Articles Posted in U.S. 3rd Circuit Court of Appeals

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Plaintiffs, the third-party insurers of a shipping service for coins and special metals, invoked their subrogation rights and alleged that several of the service’s shipments, worth a total of $150,000, were lost or stolen by United Parcel Service of America, Inc. (UPS) or its employees. Plaintiffs brought state law claims against UPS in federal district court, alleging true and fraudulent conversion, among other claims, premising subject matter jurisdiction solely upon the complete diversity of the parties. The district court dismissed the complaint for failure to state a claim, holding (1) the Carmack Amendment preempted all of Plaintiffs’ state law claims, and (2) the exception recognized by some courts when the common carrier has committed a “true conversion” of goods does not permit an action based on state law but rather abrogates the limitation of liability for causes of action brought under the Amendment itself. The Third Circuit affirmed, holding (1) the Carmack Amendment preempts all state law claims for compensation for the loss of or damage to goods shipped by a ground carrier in interstate commerce; and (2) the “true conversion” exception vitiates the liability limiting features in the Amendment and is not an exception to the Amendment’s preemptive scope. View "Certain Underwriters at Interest at Lloyds of London v. United Parcel Serv. of Am., Inc." on Justia Law

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The Medicare as a Secondary Payer Act, 42 U.S.C. 1395y(b)(2) precludes Medicare from providing benefits when a “primary plan” could be expected to pay. When the primary plan does not promptly pay medical expenses, Medicare makes conditional payments and is entitled to reimbursement. Under the New Jersey Collateral Source Statute (NJCSS), N.J. Stat. 2A:15–97, a tort plaintiff cannot recover damages from a defendant when she has already received funding from a different source. Taransky was injured when she fell at a shopping center. Medicare conditionally paid for her care. She sued the owner, seeking damages for bodily injury, disability, pain and suffering, emotional distress, economic loss, and medical expenses. She settled for $90,000, granting a full release, stating that liens or subrogation claims would be satisfied from settlement proceeds, and stating that Taransky would indemnify the owner with respect to such claims. Based on the NJCSS, Taransky then claimed that her Medicare expenses were not included in the settlement and obtained an order that the settlement was solely recovery for bodily injury, disability, pain and suffering, emotional distress, and non-economic, otherwise-uncompensated loss. A Medicare contractor demanded reimbursement of $10,121.15. Taransky refused to pay, arguing that a tortfeasor was not a “primary plan” and that reimbursement would be inequitable because she had not recovered medical expenses. An ALJ ruled against Taransky. The Medicare Appeals Council affirmed. The district court dismissed, holding that it lacked jurisdiction over proportionality and due process claims because she had not raised them before the agency; that the NJCSS did not apply to conditional Medicare benefits; and that the MSP Act authorized reimbursement from the settlement. The Third Circuit affirmed. View "Taransky v. Sec'y U.S. Dep't of Heath & Human Servs." on Justia Law

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Facing asbestos-related personal injury lawsuits filed in the 1980s, a group of producers of asbestos and asbestos-containing products formed the Center for Claims Resolution to administer such claims on behalf of its Members. About 20 Members negotiated and signed the Producer Agreement, which established and set forth the mechanics of the Center and the obligations of the Members. After G-I failed to pay its contractually-calculated share of personal injury settlements and Center expenses, U.S. Gypsum and Quigley were obligated to pay additional sums to cover G-I’s payment obligations. G-I filed for bankruptcy and the Center, U.S. Gypsum, and Quigley each filed a proof of claim, seeking to recover for G-I’s nonpayment under the Producer Agreement. The Center settled its claim with G-I. The Bankruptcy Court granted summary judgment in G-I’s favor. The district court affirmed. The Third Circuit vacated, holding that the Producer Agreement permits the Former Members to pursue a breach of contract action against G-I for its failure to pay contractually-obligated sums due to the Center, in light of their payment of G-I’s share. View "In re: G-I Holdings, Inc." on Justia Law

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In 2001, the Bryan family’s adopted son, J.O., repeatedly raped and molested his younger foster brother, K.B., in the room the boys shared. After weeks of abuse, K.B. told his foster parents, who contacted the Erie County Office of Children and Youth (ECOCY), which had facilitated J.O.’s adoption, and had J.O. removed from their home. The Bryans blamed ECOCY for K.B.’s ordeal, claiming that ECOCY employees concealed J.O.’s history of violent behavior and sexual misconduct. The Bryans sued ECOCY and seven employees under 42 U.S.C. 1983 on a theory that permits recovery from state actors when “the state’s own actions create the very danger that causes the plaintiff’s injury.” During trial, the parties agreed to a high-low settlement. Regardless of the verdict, the Bryan family was to receive at least $900,000 and defendants were to pay no more than $2.7 million. The jury returned an $8.6 million verdict; the defendants tendered $2.7 million. The Bryans claimed breach of the settlement agreement’s confidentiality clause, rendering the deal unenforceable. The district court concluded that it lacked subject matter jurisdiction to decide whether to enforce those terms or the verdict. The Third Circuit remanded. The case was not dismissed, nor was the verdict satisfied. A district court’s jurisdiction does not terminate at the moment jury deliberations do. View "Bryan v. Erie Cnty. Office of Children & Youth" on Justia Law

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Sara sued the City of Newark and Police Officer Borrero, alleging that Borrero, who had an extensive disciplinary history and who was off-duty at the time, stopped Sara for alleged unsafe driving. Borrero then entered her car and attacked Sara, threatened a bystander who tried to intervene, charged Sara with attacking an officer, and held her without counsel for 12 hours. A jury found that Borrero and the city were liable and awarded $2,700,000 in compensatory damages. The district court remitted Sara’s award to $750,000 and informed her of her right to either accept the remitted award or reject it and proceed to a second jury trial, limited to the quantum of her compensatory damages. A second jury was convened and awarded $4,000,000 in compensatory damages. Instead of addressing the city’s new motion for remittitur, the court entered a final order, vacating the second jury’s verdict and the earlier order of remittitur, and reinstating the first jury’s verdict. The Third Circuit vacated and remanded with instructions that the district court should resolve the city’s motion for remittitur of the second jury’s verdict, but stating that it saw little merit to any of the arguments on appeal. View "Lesende v. Borrero" on Justia Law

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In connection with a loan, Bayonne provided Nuveen with an audit report by accounting firm, Withum and an opinion letter from Bayonne’s counsel, Lindabury. Later, Bayonne filed a Chapter 11 bankruptcy petition. Nuveen claimed that the audit report and opinion letter concealed problems. The district court dismissed claims of fraud (Withum), negligent misrepresentation, and malpractice (Lindabury) based on Nuveen’s noncompliance with N.J. Stat. 2A:53A-26 (AOM Statute), which requires an affidavit of merit for certain actions against professionals. The Third Circuit remanded for reconsideration of diversity jurisdiction. On remand, the court found that the action was “related to” Bayonne’s bankruptcy, establishing jurisdiction under 28 U.S.C. 1334(b), and again dismissed. The Third Circuit affirmed as to jurisdiction and held that the AOM Statute can be applied by a federal court without conflicting with FRCP 8. In 2012 the court certified to the New Jersey Supreme Court questions relating to the “nature of the injury” and “cause of action” elements of the AOM Statute. The state court declined. The Third Circuit then held that the AOM Statute applies and affirmed the dismissal. Although such statutes typically apply only to malpractice claims rooted in negligence resulting from harm to a known property, New Jersey courts go further. View "Nuveen Mun. Trust v. Withumsmith Brown PC" on Justia Law

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In 1995 the FDA approved Fosamax® to treat or prevent osteoporosis and Paget’s Disease. Teva developed alendronate sodium, a generic form of the branded drug, and obtained FDA approval on its abbreviated new drug application in 2008. Other generic manufacturers subsequently obtained approval for formulations. The drugs act by inhibiting bone resorption or absorption and suppressing bone turnover; they also inhibit primary mineralization, which is involved in the formation of new bone. Meanwhile, secondary mineralization of existing bone continues, which increases the bone’s mineral content and results in higher bone mineral density. According to the plaintiffs, higher bone mineral density does not necessarily correspond with reduction of fracture risk but can make bone highly mineralized, homogenous, brittle, and more susceptible to fracture. According to some studies, the effects of alendronate sodium linger, with one study reporting that bone turnover may be inhibited by 50% five years after discontinuing treatment. The district court granted judgment on the pleadings in favor of the generic manufacturer defendants finding that state-law strict liability claims were pre-empted by federal law. The Seventh Circuit affirmed. Manufacturers have no control over the design or labeling of generic drugs; the plaintiffs failed to identify anything the generic defendants could do to reconcile their conflicting duties under state and federal law. View "In re: Fosmax (Alendronate Sodium)" on Justia Law

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In the late 1990s, people who had taken the prescription diet-drug combination Fen-Phen began suing Wyeth, claiming that the drugs caused valvular heart disease. A 2000 settlement included creation of the Fen-Phen Settlement Trust to compensate class members who had sustained heart damage. Claims required medical evidence. Attorneys who represented certain claimants retained Tai, a board-certified Level 2-qualified cardiologist, to read tests and prepare reports. Tai read 12,000 tests and asserted that he was owed $2 million dollars for his services. Tai later acknowledged that in about 10% of the cases, he dictated reports consistent with the technicians’ reports despite knowing that the measurements were wrong, and that he had his technician and office manager review about 1,000 of the tests because he did not have enough time to do the work. A review of the forms Tai submitted found that, in a substantial number of cases, the measurements were clearly incorrect and were actually inconsistent with a human adult heart. Tai was convicted of mail and wire fraud, 18 U.S.C. 1341 and 1343, was sentenced to 72 months’ imprisonment, and was ordered to pay restitution of $4,579,663 and a fine of $15,000. The Third Circuit rejected arguments that the court erred by implicitly shifting the burden of proof in its “willful blindness” jury instruction and applying upward adjustments under the advisory Sentencing Guidelines for abuse of a position of trust and use of a special skill, but remanded for factual findings concerning whether Tai supervised a criminally culpable subordinate, as required for an aggravated role enhancement. View "United States v. Tai" on Justia Law

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AAOS is a voluntary professional organization for orthopaedic surgeons, which has adopted professional standards, including member grievance procedures. Most orthopaedic surgeons are members of the AAOS, but it is not a licensing authority. AAOS member Dr. Meller initiated a grievance against another AAOS member, Dr. Graboff, claiming that Graboff wrote an inaccurate report based on incomplete information that was used against him in a civil malpractice case. After determining that Graboff’s testimony violated the AAOS’s Standards of Professionalism, which require members to provide honest and accurate testimony when serving as expert witnesses, the AAOS suspended Graboff from membership for two years and published a description of the proceedings in AAOS Now, its newsletter. Graboff sued, alleging that the AAOS article was defamatory and a false-light invasion of privacy because it selectively recounted the circumstances of the grievance proceedings to imply that he had testified falsely. A jury awarded Graboff $196,000 in damages for “false light” invasion of privacy. The Third Circuit affirmed, rejecting an argument that, as a matter of law, the jury’s finding that the AAOS had not made false statements foreclosed the possibility that it could be liable on the false-light claim. View "Graboff v. Colleran Firm" on Justia Law

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Aaroma acquired certain assets and liabilities of Emoral, a manufacturer of diacetyl, a chemical used in the food flavoring industry. The parties were aware of potential claims arising from exposure to diacetyl. Their agreement stated that Aaroma was not assuming liabilities related to “Diacetyl Litigation,” and was not purchasing Emoral’s corresponding insurance coverage. Emoral filed for bankruptcy. The Trustee and Aaroma entered into an agreement, under which Aaroma paid $500,000 and the Trustee released Aaroma from any “causes of action . . . that are property of the Debtor’s Estate.” In response to objections by the Diacetyl Claimants, the parties added that their agreements would not “operate as a release of, or a bar to prosecution of any claims held by any person which do not constitute Estate’s Released Claims.” The Bankruptcy Court approved the settlement without resolving whether the Diacetyl claims constituted “Estate’s Released Claims.” The Diacetyl Claimants filed individual complaints, alleging that Aaroma was a “mere continuation” of Emoral. The Bankruptcy Court held that the Diacetyl claims were not property of the estate. The district court reversed, finding that the claim for successor liability was a “generalized” claim belonging to the estate because a finding that Aaroma was a “mere continuation” of Emoral would benefit Emoral’s creditors generally. The Third Circuit affirmed. Because the Diacetyl claim belongs to the bankruptcy estate, it falls within the “Estate’s Released Claims.” The Diacetyl Plaintiffs have no apparent recourse against Aaroma. View "In re: Emoral, Inc." on Justia Law