Tagged: Rule 12

Slow Down You’re Moving Too Fast: Third Circuit Directs District Court to Resolve Motion to Compel Arbitration Before Motion to Dismiss

Slow Down You’re Moving Too Fast: Third Circuit Directs District Court to Resolve Motion to Compel Arbitration Before Motion to Dismiss

In a recent decision, the Third Circuit made it abundantly clear that a motion to compel arbitration must be decided before a Rule 12(b)(6) motion to dismiss. Joshua Silfee filed a lawsuit against ERG Staffing Service, his former employer, in the Middle District of Pennsylvania, claiming the company’s payroll policies violated state law because workers were required to use a fee-carrying debit card. ERG filed a motion to compel arbitration pursuant to Section 4 of the Federal Arbitration Act, asserting that the arbitration agreement between Silfee and ERG’s payroll vendor precluded the suit against ERG. ERG also filed a Rule 12(b)(6) motion to dismiss Silfee’s complaint based on the merits of his state law claims against the company. The district court decided to delay consideration of ERG’s motion to compel arbitration and denied the company’s motion to dismiss the case. ERG appealed. The Third Circuit concluded that the district judge erred in delaying the arbitrability inquiry, explaining that arbitrability is a “gateway” issue and that, after a motion to compel arbitration is filed, a court “must refrain from further action until it determines arbitrability.” The Third Circuit noted that “[t]he seeds of the District Court’s confusion may have been sown...

Third Circuit Relaxes Pleading Requirements for Limited Liability Company Defendants and Urges Supreme Court to Redefine Citizenship Rule 0

Third Circuit Relaxes Pleading Requirements for Limited Liability Company Defendants and Urges Supreme Court to Redefine Citizenship Rule

Should limited liability companies continue to be treated differently than corporations for diversity-of-citizenship purposes? If a limited liability company’s citizenship continues to be determined by the citizenship of each of its members, how can a plaintiff get past the pleading stage if the identity of one or more members is unknown even after a diligent pre-filing investigation? In a recent precedential opinion, the Third Circuit in Lincoln Benefit Life Company v. AEI Life, LLC answered the latter question for the first time, holding that a plaintiff need not affirmatively allege the citizenship of each member of a defendant limited liability company to survive a motion to dismiss for lack of subject-matter jurisdiction. And in a separate concurrence targeted directly at the U.S. Supreme Court, the Third Circuit urged the Supreme Court to consider the former question and adopt a more practical rule for determining the citizenship of limited liability companies.

Recent D.N.J. Opinion Offers Roadmap to Practitioners Defending Antitrust Claims 0

Recent D.N.J. Opinion Offers Roadmap to Practitioners Defending Antitrust Claims

A recent opinion from the District of New Jersey illustrates the breadth of defenses available to an entity accused of violating the antitrust laws. World Phone Internet Services, Pvt. Ltd., a provider of VoIP services in India, and its majority shareholder, TI Investment Services, LLC, sued Microsoft (owner of Skype), alleging that Microsoft’s intentional failure to abide by the requirements of India’s licensing regime for VoIP service providers allowed it to undercut World Phone’s pricing, which advantage Microsoft supposedly used to quash its competitors. In granting Microsoft’s motion to dismiss the complaint in TI Investment Services, LLC v. Microsoft Corp., the Court relied on four independent grounds to decide that plaintiffs’ claims of monopolization and collusion did not pass muster under the Sherman Act.

The Foreign Trade Antitrust Improvements Act: A Recent Take in the S.D.N.Y. 0

The Foreign Trade Antitrust Improvements Act: A Recent Take in the S.D.N.Y.

The Foreign Trade Antitrust Improvements Act (“FTAIA”) removes from the ambit of the Sherman Antitrust Act otherwise actionable anti-competitive conduct abroad that does not have a “direct, substantial, and reasonably foreseeable” effect on domestic commerce. Questions persist as to what effects qualify as being sufficiently “direct” and also whether the FTAIA is jurisdictional in nature or goes to the substantive merits of a claim. A recent decision out of the Southern District of New York addressed both questions in dismissing an antitrust suit brought by one Chinese corporation against its Chinese competitors.

Factual Allegations in Superceded Complaint Not Judicial Admissions, But May Be Used for Rebuttal Purposes 0

Factual Allegations in Superceded Complaint Not Judicial Admissions, But May Be Used for Rebuttal Purposes

In West Run Student Housing Associates., LLC v. Huntington National Bank, the United States Court of Appeals for the Third Circuit ruled that, under the liberal policy of allowing amendment under Rule 15, factual allegations made in a superceded complaint are not binding judicial admissions for purposes of a motion to dismiss, but such allegations may be used in the litigation to rebut the plaintiff’s subsequent factual contentions.

Antitrust Pleading Standards: A(nother) Cautionary Tale 0

Antitrust Pleading Standards: A(nother) Cautionary Tale

A New Jersey federal district court’s March 18th opinion granting defendants’ motions to dismiss an antitrust complaint is yet another reminder of the need to inject precision and factual detail into an antitrust claim in order to meet the strict pleading requirements applicable to such claims. The putative class of indirect purchaser plaintiffs in In re Ductile Iron Pipe Fittings (“DIPF”) Indirect Purchaser Antitrust Litigation brought a total of ten claims, alleging principally that iron pipe fitting manufacturers and distributors conspired to fix prices and monopolized the domestic iron pipe fitting market in violation of Sherman Act Sections 1 and 2. In holding that the pleadings failed to establish antitrust impact with sufficient specificity (but granting plaintiffs leave to amend their complaint), the Court reasoned as follows:

Ford Can’t Halt All Claims in Alleged Defective Fuel Tank Putative Class Action 0

Ford Can’t Halt All Claims in Alleged Defective Fuel Tank Putative Class Action

In an opinion authored by Judge Debevoise, a federal district court in New Jersey denied Ford Motor Company’s attempt to toss out a putative class action regarding an alleged defect in the fuel tanks of various Ford trucks and vans. In Coba v. Ford Motor Co., Judge Debevoise held that the plaintiffs’ claims of breach of express warranty and breach of the implied covenant of good faith and fair dealing were adequately pleaded based on allegations that Ford knowingly replaced defective fuel tanks with other defective tanks. But Judge Debevoise dismissed, with leave to replead, the plaintiffs’ claims of common law fraud and violations of the New Jersey Consumer Fraud Act because there were no allegations that Ford knew the plaintiffs’ tanks were defective when they were sold.

Second Circuit Clarifies the Pleading Standard for “Substantial Assistance” in SEC Enforcement  Cases Against Aiders and Abettors 0

Second Circuit Clarifies the Pleading Standard for “Substantial Assistance” in SEC Enforcement Cases Against Aiders and Abettors

In SEC v. Apuzzo, the Second Circuit Court of Appeals recently lowered the pleading standard for aiding and abetting of securities fraud in SEC enforcement actions by reversing the District Court’s finding that proximate causation of the ultimate harm was required to establish substantial assistance. When evaluating aiding and abetting claims, courts previously extended the proximate cause requirement that applies in litigation between private parties to SEC enforcement proceedings. The SEC’s complaint in Apuzzo outlined the details of a complex, but calculated, fraud scheme. The defendant-appellee, Joseph Apuzzo, was the CFO of an equipment manufacturer — Terex Corporation.

Second Circuit Holds That a Post-Disclosure Stock Price Rebound Does Not Per Se Preclude Damages for Alleged Federal Securities Fraud 0

Second Circuit Holds That a Post-Disclosure Stock Price Rebound Does Not Per Se Preclude Damages for Alleged Federal Securities Fraud

Recently, the Second Circuit vacated a District Court’s dismissal of a securities fraud action brought by Acticon AG, shareholder of China North East Petroleum Holdings Ltd. (“NEP”), for failure to plead economic loss—a necessary element to maintain a private damages action under § 10(b) of the Securities Exchange Act of 1934 (“§10(b)”). Acticon had multiple opportunities to, but did not, sell its NEP shares at a profit after NEP’s disclosure of the alleged fraud. The Court held that economic loss is not conclusively negated at the pleadings stage where the price of a security recovers shortly after a disclosure of alleged fraud. Significantly, in drawing all reasonable inferences in favor of the plaintiff under NEP’s 12(b)(6) motion, the Court explained that a rise in the price of a stock following a corrective disclosure requires an inquiry into whether the security rose for “reasons unrelated to [the] initial drop,” and thus introduces factual questions and competing theories of causation that would be inappropriate to resolve on a motion to dismiss.

Second Circuit Finds No Anti-Competitive Conduct in Eatoni v. RIM, Applies “Manifest Disregard of the Law,” Post-Hall Street 0

Second Circuit Finds No Anti-Competitive Conduct in Eatoni v. RIM, Applies “Manifest Disregard of the Law,” Post-Hall Street

In a summary order issued on June 21, 2012, the Second Circuit in Eatoni Ergonomics, Inc. v. Research in Motion Corp., affirmed the Rule 12(b)(6) dismissal of Eatoni’s monopolization complaint against BlackBerry maker RIM for failure adequately to plead anti-competitive conduct. Significantly, the Court held that individual instances of alleged misconduct that are not anti-competitive on their own do not state a claim under Section 2 of the Sherman Act when considered together.