Category: Civil Procedure

Second Circuit Certifies Question to New York of Appeals on Unsettled Issue of Whether the New York Public Health Law Creates a Private Cause of Action

Case Name: Haar v. Nationwide Mutual Fire Ins. Co. – Second Circuit

Date of Opinion: March 13, 2019

Opinion by: Judge Katzmann, Judge Hall, and Judge Lynch (per curiam)

Summary:

In 2012 and 2013, Robert D. Haar (“Haar”), an orthopedic surgeon, provided treatment to several patients injured in car accidents for which Nationwide Mutual Fire Insurance Company (“Nationwide”) was the insurer. After treating these patients, Haar submitted the claims to Nationwide for payment of the medical treatment he provided. Nationwide denied one claim in full and denied three others in part. Nationwide based the full denial on a Peer Review Report which stated that there was no cause and effect relationship between the injuries treated and the alleged incident. For the other three claims, Nationwide based its decision on the applicable fee schedule, rather than any issue with the medical treatment provided. Nationwide then submitted a complaint to the New York State Office of Professional Medical Conduct (“OPMC”). On January 27, 2017, the OPMC notified Haar that it had concluded an investigation and would not take any disciplinary action.

Harr then initiated this suit under N.Y. Public Health Law section 230(11)(b) against Nationwide, alleging that Nationwide had submitted a bad faith report about him with the OPMC. On November 30, 2017 the United States District Court for the Southern District of New York dismissed Haar’s complaint, finding that the New York Court of Appeals, were it faced with the question, would find that the statute does not create a private right of action. Because the issue turns on a question of state law for which no controlling decisions of the New York Court of Appeals exist, and given a split in the Appellate Division, the Second Circuit certified this question to the Court of Appeals, pursuant to 22 N.Y.C.R.R. § 500.27 and 2d Cir. R. 27.2(a).

The Second Circuit stated that New York courts are to consider three factors when determining whether an implied private right of action exists under a statute: (1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme. The district court had held that the overall statutory scheme was not enacted for the benefit of individuals against whom reports were made but, rather, to create a scheme to regulate medical misconduct.

The Second Circuit noted that, in relation to the second factor, the Court of Appeals has articulated the purpose of section 230(11)(b) as encouraging complaints by individuals who would otherwise be reluctant to provide information regarding errant doctors for fear of litigation, and has written that the creation of an implied right of action would “chill such complaints.”  Nevertheless, the Second Circuit found that the Court of Appeals had not squarely ruled on the issue of whether a private right of action exists under the statute and New York’s Appellate Division has been split over this issue for over a decade.  Accordingly, although the parties did not request certification, the Second Circuit certified the dispositive question of law – does New York Public Health Law Section 230(11)(b) create a private cause of action for bad faith and malicious reporting to the Office of Professional Medical Conduct –  to the New York Court of Appeals.

Summary by: Caitlin Ens

To read the full opinion, please visit this link.

In a First, the Second Circuit Extends Discovery Accrual Rule to Commodities Exchange Act, Barring Claims

Case Name: Levy v. BASF Metals, Ltd.

Date of Opinion: February 28, 2019

Opinion by: Per curiam

Summary:

After obtaining a partial recovery in the 2014 settlement of a suit alleging platinum market manipulation class action, the plaintiff, an attorney proceeding here pro se, brought the present action against a different set of defendants on September 16, 2015. In the 2015 complaint, she raised similar platinum market manipulation claims in violation of state and federal law. She alleged that she first learned about certain conduct by the defendants, and their identities from a complaint filed in a related 2014 class action suit. The United States District Court for the Southern District of New York granted defendants’ motion to dismiss, finding that the plaintiff’s federal claims were time barred, and declined to exert supplemental jurisdiction over her state law claims.

The Second Circuit affirmed the district court’s decision in a summary order published simultaneously with a separate decision where they specifically address the plaintiff’s Commodities Exchange Act (“CEA”) claims. In so affirming that her federal claims were time-barred, the Court held, for the first time, that Rotella v. Wood, 528 U.S. 549 (2000) applies to CEA claims. Under Wood, federal courts apply a ”discovery accrual rule” – pursuant to which “discovery of the injury, not discovery of the other elements of the claim” will “start[s] the clock” for statute of limitations purposes – when a statute does not address the issue.

In applying the rule to the facts in the case, the Court found the plaintiff discovered her CEA injury when she suffered the financial losses in 2008 in what her complaint describes as “’an extraordinary, unprecedented and unjustified sudden collapse’” in market price. Because the CEA sets a two-year limitations period, plaintiff’s 2015 suit was thus time -barred. The Court emphasized that the date on which this plaintiff had actual knowledge of her injury, and not years later when she discovered additional information relating to the identity of the defendants or other information about the manipulation scheme necessary for her to bring suit, determined the limitations period.

To read the full opinion, please visit: http://www.ca2.uscourts.gov/decisions/isysquery/1cf2844b-0e2b-44da-be6b-815c2f0f5f46/1/doc/17-3823_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/1cf2844b-0e2b-44da-be6b-815c2f0f5f46/1/hilite/

Summary by: Matla Garcia Chavolla

Second Circuit Denies En Banc Review of Decision Upholding Private Damages Remedy under the Religious Freedom Restoration Act

Case Name: Tanvir v. Tanzin

Date of Opinion: February 14, 2019

Opinion by: En banc. Judge Pooler and Chief Judge Katzmann Concur in Denial of Rehearing En Banc; Judges Jacobs, Cabranes, and Sullivan Dissent

Summary:

In the underlying case, plaintiffs sued federal law enforcement officials and officers alleging that they were put on a national “No Fly” list, despite not posing an aviation threat, in retaliation for their declining to serve as FBI informants reporting on fellow Muslims. Plaintiffs alleged defendants’ actions constituted a substantial burden on their exercise of religion in violation of the Religious Freedom Restoration Act (“RFRA”).  The United States District Court for the Southern District of New York dismissed the complaint, in relevant part, on the ground that the RFRA does not permit private parties to recover monetary damages against federal officers sued in their individual capacities. Plaintiffs appealed and, on June 25, 2018, a Second Circuit panel consisting of Chief Judge Katzmann and Circuit Judges Pooler and Lynch reversed, holding that the RFRA does permit private recovery of money damages against federal officers sued in their individual capacities.

Following the June 2018 decision, an active judge of the Second Circuit requested a poll on whether to rehear the case en banc. A majority of the Second Circuit declined the en banc review, and Judge Pooler issued a written concurrence, joined by Chief Judge Katzmann, in support of the panel’s original ruling that the RFRA permits a private action for monetary damages.  Judges Jacobs and Cabranes each issued a written dissent to the denial of the en banc review and joined the other, and Judge Sullivan joined both dissents.

The concurring judges contend that, contrary to the position taken in the dissenting opinions, the holding that a private action for monetary damages exists in this case is grounded in the express provisions for relief set out in the RFRA, and is not a judicially implied right of action that represents an extension of the Supreme Courts’ 1971 decision in Bivens v. Six Unknown Named Agents of the Federal Bureau of NarcoticsContinue reading

Second Circuit Allows Derivative Shareholder Lawsuit to Go Forward Even After Plaintiff Loses her Financial Stake in the Entity, Distinguishing Between Standing and Mootness

Case Name: Klein v. Cadian Capital Mgmt., LP – Second Circuit 

Date of Opinion: October 2, 2018

Opinion By: Judge Pooler (majority); Judge  Lohier (dissent)

Summary:

Appellant Terry Klein brought a derivative lawsuit suit as a shareholder of Qlik Companies. She alleged that a group of funds (referred to collectively as the “Cadian Group”) owned more than ten percent of Qlik and engaged in short-swing transactions in Qlik stock in 2014, in violation of Section 16(b) of the Securities Exchange Act. Subsequently, the action was stayed pending resolution of a motion in a related case. While the action was stayed, a private equity company bought out Qlik in an all-cash merger. As a result of that merger, Klein lost any financial interest in the litigation.

After the stay was lifted, Cadian Group moved to dismiss the action for lack of standing. Klein moved to substitute Qlik itself as a plaintiff under Rule 17(a)(3) of the Federal Rules of Civil Procedure. The United States District Court for the Southern District of New York granted the Cadian Group’s motion to dismiss and denied Klein’s motion to substitute. The District Court reasoned that Klein’s lack of continuing financial interest in the litigation caused her to lose standing, which made the case moot. In the alternative, the District Court found that Qlik could not be substituted under Rule 17(a)(3) because Klein had not made an “honest mistake” in failing to include Qlik as a plaintiff.

The Second Circuit disagreed, and vacated the ruling.  The court explained that Klein had already established her standing by virtue of the fact that she had a personal stake at the outset of the litigation.  The only question, therefore, was whether the case was now moot.  As the court put it, the standing doctrine “evaluates a litigant’s personal stake as of the outset of litigation,” while the mootness doctrine “determines what to do if an intervening circumstance deprives the plaintiff of a personal stake in the outcome of the lawsuit, at any point during litigation after its initiation.”

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