I’m a trial lawyer for injured people and businesses at The Beasley Firm, founded in 1958. Our clients have been awarded over $2 billion through hundreds of verdicts and settlements in excess of $1 million. We’re listed in Super Lawyers, Best Lawyers in America, U.S. News’s Top Lawyers, et cetera. The [...]
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I write this blog primarily for lawyers and others interested in the law. If you’re looking for a lawyer, start with my legal services page or call my office at (215) 931-2634. I represent individuals in personal injury, wrongful death, and medical malpractice lawsuits. I also represent patients injured by medicines and medical devices, like Actos, Pradaxa, NuvaRing, Fresenius dialysis, and the erosion of implanted vaginal mesh.
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Never Trust A Vampire Squid: Merger Clauses & Fraudulent Inducement
Rolling Stone’s Matt Taibbi described Goldman Sachs as “a great vampire squid wrapped around the face of humanity,” a phrase that, while defamatory of a uniquely adapted cephalopod minding its own business 3,000 feet under the sea, rang true. Yesterday, the intermediate appellate court for New York state agreed: Goldman Sachs is so obviously dishonest that you cannot sue them for fraud unless you get them to specifically agree that they aren’t lying to you.
First, the facts. In essence, Goldman Sachs brought in a hedge fund (Paulson & Co.) to put together a group of horrible investments (called “Abacus”) that they expected to fail — and even bet against — and then set about finding rubes to invest in it, thereby helping Goldman and Paulson make a tidy profit off the investor’s losses. One other banker who passed on the deal described it as “like a bettor asking a football owner to bench a star quarterback to improve the odds of his wager against the team.” (He’s quoted in the dissent.)
ACA Financial Guaranty Corporation was one of the rubes Goldman Sachs found. As Reuters reported, ACA’s lawsuit against Goldman Sachs “alleged that Goldman misrepresented the role of the hedge fund Paulson & Co, which supposedly selected underlying mortgage-backed securities that doomed the [collateralized debt obligation] to fail, thereby assuring Paulson of big profits on its undisclosed Abacus short.” The scam was so blatant the Securities and Exchange Commission brought its own case against Goldman Sachs, which settled for $550 million.
Sounds simple enough; as James Surowiecki wrote about the scandal three years ago, echoing the thoughts of many financial journalists, there was ample reason to believe that ACA was both a “dupe” hoodwinked by Goldman and a “dope” that failed to perform adequate due diligence on a complicated investment. Being a “dope” is a problem, but one would assume that a duped dope would be allowed to present evidence to a jury arguing that the fraud was a bigger problem than the lack of due diligence.
Except that the New York courts won’t let ACA get to a jury. Continue reading
Software Patents Are “The Plaything Of The Judges”
Last week, a bunch of banks won a major federal appellate court victory. That’s no surprise, of course, but the case nonetheless signals slow but steady progress in the otherwise dismal field of patent law, particularly as it applies to patents involving matters of abstract reasoning like computer software and business methods.
First, a refresher. Surely you remember how a bill becomes a law. But what happens when the bill doesn’t say much, and it’s left to the Executive Branch and the Judiciary to figure out what it means?
That, in a nutshell, is what has happened with the Patent Act. Congress passed a law way back in 1793 providing patent protection for “any new and useful art, machine, manufacture or composition of matter and any new and useful improvement on any art, machine, manufacture or composition of matter.” The only real difference after 1952 is the addition of the term “process” in lieu of “art,” with a definition of “process” so expansive — e.g., the “term ‘process’ means process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material” — that it makes the word virtually limitless.
Back in 1952, Congress enacted a couple changes around the fringes — without reconsidering the core text of the statute — for a variety of reasons, including because, when it came to assessing whether an invention really deserved a patent, “judges did whatever they felt like doing according to whatever it was that gave the judge his feelings—out of the evidence coupled with his past mental conditioning—and then selected those precedents which supported his conclusions.” George M. Sirilla & Hon. Giles S. Rich, 35 U.S.C. 103: From Hotchkiss to Hand to Rich, the Obvious Patent Law Hall-of-Famers, 32 J. Marshall L. Rev. 437, 501 (1999). The 1952 Act was supposed to fix that by replacing judicially-created standards for “inventiveness” and the like with an objective test for “obviousness.”
That’s pretty much been the course ever since then: Congress hasn’t made much effort to define the limits of patent law, and so it’s determined by way of a strange triangulation between the U.S. Patent Office, which issues patents in the first place, the Federal Circuit Court of Appeals, the one and only court to which plaintiffs in patent cases have a right to appeal, and, the Supreme Court, which occasionally grants certiorari and gives the lower courts guidance. It is not a healthy way to run a patent system; neither executive agencies nor courts are particularly well-suited to consider and to address large societal changes like, say, the rise of the digital computer, which took place almost entirely after the last major revision to the Patent Act more than half a century ago.
Yet, somebody has to do the job, and the bulk of that work has fallen to the Federal Circuit. Last week, they issued a doozy of an en banc opinion in CLS Bank v. Alice Corp. The JURIST’s Paper Chase has links to the software patents at issue. Frankly, it’s hard to call any of them “inventions.” The “inventors” didn’t actually make anything; instead, they tried to shoehorn some ideas for software code — which is already protected by copyright — into the definition of a “process” or a “machine.” This is only allowed because courts have said it’s allowed, not because of any indisputable argument for calling a general description of software running on a computer a “process” or a computer with a certain type of software on it a “machine” in the same ways those terms were understood in 1952.
The opinion, in which seven of the ten Federal Circuit judges agreed the “inventions” in the patents weren’t really worthy of patent protection, has garnered significant press. It’s unfortunate that there wasn’t any agreement by a majority of judges for why the inventions weren’t eligible for patent protection, but it’s quite fortunate that a significant majority of the Federal Circuit held that the abstract claims at issue in the case — in essence, the “inventions” were nothing more than general descriptions of how to make software that help financial traders in particular circumstances — shouldn’t have been granted patents. Continue reading
WSJ Blames Mesothelioma Lawyers For Donating To Mesothelioma Research
As I’ve mentioned before, due to the ubiquitous presence of asbestos in certain industries all the way until the 1990s, we could see 60,000 or more new mesothelioma cases filed over the next few decades, and it seems there are still many big questions to answer through litigation. We should be talking about ways to streamline that process and, more than that, looking for ways to cure or to prevent mesothelioma.
Yet, when insurance companies and negligent corporations want to avoid responsibility for hurting someone, they try to change the subject by pointing the finger at the trial lawyers. Thus, earlier this week the Wall Street Journal had a long profile of the relationship between the lawyers who represent mesothelioma patients in their claims against the asbestos companies and the doctors who treat mesothelioma patients. In short, nobody funds mesothelioma research — not the government, not the big pharmaceutical companies, and certainly not the companies responsible for poisoning tens of thousands of workers — and thus much of the research money ends up coming from non-profits funded by mesothelioma lawyers who, having spent years watching their clients succumb to mesothelioma, felt compelled to put their own money back into improving treatments and, maybe, finding a cure.
But I bet you already knew where the Wall Street Journal was going with these donations:
The two have forged what has become an increasingly common relationship between a subset of cancer doctors and plaintiffs’ attorneys, sharing what for each is an increasingly scarce but valuable resource: victims of mesothelioma.
It is an unusual alliance in the world of medicine that some ethics experts say blurs ethical lines. This is particularly true when doctors refer patients to attorneys who provide financial support for their medical research.
And there you go: in one fell swoop, people dying of cancer caused by just going to work are reduced a “valuable resource,” and charitable giving is turned into an implied ethical violation, and the handful of doctors capable of treating these patients have a cloud of doubt cast over them. The WSJ then had a companion article about advertising for asbestos lawsuits that relies primarily on remarks by “a provider of Internet marketing software and services” and someone who “specializes reselling domain names he has purchased,” as if either of them had a clue about how mesothelioma clients actually find lawyers.
Let’s put aside the fact that the two WSJ articles reach opposite conclusions — one says the clients are passed along by nefarious doctors, the other says clients are “caught” through blanket television and web advertising — and go back to the accusation that there’s something wrong with mesothelioma lawyers putting money, with no strings attached, into non-profits that grant research funding, and that there’s something wrong with mesothelioma doctors accepting that money to conduct research. Continue reading
Why Startup Founders Should Hire Lawyers When They Deal With Venture Capital Firms
Earlier this week at DealBook, in a post about how “In Venture Capital Deals, Not Every Founder Will Be a Zuckerberg,” professor Steven Davidoff cites to research showing that “the dirty secret of venture capital is that the dream can be dashed as the venture capitalists make millions in a sale, leaving the founders with nothing.” Davidoff also references a study by Brian Broughman and Jesse Fried that found, in Davidoff’s words, “that founders who negotiated greater control rights ended up receiving on average $3.7 million more.”
I don’t doubt that’s true, and as I’ve explained on this blog before, despite strange claims by conservatives to the contrary, corporations put profits before everything else, and corporate executives and board members tend to put their interests before shareholders’ interests. The idea that venture capitalists are out to make money, including at the expense of startup company founders, really shouldn’t surprise anyone. If you want to make money from a corporation, you need control. Venture capitalists know that. Startup founders should know that.
But how do startup company founders maintain control of their company? They could spend a couple hours at night teaching themselves the finer points of fiduciary duties in Delaware and then try to outwit the investors (and their lawyers) who have done this a hundred times, or they could shell out their own money to pay for their own personal lawyers. Continue reading
NuvaRing Court Dismisses Bellwether Trials On Summary Judgment For No Good Reason
In case you missed it, last week I had a guest post up at TortsProf lamenting how recent changes in civil procedure law have created a situation in which judges are frequently deciding complex cases by improperly deciding for themselves what the true facts were, in advance of a jury trial, and sometimes on nothing but the initial complaint.
Unfortunately, we just had another example: the recent order in the NuvaRing litigation consolidated in New Jersey state court dismissing all of the bellwether cases, primarily on causation grounds. It’s not the end of the game — motions for reconsideration will be filed, as will an appeal, and it doesn’t affect the federal court MDL — but it’s disappointing nonetheless. There’s much to complain about (and, on appeal, to reverse), but I’m going to focus on the “learned intermediary” part. First, a little bit of background.
The most popular form of hormonal contraceptives are combined hormonal contraceptives (“CHC”), which use an estrogen (typically ethinyl estradiol) to prevent ovulation and thicken cervical mucus. Estrogen use, however, is correlated with an increased risk of venous thromboembolism, such as deep vein thrombosis, and thus pulmonary embolisms (blood clots in the lungs) and cerebral venous thrombosis (blood clots in the brain), so CHCs add a progestin to counterbalance that risk.
NuvaRing uses desogestrel as its progestin, making it a “third-generation” CHC. Since 1995 — six years before NuvaRing went on the market — it has been known that third-generation CHCs have a significantly higher risk of causing thrombosis and blood clots than second-generation CHCs. As the New Jersey court opinion recounts (based on the plaintiffs’ filings), by the time NuvaRing went on the market in 2001, 15 studies had examined that difference in risk, and 13 of those studies found an elevated risk, ranging between 1.4 times and 4 times greater risk of venous thromboembolism when using NuvaRing.
NuvaRing’s prescribing information and patient insert warned about the general risk of venous thromboembolism when using CHCs, but then hedged on the increased risk with vague, ambivalent language obviously written more for purposes of litigation than for informing patients and doctors about the risks of the product:
The use of combination oral contraceptives is associated with increased risks of several serious side effects, including blood clots, stroke, or heart attack. NuvaRing is not for women with a history of these conditions. The risk of getting blood clots may be greater with the type of progestin in NuvaRing than with some other progestins in certain low-dose birth control pills. It is unknown if the risk of blood clots is different with NuvaRing use than with the use of certain birth control pills.
The risk “may be greater” but “is unknown?” That wasn’t even accurate when NuvaRing was first put on the market, and now, more than a decade later, it is even less defensible: last year, a meta-study of 625 studies published between January 1995 and April 2010 found the risk of venous thromboembolism for CHCs that use desogestrel, like NuvaRing, was about double the risk of second generation CHCs. Yet, the manufacturer (Organon and Merck) have refused to update the label; perhaps it’s because they sell over $600 million worth of NuvaRings every year to over a million women. Continue reading
ERISA: The Enemy Of Working Families
In 1974, spurned by the collapse of the Studebaker Corporation and the corresponding loss of pension benefits, Congress enacted the Earned Retirement Income Security Act (“ERISA”) nominally “to protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries” by ensuring the financial stability of employee benefit plans. 29 U.S.C. § 1001(b). Congress’ intentions were good — we’d all like to see pensions protected — but ERISA hasn’t accomplished much in practice. Just ask the 5,000 people who used to work at Enron, all of whom watched their $2.1 billion in retirement savings go up in smoke, or the fine employees of Hostess, which diverted pension benefits to fund its own operations, only to go bankrupt anyway.
Another purpose of ERISA was to provide “appropriate remedies, sanctions, and ready access to the Federal courts.” 29 U.S.C. § 1001(b). That purpose has failed miserably, the victim of judicial interpretation. Notice in that second link above what the Chair of the American Bar Association’s ERISA and Pension Litigation Subcommittee called the Hostess sham: a “betrayal without remedy.”
The majority of ERISA litigation can be summed up in a single sentence: the plaintiff seeks to avoid ERISA while the defendant seeks to apply it. As Professor Andrew Stumpff described in his law review article “Darkness at Noon,” since ERISA’s enactment, “the strength of an ERISA plaintiff’s legal position has steadily eroded, to the point where today it is routinely the case that a plan participant can prevail only if he is able to persuade the court that ERISA does not apply to his case.” If the cheated plaintiff — such as a beneficiary improperly denied health insurance coverage from an employer-sponsored plan — can avoid ERISA, they might recover compensation; if they cannot avoid ERISA, then they are typically “without remedy.”
So much for “income security.”
The biggest problem is, just like in pharmaceutical and medical device lawsuits, federal preemption. It’s a one-two punch. First, ERISA “preempts” state laws (like the bad faith claims that insurance beneficiaries can typically bring against insurers who improperly deny coverage, or the breach of fiduciary duty claims investors can typically bring against financial advisors who mismanage investments), so that beneficiaries can’t bring any of the normal claims against employer-sponsored pension and health care plans. Second, ERISA’s built-in remedies are nearly worthless, and everything from investment decisions to health care benefit decisions is reviewed merely for an abuse of discretion, with the ERISA plans allowed to grant themselves the discretion to interpret their own contract language. Metropolitan Life Ins. Co. v. Glenn, 128 S. Ct. 2343 (2008). Under ERISA’s built-in remedies, for example, even when a benefit plan run by the company invests most of the plan’s money in the company’s own stock — which would normally be considered a blatant conflict of interest — the benefit plan is presumed to have acted appropriately.
How did a law intended to protect employees and their families end up shutting the courthouse doors to them? Continue reading
Cleaning Up The Supreme Court’s Newest Class Action Mess, Comcast v. Behrend
As Judge Posner remarked, “only a lunatic or a fanatic sues for $30,” Carnegie v. Household Int’l, Inc., 376 F.3d 656 (7th Cir. 2004), and that’s because it costs money to seek civil justice. For all the complaints by corporate defendants about the “rising costs of litigation,” those costs are just as frequently — perhaps more frequently — borne by plaintiffs. I’ve had individual wrongful death cases that required hundreds of thousands of dollars in litigation expenses alone, not including attorney and paralegal time.
Here in Philadelphia, the tallest building by far is the Comcast Center, built in part by the enormous profits reaped by way of Comcast’s monopoly power over cable-television services in the area, causing Philadelphia-area consumers to be overcharged by over $875 million from 1998 to 2007, as alleged by the Behrend lawsuit. I was a Comcast customer in that timeframe, and you know how much my individual antitrust claim is worth? Zero. I was personally overcharged no more than $500; the $350 filing fee for my complaint will eat up most of what I could recover, and certainly the remaining $150 in potential damages won’t justify the millions of dollars in litigation expenses and tens of thousands of hours of attorney time I’ll need to invest in the case.
This problem was solved nearly fifty years ago, when Federal Rule of Civil Procedure 23 was amended to create a streamlined procedure for these types of cases. “The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997)(internal quotation omitted).
The actual requirements of Fed.R.Civ.P. 23 are not particularly strict. Continue reading
When An Employer’s Social Media “Encouragement” Becomes An Overtime Wage Violation
“Social media law” is all the rage these days, and it’s not hard to see why: employers across the country are desperate to use social media to promote their brands or to rid themselves of undesirable employees, as the case may be. 2012 was the first year that really produced anything like a solid body of law to be analyzed as the first wave of social media lawsuits produced court opinions and a handful of legislatures began to address the issue.
A recap is in order. I don’t profess to be an expert on social media law — Google tells me there are over 194 million “social media lawyer” pages, though most everything you could need would be on MoFo’s Socially Aware, or Eric Goldman’s blog, or Bradley Shear’s blog — but the big trends aren’t hard to spot. Three of those trends jumped out at me:
First, the National Labor Relations Board issued several memoranda last year noting that both union and non-union workers had a right to discuss working conditions without fear of retaliation, including on social media websites, a policy the NLRB has already enforced to restore the jobs of workers fired for negative remarks about their employer on Facebook and Twitter. (Then came the judicial atrocity of Canning v. NLRB, which has thrown into doubt everything the NLRB has done since January 2012, so who knows what the eventual fate of those policies will be.)
Second, a couple of state legislatures have stepped in to stop the odious practice of employers demanding the usernames and passwords of potential employees, to snoop for embarrassing information. Eric Goldman and Venkat Balasubramani have raised concerns about these laws (Eric here, Venkat here), not (I hope) because they think employers should be snooping around their employee’s private lives, but primarily on the grounds that the law can create problems where employees end up using their social media accounts for “mixed” personal and business purposes. More on that in a moment.
Third, several lawsuits involving Twitter, Facebook, and LinkedIn accounts that were either — depending on which side you credit — personal accounts hijacked by the employer after the employee was left, or business accounts stolen by the employee after the employee left, produced court opinions. Venkat’s post above links to his various discussions of each, but for the moment there aren’t really any clear rules of law other than, in essence, everybody (employers and employees) should pay attention to their employment policies and should figure this issue out in advance.
The “mixed” personal and business social media accounts are what prompted this post. Continue reading
Pleading The Fifth Amendment And Adverse Inferences In Civil Litigation
Ken over at Popehat has been chronicling the implosion of Prenda Law, a law firm that, on paper, represented copyright holders (particularly of adult films) suing individuals who had shared the films online. I would not dare try to summarize Ken’s comprehensive coverage, nor claim any direct knowledge of the facts, other than to point out the handful of allegations against the firm — and their tactical response — that prompted this post. Allegedly, Prenda Law’s “clients” were merely shells for the lawyers themselves (a fraud on the court), and the firm allegedly forged someone’s signature on corporate documents to create the appearance of a legitimate attorney–client relationship. The federal judge overseeing a number of lawsuits caught wind of this and held a sanctions hearing yesterday, in which essentially everyone associated with Prenda Law asserted their Fifth Amendment right against self-incrimination, and so did not testify.
That’s the issue I wanted to pick up for this post: the ramifications of asserting the Fifth Amendment right against self-incrimination in civil litigation. As a bonus, we’ll discuss what an adversary can do to maximize the negative impact of that assertion on their opponent. The issue comes up more often than you’d think; we see it frequently in egregious wrongful death cases (where the defendant is trying to avoid a manslaughter prosecution), drunk driving cases, and (obviously) fraud cases. I have a handful of civil cases now where the opposing party has either already asserted the Fifth or is expected to do so.
The Fifth Amendment says that “No person. . . shall be compelled in any criminal case to be a witness against himself.” As the Supreme Court has long held, “The privilege afforded not only extends to answers that would in themselves support a conviction under a federal criminal statute but likewise embraces those which would furnish a link in the chain of evidence needed to prosecute the claimant for a federal crime.” Hoffman v. United States, 341 U.S. 479, 486-487 (1951). There are rare circumstances in which a judge can deny the privilege and then compel the testimony, but that’s highly unusual. Once you assert it, your refusal to testify cannot be used against you in criminal proceedings.
But two problems remain for civil cases. Continue reading
Allegedly Abused Prisoner Wins Unanimous Supreme Court Tort Case (Was It All Justice Alito’s Doing?)
Yesterday, the Supreme Court unanimously held in Millbrook v. United States that 28 U.S.C. § 2680(h) — the statute that permits lawsuits against “investigative or law enforcement officers of the United States Government” for claims arising “out of assault, battery, false imprisonment, false arrest, abuse of process, or malicious prosecution” — means just what it says, reversing nearly thirty years of law in the Third Circuit. So why did the Supreme Court have to tell us that a statute meant what it obviously meant?
The case arose from a prisoner in the United States Penitentiary in Lewisburg, Pennsylvania, who alleged “that he was taken to the basement of the SMU and forced to perform oral sex on Correctional Officer Pealer while Correctional Officer Edinger held his neck and Correctional Officer Gimberling stood watch by the door.” “SMU” stands for “Special Management Unit”; if you’ve ever watched a movie or TV with a prison in it, you know SMU as “the hole.”
Millbrook alleged he was assaulted, battered, and falsely imprisoned by three law enforcement officers of the United States. Under § 2680(h), there’s not much more to ask about the case: his claim was exactly the sort of claim Congress sought to permit when it amended the Federal Tort Claims Act in 1974 in response to a disturbing rise in “no knock” raids that destroyed homes and even killed people — without even probable cause or a warrant, as required by the Fourth Amendment. (It’s a couple years old now, but this long report from Radley Balko on the rise of paramilitary raids by domestic law enforcement is essential reading — sadly, the problem has gotten much worse in the past 40 years.) The law means, quite simply, that the United States is liable when investigative or law enforcement officers of the United States Government commit those specific intentional torts in the scope of their employment.
In the years since the Act’s passage, the courts have been busy eviscerating it by granting the government and its employees an increasing amount of immunity. In 1986, the Third Circuit decided in Pooler v. United States, 787 F.2d 868, 872 that § 2680(h) was limited to claims where the “investigative or law enforcement officers” were “executing a search, seizing evidence, or making an arrest.” The Third Circuit reasoned: Continue reading
