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

[UPDATE: The WSJ Law Blog has copies of the letters submitted to the Delaware Chancery Court. Professor Hazard is undoubtedly one of the pre-eminent experts in the field, and he makes a compelling argument that Cravath violated the Rules of Professional Conduct. Yet, showing a violation of the Rules is not enough — to disqualify counsel under Chancellor Chandler's standard, Airgas will have to show the violation will "materially advance" Air Product's position or undermine the fair and efficient administration of justice. So far, I haven't seen anything demonstrating that. The vague references made so far to Cravath's insider knowledge of Airgas's finances isn't enough, since a firewall within Cravath can likely cure that problem.

UPDATE II: As predicted, the Eastern District of Pennsylvania declined to enter an injunction against Cravath, and the Delaware Chancery Court did not disqualify them.]

As has been reported all over the legal media,

Industrial gas producer Airgas filed suit against Cravath, Swaine & Moore on Friday over the firm's role as legal adviser to rival Air Products on that company's $5.1 billion bid for Airgas.

... Air Products filed a complaint on Thursday in Delaware's Chancery Court against Airgas, claiming that the smaller company improperly blocked its board of directors from considering previous Air Products takeover offers. Cravath litigation partners Francis Barron, David Marriott and Gary Bornstein are representing Air Products in the Delaware litigation along with local counsel Kenneth Nachbar (he of sports gambling notoriety) and Jon Abramczyk from Morris, Nichols, Arsht & Tunnell. (Click here for the Chancery Court complaint, courtesy of The Times' Dealbook.)

Airgas responded by retaining Cozen O'Connor chairman Stephen Cozen, litigation chair Jeffrey Weil and litigation partner Thomas Wilkinson Jr., for a civil suit against Cravath in state court in Pennsylvania. In the suit, Airgas claims that Cravath has a conflict of interest and breached its fiduciary duty by representing Air Products because it previously advised Airgas on several financings. According to Airgas' complaint against Cravath, the company has had a client relationship with the firm for 10 years and has paid Cravath about $2 million, including a $320,000 payment last October.

There's an obvious question dangling over the Pennsylvania suit filed by Airgas: what basis — or power — does a state court in Pennsylvania have to preclude a New York law firm from representing a Delaware-registered company in Delaware state court litigation against another Delaware-registered company?

Unsurprisingly, that's just what Philadelphia Court of Common Pleas (Commerce Court) Judge Albert Sheppard Jr. wondered before denying Airgas' petition for a temporary restraining order:

In essence, I would be saying to a lawyer you can’t go to Delaware and represent your client. I find that difficult. I don’t want to do that.

Judge Sheppard only had it for two weeks, though, since Cravath, like virtually every out-of-state defendant, promptly removed the case to Federal court, i.e. the Eastern District of Pennsylvania, where it was assigned to Judge Eduardo Robreno (whose work in the Philadelphia Inquirer bankruptcy I've covered before).

Cravath (represented by a team at Conrad O'Brien*) has responded to the suit and has asked Judge Robreno to abstain from hearing the case at all:

First, whatever this Court may ultimately decide with respect to Airgas’s claim for money damages, Airgas’s request for a preliminary injunction is the functional equivalent of a motion to disqualify Cravath from appearing before the Delaware Chancery Court. With all due respect, Cravath submits that a motion precluding counsel from appearing in Delaware Chancery Court is more appropriately decided by Chancellor William B. Chandler III, who presides over the firstfiled Delaware litigation. Just as this Court has full authority over proceedings here, judicial comity warrants according Chancellor Chandler due authority over proceedings in his courtroom. ...

Second, the Delaware Chancery Court is aptly suited to decide the key issue presented by Airgas’s petition to this Court—whether Cravath should be disqualified. Indeed, the dispute concerning Cravath’s ability to represent Air Products is intertwined with the merits of the (firstfiled) Delaware litigation. ...

Third, whereas this Court’s ruling on Airgas’s petition for preliminary relief would be, by definition, provisional, the Delaware Chancery Court’s ruling on the question of whether Cravath should be disqualified will be a final decision on the merits.

(From Cravath's brief, available on RECAP.)

It's hard to argue with that; whatever the merits of the conflict-of-interest allegations, it seems they all relate to the Delaware litigation and so should be decided there.

Of course, there's a reason Cravath wants the case decided in Delaware's Chancery Court (and why Airgas wants it decided elsewhere). As Francis G.X. Pileggi notes:

[Airgas'] separate suit alleging a conflict was filed in Philadelphia. One might speculate that the suit was not filed in Delaware and it was not filed as a motion to disqualify, because the Delaware decisions recently have not granted many motions to disqualify. See, e.g., cases summarized on this blog here.

Indeed, one might speculate that. More on that in a moment.

Back in Delaware, it seems a war of correspondence has broken out:

Airgas (which has retained Wachtell, Lipton, Rosen & Katz) began the exchange of correspondence Monday, when it sent a letter to Chancellor William Chandler at Delaware's Court of Chancery ... In its Monday letter to Chandler, Airgas argues that a Pennsylvania courtroom is the proper place for the Cravath hearing. In response, Air Products and local counsel Kenneth Nachbar of Morris, Nichols, Arsht & Tunnell drafted their own letter to Chandler, urging him to decide on Cravath's fate in Delaware and accusing Airgas of trying to "circumvent" Chandler's authority by suing in Pennsylvania.

Airgas also has enlisted a legal ethics expert who has issued an opinion letter in which he claims Cravath was working under "a clear and serious conflict of interest" while it was helping Air Products formulate its takeover bid last fall, according to a copy of the letter obtained by The Am Law Daily. In his letter, Geoffrey Hazard Jr., a professor at the University of Pennsylvania Law School, says Cravath ... violated the so-called "hot potato" rule, which holds that a firm cannot get out of a conflict simply by dropping one client on short notice, Hazard wrote.

Like I wrote before, the hot potato rule lives. Here's a recent recitation of the rule:

Courts that have considered the issue have held that a firm will not be allowed to drop a client in order to shift resolution of the conflicts question from Rule 1.7 dealing with current clients, to the more lenient standard in Rule 1.9 dealing with former clients.

El Camino Res., LTD. v. Huntington Nat'l Bank, No. 1:07-cv-598, 2007 U.S. Dist. LEXIS 67813, at *39–40 (W.D. Mich. Sept. 13, 2007).

On the surface, that's not good for Cravath — if Chancellor Chandler applies a similar analysis, then Cravath will be evaluated as if it was simultaneously representing Airgas and Air Products on both sides of the litigation, which is expressly prohibited by the Delaware, Pennsylvania and New York rules.

But the final analysis is a practical one:

The finding of an ethical violation, however, does not automatically require disqualification. The court should order disqualification only where some specifically identifiable impropriety has actually occurred and the balance of relevant factors requires vindication of the integrity of the legal profession over defendant's interest in retaining counsel of its choice.

Id.

Returning again to why Cravath wants the issue decided in Delaware by Chancellor Chandler, it bears mention here that Chancellor Chandler took a strongly disqualification-unfriendly view in a similar case a year ago, in which Dow Chemical attempted to disqualify Wachtell from representing Rohm and Haas:

I am not persuaded that Wachtell’s access to this information will materially advance Rohm and Haas’s position or undermine the fair and efficient administration of justice. Dow’s defense to specific performance is that conditions in the market and within Dow have changed significantly since December 2008 and that it is no longer feasible for the merger to close. Dow has failed to convince me that the information Wachtell had access to regarding Dow’s strategies and asset values in 2006 and 2007 will substantially advance the interest of Rohm and Haas in this litigation. Additionally, Wachtell has assured the Court that its attorneys who obtained confidential Dow information have not and will not share Dow’s client confidences with the Wachtell attorneys working on this matter. While Dow is correct that the ethical rules impute knowledge of one attorney to other attorneys in the firm, the issue before the Court is not whether there was a violation of the ethical rules. To justify disqualification, the Court must find that allowing the representation to continue would threaten the fair and efficient administration of justice, a threat that is greatly reduced by a credible representation to the Court that the firm will ensure that the attorneys working on this matter do not have access to Dow’s client confidences. Dow has failed to point to information or confidences obtained by Wachtell in its 2006-2007 work for Dow that will have a material influence on the proceedings before me today.

Rohm and Haas Co. v. Dow Chem. Co., No. 4309-CC, 2009 WL 445609, at *3 (Del. Ch. Feb. 12, 2009)(also courtesy of Pileggi).

Truth be told, there's not much distinguishing the Rohm and Haas v. Dow situation from the present case with Cravath, except for the "hot potato" rule aspect, given how Cravath's work for Airgas was much more recent than Wachtell's work was for Dow. Indeed, it seems Cravath's work for Airgas unambiguously overlapped its work for Air Products.

As noted above, though, a mere violation of the rules isn't enough; the question is what prejudice the former client will suffer and if that prejudice can be avoided. Cravath's work for Airgas was comparatively small, and if Cravath sets up an ethical firewall that keeps the former Airgas attorneys away from the Air Products lawsuit, that will likely be enough to satisfy Chancellor Chandler.

Continue Reading...

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As Howard Bashman reports (along with many others, such as The Legal Intelligencer), yesterday two separate panels on the United States Court of Appeals for the Third Circuit simultaneously issued opinions in separate cases in which public-school students created prank MySpace pages about school administrators, were disciplined, and then brought suit alleging violations of their free speech rights.

The opinion in Layshock v. Hermitage School District is here. The opinion in J.S. v. Blue Mountain School District is here. 

In Layshock, the District Court granted summary judgment in favor of the student. In J.S., the District Court granted summary judgment in favor of the school district.

On appeal, Layshock still won, J.S. still lost.

So how did that happen?

Different facts.

Both panels worked off the same law. In Tinker v. Des Moines Indep. Cmty. Sch. Dist., 393 U.S. 503, 513 (1969), the Supreme Court held that student expression may not be suppressed unless school officials reasonably conclude that it will “materially and substantially disrupt the work and discipline of the school.” In Bethel School District No. 403 v. Fraser, 478 U.S. 675, 678, 683 (1986), the Court upheld the school’s suspension of a high school student for delivering a nominating speech at a school assembly using “an elaborate, graphic, and explicit sexual metaphor” because "[t]he schools, as instruments of the state, may determine that the essential lessons of civil, mature conduct cannot be conveyed in a school that tolerates lewd, indecent, or offensive speech."

At the Third Circuit, the Layshock panel noted:

At the outset, it is important to note that the district court found that the District could not “establish[] a sufficient nexus between Justin’s speech and a substantial disruption of the school environment[,]” Layshock, 496 F. Supp. 2d at 600, and the School District’s does not challenge that finding on appeal.

That killed the School District's argument. Layshock held that, without the nexus, the District had no authority to punish the student.

The J.S. panel described the distinction between its opinion and Layshock:

A separate appeal dealing with school discipline of a student who created a MySpace profile of his principal was filed simultaneously in our Court. See Layshock v. Hermitage Sch. Dist., Nos. 07-4465 & 07-4555, slip op. (3d Cir. Feb. 4, 2010). However, upon review of the holding in that case, as set forth in that panel’s opinion, we find the two cases distinguishable.

Unlike the instant case, the school district in Layshock did not argue on appeal that there was, under Tinker, a nexus between the student’s speech and a substantial disruption of the school environment. Id. at Part IV.A.1. This nexus, under Tinker, is the basis of our holding in the instant case. Rather, the Layshock panel held that the school district failed to establish that a sufficient nexus existed between the student’s creation and distribution of the profile and the school district so that the district was permitted to regulate the student’s conduct. Id. at Part IV.A.2. That panel also held, under Frazer, that the student’s speech could not be considered “on-campus” speech just because it was targeted at the Principal and other members of the school community and it was reasonably foreseeable that school district and Principal would learn about the MySpace profile. Id. at Part IV.A.3.

In litigation and trial, "winning on the law" is important. It's necessary to win the case.

But winning on the law isn't sufficient by itself to win a case.

Facts win cases. Layshock won the facts. J.S. didn't.

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Back in December, the Supreme Court held oral argument on Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection. Though the case raises several issues, the primary question is:

The Florida Supreme Court invoked “nonexistent rules of state substantive law” to reverse 100 years of uniform holdings that littoral rights are constitutionally protected. In doing so, did the Florida Court’s decision cause a “judicial taking” proscribed by the Fifth and Fourteenth Amendments to the U.S. Constitution?

(See the summary at SCOTUSWiki for more.) "Judicial taking" is in quotes for a reason: the claim has never been recognized by any Federal court.

The founder of our firm, James E. Beasley, Sr., used to say "law is made on a lawyer's desk."

Let me explain.

Brown v. Board of Education was not a simple change of heart by the Supreme Court. It was the culmination of a century of litigation challenging the treatment of African Americans in education.

Even the reasoning of Brown v. Board of Education — striking down Plessy v. Ferguson by holding "separate but equal" was inherently unequal — was born not in the Supreme Court's chambers in 1954, but on Charles Hamilton Houston's desk in the 1930s. Whole books have been written on the strategy and the years of internal debates within the NAACP as to how to best frame the issue for a favorable Supreme Court opinion.

Courts do not, and cannot, change the law on their own. Federal courts in particular need a "case or controversy" to act at all.

To make new law, Federal and state courts need lawyers who can envision how the law should change before even filing suit, lawyers who can carefully guide the case — from the factual record to the preservation of arguments — through the trial courts and to the Supreme Court with the issue properly framed for judicial disposition. 

All of that happens on a lawyer's desk.

Back to Stop the Beach Renourishment, Inc. How do you get a court to recognize a claim that has never been recognized before?

First, you argue that precedent has implicitly supported the claim all along:

This Court’s prior cases provide a sound doctrinal basis for adopting a judicial takings doctrine. Specifically, this Court should adopt the judicial takings test articulated by Justice Stewart in Hughes that a state judicial decision effects a taking under the U.S. Constitution when it “constitutes a sudden change in state law, unpredictable in terms of relevant precedents.” See Hughes v. Washington, 389 U.S. 290, 296 (1967) (Stewart, J., concurring).

This Court has expressly held that the Equal Protection and the Due Process Clauses apply to state judiciaries. The Takings Clause should apply to state courts as well. Without such a doctrine, a state is free to clothe one of its agents with the power to violate the U.S. Constitution. Ex Parte Virginia, 100 U.S. 339, 346 (1879).

Merits Brief, pp. 17–18.

Second, you argue why recognizing the claim is a good idea anyway:

First, nothing in the text of the Fifth Amendment suggests that it applies to one branch of government and not others. ... Second, the Takings Clause is founded upon basic notions of fairness and justice. ... Third, this Court’s takings jurisprudence provides no basis for distinguishing between action of a state’s court and those of its legislative or executive branches. ... Fourth, if state courts are free to reorder property rights insulated from the Takings Clause’s requirement to pay compensation, then the legislative and executive branches will no longer change the law themselves (and pay for it); rather they will encourage the judiciary to make the change so that the state does not have to pay compensation. ... Fifth, the stability of property rights is the foundation for a healthy economy.

Id., pp. 44–47.

Finally, you address why recognizing the claim will not 'open up the floodgates' to further litigation:

Despite suggestions to the contrary, a judicial takings doctrine based on Justice Stewart’s test is workable and will not result in a flood of litigation. Lower courts have had little trouble recognizing a sudden and dramatic change in property law. ... Moreover, the proposed ad-hoc test can be applied easily just like other ad-hoc tests this Court has developed.

Id., p. 48. Whoever is opposing the claim will inevitably argue that your claim will "open the floodgates," so it is essential that you use some form of the "flood" metaphor. (Don't believe me? Here's all 101 times in the last two years the "floodgates" metaphor has been used in briefs filed with the Supreme Court.)

Will it work? It's hard to tell. Justice Stevens, a Florida property-holder, recused himself, creating the possibility of a 4-4 split, which would leave the Florida Supreme Court's opinion intact and would not create new law.

Moreover, the Supreme Court is typically hesitant to second-guess a state Supreme Court's interpretations of its own laws (unless, of course, the case is Bush v. Gore). Property law, in turn, is purely a creation of state common law, unmoored from even the canons of statutory construction, much less Federal constitutional principles.

If new law is made by this case, it will have been made not in the chambers of the Supreme Court, but rather on the desk of the many lawyers who developed the theory of "judicial taking" over the years and the lawyers filed Stop the Beach Renourishment's petition back in 2004.

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Last spring, in How To Write Your Brief So That The Judge Will Hate You, I profiled a sarcastic and dismissive brief — filed by attorneys for West Publishing no less, in a case against a law professor — and concluded:

An opening brief filled with sarcasm will perturb a judge doing his or her best to reserve judgment until they've heard both sides just as much as an opening statement filled with indignity will repulse a jury doing their best to be fair and impartial until they've heard all of the evidence.

As Bruce Merenstein posted on The Legal Intelligencer Blog yesterday:

... I was curious when I read numerous reports not long ago of a brief filed by Sidley Austin lawyers in a case in Illinois state court involving claims of innocence by convicted murderer Anthony McKinney. Working on McKinney's behalf are students at Northwestern University's Medill Innocence Project. State prosecutors served subpoenas on the students, seeking to obtain, among other things, video footage of a witness statement and the students' notes. Sidley Austin filed a motion to quash the subpoenas on behalf of the students. Following the state's response to the motion, Sidley submitted a reply brief. It was this reply brief that received so much attention.

... The judge then referred to the brief as "reprehensible," an "editorial" not fit for court, and "dripping with sarcasm." She also compared the brief unfavorably to one she had received earlier that day from a pro se prisoner.

Merenstein didn't think much was wrong with the brief:

My primary conclusion after reading the brief a number of times is that the Sidley brief is well-written, to the point, devoid of irrelevant ad hominem attacks and quite persuasive. While I've seen sarcasm in many briefs (and cringed every time I read it), I looked high and low through the Sidley Austin brief and was unable to find anything remotely sarcastic in the brief. I'm also at a loss as to what is "reprehensible" about it.

I agree that the brief wasn't "reprehensible," but it certainly wasn't a model of courteous advocacy.

 Let's start with the first sentence:

The State's response brief evinces a surprising lack of comprehension of the requirements of the Illinois Reporter's Privilege Act (the ''Act'') and an equally surprising lack of affinity for the important First Amendment νalues that underlie the Act and the role of investigative reporting in promoting those values.

(Emphasis added.) Was it really necessary to accuse the flesh and blood representative of the State of Illinois of being too stupid to understand the state's laws? To accuse them of disliking free speech?

The Sidley Austin lawyers could have just as easily written:

The State's argument, if accepted by this Court, would void the requirements of the Illinois Reporter's Privilege Act (the ''Act'') and would undermine important First Amendment νalues that underlie the Act and the role of investigative reporting in promoting those values.

Same ideas, but without insulting opposing counsel's ability to "comprehend" the law.

Elsewhere in the brief, "The State must not understand the respective roles of government and the media in our society." The remark was simply gratuitous; it did nothing to enhance the argument that followed:

When the State discharges its prosecutorial powers, it does have strict disclosure obligations rooted in fundamental concepts of due process. Respondents have no such obligations. And while the maxim that ουr judicial system is entitled to "everyman's evidence" has currency, ουr society has also long recognized that the fundamental role newsgathering provides in our society places special restrictions on access to unpublished newsgathering materials. "The reporter's privilege has evolved from a common law recognition that the compelled disclosure of a reporter's sources could compromise the news media's first amendment right to freely gather and disseminate
information." In re Special Grand Jury Investigation, 104 Ill. 2d 419, 424 (1984).

A perfectly persuasive and cogent analysis marred by a gratuitous insult. Tisk, tisk.

We've all been there. We've all read briefs and heard oral arguments that were (at least to us) irrelevant, unfounded, or directly contradicted by controlling precedent or the plain meaning of the statute. The Innocence Project's attorneys had every reason to be infuriated by the State's subpoena: there's no question the State demonstrated a surprising amount of contempt for Illinois' Shield Law and for the fundamental free speech values embodied by that law.

But a brief is no place to question the intellect or motives of opposing counsel. Get mad, then get over it.

As James Fallows puts it: Always write angry letters to your enemies. Never mail them.

Always draft angry briefs. Never file them.

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[UPDATE: Welcome, Boing Boing readers! The below post was written before the South Korean edition of W Magazine was spotted out in the wild with Demi Moore's hip re-attached. As you can imagine, one of the most important parts of a retraction demand is that you get your facts straight.]

Lawyers are men and women of letters. Litigators, in particular, pride themselves on their correspondence; ask a litigator to show you their best work, and they will skip over dozens of briefs and transcripts to reveal a letter — maybe a settlement demand, a cease and desist for infringement, a spoliation warning, or a bad faith notice to an insurance carrier — that takes arms against a sea of troubles.

Among defamation lawyers, few letters are important as the first letter they send in a case, the demand for a retraction.

Under New York Times v. Sullivan, in order for the plaintiff in a defamation case to recover punitive damages, they must show "actual malice," i.e. the defendant's actual knowledge of falsity or reckless disregard for the truth. One way to show "actual malice" is to show that the defendant continued to publish the defamatory allegations even after the true facts were made known to them and a retraction was demanded. In some states, like California, a plaintiff must demand a retraction if they want to recover more than the specific monetary damage caused by the defamation.

All of which is to say: retraction demand letters are extraordinarily important in defamation cases. Each retraction demand letter, despite being only a few pages, is the product of hours of painstaking editing.  

Marty Singer is the go-to guy in Hollywood. For everyone in Hollywood.

He's written a few retraction demand letters in his time.

Which makes it hard to understand why he would end a retraction demand letter to a blogger (over the blogger's critique of an apparently photoshopped picture of Demi Moore) with this absurdity:

On behalf of Ms. Moore, we demand publication of an appropriate retraction and apology. We further request that you promptly remove from your website, twitter posts, and other site, all of the false and defamatory statements about my client and the cover photo, as well as any accompanying pictures of the W Magazine cover. We trust that now that the unequivocal facts have been established, that you will comply with these demands in order to set the record straight so that your readers/followers are not misled. If you fail to agree to the foregoing, then you will be exposed to substantial liability, and acting at your own peril.

Please govern yourself accordingly.

This does not constitute a complete οτ exhaustive statement of all of my client's rights or claims. Nothing stated herein is intended as, nor should it be deemed to constitute a waiver or relinquishment, of any of my client's rights or remedies, whether legal οr equitable, all of which are hereby expressly reserved. This letter is a confidential legal communication and is not for publication.

A threatening letter is not "a confidential legal communication" — whatever that means — just because some lawyer says so. Absent a confidentiality order, confidentiality agreement, or some other legal obligation to keep a confidence (e.g., trade secrets shown to an employee), a person has no duty to keep an unsolicited communication from a third party "confidential."

Unless, of course, Marty Singer is reading this post, in which case he should ignore the prior paragraph and consider this post a confidential legal blog post, not for publication.

Bluster — like a bogus "confidentiality" designation — is disturbingly common when powerful lawyers representing clients with essentially unlimited resources threaten unrepresented individuals. Singer's letter, however, is so full of bluster it might fail its essential purpose of establishing liability for punitive damages.

Ordinarily, the demand for a retraction is just that: a demand for an apology and retraction. There's nothing to which the defendant will "agree." Either the potential defendant retracts the publication or they don't.

The text of Singer's letter, however, does not demand a retraction, but instead apparently offers a settlement: "If you fail to agree to the foregoing, then you will be exposed to substantial liability ..." Presumably, then, if the blogger does "agree to the foregoing," then he will not be exposed to substantial liability. Indeed, the possibility of settlement is the only way that the letter could arguably be "confidential," since settlement offers are inadmissible (not the same thing as "confidential," but analogous) in court under Cal. Evid. Code § 1152.

But is that what Singer intended? Is a confidential settlement demand the functional equivalent of a retraction demand? How, exactly, does Singer intend to introduce at trial his own "confidential" letter requesting the defendant "agree" to terms to avoid "substantial liability" as evidence that a retraction was demanded? In other words, how can Singer try to admit the letter as evidence in court when the letter on its face proposes a settlement?

The target of the letter, photographer Anthony Citrano has responded with a retraction demand of his own: 

Mr. Singer: your demand that I retract my statements is a demand that I do further unwarranted and costly damage to a reputation you have already deliberately tarnished. Demanding an apology adds insult to this injury. Obviously, neither of these will be forthcoming.

On the contrary, I demand a complete retraction of all statements made or solicited by you, your client(s), and W that denied this retouching, and served to deliberately impugn my credibility and that of countless others who made similarly fair and accurate observations. I further demand a sincere and prominent public apology.

Touché.

Admissible in court, too.

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The Wall Street Journal's Law Blog points us to a WSJ story on the absurd language used in copyright contracts these days:

Decked out in sequined black and gold dresses, Anne Harrison and the other women in her Bulgarian folk-singing group were lined up to try out for NBC's "America's Got Talent" TV show when they noticed peculiar wording in the release papers they were asked to sign.

Any of their actions that day last February, the contract said, could be "edited, in all media, throughout the universe, in perpetuity."

She and the other singers, many of whom are librarians in the Washington, D.C., area, briefly contemplated whether they should give away the rights to hurtling their images and voices across the galaxies forever. Then, like thousands of other contestants, they signed their names.

...

The terms of use listed on Starwars.com, where people can post to message boards among other things, tell users that they give up the rights to any content submissions "throughout the universe and/or to incorporate it in other works in any form, media or technology now known or hereafter developed."

Lucasfilm Ltd., Star Wars creator George Lucas's entertainment company that runs the site, said the language is standard in Hollywood.

"But, to be honest with you, we have had very few cases of people trying to exploit rights on other planets," says Lynne Hale, a Lucasfilm spokeswoman.

In a May 15, 2008, "expedition agreement" between JWM Productions LLC, a film-production company, and Odyssey Marine Exploration Inc., a shipwreck-exploration outfit, JWM seeks the rights to footage from an Odyssey expedition. The contract covers rights "in any media, whether now known or hereafter devised, or in any form whether now known or hereafter devised, an unlimited number of times throughout the universe and forever, including, but not limited to, interactive television, CD-ROMs, computer services and the Internet."

It reminds me of a draft settlement I received not too long ago that, notwithstanding the statute of limitations, required my client release all claims "from the beginning of the world until the present." Just for fun, I negotiated that down to "from the dawn of mankind."

Ken Adams, the blogosphere expert on contract language (and who is interviewed in the article), blogged about the same problem nearly three years ago, and updated his post today to note:

The phrase occurs most often in contracts in which a consultant or employee assigns to a company all rights to any intellectual property the consultant or employee develops in the course of providing services under the contract. An example: "Employee hereby irrevocably assigns, licenses and grants to Company, throughout the universe, in perpetuity, all rights, if any, of Employee to ...." In that context, saying "all rights" is entirely comprehensive; adding "throughout the universe" constitutes needless elaboration.

Indeed, making your contract apply to "all rights ... throughout the universe" could be worse than applying to "all rights," because it redefines an unambiguous word and makes it more likely that other ambiguous parts of the contract will be interpreted against whoever inserted the "throughout the universe" language.

"All" means "all." "All rights... throughout the universe" means "all" with a caveat. When faced with unambiguous contract terms (e.g., "all") that are specifically defined by the parties (e.g., "throughout the universe"), a court will ask itself, why did someone try to further specify the unambiguous term?

The court will then presume there must have been some reason for the additional language and try to figure that reason out. The danger of needless elaboration like "throughout the universe" is that the court will view additional language as narrowing the unambiguous terms, which is usually not what the party demanding the additional language wanted.

Moreover, the court will presume that, if one party keeps adding language to "clarify" the meaning of general words (such as "all"), then any ambiguity in the contract should be interpreted against that party, because that party was the one with the most control over the contract's language.

In the contexts above, those distinctions are probably irrelevant. But, as Adams notes, "it’s symptomatic of the broader dysfunction in contract language." It's also a bad habit: once you become comfortable with this type of ridiculous language redefining the word "all," how do you know if the ambiguity will stop there?

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I have no problem criticizing Bank of America for deceptive conduct or blaming Wachtell for the failure of a legal stategy, but there's nothing obviously wrong with this:

Eric Roth, a litigation partner at Wachtell, Lipton, Rosen & Katz, apparently was telling the Bank of America Corp. leadership one story about how difficult it would be to escape from the merger with Merrill Lynch & Co. Inc., while singing quite a different tune to the federal government.

E-mails from Roth and in-house lawyers at the bank were among documents released last week from the House Committee on Oversight and Government Reform, which is investigating the merger. Roth and Bank of America representatives did not return calls for comment on this story.

The e-mails show that early on the morning of Dec. 19 Roth advised the bank's chief executive, Ken Lewis, and its interim general counsel, Brian Moynihan, on how difficult and financially risky it would be to try to invoke a so-called MAC -- or material adverse change -- clause, which would allow the bank to get out of the merger with Merrill.

But another e-mail from associate general counsel Teresa Brenner to Moynihan, sent several hours later and on the same day as Roth's e-mail, says, "Eric made a very strong case as to why there was a MAC" during a conference call with some officials from the Federal Reserve.

The e-mails appear to confirm previous Corporate Counsel stories that the bank was telling federal regulators that it wanted to declare the MAC, even though its own lawyers and leaders knew that legally it probably could not succeed. If the bank were to make public its MAC threat, government regulators have said Merrill would have collapsed, causing severe damage to the shaky U.S. financial system at the time.

Although it's not a given that the Rules of Professional Conduct would apply to an argument before the Federal Reserve, let's assume that, by way of Rule 3.9, all the basic duties of merit, candor and fairness apply.

Under those rules, there's nothing wrong with advocating on behalf of your client an argument you believe "probably could not succeed." There are two sides to every story, and at least two interpretations of every legal issue. The United States uses an adversarial legal system precisely so that these stories and interpretations can be fully developed, critiqued, and challenged.

Indeed, it's clear the Federal Reserve's lawyers knew how weak Bank of America's case was:

Brenner's e-mail states that all questions other than one came from a "prickly" Thomas Baxter Jr., general counsel of the New York Federal Reserve Bank. The other question came from Scott Alvarez, general counsel to the Federal Reserve Board in Washington. Baxter "pointed out that there had never been a successful MAC case before," the e-mail says, but Roth countered "that this one essentially could be the first" because of the magnitude of Merrill's losses

Just as the NY Fed's lawyer had no duty to say if he thought the Bank of America / Merrill Lynch merger could become the first successful material adverse change case, Bank of America's lawyer had no duty to say if he thought Bank of America was unlikely to win. Lawyers have no duty to reveal what they believe are the strengths and weaknesses of their case, nor how likely they believe it is that their client will prevail.

There is, however, an ethical issue lurking deeper under the surface. There is a dispute (and shareholder class action) as to when, exactly, Bank of America learned of Merrill Lynch's losses. The executives at Merrill Lynch have suggested that BoA knew of the losses before it consummated the merger. If that's true, and Bank of America's lawyers knew it, then they're in a tighter spot, since the essence of a "material adverse change" is the change in circumstances after the merger consummation. One wonders how a lawyer could in good faith argue for a "material adverse change" arising from circumstances known before the merger.

But that's an issue for another day.

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In a comment on Overlawyered, Ted Frank points to his draft paper (with Marie Gryphon), Negotiating in the Shadow of 'Bad Faith' Refusal to Settle: A Game Theory Model of Medical Malpractice Pre-Trial Settlements and Insurance Limits:

Recent empirical studies of Texas data by Hyman et al, Zeiler et al, and Silver et al suggest that insurance limits affect settlements of medical malpractice cases. Writing separately, Silver argues that insurance limits act as a de facto cap on malpractice payouts, that plaintiffs are being underpaid as a result, and that therefore legislative caps on damages are unnecessary. But this hypothesis is inconsistent with the data, which indicates that forty-seven percent of cases in which plaintiffs obtain verdicts above policy limits are subsequently settled above policy limits. We propose to reconcile the data by accounting for the effects that third-party causes of action for alleged bad-faith refusal to settle — known in Texas as a Stowers action — have on pretrial settlement negotiations. If an insurer in Texas is presented with a settlement offer within insurance limits, refuses to settle, and the plaintiff wins an award greater than insurance limits, the plaintiff is entitled to sue the insurer for the full damages amount, plus punitive damages, for refusal to settle. In this paper, we explore the game theory of medical malpractice settlement negotiations in the shadow of Stowers.

Based on their (admittedly, and necessarily, simplistic) model of malpractice settlements, they run a Monte Carlo simulation.

It's not a bad idea, but they've missed one of the most important factors in settlement — the willingness and ability of the plaintiff to fight through years of risky litigation, trials, appeals and bankruptcy, where they must succeed 100% of the time to recover — and haven't shown why the existence of third-party bad faith lawsuits (i.e., those brought by the plaintiff against the defendant's insurer) contribute more towards settlement than the existence of first-party bad faith lawsuits (i.e., those brought by the defendant against their insurer).

Let's start with the biggest missing element from their model:

Silver, et al. suggests that there are polite reasons not to seek more than [the insurance policy limits]. But this hypothesis contradicts both what we know about the incentives of attorneys and the empirical data. Are we to believe that trial lawyers, out of the goodness of their heart, refuse to seek more than [insurance policy limits]? This seems improbable: the insured doctor is likely to have substantial assets, trusts provide limited protection, and the plaintiff attorney’s fiduciary duty to her client requires her to zealously pursue the doctor’s assets.

There are indeed "goodness of heart" considerations: it's psychologically easier to take an insurance company's reserves — which have been collected and maintained for the purpose of compensating injured plaintiffs — than to take an individual's personal assets.

But let's put that aside and focus on the money. Keep in mind that, in most circumstances, the insurer can't just pay their policy limits and wave goodbye to the defendant while the plaintiff goes after the defendant's assets. If the defendant doesn't want to pay any of their own money, then the insurance company will keep defending them to a full and final conclusion, without paying the plaintiff a dime in the meantime.

Most often, the settlement of an above-policy-limits claim at policy-limits is not due to the goodness of anyone's heart: it's the rational choice between either settling at insurance policy limits and walking away with the money now, or refusing the insurance money and then chasing the doctor's assets for years (with five-or-six figure additional costs) through trial, appeals, re-trials, bankruptcy, bankruptcy appeals, and bankruptcy discharge, which often pays unsecured creditors a fraction of their claim's value. And don't forget: the plaintiff has to be successful in each and every one of those proceedings.

If the insurer actually tenders their full policy limits, then my "fiduciary duty" to the client typically compels me to recommend the client take the policy limits now, rather than starve themselves for years and endure the substantial risks of running the entire civil legal gauntlet — where they must succeed 100% of the time to recover anything — for a theoretical shot at more.

To their credit, the authors admit at the end that they haven't included these factors:

This is still a relatively simple model: it assumes instantaneous and frictionless rulings, rather than an expensive process that may take several years with substantial fees for attorneys and medical expert witnesses. We assume that the trial court’s judgment is 100% accurate, and that there will be no appeal. We therefore do not consider the issue of post-trial settlement. In real life, the risk that a favorable judgment will be struck on appeal one reason why so many large judgments are settled so seemingly favorably, but it is impossible to estimate the size of this effect without qualitative data that the Hyman “haircut” study does not have.

Trials take years. We make no effort to compare the value of a settlement in the hand with a judgment several years in the future that is stayed by appeal. On the other hand, Texas has relatively generous post-judgment interest rates with a floor of 5%. Expanding the model to consider the time-value of money from early settlement would be useful in adjudging the merits and effects of the so-called “early offers” reform. As Zeiler notes, such time-value can also result in settlements below policy limits by virtue of aggressive negotiating by insurers.

Those two economic issues — the risk of losing on appeal (and/or retrial) and the time value of money — create a massive disincentive against attempting to pursue assets beyond the insurance policy limits. Post-judgment interest is generally irrelevant in the context of cases with damages/judgments larger than insurance proceeds: unless the plaintiff wants to go all the way through appeals, retrials, judgment execution, and bankruptcy, then, regardless of any post-judgment interest, the plaintiff's recovery is still effectively capped at the insurance policy limits.

That's the first problem: the failure to consider the effect of the willingness and ability of the plaintiff to fight through years of risky litigation on settlement.

Here's the second problem: the authors "add a Stowers factor S, which is equal to expected Stowers recovery given a victory at the underlying medical malpractice trial" but don't say how they calculate S. More importantly, though, they don't explain why a third-party bad faith recovery would be expected to be any larger than the first-party bad faith claim available to the doctor if she believes the insurer did not handle the case properly.

When an insurer worries about a potential bad faith claim, they're not just worried about the plaintiff suing them. Indeed, they're usually more worried about the defendant suing them.

Like Dr. Woo:

Robert C. Woo is a Seattle-area dentist. An online guide praises his "first-class service" and "painless procedures." It is likely that Tina Alberts, his former assistant, disagrees.

Alberts cared for pot-bellied pigs, a frequent topic for office banter. Dr. Woo enjoyed taunting her with accounts of his boar-hunting trips, and a picture of a skinned pig hanging from a hook. He predicted a similar fate for Walter, her beloved pet pig. Dr. Woo informs us that this was all part of a "friendly working environment."

When Alberts required surgery to replace two teeth, Dr. Woo saw an opportunity to cement this self-impression of bonhomie. Once she was completely sedated, he halted the agreed procedure, and began a new one. Replacing her teeth required the temporary installation of standard false teeth. Dr. Woo had secretly ordered a second set of temporary teeth, shaped like boar tusks. Removing her oxygen mask, he inserted the tusks and - we must assume this was part of the friendly working environment - took photographs of her with her eyes and mouth pried open. Returning at last to his professional duties, he removed the tusks and inserted the correct temporary teeth.

A month later, Dr. Woo's staff presented Alberts with the pictures at her birthday party. The fun-loving Woo described them as a "trophy" to take home. Home she went, never to return. Instead, she sued Dr. Woo for battery, invasion of privacy, medical malpractice, and a host of related claims.

Dr. Woo's insurance company refused to defend him in Alberts' lawsuit. Dr. Woo settled the case on his own for $250,000, then sued his insurance company.

And won:

Because his insurer should have defended him, Dr. Woo recovered the $250,000 he had paid Alberts. But he also claimed emotional distress due to his insurer's abandonment. Despite "the absence of any medical, psychiatric or expert testimony" attesting these injuries, a jury awarded him $750,000, which suggests the rather even quality of justice throughout the judicial system of Washington State. And naturally, Fireman's had to pay for Dr. Woo's legal costs.

The end result was exactly what Ted Frank and Marie Gryphon's paper is supposed to focus on: a situation in which an insurance company was forced to pay more than the policy limits for a malpractice claim. Yet, in Dr. Woo's case, the third-party Stowers action had nothing to do with it — it was a purely first-party claim brought by the doctor. 

I hope there's more study down this field; the world of litigation and defense & indemnity insurance is ripe for rigorous game theory analysis. But it needs to be as thorough and rigorous as the study of any other economic situation.

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Howard Bashman (of How Appealing) has a new article in The Legal Intelligencer:

Recently, however, in cases where I am representing the party that won in the trial court, I have observed experienced appellate opposing counsel who will designate the contents of the appendix or reproduced record on appeal in a far more "adversarial" manner than I would have done had I been in their position. What I mean is that the designation they are serving will include only the parts of the record that benefit their client's position, while excluding (at least until I counterdesignate them in response) those parts of the record that favor my client's position and the trial court's ruling.

Because other experienced appellate advocates are now frequently engaging in a more "adversarial" method of appendix designation than I am, I cannot help but wonder whether this "adversarial" method ever succeeds. In other words, if counsel for appellee is inexperienced or inattentive, presumably the "adversarial" method of appendix designation could ultimately result in an appellate appendix that was bereft of the evidence and other material on which the party that won in the trial court would wish to rely in arguing for affirmance of the trial court's ruling.

Howard has a good argument against the practice and why it's unlikely to succeed. Assuming the court doesn't recognize what's happening and punish the offending party for it, let's consider the question from the perspective of game theory.

The more information available to a court about a case, the more informed and thus more sound the court's analysis will be. Conversely, the less a court knows about a case, the less informed and thus less sound its opinion will be.

I agree with Howard: limiting the appellate record makes it harder for the appellate court to closely and carefully review the case, which increases the risk to both parties of the appellate court unintentionally rendering an ill-informed opinion unjustified by the actual facts.

If a party believes they have a strong case and that they will prevail on appeal, that additional risk is a bad thing. Hence their desire for as complete a record as possible.

But if a party believes they have a weak case that's likely to lose at appeal, however, then they have an incentive to make the record incomplete, and thereby increase the likelihood of the appellate court issuing an erroneous or ill-informed opinion.

Though the losers at the trial level probably have this incentive more often than the winners, the winners can have it as well — if the party that won at trial thinks their victory is unlikely to survive appeal, then they, too, have an incentive to make the record incoherent and incomplete, thereby frustrating review. Indeed, the winning party might have more of an incentive to mess up the record, if they believe, as many lawyers do, that appellate courts generally defer to trial courts, even where the standard of review is de novo.

Perhaps not the most upstanding of tactics, but not necessarily a foolish one.

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I admire Judge Posner, one of the flag bearers for the law and economics movement. He is thoughtful, prolific, and has not succumbed to the extraordinary pressure judges feel to guard their actual thoughts and feelings. He is in every sense of the word an open book, and we should be grateful for that.

It also makes him the logical target for critics of any of the ideas he champions. Such is the case for my remarks below.

I rather enjoyed Posner's latest article, How I Became A Keynesian, which does as good a job as any at summarizing Keynes' core philosophy, until I came across this paragraph:

But the government may be able to arrest the decline--another of Keynes's central ideas, and one strongly resisted by the conservative economists of his time, as of today. It can reduce interest rates (by buying government bonds or other debt for cash, which increases the amount of money that banks are permitted to lend) in an effort to reduce the costs of active investment and thus encourage employment. Keynes urged this approach. But he also pointed out that it might not work well--as we have learned in the current downturn. The banks may lack confidence in "those who seek to borrow from them," so that "while the weakening of credit is sufficient to bring about a collapse, its strengthening, though a necessary condition of recovery, is not a sufficient condition." In fact, banks in America today are hoarding, rather than lending, most of the cash that they have received from the government's bailouts. The hoard may make the banks a little freer with lending, but the effect on economic activity, at least in the short run, may be tepid.

In sum: the government can "arrest" an economic decline by taking action to "reduce interest rates," but such has "not work[ed] well ... in the current downturn."

Perhaps he's correct. Then again, perhaps he was correct a month ago when he wrote that "the various factors that are responsible for the reduction in the rate of decline of output" last quarter are "probably impossible" to "disentangle:"

This assertion is groundless. No one has the faintest idea what effect the stimulus has had. My guess is that it has had some positive effect, because of its confidence-enhancing character that I mentiioned earlier and because some of the $100 billiion--though no one seems to know how much--has been spent rather than saved. But it is impossible to determine the net impact of the stimulus on GDP or employment because so much else has been happening to stimulate an economic recovery. Some people have had to dissave--turn savings into expenditures--because their income has fallen (maybe because they have become unemployed) below the level necessary to cover their basic expenses. Some people have had to replace durables that wore out. Foreign demand for U.S. products has risen some. (Dissaving, replacing durables, and export growth if the domestic currency loses value are standard nongovernmental spurs to recovery from a depression.) And the government has been doing a lot to stimulate recovery besides the stimulus--has in fact expended or guaranteed trillions of dollars in an effort to increase the amount of lending, which is essential to economic activity.

Disentangling the various factors that are responsible for the reduction in the rate of decline of output in the second quarter is probably impossible, but in any event has not, to my knowledge, been attempted--and certainly not in Romer's talk.

Which Posner do I believe? The one who asserts that "disentangling the various factors" affecting the economy "is probably impossible" (with whom economists vehemently disagree), or the one who asserts as a matter of fact that, of the "various factors" affecting the economy, government efforts to "reduce interest rates" "might not work well?"

Of course, Keynes himself famously responded to a critique that he had changed his mind about the causes of the Great Depression with: "When the facts change, I change my mind. What do you do, sir?"

The facts here, however, have not changed. The columns were published a month apart.

That, too, would be perfectly fine -- Richard Posner, the man, is entitled to his own thoughts and opinions and should change them as befits further thought, data, argument and experience -- but for the belief of many adherents to "law and economics"  that judges' interpretations and application of economic theory should color their judicial decisions.

There's a difference, of course, between the macroeconomics that trouble Posner and the microeconomics at play in most cases. And there's a difference, of course, between recognizing the contributions that economics can bring to legal policy decisions (which is what the original law and economics scholars, like Ronald Coase and Guido Calabresi, focused on) and enabling courts to decide cases by way of economic theories they are not even trained to understand, much less apply.

These distinctions, however, rapidly break down in actual practice. Witness the Twombly Supreme Court opinion, in which seven Justices, none of which have any formal training in economics, held the following as a matter of law:

The complaint makes its closest pass at a predicate for conspiracy with the claim that collusion was necessary because success by even one CLEC in an ILEC’s territory “would have revealed the degree to which competitive entry by CLECs would have been successful in the other territories.” Id., ¶50, App. 26–27. But, its logic aside, this general premise still fails to answer the point that there was just no need for joint encouragement to resist the 1996 Act; as the District Court said, “each ILEC has reason to want to avoid dealing with CLECs” and “each ILEC would attempt to keep CLECs out, regardless of the actions of the other ILECs.” ...

Plaintiffs’ second conspiracy theory rests on the competitive reticence among the ILECs themselves in the wake of the 1996 Act, which was supposedly passed in the “ ‘hop[e] that the large incumbent local monopoly companies … might attack their neighbors’ service areas, as they are the best situated to do so.’ ... Contrary to hope, the ILECs declined “ ‘to enter each other’s service territories in any significant way,’ ” Complaint ¶38, App. 20, and the local telephone and high speed Internet market remains highly compartmentalized geographically, with minimal competition. Based on this state of affairs, and perceiving the ILECs to be blessed with “especially attractive business opportunities” in surrounding markets dominated by other ILECs, the plaintiffs assert that the ILECs’ parallel conduct was “strongly suggestive of conspiracy.” Id., ¶40, App. 21.

But it was not suggestive of conspiracy, not if history teaches anything. In a traditionally unregulated industry with low barriers to entry, sparse competition among large firms dominating separate geographical segments of the market could very well signify illegal agreement, but here we have an obvious alternative explanation. In the decade preceding the 1996 Act and well before that, monopoly was the norm in telecommunications, not the exception. ... The ILECs were born in that world, doubtless liked the world the way it was, and surely knew the adage about him who lives by the sword. Hence, a natural explanation for the noncompetition alleged is that the former Government-sanctioned monopolists were sitting tight, expecting their neighbors to do the same thing.

 In fact, the complaint itself gives reasons to believe that the ILECs would see their best interests in keeping to their old turf. Although the complaint says generally that the ILECs passed up “especially attractive business opportunit[ies]” by declining to compete as CLECs against other ILECs, Complaint ¶40, App. 21, it does not allege that competition as CLECs was potentially any more lucrative than other opportunities being pursued by the ILECs during the same period and the complaint is replete with indications that any CLEC faced nearly insurmountable barriers to profitability owing to the ILECs’ flagrant resistance to the network sharing requirements of the 1996 Act, id., ¶47; App. 23–26. Not only that, but even without a monopolistic tradition and the peculiar difficulty of mandating shared networks, “[f]irms do not expand without limit and none of them enters every market that an outside observer might regard as profitable, or even a small portion of such markets.” Areeda & Hovenkamp ¶307d, at 155 (Supp. 2006) (commenting on the case at bar). The upshot is that Congress may have expected some ILECs to become CLECs in the legacy territories of other ILECs, but the disappointment does not make conspiracy plausible. We agree with the District Court’s assessment that antitrust conspiracy was not suggested by the facts adduced under either theory of the complaint, which thus fails to state a valid §1 claim.

Is the above economic analysis correct? We will never know -- even economists will never know -- since this economic theory was codified as law without anyone reviewing the empirical data, because the Supreme Court dismissed the case prior to any discovery.

Twombly is not some outlier case hurriedly drafted by an overworked trial judge. It is the thoughtfully considered, yet wholly uninformed, product of the highest court in the land.

That's the problem with law and economics: it creates the illusion of judicial competence to interpret and apply economic theories to individual cases. Such is particularly problematic these days because economics is in a state of intellectual collapse and is plagued by conflicts of interest, making it particularly ripe for misuse and abuse in other fields, like the law.

Now that Posner has seen the light and become a Keynesian, will he recognize the criticisms of law and economics and become a legal realist?

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The AmLaw Daily reports:

When news broke Wednesday that guitar virtuoso Joe Satriani's copyright suit against the band Coldplay had been settled, the Litigation Daily raced to Pacer to download the documents. After all, it's not every day that a copyright dispute between an aging guitar god and one of the biggest rock bands on the planet settles. (Granted, it's a bit of a stretch to call Coldplay a "rock" band.) But it turns out that the settlement is as opaque as a Coldplay lyrics sheet.

Satriani filed suit in December 2008, alleging that Coldplay's monster hit of 2008, "Viva La Vida," ripped off "substantial, original portions" of his 2004 song "If I Could Fly." (To compare the two, scroll to the bottom of this RollingStone.com post.)

On Monday, Los Angeles federal district court judge Dean Pregerson issued an order dismissing Satriani's suit. We were hard-pressed, however, to find details of the settlement between Satriani and the band in the judge's one-page filing. The only nugget: Each side will cover its own costs and attorneys' fees.

(YouTube also has an excellent analysis of the two songs by a guitar instructor.)

I must point out a technical note. The order for dismissal says:

Each party shall bear its own costs and attorney fees.

For those of you who can read English, you may be surprised to learn that the above language does not mean that each side will cover its own costs and attorney fees. Indeed, as part of the settlement, it's possible that Coldplay agreed to pay all of Satriani's costs and fees.

Here's why: in actions for copyright infringement (like actions for patent infringement and employment discrimination), a plaintiff can recover, as part of their damages, the costs and attorney's fees incurred in bringing the suit. In such a situation, once the trial was concluded favorably for the plaintiff, the plaintiff would submit a petition for fees to the court, after which the Court would evaluate the reasonableness of the fees and then award those fees which were appropriate.

In some cases, the parties settle the merits of the action, but expressly reserve the issue of costs and attorneys' fees for the Court to decide, after which the case is over. All the language in the Satriani v. Coldplay cases means is that the parties have decided to resolve the costs and fees issue themselves, rather than letting the court rule on it. It's likely Coldplay is indeed paying them, since otherwise Satrinani wouldn't recover anything on balance after paying his attorneys.

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Ronald Miller has an excellent post about the timing of interrogatories in personal injury lawsuits.

One of the most effective weapons available to plaintiff's lawyers is the element of surprise. Although defendants typically begin lawsuits with far more information about the facts (and thus a better ability to marshal specific facts in their favor), they do not know what the plaintiff's lawyer knows or believes, and they do not know how the plaintiff's lawyer intends to prove his or her case.

Moreover, in some cases, the defendant's lawyer might not even take the time to learn all the relevant facts. Thus, as Miller notes,

[S]ome [defense] lawyers are going to learn the case when they get the file and get their client ready, regardless of the stage of the case. Others are going to not know the file at all and introduce themselves to the client and the case 10 minutes before the depositions. The theory behind waiting to serve interrogatories is that if you get the latter type of defense attorney, the defendant will take positions that don’t comport with the facts, logic or good strategy because they have not looked at the nuances of the case. Arguably, this logic would even hold up against a top notch lawyer because every lawyer, even well prepared lawyers, sees a case with a clearer lens on the courthouse steps than they do when preparing for a deposition.

No doubt. On the other hand,

The advantage in first obtaining answers to interrogatories is that the answers should help the attorney determine who should be deposed, what questions should be asked of those deponents and what documents should be obtained in the case.

Of course, another highly effective weapon is the truth. Much as how cynics say that you should tell the truth because it is easier to remember, a lawyer will always be able to handle surprise at trial if his or her theory of the case is consistent with the truth. Conversely, a lawyer who presents a theory that is inconsistent with the truth (even if presented in good faith, such as when the lawyer was simply unaware of a particular fact) is exposed to the risk that a "surprise" fact will contradict their theory and take the whole case down with it.

For me, then, when determining how much discovery I want to do prior to a deposition, I consider how much I know about the witness's story and about the truth, and how much more I need to know about the witness's story and the truth. Thus, while I rarely send out comprehensive interrogatories prior to a deposition, I will usually send out enough to know the witness's position with regard to the major issues in the case. Odds are, the defense lawyer will have figured out those issues (and prepared the witness) even if they only picked up the file a few days before the deposition, so it's pointless to blind myself to those facts.

Finally, in my personal experience trickery of any form, even ethical trickery that is entirely within the bounds of professionalism, is a waste of time, and you have more to lose by attempting it than by simply investigating the case thoroughly and proving it in the most clear, concise and compelling manner possible.

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Hizook.com, "the robotics news portal," relates an unfortunate incident:

Hizook.com has received an amazing flurry of activity in the last 10 days.  We made it to the front page of Slashdot (twice!),  Reddit (twice!), Engadget, Makezine, Hacker News (etc, etc) -- amassing well over 100,000 pageviews!  During the height of the activity, we received an email indicating that Hizook's Google Adsense account was being disabled.  There was no further explanation, no warning, no attempt made to resolve the situation -- in fact, our only recourse was to fill out a web form and hope for a prompt response.  Apparently that is indicative of Google's customer service.  The remainder of our account is chronicled below.  But, as extremely loyal Google users (Search, Gmail, Google Voice, Google Calendar, formerly Adsense, someday Adwords) and Google share holders, we are simply... aghast.

Here is the entirety of the explanation provided by Google, at 11pm on Sunday night, when they unilaterally disabled the account:

Hello,

While going through our records recently, we found that your AdSense
account has posed a significant risk to our AdWords advertisers. Since
keeping your account in our publisher network may financially damage our
advertisers in the future, we've decided to disable your account.

Please understand that we consider this a necessary step to protect the
interests of both our advertisers and our other AdSense publishers. We
realize the inconvenience this may cause you, and we thank you in advance
for your understanding and cooperation.

If you have any questions about your account or the actions we've taken,
please do not reply to this email. You can find more information by
visiting
https://www.google.com/adsense/support/bin/answer.py?answer=57153.

Sincerely,

The Google AdSense Team

I've made the front page of Hacker News twice -- it is indeed quite a traffic spike, and, if I advertised, I would be very upset if my advertiser torpedoed me without notice at the height of the traffic.

So, can they sue?

Let's look at the Google Adsense Terms and Conditions:

9.      No Warranty. GOOGLE MAKES NO WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WITH RESPECT TO ADVERTISING, LINKS, SEARCH, REFERRALS, AND OTHER SERVICES, AND EXPRESSLY DISCLAIMS THE WARRANTIES OR CONDITIONS OF NONINFRINGEMENT, MERCHANTABILITY, AND FITNESS FOR ANY PARTICULAR PURPOSE. TO THE EXTENT ADS, LINKS, AND SEARCH RESULTS ARE BASED ON OR DISPLAYED IN CONNECTION WITH NON-GOOGLE CONTENT, GOOGLE SHALL NOT HAVE ANY LIABILITY IN CONNECTION WITH THE DISPLAY OF SUCH ADS, LINKS, AND SEARCH RESULTS.

10. Limitations of Liability; Force Majeure. EXCEPT FOR ANY INDEMNIFICATION AND CONFIDENTIALITY OBLIGATIONS HEREUNDER OR YOUR BREACH OF ANY INTELLECTUAL PROPERTY RIGHTS AND/OR PROPRIETARY INTERESTS RELATING TO THE PROGRAM, (i) IN NO EVENT SHALL EITHER PARTY BE LIABLE UNDER THIS AGREEMENT FOR ANY CONSEQUENTIAL, SPECIAL, INDIRECT, EXEMPLARY, OR PUNITIVE DAMAGES WHETHER IN CONTRACT, TORT OR ANY OTHER LEGAL THEORY, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY AND (ii) GOOGLE'S AGGREGATE LIABILITY TO PUBLISHER UNDER THIS AGREEMENT FOR ANY CLAIM IS LIMITED TO THE NET AMOUNT PAID BY GOOGLE TO PUBLISHER DURING THE THREE MONTH PERIOD IMMEDIATELY PRECEDING THE DATE OF THE CLAIM. Each party acknowledges that the other party has entered into this Agreement relying on the limitations of liability stated herein and that those limitations are an essential basis of the bargain between the parties. Without limiting the foregoing and except for payment obligations, neither party shall have any liability for any failure or delay resulting from any condition beyond the reasonable control of such party, including but not limited to governmental action or acts of terrorism, earthquake or other acts of God, labor conditions, and power failures.

Google obviously believes the answer is "no," and wrote their contract to prohibit any suits at all.

Yet, like with most tech companies, Google's terms of service provide "This Agreement shall be governed by the laws of California." California is among the most consumer-friendly states in the nation.

So the question isn't so simple:

Under UCC § 2-719(1)(b), '[r]esort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.' However, '[w]here circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this code.' UCC § 2-719(2). ... See id.; RRX Indus., Inc. v. Lab-Con, Inc., 772 F.2d 543, 547 (1985) ('Under the Code, a plaintiff may pursue all of the remedies available for breach of contract if its exclusive or limited remedy fails of its essential purpose.').

'A limited remedy fails of its essential purpose when the circumstances existing at the time of the agreement have changed so that enforcement of the limited remedy would essentially leave plaintiff with no remedy at all.' Computerized Radiological Servs., Inc. v. Syntex Corp., 595 F. Supp. 1495, 1510 (E.D.N.Y. 1984), aff'd in part and rev'd in part, 786 F.2d 72 (2d Cir. 1986) (emphasis added). This theory often is raised where a buyer seeks a refund or rescission of the original agreement, but the seller insists that repair is the only available remedy. See, e.g., Gavaldon v. DaimlerChrysler Corp., 32 Cal. 4th 1246, 1259-65, 13 Cal. Rptr. 3d 793, 90 P.3d 752 (2004)."

Stearns v. Select Comfort Retail Corp., 2009 U.S. Dist. LEXIS 48367, at *16–17 (N.D. Cal. Jun. 5, 2009).

Sure seems like Hizook is left with "no remedy at all" under the contract. It thus seems they could indeed sue for direct and consequential damages, including the lost ad revenue.

The above analysis applies to goods, rather than services, but two points weigh in Hizook's favor: first, the original RRX Indus., Inc. opinion itself found a software system to be a "good," and, second, a number of courts recognize the same analysis for service contracts, too.

Unfortunately, it's probably not worth Hizook's time or energy to sue over it -- which is why some creative Silicon Valley lawyers should be thinking about initiating a class action. Google's search engine shows 16,500 hits for "While going through our records recently, we found that your AdSense account has posed a significant risk to our AdWords advertisers."

As Bruce Schneier has written in the context of security software, liability changes everything. If AdSense users want Google to shape up, it seems they need to sue their way into it.

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The Recorder reports:

Michael Ross was fired and blamed for two corporate scandals at Atmel Corp. -- but now the former general counsel is fighting back.

Ross has filed a lawsuit, claiming the San Jose, Calif., semiconductor company ruined his reputation when it pointed the finger at him and others for the company's stock option backdating problems, which led to a $125 million financial restatement. Having been fired along with other Atmel executives in 2006 after an investigation into the misuse of travel funds, Ross became an easy scapegoat when the company faced a mounting backdating mess a year later, his lawyers say.

Many lawyers in Ross' position bore the brunt of the blame for the backdating scandal that swept Silicon Valley's tech companies. They were fired; they were pursued by the government for overseeing the illegal practice of fudging dates to grant stock options at low prices and not properly accounting for it. But few have fought back with lawsuits like this.

* * *

When it released the results of its internal probe to the world, it laid the blame squarely on Perlegos and Ross in an April 2007 press release.

"Mr. Ross was aware of, and participated in the backdating of, stock options," the release blared, although the company's audit committee conceded that Ross may have not understood the tricky accounting implications of backdating until 2002. It also leveled accusations that Ross backdated his own stock options.

In his lawsuit, Ross said the press release damaged his career and counts as defamation: "As a result of the reckless, false and misleading comments made by Atmel regarding Ross' culpability in Atmel's stock option troubles, Ross has had significant difficulty obtaining employment commensurate with his experience and background."

As the story continues, after the travel investigation, Atmel went through one of the most bitter corporate struggles for control in recent Silicon Valley memory, resulting in the ouster of the brothers who founded the company, with whom Ross was close.

Most interesting to me, however, is how Atmel covered its bases dealing with the travel scandal, but not the backdating scandal. Take note:

An internal investigation of Davani led to the Perlegos brothers, Ross and another executive.

Daniel Bergeson and his team found that the executives had been paying small amounts in return for lots of travel on the company's dime ...

In the end, the executives contested the travel scandal findings, claiming it was a ploy to oust the management. The company got Morrison & Foerster to double-check Bergeson's investigation -- and the MoFo lawyers concluded it was fair.

"Double-check." Reminds me of a recent derivative suit here in Pennsylvania, which the company got dismissed because it had hired outside counsel to conduct an independent investigation.

Which is exactly what Atmel did for the travel funds but not, apparently, for the backdating. Now, they might pay the price.

Hiring independent counsel for an investigation is expensive. It's inconvenient. It may end up being unnecessary, or it may end up revealing troubling facts and recommending painful remedies. But it is, bar none, the best prophylactic a company can take when it finds itself in trouble.

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AmLawDaily catches Merck passing the reins from Cravath, Swaine & Moore to Williams & Connolly for its petition to the Supreme Court regarding the consolidated Vioxx securities litigation. In a moment, we'll look at Merck's (likely very, very expensive) brief, and marvel at the Catch-22 it proposes.

But first, some background, courtesy of the Third Circuit's opinion:

Appellants, purchasers of Merck & Co., Inc. stock, filed the first of several class action securities fraud complaints on November 6, 2003, alleging that the company and certain of its officers and directors (collectively, “Merck”) misrepresented the safety profile and commercial viability of Vioxx, a pain reliever that was withdrawn from the market in September 2004 due to safety concerns. The District Court granted Merck’s motion to dismiss the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure, holding that Appellants were put on inquiry notice of the alleged fraud more than two years before they filed suit, and thus their claims were barred by the statute of limitations. Appellants argue that the District Court erred in finding as a matter of law that there was sufficient public information prior to November 6, 2001 to trigger Appellants’ duty to investigate the alleged fraud.

The Third Circuit agreed with Appellants and reversed the dismissal. That's what Merck has appealed to the Supreme Court.

Although Merck had internal doubts over Vioxx's safety long before it was even approved by the FDA, it never made those doubts public (they were only discovered through litigation). After the "VIGOR" study released in 2000 suggested Vioxx had an increased risk of cardiovascular incidents over another pain reliever, naproxen, Merck argued the difference was due to a protective effect of naproxen, rather than any danger due to Vioxx. In September 2001, the FDA sent Merck a warning letter, which noted:

Although the exact reason for the increased rate of [myocardial infarctions] observed in the Vioxx treatment group is unknown, your promotional campaign selectively presents the following hypothetical explanation for the observed increase in MIs. You assert that Vioxx does not increase the risk of MIs and that the VIGOR finding is consistent with naproxen’s ability to block platelet aggregation like aspirin. That is a possible explanation, but you fail to disclose that your explanation is hypothetical, has not been demonstrated by substantial evidence, and that there is another reasonable explanation, that Vioxx may have pro-thrombotic properties.

The issue remained controversial and disputed until October 2003, when a "study by the Harvard-affiliated Brigham and Women’s Hospital in Boston that found an increased risk of heart attack in patients taking Vioxx compared with patients taking Celebrex and placebo." A week after that study was made public, the investors sued Merck.

Merck's argument is that the FDA warning letter alone -- which it vigorously disputed in public, while concealing its own internal doubts -- was evidence enough that they committed securities fraud, thereby putting investors on "inquiry notice" and beginning the statute of limitations.

Thanks to the Private Securities Litigation Reform Act of 1995, and the Supreme Court's 2007 decision in Tellabs Inc. v. Makor Issues & Rights, Ltd., investors alleging fraud need to show facts, in their initial complaint, which create an "inference of scienter" (i.e., the defendant’s intention “to deceive, manipulate, or defraud) that is

more than merely “reasonable” or “permissible”—it must be cogent and compelling, thus strong in light of other explanations. A complaint will survive, we hold, only if a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged.

It's a high bar to meet, a "heightened pleading requirement" to be sure. In essence, investors filing a shareholder fraud suit have to prove, when they file suit, that they'll likely win.

Keep that in mind while reading Merck's brief to the Supreme Court:

With regard to those elements that are required for a violation of Section 10(b), moreover, it is not necessary that the plaintiff possess sufficient information to satisfy any heightened pleading requirements applicable to those elements before the limitations period begins running. In the Private Securities Litigation Reform Act of 1995 (PSLRA)—enacted after this Court first set out the limitations period for Section 10(b) actions in Lampf—Congress adopted heightened pleading requirements for private securities-fraud actions, including the requirement that the complaint “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” 1934 Act § 21D(b)(2), 15 U.S.C. 78u-4(b)(2).

In Rotella, this Court considered and rejected the argument that the existence of heightened pleading requirements should drive application of the discovery
rule. Specifically, the Court rejected the plaintiff’s contention that it should adopt a broader version of the discovery rule for civil RICO claims on the ground that, in
many cases, those claims were subject to the heightened pleading requirement for fraud claims in Federal Rule of Civil Procedure 9(b). 528 U.S. at 560-561. While acknowledging the plaintiff’s concern that a narrower rule could “allow[] blameless ignorance to defeat a claim,” the Court concluded that “we simply do not think such a concern should control the decision about the basic limitations rule.” Id. at 560 (internal quotation marks and citation omitted). Although the PSLRA operates differently in some respects from Rule 9(b), the basic point remains the same: under the discovery rule, the limitations period may be triggered even when a plaintiff will not possess sufficient information to satisfy any applicable heightened pleading requirements.

It is therefore true, at least as a theoretical matter, that, under Section 1658(b), a plaintiff may not be in a position to file a securities-fraud complaint that would survive a motion to dismiss before the limitations period runs. Even when the discovery rule is applicable, however, the purpose of the limitations period itself is to give the plaintiff a specified period of time in which to “prepare a case against [the] perpetrators”—not to sit on his complaint once it is ready. Lampf, 501 U.S. at 378 (Kennedy, J., dissenting); see, e.g., Fujisawa Pharm. Co. v. Kapoor, 115 F.3d 1332, 1334 (7th Cir. 1997). As the government has previously explained in another case involving the discovery rule, “statutes of limitations are designed to induce prospective plaintiffs to investigate and act; they are not designed to offer a period of leisure between the completion of an investigation and the filing of suit.” U.S. Br. at 13, Kubrick, supra (No. 78-1014). The possibility that a heightened pleading requirement “will exact some cost,” insofar as some plaintiffs may be unable to prepare valid complaints within the limitations period, is thus an insufficient basis for adopting a broader interpretation of the discovery rule. Rotella, 528 U.S. at 560.

Like I said: Catch-22. According to Merck, you can't sue until you have enough evidence to show a "strong inference" of scienter, but you have to sue within two years of the first sign -- determined in hindsight -- of when you should have been "induce[d] ... to investigate and act," even if there was no evidence of scienter.

It's odd that Cravath and Williams & Connolly didn't put more effort into this argument. Rotella reached its conclusion by analogizing the racketeering claims at issue there -- brought by a psychiatric patient eleven years after discharge against a facility which, he alleged, fraudulently kept him there to boost profits -- to medical malpractice, where the patient is typically put on "notice" of their claims at the time of their injury.

Such bears little resemblance to the Merck case, in which the investors were arguably vaguely "injured" by the 2001 FDA letter regarding Merck's marketing, but had nothing even suggesting deliberate concealment of Vioxx's risks until 2003.

Moving on to the next two paragraphs in Merck's brief: 

Significantly, in extending the limitations period for Section 10(b) claims from one year to two years in the Sarbanes-Oxley Act, Congress acted out of concern that the preexisting one-year period would foreclose plaintiffs who were unable to prepare complaints sufficient to satisfy the PSLRA’s heightened pleading requirements in time. In its report, the Senate Judiciary Committee observed that “[t]he one year statute of limitations from the date the fraud is discovered is * * * particularly harsh on innocent defrauded investors,” because “the complexities of how the fraud was executed often take well over a year to unravel, even after the fraud is discovered.” S. Rep. No. 146, supra, at 9. Specifically, the committee noted that, “[w]ith the higher pleading standards that * * * govern securities fraud victims, it is unfair to expect victims to be able to negotiate such obstacles in the span of 12 months.” Ibid. That concern would have been wholly misplaced if the one-year period did not begin to run until the plaintiff possessed enough information to satisfy the PSLRA’s heightened pleading requirements in the first place.

Conversely, if the limitations period were triggered only once a plaintiff was able to bring suit, the practical effect of Congress’s adoption of heightened pleading requirements in the PSLRA would have been to postpone the start of the limitations period, sometimes significantly, in many cases. Given that the PSLRA’s primary purpose was to “check * * * abusive litigation by private parties,” Tellabs Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 313 (2007), it is implausible that, in enacting the PSLRA, Congress would have wanted effectively to extend the time for filing private securities fraud actions—and thus to enable more plaintiffs to use securities-fraud actions as a hedge against downside risk. See pp. 48-49, infra. In sum, the limitations period in Section 1658(b) is triggered by something short of the ability to file a viable complaint, and there is therefore no valid statutory basis for the court of appeals’ rule that a plaintiff must possess information specifically relating to scienter in order to be on inquiry notice.

That misses the point entirely. If Congress wanted to "check abusive litigation," then it is similarly "implausible" that Congress wants to force investors to file suit before they "possess sufficient information to satisfy any heightened pleading requirements."

Which is what Merck suggests.

The investors' brief is due in October. The Supreme Court has not yet scheduled oral argument.

But it will raise an interesting question: should investors be required to sue companies at the first hint of trouble, or can they wait until they have facts suggesting wrongdoing? Do we really want to encourage suits which even the plaintiffs don't know are meritorious?

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Not too long ago, I argued that Ashcroft v. Iqbal was not nearly as important as commentators thought, and that the sky had not fallen on plaintiffs. Instead, Iqbal merely put into words the standard that numerous courts had already applied to large-scale litigation without saying as much. I also argued that Iqbal in particular involved a very unique circumstance -- a Bivens suit against top-level official -- and so was easily distinguishable from the vast majority of civil litigation.

For a while, it seemed no one agreed with me. Every week there was another "[pharmaceutical manufacturing defect / establishment clause / whatever] case dismissed under Iqbal" story.

It's not easy being green.

But I'm no longer alone.

Drug & Device Law has more news, referencing a law review article and a post by a law professor who, like me, but in a more scholarly fashion, reject the argument that six paragraphs of Iqbal radically re-rewrote the rules of civil procedure.

"They're just professors," the defense bar nay-sayers will nay-say, "Iqbal has nonetheless overruled centuries of precedent, making it nearly impossible to file a lawsuit against anyone anymore."

I, of course, disagree. So how about I up the ante with recent opinions from two of the most respected conservatives judges in the federal appellate courts?

Like Judge Frank Easterbrook:

Lusby contends that Rolls-Royce defrauded the United States about the quality of the turbine blades in the T56 engine. The complaint alleges that five contracts between Rolls-Royce and the United States require all of the engine's parts to meet particular specifications; that the parts did not do so (and the complaint describes tests said to prove this deficiency); that Rolls-Royce knew that the parts were non-compliant (not only because Lusby told his supervisors this but also because audits by Rolls-Royce's design and quality-assurance departments confirmed Lusby's conclusions); and that Rolls-Royce nonetheless certified that the parts met the contracts' specifications. The complaint names specific parts shipped on specific dates, and it relates details of payment. Simple breach of contract is not fraud, but making a promise while planning not to keep it is fraud, see Wharf (Holdings) Ltd. v. United Int'l Holdings, Inc., 532 U.S. 588, 121 S. Ct. 1776, 149 L. Ed. 2d 845 (2001), and this complaint alleges the promise, the intent not to keep that promise, and the details of non-conformity. What else might be required to narrate, with particularity, the circumstances that violate 31 U.S.C. §3729(a)(1)?

Rolls-Royce's answer is: the specific request for payment. Lusby has not seen any of the invoices and representations that Rolls-Royce submitted to its customers. He knows about shipments and payments, but he does not have access to the paperwork. The district court held that, unless Lusby has at least one of Rolls-Royce's billing packages, he lacks the required particularity. Since a relator is unlikely to have those documents unless he works in the defendant's accounting department, the district court's ruling takes a big bite out of qui tam litigation.

We don't think it essential for a relator to produce the invoices (and accompanying representations) at the outset of the suit. True, it is essential to show a false statement. But much knowledge is inferential--people are convicted beyond a reasonable doubt of conspiracy without a written contract to commit a future crime--and the inference that Lusby proposes is a plausible one. 

United States ex rel. Lusby v. Rolls-Royce Corp., No. 08-3593, 2009 U.S. App. LEXIS 14119, at *10–11 (7th Cir. Jun. 30, 2009)(reversing dismissal of qui tam / false claims act complaint).

And Judge Richard Posner:

In our initial thinking about the case, however, we were reluctant to endorse the district court's citation of the Supreme Court's decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007), fast becoming the citation du jour in Rule 12(b)(6) cases, as authority for the dismissal of this suit. The Court held that in complex litigation (the case itself was an antitrust suit) the defendant is not to be put to the cost of pretrial discovery--a cost that in complex litigation can be so steep as to coerce a settlement on terms favorable to the plaintiff even when his claim is very weak--unless the complaint says enough about the case to permit an inference that it may well have real merit. The present case, however, is not complex. Were this suit to survive dismissal and proceed to the summary judgment stage, it would be unlikely to place on the defendants a heavy burden of compliance with demands for pretrial discovery. The parties did not negotiate face to face over the termination agreement, and though some of the negotiations were over the telephone rather than in letters or emails, Smith recorded those and the transcripts are attached to his complaint. So almost all the potentially relevant evidence is already in the record.

But Bell Atlantic was extended, a week after we heard oral argument in the present case, in Ashcroft v. Iqbal, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009)--over the dissent of Justice Souter, the author of the majority opinion in Bell Atlantic--to all cases, even a case (Iqbal itself) in which the court of appeals had 'promise[d] petitioners minimally intrusive discovery.' Id. at 1954. Yet Iqbal is special in its own way, because the defendants had pleaded a defense of official immunity and the Court said that the promise of minimally intrusive discovery 'provides especially cold comfort in this pleading context, where we are impelled to give real content to the concept of qualified immunity for high-level officials who must be neither deterred nor detracted from the vigorous performance of their duties.' Id. (emphasis added).

So maybe neither Bell Atlantic nor Iqbal governs here. It doesn't matter. It is apparent from the complaint and the plaintiff's arguments, without reference to anything else, that his case has no merit. That is enough to justify, under any reasonable interpretation of Rule 12(b)(6), the dismissal of the suit.

Smith v. Duffey, No. 08-2804, 2009 U.S. App. LEXIS 17211, at *11–13 (7th Cir. Aug. 3, 2009).

Neither Easterbrook nor Posner are bleeding hearts, and neither has shown much sympathy for plaintiffs in the past. Yet, even they believe the Twombly and Iqbal chatter is overblown.

Chalk two victories up for plaintiffs. It seems the battle over pleading standards is far from over.

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[UPDATE: The Supreme Court issued its opinion in Mohawk Industries v. Carpenter, holding attorney-client privilege was not immediately appealable.]

Last week, the Fulton County Daily Report noted:

The Obama administration and a group of law professors and former federal judges are asking the U.S. Supreme Court to reject a Georgia company's plea for a change in the way many appellate courts deal with questions of attorney-client privilege.

Earlier this year, a coalition of business interests and the American Bar Association filed amicus briefs joining carpet maker Mohawk Industries' argument that parties in federal cases should be allowed to immediately appeal lower court findings that the parties have waived their rights to keep key information secret under attorney-client privilege. They argue that once privileged material is produced in discovery, the consequences of disclosure cannot be undone by an appellate reversal of the trial order mandating production.

But this month, the former Mohawk employee seeking information the company claims is privileged received some high-powered help of his own. U.S. Solicitor General Elena Kagan filed an amicus brief supporting the former employee, plaintiff Norman Carpenter, as did the group of 19 law professors and six former federal judges that includes former Whitewater independent counsel Kenneth W. Starr; former Federal Bureau of Investigation director William S. Sessions; former federal judges Patricia M. Wald and Abner J. Mikva; and legal scholar Erwin Chemerinsky. They argue that a Mohawk win at the Supreme Court would undermine district court judges' ability to control the discovery process.

The relevant briefs and a synopsis of the arguments are available at SCOTUSwiki. Seeing Starr and Chemerinsky on the same side of an issue is almost as odd as seeing Ted Olson joining David Boies to sue for gay rights.

The position of the Chamber of Commerce and Defense Research Institute is no surprise: deny, distract and, above all, delay.

But why do bar associations (like the Philadelphia Bar Association) have a penchant for chiming in only on behalf of defendants?

In one sense, the question we're really asking is one of balance. Everyone would like to have every issue decided against them made immediately appealable. But we can't do that; as the former judges' brief notes, the courts are overworked as is, and, as the plaintiff's brief notes, there are dozens of serious issues -- like those affecting constitutional rights and criminal convictions -- which are not immediately appealable.

Where does attorney-client privilege (involving discussions regarding a separate case) fit on the totem pole?

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[Apologies for the typo in the title -- unfortunately, I can't change it without damaging all the syndication links to the post. See also update below regarding the "downloading" and "sharing" distinction.]

Green Day's "Minority" is available for $0.99 on Amazon MP3.

Joel Tenenbaum will pay $22,500 for it (a total of $675,000 for 30 songs) because he downloaded and shared it through KaZaA, a peer-to-peer network.

Since Warner Music apparently didn't bother proving any actual damages beyond the $0.99 for Tenenbaum's personal use of the song, we must assume that $21,499.01 of the award is for punitive damages.*

Tenenbaum and other activists have argued such an award is unconstitutional. The issue is "unsettled," but doesn't look good for Tenenbaum: previously, in Eldred and Grokster, the Supreme Court bent over backwards for copyright owners by, respectively, nullifying a clause of the United States Constitution and inventing an entirely new federal common law cause of action for copyright holders.

If the Tenenbaum situation had been reversed -- if Warner Music had ripped off Tenenbaum by fraudulently selling him an MP3 then revoking his access to it, which Warner (through the RIAA) claims they can do -- then there would be no question on the limit of the punitive damages. As the Supreme Court held in State Farm v. Campbell:

Our jurisprudence and the principles it has now established demonstrate, however, that, in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process. In Has lip, in upholding a punitive damages award, we concluded that an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety. 499 U. S., at 23-24. We cited that 4-to-1 ratio again in Gore. 517 U. S., at 581. The Court further referenced a long legislative history, dating back over 700 years and going forward to today, providing for sanctions of double, treble, or quadruple damages to deter and punish. Id., at 581, and n. 33. While these ratios are not binding, they are instructive. They demonstrate what should be obvious: Single-digit multipliers are more likely to comport with due process, while still achieving the State's goals of deterrence and retribution, than awards with ratios in range of 500 to 1, id., at 582, or, in this case, of 145 to 1.

(emphasis added)

The unconstitutional 145-to-1 verdict is but a tiny fraction of the 21,716-to-1 awarded against Tenenbaum. Tenenbaum's award is thus a no-brainer under existing due process / constitutional precedent: it's grossly excessive and unreasonable.

The only question is if we have one set of laws for lawsuits against big corporations and another set for lawsuits by big corporations.

Continue Reading...

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UPDATE III: The most thorough critique I've read of Iqbal is Professor Burbank's Senate testimony, available here (PDF). As an empirical matter, Iqbal has had a significant effect, particularly on constitutional rights plaintiffs:

The statistical analysis of 1,039 cases shows that 49% of 12(b)(6) motions were granted (with or without leave to amend) in the cases selected (from May 2005 to August 2009). Further, the rate of granting such motions increased from 46% of motions decided under Conley, to 48% of motions decided under Twombly, to 56% of motions decided under Iqbal. A multinomial logistic regression indicates that under Twombly/Iqbal, the odds of a 12(b)(6) motion being granted rather than denied are 1.5 times greater than under Conley, holding all other variables constant.

Moreover, the largest category of cases in which 12(b)(6) motions are filed was constitutional civil rights. Motions to dismiss in constitutional civil rights cases were granted at a higher rate (53%) than in cases overall (49%), and the rate of granting 12(b)(6) motions in constitutional civil rights cases increased in the cases selected from Conley (50%) to Twombly (55%) to Iqbal (60%).

Personally, I think the powers that be understated the degree to which cases were dismissed before, and now overstate the degree to which Iqbal will increase their likelihood of being dismissed. The odds are indeed worse now, but they're still generally 50/50.

UPDATE II: Judge Posner weighs in, wondering if Twombly and Iqbal are limited to complex cases or those with other compelling interests, such as ensuring high-level officials are not distracted from their duties by suits of doubtful merit. I have a new post referencing Posner's opinion and a separate opinion by Judge Easterbrook that throw cold water on those who believe Iqbal has doomed all but the sharpest of complaints.

UPDATE: The NYTimes has an article on the case as well, also believing it to be a death-knell for plaintiffs, noting that federal judges "have cited it more than 500 times in just the last two months." As I wrote below, citation is not the same thing as impact. The standard is not any different from what courts have been practically applying for years, except to add the word "plausible."

Indeed, you don't have to go far to see the limits of Iqbal; just last month the District Court in Padilla v. Yoo, a similar suit against a high-ranking government official, denied defendants' motion to dismiss, quoting Iqbal as follows:

“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’” Id. (citing Twombly, 550 U.S. at 557 (brackets omitted))

To reiterate: the sky is not falling on plaintiffs. They need only plead "more than a sheer possibility that a defendant has acted unlawfully," something lawyers have been doing for centuries.]

Drug and Device Law points us to an article in Saturday's Wall Street Journal:

Ashcroft v. Iqbal, released in May, will make it harder to bring a lawsuit without specific factual evidence, raising the threshold for moving a case into expensive litigation and possibly saving companies millions of dollars in legal fees. The case was overshadowed by other business rulings on consumer lawsuits, environmental and employment law and other matters in a term set to end Monday, but legal experts said it may be the most important.

"It's the case that will be cited more than any other by a factor of 100," said Tom Goldstein, partner at Akin Gump Strauss Hauer & Feld LLP and founder of the Scotusblog Web site. He called the ruling "an unexpected gift for the business community."

In the case, a Pakistani named Javaid Iqbal sued government officials over his detainment after Sept. 11, 2001. The Supreme Court ruled that Mr. Iqbal didn't have sufficient factual evidence to proceed with his discrimination claims.

"While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations," Justice Anthony Kennedy wrote in the 5-4 opinion. He cited the 2007 decision in Bell Atlantic Corp. v. Twombly, an antitrust case that outlined what plaintiffs must assert to make it through initial court proceedings.

As a result of the Iqbal ruling, businesses may find it easier to fend off lawsuits by persuading courts to dismiss complaints early in litigation.

I disagree. Maybe a handful of cases at the fringes with no factual allegations will be dismissed (most of these cases were already dismissed even prior to Twombly), but that's it. Iqbal's casual reference to pleading standards does not change the narrow focus of the actual opinion, which relates to the very specific issue of how "qualified immunity" applies to high-ranking officials in suits against the federal government for deprivations of constitutional rights.

Tom Goldstein is right that the Ashcroft v. Iqbal opinion will be cited all of the time by defendants' motions to dismiss, and will be cited by court opinions evaluating motions to dismiss, but that doesn't mean defendants will get much mileage out of it.

Rather than argue the details why, let me show you what will probably become my standard draft response to such motions:

Defendant's heavy reliance on Iqbal is misplaced. Iqbal was a Bivens action brought by a Pakistani national who alleged ethnically and racially discriminatory treatment in the post-September 11, 2001, period by numerous federal officials while he was detained for charges of defrauding the United States with regard to identification documents, charges to which he plead guilty, prompting his deportation. Iqbal, 556 U.S. ___; Slip op. 1. There was no dispute that the facts alleged by Iqbal stated a Bivens claim against all individuals directly and indirectly involved in his treatment. Id.

The narrow question in Iqbal was whether Bivens liability -- which indisputably does not extend to supervisors through respondeat superior (see Monell) -- attached where the complaint alleged "a supervisor’s mere knowledge of his subordinate’s discriminatory purpose." Slip op., 13. The Supreme Court reiterated that Bivens creates a unique, disfavored and limited cause of action disconnected from normal tort doctrines and reaffirmed that, "[a]bsent vicarious liability, each Government official, his or her title notwithstanding, is only liable for his or her own misconduct." Id.

Such a Bivens-specific holding bears no relationship to the business lawsuit sub judice. Importantly, though, and contra defendant's arguments, the Supreme Court reiterated in Iqbal that "a court must accept as true all of the allegations contained in a complaint" and that a plaintiff need only "state[] a plausible claim for relief [to] survive[] a motion to dismiss." Slip op. 14-15. Plaintiff has clearly done that here; defendants' heavy reliance on an irrelevant Bivens opinion reveals the lack of any support in existing case law for their request to throw plaintiff out of court entirely. The Supreme Court has always instructed, and continues to instruct, District Courts to assume the facts in the complaint to be true, to make reasonable inferences on behalf of plaintiff's allegations, and to deny dismissal where plaintiff has a "plausible" claim.

Finally, again contra defendants, Iqbal was specifically remanded to the Circuit Court to consider whether the plaintiff there should be permitted to amend his complaint to cure the deficiencies. Such is consistent with this Circuit's precedent, in which leave to amend is to be freely granted prior to dismissal unless such amendment is clearly futile or inequitable.

So there you go. Iqbal soundly rejects Bivens liability for high-ranking government officials merely potentially aware of misdeeds much further down the chain of command (and it reiterates the appealability of an order on qualified immunity), but that's it.

The sky has not fallen on business plaintiffs.

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An interesting opinion out of the Eastern District of Pennsylvania in Youtie v. Macy's Retail Holding, 2009 U.S. Dist. LEXIS 47383 (June 5, 2009) by Senior Judge Thomas N. O'Neill, Jr.:

On August 1, 2000, Macy's acquired all of the publicly-held shares of David's Bridal, Inc. David's Bridal is a corporation and a clothier specializing in bridal gowns and other formal wear and accessories. Plaintiff had purchased David's Bridal in 1972, expanded the operations, partnered with Steven Erlbaum beginning in 1989 or 1990 and with Erlbaum made a public offering of David's Bridal's stock in 1999. After Macy's acquired David's Bridal, plaintiff entered into a contract of employment with a division of Macy's, Macy's Retail, on or about October 1, 2001. In accordance with the terms of the agreement, Youtie served as the Executive Vice-President, Product Development and Sourcing of the David's Bridal division of Macy's Retail. On November 17, 2006, an affiliate of Leonard Green & Partners signed an agreement with Macy's to acquire David's Bridal and consummated the sale and transfer of stock of David's Bridal to the Leonard Green affiliate on January 31, 2007. As part of the transaction, Macy's subsidiary Macy's Retail assigned its employment agreement with plaintiff to David's Bridal.

In short, Plaintiff claimed that the sale of his division to another company was a termination entitling him to severance. He lost; applying Missouri law (per the contract), the Court held:

The employment contract at issue in this case is one for personal services, which, as a general rule, cannot be assigned without the consent of the employee. Alexander & Alexander, Inc. v. Koelz, 722 S.W.2d 311, 312-13 (Mo. Ct. App. 1986), citing Alldredge v. Twenty-Five Thirty-Two Broad. Corp., 509 S.W.2d 744, 749 (Mo. Ct. App. 1974). However, a mere change in the form in which a business is owned or conducted should not work to prohibit assignment. Id. at 313. Whether there is a change in partnership personnel or structure, the incorporation of a previously unincorporated business, the dissolution of a corporation or a change in corporate structure, "if there is no material change in the contract obligations and duties of the employee, there is no reason for the transfer of the rights from one entity or form to another to work an assignment putatively prohibited by the rule against assignment of personal service contracts." Id.

That's what happened here, in addition to the employment agreement itself recognizing the possibility of assignment. Hence, summary judgment for the Defendant on Plaintiff's claims.

Plaintiff probably should have left it alone:

Defendants filed an answer, affirmative defenses and counterclaims on December 17, 2007, alleging that plaintiff breached his employment agreement, misappropriated trade secrets and/or confidential and proprietary information, breached his fiduciary duty and duty of loyalty, engaged in tortious interference with business and employment relations, was unjustly enriched and engaged in unfair competition.

Uh oh. Among other allegations:

Plaintiff does not dispute that the "first cost" data at issue is the cost the manufacturer charged David's Bridal to manufacture the designs David's Bridal provided the manufacturer for its Spring 2007 catalogue. Additionally, plaintiff admitted in his affidavit that he "asked for the cost data because [] Erlbaum . . . was interested in what David's Bridal paid various manufacturers for the dresses they manufactured." Plaintiff further admits that he gave a copy of the cost sheet to Erlbaum but believes that plaintiff provided it to Erlbaum after plaintiff recovered from the surgical procedure he underwent after his January trip to Hong Kong.

Plaintiff also admits that he and his former partner Erlbaum had general discussions about Erlbaum returning to the bridal business. 

It's never a good idea to share proprietary information about your current employer with your former business partner.

Plaintiff raise a good issue; most of Defendants' claims were actually a single "trade secrets" claim:

laintiff argues that defendants' counterclaims for misappropriation of trade secrets and/or confidential and proprietary information, unjust enrichment and unfair competition are preempted by the PUTSA. The relevant section of the PUTSA provides as follows:

(a) General rule.--Except as provided in subsection (b), this chapter displaces conflicting tort, restitutionary and other law of this Commonwealth providing civil remedies for misappropriation of a trade secret.

(b) Exceptions.--This chapter does not affect:

(2) other civil remedies that are not based upon misappropriation of a trade secret; or

12 Pa. C.S.A. § 5308. The dominant view of courts in states that have also adopted the Uniform Trade Secrets Act of 1985 is that preemption exists to the extent that defendants' counterclaims are based on the same conduct that is said to constitute a misappropriation of trade secrets. See e.g., Motorola, Inc. v. Lemko Corp., 2009 WL 383444, at *10 (N.D. Ill. Feb. 11, 2009); Hecny Trans., Inc. v. Chu, 430 F.3d 402, 404-05 (7th Cir. 2005); Penalty Kick Mgmt. Ltd. v. Coca Cola Co., 318 F.3d 1284, 1296-98 (11th Cir. 2003); Savor, Inc. v. FMR Corp., 812 A.2d 894 (Del. 2002).

Defendants' counterclaims for misappropriation of trade secrets and/or confidential and proprietary information, breach of fiduciary duty and duty of loyalty, unjust enrichment and unfair competition involve plaintiff's conduct of requesting and disclosing "first cost" data to Erlbaum. These claims each refer to the same "first cost" data and are wholly based on the same conduct as the conduct that comprises a misappropriation of trade secrets claim. The "first cost" data is the sole information at issue in this case and it is either a trade secret or something less. Thus, these counterclaims are preempted only if the "first cost" data at issue constitutes a misappropriation of a trade secret.

And that's what would have kicked out most of these claims, except that the parties forgot to brief if the information was actually a trade secret:

A trade secret under the PUTSA is defined as:

Information, including a formula, drawing, pattern, compilation including a costumer list, program, device, method, technique or process that:

(1) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.

(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

PUTSA, 12 P.S. § 5302.

However, neither party has properly briefed whether this information qualifies as a trade secret. Plaintiff argues that the PUTSA preempts defendants' counterclaims but states, without sufficient legal analysis, that the information does not qualify as a trade secret to satisfy the PUTSA because it was readily available to anyone who asked for it. These arguments are contradictory; plaintiff cannot have it both ways. See Callaway Golf Co. v. Dunlop Slazenger Group Am., Inc., 295 F. Supp.2d 430, 437 (D. Del. 2003), stating that arguing that information does not constitute a trade secret and also that other claims are preempted by the Trade Secret Act is contradictory. Defendants did not respond with legal analysis on whether the "first cost" data constitutes a trade secret; instead they merely requested leave to file an amended counterclaim complaint if I find such information to be a trade secret. As this information may qualify as a trade secret, I will not find that the data satisfies lesser standards than those required for a trade secret merely because the issue has not been properly briefed. For this reason, I cannot find that defendants' counterclaims of misappropriation of trade secrets and/or confidential and proprietary information, breach of fiduciary duty and duty of loyalty, unjust enrichment and unfair competition are preempted at this time because defendants may still be able to recover under such theories in the event that the "first cost" data does not constitute a misappropriation of a trade secret under the PUTSA. Cenveo Corp. v. Slater, 2007 WL 527720, at *3 (E.D. Pa. Feb. 12, 2007), stating "that the cases holding that the Trade Secrets Act does not preempt common law tort claims when it has yet to be determined whether the information at issue constitutes a trade secret take the better approach." 

 

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I've written before about Contingent Fee Business Lawyers As Venture Capitalists and Lawyers Who "Don't Take Possible Losers," so I was thrilled to read the NYTimes yesterday:

Richard W. Fields says he has come up with a win-win financial strategy for the downturn. He is investing in lawsuits.

Not in trip-and-fall cases, mind you, but in disputes that are far larger, more costly and potentially more lucrative, often pitting major corporations against each other.

Mr. Fields is chief executive of Juridica Capital Management. which runs a fund that invests in one side of a lawsuit in exchange for a share of any winnings.

Larry Ribstein has the most thorough commentary on it:

Litigation financing can be viewed as simply another way for the capital markets to help firms exploit productive assets. Of course there are special problems relating to outsiders stirring up claims by simply funding actions by others (maintenance), particularly where the investor gets some of the proceeds (champerty) or the claims are groundless (barratry).  Also, confidentiality and privilege rules may forbid disclosure of litigation information to outside funders, making these particularly difficult investments. The basic problem, as discussed in my earlier blog post, is that "it turns litigation into a business rather than the search for corrective justice."

With respect to the excessive litigation point, it's worth noting that the hedge funds aren't financing the most abusive types of strike suits. These aren’t consumer class actions, but b2b litigation. ...

I asked Larry in comments for some support for that latter point, to no avail, and I stick by my point that "There's no shortage of patent, copyright, antitrust and securities regulation defense attorneys willing to opine that those 'b2b' areas are as ripe with abuse as any other legal field."

In any event, we already have an industry in which billions (potentially trillions) of dollars of investments are pooled to fund litigation directed towards a particular result. We call it "insurance."

There is a good reason that plaintiff's trial lawyers up against insurance companies (not just in personal injury cases like wrongful death or medical malpractice, but also a variety of "b2b" claims like director & officer liability) accept it as an article of faith that they will not get any reasonable settlement offers until the eve of trial. The economic relationship between insurance companies, defense lawyers, and policyholders creates a situation in which no one mentally accepts the legitimacy of the claim -- much less a reasonable value of it -- until they are staring down the barrel of a verdict.

Thanks to defense liability insurance, even the most obvious of cases will be met with denial and furious litigating of any and all liability, including a denial of basic common sense principles such as a truck driver being the "agent" of the trucking company or a hospital having a duty to its patients.

Why?

To roll the dice: spending a couple thousand dollars litigating the issue could save them the cost of the entire judgment, or at least cause the plaintiff and their lawyer to worry and accept a smaller settlement.

So count me as deeply unimpressed by fears that these hedge funds will spur frivolous plaintiff's litigation: we've already got plenty of frivolous defense litigation and no one raises a peep.

Moreover, as I've mentioned time and again, investing in lawsuits is a risky business. The potential downside is 100%. Look at Juridica's cautious business model:

The investing companies say that because they do not take control of the lawsuit from the company and lawyers waging it, their most important task is identifying cases likely to produce a substantial return. That means, for example, rejecting claims that raise novel legal questions or that will probably end up before a jury, Mr. Fields said.

“Juries are a coin toss,” and that is too much uncertainty, he said. The company also avoids cases where the outcomes are difficult to predict because they could draw political attention or could be reversed on appeal, and cases in which the other side lacks deep pockets.

Let me reiterate that: these litigation investment hedge funds only take non-jury cases with simple issues and low odds of appeal.

That's a small fraction of the litigation and trial market, one with no "frivolous" cases at all. The funds are investing solely in the cases they believe are very likely to win.

The "danger" of frivolous cases is thus non-existent: the real "danger" is when plaintiffs with meritorous cases can't afford to pursue them.

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The Am Law Litigation Daily brings us important news:

Last fall, when the U.S. Court of Appeals for the Federal Circuit took a look, en banc, at the Patent and Trademark Office's rejection of Bernard Bilski's application for a patent on a method to hedge risk in commodities trading, Bilski was represented by The Webb Law Firm, a little-known Pittsburgh shop. Bilski lost in a landmark ruling that significantly tightened the standards for so-called business methods patents. But he didn't give up. He brought in new lawyers from the Washington, D.C., IP powerhouse Finnegan, Henderson, Farabow, Garrett & Dunner and petitioned the U.S. Supreme Court to hear his case.

On Monday, Bilski and his new lead counsel, Finnegan partner J. Michael Jakes, learned that the high court had granted their petition for certiorari. (Akin Gump's justly celebrated Scotus Blog has links to all the Bilski documents, including the Supreme Court's order, the Federal Circuit ruling, and briefs from the petitioner, respondent, and amici.) The case, Bilski v. Doll, will center on whether business methods--intangible processes and techniques--are eligible for patents if they're not tied to particular machines or apparatuses and don't transform an article into a new state or thing. Here's Incisive Media Supreme Court correspondent Tony Mauro on the Court's grant of certiorari and here's Joe Mullin of IP Law & Business on hints various justices have dropped on how they're likely to rule.

It's a big deal for the Supreme Court to grant certiorari on a patent case decided by the Federal Circuit, given the Federal Circuit's experience and expertise in patent law. If you're interested in the case, the article linked above is thorough and entertaining.

The news gives us an opportunity to talk about the most important thing a Supreme Court Justice does: agree or disagree to grant the writ of certiorari.

These days, after the Judiciary Act of 1891 (the "Evarts Act"), which created the Federal Circuit Courts of Appeal, and the Judiciary Act of 1925 (the "Certiorari Act"), which exercised Congress' constitutional power to control the flow of appeals, the only cases with a right to be heard in the Supreme Court are those specified by the US Constitution as within the "original jurisdiction" of the Court:

In all cases affecting ambassadors, other public ministers and consuls, and those in which a state shall be party, the Supreme Court shall have original jurisdiction.

That is to say, these rare cases can be filed directly with the Supreme Court. Congress further required (by calling it "exclusive" jurisdiction) disputes between States be filed with the Supreme Court.

Thus, for the vast majority of cases, the parties must first complete all of their appeals through state or federal appellate courts, after which they file a "writ of certiorari" with the Supreme Court requesting the Court hear their case. About 8,000 of these writs are filed every year. The Supreme Court grants (through a vote of at least four justices in favor) about 1 or 2% of them.

Why is this so important? Of course, a Supreme Court decision is always a big deal, affecting the livelihood and liberty of millions of people.

But there's another reason, too, one that goes to the heart of debates about "judicial temperament:" the law of unintended consequences.

Just as the best-laid plans of mice and men go oft' astray, so too do Supreme Court decisions:

Appellate judges who don't first serve as trial judges are prone to stupid decisions.  Not because the judges themselves are stupid, of course, but because they literally don't know what they're doing. Example: Scalia insisting that his 2006 Davis decision imposed a constitutional test that was "objective and quite 'workable'." 

After three years, that test has come to mean something different in every state - literally, without exaggeration, different in each of the 50 states.  It produces contradictory results on a daily basis. It's become a constitutional Rorschach test, revealing judges' biases with hi-res fidelity.

So was Scalia lying?  Of course not.  How could he have known enough to be able to lie about what he was doing?  He's never been a trial judge, never practiced criminal law, and hasn't practiced any kind of law since 1967.  He was just guessing.

(via Sentencing Law & Policy)

Since these days actual ideology is off the table in Supreme Court confirmation hearings (everyone claims they don't want to "prejudge" the issue (PDF), even to the extent of neither agreeing nor disagreeing with existing case law), we should at least examining when, how and why a potential Justice would grant the writ.

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In the world of venture capitalism, Fred Wilson’s blog, “A VC” is essential reading, and Fred is particularly generous with his insight and information about the field.

I read Fred’s blog partly because it’s darn interesting and partly because there are a lot of parallels between venture capitalism and contingent fee litigation. We both take on a lot of risk and invest a lot of time and money for the potential of a big payoff down the road, as compared to regular and steady income.

Yesterday, Fred wrote an interesting post about the venture capitalism industry as a whole, and how the math doesn't add up. There are just not enough “exits” (through a merger / acquisition or an initial public offering) to justify the size of the venture capitalism industry as a whole.

So I commented, he responded, and we had a short conversation about the economics of contingent fee litigation and the potential for creating a market for contingent patent infringement defense.

But that’s not what this post is about. At the end, Brad Feld chimed in: 

If they did one-way loser pays (e.g. plaintiff has to cover defendants cost if the plaintiff loses) and they prohibited contingency fee relationships that would solve a lot of problems.

That’s a common sentiment among businesses, from big corporations to entrepreneurs to mom and pop stores, a sentiment that usually disappears the moment they need an attorney but can't afford the risk of paying for years of litigation without a guaranteed return.

I’ve written before about loser pays and how it’s unfair to penalize the party that bears the burden of proof on an issue from failing to meet that burden, and that loser pays serves as a strong deterrent against meritorious claims.

But let me focus on the contingent fee aspect. As part of my discussion with Fred, I talked about some of the numbers when the plaintiff wins a big case:

[A big win in the litigation business] depends on the resources devoted to it, so let me give some examples based on actual costs and number of attorneys on the case.

(Someone might ask, "why not use billable hours for resources?" Well, contingent fee attorneys almost never devote themselves entirely to one case, and each minute spent on the case instantly becomes a sunk cost, so we generally ignore time already spent on a case and focus on two things: actual costs and opportunity cost due to the lawyer(s) having to turn down other work. I refer to the latter as "bandwidth," i.e. the availability of a lawyer to take on other work. Keep in mind also you're paying these attorneys (including yourself) a salary, and thus have a significant carry cost, although the salary on a 'per case' basis is quite low given how most attorneys have over 10 cases, even those on substantial matters.)

A large-damages personal injury / product liability / medical malpractice lawsuit can be done by one or two attorneys and costs below $250,000, with recovery of $5-$10m within 1.5-3 years. That's a big win: you put in $250k out of pocket, likely didn't impair bandwidth, and recovered $2-$4m in attorneys' fees.

The numbers aren't too much different for most small business cases, with breach of contract, unfair competition, etc.

A regional-market antitrust / mid-sized patent infringement case can be done with 3-6 attorneys, $1-$5m in costs, with a recovery of $15-$50m in 2-4 years. Another big win: you put in $1-$5m out of pocket, moderately impaired bandwidth, and recovered $7-$20m in attorneys' fees.

A massive shareholder class action / national antitrust / large patent infringement case can be done with 10-40 attorneys, $10-40m in costs, and a recovery of >$100m in 4-10 years. Think of the Blackberry patent infringement case, which ended with a $612m settlement and over $200m in fees (resulting in profits-per-partner than year over $4m).

Big money, right? Why not file lawsuits all day long?

The difference is, those are the big winners, the venture capital equivalent of starting a company that gets bought out by Microsoft or which enters the public market with a heralded IPO proceeded by weeks of favorable press, like Google. It’s great, but it’s also rare.

Day in and day out, the primary thing a contingent fee law firm does is spend lots of money. In addition to all the normal costs of a business (rent, staff, etc.), you have to pay your attorneys salaries which are competitive in the market, even against hourly billing firms, and you have to dump loads of money and time into cases for experts, motions, discovery, trials, appeals and negotiations, none of which earn you a dime until the very end.

So I'd say it's no different from Brad's or Fred's ventures: we have as strong an incentive against taking frivolous or vexatious claims as they have against investing in unprofitable businesses. The last thing I want to do is spend years of my life and five, six or seven-figures pursuing a case that returns nothing. Like a venture capital fund, our contingent fee law firm turns down far more cases than it accepts.

Do vexatious or extortionate law suits happen? Sure, potentially more for cases which are high stakes and expensive to defend, like shareholder class actions or patent infringement. That's why I think a limited form of fee-shifting is appropriate, like when the patent being sued upon is declared invalid as a matter of law.

But loser pays and no contingency would close the courthouse doors to all but the wealthiest of parties, since no one would be able to afford pursuing even the best of claims without a massive war chest, particularly in the extremely-expensive shareholder class action, antitrust and patent infringement contexts.

It'd be like stripping venture capital funds of limited liability and restricting them to using secured debt, not equity, to fund investments, forcing them to do little more than invest in the biggest companies in the world.

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Via @walterolson, CQ Politics reported yesterday:

The Senate rejected a bid Thursday to impose new limits on whistleblower awards as it moved toward passage of legislation to beef up the government’s ability to combat financial fraud.

By 31-61, the Senate rejected an amendment by Jon Kyl , R-Ariz., that sought to set a $50 million maximum on the amount that a whistleblower could receive through a False Claims Act lawsuit to recoup taxpayer funds lost to fraud. Currently, awards can reach 30 percent of the total recovered for the federal government, if a judge approves that much.

Kyl said whistleblowers who pinpoint fraud by government contractors and other recipients of taxpayer funds “deserve to be compensated when they save the government money.” But he said the current percentage formula can result in some successful litigants being “grossly overcompensated.”

Senate Judiciary Chairman Patrick J. Leahy , D-Vt., sponsor of the antifraud bill, and Sen. Charles E. Grassley , R-Iowa, author of the 1986 False Claims Act provisions that reward citizens for suing on behalf of taxpayers, opposed Kyl’s effort to cap the awards.

The law, Leahy said, “is very well balanced the way it is, with a judge having to make a final decision on the award. ...I don’t want to fix something that’s not broken.”

Grassley said whistleblower suits under the False Claims Act have recovered $22 billion for the government since 1986.

False Claims Act cases, sometimes known as qui tam (an abbreviation of qui tam pro domino rege quam pro se ipso in hac parte sequitur, meaning "[he] who sues in this matter for the king as [well as] for himself"), are unique and complicated beasts dating back to the 13th century in England. 1986 is when the most recent amendments to the Act were passed.

The cases are initially filed in under seal for review by the U.S. Attorney, who then decides if they want to pursue the action themselves. If they decline, then the whistleblower can proceed as a "relator" of the United States, fighting the action on the government's behalf. There's already a huge backlog of these cases waiting for Department of Justice review, unable to proceed.

I don't blame them for the delay. The cases combine the legal complexity of interpreting federal regulations and procurement contracts with the factual difficulty of proving mens rea in a white collar criminal case, making them difficult and time-consuming just to screen, much less pursue.

The reason whistleblowers and law firms take them -- with extraordinary risk to the whistleblower's career and livelihood, and substantial investments in time and money by the law firm, which usually represents the plaintiff on a contingent fee -- is because they can result in tremendous damages if proven at trial. Under 37 U.S.C. § 3729, anyone proven to have knowingly presented a false claim "is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000 [for each false claim], plus 3 times the amount of damages which the Government sustains because of the act of that person," as well as "costs of a civil action brought to recover any such penalty or damages."

The whistleblower -- assuming they can prove entitlement by, among other elements, being the "original source" of the information -- gets a portion of the recovery, which they then split with the lawyers who represented them on the contingent fee.

The question is: why would anyone want to cap these incentive awards at $50 million?

The vast majority of qui tam / False Claims Act cases don't get anywhere near that. Some recent large settlements have been for $325 million against Northrop Grumman, with the plaintiff / relator receiving $48.7 million, and for $128 million against Network Appliance, with the plaintiff / relator receiving $19.2 million. One of the very few cases in which the award broke $50 million was the $1.4 billion Eli Lilly Zyprexa case, in which the four different plaintiff / relators together received $78,870,877, about 5% of the overall recovery. It's unclear if even that would have hit Senator Kyl's proposed cap, since it was divided among the plaintiffs.

The answer becomes clearer when you talk about massive cases, particularly those in which the government declines to intervene.

Assuming a 40% contingent fee agreement, a $50 million cap results in a $20 million cap on the attorney's fees. Sounds like a lot until you consider that litigation and trial over the meaning of a few documents and involving only half a million pages of documents, 124 trial witnesses, and 80 depositions, can cost $60 million for each side. For the In re Visa Check/Mastermoney Antitrust Litigation, 297 F. Supp. 2d 503 (E.D.N.Y., 2003), had plaintiffs' lawyers been billing by the hour, they would have worked in just the litigation the equivalent of $62,545,603 -- trial would have been extra.

But the plaintiffs' firms weren't billing by the hour -- they took on the risk themselves, much as most False Claims Act firms do. Can you imagine what it would take to actually prove at trial, as the DoJ press release says, "Northrop provided and billed the National Reconnaissance Office (NRO) for defective microelectronic parts, known as Heterojunction Bipolar Transistors (HBTs)?"

What about something bigger? What if there are serious problems with more than just the "Heterojunction Bipolar Transistors" in the $337 billion F-35 joint strike fighter? What if private military contractors in Iraq have been overbilling the more than $100 billion they've received? What about the next Zyprexa fraud?

Such cases would be enormously costly, time-consuming and difficult to pursue, undoubtedly many times larger than the $120-million-in-fees Princeton case and at least as large as the more-than-$120 million Visa antitrust case. Most importantly, such would be exceedingly risky, as the plaintiffs would have to prove "knowing" fraud among millions of documents, thousands of transactions, and hundreds of pages of complicated regulations.

What if the Department of Justice wasn't able to commit the resources to do that? The government can't always get David Boies and his team, eager to promote their new firm, for half price, like they did in the antitrust case against Microsoft.

Keep in mind, the core purpose of qui tam is not only to encourage whistleblowers, but to outsource the heavy lifting of carrying a lawsuit through to recovery. As noted by Justice Scalia, "The FCA can reasonably be regarded as effecting a partial assignment of the Government’s damages claim," critical because "the assignee of a claim has standing to assert the injury in fact suffered by the assignor. " Vermont Agency of Natural Resources v. United States ex. rel. Stevens, 529 U.S. 765 (2000).

An upper limit on recovery of $20 million -- or even, say, $40 million, if we doubled the contingent fee to 80% -- isn't enough to justify pursuing a case of that magnitude, which leaves us, the taxpayer, holding the bag for someone else's fraud on the government.

Senator Kyl has never been a fan of open government. Is there a particular case brewing that he has in mind? 

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The WSJ has a fascinating story about Justice Stevens' investigations into the true authorship of the works of William Shakespeare, which includes this intriguing chart:

Tell the truth: that's not what you expected.

It transcends ideology; Scalia, O'Connor, and Ginsburg all have differing views, none of them being William Shakespeare himself, which is the academic consensus.

Next time someone -- including yourself -- gives all the reasons they "know" how a judge will rule, keep in mind that all that glisters is not gold.  

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My interest was piqued by this story in The Legal Intelligencer: 

In a federal lawsuit, professors David Rudovsky of the University of Pennsylvania and Leonard Sosnov of Widener Law School claim that the December 2008 supplement, or "pocket part," to their book, "Criminal Procedure — Law, Commentary and Forms," was so poorly researched that it will harm their reputations if allowed to remain on library shelves.

In an injunction hearing Tuesday, the professors' lawyer, Richard L. Bazelon of Bazelon Less & Feldman, argued that West should be ordered to notify all recipients of the supplement that Rudovsky and Sosnov were not the authors and that any unhappy customers may demand a refund.

...

[U.S. District Court Judge John P.] Fullam said he had just finished reading Rittinger's most recent brief in the case and said, "I'm disheartened by the tone of it — and you seem to be following in that same tone here today."

Adopting an almost somber tone himself, Fullam delivered a short lecture on manners.

"I'm much less interested in whether you have a reason to be angry with your opposing counsel and much more interested in the merits of the case. I don't take kindly to briefs which attack opposing counsel and make snide comments right and left, and yours do. And you're doing the same thing here today — you're more critical of your opponent than you are of the facts of the case," Fullam said.

So I jumped on PACER and looked at the offending brief, which I've uploaded here.

Here's part of the introduction:

In short, plaintiffs are unhappy with West's editing and publishing of the 2008-2009 pocket part - including the fact that plaintiffs' names are listed as co-authors on that pocket part along with West's "Publisher's Staff' - and plaintiffs want this Court to order West to publish to the world that the 2008-2009 pocket part cannot be relied upon for any purpose.

Plaintiffs' requested injunction should be promptly denied because, among other reasons, plaintiffs face no irreparable harm and have no likelihood of success on the merits of their claims. Putting aside for the moment the sheer over-breadth and vagueness of what plaintiffs mean when they ask the Court to enjoin West from "using" the Treatise - which in and of itself is a reason to deny the injunction - the plaintiffs' request lacks legal merit.

Emphasis added. West's argument has four sections, corresponding with the four elements of a preliminary injunction:

To justify a preliminary injunction, a district court must be convinced that the moving party has established: (i) a likelihood of success on the merits; (ii) that it will suffer irreparable harm if the injunctive relief is not granted; (iii) that the harm suffered by the moving party absent the requested injunction will outweigh the harm to the nonmoving party if the injunctive relief is granted; and (iv) that the public interest favors granting the injunctive relief. Shire U.S. Inc. v. Barr Laboratories Inc., 329 F.3d 348, 352 (3d Cir. 2003).

Here's how the respective sections end:

1. Based on the foregoing, if there ever was any harm to plaintiffs (and West disputes that there ever was any), that harm was cured by the March 2009 letter and the 2009 Cumulative Supplement, and any assertion by plaintiffs to the contrary is merely a poor attempt to feign irreparable injury.
2. For all of these reasons, plaintiffs' defamation claim is specious and not likely to succeed.
3. Because West will face great harm if the requested injunction forcing West to act is granted, and plaintiffs would suffer virtually no harm from the denial of their motion, the balance of the harms weighs heavily in favor of West.
4. Plaintiffs, nonetheless, continue to press their unmeritorious claims, resulting in the waste of much time, money, and resources by both the parties and now the Court. The public interest would be better served by denying plaintiffs' obviously unmeritorious motion for an injunction.

(Emphasis mine).

Outrage and scorn are not wholly forbidden in front of a judge or a jury but you have to earn it.

An opening brief filled with sarcasm will perturb a judge doing his or her best to reserve judgment until they've heard both sides just as much as an opening statement filled with indignity will repulse a jury doing their best to be fair and impartial until they've heard all of the evidence.

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Amy Kolz has an extensive article at The American Lawyer detailing a merger debacle which settled last winter for $1 billion after "Vice-Chancellor Stephen Lamb [of the Delaware Chancery Court] declared that Wachtell's client, an Apollo Management, L.P., portfolio company called Hexion Specialty Chemicals, Inc., had 'knowingly and intentionally breached' its merger agreement with Huntsman Corporation in a deliberate effort to walk away from their $10.6 billion deal."

If you're interested in the subject, you should read the article.

I highlight three elements fundamental to their defeat, and the defeat of many business litigation plaintiffs:

Evading The Obvious Spirit of the Agreement:

Huntsman and its lawyers at Shearman & Sterling and Vinson & Elkins were able to negotiate a merger agreement that all but locked Hexion into the acquisition. There was no "financing out," which meant that Hexion would have to pay a $325 million termination fee if it failed-despite using best efforts-to obtain debt financing. The material adverse effect clause, as Lamb would later remark, was also "narrowly tailored." And though one of the parties had to deliver a solvency letter to the banks funding the deal, there was no "solvency out" for Hexion.

The deal also included a provision that later proved harmful to Apollo. Though the agreement capped Hexion's liability at $325 million if it couldn't complete the deal despite making "best efforts," it allowed for uncapped damages in the event of a "knowing and intentional breach of any covenant" by Hexion, a provision more often seen in deals with strategic acquirors.

If you want to be able to back out of an agreement, leave in place mechanisms by which you can. Huntsman smartly negotiated an agreement locking Hexion / Apollo into the deal.

I've seen plenty of sophisticated individuals and business make or break contracts in a manner charitably described as commercially unreasonable. I can't fix those mistakes. If you walked away from a good deal because you were afraid, I can't enforce it. If you consented to an air-tight contract because you desperately wanted the deal, I can't undo it. There's a lot I can do, but where the case would revolve around an issue fairly negotiated and clearly incorporated into the contract, that usually ends the story unless you can show fraud or fraudulent misrepresentation.

I don't know what fee arrangement Apollo had with Wachtell; Wachtell does a fair amount of contingent fee work, particularly in the mergers & acquisitions arena, and it seems like they really believed in their case, as Marty Lipton apparently assured Apollo victory at trial.

But that's not always the situation. We represent business litigation clients on a contingent fee, most of whom quickly pick up on the idea of a partnership in the litigation. Frankly, if your lawyer isn't willing to shoulder some of the risk of your lawsuit, you should ask yourself why not.

Making The Facts Fit Your Lawyer's Strategy:

Apollo arrived at the meeting, according to testimony from Apollo partner Jordan Zaken, focused on the contract's material adverse effect clause: If Huntsman's declining numbers constituted an MAE, Hexion could walk away without even paying the deal's $325 million termination fee. But Wolinsky had to know that was a long shot. Delaware courts have never found a MAE in the context of a merger agreement, and Wolinsky himself helped to litigate the precedent-setting case on the issue, IBP, Inc. v. Tyson Foods, Inc., in 2001.

Instead, Apollo and Wachtell began to consider the combined company's potential insolvency as a possible way out of the merger. The strategy was certainly intriguing. If the merger would result in an insolvent company, the banks could refuse to finance it, leaving Hexion with no choice but to abandon the deal. And if it were the banks-not Hexion-scuttling the deal, Hexion would be liable for, at most, the breakup fee.

Lawyers are smart, creative and innovative (or should be). They can change their strategies to meet a wide variety of fact patterns.

But facts are stubborn things. Trying to create facts, even in the midst of litigation, create a huge risk that the judge or jury will find your whole case to be a farce constructed for their benefit, which is what happened here: Judge Lamb ruled that insolvency wasn't even ripe for judgment.

Voiding Your Legal Protections, Like Attorney-Client Privilege:

Wolinsky explained that Wachtell was potentially interested in a formal solvency opinion, but also wanted to hire Duff in a "consultative arrangement to assess the solvency analysis," according to testimony from Duff's Philip Wisler. The firm would use Duff & Phelps, in other words, for two roles: a litigation consulting team that would provide various financial analyses to assess the possibility of deal litigation, and an opinion team that would be engaged if Hexion decided "to go forward with a particular course of action," namely litigation to end the merger.

...

From the beginning, Duff's efforts to separate the consulting and opinion teams were imperfect, at best. Wisler, for instance, attended the May 20 kickoff meeting for the litigation consulting team at Apollo's New York offices, even though he was to be the author of the insolvency opinion. The same Duff expert performed modeling work for both teams. And litigation team leader Pfeiffer, at Wachtell's request, e-mailed Wisler various deal models for the opinion analysis; Wisler later testified that he was unaware he was supposed to be walled off from Pfeiffer's work.

...

The blurry line between Duff's consulting and opinion work would later come back to haunt Wachtell in Delaware. Vice-Chancellor Lamb ultimately concluded that Duff's consulting assignment cast doubt on the objectivity of its solvency opinion. Moreover, the dual role destroyed any potential work-product privilege claim over the Hexion team's communications with both the Duff litigation consultants and solvency experts. Duff had to provide comprehensive discovery to Huntsman, which was a huge gift to Huntsman's Vinson & Elkins litigators.

Remember the Watchmen suit where a witness' testimony was so guarded and unhelpful the Court precluded the witness from testifying on the subject again, thereby warranting summary judgment?

If you misuse or abuse the law's protections and privileges, you run the risk of having them deemed waived or void by the court, as happened here. It's the same when clever businesses set up a variety of undercapitalized or alter ego LLCs and S-Corporations to evade liability -- odds are good the court will respond by striking the house of cards and seeing what's left standing, often nothing.

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At the National Law Journal:

The American College of Trial Lawyers and a legal think tank have called for a sweeping overhaul of civil discovery rules to curtail expensive, time-consuming battles for documents, in a study released on March 11.

The most radical of the changes would impose strict limits on discovery after initial up-front disclosure by both sides.

...

The 30-page report contains more than two dozen proposals and general principles for overhauling the discovery rules used in both federal and state courts. It was an 18-month joint project of the ACTL and the Institute for the Advancement of the American Legal System at the University of Denver.

Saunders said the task force, drawn from the experienced trial lawyers of the ACTL, came from both the plaintiffs' and defense bar. The proposals fall no harder on the plantiffs' bar than on the defense, he said.

There's a lot to be said about this report; let me start with the most basic problem.

When I file suit, I generally have my client's story and a little bit of paperwork. The defendant possesses the bulk of the proof. If I do not pry deeply into the defendants' materials, I will lose, either at the inevitable summary judgment motion that blames me for not having the evidence I was denied, or at the trial where a sweet-talking defense lawyer points their finger at my client demanding "where's the proof?"

Under the current, supposedly excessive discovery rules, more than half of my discovery requests are already met with unfounded objections like "unduly burdensome" or "not reasonably calculated to lead to discoverable evidence," objections often sustained by courts which already apply de facto limits on discovery in an effort to move cases along. If you want a glimpse of how quickly these judgments are made by courts (as a matter of necessity given the volume), spend a morning in Philadelphia City Hall's Courtroom 285, where 200+ discovery motions are decided before lunch.

The ACTL proposals dramatically raise the incentive defendants' already have in filing frivolous objectives by giving defendants all new bases upon which to object, creating whole new anti-discovery principles such as "Proportionality should be the most important principle applied to all discovery" and "All facts are not necessarily subject to discovery." Yet, even as they greatly expand the field of possible objections, the ACTL proposals take no steps towards reducing the filing of frivolous objections.

Thus, my case is supposed to be held to defendants' self-selected "initial disclosures" followed by time-pressured "limited" additional discovery, but defendants suffer no consequences whatsoever if they initially disclose a tiny fraction of the relevant information then frivolously object to every last one of my requests, tying up the courts (and my practice) by forcing judges to determine the "limited" nature of every last discovery request.

Putting it all together: the proposals eviscerate plaintiffs' ability to seek out evidence in discovery while increasing defendants' incentives to file excessive objections.

I wouldn't say such a lopsided outcome "falls as hard" on plaintiffs as defendants; for contingent-fee plaintiffs' lawyers, it's crippling, as it hampers their ability to prove their cases while also making discovery more time-consuming, whereas for hourly-paid defense lawyers, it's a goldmine, permitting them to litigate the heck out of a case before inevitably winning it. Hourly-paid plaintiffs' lawyers (a rare beast that appears largely in the mid-to-large-size corporate world) get a boon as well, even if they keep losing their cases, too.

If the ACTL truly wants to make discovery more just, speedy and efficient, I can see three easy ways to level the playing field under these proposals:

1. Mandate spoliation and/or adverse inference sanctions for parties that do not produce adequate initial disclosures in a timely fashion;
2. Modify the summary judgment burden of persuasion to eliminate the non-movant's requirement to produce specific evidence in rebuttal (since they're less likely to have it);
3. Mandate attorneys' fees and/or sanctions against parties which lose (not merely "frivolously file," since courts rarely hold that) motions for protective orders and other discovery objections.

To put it another way: the reason I have to send so many interrogatories and requests for production of documents is because fewer than 1 in 10 gets a candid answer, usually then only after sending threatening letters and filing a motion. Put some teeth behind the principle of "disclosure" and then we'll get somewhere.

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Paul Lippe at the AmLawDaily opines that corporate spending on BigLaw will go down over the next few years, imperiling the "leverage" model whereby equity partners "leverage" their own time by delegating much of their work to associates, whom they bill out at a substantial premium. BigLaw leverage runs from one associate for each partner up to eight(!) associates per partner. Here's two of Lippe's reasons why:

First, associate time is a pricing mechanism, not an indicator of value. Like so much in the modern law firm model, the explosion in associate hours, rates, and leverage began with the Cravath IBM antitrust defense in the 1970s and 1980s, when the firm discovered that in the quintessential "bet the company" case IBM would willingly pay full freight for associate time on massive and pretty routine document review, and that in turn would drive up Cravath's profits dramatically. Since this wasn't particularly compelling work for the associates, the firm had to raise salaries to hold onto folks, triggering the great associate salary escalation.

Second, clients have always recognized that associate time is overpriced. Every client I know views associate time as the price for getting access to partner time and to the firm "brand." In truth, there are two billable hours: the partner's, which should reflect deep expertise and judgment about the client, the law, and best practices, and the associate's, which is generally spent on some form of information processing, which clients recognize as relatively poorly managed compared to other arenas of information processing. As Susan Hackett, general counsel of the Association of Corporate Counsel, recently put it, "I don’t have a problem with the $1,000-an-hour lawyer, but the $350-an-hour junior associate isn't worth it."

(emphasis mine)

I agree with Lippe's final conclusion that firm revenues will go down, forcing firms to look for profit elsewhere through alternative fee arrangements (contingent fee, fixed fee, blended fee, etc), as I've discussed before.

But the two reasons given above are fundamentally inconsistent with one another. If IBM will "willingly pay full freight for associate time on massive and pretty routine document review," then they obviously find it "worth it" to pay a junior associate $350-an-hour to comb through documents. It's not like these arrangements developed by accident; leverage has been a long, slow dance between BigLaw and Corporate America.

But why are companies willing to pay such outsized attorneys' fees? Because if you're the type of in-house counsel or executive who demands a "$1,000-an-hour lawyer" at the century-old firm in a famous building in Manhattan, then you're almost certainly the type of person who would throw a fit if you learned that some loser from Fordham or Vanderbilt or -- the horror! -- a state-supported law school was doing document review in a third-rate hillbilly village like Cincinnati or Albuquerque.

But the bigger issue is: big companies that hire big firms aren't looking for "value," they're looking to show to their opponents, competitors and themselves that they hired "the best."

Sure, there's internal pressure for executives and general counsel to keep legal costs in line, but there's far more pressure to "spare no expense." Even moreso, if things go wrong -- as they often do in corporate transactions or corporate litigation -- then who takes the blame?

An executive or vice president who put down six, seven or eight figures to get "the best" firm "to go all out" will rarely shoulder the blame when the bigshot firm adds 179 contracts to the billion-dollar Lehman / Barclay deal or reveals the $65 million-dollar confidential Facebook settlement.

What if that had happened after a VP or general counsel had smartly set up a monthly flat fee with a non-Manhattan boutique? The fear alone keeps many big companies firmly in BigLaw's grasp.

And that's just basic errors -- what about "bet the company" or big ticket litigation? No one ever got sacked for hiring Cravath, Wachtell or Sullivan & Cromwell and losing miserably. The same cannot be said for executives or VPs who were "cheap" and hired some "lesser" firm.

Finally, there's the psychological "leverage" that clients think they have when name-dropping a big firm with hundreds of lawyers, as if the whole firm is prepared to storm the bastille. Given the way people talk about some of these firms, I sometimes wonder if companies believe that judges decide cases on numerical superiority alone.

Overall, the internal dynamics in big corporations are far more important in determining the biglaw market than objective evaluations of "value." When all is said and done, complaints about leverage are largely that -- complaints. If they wanted to do something about it, there's an ample market of boutique firms ready and waiting, firms which, like mine, have no trouble picking up corporate clients where the leadership is focused protecting the company, not their own backside.

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The San Francisco Chronicle writes,

The Web 2.0 movement, which ushered in an interactive Internet, sought to put power in the hands of the people by tapping the so-called wisdom of the crowds to change the world - and to keep such a digital democracy in check.

A decade later, as defamation lawsuits have begun to mount, some are questioning the wisdom of the crowds, and wondering if it hasn't turned into mob rule.

"I don't know why this has taken so long," said Andrew Keen, author of a controversial book, "The Cult of the Amateur: How Today's Internet is Killing Our Culture." "The Internet is a culture of rights rather than responsibilities. We have no coherent theory of digital responsibility. The issue has broken through, broken out of Silicon Valley - now it affects real people with real reputations to defend."

I guess I'm supposed to be impressed by the "rights" and "responsibilities" distinction. I'm not. Every legal "right" is an enforceable legal "responsibility" upon another.

Take the First Amendment. The right to free speech imposes on the government the responsibility -- whether the government wants it or not -- to let you speak freely.

But back to the subject at hand, defamation law:

Meanwhile, the review site Yelp, based in San Francisco, has found itself in the crosshairs of the free e-speech debate.

Yvonne Wong, a pediatric dentist in Foster City, recently sued Los Altos couple Tai Jing and Jia Ma after they criticized her treatment of their son in a posting on Yelp. They questioned her use of laughing gas and said they were angry she had used fillings containing mercury.

Wong's lawyer, Marc TerBeek of Oakland, said the review is false, and Yelp has since taken it down.

That reminds me of a Pennsylvania case, a lawsuit brought by another physician who felt he had been slandered with regard to his methods:

There were four counts in the declaration.

1st count. "He, (the plaintiff,) is not a physician, but a two-penny bleeder."

2d count. "He, (the plaintiff,) was called to a man near the new bridge, who had injured his leg, and by his (plaintiff's) bad treatment the man must have been lame for life had not I, (defendant, Dr. Small,) been called to him."

3d count. "Foster had given a child stuff to butcher it."

4th count. "He, (the plaintiff,) had butchered a child."

That case was Foster v. Small, 3 Whart. 138 (Pa. 1838)(upholding directed verdict for defendant because "Now though words which impute professional ignorance are certainly actionable, yet to say of a physician that he is a two-penny bleeder, imputes not want of professional skill, but want of professional dignity manifested by a petty attention to the humbler employments of the art. They are, in fact, words of mere contempt.").

Did you catch the year? That virtually identical doctor-slander case was decided one-hundred and seventy-one years ago, long enough ago that calling a doctor a "bleeder" -- one who treated by bleeding the patient -- was a sufficiently accepted practice that it wasn't defamatory to accuse a doctor of being a "bleeder."

Defamation -- whether written ("libel") or spoken ("slander") -- is among the oldest claims recognized by the legal system, dating back to ancient Rome and likely before.

The law isn't changing. People aren't changing. Only one thing is changing: people are more connected.

Here's an example. Based on a suggestion from Robert Scoble, whom I've never met, I search Friendfeed for "defamation" posts (with 5 comments and 5 "likes") and find a Twitter post (with about 50 comment and 50 "likes") from Mona L, who I've never met, that says:

“Should you be held accountable for what you publish online? - Cnet "Yelp user faces lawsuit over negative review" http://tinyurl.com/7uwtom”

The link is to a story on a different Yelp defamation suit. We don't even have to consider the story to see how powerful the internet is at spreading commentary -- the tweet and the Friendfeed post alone were viewed by hundreds, more likely thousands, of people.

With every single off-the-cuff comment about that story effectively permanent, broadcast-worldwide, and easily accessible world-wide.

But that's it. People haven't become more disgruntled with one another, nor more prone (or able) to sue, nor have we suddenly left a responsible and respect world for "mob rule." The allegedly defamatory comments just spread faster, travel farther and last longer.   

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Continuing on from our discussion yesterday, medical malpractice, like any other negligence tort, is proven by showing:

(1) the defendant had a duty to the plaintiff to act a certain way,

(2) that the defendant breached that duty,

(3) that the defendant’s breach caused the plaintiff harm and

(4) that the harm caused is compensable under the law.

In most medical malpractice cases, the first element (the duty) is undisputed: every doctor has a duty to provide appropriate professional care and treatment to their patients. Similarly, the fourth (the harm) is usually not denied, though the defense will raise questions about the degree of harm actually suffered, particularly where significant non-economic damages (a.k.a., “pain and suffering”) are alleged.

In most medical malpractice cases, the fight is over whether the standard of care was breached and whether that breach actually caused the patient’s harm. The latter is sometimes the biggest issue in wrongful death cases, with the defense lawyer arguing that, even if the doctor had not been negligent, the patient still would have died.

The octuplets are different. There’s no question about the second element: the doctor very clearly breached the standard of care by transferring so many embryos through IVF. There’s also little question about the third element: the octuplets’ obstetrical and neonatal care appears to have been impeccable, so any birth injuries (or fetal or neonatal injuries) they suffer were likely caused by the multiple gestation and resulting placental insufficiency and premature birth.

As noted previously, the fourth element is up in the air – they’re all reportedly in good health – but a simple fact of neonatology and pediatrics is that problems can develop months or years down the line. Bronchopulmonary dysplasia, cognitive delays, and cerebral palsy are all very common among premature babies, even those with “normal” NICU courses.

Which leaves us with the first element: did the doctor who transferred those embryos have any duty to the resulting children?

Most of the cases brought arising from IVF revolve around either a failed attempt to prevent or terminate the pregnancy or a fertility clinic’s failure to screen the embryo for genetic defects. In each of those cases, courts have found that the ‘wrongfully born’ child has no claim against the clinic. But let’s take a careful look at what the “wrongful life” laws really prohibit. Here’s Pennsylvania’s statute:

WRONGFUL LIFE.-- There shall be no cause of action on behalf of any person based on a claim of that person that, but for an act or omission of the defendant, the person would not have been conceived or, once conceived, would or should have been aborted.

42 Pa.C.S. § 8305. Yet, as noted last time, that’s not what the octuplets would claim here. There was no attempt or desire to terminate any of them; the problem is that they were gestated in an unsafe manner, not that they should not have been transferred through IVF or gestated or born. They would not be claiming that they should have not been transferred through IVF or should have been aborted, but that one or more of their siblings should have been.

I have not found any cases raising that theory; the law here is anything but settled. To determine if a court would find such a duty, we can turn to that old war horse of law school classrooms, Tarasoff, cited by courts across the country for the factors to be weighed in establishing a legal duty:

[T]he foreseeability of harm to the plaintiff,

the degree of certainty that the plaintiff suffered injury,

the closeness of the connection between the defendant's conduct and the injury suffered,

the moral blame attached to the defendant's conduct,

the policy of preventing future harm,

the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and

the availability, cost and prevalence of insurance for the risk involved.

Tarasoff v. Regents of Univ. of Cal., 17 Cal. 3d 425, 435 (1976). As Tarasoff continued, “The most important of these considerations in establishing duty is foreseeability. As a general principle, a defendant owes a duty of  care to all persons who are foreseeably endangered by his conduct, with respect to all risks which make the conduct unreasonably dangerous."

There’s no doubt of the foreseeability of the danger of transferring eight embryos, and no doubt of the moral, policy and community reasons for recognizing a legal duty. As noted by Dr. Thomas H. Murray, a bioethicist, the American Society for Reproductive Medicine acknowledged in a 2004 report that fertility programs may withhold services when they can provide "well-substantiated judgments" that the child will not receive adequate care, and to exercise such judgment particularly" when significant harm to a future child is likely." A professional duty is thus recognized, so why not a legal one?
 
Yet, in another sense, permitting the octuplets to claim that each other should not have been born raises similar philosophical problems as “wrongful life:” for example, who is to say which sibling should have not been born, and how many? Pennsylvania’s case law on “wrongful life” – a split Supreme Court, which prompted the statute above – gives us a forceful example of how courts (and lawyers) can cut such Gordian knots:

It is undoubtedly true, as a review of the cases on this subject indicates, that legal scholars are able to cite numerous theories and reasons to support the view that recovery must be defeated in all cases of this type, and therefore that courts should not even entertain such complaints. The view that we cannot calculate the value of existence as compared to nonexistence is only one such hyper-scholastic rationale used to deny a cause of action in these cases. Those holding such views are apparently able to overlook what is plain to see: that -- in cases such as this -- a diseased plaintiff exists and, taking the allegations of the complaint as true, would not exist at all but for the negligence of the defendants. Existence in itself can hardly be characterized as an injury, but when existence is foreseeably and inextricably coupled with a disease, such an existence, depending upon the nature of the disease, may be intolerably burdensome. To judicially foreclose consideration of whether life in a particular case is such a burden would be to tell the diseased, possibly deformed plaintiff that he can seek no remedy in the courts and to imply that his alternative remedy, in the extreme event that he finds his life unduly burdensome, is suicide. No court in the land would directly send such a message to these plaintiffs. We deem it unfortunate that some courts have indeed sent that message by implication.

Speck v. Finegold, 497 Pa. 77, 87 (1981, Flaherty, J., concurring).

The irony here is that, while the mother may bear some fault for these circumstances, her claim is far more simple, and more likely to prevail, than her children's claims. Indeed, the parents in the original “wrongful life” case, Becker v. Schwartz, were permitted to claim damages arising from the cost of care and treatment of their child, although not damages for noneconomic and emotional harm. Recall what I wrote above: every doctor has a duty to provide appropriate professional care and treatment to their patient, here the mother, if maybe not the children.

[Here's Part 1, see also Can a Patient Consent to Medical Malpractice? (A Followup on the Octuplets)]

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News has spread far and wide of the octuplets born to Nadya Suleman at the Kaiser Permanente Medical Center in California.

In one sense, their birth and continued life is a “miracle,” as they made it to 30 weeks gestation, about 8 weeks past the threshold of viability and about 4 weeks past the point at which serious mortality or morbidity are more likely than not. Importantly, the octuplets have made it through their first week of life (sometimes referred to as the “honeymoon” period in neonatal intensive care units) without having any serious complications, like higher-grade intraventricular hemorrhages ("IVH"), a.k.a. “brain bleeds.”

Yet, it was a completely avoidable “miracle,” the same as if Captain Sully on U.S. Airways Flight 1549 had intentionally landed on the Hudson River. Multiple pregnancies are inherently high risk, with the risks increasing exponentially with each new fetus in higher order multiples. Twins are more than twice as dangerous as singletons; triplets are more than one-and-a-half times as dangerous as twins, and on and on.

These risks are well known and accepted within the international medical community, which is why some countries, like as Belgium, prohibit in vitro fertilization of more than one embryo at a time, while others, like Sweden, impose financial disincentives against the practice. Sweden’s national healthcare system covers an unlimited number of single-embryo IVF treatments but only four multiple embryos IVF treatments. Here in the United States, embryo transfers are not regulated by the government, but there are professional guidelines.

The Practice Committee of the Society for Assisted Reproductive Technology ("SART") and the Practice Committee of the American Society for Reproductive Medicine ("ASRM") produced a joint Guidelines on number of embryos transferred, which, for the 33-year-old Nadia Suleman, holds:

For patients under the age of 35 who have a more favorable prognosis, consideration should be given to transferring only a single embryo. All others in this age group should have no more than 2 embryos (cleavage-stage or blastocyst) transferred in the absence of extraordinary circumstances.

Ms. Suleman certainly had a “more favorable prognosis” considering that she had six prior children, all of them through IVF.

Which brings us to the medical malpractice: what on earth was their doctor doing?

Some have speculated that the octuplets simple couldn't have come from IVF, since it's so far outside the guidelines, but everything we know from Kaiser Permanente tells us that's exactly what happened. Perhaps most troubling:

According to [Suleman's mother's] account, when her daughter discovered that she was expecting multiple babies, doctors gave her the option of selectively reducing the number of embryos, but she declined.

"Discovered?" She didn't expect multiples from eight embryos?

It’s hard to overstate how foolish, reckless and irresponsible it is for any physician to transfer eight embryos in IVF, particularly to a young and healthy mother with a history of successful pregnancies. The Suleman octuplets have become celebrities precisely because of the rarity of their situation – which is not over by any means – since, in the past, every octuplet pregnancy in the United States has resulted either in miscarriages (frequently miscarriage of all the embryos) or the death of at least one of the neonates, possibly more.

The procedure itself was reckless; to have done it without the patient's informed consent was unconscionable.

Tomorrow we'll talk about the law.

To raise a couple points now, every jurisdiction I know of, following the seminal New York case Becker v. Schwartz, prohibits the claim for "wrongful life," based in part upon the idea that the law is simply incompetent to calculate the "damages" that arise as a result of being born or born with a disability as compared to never existing in the first place. Parker v. Chessin, mod. sub nom. Becker v. Schwartz, 46 N.Y.2d 401, 413 N.Y.S.2d 895, 386 N.E.2d 807 (1978).

But that's not really the issue here. In contrast to a "wrongful life" claim, where the person born claims they should not have been, the octuplets born here can claim that while they should have been born, one or more of the other octuplets should not have been, and that each was put in danger by the others. That may become important soon -- while the first week is over without any apparent birth injury, the first month and first two years, both important milestones, are not. If it turns out that any of the octuplets has, say, bronchopulmonary dysplasia or cerebral palsy, it can hardly be said that the damages of having BPD or CP due to placental insufficiency and being born premature are philosophically impossible to calculate.

And then we'll get to the mother's claims; can she, for example, recover the cost of raising seven additional children?

[Continued at Part 2, see also Can a Patient Consent to Medical Malpractice? (A Followup on the Octuplets)]

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Kottke.org links us to a thrilling moment in the early weeks of a videogame startup company:

In the main engineering room, there was a whoop and cry of success.

Our company financial controller and acting HR lady, Jen, came in to see what incredible things the engineers and artists had come up with. Everyone was staring at a television set hooked up to a development box for the Sony Playstation. There, on the screen, against a single-color background, was a black triangle.

“It’s a black triangle,” she said in an amused but sarcastic voice. One of the engine programmers tried to explain, but she shook her head and went back to her office. I could almost hear her thoughts… “We’ve got ten months to deliver two games to Sony, and they are cheering over a black triangle? THAT took them nearly a month to develop?”

Of course, it was no ordinary black triangle:

It wasn’t just that we’d managed to get a triangle onto the screen. That could be done in about a day. It was the journey the triangle had taken to get up on the screen. It had passed through our new modeling tools, through two different intermediate converter programs, had been loaded up as a complete database, and been rendered through a fairly complex scene hierarchy, fully textured and lit (though there were no lights, so the triangle came out looking black). The black triangle demonstrated that the foundation was finally complete – the core of a fairly complex system was completed, and we were now ready to put it to work doing cool stuff.

Sometimes lawyers just hold people's hands. Criminal defense lawyers sometimes walk the guilty through to a fair plea. Corporate lawyers sometimes translate a client's phone call and napkin scribblings on a done deal into better formatting. Estate lawyers sometimes change a few lines about a piano and a car and execute the will again.

For that, draw a triangle on the screen.

Other times, lawyers solve problems. As a trial lawyer, I spent a lot more time solving problems than holding hands.

Drawing a triangle on a screen rarely solves problems. Problem-solving requires most of the work be done before you see anything tangible at all. Here's how the videogame startup described it:

Afterwards, we came to refer to certain types of accomplishments as “black triangles.” These are important accomplishments that take a lot of effort to achieve, but upon completion you don’t have much to show for it – only that more work can now proceed. It takes someone who really knows the guts of what you are doing to appreciate a black triangle.

Exactly right. Not too long ago, I was dozens of hours deep into a complicated memo going out to a business client paying by the hour. The memo was sprawling all over the place, reaching well beyond my initial task.

Then I deleted everything and started again.

Billed every penny, too. Why?

Because I needed that time. Because the matter was very important to my client, who didn't want me to draw a black triangle. They wanted me to solve the problem. A couple dozen hours into it, I had finally fought long enough with the whole universe of issues to realized how to line up all the work on the backend to create the black triangle the right way.

A black triangle I could "put to work doing cool stuff." A black triangle that would still look like a black triangle after going through business and negotiations and lawsuits and trials and appeals.

The client loved the black triangle and, better yet, loved how low my bills were after that as the black triangle held up under scrutiny. No surprises down the road, no need to throw another a couple dozen more hours at it.

Trials, depositions and briefs are problems just waiting to be solved. Get the black triangle working before you go in and you'll be amazed how "lucky" you get.

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Yesterday we discussed the outrageous attorneys fees in the Robertson v. Princeton suit, which amounted to $80 million in pre-trial litigation costs and $40 million in projected trial costs. Based on those fees, it seems each side had a team of 6 lawyers working all day, every day, for all 6.5 years of the litigation, all for a case more comparable in size to a complicated personal injury / wrongful death case than a major commercial or business case.

It's time to ask some basic business / commercial litigation questions.

Did the lawyers engage in 'total war' litigation? Did the clients understand that decision?

Unfortunately, Mercer County (in New Jersey, where the litigation took place) doesn't keep its hearing and docket lists up permanently or publish its orders. Did the Robertsons decide it would be tactically advantageous to pummel Princeton with discovery requests? Did Princeton decide it would be tactically advantageous to stonewall every discovery request? Did everything require a motion or two?

When there's a paying client (as opposed to an insurance carrier or a contingent fee agreement), most litigators will sit down with their client early in the case and ask: how do you want me to handle it? If a client asks for 'the works,' an experienced, tough litigator would have no trouble churning through $500,000 in fees on a simple bread-and-butter business contract dispute. Add in any variables -- like sophisticated accounting, extensive documentation or novel issues -- and you'll start the process at $1 million, breaching $5 million well before trial.

But that's still not $40 million apiece.

Did the clients understand the workflow at the law firms?

Even if we generously assume that some of the $80 million comes from work in the years preceding the actual lawsuit, we still have whole teams of lawyers working full time.

Pareto's 80/20 rule applies just as much to litigation as it does to any other business. Did either of these clients recognize what, exactly, the firms were doing?

• Did the lawyers assert privilege as broadly as possible and then force litigation on every issue?
• Did the lawyers apply any thought to whom they should depose, or did they depose everyone who arguably was aware of discoverable facts?
• Was every brief right at the page limit, chock full of barely-relevant cases that took hours to track down even on issues where the judge had considerable discretion?

That is to say, did either party hire a liitigation consultant, ask their in-house counsel, or use their common sense to assess if the work was really needed or if the litigation attorneys were churning through hours as fast as they could?

Did the lawyers and clients consider alternative dispute resolution?

The core of Robertson involved dry and technical issues of legal interpretation, accounting and oversight. There was no "pain and suffering" component. Witness credibility was not the critical factor. All of the main reasons a party would either want non-lawyers or a jury of twelve reviewing a case were absent.

Why, then, did the parties subject the Mercer County Superior Court to this punishment? Did the clients really understand the ramifications of staying in state court and the delays and additional attorneys' fees that usually come with such a decision? Did the parties even consider arbitration?

In an antitrust case much larger than Robertson (a different antitrust case from the one mentioned above), Visa, Mastercard and AmEx resolved their multi-billion-dollar largely-legal dispute in arbitration. Why not here? Discovery probably would have gone much more smoothly, with Princeton more easily obtaining confidentiality and the Robertsons more easily obtaining documents.

Did the lawyers and clients consider alternative fee arrangements?

The Robertsons, as plaintiffs, paid an effective fee of 44% of their total recovery of $90 million.

A 40% gross-recovery contingent fee agreement is not uncommon in complex, expensive and/or risky business disputes; here, however, the client received none of the benefits of a contingent fee. As best I can tell, the lawyers bore no risk and paid no expenses out of pocket -- the clients did.

Did the Robertsons consider a contingent fee agreement? 40% would have been cheaper and during the six years of litigation their foundation could have held onto the money, investing it tax-free. They could also have done a blended agreement, with the Robertsons covering costs and expenses and the attorneys claiming, say, one-third of the recovery.

Princeton, in turn, paid $40 million over six years to defend a claim they later settled for $90 million. Making matters worse, the $40 million likely came in the unpredictable form that managers hate, with huge swings depending on the litigation, invoiced in a manner completely opaque to non-lawyers and lawyers not familiar with the case.

Did Princeton consider, say, a flat fee? The controversy had been brewing for almost forty years, with Princeton well aware of the major factual issues. The major legal issues are all apparent on the face of the complaint, which is only 68 pages long. Obviously, there will be an extensive accounting, lots of discovery and document review, and a couple big motions for summary judgment with regard to characterizations of various payments and the duties of your clients.

It's a big case but it's not unbounded in scope. It's not a class action or antitrust case sprawling over dozens of parties and whole industries; it's a dispute between a university and a foundation over a specific sum of money and a specific grant.

You could do it with the "feeding frenzy" team: two lead attorneys and a handful of associates and paralegals.

They could have blended that fee as well: Princeton covers external costs and expenses, like the accounting firm and deposition costs, with a flat fee payable every six months for attorneys' fees. Going off of our big firm average hourly rate of $348, estimating the case will take up half of their 12,000 billable hours per year available time, puts us at $1 million every six months. Princeton would have ended the case for less than $18 million, including all costs and expenses. 

These are all just ideas, any one of which would have likely saved millions.

Was anyone really looking out for the client? Are non-profits the new profit centers for lawyers?

Maybe in the end we have another example of the dangers of using "OPM." No individual or for-profit enterprise paid a dime for this excess and waste; it all came out of "charity."

The Robertsons paid for the suit via the Banbury Fund, which they control. As best I can tell, they exhausted most of the Fund's assets on this suit, though they are being reimbursed under the settlement.

Princeton paid for it out of their multi-billion-dollar endowment; as part of the settlement, the funds expended will be deducted from the Robertson Foundation as it is dissolved into Princeton's general endowment.

So, there you have it. $80 million in litigation fees to move $50 million from one charity to another. Princeton President Shirley M. Tilghman called the whole case "a tragedy" because the legal fees could have been spent on education. I'd agree, except that I can't help but wonder what steps Princeton could have taken to reign in their costs; you can't blame the other side for everything.

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Cal Biz Lit tips us off in a great how-to post for defense lawyers about an early step in the process:

This first step is not unique to California, and not unique to product liability cases.  In fact, Phone the phrase “stupid call” wasn’t even invented in California.  As far as I know, the phrase was invented by a friend of mine who practices product liability nationally but is based in Montana.

The elements of the first step are incredibly simple:

1.    Pick up telephone;
2.    Dial number of plaintiff attorney;
3.    Engage him or her in pleasant, or at least civil, conversation;
4.    Act stupid about his or her case (this is easier for some of us than others);  and
5.    Try to get him or her to tell you as much about the case as possible.

The theory of the stupid call is really simple:  first of all, more information is almost always better than less information.  And while you can expect that the other side is going to posture, exaggerate, and, dare we say it, confabulate, the odds are that they are also going to tell you some things about the case that you wouldn’t otherwise know.  And since the California complaint may have told you very little – in fact, if it’s a Judicial Council Form Complaint, it told you nothing at all – this is your chance to at least learn something about the injury and how much the plaintiff’s attorney knows.

Now, it may be that the other side won’t give you any useful information.  It may be that he or she won’t even talk to you;  there are plenty of jerks in this world, and a representative number of them are lawyers.  But the other side isn’t going to give you any useful information if you don’t call, either, so you aren’t going to be any worse off for trying.

That's pretty common and it's not a bad idea for defense lawyers, but there are some caveats.

First, I'm usually candid about my theories, to a degree, because I want to frame the whole case on my terms, not your's. Letting me infect your brain with my memes is sometimes in my best interest.

Second, if you act really stupid -- you "don't understand" a common legal issue or you "haven't heard" a particular industry standard -- I will take that as a sign that you are a lying snake and I will suspect and treat you accordingly.

Third, we're all one big community of lawyers. Maybe you think I'm some nobody in your world and you'll never encounter me again. Maybe that's true. But maybe, just maybe, someday someone whose opinion you care about is going to ask me about you and I'm going to say, "he called me at the beginning of the case and either acted like he was stupid or really was just STUPID." Is that the reputation you want?

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Beck and Herrmann at Drug and Device Law are mostly right:

What, our reader asked, should companies do to minimize the risk that they become embroiled in a mass tort?

Ha!

There's an old political cartoon, maybe from The New Yorker, where a man is strolling down a city street. The caption reads: "Exercises regularly. Eats right. Doesn't smoke. Doesn't drink. Has regular check-ups." In the cartoon itself, you see that a safe has fallen out of a window and is about do this poor fellow in.

...

Do everything right. Obey the law. ... Comply with industry standards. ... Avoid [the need for] recalls.

All well and good: want to avoid liability? Don't cause others harm through a breach in the standard of care.

I'm not so hot on the second part of their advice:

Have a corporate communications policy that instructs employees to communicate only facts -- not unsupported opinions or snide comments -- in e-mails. ...

Draft a document retention policy, and then enforce it. Preserve what you need, and eliminate what's unnecessary.

Unless those policies manage to eliminate 'smoking gun' documents -- which I doubt, given how a 'gun' is normally made 'smoking' by a party failing to "do everything right" -- then they won't reduce the frequency of litigation or size of liability, they'll just create gaps in the documentary record. That's a problem for defendants for two reasons:

First, it may enable plaintiff's lawyers like me to fill those gaps with whatever I think was there. Sometimes that happens by way of circumstantial evidence. Sometimes -- and this situation can be much worse for defendants -- the absence of documentary evidence leaves the defendant's deposition and trial testimony ungrounded, allowing me to set and spring traps for deceptive witnesses, walking them where they don't want to go and making them look like liars when they do it.

Second, I'll get a copy of those communications and document retention policies in discovery, and I will use them to show that the company actually established a policy to discourage employees from recording their own opinions. Add that to the point above and, well, you might have yourself a recipe for disaster. Fact is, whenever there are gaps in the documentary record, it increases the importance of witness credibility. If, by design, your company didn't keep a thorough record and I reveal one of your employees to have been less than candid, then you're toast.

Point is (and this is, I believe, Beck and Herrmann's main point): there's no panacea for litigation/liability avoidance. If you did something wrong or look like you did something wrong, you increase the likelihood of getting sued.

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Amid all the implications and accusations of greed that come with a lawsuit, it's worth stepping back and realizing that civil and criminal investigations are often the only way that the truth is discovered after things go wrong. Like in this Greek cruise ship disaster:

A year after Cyprus-based Louis Cruise Lines blamed a faulty map for the grounding and subsequent sinking of Sea Diamond off the island of Santorini in April 2007, new evidence has emerged to support the claim.

The back story: In November 2007, Louis blamed "erroneous mapping information" as the cause of the accident after commissioning a hydrographic survey from Greece's AKTI Engineering. The survey revealed that the reef Sea Diamond hit -- causing it take on water and eventually sink -- was both further from shore and larger than estimated on an official undersea map from the Hellenic Navy Hydrographic Service.

The Navy initially rejected claims that the map was inaccurate, and it was widely believed that finding the Navy was at fault would prove difficult. However, a new hydrographic survey carried out by the Hydrographic Office of the Hellenic Navy -- the official government authority for conducting hydrographic surveys in Greek waters and issuing nautical charts -- has now confirmed the findings of AKTI.

According to an official statement from the cruise line, the reef in question is actually located 131 meters from the coastline, instead of only 57 meters as was marked on the official map with which all ships were equipped (Hellenic Hydrographic Service nautical chart no. 423/8). Also, the official map indicated the depth at the point of impact was 18 to 22 meters; surveys have now shown that it is between 3.5 and 5 meters.

 

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A picture that's been making its way around the internet:

Can you imagine how fast they were going?

From the Daily Mail, here's why this picture is evidence of triumph, not failure:

The un-named driver and his passenger were taken to the Royal Adelaide Hospital for treatment, but their injuries were said to be not serious.

"Not serious?" They destroy a race car driving it into an immobile object at a speed most people never reach and their injuries are "not serious?"

Ignore the idiot driver. Three cheers for Ferrari, for designing a car that collapsed in such a manner to slow the impact sufficiently to prevent decelleration injury, yet not permit intrusion into the driver and passenger spaces.

That is to say, the Ferrari "failed well." When things went wrong, it did its job and accomplished its primary goal of protecting the occupants.

Compare to all the things you have seen "fail badly," like the trial case that collapsed when a third party witness mixed up seemingly (to them) minor details, or the litigation that changed course entirely when you trapped a defendant with inconsistent discovery answers, or the complete waste of a day when you botched a filing procedure in the most trivial of ways and then spent hours rectifying the situation.

Before your next trial, think for a moment: what happens if I lose most of the court rulings, get beat up by my opponent's witnesses, and can't keep my witnesses from fumbling most of their testimony? 

If the answer is, "I definitely lose," then you need to rethink your strategy. You need to find a more robust theory of the case that can deliver your passengers safety to their destination.

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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 dismissing that same critique. Do we now decide the law by looking neither to the past nor careful reasoning for guidance, but instead by simply declaring "in our view" before our conclusion?

Perhaps they should have perused the legal scholarship network on SSRN for a little bit before publishing that. "'Class action' AND 'due process'" returns 378 hits.

Whatever else goes your way, I can guarantee that, if you don't put in the time to really prepare and test your argument, something will go wrong. And that's the heart of poor advocacy.

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"Schiess's basic document design for lawyers" at Legalwriting.net.

Although I agree in principle, I don't think it works in practice.

For example, I don't think it is practical to use more than one font in a given document, since too many readers will not expect it and will be momentarily confused when they see it, making skimming harder, not easier.

The same goes for using hyphenation with the justification of text. If you are not expecting that, it takes a minute for your brain to connect the single word split across the end of one line and the beginning of another.

By and large, if you follow Schiess' advice, you'll end up with work that looks a lot like a formal appellate court opinion, with a professional appearance that rewards speedreaders (particularly when you use wide margins and single spacing). Problem is, while lawyers (especially appellate lawyers) may be used to reading that, judges themselves are not -- they are used to reading what lawyers submit to them, which usually defaults to Times New Roman 12-point, double spacing, full justification without hyphens. Most of us are stuck only making subtle changes to that framework.

As an aside: I completely agree with underlining, italics and boldface. I particularly dislike underlining case names, which causes the eye to focus on a bunch of irrelevant proper nouns in the citation rather than the real focus of the document, which is the argument presented. Yet, very few judges expect bold in briefs and many believe that case names must be underlined. So, without a formal order (most local rules require only 12-point font and double spacing), we carry on...

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Barry Barnett passes along a classic legal analysis of a copyright claim, courtesy of Groucho Marx.

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What About Clients on "easy" defense representation in a declining economy:

So you think you will win your case on a dispositive motion (and you do, eventually). You are right on the merits--and any law professor in the U.S. would agree with you. The "case" your long-time GC just handed you is silly, right? And a piece of cake. Beneath you, you tell yourself. An "easy win", right?

Well, think again, Skippy.

Your GC couldn't have hired you to do anything more difficult. "Winning" just took on a new and more complicated meaning. Because now--especially if you were just handed a defense counsel's dream and stone "winner" of a case--you will have to work harder, and be smarter, than if you were defending a good faith or meritorious suit in which your client had the lion's share of bad facts. The trick now is to win cheap*. An easy-to-win business suit handled by the most efficient defense counsel on earth can have defense fees and costs well over $100,000, even with minimal or no discovery. You really think that your GC or client rep will be happy the day you tell him or her about your great win on all counts based on your brilliant Rule 12(b)(6) or Rule 56 motion?

Don't bet on it. For the experienced client, the cost of the lawsuit is part of the "victory" analysis. In a down American economy, litigation tends to increase. More suits are filed. And in my view clients and their plaintiff's lawyers file more questionable suits, i.e., ranging from Rule 11 violations and frivolous to iffy and wasteful. Employee and business nuisance cases are a big chunk of those filings.

In some sense, I understand the desire not to resolve "iffy" cases on any level, because you don't want to encourage more of them.

On the other hand, a lot of "iffy" cases are simply weak, not frivolous. The distinction is critical. A "weak" case is valid and meritorious but difficult to prove, like a soft tissue injury case. Plenty of people have serious soft tissue injuries, resulting from negligence, that restrict their ability to work and have hampered their personal lives. But they have an uphill battle at trial attempting to prove the extent of their injuries, given the nature of juries these days, and even if they win the recovery usually isn't that large.

But the possibility of recovery is there (as is the possibility of a substantial recovery) and, just as important, the ethical duty to right a wrong is there, too. Same goes for any business case: if there's a claim in any sense there, there's a chance it will carry the day, and a chance it should carry the day. Which brings me to my real point: everyone, both plaintiffs and defendants, should always consider actually resolving the case, rather than "litigating" it, which does nothing good for the clients.

If that takes mediation or arbitration or some other ADR, so be it; if it takes cutting off your own billing (or slashing your contingency agreement), so be it. Just always keep in mind that your role is to resolve conflict, not create it.

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From an order quoted on Trial Ad notes:

... The Court recognizes the tension between Rule 8(a), which requires a “short and plain statement,” and Rule 9(b), which requires the party state his claim with particularity. The issue before the Court is whether Plaintiff’s 465 page Complaint correctly balances this tension.

The Complaint does not correctly balance this tension. The title to the Complaint is eight pages. (Compl., 1-8) (Dkt. #9). It appears to list all of Plaintiff’s claims, as well as their statutory and precedential basis. In eighteen pages following the title, the Plaintiff lists the Defendants. There are six Defendants. This section consists largely of useless repetition.

Not before page 30 does the Complaint address the facts alleged. Plaintiff’s allegations continue for 87 pages — including a 37 page pit-stop to quote emails. (Compl., 39-76). The Court notes, with some irony, that in his response opposing Defendants’ motions for a more definite statement, the Plaintiff successfully states his allegations in two pages. (Pl.’s Resp., 1-3)(Dkt. #25).

On page 117, Plaintiff embarks on an odyssey through his claims for relief. While the Court understands that asserting 54 claims requires some space, the 341 pages used to do so is unreasonable. The root of the problem lies in paragraphs like the following:

Plaintiffs, for a Fifty-Fourth Claim for Relief, reallege and incorporate herein Paragraphs 1 through 105, including the First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth, Nineteenth, Twentieth, Twenty-First, Twenty-Second, Twenty-Third, Twenty-Fourth, Twenty-Fifth, Twenty-Sixth, and Twenty-Seventh Claims for Relief alleged under the federal Racketeer Influenced and Corrupt Organizations Act of 1970 [“RICO”][Title 18 U.S.C.A. §§1961 et.seq.], and the Twenty-Eighth, Twenty-Ninth, Thirtieth, Thirty-First, Thirty-Second, Thirty- Third, Thirty-Fourth, Thirty-Fifth, Thirty-Sixth, Thirty-Seventh, Thirty-Eighth, Thirty-Ninth, Fortieth, Forty-First, Forty-Second, Forty-Third, Forty-Fourth, Forty-Fifth, Forty-Sixth, Forty-Seventh, Forty-Eighth, Forty-Ninth, Fiftieth, Fifty-First , Fifty-Second, and Fifty-Third Claims for Relief.

(Pl.’s Am. Compl., 458) (Dkt. #9).

Did he think "Plaintiffs, for a Fifty-Fourth Claim for Relief, reallege and incorporate herein Paragraphs 1 through 105" would fail to reincorporate the claims alleged in those paragraphs? Or was he paid by the word?

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Via Settle It Now,

Gini Nelson of Engaging Conflicts ran a six-part series recently on "Adding Cooperative Practice to the ADR Toolkit."  Her final part in this series -- linked supra -- is the final entry of Guest Blogger Law Professor John Lande’s posts.  Linked here is his article The Promise and Perils of Collaborative Law -- which is also linked in Gini's blog with her comments here.

Before you run over to Gini's site to read Lande's excellent post or his great article, I'd like to simply bullet-point some observations based upon my four-years of full-time mediation and arbitration practice.

• when I co-arbitrate with some of the best commercial arbitrators in the business -- these are Ivy League lawyers with many decades of experience representing Fortune 50 Companies in AmLaw 100 Law Firms, the ultimate decision changes many times during the course of deliberations and almost always could go either way.
• having spent a considerable time in the Los Angeles Complex Court as an experienced commercial litigator "externing" for credit to earn my LL.M in '06, I can tell you that the deliberations in chambers of these highly respected jurists is not much different that those in which I have engaged when sitting on an arbitration panel

The take away?  No matter who is hearing your case, your chances of winning are 50-50.  Flip a coin.  Think this doesn't apply to you?  I have arbitrated cases being handled by the top ten law firms in the country.  I have seen those same type of firms litigate and try cases in the Complex Court.  It's 50-50 friends.

Here's from Lande's series:

In mediation, an impartial third party helps parties to negotiate an agreement. In Collaborative Law, at the beginning of a case, lawyers and parties sign a “participation agreement” to negotiate in good faith and disclose all relevant facts. The participation agreement includes a “disqualification” clause which provides that if any party decides to litigate, the Collaborative lawyers are disqualified from representing the parties, who must hire new lawyers if they want representation in litigation. The formal difference between Cooperative Practice and Collaborative Practice is that Cooperative Practice participation agreement does not include the disqualification provision.

...

Since a Cooperative process does not include a disqualification clause as in Collaborative cases, some people wonder if Cooperative process is any different from negotiation in litigated cases.

Although many lawyers negotiate cooperatively at times, a Cooperative process can provide greater predictability and confidence than in litigation. DCI members say that a Cooperative process creates a legal culture where cooperation is the norm. Traditional litigation-oriented practice normally does not involve an explicit process agreement. In litigation, lawyers often are not sure about the other side’s intentions and each side may feel that it needs to take tough positions to protect themselves. This sometimes creates a cycle of adversarial behavior that is hard to break out of.

I appreciate new approaches to the practice of law, I really do. But I both (1) don't agree all litigation is 50-50 and (2) fail to see how any of the above is different from good legal practice.

Regarding the first, I'm always suspicious of anything meant to be more persuasive by the inclusion of such terms as "Ivy League" and "top ten." You can see my post about the real motivations of General Counsel for some of the reasons I'm suspicious, given how none of them are immune from completely dropping the ball, obliterating their client's interests.

More importantly, I refuse to believe that any case is 50-50, much less all of them. It is absolutely true that anything could happen at trial and that slamdunk cases lose every day. It is also true that a rational argument can be made for almost anything, and that a factfinder, judge, mediator, arbitrator, or any other neutral would be derelict in their duty if they did not give serious consideration to the arguments made before them.

That said, in the real world people are innocent or guilty. People make mistakes or don't make mistakes. What they did was outrageous or it was not. Are there gray areas? Sure. That's why the law includes explicit burdens of proof and persuasion. In a criminal case, if a factfinder has a doubt about guilt that is founded in reason, they should return an innocent verdict. In a civil case, if a plaintiff has proven their claims are more likely true than not, the jury or judge should return a verdict in the plaintiff's favor.

Have you ever seen a situation in life in which, after complete consideration, you were still totally unable to reach any conclusion? Were you really Buridan's donkey? Spinoza doubted any rational person could find themselves in such a situation and I agree. If you can see a wide array of evidence and argument, which it is your sworn duty to evaluate, and yet you remain totally unmoved, then the problem lies with you, not with the inherent unknowability of the world.

Regarding the second, any plaintiff or defense attorney who truly has their eye on the client's interest will always keep in mind the possibility of resolving the matter. Just like I said above, slamdunk cases lose every single day of the week. I'm sure defense attorneys can chime in that completely frivolous cases can return extraordinary verdicts.

A good lawyer always has that in mind, as well as the financial and emotional cost of litigation. If referring to that process of continual re-evaluation and resolution as "cooperative law" makes it more likely to happen, then that is certainly a benefit to the profession, but litigators and trial lawyers shouldn't be told they're doing it wrong just because they don't use the name.

Same with "collaborative law." If the clients are willing to disclose everything upfront, then by all means we should take all steps to facilitate their resolution. Yet, I have to believe that such openness can only come from the clients, and then only for reasons external to the litigation itself. Disputes simply don't up and resolve themselves by changing the name of the process.

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Broadcast Law Blog on a timely example where myth becomes de facto law:

But perhaps the greatest misimpression of the Carlin routine is the widely held belief that there are in fact Seven Dirty Words that you can never say on the air.  In fact, that is not and has never been the FCC's holding.  In fact, until recently, there were no words that were specifically banned on the air - all had to be evaluated by context.

Yet, over the years thousands of broadcasters have looked to Seven Dirty Words for guidance. I'll be a number of FCC counsel have, too.

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A tip of my hat to Judge McLaughlin of the United States District Court for the Eastern District of Pennsylvania for this footnote:

The URL for the "Fair Value for Dummies" article is:

http://web.archive.org/web/20011107091956/
http://money.cnn.com/2000/04/17/investing/fairvalue/

Exhibit FP-35. According to the affidavit of Molly Bragg, Project Coordinator of the Internet Archive, Exhibit FP-34, a URL in this format indicates an archived version of a document from the Internet Archive. The URL of a document in the internet archive is in the format:

http://web.archive.org/web/[Year in yyyy] [ Month in mm] [Day in dd] [Time code in hh:mm:ss] /Archived URL

Exhibit FP-34. The URL of the "Fair Value for Dummies" article therefore shows that it was archived in the Internet  [*40] Archive on November 7, 2001, at 09:19:56 a.m. from the website http://money.cnn.com.

There's no reason a court shouldn't take judicial notice of useful resources like the Internet Archive. Is their credibility unimpeachable? Of course not. But there's no need to reinvent the wheel when you've got bicycles lying around. Same goes for lawyers.

The footnote is from Fishkin v. Susquehanna, 2008 U.S. Dist. LEXIS 47551.

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At the (new) legal reader:

A magazine I’m looking at now has a story with this headline:

    401(k) Excessive Fee Litigation

This leaves me to wonder what is excessive: the fee or the litigation? The story reveals that it’s about litigation over excessive fees. A little punctuation removes the ambiguity:

    401(k) Excessive-Fee Litigation

“When a phrase functions as an adjective—an increasingly frequent phenomenon in late-20th-century English—the phrase should ordinarily be hyphenated. Seemingly everyone in the literary world knows this except lawyers.” Bryan A. Garner, A Dictionary of Modern Legal Usage 657 (2d ed. 1995).

Good call.

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At New York Attorney Malpractice Blog:

How Do You Forget to File a $19 Million Legal Malpractice Case?

Chicago Business Litigation Lawyer Blog reports that a huge class action legal malpractice case against DLA Piper Rudnick has been dismissed.  Plaintiff's and defendants had entered into a tolling agreement that was amended and went on for several years.  This case was valued at over $ 19 million dollars.  After several amendments of the tolling agreement plaintiffs started the case, but the court determined that it was started a year too late!  Joyce v. DLA Piper Rudnick ended in dismissal.

The easiest and most common way to commit legal malpractice is to fail to file or fail to prosecute. Now the plaintiffs' lawyers themselves are likely on the hook.

The easiest way I know of to avoid that is to create tickler and to-do systems. The moment something comes in, put it in the system. I just have to look at my calendar to know when I'm hitting a deadline, since I put it in the moment the motion, case, whatever came in.

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From The Virtual Chase:

1. U.S. Party/Case Index
2. Justia
3. Legal Dockets Online
4. Cornell Legal Information Institute
5. GPO Access
6. Full-text State Statutes and Legislation
7. Electronic Discovery Law
8. The Bluebook
9. BRB Publications Inc.
10. ZoomInfo

More detail at the site. To me, the most useful is Cornell's LII -- it's the fastest, most intuitive form of Federal law available anywhere, and it's free (donations are encouraged). I use it all the time.

The remainder are largely investigative tools; they're great when you need them, but it's really not that often.

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Legalwriting.net is unhappy with double spacing, as am I.

Ken Adams agrees, and he's always right.

Take that, State v. Riley, 605 S.E.2d 212, 214 (N.C. App. 2004).

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