Wake Forest Law Review

By Shawn Namet

On September 28, 2017, the Forth Circuit issued a published opinion in Di Biase v. SPX Corp.  Plaintiffs, retirees of SPX Corporation (“SPX”) as well as the International Union United Automobile, Aerospace and Agricultural Implement Workers of America, UAW (collectively, “Plaintiffs”) filed a motion for preliminary injunction in an action to enforce the terms of two prior settlement agreements.  Plaintiffs sought interlocutory appeal from the district court’s denial of its motion for preliminary injunction.  The Fourth Circuit affirmed the district court’s finding that Plaintiffs failed to satisfy the requirements for a preliminary injunction and remanded the action for further proceedings.

Facts and Procedural History

 In 2003, the parties to a class action suit against SPX signed settlement agreements that required SPX to provide lifetime health coverage to identified retirees and their families through specified group insurance plans or through “coverage which is substantially equivalent in benefits.”  SPX provided the coverage required by the settlement agreements from 2004 to 2015. SPX announced in 2014 that as of January 1, 2015, the group insurance plans would be cancelled and replaced with annual healthcare reimbursement accounts (“HRA”) that would provide funds to beneficiaries to purchase their own insurance plans.

In November 2014, Plaintiffs brought the underlying class action suit against SPX, alleging that the proposed HRA accounts did not constitute “coverage which is substantially equivalent in benefits” to the original group insurance plans and that SPX therefore intended to breach the settlement agreements.  Plaintiffs filed a motion for preliminary injunction, seeking to prevent SPX from moving forward with the proposed coverage changes on the effective date.  Resolution of the motion was delayed, however, until after the HRA accounts were implemented.

The district court denied the motion for preliminary injunction in September, 2015 on the basis that the motion was moot, as the HRA accounts had already gone into effect.  Alternatively, the court found that Plaintiffs failed to meet the standard required to warrant a preliminary injunction.

Motion for Preliminary Injunction Not Moot When Status Quo May Be Restored

 Defendant argued that the motion for preliminary injunction was rendered moot when the HRA accounts were implemented.  The Fourth Circuit recognized that the purpose of a preliminary injunction is to maintain the status quo, as stated in Pashby v. Delia.  709 F.3d 307, 319 (4th Cir. 2013).  However, under Aggarao v. MOL Ship Mgmt. Co., a preliminary injunction may also act to restore the status quo even when the event sought to be prevented has already occurred.  675 F.3d 355.  The Fourth Circuit found that the district court erred in failing to consider, in light of the decisions in Pashby and Aggarao, whether Plaintiff’s motion was still moot even after the HRA accounts were implemented.  The Court further rejected SPX’s argument that cancelling the HRA accounts and reinstating the previous group insurance plans would be unduly burdensome, holding that difficulties in restoring the status quo were not sufficient to render the Plaintiffs’ motion moot.

Plaintiffs Failed to Meet Requirements for Preliminary Injunction

 In support of a motion for preliminary injunction, a plaintiff must establish that (1) he is likely to succeed on the merits, (2) that he is likely to suffer irreparable harm in the absence of the injunction, (3) that the balance of equities tips in his favor and (4) that the injunction is in the public interest. Winter v. National Resource Defense Council, Inc., 555 U.S. 7, 20 (2008).  The Fourth Circuit agreed with the district court that Plaintiffs failed to present evidence sufficient to establish that they were likely to ultimately succeed on the merits.  Plaintiffs argued that the words “plan” and “coverage” in the settlement agreements had clear meanings to which the HRA accounts did not conform.  The Court found the meanings of the words “plan” and “coverage” in the agreement to be ambiguous, and therefore declined to say it was likely the Plaintiffs’ argument would be successful.  The Court further found no irreparable harm to the Plaintiffs in absence of an injunction, as they presented no evidence that any beneficiaries of the HRA accounts were unable to acquire health insurance. Finally, the balance of equities and public interest were best served by proceeding to a decision on the merits, as an injunction requiring a change in insurance plans at the time, and another potential change later if the Plaintiffs did not prevail, would be a burden on both parties.

Conclusion

The Fourth Circuit found that the district court erred in finding the Plaintiffs’ motion for preliminary injunction moot, but affirmed the district court’s denial of the motion on the grounds that Plaintiffs failed to meet the standard requirements for a preliminary injunction.

By John Van Swearingen

On March 24, 2017, the Fourth Circuit issued a published opinion in the prisoner civil rights case Porter v. Clarke. Plaintiffs, originally four Virginia death row inmates, filed a complaint in the United States District Court for the Eastern District of Virginia alleging that the conditions of their confinement amounted to cruel and unusual punishment violative of the Eighth Amendment. One inmate was executed during the course of this action, leaving three inmates as Plaintiffs. Defendants, the Director of the Virginia Department of Correction and the Warden of the Sussex I State Prison, thereafter changed the policies at issue in the complaint. The district court subsequently dismissed Plaintiff’s action for mootness. Plaintiffs timely appealed, claiming their action is not moot.

Facts and Procedural History

In November 2014, when Plaintiffs filed this lawsuit, the Virginia Department of Corrections was operating under a pair of 2010 policies that governed the living conditions of death row inmates. Plaintiffs spent twenty-three hours a day in seventy-one-square-foot cells, alone, with a steel bed, a desk, and a combination commode-and-sink. Death row inmates could not have “contact” visits with anyone; all visitation was separated by plexiglass. The warden had unlimited discretion in granting contact visits with immediate family under “extreme circumstances.”

Inmates were allotted one hour of “outdoor recreation” five days a week. This consisted of an empty outdoor cell similar in size to the inmates’ living cells. Inmates had zero access to any group behavioral, educational, vocational, or religious services.

In August 2015, Defendants established new interim guidelines permitting death row inmates one-and-a-half-hour weekly contact visits with immediate family, one-and-a-half-hour weekend and holiday contact visits with other approved visitors, one-and-a-half-hour outdoor recreation sessions five days a week, daily one-hour indoor recreation sessions with up to three other inmates, and a daily fifteen-minute shower. Defendants built a new outdoor recreation area for group activities and an indoor recreation dayroom for group behavioral, educational, vocational, and religious services.

In December 2015, Plaintiffs and Defendants filed cross-motions for summary judgment. Defendants never explicitly moved for dismissal on the grounds of mootness. At the motion hearing, Defendants also noted that they would not take any action binding them to the new guidelines, stating instead that the fluid nature of corrections require that they be able to increase security back to “lockdown status” if need be.

In May 2016, the district court requested an update from Defendant’s on the status of the interim guidelines. Defendants filed an affidavit stating they had updated to new policies providing one-and-a-half-hour outdoor recreation five days a week, one-hour indoor recreation with up to four inmates daily, fifteen minute daily showers, weekly one-and-a-half-hour contact visitation sessions with immediate family and one approved other visitor, non-contact weekend and holiday visitation, and extended visitation sessions granted on a case-by-case basis. Per Defendants’ affidavit, the new policies will be reviewed annually and updated in no later than three years.

In July 2016, the district court granted summary judgment for Defendants’ despite the Defendants’ refusal to neither admit that the pre-2015 inmate conditions violated the Eighth Amendment nor offer any guarantee that the pre-2015 policies would not be restored. The lower court dismissed the Plaintiff’s cross-motion as moot, and Plaintiffs timely appealed.

Mootness Requires More Than a Voluntary Cessation of the Challenged Behavior

Under Article III § 2 of the United States Constitution, federal courts are deprived of subject matter jurisdiction when litigation ceases to involve a “case or controversy.” In other words, as noted by the United States Supreme Court in Powell v. McCormack, “a case is moot when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.” 395 U.S. 486, 496 (1969).

However, in City of Mesquite v. Aladdin’s Castle, Inc., the Supreme Court also noted that “a defendant’s voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice.” 455 U.S. 283, 289 (1982). As noted by the First Circuit in ACLU of Mass. v. U.S. Conference of Catholic Bishops, a savvy litigant could otherwise render itself immune to litigation by voluntary ceasing a challenged behavior upon the filing of a complaint, then resume that behavior following dismissal for mootness. 705 F.3d 44, 54–55 (1st Cir. 2013).

Instead, a Defendant seeking dismissal for mootness must, pursuant to the Supreme Court’s holding in Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., meet the heavy burden of showing that “it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur.” 528 U.S. 167, 190 (2000). This burden is not met if, as in the Fourth Circuit’s decision in Pashby v. Delia, a defendant retains the authority to reinstate a challenged policy. 709 F.3d 307, 316–17 (4th Cir. 2013).

Nothing here bars Defendants from returning to the original policies addressed in Plaintiff’s complaint. Indeed, they have stated that the policies may be reinstated in some form if a situation demanded “lockdown” of the inmates. Further, Defendants expressly refused to commit to the revised policies or admit that the original policies violated Plaintiff’s Eighth Amendment rights. The Fourth Circuit expressly declined to support or denounce the original policies, noting that there may be valid “penological rationale” for reverting to the original policies as described if a situation rendered those policies appropriate. However, the Fourth Circuit noted that this very possibility rendered the dismissal of Plaintiff’s complaint for mootness improper.

Disposition

The Fourth Circuit reversed the district court’s judgment and remanded for further proceedings. Since Defendants expressly retained the discretion to reinstate the policies challenged by Plaintiffs, the voluntary dismissal of those policies did not render the action moot.

By Taylor Ey

On July 9, 2015, the Fourth Circuit issued its published opinion in the civil case of CVLR Performance Horses, Inc. v. Wynne.  This case was on appeal from the District Court for the Western District of Virginia, where Vicky Marsh and Karen Foster sought to intervene as plaintiffs in an action under 18 U.S.C. §§ 1961-68 (Racketeer Influenced and Corrupt Organizations Act or “RICO”), an action which was originally filed by CVLR Performance Horses, Inc. (“CVLR”) against John Wynne and his businesses.  The district court denied the motions to intervene filed by Marsh and Foster, and the Fourth Circuit affirmed.

Procedural History

On September 8, 2011, CVLR filed suit against Wynne alleging violations against RICO and Virginia state law.  CVLR claimed that Wynne and his businesses had a scheme to defraud CVLR when Wynne’s business, Rivermont Consultants, made loans to CVLR and held itself out as a bank.  Wynne filed a motion to dismiss for failure to state a claim, the district court granted the motion, and on appeal the Fourth Circuit remanded to the district court, stating that CVLR had stated a claim upon which relief can be granted.  In November 2013 Marsh and Foster sought to intervene as plaintiffs.  Marsh and Foster were mentioned in CVLR’s amended complaint as victims of Wynne’s RICO scheme.  They adopted the allegations in the amended complaint, and added individual RICO claims.

The district court denied their motions to intervene, explaining that their claims were barred by the four-year statute of limitations on private RICO claims.  The district court further stated that equitable tolling was not appropriate in this case because Marsh and Foster had failed to diligently pursue their claims and had not demonstrated extraordinary circumstances to warrant equitable relief.

Marsh and Foster timely appealed.  Shortly thereafter, CVLR and Wynne reached a settlement agreement, where both parties agreed to dismiss the action.

This case presented two issues before the Fourth Circuit.

Issue One: Whether the Settlement Agreement and Dismissal Renders This Appeal Moot

Wynne argued that because the underlying case was settled and dismissed, there is no remaining case or controversy, and therefore this appeal is moot.  Prior to this case, the Fourth Circuit had not decided whether the dismissal of an underlying case would render moot an appeal from the district court’s denial of a motion to intervene.  In making its determination, the Fourth Circuit looked to its sister circuits, the Third and Eleventh Circuits, that had decided the issue.   The Third and Eleventh Circuits, and Ninth and D.C. Circuits, have held that the dismissal of a case does not automatically render moot the appeal from a district court’s denial of a motion to intervene.

The Fourth Circuit adopted this position, reasoning that the resolution of an action between the original parties is not determinative of the defendant’s liability with respect to potential plaintiffs.  So long as the motion to intervene was made while the controversy is live and the disposition of the case does not provide the relief sought, then the court will have jurisdiction.

Issue Two: Whether the District Court Committed Reversible Error in Declining to Apply Equitable Tolling

The Court reviewed this question under an abuse of discretion standard.  The four year statute of limitations for private RICO claims begins on the date the plaintiff “discovered, or should have discovered, the injury.” Even though the record did not provide a specific date for when Marsh or Foster may have discovered, or should have discovered their injuries, the latest accrual date alleged was September 2008.  Thus, by the time Marsh and Foster filed their motions to intervene in November 2013, over five years had passed, and their claim would be barred by the statute of limitations.  Furthermore, they filed their motions over fourteen months after the statute of limitations had expired.

Marsh and Foster argued that the delay in filing did not bar relief under the doctrine of equitable tolling.  Under the doctrine of equitable tolling, Marsh and Foster had to demonstrate two things: (1) they had diligently pursued their rights, but (2) an extraordinary circumstance prevented them from timely filing.  The Fourth Circuit mentioned that it has long considered this equitable remedy an extraordinary one, and thus place a high burden on litigants seeking to benefit from its application.

According to the Fourth Circuit, Marsh and Foster made no attempt to file their claims at all between 2008 and 2013.  Further, they made no attempt to explain their delays in a manner that would suggest that they met the standard for diligently pursing their rights.  While the district court’s dismissal of CVLR’s case made it more difficult for Marsh and Foster, the Fourth Circuit was unconvinced that they would have been subject to sanctions under Rule 11 for filing.  Therefore, the Fourth Circuit explained, the district court did not err in its refusal to apply equitable tolling because Marsh and Foster failed to prove they had diligently pursued their rights under RICO and failed to show extraordinary circumstances prevented them from filing.

The Fourth Circuit Affirmed the District Court Decision

Because the Fourth Circuit holds that appeals from denial of motions to intervene are not rendered moot when the underlying case is dismissed, the Fourth Circuit denied Wynne’s motion to dismiss this appeal. However, the Fourth Circuit affirmed the district court’s refusal to apply the doctrine of equitable tolling, and subsequent denial of Marsh and Foster’s motions to intervene.