Philadelphia Trial Lawyer Max Kennerly : Business and Commercial Litigation : Civil Attorney : The Beasley Firm : Philadelphia Pennsylvania

The United States District Court for the Eastern District of Pennsylvania punts an easy one:

Counts I and II of the complaint arise under the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601, et seq., Home Ownership and Equity Protection Act of 1994 ("HOEPA"), 15 U.S.C. § 1639 and Regulation Z of the Federal Reserve Board ("Regulation Z"), 12 C.F.R. §§ 226.1 et seq. Plaintiff seeks rescission of the loan transaction and actual and statutory damages. ...

Under TILA, a borrower has the right to rescind certain consumer credit transactions [either until midnight of the third business day or, if the consumer was not provided the rescission forms, within 3 years or delivery of those forms] ...

Regulation Z requires the creditor to deliver two copies of the notice of right to rescind to each consumer entitled to rescind and specifies the information that the creditor must include in the notice.

...

Defendants believe plaintiff's rescission claim is untimely because the three-day limitations period under 15 U.S.C. § 1635 (a) applies and plaintiff failed to notify them of her intention to rescind until January 9, 2007. Defendants claim to have complied with 12 C.F.R. § 226.23 (b) (1) by delivering to plaintiff two copies of the required rescission form on January 22, 2004. ...

Defendants support their motion for partial summary judgment with evidence that plaintiff received two copies  of the required rescission form. Exhibit C, attached to Defendants' memorandum of law, is a rescission form dated January 22, 2004 and titled "Notice of Right to Cancel." ... Ms. Gonzales' signature appears below the following sentence: "The undersigned each acknowledge receipt of two completed copies of this Notice of Right to Cancel." Plaintiff does not deny it is her signature.

Counsel for plaintiff contends that, contrary to the written acknowledgment, only one copy of the Notice of Right to Cancel "wound up in the hands of Plaintiff, the borrower." (Plaintiff's Memorandum at 13.) TILA addresses the effect of written acknowledgments of receipt, such as the Notice of Right to Cancel  [*7] produced by Defendants:

Notwithstanding any rule of evidence, written acknowledgment of receipt of any disclosures required under this title ... does no more than create a rebuttable presumption of delivery thereof.

15 U.S.C. § 1635 (c). Plaintiff's written acknowledgment of the Notice of Right to Cancel creates the presumption that plaintiff received two copies of the document. ...

On a motion for summary judgment, the nonmoving party must come forward with evidence setting forth specific facts showing that there is a genuine issue for trial. The nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). Plaintiff has failed present evidence sufficient to rebut the presumption of delivery. Absent from the record is any sworn statement from Ms. Gonzales or other witness that plaintiff received one copy rather than two. Plaintiff relies entirely on the assertions of counsel and the Closing Checklist. No reasonable jury could conclude, on the basis of the Closing Checklist alone, that plaintiff received one copy rather than two. The three-day limitations period under 15 U.S.C. § 1635 (a) applies and commenced on January 22, 2004, the date plaintiff received the Notice of Right to Cancel. Plaintiff is not entitled to rescission because her letter demanding rescission on January 9, 2007 was untimely.

Gonzales v. CIT Group/Consumer Fin., Inc. (E.D.PA, October 30, 2008, Shapiro, J.).

And just like that, the Truth In Lending rescission claim and all the other pendant federal claims are dismissed, with the state law claims remanded back to state court.

The plaintiff's counsel apparently made a complicated argument relying upon words in the agreement itself that arguably reflected their position that the plaintiff had only received one copy.

But there was no need to go down that road: all they needed was an affidavit from the plaintiff saying that she had only received one copy. That's all. At that point, it would've been a fact issue for the jury and would have survived summary judgment.

Federal Rule of Civil Procedure 56(e) provides for exactly this situation:

(e) Affidavits; Further Testimony.

(1) In General.

A supporting or opposing affidavit must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant is competent to testify on the matters stated. If a paper or part of a paper is referred to in an affidavit, a sworn or certified copy must be attached to or served with the affidavit. The court may permit an affidavit to be supplemented or opposed by depositions, answers to interrogatories, or additional affidavits.

(2) Opposing Party's Obligation to Respond.

When a motion for summary judgment is properly made and supported, an opposing party may not rely merely on allegations or denials in its own pleading; rather, its response must — by affidavits or as otherwise provided in this rule — set out specific facts showing a genuine issue for trial. If the opposing party does not so respond, summary judgment should, if appropriate, be entered against that party.

Keep that in mind the next time you get a motion for summary judgment saying the evidence revealed in discovery failed to meet an essential element of your claim: odds are your client or another witness can fill that gap based on their own recollection.

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EDD Update points us to this article from Wes Billingsley in the Texas Lawyer:

... all too often, lawyers raise spoliation claims not for legitimate reasons but instead to turn cases lacking substantive merit into opportunities to procure a quick settlement.

...

Openly challenge spoliation allegations through candid discussions with opposing counsel. Often these discussions may become technical in nature and require greater client involvement, but they should reveal quickly whether there is merit to the other side's claims, sometimes even before an opponent files a sanctions motion.

When legitimate concerns about a client's ESI [electronically stored information] do exist, explore other sources from which to obtain the electronic documents. Do not become fixated -- or let the other side fixate -- on the fact that documents from a specific source may no longer be available. The amended rules require that relevant documents be produced once; if the client produces documents from a server or backup tapes, that should be sufficient to refute a spoliation claim that alleges the documents were not also produced from a particular source, such as an individual's personal computer.

If only it were that simple... Unfortunately, the "spurious" spoliation allegation is frequently the only way I can get the other side to actually produce all of the documents I requested.

Take, for example, a typical tractor-trailer trucking accident. The Federal Motor Carrier Safety Regulations (49 CFR Part 325 et seq., which have been adopted wholesale by every state of which I'm aware) impose very specific requirements upon motor carriers for the retention of a wide variety of "supporting documents," including bills of lading, waybills, fuel receipts, you name it.

Part 379.7 ("Preservation of Records") should be ideal for plaintiff's lawyers, as it requires:

The records shall be indexed and retained in such a manner as will render them readily accessible. The company shall have facilities available to locate, identify and produce legible paper copies of the records.

That is, it's supposed to be trivially easy for trucking companies to produce these records. If the Department of Transportation asked, they'd have them on the spot.

But when I ask for them, my request is "too vague" and "overly broad" and it would be "unduly burdensome" to produce them. "Candid discussions" get nowhere; motions get somewhere.

Of course, once they are "produced," it soon becomes apparent that I have 90% of the documents I don't care about and 5% of the ones I do.

What to do? Well, I could file yet another discovery motion to clog up the courts after my "candid discussion" fails, or I could inform defense counsel that their failure to retain these documents represents spoliation, and that my experts will testify such missing documents could have revealed whatever it is I'm trying to prove.

Is such an allegation "spurious?" I don't think so, I genuinely believe that the failure to preserve records like that creates a factual issue for the jury to consider. Why not sit down and have a candid discussion with defense counsel about that? It usually gets better results than hearing from defense counsel, over and over again, that certain documents don't exist when you know they should.

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At the Maryland Injury Lawyer Blog:

We also have a medical malpractice case pending against the same doctor. In April, a jury in Baltimore found this doctor negligent in yet another medical malpractice case. ...

... this doctor underscores that high malpractice rates are not from medical malpractice lawyers filing frivolous lawsuits. Instead, the problem is that 3% of doctors in Maryland are responsible for half the medical malpractice payouts (data from earlier this decade but I suspect it is still holding true). If these doctors are [fill in your own phrase for politely asked to stop treating patients], malpractice premiums in Maryland would plummet.

In Pennsylvania, I recall the number is 2% being responsible for half of all payouts.

IMHO, a significant contributor to this problem is the rarity of disciplinary action by the Board of Medicine. I don't mean to blame anyone in particular — there are few complaints, few experts willing to testify against other physicians, insufficient resources to prosecute, et cetera — but the point remains that doctors have virtually no fear whatsoever of disciplinary action, regardless of their conduct.

Moreover, the MCARE insurance fund makes the problem worse, by removing market pressures that might otherwise make insurance unaffordable for these individuals.

And, of course, no post about these issues would be complete without mentioning that we have a crisis of new physicians, as medical schools still graduate the same number of new doctors as they did forty years ago. We need more doctors overall and fewer repeat-negligent doctors.

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Legal Blog Watch points us to an interesting development:

A project spearheaded by the Media Bloggers Association will provide bloggers access to first-of-its-kind liability insurance along with free training in media law. The insurance program, called BlogInsure, will provide coverage for claims against bloggers involving defamation, invasion of privacy and copyright infringement. According to the MBA's announcement, its members will be eligible to purchase liability insurance at a "significant discount." Offered through Media/Professional Insurance, a division of AXIS Insurance, the policy will cover costs and damages for claims against bloggers and will parallel coverage offered to tradition media organizations.

In conjunction with this announcement, the MBA has partnered with The Poynter Institute's News University and the Berkman Center's Citizen Media Law Project to create a free e-learning course on media law designed specifically for bloggers and other online publishers. Bloggers wishing to join the MBA and take advantage of its insurance program will be required to take this course and take a test on what they learn (and pay an MBA membership fee of $25). But the course is open to anyone to take, free of charge, by registering at News University.

It is usually good for everyone involved when previously uninsured parties become both insured and educated in how not to to cause damage in the first place.

Of course, there is a flip side: there will likely be a substantial increase in the number of defamation suits filed against bloggers.

Is that necessarily a bad thing? No. Given how truth is an absolute defense to defamation, and the burden rests with the plaintiff to prove falsity, defamation suits are by and large only filed in the most egregious cases, when a defendant knowingly lies about someone else and refuses to correct the mistake. As such, defamation suits serve an important counterbalance to the ease with which rumor and innuendo can spread in the modern age.

I think the real impact of this policy will be to provide costs of defense for generally honest bloggers, thereby protecting them from meritless suits filed solely to intimidate them into silence, suits which could crush (or at least distract) those without insurance coverage. And that's a good thing.

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Over at PhilaLawyer, an anonymous (and largely humor-focused) part of the Rudius blog network, there are four ideas for "Shyster-Proofing the Courts:"

1. Immediate Mandatory Mediation
2. Allow Expert Witnesses to be Deposed
3. Give Frivolous Litigation Claims Teeth and Allow Expert Witnesses to Be Sued in Such Claims
4. Eliminate Referral Fees

First, let's keep something important in mind: the bulk of civil cases involve automobile accidents. So in some sense we're really missing the boat unless we're talking about that specifically. That said, I doubt any of these would make a difference.

1. Immediate Mandatory Mediation

Because I work on a contingent fee, I would like nothing better than to settle cases as quickly as possible.. Settlement puts money in my pocket, does not require my own money put out on the street for costs and fees, and puts my client back on their feet, a particular concern in personal injury and medical malpractice cases. So don't think I am ever the one driving the litigation.

Problem is, even a hypothetically perfect insurance company that promptly and fairly evaluates every claim, sets an appropriate reserve, and begins negotiation has multiple incentives not to settle early. The insurance company makes a return on every single penny in their reserves, a return that evaporates the moment they tender a check to me. The insurance company also typically starts blind on damages; they know a lot about their insured's liability, but very little about my client's medical expenses, lost wages, and the impact the injury has had on their life, and for obvious reasons the insurance company is not going to take my word for any of them. Finally, the insurance does not know how highly I really value the case. The only way they believe they can estimate my bottomline is by pushing back against me and seeing how I respond. Even at a firm with a strong reputation for taking cases to trial and for rejecting weaker (even though meritorious) cases, there is still a belief among insurers and defense counsel that some of the cases are "nuisance value" cases taken to maintain cash flow, with little expectation of a substantial settlement or verdict.

In the real world, the above analysis does not even happen at the insurance company until the case is ready for trial. The insurance adjuster, who, as a cog in a bureacracy, has the primary goal of demonstrating their usefulness to the bureaucracy by creating an extensive paper trail, frequently does not even bother to set a reserve for the case until trial schedules have been finalized. Similarly, the defense attorney, who gets paid by the 10th of the hour they spend defending the case, has little incentive to encourage a swift resolution of the case, thereby extinguishing a source of income and appearing feckless in the face of controversy.

Thus, by and large early mandatory mediation conferences will function as a subsidy for defense lawyers — by giving them something else to bill for — and a tax on plaintiff's lawyers — by taking them away from their other contingent fee cases. At the conference, the defense attorney will have authority only for a nuisance value while the plaintiff's attorney (who will be a junior associate, if the firm has them) will have authority only for the highest number the plaintiff's attorney can reasonably demand. If there is some external force which could drive early settlement, that force will do so regardless of court intervention.

2. Allow Expert Witnesses to be Deposed

That's already the case in the federal system. While it probably does reduce the need for trial because it puts almost everything on the table, it won't do anything to cut back on litigation. The point about having experts who write bogus opinions expecting a case will never go to trial is well taken, but that's already factored into our current system — if one of the sides thinks the expert will pull out the event at trial, they'll just push the case straight to trial, extracting a favorable settlement while teaching the other side a lesson. Adding a deposition, which would naturally have to occur after discovery (as it does in the federal system), won't really change that dynamic, it just slightly advances the time when the expert pulls out. There might be some savings to that, since it obviates the need for full trial preparation, but those savings would be minimal.

I don't think expert witness depositions are a bad idea, I just don't think they will result in any significant savings. Moreover, in cases worth less than, say, $100,000, expert witness depositions could have the perverse effect of making settlement less likely, because they hike up the costs of bringing the case to trial, thereby requiring the plaintiff and their attorney to raise the demand accordingly to protect the amount they get in the end, which in turn makes it less likely the insurer will meet the demand.

3. Give Frivolous Litigation Claims Teeth and Allow Expert Witnesses to Be Sued in Such Claims

Frivolous lawsuits are already actionable in most states, and are frequently acted upon right here in Philadelphia County. In Pennsylvania, there is specific statutory authorization for them under the so-called Dragonetti Act, named after the first attorney to get really walloped under it. The elements of such a wrongful use of civil proceedings suit seem reasonable to me:

§ 8351.  Wrongful use of civil proceedings

(a) ELEMENTS OF ACTION.-- A person who takes part in the procurement, initiation or continuation of civil proceedings against another is subject to liability to the other for wrongful use of civil proceedings:
 
   (1) He acts in a grossly negligent manner or without probable cause and
   primarily for a purpose other than that of securing the proper
   discovery, joinder of parties or adjudication of the claim in which the
   proceedings are based; and
 
   (2) The proceedings have terminated in favor of the person against whom
   they are brought.

...

§ 8352.  Existence of probable cause

A person who takes part in the procurement, initiation or continuation of civil proceedings against another has probable cause for doing so if he reasonably believes in the existence of the facts upon which the claim is based, and either:
 
   (1) Reasonably believes that under those facts the claim may be valid
   under the existing or developing law;
 
   (2) Believes to this effect in reliance upon the advice of counsel,
   sought in good faith and given after full disclosure of all relevant
   facts within his knowledge and information; or
 
   (3) Believes as an attorney of record, in good faith that his
   procurement, initiation or continuation of a civil cause is not
   intended to merely harass or maliciously injure the opposite party.

42 Pa.C.S. § 8351 et seq.
 

If there is a way to improve these elements, I would love to hear it. I personally can't think of any way of strengthening it without making it, at best, confusing and, at worst, a violation of the rights of due process and access to the courts.

As for moving against experts, there is always perjury. Beyond that, it's hard to imagine a worse idea than intimidating witnesses not to say what they really think. The point about this honest experts is, again, well taken, and I have tangled with my fair share of them, but such annoyances must be balanced against minor concerns like truth, justice and fairness. The best you can do now to retaliate against a lying expert is to report them to whatever professional organization of which they are a member, which hopefully have a deterrent effect against future offenders. I am loath to really encourage that idea, though, because by and large professional associations have a serious pro-defense bias, the natural result of a (perhaps understandable) desire to protect and shield their members from liability.

4. Eliminate Referral Fees

I have no idea how that would help anything. Plaintiffs lawyers bill on a contingent fee; if the case is meritless, they're a waste of time and money to pursue. Indeed, referral fees in my opinion actually reduce the number of cases filed, because they cut into the fee earned by the attorney actually pursuing the matter, thus requiring the case be stronger and have larger damages than if the case been brought in directly. Moreover, if there really is a problem of "recidivist professional plaintiffs," what good would it do to eliminate referral fees? They'll simply go to the same attorneys over and over or they'll find attorneys on their own — they're among the few people who really can find the right attorney for them on their own.

More importantly, referral fees serve a critical purpose in the civil justice system, introducing economic efficiency to an ordinarily inefficient process: the selection of a personal injury attorney by a nonlawyer. Corporate lawyers and clients don't need anything like a referral system because, as part of their paying jobs, they interact with all kinds of attorneys and generally have connections that can set them up with the right person for the job.

Your typical Wal-Mart or Wawa cashier hasn't the faintest clue about what to do when they get paralyzed by a drunk truck driver or when their spouse's brain gets blown out by an overdose of Heparin. Most lawyers don't even know to whom they'd turn in the event of a catastrophic injury. The referral system creates an incentive for the initial attorneys not just to half-assedly send a case away, but to diligently choose an appropriate attorney who can get the best result for the client.

Finally, and to me this is the most important function of the referral system, referral fees — specifically large referral fees — encourage attorneys who are not really qualified to handle large matters to refer those matters out to attorneys who are qualified. I cannot tell you the number of times I have been referred a case either because "it's just too big for me" or because "after I filed suit, the defense attorneys went nuclear on me." That is a good thing; attorneys should have no hesitation to radio SOS when the waters get rough. Eliminating referral fees gives them an incentive to hold on to these cases and "do their best," which is frequently not in the client's best interest.

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Steve Rubel at Micropersuasion complains about the Official Google Docs Blog encouraging students to automatically cut-and-paste images found online, without attribution:

Fans of Google Image Search will be happy to see that you can also find and insert images into your documents. Again, you just highlight a word or phrase. Then, use Tools>Search... using Image Search. Once you find the right image, you can drag-and-drop that image directly into your document.

Steve has a simple, elegant solution:

There's a simple solution here. Add a Creative Commons filter for re-usable content to any image search activated from Google Docs and teach students how to source them.

That's not just a good idea -- as Lawrence Lessig has been shouting from the roof tops, under the Grokster decision,

one who distributes a device with the object of promoting its use to infringe copyright … is liable for the resulting acts of infringement by third parties.

Photographs can and do sue over infringement of their photos, like PhillySkyLine did recently (see here for more; frankly, it looks like a slam dunk for them).

Probably not what Google intended.

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If you haven't been following, Victoria Pynchon at the Settle It Now Negotiation Blog and I have been having a running discussion about The Settlement Unicorn, which I originally defined as follows:

I've heard of a mythical beast, which I'll call The Unicorn Settlement, where two hostile parties on the verge of a lawsuit get lawyers, almost file suit, and then, through deft representation, settle their differences peacefully and move on.

Let me exclude from The Unicorn a particular class of dispute, where two businesses with an ongoing relationship have a big dispute. I exclude that because, while I've seen many such disputes resolved pre-litigation, it has always been in the context of an ongoing relationship the value of which exceeds the value of the dispute. So I don't call that a "settlement of a case," I call it a "continuation of a business relationship."

Victoria most recently gave an example in a medical malpractice case, which caused me to move the goal posts:

Thus, when the parties agreed to mediate, there was likely $40-60,000 "on the table," which could either be used to help settle the case or could be thrown away on experts. As noted above, that sum alone -- putting aside attorneys' fees and all the other costs and issues -- likely represented between one quarter and one half of the eventual settlement value, and the lawyers, whom I am guessing were experienced in medical malpractice, both deserve credit for recognizing this economic waste.

But that's why I just can't verify this as an actual sighting of the mighty unicorn. To me, it's analytically similar to my initial example of two businesses who resolve their dispute not because they really reach an agreement, but because the cost of the dispute is less than the value of their continuing relationship. The equation above doesn't work in a wrongful death or birth injury case. It frequently doesn't apply in cases worth more than $250,000 and virtually never applies to cases worth more than $500,000.

So Victoria commented:

On to the main point, isn't there ALWAYS some "external" factor that brings litigating parties to the table?

Which external factors do you want to rule out for our poor unicorn?

I deftly didn't answer for several days [sorry, Vickie]. Let me clarify: my biggest issue with her example was my suspicion that the final settlement didn't substantially exceed the cost of continued litigation. As such, it doesn't really look like a genuine desire to settle, it looks like a cost-avoidance measure with a little bit of personal understanding (the scar) involved.

That's all well and good, and covers a lot of cases, but it's not what I'm looking for and what I think needs more consideration. What I'm looking for is a settlement reached, for substantial money, because the lawyers sat down, considered the case, and came to an agreement on its value.

The frustratingly inefficient process that nags at me is this: after my investigation of a case, I have a good idea of three different numbers:

1. the highest reasonable verdict value of the case;
2. the likely settlement / verdict value;
3. the lowest reasonable successful resolution.

Unspoken there is #4, a defense verdict / abandoning the case, which I guess you could say is a consideration, except that, given how I'm largely in the business of contingent fee cases, I'm not in the business of taking cases I think can't win. It's always a concern, but not for settlement: if I settle a case, I settle it at a "win" amount. Otherwise I go for #1 and don't look back.

Here's the frustrating part. Every insurer is different, as is every defense attorney, and certainly every defendant, and there are disincentives for all of them (respectively bureaucratic, financial, and emotional disincentives) not to settle early. And even though I've done defense work, I know I just don't get how this adjuster works, how this case is evaluated, how my client is lying, blah, blah blah.

But at some point the adjuster, lawyer and/or client will start throwing numbers around in their head. At least along the lawyers, the #2 numbers usually aren't that far apart, and will be within half (plus or minus) of what a judge / mediator would put on it for settlement purposes.

Time after time, I litigate a case for months / years, for which I've known #2, and after all that time and money, no one knows any more than when they started. Some defense lawyers will, after the close of discovery, start talking settlement. Others refuse to discuss until jury selection.

Now, in some circumstances, such litigation is inevitable. Take a birth injury (hypoxia) / medical malpractice case. The potential damages are enormous, and heavily dependent upon developmental / life care / economic assumptions. There's always a thrombophilia defense, there's always some Chair-of-Whatever who can describe how a fetal strip says the opposite of what it actually does. So we'll need to litigate, depose the doctors, find the experts, wave to the insurance surveillance, and get the whole thing ready for trial before appropriate numbers are offered.

On others, it's just plain silly. Here's a hypothetical: industrial product failed, 54yo male client spent 16 days in the hospital, lost $80,000 in wages while recovering in physical therapy for months, now earns $15,000 less per year at a crummier job, has a recurring severe pain in legs, and can't engage in normal physical recreation anymore. He'll need continuing care plus a couple surgeries.

There are thousands of cases like that every year, more than enough to get a contemporary sense of "what they're worth."

Months of discovery will create dozens of copies of his medical records, find out he had three workplace safety violations in the past 15 years (none related to the machine), and reveal the company has had two other incidents with this same product, but no smoking guns.

Just before trial, we're exactly where we started, except the insurance company is poorer $50,000-$150,000 in legal fees and experts, I've put out $20,000-50,000 in costs and experts, and my client has gone more than a year since filing suit living off loans from family to pay off the massive credit card debt and home equity loans they took on immediately after the accident.

Why did we mess around all that time? The defense lawyers would have known proving liability wouldn't be that hard for me, and that neither me nor my firm ever shows up to trial unprepared. All of their discovery was, at best, a half-hearted fishing expedition. The bulk of what they did was force me to "prove" things that should have been beyond any genuine dispute. Why couldn't we get this done sooner?

Victoria, do you have any examples of two parties sitting down, before largely completing litigation, and wrapping up a case for substantially more than nuisance / cost of suit? If so, what brought them to the table?

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An interesting aside from Sovereign Bank v. BJ's Wholesale Club, Inc., 533 F.3d 162 (3d Cir. 2008), a complex business dispute discussed in my prior post.

Here's the deposition testimony given by a Visa corporate representative, on which the Third Circuit relied in reversing summary judgment in favor of the Acquirer:

Q: [by Acquirer's counsel] Is it fair to say that the operating regulations are not intended to benefit a single group of participants, but the Visa payment system as a whole?

Objection. Leading.

A: [by Visa rep] It's fair to say that the core purpose of the operating regulations is to set up the conditions for participation in the system, to set up rules and standards that apply to that ultimately for the benefit of the Visa payment system, the members that participate in it and other stakeholders such as cardholders, merchants and others who may participate in the system as well. (emphasis added).

Q: They may have some incidental benefit; is that correct?

Objection

Leading, and calls for a legal conclusion.

A: The bylaws and operating regulations, by their terms, apply only to members. So to the extent you mean they might have benefits beyond the rules that apply to other stakeholders, that's correct. They're not directly parties to these rules. (emphasis added)

Stop for one second and consider: these questions were asked by the Acquirer's counsel. They were blatantly leading ("is it fair to say") and tried to get legal conclusions ("incidental benefit"), resulting in the Visa corporate representative rejecting their argument, providing fodder for the Third Circuit to overturn their summary judgment.

I don't mean to question the tactical decisions of the Acquirer's lawyers. Indeed, given the absence of other deposition excerpts in support of the Issuer's argument, there seems to have been a reasonable basis for the Acquirer's lawyer to think the Visa corporate representative was going to give them exactly what they wanted to hear.

But the representative did not, and instead gave the appellate court grounds to overturn summary judgment when, as mentioned above, it appears there was little other testimony favorable to the Issuer.

Just something to keep in mind: as tempting as the coup de grace may be, it rarely works as planned.

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As mentioned yesterday, a jury awarded Mattel $100 million* for the Bratz infringement, one-twentieth of the $2 billion requested in their closing argument, just over three times the $30 million suggested by MGA (and which may be reduced to $40 million, discussed below).

* see end of post, damages are apparently only $20 million due to duplication on verdict sheet

What happened? Mattel misjudged the jury's outrage and overshot.

Here's the jury's breakdown:

The jury awarded damages of $20 million against MGA and $10 million against [MGA CEO] Larian in each of three causes of action, intentional interference with contractual relations, aiding and abetting breach of fiduciary duty, and aiding and abetting breach of the duty of loyalty.

They also found that MGA owed Mattel $6 million for copyright infringement, while Larian owed $3 million in distributions he'd received from Bratz-related sales, and MGA Hong Kong owed $1 million.

Here is what each side claimed:

Quinn said MGA owed Mattel for the entire Bratz empire, amounting to at least $1 billion in Bratz profits and interest. Quinn argued that Larian, too, personally gained nearly $800 million in stock value and distributions flowing from the success of the dolls.

...

MGA attorneys countered that the jury should award Mattel as little as $30 million because the company had built the doll line's value with smart additions, branding and packaging.

(emphasis added) And here's a critical fact:

The four original dolls made just $4 million in profit their first year and comprised only 2.5% of MGA's entire Bratz revenue, said Raoul Kennedy, one of MGA's attorneys.

In the past seven years, MGA has built the popular brand to include more than 40 characters and expanded it with spin-offs such as Bratz Babyz, Bratz Petz, Bratz Boyz and items like helmets, backpacks and bedsheets.

(emphasis added) Recall that excellent Learned Hand quote unearthed by the Eleventh Circuit (and discussed in my post on the Watchmen lawsuit:

It must be obvious to every one familiar with equitable principles that it is inequitable for the owner of a copyright, with full notice of an intended infringement, to stand inactive while the proposed infringer spends large sums of money in its exploitation, and to intervene only when his speculation has proved a success. Delay under such circumstances allows the owner to speculate without risk with the other's money; he cannot possibly lose, and he may win.

I don't believe the Bratz trial addressed laches and the suit was somewhat timely filed from what I can tell, perhaps two years after the infringement was discovered. I doubt any of the jurors were familiar with Learned Hand, but the core idea is well-accepted in America: expanding upon others' ideas is a legitimate enterprize.

The jury essentially found that MGA was entitled to 95% of the Bratz empire's profits, despite accepting that:

• the original idea was wrongfully lifted from Mattel;
• MGA willfully interfered with Mattel's business;
• MGA aided and abetting in breaches of fiduciary duties;
• MGA aided and abetting in breaches of the duty of loyalty duties.

Despite that, the jury accepted MGA's proposed $30 million and then, perhaps as a deliberations compromise or perhaps in confusion, awarded it thrice. That alone presents a big problem for Mattel, as it's possible the judge will strike two of the three $30 million awards as duplicative, resulting in a $40 million final verdict.

After, say, a 40% gross contingency fee (which is probably on the high end, given the massive damages both Mattel and Quinn thought they could get, but which is common in commercial and business litigation) and costs, that would leave Mattel with about $20-24 million, or less than 5% of their annual profit. Yikes.

For MGA's greedy, unjustified, wrongful conduct, the jury awarded $0 in punitive damages and a fraction of the plaintiff's proposed compensatory damages. What the heck happened?

I'm not in a position to question the tactical decisions of Mattel's counsel, so I won't. With the benefit of hindsight, though, I believe Mattel dramatically overshot. It's indisputable that MGA did virtually all of the work and invested virtually all of the funds that made Bratz the success it is today. They didn't start the fire, but they gathered all the wood, they sheltered it from the rain, and they used it to kindle others. Yet, Mattel claimed it was entitled to everything, that for MGA's risk it should be granted all the reward.

There were three elements missing, at least two of which are essential for a large verdict:

1. fairness,
2. the absence of a windfall, and
3. outrage.

First, jurors try very hard to be fair. What Mattel proposed was not fair. Sure, Mattel may be entitled to it under the law, and it was unfair that their design was stolen. But it's just as unfair to all the people at MGA who didn't know they were working with stolen goods, and, indeed, it's unfair to the infringing parties themselves, since it denies their own contribution to the final work.

Second, jurors don't like to give money for nothing. Mattel proposed a windfall. Why should they get all the profits? Mattel did almost nothing to earn those profits, it just had some design sketchs stolen. Big whoop -- for that you get an entire empire that someone else built?

Third, If the jury had been outraged by MGA's conduct, "fairness" would have already been decided in the plaintiff's favor, and the windfall would have mattered less. But they weren't outraged; they thought it was an unjustified way to do business, but obviously not enough to warrant punishment.

And here's where I think Mattel made its biggest mistake: Mattel only asked for a number, while MGA gave them the tools to reach their own decision in a way that was favorable to MGA. How do I know the jury used MGA's tools? Look at the numbers they used, right out of MGA's closing: $30 million, around 2.5% of $1 billion in Bratz profit.

It can't be said enough: in closing arguments, arm your jurors with the arguments they need to prevail over the others in liability and the tools they need to reach your proposed award.

Either way, MGA is breathing a deep sign of relief today. And Mattel is digging deeply through the transcript to find something warranting a retrial.

UPDATE: MGA has been pushing heavily in the press that it's apparently undisputed the damages were overlapping, so the final sum really is just $20 million. Which means the jury took Mattel's damages instructions almost verbatim. I have cleaned up slightly (typo) and moved the old discussion of that issue below the fold, to keep around for posterity, and pasted the MGA press release.

Continue Reading...

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Victoria Pynchon at Settle It Now says she has spotted a settlement unicorn out in the wild. Indeed, she says she actually caught it and fully and finally released its to become the certified check it always wanted to be.

I dispute the taxonomy. What she caught was nice, but it was at most a narwhal. The case, a medical malpractice action, had already progressed through substantial discovery, including the plaintiff's deposition and, I presume, the written discovery, which usually happens before the major depositions. Moreover, there seems to be an element of res ipsa, too, as it was not just an unwanted scar after surgery but after plastic surgery, and the substantial focus paid to it by the lawyers and insurance adjuster suggests to me that the scar represented not only the damages but much of the breach of the standard of care as well.

Most importantly, the damages and ultimate settlement value did not appear to be substantially greater than the cost to the insurer of defending the case through trial.

Given how it was a scar case, with the plaintiff initially demanding $500,000 (and the insurer initially offering nuisance value), I would presume the case settled for $150-250,000 in an urban jurisdiction or $75-150,000 elsewhere. That's more than the cost of defending the case at trial, but not much more. Defending a simple plastic surgery malpractice case is probably between $75-125,000, including attorneys' fees and experts and costs. Could be less if they're lucky, could certainly be more.

Which brings me to the biggest question here: why did they agree to mediation? I think I know the answer. Given where they were in the litigation, the parties had not yet spent substantial sums on expert fees. The plaintiff's lawyer had had probably spent less than $5,000 on experts, depending on their relationship with the experts (some get the experts heavily involved from day one to help guide them, others are comfortable with their own knowledge up until discovery has been substantially completed). The defense expert fees were minimal, as the insurance company has a much larger roster of experts and did not yet need to select them and fully brief them.

Thus, when the parties agreed to mediate, there was likely $40-60,000 "on the table," which could either be used to help settle the case or could be thrown away on experts. As noted above, that sum alone -- putting aside attorneys' fees and all the other costs and issues -- likely represented between one quarter and one half of the eventual settlement value, and the lawyers, whom I am guessing were experienced in medical malpractice, both deserve credit for recognizing this economic waste.

But that's why I just can't verify this as an actual sighting of the mighty unicorn. To me, it's analytically similar to my initial example of two businesses who resolve their dispute not because they really reach an agreement, but because the cost of the dispute is less than the value of their continuing relationship. The equation above doesn't work in a wrongful death or birth injury case. It frequently doesn't apply in cases worth more than $250,000 and virtually never applies to cases worth more than $500,000.

Frankly, in those cases, I can't blame defendants and insurance companies from making me work for it. As a purely economic analysis, why not spend $50-100,000 just to see if I get a crummy expert or if I bungle a deposition or are unable to pry those incriminating e-mails out of their servers?

I know, it sounds like I'm changing the definition of the unicorn by taking these smaller cases off the table and by discounting settlements reached after substantial discovery. I'm not trying to create a moving target, I'm trying to figure something out. At the end of the day, I just can't see how to bring parties to the table without an external factor narrowing the issues, whether that factor be an ongoing business relationship, the "money on the table" that exists before expert and other fees, or, most commonly, the discovery and litigation that reveals in detail the strengths and weaknesses of each other's position.

To put it another way, I can't see, as a matter of game theory, how to convince a defendant to settle a large case prior to them exhausting all their options in litigation.

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GCs and in-house counsel are clamping down, driven by a weak economy, bringing litigation cost containment back into the spotlight (as well as general counsel peevishness).

Stewart Weltman, who wrote that second linked article, was generous enough to chime in on my post on a few suggestions for cutting costs (if you get a chance, see his blog -- inspiring stuff for lean and mean plaintiff's lawyers):

It is one thing to say the words but it is another thing to put it in practice. For instance, while unnecessary depositions are one of the biggest black holes of discovery costs, suggesting that depositions be replaced by witness statements reflects a naivety and superficiality about the actual process of preparing for trial.

Of course you try to obtain witness statements if you can, but anyone who has handled complex litigation matters knows that obtaining (1) witness statements from hostile witnesses is an impossibility, (2) witness statements from neutral witnesses can be beneficial but because most lawyer up usually provides little benefits and (3) witness statements from friendly witnesses is rarely a good tack.

All true, though in my experience there's plenty of room for fat to be trimmed from the typical business / commercial litigation deposition. I can't count how many times I've seen:

• multiple lawyers defending a deposition;
• lawyers flying out to meet with clients the day before a brief phone deposition;
• depositions of employees / corporate representatives who only know facts that could have been or already have been answered by written discovery;
• day-long depositions of witness' spouses, siblings, parents;
• depositions where I make a witness read in a handwritten text, because opposing counsel refused to stipulate anything; and,
• depositions where I make a witness read through extensive materials in order to answer questions, because opposing counsel instructed them not to review any materials, in spite of my notice of deposition.

All of those tactics can have a place, particularly if you're playing hardball. Ordinarily, they're a complete waste of everyone's time, which is a big problem if you're paying the lawyers by the hour.

It's true, I rarely get useful "signed witness statements," but I frequently get useful interrogatory answer in lieu of whole depositions. If defendants were willing to stipulate to more (and defense is usually what businesses are complaining about), they'd save a lot of time and money.

The biggest problem with that is how a good deal of "defenses" are stupid and so the "defense" is predicated on confusing the issues as much as possible, which encourages forcing the plaintiff to prove even the most basic facts. Can't help GCs there -- consider paying up.

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Rees Morrison sees the value of "Three litigation cost controls: motions, depositions, and attendees at court conferences and depositions:"

As published in Met. Corp. Counsel, Vol. 16, July 2008 at 39, the steps are (1) permit no motions to be made without your approval; ...

Among the several other cost-control measures they advocate is to try to get signed witness statements. Those statements are “easier, better, more effective and often achieved at a fraction of the cost” of a deposition. According to them, “Only truly material witnesses should be deposed.”

As a third method to pare litigation costs, “Rarely is there a need for more than one attorney to be present at court conferences or depositions.” ...

All good ideas. As a plaintiffs' attorney, who is rarely paid by the hour (and thus for whom time is money), I can tell you that we watch our budgets by not filing too many motions, by trying to have written discovery answer the basics, and by generally using one attorney.

That said, my goals are not just the opposite of defense counsel's but are substantially different in character. I'm trying to build a coherent trial record and case theory that supports my claims and smokes out potential problems. Defense counsel, in contrast, is either trying to poke holes in my theories or is trying to drive me into the ground (or both).

The former can be done on a lean budget; the latter is a bit harder. Note: the latter works far, far, far less frequently than defense lawyers and defendants believe it will. You can bet that, if I took a case, I already judged it as having some inherent strength, which means you likely can't bury it even if I screw it up.

My biggest recommendation would be for general counsel / in-house counsel and their litigators to sit down, early in a case, and figure out their goals. That does not mean choosing between "giving in" and "fighting it." "Fight it" means diddley-squat in litigation, yet I hear that all the time; of course it can be "fought."

The questions are much more complicated than that; if your litigator can't explain why it's more complicated, then you should start demanding they explain how they're looking out for your strategic interests and not just churning the hours.

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Victoria Pynchon responds again in our ongoing conversation.

First, a comment on one of her later posts. She quotes an article in California Lawyer in which a litigator advises parties lobby the devil out of mediators prior to the mediation because:

If the other side convinces the mediator that you will accept a lesser result than advertised, your chance of success will plummet (and you may end up facing a very unhappy client). On the other hand, if you convince the mediator that your adversary is willing to give more to settle than is on the table, you may well be on the way to having a successful outcome and a satisfied client.

A rhetorical question: if you have a solid bottom line, and engage appropriate negotiation tactics, does it matter what the mediator thinks?

Under standard business theory, the answer is "no." You and the opposing party are either in the zone of potential agreement, where your client will be "happy" with the result, or you aren't. Once in that zone, the question is money on the table -- which should be covered by your negotiation tactics.

But the real answer is: maybe it shouldn't, but it does.

Here's part of the proof, from Victoria's other post:

This very morning I failed to settle a very small case that is poised to become a very big case with cross-actions for legal malpractice and malicious prosecution. 

The delta between the Plaintiff's final demand and the defendant's final offer?   

$3,000.

Even her offer to donate half of that amount failed to seal the deal. For an amount that, in all but the smallest soft tissue case, would be considered trivial and unworth the cost and burden of litigating.

Here's my thought why: both sides were already well beyond their "bottom lines." It's no secret that, perhaps excepting where a precise, provable monetary sum is at stake, there really aren't any true bottom lines. There's always room to move, and a strong mediator -- or someone successfully using those social influence 'tricks' I worried about -- can push one side or the other beyond what they thought was their bottom line into deeper (or more shallow) waters.

But once you're in that deep, and you've cast aside what you thought was your rational, economic decision, then everything else matters more, heightening the importance of vindication and the like.

Such heightened non-economic demands increase the likelihood of failure, since, obviously, those demands are the type least likely to be satisfied by tossing around different numbers.

Victoria provides a great summary of some of the key negotiation theory findings:

[D]espite everything I've now said about litigants behaving irrationally, as I've written elsewhere in greater detail, Harvard negotiation gurus Deepak Malhotra and Max H. Bazerman suggest that negotiators too often confuse hidden interests and constraints with irrationality.  The mistakes and solutions when this is the case?  

Mistake No. 1: They are Not Irrational; They Have Hidden Interests -- find out what they are and you may well be able to resolve the dispute and settle the litigation without putting any more money on the table or making any further concessions;

Mistake No. 2: They are Not Irrational; They Have Hidden Constraints -- keep one ear to the ground for hidden constraints, explore them with the mediator, opposing counsel or the opposing party; often those constraints can be problem-solved away;

Mistake No. 3: They are Not Irrational; They Are Uninformed -- listen and respond; respond and listen.  You will find that EACH of you is uninformed about something that will likely make a genuine difference in the manner in which the litigation is resolved.

All true. The question is: how do I open up the hidden interests, constraints and ignorance without sacrificing my client's interests?

Obviously, Victoria's interests here are a little different from mine. While I'm sure she'd rather not be a driving force behind a settlement that one of the parties later seriously regretted, her interest is more in resolving the conflict than getting the best result for one of the parties.

Fact is, when I try to inquire into hidden interests, constraints or ignorance, I usually get a brick wall, and in truth I can understand that. If opposing counsel tries to get in my head, well, I'll argue my position in the case relentlessly, give them my number for settling it, and leave it at that.

Anything else would be perceived as weakness -- is there any doubt the author of that first article I quoted would interpret my attempt to find "hidden constraints" as a sign of weakness? And if he saw a sign of weakness, correct or not, it would make it harder for me to convince him or the mediator that the numbers I'm demanding are legitimate.

I'll address all of this material more in our continuing conversation. My primary conclusion for now is: if a plaintiff wants to participate in mediation without sacrificing their interests, they must demand, prior to participation, a tender from the defendants of the plaintiffs' bottom-line. At that point, we're not talking about where the ZOPA is -- we're talking about the money on the table.

My question back to Victoria is: how do I get there in a routine fashion? I've had such sessions plenty of times before, but I've never been able to create the circumstances for them, except by creating the circumstances for a strong case at trial.

Some defense lawyers see those circumstances for what they are and propose mediation prior to the eve of trial. Others tell me how tenuous and frivolous my case is up until jury selection. Is it worth my effort to encourage the former over the latter? Should I continue to search for the unicorn?

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Victoria Pynchon has responded to my question about getting parties to the settlement table pre-trial, although she hasn't had a chance to answer it fully since she apparently has a real job outside of blogging.

While we're waiting, I do want to address the study (to be published in the Journal of Empirical Legal Studies, covered by the New York Times) that originally prompted her post.

Here's the punchline:

Defendants made the wrong decision by proceeding to trial far less often, in 24 percent of cases, according to the study; plaintiffs were wrong in 61 percent of cases. In just 15 percent of cases, both sides were right to go to trial — meaning that the defendant paid less than the plaintiff had wanted but the plaintiff got more than the defendant had offered.

...

On average, getting it wrong cost plaintiffs at about $43,000; the total could be more because information on legal costs was not available in every case. For defendants, who were less often wrong about going to trial, the cost was much greater: $1.1 million.

First, a caveat: I haven't seen the study, and I am always wary of commenting on the way a study was reported, which usually differs greatly from the study and its results, even with the best of reporting. Further, based on what I can gleam from the article, the authors may have conflated too many types of disparate cases together -- few trial lawyers would say that soft-tissue automobile accident cases are litigated, tried or settled the same way as wrongful death medical malpractice suits -- so the data may not be as useful as the article claims. 

That said, I think many of the conclusions around the blogosphere (e.g., "Settlement is Better than Trial") are off the mark, given what we know.

Based on those numbers before, plaintiffs should always take big cases to trial. Here's why:

The numbers show that, 61% of the time, plaintiffs get less at trial than they were offered. 24% of the time, they get more. Ergo, if you take a case to trial, the odds roughly 3 to 1 that you'll do worse for it.

But look at the difference in the money! 3 out of 4 times, a plaintiff loses on average $43,000 by going to trial. 1 out of 4 times, a plaintiff gains on average $1.14 million!

Thus, every single "win" cancels out a whopping 26.5 "losses!" Yet, based on the data above, as a plaintiff you don't "lose" 25 out of 26 cases, you "lose" 3 out of 4 (keep in mind that we've excluded the 15% of cases were both sides were right to go to trial).

The expected value / expected return for choosing trial over settlement is a whopping $1.01 million!

Based on those numbers, why on earth would I ever settle anything again?

Let me conclude: I'm assuming, as noted above, the study was either misreported or in fact jumbled disparate or outlying data together. Based on what we have, though, settlement is never the right choice unless you get every penny you've demanded.

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Victoria Pynchon lays down the gauntlet (read: politely, generously and substantively replies) in response to my post about opening you and your client up to 'social influence' both as a comment and as a blog post.

I'm honored! I'm a big fan.

Pynchon writes (I'm mixing both her comment and blog post here):

The "trick" is to help the lawyers find where their bottom lines OVERLAP. It's a shame when the parties fail to find that point of overlap because it's a missed opportunity to make a mutually beneficial deal. It's also a shame when, for example, an apology or an expression of feeling can cause the parties to move close enough together to cause one or both of them to close the gap between bottom lines.

...

A friend of mine who is a psychoanalyst once told me that patients get better in therapy despite their analysts' "technique."  It's the relationship that's curative, she told me.  A patient in need will find the water of healing in the desert of a therapist's theory.  If the same can be said of mediation -- that it's the relationship that's curative -- the question that naturally arises is whose relationship?  

Why the disputants of course, which is why I recommend joint sessions.  Not stylized adversarial position-based, chest-thumping, shoe-banging joint sessions ("we will bury you") but interest-based, inquisitive, collaborative, reality-testing mediator-and-attorney directed negotiation sessions. 

It's a great point -- but, in my opinion and experience, the application of the idea will fail more often than it will work.

Why ZOPA Doesn't Usually Apply to Lawsuits

First, the zone of potential agreement ("ZOPA") is a major concept in business negotiation, no doubt, and it's an important intellectual tool.

When it comes to settling lawsuits, though, I think applying it will more often than not lead people astray. In business or commerce, the parties usually have goals that don't align per se, but do intertwine. E.g., buyers and sellers both have the same goal: the transfer of the property in question. They're just figuring out how to do it.

The parties to a lawsuit do not have intertwined interests: they have directly adverse interests. Unless there's some possibility of a future relationship, the defendant doesn't want to resolve the conflict: they want the plaintiff to drop their frivolous claim. In their mind, their best alternative to a negotiated agreement ("BATNA") is for the plaintiff to crawl in a hole and die.

Same with the plaintiff. Unlike buyers and sellers, who usually don't get much joy out of their 'conflict' as a conflict, the plaintiff usually prefers imposing a conflict on the defendant (who the plaintiff believes cast the first stone) in pursuit of justice, an imposition they will only relieve for at least "full" compensation.

That is to say, ZOPA works best when the parties consider their claims to be assets like any other; if there's emotional baggage around the assets, so be it, we can deal with that, too, with sufficient venting.

The problem is that most parties don't consider their claims to be assets; the problem isn't that there's emotional baggage around the economic understanding, it's that the parties interpret their dispute as fundamentally non-economic.

I understand why plaintiffs do that (they feel they have been wronged, not that they've acquired an asset for sale), the part that gets me is why defendants and even insurance carriers don't think of their defenses as an asset. I've seen more cases than I can count where an insurance carrier gleefully paid 50% or more -- sometimes over 100% -- of the final settlement amount in legal fees before even humoring real settlement. If everyone's behaving rationally, that should not happen. IMHO, the biggest stumbling block in most cases is the defense refusal to acknowledge the validity/possibility of plaintiff's claim. That refusal encourages and reinforces the non-economic aspects of the claim.

Then, after years of pain, and hours of bull at a settlement conference, the defendants finally make a real offer that's framed as take-it-or-leave it. Little wonder so many walk and keep going until they get a better offer, regardless of the merits of the initial offer.

The Unicorn Settlement: How Do We Find It?

I've heard of a mythical beast, which I'll call The Unicorn Settlement, where two hostile parties on the verge of a lawsuit get lawyers, almost file suit, and then, through deft representation, settle their differences peacefully and move on.

Let me exclude from The Unicorn a particular class of dispute, where two businesses with an ongoing relationship have a big dispute. I exclude that because, while I've seen many such disputes resolved pre-litigation, it has always been in the context of an ongoing relationship the value of which exceeds the value of the dispute. So I don't call that a "settlement of a case," I call it a "continuation of a business relationship."

I entered the law expecting The Unicorn to be rare but real; by this point, I have been trained by defense lawyers not to bother to check for it. I still usually do, throwing out what I think is a perfectly reasonable offer early on, which is routinely ignored or dismissed by a letter that gratuitously refers to my claims as baseless, frivolous, or made in bad faith.

So that's my biggest question to you: how do you suggest I get defendants, prior to the courthouse steps, to even enter the mindset that there's a valid claim and mediation / settlement should be considered? Reframed in words closer to your post: what can I do to (a) get the joint session to happen and (b) ensure everyone's in the right mindset?

I start every case telling the plaintiff, "this is about money." The civil justice system can't give you anything else; it can use money to fix what can be fixed, help what can be helped, and make up for the rest. (Cf: David Ball on Damages). It's crass. It's unfair. It feels cheap. All true: but either keep your eye on the ball or at least start looking for it, because the judge and jury can't give you anything else.

Not too long ago I attended an all day settlement conference in front of a Federal judge in a case involving three defendants. Discovery was done, expert reports were in. Defense counsel recognized the likelihood of plaintiff winning at trial and the possibility of substantial liability. Judge had ordered the parties come not just with settlement authority, but with the actual person who had the authority.

Defendant #1 had a reasonable offer and was ready to talk. Defendant #2 had a reasonable offer and was ready to talk. Defendant #3 "didn't know." Their answer wasn't "no," it was "don't know." "Don't know" if they want to settle, and obviously "don't know" any numbers. [You can imagine the judge's reaction.]

Point is: their ZOPA wasn't "zero," it was a null value, even after we were almost trial-ready! We were light-years away from the Unicorn Settlement problem and we had the same problem anyway, despite even a court order designed to avoid it.

What do I do about D3 and others like D3 in the future? The Judge got them to come to the table and to move; not sure how I would have, or why I should bother. I would have taken them to trial. They can come to me, on the courthouse steps, with a solution.

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Title rephrased from Settle It Now's "Negotiating Influence: How to Help Your Opponents Change Their Minds," where she wrote:

I have alot more to say about this but for the moment am simply linking you to an article at Cognitive daily demonstrating the known fact that you are far more likely to persuade another if you are making eye contact with him.  

And still opposing parties resist sitting in the same room with one another when attempting to settle litigation!

There is a considerable body of research showing that eye contact is a key component of social interaction. Not only are people more aroused when they are looked at directly, but if you consistently look at the person you speak to, you will have much more social influence over that person than you would if you averted your gaze.

For full article, click here.

Emphasis on the "same room" comment mine. Whether eye-to-eye contact is a good thing for you depends on the situation. Why, for example, would I want opposing counsel staring down my injured, situationally-weakened client with no negotiation skills? The other side will exert social influence over them! That won't do me or the client any good.

Indeed, sometimes I don't want to discuss the case. Sometimes either we're at the end of the road or you're not even on our road, and I'm not going to humor you and your insufficient offers and your attempt to use social influence on me. Indeed, many of my best offers come after cancelling settlement conferences before they happen. 

Just something to keep in mind. Every trick you know is a trick that can be played on you and/or your client.

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In today's Wall Street Journal there's a great lesson on poor advocacy.

The article's text is indented and italicized.

Bad Legal Argument 1: Rushing Into a Judo Flip

There's a hidden tax imposed on companies that do business in the United States that hinders their international competitiveness and eventually filters down to consumers.

This "tax" takes the form of certain class-action attorneys who, like a roving shadow, look for any opportunity to claim that a business has done something wrong -- for example, provided misleading consumer advertising -- without concern for whether any member of the public actually thinks he or she was harmed. To avoid high legal fees and litigation distractions, corporations very often settle, paying out millions of dollars.

Bolding mine. When choosing themes and images ("if the gloves don't fit..."), always anticipate what happens to your themes and images in your opponent's hands, like so:

There's a hidden tax imposed on customers in the United States ... this "tax" takes the form of the widespread damage caused every year by unsafe, defective or deceptive products. Numerous business, like pickpockets, look for ways to rip off the public in small ways -- for example, providing misleading consumer advertising -- without concern for the cost it imposes upon consomers who are hurt, disappointed, or cheated by these products.To avoid high legal fees and litigation distractions in light of the damages, which are small in individual cases but large in the aggregate, customers usually don't sue even when they have strong claims. That's why class actions are so important.

Bad Legal Argument 2: Failing to Answer "So What?"

What courts often do in these cases [where not all the money is claimed by plaintiffs] is distribute the money, in an ad hoc manner, to people who are not even in the class, who would not have had standing to sue, and who were never even alleged to have been wronged. This alternative remedy is known as cy pres, which translates to "as near as possible," and in theory is supposed to benefit class members.

But often these windfalls go to charities with little or no relationship to what was at issue in the original dispute. A good illustration is a recent California case involving debt collection practices, in which the unclaimed proceeds were designated for distribution to a legal aid society to use in representing or educating consumers .

While a particular fact may bother you to no end -- a completely blank medical record, a deleted email, the defendant blaming an empty chair for what happened -- it doesn't necessarily mean anything to the rest of us. Here's a simple response:

After extensive research, these two litigators, published in the WSJ, couldn't find a more galling example than a legal aid society receiving funds from a wrongful debt collection practices lawsuit. So what? What's wrong with that? What better way to help society prevent the exact wrongdoing that happened in the case?

Bad Legal Argument 3: Getting It Wrong

In our view, this as-near-as-possible remedy in class actions is defective. The Constitution provides for the resolution of "cases" and "controversies" between aggrieved parties. Courts are empowered to resolve those specific disputes, and not to transfer a corporate defendant's assets to an outside organization that has not appeared before the court. The Constitution does not give courts the authority to satisfy notions of "deterrence" by giving institutions like legal aid societies or universities windfalls when those entities are not even parties to the lawsuit.

In most cases, you will have a flash of brilliance where suddenly a difficult issue will become simple and obvious.

When that happens, write your brilliant insight down. Then go to bed and look at it again the next day. If you can, look at it again next week. Or else you get what happened here.

Class actions are, except where Congress has specifically created federal jurisdiction in an attempt to help businesses, state creations. Article III defines the powers and limitations of "the judicial power of the United States."

That's a limitation on federal judicial power. There's no federal limitation on state court power, except where that power violates rights guaranteed by the federal Constitution.

Perhaps that's what the authors meant, that class actions are a due process violation. Except that's not what they said. They said the Constitution didn't empower courts to act that way; well, the Constitution doesn't empower state courts to do anything, the states are sovereign in their own right.

Bad Legal Argument 4: Pretending the Complex is Simple

Let's assume they had done that the right way, and had argued class actions were a due process violation. They would still be open to this attack:

After 232 years of judicial, congressional, presidential and state efforts to interpret the Constitution, including a civil war, these authors have figured it all out in three sentences, without a single reference to anything that transpired before them, not even the hundreds of cases specifically raising their critique, nor the dozens of judicial opinions dismis