Family Separation Cases: What Were They About and What Is the Next Wave of Litigation?
Moderator: Erin O’Neil-Baker, Principal, Hartford Legal Group
Panelists: Anand Balakrishnan, Staff Attorney, American Civil Liberties Union Immigrants’ Rights Project,
New York Anthony Enriquez, Director, Catholic Charities’ Unaccompanied Minors Program Michael J. Wishnie, William O. Douglas Clinical Professor of Law, Yale Law School, New Haven
3:30 – 4:30 Reception (appetizers and cash bar)
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Faculty Biographies
Anand Balakrishnan is a staff attorney with the New York City office of the American Civil Liberties Union Foundation Immigrants’ Rights Project, where he litigates nationally-visible policy cases on behalf of immigrant clients. He is part of the team representing the plaintiffs in the Ms. L. v. U.S. Immigration and Customs Enforcement matter in the United States District Court for the District of Southern California challenging a federal policy of separating immigrant children from their families at national borders. Mr. Balakrishnan is an alumnus of the Yale Law School, where he previously worked on immigration matters in the university’s Worker and Immigrant Rights Advocacy Clinic. Beth S. Brinkmann is an experienced appellate and Supreme Court litigator who has served in high-level positions in the Department of Justice, most recently as Deputy Assistant Attorney General in the Civil Division. She has argued 24 cases before the Supreme Court of the United States. Ms. Brinkmann also has argued in numerous federal and state appellate courts across the country. As the Civil Division’s top appellate lawyer, she was responsible for supervising much of the federal government’s civil litigation in appellate courts, including constitutional challenges, administrative law issues, intellectual property matters, and national security cases. During her tenure at the DOJ, Ms. Brinkmann presented oral argument in several high-profile court of appeals cases, including the successful defense of the constitutionality of the Affordable Care Act and the government’s victory in federal immigration preemption litigation. She also regularly consulted with trial lawyers for the government on legal arguments and strategy at early phases of litigation, made recommendations on appellate matters to the U.S. Solicitor General, and advised senior leadership of cabinet-level departments and at regulatory agencies regarding litigation risk, legislative proposals, and rulemaking matters. From 1993 to 2001, Ms. Brinkmann served as an Assistant to the Solicitor General in the Department of Justice. In this role, she briefed and argued cases to the Supreme Court on behalf of the United States and also provided advice and analysis on whether to authorize appeals, petitions for certiorari, and petitions for rehearing en banc. Ms. Brinkmann served two years as an Assistant Federal Public Defender, where she represented indigent criminal defendants in federal district court, including approximately a dozen felony jury trials. She also previously handled both trial and appellate litigation in state and federal court at a small boutique litigation firm. Anthony Enriquez is the Director of the Unaccompanied Minors Program at Catholic Charities Community Services in New York City, where each year he oversees and ensures the provision and quality of legal services to thousands of immigrant children who lack the care of a parent or guardian and have been detained by the federal government. In the summer of 2018, he led a team of non-profit organizations and attorneys in the family reunification of hundreds of separated immigrant children who had been placed in New York shelters as a result of the federal government’s zero tolerance policy toward asylum seeking families. In his current role, Anthony also oversees the legal arm of Terra Firma, the nation’s first legal-medical partnership focused on the wellbeing of unaccompanied immigrant youth, a collaboration between Catholic Charities and Montefiore Hospital in the South Bronx. Anthony is a co-creator of the Immigrant Children Advocates Relief Effort
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(ICARE), a coalition of New York City legal service providers that provides free lawyers for young people in New York City facing deportation. In addition to his work with immigrant youth, Anthony clerked for a federal judge and has litigated unlawful immigration detention practices before the federal courts. Prior to his career as a lawyer, Anthony worked in translation, film, and in United Nations advocacy related to peacekeeping missions. Anthony received his JD from New York University School of Law. Ken Epstein is an investment manager and legal counsel at Bentham IMF, responsible for leading the company’s investments in bankruptcy and insolvency-related matters. He serves as a resource for debtors, creditors (including hedge funds, private equity funds and alternative asset managers), bankruptcy estate representatives and other stakeholders seeking to maximize the value of litigation claims. Ken has extensive experience advising and managing debtors-in-possession, individual creditors and creditor groups (ad hoc and OCUC's) and financial institutions in insolvency and bankruptcy-related litigation matters nationally and internationally. He began his career as a lawyer in the financial restructuring group of Cadwalader, Wickersham & Taft. Prior to joining Bentham IMF, he was managing director in the restructuring and remediation group at MBIA, a publicly listed financial institution. Ken taught bankruptcy law as an adjunct professor at Cardozo Law School and has served as a panelist and author on bankruptcy-related topics. He has testified on several occasions before the Michigan House of Representatives, Financial Liability Reform Committee and is certified as an insolvency and restructuring advisor by the AIRA. Ken earned his J.D. from Brooklyn Law School in 2000, where he graduated cum laude after serving on the Journal of Law and Public Policy. He currently serves on the board of Friends of the Children NY, a NY nonprofit, and has other for-profit and non-profit board experience. Allan L. Gropper was appointed as a United States Bankruptcy Judge for the Southern District of New York on October 4, 2000, and retired on January 9, 2015.
Prior thereto he was a member of the law firm of White & Case, initially as a litigator and later as head of the Bankruptcy and Reorganization group. In the latter capacity he represented clients in connection with some of the nation’s largest Chapter 11 cases, including Manville Corporation, Texaco, LTV Corporation, Federated Department Stores/Allied Stores Corp,, Thatcher Glass Corporation, Maxwell Communications Corp., MGM, and United States Lines. He was also active in international and cross-border restructurings and was located in the White & Case Hong Kong office during the year 1999-2000.
Judge Gropper presently serves as a consultant and expert witness in litigated matters and as an arbitrator and mediator. He is an adjunct professor of law at Fordham Law School, a member of the National Bankruptcy Conference and a Fellow of the American College of Bankruptcy. He is a member of the United States delegation to Working Group V (Insolvency Law) of the United Nations Commission on International Trade Law (UNCITRAL). He is also a member of the American Arbitration Association Roster of Neutrals and the INSOL International College of Mediation. He is a graduate of Yale College and Harvard Law School.
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Hon. Janet C. Hall was sworn in as a United States District Judge for the District of Connecticut on October 14, 1997. She received an A.B. degree, magna cum laude, from Mount Holyoke College in 1970 and a Juris Doctor from New York University School of Law in 1973 where she was a Root-Tilden Scholar. In 2007, she received a Doctor of Laws (Hon. Caus.) from Quinnipiac University. From 1980 until her appointment in 1997, Judge Hall was first an Associate, and then named Partner (1982), in the Law Firm of Robinson & Cole in its Hartford office, where she concentrated her practice in Civil Litigation. Prior to 1980, she served in the United States Department of Justice Antitrust Division from 1975-80, except for a period in 1979 as a Special Assistant United States Attorney in the Eastern District of Virginia. After graduation from law school, she was associated with the firm of Hale & Dorr in Boston from 1973-75. Judge Hall served as Chief Judge for the District of Connecticut from September 9, 2013 through August 31, 2018. She also served on the Federal-State Jurisdiction Committee of the Judicial Conference of the United States from 2004 to 2011, including serving 4 years (2007-2011) as Chair. Active in both the Federal Bar Council and the Connecticut Bar Association, Judge Hall served as Chair of the Federal Bar Council from 1995-97. She has also served as Trustee of Mount Holyoke College, and as President of the Alumnae Association of Mount Holyoke College. Judge Hall currently serves as a Director of the Connecticut Bar Foundation. Nicholas F. Kajon is Co-Chair of Stevens & Lee's Bankruptcy and Financial Restructuring Department, Co-Chair of the Litigation Finance and Alternative Funding Group and a Member of the Litigation Group. He has over 30 years of experience advising clients on financial restructuring, corporate governance and commercial litigation matters. Nick primarily represents debtors, hedge funds and trustees. He also regularly represents lenders, buyers of distressed assets, investors, suppliers, directors and executives. His clients have included companies in industries such as retail, apparel, transportation, energy, manufacturing, technology, telecommunications, hospitality and services. Nick also has significant experience representing plaintiffs and defendants in insolvency related litigation including claims involving preferences, fraudulent transfers, breach of fiduciary duty, wrongful redemption, declaration of illegal dividends, equitable subordination, recharacterization and veil-piercing. Nick has negotiated a number of multi-million dollar agreements with litigation funders pertaining to both insolvency and other commercial litigation claims, and has extensive contacts in the litigation finance industry. As a result, he and the lawyers in the Litigation Finance and Alternative Funding team can provide an end-to-end solution for clients seeking to assert litigation claims without committing their own capital. In September 2016, Nick closed a $26.2 million sale to Gerchen Keller Capital, LLC, n/k/a Burford Capital LLC, the largest capital provider in the litigation finance industry, of the right to receive a portion of net recoveries on account of a bankruptcy trustee’s $213 million judgment against The Renco Group, Inc. and Ira L. Rennert, while the judgment was on appeal to the Court of Appeals for the Second Circuit. Nick and his team overcame objections filed by the judgment debtors and certain of the Debtors’ noteholders to both the bidding procedures and the sale itself. Thereafter, Nick and his team were successful in opposing the noteholders’ motion for a stay pending their appeal of the sale order in the District Court for the Southern District of New York. On March 8, 2017, the judgment was affirmed in all respects. In December 2017, the Financial Times recognized this unique transaction with its Innovative Lawyer Award for North America.
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Nick is currently representing various offshore hedge funds in audit malpractice litigation against RSM as successor in interest to McGladrey for claims arising from its failure to detect the Petters Ponzi scheme while serving as auditor to a Petters feeder fund. He is currently defending Legacy Capital Ltd., a Madoff feeder fund, in a fraudulent conveyance case brought by the Madoff trustee. On March 14, 2016, Judge Bernstein issued an opinion granting Nick’s motion to dismiss over $120 million in claims against our client. On behalf of his BVI hedge fund clients, in 2014, Nick brought an action against ABM AMRO Bank as successor in interest to Fortis for negligent misrepresentation in connection with the Madoff Ponzi scheme, and obtained a favorable settlement thereof within three months. Nick led the team that represented shipping company B+H Ocean Carriers Ltd. and its subsidiaries in their Chapter 11 case in the Southern District of New York. Nick negotiated a consensual plan with two banks holding mortgages on the company’s ships and the unsecured creditors’ committee, thereby maximizing value for holders of approximately $50 million in debt. Nick led the team that represented a group of investors (who collectively invested over $90 million through U.S. and Cayman feeder funds) in the Chapter 11 case of the New Stream hedge fund group in Delaware, where a consensual plan was confirmed in April 2012 that provided significant recoveries for the firm’s clients. Nick led the team that represented retailers Friedman’s Inc. and Crescent Jewelers in their Chapter 11 case in Delaware, and oversaw an orderly liquidation of assets that resulted in full payment of secured claims and over $20 million paid on account of unsecured claims. Nick represented bond holders and swap counterparties in the Lehman Brothers case. Nick represented the trustees of Alliance Bancorp (prosecuting claims against lenders to Alt-A mortgage banker) and Magnesium Corporation of America (manufacturer that defaulted on $150 million in bonds). Nick represented Community National Bank in the Chapter 11 case of Creative Group Acquisition Co. in Delaware. Debtor representations have included EAL (Delaware) Inc., an aircraft leasing company with over $500 million in secured debt; Cellular Information Systems, Inc., a public company with over $100 million in bank debt; govWorks, Inc., an e-government dot com company with $60 million in debt that was acquired by First Data Corp.; North American Energy Conservation, Inc., an energy trading company with $70 million in debt; Nathan’s Equity Group, L.P., which controlled Nathan’s Famous, Inc., a restaurant company; and apparel companies such as Biscayne Apparel, Inc. and Masterwear Corporation. His other debtor representations have included companies in the shipping, retail, real estate, service and mining industries. Nick is currently representing senior lender RB International Finance (USA) LLC (“RBI”) in the Chapter 11 case of Ryckman Creek Resources LLC. Nick represented RBI or its affiliates in the Chapter 11 cases of Lehman Brothers, Lyondell, SemCrude, Lenox Group, Bethlehem Steel and Harnischfeger. He has represented parties to license agreements and other executory contracts such as Ford Motor Company in Livent (U.S.) Inc., NFL Films, Inc. in Vestron, Inc. and Compuware Corporation in AG Systems, Inc. Nick also represented creditors in the Dana, Refco and Enron cases. Nick's committee representations have included companies in the technology, biotech, manufacturing and financial services industries. His other creditor representations have included companies in the technology, apparel, retail, manufacturing, transportation, energy, hospitality, financial services and media industries. Nick was a law clerk to the Honorable Tina L. Brozman, Southern District of New York. In law school, he was Articles Editor for the New York Law School Law Review. Nick has served as a lecturer on bankruptcy-related topics for the Association for Corporate Growth and the Practicing Law Institute. He regularly writes on issues affecting bankruptcy practice. His articles have been published by the Commercial Law League of America, Bankruptcy Law360, Mondaq and others. He is a past Chair of the Editorial Advisory Board of the Turnaround Management Association's Journal of Corporate Renewal. Nick has been recognized as a New York Metro Super Lawyer in 2011 and 2013 through 2018 by being selected by his peers as among the top 5 percent of lawyers in the New York City metro area.
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Adam S. Mocciolo provides “business-first” counseling and advocacy to clients in sophisticated, multinational employment matters including advice on hiring, termination, compliance, and human resources policies; litigation in multiple federal- and state-court jurisdictions; internal investigations; business immigration; and cross-border employment law issues. He also works in related cross-disciplinary legal matters with employment-law and HR implications, including intellectual property, data privacy, and corporate transactions. Adam represents clients in financial services, technology, e-commerce, telecommunications, medical and biotechnology, manufacturing, and professional services industries, among others. He has served in leadership capacities in national, state, and local bar association, has been named a “New Leader in the Law” by the Connecticut Law Tribune and a “Connecticut Super Lawyer in employment law, and he holds the highest peer-review rating – “AV Preeminent” – from Martindale Hubbell. Prior to entering the practice of law, Adam served on the professional staff of the United States Senate. Attorney Erin O’Neil-Baker is the founder and partner of Hartford Legal Group, LLC, a law firm in Hartford, Connecticut, established in 2005, that focuses primarily on representing individuals with their immigration and naturalization needs. Her representation extends to representing clients in Immigration Court proceedings, U.S.C.I.S. adjudications, U.S. District Court actions, Fifth and Second Circuit Appeals and Board of Immigration Appeals proceedings. She has defended and challenged the deportation of high-profile clients and has been a invited speaker and clinic and forum participant for immigrant rights and community groups such as the Women and Girl Fund, Unidad Latina, CT For Dreamers, Middlesex Immigrant Rights Alliance, ACLU People Power-New Britain, Wethersfield Women for Progress, Hartford Deportation Defense, and local Hartford, Meriden, Norwich, Newington, Manchester, Wethersfield and Willimantic area churches and public schools. She is also the President of her town library’s Board of Directors. Attorney O’Neil-Baker was admitted to the Connecticut Bar in 2000, to the U.S. District Court, District of Connecticut, in 2001, to the U.S. Court of Appeals for the Second Circuit in 2010 and Fifth Circuit in 2014. She is a member of the Connecticut Bar Association, American Immigration Law Association, Connecticut Chapter of American Immigration Law Association, Women in Law Section of the CBA, media liaison and co-chair of the Rapid Raid Response team for CT AILA. Before co-founding Themis Legal Capital, Edward A. Reilly, Jr. was a corporate partner with several international law firms, including Goodwin Procter; Morgan Lewis & Bokius and LeBoeuf, Lamb, Greene & McRae. Over the course of his career, he represented corporations and financial sponsors including prominent venture capital, mezzanine, private equity and hedge funds for more than 30 years.
Ed routinely acted as his clients’ de facto general counsel and advised them on a broad spectrum of issues ranging from the prosecution, defense and resolution of litigation and pre-litigation disputes to the structuring and closing of innovative financial transactions. During his tenure in private practice, Ed enjoyed leadership roles including rotations as a managing partner of a growing regional office, a member of a firm-wide administrative committee and the head of a firm’s international private equity initiative.
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Since 2012 Ed has immersed himself in the Claim Based Funding business developing a sourcing network, collaborating on case evaluation and transaction structuring with established and emerging fund managers and contributing to academic efforts to promote best practices in the field.
Ed is admitted to the bar in New York, Connecticut and the District of Columbia. He is a graduate of the University of Notre Dame and the Columbia University School of Law.
Judith Resnik is the Arthur Liman Professor of Law at Yale Law School, where she teaches about federalism, procedure, courts, prisons, equality, and citizenship. Her scholarship focuses on the impact of democracy on government services, from courts and prisons to post offices, on the relationships of states to citizens and non-citizens, on the forms and norms of federalism, and on equality and gender.
Professor Resnik's books include Representing Justice: Invention, Controversy, and Rights in City-States and Democratic Courtrooms (with Dennis Curtis, Yale University Press, 2011); Federal Courts Stories (co-edited with Vicki C. Jackson, Foundation Press, 2010); and Migrations and Mobilities: Citizenship, Borders, and Gender (co-edited with Seyla Benhabib, NYU, 2009). In 2014, Resnik was the co-editor (with Linda Greenhouse) of the Daedalus volume, The Invention of Courts. Recent book chapters and articles include Accommodations, Discounts, and Displacement: The Variability of Rights as a Norm of Federalism(s) (Jus Politicum, 2017); Bordering by Law: The Migration of Law, Crimes, Sovereignty, and the Mail, in Nomos LVII: Immigration, Emigration, and Migration (2017); Revising Our “Common Intellectual Heritage” (Notre Dame Law Review, 2016); Constructing the “Foreign:” American Law’s Relationship to Non-Domestic Sources, in Courts and Comparative Law (2015); and Diffusing Disputes: The Public in the Private of Arbitration, the Private in Courts, and the Erasure of Rights (Yale Law Journal, 2015).
Professor Resnik now chairs Yale Law School’s Global Constitutional Law Seminar, a part of the Gruber Program on Global Justice andWomen’s Rights. She is the editor of the volumes, published as e-books, from 2012 forward, including Reconstituting Constitutional Orders (2017), and The Reach of Rights (2015).
Professor Resnik is the founding director of Yale's Arthur Liman Center for Public Interest Law, supporting fellowships for law graduates and summer fellowships for students at Barnard, Brown, Bryn Mawr, Harvard, Princeton, Spelman, Stanford, and Yale. The Liman Center sponsors colloquia and seminars on the civil and criminal justice systems. From its inception in 1997 through 2018, 133 graduates of the Yale Law School have held Liman Fellowships.
During the past few years, the Liman Center has worked on projects related to incarceration and the challenges of the justice system for individuals with limited resources. The Liman Center has joined with the Association of State Correctional Administrators (ASCA) to do a series of reports on solitary confinement, in which prisoners are held for 22 hours or more in their cells, for 15 days or longer. In 2013, ASCA and Liman documented the rules governing isolation and showed how easy it was to be sent to segregation. In 2015, ASCA and the Liman Center co-authored Time-in-Cell: The ASCA-Liman 2014 National Survey of Administrative Segregation in Prison. The report was the first to provide updated information, as of the fall of 2014, on both the numbers of people (80,000 to 100,000) and the conditions in solitary confinement nationwide. In 2016, Liman and ASCA coauthored Aiming to Reduce Time-In-Cell: Reports from Correctional Systems on the Numbers of Prisoners in Restricted Housing and on the Potential of Policy Changes to Bring About Reforms. Like the prior report, this monograph provides the only current, comprehensive data on the use of isolation—on the 66,000 or more in segregation, some 6,000 people were held under such conditions for more than three years. The report also documents efforts across the country to reduce the number of people so confined and to reform the conditions, so as to limit the degree of deprivation and to improve safety for prisoners, staff, and
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communities at large. A 2018 report, Reforming Restrictive Housing, will be available in the fall of 2018. The Liman Center has also produced a volume, Who Pays? Fines, Fees, Bail, and the Cost of Courts, which examines the economic challenges that courts and their users experience, the constitutional law framing obligations to provide access to justice, the litigation challenging “court debt,” and the efforts of judiciaries to change their use of fees and fines.
Professor Resnik has chaired the Sections on Procedure, on Federal Courts, and on Women in Legal Education of the American Association of Law Schools. She is a Managerial Trustee of the International Association of Women Judges. Professor Resnik served as a founder and, for more than a decade, as a co-chair of Yale University’s Women Faculty Forum, begun in 2001.
Professor Resnik is also an occasional litigator; she argued Mohawk Industries, Inc. v. Carpenter, decided in 2009 by the United States Supreme Court; and the decision, decades earlier, about admission of women to the Rotary Club, and she also has provided amici filings to the Court in areas related to her expertise. Professor Resnik has testified before Congress, before rulemaking committees of the federal judiciary, and before the House of Commons of Canada.
From 2014 to 2016, Professor Resnik was a Phi Beta Kappa Visiting Scholar, travelling to various liberal arts colleges in the United States. In 2015, she was a visiting professor at Université Panthéon-Assas Paris II. In 2018, she received an honorary doctorate from the University College London. She also received an Andrew Carnegie Fellowship, a two-year award to enable her to complete her research and write her book, The Impermissible in Punishment.
In 1998, Professor Resnik was the recipient of the Margaret Brent Women Lawyers of Achievement Award from the Commission on Women of the American Bar Association. In 2001, she was elected a fellow of the American Academy of Arts and Sciences, and in 2002, a member of the American Philosophical Society, where she delivered the Henry LaBarre Jayne Lecture in 2005. In 2008, Professor Resnik received the Outstanding Scholar of the Year Award from the Fellows of the American Bar Foundation. In 2010, she was named a recipient of the Elizabeth Hurlock Beckman Prize, awarded to outstanding faculty in higher education in the fields of psychology or law. That year, Professor Resnik also had a cameo role in the Doug Liman film, Fair Game. In 2013, Professor Resnik was given the Arabella Babb Mansfield Award, the highest honor presented by the National Association of Women Lawyers. In 2017, she was honored by former Liman fellows with the establishment of the Resnik-Curtis Fellowship in Public Interest Law. Hon. Stefan R. Underhill was appointed United States District Judge for the District of Connecticut on July 7, 1999 and was sworn in on September 1, 1999. He has served as Chief Judge of the District since September 1, 2018. Judge Underhill graduated from the University of Virginia in 1978 with a Bachelor of Arts in Interdisciplinary Studies. In 1981, he received a second Bachelor of Arts in Philosophy, Politics and Economics from Oxford University, which he attended on a Rhodes Scholarship. In 1984, he received his law degree from Yale Law School. At Yale, Judge Underhill served as Articles and Book Reviews Editor of the Yale Law Journal. Following his graduation from law school, Judge Underhill clerked for Judge Jon O. Newman of the Second Circuit Court of Appeals. Thereafter, he joined Day, Berry & Howard LLP as an associate, resident in the firm’s Stamford, Connecticut office. In 1991, Judge Underhill became a partner of that firm, where he spent the remainder of his career as a lawyer. In private practice, Judge Underhill handled a wide variety of Commercial Litigation, concentrating in Insurance Coverage, Intellectual Property, and Appellate Practice.
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Judge Underhill has long been active in the Federal Bar Council and the Federal Practice Section of the Connecticut Bar Association. He served for several years on the Board of Directors of Connecticut Legal Services. Judge Underhill presently serves on the Board of Directors of the Federal Judges Association. Michael J. Wishnie is William O. Douglas Clinical Professor of Law and Counselor to the Dean at Yale Law School. Professor Wishnie’s teaching, scholarship, and law practice have focused on immigration, labor and employment, habeas corpus, civil rights, government transparency, and veterans law. For years, Professor Wishnie and his students have represented low-wage workers, immigrants, and veterans in federal, state, and administrative litigation. He and his students have also represented unions, churches, veterans’ groups, and grassroots organizations in a range of legislative, media, and community education matters. Professor Wishnie's recent publications include “A Boy Gets Into Trouble”: Service Members, Civil Rights, and Veterans’ Law Exceptionalism, 97 B.U. L. Rev. ___ (forthcoming 2017); Asking for Directions: The Case for Federal Courts To Use Certification Across Borders, 125 Yale L.J. F. 156 (2015) (with Oona A. Hathaway); Forty Years of First-Year Students Representing Clients at Yale, in E. Capulong, M. Millemann, S. Rankin & N. Ruan, eds., THE NEW1L: FIRST-YEAR LAWYERING WITH CLIENTS (Carolina Press: 2015); and Immigration Law and the Proportionality Requirement, 2 U.C. IRV. L. REV. 415 (2012). From 1998-2006, Professor Wishnie taught at New York University School of Law. Previously, he worked at the American Civil Liberties Union Immigrants’ Rights Project as a Skadden Fellow; in the Brooklyn Neighborhood Office of The Legal Aid Society; as a law clerk to Judge H. Lee Sarokin of the District Court of New Jersey and U.S. Court of Appeals for the Third Circuit; and as a clerk for Justice Harry A. Blackmun, retired, working in the chambers of Associate Justice Stephen G. Breyer of the Supreme Court of the United States. Before earning his J.D. from Yale Law School in 1993, Professor Wishnie spent two years teaching in the People’s Republic of China.
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878 F.3d 488 (5th Cir. 2017), 16-41674, Archer and White Sales, Inc. v. Henry Schein, Inc. /**/
div.c1 {text-align: center} /**/
Page 488
878 F.3d 488 (5th Cir. 2017)
ARCHER AND WHITE SALES, INC., Plaintiff-Appellee
v.
HENRY SCHEIN, INC., Danaher Corporation, Instrumentarium Dental Inc., Dental Equipment
LLC, Kavo Dental Technologies LLC, and Dental Imaging Technologies Corporation,
Defendants-Appellants
No. 16-41674
United States Court of Appeals, Fifth Circuit
December 21, 2017
Page 489
[Copyrighted Material Omitted]
Page 490
Appeals from the United States District Court for the Eastern District of Texas
Lewis T. LeClair, McKool Smith, P.C., Dallas, TX, for Plaintiff-Appellee.
Christopher E. Ondeck, Esq., Stephen R. Chuk, Adrian Fontecilla, Proskauer, Washington,
Before HIGGINBOTHAM, GRAVES, and HIGGINSON, Circuit Judges.
OPINION
PATRICK E. HIGGINBOTHAM, Circuit Judge:
Sued by a competitor for antitrust violations, Defendants-Appellants sought to enforce an
arbitration agreement. The magistrate judge granted the motion to compel arbitration, holding that
the gateway question of the arbitrability of the claims belonged to an arbitrator. The district court
reversed, holding it had the authority to rule on the question of arbitrability and
Page 491
the claims at issue were not arbitrable. We now affirm.
I.
Five years ago, Plaintiff-Appellee Archer and White Sales, Inc. (" Archer" ), a distributor,
seller, and servicer for multiple dental equipment manufacturers, brought this suit against
Defendant-Appellants Henry Schein, Inc. and Danaher Corporation, allegedly the largest
distributor and manufacturer of dental equipment in the United States, and certain wholly-owned
subsidiaries of Danaher.
Page 13 of 112
The suit alleges violations of Section 1 of the Sherman Antitrust Act and the Texas Free
Enterprise and Antitrust Act, contending that the Defendants' activities occurred over the
preceding four years and are " continuing" violations, and seeking both damages (" estimated to
be in the tens of millions of dollars" ) and injunctive relief.[1] The district court referred the case to
a United States Magistrate Judge.
Defendants moved to compel arbitration pursuant to a clause in a contract between Archer
and Pelton & Crane, allegedly a Defendant's predecessor-in-interest (the " Dealer Agreement" ).
The arbitration clause reads as follows:
Disputes. This Agreement shall be governed by the laws of the State of North Carolina. Any
dispute arising under or related to this Agreement (except for actions seeking injunctive relief and
disputes related to trademarks, trade secrets, or other intellectual property of Pelton & Crane),
shall be resolved by binding arbitration in accordance with the arbitration rules of the American
Arbitration Association [ (AAA) ]. The place of arbitration shall be in Charlotte, North Carolina.
Following a hearing, the magistrate judge issued a Memorandum Order holding that: (1) the
incorporation of the AAA Rules in the arbitration clause clearly evinced an intent to have the
arbitrator decide questions of arbitrability; (2) there is a reasonable construction of the arbitration
clause that would call for arbitration in this dispute; and (3) the Grigson equitable estoppel test,
which both sides agree is controlling in their dispute, required arbitration against both signatories
and non-signatories to the Dealer Agreement.[2]
The district court vacated the magistrate judge's order and held that the court could decide
the question of arbitrability, and that the dispute was not arbitrable because the plain language of
the arbitration clause expressly excluded suits that involved requests for injunctive relief. The court
declined to reach the question of equitable estoppel.[3]
Defendants appealed.[4]
Page 492
II.
We review a ruling on a motion to compel arbitration de novo .[5] " Enforcement of an
arbitration agreement involves two analytical steps." [6] First, a court must decide " whether the
parties entered into any arbitration agreement at all ." [7] This inquiry is one of pure contract
formation, and it looks only at whether the parties " form[ed] a valid agreement to arbitrate some
set of claims." [8] The next step is to determine " whether [the dispute at issue] is covered by the
arbitration agreement." [9] Before this step, however, the court must answer a third question: " [w ]
ho should have the primary power to decide ' whether the claim is arbitrable." [10] This question
turns on " whether the agreement contains a valid delegation clause— ‘ that is, if it evinces an
intent to have the arbitrator decide whether a given claim must be arbitrated.' " [11]
This determination begins the two-step inquiry adopted in Douglas v. Regions Bank .[12]
First, whether the parties " clearly and unmistakably" intended to delegate the question of
arbitrability to an arbitrator.[13] If so, " the motion to compel arbitration should be granted in almost
all cases." [14] But not " [i]f the argument that the claim at hand is within the scope of the
arbitration agreement is ‘ wholly groundless.' " [15] So Douglas ‘ s second step asks whether there
is a plausible argument for the arbitrability of the dispute. Where there is no such plausible
Page 14 of 112
argument, " the district court may decide the ‘ gateway' issue of arbitrability despite a valid
delegation clause.' " [16]
The parties agree that the Dealer Agreement contained an arbitration provision, though not
whether the arbitration provision applies here.[17] Specifically, they disagree on whether the court
or an arbitrator should decide the gateway question
Page 493
of arbitrability— and relatedly, whether the underlying dispute is arbitrable at all. We turn to the
two-step Douglas test.
A.
We first ask if the parties " clearly and unmistakably" delegated the issue of arbitrability.[18]
Absent a delegation, " the question of whether the parties agreed to arbitrate is to be decided by
the court, not the arbitrator." [19] " Just as the arbitrability of the merits of a dispute depends upon
whether the parties agreed to arbitrate that dispute, so the question ‘ who has the primary power
to decide arbitrability' turns upon what the parties agreed about that matter.' " [20]
A contract need not contain an express delegation clause to meet this standard. An
arbitration agreement that expressly incorporates the AAA Rules " presents clear and
unmistakable evidence that the parties agreed to arbitrate arbitrability." [21] Under AAA Rule 7(a),
" the arbitrator shall have the power to rule on his or her own jurisdiction, including any objections
with respect to the existence, scope or validity of the arbitration agreement." [22]
By the Dealer Agreement, " [a]ny dispute arising under or related to this Agreement (except
for actions seeking injunctive relief and disputes related to trademarks, trade secrets, or other
intellectual property of [the predecessor] ), shall be resolved by binding arbitration in accordance
with the arbitration rules of the American Arbitration Association ." The parties dispute the
relationship between the carve-out clause— " except for actions seeking injunctive relief and
[intellectual property] disputes" — and the incorporation of the AAA Rules.
The magistrate judge saw three separate parts to the arbitration provision: (1) a general rule
compelling arbitration for any dispute related to the agreement, (2) an exemption from arbitration
for actions seeking injunctive relief, and (3) a clause incorporating the AAA Rules.[23] On this
reading, the AAA Rules would apply to all disputes arising under the contract, including those
eventually found to fall within the Dealer Agreement's carve-out. The district court disagreed,
holding that the carve-out clause removed the disputes from the ambit of both arbitration and the
AAA Rules. The district court distinguished Petrofac, where the agreement at issue " did not
contain any exclusions[; ] [r]ather, it was a standard broad arbitration clause." [24]
Defendants argue that Petrofac controls; that, by holding otherwise, the district court
conflated the issue of whether the dispute is arbitrable with the issue of who
Page 494
decides arbitrability; and that, under the plain language of the clause, disputes about arbitrability
do not fall within the carve-out and thus belong to the arbitrator. This court has previously applied
Petrofac to arbitration provisions containing carve-out provisions. In Crawford, we examined an
agreement that incorporated the AAA Rules and preserved the parties' ability to seek injunctive
relief in the courts.[25] We held— without directly addressing the relevance of its carve-out
Page 15 of 112
provision— that the Crawford agreement's incorporation of the AAA Rules constituted " clear and
unmistakable evidence that the parties to the [ ] Agreement agreed to arbitrate arbitrability, and so
... whether the Plaintiffs' claims are subject to arbitration must be decided in the first instance by
the arbitrator, not a court." [26]
Archer responds that the agreement in Petrofac did not include a carve-out provision, and
the Crawford agreement is distinguishable because it contained separate clauses incorporating
the AAA Rules and creating a carve-out excluding claims for injunctive relief— specifically, the
agreement stated that the AAA Rules would apply to " [a]ny and all disputes in connection with or
arising out of the Provider Agreement," and contained a carve-out in a subsequent sentence
stating that nothing in the agreement would prevent a suit seeking injunctive relief in a court of law.[27]
Archer argues that, in contrast, the structure of the specific carve-out at issue here leads to
the natural reading that the AAA Rules only apply to the category of cases that are subject to
binding arbitration under the Dealer Agreement— namely, those outside of the contract's express
carve-out. Archer further notes that Defendants' predecessor-in-interest drafted the Dealer
Agreement, and that North Carolina law requires that " [p]ursuant to well [ ]settled contract law
principles, the language of [an] arbitration clause should be strictly construed against the drafter of
the clause." [28]
There is a strong argument that the Dealer Agreement's invocation of the AAA Rules does
not apply to cases that fall within the carve-out. It is not the case that any mention in the parties'
contract of the AAA Rules trumps all other contract language. Here, the interaction between the
AAA Rules and the carve-out is at best
Page 495
ambiguous. On one reading, the Rules apply to " [a]ny dispute arising under or related to [the]
Agreement." On another, the provision expressly exempts certain disputes and the Rules apply
only to the remaining disputes. We need not decide which reading to adopt here because Douglas
provides us with another avenue to resolve this issue: the " wholly groundless" inquiry.
B.
Regardless of whether an agreement clearly and unmistakably delegates the question of
arbitrability, the second step in Douglas provides a narrow escape valve. If an " assertion of
arbitrability [is] wholly groundless," the court need not submit the issue of arbitrability to the
arbitrator.[29]
We have cautioned that the " wholly groundless" exception is a narrow one and that it " is
not a license for the court to prejudge arbitrability disputes more properly left to the arbitrator
pursuant to a valid delegation clause." [30] " An assertion of arbitrability is not ‘ wholly groundless'
if ‘ there is a legitimate argument that th[e] arbitration clause covers the present dispute, and, on
the other hand, that it does not.' " [31] If a court can find " a ‘ plausible' argument that the
arbitration agreement requires the merits of the claim to be arbitrated," the wholly groundless
exception will not apply.[32]
The magistrate judge issued his order before Douglas, and therefore he did not address the
" wholly groundless" exception directly. Instead, he found that while " [o]n the most superficial
Page 16 of 112
level, this lawsuit is clearly an action seeking injunctive relief since it does seek that relief," there
was also " a plausible construction [of the Dealer Agreement] calling for arbitration." [33] Thus, he
concluded that " the question of whether the exception for actions seeking injunctive relief should
be limited to actions for an injunction in aid of arbitration or to enforce an arbitrator's award should
properly be left for the arbitrator to decide." [34]
The district court, now with Douglas at hand, found the Defendants' arguments for
arbitrability wholly groundless. The court first stated that the wholly groundless inquiry "
necessarily requires the courts to examine and, to a limited extent, construe the underlying
agreement." [35] It then noted that the Dealer Agreement's carve-out language " differs from the
standard arbitration clause suggested by [AAA]," [36] and found that " the phrase ‘ except actions
seeking injunctive relief' is clear on its
Page 496
face— any action seeking injunctive relief is excluded from mandatory arbitration." [37] Thus, the
provision's plain language includes all actions seeking injunctive relief, not a more limited category
of cases. The court declined to " re-write the terms of the Parties' agreement to accommodate a
party— notably the party that drafted the agreement— that could have negotiated for more precise
language," [38] and held that the arguments for arbitrability were " wholly without merit based on
the plain language of the arbitration clause itself" and fell squarely within the Douglas exception.[39]
Defendants suggest a limited reading of the " wholly groundless" exception that would only
apply when the contract containing the arbitration provision has " nothing to do with" the dispute
before the court.[40] In Douglas, the plaintiff had signed an agreement with an arbitration provision
when she opened a checking account with Regions Bank that closed less than one year later.
Years later, the plaintiff was involved in an automobile accident, and she received a $500,000
settlement in subsequent litigation. She then alleged that her attorney, who banked with Regions,
had embezzled that money, and she brought suit against the bank for negligence and conversion
on the theory that the bank had notice of the embezzlement and failed to report it. Regions moved
to compel arbitration pursuant to the agreement that the plaintiff signed when she opened the
now-closed checking account. This court held that " [t]he mere existence of a delegation provision
in the checking account's arbitration agreement ... cannot possibly bind [the plaintiff] to arbitrate
gateway questions of arbitrability in all future disputes with the other party, no matter their origin."[41]
Defendants argue that applying the " wholly groundless" exception here would allow the
court to construe the bounds of an arbitration clause before an arbitrator can do so— effectively
obviating the entire purpose of delegating the gateway question to the arbitrator in the first place;
that their arbitrability arguments are not wholly groundless, pointing to the magistrate judge's
finding of plausible readings of the arbitration clause that would not exclude the suit from
arbitration; and that doubts about the arbitrability of a claim should be resolved in favor of
arbitration, pursuant to settled federal law.
Defendants urge that " [t]he correct reading of this arbitration clause is that the parties may
come to court seeking injunctive relief at any time ... but still must arbitrate any claim for
Page 17 of 112
damages." Defendants further urge the court should send the damages clause to arbitration, even
if it results in " piecemeal litigation." In their view, " [t]he correct reading of this arbitration clause is
that the parties may come to court seeking injunctive relief at
Page 497
any time ... but still must arbitrate any claim for damages."
Archer counters that the plain language of the clause makes clear that the parties did not
agree to arbitrate actions that involve a request for injunctive relief, and that any argument to the
contrary is wholly groundless. Archer emphasizes that arbitration agreements are " as enforceable
as other contracts, but not more so," [42] and states that under North Carolina law, " when the
terms of a contract are plain and unambiguous, there is no room for construction. The contract is
to be interpreted as written and enforced as the parties have made it." [43] Archer says the Dealer
Agreement clearly contemplates two categories of disputes— those involving " actions seeking
injunctive relief" and certain intellectual property disputes, and all other disputes— and that only
the latter category must be subject to arbitration. Archer contends that the clause's incorporation
of " action" prohibits any piecemeal litigation because " action," as distinct from " claim," pertains
to all of the claims in a given case.[44]
While Douglas is a recent case, with contours of the " wholly groundless" exception not yet
fully developed, if the doctrine is to have any teeth, it must apply where, as here, an arbitration
clause expressly excludes certain types of disputes. The arbitration clause creates a carve-out for
" actions seeking injunctive relief." It does not limit the exclusion to " actions seeking only
injunctive relief," nor " actions for injunction in aid of an arbitrator's award." Nor does it limit itself to
only claims for injunctive relief. Such readings find no footing within the four corners of the
contract. " When the language of a contract is clear and unambiguous, effect must be given to its
terms, and the court, under the guise of construction, cannot reject what the parties inserted or
insert what the parties elected to omit." [45] We see no plausible argument that the arbitration
clause applies here to an " action seeking injunctive relief." The mere fact that the arbitration
clause allows Archer to avoid arbitration by adding a claim for injunctive relief does not change the
clause's plain meaning. " While ambiguities in the language of the agreement should be resolved
in favor of arbitration, we do not override the clear intent of the parties, or reach a result
inconsistent with the plain text of the contract, simply because the policy favoring arbitration is
implicated." [46]
III.
Defendants argue in the alternative that, even if the district court was correct to decide the
issue of arbitrability, it erred in determining that the complaint was not subject to the arbitration
clause. Because we find that Defendants' arguments for arbitrability are wholly groundless, we
affirm the district court's holding that the claims are not arbitrable. Having concluded that this
action is not subject to mandatory arbitration, we need not reach the
Page 498
question of whether the third parties to the arbitration clause in this case can enforce such an
arbitration clause.
We affirm the district court's order denying the motions to compel arbitration.
Page 18 of 112
---------
Notes: [1] Archer alleges that Defendants conspired " to fix prices and refuse to compete with each other"
and to " force their common supplier Danaher and its various subsidiaries to terminate and/or
reduce the distribution territory of their price-cutting distributor Archer Dental." It also alleges that
the Defendants " carried out their conspiracy through a series of unlawful activities, including, but
not limited to agreements not to compete, agreements to fix prices, and boycotts." [2] Archer & White Sales, Inc. v. Henry Schein, Inc., No. 2:12-cv-572-JRG-RSP, 2013 WL
12155243 (E.D. Tex. May 28, 2013), vacated, 2016 WL 7157421 (E.D. Tex. Dec. 7, 2016). [3] Archer & White Sales, Inc. v. Henry Schein, Inc., No. 2:12-cv-572-JRG, 2016 WL 7157421, at
*9 (E.D. Tex. Dec. 7, 2016). [4] Defendants filed an interlocutory appeal pursuant to 9 U.S.C. § 16(a)(1)(C). See Al Rushaid v.
provides that a party may seek interlocutory review of an order ... denying an application ... to
compel arbitration." ) (internal quotation marks omitted). [5] Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199, 201 (5th Cir. 2016) (citing Carey v. 24
Hour Fitness, USA, Inc., 669 F.3d 202, 205 (5th Cir. 2012)). [6] Kubala, 830 F.3d at 201 (5th Cir. 2016). [7] Id. [8] IQ Prods. Co. v. WD-40 Co., 871 F.3d 344, 348 (5th Cir. 2017). [9] Kubala, 830 F.3d at 201. [10] Id. at 202 (quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 942, 115 S.Ct. 1920,
131 L.Ed.2d 985 (1995)). [11] IQ Prods., 871 F.3d at 348 (quoting Kubala, 830 F.3d at 202). [12] 757 F.3d 460, 464 (5th Cir. 2014). [13] " [C]ourts should not assume that the parties agreed to arbitrate arbitrability unless there is ‘
clea[r] and unmistakabl[e]' evidence that they did so." First Options, 514 U.S. at 944, 115 S.Ct.
1920 (citing AT&T Technologies, Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649, 106 S.Ct.
1415, 89 L.Ed.2d 648 (1986)). [14] Kubala, 830 F.3d at 202. [15] Douglas, 757 F.3d at 464. [16] IQ Prods., 871 F.3d at 349. [17] Archer states that, because the Dealer Agreement " unambiguously divides disputes into two
categories" — those within the carve-out and all other disputes— there is no valid agreement to
arbitrate. This argument misconstrues the very first analytical step in enforcement of an arbitration
agreement, which asks " whether the parties entered into any arbitration agreement at all ." Archer
does not appear to argue that there was no arbitration agreement regarding claims outside the
scope of the carve-out. Instead, Archer contends that the Dealer Agreement is " best construed to
express the parties' intent not to arbitrate this action seeking injunctive relief." Thus, we treat
Archer's arguments to this effect as going to whether the parties agreed to arbitrate this particular
dispute.
Page 19 of 112
[18] AT&T, 475 U.S. at 649, 106 S.Ct. 1415. [19] Id. [20] First Options, 514 U.S. at 943, 115 S.Ct. 1920 (internal citations omitted). See also Rent-A-
Center, W., Inc. v. Jackson, 561 U.S. 63, 68-69, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010) (holding
that parties may delegate arbitrability through an express delegation clause). [21] Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671, 675 (5th Cir. 2012). [22] This version of Rule 7(a) was in effect when the parties signed their agreement. AM.
ARBITRATION ASS'N, COMMERCIAL ARBITRATION RULES AND MEDIATION PROCEDURES
20Mediation% 20Procedures% 20Sept.% 201% 2C% 202007.pdf. [23] Archer, 2013 WL 12155243 at *1. [24] Archer, 2016 WL 7157421, at *7. [25] Crawford Prof'l Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249, 256 (5th Cir. 2014). In that
case, the Provider Agreement read, in relevant part:
Any and all disputes in connection with or arising out of the Provider Agreement by the parties will
be exclusively settled by arbitration before a single arbitrator in accordance with the Rules of the
American Arbitration Association. The arbitrator must follow the rule of Law, and may only award
remedies provided for in the Provider Agreement.... Arbitration shall be the exclusive and final
remedy for any dispute between the parties in connection with or arising out of the Provider
Agreement; provided, however, that nothing in this provision shall prevent either party from
seeking injunctive relief for breach of this Provider Agreement in any state or federal court of law
....
Id. [26] Id. at 263. Defendants also point to Oracle, where the Ninth Circuit addressed an arbitration
clause that adopted the UNCITRAL Rules (which also delegate arbitrability issues to the arbitrator)
and a carve-out for certain types of claims. The court rejected the argument that the carve-out
provision bore on the question of arbitrability, stating that such an argument " conflates the scope
of the arbitration clause ... with the question of who decides arbitrability." Oracle Am., Inc. v.
Myriad Group A.G., 724 F.3d 1069, 1072-76 (9th Cir. 2013). [27] Crawford, 748 F.3d at 256. [28] T.M.C.S., Inc. v. Marco Contractors, Inc., __ N.C.App. __, 780 S.E.2d 588, 597 (2015). [29] Douglas, 757 F.3d at 463 (quoting Agere Systems, Inc. v. Samsung Elecs. Co., 560 F.3d 337,
340 (5th Cir. 2009)). [30] Kubala, 830 F.3d at 202 n.1. [31] IQ Prods., 871 F.3d at 350 (quoting Douglas, 757 F.3d at 463). [32] Kubala, 830 F.3d at 202 n.1. [33] Archer, 2013 WL 12155243, at *1-2. [34] Id. at *2. [35] Archer, 2016 WL 7157421, at *8 (quoting Douglas, 757 F.3d at 463) (internal quotation marks
omitted). This limited inquiry allows the parties to avoid jumping through hoops to begin arbitration
only to be sent directly back to the courthouse. See Douglas, 757 F.3d at 464 (" When [plaintiff]
Page 20 of 112
signed the arbitration agreement containing a delegation provision, did she intend to go through
the rigmaroles of arbitration just so the arbitrator can tell her in the first instance that her claim has
nothing whatsoever to do with her arbitration agreement, and she should now feel free to file in
federal court? Obviously not." ). [36] The district court claimed that " [s]uch an intentional drafting effort" deserves notice. Archer,
2016 WL 7157421, at *5. [37] Id. [38] Id. at *6. [39] Archer, 2016 WL 7157421, at *9. The district court also rejected arguments from Defendants
that Archer failed to " plead" a claim for injunctive relief based on the fact that Archer had not
made any showing on the factors articulated by the Supreme Court in eBay Inc. v. MercExchange,
L.L.C., 547 U.S. 388, 394, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006). The court held first that the
eBay factors are not pleading requirements, and that in any event, the proper vehicle to argue the
plaintiff is not entitled to relief would be a motion to dismiss under Rule 12. We do not address the
underlying merits of Archer's claim here because, as Defendants concede, " the issue here is not
whether Archer's injunctive relief claim fails on the merits." [40] Douglas, 757 F.3d at 461. [41] Id. at 462, 464. [42] See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12, 87 S.Ct. 1801, 18
L.Ed.2d 1270 (1967). [43] State v. Philip Morris USA Inc., 363 N.C. 623, 685 S.E.2d 85, 91 (2009) (internal quotation
marks omitted) (internal citations omitted). [44] An action is " [a] civil or criminal judicial proceeding," which is " nearly if not quite
synonymous" with suit. BLACK'S LAW DICTIONARY 28-29 (7th ed. 1999). [45] Procar II, Inc. v. Dennis, 218 N.C.App. 600, 721 S.E.2d 369, 371 (2012). [46] E.E.O.C. v. Waffle House, 534 U.S. 279, 294, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002)
(emphasis added).
---------
Page 21 of 112
694 Fed.Appx. 750 (11th Cir. 2017), 16-16760, United States v. Gamble /**/ div.c1 {text-align:
center} /**/
Page 750
694 Fed.Appx. 750 (11th Cir. 2017)
UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
TERANCE MARTEZ GAMBLE, Defendant-Appellant
No. 16-16760
United States Court of Appeals, Eleventh Circuit
July 28, 2017
Petition for certiorari filed at, 10/24/2017
Editorial Note:
DO NOT PUBLISH. (See Federal Rule of Appellate Procedure Rule 32.1)
Appeal from the United States District Court for the Southern District of Alabama. D.C.
Docket No. 1:16-cr-00090-KD-B-1.
United States v. Gamble, (S.D. Ala., June 20, 2016)
For UNITED STATES OF AMERICA, Plaintiff - Appellee: Christopher B. Brinson, Adam W.
Overstreet, Kenyen Ray Brown, Michele Carstens O'Brien, U.S. Attorney's Office, MOBILE, AL.
For TERANCE MARTEZ GAMBLE, Defendant - Appellant: Barre Clark Dumas, Dumas &
McPhail, LLC, MOBILE, AL.
Before HULL, WILSON, and ANDERSON, Circuit Judges.
OPINION
PER CURIAM:
Terance Martez Gamble appeals his conviction for possession of a firearm by a convicted
felon, in violation of 18 U.S.C. § 922(g)(1). Gamble argues that the district court erred by
determining that double jeopardy did not prohibit the federal government from prosecuting Gamble
for the same conduct for which he had been prosecuted and sentenced for by the State of
Alabama.
We review de novo, as a pure question of law, any possible violation of the Double Jeopardy
Clause. United States v. McIntosh, 580 F.3d 1222, 1226 (11th Cir. 2009).
The Supreme Court has determined that prosecution in federal and state court for the same
conduct does not violate the Double Jeopardy Clause because the state and federal governments
are separate sovereigns. Abbate v. United States, 359 U.S. 187, 195, 79 S.Ct. 666, 3 L.Ed.2d 729
(1959). We have followed the precedent set by Abbate in Hayes, stating that unless and until the
Supreme Court overturns
Page 751
Abbate, the double jeopardy claim must fail based on the dual sovereignty doctrine. United States
v. Hayes, 589 F.2d 811, 817-18 (5th Cir. 1979). We have, more recently, stated that " [t]he Double
Jeopardy Clause does not prevent different sovereigns (i.e., a state government and the federal
government) from punishing a defendant for the same criminal conduct." United States v. Bidwell,
393 F.3d 1206, 1209 (11th Cir. 2004).
Page 22 of 112
In Sanchez-Valle, the Supreme Court stated that the states were separate sovereigns from
the federal government because the States rely on authority originally belonging to them before
admission to the Union and preserved to them by the Tenth Amendment. Puerto Rico v. Sánchez
Valle, 579 U.S. __, __, 136 S.Ct. 1863, 1871, 195 L.Ed.2d 179 (2016). It explained that prior to
forming the Union, the States possessed separate and independent sources of power and
authority, which they continue to draw upon in enacting and enforcing criminal laws. Id. State
prosecutions therefore have their most ancient roots in an " inherent sovereignty" unconnected to,
and indeed pre-existing, the U.S. Congress. Id. The Supreme Court differentiated Puerto Rico
from the States, stating that it was not a sovereign distinct from the United States because it had
derived its authority from the U.S. Congress. Id. at 1873-74. It concluded that the Double Jeopardy
Clause bars both Puerto Rico and the United States from prosecuting a single person for the same
conduct under equivalent criminal laws. Id. at 1876.
The district court did not err by determining that double jeopardy did not prohibit the federal
government from prosecuting Gamble for the same conduct for which he had been prosecuted
and sentenced for by the State of Alabama, because based on Supreme Court precedent, dual
sovereignty allows a state government and the federal government to prosecute an individual for
the same crime, when the States rely on authority originally belonging to them before admission to
the Union and preserved to them by the Tenth Amendment. Accordingly, we affirm.
AFFIRMED.
Page 23 of 112
869 F.3d 737 (9th Cir. 2017), 15-15858, In re Google Referrer Header Privacy Litigation /**/ div.c1
{text-align: center} /**/
Page 737
869 F.3d 737 (9th Cir. 2017)
IN RE GOOGLE REFERRER HEADER PRIVACY LITIGATION, PALOMA GAOS; ANTHONY
ITALIANO; GABRIEL PRIYEV, individually and on behalf of all others similarly situated,
Plaintiffs-Appellees,
v.
MELISSA ANN HOLYOAK; THEODORE H. FRANK, Objectors-Appellants,
v.
GOOGLE, INC., a Delaware corporation, Defendant-Appellee
No. 15-15858
United States Court of Appeals, Ninth Circuit
August 22, 2017
Argued and Submitted, San Francisco, California March 13, 2017.
Page 738
Appeal from the United States District Court for the Northern District of California. D.C. No.
5:10-cv-04809-EJD. Edward J. Davila, District Judge, Presiding.
In re Google Referrer Header Privacy Litig., 87 F.Supp.3d 1122, (N.D. Cal., Mar. 31, 2015)
SUMMARY[*]
Stored Communications Act / Settlement
The panel affirmed the district court's order approving the cy pres -only settlement of a class
action brought under the Stored Communications Act and state law by Google Search users,
alleging that Google violated their privacy by disclosing their Internet search terms to owners of
third-party websites.
The panel held that the district court did not abuse its discretion in approving the settlement,
which provided that Google would pay a total of $8.5 million and provide information on its website
disclosing how users' search terms are shared with third parties, in exchange for a release of the
claims of the approximately 129 million people who used Google Search in the United States
between October 25, 2006 and April 25, 2014. Of the $8.5 million settlement fund, approximately
$3.2 million was set aside for attorneys' fees, administration costs, and incentive payments to the
named plaintiffs, and the remaining $5.3 million or so was allocated to six cy pres recipients.
The panel held that the cy pres -only settlement, reached prior to class certification, was
appropriate because the settlement fund was non-distributable. In addition, the fact that the
settlement fund was non-distributable did not mean that a class action could not be the superior
means of adjudicating the controversy under Fed.R.Civ.P. 23(b)(3). The panel held that approval
of the settlement was not an abuse of discretion due to claimed relationships between counsel or
the parties and some of the cy pres recipients. The panel held that a prior relationship or
connection, without more, is not an absolute disqualifier. Rather, a number of factors, such as the
nature of the relationship, the timing and recency of the relationship, the significance of dealings
between the recipient and the party or counsel, the circumstances of the selection process, and
Page 24 of 112
the merits of the recipient play into the analysis. The panel also held that the district court did not
abuse its discretion by approving the attorneys' fees and costs.
Concurring in part and dissenting in part, Judge Wallace agreed that a cy pre -only
settlement was appropriate and that the district court did not abuse its discretion in calculating
class counsel's fees. Dissenting from Section II of the majority opinion, Judge Wallace wrote that
the fact alone that 47% of the settlement was being donated to the alma maters of class counsel
raised an issue which, in fairness, the district court should have pursued further. Judge Wallace
would vacate the district court's approval of the class settlement and remand with instructions to
hold an evidentiary hearing, examine class counsel under oath, and determine whether class
counsel's prior affiliation with the cy pres recipients played any role in their selection as
beneficiaries.
Theodore H. Frank (argued), Melissa A. Holyoak, and Adam Ezra Schulman, Competitive
Enterprise Institute, Center for Class Action Fairness, Washington, D.C., for Objectors-Appellants.
Kassra P. Nassiri (argued) and John J. Manier, Nassiri & Jung LLP, San Francisco,
California, for Plaintiffs-Appellees.
Donald M. Falk (argued) and Edward D. Johnson, Mayer Brown LLP, Palo Alto, California;
Daniel E. Jones, Mayer Brown LLP, Washington, D.C.; Randall W. Edwards, O'Melveny & Myers
LLP, San Francisco, California; for Defendant-Appellee.
Before: J. Clifford Wallace, M. Margaret McKeown, and Jay S. Bybee, Circuit Judges.
Opinion by Judge McKeown; Partial Concurrence and Partial Dissent by Judge Wallace.
OPINION
Page 739
M. Margaret McKeown, Circuit Judge:
Google's free Internet search engine (" Google Search" ) processes more than one billion
user-generated search requests every day. This case arises from class action claims that Google
violated users' privacy by disclosing their Internet search terms to owners of third-party websites.
We consider whether the district court abused its discretion in approving the $8.5 million cy pres -
only settlement and conclude that it did not.
Background
In these consolidated class actions, three Google Search users--Paloma Gaos, Anthony
Italiano, and Gabriel Priyev (collectively " plaintiffs" )--asserted claims for violation of the Stored
Communications Act, 18 U.S.C. § 2701 et seq. ;
Page 740
breach of contract; breach of the covenant of good faith and fair dealing; breach of implied
contract; and unjust enrichment. The plaintiffs sought statutory and punitive damages and
declaratory and injunctive relief for the alleged privacy violations.
The claimed privacy violations are the consequence of the browser architecture. Once users
submit search terms to Google Search, it returns a list of relevant websites in a new webpage, the
" search results page." Users can then visit any website listed in the search results page by
clicking on the provided link.
When a user visits a website via Google Search, that website is allegedly privy to the search
Page 25 of 112
terms the user originally submitted to Google Search. This occurs because, for each search
results page, Google Search generates a unique " Uniform Resource Locator" (" URL" ) that
includes the user's search terms. In turn, every major desktop and mobile web browser (including
Internet Explorer, Firefox, Chrome, and Safari) by default reports the URL of the last webpage that
the user viewed before clicking on the link to the current page as part of " referrer header"
information. See In re Zynga Privacy Litig., 750 F.3d 1098, 1102 (9th Cir. 2014) (explaining how "
referrer headers" operate).[1]
The genesis of the plaintiffs' complaints is the application of the search protocol, coupled
with Google's " Web History" service, which tracks and stores account holders' browsing activity
on Google's servers. Following mediation, the parties reached a settlement, which they submitted
to the district court for preliminary approval in July 2013. The settlement provided that Google
would pay a total of $8.5 million and provide information on its website disclosing how users'
search terms are shared with third parties, in exchange for a release of the claims of the
approximately 129 million people who used Google Search in the United States between October
25, 2006 and April 25, 2014 (the date the class was given notice of the settlement).
Of the $8.5 million settlement fund, approximately $3.2 million was set aside for attorneys'
fees, administration costs, and incentive payments to the named plaintiffs. The remaining $5.3
million or so was allocated to six cy pres recipients, each of which would receive anywhere from
15 to 21% of the money, provided that they agreed " to devote the funds to promote public
awareness and education, and/or to support research, development, and initiatives, related to
protecting privacy on the Internet." The six recipients were AARP, Inc.; the Berkman Center for
Internet and Society at Harvard University; Carnegie Mellon University; the Illinois Institute of
Technology Chicago-Kent College of Law Center for Information, Society and Policy; the Stanford
Center for Internet and Society; and the World Privacy Forum. Each of the recipients submitted a
detailed proposal for how the funds would be used to promote Internet privacy.
After a hearing, the district court certified the class for settlement purposes and preliminarily
approved the settlement. Notice was given to the class on April 25, 2014, via a website, toll-free
telephone number, paid banner ads, and press articles. Thirteen class members opted out of the
settlement, and five class members, including Melissa Ann Holyoak and Theodore H. Frank
(collectively " Objectors" ), filed objections.
Page 741
Following a final settlement approval hearing at which the district court heard from both the
parties and Objectors, the district court granted final approval of the settlement on March 31, 2015.
With respect to the objections, the district court found that: (1) a cy pres -only settlement was
appropriate because the settlement fund was non-distributable; (2) whether or not the settlement
was cy pres -only had no bearing on whether Rule 23(b)(3)'s superiority requirement was met; (3)
the cy pres recipients had a substantial nexus to the interests of the class members, and there
was no evidence that the parties' preexisting relationships with the recipients factored into the
selection process; and (4) the attorneys' fees were commensurate with the benefit to the class.
The district court awarded $2.125 million in fees to class counsel and $15,000 in incentive awards
to the three named plaintiffs. Objectors appealed.
Page 26 of 112
Analysis
The settlement at issue involves a cy pres --only distribution of the $5.3 million or so that
remains in the settlement fund after attorneys' fees, administration costs, and incentive awards for
the named plaintiffs are accounted for. Cy pres, which takes its name from the Norman French
expression cy pres comme possible (or " as near as possible" ), is an equitable doctrine that
originated in trusts and estates law as a way to effectuate the testator's intent in making charitable
gifts. Nachshin v. AOL, LLC, 663 F.3d 1034, 1038 (9th Cir. 2011). In the class action settlement
context, the cy pres doctrine permits a court to distribute unclaimed or non-distributable portions of
a class action settlement fund to the " next best" class of beneficiaries for the indirect benefit of the
class. Id.
Here, the cy pres recipients were six organizations that have pledged to use the settlement
funds to promote the protection of Internet privacy. We review for abuse of discretion the district
court's approval of the proposed class action settlement. Id. In addition, because the settlement
took place before formal class certification, settlement approval requires a " higher standard of
fairness." Lane v. Facebook, Inc., 696 F.3d 811, 819 (9th Cir. 2012) (quoting Hanlon v. Chrysler
Corp., 150 F.3d 1011, 1026 (9th Cir. 1998)), cert. denied sub nom. Marek v. Lane, 134 S.Ct. 8,
187 L.Ed.2d 392 (2013). Recognizing that, at this early stage of litigation, the district court cannot
as effectively monitor for collusion and other abuses, we scrutinize the proceedings to discern
whether the court sufficiently " account[ed] for the possibility that class representatives and their
counsel have sacrificed the interests of absent class members for their own benefit." Id.
I. Appropriateness of the Cy Pres-Only Settlement
As an initial matter, we quickly dispose of the argument that the district court erred by
approving a cy pres -only settlement. Notably, Objectors do not contest the value of the settlement
nor do they plead monetary injury. To be sure, cy pres -only settlements are considered the
exception, not the rule. See Klier v. Elf Atochem N. Am., Inc., 658 F.3d 468, 474 (5th Cir. 2011)
(explaining that direct distributions to class members are preferable because " [t]he settlement-
fund proceeds, having been generated by the value of the class members' claims," are " the
property of the class" ); accord William B. Rubenstein, Newberg on Class Actions § 12:26 (5th ed.
2017). However, they are appropriate where the settlement fund is " non-distributable" because "
the proof of individual claims would be burdensome or distribution of damages costly."
Page 742
Lane, 696 F.3d at 819 (quoting Nachshin, 663 F.3d at 1038). We have never imposed a
categorical ban on a settlement that does not include direct payments to class members.
The district court's finding that the settlement fund was non-distributable accords with our
precedent. In Lane, we deemed direct monetary payments " infeasible" where each class
member's individual recovery would have been " de minimis " because the remaining settlement
fund was approximately $6.5 million and there were over 3.6 million class members. Id. at 817-18,
820-21. The gap between the fund and a miniscule award is even more dramatic here. The
remaining settlement fund was approximately $5.3 million, but there were an estimated 129 million
class members, so each class member was entitled to a paltry 4 cents in recovery--a de minimis
amount if ever there was one. The district court found that the cost of verifying and " sending out
Page 27 of 112
very small payments to millions of class members would exceed the total monetary benefit
obtained by the class."
To begin, the district court found that the amount of the fund was appropriate given the
shakiness of the plaintiffs' claims. Objectors do not contend that it would have been feasible to
make a 4-cent distribution to every class member. Instead, they ask us to impose a mechanism
that would permit a miniscule portion of the class to receive direct payments, eschewing a class
settlement that benefits members through programs on privacy and data protection instituted by
the cy pres recipients. Objectors suggest, for example, that " it is possible to compensate an
oversized class with a small settlement fund by random lottery distribution," or by offering " $5 to
$10 per claimant" on the assumption that few class members will make claims. Our review of the
district court's settlement approval is not predicated simply on whether there may be " possible"
alternatives; rather, we benchmark whether the district court discharged its obligation to assure
that the settlement is " fair, adequate, and free from collusion." Lane, 696 F.3d at 819 (quoting
Hanlon, 150 F.3d at 1027). If we took their objections at face value, Objectors would have us
jettison the teachings of Lane. Objectors would also have us ignore our prior endorsement of cy
pres awards that go to uses consistent with the nature of the underlying action. Nachshin, 663
F.3d at 1039-40.[2]
Likewise, we easily reject Objectors' argument that if the settlement fund was non-
distributable, then a class action cannot be the superior means of adjudicating this controversy
under Rule 23(b)(3). " [T]he purpose of the superiority requirement is to assure that the class
action is the most efficient and effective means of resolving the controversy." Wolin v. Jaguar Land
Rover N. Am., LLC, 617 F.3d 1168, 1175 (9th Cir. 2010) (alteration in original) (quoting 7AA
Charles Alan Wright et al., Federal Practice and Procedure § 1779 (3d ed. 2005)). Not
surprisingly, there is a relationship between the superiority requirement and the appropriateness of
a cy pres -only settlement. The two concepts are not mutually exclusive, since " [w]here recovery
on an individual
Page 743
basis would be dwarfed by the cost of litigating on an individual basis, this factor weighs in favor of
class certification." Id. The district court did not abuse its discretion in finding the superiority
requirement was met because the litigation would otherwise be economically infeasible. This
finding dovetails with the rationale for the cy pres -only settlement.[3]
II. The Cy Pres Recipients
We now turn to the crux of this appeal: whether approval of the settlement was an abuse of
discretion due to claimed relationships between counsel or the parties and some of the cy pres
recipients. We have long recognized that the cy pres doctrine, when " unbridled by a driving nexus
between the plaintiff class and the cy pres beneficiaries[,] poses many nascent dangers to the
fairness of the distribution process," because the selection process may then " answer to the
whims and self interests of the parties, their counsel, or the court." Nachshin, 663 F.3d at 1038-39;
see also Dennis v. Kellogg Co., 697 F.3d 858, 865 (9th Cir. 2012); Six (6) Mexican Workers v.
Arizona Citrus Growers, 904 F.2d 1301, 1308-09 (9th Cir. 1990). Due to these dangers, we require
cy pres awards to meet a " nexus" requirement by being tethered to the objectives of the
Page 28 of 112
underlying statute and the interests of the silent class members. Nachshin, 663 F.3d at 1039.
Objectors suggest that the district court rubber-stamped the settlement, by " simply h[olding]
that the Ninth Circuit and district courts have approved other all- cy--pres settlements and class
members effectively had no right to complain about the parties' choice of compromise." That
characterization is unfair and untrue. And oddly, despite this claim, Objectors do not dispute that
the nexus requirement is satisfied here.
The district court found that the six cy pres recipients are " established organizations," that
they were selected because they are " independent," have a nationwide reach and " a record of
promoting privacy protection on the Internet," and " are capable of using the funds to educate the
class about online privacy risks." Although the district court expressed some disappointment that
the recipients were the " usual suspects," it recognized that " failure to diversify the list of
distributees is not a basis to reject the settlement . . . when the proposed recipients otherwise
qualify under the applicable standard." Accordingly, the district court appropriately found that the
cy pres distribution addressed the objectives of the Stored Communications Act and furthered the
interests of the class members. Previous cy pres distributions rest on this same understanding of
the nexus requirement. See, e.g., Dennis, 697 F.3d at 866-67 (no nexus between false advertising
claims relating to the nutritional value of Frosted Mini-Wheats® and charities providing food for the
indigent); Lane, 696 F.3d at 817, 820-22 (nexus between Facebook privacy claims and charity
giving grants promoting online privacy and security); Nachshin, 663 F.3d at 1039-41 (no nexus
between breach of privacy, unjust
Page 744
enrichment, and breach of contract claims relating to AOL's provision of commercial e-mail
services and the Legal Aid Foundation of Los Angeles, the Boys and Girls Clubs of Santa Monica
and Los Angeles, and the Federal Judicial Center Foundation); Six (6) Mexican Workers, 904 F.2d
at 1307-09 (no nexus between Farm Labor Contractor Registration Act claims and foundation
operating human assistance projects in areas where plaintiffs resided).
Nonetheless, Objectors take issue with the choice of cy pres recipients because Google has
in the past donated to at least some of the cy pres recipients, three of the cy pres recipients
previously received Google settlement funds, and three of the cy pres recipients are organizations
housed at class counsel's alma maters. See In re Google Buzz Privacy Litig., No. C 10-00672 JW,
2011 WL 7460099, at *3 (N.D. Cal. Jun. 2, 2011). The Objectors point to a comment from the
American Law Institute's (" ALI" ) Principles of the Law of Aggregate Litigation which suggests that
" [a] cy pres remedy should not be ordered if the court or any party has any significant prior
affiliation with the intended recipient that would raise substantial questions about whether the
selection of the recipient was made on the merits." Principles of the Law of Aggregate Litig. § 3.07
cmt. b (Am. Law Inst. 2010) (emphasis added).[4]
The benchmark for " significant prior affiliation" is left undefined. Id. Of course it makes
sense that the district court should examine any claimed relationship between the cy pres recipient
and the parties or their counsel. But a prior relationship or connection between the two, without
more, is not an absolute disqualifier. Rather, a number of factors, such as the nature of the
relationship, the timing and recency of the relationship, the significance of dealings between the
Page 29 of 112
recipient and the party or counsel, the circumstances of the selection process, and the merits of
the recipient play into the analysis. The district court explicitly or implicitly addressed this range of
considerations.
We do not need to explore the contours of the " significant prior affiliation" comment because
in the context of this settlement, the claimed relationships do not " raise substantial questions
about whether the selection of the recipient was made on the merits." See id. § 3.07 cmt. b.[5] As
a starting premise, Google's role as a party in reviewing the cy pres recipients does not cast doubt
on the settlement. In Lane, we approved a cy pres -only settlement in which the distributor of the
settlement fund was a newly-created entity run by a three-member board of directors, one of
whom was defendant Facebook's Director of Public Policy. 696 F.3d at 817. We rejected the claim
that this structure created an " unacceptable conflict of interest," explaining that " [w]e do not
require . . . that settling parties select a cy pres recipient that the court or class members would
find ideal" since " such an intrusion into the private parties' negotiations would be improper and
disruptive to the settlement process." Id. at 820-21. Instead, we
Page 745
recognized that, as the " 'offspring of compromise,'" settlement agreements " necessarily reflect
the interests of both parties to the settlement." Id. at 821 (quoting Hanlon, 150 F.3d at 1027).
Thus, we concluded that Facebook's ability to have " its say" in the distribution of cy pres funds
was " the unremarkable result of the parties' give-and-take negotiations" and acceptable so long
as the nexus requirement was satisfied. Id. at 821-22.
Given the burgeoning importance of Internet privacy, it is no surprise that Google has
chosen to support the programs and research of recognized academic institutes and nonprofit
organizations. Google has donated to hundreds of third-party organizations whose work implicates
technology and Internet policy issues, including university research centers, think tanks, advocacy
groups, and trade organizations.[6] These earlier donations do not undermine the selection
process employed to vet the cy pres recipients in this litigation. The district court conducted a "
careful[] review" of the recipient's " detailed proposals" and found a " substantial nexus" between
the recipients and the interests of the class members. Notably, some of the recipient organizations
have challenged Google's Internet privacy policies in the past.[7] Most importantly, there was
transparency in this process, with the proposed recipients disclosing donations received from
Google. Each recipient's cy pres proposal identified the scope of Google's previous contributions
to that organization, and, unlike in Lane, explained how the cy pres funds were distinct from
Google's general donations. See Dennis, 697 F.3d at 867-68 (casting doubt on the value of cy
pres funds that a defendant " has already obligated itself to donate" ). Citing Lane, the district court
found that " [t]he chosen recipients and their respective proposals are sufficiently related so as to
warrant approval; they do not have to be the recipients that objectors or the court consider ideal."
The objection that three of the cy pres recipients had previously received cy pres funds from
Google does not impugn the settlement without something more, such as fraud or collusion. See
Rodriguez v. W. Publ'g Corp., 563 F.3d 948, 965 (9th Cir. 2009). That " something more" is
missing here. Indeed, the proposition that cy pres funds should not be awarded to previous
recipients would be in some tension with our nexus requirements. As we have recognized, it is
Page 30 of 112
often beneficial for a cy pres recipient to have a " 'substantial record of service,'" because such a
record inspires
Page 746
confidence that the recipient will use the funds to the benefit of class members. See Dennis, 697
F.3d at 865 (quoting Six (6) Mexican Workers, 904 F.2d at 1308); Lane, 696 F.3d at 822. But in
emerging areas such as Internet and data privacy, expertise in the subject matter may limit the
universe of qualified organizations that can meet the strong nexus requirements we impose upon
cy pres recipients. Given that, over time, major players such as Google may be involved in more
than one cy pres settlement, it is not an abuse of discretion for a court to bless a strong nexus
between the cy pres recipient and the interests of the class over a desire to diversify the pick via
novel beneficiaries that are less relevant or less qualified. See Nachshin, 663 F.3d at 1040
(considering whether the cy pres distribution " provide[s] reasonable certainty that any member will
be benefitted" ).
Finally, we reject the proposition that the link between the cy pres recipients and class
counsel's alma maters raises a significant question about whether the recipients were selected on
the merits. There may be occasions where the nature of the alumni connections between the
parties and the recipients could cast doubt on the propriety of the selection process. But here, we
have nothing more than a barebones allegation that class counsel graduated from schools that
house the Internet research centers that will receive funds.
The claim that counsel's receipt of a degree from one of these schools taints the settlement
can't be entertained with a straight face. Each of these schools graduates thousands of students
each year. Objectors have never disputed that class counsel have no ongoing or recent
relationships with their alma maters and have no affiliations with the specific research centers. Nor
did the district court simply accept this concession or put the burden on the Objectors. The district
court appropriately considered the substance of the objections and explained why those
challenges did not undermine the overall fairness of the settlement. See In re Pac. Enters. Sec.
Litig., 47 F.3d 373, 377 (9th Cir. 1995). The court affirmatively analyzed the issue and was
cognizant of the claim of a potential conflict. All class counsel swore that they have no affiliations
with the specific research centers. Class counsel repeated that attestation at the final settlement
approval hearing and added that they sit on no boards for any of the proposed recipients. As one
class counsel put it, " I simply got my law degree [at Harvard], and that's simply the end of it." [8]
The recipients are well-recognized centers focusing on the Internet and data privacy, and the
district court conducted a " careful[] review" of the recipients'" detailed proposals" and found a "
substantial nexus" between the recipients and the interests of the class members.[9] No one
suggested that any of the centers
Page 747
acted with any impropriety, and the Objectors provided no alternative suggestions for other law
schools with more qualified centers or institutes. The district court found " no indication that
counsel's allegiance to a particular alma mater factored into the selection process," particularly
since the identity of the recipients " was a negotiated term included in the Settlement Agreement
and therefore not chosen solely by . . . alumni." Thus, the district court gave a " sufficient[ly]
Page 31 of 112
reasoned" response to the objections as to the claimed preexisting relationships. In re Pac.
Enters. Sec. Litig., 47 F.3d at 377. We can hardly say that the alumni connections cloud the
fairness of the settlement.
As an overarching matter, nothing in this record " raise[s] substantial questions about
whether the selection of the recipient was made on the merits." See Principles of the Law of
Aggregate Litig. § 3.07 cmt. b. We do not suggest, however, that a party's prior relationship with a
cy pres recipient could not be a stumbling block to approval of a settlement. Cf. Marek, 134 S.Ct.
at 9 (mem.) (statement of Roberts, C.J., respecting the denial of certiorari) (recognizing that given
the " fundamental concerns surrounding" cy pres awards and their increasing prevalence, the
Court " may need to clarify the limits on the use of such remedies" in the future). We hold merely
that, under the circumstances here, the district court did not abuse its discretion in approving the
cy pres recipients.
III. Attorneys' Fees
Turning to the issue of attorneys' fees, the district court did not abuse its discretion by
approving $2.125 million in fees and $21,643.16 in costs. As an initial matter, there is no support
for Objectors' view that the settlement should have been valued at a lower amount for the
purposes of calculating attorneys' fees simply because it was cy pres -only. See generally Lane,
696 F.3d at 818 (acknowledging a 25% fee award that also involved a cy pres -only settlement).
Rather, the question is whether the amount of attorneys' fees was reasonable. In re Bluetooth
v. Bear, Stearns & Co., Inc., 626 F.Supp.2d 402, 414-16 (S.D.N.Y. 2009); Adam Liptak, Doling out
Other People's Money, N.Y. Times, Nov. 26, 2007 (" Lawyers and judges have grown used to
controlling these pots of money, and they enjoy distributing them to favored charities, alma maters
and the like" ).
In response to this all-too-common development, the American Law Institute has set forth, in
its Principles of the Law of Aggregate Litigation, that " [a] cy pres remedy should not be ordered if
the court or any party has any significant prior affiliation with the intended recipient that would
raise substantial questions about whether the selection of the recipient was made on the merits."
American Law Institute (ALI), Principles of the Law of Aggregate Litigation § 3.07 comment b
(2010) (emphasis added). Although the majority tells us correctly that no circuit has adopted the
specific " prior affiliation" language, circuits have endorsed § 3.07's guidance regarding
scrutinizing cy pres disbursements. See, e.g., In re BankAmerica Corp. Sec. Litig., 775 F.3d 1060,
1064-65 (8th Cir. 2015) (vacating a cy pres settlement because " class counsel and the district
court entirely ignored this now-published ALI authority" ); In re Baby Prods. Antitrust Litig., 708
F.3d 163, 172 (3d Cir. 2013) (quoting ALI § 3.07, comment a (2010)); In re Lupron Marketing and
Sales Practices Litig., 677 F.3d 21, 33 (1st Cir. 2012) (citing to ALI § 3.07 and asserting that "
[c]ourts have generally agreed with the ALI Principles" ).
I conclude that our circuit should adopt the ALI's guidance as set forth in § 3.07. District
courts should be required to scrutinize cy pres settlements when the proffered recipients of the
funds have a " prior affiliation" with counsel, a party, or even the judge, especially when one of
those players is a loyal alumni of a cy pres recipient. I do not mean to suggest that class counsel's
alma mater can never be a cy pres beneficiary. Rather, I propose that the burden should be on
class counsel to show through sworn testimony, in an on-the-record hearing, that the prior
affiliation played no role in the negotiations, that other institutions were sincerely considered, and
that the participant's alma mater is the proper cy pres recipient.
The majority responds to this line of argument by asserting that " here, we have nothing
more than a barebones allegation that class counsel graduated from schools that house the
Internet research centers that will receive funds." The majority then salutes the district court's
conclusion that there is " no indication that counsel's allegiance to a particular alma mater factored
into the selection process," and stresses that the cy pres recipients were a negotiated term, not
chosen solely by alumni. In
Page 750
essence, the majority holds that despite the nascent dangers posed by apportioning cy pres funds
to the distributing parties' alma maters, the burden is entirely on the objectors to show that the
Page 34 of 112
settlement might be tainted.
I disagree fundamentally with this analysis. Our precedent requires that district courts " must
be particularly vigilant not only for explicit collusion, but also for more subtle signs that class
counsel have allowed pursuit of their own self-interests and that of certain class members to infect
the negotiations." In re Bluetooth, 654 F.3d at 947. In our case, we have a cy pres -only
settlement. That alone raises a yellow flag. Furthermore, we have a class settlement before formal
class certification. That raises another yellow flag. Lastly, we have almost half of the settlement
fund, several million dollars, being given to class counsel's alma maters. To me, that raises a red
flag. I am especially dubious of the inclusion of the Center for Information, Society and Policy at
Chicago-Kent Law School (a law school attended by class counsel), which center appears to have
inaugurated only a year before the parties herein agreed to their settlement. Even with these red
and yellow flags, under the majority's holding, the burden is still on the objectors to prove more,
despite the objectors' lack of access to virtually any relevant evidence that would do so.
I would hold that the combination of a cy pres -only award, a pre-certification settlement, and
the fact that almost half the cy pres fund is going to class counsel's alma maters, is sufficient to
shift the burden to the proponents of the settlement to show, on a sworn record, that nothing in the
acknowledged relationship was a factor in the ultimate choice. Here, the only sworn-to items in the
record on this issue are boiler plate, one-line declarations from class counsel stating " I have no
affiliation" with the subject institutions. While the majority asserts that the district court conducted a
" careful review," these terse declarations are the only shred of sworn-to evidence in the record.
There was essentially nothing for the district court to review--carefully or not. Although there was
some discussion between counsel and the district court during the hearings on the settlement, this
was nothing more than unsworn lawyer talk during an oral argument.[1]
I still have many questions surrounding how these universities were chosen, such as: What
other institutions were considered? Why were the non-alma mater institutions rejected? What
relationship have counsel had with these universities? Have counsel donated funds to their alma
maters in the past? Do counsel serve on any alma mater committees or boards? Do counsel's
family members? How often do counsel visit their alma maters? There are many questions still
lingering that have not been answered under oath. Here, as we have directed before, " the district
court should have pressed the parties to substantiate their bald assertions with corroborating
evidence." Id. at 948.
Although I would vacate the parties' settlement, I express no opinion on the definitive
fairness of the parties' agreement. It is not the province of appellate judges to " substitute our
notions of fairness for those of the district judge." Officers for
Page 751
Justice v. Civ. Serv. Commission of the City and County of San Francisco, 688 F.2d 615, 626 (9th
Cir. 1982) (internal citations omitted). Instead, I would remand the case to the district court for
further fact finding in accordance with the concerns I have expressed.
---------
Notes: [*] This summary constitutes no part of the opinion of the court. It has been prepared by court staff
Page 35 of 112
for the convenience of the reader. [1]For instance, if a user enters " 2016 presidential election" into Google Search and clicks on a
link to www.cnn.com/election on the search results page, the " referrer header" would tell CNN
that the user found her way there via "
http://www.google.com/search?q=2016+presidential+election ." [2]It bears noting, of course, that district courts are not precluded from approving other distribution
methods that might benefit the class more directly under certain circumstances. However, the fact
that there are other conceivable methods of distribution does not mean that the district court
abused its discretion by declining to adopt them. See Kode v. Carlson, 596 F.3d 608, 612 (9th Cir.
2010) (per curiam) (holding that " [t]he abuse of discretion standard requires us to uphold a district
court determination that falls within a broad range of permissible conclusions" ). [3]Objectors point to In re Hotel Tel. Charges, 500 F.2d 86, 91 (9th Cir. 1974), as an example of a
case where we found the superiority requirement not met because " the principal, if not the only,
beneficiaries to the class action are to be the attorneys for the plaintiffs and not the individual class
members." But In re Hotel did not involve a cy pres distribution or even a settlement. See id.
Instead, we held that a class action was not the superior means of resolving the controversy
because the class members' antitrust claims involved a " great variety" of individualized
determinations. Id. at 90-91; see also Six (6) Mexican Workers v. Ariz. Citrus Growers, 904 F.2d
1301, 1305-06 (9th Cir. 1990) (distinguishing In re Hotel on the basis that the case raised
concerns regarding " individual proof of damages" ). [4]This statement is found in a comment that is unsupported by any illustration, case law, or other
authority. Id. § 3.07 cmt. b. [5]Other circuits have endorsed § 3.07's preference for direct distribution to class members over
the use of cy pres awards where practicable. See In re BankAmerica Corp. Sec. Litig., 775 F.3d
1060, 1064-65 (8th Cir. 2015); Klier, 658 F.3d at 475 n.16. And though we have not adopted §
3.07, we too have expressed a similar preference. See Nachshin, 663 F.3d at 1036. However, no
circuit has yet adopted § 3.07 comment b's " significant prior affiliation" reference. [6] See Transparency -- U.S. Public Policy -- Google, Google.com,
https://www.google.com/publicpolicy/transparency.html (last visited July 21, 2017) (listing third-
party organizations Google has supported in the past). [7]At least one of the recipients, World Privacy Forum, has publicly criticized Google's lack of
transparency regarding its privacy policies. See Joseph Menn, Privacy Advocates Target Google,
L.A. Times (June 4, 2008), http://articles.latimes.com/2008/jun/04/business/fi-google4 . And a
complaint filed by the World Privacy Forum and a Stanford Center for Internet and Society study
played a key role in the $17 million fine Google paid to the Federal Trade Commission for
circumventing user's privacy choices in Apple's Safari Internet browser. See Kukil Bora, FTC
Appears Ready to Fine Google Millions Over Apple Safari Privacy Breach, Int'l Bus. Times (May 5,
personality/ . Both organizations are cy pres recipients here. [8]The dissent's suggestion that what is needed is a hearing with sworn testimony seems
superfluous in view of the extensive hearing held by the district court, the specific queries to
counsel about the cy pres recipients, and the submission of sworn declarations. [9]The dissent challenges the inclusion of the Chicago-Kent College of Law Center for Information,
Society and Policy (" CISP" ) as a recipient, noting that the center was only inaugurated in 2012.
See Chicago-Kent Mag., Summer 2012, at 8, available at
https://issuu.com/chicagokentlaw/docs/chicago-kent-magazine-2012 . This judicial second-
guessing does not bear scrutiny, particularly in a field that is developing quickly and where the
record reveals a different story. CISP's cy pres proposal, which outlines a " privacy preparedness"
project that would develop interactive materials to educate the public about ways to protect their
Internet and data privacy, notes that the five faculty involved in the proposed project are respected
leaders in the field of Internet and privacy law, that CISP has received other cy pres awards and
grants, and that CISP has hosted five conferences on Internet and data privacy issues that have
attracted hundreds of attendees and trained over a hundred journalists on data privacy. In
addition, CISP conducts research in such areas as data aggregation, social networks and health
information, and children and internet privacy; engages in policy advocacy, community outreach,
and public education; and holds seminars on Internet and data privacy issues for law students.
See Center for Information, Society and Policy, Kentlaw.iit.edu,
July 24, 2017). [1]I disagree with the majority's assertion that " sworn testimony seems superfluous" because
counsel submitted one-line boilerplate declarations and the district court heard some unsworn
argument from the lawyers. My experience as a trial judge taught me to be skeptical of unsworn
statements from lawyers, especially when it comes to conflict of interest issues. To me, there is a
significant difference between sworn and unsworn testimony.
---------
Page 37 of 112
857 F.3d 7 (1st Cir. 2017), 15-2364, Oliveira v. New Prime, Inc. /**/ div.c1 {text-align: center} /**/
Page 7
857 F.3d 7 (1st Cir. 2017)
DOMINIC OLIVEIRA, on his behalf and on behalf of all others similarly situated, Plaintiff,
Appellee,
v.
NEW PRIME, INC., Defendant, Appellant
No. 15-2364
United States Court of Appeals, First Circuit
May 12, 2017
Page 8
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MASSACHUSETTS. Hon. Patti B. Saris, U.S. District Judge.
Theodore J. Boutrous, Jr., with whom Joshua S. Lipshutz, Jason C. Schwartz, Thomas M.
Johnson, Jr., Lindsay S. See, Gibson, Dunn & Crutcher LLP, William E. Quirk, James C. Sullivan,
Robert J. Hingula, Polsinelli PC, Judith A. Leggett, and Leggett Law Firm, P.C. were on brief, for
appellant.
Jennifer D. Bennett, with whom Public Justice, P.C., Hillary Schwab, Fair Work, P.C.,
Andrew Schmidt, and Andrew Schmidt Law, PLLC were on brief, for appellee.
Richard Frankel on brief for amicus curiae in support of appellee.
Before Thompson and Kayatta, Circuit Judges, and Barbadoro,[*] District Judge.
OPINION
Page 9
THOMPSON, Circuit Judge.
This case raises two questions of first impression in this circuit. First, when a federal district
court is confronted with a motion to compel arbitration under the Federal Arbitration Act (FAA or
Act), 9 U.S.C. § § 1-16, in a case where the parties have delegated questions of arbitrability to the
arbitrator, must the court first determine whether the FAA applies or must it grant the motion and
let the arbitrator determine the applicability of the Act? We hold that the applicability of the FAA is
a threshold question for the court to determine before compelling arbitration under the Act.
Second, we must decide whether a provision of the FAA that exempts contracts of employment of
transportation workers from the Act's coverage, see id. § 1 (the § 1 exemption), applies to a
transportation-worker agreement that establishes or purports to establish an independent-
contractor relationship. We answer this question in the affirmative. Accordingly, we affirm the
district court's order denying the motion to compel arbitration and dismiss this appeal for lack of
appellate jurisdiction.
Background [1]
The defendant, New Prime, Inc. (Prime), operates an interstate trucking company. Under its
Student Truck Driver Program (apprenticeship program), Prime recruits and trains new drivers.
Prime touts its program as offering " [p]aid [a]pprenticeship [Commercial Driver's License (CDL)]
[t]raining." After attending a four-day orientation, student drivers hit the road with a Prime truck
Page 38 of 112
driver, who acts as an on-the-job instructor. In this phase of the apprenticeship program, student
drivers must log 10,000 miles as a driver or passenger, and, apart from an advance of $200 per
week for food (which eventually must be repaid), the apprentices are not paid.[2] After completing
the supervised-driving period, the student driver takes the examination for a CDL and then must
drive 30,000 more miles as a B2 company driver trainee (B2 trainee). Prime pays its B2 trainees
fourteen cents per mile. At the conclusion of the B2 trainee portion of the apprenticeship program,
the apprentices attend additional orientation classes for approximately one week. Apprentices are
not paid for time spent in this orientation.
The plaintiff, Dominic Oliveira, is an alum of Prime's apprenticeship program. He was not
paid for the time he spent in orientation and was paid on a per-mile
Page 10
basis while driving as a B2 trainee, although Prime docked his pay during this period to recoup the
$200 advances that it paid him during the supervised-driving period.
Drivers are relieved of paying tuition for the apprenticeship program as long as they remain
with Prime for one year as either company drivers or independent contractors. After completing
the program, drivers choose between the two options, and Prime offers a $100 bonus to those
who elect independent-contractor status. When Oliveira finished the apprenticeship program,
Prime representatives informed him that he would make more money as an independent
contractor than a company driver. Prime directed Oliveira to Abacus Accounting (Abacus) -- a
company with offices on the second floor of Prime's building -- to assist him in forming a limited
liability company (LLC). After Oliveira filled out a form provided by Abacus and listed his preferred
LLC names, Abacus created Hallmark Trucking LLC (Hallmark) on Oliveira's behalf.
Prime then directed Oliveira to the offices of Success Leasing (Success) -- located on the
first floor of the same building -- for help in securing a truck. After selecting a truck, Oliveira was
informed that his first load of freight was ready to be trucked for Prime, and he was instructed to
sign the highlighted portions of several documents before hitting the road. He hastily did so, and
Prime then steered him towards its company store, where he purchased -- on credit -- $5,000
worth of truck equipment and fuel.
Among the documents Oliveira signed was an Independent Contractor Operating Agreement
(the contract) between Prime and Hallmark.[3] The contract specified that the relationship between
the parties was that " of carrier and independent contractor and not an employer/employee
relationship" and that " [Oliveira is] and shall be deemed for all purposes to be an independent
contractor, not an employee of Prime." [4] Additionally, under the contract, Oliveira retained the
rights to provide transportation services to companies besides Prime,[5] refuse to haul any load
offered by Prime, and determine his own driving times and delivery routes. The contract also
obligated Oliveira to pay all operating and maintenance expenses, including taxes, incurred in
connection with his use of the truck leased from Success. Finally, the contract contained an
arbitration clause under which the parties agreed to arbitrate " any disputes arising under, arising
out of or relating to [the contract], . . . including the arbitrability of disputes between the parties." [6]
Page 11
Page 39 of 112
Oliveira alleges that, during his Hallmark days, Prime exercised significant control over his
work. According to Oliveira, Prime required him to transport Prime shipments, mandated that he
complete Prime training courses and abide by its procedures, and controlled his schedule.
Because of Prime's pervasive involvement in his trucking operation, Oliveira was unable to work
for any other trucking or shipping companies.
Prime consistently shortchanged Oliveira during his time as an independent contractor.
Eventually, Oliveira -- frustrated and, he alleges, unlawfully underpaid -- stopped driving for Prime.
It was a short-lived separation, however; Prime rehired Oliveira a month later, this time as a
company driver. Oliveira alleges that his job responsibilities as a company driver were "
substantially identical" to those he had as an independent contractor. Job responsibilities were not
the only constant; Oliveira's pay as a company driver was as paltry as ever.
Oliveira filed this class action against Prime, alleging that Prime violated the Fair Labor
Standards Act (FLSA), 29 U.S.C. § § 201-219, as well as the Missouri minimum-wage statute, by
failing to pay its truck drivers minimum wage. Oliveira also asserted a class claim for breach of
contract or unjust enrichment and an individual claim for violation of Maine labor statutes. Prime
moved to compel arbitration under the FAA and stay the proceedings or, alternatively, to dismiss
the complaint for improper venue and the breach of contract/unjust enrichment count for failure to
state a claim upon which relief may be granted.[7] In its motion, Prime asserted that " Oliveira . . .
entered into an Independent Contractor Operating Agreement with . . . Prime . . . to work as an
owner-operator truck driver." (Emphasis added.)
In response, Oliveira argued that, because he was not a party to the contract between Prime
and Hallmark, he could not be personally bound by any of its provisions, including the arbitration
clause. He further contended that the motion to compel arbitration should be denied because,
among other reasons, the contract is exempted from the FAA under § 1. He also argued that the
question of the applicability of the § 1 exemption was one for the court, and not an arbitrator, to
decide.
Prime disputed Oliveira's argument that he could not be personally bound by the contract
between Prime and Hallmark, stating that " Oliveira and Hallmark Trucking are factually one and
the same." Prime also took issue with both of Oliveira's other arguments, contending that the § 1
exemption does not include independent-contractor agreements and, in any event, the question of
whether the § 1 exemption applies is a question of arbitrability that the parties had delegated to
the arbitrator. [8]
The district court proceeded straight to the FAA issues and concluded that the question of
the applicability of the § 1 exemption was for the court, and not an arbitrator, to decide. And it
determined
Page 12
that it could not yet answer that question because (1) the " contracts of employment" language of
the § 1 exemption does not extend to independent contractors; and (2) discovery was needed on
the issue of whether Oliveira was a Prime employee or an independent contractor before the court
could decide whether the contract was a contract of employment under the § 1 exemption.[9] The
district court therefore denied Prime's motion to compel arbitration without prejudice and permitted
Page 40 of 112
the parties to conduct discovery on Oliveira's employment status. Prime timely appealed.[10]
Analysis
The FAA lies at the center of the two questions raised by this appeal. Thus, before tackling
those questions, we first briefly outline the statutory framework.
To combat deep-rooted judicial hostility towards arbitration agreements, Congress enacted
the FAA in 1925. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 111, 121 S.Ct. 1302, 149
L.Ed.2d 234 (2001). Section 2 of the FAA enshrines the " liberal federal policy favoring arbitration
agreements," Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct.
927, 74 L.Ed.2d 765 (1983), by declaring that an arbitration agreement in " a contract evidencing a
transaction involving commerce . . . shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any contract," 9 U.S.C. § 2.
And the FAA does not simply talk the talk. Instead, two separate provisions provide the bite
to back up § 2's bark. See Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 70, 130 S.Ct. 2772,
177 L.Ed.2d 403 (2010). First, under § 3, a party may obtain a stay of federal-court litigation
pending arbitration. See 9 U.S.C. § 3. Second, § 4 authorizes district courts to grant motions to
compel arbitration. See id. § 4.
The scope of the FAA, however, is not unbounded. Section 1 of the FAA provides that the
Act shall not apply " to contracts of employment of seamen, railroad employees, or any other class
of workers engaged in foreign or interstate commerce." Id. § 1. The Supreme Court has
interpreted this section to " exempt[] from the FAA . . . contracts of employment of transportation
workers." Circuit City, 532 U.S. at 119.
This case presents us with two questions pertaining to the § 1 exemption. We address each
question in turn.
A. Who Decides Whether the § 1 Exemption Applies?
The question of whether the district court or the arbitrator decides the applicability of the § 1
exemption is one of first impression in this circuit. The parties champion dueling out-of-circuit
precedent in support of their respective positions on this issue. Relying on the Eighth Circuit's
decision in Green v. SuperShuttle International, Inc., 653 F.3d 766 (8th Cir. 2011), Prime argues
that the question of whether the § 1 exemption applies is a question of arbitrability that must be
decided by the arbitrator where, as here, the parties have delegated such questions to the
arbitrator.
Page 13
In Green, the plaintiffs, a class of shuttle-bus drivers, alleged that the defendant, a shuttle-
bus company, misclassified the drivers as franchisees instead of classifying them as employees.
653 F.3d at 767-68. When the defendant moved under the FAA to compel arbitration pursuant to
the arbitration clause contained in the parties' contracts, the plaintiffs countered that their contract
was outside the scope of the FAA by virtue of the § 1 exemption. Id. at 768. The Eighth Circuit
upheld the district court's grant of the defendant's motion, concluding that " [a]pplication of the
FAA's transportation worker exemption is a threshold question of arbitrability" in the parties'
dispute. Id. at 769. Because the parties' agreements incorporated the AAA rules, which provide
that the arbitrator has the power to determine his or her own jurisdiction, the court concluded that
Page 41 of 112
the parties agreed to allow the arbitrator to determine threshold questions of arbitrability, including
the applicability of the § 1 exemption. Id.
With Green as its guide, Prime offers several reasons why the question of § 1's applicability
is one for the arbitrator to determine, but each of these arguments flows from the Green court's
characterization of this issue as a question of arbitrability. The case on which Oliveira relies -- the
Ninth Circuit's decision in In re Van Dusen, 654 F.3d 838 (9th Cir. 2011) -- considered this
characterization to be a flawed starting premise.
Van Dusen arose on facts strikingly similar to those in this case; the plaintiffs, interstate truck
drivers, alleged that one of the defendants, a trucking company, misclassified its truck drivers as
independent contractors to circumvent the requirements of the FLSA and parallel state laws. See
id. at 840; see also Van Dusen v. Swift Transp. Co., 830 F.3d 893, 895 (9th Cir. 2016) (later
appeal in same case). The defendant moved to compel arbitration under the FAA, and the
plaintiffs opposed that motion, asserting that the § 1 exemption applied to their contracts. Van
Dusen, 654 F.3d at 840. The district court ordered arbitration, concluding that the question of
whether the § 1 exemption applied was one for the arbitrator to decide in the first instance. Id.
After the district court refused the plaintiffs' request for certification of an interlocutory appeal, the
plaintiffs sought mandamus relief before the Ninth Circuit. Id.
The Ninth Circuit ultimately declined to issue the extraordinary remedy of mandamus relief
because the district court's conclusion was not clearly erroneous in light of the dearth of federal
appellate authority addressing the issue and the general federal policy in favor of arbitration. Id. at
845-46. The court nonetheless outlined why " the best reading of the law requires the district court
to assess whether [the § ] 1 exemption applies before ordering arbitration" under the FAA. Id. at
846. The court explained that, because a district court's authority to compel arbitration under the
FAA exists only where the Act applies, " a district court has no authority to compel arbitration
under Section 4 [of the FAA] where Section 1 exempts the underlying contract from the FAA's
provisions." Id. at 843. The court elaborated:
In essence, [the d]efendants and the [d]istrict [c]ourt have adopted the position that contracting
parties may invoke the authority of the FAA to decide the question of whether the parties can
invoke the authority of the FAA. This position puts the cart before the horse: Section 4 has simply
no applicability where Section 1 exempts a contract from the FAA, and private contracting parties
cannot, through the insertion of a delegation clause, confer authority upon a
Page 14
district court that Congress chose to withhold.
Id. at 844. The court also concluded that the question of whether the § 1 exemption applies " does
not fit within th[e] definition" of " questions of arbitrability." Id.
After careful consideration of these competing cases, we are persuaded that the Ninth
Circuit hit the nail on the head, and we therefore hold that the issue of whether the § 1 exemption
applies presents a question of " whether the FAA confers authority on the district court to compel
arbitration" and not a question of arbitrability. Id.
" The Supreme Court defines 'questions of arbitrability' as questions of 'whether the parties
have submitted a particular dispute to arbitration.'" Id. (quoting Howsam v. Dean Witter Reynolds,
Page 42 of 112
Inc., 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002)); see also Rent-A-Center, 561 U.S.
at 68-69 (" [P]arties can agree to arbitrate 'gateway' questions of 'arbitrability,' such as whether the
parties have agreed to arbitrate or whether their agreement covers a particular controversy." );
Arbitrability, Black's Law Dictionary (10th ed. 2014) (defining arbitrability as " [t]he status, under
applicable law, of a dispute's being or not being resolvable by arbitrators because of the subject
matter" ). In this case, determining whether the § 1 exemption applies to the contract does not
entail any consideration of whether Prime and Oliveira have agreed to submit a dispute to
arbitration; instead, it raises the " distinct inquiry" of whether the district court has the authority to
act under the FAA -- specifically, the authority under § 4 to compel the parties to engage in
arbitration. Van Dusen, 654 F.3d at 844.
Therefore, as the Ninth Circuit explained in Van Dusen, the question of the court's authority
to act under the FAA is an " antecedent determination" for the district court to make before it can
compel arbitration under the Act. Id. at 843. Prime's argument to the contrary " puts the cart before
the horse" and makes no sense. Id. at 844. The following scenario readily demonstrates why this
is so: First, assume that two parties enter into a contract containing an arbitration clause with
language identical to that contained in the contract in this case, including a provision delegating
questions of arbitrability to the arbitrator. Second, assume that, unlike in this case, the parties are
in agreement that the contract involved is clearly a contract of employment of a transportation
worker. Third, assume that, as in this case, one of the parties, relying solely on the FAA, moves to
compel arbitration. Taking Prime's position to its logical conclusion, the district court would be
obligated to grant the motion because the parties have agreed to allow the arbitrator to decide
questions of arbitrability, including whether the § 1 exemption applies. See Green, 653 F.3d at
769. This would be so even though the § 1 exemption indisputably applies to the contract, such
that the district court had no authority to act under the FAA in the first place. See Van Dusen, 654
F.3d at 843 (" [A] district court has no authority to compel arbitration under Section 4 where
Section 1 exempts the underlying contract from the FAA's provisions." ).[11]
Page 15
This position cannot be correct. When the only basis for seeking arbitration in federal court
is the FAA, the district court can grant the requested relief only if it has authority to act under the
FAA. See id. at 843. If the FAA does not apply, " private contracting parties cannot, through the
insertion of a delegation clause, confer authority upon a district court [i.e., to compel arbitration
under the FAA] that Congress chose to withhold." Id. at 844. Therefore, " the district court must
make an antecedent determination that a contract is arbitrable under Section 1 of the FAA before
ordering arbitration pursuant to Section 4." Id. at 843.
Because we reject Green's starting premise -- that the issue of § 1's applicability is a
question of arbitrability -- we are unpersuaded by Green's reliance on a contract's incorporation of
the AAA rules, which allow an arbitrator to determine his or her own jurisdiction. Where, as here,
the parties dispute whether the district court has the authority to compel arbitration under the FAA,
the extent of the arbitrator's jurisdiction is of no concern. Instead, we are concerned only with the
question of whether the district court has authority to act under a federal statute. Nothing in the
AAA rules -- including the power to determine the arbitrator's jurisdiction -- purports to allow the
Page 43 of 112
arbitrator to decide whether a federal district court has the authority to act under a federal statute.[12]
For all these reasons, we join our colleagues on the Ninth Circuit and hold that the question
of whether the § 1 exemption applies is an antecedent determination that must be made by the
district court before arbitration can be compelled under the FAA. But we can't stop there.
B. Independent Contractors and the § 1 Exemption
After concluding that it must decide for itself whether the § 1 exemption applies, the district
court in this case ordered the parties to conduct factual discovery to determine whether Oliveira
was truly an independent
Page 16
contractor or instead was in reality a Prime employee during the time that the contract was in
place. Discovery on that issue was necessary, in the court's view, because " courts generally
agree that the § 1 exemption does not extend to independent contractors."
On appeal, both parties challenge this aspect of the district court's order. Prime agrees that §
1 does not extend to independent contractors, but it argues that discovery on the relationship
between the parties is inappropriate because Oliveira's status as a Prime employee or
independent contractor should be decided by the arbitrator. See AT& T Technologies, Inc. v.
Communications Workers of America, 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)
(" [I]n deciding whether the parties have agreed to submit a particular grievance to arbitration, a
court is not to rule on the potential merits of the underlying claims." ). Alternatively, Prime argues
that if the district court must determine whether the § 1 exemption applies, it should consider only
whether the face of the contract demonstrates an intent to make Oliveira an independent
contractor. Oliveira, on the other hand, argues that the § 1 exemption covers the employment
contracts of " all transportation workers, including independent contractors." If we agree with
Oliveira, discovery is not needed.
Thus, the question presented is whether the § 1 exemption extends to transportation-worker
agreements that establish or purport to establish independent-contractor relationships, and we
review this issue of statutory interpretation de novo.[13] See United States v. Maldonado-Burgos,
844 F.3d 339, 340 (1st Cir. 2016). As always, the statutory text is our starting point. See id. The §
1 exemption provides that nothing contained in the FAA " shall apply to contracts of employment
of seamen, railroad employees, or any other class of workers engaged in foreign or interstate
commerce." 9 U.S.C. § 1 (emphasis added). The Supreme Court has declared that " [§ ] 1
exempts from the FAA only contracts of employment of transportation workers." Circuit City, 532
U.S. at 119.
Page 17
Before embarking on our analysis, we first identify two issues that we need not decide. First,
Prime does not dispute that Oliveira, whose work for Prime included driving a truck across state
lines, is a " transportation worker" within the meaning of the § 1 exemption, as interpreted by
Circuit City.[14] Thus, we have no need to definitively decide that issue. Second, we note that,
although the parties to the contract are Prime and Hallmark, Prime has, both below and on appeal,
treated the contract as one between Oliveira and Prime.[15] We do the same. Therefore, because
Page 44 of 112
the parties do not dispute that Oliveira is a transportation worker under § 1, we need not address
whether an LLC or other corporate entity can itself qualify as a transportation worker. We also
need not address the scope of the word " worker" in the residual clause of the § 1 exemption.
Accordingly, we limit our focus to the issue of whether an agreement between a trucking company
and an individual transportation worker cannot be a " contract of employment" within the meaning
of § 1 if the agreement establishes or purports to establish an independent-contractor relationship.
Prime points out that the weight of district-court authority to consider the issue has
concluded that the § 1 exemption does not extend to contracts that establish or purport to
establish an independent-contractor relationship.[16] Several of these
Page 18
decisions simply assume, explicitly or implicitly, that independent-contractor agreements are not
contracts of employment under § 1. See, e.g., Aviles, 2015 WL 5601824, at *6; Doe, 2015 WL
274092, at *3; Villalpando, 17 F.Supp.3d at 982; Bell, 2009 WL 4730564, at *4-6; Davis, 2008 WL
4755835, at *4; Kayser, 1999 WL 817724, at *4 n.4; see also Johnson, 608 N.E.2d at 540.[17]
Other courts have " simply go[ne] along with the developing group consensus," In re Atlas IT Exp.
Corp., 761 F.3d 177, 183 (1st Cir. 2014), without adding any independent analysis. See, e.g.,
Alvarado, 2014 WL 3888184, at *4-5; Carney, 10 F.Supp.3d at 853; All Saints, 757 F.Supp.2d at
472; see also Aleman, 194 Cal.Rptr.3d at 536-37. The few district-court decisions that offer
independent analysis to support the conclusion that the § 1 exemption does not cover
independent-contractor agreements have, viewed collectively, offered two reasons for that
conclusion: first, that this interpretation is consistent with the " strong and liberal federal policy
favoring arbitral dispute resolution," Swift Transp., 288 F.Supp.2d at 1035-36; see also Morning
Star, 2015 WL 2408477, at *5; United Van Lines, 2006 WL 5003366, at *3; and, second, that such
a rule is justified by the narrow construction that the Supreme Court has instructed courts to give
the § 1 exemption, see United Van Lines, 2006 WL 5003366, at *3.
Prime urges us to add our voice to this " judicial chorus," but we are unwilling
Page 19
to do so. Interpreting a federal statute is not simply a numbers game. See In re Atlas IT Exp.
Corp., 761 F.3d at 182-83 (" The numbers favoring a rule do not necessarily mean that the rule is
the best one. Indeed, there is an observable phenomenon in our courts of appeal and elsewhere --
sometimes called 'herding' or 'cascading' -- where decisionmakers who first encounter a particular
issue (i.e., the first court to consider a question) are more likely to rely on the record presented to
them and their own reasoning, while later courts are increasingly more likely to simply go along
with the developing group consensus." ). Instead of simply tallying the score, " it is always
incumbent on us to decide afresh any issue of first impression in our circuit." Id. at 183. After
conducting that fresh look in this case, we are distinctly unpersuaded by the district courts'
treatment of this issue.
The fatal flaw in the district-court authority on which Prime relies is a failure to closely
examine the statutory text -- the critical first step in any statutory-interpretation inquiry. See
Maldonado-Burgos, 844 F.3d at 340. Because Congress did not provide a definition for the phrase
" contracts of employment" in the FAA, we " give it its ordinary meaning." United States v.
Page 45 of 112
Stefanik, 674 F.3d 71, 77 (1st Cir. 2012) (quoting United States v. Santos, 553 U.S. 507, 511, 128
S.Ct. 2020, 170 L.Ed.2d 912 (2008)). And we discern the ordinary meaning of the phrase at the
time Congress enacted the FAA in 1925. See Perrin v. United States, 444 U.S. 37, 42, 100 S.Ct.
311, 62 L.Ed.2d 199 (1979) (" A fundamental canon of statutory construction is that, unless
otherwise defined, words will be interpreted as taking their ordinary, contemporary, common
meaning. Therefore, we look to the ordinary meaning of the term . . . at the time Congress enacted
the statute . . . ." (citation omitted)); see also Sandifer v. U.S. Steel Corp., 134 S.Ct. 870, 876, 187
L.Ed.2d 729 (2014) (consulting " [d]ictionaries from the era of [statutory provision's] enactment" to
espy ordinary meaning of undefined term); Carcieri v. Salazar, 555 U.S. 379, 388, 129 S.Ct. 1058,
172 L.Ed.2d 791 (2009) (" We begin with the ordinary meaning of the word 'now,' as understood
when the [statute] was enacted." ).[18] We now turn to that task.
Page 20
1. Ordinary Meaning of Statutory Text
Oliveira argues that the phrase " contracts of employment" contained in § 1 means simply "
agreements to do work." We agree. This interpretation is consistent with the ordinary meaning of
the phrase at the time Congress enacted the FAA.
Dictionaries from the era of the FAA's enactment confirm that the ordinary meaning of "
contracts of employment" in 1925 was agreements to perform work. See Webster's New
International Dictionary of the English Language 488 (W.T. Harris & F. Sturges Allen eds., 1923)
(defining " contract" when used as noun as " [a]n agreement between two or more persons to do
or forbear something" ); id. at 718 (defining " employment" as " [a]ct of employing, or state of being
employed" and listing " work" as synonym for " employment" ); id. (defining " employ" as " [t]o
make use of the services of; to have or keep at work; to give employment to" ); see also Webster's
Collegiate Dictionary 329 (3d ed. 1925) (providing similar definition of " employment" and similarly
listing " work" as synonym for " employment" ); id. (defining " employ" as " [t]o make use of; use"
and " [t]o give employment or work to" and explaining " [e]mploy is specifically used to emphasize
the idea of service to be rendered" ). In other words, these contemporary dictionaries do not
suggest that " contracts of employment" distinguishes employees from independent contractors.[19]
Additionally, this ordinary meaning of " contracts of employment" is further supported by
other authorities from the era of the FAA's enactment, which suggest that the phrase can
encompass agreements of independent contractors to perform work. See, e.g., Annotation,
Teamster as Independent Contractor Under Workmen's Compensation Acts, 42 A.L.R. 607, 617
(1926) (" When the contract of employment is such that the teamster is bound to discharge the
work himself, the employment is usually one of service, whereas, if, under the contract, the
teamster is not obligated to discharge the work personally, but may employ others to that end and
respond to the employer only for the faithful performance of the contract, the employment is
generally an independent one." (emphasis added)); Theophilus J. Moll, A Treatise on the Law of
Independent Contractors & Employers' Liability 47-48 (1910) (" It has been laid down that the
relation of master and servant will not be inferred in a case where it appears that the power of
Page 46 of 112
discharge was not an incident of the contract
Page 21
of employment." (emphasis added)); id. at 334 (" The [independent] contractor . . . is especially
liable for his own acts when he assumes this liability in his contract of employment." (emphasis
added)).[20]
Prime seeks to downplay the significance of these other authorities, noting that they do not
deal with the FAA. True enough, but the phrase " contracts of employment" must have some
meaning, and Prime does not attempt to explain how its proposed interpretation is consistent with
the ordinary meaning of the words used in the statute. And the lack of a textual anchor
Page 22
is not the only flaw in Prime's interpretation. In Circuit City, the Supreme Court noted "
Congress'[s] demonstrated concern with transportation workers and their necessary role in the
free flow of goods" at the time when it enacted the FAA. 532 U.S. at 121. Given that concern, the
distinction that Prime advocates based on the precise employment status of the transportation
worker would have been a strange one for Congress to draw: Both individuals who are
independent contractors performing transportation work and employees performing that same
work play the same necessary role in the free flow of goods.
In sum, the combination of the ordinary meaning of the phrase " contracts of employment"
and Prime's concession that Oliveira is a transportation worker compels the conclusion that the
contract in this case is excluded from the FAA's reach. Because the contract is an agreement to
perform work of a transportation worker, it is exempt from the FAA. We therefore decline to follow
the lead of those courts that have simply assumed that contracts that establish or purport to
establish independent-contractor relationships are not " contracts of employment" within the
meaning of § 1.
2. Narrow Construction and Policy Favoring Arbitration
We also are unpersuaded by the two justifications that some district-court decisions put
forward to support the conclusion that the § 1 exemption does not apply to contracts that establish
or purport to establish independent-contractor relationships -- that such an interpretation is
consistent with the need to narrowly construe § 1 and the liberal federal policy favoring arbitration.
In our view, neither consideration warrants retreat from the ordinary meaning of the statutory text.
To be sure, the Supreme Court has cautioned that the § 1 exemption must " be afforded a
narrow construction." Circuit City, 532 U.S. at 118. Prime seizes on this pronouncement and
insists that it forecloses our conclusion that the § 1 exemption applies to transportation-worker
agreements that establish or purport to establish independent-contractor relationships. We
disagree.
In Circuit City, the contract at issue was between Circuit City, a national retailer of consumer
electronics, and Adams, a store sales counselor. 532 U.S. at 109-10. The Ninth Circuit had
interpreted the § 1 exemption to exclude all contracts of employment from the FAA's reach. Id. at
112. In defense of this interpretation, Adams argued that the phrase " engaged in . . . commerce"
in § 1 exempted from the FAA all employment contracts falling within Congress's commerce
power. Id. at 114. The Supreme Court rejected this broad interpretation in favor of a narrower one
Page 47 of 112
that was compelled by the text and structure of § 1: " Section 1 exempts from the FAA only
contracts of employment of transportation workers." Id. at 119; see id. at 114-15. Because the
phrase " any other class of workers engaged in . . . commerce" appeared in the residual clause of
§ 1, id. at 114, the Court reasoned that " the residual clause should be read to give effect to the
terms 'seamen' and 'railroad employees,' and should itself be controlled and defined by reference
to the enumerated categories of workers which are recited just before it," id. at 115.
This context is critical. The Court announced the need for a narrow construction of the § 1
exemption in the course of " rejecting the contention that the meaning of the phrase 'engaged in
commerce' in § 1 of the FAA
Page 23
should be given a broader construction than justified by its evident language." Id. at 118
(emphasis added). As the Court explained, this broader construction was doomed by the text
itself; " the text of the FAA foreclose[d] the [broader] construction of § 1," id. at 119, and "
undermine[d] any attempt to give the provision a sweeping, open-ended construction," id. at 118.
The Court's narrower interpretation, by contrast, was based on " the precise reading" of that
provision. Id. at 119.
It is one thing to say that statutory text compels adoption of a narrow construction over " an
expansive construction . . . that goes beyond the meaning of the words Congress used." Id.
Prime's argument is very different: It snatches up Circuit City's narrow-construction
pronouncement, wholly ignores the context in which that pronouncement was made, and attempts
to use it as an escape hatch to avoid the plain meaning of the § 1 exemption's text. But nothing in
Circuit City suggests that the need for a narrow construction can override the plain meaning of the
statutory language in this fashion, and we reject Prime's attempt to artificially restrict the plain
meaning of the text.
Moreover, Oliveira is nothing like the sales counselor in Circuit City. Instead, the truck-driving
work that he performs directly impacts " the free flow of goods." Id. at 121. Therefore, Circuit City's
adoption of a narrow construction to cover only transportation workers and not sales counselors is
no basis for this court to accept a constricted interpretation of the phrase " contracts of
employment" that is inconsistent with both the ordinary meaning of the language used in § 1 and "
Congress's demonstrated concern with transportation workers and their necessary role in the free
flow of goods." Id. For these reasons, we do not view Circuit City or the narrow-construction
principle as supporting Prime's interpretation that the § 1 exemption does not extend to
independent contractors.
We are similarly unpersuaded by invocation of the federal policy in favor of arbitration. That
policy cannot override the plain text of a statute. See EEOC v. Waffle House, Inc., 534 U.S. 279,
295, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002) (rejecting notion that " the federal policy favoring
arbitration trumps the plain language of Title VII and the contract" ); cf. id. at 294 (explaining that, "
[w]hile ambiguities in the language of the agreement should be resolved in favor of arbitration, we
do not override the clear intent of the parties, or reach a result inconsistent with the plain text of
the contract, simply because the policy favoring arbitration is implicated" and concluding that " the
proarbitration policy goals of the FAA do not require the [EEOC] to relinquish its statutory authority
Page 48 of 112
if it has not agreed to do so" (citation omitted)); Paul Revere, 226 F.3d at 25 (rejecting " attempts
to invoke the federal policy favoring arbitration" because " [t]hat policy simply cannot be used to
paper over a deficiency in Article III standing" ); Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 116
n.13, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996) (Souter, J., dissenting) (" [P]lain text is the Man of
Steel in a confrontation with background principle[s] and postulates which limit and control."
(internal citation and quotation marks omitted)). As we have explained, a careful examination of
the ordinary meaning of the phrase " contracts of employment" -- an effort eschewed by the
district-court authority cited by Prime -- supports our conclusion that the phrase means
agreements to perform work and includes independent-contractor agreements. The federal policy
Page 24
favoring arbitration cannot erase this plain meaning.
3. Final Words
For these reasons, we hold that a transportation-worker agreement that establishes or
purports to establish an independent-contractor relationship is a contract of employment under §
1. We emphasize that our holding is limited: It applies only when arbitration is sought under the
FAA, and it has no impact on other avenues (such as state law) by which a party may compel
arbitration.[21]
Conclusion
To recap, we hold that, when confronted with a motion to compel arbitration under § 4 of the
FAA, the district court, and not the arbitrator, must decide whether the § 1 exemption applies.
Additionally, we hold that transportation-worker agreements that establish or purport to establish
independent-contractor relationships are " contracts of employment" within the meaning of the § 1
exemption.[22] Because the contract in this case is within the § 1 exemption, the FAA does not
apply, and we consequently lack jurisdiction under 9 U.S.C. § 16(a)(1)(B) -- the only conceivable
basis for our jurisdiction over this interlocutory appeal. See Int'l Bhd. of Teamsters Local Union No.
50 v. Kienstra Precast, LLC, 702 F.3d 954, 957-58 (7th Cir. 2012). Accordingly, we affirm the
district court's denial of Prime's motion to compel arbitration, and dismiss the appeal for lack of
appellate jurisdiction.
DISSENT
BARBADORO, District Judge, concurring in part and dissenting in part.
I agree with the majority that the applicability of the § 1 exemption is a threshold matter for
the district court to decide. Where we part company is at the point where the majority decides to
take on the difficult issue as to whether transportation-worker agreements that purport to create
independent-contractor relationships are exempt from the Federal Arbitration Act. That, in my
view, is an issue we need not decide now. Instead, if it ultimately proves necessary to determine
whether the § 1 exemption covers all such independent-contractor agreements, the district court
should do so in the first instance with the benefit of more in-depth briefing and a fully developed
factual record.
Page 25
The scope of the § 1 exemption comes before us on what amounts to an interlocutory
appeal. See Omni Tech Corp. v. MPC Sols. Sales, LLC, 432 F.3d 797, 800 (7th Cir. 2005). The
Page 49 of 112
district court did not reach any final judgment as to the exemption, instead dismissing New Prime's
motion to compel arbitration without prejudice and allowing for discovery on Oliveira's employment
status. Oliveira v. New Prime, Inc., 141 F.Supp.3d 125, 135 (D. Mass. 2015). As there has been
no final judgment in the district court, I hesitate to resolve an issue that is not necessary to the
disposition of this appeal. See Doe v. Cape Elizabeth Sch. Dist., 832 F.3d 69, 86 (1st Cir. 2016)
(declining to address unnecessary issue and deeming it prudent to allow district court to make
determination in the first instance). And it is indeed unnecessary to determine the scope of the
exemption at this time. If the case were remanded to the district court for discovery, the court
might well rule that the nominally independent-contractor agreements between Oliveira and New
Prime actually created an employer-employee relationship. In that circumstance, neither we nor
the district court would have any occasion to categorically decide whether all transportation-worker
agreements purporting to create independent-contractor relationships qualify for the § 1
exemption.
I am particularly reluctant to unnecessarily resolve an issue on an interlocutory appeal when,
as is the case here, a number of factors counsel against doing so. Most fundamentally, deciding
whether " contracts of employment" includes all transportation-worker agreements presents a
challenging question of statutory interpretation. The statute itself provides little guidance. Further,
as the majority notes, most courts that have considered independent-contractor agreements in the
§ 1 context have concluded that the exemption does not apply, and no other court has engaged in
the kind of detailed analysis of ordinary meaning that characterizes the majority's opinion. We
therefore have neither an example to guide and corroborate our analysis nor a contrary opinion to
provide counterbalance.
Moreover, applying § 1 in this case requires venturing into the fact-bound, and notoriously
precarious, field of employment-status determinations. Although the majority's categorical rule
would eliminate the need for fact-finding on status, it could also lead to the over-and under-
inclusiveness concerns typical of such rules. As Justice Rutledge observed in N.L.R.B. v. Hearst
Publications, 322 U.S. 111, 64 S.Ct. 851, 88 L.Ed. 1170 (1944): " Few problems in the law have
given greater variety of application and conflict in results than the cases arising in the borderland
between what is clearly an employer-employee relationship and what is clearly one of independent
entrepreneurial dealing." Id. at 121 (subsequent history omitted). The doctrinal line separating
employee from independent contractor is difficult to discern in the context of vicarious liability. See
id. " It becomes more [difficult] when the field is expanded to include all of the possible
applications of the distinction." Id. We find ourselves confronted by one of those " possible
applications," making the issue before us all the more challenging. See Mandel v. Boston Phoenix,
Inc., 456 F.3d 198, 206-07 (1st Cir. 2006) (vacating and remanding summary judgment order
where, inter alia, there was little on-point federal or state case law and pertinent determination was
fact-intensive).
Not only do we face a hard question -- given that the contemporary meaning of § 1's
language may differ from its meaning when adopted -- but we do so without the aid of a well-
developed district court record. Before the district court, the parties provided little briefing on the
ordinary meaning of " contracts of employment" as
Page 50 of 112
Page 26
of 1925. Oliveira initially argued that he was an employee of New Prime. He first briefed an
ordinary-meaning argument in a short supplemental surreply submitted to the district court after a
hearing on the motion to compel arbitration. Oliveira cited just two sources from the time of
adoption. In a subsequent supplemental surreply, New Prime declined to address the ordinary-
meaning issue head-on, instead only reiterating that the matter was for the arbitrator. The district
court's order reflects this dearth of briefing. Rather than directly addressing the less-than-robust
argument Oliveira raised in his supplemental brief, the court noted the extensive contrary case law
and permitted discovery to resolve the case. See Oliveira, 141 F.Supp.3d at 130-31, 135. When
the ordinary-meaning issue reached this court, the record accordingly provided little guidance. See
United States v. Clark, 445 U.S. 23, 38, 100 S.Ct. 895, 63 L.Ed.2d 171 (1980) (Rehnquist, J.,
dissenting) (recognizing usefulness of lower court opinions); Cape Elizabeth Sch. Dist., 832 F.3d
at 84-85 (choosing not to decide unnecessary question where parties gave " scant attention" to
issue in lower court).
The briefing before this court was also less than ideal. Although Oliveira devoted significant
effort to arguing that the ordinary meaning of " contracts of employment" in 1925 included
contracts with independent contractors, New Prime barely addressed the matter. It did not mention
the ordinary-meaning argument in its opening brief, and spent only a page on the topic in its reply
brief. At oral argument, New Prime merely insisted that ordinary-meaning analysis is inappropriate
in the § 1 context. Where a court has the discretion to decide an issue, it should be wary of acting
without the benefit of fully developed arguments on both sides. That is especially the case when
we rule against the party with the less-developed argument.
Just as we have been presented with a one-sided view of the ordinary meaning of "
contracts of employment," we have received a one-sided view of the facts. This appeal was taken
early in the litigation between the parties, prior to any discovery that would have shed greater light
on the facts underlying the dispute. The current factual record contains only Oliveira's unanswered
complaint and some documents attached to the parties' motions. While the court is entitled to base
its analysis on allegations in the complaint, Gove v. Career Sys. Dev. Corp., 689 F.3d 1, 2 (1st Cir.
2012), we should exercise added caution in denying affirmative relief to a defendant when our
view of the facts is informed largely by the plaintiff's untested allegations.
Under these circumstances, our best option is to remand the § 1 exemption question to the
district court so that discovery may proceed and the court may reach a final decision. If either party
were to appeal any subsequent final decision of the district court, we would have the benefit of a
better-developed factual record, more-focused briefing from both parties, and additional district
court analysis. See Denmark v. Liberty Life Assur. Co. of Boston, 566 F.3d 1, 12 (1st Cir. 2009)
(Lipez, J., concurring) (expressing concern over dicta in majority opinion " fashioned without the
benefit of district court analysis or briefing by the parties" ).
The majority has done an impressive job of marshalling the arguments in support of its
interpretation of § 1. I dissent not to take issue with the court's reasoning but merely to express my
view that we would be better served in following a more cautious path.
---------
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Notes: [*]Of the District of New Hampshire, sitting by designation. [1]Because the motion to compel arbitration was made in connection with a motion to dismiss or
stay, we glean the relevant facts from the operative complaint and the documents submitted to the
district court in support of the motion. See Gove v. Career Sys. Dev. Corp., 689 F.3d 1, 2 (1st Cir.
2012). [2]This arrangement allows Prime to transport its shipments in a more economical and efficient
manner. Under United States Department of Transportation regulations, a truck driver's " [o]n-duty
time" includes " [a]ll driving time" as well as a host of other non-driving tasks, including time spent
supervising a student driver who is behind the wheel. 49 C.F.R. § 395.2. In any fourteen-hour
period of on-duty time, a truck driver has only eleven hours of driving time. Id. § 395.3(a)(2)-(3)(i).
After a Prime instructor driver has maxed out his or her eleven hours of driving time, the instructor
driver still has three more hours of on-duty time remaining. Thus, once an instructor driver has
exhausted his or her own driving time, a student driver can drive the truck toward its ultimate
destination for up to three more hours, and Prime does not pay the student driver for this bonus
driving time. [3]Around ten months later, Hallmark and Prime executed another Independent Contractor
Operating Agreement. Because the pertinent language of the two agreements is identical, we refer
to them collectively as " the contract." When quoting the contract in this opinion, we omit any
unnecessary capitalization. [4]Although the contract was between Prime and Hallmark, Prime has -- with one small exception
discussed below, see note 15, infra -- treated the contract as one between Prime and Oliveira. We
similarly treat Oliveira and Hallmark interchangeably. [5]Before he could drive for another carrier, however, Oliveira was contractually obligated to give
Prime five days' advance notice and to " remove all identification devices, licenses and base
plates from the [truck] and return [them] to Prime." [6]The arbitration provision also specified that " arbitration between the parties will be governed by
the Commercial Arbitration Rules of the American Arbitration Association [(AAA)]." [7]Because the district court never addressed the alternative arguments for dismissal and Prime
has not pressed them on appeal, we focus only on the motion to compel arbitration. [8]The parties also squabbled over whether Oliveira's claims arising from periods of time in which
the contract was not in effect -- during Oliveira's pre-contract time in the apprenticeship program
and his post-contract stint as a company driver -- were arbitrable under the arbitration clause of
the contract. The district court did not resolve the issue, electing instead to focus on the question
of whether the § 1 exemption applied. [9]The district court noted that the parties did not dispute that Oliveira, as a truck driver, was a
transportation worker under the § 1 exemption. [10]Although interlocutory orders are ordinarily not immediately appealable, the FAA permits
immediate appeal from an order denying a motion to compel arbitration. See 9 U.S.C. §
16(a)(1)(B); Gove, 689 F.3d at 3-4 n.1. We review the denial of a motion to compel arbitration de
novo. Gove, 689 F.3d at 4.
Page 52 of 112
[11]When confronted with the logical extreme of its position at oral argument, Prime sought to
qualify it to some degree. Prime insisted that, so long as the party seeking to compel arbitration
had a good-faith basis for asserting that the § 1 exemption did not apply, the question of the
applicability of the § 1 exemption would need to be arbitrated under the delegation clause of the
arbitration agreement. But, even with this minor qualification, Prime's position still boils down to
the conclusion that the district court can compel arbitration under the FAA before determining
whether it has authority to act under the FAA, even in a case where it might not have such
authority. We do not accept this position. [12]We are likewise unmoved by each of Prime's subsidiary arguments, all of which are grounded
on the question-of-arbitrability premise that we reject. For example, Prime's invocation of the
liberal federal policy in favor of arbitration and its corollary, the principle that any doubts about the
scope of arbitrable issues should be resolved in favor of arbitration, goes nowhere because we are
not confronted with a scope question. See Paul Revere Variable Annuity Ins. Co. v. Kirschhofer,
226 F.3d 15, 25-26 (1st Cir. 2000). Similarly, Prime's argument that, so long as the court is "
satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in
issue," 9 U.S.C. § 4, the court must compel arbitration overlooks that one does not even approach
the § 4 inquiry until one first determines that the § 1 exemption does not apply. See Van Dusen,
654 F.3d at 843-44. Finally, Prime's effort to compare the question of the applicability of the § 1
exemption to questions concerning the validity of an agreement or whether it can be enforced by
the party seeking to compel arbitration -- questions that can be referred to the arbitrator -- is
unavailing. Issues concerning alleged flaws with an agreement's validity or enforceability are
fundamentally different than the issue of the district court's authority to act under the FAA in the
first place. See id. at 844 (" [P]rivate contracting parties cannot, through the insertion of a
delegation clause, confer authority upon a district court that Congress chose to withhold." ).
Additionally, it is not unusual for a court to first decide a specific challenge to the validity or
enforceability of the arbitration clause that a party is seeking to enforce. See Rent-A-Center, 561
U.S. at 71; Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04, 87 S.Ct. 1801,
18 L.Ed.2d 1270 (1967). [13]We have considered the possibility, proposed by our dissenting colleague, of remanding
without deciding this question of statutory interpretation. The benefit of this approach, according to
the dissent, would be avoiding this difficult legal question now on the chance that the discovery
contemplated by the district court might lead to a conclusion that Oliveira is not an independent
contractor -- a conclusion that would moot, for this case, the question whether independent
contractors are within the exemption. But we do not view this approach as a viable option because
the district court ordered discovery based on its legal conclusion that " the § 1 exemption does not
extend to independent contractors." If that legal conclusion is incorrect -- an issue that Oliveira
sufficiently raised below and both parties have briefed on appeal -- there is no need for discovery
in the first place. Therefore, we will not adopt an approach that assumes away one of the live
issues on appeal simply because the issue is a difficult one. Cf. Citizens United v. FEC, 558 U.S.
310, 375, 130 S.Ct. 876, 175 L.Ed.2d 753 (2010) (Roberts, C.J., concurring) (" It should go without
saying . . . that we cannot embrace a narrow ground of decision simply because it is narrow; it
Page 53 of 112
must also be right. Thus while it is true that '[i]f it is not necessary to decide more, it is necessary
not to decide more,' . . . sometimes it is necessary to decide more. There is a difference between
judicial restraint and judicial abdication." ). Finally, we note that we are not convinced that the
dissent's approach in fact provides a narrower ground of decision; such an approach would
require us to address Prime's contention (which the dissent implicitly rejects) that discovery on the
parties' relationship would render the contractual right to arbitration a nullity. Addressing that
contention would present its own set of challenges, but, given the manner in which we decide the
statutory-interpretation question, that issue is the one that need not be decided in this appeal. [14]The district court's decision indicated that the parties did not dispute this issue. Similarly,
Prime did not argue in its opening brief that Oliveira is not a transportation worker. In a single
sentence in its reply brief, Prime asserts that this court " has never extended the [§ ] 1 [e]xemption
to truck drivers, as opposed to rail workers and seamen (the core workers of concern when
Congress enacted the exemption)." To the extent that Prime intended this lone sentence to
resurrect the transportation-worker issue in this case, we will not allow it. Any such " argument" is
wholly undeveloped, see United States v. Sevilla-Oyola, 770 F.3d 1, 13 (1st Cir. 2014) ("
Arguments raised in only a perfunctory and undeveloped manner are deemed waived on appeal."
), and, moreover, an argument that makes its debut in a reply brief will not receive a warm ovation
from us, see United States v. Arroyo-Blas, 783 F.3d 361, 366 n.5 (1st Cir. 2015) (" [A] legal
argument made for the first time in an appellant's reply brief comes too late and need not be
addressed." (quoting United States v. Brennan, 994 F.2d 918, 922 n.7 (1st Cir. 1993))). Finally, we
note in passing that Prime's position has not been accepted elsewhere. See, e.g., Lenz v. Yellow
Transp., Inc., 431 F.3d 348, 351 (8th Cir. 2005) (" Indisputably, if Lenz were a truck driver, he
would be considered a transportation worker under § 1 of the FAA." ); Harden v. Roadway
Package Sys., Inc., 249 F.3d 1137, 1140 (9th Cir. 2001) (" As a delivery driver for RPS, Harden
contracted to deliver packages 'throughout the United States, with connecting international
service.' Thus, he engaged in interstate commerce that is exempt from the FAA." ). [15]Before the district court, Prime opposed Oliveira's argument that he could not be personally
bound by the terms of the contract between Prime and Hallmark by arguing that " Oliveira and
Hallmark Trucking are factually one and the same." Along similar lines, Prime stated in its opening
brief that " Oliveira entered into an Independent Contractor Operating Agreement . . . with Prime"
(emphasis added), and its brief proceeded on the assumption that Oliveira and Hallmark were
interchangeable. In its reply brief, for the first time in this case, Prime relies on the fact that the
contract was between Prime and Hallmark in arguing that the contract established an
independent-contractor relationship. We need not decide whether Prime is judicially estopped from
taking this position at this late juncture; it suffices that a reply brief is not the appropriate place to
switch gears and offer new arguments. See Arroyo-Blas, 783 F.3d at 366 n.5. [16]See, e.g., Aviles v. Quik Pick Express, LLC, No. CV-15-5214-MWF (AGR), 2015 WL 5601824,
at *6 (C.D. Cal. Sept. 23, 2015); Morning Star Assocs., Inc. v. Unishippers Glob. Logistics, LLC,
No. CV-115-033, 2015 WL 2408477, at *5-7 (S.D. Ga. May 20, 2015); Doe v. Swift Transp. Co.,
No. 2:10-cv-00899 JWS, 2015 WL 274092, at *3 (D. Ariz. Jan. 22, 2015); Alvarado v. P. Motor
Trucking Co., No. EDCV 14-0504-DOC(DTBx), 2014 WL 3888184, at *4-5 (C.D. Cal. Aug. 7,
Page 54 of 112
2014); Villalpando v. Transguard Ins. Co. of Am., 17 F.Supp.3d 969, 982 (N.D. Cal. 2014);
Carney v. JNJ Express, Inc., 10 F.Supp.3d 848, 852 (W.D. Tenn. 2014); Port Drivers Fed'n 18,
Inc. v. All Saints, 757 F.Supp.2d 463, 472 (D.N.J. 2011); Davis v. Larson Moving & Storage Co.,
Civ. No. 08-1408 (JNE/JJG), 2008 WL 4755835, at *4 (D. Minn. Oct. 27, 2008); Owner-Operator
Indep. Drivers Ass'n v. United Van Lines, LLC, No. 4:06CV219 JCH, 2006 WL 5003366, at *3
(E.D. Mo. Nov. 15, 2006); Owner-Operator Indep. Drivers Ass'n v. Swift Transp. Co., 288
F.Supp.2d 1033, 1035-36 (D. Ariz. 2003); Roadway Package Sys., Inc. v. Kayser, No. CIV. A. 99-
MC-111, 1999 WL 817724, at *4 n.4 (E.D. Pa. Oct. 13, 1999); see also Performance Team Freight
Sys., Inc. v. Aleman, 241 Cal.App.4th 1233, 194 Cal.Rptr.3d 530, 536-37 (Cal.Ct.App. 2015);
Johnson v. Noble, 240 Ill.App.3d 731, 608 N.E.2d 537, 540, 181 Ill.Dec. 464 (Ill.App.Ct. 1992); cf.
Bell v. A. Trucking Co., No. 3:09-cv-406-J-32MCR, 2009 WL 4730564, at *4-6 (M.D. Fla. Dec. 7,
2009) (conducting analysis on applicability of § 1 exemption on assumption it does not apply to
independent contractors). [17]This assumption was implicit in Judge Ikuta's dissenting opinion in In re Swift Transportation
Co., 830 F.3d 913 (9th Cir. 2016). The majority in Swift determined that mandamus relief was not
warranted because the district court's proposed course of action -- " resolv[ing] the § 1 question
through discovery and a trial" -- was not clearly erroneous; the district court's decision was not
contrary to any Supreme Court or Ninth Circuit precedent, and " there [did] not appear to be any
decisions from [the other] circuits on the question of whether the FAA compels a certain
procedural choice in a district court's § 1 determination." Id. at 917. Judge Ikuta dissented,
expressing her belief that the § 1 determination should be made solely from an examination of the
contract's terms. Id. at 920-21 (Ikuta, J., dissenting). Implicit in Judge Ikuta's dissent is the
assumption that independent-contractor agreements are not contracts of employment under the
FAA. But there was good reason for that assumption in the circumstances of that case: Unlike in
this case, none of the litigants argued that independent-contractor agreements of transportation
workers are contracts of employment. And the district court in that case simply assumed -- with no
analysis or citation to authority -- that the § 1 exemption covered only contracts between
employers and employees. See Doe, 2015 WL 274092, at *3 (" Whether the parties formed an
employment contract -- that is whether plaintiffs were hired as employees -- necessarily involves a
factual inquiry apart from the contract itself." ). [18]At oral argument, Prime insisted that the Supreme Court in Circuit City rejected this approach
for discerning the plain meaning of the FAA's text. But the Court did no such thing. In that case,
the Court was confronted with an argument that, " because the FAA was enacted when
congressional authority to regulate under the commerce power was to a large extent confined by
[Supreme Court] decisions," the phrase " engaged in commerce" in § 1 should be interpreted as "
expressing the outer limits of Congress'[s] power as then understood." Circuit City, 532 U.S. at
116. The Court rejected this argument, which it characterized as " [a] variable standard"
depending on " shifts in the Court's Commerce Clause cases" that would require courts to " take
into account the scope of the Commerce Clause, as then elaborated by the Court, at the date of
the FAA's enactment in order to interpret what the statute means now." Id. at 116-17. The Court
reasoned that " [i]t would be unwieldy for Congress, for the Court, and for litigants to be required to
Page 55 of 112
deconstruct statutory Commerce Clause phrases depending upon the year of a particular statutory
enactment." Id. at 118. In this case, by contrast, our attempt to discern the ordinary meaning of the
phrase " contracts of employment" does not require us to sort through paradigm shifts in Supreme
Court precedent but simply to apply the " fundamental canon of statutory construction" that
undefined statutory terms should be given their ordinary meaning at the time of the statute's
enactment, Sandifer, 134 S.Ct. at 876 (quoting Perrin, 444 U.S. at 42) -- a canon that has been
applied in FAA cases since Circuit City. See, e.g., Conrad v. Phone Directories Co., 585 F.3d
1376, 1381-82 & n.1 (10th Cir. 2009) (in interpreting undefined term in § 16 of FAA, consulting
dictionary from era of § 16's enactment). [19]Although not referenced by either party, we note that the current edition of Black's Law
Dictionary indicates that the earliest known use of the phrase " employment contract" was 1927 --
two years after the FAA's enactment. See Employment Contract, Black's Law Dictionary (10th ed.
2014); id. at xxxi (explaining that " [t]he parenthetical dates preceding many of the definitions show
the earliest known use of the word or phrase in English" ). The current edition also indicates that "
contract of employment" is a synonym for " employment contract," and it defines " employment
contract" in a manner that arguably excludes independent contractors: " [a] contract between an
employer and employee in which the terms and conditions of employment are stated."
Employment Contract, Black's Law Dictionary (10th ed. 2014). It is unclear whether the unknown
source from 1927 provided the basis for the current definition of " employment contract" or,
instead, whether that source has merely been identified as the first known use of the phrase. We
need not, however, dwell on this point because, as explained below, several sources from the era
of the FAA's enactment use the phrase " contract of employment" to refer to independent
contractors. Additionally, we note that the two editions of Black's Law Dictionary that bookend the
FAA's enactment, see Black's Law Dictionary (3d ed. 1933); Black's Law Dictionary (2d ed. 1910),
provide no definition for the phrases " contract of employment" or " employment contract." [20]See also Luckie v. Diamond Coal Co., 41 Cal.App. 468, 183 P. 178, 182 (Cal. Dist. Ct.App.
1919) (" We think that the nature of Foulk's relation to defendant at the time of the accident,
whether that of an independent contractor or servant, must be determined not alone from the
terms of the written contract of employment, but from the subsequent conduct of each, known to
and acquiesced in by the other." (emphasis added)); Hamill v. Territilli, 195 Ill.App. 174, 175
(1915) (" [T]he only question in the case was whether or not, under the contract of employment,
the relationship existing between Territilli and Scully and the appellant was that of independent
contractor or that of master and servant . . . ." (emphasis added)); Eckert's Case, 233 Mass. 577,
124 N.E. 421, 421 (Mass. 1919) (" It was provided by his contract of employment that he should
furnish the team, feed, take care of and drive the horses for a fixed daily remuneration. The entire
management and mode of transportation were under his control . . . . It is plain as matter of law . .
. that when injured he was not an employé of the town but an independent contractor." (emphasis
added) (citations omitted)); Lindsay v. McCaslin, 123 Me. 197, 122 A. 412, 413 (Me. 1923) ("
When the contract of employment has been reduced to writing, the question whether the person
employed was an independent contractor or merely a servant is determined by the court as a
matter of law." (emphasis added)); Allen v. Bear Creek Coal Co., 43 Mont. 269, 115 P. 673, 679
Page 56 of 112
(Mont. 1911) (" The relation of the parties under a contract of employment is determined by an
answer to the question, Does the employé in doing the work submit himself to the direction of the
employer, both as to the details of it and the means by which it is accomplished? If he does, he is
a servant, and not an independent contractor. If, on the other hand, the employé has contracted to
do a piece of work, furnishing his own means and executing it according to his own ideas, in
pursuance of a plan previously given him by the employer, without being subject to the orders of
the latter as to detail, he is an independent contractor." (emphasis added)); Tankersley v.
Webster, 1925 OK 520, 116 Okla. 208, 243 P. 745, 747 (Okla. 1925) (" [T]he contract of
employment between Tankersley and Casey was admitted in evidence without objections, and we
think conclusively shows that Casey was an independent contractor." (emphasis added)); Kelley v.
Del., L. & W. R. Co., 270 Pa. 426, 113 A. 419, 419 (Pa. 1921) (" The question for determination is
whether deceased was an employee of defendant or an independent contractor . . . . To decide, it
is necessary to construe the written contract of employment . . . ." (emphasis added)); United
States Fidelity & Guaranty Co. v. Lowry, 231 S.W. 818, 822 (Tex.Civ.App. 1921) (stating that, in
determining whether person " was an employé and not an independent contractor," " '[n]o single
fact is more conclusive as to the effect of the contract of employment, perhaps, than the
unrestricted right of the employer to end the particular service whenever he chooses, without
regard to the final result of the work itself'" (emphasis added) (quoting Cockran v. Rice, 26 S.D.
393, 128 N.W. 583, 585 (S.D. 1910))); Annotation, General Discussion of the Nature of the
Relationship of Employer and Independent Contractor, 19 A.L.R. 226, 250 (1922) (discussing " the
question whether a contract of employment is one of an independent quality" ).
Along similar lines, legal dictionaries from the era of the FAA's enactment used the term "
employment" as part of the definition of " independent contractor." See, e.g., Independent
Contractor, Ballentine's Law Dictionary (1930) (defining independent contractor as " [o]ne who,
exercising an independent employment, contracts to do a piece of work according to his own
methods and without being subject to the control of his employer except as to the result of the
Contractor, Black's Law Dictionary (2d ed. 1910) (same); 2 Francis Rawle, Bouvier's Law
Dictionary & Concise Encyclopedia 1533 (3d rev. 1914) (same). [21]Prime insists that, even if the district court is powerless to compel arbitration under the FAA
because the § 1 exemption applies, it still can request the district court to " compel arbitration on
other grounds, such as state law, or use other tools at its disposal to enforce the parties' explicit
agreement to arbitrate -- such as dismissing or staying the case." For his part, Oliveira appears to
suggest that this ship has sailed because Prime's motion to compel was based solely on the FAA.
Prime counters that, to the extent Oliveira is under the impression that Prime has waived the right
to compel arbitration on grounds other than the FAA, he is mistaken because no prejudice has
been shown. We do not wade into this dispute. The fleeting references in both parties' briefs are
hardly the stuff of developed argumentation, and this waiver issue was not addressed by the
district court. If the parties desire to continue this fight in the district court, they are free to do so.
Along similar lines, although Prime argues in its opening brief that the arbitration provision covers
disputes between the parties that arose before and after the time period in which the contract was
Page 57 of 112
in effect, it takes a different tack in its reply brief, imploring us to refrain from deciding this issue
because the district court did not definitively rule on it below. We accept Prime's invitation and
leave the issue for the district court to address in the first instance. [22]In light of this conclusion, we need not address the parties' arguments about the necessity and
permissibility of discovery in the event that the § 1 exemption does not apply to independent-
contractor agreements.
---------
Page 58 of 112
62 N.E.3d 472 (Ind.App. 2016), 27A04-1511-MI-1976, State v. Timbs /**/ div.c1 {text-align: center}
/**/
Page 472
62 N.E.3d 472 (Ind.App. 2016)
State of Indiana, Appellant-Plaintiff,
v.
Tyson Timbs and a 2012 Land Rover LR2, Appellees-Defendants
Court of Appeals No. 27A04-1511-MI-1976
Court of Appeals of Indiana
October 20, 2016
As Corrected October 20, 2016.
Appeal from the Grant Superior Court 1. The Honorable Jeffrey D. Todd, Judge. Trial Court
Cause No. 27D01-1308-MI-92.
ATTORNEYS FOR APPELLANT: Gregory F. Zoeller, Attorney General of Indiana; Aaron T.
Craft, Justin F. Roebel, Deputy Attorney General, Indianapolis, Indiana.
ATTORNEYS FOR APPELLEE: David W. Stone IV, Stone Law Office & Legal Research,
Anderson, Indiana.
Mathias, Judge. Vaidik, C.J., concurs. Barnes, J., dissents with opinion.
OPINION
Page 473
Mathias, Judge.
[¶1] The State of Indiana filed a complaint for forfeiture in Grant Superior Court seeking to obtain a
2012 Land Rover LR2 owned by Tyson Timbs (" Timbs" ). The trial court ruled in favor of Timbs,
and the State appeals, presenting one issue, which we restate as whether the trial court erred in
concluding that forfeiture of Timbs's vehicle would constitute a constitutionally excessive fine.
[¶2] We affirm.
Facts and Procedural History
[¶3] In January 2013, Timbs purchased a Land Rover LR2 (" Land Rover" ) for the sum of
$42,058.30 from a dealer in Indianapolis. Timbs paid for the Land Rover with life insurance policy
proceeds that he received following the death of his father. Thereafter, Timbs began to use this
vehicle to drive from Marion, Indiana to Richmond, Indiana for the purposes of purchasing heroin.
Timbs also used the Land Rover to transport the heroin back to Richmond.
[¶4] In May 2013, a confidential informant (" CI" ) told a member of the Joint Effort Against
Narcotics (" JEAN" ) team[1] that he could purchase heroin from Timbs. The police then set up a
controlled buy, and on May 6, 2013, an undercover detective and the CI met Timbs at an
apartment.[2] The detective gave the CI the purchase money, and the CI went inside the
apartment with Timbs and returned with two grams of heroin that he had purchased for the
previously agreed-to price of $275.
[¶5] The police set up another controlled buy on May 22, 2013, to take place at a local gas station.
This time, the undercover
Page 474
Page 59 of 112
detective purchased two grams of heroin from Timbs for a price of $260. After this transaction, the
detective spoke with Timbs about arranging yet another purchase of heroin. However, on the day
this controlled buy was set to take place, the police instead apprehended Timbs during a traffic
stop.
[¶6] On June 5, 2013, the State charged Timbs with two counts of Class B felony dealing in a
controlled substance and one count of Class D felony conspiracy to commit theft. On August 5,
2013, the State filed a complaint for forfeiture, seeking to obtain Timbs's Land Rover.
[¶7] On April 12, 2015, Timbs entered into a plea agreement with the State whereby he agreed to
plead guilty to one count of Class B felony dealing in a controlled substance and Class D felony
theft in exchange for the State dismissing the remaining charges. The following day, the trial court
accepted the plea and sentenced Timbs pursuant to the agreement to six years, with one year
executed in community corrections and five years suspended to probation. Pursuant to the plea
agreement, Timbs also agreed to reimburse the JEAN team $385 for the cost of the investigation
and pay a drug abuse, prosecution, and interdiction fee of $200; court costs of $168; a bond fee of
$50; and a $400 certified court program fee after undergoing a drug and alcohol assessment with
the probation department. The complaint for forfeiture remained pending.
[¶8] On July 15, 2015, the trial court held a hearing on the forfeiture complaint. At the hearing,
Timbs argued that forfeiture of his Land Rover, which he claimed was worth over $40,000,
constituted an excessive fine, given that he had only dealt drugs twice, that he was only convicted
for one count of dealing, and that the maximum statutory fine for his crime was $10,000. The trial
court took the matter under advisement and, on August 28, 2015, entered an order in favor of
Timbs, which provided in relevant part:
7. The State now seeks a judgment against the Defendant for forfeiture of the Land Rover; a
vehicle that just five (5) months before it was seized had a fair market value of almost four (4)
times the maximum monetary fine of $10,000. 8. The Court finds that the judgment of forfeiture
sought by the State violates the Excessive Fines Clause of the Eighth Amendment of the United
States Constitution. The amount of the forfeiture sought is excessive and is grossly disproportional
to the gravity of the Defendant's offense. 9. While the negative impact on our society of trafficking
in illegal drugs is substantial, a forfeiture of approximately four (4) times the maximum monetary
fine is disproportional to the Defendant's illegal conduct. Judgment is entered in favor of the
Defendant and against the State. The Land Rover LR2, at issue, is ordered released to the
Defendant immediately.
Appellant's App. pp. 15-16. The State filed a motion to correct error on September 14, 2015,
claiming for the first time that the trial court should have ordered a sale of the Land Rover from
which a non-excessive fine could be deducted.[3] The trial court held a hearing on the State's
motion to correct error on October 14, 2015, and entered an order denying the State's motion on
October 21, 2015. The State now appeals.
Page 475
Standard of Review
[¶9] At trial, the State bore the burden of establishing the requirements of forfeiture. See Ind. Code
Page 60 of 112
§ 34-24-1-4(a). Thus, the State is appealing from a negative judgment. See Merrillville 2548, Inc.
v. BMO Harris Bank N.A., 39 N.E.3d 382, 390-91 (Ind.Ct.App. 2015), reh'g denied, trans. denied.
On appeal, we will not reverse a negative judgment unless it is contrary to law. Id. Here, the State
argues that the trial court erred in determining that the forfeiture of the Land Rover constituted an
excessive fine. This court has held that forfeitures are subject to the Excessive Fines Clause of the
Eighth Amendment to the United States Constitution. $ 100 and a Black Cadillac v. State, 822
N.E.2d 1001, 1011 (Ind.Ct.App. 2005), trans. denied (citing Austin v. United States, 509 U.S. 602,
609-10, 113 S.Ct. 2801, 125 L.Ed.2d 488 (1993)).[4] We review the trial court's conclusion
regarding the excessiveness of a fine de novo. United States v. Bajakajian, 524 U.S. 321, 336,
118 S.Ct. 2028, 141 L.Ed.2d 314 (1998).
Discussion and Decision
In rem forfeiture is an ancient concept under which courts obtained jurisdiction over property when
it was virtually impossible to seek justice against property owners guilty of violating maritime law
because they were overseas. Civil forfeiture traces to ancient Roman and medieval English law;
both made objects used to violate the law subject to forfeiture to the sovereign. Civil forfeiture is no
longer tethered to difficulties in obtaining personal jurisdiction over an individual. It now serves as
one of the most potent weapons in the judicial armamentarium[.] Civil forfeiture is a leading
method for imposing economic sanctions against narcotics traffickers. Today, all states have
statutory provisions for some form of asset forfeiture, and there are more than four hundred
federal forfeiture statutes relating to various federal crimes. An important feature of many of these
statutes is characterization of the process as civil forfeiture under which (by contrast to criminal
forfeiture) a property owner need not be found guilty of a crime--or even charged--to lose
permanently their cash, car, home or other property. The relative ease of effecting such forfeiture
and the disposition of the assets have become a matter of public note.
[¶10] The Eighth Amendment provides, " Excessive bail shall not be required, nor excessive fines
imposed, nor cruel and unusual punishments inflicted." U.S. Const. amend. VIII. At the time the
Constitution was adopted, " the word 'fine' was understood to mean a payment to a sovereign as
punishment for some offense." $ 100 and a Black Cadillac,
Page 476
822 N.E.2d at 1011 (quoting Bajakajian, 524 U.S. at 327). Accordingly, the Excessive Fines clause
of the Eighth Amendment " limits the government's power to extract payments, whether in cash or
in kind, as punishment for some offense." Id. (quoting Bajakajian, 524 U.S. at 328) (emphasis
added) (internal quotation marks omitted). As noted above, this court has already held that
forfeitures in Indiana are subject to the Excessive Fines Clause. Id. (citing Austin, 509 U.S. at
622).
[¶11] To determine whether a fine or forfeiture is " excessive," for purposes of the Excessive Fines
Clause, we consider whether the amount of the forfeiture bears " some relationship to the gravity
of the offense that it is designed to punish." Id. (quoting Bajakajian, 524 U.S. at 334). A punitive
forfeiture violates the Excessive Fines Clause " if it is grossly disproportional to the gravity of a
defendant's offense." Id. (quoting Bajakajian, 524 U.S. at 334).[5]
Page 61 of 112
[¶12] Here, there is no question that the nature of Timbs's offense was serious. He committed a
Class B felony. However, our General Assembly has determined that a Class B felony should be
punishable by a maximum fine of $10,000. Here, the evidence before the trial court was that
Timbs's vehicle was worth approximately four times the amount of the maximum fine. Although we
do not suggest that forfeiture of any asset valued over the maximum fine is automatically a
violation of the Excessive Fines Clause, it is instructive to our analysis that the value of the asset
sought by the State is well in excess of the maximum fine. Moreover, it is undisputed that the Land
Rover was not purchased with the proceeds of any criminal behavior; it was purchased with life
insurance proceeds.
[¶13] The State notes that an asset may be forfeited even if the State does not convict the owner
of the criminal charge. See Katner v. State, 655 N.E.2d 345, 348 (Ind. 1995) (noting that a
conviction on the underlying criminal activity is not a prerequisite for forfeiture). Thus, the State
argues, it could have sought forfeiture of the Land Rover even if Timbs had not been convicted.
However, this does not negate the fact that our General Assembly has set the maximum fine for
the crime for which Timbs was convicted at $10,000, whereas the value of the Land Rover was
upwards of $40,000.
[¶14] We also note that financial burdens had already been imposed on Timbs when he pleaded
guilty. Pursuant to his plea agreement, Timbs agreed to reimburse the JEAN team $385 for the
cost of the investigation and pay a drug abuse, prosecution, and interdiction fee of $200; court
costs of $168; a bond fee of $50; and a $400 certified court program fee. Notably, the trial court
imposing the sentence found no need to impose any fine, much less the maximum fine of $10,000.
[¶15] The State also argues that the evidence before the trial court was that Timbs committed
criminal acts other than the one for which he was convicted. This may be true. However, the
complaint for forfeiture referred only to May 31, 2013.[6]
Page 477
If the State wished to seek forfeiture of the Land Rover based on Timbs's other criminal acts, it
should have done so more clearly in its forfeiture complaint. Moreover, even considering these
other acts, we note that the only evidence before the trial court was that Timbs sold heroin twice,
both times as a result of controlled buys. The remaining times he transported heroin, it was
apparently for his own use. The trial court was free to consider these circumstances in making its
determination.
[¶16] We also find the State's citation to United States v. Aleff, 772 F.3d 508 (8th Cir. 2014), to be
unpersuasive. In Aleff, the defendants were convicted of conspiracy to defraud the federal
government and ordered to pay almost $304,000 in restitution. Thereafter, the federal government
brought suit against the defendants under the False Claims Act, and the District Court awarded
the government treble damages and statutory penalties of over $1,300,000. On appeal, the Eighth
Circuit Court of Appeals held that this was not grossly disproportionate under the Excessive Fines
Clause. Aleff, 772 F.3d at 512-13. In so holding, the court noted that the defendants' scheme to
defraud the government was extensive and took more than six years. Id. at 513. The defendants "
received $303,890 from the public fisc to which they were not entitled," and the government "
suffered damage to the integrity of one of its programs." Id. More importantly, the damages
Page 62 of 112
recovered by the government were within the limits of damages allowed by the False Claims Act.
Id.
[¶17] The present case is readily distinguishable from Aleff. Timbs did not engage in a years-long
scheme to defraud the State, nor did the State here seek to recover treble damages under a false
claims statute. It instead sought to forfeit a vehicle that was not purchased with the proceeds of
Timbs's crimes. Here, the value of the asset subject to potential forfeiture was well over the
statutory maximum fine, whereas in Aleff, the damages were more than the actual damages but
still within the statutory maximum allowed under the False Claims Act.[7]
Conclusion
[¶18] Forfeiture of the Land Rover, which was worth approximately four times the maximum
permissible statutory fine, was grossly disproportionate to the gravity of Timbs's offense. We
therefore affirm the trial court's conclusion that forfeiture of the Land Rover violated the Excessive
Fines Clause of the Eighth Amendment.
[¶19] Affirmed.
Page 478
Vaidik, C.J., concurs.
Barnes, J., dissents with opinion.
DISSENT
Barnes, Judge, dissenting.
[¶20] I respectfully dissent. I realize that my colleagues point to the allegedly " disproportionate"
nature of the forfeiture sought by the State here. I understand their concern. I would simply say as
follows:
[¶21] Forfeitures are constitutional and, although some have been found to be excessive, are a
useful law enforcement tool. See U.S. v. Ursery, 518 U.S. 267, 290, 116 S.Ct. 2135, 2148, 135
L.Ed.2d 549 (1996).
[¶22] We have ruled that, in limited situations, the Excessive Fines Clause of the Eighth
Amendment may come into play in a forfeiture case. See $ 100 and a Black Cadillac, 822 N.E.2d
at 1011-12.
[¶23] However, it is clear and without conflict in the evidence that the vehicle here was Timbs's
and was used to facilitate crime, i.e., to transport Timbs to the place of an arranged heroin buy.
The vehicle did not have only a tangential relationship to the crime or to the defendant. It should
not matter that Timbs committed the crime using an expensive new Land Rover rather than an old,
inexpensive " beater."
[¶24] The majority correctly points out that the record reflects Timbs " only" sold heroin twice. I
simply posit that Timbs was arrested before the third buy could take place, and we are left to
wonder how much heroin he had access to.
[¶25] I am keenly aware of the overreach some law enforcement agencies have exercised in
some of these cases. Entire family farms are sometimes forfeited based on one family member's
conduct, or exorbitant amounts of money are seized. However, it seems to me that one who deals
heroin, and there is no doubt from the record we are talking about a dealer, must and should suffer
the legal consequences to which he exposes himself.
Page 63 of 112
[¶26] Timbs dealt heroin and got caught. I vote to reverse the trial court's denial of the State's
forfeiture request.
---------
Notes: [1]The JEAN team is composed of members from the Grant County Sheriff's Department, the
Grant County Prosecutor's Office, and the Marion Police Department. [2]This apartment was apparently not Timbs's residence. See Tr. pp. 27-28. [3]The State does not reiterate this claim on appeal, and even if it did, it is well settled that an
issue may not be presented for the first time in a motion to correct error. Van Winkle v. Nash, 761
N.E.2d 856, 859 (Ind.Ct.App. 2002). [4]The State claims that there is a question as to whether the Excessive Fines Clause of the
Eighth Amendment is applicable to the states via the Fourteenth Amendment. The United States
Supreme Court has yet to hold that the Excessive Fines Clause is applicable to the States. See
Browning-Ferris Indus., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 276, 109 S.Ct. 2909, 106
L.Ed.2d 219 (1989) (" We shall not decide whether the Eighth Amendment's prohibition on
excessive fines applies to the several States through the Fourteenth Amendment." ). But this court
held in $ 100 and a Black Cadillac that the Excessive Fines Clause did apply to Indiana's forfeiture
statutes. 822 N.E.2d at 1011. We see no reason to disagree with our prior opinion. We also note
that the Indiana Constitution contains its own provision against excessive fines. See Ind. Const.
art. 1, sec. 16 (" Excessive fines shall not be imposed). Because neither side addresses the
Indiana Constitution, we base our opinion on the federal Excessive Fines Clause. [5]The State claims that the Supreme Court in Bajakajian " allow[ed] a forfeiture three times the
applicable fine" of $5,000. This is incorrect. The Supreme Court was abundantly clear that the only
question before it was whether forfeiture of the entire amount of cash at issue, $357,144, was
proper. See Bajakajian, 524 U.S. at 339 n.11. [6]The complaint set forth in relevant part:
1. On or about May 31, 2013, officers of the Plaintiff, J.E.A.N. Team Drug Task Force, seized from
the Defendant, TYSON TIMBS, One (1) 2012 Land Rover LR2 . . . in Grant County, Indiana.
2. On said date and at said place, the Defendant, TYSON TIMBS, had in his possession, the
above described vehicle, said vehicle had been furnished or intended to be furnished by
Defendant, TYSON TIMBS, in exchange for an act that is in violation of a criminal statute, or used
to facilitate any violation of a criminal statute or is traceable as proceeds of the violation of a
criminal statute under Indiana Law, as provided in I.C. 34-24-1-1.
3. The Defendant, TYSON TIMBS, is the owner of the vehicle.
WHEREFORE, the Plaintiffs demand judgment against the Defendant for forfeiture of vehicle, for
the delivery of said vehicle upon forfeiture as provided for in I.C. 34-24-1-1, for reimbursement of
law enforcement costs as provided by statute, and for all other relief just and proper in the
premises.
Appellant's App. p. 14. [7]The same holds true for the State's citation to United States v. Mackby, 339 F.3d 1013 (9th Cir.
2003), which was also brought under the False Claims Act. The total damages awarded in that
Page 64 of 112
case were within the statutory limits and the government was directly defrauded. Id. at 1018.
Although the amount awarded, $729,455, was much greater than the $58,151 sought by the
government, the defendants had filed fraudulent Medicare claims for which they received payment
without analysis or discussion is " weak authority." ). See also Benson v. McMahon, 127 U.S. 457,
468-469, 8 S.Ct. 1240, 32 L.Ed. 234 (1888)(" the views of counsel...are unsupported by any well-
considered judicial decision" ); Sandifer v. U.S. Steel Corp., 678 F.3d 590, 598 (7th Cir. 2012)("
the Franklin opinion offers only a conclusion, not reasons" ); Bogan
Page 724
v. City of Chicago, 644 F.3d 563, 570 (7th Cir. 2011)(rejecting four appellate decisions because
the point was made " without discussion" ); Henry M. Hart, Jr., Foreword: The Time Chart Of The
Justices, 73 Harv.L.Rev. 84, 98-99 (1959)(" ipse dixits are futile as instruments for the exercise of
'the judicial Power of the United States.'" ).
Caterpillar's claim of relevance for the " deal documents" ultimately rests on the theory that
they relate to the unpled defense that Miller has violated the Illinois maintenance statute, and that
Miller's funder is or may be the real party in interest under Rule 17(a). ( Defendant's Memorandum
at 7). Neither argument has any cogency.
A.
Champerty and Maintenance
Caterpillar's claim that the " deal documents" are relevant rests on its largely unexplained
assertion that the Miller's funding agreement offends the Illinois statute prohibiting champerty and
maintenance and its utterly unsupported and unexplained conclusion that that a violation of the
statute by Miller is a defense to Miller's claims against it. ( Defendant's Memorandum at 14).
Indeed, we are told unequivocally that " litigation funding agreements are unlawful in Illinois and
support a new Caterpillar defense." ( Id. at 7, incorporating the discussion in the Rule 37.2 report).[5] Even the most casual reading of Puckett v. Empire Stove Co. 183 Ill.App.3d 181 539 N.E.2d
420, 132 Ill.Dec. 110 (5th Dist.1989), on which Caterpillar relies, reveals the unsupportability of
this assertion. Here is what the court said in a case involving an assignment of a claim to a third
party:
ITT argues that the assignment of Ghibaudys' right of action for contribution against ITT is void as
against public policy because it encourages litigation which otherwise would not be brought. To
allow the assignment in this case, ITT argues, would constitute approval of what was known at
common law as champerty or maintenance. We disagree. Black's Law Dictionary defines
champerty as " [a] bargain by a stranger with a party to a suit, by which such third person
undertakes to carry on the litigation at his own cost and risk, in consideration of receiving, if
successful, a part of the proceeds or subject sought to be recovered." Maintenance is defined as "
maintaining, supporting, or promoting the litigation of another." Champerty and maintenance have
been disapproved by the courts as against public policy because a litigious person could harass
and annoy others if allowed to purchase claims for pain and suffering and pursue the claims in
court as an assignee. However, plaintiff in the instant case is no stranger to the action between
third-party plaintiffs Ghibaudys and third-party defendant ITT. Nor is plaintiff promoting the
litigation of another which otherwise might not be maintained. Instead, plaintiff has a direct and
immediate interest in Ghibaudys' right of action for contribution against ITT. Allowing Ghibaudys to
assign that cause of action to plaintiff is not violative of any public policy of which we are aware.
Page 75 of 112
Page 725
Puckett, 183 Ill.App.3d at 191-192 (emphasis supplied)(citations omitted).
The situation in Puckett is not remotely comparable to that in the instant case.
In Illinois, the common-law offense of maintenance was abolished long ago by statute,
Brush v. City of Carbondale, 229 Ill. 144, 151, 82 N.E. 252, 254 (1907), which has remained
virtually unchanged for over a century. 720 ILCS 5/32-12 provides that " if a person officiously
intermeddles in an action that in no way belongs to or concerns that person, by maintaining or
assisting either party, with money or otherwise, to prosecute or defend the action, with a view to
promoting litigation, he or she is guilty of maintenance and upon conviction shall be fined and
punished as in cases of common barratry." (Emphasis supplied). Being a criminal statute, it must
be strictly construed. People v. Sedelsky, 2013 IL App. (2d) 111042, 997 N.E.2d 664, 375 Ill.Dec.
353, 2013 WL 5370287, 3 (2nd Dist. 2013).
In construing penal statutes, the goal is to ascertain and give effect to the intent of the
legislature. People v. Davis, 199 Ill.2d 130, 135, 766 N.E.2d 641, 262 Ill.Dec. 721 (2002). " The
most reliable indicator of legislative intent is the language of the statute, which, if plain and
unambiguous, must be read without exception, limitation, or other condition." Id. " Moreover, in
construing criminal statutes, " nothing should be taken by intendment or implication beyond the
obvious or literal meaning of the statute." Id. [6] Caterpillar's argument puts to one side the
maintenance statute's limited purpose and its explicit requirement that there be " officious
intermeddling." And it assumes -- without any explanation or analysis -- that a violation of the
statute by Miller's funding agreement would provide Caterpillar with a viable defense to Miller's
trade secret action. Being unamplified and unsupported, that argument could be deemed waived.
Cadenhead v. Astrue 410 F.App'x 982, 984, 2011 WL 549785, 2 (7th Cir.2011). But we prefer to
consider it, since it implicates the public policy of this state.
Officiousness is synonymous with meddlesomeness and can be described as volunteering
one's services where they are neither asked for nor needed. Matter of Estate of Milborn, 122
Ill.App.3d 688, 691, 461 N.E.2d 1075, 1078, 78 Ill.Dec. 241 (3rd Dist.1984). Here, there was no
intermeddling by the funder in the sense contemplated by the statute. Quite the contrary. The
funder was sought out by a cash-strapped litigant embroiled in bitterly contested litigation. There is
no suggestion let alone proof that any of the funders with which Miller conferred " wickedly and
willfully" tried to stir up a suit between Caterpillar and Miller, Wyman-Gordon Co. v. Lynch Area
MILLERREV-006957, MILLERREV-006958, MILLERREV-006959. [4]For good cause, the court may order discovery " relevant to the subject matter involved in the
action." Rule 26(b)(1). This provision has not been invoked by Caterpillar. [5]If third party funding agreements were " illegal" in Illinois, one would expect there to be a
defense to that effect raised by Caterpillar. Tellingly, there is none. Cf. Muhammad v. Oliver, 547
F.3d 874, 877 (7th Cir. 2008) (Posner, J)(" [I]f there is an executed standstill agreement, one
would expect an allegation to that effect. There is none. The complaint's silence is deafening." );
Alexander v. City of South Bend, 433 F.3d 550, 556 (7th Cir. 2006). [6]Thus, there is no implied private cause of action for champerty, maintenance or barratry.
Dist.1985). [7]None of these cases have been cited by the parties. [8]As in American Nat. Bank and Trust Co. of Chicago, neither party has addressed the question
of the applicable state law. Thus, as in situations where the parties do not raise the issue of which
law should apply, Illinois law will be selected. Faulkenberg v. CB Tax Franchise Systems, LP 637
F.3d 801, 809 (7th Cir.2011). [9]Miller was careful to divorce the funders from any legal interest in this case. It repeatedly argues
that the case was and continues to be its own, and that it has no more than a funding relationship
with the funder. (Dkt. #402, at 5-6; Dkt. #362, at 21-23). A review of the funding agreement
confirms these representations. [10]Caterpillar's Memorandum points to the following items in " Miller's Privilege Log for Funding
Documents," which is attached as Exhibit G to its Memorandum -- as being documents " created
either for Plaintiffs to finalize their claimed business transaction with third party funders or for the
full or partial purpose of third party review" : Entry Nos. 4, 6-7, 9, 11, 16, 18, 21, 24, 26-51, 53-62,
114 and 118, which are spreadsheets and summaries apparently prepared for third party funder
review." ( Caterpillar Memorandum at 9).
At my request, Miller produced in one binder copies of the materials which it has refused to
produce on the ground of attorney/client or work-product privilege, or both. The numbers in the
revised privilege log no longer correspond to those in the original log. I have reviewed in camera
the 160 items in the revised Privilege Log. [11]While the parties' characterization in the agreement is not conclusive, cf., TKO Equipment Co.
v. C & G Coal Co., 863 F.2d 541, 543 (7th Cir. 1988), it is not without value in assessing the
nature of the relationship. [12]The " common interest" exception is closely related to the exception for jointly represented co-
parties, with the difference being that parties may have a " common interest" even if they are not
represented by the same lawyer. See In re Pacific Pictures Corp., 679 F.3d at 1129 -1130 for an
extended discussion and explanation of the matter. The " common interest" doctrine is not limited
Page 94 of 112
to defendants, to formal parties to litigation, or to litigated matters. United States v. BDO Seidman,
LLP, 492 F.3d 806, 815 (7th Cir. 2007). [13]Miller seems to have tacitly acknowledged the necessity that the interest be legal. In his
Declaration of February 12, 2013, Miller's Chairman of the Board, Keith Miller, states that Miller
and one of the funders it consulted with, " had a common legal interest in obtaining and/or
providing financial assistance that would allow Miller to pursue its legal claims against Caterpillar."
(Motion, Ex. I, ¶ 3). [14]The Court of Appeals cited BDO Seidman in support of this proposition. [15]There is no claim by Miller that it undertook a joint litigation strategy with any funding source.
See United States v. Evans, 113 F.3d 1457, 1467 (7th Cir.1997)(The common interest doctrine "
serves to protect the confidentiality of communications passing from one party to the attorney for
another party where a joint defense effort or strategy has been decided upon and undertaken by
the parties and their respective counsel." ). And a review of the documents provided for my in
camera review shows conclusively that no such action was undertaken or contemplated. [16]The Court of Appeals in In re Teleglobe Communications Corp. cited Duplan Corp. v. Deering
" 'A community of interest exists among different persons or separate corporations where they
have an identical legal interest with respect to the subject matter of a communication between an
attorney and a client concerning legal advice. The third parties receiving copies of the
communication and claiming a community of interest may be distinct legal entities from the client
receiving the legal advice and may be a non-party to any anticipated or pending litigation. The key
consideration is that the nature of the interest be identical, not similar, and be legal, not solely
commercial. The fact that there may be an overlap of a commercial and a legal interest for a third
party does not negate the effect of the legal interest in establishing a community of interest.'"
(Emphasis supplied).
After noting that the Restatement (Third) of the Law Governing Lawyers, takes a more flexible
approach than Duplan, the Third Circuit said: " For our purposes, it is sufficient to recognize that
members of the community of interest [i.e., those not represented by the same lawyer] must share
at least a substantially similar legal interest." In re Teleglobe Communications Corp., 493 F.3d at
365. (Emphasis supplied). [17]The Seventh Circuit cited Diversified Industries, Inc. v. Meredith, 572 F.2d 596, 604 (8th
Cir.1977), which in turn relied on the " because of" test in the Wright & Miller treatise cited by the
Adlman majority. [18]Miller's Reply Brief has represented that no confidential materials were disclosed to Juris
before October 27. [19] See Nester v. Diamond Match Co., 143 F.72 (7th Cir. 1906); Ocasio-Hernandez v. Fortuño-
Burset, 640 F.3d 1, 8 (1st Cir. 2011); Smith v. McAlister-Smith Funeral Home, Inc., 2012 WL
4378185, 3 (D.S.C.2012; Maldonis v. City of Shell Lake, 2008 WL 4735143, 2 (W.D.Wis.2008);
Shields Enterprises, Inc. v. First Chicago Corp., 1988 WL 142200, 4 (N.D.Ill.1988)(Moran, J.). [20]Caterpillar's Memorandum (at 4) merely notes, without discussion or analysis, that a letter from
Miller's counsel states in " conclusory fashion" that Mr. Miller and Mr. John Burley, a public
Page 95 of 112
relations expert in England who was advising Miller on funding issues and who was a recipient of
most of the materials listed on the Privilege Log, had an oral confidentiality agreement. But that is
a very different matter than advancing a supported argument regarding the question of whether
Mr. Miller's Declaration is insufficient because it states a legal conclusion. [21]Skeletal and perfunctory arguments are essentially mere assertions and are deemed waived.
Plan Trust Funds v. Royal Intern. Drywall and Decorating, Inc., 493 F.3d 782, 789 (7th Cir. 2007);
United States v. Cusimano, 148 F.3d 824, 828 n.2 (7th Cir. 1998). [22]Contrary to Caterpillar's argument, it does not follow that Caterpillar must have learned of
Miller's attempts to obtain funding from a third-party funder. ( Defendant's Memorandum at 13).
The information could have come from a faithless present or former employee of Miller or could
have been an educated guess by Caterpillar about Miller's financial condition following the
severance of its relationship with Miller and its possible need for money. [23]This rationale would apply to John Burley, who was counseling Miller on funding issues. One
of the withheld documents says he had a confidentiality agreement (Privilege Log No. 78), but
even if he did not, it is obvious a turnover to him did not substantially increase the chances of
Caterpillar learning of the information. [24]To be certain that all of the materials on Miller's privilege log were included in the Litigation
Funding Materials, I requested that they be submitted separately. I have reviewed the 160 items in
that submission that Miller claims are covered by the work-product privilege, the attorney/client
privilege, or both, as well as the five volumes of Litigation Funding Documents. [25]The original privilege log seems to have more entries for this category of documents. See 22,
supra n.10. [26] Frederick holds that numerical information can fall within the attorney-client or work-product
privilege, and Adlman held that an evaluation of the likelihood of success in contemplated litigation
would be protected even though its primary purpose was to inform a business decision of whether
to initiate contemplated litigation.
---------
Page 96 of 112
310 F.Supp.3d 1133 (S.D.Cal. 2018), : 18cv0428 DMS (MDD), MS. L. v. U.S. Immigration and
Cal. 2018). A class action has been certified to include similarly situated migrant parents. Plaintiffs
now request classwide injunctive relief to prohibit separation of class members from their children
in the future absent a finding the parent is unfit or presents a danger to the child, and to require
reunification of these families once the parent is returned to immigration custody unless the parent
is determined to be unfit or presents a danger to the child.
Plaintiffs have demonstrated a likelihood of success on the merits, irreparable harm, and
that the balance of equities and the public interest weigh in their favor, thus warranting issuance of
a preliminary injunction. This Order does not implicate the Government’s discretionary authority to
enforce immigration or other criminal laws, including its decisions to release or detain class
members. Rather, the Order addresses only the circumstances under which the Government may
separate class members from their children, as well as the reunification of class members who are
returned to immigration custody upon completion of any criminal proceedings.
I.
BACKGROUND
Page 98 of 112
This case started with the filing of a Complaint by Ms. L., a Catholic citizen of the Democratic
Republic of the Congo fleeing persecution from her home country because of her religious beliefs.
The specific facts of Ms. L.’s case are set out in the Complaint and this Court’s June 6, 2018 Order
on Defendants’ motion to dismiss. See Ms. L., 302 F.Supp.3d at 1153-57, 2018 WL 2725736, at
*1-3. In brief, Ms. L. and her then-six-year-old daughter S.S., lawfully presented themselves at the
San Ysidro Port of Entry seeking asylum based on religious persecution. They were initially
detained together, but after a few days S.S. was "forcibly separated" from her mother. When S.S.
was taken away from her mother, "she was screaming and crying, pleading with guards not to take
her away from her mother." (Am. Compl. ¶ 43.) Immigration officials claimed they had concerns
whether Ms. L. was S.S.’s mother, despite Ms. L.’s protestations to the contrary and S.S.’s
behavior. So Ms. L. was placed in immigration custody and scheduled for expedited removal, thus
rendering S.S. an "unaccompanied minor" under the Trafficking Victims Protection and
Reauthorization Act ("TVPRA"), Pub. L. No. 110-457 (Dec. 23, 2008), and subjecting
Page 1138
her to the "care and custody" of the Office of Refugee Resettlement ("ORR").[3] S.S. was placed
in a facility in Chicago over a thousand miles away from her mother. Immigration officials later
determined Ms. L. had a credible fear of persecution and placed her in removal proceedings,
where she could pursue her asylum claim. During this period, Ms. L. was able to speak with her
daughter only "approximately 6 times by phone, never by video." (Am. Compl. ¶ 45.) Each time
they spoke, S.S. "was crying and scared." (Id. ¶ 43.) Ms. L. was "terrified that she would never see
her daughter again." (Id. ¶ 45.) After the present lawsuit was filed, Ms. L. was released from ICE
detention into the community. The Court ordered the Government to take a DNA saliva sample (or
swab), which confirmed that Ms. L. was the mother of S.S. Four days later, Ms. L. and S.S. were
reunited after being separated for nearly five months.
In an Amended Complaint filed on March 9, 2018, this case was expanded to include
another Plaintiff, Ms. C. She is a citizen of Brazil, and unlike Ms. L., she did not present at a port of
entry. Instead, she and her 14-year-old son J. crossed into the United States "between ports of
entry," after which they were apprehended by U.S. Border Patrol. Ms. C. explained to the agent
that she and her son were seeking asylum, but the Government, as was its right under federal law,
charged Ms. C. with entering the country illegally and placed her in criminal custody. This
rendered J. an "unaccompanied minor" and he, like S.S., was transferred to the custody of ORR,
where he, too, was housed in a facility in Chicago several hundred miles away from his mother.
Ms. C. was thereafter convicted of misdemeanor illegal entry and served 25 days in criminal
custody. After completing that sentence, Ms. C. was transferred to immigration detention for
removal proceedings and consideration of her asylum claim, as she too had passed a credible fear
screening. Despite being returned to immigration custody, Ms. C. was not reunited with J. During
the five months she was detained, Ms. C. did not see her son, and they spoke on the phone only
"a handful of times[.]" (Id. ¶ 58.) Ms. C. was "desperate" to be reunited with her son, worried about
him constantly and did not know when she would be able to see him. (Id. ) J. had a difficult time
emotionally during the period of separation from his mother. (Id. ¶ 59.) Ms. C. was eventually
released from immigration detention on bond, and only recently reunited with J. Their separation
Page 99 of 112
lasted more than eight months despite the lack of any allegations or evidence that Ms. C. was unfit
or otherwise presented a danger to her son.[4]
Page 1139
Ms. L. and Ms. C. are not the only migrant parents who have been separated from their
children at the border. Hundreds of others, who have both lawfully presented at ports of entry (like
Ms. L.) and unlawfully crossed into the country (like Ms. C.), have also been separated. Because
this practice is affecting large numbers of people, Plaintiffs sought certification of a class
consisting of similarly situated individuals. The Court certified that class with minor modifications,[5] and now turns to the important question of whether Plaintiffs are entitled to a classwide
preliminary injunction that (1) halts the separation of class members from their children absent a
determination that the parent is unfit or presents a danger to the child, and (2) reunites class
members who are returned to immigration custody upon completion of any criminal proceedings
absent a determination that the parent is unfit or presents a danger to the child.
Since the present motion was filed, several important developments occurred, as previously
noted. First, on May 7, 2018, the Government announced its zero tolerance policy for all adult
persons crossing the border illegally, which resulted in the separation of hundreds of children who
had crossed with their parents. This is what happened with Ms. C., though she crossed prior to the
public announcement of the zero tolerance policy. She is not alone. There are hundreds of
similarly situated parents, and there are more than 2,000 children that have now been separated
from their parents.
When a parent is charged with a criminal offense, the law ordinarily requires separation of
the family. This separation generally occurs regardless of whether the parent is charged with a
state or federal offense. The repercussions on the children, however, can vary greatly depending
on status. For citizens, there is an established system of social service agencies ready to provide
for the care and well-being of the children, if necessary, including child protective services and the
foster care system. This is in addition to any family members that may be available to provide
shelter for these minor children. Grandparents and siblings are frequently called upon. Non-
citizens may not have this kind of support system, such as other family members who can provide
shelter for their children in the event the parent is detained at the border. This results in immigrant
children going into the custody of the federal government, which is presently not well equipped to
handle that important task.
For children placed in federal custody, there are two options. One of those options is ORR,
but it was established to address a different problem, namely minor children who were
apprehended at the border without their parents, i.e., true "unaccompanied alien children." It was
not initially designed to address the problem of migrant children detained with their parents at the
border and who were thereafter separated from their parents. The second option is family
detention facilities, but the options there are limited. Indeed, at the time of oral argument on this
motion, Government counsel represented to the Court that the "total capacity in [family] residential
Page 1140
centers" was "less than 2,700." (Rep. Tr. at 9, May 9, 2018, ECF No. 70.) For male heads of
households, i.e., fathers traveling with their children, there was only one facility with "86 beds." (Id.
Page 100 of 112
at 43.)
The recently issued EO confirms the government is inundated by the influx of children
essentially orphaned as a result of family separation. The EO now directs "[h]eads of executive
departments and agencies" to make available "any facilities ... appropriate" for the housing and
care of alien families. EO § 3(d). The EO also calls upon the military by directing the Secretary of
Defense to make available "any existing" facility and to "construct such facilities[,]" if necessary, id.
§ 3(c), which is an extraordinary measure. Meanwhile, "tent cities" and other make-shift facilities
are springing up. That was the situation into which Plaintiffs, and hundreds of other families that
were separated at the border in the past several months, were placed.
This situation has reached a crisis level. The news media is saturated with stories of
immigrant families being separated at the border. People are protesting. Elected officials are
weighing in. Congress is threatening action. Seventeen states have now filed a complaint against
the Federal Government challenging the family separation practice. See State of Washington v.
United States, Case No. 18cv0939, United States District Court for the Western District of
Washington. And the President has taken action.
Specifically, on June 20, 2018, the President signed the EO referenced above. The EO
states it is the Administration’s policy "to maintain family unity, including by detaining alien families
together where appropriate and consistent with law and available resources." Id. § 1.[6] In
furtherance of that policy, the EO indicates that parents and children who are apprehended
together at the border will be detained together "during the pendency of any criminal improper
entry or immigration proceedings" to the extent permitted by law. Id. § 3. The language of the EO
is not absolute, however, as it states that family unity shall be maintained "where appropriate and
consistent with law and available resources[,]" id. § 1, and "to the extent permitted by law and
subject to the availability of appropriations[.]" Id. § 3. The EO also indicates rigorous enforcement
of illegal border crossers will continue. Id. § 1 ("It is the policy of this Administration to rigorously
enforce our immigration laws."). And finally, although the Order speaks to a policy of "maintain[ing]
family unity," it is silent on the issue of reuniting families that have already been separated or will
be separated in the future." Id.
In light of these recent developments, and in particular the EO, the Court held a telephonic
status conference with counsel on June 22, 2018. During that conference, the Court inquired
about communication between ORR and DHS, and ORR and the Department of Justice ("DOJ"),
including the Bureau of Prisons ("BOP"), as it relates to these separated families. Reunification
procedures were also discussed, specifically whether there was any affirmative reunification
procedure for parents and children after parents were returned to immigration detention following
completion of criminal proceedings. Government counsel explained the communication
procedures that were in place, and represented, consistent with her earlier representation to the
Court, that there was no
Page 1141
procedure in place for the reunification of these families.[7]
The day after the status conference, Saturday, June 23, DHS issued the Fact Sheet
referenced above. This document focuses on several issues addressed during the status
Page 101 of 112
conference, e.g., processes for enhanced communication between separated parents and
children, but only "for the purposes of removal." It also addresses coordination between and
among three agencies, CBP, ICE, and HHS agency ORR, but again for the purpose of removal.
The Fact Sheet does not address reunification for other purposes, such as immigration or asylum
proceedings, which can take months. It also does not mention other vital agencies frequently
involved during criminal proceedings: DOJ and BOP.
At the conclusion of the recent status conference, the Court requested supplemental briefing
from the parties. Those briefs have now been submitted. After thoroughly considering all of the
parties’ briefs and the record in this case, and after hearing argument from counsel on these
important issues, the Court grants Plaintiffs’ motion for a classwide preliminary injunction.
II.
DISCUSSION
Plaintiffs seek classwide preliminary relief that (1) enjoins Defendants’ practice of separating
class members from their children absent a determination that the parent is unfit or presents a
danger to their child, and (2) orders the government to reunite class members with their children
when the parent is returned to immigration custody after their criminal proceedings conclude,
absent a determination that the parent is unfit or presents a danger to the child. Injunctive relief is
"an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is
entitled to such relief." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22, 129 S.Ct. 365,
172 L.Ed.2d 249 (2008). To meet that showing, Plaintiffs must demonstrate " ‘[they are] likely to
succeed on the merits, that [they are] likely to suffer irreparable harm in the absence of preliminary
relief, that the balance of equities tips in [their] favor, and that an injunction is in the public interest.’
" Am. Trucking Ass’ns, Inc. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009) (quoting
Winter, 555 U.S. at 20, 129 S.Ct. 365).[8]
Page 1142
Before turning to these factors, the Court addresses directly Defendants’ argument that an
injunction is not necessary here in light of the EO and the recently released Fact Sheet. Although
these documents reflect some attempts by the Government to address some of the issues in this
case, neither obviates the need for injunctive relief here. As indicated throughout this Order, the
EO is subject to various qualifications. For instance, Plaintiffs correctly assert the EO allows the
government to separate a migrant parent from his or her child "where there is a concern that
detention of an alien child with the child’s alien parent would pose a risk to the child’s welfare." EO
§ 3(b) (emphasis added). Objective standards are necessary, not subjective ones, particularly in
light of the history of this case. Furthermore, the Fact Sheet focuses on reunification "at time of
removal[,]" U.S. Dep’t of Homeland Sec., supra, note 2, stating that the parent slated for removal
will be matched up with their child at a location in Texas and then removed. It says nothing about
reunification during the intervening time between return from criminal proceedings to ICE detention
or the time in ICE detention prior to actual removal, which can take months. Indeed, it is
undisputed "ICE has no plans or procedures in place to reunify the parent with the child other than
arranging for them to be deported together after the parent’s immigration case is concluded." (Pls.’
Supp. Mem. in Supp. of Classwide Prelim. Inj., Ex. 31 ¶ 11.) Thus, neither of these directives
Page 102 of 112
eliminates the need for an injunction in this case. With this finding, the Court now turns to the
Winter factors.
A. Likelihood of Success
"The first factor under Winter is the most important— likely success on the merits." Garcia v.
Google, Inc., 786 F.3d 733, 740 (9th Cir. 2015). While Plaintiffs carry the burden of demonstrating
likelihood of success, they are not required to prove their case in full at the preliminary injunction
stage but only such portions that enable them to obtain the injunctive relief they seek. See Univ. of
Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981).
Here, the only claim currently at issue is Plaintiffs’ due process claim.[9] Specifically,
Plaintiffs contend the Government’s practice of separating class members from their children, and
failing to reunite those parents who have been separated, without a determination that the parent
is unfit or presents a danger to the child violates the parents’ substantive due process rights to
family integrity under the Fifth Amendment to the United States Constitution. To prevail on this
claim, Plaintiffs must show that the Government practice "shocks the conscience." In the Order on
Defendants’ motion to dismiss, the Court found Plaintiffs had set forth sufficient facts to support
that claim. Ms. L., 302 F.Supp.3d at 1160-67, 2018 WL 2725736, at *7-12. The evidence
submitted since that time supports that finding, and demonstrates Plaintiffs are likely to succeed
on this claim.
As explained in the Court’s Order on Defendants’ motion to dismiss, the "shocks the
conscience" standard is not subject to a rigid list of established elements. See
Page 1143
County of Sacramento v. Lewis, 523 U.S. 833, 850, 118 S.Ct. 1708, 140 L.Ed.2d 1043 (1998)
(stating "[r]ules of due process are not ... subject to mechanical application in unfamiliar territory.")
On the contrary, "an investigation into substantive due process involves an appraisal of the totality
of the circumstances rather than a formalistic examination of fixed elements[.]" Armstrong v.
Squadrito, 152 F.3d 564, 570 (7th Cir. 1998).
Here, each Plaintiff presents different circumstances, but both were subjected to the same
government practice of family separation without a determination that the parent was unfit or
presented a danger to the child. Ms. L. was separated from her child without a determination she
was unfit or presented a danger to her child, and Ms. C. was not reunited with her child despite the
absence of any finding that she was unfit or presented a danger to her child. Outside of the
context of this case, namely an international border, Plaintiffs would have a high likelihood of
success on a claim premised on such a practice. See D.B. v. Cardall, 826 F.3d 721, 741 (4th Cir.
2016) (citing cases finding due process violation where state action interfered with rights of fit
parents); Heartland Academy Community Church v. Waddle, 595 F.3d 798, 808-811 (8th Cir.
2010) (finding removal of children from religious school absent evidence the students were "at
immediate risk of child abuse or neglect" was violation of clearly established constitutional right);
Brokaw v. Mercer County, 235 F.3d 1000, 1019 (7th Cir. 2000) (citing Croft v. Westmoreland
County Children and Youth Services, 103 F.3d 1123, 1126 (3d Cir. 1997) ("courts have
recognized that a state has no interest in protecting children from their parents unless it has some
definite and articulable evidence giving rise to a reasonable suspicion that a child has been
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abused or is in imminent danger of abuse.")
The context of this case is different. The Executive Branch, which is tasked with
enforcement of the country’s criminal and immigration laws, is acting within its powers to detain
individuals lawfully entering the United States and to apprehend individuals illegally entering the
country. However, as the Court explained in its Order on Defendants’ motion to dismiss, the right
to family integrity still applies here. The context of the family separation practice at issue here,
namely an international border, does not render the practice constitutional, nor does it shield the
practice from judicial review.
On the contrary, the context and circumstances in which this practice of family separation
were being implemented support a finding that Plaintiffs have a likelihood of success on their due
process claim. First, although parents and children may lawfully be separated when the parent is
placed in criminal custody, the same general rule does not apply when a parent and child present
together lawfully at a port of entry seeking asylum. In that situation, the parent has committed no
crime, and absent a finding the parent is unfit or presents a danger to the child, it is unclear why
separation of Ms. L. or similarly situated class members would be necessary. Here, many of the
family separations have been the result of the Executive Branch’s zero tolerance policy, but the
record also reflects that the practice of family separation was occurring before the zero tolerance
policy was announced, and that practice has resulted in the casual, if not deliberate, separation of
families that lawfully present at the port of entry, not just those who cross into the country illegally.
Ms. L. is an example of this family separation practice expanding beyond its lawful reach, and she
is not alone. (See, e.g., Pls.’ Reply Br. in Supp. of Mot. for Class Cert., Exs. 22-23, 25-26)
(declarations from parents
Page 1144
attesting to separation at border after lawfully presenting at port of entry and requesting asylum);
Pls.’ Supp. Mem. in Supp. of Classwide Prelim. Inj., Ex. 32 ¶¶ 9, 10b, 11a (listing parents who
were separated from children after presenting at ports of entry) ).
As set out in the Court’s prior Order, asylum seekers like Ms. L. and many other class
members may be fleeing persecution and are entitled to careful consideration by government
officials. Particularly so if they have a credible fear of persecution. We are a country of laws, and
of compassion. We have plainly stated our intent to treat refugees with an ordered process, and
benevolence, by codifying principles of asylum. See, e.g., The Refugee Act, PL 96-212, 94 Stat.
102 (1980). The Government’s treatment of Ms. L. and other similarly situated class members
does not meet this standard, and it is unlikely to pass constitutional muster.
Second, the practice of separating these families was implemented without any effective
system or procedure for (1) tracking the children after they were separated from their parents, (2)
enabling communication between the parents and their children after separation, and (3) reuniting
the parents and children after the parents are returned to immigration custody following completion
of their criminal sentence. This is a startling reality. The government readily keeps track of
personal property of detainees in criminal and immigration proceedings. Money, important
documents, and automobiles, to name a few, are routinely catalogued, stored, tracked and
produced upon a detainees’ release, at all levels— state and federal, citizen and alien. Yet, the
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government has no system in place to keep track of, provide effective communication with, and
promptly produce alien children. The unfortunate reality is that under the present system migrant
children are not accounted for with the same efficiency and accuracy as property. Certainly, that
cannot satisfy the requirements of due process. See Santosky v. Kramer, 455 U.S. 745, 758-59,
102 S.Ct. 1388, 71 L.Ed.2d 599 (1982) (quoting Lassiter v. Dept. of Soc. Services of Durham
County, N.C., 452 U.S. 18, 101 S.Ct. 2153, 68 L.Ed.2d 640 (1981) ) (stating it is " ‘plain beyond
the need for multiple citation’ that a natural parent’s ‘desire for and right to the companionship,
care, custody, and management of his or her children’ is an interest far more precious than any
property right.") (internal quotation marks omitted).
The lack of effective methods for communication between parents and children who have
been separated has also had a profoundly negative effect on the parents’ criminal and immigration
proceedings, as well as the childrens’ immigration proceedings. See United States v. Dominguez-
immigration-enforcement-actions. [2] See U.S. Dep’t of Homeland Sec. , Fact Sheet: Federal Regulations Protecting the
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Confidentiality of Asylum Applicants (June 23, 2018), https://www.dhs.gov/news/2018/06/23/fact-
sheet-zero-tolerance-prosecution-and-family-reunification. [3] The TVPRA provides that "the care and custody of all unaccompanied alien children, including
responsibility for their detention, where appropriate, shall be the responsibility of" HHS and its sub-
agency, ORR. 8 U.S.C. § 1232(b)(1). An "unaccompanied alien child" ("UAC") is a child under 18
years of age with no lawful immigration status in the United States who has neither a parent nor
legal guardian in the United States nor a parent nor legal guardian in the United States "available"
to care for them. 6 U.S.C. § 279(g)(2). According to the TVPRA, a UAC "may not be placed with a
person or entity unless the Secretary of Health and Human Services makes a determination that
the proposed custodian is capable of providing for the child’s physical and mental well-being. Such
determination shall, at a minimum, include verification of the custodian’s identity and relationship
to the child, if any, as well as an independent finding that the individual has not engaged in any
activity that would indicate a potential risk to the child." 8 U.S.C. § 1232(c)(3)(A). [4] As stated in the Court’s Order on Defendants’ motion to dismiss, Plaintiffs do not challenge Ms.
C.’s initial separation from J. as a result of the criminal charge filed against her. Plaintiffs’ only
complaint with regard to Ms. C. concerns the Government’s failure to reunite her with J. after she
was returned to immigration custody. [5] The class is defined to include: "All adult parents who enter the United States at or between
designated ports of entry who (1) have been, are, or will be detained in immigration custody by the
[DHS], and (2) have a minor child who is or will be separated from them by DHS and detained in
ORR custody, ORR foster care, or DHS custody absent a determination that the parent is unfit or
presents a danger to the child." (See Order Granting in Part Mot. for Class Cert. at 17.) The class
does not include parents with criminal history or communicable disease, or those apprehended in
the interior of the country or subject to the EO. (See id. at 4 n.5.) [6] The Order defines "alien family" as "any person not a citizen or national of the United States
who has not been admitted into, or is not authorized to enter or remain in, the United States, who
entered this country with an alien child or alien children at or between designated ports of entry
and who was detained[.]" Id. § 2(a)(i). [7] The Court: "Is there currently any affirmative reunification process that the government has in
place once parent and child are separated? Government counsel: I would say ... when a parent is
released from criminal custody and taken into ICE custody is the practice to reunite them in family
detention[?] And at that [previous hearing] I said no, that that was not the practice. I think my
answer on that narrow question would be the same." (Rep. Tr. at 29-30, June 22, 2018, ECF No.
77.) [8] The Ninth Circuit applies separate standards for injunctions depending on whether they are
prohibitory, i.e., whether they prevent future conduct, or mandatory, i.e., "they go beyond
‘maintaining the status quo[.]’ " Hernandez v. Sessions, 872 F.3d 976, 997 (9th Cir. 2017). The
standard set out above applies to prohibitory injunctions, which is what Plaintiffs seek here. To the
extent Plaintiffs are also requesting mandatory relief, that request is "subject to a higher standard
than prohibitory injunctions," namely that relief will issue only "when ‘extreme or very serious
damage will result’ that is not capable of compensation in damages,’ and the merits of the case
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are not ‘doubtful.’ " Id. at 999 (quoting Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co.,
571 F.3d 873, 879 (9th Cir. 2009) ). The Ninth Circuit recognizes that application of these different
standards "is controversial[,]" and that other Circuits have questioned this approach. Id. at 997-98.
This Court need not, and does not, address that discrepancy here. Suffice it to say that to the
extent some portion of Plaintiffs’ requested relief is subject to a standard higher than the traditional
standard for injunctive relief, Plaintiffs have met their burden for the reasons set out below. [9] In their supplemental brief, Defendants assert Plaintiffs are raising new claims based on events
that transpired after the Complaints were filed, e.g., the announcement of the zero tolerance policy
and the EO. The Court disagrees. Plaintiffs’ claims are not based on these events, but are based
on the practice of separating class members from their children. The subsequent events are
relevant to Plaintiffs’ claim, but they have not changed the claim itself, which remains focused on
the practice of separation. [10] See, e.g., Pls.’ Supp. Mem. in Supp. of Classwide Prelim. Inj., Ex. 32 ¶ 16k, Ex. 36 ¶ 7a;
Nelson Renteria, El Salvador demands U.S. return child taken from deported father, REUTERS
‘I Can’t Go Without My Son’: A Deported Mother’s Plea, N.Y. TIMES (June 17, 2018),
https://www.nytimes.com/2018/06/17/us/immigration-deported-parents.html. [11] "Fitness" is an important factor in determining whether to separate parent from child. In the
context of this case, and enforcement of criminal and immigration laws at the border, "fitness"
could include a class member’s mental health, or potential criminal involvement in matters other
than "improper entry" under 8 U.S.C. § 1325(a), (see EO § 1), among other matters. Fitness
factors ordinarily would be objective and clinical, and would allow for the proper exercise of