Trial Practice and Procedure - John O'shea Sullivan, Ashby L. Kent, and Amanda E. Wilson
| Publication year | 2012 |
Trial Practice and Procedure
by John O'Shea Sullivan*
Ashby L. Kent** and Amanda E. Wilson***
The 2011 survey period yielded several noteworthy decisions relating to federal trial practice and procedure in the United States Court of Appeals for the Eleventh Circuit, some of which addressed issues of first impression.1 This Article analyzes recent developments in the Eleventh Circuit, including significant rulings regarding arbitration, removal, subject matter jurisdiction, and civil procedure.
I. Arbitration
A. Whether Filing an Amended Complaint Can Revive a Defendant's Right to Compel Arbitration, Notwithstanding Its Previous Waiver of that Right
In Krinsk v. SunTrust Banks, Inc.,2 the Eleventh Circuit held, as a matter of first impression, that filing an amended complaint could revive a defendant's right to compel arbitration, notwithstanding the defen-
* Partner in the firm of Burr & Forman, LLP, Atlanta, Georgia. University of Georgia (A.B.J., 1991); Mercer University, Walter F. George School of Law (J.D., cum laude, 1992). Member, Mercer Law Review (1993-1994); Managing Editor (1994-1995). Member, State Bars of Georgia and North Carolina.
** Partner in the firm of Burr & Forman, LLP, Atlanta, Georgia. Vanderbilt University (B.A., magna cum laude, 2000) (Phi Beta Kappa); Emory University School of Law (J.D., with honors, 2003). Member, State Bar of Georgia.
*** Associate in the firm of Burr & Forman, LLP, Atlanta, Georgia. Florida State University (B.S., magna cum laude, 2007); Emory University School of Law (J.D., with honors, 2010). Member, State Bar of Georgia.
1. For an analysis of trial practice and procedure during the prior survey period, see John O'Shea Sullivan, Ashby L. Kent & Amanda Wilson, Trial Practice and Procedure, Eleventh Circuit Survey, 62 MERCER L. REV. 1217 (2011).
2. 654 F.3d 1194 (11th Cir. 2011).
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dant's previous waiver of that right.3 The dispute in Krinsk arose out of a home-equity line of credit (HELOC) that the plaintiff/appellee Sara Krinsk obtained from the defendant/appellant SunTrust Bank in December 2006. Krinsk's HELOC contained an arbitration clause which required the parties to resolve all disputes via binding arbitration.4 The arbitration clause provided that a party's notice of election to arbitrate "may be given after a lawsuit has been filed and/or in papers filed in the lawsuit," and precluded resolution of claims by class action.5
In October 2008, SunTrust suspended Krinsk's access to her HELOC, alleging concern over her ability to fulfill her payment obligations due to a change in her financial circumstances.6 Krinsk alleged that SunTrust's concern was pretextual and that SunTrust had suspended her HELOC access, and that of other Florida homeowners, as part of a scheme to restore its capital reserves.7 Krinsk, who was ninety-two years old, alleged that elderly HELOC borrowers were the most vulnerable targets of SunTrust's scheme because SunTrust did not anticipate much resistance.8
On May 15, 2009, Krinsk filed a class action complaint against SunTrust in the United States District Court for the Middle District of Florida.9 The complaint defined the proposed class as follows:
3. Id. at 1196.
4. Id. at 1197.
5. Id. (internal quotation marks omitted). The arbitration clause in Krinsk's HELOC agreement provided in pertinent part as follows:
5. NO CLASS ACTIONS, ETC____if you or we elect to arbitrate a claim, neither
you nor we will have the right: (a) to participate in a class action in court or in arbitration, either as a class representative, class member or class opponent; or (b) to join or consolidate [c]laims with claims of any person other than you. No arbitrator shall have authority to conduct any arbitration in violation of this provision.
Id. at 1197 n.1.
6. Id. at 1197. Prior to suspending her HELOC access, SunTrust had mailed Krinsk a letter requesting updated financial information from her. SunTrust contended that Krinsk's HELOC access was suspended due to the information that Krinsk provided in response to that request. Id.
7. Id.
According to Krinsk, HELOCs like hers-those sold to Florida residents between the late 1990s and early 2008 and secured by Florida real property-were among the highest-rated risk elements in SunTrust's debt portfolio, and SunTrust, recognizing that it had a significant concentration of credit risk arising from these loans, aimed to systematically liquidate the loans' available credit balances.
Id.
8. Id.
9. Id. at 1197-98. In her original complaint, Krinsk sought declaratory relief regarding her right to access her HELOC and asserted claims for financial elder abuse under
2012] TRIAL PRACTICE & PROCEDURE 1333
[A]ll Florida permanent or part-time residents that entered into an agreement with SunTrust entitled "Access 3 Equity Line Account Agreement and Disclosure" and who, after attaining the age of sixty-five (65), received a letter from SunTrust between July 1, 2008 and October 16, 2008, requesting updated financial information . . . and who were subsequently informed their collateralized credit line had been suspended or reduced during the draw period for purportedly failing to provide the information requested by SunTrust.10
Krinsk estimated in her motion for class certification that this class would "consist[] of hundreds of members located throughout Florida."11
SunTrust filed a motion to dismiss, but did not seek to compel arbitration or otherwise mention the HELOC's arbitration clause. The litigation proceeded while SunTrust's motion was pending, during which time the parties filed a case management report wherein they submitted a proposed discovery and pretrial plan, and SunTrust stated that it opposed arbitrating Krinsk's claims. SunTrust also defended against Krinsk's motion for class certification and class discovery. SunTrust never asserted its right to compel arbitration and never otherwise indicated its intent to do so.12
On January 8, 2010, the district court granted SunTrust's motion in part but allowed Krinsk leave to amend the complaint.13 On January 28, Krinsk filed an amended complaint which offered a new definition of the proposed class as follows:
All Florida residents who entered into one or more agreements for a . . . [HELOC] with SunTrust Bank pursuant to its "Access 3 Equity Line Account Agreement and Disclosure" that was collateralized by real estate located in Florida, and who had the available balance of their HELOC suspended or reduced anytime between January 1, 2007 to the date of class certification (the "Class Period").14
The amended complaint and definition encompassed all Florida residents, regardless of age, who had their HELOCs suspended for any
Florida's Adult Protective Services Act, breach ofcontract, deceit, negligent misrepresentation, breach of fiduciary duty, violation of the Truth in Lending Act and its corresponding Regulation Z, and breach of the implied covenant of good faith and fair dealing. Krinsk also named SunTrust's corporate parent and President/CEO as defendants, although her claims against these defendants were later dismissed. Id. at 1198-99.
10. Id. at 1198.
11. Id. (alteration in original) (footnote and internal quotation marks omitted).
12. Id.
13. Id. at 1198-99.
14. Id. at 1199. The district court had not yet ruled on Krinsk's motion for class certification at the time she filed her amended complaint. Id.
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reason during a three-year period, which had the potential to greatly enlarge the size of the putative class. Krinsk estimated in her amended motion for class certification that the number of class members would be in the thousands, if not the tens of thousands.15
In its answer to the amended complaint, and for the first time since litigation began, SunTrust raised its right to arbitrate. SunTrust also filed a motion to compel arbitration, a motion to stay the action pending arbitration, and a motion to prohibit maintenance of a class action pursuant to the HELOC's arbitration clause. Krinsk opposed SunTrust's motions, claiming that SunTrust had waived its right to compel arbitration.16
The district court denied SunTrust's motion to compel arbitration, finding that Krinsk had met both prongs of a two-part test designed to determine whether SunTrust had waived its contractual right to arbitrate.17 First, the court found that SunTrust had acted inconsistently with its right to arbitrate by permitting nearly nine months to pass and participating in the litigation up until the filing of the amended complaint.18 Second, the court concluded that "Krinsk would suffer prejudice were SunTrust permitted to assert its arbitration rights in such an untimely manner," because she had been induced to spend time and money on class-related motion practice and discovery-"the type of litigation expense[s] that arbitration was designed to alleviate"-due to her belief that SunTrust would not pursue arbitration under the contract.19 SunTrust appealed, arguing that even if its right to
15. Id.
16. Id. at 1199-1200.
17. Id. at 1200.
To determine whether a party has waived its contractual right to arbitrate, courts apply a two-part test: "First, [they] decide if, under the totality of the circumstances, the party has acted inconsistently with the arbitration right, and, second, [they] look to see whether, by doing so, that party has in some way prejudiced the other party."
Id. (quoting Ivax Corp. v. B. Braun of Am., Inc., 286 F.3d 1309, 1315 (11th Cir. 2002)).
18. Id. at 1201. Specifically, "the district court concluded that SunTrust had, for nine months prior to filing its answer and motion to compel arbitration, 'invoked the judicial process in litigating this case without any indication that it was contemplating arbitration.'" Id. The district court also focused on SunTrust's express opposition to arbitration in its case management report, in addition to the significant motions practice that SunTrust had employed in...
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