Howard J. Bashman's appellate columns, etc.

2002 Third Circuit En Banc Round-Up: Full Court To Examine Monopoly Maintenance Claim And Effect Of Settlement With Named Plaintiff Before A Class Action Is Certified

By Howard J. Bashman
Monday, October 14, 2002
Last year at this time, my Third Circuit en banc round-up reported on eight cases that were then pending before the full Third Circuit for decision. This year, the Third Circuit has only two cases pending before the en banc court. Both currently pending cases involve especially important issues, while the same could not have been said of all eight of the en banc cases pending before the Third Circuit one year ago.

Before examining the specific issues presented in the two pending en banc cases, it is helpful to review the Third Circuit's procedures for determining whether the full court will hear and decide a given appeal.

The Third Circuit's internal rules provide that rehearing en banc will be ordered "[i]f a majority of the active judges of the court who are not disqualified, provided that the judges who are not disqualified constitute a majority of the judges who are in regular active service, votes for rehearing en banc." 3d Cir. IOP 9.5.9. Once rehearing en banc is granted, all active, non-recused Third Circuit judges participate in deciding the case. Any senior Third Circuit judges who were on the three-judge panel originally assigned to the appeal may also elect to participate. If a district judge or an appellate judge visiting from another circuit was on the original panel, however, that judge is not permitted to participate in the en banc rehearing.

Cases are reheard en banc in the Third Circuit for a variety of reasons, and the active judges serving on that court do not share an entirely uniform view of the reasons why an appeal should be reheard en banc. Nonetheless, experience reveals certain patterns in the cases that the court takes en banc.

Before a panel of Third Circuit judges issues a published opinion, the opinion is circulated to all active judges. The appeal can be taken en banc at that stage, before an opinion is issued to the parties, if sufficient votes for rehearing are received. Typically, a case will not be voted en banc before the panel's opinion issues unless the panel's decision contains a dissent or explains that the panel wishes to reach a result in conflict with an earlier Third Circuit decision that the panel views as incorrectly decided.

If a panel consisting of three active Third Circuit judges has reached a unanimous, but not clearly wrong, ruling with which a non-panel member disagrees, usually the non-panel member will not vote to take the case en banc before the panel's opinion issues. If the decision later draws a rehearing petition, the non-panel member who disagreed with the result may then attempt to persuade other non-panel members to vote for rehearing en banc.

In the Third Circuit, three categories of cases are most likely to go en banc. In the first category are those cases in which a visiting judge or a district judge provides the crucial second vote for the panel's result over the dissent of an active or senior Third Circuit judge. If two Third Circuit judges on a three-judge panel disagree on the outcome of a case, and the third judge who holds the controlling vote is visiting from another court, the case has a stronger than average chance for en banc review.

The second category of cases involves the situation where a panel reaches, or desires to reach, a result that is in conflict or serious tension with a preexisting Third Circuit ruling. The Third Circuit follows a policy whereby one three-judge panel is powerless to overrule the decision of an earlier three-judge panel. Thus, if enough Third Circuit judges are willing to consider whether an earlier Third Circuit precedent should be abandoned, en banc review will be granted.

The third and final category consists of cases in which en banc review would prevent or alleviate a split of authority among the various federal appellate courts in the nation. Last year's en banc round-up included a case in which the Third Circuit had granted en banc review to consider whether to adhere to a ruling that, according to most every other federal appellate court to have decided the issue, had reached the wrong result. This year, one of the two pending en banc cases went en banc after the losing party on appeal argued that the Third Circuit's decision had created a circuit split.

The following two cases are summarized in the order that their oral arguments will occur. Indeed, rehearing en banc was granted so recently in the second of the two cases that the Third Circuit has yet to schedule a date for en banc argument in that case.

Monopoly maintenance: LePage's Inc. v. 3M is one of the most important antitrust cases to have come before the Third Circuit in some time. A jury in the U.S. District Court for the Eastern District of Pennsylvania ruled in favor of LePage's and held that 3M unlawfully sought to gain a competitive advantage in the private label portion of the transparent tape market, thereby almost forcing LePage's out of business. The jury found in favor of LePage's and awarded more than $22 million in damages, which, when tripled as the federal antitrust laws provide, gave rise to a judgment against 3M totaling nearly $69 million. U.S. District Judge John R. Padova denied most of 3M's post-judgment motions challenging the verdict, and the jury's award of nearly $69 million after trebling was allowed to stand.

3M next appealed to the Third Circuit, where the case was assigned to a three-judge panel consisting of Judge Dolores K. Sloviter, Judge Samuel A. Alito, Jr., and Senior Judge Morton I. Greenberg. Stephen V. Bomse, a nationally renowned antitrust lawyer from San Francisco, argued the appeal on 3M's behalf, while Philadelphia's own Barbara W. Mather argued the appeal for LePage's.

I attended the panel oral argument, and Bomse did an excellent job arguing the case for 3M. It appeared clear at the argument that 3M was likely to prevail, because both Judges Alito and Greenberg seemed persuaded by 3M's arguments.

On January 14, 2002, the panel issued its ruling. By a vote of 2-1, with Judge Sloviter dissenting, the Third Circuit ruled in a majority opinion written by Judge Greenberg that the trial court should have granted judgment as a matter of law in defendant 3M's favor on all claims after the jury returned its verdict. Judge Sloviter issued a passionate dissent in which she contended that "the majority applies reasoning that would weaken Section 2 of the Sherman Act to the point of impotence."

Judge Sloviter's dissent also accused the majority's opinion of ignoring directly applicable Third Circuit precedent, which she characterized as "a development that calls for full en banc review." In an order entered February 25, 2002, the full Third Circuit apparently agreed, because the court granted rehearing en banc in the case.

The Third Circuit has scheduled en banc oral argument in the LePage's case for Wednesday, October 30, 2002 in Philadelphia. The order granting rehearing en banc indicates that three active judges are recused -- Judges Jane R. Roth, Marjorie O. Rendell, and Maryanne Trump Barry -- because they are not shown as participating in the decision whether to grant rehearing en banc.

Judge Carol Los Mansmann participated in the order granting rehearing en banc, but she has since lost her long battle against cancer. It is not known whether brand new Third Circuit Judge D. Brooks Smith will elect to participate in the Third Circuit's rehearing of the LePage's case.

The outcome of the en banc rehearing in LePage's is impossible to predict with certainty. In my view, whichever side is able to garner two or more votes in its favor from the three judges whose views about the case I find most unpredictable -- Chief Judge Edward R. Becker, Judge Anthony J. Scirica, and Judge Thomas L. Ambro -- is likely to emerge victorious. In the case of an evenly divided en banc court, LePage's would emerge victorious because the district court's judgment is affirmed when the en banc Third Circuit finds itself evenly divided.

Class Action Settlements: The second and final case now pending before the en banc Third Circuit presents the question of what consequences ensue if the defendant offers the plaintiff in a class action suit, before the case has reached the class certification stage, all the relief the plaintiff is seeking. The name of the second case is Colbert v. Dymacol, Inc., and the Third Circuit granted rehearing en banc in this case on October 3, 2002.

On August 28, 2002, a three-judge panel consisting of Judges Roth, Rendell and Max Rosenn ruled, in a unanimous opinion by Judge Rosenn, that if the defendant offers to provide the named plaintiff with all the relief he is seeking, the district court should dismiss the case as moot if the case has not yet reached the class certification stage. In so ruling, the Third Circuit reversed the trial court's decision, which held that the defendant in a so-called "putative class action" (shorthand for a case filed as a class action but not yet judicially certified as one) has no unilateral right to settle with the named plaintiff by offering all that the plaintiff has demanded for himself.

Colbert can be viewed as an unusual candidate for rehearing en banc because the case was decided by a unanimous three-judge panel consisting of two active and one senior Third Circuit judges. But, as reporter Shannon P. Duffy recently explained in these pages, the counsel for the class argued in the petition for rehearing en banc that the Third Circuit's ruling gives rise to a circuit split. The other federal appellate courts to have considered the question have held, according to plaintiff's rehearing petition, that the rules for settling a putative class action are no different than the rules for settling a court-certified class action -- approval of the settlement from the trial court is required if a settlement is proposed at any stage of the case.

It thus seems quite likely to me, given the apparent unanimity among other federal appellate courts and given the dictates of common sense, that the en banc Third Circuit will disagree with the result that the panel reached and will affirm the trial court's ruling, which refused to allow the defendants to dispose of the putative class action simply by offering the named plaintiff all of the recovery that he sought for himself.

Because rehearing en banc was so recently granted in Colbert, the Third Circuit has yet to assign a date for reargument en banc.

This article is reprinted with permission from the October 14, 2002 issue of The Legal Intelligencer © 2002 NLP IP Company.