Monday, January 04, 2010

There’ll Always Be Posner

The New Yorker occasionally runs squibs called “There’ll Always Be an England”-- little ditties highlighting charming English eccentricity, often involving gardening for some reason.


We’re thinking of posting entries called “There’ll Always Be Posner,” comments on opinions by Judge Posner, which typically are brilliant and snappily written, typically address jurisdictional issues that nobody raised, typically take a journey through various far-flung areas of law, and, finally, typically arrive at a clear-cut result – all the while disdaining footnotes and oozing disappointment with the quality of advocacy.

 
Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC, 2009 WL 4894242 (7th Cir. Dec. 21, 2009), is a recent example. The Seventh Circuit affirmed the judgment in favor of defendant Anodyne. But how it got there is interesting.

 
The case centered around Nightingale’s claim that Anodyne fraudulently represented that its infrared lamps had been approved by the FDA for the treatment of peripheral neuropathy. Nightingale filed claims for fraud and breach of warranty in state court. Anodyne removed to federal court, asserting diversity. Nightingale then lobbed in a federal Lanham Act claim, a decision it would come to rue, and not only because the district court promptly dismissed the federal claim. More on that later.

The parties apparently agreed that there was diversity jurisdiction. Not so fast, says the Seventh Circuit. There is no way the plaintiff could have in good faith claimed damages in excess of $75,000. Why? The court does not disclose that until the end of the opinion. Instead, at this point the court explores other issues. (It’s like a Tarantino movie, only without the gunplay).

 
What other issues? Glad you asked. First, the court says that federal question jurisdiction might lie. Yes, the Lanham Act claim was dismissed before the state law claims were resolved, but a court can exercise discretion and retain the pendant claims. Then again, since the district court incorrectly assumed there was diversity jurisdiction, it didn’t really exercise the discretion. And (here comes the zinger) “[i]t is an abuse of discretion not to exercise discretion.”  2009 WL 4894242, at *1.

So where are we? Still in federal court, because the state law claims were litigated, neither side is arguing for relinquishment, and judicial economy suggests that we simply get on with it. Whew! (Isn’t this sort of like Marbury v. Madison, an intellectual tour de force that, when you get right down to it, is breathtaking dicta?) But we're not done with jurisdiction quite yet. It continues to lurk off-stage.

 
Next we are treated to a pithy discussion of off-label. Anodyne may say that its lamps treat symptoms of neuropathy. But it may not say that they are approved to treat neuropathy. The FDA wrote a warning letter to Anodyne reminding it of this distinction. In any event, Posner makes the point that we defense lawyers love to make when off-label issues crop up: that doctors can exercise their expertise and prescribe off-label where appropriate.  2009 WL 4894242, at *2.

 
When Nightingale learned of the FDA’s warning letter to Anodyne, it waited a while, bought similar devices from another manufacturer, then told Anodyne it was returning the Anodyne lamps and wanted its money back. There’s a problem with Nightingale’s theory, and we’ll get to that. Later.

 
Once again, the scene shifts, only now it is to Anodyne’s warranty disclaimer. (Think of the Christopher Walken interlude in Pulp Fiction.) The one-year warranty covers defects for one year and is “in lieu of [all] other warranties.” But the warranty also acknowledges that the buyers “may have other rights, which vary from state to state.” Oops. You mean like suing for fraud? So much for the disclaimer defense. The court then mentions the potential applicability of “Big Boy” no-reliance clauses (we’re big boys and can look after ourselves) – except that no such clause exists here. 2009 WL 4894242, at *3.  Still, it was sort of an interesting point. (Like Travolta and Jackson discussing what the Big Mac is called in France).

 
And then, finally, comes the denouement, where everything gets wrapped in a neat package:
  • There is no fraud
  • There are no damages
  • There really shouldn’t be diversity jurisdiction.

2009 WL 4894242, at *4.  The problem for Nightingale is that there really wasn't a problem. The lamp-devices that Nightingale bought to replace the Anodyne lamps were “materially identical.”  Id.  They were just as effective, and no more. They were just as off-label, and no more (or less). By buying materially identical devices, Nightingale is in no way mitigating damages and is pretty much admitting that there weren’t any actual damages. So it could not in good faith have believed there was an amount in controversy. So no diversity jurisdiction. And since federal jurisdiction cannot be conferred by consent, the Seventh Circuit thought about dismissing the case for want of jurisdiction. That would mean that Nightingale could file the case again in state court. A do-over!

 

Only it doesn’t end so happily for Nightingale, which had, after all, originally filed in state court. Anodyne had removed the case to federal court, where it had the burden of persuading the court that the amount in controversy was satisfied. It didn’t do so, but nobody noticed. Nobody, that is, until the Seventh Circuit. But somewhere along the way Nightingale got clever and added the federal claim. A little too clever, for in doing so, it created federal question jurisdiction without a minimum amount in controversy requirement … and thereby lost the case.  Id.

 

Now we switch from Tarantino to Keats: “Adieu! Adieu! Thy plaintive (plaintiff?) anthem fades.” (Shouldn’t be hard to guess which Ode that is from.) One’s mind reels at the conclusion of the Seventh Circuit opinion. It’s all so tightly wrapped, maybe a little circular or even contradictory, taking flight on the “viewless wings of Poesy” (or should we say "viewless wings of Posner"?) and seems to reach the right result. (Just be grateful that the plaintiff wasn't called "Grecian Urn.")

 

 And there is this rather prosaic takeaway: If you’re litigating in the Seventh Circuit, think long and hard about damages issues and think just as much about federal jurisdiction.

 

1 comment:

Ted Frank said...

Posner's position on diversity jurisdiction seems incorrect. The issue is not the value of the claim, but the amount in controversy. Otherwise, no defendant could ever remove a diversity case unless they admitted to some liability.

A diverse defendant is entitled to remove a case that brings a frivolous claim for $5 million, even if the claim is brought in bad faith.