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

One of the big issues that's been floating around the personal injury / wrongful death world over the past few years is the extent to which states can recoup the money they spent on an injured person's care if that person later sues the person who caused the injury and obtains a settlement.

The Supreme Court gave us a partial answer in Arkansas Dept. of Health and Human Servs. v. Ahlborn:

There is no question that the State can require an assignment of the right, or chose in action, to receive payments for medical care. So much is expressly provided for by §§ 1396a(a)(25) and 1396k(a). And we assume, as do the parties, that the State can also demand as a condition of Medicaid eligibility that the recipient "assign" in advance any payments that may constitute reimbursement for medical costs. To the extent that the forced assignment is expressly authorized by the terms of §§ 1396a(a)(25) and 1396k(a), it is an exception to the anti-lien provision. See Washington State Dept. of Social and Health Servs. v. Guardianship Estate of Keffeler, 537 U. S. 371, 383-385, and n. 7 (2003). But that does not mean that the State can force an assignment of, or place a lien on, any other portion of Ahlborn's property.

The issue became all the more pressing when the Medicare, Medicaid and SCHIP Extension Act of 2007 (“MMSEA”), effective July 1, 2009, named tort defendants as “responsible reporting entities” that also have to assess the plaintiff's Medicare / Medicaid status and ensure that those government liens have been paid. Defendants have, understandably, been annoyed by that.

Plaintiffs, of course, have already been responsible for clearing these liens.

Let's pause and consider the background of these cases: a plaintiff is injured, has some care paid for by the government, and hires an attorney. The attorney then spends his or her own time, and own money, pursuing the case, until the plaintiff — who, despite their injury and resulting hardship, has tried to hold out for an appropriate settlement figure — and the defendant reach an agreement on how much the case is worth. The attorney then takes a cut of the settlement, covering their costs and paying themselves a fee for all that time and risk they put into the case.

Then the government wants a piece. It didn't do anything to get the money, but it thinks it deserves to be reimbursed in full.

The vast majority of these claims are resolved amicably between then plaintiff's attorney and the government, with the government waiving a chunk of the claim in order to get payment now, rather than later, and to not have to litigate the issue and risk having a judge rule against them.

But sometimes the plaintiff's attorney and the government can't reach an agreement, and so have to get the court to figure it out.

The big question has been: how does a court figure it out?

We just got one answer:

In a decision that is sure to grab the attention of the personal injury bar, a federal judge has ruled that a settling plaintiff cannot be automatically required to reimburse the Pennsylvania Department of Public Welfare for 100 percent of her Medicaid expenses because a settlement always reflects a compromise.

The ruling by U.S. District Judge Berle M. Schiller comes just a few months after lawyers at Kline & Specter secured a settlement worth nearly $12 million in a "state-created danger" suit against the Philadelphia Housing Authority over persistent mold in a home that allegedly triggered an acute asthma attack and left a teenage girl brain damaged.

The settlement in McKinney v. PHA sparked a new court battle when lawyers for DPW moved to vacate the settlement and to intervene in the suit to assert a $1.2 million lien.

...

Schiller decided instead that the proper approach was for the trial judge to "assess the factors that would have influenced the parties' settlement positions and to make an ultimate determination of what portion of the settlement represents compensation for past medical expenses."

As the judge who presided over the McKinney case through summary judgment and Daubert hearings, as well as settlement talks, Schiller concluded that the plaintiffs had settled for two-thirds of the value of the case.

That's not a perfect answer, but it's not a bad one. There's no basis for the government to claim full reimbursement for a settlement in which a claim is, by definition, compromised. There's also no easy way to figure out just how much of an overall settlement "should" be allocated to medical expenses, and it doesn't make sense to engage in full-blown litigation over that question when the case itself has been settled.

Hence the shoot-from-the-hip approach. It's not what I'd prefer — I think the plaintiff was right about the parties, who know the most about the case and the reasons for settlement, establishing the portion attributable to medical expenses — but I'll take it.

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Last week, after more than a year of drafting following oral argument, and nearly two years after the original District Court order, a Third Circuit panel (Chief Judge Scirica and Judges Fisher and Greenberg) issued their magnum opus on pleading Section 1 antitrust violations after Twombly and RICO Act "enterprises" after Boyle in the consolidated Multi-District Litigation In re: Insurance Brokerage Antitrust Litigation.

The plaintiffs alleged a massive, "global" conspiracy among the major insurance companies and insurance brokers to artificially allocate customers and rig prices for commercial insurance:

(Here's the First Amended Complaint; the Second Amended Complaint was, I believe, sealed).

§ 1 of the Sherman Act and § 1962 of the RICO Act are almost constitutional in their breadth and power. Here's the relevant part of § 1 of the Sherman Act:

And here's § 1962(c) of the RICO Act:

Such breadth is a blessing and a curse for plaintiffs; like with the Bill of Rights, § 1 of the Sherman Act and § 1962 of the RICO Act are so broad, and so empowering, that Courts have spent decades literally ignoring the statutes' text to narrow the relief available to plaintiffs. See, e.g., Fitzgerald v. Chrysler Corp., 116 F. 3d 225 (7th Cir. 1997)(admitting that a judicially-created exclusion to the meaning of "enterprise" under the RICO Act "doesn't emerge from the statutory language," but applying it anyway).

The Third Circuit panel does an exceptional job summarizing this unwieldy body of extra-textual precedent on pages 32-42 of the opinion (for § 1 antitrust claims) and 153-172 (for RICO enterprises); any associates or clerks trying to figure out these complex fields could do worse than to review them.

These artificial restrictions force plaintiffs bringing antitrust and RICO claims — who typically only have circumstantial evidence at the beginning of their case given the efforts undertaken by the defendants to conceal their wrongdoing — to make suppositions about how the defendants carried out their scheme.

That's where Twombly and Iqbal come in. 

In the Insurance Brokerage Antitrust cases, there were, shall we say, a lot of defendants*, defendants who, for purposes of antitrust and RICO allegations, could have been configured in a wide variety of ways. The plaintiffs thus, understandably, had to make some tactical decisions about their allegations, like with the type of antitrust violation alleged:

Although plaintiffs’ 16 First Amended Complaints (FAC) expressly pled a rule-of-reason claim in the alternative, see, e.g., Comm. FAC ¶ 530; EB FAC ¶ 454, their Second Amended Complaints omit any reference to the rule of reason, and their moving papers and appellate arguments make clear they are alleging exclusively per se violations. In their initial motions to dismiss, defendants contended that the First Amended Complaints had not adequately defined a market or pled anticompetitive effects and had thus failed to state a claim under the rule of reason. In response, plaintiffs did not assert that they had, in fact, met these requirements; they argued only that “where plaintiffs allege per se claims,” these requirements do not apply.

And with the type of RICO enterprise they alleged:

While plaintiffs strenuously insist they have adequately pled the existence of “broker-centered enterprises,” they have conspicuously refrained, throughout the district-court proceedings and on appeal, from asserting alternative bilateral or single-entity enterprises.

Presumably, the plaintiffs deliberately chose to avoid rule-of-reason claims (in which the plaintiff is required to demonstrate, e.g., the defendant's market power in a defined market) and the allegation of "bilateral or single-entity enterprises" to preserve their class action status against all defendants. If, for example, the plaintiffs had split their claims up into multiple allegations of single-entity enterprises, each of those respective defendants tied to a particular scheme would move to decertify themselves from the bigger case. 

In the end, that's what did the plaintiffs in; their "parallel conduct" allegations ran smack into Twombly**:

Contrary to plaintiffs’ arguments, one cannot plausibly infer a horizontal agreement among a broker’s insurer-partners from the mere fact that each insurer entered into a similar contingent commission agreement with the broker. As the District Court concluded, the first stage of the alleged brokercentered conspiracies—the consolidation of the groups of insurers to which each broker referred business—evinces nothing more than a series of vertical relationships between the broker and each of its “strategic partners.” 2007 WL 2533989, at *15.
…
Moreover, plaintiffs’ argument proves too much. If the parallel decisions by several insurers to pay contingent commissions imply a horizontal agreement, then it is difficult to see why parallel decisions to pay standard commissions (that is, a fixed percentage of each policyholder’s premium payment) would not also imply an agreement. For that matter, plaintiffs’ logic would divine a horizontal agreement from virtually any parallel expenditures for marketing services, on the mistaken ground that a firm would not pay for advertising, for example, in the absence of an agreement with its competitors to enter into similar contracts with the advertising company. Cf. Twombly, 550 U.S. at 566 (noting that “resisting competition is routine market conduct,” and that “if alleging parallel decisions to resist competition were enough to imply an antitrust conspiracy, pleading a § 1 violation against almost any group of competing businesses would be a sure thing”)

And the same problem hit the RICO claims:

In seeking to establish a “rim” enclosing the insurer-partners in the alleged RICO enterprises, plaintiffs rely on the same factual allegations we found deficient in the antitrust context: that each insurer entered into a similar contingent-commission agreement in order to become a “strategic partner”; that each insurer knew the identity of the broker’s other insurer-partners and the details of their contingent-commission agreements; that each insurer entered into an agreement with the broker not to disclose the details of its contingent-commission agreements; that the brokers utilized certain devices, such as affording “first” and “last looks,” to steer business to the designated insurer; and that, in the Employee Benefits Case, insurers adopted similar reporting strategies with regard to Form 5500. As noted, these allegations do not plausibly imply concerted action—as opposed to merely parallel conduct—by the insurers, and therefore cannot provide a “rim” enclosing the “spokes” of these alleged “hub-andspoke” enterprises. Even under the relatively undemanding standard of Boyle, these allegations do not adequately plead an associationin- fact enterprise. They fail the basic requirement that the components function as a unit, that they be “put together to form a whole.” Boyle, 129 S. Ct. at 2244 (internal quotation marks omitted). Because plaintiffs’ factual allegations do not plausibly imply anything more than parallel conduct by the insurers, they cannot support the inference that the insurers “associated together for a common purpose of engaging in a course of conduct.” Id. (quoting Turkette, 452 U.S. at 583); see id. at 2245 n.4 (stating that “several individuals” who “engaged in a pattern of crimes listed as RICO predicates” “independently and without coordination” “would not establish the existence of an enterprise”) ...

In short, plaintiffs' allegations didn't "plausibly" suggest any actual agreement among all the insurers; instead, they merely suggested parallel conduct that, in the Third Circuit's eyes, could just as equally be explained by way of the insurers acting independently.

Thus, the bulk of the claims were dismissed, although the plaintiffs can continue on some of their bid-rigging claims against the Marsh-connected defendants.

But there's plenty for plaintiffs to be relieved about with the opinion.

First, there's the massive size of the case. Although the Third Circuit couldn't outright say it — just like the Supreme Court didn't say it in deciding Twombly — the sheer size of the Insurance Brokerage Antitrust cases was undoubtedly a factor. The cases were an indictment of the entire commercial insurance industry, with a demand for treble damages (and attorney's fees) for years of industry-wide conduct, damages that reached into the billions. If you bring a case of that magnitude, you invite heightened scruinty.

Moreover, and more importantly, the sheer number of defendants, and the extraordinary breadth of the allegations against them, is what stretched the plaintiffs claim from "probable" into "implausible." It is understandably difficult for a court to swallow allegations of a vast conspiracy across an entire industry when the plaintiffs only have concrete evidence against a single group of defendants (the Marsh defendants whose misdeeds launched the whole investigation). The real lesson is, if you're going to file a nationwide suit of that scope, you need either to find yourself a whistleblower or to follow on the coattails of a government investigation (as the claims against the Marsh defendants did). Fair or not, nothing else will work these days.

Second, there's the actual law in In Re: Insurance Brokerage Antitrust:

 “[A] plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (quoting Fed. R. Civ. P. 8(a)(2)). Because Federal Rule of Civil Procedure 8(a)(2) “requires a ‘showing,’ rather than a blanket assertion, of entitlement to relief,” courts evaluating the viability of a complaint under Rule 12(b)(6) must look beyond conclusory statements and determine whether the complaint’s well-pled factual allegations, taken as true, are “enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555 & n.3. The test, as authoritatively formulated by Twombly, is whether the complaint alleges “enough fact[] to state a claim to relief that is plausible on its face,” id. at 570, which is to say, “‘enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal[ity],’” Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010) (quoting Twombly, 550 U.S. at 556) (alteration in Arista Records).Fn 17

(Bolding mine). I previously covered the Second Circuit's approach to antitrust post-Twombly; it's good news for plaintiffs to see the same approach approved in the Third Circuit, particularly over a prior Third Circuit case (Fowler). Under Twombly and Iqbal, the issue isn't whether or not the plaintiff has uncovered enough evidence to make a prima facie case on the face of their complaint — as some defense lawyers have claimed — but rather whether the plaintiff has alleged "enough fact to raise a reasonable expectation that discovery will reveal evidence of illegality."

The dismissal in In Re: Insurance Brokerage Antitrust might thus prove to have made the law better for plaintiffs in the Third Circuit. That the plaintiffs in the case itself lost many of their claims is of no moment; the case quite literally alleged an industry-wide agreement to commit antitrust and racketeering violations. Plaintiffs with cases of lower orders of magnitude — like those against anything less than dozens of companies at the top of two major industries, insurance and insurance brokering — will have little trouble distinguishing those facts.

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In a patent infringement suit, the defendant's first line of defense is almost always a counterclaim that the plaintiff's patent is either invalid or unenforceable. There's little to lose in raising the counterclaim and potentially a lot to gain, including the possibility of a judgment rendering the patent invalid forever.

Patently-O refers us to Golden Hour Data Systems, Inc. v. emsCharts, Inc. and Softtech (Fed. Cir. August 9, 2010), which partly affirmed and partly vacated a District Court's Judgment as a Matter of Law overturning a $3,500,000 jury verdict in favor of Golden Hour, owner of United States Patent No. 6,117,073, and entering judgment in favor of the defendants on their "inequitable conduct" counterclaim, thereby rendering the patent unenforceable.

As the Federal Circuit recited:

A patent may be rendered unenforceable due to inequitable conduct if an applicant, with intent to mislead or deceive the examiner, fails to disclose material information or submits materially false information to the PTO during prosecution.” Digital Control, Inc. v. Charles Mach. Works, 437 F.3d 1309, 1313 (Fed. Cir. 2006). The party seeking to render a patent unenforceable due to inequitable conduct must prove both materiality and intent by clear and convincing evidence. Id. The court must then weigh the levels of materiality and intent to determine whether the conduct at issue amounts to inequitable conduct. Id. We review the district court’s factual findings as to materiality and deceptive intent for clear error and the ultimate decision on inequitable conduct for abuse of discretion. Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008); Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876 (Fed. Cir. 1988) (en banc in relevant part).

Inequitable conduct is, in essence, a judicial escape-hatch that empowers courts to enforce the duties of good faith and candor that applicants for patents have; if a patentee wasn't upfront with the patent office, the court can throw out the patent, even if a patent might still have been granted if the patentee had disclosed the information.

Given the severity of the penalty, the bar for proving inequitable conduct is quite high ("clear and convincing" proof of materiality and intent to deceive), which is why many plaintiff's lawyers don't spend much time guarding against it and why many defense lawyers focus on lower-hanging fruit like the prior art and obviousness defenses.

The defendants in Golden Hour, however, had an ace up their sleeve: a brochure for a competing product that the patentee had only partially disclosed during the patenting process.

Affirming the District Court's finding of inequitable conduct, the Federal Circuit held:

The [defendants'] contention is that [the inventors] intended to deceive the PTO by failing to fully disclose the capabilities of the AeroMed system described in the brochure. The district court appears to have inferred intent to deceive from the high materiality of the AeroMed brochure, from the selective disclosure in the IDS, and from the lack of a credible explanation on the part of Hutton and prosecution counsel for the selective disclosure.

We agree that the district court could find the explanation for not submitting the brochure or its undisclosed contents not to be credible (if its contents were known). The explanation was that it was Fuller’s practice not to submit undated materials. But Fuller testified that he knew that other practitioners at Knobbe Martins submitted undated brochures to the PTO and that the PTO considers those brochures. But most importantly, even if Fuller believed that the PTO’s rules would not have permitted the examiner to consider the undated brochure, there is no suggestion that Fuller thought that the information in the brochure was off-limits—indeed Fuller submitted information from the brochure in the IDS. See Semiconductor Energy, 204 F.3d at 1375, 1376 (holding that “[i]t was incumbent upon [the inventor] to provide the PTO with sufficient information for a reasonable examiner to consider the [submission] in context, not with a selective and misleading disclosure” and because “[t]he inventor[] failed to do that” he “cannot post facto hide behind the MPEP guidelines”). In sum, prosecution counsel failed to provide any explanation for withholding the missing information from the brochure, assuming he was aware of the brochure’s contents.

(Emphasis added.)

That's a classic example of inequitable conduct: the absence of any explanation for not disclosing to the patent office everything you know.

Of course, this being patent infringement law, issues are only settled for a few months at a time, and it's quite possible that by this time next year Golden Hour will be overruled, at least in terms of the procedure by which it was decided (i.e., a jury verdict for the plaintiffs followed by JMOL for the defendants). As Judge Newman's dissent notes: 

At the trial, the full brochure was in evidence, and stressed by the defendants, and the jury found that it was not invalidating. In view of the majority’s ruling that deceptive intent was not established in the district court, and the jury’s verdict of validity despite the brochure, the charge of inequitable conduct should be laid to rest. At most, this charge was deemed viable only because of inconsistencies in the law, inconsistencies that this court has presented for resolution in the pending en banc case of Therasense, Inc. v. Becton, Dickinson & Co., Nos. 2008-1511, -1512, -1513, -1514, -1595.

Oral arguments on Therasense are scheduled for November 9, 2010.

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As you, the reader of a legal blog, undoubtedly know, earlier today Judge Walker released his opinion in Perry v. Schwarzenegger, which everyone knows as the Proposition 8 suit. (Back when it was filed, I wrote about why the suit was against Schwarzenegger, rather that against the State of California.)

As you also know, the plaintiff won:

Proposition 8 fails to advance any rational basis in singling out gay men and lesbians for denial of a marriage license. Indeed, the evidence shows Proposition 8 does nothing more than enshrine in the California Constitution the notion that opposite sex couples are superior to same-sex couples. Because California has no interest in discriminating against gay men and lesbians, and because Proposition 8 prevents California from fulfilling its constitutional obligation to provide marriages on an equal basis, the court concludes that Proposition 8 is unconstitutional.

Most likely, you either agree with the opinion or you don't.

Kevin Drum, one of the political bloggers at Mother Jones, agrees with the opinion but worries about its staying power:

But as we all know, his ruling per se doesn't matter. It will be appealed to the Ninth Circuit Court shortly, and after that it's sure to be appealed to the Supreme Court. What's more, a stay is likely in the meantime. So the question is, how compelling is his opinion? Is it likely to sway members of either the circuit or supreme courts?

I am nothing close to a legal expert, so feel free to ignore what follows even more than usual. But I have a feeling the answer is no. The problem is that Walker's ruling relies very, very heavily on the factual evidence provided by each side's expert witnesses.

The very reliance on facts is exactly why the opinion is more likely to sway members of the appellate courts.

As general matter, on appeal "purely legal questions, including jurisdictional questions, are reviewed de novo." Tampubolon v. Holder, 598 F. 3d 521 (9th Cir. 2010). The Circuit Court is duty-bound to re-examine, on its own, every legal decision made by the District Court.

Thus, although it's always nice for the winner in the District Court to sail into the Circuit Court with a persuasive legal analysis behind them, it's not essential. Indeed, Judge Walker's legal conclusions are practically unnecessary, since the appellate court will no doubt be inundated by amicus briefs from many of the most prominent legal organizations in the country, briefs raising every conceivable angle on the case.

Circuit Court Judges and Supreme Court Justices are also more than happy to interject their own legal ideas into cases, particularly in cases as important and high-profile as this one.

I'd venture to say the factual record is more important in preserving Judge Walker's holding, since his factual findings are protected on appeal: "We [the Circuit Court] review for clear error the district court's factual findings in connection with a bench trial." U.S. v. Brobst, 558 F. 3d 982 (2009)(emphasis added). "For clear error" is a far cry from "de novo," and the limitation is doubly important since "We [the Circuit Court] may affirm on any grounds supported by the record." Corales v. Bennett, 567 F. 3d 554 (9th Cir. 2009)(emphasis added).

Thus, while the Circuit Courts and Supreme Court can and will do whatever they want on the law, their hand is not nearly as free on the facts. If Judge Walker's goal was to draft the opinion in the manner most likely to survive appeal, his best bet was to make his decision light on the law and heavy on the facts.

[UPDATE: Dave Hoffman and Orin Kerr both question the significance of the factual findings. On the one hand, they are correct that neither the circuit court nor the Supreme Court is inherently bound by every last factual judgment made by a single district court judge. They remain free to speculate wildly about the history of marriage and the nature of sexuality, and free to completely disregard the facts and instead make up a ruling based entirely upon imagined facts.

On the other hand, they were free to do that anyway. The presence of Judge Walker's factual findings, however, puts the burden upon those appellate courts — as a matter of institutional legitimacy — to explain their reasoning, including by describing, at least in general, what facts underlie that reasoning. That is to say, they can't simply reverse Judge Walk's opinion by claiming he was wrong on the law; they need to explain, at least briefly, why they feel he was also wrong on the facts.

That may be very hard to do for some of these judges, such as Justice Kennedy. Justice Kennedy, for example, has already explained why he feels the government has no legitimate interest in the persecution of gays:

The petitioners are entitled to respect for their private lives. The State cannot demean their existence or control their destiny by making their private sexual conduct a crime. Their right to liberty under the Due Process Clause gives them the full right to engage in their conduct without intervention of the government. "It is a promise of the Constitution that there is a realm of personal liberty which the government may not enter." Casey, supra, at 847. The Texas statute furthers no legitimate state interest which can justify its intrusion into the personal and private life of the individual.

Had those who drew and ratified the Due Process Clauses of the Fifth Amendment or the Fourteenth Amendment known the components of liberty in its manifold possibilities, they might have been more specific. They did not presume 579*579 to have this insight. They knew times can blind us to certain truths and later generations can see that laws once thought necessary and proper in fact serve only to oppress. As the Constitution endures, persons in every generation can invoke its principles in their own search for greater freedom.

Lawrence v. Texas, 539 US 558 (2003). If he wants to reach a different conclusion in Perry, he will feel compelled to explain why — and the attempt to do so may convince him otherwise.

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Yesterday the Third Circuit released a unanimous precedential opinion in Reedy v. Evanson:

While working as a cashier at a convenience store, nineteen-year-old Sara R. Reedy was sexually assaulted and robbed at gunpoint by a serial sex offender. She reported the crime to the police within minutes, subjected herself to a rape kit examination, and gave detailed and consistent statements to law enforcement officers and hospital staff.

Reedy needed Sam Spade. Instead, she got Der Prozess:

However, Detective Frank Evanson of the Cranberry Township, Pennsylvania Police Department, the lead investigator assigned to Reedy’s case, believed that Reedy had fabricated the incident to cover up her own theft of cash from the convenience store. Approximately three months later, Evanson also became the lead investigator on another sexual attack that was substantially similar to the assault on Reedy and that Evanson knew was suspected to be the work of a serial rapist. Six months after the assault on Reedy, Evanson filed a criminal complaint against her, charging her with falsely reporting a crime, theft, and receipt of stolen property. Reedy spent five days in jail. The charges against her were dropped only when the serial rapist was captured and confessed to assaulting her, to committing the theft, and to committing the other sexual assault investigated by Evanson.

As Reedy alleged, after the assault, she immediately called the police, who took her straight to the hospital, where Evanson — who had never met her before — called her a liar, asked her how much "dope" she did each day, accused her of stealing the money, watched her break down crying, and then told her to save it "because tears aren't going to save you now."

Three months later, another woman reported an almost identical sexual assault; the perpetrator looked the same, acted the same, and initiated the attack at the same time of night only a mile and a half from Reedy's attack.

"Sherlock" Evanson didn't — or chose not to — connect the dots, and three months later sought charges against Reedy, in support of which he filed an affidavit riddled with material omissions and misstatements.

Thus, six months after being sexually assaulted, Reedy was in jail for the crime of truthfully reporting sexual assault. She stayed in jail for five days awaiting a bail reduction hearing, after which she was released, with her trial scheduled for nine months later. Less than a month before her criminal trial was to begin, the serial rapist was caught in the midst of raping a third victim, after which he confessed to all three assaults.

The District Attorney was kind enough to drop the charges against Reedy.

Reedy, unsurprisingly, sued.

Unlawful seizure was her primary claim:

The Fourth Amendment provides that people are “to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, ... and no Warrants shall issue, but upon probable cause ... .” U.S. CONST. amend. IV. It is well-established that the Fourth Amendment “prohibits a police officer from arresting a citizen except upon probable cause.” Orsatti v. N.J. State Police, 71 F.3d 480, 482 (3d Cir. 1995) (citing Papachristou v. City of Jacksonville, 405 U.S. 156, 169 (1972)).

Probable cause “requires more than mere suspicion[.]” Orsatti, 71 F.3d at 482. However, it does not “require the same type of specific evidence of each element of the offense as would be needed to support a conviction.” Adams v. Williams, 407 U.S. 143, 149 (1972). Rather, “probable cause to arrest exists when the facts and circumstances within the arresting officer’s knowledge are sufficient in themselves to warrant a reasonable person to believe that an offense has been or is being committed by the person to be arrested.” Orsatti, 71 F.3d at 483; see also Wilson v. Russo, 212 F.3d 781, 789 (3d Cir. 2000) (“Probable cause exists if there is a ‘fair probability’ that the person committed the crime at issue.” (citation omitted).). “Probable cause need only exist as to [one of the] offense[s] that could be charged under the circumstances.” Barna v. City of Perth Amboy, 42 F.3d 809, 819 (3d Cir. 1994). In analyzing whether probable cause existed for an arrest, we must take a “totality-of-the-circumstances approach.” Illinois v. Gates, 462 U.S. 213, 230 (1983).

The District Court granted summary judgment in Evanson's favor, inexplicably holding that, even though the affidavit was loaded with material omissions and misstatements, and even though Detective Evanson was plainly reckless in his disregard of exculpatory facts (like the presence of an almost identical crime three months later), there still was probable cause to arrest Reedy.

The Third Circuit's reversal of the summary judgment — along with their remand ordering the case to go to trial, and not just another round of summary judgment — packs a wallop for future unlawful seizure cases, particularly those involving rape victims:

In general, the District Court committed four types of error. First, it erred in its reconstruction of the Affidavit because it failed to consistently interpret the record in the light most favorable to Reedy and instead, contrary to the summary judgment standard, occasionally adopted interpretations that were the least favorable to Reedy. Second, the Court cited several inculpatory “facts” to support probable cause that were not actually supported by the record. Similarly, not all of Evanson’s arguably reckless omissions were actually included in the Court’s reconstructed Affidavit and analysis. Third, the Court erred in deciding that certain facts were inculpatory when they were either irrelevant or even exculpatory. Finally, the Court erred when it gave little weight to the highly significant exculpatory facts that the Landmark attack, with all of its similarities to the attack on Reedy, occurred before Evanson sought to arrest Reedy and that Evanson was responsible for investigating both attacks.

The Court goes on to describe each in detail.

The first is a powerful reaffirmation of what was already the law, law that has been inconsistently applied: when, at summary judgment in a civil rights lawsuit, a court goes back to look at the affidavit submitted by a police officer in support of an arrest, it must do so in the light most favorable for the plaintiff. It is for the jury, not the Court, to decide which parts of that affidavit were false and what the police officer's mindset was in submitting them.

The third, however, is perhaps the most interesting. As the Third Circuit noted, "The District Court thought it inculpatory that Reedy had failed to push the panic alarm while a gun was being pointed at her, and that she had declined professional counseling when it was offered to her."  Neither of those two judgments are legal judgments — they're moral judgments about how a woman "should" act while, and after, she is being raped.

As the Women's Law Project argued in its amicus brief in the case,

The district court also viewed Ms. Reedy’s “failure” to push the panic alarm while a gun was being held to her head as inconsistent with the behavior of a “genuine” rape victim. See App. 34a n.7, 37a, 38a (drawing negative inferences from Ms. Reedy’s “failure” to press the panic alarm). This inference is based on the assumption that victims should engage in active forms of resistance during their sexual assault. See, e.g., State in the Interest of M.T.S., 609 A.2d 1266, 1277 (N.J. 1992) (discussing assumptions historically made by courts). This is not true. Nor is it legally permissible, Pennsylvania having eliminated the resistance requirement three decades ago. See Act of May 18, 1976, Pub. L. 120, No. 53, §§ 1-2 (codified at 18 Pa. Cons. Stat. § 3107) ...

A review of ten years of research on the subject clearly reveals that active forms of physical resistance are used by only a minority of women (20-25%) who are sexually assaulted. Sarah E. Ullman, A 10-Year Update of Review and Critique of Empirical Studies of Rape Avoidance, 34 Crim. Just. & Behav. 411, 413-14 (2007). Physical resistance during a rape is particularly unlikely among women who have been sexually assaulted in the past. Id. This response to sexual assault is both understandable and more than reasonable. ...

The district court further buttressed its decision by accepting as inculpatory evidence the fact that Reedy did not access counseling services. See App. 32a, 34a n.7 (drawing negative inferences from Ms. Reedy’s choice to forgo rape crisis counseling). Yet again, the research documents that this behavior is consistent with the behavior of many sexual assault victims. Empirical evidence suggests that a sizeable portion of victims do not access mental health services. See Dean G. Kilpatrick et al., Drug-Facilitated, Incapacitated, and Forcible Rape: A National Study 56 (2007).

The Third Circuit adopted that argument almost entirely:

[T]he District Court’s implication that there is a duty to attend counseling is incorrect. There is no such duty. Moreover, implicit in the Court’s conclusion that an inculpatory inference can be drawn from Reedy’s decision not to attend counseling is a value judgment about how victims ought to respond to trauma. That is a highly debatable judgment, lacking any foundation in the record. Even if there were some basis for saying that refusing counseling is inculpatory, Reedy explained why she did not want counseling, saying that her earlier experience with sexual abuse would allow her to handle the trauma. When confronted, as the District Court evidently believed it was, with two explanations for Reedy’s decision to refuse counseling – either she was lying about the assault or she believed counseling was not necessary – the Court chose to operate on the least favorable interpretation of the evidence. That was error. Likewise, Reedy’s failure to reach for a panic alarm when a gun was pointed at her and she was being sexually assaulted, which are the facts we must accept at this stage, is not in the least inculpatory.

Fact is, none of that is controversial — the International Association Chiefs of Police, for example, has argued for years that there is no "model" or "example" rape victim, no one way in which women deal with the trauma of rape, and so police officers have to evaluate accusations on a case-by-case basis.

Apparently, some police officers and departments still haven't heard the message.

As they say, money talks. I hope it also teaches. 

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As The Legal Intelligencer reported,

When a top-level executive suddenly quits to take a job at a competing firm, the courts have the power to block the start of the new employment if the evidence shows that such an injunction is needed to prevent a likely misappropriation of trade secrets, the 3rd U.S. Circuit Court of Appeals has ruled.

The ruling came in Bimbo Bakeries USA Inc. v. Botticella, in which the appellate court considered whether the manufacturer of Thomas' brand English muffins was entitled to an injunction that barred one of its top-level executives from taking a new job with Hostess Inc.

Bimbo Bakeries won the first round in February when U.S. District Judge R. Barclay Surrick enjoined Chris Botticella, a former senior vice president at Bimbo, from starting the new job on the ground that Botticella's extensive knowledge of Bimbo's trade secrets -- including manufacturing secrets used to make the famous "nooks and crannies" in Thomas' English muffins -- made it substantially likely, if not inevitable, that he would disclose Bimbo's secrets to Hostess.

The Third Circuit affirmed.

The case turned on Pennsylvania law, specifically the Pennsylvania Uniform Trade Secrets Act (“PUTSA”) and the "inevitable disclosure" doctrine established by Air Products and Chemicals v. Johnson, 442 A.2d 1114 (Pa. Super. Ct. 1982):

Essentially, Johnson and Liquid Air remonstrate that the trial court improperly reasoned from Allis-Chalmers, supra,  Emery, supra, and Goodrich, supra, in holding that it was inevitable that Johnson would disclose information to Liquid Air. They contend that inevitability of disclosure is not the proper standard by which the trial court can determine that it was clear that an immediate and irreparable injury would result unless an injunction issued. While we do not adopt the reasoning of the trial court or its use of the term inevitable, we are unable to find that the trial court committed reversible error.

The lower court held that: "It would be impossible [for Johnson] to perform his managerial functions in on-site work without drawing on knowledge he possesses of Air Products' confidential information." (Trial Court Opinion at page 18.) We are satisfied that this expression of its determination of the likelihood of disclosure was proper. The court reasoned that the duties which Johnson was to perform at Liquid Air would make it impossible for Johnson not to disclose trade secrets. This was precisely the reasoning of the court in Emery, supra, which we find persuasive. Both courts held it would be impossible for the employee to perform his duties at the new employer without disclosing trade secrets. Accordingly, we hold that the trial court acted reasonably when it issued a preliminary injunction. Valley Forge Historical Society v. Washington Memorial Chapel, supra; Boyd v. Cooper, supra; Jostan Aluminum Products Co., Inc. v. Mount Carmel Dist. Indus. Fund, supra.

The above from Air Products isn't exactly a model of clarity, prompting the Third Circuit to engage in a bit of extrapolation:

With respect to the probability of disclosure required to warrant an injunction, the Superior Court stated at the outset of its analysis that Pennsylvania law permits the issuance of an injunction where a defendant’s new employment “is likely to result in the disclosure” of a former employer’s trade secrets. Id. at 1120 (emphasis added). The Court then determined that it was reasonable for the trial court to issue an injunction based on the inevitability that Johnson would disclose trade secrets, but the Superior Court explicitly chose “not [to] adopt the reasoning of the trial court or its use of the term inevitable.” Id. at 1124. Based on these statements it seems clear that the Superior Court believed that the trial court permissibly could have granted the injunction even if the disclosure of trade secrets was not inevitable.

...

The Superior Court subsequently stated that the “proper inquiry” in determining whether to grant an injunction to prevent the threatened disclosure of trade secrets is not whether a defendant inevitably will disclose a trade secret in the absence of injunctive relief, but instead whether “there is sufficient likelihood, or substantial threat, of defendant doing so in the future.” Den-Tal-Ez, 566 A.2d at 1232 (citing Air Prods., 442 A.2d at 1122-25; SI Handling Sys.,753 F.2d at 1263-64).

I'll pass over the interesting, but highly technical, question about the precedential effect of Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007), which Botticella argued held required the former employer show, as a prerequisite to an injunction, that it "would be 'virtually impossible' for an employee to fulfill his responsibilities for a new employer without disclosing a former employer’s trade secrets." In short, the Third Circuit held that the "virtually impossible" language from Victaluic Co. was dicta, and so did not bind them.

There's an underlying theme to the Third Circuit's ruling, which, like Air Products before it, didn't really lay down a rule but instead rejected the hard-and-fast rule suggested by the losing party. That underlying theme is: respect for District Courts' ability to assess the need for entering injunctions, even injunctions that impose a significant hardship, like the injunction here.

Put another way, rather than set a high bar for District Courts — as a ruling which incorporated terms like "inevitable" or "virtually impossible" would have — the Third Circuit set no bar at all, and instead deferred to the judgment and determinations of the District Court.

It's hard to argue with the logic of that; as much as we would like to set hard-and-fast rules to govern all situations, the simple truth is that every case is unique, and we have to leave some discretion in the system, have to have some trust in the trial judges, to make it work right.

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The False Claim Act envisions a broad definition under 31 U.S.C. § 3729(b) for when a defendant "knowingly" makes a false or fraudulent claim to the federal government:

(b) Knowing and Knowingly Defined.— For purposes of this section, the terms “knowing” and “knowingly” mean that a person, with respect to information—

(1) has actual knowledge of the information;
(2) acts in deliberate ignorance of the truth or falsity of the information; or
(3) acts in reckless disregard of the truth or falsity of the information,

and no proof of specific intent to defraud is required.

The burden of persuasion for proving it is, like under most federal statutes, only preponderance of evidence:

Unlike a large number, and perhaps the majority, of the States, Congress has chosen the preponderance standard when it has created substantive causes of action for fraud. See, e. g., 31 U. S. C. § 3731(c) (False Claims Act); 12 U. S. C. § 1833a(e) (1988 ed., Supp. I) (civil penalties for fraud involving financial institutions); 42 CFR § 1003.114(a) (1989) (Medicare and Medicaid fraud under 42 U. S. C. § 1320a-7a); Herman & MacLean v. Huddleston, 459 U. S., at 388-390 (civil enforcement of the antifraud provisions of the securities laws); Steadman v. SEC, 450 U. S. 91, 96 (1981) (administrative proceedings concerning violation of antifraud provisions of the securities laws); SEC v. C. M. Joiner Leasing Corp., 320 U. S. 344, 355 (1943) (§ 17(a) of the Securities Act of 1933); First National Monetary Corp. v. Weinberger, 819 F. 2d 1334, 1341-1342 (CA6 1987) (civil fraud provisions of the Commodity Exchange Act). Cf. Sedima, S. P. R. L. v. Imrex Co., 473 U. S. 479, 491 (1985) (suggesting that the preponderance standard applies to civil actions under the Racketeer Influenced and Corrupt Organizations Act).

Grogan v. Garner, 498 U.S. 279, 288-289 (1991).

But even though a whistleblower need not show specific intent to defraud, there nonetheless are limits on the claims. The Fourth Circuit recently decided US ex rel. Owens v. First Kuwaiti General Trading, affirming the District Court's grant of summary judgment:

Relator John Owens brought this qui tam suit under the False Claims Act (“FCA”), 31 U.S.C. §§ 3729, et seq., against First Kuwaiti construction firm, his former employer. He alleged that the firm billed falsely for deficient work in connection with construction of the U.S. embassy in Baghdad and that it retaliated against him for actions taken in furtherance of his FCA contentions. The district court granted summary judgment to defendant.

The essence of Relator's claim is that defendant failed to live up to its contractual obligations. He produced no evidence either of knowing misrepresentations on defendant's part or of having been mistreated for any actions taken on behalf of his FCA claims. We therefore affirm the district court's judgment. Congress crafted the FCA to deal with fraud, not ordinary contractual disputes. The FCA plays an important role in safeguarding the integrity of federal contracting, administering strong medicine in situations where strong remedies are needed. Allowing it to be used in run-of-the-mill contract disagreements and employee grievances would burden, not help, the contracting process, thereby driving up costs for the government and, by extension, the American public.

I'm a sucker for Circuit Court opinions that state the law in plain English and cite to other Circuits, which is why I'm posting this one:

The FCA provides that suit may be brought against anyone who “knowingly presents” to the government “a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1). It similarly allows suit against anyone who “knowingly makes ․ a false record or statement material to a false or fraudulent claim.” Id. at § 3729(a)(1)(B). In adopting the FCA, “the objective of Congress was broadly to protect the funds and property of the government.” Rainwater v. United States, 356 U.S. 590, 592 (1958).

The FCA's scienter requirement does not demand “specific intent to defraud” and can be satisfied by proving only “reckless disregard of the truth or falsity of the information.” Id. § 3729(b). Congress, however, has made plain “ ‘its intention that the act not punish honest mistakes or incorrect claims submitted through mere negligence.’ “ United States ex rel. Hochman v. Nackman, 145 F.3d 1069, 1073 (9th Cir.1998) (quoting S.Rep. No. 99-345, at 7 (1986)). This is because “[t]he FCA is a fraud prevention statute.” United States ex rel. Lamers v. City of Green Bay, 168 F.3d 1013, 1019 (7th Cir.1999); see also Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662, 128 S.Ct. 2123, 2130 (2008). It does not allow a qui tam relator to “shoehorn what is, in essence, a breach of contract action into a claim that is cognizable under the False Claims Act.” United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 373 (4th Cir.2008).

The case itself is good example of when faulty government contracting work is not quite bad enough to warrant liability. The defendant there apparently messed up some of the building work, but no worse than other contracts with similar claims did, and — more importantly — no worse than envisioned by the contract itself. The whistleblower thus couldn't muster, at least in the Circuit Court's eyes, enough evidence to show the defendant even "recklessly disregard" the falsity of the claims it submitted.

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Talking Points Memo reports the latest on the Shirley Sherrod fiasco:

Shirley Sherrod said this morning on CNN that she would like to "get back at" Andrew Breitbart.

Asked if she would consider a defamation suit against Breitbart, the conservative blogger who posted the edited clip that got her fired, she said, "I really think I should."

"I don't know a lot about the legal profession but that's one person I'd like to get back at, because he came at me. He didn't go after the NAACP; he came at me," she went on.

To recap the underlying facts here:

BigGovernment.com "broke" a story yesterday about a speech given a few months ago by Shirley Sherrod, USDA Georgia Director of Rural Development, at an NAACP Freedom Fund dinner. In it, Sherrod tells a story from 24 years ago about not helping a white farmer as much as she could have because she was "struggling with the fact that so many black people had lost their farm land."

The point of this story, told in a public venue, was that she quickly realized that she had done wrong. "That's when it was revealed to me that it's about poor versus those who have. It's not so much about white...it is about white and black but it's not, you know...it opened my eyes."

Breitbart apparently edited the video he released, removing the context which showed the timeframe in which it occurred, Sherrod's quick realization of how wrong she had been, and Sherrod's subsequent friendship with the white farmers at issue. To anyone who saw the video and the report — including Secretary of the Agriculture Tom Vilsack and the NAACP — it appeared that Sherrod had unabashedly admitted discriminating against whites in her official duties.

The NAACP sharply criticized Sherrod, and Secretary Vilsack promptly fired her. Once the full tape was released, the NAACP apologized profusely for having been "snookered" by Breitbart, and Vilsack offered Sherrod her job back. Breitbart also posted a correction:

Correction: While Ms. Sherrod made the remarks captured in the first video featured in this post while she held a federally appointed position, the story she tells refers to actions she took before she held that federal position.

So if everyone supposedly now knows the truth, can she still sue for defamation?

Certainly.

Two words: Richard Jewel.

What came to mind when you read that?

If you're like me, you thought: Olympic Park Bomber.

Jewel wasn't the bomber, of course — that was Eric Rudolph — but after he was identified as a "person of interest," the media quickly cemented in the public's mind a nefarious, rather than heroic, connection between Jewel and the bombing. Subsequent corrections were issued, but the libelous link lingered.

He sued in Georgia, where Sherrod is based and where she would likely sue.

The problem, though, was the high bar he had to reach to prevail:

The central issue presented by this appeal is whether Jewell, as the plaintiff in this defamation action, is a public or private figure, as those terms are used in defamation cases. This is a critically important issue, because in order for a "public figure" to recover in a suit for defamation, there must be proof by clear and convincing evidence of actual malice on the part of the defendant. Plaintiffs who are "private persons" must only prove that the defendant acted with ordinary negligence. Jewell contends the trial court erred in finding that he is a "public figure" for purposes of this defamation action.

Atlanta Journal-Constitution v. Jewell, 555 SE 2d 175 (Ga. 2001). Jewel lost on that, though, and had to move forward in his case as a "public figure."

But he prevailed anyway, negotiating settlements with several media outlets that were apparently in the six or seven figure range. We'll never know what a jury would have found in his case, but we know that the defendants were certainly worried about it, despite the subsequent corrections.

Breitbart apparently senses the danger, and has, through his site, started a defense:

Did Breitbart really excise or ignore the exculpatory portion of Sherrod’s remarks? The initial version of the video included Sherrod’s change-of-heart conclusion that she ought to engage in class warfare rather than race warfare. Her subsequent remarks (the ones that were supposedly edited out) simply built on that theme. Also, does anyone really believe that Andrew Breitbart would intentionally distort a video clip to make a one-day splash? Risk his growing reputation with a deliberate, easily refutable distortion? For those clamoring for more careful consideration of context and intent, perhaps they should contemplate those questions.

Those are just the type of questions a jury would contemplate in assessing whether or not Brietbart acted with "actual malice." Indeed, there's reason to believe Brietbart had some objective in mind with the edited video:

It's also important to understand that Andrew Breitbart's timing of the release of the grossly distorted video of Sherrod, which he admits having had for weeks, may not be entirely random. Congress will soon vote on whether to fund part of a settlement between the USDA and African-American farmers who faced acknowledged discrimination -- farmers like Sherrod and her husband used to be. It's a tiny piece of the upcoming war supplemental bill.

The only way we'll actually get an answer to Breitbart's own questions is if Sherrod does indeed sue.

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The Los Angeles Times featured a story about the legal saga that has enveloped the Christian bestseller The Shack:

"The Shack," William Paul Young's novel about a man rediscovering lost faith after the murder of his 5-year-old daughter, started out as a manuscript no one would touch. Finally, pastors Wayne Jacobsen and Brad Cummings discovered the book and created a start-up, Windblown Media, to publish it. The novel sold a million copies for them in the first year, eventually ending up at No. 1 on the New York Times' trade paperback bestseller list.

Then Hachette Book Group got involved. In May 2008, the publishing conglomerate — one of the largest in the country — cut a deal with Windblown Media to market and distribute the book. In the two years since, "The Shack" has become a 12-million-copy-selling phenomenon and the biggest Christian publishing sensation in decades.

But unlike Cinderella — at least in the Disney version — there's no happy ending in sight for Young, or for the two men, Jacobsen and Cummings, he once called friends and business partners.

For nearly eight months, the trio have been mired in a series of lawsuits, accusations flying over improper accounting practices, millions of dollars in missing royalties, contract breaches and copyright disputes. Hachette, meanwhile, just wants to know to whom it owes money — and how much.

I suppose none of them are in the mood for a reminder about that camel passing through the eye of a needle, not when — according to the federal interpleader complaint filed by Hachette — there's nearly a million dollars in royalties per quarter at stake.

Let's see if the lawyers can provide some balance and perspective on the case:

"In all of my 30 years of practice, Young's lawsuit is the most ridiculous I have ever seen," said Windblown Media's legal representative, Martin Singer, a partner with Lavely Singer. He claimed that Young's lawsuit was a "complete misrepresentation" of the author's financial state, with no mention of the more than $10.5 million Young had earned from "The Shack" to date.

Young's legal representative, Michael Anderson of Anderson & Loeb, scoffed at the countersuit. "They agreed in a written contract that Young was the sole author of 'The Shack,'" he said by telephone. "Back before the work was known to be a bestseller, both parties filed a copyright notice indicating that Young was the sole author. For three years Windblown has been publishing the book under Young's name. [The federal court] action is a belated attempt by [Jacobsen and Cummings] to take credit for a book they didn't write."

Apparently not. Regular readers will delight in seeing Martin Singer make another appearance on these pages; his gift for hyperbole is unparalleled.

From looking at the main pleadings — like the federal court complaint, Young's motion to dismiss, and Windblown's response — neither side's claims strike me as "ridiculous."

In essence, there are three claims, filed in this order:

1. Young sued Jacobsen and Cummings in state court for breach of contract;
2. Jacobsen and Cummings sued Young in federal court to obtain joint control of the copyright for The Shack;
3. Hachette filed an interpleader in federal court asking the court to take control of the money that keeps rolling in from sales of The Shack.

Let's look at the merits of each.

Starting with Young's state-law breach of contract allegations, "creative" accounting is common in Hollywood and in the music industry, so why not in the book industry, too? Young likely has little ability to monitor or police the transactions entered into by Windblown or Hachette, and in many instances — particularly with movies — the transactions at issue are not so much explicit fraud as they are bad faith. That is to say, there's nothing obviously fraudulent about the defendant's conduct, it's just not within the spirit of the party's agreement. That often leads to longer, more drawn-out litigation, since nobody sees themselves as being caught red-handed, they see the dispute as a difference of opinion.

Looking at Jacobsen's and Cummings' federal-law copyright allegations, it is indeed possible that the co-authors to a work, for reasons of convenience (and money), chose not to list themselves as "author" of the work either in the contracts or in the copyright registration. Those facts certainly make it harder for them to prove authorship in front of a jury, but they don't necessarily close the courthouse doors. Consider the Seventh Circuit's opinion in Janky v. Lake County Convention & Visitors Bureau, 576 F. 3d 356 (7th Cir. 2009):

This over-litigated case, involving a song by a doo-wop group, comes to us with 18 district court orders and memorandum opinions spread over a combined 239 pages. The district court's 46-page docket contains a staggering 371 entries. And the briefs of the parties on appeal are a bit unfocused to say the least. But although it's a tough job, someone has to do it, so with shoulder to the wheel, we forge on. ...

Under 17 U.S.C. § 201(a), "[t]he authors of a joint work are co-owners of copyright in the work." In other words, "the joint authors hold undivided interests in [the] work, despite any differences in each author's contribution." Erickson, 13 F.3d at 1068. The benefits of co-authorship are therefore significant: each author may use or license the joint work. Id. But when does a song qualify as a "joint work"? Section 101 of the Copyright Act defines a joint work as "a work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole." 17 U.S.C. § 101. In Erickson, we determined that this language requires (1) intent to create a joint work; and (2) contribution of independently copyrightable material.

Since biblical analogies seem to go so well with this case, let's add another: the Synoptic Gospels, i.e. the Gospels of Matthew, Mark and Luke.

Embedded to the right is diagram of the shared content among those gospels — shared content that includes the line about the camel passing through the eye of a needle, which shows up verbatim in all three — explained as follows on Wikipedia:

The Gospel of Matthew, the Gospel of Mark, and the Gospel of Luke are known as the Synoptic Gospels because they include many of the same stories, often in the same sequence, and sometimes the exact same wording. This degree of parallelism in content, narrative arrangement, language, and sentence structures can only be accounted for by literary interdependence. Scholars believe that these gospels share the same point of view and are clearly linked.

In light of the nature of the similarities, most scholars believe the Gospel of Matthew and the Gospel of Luke were based on the Gospel of Mark and a lost, hypothetical gospel called Q. 

Which raises a question pertinent to the lawsuit: assuming Matthew and Luke contributed, respectively, only 20% and 35% of their own Gospels, would that be sufficient to be "independently copyrightable material" that could make them joint authors of the overall Synoptic Gospels? (Let's put aside divine inspiration; that might make the whole thing a work-for-hire, with copyright going to the person who contracted for the work.)

Probably so; "the essence of copyrightability is originality of artistic, creative expression." Ets-Hokin v. Skyy Spirits, Inc., 225 F. 3d 1068 (9th Cir. 2000). Adding text, or substantially re-writing an existing text — as The Shack apparently acknowledges Jacobsen and Cummings really did — is generally enough to make the contribution copyrightable.

As you can imagine, everybody wants their own suit to go first while everyone else's suit waits its turn. The Anti-Injunction Act, however, precludes both District Courts from enjoining the state court from hearing Young's breach of contract claim:

In Atlantic Coast, the Court emphasized an order directed at a state court proceeding must be necessary in aid of jurisdiction — "it is not enough that the requested injunction is related to that jurisdiction." 398 U.S. at 295, 90 S.Ct. 1739. Acknowledging the language is nonetheless broad, the Court elaborated: an injunction is necessary in aid of a court's jurisdiction only if "some federal injunctive relief may be necessary to prevent a state court from so interfering with a federal court's consideration or disposition of a case as to seriously impair the federal court's flexibility and authority to decide that case." Id.

Without more, it may not be sufficient that prior resolution of a state court action will deprive a federal court of the opportunity to resolve the merits of a parallel action in federal court. "The traditional notion is that in personam actions in federal and state court may proceed concurrently, without interference from either court, and there is no evidence that the exception to § 2283 was intended to alter this balance." Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623, 642, 97 S.Ct. 2881, 53 L.Ed.2d 1009 (1977) (plurality opinion). In ordinary actions in personam, "[e]ach court is free to proceed in its own way and in its own time, without reference to the proceedings in the other court. Whenever a judgment is rendered in one of the courts and pleaded in the other, the effect of that judgment is to be determined by the application of the principle of res adjudicata by the court in which the action is still pending...." Kline v. Burke Constr. Co., 260 U.S. 226, 230, 43 S.Ct. 79, 67 L.Ed. 226 (1922). Therefore, it may not be sufficient that state actions risk some measure of inconvenience or duplicative litigation. In re Baldwin-United Corp., 770 F.2d 328, 337 (2d Cir.1985). An injunction may issue, however, where "the state court action threatens to frustrate proceedings and disrupt the orderly resolution of the federal litigation." Winkler v. Eli Lilly & Co., 101 F.3d 1196, 1202 (7th Cir.1996). In other words, the state action must not simply threaten to reach judgment first, it must interfere with the federal court's own path to judgment.

In re Diet Drugs, 282 F. 3d 220 (3rd Cir. 2002).

Although the federal courts have jurisdiction over the copyright and interpleader claims, they don't have jurisdiction over Young's breach of contract claim (since he didn't bring it there and the defendants didn't remove it to federal court), and so can't enjoin the state court from moving forward on it.

Moreover, there's no reason that all of these suits can't be litigated at the same time — of all of them, Hachette might have the most urgent claim in the form of the interpleader, since it doesn't know to whom it should pay that million dollars — up until the point of trial. In a case of this nature, the parties have ample resources to persue multiple actions at once, and the copyright claim is indeed a separate and distinct claim from the breach of contract claim.

That said, I think a District Court will likely look very suspiciously at Jacobsen's and Cummings' federal copyright claim. Even if their claim is meritorious, it plainly was a tactical move prompted by Young's state-law breach of contract claim. That's not necessarily wrong but it's also not very compelling; the District Court may decide to "abstain" from hearing the case or, more likely, to "stay" the case pending the conclusion of Young's case.

Nonetheless, the copyright claim obviously impacts the resolution of Young's claim, and the core issue in that copyright — who owns the rights to The Shack — won't be wholly resolved by Young's case, which revolves around the method of payments. There may be some judicial efficiency in having it run a parallel course, since the controversy is unlikely to go away on the resolution of Young's claim alone.

For any law students out there struggling through their Federal Courts class, take a peek at the briefs linked above — they'll tell you as much about Younger and Colorado River abstention as anything else.

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Today's The Legal Intelligencer includes an article titled, "Limited Liability Law May Apply in Duck Boat Accident" about the effect of the Limitation of Liability Act of 1851 on claims arising from last's weeks collision between a tugboat and a duck boat on the Delaware River.

The Limitation Act — which nominally limits the liability of a ship owner to the value of the ship itself — is a fascinating relic from a turbulent time in the United States, when whispers of war were beginning and the young agrarian nation was painfully converting to a steam-powered industrial society. The world's first commercial oil well would not be built, in Poland, and the world's first union railway station would not be built, in Indianapolis, for another two years.

With a lot of output, a big country, and not much transportation infrastructure, we needed investment in shipping, and lots of it.

Hence the Act.

Few would disagree that the Act has outlived its purpose, but it's still on the books.

It's just as well that the Legal article is subscription only, since it doesn't tell us much other than that defense lawyers think the tugboat and duck boat are free and clear while plaintiff's lawyers believe there are ways around it.

The press did a similar dance a few weeks ago, after Transocean invoked the same act to limit its liability following the catastrophic oil leak caused by the sinking of the Deepwater Horizon oil rig. Transocean's use of the Act so bothered Congress that they're trying to get the entire Act repealed; if that happens, this entire discussion will be rendered moot in the near future, as it should be: in our modern world of insurance, re-insurance, global finance, and limited liability companies, there's no need to give vessel owners special treatment. Ships will still be built and used, regardless of the Act.

But the Act is still on the books. I'm with the plaintiff's lawyers; there's plenty of ways to get around the Act and get these types of maritime accidents back in the state courts where they belong.

First, the Act doesn't apply if the liability of the vessel owner isn't actually at issue:

In construing the Limitation Act, this Court long ago determined that vessel owners may contest liability in the process of seeking limited liability, and we promulgated rules to that effect pursuant to our "power to regulate . . . proceedings." The "Benefactor," 103 U. S., at 244; Supplementary Rule of Practice in Admiralty 56, 13 Wall., at xiii; Supplemental Admiralty and Maritime Claims Rule F(2). Thus, we agree with respondent that a vessel owner need not confess liability in order to seek limitation under the Act. The Act and the rules of practice, however, do not create a freestanding right to exoneration from liability in circumstances where limitation of liability is not at issue. In this case, petitioner stipulated that his claim for damages would not exceed the value of the vessel and waived any claim of res judicata from the state court action concerning issues bearing on the limitation of liability. The District Court concluded that these stipulations would protect the vessel owner's right to seek limited liability in federal court. Then, out of an "abundance of caution," the court stayed the limitation proceedings so that it could act if the state court proceedings jeopardized the vessel owner's rights under the Limitation Act. 31 F. Supp. 2d, at 1170-1171. We believe nothing more was required to protect respondent's right to seek a limitation of liability.

Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438 (2001). Here, it's already been reported that K-Sea had an insurance policy* in excess of $100 million; if the plaintiffs stipulate their damages don't exceed that (which they reasonably could), then the Act's purpose has been met.

Second, even where the Act applies, there are plenty of exceptions:

The Limited Liability Act allows a vessel owner to limit its liability for any loss or injury caused by the vessel to the value of the vessel and its freight.[6] "Under the Act, a party is entitled to limitation only if it is `without privity or knowledge' of the cause of the loss."[7] If the shipowner is a corporation, "knowledge is judged by what the corporation's managing agents knew or should have known with respect to the conditions or actions likely to cause the loss."[8] Once the claimant establishes negligence or unseaworthiness, the burden shifts to the owner of the vessel to prove that negligence was not within the owner's privity or knowledge.[9]

In re Hellenic Inc., 252 F.3d 391 (5th Cir. 2001)(footnotes omitted, but they're worth reading if you're looking for more cases).

For anyone interested in the subject, the Admiralty and Maritime Law Guide has a couple cases on the Act. For anyone really interested, yesterday I went to a CLE on Boating Law and Liability — hosted, coincidentally, by Ride The Duck's maritime lawyer — that included a thick book of materials on maritime law that can be purchased, even after the CLE.

As noted by those materials, "the knowledge of a corporation necessarily is measured by the knowledge of the corporation's employees and agents." A clever plaintiff's lawyer would point out that the knowledge and negligence of the mate — the one who took the Fifth and refused to testify — is imputed back to the owners of the vessel.

All of which is to say: as nice as the Act sounds on its face to defense lawyers, that tugboat company and its insurer aren't going to just walk away from this tragedy.

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Via Howard Bashman, whose client won, comes the Third Circuit's Sullivan et al. v. De Beers et al. ruling reversing the District of New Jersey's approval of a massive, nationwide settlement of antitrust claims brought by diamond purchasers against the De Beers cartel. As The Legal Intelligencer put it:

In its 75-page opinion in Sullivan v. DB Investments Inc., the 3rd U.S. Circuit Court of Appeals ruled that the settlement must be vacated because the lower court had improperly certified a nationwide class of indirect purchasers despite recognizing that some of those plaintiffs would be barred from pursuing such indirect claims under the laws of their own states.

As a result, the 3rd Circuit found that a single objector from Texas had identified a fatal flaw in the lower court's class certification analysis by showing that the common issues did not "predominate."

"The objection regarding the lack of predominance of class issues in this case raises an insurmountable hurdle to certification of the indirect purchaser class," U.S. Circuit Judge Kent A. Jordan wrote.

"Two plaintiffs cannot be joined in a single class to adjudicate the same set of facts when those facts give only one of them a legally cognizable claim," Jordan wrote in an opinion joined by visiting U.S. District Judge Donetta Ambrose of the Western District of Pennsylvania.

U.S. Circuit Judge Marjorie O. Rendell concurred in the judgment, but wrote a separate opinion that said she disagreed with Jordan's decision to undertake his own analyses of predominance and the plaintiffs' entitlement to injunctive relief, rather than allowing the lower court on remand to evaluate these issues in the first instance.

Frankly, I'm surprised by the ruling, but it takes some background to explain why.

As described by the Court:

The plaintiffs in the seven cases can be divided into two categories, based on the claims that they assert. The first category consists of direct purchasers that acquired rough gem diamonds directly from De Beers or one of its competitors. The direct purchasers advanced claims of price-fixing and monopolization, citing §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-2, for which they sought damages and injunctive relief under §§ 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 26.

The second category of plaintiffs consists of indirect purchasers, which are entities or individuals that acquired either rough or cut-and-polished gem diamonds but did not do so directly from De Beers or its competitors. Consumers and jewelry retailers fall into this category, as do middlemen who acquired diamonds from sightholders or from another indirect purchaser. The indirect purchasers sought recovery for the same
antitrust injury as did the direct purchasers but brought their claims under state antitrust, consumer protection, and unjust enrichment law. These plaintiffs could only rely on state law as a route to monetary relief because they lack standing to bring a federal antitrust claim for damages under § 4 of the Clayton Act. Illinois Brick Co. v. Illinois, 431 U.S. 720, 735-36 (1977). They did, however, seek injunctive relief for those antitrust violations under § 16 of the Clayton Act. See Mid-W. Paper Prods. Co. v. Cont’l Group, 596 F.2d 573, 594 (3d Cir. 1979) (“Illinois Brick does not preclude indirect purchasers from suing for injunctive relief[,] and ... they have standing to sue under § 16 ... .”).

That is to say, direct purchasers can all claim together under the same federal antitrust law, but, since federal antitrust law doesn't permit indirect purchasers to claim, each of those indirect purchasers has to rely on the law of their own states to obtain relief. Those states, however, vary widely in their treatment of indirect purchaser claims: some states reject them (like federal law does), some states expressly permit them, and some states permit them, but with limitations.

The District Court simply lumped all of those indirect purchasers together, hence the reversal. Their claims don't share enough "commonality."

One possible solution to the problem would have been to set up subclasses for each of the fifty states, but that's not what happened here, apparently because De Beers wanted the class action settlement to resolve all possible claims in all 50 states. (I suppose we'll have to put aside, for the moment, why De Beers felt it necessary to resolve indirect purchaser claims in the states which don't recognize indirect purchaser claims.)

It would not have surprised me if, in the first instance, the Third Circuit had ruled that a national class action can't be certified — not even for settlement purposes, where the defendants essentially concede a class would be appropriate — if some of the subclasses rely on varied state laws. As noted above, it's possible to cure that defect, albeit difficult and time-consuming: set up subclasses for indirect purchasers in each state, and compensate them based on the strength of their state's laws.

But as the majority opinion admitted, the Third Circuit already ruled that it was okay to cobble together disparate state law claims for purposes of a nationwide class action settlement:

We have recognized that “there may be situations where variations in state laws are
so significant so as to defeat commonality and predominance even in a settlement class certification.” In re Warfarin Sodium Antitrust Litig. (Warfarin Sodium II), 391 F.3d 516, 524, 529-30 (3d Cir. 2004) (certifying a class of consumer deception claims under the law of all fifty states while recognizing that the entire class also shared a single, common deception claim under the law of Delaware, where the allegedly deceptive communications had originated). However, neither we nor our sister courts of appeals have considered whether variations among state antitrust statutes are so far-reaching that those differences overshadow commonalities when a class of indirect purchasers seeks certification on a nationwide basis. We must therefore consider for the first time whether a national class of indirect purchaser claimants under state law is “sufficiently cohesive to warrant adjudication by representation.” Amchem, 521 U.S. at 623.

You can read the In re Warfarin opinion here. The most pertinent part was:

[S]everal Appellants argue that the District Court erred when it certified a single nationwide class of plaintiffs because variations in and inconsistencies between the state consumer fraud and antitrust laws of the fifty states defeat the commonality and predominance requirements of Rule 23. Appellants rely principally on the Seventh Circuit's decision in In re Bridgestone/Firestone Inc., 288 F.3d 1012 (7th Cir.2002) ("Bridgestone"), a case involving the certification of a nationwide class alleging tort claims arising under the laws of all fifty states. However, Bridgestone is distinguishable from the instant matter because that case concerned certification of a class for purposes of litigation, not a class solely for purposes of settlement, which is at issue in this case. 288 F.3d at 1018.

The difference is key. In certification of litigation classes for claims arising under the laws of the fifty states, we have previously noted that the district court must determine whether variations in state laws present the types of insuperable obstacles which render class action litigation unmanageable. See Prudential, 148 F.3d at 315; see also In re Sch. Asbestos Litig., 789 F.2d 996, 1010 (3d Cir.1986). Thus, for instance, we have stated that a district court should examine whether varying state laws can be grouped by shared elements and applied as a unit in such a way that the litigation class is manageable. Prudential, 148 F.3d at 315; In re Sch. Asbestos Litig., 789 F.2d at 1010. However, when dealing with variations in state laws, the same concerns with regards to case manageability that arise with litigation classes are not present with settlement classes, and thus those variations are irrelevant to certification of a settlement class. See Amchem, 521 U.S. at 620, 117 S.Ct. 2231 (in a settlement-only class certification, "a district court need not inquire whether the case, if tried, would present intractable management problems ... for the proposal is that there be no trial").

Nonetheless, we recognize that problems beyond those of just manageability may exist when a district court is asked to certify a single nationwide class action suit, even for settlement purposes, when claims arise under the substantive laws of the fifty states. Although there may be situations where variations in state laws are so significant so as to defeat commonality and predominance even in a settlement class 530*530 certification, this is not such a case.

Was the In re Warfarin situation really so different from De Beers just because there was that single Delaware claim? The Third Circuit back then didn't think so; instead, it found it "key" that the certification was solely for settlement purposes.

As I described above, De Beers demanded these non-existent state law indirect purchaser claims be released. Whatever the Third Circuit thinks of the merits of that, De Beers sure thought the indirect purchasers in all fifty states had something, and so sought to release those claims. In the absence of some clear, verifiable prejudice to other members of indirect purchaser classes, I just don't see the need to unwind the settlement, much less do so in a manner that ties the District Court's hands.

And that's the key difference between the majority and Judge Rendell's opinion. Judge Rendell would have vacated the settlement with instructions to the District Court to better develop its reasoning, which would then have had its reasoning reviewed under an "abuse of discretion" standard. The majority, however, has all but precluded the District Court from doing anything but adopting the majority's analysis of the various state laws, and then going about the laborious — and unwanted by anyone but a single objector — process of determining the availability of relief under each state's laws.

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Tomorrow, July 15, 2010, I'm giving the plaintiff's perspective in a webinar CLE titled: Pleadings Standards Post-Iqbal: Meeting Tougher Plausibility Standards in Commercial Litigation.

If you've not yet had the pleasure of litigating the heck out of Iqbal v. Ashcroft, this CLE is a good opportunity to get some case cites and perspective.

If you have litigated the heck out of it, you might still find some use in it (e.g., my part of the presentation cites 16 plaintiff-friendly cases interpreting Iqbal, including opinions from the Second, Third, Fifth, Seventh, Eighth, Ninth, Tenth, and D.C. Circuits) and you'll get 1.5 hours CLE credit from the comfort of your home or office.

The reviews for last year's presentation were quite positive (there's some quotes on the linked website), and one of the highly-informative slides from my part is embedded in this post.

Alternatively, if you're not up for a 1.5 hour CLE, you can spend a few hours perusing some poor, poor federal clerk's nearly 300-page summary of all the recent decisions on Iqbal for the Federal Rules Committee, or perhaps the Administrative Office's statistical analysis of motions to dismiss since Iqbal.

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Some time ago, I heard that this fall was the release of The Social Network, a movie based on the founding of Facebook.

That is, a movie about geeks in their bedrooms, but without bionic women, giant lasers, or nuclear weapons. Instead, all of the action happens on computers or in meetings. 

Thrilling.

Intriguingly, the script was written by West Wing creator Aaron Sorkin, who knows a thing or two about storytelling, and it was odd to see David Fincher directing it, given prior works like Se7ev, Fight Club, and The Game, but I just assumed everybody, including Sorkin and Fincher, has a mortgage to pay. Orson Welles rounded out his career selling frozen peas.

Last week, we learned who was doing the score: Trent Reznor.

David Fincher started inquiring about my interest in scoring his upcoming film, The Social Network. Yeah, the movie about the founding of Facebook. I've always loved David's work but quite honestly I wondered what would draw him to tell that story. When I actually read the script and realized what he was up to, I said goodbye to that free time I had planned. ...

Months later, I'm happy to tell you we're nearing the completion of this and I couldn't be happier with how it's turned out. The level of excellence that David operates on is inspiring and the entire process has been challenging and truly enjoyable. ...

Speaking of the film... it's really [ ] good. And dark!

"And dark?"

It seems there's a bit more to the story:

Based on the book The Accidental Billionaires – The Founding of Facebook: A Tale of Sex, Money, Genius and Betrayal by Ben Mezrich, Sorkin's script purports to tell the inside story of the beginnings of Facebook and its spectacular rise from Harvard-undergrad networking tool to worldwide media phenomenon. Some of the material is already familiar Internet legend: How Zuckerberg conceived of an early version of the site by posting pictures of female classmates so that other students could rank their hotness (original, huh?). How his early backers, the handsome, rich, athletic Winklevoss twins, ended up suing the geeky, awkward, middle-class Zuckerberg and settling out of court for $65-million (U.S.) – the same deal that's now being disputed in appeal courts – before going on to compete for the U.S. Olympic rowing team. And, of course, how Zuckerberg cemented his image as the sophomore CEO by attending meetings in tracksuits and shower sandals.

What is surprising is the way the script explodes the myth of the idealistic, pimply software geek writing code in his dorm room in an attempt, as Zuckerberg writes on his own FB profile, “to make the world a more open place by helping people connect and share.” This is the utopian vision that Zuckerberg has peddled all along – a vision that stands in sharp contrast to the increasingly invasive practices of the site (i.e., new settings that automatically default to share all your personal information with the world – including advertisers). In the movie, Zuckerberg's character comes off as a grasping, driven, sexually frustrated borderline sociopath who would gladly sell his best friend for a chance to get into the right nightclub, his inspiration for Facebook driven less by the hope of financial success than by the urge to control his own social destiny. While in real life Zuckerberg wasn't invited to the party, online he invented the coolest party in town.

I know what you're thinking. Stop the presses. Geek seeks social revenge through trappings of success. But there's more to be gleaned from The Social Network than a gossipy back story of the digital generation's answer to Bill Gates. Zuckerberg's dramatized misanthropy only makes him more enigmatic. What delicious irony that the wunderkind who connected hundreds of millions of people online has difficulty connecting with people himself. As his co-founder marvels in the script after finding out Zuckerberg has betrayed him, “I was your only friend. You had one friend.”

Since this is a legal blog, you can tell where this is going:

The movie, which clearly takes liberty with historical details, is presumably relying on the fact that Zuckerberg is a public figure and won't have a case for libel. How else to explain the brazen use of real names and regurgitated conversations that couldn't possibly be confirmed by either the author of the book or Sorkin? (While successful and entertaining, Mezrich's non-fiction work has come under attack in the past for being less than accurate.) 

We've discussed libel-in-fiction here before, like with Sgt. Jeffrey Sarver's suit against the producers of The Hurt Locker. As I wrote there:

False light and defamation are highly similar claims, and often analyzed together. As THR, Esq. said, there’s precedent out there for “libel-in-fiction,” and Sgt. Sarver’s case seems similar to the The Red Hat Club case linked above: taking an already incredible, but nonetheless real, story and scandalizing it some more. It’s a little bit harder for Sgt. Sarver here, though, since it seems that anyone who recognized him from the film would also know the differences between him and the character, and the complaint admits that he already had substantial family troubles and that he broke military regulations, such as drinking after missions. Those issues, however, are typically issues for a jury, not a judge, to decide.

(If you're itching for more about libel-in-fiction, peruse the cases citing Bindrim v. Mitchell.)

If The Social Network does indeed "take liberty with historical details" to make the story more salacious, while still retaining the undeniable connection to the real-life Mark Zuckerberg, then it could make the producers, writer and director liable for defamation. He could theoretically hook the actors into it, though that'd be a tough sell.

Mark Zuckerberg's status as a public figure does make it harder for him to prove defamation — since, under First Amendment law, he'll have to show the defendants' "actual malice" against him — but it doesn't make it impossible.

So what's going on here?

Here's one speculation (in When Is Fiction Just Fiction? Applying Heightened Threshold Tests to Defamation in Fiction) about why people don't sue over defamation-in-fiction:

In 2006, New Republic columnist Michael Crowley authored a critical profile of author Michael Crichton. Shortly thereafter, Crowley noticed a strong resemblance between himself and the character “Mick Crowley” in Crichton’s latest novel, Next. In addition to having nearly identical names, both Crowleys are graduates of Yale University and political journalists in Washington, D.C. In the novel, Mick Crowley’s appearance is brief but notable. He is a pedophile on trial for sodomizing a two-year-old child and, Crichton writes, his “penis was small.”

Crichton has apparently resorted to employing the small penis rule, a “sly trick” used in publishing to ward off defamation lawsuits. Assuming no man would come forward claiming to be a character with a small penis (or would invite such an inquiry), the scheming author simply depicts his target as less than fully endowed. The author then defames as he pleases and hopes his subject forgoes legal action due to the possible embarrassment of coming forward. Thus, the small penis rule is not really a rule, merely a tactic for discouraging litigation. In the end, Michael Crowley appears disinclined to file suit. Although “grossed out,” Crowley says that he was “strangely flattered” by his “sliver of literary immortality.”

Emphasis mine.

The issue isn't really whether or not Crowley is poorly-endowed, nor whether or not Mark Zuckerberg is a "grasping, driven, sexually frustrated borderline sociopath."

The issue is whether or not Crowley wants to put his manhood, or Mark Zuckerberg his history, on trial.

Truth is an absolute defense to defamation. Even if a defendant had only scant information about a person before they published their defamatory remark, once a lawsuit is filed, the defendant is entitled to use all of the means of civil procedure to discover any information that is relevant to the case or could lead to the discovery of relevant information.

Being a plaintiff in a defamation case — really, any case — is no walk in the park. The movie itself apparently tells the story of Facebook through flashbacks during court testimony; that's how invasive — or thorough, depending on your perspective — a civil lawsuit can be.

If sued, the makers of The Social Network will have access to information that Mezrich and Sorkin could have only dreamed of when writing, respectively, the book and the script. They'll be able to depose Zuckerberg and his friends under oath. They'll be able to subpoena any email he wrote to people about the book or the movie. If he claims financial losses, they'll be able to dig into his income and his assets.

They can depose his mom.

All so they can prove, at trial, that their allegations were true, which puts Zuckerberg in an additional conundrum: if any of the accusations actually are true, their proof at trial through testimony under oath will likely do more damage to Zuckerberg than either the book or the film did.

That's why, for example, when Orson Welles (in his pre-frozen peas days) allegedly defamed the bejesus out of William Randolph Hearst in Citizen Kane, Hearst did not sue, but instead embarked on a campaign against Welles and the film:

Citizen Kane was a brutal portrait of newspaper magnate William Randolph Hearst. When Hearst learned through Hopper of Welles' film, he set out to protect his reputation by shutting the film down. Hollywood executives, led by Louis B. Mayer, rallied around Hearst, attempting to buy Citizen Kane in order to burn the negative. At the same time, Hearst's defenders moved to intimidate exhibitors into refusing to show the movie. Threats of blackmail, smears in the newspapers, and FBI investigations were used in the effort.

Hearst's campaign was largely successful. It would be nearly a quarter-century before Citizen Kane was revived--before Welles would gain popular recognition for having created one of cinema's great masterpieces.

It seems Zuckerberg has decided to respond via public relations:

 On Friday, as Zuckerberg celebrated his 26th birthday, he faced another tsunami of anger, this time from Facebook users who turned the socially awkward youth into the world’s youngest billionaire.

Zuckerberg wanted to enjoy his birthday in the Caribbean. Instead, the pale-faced supergeek is spending the weekend in crisis meetings in California, seeking ways to calm many of Facebook’s users who fear that website changes mean he is going to sell details of their on-line lives to the highest bidder.

A horrified Zuckerberg told colleagues he wants to establish himself as a “good guy”, a task made more difficult as the draft script of the film leaked online.

Time will tell if Zuckerberg sticks with the positive public relations or if he begins a more sinister campaign, becoming the Citizen Kane of the 21st Century.

Maybe they'll make a movie out of that, too.

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The Supreme Court released its opinion in Bilski v. Kappos this morning, which tested the sufficiency of a "business method" patent relating to the hedging of risk in investments.

Four Justices wanted to scrap "business methods" patents altogether. Five wanted to scrap just the patent at issue here.

Given the complexity of the issues involved, I'm pleasantly surprised to report that the actual holding of the case can be summarized with just a few quotes:

Section 101 defines the subject matter that may be patented under the Patent Act:

“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

Section 101 thus specifies four independent categories of inventions or discoveries that are eligible for protection: processes, machines, manufactures, and compositions of matter. “In choosing such expansive terms . . . modified by the comprehensive ‘any,’ Congress plainly contemplated that the patent laws would be given wide scope.” Diamond v. Chakrabarty, 447 U. S. 303, 308 (1980).

Slip op., 4.

The Court’s precedents provide three specific exceptions to §101’s broad patent-eligibility principles: “laws of nature, physical phenomena, and abstract ideas.” Chakrabarty, supra, at 309.

Slip op., 5.

In light of these precedents, it is clear that petitioners’ application is not a patentable “process.” Claims 1 and 4 in petitioners’ application explain the basic concept of hedging, or protecting against risk: “Hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class.” 545 F. 3d, at 1013 (Rader, J., dissenting); see, e.g., D. Chorafas, Introduction to Derivative Financial Instruments 75–94 (2008); C. Stickney, R. Weil, K. Schipper, & J. Francis, Financial Accounting: An Introduction to Concepts, Methods, and Uses 581–582 (13th ed. 2010); S.Ross, R. Westerfield, & B. Jordan, Fundamentals of Corporate Finance 743–744 (8th ed. 2008). The concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook. Allowing petitioners to patent risk hedging would preempt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea.

Slip op., 15.

And that's it: hedging is an "abstract idea," and thus not subject to patenting.

That is undoubtably the correct result; this same morning, Fred Wilson over at AVC gave some basic advice for startups on the concept of hedging. I doubt Fred ever read the patent at issue here, or ever read any paper or article based on the patent. Hedging is an abstract concept that can be applied to a particular situation, no different from the Ruy Lopez in chess or moonwalking.

But not everybody's happy, since the Supreme Court took the nice, clean rule established by the Federal Circuit in its opinion denying the patent, threw that rule out, and restored the old mess. Patent professors like Dennis Crouch at Patently-O are frustrated:

In general, the opinion offers no clarity or aid for those tasked with determining whether a particular innovation falls within Section 101. The opinion provides no new lines to be avoided. Rather, the outcome from the decision might be best stated as "business as usual."

Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text. The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr.

By refusing to state any particular rule or categorical exclusion, the Court has almost certainly pushed Section 101 patent eligibility to the background in most patent prosecution and litigation.

Techies (and techie lawyers) are also similarly annoyed:

The Software Freedom Law Center, which supports open source licenses, lamented the ruling.

"The landscape of patent law has been a cluttered, dangerous mess for almost two decades," said Eben Moglen, Chairman of the Software Freedom Law Center. "The confusion and uncertainty behind today’s ruling guarantees that the issues involved in Bilski v. Kappos will have to return to the Supreme Court after much money has been wasted and much innovation obstructed."

These aren't merely theoretical considerations. Patents don't control what people are allowed to think, but they certainly control what people are allowed to do with what they think. Billions, potentially trillions, of dollars of revenue are dependent on the patent laws of the United States. Whole businesses live, die, and pursue or forgo opportunities based on those laws.

And, of course, every day, patent infringement lawsuits are filed, and millions of dollars are spent pursuing or defending those lawsuits. The issue is not one to be taken lightly.

Given the circumstances here — i.e., the abrupt and sporadic acceptance, and then rejection, of the patentability of some business methods by the Federal Circuit in the 1990s — it would have been better for the majority to have clearly reaffirmed the longstanding pre-1990s rule that business methods were not patentable, as the concurrence recommended.

The majority opinion and the concurrence are both worth reading; further, as the majority noted, "Students of patent law would be well advised to study [the] scholarly opinions" of the Federal Circuit in the case. Since patent law has just been made a bit messier again, it's a good idea to keep your mind limber.

Though I agree with the concurrence, the majority's reasoning isn't wrong per se. The problem, to me, is the philosophical underpinning of their interpretation.

Four of the majority's members' hesitation in going further was understandable:

It is important to emphasize that the Court today is not commenting on the patentability of any particular invention, let alone holding that any of the above-mentioned technologies from the Information Age should or should not receive patent protection. This Age puts the possibility of innovation in the hands of more people and raises new difficulties for the patent law. With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck.

Slip op., 9-10 (Justice Scalia chose not to join that part, so that language is only a plurality opinion). But I don't think the majority's overall reasoning stands up: 

The Court’s precedents provide three specific exceptions to §101’s broad patent-eligibility principles: “laws of nature, physical phenomena, and abstract ideas.” Chakrabarty, supra, at 309. While these exceptions are not required by the statutory text, they are consistent with the notion that a patentable process must be “new and useful.” And, in any case, these exceptions have defined the reach of the statute as a matter of statutory stare decisis going back 150 years. See Le Roy v. Tatham, 14 How. 156, 174– 175 (1853). The concepts covered by these exceptions are “part of the storehouse of knowledge of all men . . . free to all men and reserved exclusively to none.” Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U. S. 127, 130 (1948).

Slip op., 5.

The problem with this analysis is that the second sentence contradicts the first. There are plenty of "abstract ideas" that are "new and useful:" consider the Ruy Lopez and moonwalking. Neither of these ideas teaches a person how to make anything, as is the focus of the Patent Act; rather, they teach people how to do something in a "new and useful" way, much like business methods do. 

Are they patentable? There's no way to know beforehand with certainty, and so there's a chilling effect on businesses or individuals. As Justice Stevens opened his concurrence, "In the area of patents, it is especially important that the law remain stable and clear." For someone like me, who represents plaintiffs enforcing patents, stability and clarity help me evaluate whether or not to accept a potential client's case.

Unfortunately, although the law is a bit more stable than it could have been — the majority did, after all, affirm the denial of the patent — it's less clear than the Federal Circuit had made it.

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As widely reported last week, the local Boy Scouts won a partial victory against the City of Philadelphia from a federal jury in the Eastern District of Pennsylvania:

A federal jury on Wednesday declared that the city of Philadelphia had violated the First Amendment rights of the local chapter of the Boy Scouts of America by moving to evict it from its city-owned headquarters if it refused to repudiate the anti-gay policies of the Scouts' national parent group.

In its verdict, the jury of six women and two men found that the city had imposed an "unconstitutional condition" on the Scouts and declared that it was not "reasonable" to do so.

But the jury found in favor of the city on two other claims. It rejected the Scouts' claim that the city had engaged in "viewpoint" discrimination, and it also rejected an Equal Protection claim by finding that the city had a rational basis for its actions.

Nevertheless, lawyers said the verdict must be described as a win for the local scout chapter -- known as the Cradle of Liberty Council -- because a win on any one of its three constitutional claims would prevent the city from going ahead with its planned eviction.

In essence, the Boy Scouts raised four constitutional claims, two under the First Amendment and two under the Equal Protection Clause of the Fourteenth Amendment. The jury rejected both of the equal protection claims, one of which alleged the Boy Scouts were treated differently from other entities with similar membership policies, the other of which claimed the city had no rational basis (apart from animus towards the group) for evicting Boy Scouts.

The jury similarly rejected the Boy Scouts' First Amendment claim that the city had created a "nonpublic forum" for various other entities to use to promote their beliefs, from which it improperly excluded the Boy Scouts.

That left a single claim, which the jury accepted, that the City had unconstitutionally conditioned the subsidized use of city property upon the Boy Scouts limiting their own freedom of speech. As Judge Ronald Buckwalter explained in denying the city's motion to dismiss — which, unusually, and perhaps tellingly, was far more detailed than his order denying summary judgment for the city — an unconstitutional conditions claim works as follows:

The general idea behind the unconstitutional conditions doctrine is that the government “may not deny a benefit to a person on a basis that infringes his constitutionally protected interests—especially his interest in freedom of speech.” Perry v. Sinderman, 408 U.S. 593, 597 (1972). “Put another way, the Government may not propose a penalty ‘to produce a result which [it] could not command directly.’ ” Forum for Academic and Institutional Rights (FAIR) v. Rumsfeld (FAIR I), 390 F.3d 219, 229 (3d Cir. 2004) (quoting Speiser v. Randall, 357 U.S. 513, 526 (1958)), rev’d, Rumsfeld v. Forum for Academic & Institutional Rights (FAIR II), 547 U.S. 47 (2006). Unconstitutional conditions claims have proven troublesome, and courts have wrestled with how to best apply a series of Supreme Court cases that appear to be in some conflict. Additionally, there is a great deal of overlap between the doctrine of unconstitutional conditions and claims of viewpoint discrimination like the one addressed above. See Wyman, 335 F.3d at 92 (observing that “[t]he case before us,” which also involved the Boy Scouts, “lies at the intersection of these two lines of
authority”).

The Third Circuit recently examined the unconstitutional conditions doctrine in
FAIR I. There, a group of law schools challenged the Solomon Amendment, which withheld a broad array of federal funding from universities that did not provide access to military recruiters. Id. at 224. As the Third Circuit succinctly put it, “if the law schools’ compliance with the Solomon Amendment compromises their First Amendment rights, the statute is an unconstitutional condition.” Id. at 229. The court went on to find that forcing the law schools to accommodate military recruiters both violated the law schools’ right of expressive association and impermissibly compelled speech. Id. at 230-42. Having established this, the court applied strict scrutiny and determined that the government could not demonstrate that its actions survived this test. Id. at 243.

The Supreme Court reversed in FAIR II, stating that “[b]ecause the First Amendment would not prevent Congress from directly imposing the Solomon Amendment’s access requirement, the statute does not place an unconstitutional condition on the receipt of federal funds.” 547 U.S. 47, 60 (2006). In other words, the Supreme Court disagreed that the Solomon Amendment compromised FAIR’s First Amendment rights, whether framed as FAIR’s right to be free of compelled speech or its right of expressive association. See id. at 61-68.

The most prestigious law schools in the country banded together to litigate the FAIR cases — which revolved around, ironically, the government forcing private entities to accept military recruiters, who necessarily brought with them the military's policies prohibiting gays from service — and lost. As the Supreme Court held, there's no right to government subsidies: if the government could have taken them away for the heck of it, then it rarely matters if the government took it away because it didn't like the views of the targeted group.

That would seem to be a serious problem here for the Boy Scouts, because:

Under the ordinance that leased the property to the scouts, the city has the right to evict them without giving any reason at all, both sides have agreed.

Asked if the city would take that step, Smith said, "The verdict was just issued today, and we'll be considering all of our options."

I'd thus be surprised to see the verdict survive appeal. The City clearly misfired at summary judgment — a common occurrence in complicated cases — and, more importantly, the Boy Scouts only succeeded on what was arguably their weakest claim. Judge Buckwalter dealt with the Third Circuit's conflicting precedent on these claims in a compelling and persuasive manner, he did so only by assuming a number of facts favorable to the Boy Scouts, including the facts underlying the Boy Scout's unsuccessful viewpoint discrimination claim.

Under the Supreme Court's opinion in FAIR, if the City of Philadelphia didn't engage in viewpoint discrimination and could have kicked them out for no reason at all, then it rarely matters what the City's reason actually was. Where the government can discriminate in its subsides in opposition to gay rights, it can discriminate in favor of them, too.

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Few enterprises generate as much frustration among their suppliers and consumers as the scientific publishing industry. The business model is so unfair it's comical:

• Governments, foundations, universities and private companies provide grants to researchers for scientific research;
• Researchers spend weeks, months, and sometimes years drafting papers based upon the results of their research;
• The papers are submitted to the publishers;
• The publishers send the papers out to other researchers, who peer review the papers free of charge;
• The publishers pick the best papers and publish them in their journals, without paying the authors;
• The publishers charge governments, foundations, universities, private corporations, and researchers to access the papers.

As PZ Myers says, "This is not to deny that the professionals who publish and edit at Nature Publishing Group aren't an essential part of the institution of publishing, but honestly, science journal publishing has the most incomprehensibl[y] screwed up model for making money that you can find just about anywhere." In England, free participation in the peer review process amounts to a subsidy to the industry worth nearly a quarter-billion pounds a year; in the United States, the subsidy is likely equal or greater. The peer review process is so unfair to the researchers that alternative models were explored recently in, ironically, a Nature Chemical Biology editorial.

The grip of the top scientific journals, though, is like the weather: everybody talks about it, but nobody does anything about it. While there are dozens of journals out there, there are only a handful of prestigious journals. If you're a researcher trying to make an impact and win the Nobel Prize, what are you going to do? Not publish your groundbreaking work in Nature?

It seems the University of California is asking its researches to do just that:

The University of California system has said "enough" to the Nature Publishing Group, one of the leading commercial scientific publishers, over a big proposed jump in the cost of the group's journals.

On Tuesday, a letter went out to all of the university's faculty members from the California Digital Library, which negotiates the system's deals with publishers, and the University Committee on Library and Scholarly Communication. The letter said that Nature proposed to raise the cost of California's license for its journals by 400 percent next year. If the publisher won't negotiate, the letter said, the system may have to take "more drastic actions" with the help of the faculty. Those actions could include suspending subscriptions to all of the Nature Group journals the California system buys access to—67 in all, including Nature.

The pressure does not stop there. The letter said that faculty would also organize "a systemwide boycott" of Nature's journals if the publisher does not relent. The voluntary boycott would "strongly encourage" researchers not to contribute papers to those journals or review manuscripts for them. It would urge them to resign from Nature's editorial boards and to encourage similar "sympathy actions" among colleagues outside the University of California system.

The threat is significant. As the letter from the University of California points out,

UC Faculty and researchers author a significant percentage of all articles published in NPG journals and are a major force in shaping the prestige of its publications. In the past six years, UC authors have contributed approximately 5300 articles to these journals, 638 of them in the flagship journal Nature. Using NPG’s own figures, an analysis by CDL suggests that UC articles published in Nature alone have contributed at least $19 million dollars in revenue to NPG over the past 6 years—or more than $3 million dollars per year for just that one journal. Moreover, UC Faculty supply countless hours serving as reviewers, editors, and advisory board members.

It's enough to make me wonder if the University of California's threat of a boycott is too significant.

The primary enforcement mechanisms for antitrust violations in the United States are two sentences in the Sherman Act:

[Section 1] Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. ...

[Section 2] Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony ...

The Sherman Act has produced almost as many court opinions (over 17,200) as there are protein-coding genes in the human genome (under 25,000). I won't pretend that I can decode for sure if anything about the Nature Publishing Group / University of California standoff violates either of those two sentences or their progeny of opinions; you often have to get to the Supreme Court before you know if a given antitrust claim is viable or not. Sometimes you have to get to the Supreme Court just know if a particular antitrust claim is subject to the "per se" rule — which prohibits certain conduct regardless of its effect — or the "rule of reason," which looks to the anticompetitive effects of the conduct before deciding whether or not it violates antitrust law.

But a few issues come to mind.

First, the University of California certainly thinks Nature is a monopoly — they use the word in their letter — and NPG's copyright policy suggets why:

NPG does not require authors of original (primary) research papers to assign copyright of their published contributions. Authors grant NPG an exclusive licence to publish, in return for which they can reuse their papers in their future printed work without first requiring permission from the publisher of the journal. For commissioned articles (for example, Reviews, News and Views), copyright is retained by NPG.

When a manuscript is accepted for publication in an NPG journal, authors are encouraged to submit the author's version of the accepted paper (the unedited manuscript) to PubMedCentral or other appropriate funding body's archive, for public release six months after publication. In addition, authors are encouraged to archive this version of the manuscript in their institution's repositories and, if they wish, on their personal websites, also six months after the original publication.

In one sense that's just creative accounting — NPG doesn't own the copyright for research papers, but they own an exclusive license to publish the work thereafter, and so control how and when the paper can be used. (A "personal website" of a researcher is typically where papers go to die; if the paper isn't in a journal, it won't be found.)

Nature, though, isn't the only journal in town; in addition to other paid journals, there are now dozens of open-source scientific journals out there, and their legitimacy is increasing every day. But the Nature journals are among the most prestigious, particularly in biology and its subfields. NPG thus publishes the journals everyone wants to be in and everyone needs to read.

Does that make it a monopoly in the market of scientific publishing? Maybe so. Problem is, being a monopoly isn't illegal; what's illegal is being a monopoly and abusing that position to increase or to maintain monopoly power. As described by the Court of Appeals for the D.C. Circuit in the Microsoft case:

Section 2 of the Sherman Act makes it unlawful for a firm to "monopolize." 15 U.S.C. § 2. The offense of monopolization has two elements: "(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966).

US v. Microsoft Corp., 253 F. 3d 34, 50 (D.C. Cir. 2001)(emphasis added). The issue here would be whether Nature did anything to acquire or to maintain its monopoly power. Raising rates on the University of California to an unaffordable level seems contrary to such a plan; most monopoly claims are brought by competitors who claim that the monopolist has either engaged in predatory pricing or has otherwise precluded competition. Here, the problem isn't that there's no competition, it's that the competition isn't as prestigious. 

Second, looking on the other side of the dispute, an agreement among University of California researchers not to submit ~800 papers a year to, or to peer review many times that many papers in, Nature journals may well be a "conspiracy in ... restraint of trade or commence."

It does not matter, for example, that goal and likely effect of the proposed boycott is to benefit consumers in the end by driving subscription prices down:

The Supreme Court's treatment of monopsony cases strongly suggests that suppliers (under Southwestern Bell's theory of the market, the location owners) are protected by antitrust laws even when the anti-competitive activity does not harm end-users. In its leading monopsony case, the Supreme Court stated:

It is clear that the [anti-competitive buyer's price-fixing] agreement is the sort of combination condemned by the [Sherman] Act, even though the price-fixing was by purchasers, and the persons specially injured under the treble damage claim are sellers, not customers or consumers.

. . . .

The statute does not confine its protection to consumers, or to purchasers, or to competitors, or to sellers. Nor does it immunize the outlawed acts because they are done by any of these. The Act is comprehensive in its terms and coverage, protecting all who are made victims of the forbidden practices by whomever they may be perpetrated.

Mandeville Island Farms v. American Crystal Sugar Co., 334 U.S. 219, 235-36, 68 S.Ct. 996, 92 L.Ed. 1328 (1948) (citations omitted).

Telecor Comm. v. Southwestern Bell, 305 F.3d 1124, 1134 (10th Cir. 2002).

Thankfully for the University of California, it's unlikely that the proposed boycott is a per se violation of antitrust laws, given the Supreme Court's disfavor of per se antitrust claims in the context of boycotts:

[T]he specific legal question before us is whether an antitrust court considering an agreement by a buyer to purchase goods or services from one supplier rather than another should (after examining the buyer's reasons or justifications) apply the per se rule if it finds no legitimate business reason for that purchasing decision. We conclude no boycott-related per se rule applies and that the plaintiff here must allege and prove harm, not just to a single competitor, but to the competitive process, i. e., to competition itself.

Nynex Corp. v. Discon, Inc., 525 US 128, 135 (1998). Then again, the above might protect the University of California's refusal to purchase the Nature journals, but encouraging their researchers not to participate in the journals is another matter entirely. Moreover, though it's a lot harder to win a "rule of reason" case, it's not impossible, and a court could find that the University of California researchers conspired to restrain trade in scientific publications.

Sure, the University of California has a number of defenses, including their comparatively small role in the overall scientific publishing market. Moreover, the State of California is almost certainly immune from monetary antitrust damages under the Eleventh Amendment and Board of Trustees of Univ. of Ala. v. Garrett, 531 U.S. 356 (2001), but immunity for the researchers — i.e., the ones actually carrying out the boycott — isn't nearly as clear. Just last week the Ninth Circuit again considered the circumstances under which a state agency may be liable under antitrust laws. It's not as blanket an immunity as many think. (See more on antitrust immunity here and in California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97 (1980).)

Perhaps the bigger question is if Nature Publishing Group has the guts to go down that road — suing your largest supplier and consumer isn't the best business model — but my suspicion is that they would at least consider it.  They may see the writing on the wall, just as other publishing and media companies do. Record and film companies, for example, haven't hesitated in suing their customers.

That possibility is almost too unfair to believe: the University of California likely has no legal recourse against the Nature monopoly, while the monopoly might have recourse if the free labor calls it quits. But that's the product of one hundred years of antitrust law evolution in the hands of pro-corporate courts. As Justice Holmes, who shaped many of these antitrust laws, said: "this is a court of law, not a court of justice."

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Some background: the Oil Pollution Act establishes strict liability for anyone who spills oil, but limits that liability in the case of offshore rigs to $75 million per spill, plus removal costs. Congress has contemplated removing those caps for the BP spill and all future spills.

Over at the National Law Journal, David Ingram reports that BP, in addition to spilling oil and other substances all over the Gulf of Mexico, is now blowing smoke in the Washington, DC vicinity:

A private consultant for energy companies told Congress on Tuesday that any effort to rewrite oil spill liability laws retroactively would likely face a legal challenge based on breach-of-contract claims.

W. Jackson Coleman, managing partner of EnergyNorthAmerica, said that if successful, those breach-of-contract claims could cost the federal government billions of dollars in payments to the oil and gas industry.

Coleman testified at a hearing of the Senate Judiciary Committee, which is considering legislation to lift limits on damage awards. A former lawyer for the Interior Department and for Republicans on the House Committee on Natural Resources, Coleman said the drilling leases purchased by oil and gas companies are contracts with the federal government, and that the contracts were signed with certain expectations about liability.

He said there is ample precedent for companies to sue when the federal government changes the terms of those leases.

In 2000, for example, the U.S. Supreme Court ruled that the federal government had to return $158 million to Mobil Oil Exploration & Producing Southeast Inc. and Marathon Oil Co. after Congress passed a law limiting drilling off the Outer Banks of North Carolina. Justice Stephen Breyer wrote for an 8-1 majority in the case, Mobil Oil Exploration v. United States. Coleman worked on the case when it was before the U.S. Court of Federal Claims and he was at the Interior Department.

"Certain expectations about liability?"

Since when could you sue the United States government for monetary damages over your "expectations" about its laws?

The Mobil Oil Exploration case was an entirely different situation. There, the government sold a bunch of leases and then passed laws that precluded them from complying with certain terms of the leases. Such is, undoubtedly, a breach of contract: the government did not do what it contracted to do.

In the Gulf of Mexico, BP bought leases from the United States government to conduct offshore drilling. The government complied with every last word of those lease contracts. All on its own, BP screwed up and initiated the revenge of the dinosaurs.

The fact that BP bought the leases with the "expectation" that they would be subject only to the liability caps in the Oil Pollution Act is irrelevant. The government changes its laws all the time, including those relating to liability. In MGM v. Grokster, for example, the Supreme Court invented a wholly-new cause of action for "contributory" copyright infringement, putting Grokster out of business.

In one sense, though, these arguments over the Oil Pollution Act may be a tempest in a teapot, or I suppose a drop in the bucket.

First, the Oil Pollution Act's caps don't apply if the spill was caused by "gross negligence or willful misconduct" or "the violation of an applicable Federal safety, construction, or operating regulation." From the little bit we know about Transocean using seawater instead of mud or cement, and about the impotence of the "failsafe" blowout preventer, at least one of those is going to be met, possibly all of them.

Second, there are a lot of ways to sue BP; the common law of Texas, Louisiana, Mississippi, Alabama, and Florida all allow full recovery under negligence and trespass claims when a person is damaged by someone else's irresponsible conduct.

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At the Weekly Standard, art critic Lance Esplund has an essay decrying the upcoming move of the Barnes Museum from Lower Merion, Pa., to Philadelphia:

Now after years of litigation, Albert Barnes’s intentions have been subverted and his will broken. And the Barnes Foundation is scheduled to be moved. Galleries have already been closed. Ground broken. Pictures crated. The thousands of artworks are all being uprooted from their home in Merion, Pennsylvania, a leafy suburb 20 minutes from downtown Philadelphia, and transplanted to the mall on the Benjamin Franklin Parkway next to the Philadelphia Museum of Art.

Advocates claim the relocation is being done in the name of progress, conservation, civic responsibility, and convenience. It all sounds benign enough if you fail to consider that the Barnes Foundation, unlike almost every other museum in the world, is a rooted organism. Yes, the artworks will arrive in Philadelphia, but the museum—the experience of its art—will be irreversibly maimed. And with its move there will be considerable collateral damage extending to the broader areas of museum stewardship, museum donors, and the public trust. Besides violating the legal will and stated intentions of the foundation’s sole benefactor—who stipulated that no work in his collection ever be loaned, deaccessioned, or moved from the building he had designed for it; that no object ever stray, not even an inch, from the precise spot in which he had personally placed it—the move is an unforgivable act that disregards the true purpose of museums.

The essay is primarily a celebration of the museum in its current form and the aesthetic choices by its creator.

Problem is, Esplund's having the wrong debate:

The new Barnes is scheduled to open in downtown Philadelphia by 2012. Rebranded as the Barnes Foundation Art Education Center, it will not follow the museum’s original footprint. It will be bigger—able to accommodate a projected four times the number of annual visitors, roughly 250,000 people. While the new Barnes’s galleries will supposedly replicate the scale, proportion, and configuration of the existing galleries, it will be through a Frankenstein’s monster-like revivification. And though almost all of the artworks are to be reinstalled as they were in Merion, there are exceptions.

Maybe so. But does that make the decision "unforgivable" because it is "violating the legal will" and will cause "collateral damage extending to the broader areas of museum stewardship, museum donors, and the public trust?" 

Pennsylvania law already strongly protects the intent of donors, even those long since deceased; consider the failed effort to expand Fox Chase Cancer Center into Burholme Park. Esplund's argument seems to be that, since Barnes himself "understood and advocated" that "[a]rtworks exist outside—above—their specific movement, mythology, time, and place," that "[e]ach piece is a gateway into an exploration of the language of art; the subject is secondary, even tertiary, to its function as a vehicle for life," and that Barnes settled upon a design that expresses these conception in a compelling way and sought by law to preserve that design, the Foundation should be bound forevermore by that design, come hell or high water.

Legal scholars call that the problem of "dead-hand control." (See, e.g., The Low Road to Cy Pres Reform: Principled Practice to Remove Dead Hand Control of Charitable Assets.) As much as we want to protect a person's right to dispose of their assets upon their death as they see fit, we can't bind the management of those assets to every last word of a testator's will, and have to make allowances when circumstances require we do so to preserve the testator's overall intent.

Here, the trustees tried to respect the dead-hand. The Judge tried to respect the dead-hand. Problem is, as described in Judge Ott's order permitting the move, "The Foundation was on the brink of financial collapse." Moreover, "the provision in Dr. Barnes’ indenture mandating that the gallery be maintained in Merion was not sacrosanct, and could yield under the 'doctrine of deviation,' provided we were convinced the move to Philadelphia represented the least drastic modification of the indenture that would accomplish the donor’s desired ends." 

The 2004 Order found exactly that: the move to Philadelphia represented the least drastic modification of the indenture that would accomplish the donor’s desired ends. That's called cy pres: the attempt by courts to follow a testator's intent as closely as possible.

Esplund briefly references the problem — i.e., "the brink of financial collapse" — that made the decision necessary in the first place:

The art dealer Richard L. Feigen, who was dismissed from the Barnes Foundation’s art advisory committee by Glanton in 1991 because he refused to support the deaccessioning plans, eloquently summarized the deceptiveness of the Barnes move in the Art Newspaper:

One could wonder whether the only reason not to homogenize the Frick Collection into the Metropolitan Museum of Art, the Gardner Museum into the Boston Museum of Fine Arts, the Phillips Collection into the National Gallery of Art, is that they have endowments large enough to keep predators at bay. .  .  . The arguments for this foolish project are specious. The present Barnes building could easily be made more accessible. Hours could be extended. Shuttle-buses could run continuously from the Philadelphia Museum of Art, a short 4.6 miles away. .  .  . Insufficient effort[s have] been made to tap private resources for the old Barnes .  .  . to sell the redundant real estate of Barnes’s valuable farm, its 19th-century American pottery collection or unrestricted paintings in the offices, which have been appraised at more than $30m. Despite its claims that the Barnes had run through its money and had to be “saved,” the establishment did not really want to “save” it, only steal it.

But all of that was considered by Judge Ott and rejected as simply not feasible (see pp. 29-32 of the Order). Instead of waxing poetic about the museum's current configuration — which surely is worthy of praise — how about Esplund offer some solutions to the problem that has made that configuration impossible to sustain?

As easy as it is to claim that moving the museum is "violating the legal will," the reality is far more complicated. There's no doubt Barnes wanted the museum to be public. As he wrote his lawyer back when creating the trust: "In short, I am building for the future, I want to guarantee my privacy, and I want to prepare the way for the gallery to be a public one after my death." (Order, p. 22.)

Esplund does nothing with that fact, either. He simply complains that the new, larger museum — with essentially all of the same artwork in a comparable, but more spread out, configuration — isn't within his views of Barnes' tastes.

But would Barnes have chosen that particular configuration over financial ruin? Judge Ott didn't think so. Most judges would agree. Aesthetics are nice, but someone's got to pay for them. If they can't, then the dead-hand has to give way.

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At Mother Jones:

Michael Clauer is a captain in the Army Reserve who commanded over 100 soldiers in Iraq. But while he was fighting for his country, a different kind of battle was brewing on the home front. Last September, Michael returned to Frisco, Texas, to find that his homeowners' association had foreclosed on his $300,000 house—and sold it for $3,500. This story illustrates the type of legal quagmire that can get out of hand while soldiers are serving abroad and their families are dealing with the stress of their deployment. And fixing the mess isn't easy.

Michael went on active duty in February 2008 and was sent to Iraq. After he shipped out, his wife May slipped into a deep depression, according to court documents. "A lot of people say that the deployment is more stressful on the spouse than the actual person who's being deployed," Michael, 37, says in an interview with Mother Jones. May Clauer had two kids to take care of—a ten-year-old and a one-year-old with a serious seizure-related disorder. In addition, she was worried sick about her husband. Michael's company was doing convoy security in Iraq—an extremely dangerous job. "It was a pretty tough year for the whole company," he says. "We had IEDs, rocket attacks and mortar attacks, and a few soldiers that were hurt pretty bad and had to be airlifted back to the States."

Seeking to avoid hearing about the situation in Iraq, May stopped watching the news. She rarely answered the door, and Michael says he couldn't tell her when he went "outside the wire"—off-base. May also stopped opening the mail. "I guess she was scared that she would hear bad news," says Michael. That was why she missed multiple notices from the Heritage Lakes Homeowners Association informing her that the family owed $800 in dues—and then subsequent notices stating that the HOA was preparing to foreclose on the debt and seize the home.

In case you're wondering, there are indeed laws that are supposed to prevent this sort of thing from happening:

There are a bevy of laws that are supposed to protect servicemembers from losing their homes or jobs while they're on active duty, including the Servicemembers Civil Relief Act (SCRA). The homeowners' association's lawyer filed an affidavit wrongly claiming that neither of the Clauers was on active duty, says Barbara Hale, the couple's lawyer. Hale is seeking to have the court reverse the foreclosure and declare it "null and void," she says.

Aw, shucks. I'm sure the homeowners' association and their lawyer meant to investigate the issue, but reconsidered when they realized it was a lot more convenient to just lie about it.

Maybe I'm being too harsh; then again, the circumstances look, well, fishy:

In Texas, homeowners' associations can foreclose on homes without a court order, no matter the size of the debt. In May 2008, the HOA sold the Clauers' home for a pittance—$3,500—although its appraisal value was $300,000, according to court documents. The buyer then resold the house to a third person.

Maybe there's a good explanation for that, too.

Select Management Co., the company that manages Heritage Lakes, declined to comment for this story.

Or maybe not.

Unfortunately, abuse of solders-as-consumers is rampant; consumer protection laws in the United States are woefully inadequate, so if you're unable to fight tooth-and-nail to protect the minimal rights you have — perhaps because you're on the other side of the planet — then odds are good you'll just get rolled and have to fight in the courts for a few years to get back to where you've started. Progress has been made on that front under the current Administration and Congress, we're still a long way from an acceptable state of affairs.

I would normally leave it at that, but then The New York Times Magazine came along:

For the past few years, it’s been open season on Generation Y — also known as the millennials, echo boomers or, less flatteringly, Generation Me. Once described by the trend-watchers Neil Howe and William Strauss as “the next great generation” — optimistic, idealistic and destined to do good — millennials, born between 1982 and 2002, have been depicted more recently by employers, professors and earnestly concerned mental-health experts as entitled whiners who have been spoiled by parents who overstoked their self-esteem, teachers who granted undeserved A’s and sports coaches who bestowed trophies on any player who showed up.

As they’ve entered adulthood, they have inspired a number of books on how unmanageable they are in the workplace, with their ubiquitous iPods, flip-flops and inability to take criticism. Stories abound about them as college students, requiring 24/7 e-mail access to professors and running to Mom and Dad for help with papers or to contest a bad grade. A consensus has emerged that, psychologically, they’re a generation of basket cases: profoundly narcissistic and deprived of a sense of agency by their anxiously overinvolved parents — in short, a “nation of wimps,” as Hara Estroff Marano, the Psychology Today editor at large, has put it.

(Via Greenfield.) I normally refrain from reading, much less commenting about, such drivel, but the "nation of wimps" comment deserves a response.

The same day that story was published, Army Pfc. Christopher R. Barton, 22, died in Khowst province, Afghanistan, of wounds sustained when insurgents attacked his unit using small-arms fire.

"Nation of wimps?"

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Via the WSJ Law Blog, Amy Kolz at The American Lawyer has a new article about the False Claims Act:

"[FCA cases] are a big gamble," says Piacentile's counsel, former Boies, Schiller & Flexner partner David Stone of Stone & Magnanini, who cites cost-benefit analyses and good relationships with prosecutors as essential to his qui tam practice. "That's why you have to know what you're doing. Otherwise you can be in a case for ten years and not get anything."

But there is a darker perspective on Joseph Piacentile. Unlike most qui tam relators, he doesn't blow the whistle as an employee or business partner of the companies he has sued. Instead he relies on secondhand information collected through his own investigations. (Piacentile declined to comment for this article.) Defense counsel call him a professional mudslinger; some qui tam lawyers and former government lawyers say that he's a parasitic bully who files vague or questionable complaints and then pushes his way into settlements based on his qui tam savvy and his willingness to litigate. And Piacentile has a criminal history of his own--a 1991 conviction on fraud and tax charges--which some lawyers say can undercut his credibility as a plaintiff.

It's an interesting argument, worth the read, not least to see how lame most objections to the False Claims Act are these days. Piacentile "pushes his way into settlements based on his qui tam savvy and his willingness to litigate?"

Do billion-dollar companies lack the "willingness" to defend themselves in litigation? Do they hire lawyers who are not "qui tam savvy?"

Do they roll over every time some doctor from New Jersey with a fraud conviction "pushes" them?

That's what the corporate PR departments want you to believe, but even for Piacentile:

Out of 14 unsealed cases in which Piacentile has been a named relator, just four have successfully settled, seven have been dismissed (some without prejudice), and three are ongoing. In two of the three ongoing cases, those filed against Novartis and Sanofi-Aventis, the government has declined to intervene, a negative sign. And Piacentile's share in at least two of the four successful settlements has been relatively small. Two of the three corelators in Medco earned a combined award that was seven times greater than Piacentile's. Of the approximately $52 million in relators' awards in the 2007 Bristol-Myers settlement, Piacentile earned $7.3 million.

"Relatively small" is indeed relative. Though $7.3 million is a good chunk of change in most contexts, that's not necessarily the case in False Claims Act litigation, which typically require the relator prove systematic fraud by highly sophisticated entities that have covered their tracks thoroughly, often with the assistance of counsel. The cases frequently go on for years without trial, requiring thousands of attorney hours on plus extensive efforts by investigators, experts, and an army of support staff. It's not uncommon for relators to provide the U.S. Attorney's office several thousand pages of organized, indexed documents with explanatory memos at the very first meeting.

Qui tam cases are intense. They're expensive. They're prolonged.

Consequently, they're rare. There's ample incentive against filing them.

Maybe, in the big scheme of things, Piacentile is reaping more reward than some people think he should. It's hard to even evaluate; we don't know the details of the sealed cases. It bears mention here that, in all these cases, the U.S. Attorney's office and the Court obviously didn't have a problem with the awards that Piacentile received.

But let's keep our eye on the ball here. The rewards received by relators are but a fraction of the size of the fraud perpetrated by the defendants. The awards are capped by statute at 25% of the overall resolution of the case, 30% if the government doesn't intervene. Typically, courts (and lawyers) start around 15% and then adjust it up or down based on the facts of the case. See the Department of Justice’s Relator’s Share Guidelines (p. 17).

When we weigh the scales of equity, which is really worth of more complaint — that Piacentile has reaped a few million dollars for questionable investigation techniques, or that dozens of companies defraud the government of billions of dollars every year?

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Tricia Pil, M.D., is a pediatrician and a mother, with a terrible story to tell at Kevin, M.D.:

This is the true story of a hospitalization as told from three points of view: first, the recollections of the patient (who happens to be a physician); second, events as recorded in the medical charts by doctors and nurses; and third, the version put forth by the hospital.

FRIDAY

Patient:
It is fall 2005, and I am nine months pregnant. A healthy 33-year-old pediatrician, I am a longtime patient of Doctor A and Doctor B, who delivered my two young children at this hospital. My husband and I are eagerly anticipating the birth of our third child.
One evening after dinner, the contractions start coming every five minutes. My husband and I pack our bags and drive to the hospital. I am nearly 4 cm dilated. After observation, Doctor C calls Doctor A, makes a diagnosis of false labor and sends us home.

Chart:
9:25 pm: 33 year old gravida 3, para 2, 38 5/7 week seen in office this AM almost 3 cm. Negative PMHx, c/o contractions q 5 min. Cervix 3+. Will ambulate 2 hours.
12:15 am: Continued contractions q 5 min. Spoke with Doctor A–home or stay–patient chooses to go home. Keep appointment Monday for induction.–Doctor C

Hospital:
Your presentation to Triage was discussed with Doctor A by the OB Triage Specialist. Since there was no change in cervical dilation, you were discharged.

You can tell where the story is going.

The facts of her case are depressingly familiar to me. The diligent mother-to-be presenting at Labor and Delivery with the very symptoms her obstetrician and every book, magazine, and website about pregnancy says are a sign of labor. The dismissal of her concerns, the allegation that she is neurotic and overreacting, the matter-of-fact discharge without consulting her, and the falsification of medical records.

The mother-to-be's return, followed by eye-rolling, sighing, and the whispered complaint that she's back again. She's not in labor. She's crazy. She's annoying. The denial that she's in labor until the very delivery itself. The ludicrous demand: don't push. Wait for us. Resist millions of years of mammalian evolution.

Postpartum, the rough handling, the belittling of her conditions and concerns, more falsification symptoms in the medical record. Snide remarks. More allegations that she — not her condition and certainly not the doctors of the nurses — is to blame for everything.

Weeks and months later, the failure to take any responsibility at all, even after the fact, and to treat her like an idiot for believing she deserved better.

I've seen it all before. See it all the time. Our case intake files are filled with client narratives describing crude, heartless and substandard treatment that differs markedly from medical records but always say the patient chose to be discharged from the hospital, sometimes against medical device.

Alas, there's nothing I can do for most of them. I would not have put it the same way that a plaintiff's lawyer told her:

He listened sympathetically and then zeroed in on the key word–damages. Aside from my psychotherapy bills, it was hard to pinpoint a lasting physical injury to me or to my baby. “This case would be worth a lot more if we had three motherless children or a brain-dead baby in a wheelchair,” he said. That’s when I politely thanked him for his time.

I wanted an apology, answers and change–not money.

But the lawyer wasn't wrong. Obstetrical malpractice cases are difficult and expensive. They take years and hundreds, sometimes thousands, of hours, as well as hundreds of thousands of dollars spent out of pocket to pay for experts and other litigation costs.

Putting aside attorney time, her case would easily cost $250,000 just to survive summary judgment. You'll need an obstetrician to comment on the discharge and the delivery, a pathologist to look at the report on the placenta,  an emergency physician and/or hospitalist to comment on how the hospital handled her hemorrhaging, and a neonatologist to comment on how the hospital handled the baby's discharge and re-admission. If the defense coughs up some irrelevant expert — perhaps a psychologist, to say the mother had pre-existing undiagnosed depression, or issues with her father, or some other nonsense — you may need to get one of the same to rebut them.

Your paralegal will spend thousands of hours just sorting through the records to give you their thoughts and to get the records to the experts in a presentable and organized form, since the experts bill by the hour. If you are lucky and efficient, you can file all the necessary pleadings and motions, and conduct all the discovery and depositions, in less than 100 hours of work. That's a generous estimate; you will likely need many times that.

In discovery and at trial, the doctors will have explanations for everything, as will the defense lawyers. Your client is just in it for the money. Are you accusing these good doctors of falsifying medical records? That's outrageous. She's a liar. Why would the nurses and doctors falsify a medical record? They were trying to help her. It's her fault.

And on and on and on. For what? You don't have, as the tort reformers say, "economic damages." You "only" have so-called "pain and suffering," which more than a generation of insurance industry and health care industry propaganda has taught jurors to mean nothing.

It's hard for me to accept she "wants an apology, not money," because there's no money to be had. The insurance and health care giants have made sure of that. I didn't see Dr. Pil volunteer to deposit a retainer of $500,000 to cover the pre-trial costs and attorney's fee to have her rights vindicated. That's what it would take.

Birth injury cases are risky enough when the child has been injured and needs millions of dollars worth of care for the rest or his or her life. If there are no economic damages, then there is no question: you cannot take the case. If you do, it will swallow up your time and bankrupt you.

The hospital knows it. The insurance company knows it. That's why it's so insulting that they can't even apologize to her, a pediatrician, "one of their own," for treating her with less respect, and less concerned for her safety, than a veterinarian would have treated her pets.

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I haven't seen Iron Man 2, but Robert Farley and Davida H. Isaacs have, and they've written a great column about the legal issues at the heart of the story, The Stark Reality of Defense Contracting:

Iron Man 2 is the most expensive movie ever made about an intellectual property dispute....

In the United States, inventors are supposed to profit from their creations, as emphasized in the original comics. But Iron Man 2 takes a different tack. While trying to fend off Vanko, Stark is pressured by the U.S. government to give up the secrets of the Iron Man suit. After Stark refuses a senator's demand that he relinquish his body-armor technology, the government forcibly takes it from him, only to turn it over to a competitor that then uses the technology to fulfill its own defense contract. Consciously or no, this echoes the real world; the United States government can take such actions with almost total legal impunity.

In real life, most inventors aren't trying to "privatize peace." Many just want to get a government contract. Their inventions are kept as trade secrets, like the Iron Man suit, or they are patented. (In the film, Pepper Potts, played by Gwyneth Paltrow, demands action from "patent attorneys," but Stark Industries obviously hadn't patented the technology, or else the government would already have access to the information needed to reproduce the armor.) It is not unheard of for a potential contractor to provide the government with product specifications, only to then watch the government award the contract to a competitor that has suddenly and suspiciously generated remarkably similar technology. For example, Crater Corporation charged that Lucent Technologies improperly used its tennis-inspired coupler to fulfill a Defense Department contract.

These inventors theoretically have their own superpower at their disposal: the Fifth Amendment's "Takings Clause," which requires compensation for government appropriation. But it has one weakness: the military and state secrets privilege, which has been invoked with increasing frequency in the past 25 years.

... [Courts] have treated the privilege as legal Kryptonite, dismissing inventors' lawsuits. In Iron Man 2, Stark's competitor Hammer could have immediately begun production after acquiring the Iron Man suit, insisting that it had generated the technology itself. Had Stark sued, the government could have claimed state-secrets privilege, protecting details of the contract and production design from Stark's lawyers. Stark would have been left without recourse to obtain the evidence needed to prove his case.

I would have quoted more, but for my respect of their intellectual property rights.

Indeed, in Crater Corp. v. Lucent Technologies, the United States officially intervened and tried to halt the case entirely, because, it asserted, "any information to be obtained in [discovery regarding the manufacture or use of the coupler by or on behalf of the United States] was protected by the state secrets privilege." The Court of Appeals for the Federal Circuit didn't rule on that claim, because it dismissed the case under 28 U.S.C. § 1498(a), which:

provides "an affirmative defense for applicable government contractors." Va. Panel Corp., 133 F.3d at 869, 45 USPQ2d at 1232. If a patented invention is used or manufactured for the government by a private party, that private party cannot be held liable for patent infringement. Trojan, Inc. v. Shat-R-Shield, Inc., 885 F.2d 854, 856, 12 USPQ2d 1132, 1134-35 (Fed.Cir.1989); W.L. Gore & Assocs., Inc. v. Garlock, Inc., 842 F.2d 1275, 1282-83, 6 USPQ2d 1277, 1283-84 (Fed.Cir.1988).

And that's just what happened:

We affirm the district court's dismissal of Crater's patent infringement claims because there is no genuine issue of material fact that Lucent's use and manufacture of the allegedly infringing coupler was for the government. Because Lucent established its affirmative defense under 28 U.S.C. § 1498(a), Lucent's activities cannot be held to be infringing.

All's fair in love and war-for-profit.

Let's get back to the patent infringement versus trade secret issue.

Once Tony Stark invents his Iron Man suit, he has two legal options to protect his intellectual property: file for a patent or treat the suit as a trade secret. The law protects both patents and trade secrets, but in different ways.

With a patent, the inventor publicly discloses the invention by filing a patent. If the patent is granted, the inventor is granted exclusive legal domain over the use of the patent for a limited amount of time. If someone wants to build the same device, they can do so by simply reviewing the patent, but they will have to pay the inventor for the use or sale of that device. As a reward for making the instructions public, the inventor is granted a plethora of legal protections, such as the ability to file for injunctions against infringement, and to recover attorney's fees and treble damages in a lawsuit.

With a trade secret, the inventor is required to "take reasonable measures to keep the information secret." If they do that, and "the information derives independent economic value... from not being generally known to, and not being readily ascertainable through proper means by, the public," then federal law makes it a crime to misappropriate that information. Here's an example of the types of things that can get you indicted, such as under the Economic Espionage Act:

Taking the allegations in the Superseding Indictment as true, the defendant engineers were to design tire manufacturing equipment for "off the road" (OTR) tires for their employer Wyko. The defendants formed a plan to take unauthorized photographs of Goodyear's OTR manufacturing equipment under the guise of evaluating Wyko equipment. While at the Goodyear facility, defendant Roberts falsely told the security guard that he had signed a nondisclosure agreement within the past year. The defendants then falsely stated to the Goodyear engineer that they were there to evaluate Wyko-made equipment. Defendant Howley used his cellular telephone to take photographs of Goodyear's OTR manufacturing equipment while defendant Roberts acted as lookout. Defendant Howley emailed the photographs to his work email account and then sent them to defendant Roberts' work email account. Defendant Roberts emailed the photographs to Wyko employees in England.

With a trade secret, state common law allows compensatory relief, through typically not attorney's fees or treble damages. Similarly, it's harder to get an injunction for misuse of a trade secret than for infringement of a patent. (Here's an example in the Second Circuit of misappropriation being clear, but there being no clear risk of "irreparable harm," and so no injunction.)

So, Tony Stark gets to choose: disclose the details of the invention in a patent and correspondingly get superior civil (i.e. monetary) relief if someone copies it, or try to keep the invention secret himself and hope that criminal law dissuades people from stealing it.

In his case it's a no-brainer. He has no intent to sell the technology and he'd lose his advantage if others had it, too. A trade secret it is.

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The University of Chicago Law School Faculty Blog is hosting a debate over a new paper, Ambiguity About Ambiguity: An Empirical Inquiry Into Legal Interpretation written by Ward Farnsworth, Dustin F. Guzior, and Anup Malani.

As the paper's abstract says:

Most scholarship on statutory interpretation discusses what courts should do with ambiguous statutes. This paper investigates the crucial and analytically prior question of what ambiguity in law is. Does a claim that a text is ambiguous mean the reader is uncertain about its meaning? Or is it a claim that readers, as a group, would disagree about what the text means (however certain each of them may be individually)? This distinction is of considerable theoretical interest. It also turns out to be highly consequential as a practical matter.

To demonstrate, we developed a survey instrument for exploring determinations of ambiguity and administered it to nearly 1,000 law students. We find that different ways of asking whether a statute is ambiguous produce very different answers. Simply asking respondents whether a statute is “ambiguous” as applied to a set of facts produces answers that are strongly biased by the policy preferences of those giving the answers. But asking respondents whether they would expect others to agree about the meaning of the statute does not produce answers biased in this way. This discrepancy leads to important questions about which of those two ways of thinking about ambiguity is more legally relevant. It also has potential implications for how cases are decided and for how law is taught.

It's not a minor issue. If the plain meaning rule fails, then:

[C]ourts often treat ambiguity as a kind of gateway consideration when they interpret a statute. If the statute is ambiguous, the judge might then become interested in sources of guidance, such as legislative history, that wouldn’t otherwise be considered. Or ambiguity might cause a judge to defer to an agency’s view of the statute, as under the Chevron doctrine. Or ambiguity might cause a judge to resort to a canon of construction such as the rule of lenity, or the doctrine that courts should prefer interpretations of ambiguous statutes that avoid difficult constitutional issues, or the rule that ambiguous statutes will be interpreted to avoid conflict with foreign law, or many others. Ambiguity also serves as an occasion for judges to consult their own views of policy, whether openly, quietly, or unconsciously

Here's a selection from the paper:

If we assume that a respondent’s policy preference is in some way a reflection
of personal views, then asking people whether a statute is ambiguous, or whether two different readings of it are plausible, evidently causes them to consult their own views of how they would like the statute to be read. We hypothesize that those two questions amount, in the experience of people who are asked them, to inquiries into how strongly they themselves feel sure that one reading is better than another, and those judgments are easily contaminated by the respondents’ preferences—as a matter of policy—for a particular outcome. Asking respondents whether ordinary readers of English would agree about the best reading, however, forces them to change their frame of reference. They no longer are asking themselves which reading they prefer, or how sure they feel that one of them is right. They are forced to look outside themselves, so to speak, and to consider what others would likely say. The outward investigation is merely hypothetical—a thought experiment; but it’s a consequential thought experiment, because it reduces the bias otherwise exerted by the respondent’s policy preferences.

In other words: a reader's mindset changes the way they interpret law. If a reader is simply asked to read a statute and interpret it, they will interpret it according to their policy preferences. If, instead, the reader is asked to read the statute the way they think a hypothetical unbiased person would read it, the reader is more likely to discern ambiguity and thus presumably more likely to reach an unbiased interpretation.

You can play the ambiguity game yourself using one of the examples from their study:

A federal statute, 21 U.S.C. § 841(b), provides for a mandatory minimum sentence of five years for anyone who distributes more than one gram of a “mixture or substance containing a detectable amount of lysergic acid diethylamide (LSD).” The defendant was caught distributing LSD that had been dissolved and sprayed onto blotter paper. The weight of the LSD alone was 50 milligrams, well below the statutory threshold. But if the weight of the blotter paper was included, the total weight was five grams, well above the statutory threshold.

The question is whether, under § 841(b), the blotter paper should be included in deciding, for purposes of sentencing, the weight of the LSD the defendant distributed. Under the defendant's reading of the statute, the blotter paper should not be included in deciding the weight. Under the government's reading, it should be included in deciding the weight.

Do you think the statute is ambiguous? If not, which way should it be interpreted? Is that the way you want it to be interpreted? How do you think others would interpret it?

My initial reaction to the study was the same as William Eskridge's:

The methodology for the questions seems to me to invite normativity from respondents: The authors repeatedly ask which reading of the statute is "better". I have no idea how a first-year law student would understand this kind of inquiry; I'd understand it as asking me to see "ambiguity" (or whatever) as a normative rather than a purely descriptive endeavor. It is hard for me to tell how serious a concern this is.

Indeed, that seems to be the biggest problem with the questions they asked. It is no answer for a court — or a law student — to deem a statue ambiguous and then give up. They have been asked to decide what a statute means, and so they must come up with an answer. Lacking anything else to go on, they will defer to their own policy interpretations.

As Judge Frank Easterbrook commented,

Judges read statutes in context, not as isolated clauses. So for Chapman v. United States, 500 U.S. 453 (1991), the LSD case, the judges asked not whether the LSD's carrier medium (blotter paper) is part of the same "mixture or substance" as LSD in the abstract (or as a matter of chemistry), but whether LSD-in-blotter-paper is the same sort of mixture as cocaine-in-mannitol or other common dilutants. And the judges knew (as the students answering the survey did not) that the statute provided alternative punishment levels for pure PCP and diluted PCP but treated the weight of all other drugs as including the entire "mixture or substance". This implied that the weight of LSD's carrier counts.

Even so, every judge of the seventh circuit (which sat en banc, see 908 F.2d 1312 (1991)) and every Justice of the Supreme Court deemed the statute ambiguous. It's a surprise to me that so many of the first-year students found clarity where, despite the aid of context, the members of the interpretive community found ambiguity. What divided the judges was not disagreement about the existence of ambiguity but disagreement about how to respond to that ambiguity. Some thought it appropriate to use linguistic context to make a best estimate of meaning; others wanted to put the linguistic context aside and consider practical effects—which when coupled with the rule of lenity or a desire to avoid constitutional questions led to a vote for the defendant.

I agree with his analysis, but it doesn't surprise me that the first-year students didn't recognize the ambiguity. One of the core components of "thinking like a lawyer" — which is what law school is supposed to teach — is the ability to review statutes, regulations, opinions, agreements, testimony, and other writings critically to discern the meaning of those writings.

It's thus no surprise to me that a first-year law student, with only minimal training in the law, would not perceive multiple possible interpretations of a complicated statute, particularly if they didn't have the benefit of any additional information. After all, even Congress and the President apparently didn't recognize the ambiguity or, at least, didn't find it important enough to rewrite the statute to avoid the ambiguity prior to enacting it.

Let's get back to the main finding: a reader's mindset changes the way they interpret law. Contrary to Steve Williams' response, this finding has practical implications for judges, since judges are asked to resolve ambiguities by adopting different mindsets, such as by attempting to divine the legislature's intent.

Judge Richard Posner's remarks exemplify the problem:

When judges say that the "literal" meaning of a statute should be followed unless the result is "absurd," they mean (or should I think be understood to mean) that the statute isn't clear once the context is understood.

And another way to put all this is that a statute is a communication and that in decoding a communication we draw on everything we know about the communicator and the subject matter of the communication in deciding what it means.

Problem is, that's putting the cart before the horse — what better evidence is there of a legislature's intent than the statute itself? Once we deem the statute ambiguous and start "decoding" even more ambiguous sources, like legislative history (e.g., "everything we know about the communicator and the subject matter..."), we've done little more than move into material even more ambiguous than the material with which we started.

Consider Judge Posner's opinion for the Seventh Circuit in Fitzgerald v. Chrysler Corp., 116 F. 3d 225 (7th Cir. 1997):

Read literally, [the Racketeer Influenced and Corrupt Organizations Act] would encompass every fraud case against a corporation, provided only that a pattern of fraud and some use of the mails or of telecommunications to further the fraud were shown; the corporation would be the RICO person and the corporation plus its employees the "enterprise." The courts have excluded this far-fetched possibility by holding that an employer and its employees cannot constitute a RICO enterprise. ... We do not understand the plaintiffs to be quarreling with this exclusion, even though it doesn't emerge from the statutory language; it emerges from a desire to make the statute make sense and have some limits.

That's simply "decoding" one ambiguity (i.e., the definition of "enterprise" in the RICO Act) by way of "decoding" even greater ambiguities (i.e., divining the legislature's intent and "sensible" judicial policy by way of a variety of sources).

That's where the paper's conclusion has practical application for judges: how did Judge Posner analyze which sources to review? How did he decide the persuasive weight he gave each source? How did he interpret them: according to the meaning he found in the sources, or according to the meaning he thought an "ordinary English speaker" would find?

The canons of statutory interpretation don't provide a clear answer to any of the foregoing questions.

That brings us back to the paper's conclusions about the effect of a reader's mindset on their interpretation: since courts don't have clear guidance on what "mindset" they should use in interpreting secondary sources to decode ambiguous statutes, the study suggests they're likely to use their "internal" mindset and thereby likely to end up with biased interpretations.

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One of my most popular posts was "Investing in Lawsuits" - The Free Market Counterpart to Liability Insurance, which analyzed a New York Times article on Juridica, a company that finances business litigation on the plaintiff's side. The post drew a thoughtful comment from Richard Fields, CEO and Chairman of Juridica, about their business model.

Via Legal Theory Blog, Dr. Maya Steinitz at Columbia Law School has posted a draft of Whose Claim is this Anyway? Third Party Litigation Funding:

This article is among the first to address litigation finance by institutional investors in the U.S. It describes the empirical reality of the industry; identifies and addresses the emergence of a secondary market in legal claims and the prospect of securitization of legal claims; discusses third party funding of international arbitration and; applies a bargaining analysis to understanding the systemic effects of the practice. Specifically, the article asks what happens when, through litigation funding, litigation ceases to be expensive and uncertain and when parties “bargain in the shadow of financing.” Using bargaining theory the article offers a three-step argument for a move away from a prohibition of litigation funding towards nuanced regulation of the industry.

After reading the abstract, I started rolling my eyes, and was sure that I'd have to drag out the most common tool in the lawyer-blogger's toolbox: the accusation that some pointy head ivory tower academic doesn't know how the real world works.

Here's why. As I wrote before:

[W]e 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.

Virtually none of the articles about litigation funding even mention — much less to fairly evaluate — the fact that we are ready have a multi-trillion dollar market for litigation funding on the defense side. Such blindness makes it hard for plaintiffs' lawyers like me to see the articles as anything more than ignorance or propaganda.

I was thus pleasantly surprised to see Steinitz's article note,

Third party litigation funding is “a group of funding methods that rely on funding from the insurance markets or capital markets instead of, or in addition to, a litigant’s own funds.” In other words, it is the provision of funds by companies who have no other connection with the litigation. When provided to plaintiffs, third party funding promotes access to justice by enabling plaintiffs who have meritorious cases to bring litigation they would otherwise be unable to bring and to avoid premature settlements at a discount due to exhaustion of funds. When provided to defendants, it allows corporations who can afford to litigate but who do not want to incur any of the costs or risks associated with litigation to shift the costs and hedge the risks.

The door swings both ways; if we're going to worry about funding the plaintiffs' side of litigation then we need to worry about funding the defendants' side, too.

The most interesting development mentioned by Steinitz's article is this one:

The rise of the litigation funding industry i.e., of a primary market in legal claims, had an additional effect besides competitive pressures on global law firms. The last couple of years have also ushered in a secondary market in legal claims. Predominantly, this secondary market takes the form of litigation funding firms going public – selling shares to the public and listing on stock exchanges. But it is possible that in the foreseeable future we will also be witnessing the creation of a new form of securities—legal claims-backed securities. Reportedly, some tort litigation lenders are already in the practice of aggregating the claims they acquire and selling shares of the composite funds i.e., are engaged in a rudimentary form of securitization.

Now that's an interesting idea. And why not? We already have a secondary securitized markets for everything else — including liability insurance, which is often sold off through re-insurance — so why not for litigation, too?  

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Christianity, Islam, Hinduism, and Buddhism all agree: it's easy to miss the details when you're focusing on something important.

That's why they all have their own form of prayer beads so the faithful don't lose count of their mantras.

Science and medicine agree: you can save lives with checklists. You can even land airplanes on water. As Captain Sully says,

If you think you’re infallible, you’re kidding yourself.

Hence checklists.

Here's the first item on the litigator's checklist:

1. Did you check the rules?

That includes the federal or state rules of civil procedure, the local rules for the venue, and the judge's own procedures.

I do that before filing every motion and upon receiving every motion. It's repetitive, in a good way: the rules are the mantra.

Count the prayer beads.

Check the checklist.

Every time.

Yesterday I received a call from defense counsel in one of my cases:

Since the judge requires a phone conference prior to the filing of a motion to compel, will you agree to withdraw your motion and set up the phone conference instead?

Really? I checked the judge's procedures before filing.

So I checked them again: no requirement for a phone conference. I emailed a copy to the defense lawyer asking him to show me where it said the judge needed a phone conference.

A few hours later, another call:

You have a copy of the judge's old procedures. He updated them in November. Take a look on the court's website.

So I did.

Sure enough, between the time I filed the case — when I downloaded a copy of the judge's procedures and saved them in the case file — and the time I filed the motion, the judge changed them.

Just goes to show that you can make a mistake even without taking a shortcut, even if you have "a little local knowledge."

Check the checklist, and check to make sure you're using the right checklist.

Every time.

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The New York Times reports:

Private equity deal-makers, those kings of corporate buyouts, made billions for themselves when times were good. But some of their biggest investors, public pension funds, are still waiting for the hefty rewards they were promised.

The nation’s 10 largest public pension funds have paid private equity firms more than $17 billion in fees since 2000, according to a new analysis conducted for The New York Times, as the funds flocked to these so-called alternative investments in hopes of reaping market-beating returns.

But few big public funds ended up collecting the 20 to 30 percent returns that private equity managers often held out to attract pension money, a review of the funds’ performance shows.

It seems, too, that private equity managers all operate out of Lake Wobegone:

The funds vary in how they report their performance and calculate their returns, allowing a significant number to classify themselves as “top quartile,” or the best performers.

We've been cheated here in Pennsylvania, too:

In 2009, the Pennsylvania Public School Employees’ Retirement System paid $477.5 million in fees — 20 percent more than it did in 2008 and 283 percent more than in 2000, the earliest year for which data was available.

These funds generally charge fees totaling 2 percent of the money they manage and then take 20 percent of the profits they generate.

And yet, even after paying hundreds of millions of dollars in fees, the Pennsylvania fund is ailing. It lost more than a quarter of its value during its latest fiscal year and is now worth less than it was a decade ago, although its performance has improved recently.

There is a solution, you know.

It's called Jones v. Harris Associates, and it was decided last week:

On Tuesday the [Supreme] Court issued its opinion in No. 08-586, Jones v. Harris Associates. In a unanimous opinion by Justice Alito, the Court held that Gartenberg v. Merrill Lynch Asset Management, Inc. applied the correct standard for determining when an investment adviser has breached the fiduciary duty owed to captive mutual fund shareholders established under Section 36(b) of the Investment Company Act of 1940 (ICA). Under Gartenberg, Section 36(b) is violated when advisers’ fees are “so disproportionately large” that they “bear no reasonable relationship to the services rendered.”

Ultimately, the Court concluded, although Gartenberg “may lack sharp analytical clarity,” it has “provided a workable standard for nearly three decades.” The Court noted that the “fiduciary duty” standard established by the ICA represents a “delicate compromise,” protecting investors from fee arrangements not negotiated at arm’s length, but simultaneously shifting the burden of proof to the party claiming the breach of duty.

Why not use it? Even if pay-for-play doesn't drive public pension shareholder lawsuits, the pensions will probably be blamed for it anyway, so give me a call and we'll put you on a contingent fee. 

Don't worry: unlike private equity managers, we don't get a fat paycheck when we lose.

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Yesterday, the Supreme Court released its opinion in Shady Grove v. Allstate.

On the whole, the issue was quite simple:

New York law prohibits class actions in suits seeking penalties or statutory minimum damages. We consider whether this precludes a federal district court sitting in diversity from entertaining a class action under Federal Rule of Civil Procedure 23.

The answer was no: 

The question in dispute is whether Shady Grove’s suit may proceed as a class action. Rule 23 provides an answer. It states that “[a] class action may be maintained” if two conditions are met: The suit must satisfy the criteria set forth in subdivision (a) (i.e., numerosity, commonality, typicality, and adequacy of representation), and it alsomust fit into one of the three categories described in subdivision (b). Fed. Rule Civ. Proc. 23(b). By its terms this creates a categorical rule entitling a plaintiff whose suit meets the specified criteria to pursue his claim as a class action. (The Federal Rules regularly use “may” to confer categorical permission, see, e.g., Fed. Rules Civ. Proc. 8(d)(2)–(3), 14(a)(1), 18(a)–(b), 20(a)(1)–(2), 27(a)(1),30(a)(1), as do federal statutes that establish procedural entitlements, see, e.g., 29 U. S. C. §626(c)(1); 42 U. S. C. §2000e–5(f)(1).) Thus, Rule 23 provides a one-size-fits-all formula for deciding the class-action question. Because §901(b) attempts to answer the same question—i.e., it states that Shady Grove’s suit “may not be maintained as a class action” (emphasis added) because of the relief it seeks—it cannot apply in diversity suits [...] .

In short, States cannot preclude state-law class actions from being filed in federal court because the federal rules specifically permit class actions.

The way in which the Supreme Court got there, however, was anything but simple:

SCALIA, J., announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I and II–A, in which ROBERTS, C. J., and STEVENS, THOMAS, and SOTOMAYOR, JJ., joined, an opinion with respect to Parts II–B and II–D, in which ROBERTS, C. J., and THOMAS, and SOTOMAYOR, JJ., joined, and an opinion with respect to Part II–C, in which ROBERTS, C. J., and, THOMAS, J., joined. STEVENS, J., filed an opinion concurring in part and concurring in the judgment. GINSBURG, J., filed a dissenting opinion, in which KENNEDY, BREYER, and ALITO, JJ., joined.

Yikes.

Let's break that down.

Scalia wrote an opinion that was broken up into Parts I, II-A, II-B, II-C, and II-D.

Five justices agreed with Parts I and II-A: Scalia, Roberts, Stevens, Thomas and Sotomayor. Those two parts are thus the law of the land.

Four justices agreed with Parts II-B and II-D: Scalia, Roberts, Thomas and Sotomayor.

Three justices agreed with Part II-C: Scalia, Roberts and Thomas.

Stevens, in addition to joining Parts I and II-A, wrote a separate concurrence.

Ginsburg disagreed with all of it, so wrote a dissent, with which Kennedy, Breyer and Alito agreed.

Here's the interesting part. Stevens agreed with the result and with Parts I and II-A of Scalia's opinion, but didn't agree with the rest, so he wrote a concurrence explaining why he didn't also join Parts II-B, II-C, and II-D.

Sotomayor, in contrast, agreed with Parts I, II-A, II-B, and II-D, but not with II-C. Let's take a look at the beginning of Part II-C to figure out why not:

A few words in response to the concurrence. We understand it to accept the framework we apply—which requires first, determining whether the federal and state rules can be reconciled (because they answer different questions), and second, if they cannot, determining whether the Federal Rule runs afoul of §2072(b). Post, at 5–7 (STEVENS, J., concurring in part and concurring in judgment). The concurrence agrees with us that Rule 23and §901(b) conflict, post, at 15–16, and departs from usonly with respect to the second part of the test, i.e., whether application of the Federal Rule violates §2072(b), post, at 7–13. Like us, it answers no, but for a reason different from ours. Post, at 17–22.

The concurrence would decide this case on the basis, not that Rule 23 is procedural, but that the state law it displaces is procedural, in the sense that it does not “function as a part of the State’s definition of substantive rights and remedies.” Post, at 1. A state procedural rule is not preempted, according to the concurrence, so long as it is “so bound up with,” or “sufficiently intertwined with,” a substantive state-law right or remedy “that it defines the scope of that substantive right or remedy,” post, at 4, 13.

This analysis squarely conflicts with Sibbach, which established the rule we apply. [...]

Presumably, since Sotomayor did not join Part II-C, she disagreed with its criticisms of Stevens' concurrence.

Yet, she also didn't join Stevens' concurrence. She didn't give any indication as to what she thought about the debate between Part II-C (i.e., Scalia, Roberts and Thomas) and Stevens' concurrence.

Why not? We may never know.

You, however, are reading a blog, so let's speculate.

As I wrote before about Sotomayor's first opinion, in Mohawk Industries v. Carpenter, "As hoped, Justice Sotomayor has brought her trial experience to bear, and has contributed a practical understanding of how the law works at the trial level previously unseen in Supreme Court opinions."

My speculation is: Sotomayor understood that the debate between Scalia, Roberts, Thomas and Stevens was irrelevant to deciding the case at hand. The debate was, in legal terms, little more than dictum proprium that would serve only to confuse lower courts.

Every time a Supreme Court nomination comes up, politicians throw around the terms "judicial temperament" and "judicial restraint."

If you want to know what these terms mean, look no further than Justice Sotomayor.

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One of the most common "tort reform" (and "patent litigation reform" and "anti-SLAPP") ideas is to enact "loser pays," in which the side that lost has to pay the attorney's fees or costs to the side that won.

In theory, "loser pays" (more officially known as "fee-shifting") will create a disincentive against filing frivolous lawsuits.

As you can tell from the linked posts, I'm not a fan of fee-shifting. First, plaintiffs and plaintiffs' lawyers have ample incentive not to file a weak cases and tremendous incentive not to file frivolous cases, which by definition have no chance of success. Second, fee-shifting punishes plaintiffs for doing nothing more than exercising their civil rights and punishes defendants for doing nothing more than mounting a defense. There are some special cases — e.g., those involving systematic fraud, like with False Claims Act or RICO Act cases — where fee-shifting makes sense, but not for common law tort cases like this one:

The Topeka, Kansas-based Westboro Baptist Church, led by Rev. Fred Phelps, preaches an anti-homosexual message. Members maintain that combat deaths in Iraq and Afghanistan are God's retribution for America's tolerance of gay men and lesbian women.

Church members have promoted that agenda with a series of intentionally provocative demonstrations outside funerals of servicemen and women who were killed in combat, during which they chant and hold signs bearing messages such as "Thank God For Dead Soldiers."

Church members staged such a protest outside the funeral for Snyder's son, Marine Lance Cpl. Matthew Snyder, in Westminster, Md. Snyder's son was killed in Iraq in 2006 when his Humvee overturned.

Snyder sued.

Does anyone doubt that Snyder was appropriately exercising his right to civil justice? Does anyone believe Synder should not be entitled to have a court and jury assess his claim?

Certainly the District Court and the jury did not: they awarded him $5 million dollars for invasion of privacy and emotional distress.

Westboro Baptist Church appealed. The Federal Rules of Appellate Procedure have their own cost-shifting provision, Rule 39:

(a) Against Whom Assessed. The following rules apply unless the law provides or the court orders otherwise: 

(1) if an appeal is dismissed, costs are taxed against the appellant, unless the parties agree otherwise;

(2) if a judgment is affirmed, costs are taxed against the appellant;

(3) if a judgment is reversed, costs are taxed against the appellee;

(4) if a judgment is affirmed in part, reversed in part, modified, or vacated, costs are taxed only as the court orders. 

The Fourth Circuit Court of Appeals reserved the judgment in Snyder's favor on First Amendment grounds.

Thus, Synder now owes the Westboro Baptist Church $16,500 in costs. Thankfully there's no Federal Anti-SLAPP law: if there had been one, Synder would have been on the hook for all of Westboro's attorney's fees and costs, not merely the costs on appeal.

Civil it may be, but justice it is not.

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Via Blawgletter (and a couple other sources), the whole eleven-judge Federal Circuit issued a rare en banc opinion that held, 9-2, that Harvard, MIT, the Whitehead Institute for Biomedical Research, and Ariad Pharmaceuticals, Inc. couldn't, well, I'll let Barry Barnett explain:

Ariad, MIT, the Whitehead Institute, and Harvard claimed that Eli Lilly infringed their patent on ways to reduce the symptoms of some diseases by causing a protein -- Nuclear Factor kappaB* -- to behave.  The problem (as Blawgletter gleans from the judges' five opinions) arises from the fact that the inventors seem not to have figured out how to suppress symptom-causing NF-kB activity.  They appear simply to have discovered that NF-kB existed and guessed that somehow bringing it to heel would help sick people feel better.

Ariad, MIT, Whitehead, and Harvard urged that the first paragraph of section 12 requires a patent to say only enough to "enable" an in-the-know person to build something that makes NF-kB curtail its hurtful conduct inside human cells.

I knew some of the folks at those places were smart, but I never realized they were so smart they didn't have to actually invent anything to get a patent. Instead, they can just describe a problem and then claim a patent over someone else's solution.

To call the case "significant" is an understatement. Among those submitting amicus briefs to the Federal Circuit were:

• The University of California
• Federal Circuit Bar Association
• Monsanto Company
• GlaxoSmithKline
• Microsoft Corporation
• Google Inc.
• Verizon Communications, Inc.

...and a dozen other schools and technology, pharmaceutical, and research companies who make—or pay—billions of dollars related to broad patents that claim to cover discoveries, but not necessarily inventions, in scientific fields.

The Federal Circuit, however, is even smarter still:

[A] separate requirement to describe one’s invention is basic to patent law. Every patent must describe an invention. It is part of the quid pro quo of a patent; one describes an invention, and, if the law’s other requirements are met, one obtains a patent. The specification must then, of course, describe how to make and use the invention (i.e., enable it), but that is a different task. A description of the claimed invention allows the United States Patent and Trademark Office (“PTO”) to examine applications effectively; courts to understand the invention, determine compliance with the statute, and to construe the claims; and the public to understand and improve upon the invention and to avoid the claimed boundaries of the patentee’s exclusive rights.

[...]

Perhaps there is little difference in some fields between describing an invention and enabling one to make and use it, but that is not always true of certain inventions, including chemical and chemical-like inventions. Thus, although written description and enablement often rise and fall together, requiring a written description of the invention plays a vital role in curtailing claims that do not require undue experimentation to make and use, and thus satisfy enablement, but that have not been invented, and thus cannot be described. For example, a propyl or butyl compound may be made by a process analogous to a disclosed methyl compound, but, in the absence of a statement that the inventor invented propyl and butyl compounds, such compounds have not been described and are not entitled to a patent.

Ariad Pharmaceuticals, Inc. v. Eli Lilly and Co., pp. 12, 26.

Specific to the patent at issue,

The ’516 patent discloses no working or even prophetic examples of methods that reduce NF-κB activity, and no completed syntheses of any of the molecules prophesized to be capable of reducing NF-κB activity. The state of the art at the time of filing was primitive and uncertain, leaving Ariad with an insufficient supply of prior art knowledge with which to fill the gaping holes in its disclosure. See Capon, 418 F.3d at 1358 (“It is well-recognized that in the unpredictable fields of science, it is appropriate to recognize the variability in the science in determining the scope of the coverage to which the inventor is entitled.”).

Whatever thin thread of support a jury might find in the decoy-molecule hypothetical simply cannot bear the weight of the vast scope of these generic claims. ... Here, the specification at best describes decoy molecule structures and hypothesizes with no accompanying description that they could be used to reduce NF-κB activity. Yet the asserted claims are far broader.

Thus, the patent was invalid.

The Federal Circuit's opinion, though, goes much farther than the facts of the case, with a broad rule for future "discovery" patents:

Ariad complains that the doctrine disadvantages universities to the extent that basic research cannot be patented. But the patent law has always been directed to the “useful Arts,” U.S. Const. art. I, § 8, cl. 8, meaning inventions with a practical use, see Brenner v. Manson, 383 U.S. 519, 532-36 (1966). Much university research relates to basic research, including research into scientific principles and mechanisms of action, see, e.g., Rochester, 358 F.3d 916, and universities may not have the resources or inclination to work out the practical implications of all such research, i.e., finding and identifying compounds able to affect the mechanism discovered. That is no failure of the law’s interpretation, but its intention. Patents are not awarded for academic theories, no matter how groundbreaking or necessary to the later patentable inventions of others. “[A] patent is not a hunting license. It is not a reward for the search, but compensation for its successful conclusion.” Id. at 930 n.10 (quoting Brenner, 383 U.S. at 536). Requiring a written description of the invention limits patent protection to those who actually perform the difficult work of “invention”—that is, conceive of the complete and final invention with all its claimed limitations—and disclose the fruits of that effort to the public.

That research hypotheses do not qualify for patent protection possibly results in some loss of incentive, although Ariad presents no evidence of any discernable impact on the pace of innovation or the number of patents obtained by universities. But claims to research plans also impose costs on downstream research, discouraging later invention. The goal is to get the right balance, and the written description doctrine does so by giving the incentive to actual invention and not “attempt[s] to preempt the future before it has arrived.” Fiers, 984 F.2d at 1171. As this court has repeatedly stated, the purpose of the written description requirement is to “ensure that the scope of the right to exclude, as set forth in the claims, does not overreach the scope of the inventor’s contribution to the field of art as described in the patent specification.” Rochester, 358 F.3d at 920 (quoting Reiffin v. Microsoft Corp., 214 F.3d 1342, 1345 (Fed. Cir. 2000)). It is part of the quid pro quo of the patent grant and ensures that the public receives a meaningful disclosure in exchange for being excluded from practicing an invention for a period of time. Enzo, 323 F.3d at 970.

Id., pp. 28-29 (emphases added).

I think the Federal Circuit made the right decision both on the statute and on the policy—there's a substantial consensus today that our patent system is unjustly overprotective in many areas, including biochemical research—but the decision is not without some costs. As the Circuit recognized with the "loss of incentive" part above, it was already hard for scientists to justify to non-scientist corporate managers or school trustees the value of basic research without referencing the financial upside of patentable discoveries. Now that will be even harder, since the financial upside is less lucrative and less secure.

That said, basic research progressed well enough for hundreds of years without the over-patenting we have today, and even a small increase in government funding could likely make up for any new losses due to reduced patentability. Thus, on the whole, the case is a victory for law and for science.

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Last week, Prof. Edward A. Hartnett (of Seton Hall University School of Law) posted Responding to Twombly and Iqbal: Where Do We Go from Here?

Hartnett's idea was eminently reasonable:

I also offer my own proposal, which focuses on the core issue at stake in debates about Twombly and Iqbal: should a plaintiff be able to obtain discovery in an effort to uncover evidence without which he or she cannot prevail?

Hartnett proposes amending Rule 12 of the Federal Rules of Civil Procedure to include:

Rule 12(j): Allegations Likely To Have Evidentiary Support After a Reasonable Opportunity for Discovery

If, on a motion under Rule 12(b)(6) or 12(c) that has not been deferred until trial, the claim sought to be dismissed includes an allegation specifically identified as provided in Rule 11(b)(3) as likely to have evidentiary support after a reasonable opportunity for discovery, the court must either (1) assume the truth of the allegation, or (2) decide whether the allegation is likely to have evidentiary support after a reasonable opportunity for discovery. In deciding whether an allegation is likely to have evidentiary support after a reasonable opportunity for discovery, the court must consider the parties‘ access to evidence in the absence of discovery and state on the record the reason for its decision.

If the court decides that the allegation is likely to have evidentiary support after a reasonable opportunity for discovery, it must allow for that discovery, under the standards of Rule 26, and deny the motion to dismiss. If the court decides that the allegation is not likely to have evidentiary support after a reasonable opportunity for discovery, the court must treat the motion as one for summary judgment under Rule 56, and provide all parties a reasonable opportunity to present all the material that is pertinent to the motion.

Again, eminently reasonable. Such an addition would immediately focus litigation on the real issues, thereby (1) enabling plaintiffs to conduct discovery into the most important areas while also (2) empowering defendants to have cases dismissed—prior to full discovery—if the plaintiff won't be able to prove an essential element of their case.

How could anyone think that was unfair?

The defense bar champions at Drug and Device Law tried to manufacturer an objection, but the argument degenerated into blather and insults. They barely even mention the details of Hartnett's proposal. Instead, they summarily dismissed him with:

Most of these proposals (except Professor Burbank's) actually go far beyond Twombly/Iqbal and would overrule all or most of the prior precedent we cited above. That strikes us as facially overkill and indicative of unexpressed (and in some cases, ulterior) motives at work.

...

We understand that a lot of academics feel that they have to help their students get jobs, or else eventually they won’t have jobs either.  Thus, they tend to support anything and everything that results in more, rather than less, litigation.

Oh, snap.

Then again, an accusation of "ulterior motives" probably would have meant more if it didn't come from someone paid by the hour to ensure corporations pay as little as possible to the people and families they hurt.

Frankly, reading through the post, I can't help but wonder if Beck et al. indeed have some "ulterior motive" in misrepresenting how defense lawyers use Ashcroft v. Iqbal in their practice:

So when we get a complaint, we look to see whether, there’s at least one actual fact pleaded that supports each essential element of a cause of action.  A plaintiff can plead more if s/he so pleases, but there has to be at least one – otherwise we’ll probably file a Twombly/Iqbal motion.

The implied concession there—that they won't file a motion to dismiss if "there's at least one actual fact pleaded that supports each essential element of a cause of action"—is rubbish. They don't run a charity over there at Dechert: if you file a case against one of their clients, they will come up with any argument they can to get it dismissed.

And that's where the problem with Twombly / Iqbal—really, just Iqbal—comes in. Every time a case is filed today, the defendant inevitably files a motion to dismiss claiming that the "actual facts" plead aren't "facts" at all, they're "conclusions," and so are not, under Iqbal, entitled to an assumption of truth.

What's the difference between a "fact" and a "conclusion?" Merriam-Webster says:

fact: an actual occurrence

conclusion: a reasoned judgment

Let me ask you, Dear Reader: who really won more votes in Florida in 2000, Bush or Gore?

Is your answer a "fact" or a "conclusion?" Do you know it as an actual occurrence, or did you make a reasoned judgment?

The problem with Iqbal is that it instructs courts—at the very beginning of the lawsuit, when they have nothing in front of them but a "short and plain" complaint—to perform a wildly subjective analysis about which allegations are merely "conclusions" and which of the non-conclusory allegations are "plausible." 

There's nothing new about that problem. It's the same problem that prompted Rule 8—the Rule supposedly interpreted by Iqbal—to be enacted in the first place:

You used to have the requirement that a complaint must allege the “facts” constituting the “cause of action.” I can show you thousands of cases that have gone wrong on dialectical, psychological, and technical argument as to whether a pleading contained a “cause of action”; and of whether certain allegations were allegations of “fact” or were “conclusions of law” or were merely “evidentiary” as distinguished from “ultimate” facts. In these rules there is no requirement that the pleader must plead a technically perfect “cause of action” or that he must allege “facts” or “ultimate facts.”

Rules of Civil Procedure for the District Courts of the United States: Hearings Before the H. Comm. on the Judiciary, 75th Cong. 94 (1938) (statement of Edgar B. Tolman, Secretary of the Advisory Committee on Rules for Civil Procedure Appointed by the Supreme Court); quoted by p.4 of Professor Stephen Burbank's testimony before the Senate.

The whole point of Rule 8 was to ensure that the right to civil justice didn't turn on metaphysical word games.

And yet we're supposed to come full circle because, as Beck et al. continue,

Twombly/Iqbal are about reining in the cost of litigation; we might feel differently about Professor Hartnett's proposal if it required payment of all a defendant’s costs of “appropriate” (the Article's term) discovery – should designated allegations nonetheless turn out to be unfounded.  But under the proposal as offered, there’s no penalty for over-designation.  If it’s one thing that the fifty-year life span of Conley established, it’s that unrestrained pleading imposes huge discovery costs on defendants.  Even Professor Burbank (who really tried hard) was reduced to relying upon a single study of tiny cases in which even then 25% of the parties believed the process was too expensive.  The excessive cost of modern discovery is simply not a issue capable of dispute any longer.

At least Burbank actually cited something. Defense lawyers think they're entitled to assert the cost of discovery—a cost due primarily to their own practice of relentlessly frustrating discovery at every turn—is "excessive" through sheer ipse dixit.

Sounds like a "conclusion" to me, not an "actual fact."

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Last week, the Supreme Court agreed to hear Bruesewitz v. Wyeth. The case will decide:

Whether Section 22(b)(1) of the National Childhood Vaccine Injury Act of 1986 — which expressly preempts certain design defect claims against vaccine manufacturers “if the injury or death resulted from side effects that were unavoidable even though the vaccine was properly prepared and was accompanied by proper directions and warning” — preempts all vaccine design defect claims, regardless whether the vaccine’s side effects were unavoidable.

The relevant briefs and opinions are available at SCOTUSBlog.

There's an old saying that lawyers and judges bat around, "reasonable minds can disagree." (Of course, few people really believe that, but we all say we do.)

On the above question — in essence, whether Congress intended to wash away (i.e., "preempt") whole swaths of state-law product liability claims against vaccine manufacturers or if Congress merely intended to set up streamlined compensation for a certain class of rare but unavoidable vaccine-related injuries — the Georgia Supreme Court and the United States Court of Appeals for the Third Circuit reached expressly opposite answers less than one year apart from one another. The Georgia Supreme Court answered "no," while the Third Circuit answered "yes." 

The Supreme Court will tell us which Court was right.

I'll leave the merits of the arguments to others. Obviously, if a state Supreme Court and a federal Court of Appeals reached opposite conclusions, then "reasonable minds can disagree." The Third Circuit's opinion is here. The Georgia Supreme Court's opinion is here. Judge for yourself.

What caught my eye was this portion of Wyeth's brief to the Supreme Court, part of their argument for why the Supreme Court should hear the case:

Today, a new litigation threat to the nation’s vaccine supply exists. Approximately 5,000 petitions are currently pending in the "Omnibus Autism Proceeding" in Vaccine Court. HRSA, National Vaccine Injury Compensation Program Statistics Report (Sep. 14, 2009, http://www.hrsa.gov/vaccinecompensation/statistics_report.htm. While the omnibus proceeding will decide for all of the pending cases whether there is a causal link between childhood vaccines and autism, that ruling will have no preclusive effect outside of Vaccine Court. 42 U.S.C. § 300aa-23(e). Each claimant may elect to file a civil action after proceeding through Vaccine Court. Over 350 civil actions have been filed against vaccine manufacturers in various courts with allegations that childhood vaccines caused the recipient to develop autism.

The potential deluge of post-Vaccine Court litigation could lead to the same dangerous situation that existed in the mid-1980s. The number of childhood vaccine manufacturers has not increased since the enactment of the Vaccine Act. In the United States market today, as in 1986, there is still just one manufacturer for the polio vaccine, one for MMR, and two for the DTP vaccine. Compare 1986 U.S.C.C.A.N. at 6348, with FDA/CBER, Thimerosal in Vaccines, http://www.fda.gov/CBER/vaccine/thimerosal.htm (last updated Aug. 31, 2009). Thus, what Congress said in 1986 is true today: "The loss of any of the existing manufacturers of childhood vaccines at this time could create a genuine public health hazard." 1986 U.S.C.C.A.N. at 6348.

Wyeth Brief, pp. 17-18.

At first blush, Wyeth's reasoning seems sound. The question presented by Bruesewitz v. Wyeth could determine the fate of more than 5,000 pending cases. That makes Bruesewitz v. Wyeth worthy of attention.

But that doesn't make the case necessarily worthy of the Supreme Court's attention. Outside of constitutional rulings, the Supreme Court's primary job is to interpret the laws passed by Congress, not to enact new laws or to fret over the consequences of old laws. To the extent upcoming autism litigation is a problem, that's an issue for Congress — not the Court — to address.

If, indeed, "the loss of any of the existing manufacturers of childhood vaccines at this time could create a genuine public health hazard," then Congress could step in and immediately terminate all of the pending cases by amending the National Childhood Vaccine Injury Act of 1986. Congress could, for example, amend to law to clearly preempt all civil suits brought for injuries arising from polio, MMR, or DTP vaccines. 

Moreover, though 5,000 cases sure sounds like a lot, it's not really that much in the big picture. The Vioxx settlement involves ten times that many. And do you know how many cases it really turned into?

One.

Thanks to the Judicial Panel on Multidistrict Litigation, once litigation over a particular issue becomes too big, it can be consolidated into a single proceeding before a single judge. That's what happened to Vioxx, it's what's happening to Toyota, and it's what will happen to the Autism/Vaccine litigation. At this very moment, approximately 92,000 separate lawsuits arising from a wide variety of situations (ranging from asbestos poisoning to securities fraud) have been consolidated into a mere 310 MDL actions.

A "deluge" of one, I suppose.

And what will likely happen in that single case?

Probably the same thing that happened before the Special Masters and before the Court of Federal Claims: the plaintiffs will lose. Odds are good that the plaintiffs won't even get to a jury; all it takes is for the MDL court to find that plaintiffs' experts' theories do not satisfy Daubert and — poof — the cases are all over before a single witness testifies.

Consider this passage from the Cedillo opinion:

[...] Petitioners’ sequence of cause and effect depends upon a presence of persistent measles virus infection in Michelle’s body. However, the Special Master concluded that “the petitioners offered virtually no evidence concerning this necessary element in their proposed chain of proof– i.e., their claim that the measles virus, which they claim to persist in [autistic] children, is vaccine-strain measles virus.” Id. at *52. The Special Master also saw no logical sequence of cause and effect between the MMR vaccine and Michelle’s development of inflammatory bowel disease. Specifically, the Special Master found Dr. Krigsman’s theory that Michelle suffered from an MMR-induced inflammatory bowel disease to be factually incorrect because Michelle did not suffer from gastrointestinal inflammation, and Dr. Krigsman “gravely misunderstood the temporal history of Michelle’s gastrointestinal problems.” Id. at *114-15. The Special Master’s conclusion that Petitioners failed to demonstrate any relationship between the MMR vaccine and Michelle’s autism is eminently reasonable. He determined that they offered “virtually no evidence” to support their claim. See id. at *52.

That's a big problem. Given the amount of effort put into the case, it's hard to see the plaintiffs curing this problem down the road. Similarly, the primary study demonstrating a connection between the MMR vaccine and autism was officially retracted last month.

But we're getting ahead of ourselves with these details. The point is: if the Supreme Court agrees with the Georgia Supreme Court and finds that only claims arising from unavoidable vaccine injuries are preempted, the sky will not fall. Not even if the autism litigation goes forward.

Most likely, the sky won't even move at all.

And if it moves too much, then Congress can put it back, just like they did in 1986.

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Via Sports Law Blog, I saw a new paper: Aaron Zelinsky, The Justice as Commissioner: Benching the Judge-Umpire Analogy, 119 Yale L.J. Online 113. [After writing this post, I saw the WSJ Law Blog covered it, too.]

Here's the abstract:

The judge-umpire analogy has become “accepted as a kind of shorthand for judicial ‘best practices’” in describing the role of a Supreme Court Justice. However, the analogy suffers from three fundamental flaws. First, courts historically aimed the judge-umpire analogy at trial judges. Second, courts intended the judge-umpire analogy as an illustrative foil to be rejected because of the umpire’s passivity. Third, the analogy inaccurately describes the contemporary role of the modern Supreme Court Justice. Nevertheless, no workable substitute for the judge-umpire analogy has been advanced. This Essay proposes that the appropriate analog for a Justice of the Supreme Court is not an umpire, but the Commissioner of Major League Baseball.

I agree with his argument regarding Supreme Court Justices. Given the Justices' policy-making focus and their practice of deciding cases based on the long-term consequences rather than the particular facts of the case, the umpire analogy makes little to no sense for them.

But that's not the whole story. The judges-as-umpires analogy does not work for trial judges either, because the analogy downplays the inherent uncertainty in the law and diminishes the significance and breadth of what trial judges do.

There are a handful of situations in which a trial judge, like an umpire, must draw upon their experience and intuition to quickly exercise discretion in applying a general rule, like when ruling upon evidentiary objections at trial.

Most of the time, however, trial judges have plenty of time to contemplate the issues before them, like when ruling upon motions to dismiss, motions for summary judgment, and motions for post-trial relief — the three most important dispositive motions.

In those instances, the judge is not merely called upon to decide whether or not a pitch was within the strike zone. Indeed, in many situations, the judge is not even asked to decide if the pitch really was within the strike zone (i.e., whether the allegations made by one side are true or false), because they are required to accept the truth of what one of the parties says or of what the jury found. (There are a handful of exceptions, like sentencing decisions, but those, too, are fraught with uncertainty.)

In most situations, the judge is asked to figure out where the strike zone should be. It is as if there were different strike zones for fastballs, breaking balls, and changeups, and the umpire had to determine — based on nothing more the players' arguments about the pitch (i.e., the briefs and the oral argument) — which rule should apply.

But that's not the hard part. In many situations, trial judges must decide not just which rule should apply based on imperfect and incomplete information, but what the rules even are.

Imagine there were different strike zones for different pitches, yet no one agreed what a sinker, curveball, slider, screwball, palmball, or knuckleball even was, and the umpires were supposed to decide which pitch was really used by reviewing dozens of calls by prior umpires, many of which seemed to reach contradictory results and none of which involved the exact same style pitch as the situation at hand.

Making matters worse, imagine, too, that the players themselves don't know for sure what the rules are, and that, after each pitch, the coaches run out to argue over what type of pitch it was.

Does that sound like baseball to you? It sounds like Calvinball to me.

And it sounds like a heckuva game to play.

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Via Overlawyered, Eric Goldman and others favor HR 4364, the “Citizen Participation Act of 2009,” which would establish a federal anti-SLAPP law.

Around half the States have anti-SLAPP (i.e., Anti-"Strategic Lawsuit Against Public Participation") statutes which make it easier to dismiss suits allegedly filed to chill freedom of speech. If the lawsuit arises from the Defendants' exercise of their rights to free speech — which in the post-Citizens United era means virtually every time a corporation advances an agenda — then the Defendant can file, at the very beginning of the lawsuit, a "special motion" that requires the Plaintiff show concrete evidence proving each element of their claims.

The laws make sense, in theory. “The hallmark of a SLAPP suit is that it lacks merit, and is brought with the goals of obtaining an economic advantage over a citizen party by increasing the cost of litigation to the point that the citizen party’s case will be weakened or abandoned, and of deterring future litigation.” United States ex rel. Newsham v. Lockheed Missiles & Space Co., 190 F.3d 963, 972-73 (9th Cir.1999). The purpose of anti-SLAPP laws is to ensure the prompt dismissal of “legally meritless suits filed in order to obtain a political or economic advantage over the defendant, not to vindicate a legally cognizable right of the plaintiff.” Condit v. Nat’l Enquirer, Inc., 248 F. Supp. 2d 945, 952 (E.D. Cal. 2002)(internal quotation omitted). “The paradigm SLAPP suit is an action filed by a land developer against environmental activists or objecting neighbors of the proposed development.” Id.

All well and good. Indeed, anti-SLAPP Acts are sometimes used to dismiss bogus suits in which one side really was trying "to obtain a political or economic advantage" over someone with inadequate resources to defend themselves. See Melius v. Keiffer, 980 So. 2d 167, 170 (La. Ct. App. 2008)(granting motion to strike complaint brought by owners of a bar against area resident who had opposed an expansion of the bar); Lamz v. Wells, 938 So. 2d 792, 794 (La. Ct. App. 2006)(dismissing case filed one week before election by one judicial candidate against another); Darden v. Smith, 879 So. 2d 390, 393 (La. Ct. App. 2004)(dismissing case filed by public official against individual who filed a complaint with the Louisiana Board of Ethics).

Goldman gives his own example where an anti-SLAPP motion allowed a party with limited legal resources to avoid the cost and burden of full-fledged litigation:

All too often, vendors use actual or threatened litigation to take down content that criticizes their offerings. The proposed federal anti-SLAPP law applies to those lawsuits. Thus, if enacted, the federal anti-SLAPP law will help consumers share their true feeling about marketplace offerings with less fear of meritless lawsuits from vendors who would rather fight in court than compete.

BoingBoing’s recent resolution of a lawsuit brought by MagicJack nicely illustrates the virtues of anti-SLAPP laws. BoingBoing blogged some criticisms of MagicJack’s offerings, and MagicJack unwisely responded to that post with a lawsuit. Fortunately for BoingBoing, MagicJack sued it in California, which has a robust anti-SLAPP law. As a result, BoingBoing was able to end the lawsuit early (BoingBoing won its anti-SLAPP motion less than 3 months from complaint filing) and get the court to order MagicJack to pay its attorneys’ fees of over $50k.

But it's not always David using anti-SLAPP laws against Goliath; it's often the other way around.

Consider the BoingBoing case. Let's assume that, instead of suing BoingBoing, MagicJack retaliated by secretly hiring a spam company to inundate BoingBoing and other widely-read blogs with hostile comments questioning BoingBoing's motives and favorably referring to MagicJack.

BoingBoing, having no other options, sues MagicJack.

Would those allegations show MagicJack's "acts" were "in furtherance of the right of free speech?" Sure; MagicJack has just as much a right as BoingBoing to talk about other companies. So the anti-SLAPP Act would be available.*

At the beginning of the case, then, BoingBoing would be required to prove — prior to conducting any discovery, since HR 4364 automatically stays all discovery — that MagicJack was behind the posts, that the posts were false, that the posts were capable of a defamatory meaning, and that MagicJack was at "fault" in publishing the comments (defined in many states as "acting with malice or reckless intent").

How could BoingBoing prove all that immediately after filing suit? Most of that information would be in MagicJack's possession.

Odds are, BoingBoing wouldn't be able to do it. Their case would be dismissed, and MagicJack could continue to harass BoingBoing at will.

The law of unintended consequences, as they say.

Put simply, the problem with HR 4364 is that it's an extraordinarily powerful device — one that substantially increases the costs of bringing meritorious cases and will undoubtedly result in the inadvertent dismissal of many meritorious cases — with few limitations on its use.

Often the only means that "David" has to challenge "Goliath" is through a lawsuit, like when ordinary individuals are powerless to repair the damage caused by sloppy or sensationalized journalism. Yet, if Goliath wants to use the Act to dismiss David's lawsuit, he can and will.

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The producers of the Oscar-nominated The Hurt Locker, which Roger Ebert* deemed the second best film of the decade, were just sued by Sgt. Jeffrey Sarver, a former explosive ordinance disposal technician with the 788th Ordinance Company, with whom journalist Mark Boal — the writer of The Hurt Locker — was “embedded” on assignment for Playboy Magazine.

The complaint, filed in the United States District Court for the District of New Jersey (where Sgt. Sarver lived during the relevant times), gives some examples of the similarities:

The title “The Hurt Locker” – Plaintiff originated this term and said it often around colleagues while in Iraq. Defendant BOAL took interest in this phrase and asked Plaintiff what the phrase meant. Because Plaintiff was told Defendant BOAL was collecting information for the sake of documenting a factual report about Army EOD in general, Plaintiff acquiesced with BOAL’s request, which he said often while during his deployment in Iraq;

 “War is a Drug” – Another phrase Plaintiff used when talking to Defendant BOAL;

 “Will James”, played by Jeremy Renner” – Mr. Renner is essentially the same age and height; to personate Sgt. Sarver, Renner’s hair was dyed blonde, and Renner impersonated Sgt. Sarver’s persona down to the smallest detail, including the replication of Sgt. Sarver’s West Virginia accent, dialect, expressions, mannerisms, personality, and even dress habits (i.e. rolling his sleeves in the exact same manner as Sarver); succinctly stated, Renner acts and behaves just like Plaintiff5 throughout the movie;

Same Military & Family Background – Just like Plaintiff, character “Will James” is a former Army Ranger who has a young son who lives with his ex-wife back home; Renner is also referenced as a “red neck” and “trailer trash”;

Same EOD Missions – Most of the EOD missions depicted in the movie are identical to Plaintiff’s, including the same camps where the EOD team was based (ie Camp Victory), and the same manner in which they were handled - as documented in the Playboy Article;

[…]

Renner struggles with personal, family relationships just like, and in the same manner as, Plaintiff;

Renner drinking alcohol after successful missions;

Renner setting the record for the most IEDs disarmed by any single soldier;

As THR, Esq. notes,

According to legal experts on this topic, Sarver will need to overcome First Amendment protections that give broad protections on speech. Just putting someone's life story up on screen may not be enough.

Sarver's claims may be stronger if he, himself, had written about his experience in Iraq. Had Sarver written about his war stories, he might have been able to pursue a copyright claim that producers of "Hurt Locker" had violated his expression.

Sarver's best case may actually be if producers of "Hurt Locker" got things wrong. Potentially, Sarver could claim that "Will James" is just a thinly veiled depiction of him, but that they had put him in false light and defamed him with dishonest treatment about his character. We have seen these types of "libel-in-fiction" claims come up recently. 

Hence, the complaint continues:

Though the movie clings to the plaintiff’s likeness and personal circumstances throughout the movie, Plaintiff is also defamed in placed in a false light in several scenes, such as (1) the scene where Plaintiff explains to his young son that he essentially does not love him, and that the only thing plaintiff loves now is “war”. The movie ends by showing Plaintiff back in Iraq, starting another deployment mission; and (2) the portrayal of Plaintiff as a reckless, gung-ho war addict who has a morbid fascination with death which causes him to carelessly risk both his and his colleagues’ lives in the theater of war, simply to feel the thrill of cheating death.

The Complaint alleges seven counts:

• Misappropriation of Name & Likeness
• False Light Invasion of Privacy
• Defamation
• Breach of Contract
• Intentional Infliction of Emotional Distress
• Fraud
• Negligent Misrepresentation

As far as I can tell, Sgt. Sarver will have little trouble meeting most of the elements of misappropriation, with one exception:

In order that there may be liability under the rule stated in this Section, the defendant must have appropriated to his own use or benefit the reputation, prestige, social or commercial standing, public interest or other values of the plaintiff's name or likeness. It is not enough that the defendant has adopted for himself a name that is the same as that of the plaintiff, so long as he does not pass himself off as the plaintiff or otherwise seek to obtain for himself the values or benefits of the plaintiff's name or identity. Unless there is such an appropriation, the defendant is free to call himself by any name he likes, whether there is only one person or a thousand others of the same name. Until the value of the name has in some way been appropriated, there is no tort.

Restatement of the Law, Second, Torts, § 652, cmt c (emphases added); see Jeffries v. Whitney E. Houston Acad. P.T.A., 2009 N.J. Super. Unpub. LEXIS 1895, at *9 (App. Div. Jul. 20, 2009)("the purpose of an appropriation of likeness claim is to vindicate the property interest the plaintiff has in his or her name or likeness."). Misappropriation claims typically arise from false endorsements; here, however, Sarver certainly was not represented as directly endorsing the film. The challenge for his lawyers will be arguing that the use of his life story is sufficient "likeness" that it constitutes a de facto endorsement of the story.

False light and defamation are highly similar claims, and often analyzed together. As THR, Esq. said, there’s precedent out there for “libel-in-fiction,” and Sgt. Sarver’s case seems similar to the The Red Hat Club case linked above: taking an already incredible, but nonetheless real, story and scandalizing it some more. It’s a little bit harder for Sgt. Sarver here, though, since it seems that anyone who recognized him from the film would also know the differences between him and the character, and the complaint admits that he already had substantial family troubles and that he broke military regulations, such as drinking after missions. Those issues, however, are typically issues for a jury, not a judge, to decide.

The remaining claims are intriguing, though none are a good fit to the facts. Regarding breach of contract, it doesn’t appear that Sgt. Sarver was an intended third-party beneficiary to Boal’s “embedding” agreement with the U.S. Department of Defense, though he might be an implied third-party beneficiary. Without the contract in hand, it’s hard to say what will happen here. (One of the commentators at THR, Esq., linked to some of the Department of Defense embedding guidelines, which don't seem to be as strict as the complaint implies.)

The intentional infliction of emotional distress claim will likely go nowhere. The complaint essentially admits there’s no evidence the producers of the film intended to cause Sgt. Sarver harm. See Ortiz v. Ocean County Prosecutor's Office, 2005 U.S. Dist. LEXIS 29274, at *15–16 (D.N.J. Nov. 22, 2005)("To sustain such a claim, the conduct at issue must be 'so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency and to be regarded as atrocious, and utterly intolerable in a civilized community.”).

Similarly, the fraud and negligent misrepresentations claims will likely be dismissed. Most courts require some degree of explicit economic loss for these claims. McClellan v. Feit, 376 N.J. Super. 305, 313, 870 A.2d 644, 648 (App. Div. 2005)("Negligent misrepresentation constitutes an incorrect statement, negligently made and justifiably relied on, which results in economic loss."). It might be morally wrong to trick someone into revealing their personal story, but it’s not legally compensable as fraud or misrepresentation unless they're also tricked out of some money.

An interesting case to watch. Depending on Sgt. Sarver’s goals / demands, I’d expect a somewhat prompt settlement, though perhaps not until after the inevitable motion to dismiss is decided.  

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It's no secret: plaintiffs like state court and defendants like federal court.

The reasons include: 

• federal juries, by virtue of their larger geographic range, include fewer urban jurors and more rural jurors, and thus (according to lawyers' lore) will award lower verdicts;
• the Federal Rules of Civil Procedure place express limits on the amount of discovery available;
• federal courts are (and were even before Ashcroft v. Iqbal) more prone to grant motions to dismiss (and motions for summary judgment) than state courts.

Even if a plaintiff files their lawsuit in state court, the defendant can "remove" the case to federal court if the case could have been filed in federal court.

There are two ways a case 'could have been filed in federal court': first, if the claim arises under federal law; second, if all plaintiffs and all defendants are citizens of different states. The latter is called "diversity" jurisdiction, and it has a long history of being "disfavored" by federal courts. As I wrote before, in discussing one of the games defendants play to remove cases, "much like how we prefer federal courts preside over cases bringing federal claims, we prefer state courts preside over cases bringing state claims."

So how do we determine of which States a corporation is a "citizen?" 28 U.S.C. § 1332(c)(1) says, "a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business."

Incorporation is simple enough; all corporations are incorporated in one, and only one, state, most commonly Delaware.

But where is the corporation's "principle place of business?"

The Supreme Court's answered that question yesterday in Hertz Co. v. Friend et al. Here's the facts from the opinion, with substantial edits for clarity by yours truly:

In September 2007, Melinda Friend and John Nhieu, two California citizens, sued the Hertz Corporation in California state court for violations of California’s wage and hour laws as part of a potential class action on behalf of other California citizens similarly-situated to them.

Hertz removed the case to federal court claiming that the plaintiffs and the defendant were citizens of different States, and thus the federal court had diversity jurisdiction over the claims. Friend and Nhieu, however, claimed that the Hertz Corporation was a California citizen, like themselves, and that, hence, diversity jurisdiction was lacking.

To support its position, Hertz submitted a declaration by an employee relations manager that claimed Hertz’s “principal place of business” was in New Jersey, not in California, because — though its California operations accounted for 273 of Hertz’s 1,606 car rental locations, about 2,300 of its 11,230 full-time employees, about $811 million of its $4.371 billion in annual revenue and about 3.8 million of its approximately 21 million rentals — the leadership of Hertz and its domestic subsidiaries is located at Hertz’s corporate headquarters in Park Ridge, New Jersey, where its core executive and administrative functions are carried out, except for some lesser, but still substantial, administrative operations in Oklahoma City, Oklahoma.

Let's start with the big picture: this case has no business being in federal court. It's a class action brought solely by California residents alleging solely California-law claims against a company that has more business in California than anywhere else. None of the concerns underlying federal jurisdiction are present. There is no reason to believe that Hertz would be prejudiced by having the case heard by a California state court, and there are no federal issues in the case.

As the Supreme Court noted yesterday, two-hundred-and-one years ago, the Supreme Court, in a unanimous opinion by Chief Justice Marshall, scoffed at the very notion that a corporation was a "citizen" entitled to diversity jurisdiction: “the term citizen ought to be understood as it is used in the constitution, and as it is used in other laws. That is, to describe the real persons who come into court, in this case, under their corporate name.” Bank of United States v. Deveaux, 5 Cranch 91–92 (1809); see Slip op., p.5. If that was the law today, Hertz would not be entitled to remove any state-law case from any state court, since it would be a "citizen" everywhere.

But that was then, this is now. The statute we have today says Hertz is a citizen "of any State by which it has been incorporated and of the State where it has its principal place of business." If Hertz is sued anywhere else, it can remove the case to federal court. So where is its "principle place of business?"

Prior to the Hertz opinion yesterday, the answer depended upon the Circuit in which the case was brought. Friend's case was brought in the Ninth Circuit,

which instructs courts to identify a corporation’s “principal place of business” by first determining the amount of a corporation’s business activity State by State. If the amount of activity is “significantly larger” or “substantially predominates” in one State, then that State is the corporation’s “principal place of business.” If there is no such State, then the “principal place of business” is the corporation’s “‘nerve center,’” i.e., the place where “‘the majority of its executive and administrative functions are performed.’”

Slip op., p. 3. Other courts, like those in the Seventh Circuit, jumped straight to the "nerve center" approach.

Yesterday, the Supreme Court held that the "nerve center" test is the only test, that "the phrase 'principal place of business' refers to the place where the corporation’s high level officers direct, control, and coordinate the corporation’s activities." Slip op., p. 1.

The opinion is a classic example of Justice Breyer's methodology; long on "administrative simplicity" (p. 13), short on the plain meaning rule. I will leave, as an exercise for the reader, the question of whether the Court's unanimous opinion is consistent with the originalism and formalism pressed by four, sometimes five, members of the Court.

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[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.

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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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Warren Buffet often gets credit for coining the phrase "skin in the game" — even though it's not his — and his definition is, shall we say, on the money. "Skin in the game" makes a difference:

Mutual funds whose directors have "skin in the game" significantly outperform their competitors, according to a study by Syracuse University Prof. David Weinbaum. His results confirm the commonly held belief that directors who are invested in the funds that they oversee act as better stewards than directors who don't have any money on the line.

It's not the first time Prof. Weinbaum has shown that.

I'm a big believer of "skin in the game" — virtually all of my clients are on a contingent fee — and have written before about how contingency fees reduce frivolous litigation and how third-party investment in lawsuits can level the playing field against well-funded defendants.

So I was happy to read Why Investment Bankers Should Have (Some) Personal Liability at The Harvard Law School Forum on Corporate Governance and Financial Regulation:

We have written a short paper for a symposium on the work of Adolf Berle in which we advocate reintroducing some measure of personal liability for bankers, as was the case in Berle’s day, and indeed up through the 1980’s. We describe in our paper the broad outlines of a proposal to impose some measure of personal liability for a bank’s debts on the most highly paid bankers. The proposal would revive two mechanisms that imposed personal liability in an earlier era: general partnership, which was common for investment banks prior to the 1980s, and assessable stock, which was relatively common in corporations including some commercial banks through the 1930s.

It is difficult to imagine the investment banking business returning to the partnerships of old. General partnership – with the illiquidity and liability it imposes on general partners and the constraints it imposes on a bank’s ability to raise capital – probably will not be considered a viable option. It is also difficult to imagine corporations in the financial services industry issuing assessable stock to all of their shareholders or regulators seeking to require them to do so.

Our objective is to design another way to impose some of the risks of unlimited liability on the most highly compensated managers and other decision makers at investment banks and other financial services and trading firms. We seek to do so without requiring the firm itself to switch to general partnership form or to make any other change in its organizational or capital structure. We discuss below two alternatives, each one based on historical precedent.

We could argue all day about whether the theoretical incentives investment bankers have are good enough to keep them from crashing the whole financial system — a whole cottage industry has developed in the pages of the Wall Street Journal, Forbes and Business Week to do just that. But the facts are undeniable: our banking industry is broken, dangerously so.

I don't see how we can fix that without giving the bankers some "skin in the game."

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Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 217 (S.D.N.Y. 2003) is, as I wrote before, the Tale of Genji for electronic discovery. It is as widely-cited as all but the most prominent of Supreme Court opinions.

Gregory P. Joseph brings us selections from Judge Scheindlin’s new magnum opus on the subject, Pension Comm. of Univ. of Montreal, 2010 U.S. Dist. LEXIS 4546 (S.D.N.Y. Jan. 15, 2010):

In an era where vast amounts of electronic information is available for review, discovery in certain cases has become increasingly complex and expensive. Courts cannot and do not expect that any party can meet a standard of perfection. Nonetheless, the courts have a right to expect that litigants and counsel will take the necessary steps to ensure that relevant records are preserved when litigation is reasonably anticipated, and that such records are collected, reviewed, and produced to the opposing party. As discussed six years ago in the Zubulake opinions, when this does not happen, the integrity of the judicial process is harmed and the courts are required to fashion a remedy. Once again, I have been compelled to closely review the discovery efforts of parties in a litigation, and once again have found that those efforts were flawed. As famously noted, "[t]hose who cannot remember the past are condemned to repeat it." By now, it should be abundantly clear that the duty to preserve means what it says and that a failure to preserve records — paper or electronic — and to search in the right places for those records, will inevitably result in the spoliation of evidence.

The Court granted sanctions in the form of an adverse inference / spolitation instruction and monetary compensation to opposing counsel.

Going forward, courts will no longer accept excuses when corporations allow relevant evidence to be destroyed by failing to implement adequate controls:

After a discovery duty is well established, the failure to adhere to contemporary standards can be considered gross negligence. Thus, after the final relevant Zubulake opinion in July, 2004, the following failures support a finding of gross negligence, when the duty to preserve has attached:

• to issue a written litigation hold;
• to identify all of the key players and to ensure that their electronic and paper records are preserved;
• to cease the deletion of email or to preserve the records of former employees that are in a party's possession, custody, or control; and
• to preserve backup tapes when they are the sole source of relevant information or when they relate to key players, if the relevant information maintained by those players is not obtainable from readily accessible sources.

(Emphasis and formatting added).

Consider yourselves warned.

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Sometimes, a police officer's hunch is right:

Columbia [Missouri] Police Officer Jessica McNabb pulled over then-19-year-old Daniel Sanders at Stadium Boulevard and Audubon Drive for running a red light and failing to use his headlights at night. Sanders didn't have a license. He asked for an attorney almost immediately.

After a search of the trunk, McNabb found the body of Sanders' mother beneath a tire — next to a new shovel with the price tag still on it.

Sometimes not:

Jordan Miles, who is black, thought his life was in jeopardy when three white men jumped out of a car on the night of January 11 as he walked not far from his home.

"My son tried to run thinking his life was in jeopardy," Terez Miles said. "He made three steps before he slipped and fell." After that, she said, the [Pittsburgh] police used a stun gun and beat him, pulling out a chunk of his hair.

The criminal complaint says the officers, considering Jordan Miles' appearance suspicious, got out of the car and identified themselves as police. He tried to flee, fell, and then struggled to escape.

The officers "delivered 2-3 closed fist strikes to Miles' head/face with still no effect," and then a "knee strike to Miles' head causing him to momentarily stop resisting," so that he could be handcuffed, the document says.

Miles' mother said the officers did not identify themselves as police to her son, a viola player and student at the city's Creative and Performing Arts High School.

The complaint says the police officers believed Miles was engaged in criminal activity and possibly armed with a "large heavy object." The object turned out to be a bottle of Mountain Dew.

There's a law for both:

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Ironically, Daniel Sanders might have a better chance of avoiding a conviction for his mother's murder than Jordan Miles has of recovering compensation for his injuries.

Last year, the Supreme Court held in Arizona v. Gant that the Fourth Amendment prohibits "a vehicle search incident to a recent occupant’s arrest after the arrestee has been secured and cannot access the interior of the vehicle," with a limited exception for such searches "when it is reasonable to believe that evidence of the offense of arrest might be found in the vehicle."

Sanders was not pulled over or arrested for his mother's murder, so the exception doesn't apply. There's no doubt that he was "secured" — he didn't even put up a fight, he just asked for his lawyer.

His lawyer has moved to exclude from the trial all evidence found from the search of Sanders' car, including, of course, his mother's body:

In that motion, [Sanders' lawyer] Slusher said McNabb continued to question Sanders after he asked for an attorney and that the search of the car was conducted without a warrant or probable cause. Slusher characterized the search and the continued questioning as unconstitutional and thus inadmissible in trial.

He might win it. I'm sure the district attorney's office is burning the midnight oil to find some daylight in Arizona v. Gant.*

Returning to Miles, it's quite possible that the officers identified themselves as police and that Miles didn't hear them. Police confrontations are often fraught with confusion. Consider this instance:

Defendant Murphy approached the driver's side window and asked Plaintiff to produce his identification and credentials for inspection. (Frohner Dep. at 39.) Plaintiff, who kept his credentials in the door pocket of the driver's side door when driving, (Pl.'s Br. Ex. C at 4), began to reach down to retrieve his credentials. (Frohner Dep. at 39.) As Plaintiff was reaching down, Defendant Murphy shouted at Plaintiff, "keep your hands where I can see them." (Id. at 39-40.) Plaintiff, "[n]ot immediately understanding what was transpiring," continued to reach for his credentials in the door pocket, which prompted Defendant Murphy, who by this time had drawn his firearm, to again shout to Plaintiff to keep his hands in view. (Id. at 39-42.) Plaintiff complied with Defendant Murphy's second order and ceased reaching down to the door pocket. (Id. at 40.)

Frohner v. City of Wildwood, 07-1174 (D.N.J. 2008).

Plaintiff there — who was almost shot — was an on-duty undercover FBI agent. He was approached by a uniformed police officer who had pulled him over in a marked police car. Yet, even he didn't "immediately understand what was transpiring."

Consider what Miles would have "immediately understood" when three men in plainclothes jumped out of a car and started chasing him.

To win in a civil lawsuit, though, Miles has to show more than that the officers made a mistake.

First, he has to show his constitutional rights were violated. Then, he must overcome qualified immunity by showing "it would be clear to a reasonable officer that his conduct was unlawful in the situation he confronted." Curley v. Klem, 499 F.3d 199, 206-07 (3d Cir. 2007). Neither is easy to prove; most plaintiffs alleging violations of their constitutional rights lose their cases.

Miles has two constitutional rights that were potentially violated: the right to be free from false arrest and the right not to be subjected to excessive force during an arrest. I don't know what about his "appearance" was "suspicious," but the article reports "the police officers believed Miles was engaged in criminal activity and possibly armed with a large heavy object." From that, we can presume their nominal purpose was to perform a Terry v. Ohio stop and frisk to see if the Mountain Dew was an illegal weapon. If either the judge or the jury believes that, then the officers (really, the City of Pittsburgh, which will indemnify them) are free from liability for the false arrest claim.

When it comes to the excessive force claim:

In deciding whether challenged conduct constitutes excessive force, a court must determine the objective reasonableness of the challenged conduct, considering the severity of the crime at issue, whether the suspect poses an immediate threat to the safety of the officer or others, and whether he is actively resisting arrest or attempting to evade arrest by flight. Other factors include the duration of the officer's action, whether the action takes place in the context of effecting an arrest, the possibility that the suspect may be armed, and the number of persons with whom the police officers must contend at one time.

Couden v. Duffy, 446 F.3d 483, 496-97 (3d Cir. 2006). 

Hence the emphasis on the Mountain Dew: the officers want to justify their conduct by arguing "the possibility that the suspect may be armed." It also likely that, at some point, Miles was "actively resisting arrest or attempting to evade arrest by flight," given that he thought he was being assaulted. Such resistance, under excessive force precedent, makes the officers' punching and kicking less "objectively unreasonable."

After showing all of the above, Miles must also show the judge "it would be clear to a reasonable officer that his conduct was unlawful in the situation he confronted" to overcome qualified immunity. Miles can't just show what the officers did was wrong; he has to show it was so wrong that the officers had to know it was illegal.

Can Miles do that? Maybe so. Then again, a lot of constitutional rights / qualified immunity cases — like Curley v. Klem, in which a police officer was accidentally shot — end with a jury verdict for the defendant and a speech from the appellate court like so:

The mistake Klem made has undoubtedly been terrible in its long-term consequences for Officer Curley and his family, and we do not for a moment discount the pain, sorrow, expense, and frustration that it has visited on them in their innocence. But a mistake, though it may be terrible in its effects, is not always the equivalent of a constitutional violation. ... "[P]olice officers are often forced to make split-second judgments — in circumstances that are tense, uncertain, and rapidly evolving — about the amount of force that is necessary in a particular situation." Graham, 490 U.S. at 397, 109 S.Ct. 1865. Those were the circumstances facing both Trooper Klem and Officer Curley at the George Washington Bridge toll plaza. Viewed from that perspective, Saucier, 533 U.S. at 205, 121 S.Ct. 2151, the seizure effected by the mistaken shooting was not unreasonable under the Fourth Amendment. It therefore was not a constitutional violation.

Courts of law, not of justice.

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[UPDATE: The WSJ Law Blog rounds up reactions by the parties, while SCOTUSBlog rounds up reactions from the media and bloggers.]

[UPDATE II: For a peek behind the corporate curtain, see the memo that Republican election lawyer Benjamin L. Ginsberg (of Patton Boggs) is circulating. I think he's going too far in his conclusions; as much as he and his clients would like corporations' electioneering to drown out candidates' and parties' own communications, the disclosure requirements — which were upheld by the Court 8-1 — put a significant damper on that, since the money can still be traced to some extent, and since voters can generally discern if an ad is from a campaign or from some shadow group with an Orwellian name.]

The Citizens United v. FEC opinion has been released, with a majority opinion, two concurrences, and two concurrences-dissents, totaling 183 pages. For those of you keeping score at home:

KENNEDY, J., delivered the opinion of the Court, in which ROBERTS, C. J., and SCALIA and ALITO, JJ., joined, in which THOMAS, J., joined as to all but Part IV, and in which STEVENS, GINSBURG, BREYER, and SOTOMAYOR, JJ., joined as to Part IV.

ROBERTS, C. J., filed a concurring opinion, in which ALITO, J., joined.

SCALIA, J., filed a concurring opinion, in which ALITO, J., joined, and in which THOMAS, J., joined in part.

STEVENS, J., filed an opinion concurring in part and dissenting in part, in which GINSBURG, BREYER, and SOTOMAYOR, JJ., joined.

THOMAS, J., filed an opinion concurring in part and dissenting in part

Here's how Justice Kennedy (joined by Scalia, Thomas, Alito and Roberts) describe the statute at issue:

The law before us is an outright ban, backed by criminal sanctions. Section 441b makes it a felony for all corporations—including nonprofit advocacy corporations—either to expressly advocate the election or defeat of candidates or to broadcast electioneering communications within 30days of a primary election and 60 days of a general election. Thus, the following acts would all be felonies under §441b: The Sierra Club runs an ad, within the crucial phase of 60 days before the general election, that exhorts the public to disapprove of a Congressman who favors logging in national forests; the National Rifle Association publishes a book urging the public to vote for the challenger because the incumbent U. S. Senator supports a handgun ban; and the American Civil Liberties Union creates a Web site telling the public to vote for a Presidential candidate in light of that candidate’s defense of free speech. These prohibitions are classic examples of censorship.

That would, indeed, be unconstitutional.

But it's not actually the law.

Corporations, unions, and nonprofits can do all of the above, they just have to do it through a Political Action Committee. To the five conservative Justices, that, apparently, is too much:

Section 441b is a ban on corporate speech notwithstanding the fact that a PAC created by a corporation can still speak. See McConnell, 540 U. S., at 330–333 (opinion of KENNEDY, J.). A PAC is a separate association from the corporation. So the PAC exemption from §441b’s expenditure ban, §441b(b)(2), does not allow corporations to speak. Even if a PAC could somehow allow a corporation to speak—and it does not—the option to form PACs does not alleviate the First Amendment problems with §441b. PACs are burdensome alternatives; they are expensive to administer and subject to extensive regulations. For example, every PAC must appoint a treasurer, forward donations to the treasurer promptly, keep detailed records of the identities of the persons making donations, preserve receipts for three years, and file an organization statement and report changes to this information within 10 days. ...

PACs have to comply with these regulations just to speak. This might explain why fewer than 2,000 of the millions of corporations in this country have PACs. ... PACs, furthermore, must exist before they can speak. Given the onerous restrictions, a corporation may not be able to establish a PAC in time to make its views known regarding candidates and issues in a current campaign.

For shame. You run a multi-billion-dollar company and, before you can spend millions of dollars to influence an election, the mean old government demands you spend a couple grand on lawyers to set up a separate, regulated entity with disclosure requirements so that the public can actually know who is spending millions of dollars to influence an election.

It's all so unfair.

Justice Stevens' dissent (joined by Ginsburg, Breyer and Sotomayor) starts off with that malarkey: 

The real issue in this case concerns how, not if, the appellant may finance its electioneering. Citizens United is a wealthy nonprofit corporation that runs a political action committee (PAC) with millions of dollars in assets. Under the Bipartisan Campaign Reform Act of 2002 (BCRA), it could have used those assets to televise and promote Hillary: The Movie wherever and whenever it wanted to. It also could have spent unrestricted sums to broadcast Hillary at any time other than the 30 days before the last primary election. Neither Citizens United’s nor any other corporation’s speech has been “banned,” ante, at 1. All that the parties dispute is whether Citizens United had a right to use the funds in its general treasury to pay for broadcasts during the 30-day period. The notion that the First Amendment dictates an affirmative answer to that question is, in my judgment, profoundly misguided. Even more misguided is the notion that the Court must rewrite the law relating to campaign expenditures by for-profit corporations and unions to decide this case. ...

Pervading the Court’s analysis is the ominous image of a “categorical ba[n]” on corporate speech. Ante, at 45. Indeed, the majority invokes the specter of a “ban” on nearly every page of its opinion. Ante, at 1, 4, 7, 10, 11, 12, 13, 16, 20, 21, 22, 23, 26, 27, 28, 29, 30, 31, 33, 35, 38, 40, 42, 45, 46, 47, 49, 54, 56. This characterization is highly misleading, and needs to be corrected.

In fact it already has been. Our cases have repeatedly pointed out that, "contrary to the [majority's] critical assumptions,” the statutes upheld in Austin and McConnell do “not impose an absolute ban on all forms of corporate political spending.” Austin, 494 U. S., at 660; see also McConnell, 540 U. S., at 203–204; Beaumont, 539 U. S., at 162–163. For starters, both statutes provide exemptions for PACs, separate segregated funds established by a corporation for political purposes. See 2 U. S. C. §441b(b)(2)(C); Mich. Comp. Laws Ann. §169.255 (West 2005). “The ability to form and administer separate segregated funds,” we observed in McConnell, “has provided corporations and unions with a constitutionally sufficient opportunity to engage in express advocacy. That has been this Court’s unanimous view.” 540 U. S., at 203.

But what of the so-called "original meaning" of the Constitution — did the Framers intend the First Amendment's broad language to prohibit regulatory requirements for corporate speech?

[W]hereas we have no evidence to support the notion that the Framers would have wanted corporations to have the same rights as natural persons in the electoral context, we have ample evidence to suggest that they would have been appalled by the evidence of corruption that Congress unearthed in developing BCRA and that the Court today discounts to irrelevance. It is fair to say that “[t]he Framers were obsessed with corruption,” Teachout 348, which they understood to encompass the dependency of public officeholders on private interests, see id., at 373– 374; see also Randall, 548 U. S., at 280 (STEVENS, J., dissenting). They discussed corruption “more often in the Constitutional Convention than factions, violence, or instability.” Teachout 352. When they brought our constitutional order into being, the Framers had their minds trained on a threat to republican self-government that this Court has lost sight of.

So much for "originalism."

Stevens' conclusion puts the case in proper perspective:

In a democratic society, the longstanding consensus on the need to limit corporate campaign spending should outweigh the wooden application of judge-made rules. The majority’s rejection of this principle “elevate[s] corporations to a level of deference which has not been seen at least since the days when substantive due process was regularly used to invalidate regulatory legislation thought to unfairly impinge upon established economic interests.” Bellotti, 435 U. S., at 817, n. 13 (White, J., dissenting). At bottom, the Court’s opinion is thus a rejection of the common sense of the American people, who have recognized a need to prevent corporations from undermining self government since the founding, and who have fought against the distinctive corrupting potential of corporate electioneering since the days of Theodore Roosevelt. It is a strange time to repudiate that common sense. While American democracy is imperfect, few outside the majority of this Court would have thought its flaws included a dearth of corporate money in politics.

It's Kennedy's, Scalia's, Thomas', Alito's and Roberts' country; the rest of us just live in it.

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Fred Wilson links to his partner Brad Burnham's post, "We need an independent invention defense to minimize the damage of aggressive patent trolls:"

I know of no case where the engineers in one of our companies were aware of the patents that are now being used to attack them. The moral rightness of this screams at me. If, as an engineer focused on solving a problem, I happened to come up with an idea that is in some way similar to yours, then that in itself should suggest that it was obvious and not patentable. Unfortunately, that does not really help. There, the burden of proof is still on the startup and it is still smarter to settle than to burn precious capital on a defense.

If, on the other hand, the troll was required to show the startup had some prior knowledge of their technology, the burden would be shifted to the attacker, and this blatant abuse would come to a grinding halt. If you believe as I do that innovation is key to social progress, please support patent reform. It is a complicated issue, but an independent invention defense is an obvious place to start.

(Emphasis mine; keep reading to see why.)

Though I sympathize with Brad's concerns — patent infringement litigation is both high stakes and notoriously expensive, and thus risky and burdensome even for defendants likely to prevail at trial — I have a couple issues with an independent invention defense. 

First, the defense already exists to some extent in the form of differing damages for "infringement" compared to "willful infringement." If the plaintiff cannot prove at least "objective recklessness" — which is quite hard to do in the wake of In Re Seagate Technology, since the defendant has no affirmative duty to avoid infringement — then the plaintiff cannot recover treble damages or attorneys' fees. The stakes are thus lower in genuine "independent invention" cases.

Second, an independent invention defense would discourage individuals and businesses from doing an adequate patent search before investing resources into novel solutions. One of the primary reasons we have a public patenting process (rather than merely protection of private trade secrets) is to make inventions easily available to the public for use. How many times would the wheel have been reinvented if it had been kept secret? Though frustrating to businesses, from a societal standpoint patent licensing is generally preferable to the redundant investment of time, effort and money into solving problems with known solutions.

Third, an independent invention defense would be ripe for abuse. Independent invention is already a defense to to a willful patent infringement claim; making independent innovation a complete defense would give defendants an even greater incentive to manufacture "evidence" showing their "independent" invention. Worse, genuine invention is often quite messy; the independent invention defense could thus perversely protect only those defendants who from the start knew to create a trail of "evidence."

That's not to say we don't have problems with our patent system. We do. I just don't think an independent invention defense is the way to go.

So let's talk about the part of Brad's post I emphasized: obviousness and the burden of proof.

A recurring theme in the comments to Brad's post and Fred's post is the complaint that many patented "inventions," particularly in the Silicon Valley industries, are not particularly inventive. Patent law is supposed to guard against this problem. Indeed, the most common defense in patent suits is a counterclaim by the defendant that the patent is invalid because it is too obvious.

35 U.S.C. § 103 forbids patents where "the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains." The Supreme Court has explained the analysis as such:

Under § 103, the scope and content of the prior art are to be determined; differences between the prior art and the claims at issue are to be ascertained; and the level of ordinary skill in the pertinent art resolved. Against this background the obviousness or nonobviousness of the subject matter is determined. Such secondary considerations as commercial success, long felt but unsolved needs, failure of others, etc., might be utilized to give light to the circumstances surrounding the origin of the subject matter sought to be patented.

More pertinent here is how a finding of "obviousness" is the only tool courts have to mitigate the high stakes and high expense of patent infringement cases with questionable, but not outright dubious, merit.

Finding "obviousness" as a matter of law is a nuclear option; it requires the court dismiss the case, simultaneously creating precedent barring the defendant from any future litigation on the patent in the future and creating a basis for any current licensees to stop payment to the defendant. Courts' hesitation to use that nuclear option — particularly given the standards governing summary judgment and courts' unfamiliarity with the state of innovation in highly technical industries — is understandable.

So what to do?

Change the burdens.

It's not a new idea; employment-discrimination cases routinely apply the McDonnell-Douglas burden-shifting framework at summary judgment.

Right now, in terms of "obviousness," a court has two options:

1. Find the patent "obvious" as a matter of law, thereby blowing up the case and invalidating the patent;
2. Leave "obviousness" up to the jury, where the defendant has the burden of proving the patent is "obvious."

As Brad complains, #2 may be a hollow remedy.

So why not add another option? Why not allow the court to put the burden of nonobviousness upon the plaintiff if the defendant shows, pre-trial, a "cogent and compelling" argument that the patent was obvious? ("Congent and compelling" isn't foreign to courts either; such a showing is required in securities fraud cases under Tellabs.)

A court could further mitigate the pre-trial risk to the defendant by ordering bifurcation of the trial; i.e., first there's a trial on "obviousness," and then, if the patent is "nonobvious," there's a trial on infringement. Adding some element of fee-shifting — e.g., a plaintiff who loses the "obviousness" trial has to pay the trial fees of the defendant — would create a market for contingent fee defense of patent infringement suits, and thereby mitigate the "burn[ing] of precious capital ..."

Just a thought.

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Before Ashcroft v. Iqbal improperly re-wrote the Federal Rules of Civil Procedure, Bell Atlantic Corp. v. Twombly foolishly imposed a new hurdle for plaintiffs who brought antitrust claims. Specifically, in Twombly the Supreme Court held,

In applying these general standards to a §1 claim [e.g., a price-fixing claim], we hold that stating such a claim requires a complaint with enough factual matter (taken as true) to suggest that an agreement was made. Asking for plausible grounds to infer an agreement does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement. ...[A]n allegation of parallel conduct and a bare assertion of conspiracy will not suffice. Without more, parallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality. Hence, when allegations of parallel conduct are set out in order to make a §1 claim, they must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.

... A statement of parallel conduct, even conduct consciously undertaken, needs some setting suggesting the agreement necessary to make out a §1 claim; without that further circumstance pointing toward a meeting of the minds, an account of a defendant’s commercial efforts stays in neutral territory. An allegation of parallel conduct is thus much like a naked assertion of conspiracy in a §1 complaint: it gets the complaint close to stating a claim, but without some further factual enhancement it stops short of the line between possibility and plausibility of “entitle[ment] to relief.”

A number of defense lawyers — and, unfortunately, courts — have interpreted the above language to mean that an antitrust plaintiff can only "raise[ ] a suggestion of a preceding agreement" by proving, at the beginning of the lawsuit, that the defendants secretly agreed to raise prices together.

But how do you prove a secret agreement before you can use court processes to conduct an investigation?

Normally, you can't.

Catch-22.

Thankfully, the Second Circuit has just corrected those errors in reversing dismissal of a price-fixing case against several digital music companies. As the opinion (PDF) holds:

Defendants’ arguments that plaintiffs have failed to state a claim are without merit. Defendants first argue that a plaintiff seeking damages under Section 1 of the Sherman act must allege facts that “tend[] to exclude independent self-interested conduct as an explanation for defendants’ parallel behavior.” Appellee’s Br. 15-17. This is incorrect. Although the Twombly court acknowledged that for purposes of summary judgment a plaintiff must present evidence that tends to exclude the possibility of independent action, 550 U.S. at 554, and that the district court below had held that plaintiffs must allege additional facts that tended to exclude independent self-interested conduct, id. at 552, it specifically held that, to survive a motion to dismiss, plaintiffs need only “enough factual matter (taken as true) to suggest that an agreement was made,” id. at 556; see also 2 Areeda & Hovenkamp § 307d1 (3d ed. 2007) (“[T]he Supreme Court did not hold that the same standard applies to a complaint and a discovery record . . . . The ‘plausibly suggesting’ threshold for a conspiracy complaint remains considerably less than the ‘tends to rule out the possibility’ standard for summary judgment.”).

Defendants next argue that Twombly requires that a plaintiff identify the specific time, place, or person related to each conspiracy allegation. This is also incorrect. The Twombly court noted, in dicta, that had the claim of agreement in that case not rested on the parallel conduct described in the complaint, “we doubt that the . . . references to an agreement among the [Baby Bells] would have given the notice required by Rule 8 . . [because] the pleadings mentioned no specific time, place, or person involved in the alleged conspiracies.” 550 at 565 n.10. In this case, as in Twombly, the claim of agreement rests on the parallel conduct described in the complaint. Therefore, plaintiffs were not required to mention a specific time, place or person involved in each conspiracy allegation.

Starr et al v. Sony BMG et al., slip op., 08-5637 (2d Cir., January 13, 2010), pp. 15-16.

It's hard to call the opinion a "win" for antitrust plaintiffs — Twombly should have been better decided — but it definitely leaves antitrust plaintiffs better off than they were before.

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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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As The Legal Intelligencer is reporting, yesterday the Pennsylvania Commonwealth Court affirmed an order by the Orphans’ Division of the Philadelphia Court of Common Pleas prohibiting the City from leasing part of Burholme Park to Fox Chase Cancer Center for use in a substantial expansion of Fox Chase.

Under the agreement, 19.4 acres of the Park would have been leased to Fox Chase for 80 years, with options to renew the lease for up to 80 more years. The bulk of the Park was donated to the City 130 years ago by Robert W. Ryerss for use “as a public park … to be called Burholme Park … for the use and enjoyment of the people forever.”

Most of Philadelphia — including the City Council and Mayor, both of whom approved the lease — seems to believe that the Cancer Center expansion would be a good thing.

But a private cancer center is not “a public park.” Does that matter?

As every law student who takes Wills, Trusts and Estates has drilled into their heads, for hundreds of years, the common laws of England and America have held that little is more important than specific word choices in transfers of real estate, wills, and the establishment of trusts. Fortunes have changed hands — and held protected — on nothing more than a word or a comma.

Although the strict common law rule has waned over the past few decades (consider the relocation of the Barnes Museum), numerous states have passed statutes affirming the same ideas. One such state, as the Commonwealth Court described, is Pennsylvania:

We note that underlying the arguments made in this case is a question as to the continuing viability of the public trust doctrine in light of the [Donated or Dedicated Property Act]. We believe that the DDPA essentially incorporates the common law public trust doctrine by imposing a duty on political subdivisions to ensure that donated or dedicated property held in trust is used for its originally intended purpose, but, at the same time, creates a mechanism by which a political subdivision may be relieved of that duty where the originally intended use of the property is no longer practicable or possible and has ceased to serve the public interest. We discern no intent on the part of the Legislature to allow a political subdivision to change the use of donated or dedicated property where the originally intended use of that property remains practicable or possible and continues to serve the public interest.

And that’s a big problem for Fox Chase Cancer Center and City of Philadelphia:

While we agree that, pursuant to Erie Golf Course, the decision of a political subdivision is entitled to considerable deference, political subdivisions do not have the authority to exceed what is permitted under the DDPA. Section 4 of the DDPA permits a political subdivision to apply to an orphans’ court for relief from fulfilling its duty under Section 3 where, “in the opinion of the political subdivision . . . , the continuation of the original use of the particular property held in trust as a public facility is no longer practicable or possible and has ceased to serve the public interest.” 53 P.S. § 3384 (emphasis added). Thus, based on this statutory language, in order to be relieved of its duty to hold the property as a trustee for the benefit of the public under Section 3, a political subdivision must establish that the original use of the property is: (1) no longer practicable or possible; and (2) has ceased to serve the public interest.
 
Here, Appellants did not meet either of these requirements. First, Appellants did not establish that the continued use of the Property as parkland is no longer practicable or possible. While the term “practicable” is not defined in the DDPA, this Court has previously relied on that term’s common usage, explaining that “[t]he word ‘practicable’ is defined in Webster’s Third New International Dictionary 1789 (2002) as ‘1: possible to practice or perform: capable of being put into practice, done or accomplished: FEASIBLE . . . .” Erie Golf Course, 963 A.2d at 613. This Court has also recognized that the term “practicable” is not limited to physical feasibility but, rather, also includes financial feasibility. Id. at 613-14. Appellants, here, do not really dispute that the City can physically and financially continue to maintain the Property as part of the Park. Instead of focusing on the practicability of the continued use of the Property as parkland, Appellants focus on the potential negative economic consequences if the Property cannot be used by Fox Chase. While we understand that Fox Chase’s inability to expand at its present location may have negative economic consequences, this is not a consideration for which the DDPA allows the City to obtain relief from its duty to continue holding the Property in trust for its originally intended use as parkland.

(emphasis in original)

It's hard to see how Philadelphia can get around the DDPA's strict, conjunctive requirements unless they can convince the Pennsylvania Supreme Court that the DDPA doesn't even apply. To those expecting a 'political' decision by the Court, bear in mind that only two Justices — Castille and McCaffery — are from Philadelphia.

Then again, unlike the common law public trust doctrine, the DDPA is a statute like any other, open to amending or rescinding at the will of the General Assembly and the Governor, the latter indeed being from Philadelphia.

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As Patently-O reports this morning, 

The Supreme Court recently rejected Medela's petition for certiorari arguing that the conclusion of obviousness should be made by a judge rather than a lay jury.

In the wake of Medela's failure, Acushnet (maker of Titleist) is now asking the Supreme Court to hold that "a court reviewing a jury's [obviousness] verdicts must always independently render its own legal conclusion regardless of whether one or all of the jury's underlying findings are accepted as adequately supported by the evidence." Taking that a step-further, Acushnet argues that a jury's verdict on the question of obviousness should be seen as "entirely advisory as to the ultimate legal conclusion." 

Medela was intriguing — and Acushnet would be even more intriguing — because many believed that the Supreme Court's unanimous opinion in KSR International Co. v. Teleflex, Inc. gave the courts even more power to dispose of patent infringement cases prior to reaching a jury trial by making the court involved even further in determining the "nonobviousness"* of new inventions.

The denial of certiorari in Medela, however, implied the opposite, thereby preserving the primary role of juries — to resolve factual disputes — in patent cases.  A denial of certiorari in Acushnet would be a big win for plaintiffs, since it would empower them to argue that the district court can only grant summary judgment if there is no way the jury could find the patented invention "nonobvious."

On the merits of the petition, Acushnet's argument is incompatible with the civil litigation and jury trial system envisioned by the Federal Rules of Civil Procedure. We don't demand jury service from ordinary citizens, particularly the weeks of jury service required for patent trials, just so they can render "advisory opinions." We demand jury service to evaluate the material facts over which there is a "genuine" dispute.

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Another interesting statutory construction case arising from allegations scientists at Cornell University Medical College and Thomas Jefferson University "misrepresented the findings of their DNA research when they applied for National Institute of Health research grants and did not correct the misrepresentations on subsequent progress reports and renewal applications." Problem is, the grants in question were filed back in the 1990s.

As Judge Savage recounts,

The [False Claims Act] prohibits 'any person from making false or fraudulent claims for payment to the United States.' Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 545 U.S. 409, 411, 125 S. Ct. 2444, 162 L. Ed. 2d 390 (2005); 31 U.S.C. § 3729(a). Any person found liable for violating the FCA is subject to a civil penalty of $ 5,000 to $ 10,000 per violation and treble damages. 31 U.S.C.A. § 3729(a) (West Supp. 2008); Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 181 (3d Cir. 2001).

An action under the FCA may be commenced in one of two ways. The attorney general may sue on behalf of the United States government; or, a private individual, known as a relator, can bring a qui tam action. 31 U.S.C.A. § 3730(a), (b)(1); Graham County, 545 U.S. at 411-12 (citing Vermont Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 769-72, 120 S. Ct. 1858, 146 L. Ed. 2d 836 (2000)). Because the relator brings the action on behalf of the government, he must give the government notice of the action. The government has sixty days from the filing of a qui tam complaint to elect to intervene in the action, and, for good cause shown, can petition the court to permit it to intervene at a later date. Graham County, 545 U.S. at 412; § 3730(b)(2) and (c)(3).

A civil action under the FCA must be brought within six years of the violation or within three years of the date when the government learned or should have learned the facts material to the violation, whichever is later. Id. §§ (b)(1), (2). In no event may an action be brought after ten years of a violation. Id. Specifically, the FCA statute of limitations provides:

(b) A civil action under [the False Claims Act] may not be brought -

(1) more than 6 years after the date on which the violation of [the False Claims Act] is committed, or

(2) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed,

whichever occurs last.

31 U.S.C.A. § 3731(b) (2003).

The critical difference between § (b)(1) and (b)(2) is that under § (b)(1), the statute of limitations begins to run when the violation occurs, whereas under § (b)(2), it begins to run when the appropriate person learned or should have learned facts putting him on notice that a violation occurred. A conflict arises from the interplay between the unusual procedure allowing a private party to bring a qui tam action on behalf of the government and the language of the tolling provision, which appears to relate only to the government. It is this conflict that raises the issues confronting us in this case."

United States ex rel. Bauchwitz, No. 04-2892, 2009 U.S. Dist. LEXIS 111919, at *23–25 (E.D. Pa. Dec. 1, 2009).

There's no obvious right answer:

The circuits and district courts that have considered the issue are split as to whether § 3731(b)(2) applies to private relators in actions where the government has not intervened. The Courts of Appeals for the Fourth, Fifth and Tenth Circuits have held that the tolling provision does not apply to qui tam actions where the government has not intervened. United States ex rel. Sanders v. N. Am. Bus Indus., 546 F.3d 288 (4th Cir. 2008), cert. denied, 129 S. Ct. 2793, 174 L. Ed. 2d 291 (2009); United States ex rel. Erskine v. Baker, 213 F.3d 638, 2000 WL 554644 (5th Cir. 2000) (unpublished table opinion); United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 725 (10th Cir. 2006). In contrast, the Ninth Circuit, as well as district courts in Massachusetts, Georgia and Illinois, apply § 3731(b)(2) to private actions even where the government has not intervened. United States ex rel. Hyatt v. Northrup Corp., 91 F.3d 1211, 1214, 1217 (9th Cir. 1996); United States ex rel. Ven-A-Care v. Actavis Mid Atlantic LLC, ___ F. Supp. 2d ___, 2009 U.S. Dist. LEXIS 92945, 2009 WL 3171798 (D. Mass. 2009); United States ex rel. Lewis v. Walker, No. 3:06-CV-16, 2007 U.S. Dist. LEXIS 68208, 2007 WL 2713018 (M.D. Ga. Sept. 14, 2007); United States ex rel. Bidani v. Lewis, No. 97 C 6502, 1999 U.S. Dist. LEXIS 3530, 1999 WL163053 (N.D. Ill. Mar. 12, 1999). The Third Circuit has not decided the issue.

Id. at *51–52.

Although the Third Circuit's precedent leans towards allowing relators in non-intervention cases to rely on statutory provisions arguably meant only for use by the government when it intervenes, the Supreme Court says otherwise:

The Third Circuit's view of the relator's status vis-a-vis the government is no longer viable in light of the Supreme Court's recent holding in United States ex rel. Eisenstein v. City of New York, 129 S. Ct. 2230, 173 L. Ed. 2d 1255 (2009). There, the Supreme Court held that the relator in a non-intervened FCA case cannot invoke the sixty-day deadline applicable to the United States as a party for filing a notice of appeal under Fed. R. App. P. 4(a)(1)(B). Resolving the circuit split, the Supreme Court determined that the government's retaining an interest in an FCA case in which it has not intervened does not make it a 'party.' 129 S. Ct. at 2233. It concluded that this interest does not convert the government's status as a real party in interest to that of a 'party' in the litigation in which it has declined to intervene. Id. at 2235. Consequently, the relator cannot be deemed to have the same status as the government.

Because the Third Circuit's rationale regarding the relator's status in Rodriguez has been rejected, it cannot support a holding that would permit a relator to take advantage of a tolling provision applicable only to the government. 54 It has been replaced by the reasoning of the Supreme Court in Eisenstein. Therefore, following that reasoning, we conclude that the three-year tolling period in § 3731(b)(2) does not apply in cases where the government does not intervene.

Id. at *55–56.

Summary judgment granted, case dismissed. It's not good material for appeal or certiorari, either, as the Eastern District of Pennsylvania also held "Even if the tolling provision applies, as [plaintiff] argues it does, the result would be the same. Because [relator] possessed knowledge of the facts underpinning his allegations regarding all three areas of the defendants' fraudulent statements by 1999 and their probable connection to grants, the claims that are barred by the six-year limitations period would also be barred by the three-year tolling period."

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The Mohawk Industries v. Carpenter (08-678) slip opinion, written by Justice Sotomayor, is available here. Here is the core of the reasoning:

The crucial question, however, is not whether an interest is important in the abstract; it is whether deferring review until final judgment so imperils the interest as to justify the cost of allowing immediate appeal of the entire class of relevant orders. We routinely require litigants to wait until after final judgment to vindicate valuable rights, including rights central to our adversarial system.See, e.g., Richardson-Merrell, 472 U. S., at 426 (holding an order disqualifying counsel in a civil case did not qualify for immediate appeal under the collateral order doctrine); Flanagan v. United States, 465 U. S. 259, 260 (1984) (reaching the same result in a criminal case, notwithstanding the Sixth Amendment rights at stake). In Digital Equipment, we rejected an assertion that collateral order review was necessary to promote “the public policy favoring voluntary resolution of disputes.” 511 U. S., at 881. “It defies common sense,” we explained, “to maintain that parties’ readiness to settle will be significantly dampened (or the corresponding public interest impaired) by a rule that a district court’s decision to let allegedly barred litigation go forward may be challenged as a matter of favor.” Ibid.

We reach a similar conclusion here. In our estimation, postjudgment appeals generally suffice to protect the rights of litigants and assure the vitality of the attorney-client privilege. Appellate courts can remedy the improper disclosure of privileged material in the same way they remedy a host of other erroneous evidentiary rulings: by vacating an adverse judgment and remanding for a new trial in which the protected material and its fruits are excluded from evidence.

As hoped, Justice Sotomayor has brought her trial experience to bear, and has contributed a practical understanding of how the law works at the trial level previously unseen in Supreme Court opinions:

Moreover, were attorneys and clients to reflect upon their appellate options, they would find that litigants confronted with a particularly injurious or novel privilege ruling have several potential avenues of review apart from collateral order appeal. First, a party may ask the district court to certify, and the court of appeals to accept, an interlocutory appeal pursuant to 28 U. S. C. §1292(b). The preconditions for §1292(b) review—“a controlling question of law,” the prompt resolution of which “may materially advance the ultimate termination of the litigation”—are most likely to be satisfied when a privilege ruling involves a new legal question or is of special consequence, and district courts should not hesitate to certify an interlocutory appeal in such cases. Second, in extraordinary circumstances—i.e., when a disclosure order “amount[s] to a judicial usurpation of power or a clear abuse of discretion,” or otherwise works a manifest injustice—a party may petition the court of appeals for a writ of mandamus. Cheney v. United States Dist. Court for D. C., 542 U. S. 367, 390 (2004) (citation and internal quotation marks omitted); see also Firestone, 449 U. S., at 378–379, n. 13.3 While these discretionary review mechanisms do not provide relief in every case, they serve as useful “safety valve[s]” for promptly correcting serious errors. Digital Equipment, 511 U. S., at 883.

Another long-recognized option is for a party to defy a disclosure order and incur court-imposed sanctions. District courts have a range of sanctions from which to choose, including “directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action,” “prohibiting the disobedient party from supporting or opposing designated claims or defenses,” or “striking pleadings in whole or in part.” Fed. Rule Civ. Proc. 37(b)(2)(i)–(iii). Such sanctions allow a party to obtain post judgment review without having to reveal its privileged information. Alternatively, when the circumstances warrant it, a district court may hold a noncomplying party in contempt. The party can then appeal directly from that ruling, at least when the con-tempt citation can be characterized as a criminal punishment. See, e.g., Church of Scientology of Cal. v. United States, 506 U. S. 9, 18, n. 11 (1992); Firestone, 449 U. S., at 377; Cobbledick v. United States, 309 U. S. 323, 328 (1940); see also Wright & Miller §3914.23, at 140–155.

(emphasis added).

I wrote before about Mohawk Industries v. Carpenter. Essentially, a host of corporate defense interests and, disturbingly, the ABA, urged the Supreme Court hold that large corporate defendants with the financial wherewithal to over-litigate cases were special and thus entitled to more appellate review than individuals.

The Supreme Court today held otherwise. It is a good ruling — by a unanimous court — that eliminates a one-sided rule that large corporations routinely used to frustrate and to delay cases. One of the most common tricks played by corporate defense lawyers goes something like this:

• First, the defense files a motion attaching cherry-picked internal documents supporting their defense, some of which were either reviewed by, or drafted by, the corporation's counsel;
• Second, when the plaintiff requests information related to those documents, the defendant asserts attorney-client privilege;
• Third, when the district court rules against the defendant, the defendant immediately files an appeal.

That game alone would add two or more years to litigation.

No longer.

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As I’ve written before, health care is “one of the ugliest businesses in America.” Health care litigation is often just as contentious.

Today’s example comes from Robotics v. Deviedma, No. 09-cv-3552, 2009 U.S. Dist. LEXIS 112077 (E.D. Pa. Nov. 30, 2009), which denied in part and granted in part Defendants’ motion to dismiss.

The facts:

Health Robotics, S.r.L. ("HRSRL") is an Italian company that designs, develops, markets and licences robotic medical preparation products. Plaintiff, Devon Robotics, signed two agreements with HRSRL for the distribution of two robotic medication preparation products for hospitals and health care facilities, i.v.Station and CytoCare. … At the time these agreements were negotiated and signed, Mr. DeViedma, one of the Defendants, served as General Counsel for HRSRL. These contracts between Devon Robotics and HRSRL contained an identical arbitration clause which requires all disputes arising from the agreement to be arbitrated in Switzerland.

Plaintiffs claim that on March 1, 2009, Mr. DeViedma was hired as Devon Robotics' Chief Operating Officer ("COO"). In his position as COO, DeViedma was solely responsible for the management of sales, marketing, support and installation of CytoCare robots on Devon's behalf. All of Devon Robotics' employees reported directly to DeViedma. Additionally, Mr. DeViedma served as the primary contact between Devon and HRSRL.

* * *

In December 2008, Devon Robotics began negotiating a contract with McKesson Corporation, another defendant, which would give McKesson the right to distribute CytoCare within a certain territory in the United States. DeViedma played a key role in negotiating the contract as Devon Robotics' COO. On December 22, 2008, Devon Robotics and McKesson entered into a Confidential Disclosure and Non-Competition Agreement prohibiting McKesson from divulging or using any confidential information for any purpose other than analyzing its deal with Devon. After executing the agreement, McKesson engaged in extensive due diligence. According to Plaintiffs, around March 2009, McKesson and Devon reached an oral agreement regarding the material terms of the Exclusive Distribution, Licensing, Services and Support Agreement. The only thing that was needed to finalize the agreement was to allow McKesson's due diligence of HRSRL in Italy. However, DeViedma, in his capacity as an officer of HRSRL, refused to permit McKesson representatives to visit Italy and complete the due diligence.

Later, after McKesson and Devon Robotics failed to come to an agreement, HRSRL terminated the CytoCare Agreement with Devon Robotics on July 30, 2009. Then on August 10, 2009, McKesson and HRSRL entered into a five year agreement granting McKesson distribution rights with regard to CytoCare in various areas in North America which had previously been controlled by Devon Robotics.

Naturally, Devon sued everyone, alleging breach of fiduciary duty, tortious interference with current and prospective contractual relations, defamation, and conspiracy.

Defendants first moved under Rule 12(b)(1) to dismiss on the grounds that the Devon/HRSRL agreements compelled arbitration:

[A]s this Court noted in Miron, the presumption of arbitrability has never been extended to claims by or against non-signatories. Miron v. BDO Seidman, LLP, 342 F. Supp. 2d 324 (E.D. Pa. 2004); see, e.g., Medtronic Ave Inc. v. Cordis Corp., 367 F.3d 147, 100 Fed. Appx. 865 (3rd Cir. 2004) (quoting Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress International, Ltd., 1 F.3d 639, 642 (7th Cir. 1993)). Because arbitration is a matter of contract, exceptional circumstances must apply before a court will impose a contractual agreement to arbitrate on a non-contracting party. AT&T Tech., 475 U.S. at 650. However, as this Court again noted in Miron, there are five established theories under which non-signatories may be bound to the arbitration agreements of others: (1) incorporation by reference; (2) assumption; (3) agency; (4) veil-piercing/alter ego; and (5) estoppel. Thomson-CFS v. American Arbitration Association, 64 F.3d 773, 776 (2d Cir. 1995). Furthermore, where the party seeking enforcement of the arbitration clause is a willing non-signatory an alternative theory of reverse estoppel may apply. Thomson-CFS, 64 F.3d at 779.

The only theory under which DeViedma may be able to enforce the arbitration clause is the alternative estoppel theory. The alternative estoppel theory binds a signatory to arbitrate at a non-signatory's insistence where there is an obvious and close nexus between the non-signatories and the contract or the contracting parties. E.I. DuPont, 269 F.3d at 199. The two-part test for alternative estoppel requires a court to determine whether there is a 'close relationship between the entities involved,' and examine the 'relationship of the alleged wrongs to the nonsignatory's obligations and duties in the contract.' E.I. DuPont, 269 F.3d at 199 (citing Thomson-CSF, 64 F.3d at 779); see also Bannett, 331 F. Supp. 2d at 360. To satisfy the second part of the test, the non-signatory seeking enforcement of an arbitration agreement must show that the claims against them are 'intimately founded in and intertwined with' the underlying obligations of the contract to which they were not a party. E.I. DuPont, 269 F.3d at 199 (citing Thomson-CSF, 64 F.3d at 779).

The essential question in situations such as these is whether plaintiffs would have an independent right to recover against the non-signatory defendants even if the contract containing the arbitration clause were void. 'The plaintiff's actual dependence on the underlying contract in making out the claim against the nonsignatory defendant is therefore always the sine qua non of an appropriate situation for applying equitable estoppel.' Price Plaintiffs v. Humana Ins. Co., 285 F.3d 971, 976 (11th Cir. 2002) (rev'd on other grounds, PacifiCare Health Sys. v. Book, 538 U.S. 401, 123 S. Ct. 1531, 155 L. Ed. 2d 578 (2002)). In In re Humana, the Eleventh Circuit held that equitable estoppel was inappropriate where plaintiffs brought a RICO suit against a non-signatory defendant, because the RICO claims were based on a statutory remedy apart from any available remedy for breach of the underlying contract. In re Humana, 285 F.3d at 976."

Robotics v. Deviedma, No. 09-cv-3552, 2009 U.S. Dist. LEXIS 112077, at *11–13 (E.D. Pa. Nov. 30, 2009). Three strikes, one hit for the defendants:

It is not proper to dismiss this claim in favor of arbitration because the breach of fiduciary duty claim does not arise out of the various agreements between Devon Robotics and HRSRL. …

Plaintiffs' claim of tortious interference with current and prospective contractual relations is not subject to the arbitration clauses in the various agreements between Devon Robotics and HRSRL. Count V of Plaintiffs claim is based on DeViedma's alleged interference with various validation contracts. These contracts are not intimately intertwined with the i.v.Station and CytoCare agreements. …

Plaintiffs' claim of defamation is not subject to the arbitration clauses in the various agreements between Devon Robotics and HRSRL. …

To the extent that Plaintiffs' claim of conspiracy is based on the termination of the CytoCare agreement, their claim is dismissed. Plaintiffs' Complaint alleges that the Defendants conspired to wrongfully terminate the CytoCare agreement. The determination as to whether the agreement was wrongfully terminated will be intimately related to the terms of the agreement. Additionally, there is an extremely close nexus between the non-signatory parties and Devon Robotics.

Id. at 13–16.

Defendants next moved under Rule 12(b)(6) to dismiss the claims on the merits, with three strikes (on the breach of fiduciary duty, tortious interference with current contractual relations, and defamation claims) and hits on the rest. Most notably, “Devon Robotics has pled that it had several validation contracts with different hospitals, that DeViedma purposefully interfered with those contracts for his own benefit, without justification, and that as a result, Devon lost substantial amounts of business. These pleadings are sufficient to establish a claim for tortious interference with existing contractual relations.”

Though the Court “grant[ed] Plaintiffs leave to amend their tortious interference with prospective contractual relations to include any claims related to the McKesson negotiations,” it added the caveat that “Although the Court granted leave to amend the tortious interference claim and Plaintiffs may choose to attempt to amend their conspiracy claim, it should be noted that the Court likely lacks jurisdiction over any underlying torts asserted in support of the conspiracy claim based on the CytoCare or i.v.Station agreements due to the arbitration clauses in the agreements.”

A big win for Devon Robotics and a guide for future plaintiffs — in the face of an arguably applicable arbitration agreement, they kept alive the core of their suit: breach of fiduciary duty, tortious interference, and defamation.

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Years ago, Jonathan Turley, professor at George Washington University Law School, found himself unable to decide whether he wanted to be a professor or a litigator, so he cloned himself to be able to do both.

I am only half-joking; even after factoring in big firm co-counsel (including associates, paralegals, assistants, et cetera), being lead counsel on major litigation is no joke, particularly if you're up against a well-funded opponent who not only defends the rightness of their conduct, but who conceals and destroys the truth lying at the heart of the case.

Take, for example, Rayming Chang et al. v. United States et al., Civil Action 02-2010, United States District Court for the District of Columbia. Here's some background, courtesy of Washington City Paper:

On the morning of September 27, 2002, D.C. Police had set about to monitor anti-IMF/World Bank demonstrators. By then, the protests and the policing of the protests had become routine, almost boring. There were no major acts of violence, vandalism or unrest that day.

But then the police decided to move on people in Pershing Park. They had funneled protesters into the park. Video taken of the park shows the protesters looking bored, sitting around. There were also other non-protesters in the park including nurses in town for a convention, and lawyers on their way to work.  Without warning, police rounded them up and arrested them all.

Police then transferred the mass to its training  academy in Blue Plains; each citizen was then hogtied and left on a mat for hours. They were all arrested for "failure to obey" an officer's order.

We wrote  a cover story on the arrests. Cathy Lanier had a hand in developing the hogtie tactic.

The controversial arrests hounded then-Chief Charles Ramsey. Then-Councilmember Kathy Patterson conducted an investigation into the incident and issued a devastating report.

The report concluded that Ramsey and Co. did not have probable cause to arrest anyone in Pershing Park, failed to give any orders to the people in Pershing Park (they were arrested for "failure to obey"), and went on to question whether Ramsey lied to the council in his testimonies.

Prof. Turley, along with a number of lawyers at Bryan Cave, represent the plaintiffs, who filed suit in October 2002, less than a month after the incident. For seven years, plaintiffs and their lawyers have exercised their right to civil justice to investigate what happened.

Seven years, you ask? Indeed. The case is a classic example of how a determined, entrenched defendant can abuse the discovery process to bury the truth for years, forcing the plaintiffs to spend thousands of hours and hundreds of thousands of dollars to obtain basic information.

D.C. has undoubtedly failed to permit discovery: e.g., after filing a motion to dismiss attaching affidavits referencing events outside of the complaint (which is flatly prohibited), defendants turned around and objected to discovery into those affidavits and events. After agreeing to produce some discovery informally, defendants turned around and demanded formal discovery, to which they then objected. After scheduling depositions, defendants canceled them at the last minute, then turned around and claimed the depositions were inappropriate.

Adding insult to injury, all of this litigiousness — all the above attempts to delay and to deny justice in a blatantly obvious case, all 567 docket entries in the case — are paid for by taxpayers not once (paying the Court), not twice (paying the government defense lawyers), but thrice, since attorney's fees are available to plaintiffs who win in constitutional rights / 42 U.S.C. 1983 cases.

Plaintiffs have asked for simple stuff. Stuff that's preserved in the ordinary course of business even when there's no lawsuit. Stuff you'd expect the government that polices our national capitol city to hold on to when they throw hundreds of people in jail for doing nothing more than lawfully attending a protest.

Seven years of litigation later, the police's own activity log from that day (the "running resume") has never been found. Audiotapes of police radio communications from that day have been produced, but with significant gaps.

Gone.

The dog ate it.

The judge isn't buying it:

U.S. District Judge Emmet G. Sullivan last week blasted D.C. officials for mishandling evidence in a civil lawsuit brought by some of those arrested seven years ago. In an extraordinary rebuke that reduced D.C. assistant attorney general Thomas Koger to tears, Judge Sullivan likened the city's "shenanigans" to the kind of prosecutorial abuses he saw in the criminal case of former senator Ted Stevens (R-Alaska). The office of D.C. Attorney General Peter Nickles was singled out, but the questions extend to police and other officials.

Plaintiffs allege that critical evidence -- such as the "running résumé" of all events and decisions made on Sept. 27 -- was destroyed or lost. Even more troubling is their rather convincing charge that information was deleted from audiotapes supplied to them during discovery. Judge Sullivan has demanded that Mr. Nickles provide a full accounting of the city's "pattern of shortcomings" and "discovery abuses."

Mr. Nickles told us that he is taking the judge's admonition to heart. He has blamed the city's inability to properly manage records during discovery on a chronic lack of resources, but he said he is reserving judgment on exactly what went wrong in this case until he knows all the facts. It's encouraging that he enlisted former federal judge Stanley Sporkin, who is offering his considerable expertise on a pro bono basis, to advise him.

That was a few months ago. As Turley reported Saturday,

For those following the World Bank/IMF litigation, the Attorney General of the District of Columbia has been repeatedly referencing the forthcoming report of his adviser, former Judge Stan Sporkin, on the allegations of the destruction of evidence in the case. Judge Sullivan has previously indicated that he is considering a criminal referral and would wait for the Sporkin Report. The District waited until after 6 p.m. on a Friday night to file the report.

The report states the following:

* “Because the contradictory statement in the record are incapable of being reconciled, we cannot rule out the possibility of untruthfulness or something worse.” (Page 16)

* “We are particularly disturbed by the fact that not only have we been unable to retrieve a hard copy of the Running resume but also that the electronic copy was purged from the system. We have no way of knowing whether this was an act of intentional mischief or reflects a benign action. We do not believe it was the later” (sic) (page 15.)

* “We are particularly troubled by the fact that the group recordation system was purged. It is difficult to understand how something like this could occur innocently.” (Page 16)

Judge Sporkin wasn't hired by the plaintiffs; he wasn't even appointed by the Court. He's D.C.'s own advisor, and he thinks the running resume was intentionally destroyed.

Turley's role in the case precludes him from saying much about the case, but the truth is, everything can be summed up in one word: the whole case — from the arrests to the coverup to the stalling tactics in litigation — is a disgrace.

The Sporkin Report — by no means a whitewash, but an incomplete investigation since he left no paper trail — is only the beginning. If we cannot have the truth, then we must know at least where it went and why. Actions have consequences.

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Oh, Ashcroft v. Iqbal, will we ever stop blogging about you?

The newest online debate pits the class action defense lawyers at Drug & Device Law against University of Pennsylvania Law School Professor Stephen Burbank at PENNumbra, the online supplement to UPenn's Law Review.

Beck and Herrmann open with a defense of Iqbal on several grounds, including:

[C]ourts have no legitimate basis for favoring plaintiffs when interpreting pleading standards. A just system does not pick sides in advance, but instead establishes neutral rules. We reject the normative view that it is somehow “better” to let unmeritorious cases proceed than to risk that meritorious cases will be dismissed. Either way represents error, and neither error is inherently better than the other. Indeed, given the enormous transaction costs that litigation entails, Type II errors (false negatives) are probably preferable to Type I errors (false positives) from a purely economic perspective.

From a "purely economic perspective" it is better if corporations stop wrongfully causing damage in the first place, which they will only do if they have an economic incentive like the threat of legal liability.

But there's a bigger problem with Beck and Herrmann's argument.

It is an "error" when a court dismisses a meritorious case. It is a particularly unjust, unfair, and avoidable "error" when a court dismisses a meritorious case prior to any discovery.

It is not, however, an "error" for a court to refuse to dismiss a case that may be unmeritorious.

Why not? Because the case may be meritorious and, if it is not, the defendant has four more opportunities to resolve the case favorably by testing the merits of plaintiff's claim: judgment on the pleadings, summary judgment, trial, and post-trial relief. That is to say, even after the motion to dismiss, Plaintiff's claims will be assessed, re-assessed, re-re-assessed, then re-re-re-assessed. Then there's an appeal to re-re-re-re-assess each and every element of plaintiff's claims and each and every element of plaintiff's damages.

When a court declines to dismiss an unmeritorious case, there is ample room for error-correction down the road to ensure plaintiff's claims have merit. It's why we have a civil justice system: to provide a thorough airing and evaluation of disputes.

When a court dismisses a meritorious case, however, the only error-correction is a single appeal that will be evaluated under the same unfair anti-plaintiff standard established by Iqbal.

Beck and Herrmann have it exactly backwards: there is "no legitimate basis" for not favoring plaintiffs when interpreting pleading standards. Their "neutral" interpretation of pleading rules is not "neutral" at all, but rather a "normative view" that plaintiffs are not entitled to the same error-correcting procedures to which defendants are entitled.

A "just system" wouldn't pick defendant's side in advance.

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Following up on yesterday's post about "ex parte blogging," i.e. the possibility that the Supreme Court might see a newspaper editorial, article or blog post about a pending case, let's consider the supposed worst-case scenario, in which a Justice sees an editorial, article or blog post which has an effect on their interpretation of the case.

So what?

The Student Note that started the discussion at Balkinzation and Prawfsblog based its analysis on the Kennedy v. Louisiana fiasco, in which a military-justice blogger revealed a significant error in the Supreme Court's opinion, resulting in new briefing and a modification to the opinion.

Kennedy, however, does not show the danger lurking in "ex parte blogging," but rather exactly the opposite: Kennedy shows the danger in relying upon nine people (and their typically fresh-out-of-law-school staff of four clerks each) to set legal policy for the entire country based upon two merits briefs of 15,000 words each and two reply briefs of 7,500 words each. More words are spilled on the Wikipedia page listing the people in line to succeed to the British throne.

The re-hearing and re-writing of the Kennedy opinion was a good thing; we want the Supreme Court's opinions to be based on accurate facts and solid legal reasoning.

We also want those opinions to be as clear as possible; consider Washington v. Davis, the 2006 case in which the Supreme Court laid down an "objective and quite workable" rule that was, quite literally, interpreted differently in every state in the union.

Why wait until the damage has been done — why not invite public comment before the opinions become law?

That's what the other two branches of the federal government do. The United States Congress debates bills for weeks, sometime months, prior to passage, all of which you can see on the Library of Congress' Thomas service, or on the non-profit OpenCongress.org. The Executive Branch similarly posts each and every regulatory change to Regulations.gov for public review and comment prior to promulgating the regulations.

Just how powerful is the public comment process?

Consider epidemiology. As Jennifer Gardy, the co-head of British Columbia Centre for Disease Control explains in this fascinating talk (via), when the SARS coronavirus pandemic began in 2003, it took 19 days just to sequence the virus's genome. This year, after the H1N1/09 influence was declared a pandemic, by the 19th day dozens of virus genomes had been sequenced, the origin and spread of the virus had been established, and a vaccine was already in the works. (Read more from Gardy here; see late-breaking H1N1 research in progress at the Public Library of Science's Currents.)

Indeed, open access / public commenting is how most of academia functions these days. Draft social science and law journal articles are posted on SSRN prior to publication. Draft papers on physics, mathematics, and other complex quantitative papers are posted on arXiv.org.

It's hard to think of any field of government or scholarship today in which work not subject to public scrutiny is considered worthy of use by others; in cryptography, for example, any encryption method which doesn't make its source code available for public scrutiny, like even the government's own encryption standard is available, is presumed worthless.

Individual collegiate evaluation worked for Henry Oldenburg when he was peer-reviewing the Philosophical Transactions of the Royal Society back in 1665. It doesn't work so well when nine Justices are supposed to decide cases of national importance involving hundreds of thousands of pages of briefs, precedent, statutes, regulations, and appellate records at a rate of one opinion issued every four or five days, every word of which will be pondered, analyzed, scrutinized, and, unfortunately, misinterpreted by courts every day.

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Dan Markel is "singularly unimpressed" with the arguments in favor of prohibiting newspapers from editorializing about pending cases before the Supreme Court:

Over on Balkinization, Eugene Fidell has a post expressing sympathy with the idea that newspapers and others should forbear from trying to influence the Supreme Court on the same day that the Court is going to hear oral arguments in a case.  Fidell seems to be persuaded by the gist of this student note in the Stanford Law Review, which raises ethical concerns with "ex parte blogging."

With no disrepect to the competent job in the student Note, I find myself boggled at the suggestion that newspapers or other writers (including legal bloggers) should abjure from weighing in on matters before the Court.

Part of the concern raised by the Balkinization post appears to come from editorials on the day of oral argument:

Times editorial advice to the Supreme Court has, in fact, flowed very freely--increasingly, I believe, on argument days. For example, on October 6, 2009, in Animal Cruelty and Free Speech, the editorial page advised the Court to affirm in United States v. Stevens (No. 08-769), a case that was to be argued that same day. The following day, in The Constitution and the Cross, an editorial gave the Court advice on how to decide a case to be heard that day involving a cross that had been erected on federal land by the Veterans of Foreign Wars. The same thing happened on February 23 and 25 and March 2 and 24, when editorials titled Justice for American Indians, And Unequal Justice for Some, The Right to DNA Evidence, and Corporate Money and Campaigns ran. On January 9, November 4, 12 and 25, and December 10, 2008, editorials on The Court and Voter ID's, The Court and 'Fleeting Expletives,' A Case of Religious Discrimination, Indefinite Detention, and Accountability and the Court all appeared on the day of oral argument.

Sounds like a lot.

I assure you, the Justices don't care.

How do I know? Because the Justices don't care much for what even the parties to the case have to say on the day of oral argument:

Oral arguments are normally conducted during October through April. A 2-week session is held each month with arguments scheduled on Monday through Wednesday of each week. Unless the Court directs otherwise, each side is allowed one-half hour for argument. The Court generally hears argument in 2 cases (hours) each day beginning at 10 a.m. and adjourns after the argument in the second case ends, usually around noon. If more than two cases are to be argued in one day, the Court will reconvene at 1 p.m. to hear the additional arguments.

That's from the Supreme Court's own "Guide for Counsel in Cases to be Argued," which helpfully points out that 30 minutes may in fact be too much:

Your argument time is normally limited to 30 minutes. You need not use all your time. Counsel for the respondent in Whitfield v. United States, 543 U. S. 209 (2005) argued for only 10 of the allotted 30 minutes. Counsel for the respondent in Burgess v. United States, 553 U. S. ––– (2008) argued for only 7 of the allotted 30 minutes. Both respondents prevailed in unanimous decisions of the Court.

"Respondent" in Whitfield and Burgess was the United States government; the "Petitioners" there, both criminal defendants, did not pass Go, did not collect $200, but instead went straight to jail after combined oral argument shorter than a sitcom.

I digress. The bigger problem with the argument raised by the Student Note (Ex Parte Blogging: The Legal Ethics of Supreme Court Advocacy in the Internet Era, 61 Stanford L. Rev. 1535 (2008)) and the Balkinization post is that both miss the forest for the trees: the primary utility of such posts, articles and editorials on the day of oral argument is not to influence the Court but to influence everyone else.

When else — other than the day of oral arguments — are these arguments timely and interesting? When else can the raw power of the Supreme Court and the scope of its reach be highlighted for the hundreds of millions of citizens who have not a clue what the Court is doing this year? Even lawyers don't stay on top of the Supreme Court's docket; most of them learn of pending issues from their newspapers, from these day-of-argument editorials. The same goes for elected representatives.

But we are to ban this practice, one of the few ways we as a society have of keeping aware of what an entire branch of our federal government is doing because maybe, just maybe, 700 words in the newspaper will dislodge the Justices' decades of education, training, experience and ideology?

More on this subject tomorrow.

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As Justice Oliver Wendell Holmes wrote,

Great cases, like hard cases, make bad law. For great cases are called great, not by reason of their importance in shaping the law of the future, but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment.

Northern Securities Co. v. United States, 193 U.S. 197, 400–401 (1904)(Holmes, J., dissenting).

That idea seems to be on David Feige's mind when he writes in Slate about the upcoming trial of admitted 9/11 mastermind Khalid Sheikh Mohammed:

No jury on this continent is going to acquit their client, the government is certain to insist on the death penalty, and KSM will almost certainly try to put the government on trial. So what's a team of hardworking criminal defense attorneys to do?

Everything they can, which, in this case, will mean a lot of futile maneuvering that will generate a tragic flood of bad law, rendering the defense team's valiant service not merely unsuccessful but actually hostile to the interests of all their other clients. ...

In an idealized view, our judicial system is insulated from the ribald passions of politics. In reality, those passions suffuse the criminal justice system, and no matter how compelling the case for suppressing evidence that would actually effect the trial might be, given the politics at play, there is no judge in the country who will seriously endanger the prosecution. Instead, with the defense motions duly denied, the case will proceed to trial, and then (as no jury in the country is going to acquit KSM) to conviction and a series of appeals. And that's where the ultimate effect of a vigorous defense of KSM gets really grim.

At each stage of the appellate process, a higher court will countenance the cowardly decisions made by the trial judge, ennobling them with the unfortunate force of precedent.

That's surely a possibility. The trial of the admitted mastermind of 9/11 is, due to "immediate overwhelming interest," most certainly "great" under Holmes' definition.

On the other hand, whatever apparent principles, rules or interpretations of law laid down by the courts in the prosecution admitted mastermind of 9/11 will be forever indelibly stamped with an annotation that the case involved no less than the admitted mastermind of 9/11.

Moreover, the courts, aware of the "greatness" and/or difficulty of the case, often make an extra effort to minimize the precedental value of their opinion.

Consider Bush v. Gore, certainly the "greatest" — at least in terms of immediate impact — legal ruling in recent memory, which openly instructed future courts to ignore it entirely: 

Our consideration is limited to the present circumstances, for the problem of equal protection in election processes generally presents many complexities.

Bush v. Gore, 531 U.S. 98, 109 (2000). Indeed, Bush v. Gore has been treated by many as a singular case that served a pre-determined goal rather than an evolutionary step in the progression of election law. For a number of courts, the case is downright radioactive due precisely to its "greatness."

Our Constitution's protections for the criminally accused were drafted by a generation among whom treason was commonplace, then sculpted over eleven score years of rebels, thieves, gangsters, murderers and even a protracted civil war followed by decades of reconciliation and the integration of oppressed minorities into equal society in the face of socially-approved violence. Those protections can handle a couple trials of admitted mass murderers.

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"Removal" is the process by which a defendant in a state court case "removes" the case to federal court. 28 U.S.C. § 1441(b) makes it sound so simple:

Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.

There are two ideas behind removal, each expressed in their own sentence above. (If you're in the mood for some light reading of 18th century constitutional debates, here's primary source material on federal court jurisdiction.)

The first idea (in the first sentence) is that defendants have the right to have claims made against them under federal law heard by a federal court. For example, if plaintiff brings a claim under the RICO Act, a claim for violation of federal constitutional rights, or a claim under the Lanham Act, then the defendant has the right to remove the case to federal court so that a federal court will preside over the federal claims.

The second idea (in the second sentence) dates to the beginning of our Republic: federal courts, where the judges were appointed by the President and confirmed by the Senate, were (and still are) perceived as being less likely to be biased in favor of local litigants than state courts, where the judges were either elected by the public or appointed by state officials. The "other such actions" described by 28 U.S.C. § 1441(b) refer to cases brought under "diversity" jurisdiction, which allows plaintiffs in one state to sue defendants in another state in federal court, regardless of the claims brought. Thus, out-of-state defendants concerned about bias in a plaintiff's home state can remove cases if the case could have been filed in federal court in the first place under "diversity" jurisdiction.

Diversity jurisdiction, however, is disfavored by the federal courts. Personally, I think the most simple reason for the federal courts' dislike for diversity jurisdiction is because, much like how we prefer federal courts preside over cases bringing federal claims (as reflected by the first part of 28 U.S.C. § 1441(b)), we prefer state courts preside over cases bringing state claims. Much like how a defendant has an interest in having federal law claims against them heard in federal court, a plaintiff has an interest in having their state law claims heard in state court.

The United States Constitution provides for a limited federal government, including a limited federal judiciary. Thus, the requirements for removal have been strictly construed, since loosely construing them would violate basic principles of federalism:

Because lack of jurisdiction would make any decree in the case void and the continuation of the litigation in federal court futile, the removal statute should be strictly construed and all doubts resolved in favor of remand." Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985) (citations omitted). If there is any doubt as to the propriety of removal, that case should not be removed to federal court. See Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990), cert. denied, 498 U.S. 1085, 111 S. Ct. 959, 112 L. Ed. 2d 1046 (1991).

Brown v. Francis, 75 F.3d 860, 864–865 (3d Cir. 1996). 

The latest "fad" among defense lawyers — more on the source of the word "fad" in a moment — is to hire companies to monitor state court dockets for suits against big corporations, particularly class actions alleging product liability. The moment a plaintiff files a lawsuit that includes any out-of-state defendants, the big corporations collude to have the out-of-state defendant file for removal, on the grounds that the in-state defendants haven't been "properly joined and served" yet.

It doesn't matter if the case involves 99 in-state defendants and 1 out-of-state defendant. It doesn't matter, if, quite obviously, the case could not have been filed in the first instance as a diversity case, since it involves in-state defendants, too. The big corporations found themselves a dubious loophole and decided to run with it.

And run with it they have: the defense gurus at Drug & Device Law have tallied a few dozen of these cases across the country. The defense argument is always the same: under the "plain meaning" of the statute, we can remove any case we want if the in-state defendants haven't been served yet.

It's a silly argument: the plain meaning rule does not permit a court to find a "plain" meaning “demonstrably at odds with the intentions of the drafters.” United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242 (1989). There is, of course, no indication that Congress intended to let defendants avoid the strict, centuries-old federal policies against diversity jurisdiction and against removal by setting up a computer program that downloads the state court dockets every 10 minutes.

The more compelling "plain meaning" of 28 U.S.C. § 1441(b) is that Congress wanted to ensure the in-state defendants were "proper" defendants, and thus prevent plaintiffs from adding bogus in-state defendants to a lawsuit.

The defendants' game worked for a while, but the tide is turning.

Via Gregory P. Joseph's Complex Litigation Blog, we see the Northern District of Ohio rejecting the "properly joined and served" silliness:

Comerica's interpretation of §1441(b) suggests that the language "properly joined and served" creates an exception to the forum defendant rule. This argument is not novel; in fact, it has been the topic of much jurisprudential debate with varying success across the country. I, however, have no need to survey such case law because the Northern District of Ohio recently rejected Comerica's argument in a case of first impression. In Ethington v. Gen. Elec. Co., 575 F. Supp. 2d 855, 861 (N.D. Ohio), my colleague, District Judge Dan Aaron Polster, engaged in a thorough review of available case law.

And what does Ethington say?

The Court further notes that the growing trend among district courts wrestling with this latest litigation fad is to grant a timely motion to remand. While a review of the Frick, Thomson, and Ripley cases indeed shows that the judges in those cases abided by the plain meaning interpretation of the forum defendant rule, the GE Defendants' assertion that the New Jersey federal district courts 'ha[ve] rejected Plaintiffs' argument' is disingenuous at best; it fails to acknowledge that Frick (issued February 23, 2006), Thomson (May 22, 2007), and Ripley (Aug. 16, 2007) were each issued well in advance of the more recent case law from the District of New Jersey -- starting with Judge Chesler's opinion in DeAngelo-Shuayto -- that in fact rejected the approach taken in those three earlier cases. See, e.g., DeAngelo-Shuayto, 2007 U.S. Dist. LEXIS 92557, at 5, 2007 WL 4365311, at *3 (finding that '§ 1441(b) must bar removal by a forum defendant, whether it has been served or not'); Fields, 2007 U.S. Dist. LEXIS 92555, at *12-13, 2007 WL 4365312, at *5 (rejecting the plain language approach because it would create an 'untenable result' that would 'eviscerate the purpose of the forum defendant rule,' and holding that 'the 'properly joined and served' language of § 1441(b) does not encompass the situation in which the removing party is a forum defendant, and that in such situations removal to federal court is improper.'). See also, Brown, 2008 U.S. Dist. LEXIS 55490, at *8, 2008 WL 2833294, at *5 (adopting magistrate judge's report and recommendation with additional analysis, explicitly embracing the reasoning provided in the R&R, DeAngelo-Shuayto, and Fields, and stating 'this Court agrees with [the conclusion] that § 1441(b) must be read to preclude removal by an in-state defendant whether it has been served or not.'); Brown v. Organon USA Inc. (hereafter 'Brown R&R'), 2008 U.S. Dist. LEXIS 50179, at *24-25, 2008 WL 2625355, at *8 (D.N.J. June 27, 2008) (M.J. Salas) (magistrate judge's R&R concluding that '[t]he Court agrees with DeAngelo-Shuayto' and finding 'that § 1441(b) bars a forum defendant from removing to federal court even if they have not been 'properly joined and served.''); Optec Displays, Inc. v. Am. Maint., Inc., 2008 U.S. Dist. LEXIS 47562, at *3, 2008 WL 2510633, at *2 (D.N.J. June 16, 2008) (J. Debevoise) (remanding removed case with forum defendant, and explaining that 'even if [defendant] was not properly joined and served, it is still precluded, as a forum defendant, from removing the action to federal court.') (citing DeAngelo-Shuayto, 2007 U.S. Dist. LEXIS 92557, at *15, 2007 WL 4365311, at *3)).).

Notably, these more recent New Jersey federal district court cases are not alone in adopting Judge Chesler's reasoning and analysis on the proper way to interpret § 1441(b). Other federal district courts as of late have likewise followed the reasoning articulated in DeAngelo-Shuayto. See, e.g., Allen, 2008 U.S. Dist. LEXIS 42491, at *13-15, 17-18, 2008 WL 2247067, at *4-6; Vivas v. Boeing Co., 486 F. Supp. 2d 726 (N.D.Ill. 2007) (J. Lefkow). (See also, ECF No. 30-2, Pls.' Rep. Mem., Ex. A to Aff. Dec. of Mitchell M. Breit, 1-6 (remand order in Evans v. GlaxoSmithKline PLC, Civ. A. No. 07-5046 (Jan. 10, 2008) (J. Brody); remand order in Hance v. GlaxoSmithKline PLC, Civ. A. No. 07-5047 (Jan. 10, 2008) (J. Brody); remand order in Malone v. GlaxoSmithKline PLC, Civ. A. No. 07-5048, 2007 U.S. Dist. LEXIS 97461 (Dec. 4, 2007) (J. Savage) (citing Oxendine v. Merck & Co., Inc., 236 F. Supp. 2d 517, 524-25 (D. Md. 2002)); remand order in Scott v. GlaxoSmithKline PLC, No. 07-CV-5049, Order of March 11, 2008, 2008 U.S. Dist. LEXIS 84490, n.1 (E.D. Pa. Mar. 11, 2008) (J. Joyner)).) But see Flores v. Merck & Co. (In re Fosamax Prods. Liab. Litig.), 2008 U.S. Dist. LEXIS 57473, at *37-38, 2008 WL 2940560, at *2 (S.D.N.Y. July 28, 2008) (a recent federal district court opinion invoking the plain language of § 1441(b) with little analysis to deny plaintiff's motion to remand).

After considering Sixth Circuit precedent on statutory interpretation and carefully reviewing case law on both sides of a federal district court split, the Court finds that applying the plain language of § 1441(b) would produce a result demonstrably at odds with Congressional intent underpinning the forum defendant rule, and specifically with the 'properly joined and served' language. Accordingly, the Court hereby joins the DeAngelo-Shuayto line of cases, and in so doing, the Court incorporates and adopts the well-reasoned, thorough analysis and holdings of Judge Chesler in DeAngelo-Shuayto as the basis for the instant ruling.

Ethington v. GE, 575 F. Supp. 2d 855, 864 (N.D. Ohio 2008). A "fad" that is "demonstrably at odds with Congressional intent." 

Told you so.

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One of the positive parts of being involved with The Philadelphia Inquirer's bankruptcy is, though I've had to slog my way through over 1,500 separate filings (most of which are irrelevant to my clients) since The Inquirer filed bankruptcy in February, I've also been privy to extraordinarily exhaustive briefings of what are, on the surface, "simple" issues.

A $300 million question in the bankruptcy is whether the banks that loaned the current owners the money to buy the company back in 2006 can use their existing debt to "bid" on its assets at the auction proposed by management. The question should be answered in the text of the Bankruptcy Code; unsurprisingly, both the banks and management have asserted that the text of the Bankruptcy Code clearly and unambiguously supports their position.

Such a dispute means it's time to pull out the old canons of statutory interpretation.

Judge Robreno's Order yesterday — in which Judge Robreno reversed Judge Raslavich's interpretation of when a debtor may deny secured creditors the ability to "credit bid" in a pre-confirmation auction — provided a remarkably thorough description of the plain meaning rule, which I post below in full so all can cherry-pick for their own cases within our great United States Court of Appeals for the Third Circuit.

(In case you're confused why Judge Robreno of the District Court is acting as an appellate court, note that the District Court initially hears appeals from Bankruptcy Court.)

* * *

It is often said that the polestar for interpreting a statute is to ascertain the intent of Congress. See White v. Lord Abbett & Co. LLC (In re Lord Abbett Mutual Funds Fee Litig.), 553 F.3d 248, 255 (3d Cir. 2009).  “The role of the courts in interpreting a statute is to give effect to Congress's intent.” Alston v. Countrywide Fin. Corp., --- F.3d ---, 2009 WL 3448264, at *4 (3d Cir. Oct. 28, 2009) (quoting United States v. Diallo, 575 F.3d 252, 256 (3d Cir. 2009)). In seeking to ascertain the intent of a statute, a court is bound to follow principles of statutory construction. See In re J.E. Brenneman Co., Inc., 277 F. Supp. 2d 518, 521 (E.D. Pa. 2003) (Yohn, J.) (recognizing that in interpreting the intent of Congress a district court follows established precepts of statutory interpretation).

“Because it is presumed that Congress expresses its intent through the ordinary meaning of its language, every exercise of statutory interpretation begins with an examination of the plain language of the statute.” Alston, --- F.3d ---, 2009 WL 3448264, at *4 (quoting United States v. Diallo, 575 F.3d 252, 256 (3d Cir. 2009) (internal quotation marks and citation omitted)); see also Lamie v. United States Tr., 540 U.S. 526, 534 (2004) (“[W]hen the statute's language is plain, the sole function of the courts . . . is to enforce it according to its terms.”). Thus, the necessary starting point in any attempt to discern congressional intent is the language of the statute itself. United States v. Abbott, 574 F.3d 203, 206 (3d Cir. 2009) (“As in all cases of statutory interpretation, our inquiry begins with the language of the statute and focuses on Congress' intent.”) (citing United States v. Whited, 311 F.3d 259, 263-64 (3d Cir. 2002)); In re Armstrong World Indus., Inc., 432 F.3d 507, 512 (3d Cir. 2005) (citing United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989)); Idahoan Fresh v. Advantage Produce, Inc., 157 F.3d 197, 202 (3d Cir. 1998).

This plain meaning rule dictates that where the meaning of the relevant statutory language is clear then no further inquiry is required. In re Armstrong, 432 F.3d at 512; Abdul-Akbar v. McKelvie, 239 F.3d 307, 313 (3d Cir. 2001) (en banc) (where the statutory language “admits of no more than one meaning the duty of interpretation does not arise and the rules which are to aid doubtful meanings need no discussion”) (internal quotation and citation omitted); Lancashire Coal Co. v. Sec'y of Labor, Mine Safety and Health Admin. (MSHA), 968 F.2d 388, 391 (3d Cir. 1992) (“[W]hen the statutory language is clear a court need ordinarily look no further.”).

Adherence to the plain meaning rule is not simply a matter of judicial craftsmanship. Faithfulness to the words Congress has used in enacting a statute promotes respect for Congress as the principal source of positive law in a democratic society. See Lamie, 540 U.S. at 536 (“We should prefer the plain meaning since that approach respects the words of Congress.”); Pub. Citizen v. U.S. Dep’t. of Justice, 491 U.S. 440, 470-71 (1989) (Kennedy, J., concurring) (recognizing that departure from the plain meaning rule, except in limited circumstances where completely necessary, would intrude upon the lawmaking powers of Congress). Furthermore, allegiance to the plain meaning rule also disciplines courts to avoid making policy choices where the intent of Congress is expressed in the language of the statute. Pub. Citizen, 491 U.S. at 471 (Kennedy, J., concurring) (noting that courts should act with self-discipline in refraining from nonchalantly applying exceptions to the plain meaning rule); Lamie, 540 U.S. at 538 (stating that the “unwillingness to soften the import of Congress' chosen words . . . results from ‘deference to the supremacy of the Legislature, as well as recognition that Congressmen typically vote on the language of a bill.’”) (quoting United States v. Locke, 471 U.S. 84, 95 (1985) (internal citation omitted)).

There is a hierarchical approach that courts must follow in construing a statute. First, the Court “determine[s] whether the language at issue has a plain and unambiguous meaning.” Dobrek v. Phelan, 419 F.3d 259, 263 (3d Cir. 2005) (citing Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 (2002)). In order to be ambiguous, the disputed language must be “reasonably susceptible of different interpretations.” Id. at 264 (quoting Nat’l R.R. Passenger Corp. v. Atchison Topeka & Santa Fe Ry. Co., 470 U.S. 451, 473 n.27 (1985)). The plain meaning approach requires a court to “read the statute in its ordinary and natural sense.” Harvard Secured Creditors Liquidation Trust, v. I.R.S. (In re Harvard Indus., Inc.), 568 F.3d 444, 451 (3d Cir. 2009) (internal quotation marks and citations omitted). If the language is clear, “‘Congress says in a statute what it means and means in a statute what it says there.’” Singer v. Franklin Boxboard Co. (In re Am. Pad & Paper Co.), 478 F.3d 546, 554 (3d Cir. 2007) (quoting Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6 (2000) (internal quotation marks and citation omitted)). If no ambiguity exists, then the plain meaning of the text is conclusive and the inquiry generally comes to an end. Lawrence v. City of Phila., Pa., 527 F.3d 299, 316-17 (3d Cir. 2008) (“The plain meaning of the text should be conclusive, except in the rare instance when the court determines that the plain meaning is ambiguous.”); AT & T, Inc. v. F.C.C., 582 F.3d 490, 498 (3d Cir. 2009)(finding that a determination that the statutory language was unambiguous negates consideration of arguments concerning statutory purpose, non-binding case law, and legislative history).

Second, if the statutory language appears to be unambiguous, a court must look beyond that plain language where a literal interpretation would lead to an absurd result, or would otherwise produce a result “demonstrably at odds with the intentions of the drafters.” United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242 (1989) (internal quotation marks omitted); In re Kaiser Aluminum Corp., 456 F.3d 328, 330 (3d Cir. 2006) ("A basic principle of statutory construction is that we should avoid a statutory interpretation that leads to absurd results.") (citing Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 575 (1982)); Mitchell v. Horn, 318 F.3d 523, 535 (3d Cir. 2003) ("We do not look past the plain meaning unless it produces a result demonstrably at odds with the intentions of its drafters . . . or an outcome so bizarre that Congress could not have intended it."). It is only in “rare cases” that a literal application will produce such results. See In re Mehta, 310 F.3d 308, 311 (3d Cir. 2002) (internal citation omitted); Abdul-Akbar, 239 F.3d at 313 (internal citation omitted).

Third, if application of the plain meaning approach dictates that the language is ambiguous or that application of the statute would lead to results demonstrably at odds with congressional intent, then the Court may employ other traditional tools of statutory interpretation.

Where the plain meaning approach does not clearly define the disputed language, the Court should construe the relevant provision in the context of the statute as a whole. Kaufman v. Allstate N.J. Ins. Co., 561 F.3d 144, 156 (3d Cir. 2009) (citing Dolan v. U.S. Postal Serv., 546 U.S. 481, 486 (2006)). It is inappropriate, however, to reference other statutory provisions in order to create an ambiguity where none would otherwise exist. See Dir., Office of Workers' Comp. Programs v. Sun Ship, Inc., 150 F.3d 288, 292 (3d Cir. 1998) (finding that related statutory sections could not be used to create an ambiguity where the language was clear).

Further, courts may resort to canons of statutory construction, such as ejusdem generis, when the plain meaning approach does not yield a conclusive result. Baltimore County, MD. v. Hechinger Liquidation Trust (In re Hechinger Inv. Co. of Del., Inc.), 335 F.3d 243, 254 (3d Cir. 2003) (concluding that even if section 1146 of the Bankruptcy Code was ambiguous, the court’s interpretation was supported by two canons of construction); Folger Adam Sec., Inc. v. DeMatteis/MacGregor JV, 209 F.3d 252, 258 (3d Cir. 2000) (applying canons of construction to ambiguous term “any interest” in section 363(f) of the Bankruptcy Code). These canons of construction only serve as rules of thumb and “are often countered ... by some maxim pointing in a different direction.” United States v. Cooper, 396 F.3d 308, 313 (3d Cir. 2005)

One tool often used in parsing out ambiguity in the language of the statute is legislative history. It is recognized that legislative history is a “useful and appropriate tool for [an] inquiry into congressional intent” when the plain statutory text is ambiguous. Francis v. Mineta, 505 F.3d 266, 270-71 (3d Cir. 2007); In re Harvard Indus., 568 F.3d at 451. Cf. Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 406 (3d Cir. 2004) (“The Supreme Court has repeatedly explained that recourse to legislative history or underlying legislative intent is unnecessary when a statute's text is clear and does not lead to an absurd result.”) (internal citation omitted). Based upon the inherent difficulty in distilling precise congressional intent from the amorphous nature of legislative history, however, the Third Circuit has instructed that “[f]or the vast majority of ambiguous statutory provisions, then, relying on legislative history to discern legislative intent should be done with caution, if at all.” Morgan v. Gay, 466 F.3d 276, 278 (3d Cir. 2006).

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[Updated to clarify a distinction between securities suits and investment company act suits.]

This week, the Supreme Court heard arguments in Jones v. Harris. Briefly, the Oakmark complex of mutual funds "hired" Harris Associates as investment advisers, paying Harris 1% (per year) of the first $2 billion of the fund’s assets, 0.9% of the next $1 billion, 0.8% of the next $2 billion, and 0.75% of anything over $5 billion. I write "hired" because the situation is murky: Harris is directly affiliated with Oakmark. Importantly, the fee charged by Harris to Oakmark is more than double the fee it charges unaffiliated mutual funds.

Plaintiffs are investors in Oakmark funds who sued Harris under a variety of claims, including a claim that Harris's fees were "excessive," in violation of Section 36(b) of the Investment Company Act.

Section 36(b), which was added in 1970, is almost poetic in its ambiguity:

For the purposes of this subsection, the investment adviser of a registered investment company shall be deemed to have a fiduciary duty with respect to the receipt of compensation for services, or of payments of a material nature, paid by such registered investment company, or by the security holders thereof, to such investment adviser or any affiliated person of such investment adviser. An action may be brought under this subsection by the Commission, or by a security holder of such registered investment company on behalf of such company, against such investment adviser . . . . With respect to any such action the following provisions shall apply:

(1) It shall not be necessary to allege or prove that any defendant engaged in personal misconduct, and the plaintiff shall have the burden of proving a breach of fiduciary duty.

(2) In any such action approval by the board of directors of such investment company of such compensation or payments, or of contracts or other arrangements providing for such compensation or payments, and ratification or approval of such compensation or payments, or of contracts or other arrangements providing for such compensation or payments, by the shareholders of such investment company, shall be given such consideration by the court as is deemed appropriate under all the circumstances. . . .

In essence, the statute says only that the plaintiff can recover against the investment adviser by "proving a breach of fiduciary duty." Subsections (1) and (2) fill in a little detail — i.e., the investor need not prove "personal misconduct" and the court shall "consider" board of directors and/or shareholder ratification — but that's it.

Congress might as well have written, "investors can sue if investment advisers do something bad, but 'bad' doesn't necessarily mean really bad."

Twenty-seven years ago, faced with the same opaque language, the Second Circuit Court of Appeals came up with its own standard for "excessive fee" claims:

[T]he test is essentially whether the fee schedule represents a charge within the range of what would have been negotiated at arm’s-length in the light of all of the surrounding circumstances.

[and]

[t]o be guilty of a violation of §36(b) . . . the adviser-manager must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s-length bargaining.

Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F.2d 923, 928 (2d Cir. 1982).

Last year, the Seventh Circuit Court of Appeals came up with a different standard for "excessive fee" claims:

Having had another chance to study this question, we now disapprove the Gartenberg approach. A fiduciary duty differs from rate regulation. A fiduciary must make full disclosure and play no tricks but is not subject to a cap on compensation. The trustees (and in the end investors, who vote with their feet and dollars), rather than a judge or jury, determine how much advisory services are worth. ...

Federal securities laws, of which the Investment Company Act is one component, work largely by requiring disclosure and then allowing price to be set by competition in which investors make their own choices. Plaintiffs do not contend that Harris Associates pulled the wool over the eyes of the disinterested trustees or otherwise hindered their ability to negotiate a favorable price for advisory services. The fees are not hidden from investors—and the Oakmark funds’ net return has attracted new investment rather than driving investors away.

In short, the Seventh Circuit held that, regardless of what the Investment Company Act says, investment advisers don't have a fiduciary duty to investment companies; instead, they're held to the same fraud and misrepresentation standards as total strangers.

The Seventh Circuit opinion was remarkable not only because it eviscerated the Investment Company Act — which clearly does not require personal misconduct like "pulling the wool over [investors'] eyes" — but also because it produced a sharp disagreement on the underlying economics between Judges Easterbrook and Posner, two of the most notable adherents to the conservative "law and economics" doctrine.

It goes almost without saying that there are reasonable arguments in favor of both the investors and the investment advisers. The statute is ambiguous; there's no clear answer for what the standard "should" be in these cases, but there's also little doubt that something has gone awry with investment adviser fees in the context of affiliated mutual funds.

I write "almost," however, because Professor John Coates of Harvard Law School wants nothing to do with reasonable arguments:

How can such cases make it to the highest court in the land? Plaintiffs’ lawyers are able to file these cases because of three features of the US legal system. First, investors are dispersed, and cannot easily work together to protect their own interests. Collective action costs are often identified as a reason that investors cannot protect themselves from predatory institutions – and sometimes that is true. But those same costs also make it impossible for investors to control the lawyers who nominally represent them. Investors cannot stop lawyers from using weak or even frivolous claims to extract rich legal fees. Nor need lawyers even listen to investors with the most at stake in a case. Unlike the advisers, the lawyers are not required to negotiate with independent trustees, or to submit their lawsuit for approval to the investors. Once lawyers have appointed themselves as investor guardians, they face little competition – again, unlike the advisers, who compete with other advisers to attract new investments.

In Professor Coates' world, a lawyer can, on her own, file a "weak or even frivolous" case and "extract rich legal fees" without any involvement of the actual investors.

What a great racket! Lawyers must be filing these cases all the time and collecting big fat checks for nothing.

Or maybe fewer than 200 securities class actions are filed every year, and maybe only half of them settle for any amount, with the other half of investors and their lawyers recovering nothing for their losses.

Since Coates has never represented any investors in a lawsuit, much less represented a class of investors on a contingent fee, I suppose he needs a few reminders on how the process works.

"Jones" in Jones v. Harris is an investor, not a lawyer. Only investors can bring lawsuits and they can only win if they prove every element of their case. Like I wrote above, most of these cases are sent to the rubbish heap without any payment.

If the investors are in the lucky half that survive years of litigating over dismissal (for reference, Jones v. Harris was filed five years ago and is still at the dismissal stage), the court will carefully analyze which investor should represent the class as the lead plaintiff, giving preference to the investors with the "most at stake in a case." Nonetheless, every investor with a stake in the case, even if not the lead plaintiff, can participate in, and object to any part of, the process, including any settlement and any award of attorneys' fees.

Unsurprisingly, three-quarters of successful investor lawsuits are lead by large institutional investors (p. 27) such as public and union pensions, the ones with "the most at stake in the case."

Coates thus has it backwards: it's not "impossible for investors to control the lawyers who nominally represent them," it's impossible for lawyers to bring and win a lawsuit without the participation and support of the investors, particularly the ones with "the most at stake."

Indeed, in most potential investor class action cases, it's impossible for the lawyers to collect any fee at all: you never know when a court will read an act that says "it shall not be necessary to allege or prove that any defendant engaged in personal misconduct" and nonetheless require the investor prove personal misconduct. Based on this week's oral argument, it looks like the Supreme Court will do just that, leaving the investors and their lawyers with nothing after five years of litigation.

So much for a "rich legal fee." And that's the greatest irony: in the nearly forty years since Section 36(b) was passed, not one single court (see pp. 3–4) has ever held an investment adviser's fee was "excessive."

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[UPDATE: Welcome, io9 readers! If you would like to learn more about this area, you should check out the Stanford Copyright & Fair Use Center.]

The sharp readers of io9, themselves a collective Library of Alexandria of science fiction, noted surprising common elements between James Cameron's Avatar and a 1957 short story by Poul Anderson, "Call Me Joe:"

Like Avatar, Call Me Joe centers on a paraplegic — Ed Anglesey — who telepathically connects with an artificially created life form in order to explore a harsh planet (in this case, Jupiter). Anglesey, like Avatar's Jake Sully, revels in the freedom and strength of his artificial created body, battles predators on the surface of Jupiter, and gradually goes native as he spends more time connected to his artificial body.

James Cameron's been here before. After foolishly telling the truth that elements of The Terminator had been inspired by two Harlan Ellison The Outer Limits episodes, Cameron was promptly sued:

Ellison filed suit against the studio claiming that THE TERMINATOR was plagiarized from his two teleplays for THE OUTER LIMITS. One was  "Soldier" (based on a short story he written years before), in which a soldier is zapped from a future war zone into the present and causes all sorts of problems. In addition to basic plot similarities, the scenes of the future in THE TERMINATOR are very similar in look and feel to those in "Soldier".

The other teleplay was "Demon With a Glass Hand", in which a lone man with a glass-and-computer-chips hand and a woman he meets up with are on the run from some unknown enemy. He has amnesia and doesn't know a thing about who he is, or why he's in his current situation. Eventually, he finds out that he's from the future and was sent to the present on a mission to save the human race.

Cameron settled for an undisclosed amount. All versions of The Terminator distributed today include an acknowledgment to Ellison.

Of course, the paralyzed hero with a telepathic connection to extraterrestrials isn't the entirety of Avatar, and, if Wikipedia is to be believed, "Call Me Joe" has none of the elements of colonialism, rebellion, spy-turned-double-agent and whatever else is going on in this epic helicopters vs. pterodactyls trailer.

Moreover, there's nothing new about an author taking elements from pre-existing stories and re-working them. Ever see the play about the prince who feigns madness in response to his mother's hasty marriage to a usurper and, after a complicated series of manipulations, kills a spy and himself?

No, not Hamlet. I'm talking about Vita Amlethi, written four-hundred years earlier by Saxo Grammaticus. (See the connection between "Amleth" and "Hamlet?")

If Shakespeare can do it, can James Cameron?

Probably so.

Let's a take a peek at the filings in a lawsuit filed last year by the estate of the author of It Had To Be Murder (the basis for Hitchcock's Rear Window) against Steven Spielberg, Dreamworks, and others over the movie Disturbia:

Steven Spielberg and major Hollywood studios stole the plot from Alfred Hitchcock's classic 1954 film "Rear Window" in making last year's "Disturbia," a lawsuit filed in Manhattan federal court on Monday said.

Dreamworks, its parent company Viacom Inc, and Universal Pictures, a unit of General Electric Co's NBC Universal, are accused of copyright infringement and breach of contract for making "Disturbia" without first obtaining permission from the copyright holders, the suit said.

Spielberg, a Dreamworks founder, is named as a defendant. The film grossed about $80 million at the U.S. box office.

According to the lawsuit, filed by the Sheldon Abend Revocable Trust, the basis for Hitchcock's 1954 film was "Murder from a Fixed Viewpoint," a short story by Cornell Woolrich.

Hitchcock and actor James Stewart obtained the motion picture rights to the story in 1953. The lawsuit argues that Dreamworks should have done the same.

"What the defendants have been unwilling to do openly, legitimately and legally, (they) have done surreptitiously, by their back-door use of the 'Rear Window' story without paying compensation," the lawsuit said.

As Spielberg's motion for summary judgment argues,

"It is well settled that copyright law protects only plaintiffs particular expression of his ideas, not the ideas themselves." Arden, 908 F. Supp. at 1258; 17 U.S.C. § 102(b).7 As this principle is applied to literary works, general plot ideas of a work are not protected under the Copyright Act. Nichols v. Universal Pictures Corp., 45 F.2d 119, 122 (2d Cir. 1930)(a plaintiff can have no "monopoly" over a general plot idea); Arden, 908 F. Supp. at 1259-60 (generalized plot ideas are not protected, "even if first conceived by plaintiff'). ...

Simply put, no one can own a general plot idea for a story. Davis, 547 F. Supp. at 726 (no protection for plot "about the Vietnam War and its effects on people's lives, and ... love triangles in which the betrayed member ofthe triangle commits suicide"); Giangrasso v. CBS, Inc., 534 F. Supp. 472,476 (E.D.N.Y. 1982) (plot ofa live radio broadcast from a remote location being interrupted by a man with a gun - not protectable); Midwood v. Paramount Picture Corp., 1981 WL 1373 at *1, *3 & *5 (S.D.N.Y. 1981) (plot idea of sheriff whose own posse and townspeople desert him and capitulate to outlaws, and sheriffs search for the outlaws -unprotectable); Berkic v. Crichton, 761 F.2d 1289,1293 (9th Cir. 1985) (plot of "criminal organizations that murder healthy young people, then remove and sell their vital organs to wealthy people in need of organ transplants" and "the adventures of a young professional who courageously investigates, and finally exposes, the criminal organization" - not protected because "[n]o one can own the basic idea for a story").

It seems Avatar might go down that road. If Anderson's heirs can prove that the idea of telepathic control of an alien was entirely Anderson's creation — which I doubt — then they might have a claim. The paralyzed hero is likely a wash; consider Rear Window.

It'd be better for everyone, and for art in general, if Cameron could simply acknowledge the inspiration, credit Anderson's work, and thereby promote continued sales of Anderson's work.

But that won't happen without a lawsuit, not with what happened to Cameron last time he acknowledged inspiration.

Just one of the consequences of having courts of law, not courts of justice.

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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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Really, you should:

The New York Court of Appeals held Pepper Hamilton had a duty to disclose in advance to the insurers the firm's potential involvement in litigation concerning fraudulent loan securitization activities by its client, Student Finance Corp., according to a New York Law Journal article reprinted in New York Lawyer (reg. req.). The court applied Pennsylvania law in the case, which the parties agreed was controlling.

...

But the undisclosed, foreseeable risk of a SFC-related claim against Pepper Hamilton and partner W. Roderick Gagné, even though they had not been involved in SFC's wrongdoing, violated a "prior knowledge" coverage-exclusion clause in the indemnity policies, the Court of Appeals held. Hence, the carriers are not required to indemnify the firm and Gagné in SFC-related claims.

"Given the law firm defendants' role in the securitization of the loans and Gagné's close involvement with SFC, a reasonable attorney with the law firm defendant's knowledge should have anticipated the possibility of a lawsuit, particularly when millions of dollars may have been lost from activities of which they were aware," writes Judge Theodore Jones Jr. in the court's unanimous 6-0 decision.

In 2002, when the law firm applied for the excess coverage, Gagné told Pepper Hamilton's general counsel, in response to a question about the insurance application, that he knew of two suits related to SFC transactions, the ruling recounts. He was, he told the GC, "not certain" about whether the law firm might be joined in the litigation in the future.

I don't fault Pepper Hamilton for trying, but, really, if there is a multi-million-dollar lawsuit out there related to a fraud perpetrated by a client whose business you were deep into, you should probably tell your insurer about it.

The context, too, was important: SFC went bankrupt and the bankruptcy trustee started looking to third-parties for recovery.

Want to guess where bankruptcy trustees start first?

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At Legal Ethics Blog, Professor Andrew Perlman posts a hypothetical:

I was recently a panelist at the Association of Corporate Counsel's annual conference, and someone in the audience posed an interesting hypothetical.

Imagine that in-house counsel is conducting an internal investigation and speaks with an employee whose conduct may have been unlawful. 

Let me interrupt to point out that the above hypothetical is one of the classical examples used to teach professional responsibility to law students. Employees are frequently confused about the role of the company's lawyers in internal investigations, and frequently do not understand that the lawyer there represents solely the company and not the employees themselves. The context of these interviews — typically involving nothing more than the lawyer coming into the employee's workplace — heightens the likelihood of confusion.

As such, corporate lawyers are under a duty (under Model Rule 1.13(f)) to explain the distinction whenever they deal with directors, officers, employees, members, shareholders or other corporate constituents.

But Perlman's hypothetical is a bit different:

The employee does not have her own counsel, so the in-house lawyer makes clear to the employee that the lawyer represents the company and not the employee herself. So far, so good.

But now let's imagine that the employee is reluctant to speak with the lawyer. The lawyer then says to the employee, "You are subject to the company's employment policies, which require you to speak with me about this matter."

Several audience members were convinced that such a statement was both commonplace and ethically permissible. It was my position that such a statement, which appears to be giving legal advice to an unrepresented (and potentially adverse) party regarding her obligations under the employment policy, could be unethical under Rule 4.3. What do you think?

Here's the whole text of Rule 4.3:

In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer’s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding. The lawyer shall not give legal advice to an unrepresented person, other than the advice to secure counsel, if the lawyer knows or reasonably should know that the interests of such a person are or have a reasonable possibility of being in conflict with the interests of the client.

It's an interesting question. As I responded in the comments [with minor edits here], I think it comes down to context. If the context has made it clear to the employee that the employee's interests are, or could be adverse, then there is not much problem in the lawyer advancing the views of the company, since the concern about "misunderstanding" expressed by the rule is inapplicable.

If, however, the impression created is one of a neutral investigator, then it seems to be legal advice given to an adverse unrepresented party.

The precise wording also creates a problem for the attorney, because they did not merely assert that the company could do if the employee did not cooperate (e.g., terminate and/or sue them), but instead outright told the employee what their legal obligations were under the employment agreement. That's the essence of legal advice.

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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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Good for him:

WASHINGTON, D.C. — In one of the most public tests of his political skills since taking office in July, Sen. Al Franken pushed through an amendment Tuesday that would withhold defense contracts from companies like Halliburton if they restrict their employees from taking workplace sexual assault, battery and discrimination cases to court.

...

"Article 1 Section 8 of our Constitution gives Congress the right to spend money for the welfare of our citizens. Because of this, Chief Justice Rehnquist wrote, 'Congress may attach conditions on the receipt of federal funds and has repeatedly employed that power to further broad policy objectives,'" Franken said. "That is why Congress could pass laws cutting off highway funds to states that didn't raise their drinking age to 21. That's why this whole bill [the Defense Appropriations bill] is full of limitations on contractors — what bonuses they can give and what kind of health care they can offer. The spending power is a broad power and my amendment is well within it."

Franken then described the case that prompted his amendment, that of former Halliburton employee Jamie Leigh Jones, who alleged in 2007 that she was raped by multiple co-workers while serving in Iraq in 2005.

Although Jones sought to take Halliburton and its former subsidiary KBR to court, her employment agreement required her to pursue her claim through arbitration instead. Arbitration is a process in which a designated third-party (often chosen by the company) reviews the case and makes a judgment outside of the court system. Under binding arbitration agreements, there is usually no way, or very limited ways, to appeal the decision.

Halliburton and KBR have disputed Jones' claims.

"The constitution gives everybody the right to due process of law," Franken said. "And today, defense contractors are using fine print in their contracts do deny women like Jamie Leigh Jones their day in court… The victims of rape and discrimination deserve their day in court [and] Congress plainly has the constitutional power to make that happen."

(Via Feministe). Sen. Franken has a keen grasp of the powers granted to Congress under the spending clause, and the comparative ease of using it, rather than direct regulation or legislation, to encourage or discourage particular behavior.

As Stuart Smalley says, "It's easier to put on slippers than to carpet the entire world."

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That's the conclusion of new scholarship by law professors Dave Hoffman and Cristy Boyd, in a draft just published here on SSRN, with blogging about it here. After analyzing 690 cases that sought to pierce the corporate veil between 2000 and 2005, they conclude:

The part that extra-legal influences play in veil piercing cases should caution corporate lawyers and scholars. Although jurists have focused on the influence of law and lawyers' craft on the likelihood of defending the veil, we find that two previously ignored factors – ideology, and firm size, play as important a role, if not more so. This finding reminds us that legal rules create only loose constraints on judges, even those in the trial courts. ...

We contest the conventional wisdom not just in its specifics but in its general theme that veil piercing doctrine is especially random and freakish. We think that the patterns we have observed fit well with a set of cases influenced by selection. Plaintiffs do win far more often during litigation than popular accounts of the doctrine's rare nature would have had us expect, but their ultimate chance of obtaining relief on the merits is obscured by settlement, which disposes two of three veil piercing cases filed in federal court. ...

Litigation results can tell us nothing more, and nothing less, than the kinds of factors
courts have found important in previous decided cases. Here, two extra-factors appear to be both important and surprising: ideology and firm size. Formalities, plaintiffs' tactics, and defendants' legal planning, have modest relationships to observed outcomes. To owners of the smallest of businesses, the message coming from this data is unfortunately both clear and unsatisfying: neither reliance on legal formalities nor pat expectations about the pro-business orientation of conservative judges will protect your firm from the need to dispute its veil in
court. To scholars, the message is also unsettling: to predict how judges will react to veil piercing facts, and to understand their motivations, observation must yield to experiment.

In short, they found that the smaller the company, or the more conservative the judge, the more likely it is that the veil will be pierced and the owners of the company held personally liable.

One might think that smaller company size was positively correlated with veil piercing success because "undercapitalization," which is generally the most effecive veil piercing theory, is closely correlated with company size. (Common sense suggests that, although it's easy to set up a fly-by-night small business, it's quite difficult to establish an large corporation, even an "undercapitalized" one.) The above findings, however, control for factors like the type of veil piercing claim (i.e., "undercapitalization" as compared to "alter ego" or the like), which means that company size alone is a significant factor in veil piercing. That suggests something else at work, possibly a systematic bias against smaller companies (or a bias in favor of larger companies).

Frankly, I was surprised to see that "in nearly 78% of litigations, plaintiffs likely realized some value from their veil piercing claims" because the veil piercing claims had either (a) succeeded or (b) had not been dismissed at the time of settlement.

I don't believe all of those plaintiffs realized some value from it -- the mere fact that a claim has not yet been dismissed doesn't necessarily mean the defendant sees a reasonable chance of it succeeding -- but the sheer size of that figure (almost four in five!) is hard to argue with. Veil piercing claims apparently have a lot more traction than most lawyers believe.

Then again, the presumption among most plaintiff's lawyers that veil piercing is inordinately difficult and rare likely leads to a strong selection bias prior to filing suit, such that only the strongest veil piercing claims are ever brought at all.

I recommend the authors journey down this road:

This relationship also implies that the particular grounds for relief asserted in complaints generally reflect the underlying facts of the case. To some, this result will surprise, as notice pleading rules, together with the expectation that plaintiffs will learn and shape their cases through discovery, might lead scholars to expect that the framing of the complaint functions as mere rhetorical gloss, insignificant in its particulars. Our contrary finding suggests that complaints are themselves objects worthy of further study beyond the confines of this particular project.

In the world of Ashcroft v. Iqbal, complaints are anything but "rhetorical gloss." These days, they're often the strongest case the plaintiff can put forward.

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Prof. Robert Reinstein, my mentor at Temple University Beasley School of Law, has just posted on SSRN a draft of The Limits of Executive Power:

Justice Jackson’s concurring opinion in The Steel Seizure Case has taken on iconic status among legal scholars and had been adopted by the Supreme Court as the governing framework for evaluating presidential power. But Jackson’s principles are conclusory, do not rest on any historical foundation, and raise as many questions as they answer. He fails to examine, much less justify, the existence or scope of implied presidential powers, nor does he meaningfully explain the extent to which those powers are subject to congressional regulation and override. I apply novel originalist methodologies to answer those unexamined questions, with important consequences to several current theories and cases concerning presidential power.

The construction of the presidency and the allocation of legislative and executive powers can be understood only by an examination of the historical experiences that influenced the Framers. Prominent among these were the preceding two centuries of constitutional developments in England which critically influenced the allocation of executive and legislative power in the Constitution. The central lesson of these historical experiences was that proscriptive legislative restraints on executive power were necessary but not sufficient to prevent autocracy. any of the English proscriptions on the exercise of executive power were included in our Constitution, but there was also a massive transfer of previously held executive power to the legislature. Most of the prerogatives that had been exercised by the King were vested completely in Congress, prohibited to the President, or omitted altogether from the Constitution. Of the small number delegated to the Executive, only one was the same as its royal counterpart; the others were more limited or structurally shared with the Legislative Branch.

I examine this history in detail and apply its underlying principles to develop a general theory of presidential power. In lieu of creative but ultimately inconclusive arguments over indefinite powers that are said to be “executive” in nature, implied powers should be tied to, and derived from, the powers expressly vested in the President in Article II. I refute the propositions that the Vesting Clause is a residual source of plenary executive power and that there is a presidential “completion” power. I apply and elaborate on these principles in the context of the President’s two most important implied powers - executing the laws and developing and implementing foreign policy. The President has broad discretion in choosing how to exercise these powers, but they are not plenary in nature. They are subject to three basic limitations: (1) the President may not, without congressional authorization, use these powers to change domestic law or create or alter existing legal obligations; (2) these powers are subject to regulation by Congress; and (3) in the event of a conflict between the exercise of these powers and congressional legislation, the latter prevails.

Finally, I argue that these limits on presidential power have continuing validity despite the enormous changes in the country since these principles were established. We are now in much the same situation as England in the 18th century - the real power of the Executive is much greater than its nominal legal power. Although the Framers viewed the President as a necessary check on an otherwise dominant Congress, the present reality is now the reverse. The Executive has become the most powerful branch of government. There is no reason to adopt legal theories that would further enhance executive power.

Highly recommended for anyone with an interest in constitutional history.

Anyone looking for relevant primary material should review The Founder's Constitution. Anyone looking for further historical support for Reinstein's argument that,

the construction of the presidency owed much less to political theory or a reflexive reaction to George III than to two centuries of historical experiences that shaped the Framers’ views on executive and legislative powers: “the great disputes of Stuart England, which resonated still in eighteenth-century America; alarms over the rise of ministerial ‘corruption’ under the Hanoverian kings; and lessons learned from the efforts of early state constitutions to cabin executive power within strict republican limits”

should consider Kevin Phillips' The Cousins' Wars, an economic, sociological, religious and political examination of the links between the English Civil War, the American Revolution, and the U.S. Civil War.

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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 must-read SCOTUSBlog alerts us to the following petition for certorari being granted by the United States Supreme Court:

Docket: 08-1521
Title: McDonald, et al.  v. City of Chicago
Issue: Whether the Second Amendment is incorporated into the Due Process Clause or the Privileges or Immunities Clause of the Fourteenth Amendment so as to be applicable to the States, thereby invalidating ordinances prohibiting possession of handguns in the home.

• Opinion below (7^th Circuit)
• Petition for certiorari (08-1521)
• Brief in opposition
• Petitioner’s reply (08-1521)
• Brief amicus curiae of Arms Keepers
• Brief amici curiae of Texas, et al
• Brief amicus curiae of  National Shooting Sports Foundation, Inc.
• Brief amicus curiae of American Civil Rights Union
• Brief amici curiae of Institute for Justice, and Cato Institute
• Brief amicus curiae of California
• Brief amici curiae of Gun Owners of America, Inc.,et al.
• Brief amici curiae of Constitutional Law Professors

The Circuit Court opinion by Judge Easterbrook was an pitch-perfect example of judicial restraint:

Repeatedly, in decisions that no one thinks fossilized, the Justices have directed trial and appellate judges to implement the Supreme Court’s holdings even if the reasoning in later opinions has undermined their rationale. “If a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions.” Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484 (1989). Cruikshank, Presser, and Miller have “direct application in [this] case”. Plaintiffs say that a decision of the Supreme Court has “direct application” only if the opinion expressly considers the line of argument that has been offered to support a different approach. Yet few opinions address the ground that later opinions deem sufficient to reach a different result. If a court of appeals could disregard a decision of the Supreme Court by identifying, and accepting, one or another contention not expressly addressed by the Justices, the Court’s decisions could be circumvented
with ease. They would bind only judges too dim-witted to come up with a novel argument.

...

But the municipalities can, and do, stress another of the themes in the debate over incorporation of the Bill of Rights: That the Constitution establishes a federal republic where local differences are to be cherished as elements of liberty rather than extirpated in order to produce a single, nationally applicable rule. See New State Ice Co. v. Liebmann, 285 U.S. 262, 311 (1932) (Brandeis, J., dissenting) (“It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”); Crist v. Bretz, 437 U.S. 28, 40–53 (1978) (Powell, J., dissenting) (arguing that only “fundamental” liberties should be incorporated, and that even for incorporated amendments the state and federal rules may differ); Robert Nozick, Anarchy, State, and Utopia (1974). Federalism is an older and more deeply rooted tradition than is a right to carry any particular kind of weapon. How arguments of this kind will affect proposals to “incorporate” the second amendment are for the Justices rather than a court of appeals.

Plaintiffs undoubtedly believe that Heller, which invalidated the District of Columbia's handgun ban, gives them a good chance at having the state bans struck down as well.

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Adam Liptak at the New York Times writes:

In the early 1980s, the Supreme Court decided more than 150 cases a year. These days, it decides about half that many.

A couple of weeks ago, the Supreme Court advocacy clinic at Yale Law School held a conference to explore the mystery of the court’s shrinking docket. Law professors presented data, theories and speculation. Expensive lawyers told rueful stories about can’t-miss cases that somehow did not make the cut.

Some participants blamed the newer justices, others their clerks. Some blamed Congress, saying it is not cranking out enough confusing legislation. And some blamed the Justice Department, which is filing fewer appeals.

But there emerged nothing like a definitive answer to why the court now selects perhaps 80 cases from more than 8,000 requests for review it receives every year.

I suppose this is as good a time as any to dust off a post of mine from June, Granting or Denying The Writ of Certiorari: The Most Important Decision by Supreme Court Justices:

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.

It's not necessarily wrong for the Court to take few cases -- indeed, abstention generally makes the law more stable and predictable because the intermediate appellate courts are far less likely to issue sweeping rulings that change existing law.

Indeed, for the "unintended consequences" reason above, on many issues the Supreme Court should wait for organic development of the law by way of actual cases litigated throughout the District Courts and Circuit Courts of Appeal. That way, the Supreme Court can see those consequences on a smaller level before irrevocably applying them to the whole country, rather than dealing with the aftermath of an ill-considered decision.

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Business Week points us to the major cases.

As Litigation & Trial is a legal, rather than a business, blog, I'm going to take their list of cases but replace their description of each with the actual legal issue at stake, along with links to SCOTUSWiki, which hosts all of the relevant briefs for your reading pleasure:

Bilski v. Kappos: Whether a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (”machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. § 101 and whether the “machine-or-transformation” test for patent eligibility, contradicts Congressional intent that patents protect “method[s] of doing business” in 35 U.S.C. § 273.

Free Enterprise Fund v. Public Company Accounting Oversight Board, et al.: Whether the Sarbanes-Oxley Act is consistent with separation-of-powers principles - as the Public Company Accounting Oversight Board is overseen by the Securities and Exchange Commission, which is in turn overseen by the President - or contrary to the Appointments Clause of the Constitution, as the PCAOB members are appointed by the SEC.

Black et al. v. United States: Whether the “honest services” clause of 18 U.S.C. § 1346 applies in cases where the jury did not find - nor did the district court instruct them that they had to find - that the defendants “reasonably contemplated identifiable economic harm,” and if the defendants’ reversal claim is preserved for review after they objected to the government’s request for a special verdict.

American Needle Inc. v. NFL, et al.: Whether NFLP, the NFL, and the teams functioned as a “single entity” when granting the company an exclusive headwear license and therefore could not violate Section 1 of the Sherman Act, 15 U.S.C. 1, which requires proof of collective action involving “separate entities.”

United Student Aid Funds, Inc. v. Espinosa: Where a debtor declares to discharge a student loan debt in his Chapter 13 bankruptcy plan, has the debtor satisfied the due process requirements of Mullane v. Cent. Hanover Bank & Trust Co, and does the fact that the debtor failed to initiate an adversary proceeding render the enforceability of the discharge order under 11 U.S.C. 1327(a)inapplicable?

Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Company: Can a state legislature properly prohibit the federal courts from using the class action device for state law claims?

Hemi Group, LLC, et al v. City of New York: Whether city government meets the Racketeer Influenced and Corrupt Organizations Act standing requirement that a plaintiff be directly injured in its “business or property” by alleging non commercial injury resulting from non payment of taxes by non litigant third parties.

Graham County Soil and Water Conservation Dist v. ex rel. Wilson: Whether federal courts have jurisdiction over False Claims Act suits based on revelations in administrative reports or audits issued by state or local governments, as opposed to the federal government.

Stay tuned for more discussion of each in upcoming posts.

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As you may already know (Google News already lists 300+ articles on it):

A state investigation found that a Montgomery County swim club racially discriminated in June when it revoked an agreement to allow a Northeast Philadelphia day camp to use its pool after 56 African American and Hispanic children made their first visit.

"The racial animus . . . and the racially coded comments" by club members at the Valley Club in Huntingdon Valley were the reasons the club revoked Creative Steps Inc.'s contract, according to a 33-page report by the Human Relations Commission that was released last night by an attorney for four of the campers.

The situation elicited a national media firestorm during the summer over allegations that members of a swim club in a historically white suburb withdrew permission to allow minority children into their pool - even after a $1,950 check had been delivered to pay for the children to have weekly swimming trips.

We've discussed the case twice before on this site. As I wrote before,

Let's assume, for the moment, that everything the Club said is true. There's still a big unanswered question: once they realized they were overbooked, how did they choose which money to refund?

The most recent members? Did they do that for individual white members, too? What about predominantly white day camps?

On its face, the Storybrook Day Camp story sounds favorable to the Valley Swim Club's position, but upon closer inspection it's another diverse day camp whose money was refunded after they showed up. Like the "statistics" described by the Pennsylvania Supreme Court, the presence of another minority Day Camp which was excluded might be very damaging to the Swim Club's defense, unless they can show similar exclusions / refunds of white camps or members.

But I think they've got an even bigger problem: we're having a debate they obviously did not have when they refunded the money. The concern stated at the time was over "complexion" and "atmosphere."

A copy of the PHRC's findings are available on Scribd. Let me highlight a few of them (excuse any typos; I had to perform OCR to copy the text):

31. In 2009, the Respondent employed eight persons as life guards and seven persons as grounds crew. All of the life guards and grounds crew employees are race, Caucasian.

33. In 2009; the Respondent had a total of 155 paid memberships of whom none were African American.

34. In 2008, the Respondent had a total of 179 paid memberships of whom none were African American.

109. Approximately 30-45 minutes after their arrival, ________and ____________, Creative Steps campers, left the swimming pool and walked to the Respondent's concession stand to get a snack.

110. As they returned to the swimming pool area, ____________ heard Michelle Flynn (race, Caucasian), a Respondent member and a teacher at Laura H.Carnell Elementary School, state the following: "What are all of these black kids doing here?" and "I am scared they might do something to my child. "

130. Immediately after the Creative Steps campers departed, Mr. Duesler stated that Meg Wescott, a Respondent member, spoke to him on behalf of 5 or 6 women who were in favor of the ·summer day camps, including Creative Steps. Mr. Duesler also stated that Yasmin Adib, Amy Goldman, Walter Poukish, Respondent members, spoke to him in favor of Creative Steps.

131. On or about June 29, 2009 ill the early evening, Mr. Duesler received a telephone call from Mary Beth DeGeorge, a Respondent member, who indicated that she was at the pool earlier in the day. She 'told Mr. Duesler that she felt that the Respondent was not prepared to host the camps due to the volmne of children in the shaIlowend of the swimming pool and that it was beyond the Respondent's capacity.

132. On or about June 29, 2009 at 9:45 p.m., Ms. Flynn sent an e-mail to the Respondent members explaining that she was "'very upset" that when she arrived at the swim club at 4:00, there was a bus emptying off a group of kids.She explained that while it is a community pool, "'this is not the community where these kids live." She also noted that she was especiaijy annoyed "'because there was no notice ahead of time like there is for the swim team."

133. Ms. Flynn also stated: "', .. since I personally know some of these kids because I teach at their school and I have seen first hand what at least one of these children is capable of I don't feel comfortable with my children even going to the bathroom during this time." She also stated: "Thank you for your time and I needed to write something because I felt I was being treated as if because the kids were African American it was an issue.. That could not be further than the truth."

138. On or about June 29, 2009 at 11:17 p.m., Walt Slowinski, a Respondent member, sent an e-mail to the Respondent members with a subject line of "bussing." Mr. Slowinski stated that he was a "little upset" at the news "about the bussing of kid (sic) to the pool every Monday." He explained that "[w]hen we joined we assumed that this was a private club not a club for hire or some sort of social program." He concluded that "[w]e like Valley and would love to stay but after hearing what transpired today I guess we will be looking for somewhere else to go next year. "

144. Just over twelve hours after Mr. Duesler defended his decision to invite the campers in an e-mail to Mr. Slowinski, on or about June 30, 2009 at 12:40 p.m., Mr. Duesler sent an e-mail to" the members of the Responqent's Board of Directors with a subject line of "Feedback from our Summer Camp Program" recommending the cancellation of Creative Steps.

145. Mr. Duesler explained that "[w]hat ultimately is holding sway with me is the tension that will linger throughout every hour of the club, essentially pitting member against member, as we are forced to take sides in this debate. This is no way to spend the summer for anyone, and, believe me, its all people are talking about at the club." With that in mind, Mr. Duesler recommended to the Respoiu:lent Board of Directors the following: "we refund out Monday summer campers' money, and inform Wednesday's camp that things are not going to work out this summer. Our Summer Bible Camp will conclude this week." Mr. Duesler concluded by explaining he welcomed feedback from the members of the Respondent Board of Directors but requested such feedback be quick as he needed to contact the campers to let them know.

150. On or about June 30, 2009 at 3:54 p.m., Steve Korolyk, a Respondent member, e-mailed the Respondent members with a subject line of "LET THE MEMBERS KNOW." He stated: "I hear the Valley Swim Club is becoming a day camp pool, I see nothing posted on your website or at the board at the bottom of the fill." He also voiced complaints regarding the Wexler Plumbing party and asked when the party would be occurring this year. He concluded by stating that it was not right not letting members know when the pool was rented out and that he might have to rethink his membership.

151. On or about June 30,2009 at 4:01 p.m.• Mr. Duesler responded to Mr. Korolyk's e-mail stating that it was a mistake on his part not telling the club about the summer camps. He also stated: "I will also tell you that after this week, we are pulling the plug on the camps, since 1 have been receiving many emails similar to yours. "

152. On or about June 30, 2009 in the late afternoon, Mr. Duesler called Ms. Wright and informed her that the Respondent was discontinuing its relationship with Creative Steps Summer Day Camp and that it would refund the $1,950.00 payment.

It's clear from the rest of the findings that "safety" had nothing to do with the decision to refund the day camp's money. Ironically, it seems that the "atmosphere" and "complexion" remarks by Mr. Duesler that inflamed this controversy really summed up what happened: after receiving multiple complaints with implicit, but not explicit, references to the campers' race, Mr. Duesler "pulled the plug on the camps" not necessarily out of any personal racial animus he felt against the campers, but rather to assuage the complaints of those who appeared to feel racial animus towards the campers. Ergo, the campers were rejected due to their race.

Although the PHRC findings have been described as finding, for example, "racial discrimination did play a role in the rejection of campers from a local swim club," that's not quite what the findings mean. Rather, as the findings conclude:

WHEREFORE, probable cause exists to credit the Complainant's allegations that the Respondent refused and denied Complainant's child the accommodations, advantages, facilities or privileges of its public accommodation and commercial property, including the use of its swimming pool, due to the child's race, Black/African American in violation of Section 5 of the Pennsylvania Human Relations Act, 43 P.S. 955 ...

Which is to say, the Pennsylvania Human Relations Commission found probable cause to believe discrimination occurred, rather than a actually finding discrimination. As described by my second post, the next step involves the Commission sitting down with the parties to encourage a settlement. If that doesn't work, then the Commission will hold a formal hearing on the matter, after which the factual and legal findings will be made.

Interestingly, the finding awarded "actual damages, including damages caused by humilitation and embarrassment." That doesn't line up with the statute itself, which allows damages for "humiliation and embarrassment" only for employment and housing cases, but not for public accommodation cases. See 43 P.S. § 959(f)(1) and Mechensky v. Commonwealth, Pennsylvania Human Relations Comm'n, 134 Pa. Commw. 192, 205, 578 A.2d 589, 595–96 (1990)(describing Midland Heights Homes, Inc. v. Pennsylvania Human Relations Commission, 478 Pa. 625, 387 A.2d 664 (1978), as holding "the Commission was without authority to award compensatory damages").

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As you may have heard, Judge Rakoff did not like the proposed SEC settlement with Bank of America (neither did I) in part because it blamed the bank's lawyers while refusing to waive attorney-client privilege and explain what, exactly, went wrong. A week ago, he rejected it entirely:

In a 13-page order available here at the New York Times's DealBook blog, Rakoff variously calls the settlement "trivial," "absurd," and "neither fair, nor reasonable, nor adequate." His primary objection seems to be that shareholders would indirectly pay for the alleged failure to disclose the bonuses, since the bank, not the individual executives who struck the merger agreement, would pay the fine. The SEC, according to Rakoff, says it cannot punish BofA executives because those executives did not craft the merger agreement in a way that--according to the agency--violated disclosure rules. Who did craft the merger agreement in such a way?

According to the SEC, that would be the lawyers who wrote the agreement--Wachtell, Lipton, Rosen & Katz for BofA and Shearman & Sterling for Merrill. Rakoff responds with a sentence that must frighten any M&A lawyer: "If that is the case, why are the penalties not then sought from the lawyers?"

As we've written at length, the pointing of the finger at outside counsel has raised serious questions about whether the bank waived attorney-client privilege in its talks with the SEC, and whether Rakoff may try to extend that waiver into his courtroom. The bank, for its part, has denied any wrongdoing, saying it is routine to conceal sensitive information, such as bonus payments, in confidential statements filed at the same time as public merger agreements.

Now Congress has jumped in:

The chairman of the House Committee on Oversight and Government Reform on Friday told Bank of America that it has questions concerning disclosures made surrounding the bank’s purchase of Merrill Lynch. The panel’s chairman, Edolphus Towns (D-NY), told the bank it can’t use the attorney-client privilege when dealing with Congress. Click here for more, from the NYT; here for earlier coverage of BacMerSaga, from the LB.

In a letter on Friday, Towns (pictured) said the bank must divulge when it became aware of the enormous losses at Merrill last year, when it received a commitment from the federal government for a second round of bailout money and what legal advice its management received about whether it had to disclose those developments to the bank’s shareholders. (Legal advice? Yipes! It means that, at least for the moment, the roles of Wachtell, Lipton and Shearman & Sterling will likely stay firmly in the spotlight.)

...

Bank of America acknowledged that Congress had the authority to disregard attorney-client privilege. That said, the bank’s Washington law firm, WilmerHale, argued that that would set a bad precedent. It’s a sentiment shared, writes the NYT, by the Association of Corporate Counsel, which came to BofA’s defense this month when the New York attorney general Andrew Cuomo asked the bank to give up its claim that its legal advice should remain private. The group issued a statement saying that it would be an “outrageous precedent” for other public companies if the bank had to give up its right to legal privacy.

As I wrote back when Judge Rakoff was still considering the settlement,

Courts often hold that clients cannot use attorney-client privilege as both a sword and a shield. That is, clients can either use lawyers' advice as a "sword" to defend themselves or they can use the privilege as a "shield" to keep communications private, in which case they're off limits entirely.

But they can't have it both ways. If they could, every defendant would just blame their lawyers and call it a day.

Bank of America's (current) lawyers have it exactly backwards: it would set a "outrageous precedent" if privilege was not waived here, because the bank itself interjected legal advice into the matter by blaming its lawyers for what happened.

The principle involved is not complicated. If you want to keep your legal advice out of the case, then do not use it in your defense. If you want to blame your lawyers and raise advice of counsel as a defense, then you lose the privilege.

Sword or shield. Not both.

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The Philadelphia Inquirer reports:

Since the beginning of the year, a new Pennsylvania law on public records has been sending tremors through state and local governments.

Unprecedented numbers of citizens, civic groups, reporters and businesses have filed thousands of requests for government documents and data.

Now come the aftershocks: Dozens of public-record lawsuits are piling up in courthouses around the state, waiting for judges to spit out rulings on what the law really means.

...

The new law is more detailed than the old one in specifying which government records are open to the public and which are not.

It also created the [Office of Open Records], a state agency to act as a first-stage arbiter when there's a dispute over a record being public or not.

In just eight months, the OOR has handled more than 4,500 e-mails and phone inquiries, about evenly split between people wanting to get information and government agencies wondering if they have to provide it.

...

The new law could be a victim of its own success.

As of yesterday, 55 rulings from the OOR have been appealed to local or state courts, where county and appellate judges will ultimately decide which government records the public is entitled to see.

There's a serious risk that when the cases are argued, John Q. Public will be legally outgunned by local and state agencies, using taxpayer money to pay thousands of dollars in legal fees - and arguing, usually, that taxpayers have no legal right to see the records they're asking for.

The problem of excessively defensive litigation is typically mitigated by awarding the plaintiff attorney's fees if they prevail, as is done in civil rights and discrimination cases.

Unfortunately, the Pennsylvania Right To Know Law's attorney's fees provision is not nearly as strong as the federal freedom of information act. The Pennsylvania law only permits attorneys fees to be shifted where:

Section 1304. Court costs and attorney fees.

(a) Reversal of agency determination. — If a court reverses the final determination of the appeals officer or grants access to a record after a request for access was deemed denied, the court may award reasonable attorney fees and costs of litigation or an appropriate portion thereof to a requester if the court finds either of the following:

(1) the agency receiving the original request willfully or with wanton disregard deprived the requester of access to a public record subject to access or otherwise acted in bad faith under the provisions of this act; or

(2) the exemptions, exclusions or defenses asserted by the agency in its final determination were not based on a reasonable interpretation of law.

(b) Sanctions for frivolous requests or appeals. — The court may award reasonable attorney fees and costs of litigation or an appropriate portion thereof to an agency or the requester if the court finds that the legal challenge under this chapter was frivolous.

That's a hard standard to meet, as shown by cases in other states with similar "willful" language, and thus it makes the Right-To-Know Law essentially unavailable except to lawyers and well-heeled parties.

Compare that weak fee-shifting to the Federal Freedom of Information Act's more robust fee-shifting:

The Freedom of Information Act provides that the court "may assess against the United States reasonable attorney fees and other litigation costs reasonably incurred in any case . . . in which the complainant has substantially prevailed." 5 U.S.C. § 552(a)(4)(E).

Given low rates typically awarded to prevailing plaintiffs, FOIA litigation is by no means profitable, but the fee-shifting takes enough of bite out of the costs plaintiffs must incur when fighting against the unlimited resources of the government to attract the attention of public interest organizations, non-profits, and media companies. Which is good for democracy, and strikes a respectable balance between the need to know and the preservation of taxpayer funds: only the strongest cases get picked up by those organizations and carried through to their conclusion.

But that's only on the Federal level. In Pennsylvania, however, if you want to know what your state or local governments are up to, you need to be willing to pony up five-or-six figure attorneys' fees just to dispute their objections, much less prevail over them through litigation and appeals. Though it's your government, you have to put your money where their mouth is.

Of course, it bears repeating that, when the government hires lawyers by the hour, the relationship creates an inherent conflict of interest in which the lawyers have an incentive to excessively defend, delay and deny to generate more billable hours, exacerbating the problem and raising even more barriers to citizen-led investigations of the government.

Thus, much like how taxpayers are better served when the government is represented on a contingent fee for its own lawsuits, I propose the government only be defended on a contingent fee, too: if the defense lawyers don't "substantially prevail," they don't get paid at all.

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In a stunning display of judicial activism, two conservative judges on the United States Court of Appeals for the District of Columbia re-wrote several recent Department of Defense regulations, a sixty-year-old Act of Congress, a basic principle of federalism upheld by dozens of Supreme Court opinions, and millenia of common law to dismiss the Saleh v. Titan Corporation and Ibrahim v. Titan Corporation lawsuits brought by more than a dozen Iraqis who "were beaten, electrocuted, raped, subjected to attacks by dogs, and otherwise abused by private contractors working as interpreters and interrogators at Abu Ghraib prison." Dissent op., p.1. The United States was not a defendant, nor were the military officers. The lawsuit was solely against the private contractors.

You already know the "allegations" -- you've probably already seen much of the evidence. There's no doubt what happened. It was "abhorrent" and "[doesn't] represent America” according to President Bush. Secretary Rumsfeld assured “[t]he people of the Middle East . . . that we will investigate fully, that we will find out the truth . . . and [that] justice will be served.” Dissent op., p. 2. Ilham Nassir Ibrahim isn't around for justice; he was beaten to death while in captivity. His widow is one of the plaintiffs.

The prohibition on unauthorized violence, even against prisoners, is universal to civilization. Under the Code of Hammurabi, if a prisoner like Ibrahim died "from blows or maltreatment," the responsible party's son was put to death. These days, torture for fun and profit without even the pretense of government authorization violates a panolopy of laws, including the Torture Victim Protection Act, the Racketeer Influenced and Corrupt Organizations Act, numerous common law torts (assault and battery, wrongful death and survival, intentional infliction of emotional distress, and negligence), government contracting laws, and various international laws and agreements.

To cover their bases, the plaintiffs sued under all of them. Surely at least one such claim would survive under centuries-old Anglo-American legal maxim -- reaffirmed by the most important Supreme Court decision in our history -- that "where there is a legal right, there is also a legal remedy by suit or action at law whenever that right is invaded?"

The plaintiffs' claims were strengthened by the absence of any Executive or Congressional action to stop them, despite numerous claims by the private contractors that the federal government had a substantial interest in the outcome of the case. The Bush and Obama administrations both declined to intervene in the case. Congress for a half-century now has authorized dozens of military actions which included the use of private contractors without passing a single law granting them immunity from suit.

The only related Congressional Act -- the Federal Tort Claims Act -- expressly says it "does not include any contractor with the United States.”  In fact, the only recent relevant action by either the Executive or Legislative branches is a regulation from the Bush-era Department of Defense stating that, for performance-based service contracts, "contractors [are] accountable for the negligent or willful actions of their employees, officers, and subcontractors." Dissent op., p. 22. The DoD further explained that "“[i]nappropriate use of force could subject a contractor or its subcontractors or employees to prosecution or civil liability under the laws of the United States and the host nation.” Id at p. 21.

The Supreme Court, too, has made it quite clear that, when a government contractor breaches its agreement with the government and thereby causes a third party harm, that contractor is responsible for the harm. In Miree v. DeKalb County, 433 U. S. 25 (1977), the victims of an airplane crash sued a county airport because it "breached the FAA [flight permission] contracts by owning and maintaining a garbage dump adjacent to the airport, and that the cause of the crash was the ingestion of birds swarming from the dump into the jet engines of the aircraft." After reiterating (consistent with prior law) that "the issue of whether to displace state law on an issue such as this is primarily a decision for Congress" and noting "Congress has chosen not to do so in this case," the Supreme Court affirmed the victims' right to sue. Keep that "primarily a decision for Congress" concept, a basic principle of federalism recently upheld in Wyeth v. Levine, in mind -- we'll come back to it later.

Why, then were the Abu Ghraib cases dismissed? Judicial activism, plain and simple: having no act of Congress, no Executive decision (in fact, regulations to the contrary), and no applicable Supreme Court precedent to support their preferred policy outcome, two conservative judges invented an entirely new judicial doctrine.

The judges didn't say that, of course. They claimed to be applying existing law.

A bit of background is required to see why that's not true. Though Miree is the general rule for lawsuits brought by third parties injuried by government contractors who breach their contracts, an exception for government manufacturers who perform their contracts properly was created by Boyle v. United Technologies Corp., 487 U.S. 500 (1988), where a United States Marine helicopter copilot was killed when his CH-53D helicopter crashed off the coast of Virginia Beach and he drowned. His family brought a lawsuit against the manufacturer of the CH-53D, alleging that the helicopter was defective because escape hatch opened out instead of inward, and thus was impossible to open underwater.

The Supreme Court held the family could not recover against the manufacturer because that design had been specifically required by the government, and thus the federal procurement specification "preempted" any claims of negligence, rendering the contractor immune from suit for following those specifications. Make no mistake: as the Supreme Court later described Boyle, preemption and immunity for government contractors applies only in the "special circumstance" where the “government has directed a contractor to do the very thing that is the subject of the claim.”  Correctional Services Corp. v. Malesko, 534 U.S. 61, 74 n.6 (2001)(applying the old Miree rule)

It's a sensible rule, even though one not enacted by Congress (as Miree and long-standing law said it should be). But it's also a very limited rule: as Justice Scalia wrote for the Supreme Court, it applies where "the asserted basis of the contractor's liability (specifically, the duty to equip helicopters with the sort of escape-hatch mechanism petitioner claims was necessary) is precisely contrary to the duty imposed by the Government contract (the duty to manufacture and deliver helicopters with the sort of escape-hatch mechanism shown by the specifications)."

Note those words: "precisely contrary." Scalia even gave an example of where it would not apply, such as where a government merely purchased air-conditioning units without any requirement contrary to a specific safety feature. As Scalia wrote, "no one suggests that state law would generally be preempted" if someone injured by the lack of that safety feature filed a lawsuit. Of course, absolutely no one suggested that a government contractor who breached their contract would be immune. As Scalia wrote, "conflict there must be" between the federal contract requirements and the lawsuit.

Compare "precisely contrary" and "conflict there must be" to Abu Ghraib, where the contractors intentionally breached their contracts through criminal conduct. Such is even less a case for preemption and immunity than Miree, where the breach was negligent, and which was reaffirmed by Boyle. Yet, Boyle is what the conservative judges claimed they were applying:

Slip op., p 13.

Did you catch all of that? The conservative judges took a twenty-year-old Supreme Court case admittedly involving the "special circumstance" where a plaintiff sued alleging a government manufacturer should have done the exact opposite of what the government told them to do, then, by way of a federal statute that expressly says it does not apply to contractors (the FTCA), the conservative judges applied that "special circumstances" to immunitize every private contractor in any "battle-field" -- which Abu Ghraib certainly wasn't -- who tortures and kills people without even the pretense of governmental authority.

In order to do that, the conservative judges also ran roughshod over the millenia-old prohibition on abusing prisoners, the centuries-old maxim that every right has a remedy, decades of precedent holding that Congress -- not the Courts -- is responsible for creating immunities, and recent crystal-clear Department of Defense regulations affirming that private contractors remain responsible for their wrongful conduct.

Judicial activism at its finest. Read the opinion yourself, if you dare. I recommend you start with the fine dissent by Judge Garland.

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In recognition of the extraordinary circumstances, the Supreme Court has agreed to release the audio from the Citizens United v. Federal Election Commission argument soon after it is completed. It will be worth a listen, for the hearing is not only a highly unusual four-way argument involving the brand-new Solicitor General, two former Solicitors General and a legendary First Amendment lawyer:

The Court’s Day Call shows this sequence for the argument: Theodore B. Olson of Washington, arguing for Citizens United, 30 minutes [some of that time will be saved for rebuttal after all others have argued]; Floyd Abrams of New York, arguing for Senate Republican Leader Mitch McConnell of Kentucky, 10 minutes; Solicitor General Kagan, for the FEC, 30 minutes, and Seth P. Waxman of Washington (a former Solicitor General), for Sen. John McCain (R-Ariz.) and other present and former congressional sponsors of campaign finance legislation.

But also because it is a rare special session re-argument requested by the Court to address a decades-old principle of constitutional law that most people today take for granted:

The large stakes of this case were not really apparent when the Court first agreed to hear it last Nov. 14 — ten days after Americans had cast their ballots in the most recent federal elections.  At that time, Citizens United, a politically active group with strong conservative views, pressed the case primarily as a test of whether federal campaign finance restrictions applied to what it called “a broadcast feature-length documentary movie.”  There was some constitutional argument involved, but the case was primarily statutory in scope.  At the center of the case was Citizens United’s sharply critical portrayal of the presidential candidacy last year of Hillary Rodham Clinton.  The feature-length film was titled “Hillary: The Movie.”  The contents of that film have been all but obscured by the profound shift in the shape of the case that has since occurred.

After the Court heard oral argument on the case last March 24, and began debating in private how to decide it, some members of the Court — the public does not know who, or exactly why — apparently began viewing the case as a more fundamental inquiry into constitutional questions about corporations’ rights of political speech.   On the final day of the Term, the Court ordered the case reargued, and set the date for Sept. 9.  Lawyers were told to come back to debate whether the Court should overrule two of its most important precedents that had upheld curbs on campaign finance by corporations.

For more, read this SCOTUSBlog commentary, as well as the Wiki it links to, which has all the major briefs. 

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For years, gender equality advocates have argued that Title VII's prohibition on sex discrimination in employment also prohibited discrimination on the basis of sexual orientation, because the latter is inherently sex discrimination, since it's based on preconceived notions of how men and women should act.

The theory has generally been rejected by federal courts, which have refused to incorporate sexual orientation discrimination into Title VII. Worse, a number of courts have used the rejection of the sexual orientation claims as a de facto prohibition on all claims brought by gay plaintiffs, even where the facts clearly showed discrimination on the basis of sex and sexual orientation.

Last week the Third Circuit reversed that trend:

On Friday, the U.S. Court of Appeals for the Third Circuit issued a ruling in Prowel v. Wise Business Forms, 07-3997 (3d Cir. Aug. 28, 2009), which states clearly that a plaintiff can bring a claim of gender stereotyping sex discrimination under Title VII even if there is coexisting evidence of sexual orientation discrimination.  This ruling is an important victory for women’s rights advocates and will have an especially helpful impact on women in nontraditional employment, who frequently suffer not only gender stereotyping discrimination, but also discrimination on the basis of their real or perceived sexual orientation.

...

In discussing Mr. Prowel’s gender stereotyping discrimination claim, Judge Hardiman writing for the unanimous appeals court panel reasoned:

[The employer] argues persuasively that every case of sexual orientation discrimination cannot translate into a triable case of gender stereotyping discrimination, which would contradict Congress’s decision not to make sexual orientation discrimination cognizable under Title VII.  Nevertheless, [the employer] cannot persuasively argue that because Prowel is homosexual, he is precluded from bringing a gender stereotyping claim.  There is no basis in the statutory or case law to support the notion that an effeminate heterosexual man can bring a gender stereotyping claim while an effeminate homosexual man may not.  As long as the employee–regardless of his or her sexual orientation–marshals sufficient evidence such that a reasonable jury could conclude that harassment or discrimination occurred “because of sex,” the case is not appropriate for summary judgment.

Judge Hardiman quoted language from the famous gender stereotyping case of Price Waterhouse v. Hopkins, 490 U.S. 228, 251 (1989) (plurality opinion): “We are beyond the day when an employer could evaluate employees by assuming or insisting that they matched the stereotype associated with their group, for ‘[i]n forbidding employers to discriminate against individuals because of their sex, Congress intended to strike at the entire spectrum of disparate treatment of men and women resulting from sex stereotypes.’”

The Women's Law Project here in Philadelphia submitted an amicus brief in the case, available at their blog.

Thus, as a result of the ruling, employers in the Third Circuit can discriminate on the basis of sexual orientation, but not on the basis of gender stereotypes. If anyone out there knows how defendants could ever prove that in court, there's a couple hundred employment discrimination defense lawyers in Philadelphia just dying to hear from you.

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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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[UPDATE: The Volokh Conspiracy, Concurring Opinions and TechDirt picked up on the case and this post as well. Volokh has substantial discussion in the comments, including links to law review articles on the issues of vacated and unpublished opinions, and a comment by the author of The Legal Intelligencer article, Shannon Duffy, noting that you can find the opinions themselves on the Eastern District of Pennsylvania's own website. I have also edited a line (the one quoted by Co-Op) for clarity.]

The Legal Intelligencer reports:

Ordinarily, the decision to settle a case while an appeal is pending means giving up the opportunity to set a legal precedent as well as forgoing the chance to win a reversal of any unfavorable published decisions handed down by the lower court.

But a team of defense lawyers fighting to overturn a $24 million verdict have figured out a way to have their settlement cake and eat their jurisprudence, too.

The confidential settlement in Klein v. Amtrak -- a case in which two trespassing teenagers climbed atop a parked train car and suffered serious burns when they got too close to a 12,000-volt catenary wire -- included an unusual provision that called for the trial judge to vacate all of his published opinions and have them removed from Lexis and Westlaw.

And it worked.

A few months after holding an hourlong oral argument, the 3rd U.S. Circuit Court of Appeals agreed in late July to remand the case to the trial judge, U.S. District Judge Lawrence F. Stengel, who, in turn, agreed to vacate eight of his published opinions and to "direct" Lexis and Westlaw to remove them from their databases.

...

Exactly how the lawyers went about persuading Stengel to take such an unusual step is impossible to say because all of the court papers are under seal and none of the lawyers will talk about it.

The verdict drew a lot of attention in the Philadelphia legal community, not least because of the size and the names of the defendants, most of whom often avoid premises liability on a variety of theories. It's no surprise the defendants want to re-write history to prevent future plaintiffs from finding or referring to the case.

As a citizen, I am a strong believer in open government and governmental accountability, including for the judiciary. As a lawyer, I do not believe a court can ever truly "unpublish" a decision, and I believe that law is made every time a court decides any issue.

As such, I am linking to the free and publicly-available RECAP copies of the "vacated" opinions:

(a) the District Court's March 31, 2008 Memorandum Order denying Defendants' post-trial motions [reported at 2008 WL 879968 and 2008 U.S. Dist. LEXIS 25990] (District Court Docket No. 208).

(b) the District Court's October 11, 2006 Memorandum Order denying Defendants' in limine motion regarding evidence of prior electrical contacts [reported at 2006 WL 2927280 and 2006 U.S. Dist. LEXIS 73940] (District Court Docket No. 130).

(c) the District Court's October 12, 2006. Memorandum Order denying Defendants' in limine motion regarding evidence of prior electrical contacts [reported at 2006 WL 3000955 and 2006 U.S. Dist. LEXIS 75942] (District Court Docket No. 145).

(d) the District Court's March 31, 2006 Memorandum Order denying Defendants' summary judgment motion [reported at 2006. WL 859442 and 2006 U.S. Dist. LEXIS 15331] (District Court Docket No. 58).

(e) the District Court's Memorandum Order, entered August 17, 2006, denying Amtrak's motion to certify pursuant to 28 USC 1292(b) [reported at 2006 WL 2385516 and 2006 U.s. Dist. LEXIS 57613] (District Court Docket No. 72).

(f) the District Court's October 2, 2006 Memorandum Order granting Plaintiffs' motion for reconsideration of the District Court's order of July 13,2006 with respect to Norfolk Southern's liability as a non-possessor of land [reported at 2006 U.S. Dist. LEXIS 80992; not reported in Westlaw] . (District Court Docket No. 111).

(g) the District Court's October 2,2006 Order denying Defendants' in limine motion regarding Amtrak's internal memorandum dated November 17, 1983 and Amtrak's June 20, 1984 letter [This Order is not reported in LexisNexis or Westlaw] (District Court Docket No. 119).

(h) the District Court's October 10, 2006 Memorandum Order denying Defendants' in limine motion regarding evidence of prior electrical contacts for the purpose of proving ·punitive damages [This Order is not reported in LexisNexis or Westlaw] (District Court Docket No. 129).

Law, once made, cannot be unmade.

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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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All's fair in love, war and litigation:

An arbitrator cannot sue a lawyer for wrongful use of civil proceedings, the 3rd U.S. Circuit Court of Appeals has ruled, even if the lawyer allegedly lodged false accusations in court papers to have the arbitrator disqualified, because lawyers enjoy an "absolute privilege" that immunizes them from liability over any communication made in the course of litigation.

The five-page unpublished opinion is available here. It says:

The underlying litigation in this case began in 1995 when Anthony Patterson, a
member of the Church of the Lord Jesus Christ of the Apostolic Faith in Philadelphia, filed an action in state court against church leaders alleging that they had looted millions of dollars from the church’s bank accounts. In November 2006, the parties agreed to submit the case to binding arbitration. The parties selected Edward Naythons (“Naythons”), a retired United States Magistrate Judge in the Eastern District of Pennsylvania, as the neutral arbitrator. . . .

Naythons issued the final adjudication in October 2006, but dated it July 25, 2006,
the date he completed it. In November 2006, Stradley filed a motion to vacate the final arbitration award. In December 2006, Stradley filed a petition for a hearing on their petition to vacate, as well as their previous petition for recusal.

About ten months later, Naythons filed a complaint against Stradley. In it, Naythons alleged abuse of process and wrongful use of civil proceedings due to the “scorched earth” litigation strategy Stradley employed and the accusations Stradley leveled against Naythons in the course of making arguments for his recusal. Stradley moved to dismiss the case because Naythons, a non-party to the underlying litigation, lacked standing.

The Third Circuit agreed in a single paragraph of analysis:

Under Pennsylvania law, the District Court correctly dismissed Naythons’s claims
of abuse of process and wrongful use of civil proceedings. Stradley did not “use legal process” against Naythons. Naythons was the arbitrator in the state proceeding, not a party to the action, and the fact that he was named as a respondent in one of the state court petitions is of no import. Permitting Naythons to sustain either of these claims against Stradley would abrogate the doctrine of judicial privilege, whereby “pertinent and material” communications made in in the context of judicial proceedings are absolutely privileged from civil liability. Moses v. McWilliams, 549 A.2d 950, 956 (Pa. Super. Ct. 1988) (citing Post v. Mendel, 507 A.2d 351, 355 (Pa. 1986)). The proper recourse for any unethical conduct on behalf of Stradley is through judicial review of the arbitration proceedings, which could result in sanctions against Stradley if their conduct was as egregious as Naythons alleged in his complaint.

The claims were obviously a long shot -- an arbitrator isn't a party to the case they hear, so nothing is "used" or "initiated" against them.

Why didn't Naythons allege defamation? 

Ask his lawyer, George Bochetto. Bochetto was the plaintiff in the most recent Pennsylvania Supreme Court opinion on "judicial privilege," Bochetto v. Gibson,  which reaffirmed Post:

 Pursuant to the judicial privilege, a person is entitled to absolute immunity for 'communications which are issued in the regular course of judicial proceedings and which are pertinent and material to the redress or relief sought.' Post v. Mendel, 510 Pa. 213, 507 A.2d 351, 355 (Pa. 1986) (emphasis in original). This privilege is based on the 'public policy which permits all suiters, however bold and wicked, however virtuous and timid, to secure access to the courts of justice to present whatever claims, true or false, real or fictitious, they seek to adjudicate.' Id. As we explained in Post, 'to assure that such claims are justly resolved, it is essential that pertinent issues be aired in a manner that is unfettered by the threat of libel or slander suits being filed.' Id. Notably, this privilege is extended not only to parties so that they are not deterred from using the courts, but also to judges so that they may 'administer the law without fear of consequences,' 'to witnesses to encourage their complete and unintimidated testimony in court, and to counsel to enable him to best represent his client's interests.' Binder v. Triangle Publications, Inc., 442 Pa. 319, 275 A.2d 53, 56 (Pa. 1971).

Bochetto v. Gibson, 580 Pa. 245, 251, 860 A.2d 67, 71 (2004).

The Pennsylvania Supreme Court held the privilege did not apply to the facts alleged by Bochetto, however, as the defendant attorney had faxed a copy of the allegedly defamatory complaint to a reporter (at The Legal Intelligencer). Such faxing was not "in the regular course of judicial proceedings."

The lawyers at Stradley Ronon no doubt paid heed the lesson of Bochetto v. Gibson and kept all their allegations within the confines of the litigation. Hence Naythons' and Bochetto's creativity.

I don't know the merits of the allegations either way. Assuming, for a moment, that Naythons' allegations were true and Stradley injured him through "scorched earth " litigation tactics, the immunity granted to them from suit by Nathons is all the more reason that the district court needs its hands free to deal with lawyers and parties who misbehave, the exact issue pending before the Third Circuit in Grider v. Keystone Health.

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How Appealing points to this Shannon Duffy article in The Legal Intelligencer:

Shockwaves reverberated through the civil defense bar in September 2007 when a federal judge imposed sanctions on several lawyers and their clients for engaging in discovery tactics that the judge said were designed to delay and drive up the costs, but that many lawyers say are nothing more than business as usual. * * *

The case has become a cause among defense lawyers who argue that if the sanctions imposed by U.S. District Judge James Knoll Gardner are not lifted, they will find it difficult to represent their clients properly.

The Philadelphia Bar Association took the rare step of filing an amicus brief in the appeal, saying Gardner's ruling, if upheld, threatens to "increase substantially the cost of civil litigation and to chill the zealous advocacy that is every attorney's duty and the cornerstone of our judicial system." * * *

In his September 2007 decision, Gardner imposed sanctions on attorneys John S. Summers of Hangley Aronchick Segal & Pudlin; Daniel B. Huyett and Jeffrey D. Bukowski of Stevens & Lee; and Sandra A. Girifalco of Stradley Ronon Stevens & Young.

Gardner's blistering 77-page opinion concluded that the lawyers and their clients -- a pair of insurance companies -- had acted in bad faith.

By way of background, as The Legal notes,

The underlying suit was brought by a class of doctors and alleged RICO claims against Capital Blue Cross, Highmark Inc. and their jointly formed HMO, Keystone Health Plan Central. The doctors claimed they were being cheated out of their rightful fees because the insurers "shave" capitation payments to doctors by under-reporting the number of patients enrolled in the doctors' practice groups. ... The suit also accuses the insurers of defrauding doctors by "manipulating" the medical service codes used to calculate reimbursements.

Simple, right? Sure, it's a lot of documents, but they're the defendants' own payment processing documents, so they should be readily accessible.

You can read the District Court opinion here. Let's highlight some of Judge Gardner's findings:

The corporate defendants have repeatedly denied that they have access to the requested information, and have misrepresented the nature of their roles in the claims submission process. Moreover, defense counsel have feigned misunderstanding of words, terms and phrases clearly understood by them and their clients. * * * 

As stated in Finding of Fact 26, on March 1, 2004 Attorney Summers sent a letter to the court attaching a series of Declarations which affirmatively represented to the court that plaintiffs’ allegations of bundling and downcoding lacked any factual basis, and that those claims were “without merit”. Thereafter, defendant Keystone, through its counsel, Attorney Summers, refused to produce the underlying documents and data compilations which supported the Declarations on a number of frequently changing bases. Initially, Attorney Summers withheld the underlying documents and data compilations because they allegedly constituted lay opinion. Next, Attorney Summers withheld the information on the basis that it was expert opinion and immune from discovery. Finally, Attorney Summers asserted
that the underlying information was privileged material pursuant to either the attorney-client privilege or the attorney work product doctrine.

As noted by my colleague Senior United States District Judge J. William Ditter, Jr., “It is not good faith for a lawyer to frustrate discovery requests...with successive objections like a magician pulling another and another and then still another rabbit out of a hat.” Massachusetts School of Law at Andover, Inc. v. American Bar Association, 914 F.Supp. 1172, 1177 (E.D.Pa. 1996). * * * 

The most egregious instance of late production involves Keystone’s late production of claims data. Keystone claimed for years that it was unable to provide claims data. During the same time that Keystone and its counsel were feigning an inability to produce claims data (which it owned according to the ASA agreement with Synertech), Keystone was using claims data for its own self-serving purposes (i.e., the Declarations sent to the court on March 1, 2005). * * *

This case is about claims processing. To deny plaintiffs the data which Keystone owns is equivalent to denying plaintiffs their day in court. Without this data it will be more difficult for plaintiffs to prove their claims. I conclude that this is exactly what defendant Keystone hoped to accomplish by thwarting discovery in this case.

From reading the opinion, it seems the defendants' strategy was two-pronged:

1. Thwart plaintiffs' discovery by repeatedly inventing new excuses for not producing the claims processing data, and,
2. Distract, delay, and overwhelm the court and the plaintiffs by repeatedly interjecting collateral issues through "declarations."

The beauty of this plan is that it rapidly snowballs: once you introduce a new issue through #2, you can then apply #1 to refuse any further discovery into it, complicating and delaying the case further, which is apparently what happened here:

After appointment of Special Discovery Master Blume, the parties spent a period of time productively dealing with discovery issues. Plaintiffs have accepted all the decisions of Special Discovery Master Blume. Defendants initially accepted many of her decisions, but reverted to a systematic routine of not only appealing to me most, if not all, of her substantive decisions, but also filing objections to the Master’s monthly reports which detail the proceedings before her and her impressions of the status of this case. The docket reveals the amount of activity this case has generated by virtue of nearly 850 docket entries since this cases’s inception on November 7, 2001.

The cost and difficulty of discovery, particularly in complex business cases like Grider, is one of the most important issues in American law today. Unfortunately, the institutions that should be offering solutions have failed us, typically preferring to propose heads defendants win, tails plaintiffs lose "reforms" in which defendants have neither an obligation to produce evidence on their own nor an obligation to answer anything but the most specific and limited of requests. See, for example, the American College of Trial Lawyers' Civil Discovery Report, which proposed giving defense lawyers a blank check to file frivolous discovery objections while also eliminating most of the tools available to plaintiffs for compeling production.

The Philadelphia Bar Association stepped into this vacuum by hiring two defense firms to prepare an amicus brief (see the brief here) which seizes upon the above to argue that Judge Gardner's sanctions create a "chilling effect" by forcing attorneys into

... a Hobson's choice: either represent their clients in discovery matters to the limits of zealous advocacy at the risk of incurring potentially draconian sanctions; or fail to assert (or stand by) well-founded objections to arguably overreaching discovery requests, regardless of how onerous the burdens such requests may impose on their clients, for fear of incurring highly punitive sanctions.

The PBA's amicus brief misses the point: the defendants' discovery objections were meritless and designed to frustrate the action. All of the requested discovery was either highly relevant (and accessible) or was interjected into the litigation by defendants themselves.

Just like with claims for abuse of process and wrongful use of civil proceedings, attorneys and parties are not shielded from liability when they use a proper procedure for an improper purpose. Whether the means were justified is a question of what the ends were.

Here, defense counsel used a variety of theoretically appropriate discovery means -- like objections, privilege assertions, declarations, appeals from discovery masters, and motions for reconsideration -- for the illegitimate end of thwarting discovery, overwhelming the court, and delaying the action.

Fact is, discovery is going to continue to be needlessly expensive and time-consuming up until defendants have an affirmative duty to produce relevant information, since the lack of such duty forces plaintiffs to engage in fishing expeditions if they want any information at all.

If plaintiffs can't even get sanctions for intentionally dilatory and obfuscatory conduct, then talk of "reform" is pointless, since the only "reform" on the table would give the keys to the courthouse doors to whichever defense lawyer was most willing to slam them shut.

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As The Philadelphia Inquirer reported on Friday:

An association of black police officers has sued the Philadelphia Police Department in federal court for allowing its officers to post "blatantly racist . . . and offensive" content on a popular Web site devoted to law enforcement topics.

The suit, filed Wednesday, says Domelights.com, which bills itself as "the voice of the good guys," was founded by a Philadelphia police sergeant who uses the screen name "McQ" and "encourages the racially offensive conduct."

...

Guardian Civic League attorney Brian Mildenberg said that black officers had long reviled the site and that complaints had been been lodged with current and past police administrations to no avail.

Even the word domelights, which normally refers to the police lights on top of cruisers, has taken on an "insulting connotation" among black officers, according to the lawsuit.

...

Mildenberg said white officers post and moderate the forums while on duty and on department computers, creating "a racially hostile environment."

"It's the same thing as you can't hang racist material in the workplace," he said.

Of interest is the response "McQ" posted at the website:

Domelights.com has two members (founders and co-owners) with global administration rights, along with several moderators of individual forums. I am the only current PPD employee among the moderators and administrators. I do not administer the site from work, and since the site is only lightly moderated, I barely administer the site from home (it is essentially an open forum to members). I have personally NEVER made a racist/sexist post on Domelights or anywhere else on the Internet.

...

Domelights.com has no association, official or otherwise, with the Philadelphia Police Department. It is just a semi-popular social networking site that is geared towards cops/firefighters. There are THOUSANDS of city employees with blogs, facebook pages, myspace pages, twitter accounts and even websites, with ALL kinds of content, offensive and otherwise. I just happen to run the site that gets the most hits (at least for now).

WHYY has a copy of the complaint, available here.

There are plenty of sites offering analysis of the comments posted at the site and quoted in the complaint. For the moment, let's assume that, consist with Third Circuit jury instructions on hostile work environments, the allegedly harassing conduct was not "generally harsh, unfriendly, unpleasant, crude or vulgar," but rather "could be objectively classified as the kind of behavior that would seriously affect the psychological or emotional well-being of a reasonable [member of plaintiff’s race]."

How could the Philadelphia Police Department, and thus the City of Philadelphia, be liable for posts on a website with "no association, official or otherwise, with the Philadelphia Police Department?"

Let's go back to 1866.

Plaintiffs allege three counts, two of which are only against "Sgt. 'McQ,' Domelights.com a/k/a Domelights Enterprises, LLC and JOHN/JANE DOES ## 1-10,000," the other of which is:

FEDERAL CIVIL RIGHTS VIOLATION/DISCRIMINATION
HOSTILE WORK ENVIRONMENT ON THE BASIS OF RACE
42 U.S.C. § 1981 as enforceable through § 1983
Plaintiffs, individually, and on behalf of all others similarly situated v.
The Philadelphia Police Department

The core language in 42 U.S.C. § 1981 was originally passed as part of the Civil Rights Act of 1866 (over President Johnson's veto), which included:

All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.

Such did little to halt the Ku Klux Klan's frustration of Reconstruction. In 1871, Congress passed (and President Grant signed) a bill colloquially referred to as "the Ku Klux Klan Act," which included:

[A]ny person who, under color of any law, statute, ordinance, regulation, custom, or usage of any State, shall subject, or cause to be subjected any person within the jurisdiction of the United States to the deprivation of any rights, privileges, or immunities secured by the Constitution of the United States, shall, any such law, statute, ordinance, regulation, custom or usage of the State to the contrary notwithstanding, be liable to the party injured in any action at law, suit in equity, or other proper proceeding for redress

The primary purpose of the Act was to create criminal penalties -- "a fine not less than five hundred nor more than five thousand dollars, or by imprisonment, possibly with hard labor, for not less than six months nor more than six years or by both fine and imprisonment" -- for a host of wrongful conduct, including witness intimidation, voter intimidation, obstruction of justice, and interference with federal government operations.

More than a century later, lawyers revived § 1981 to pursue discrimination actions against state governments, only to be shot down by Jett v. Dallas Independent School District, 491 U.S. 701 (1989). In January of this year, the Third Circuit "consider[ed] whether a private right of action against state actors can be implied under 42 U.S.C. § 1981," and held it could not. McGovern v. City of Philadelphia, 554 F.3d 114 (3d Cir. 2009).

But suit can be brought against "state actors," including municipalities themselves, by using § 1983 to apply § 1981. Yet, to recover against a municipality under § 1983 requires proving more than just purposeful discrimination that creates a hostile work environment; plaintiffs' complaint reveals how they intend to recover against the City specifically:

50. By and through their conduct, the Philadelphia Police Department has evidenced a
policy, practice or custom of allowing the use of their computers for a racially hostile purpose, and allowing its employee Police Officers to engage publically in racially offensive and hostile commentary and postings.

 The key words are "policy, practice or custom." As the McGovern case above noted,

In Monell v. New York Department of Social Services, 436 U.S. 658, 98 S. Ct. 2018, 56 L. Ed. 2d 611 (1978), the Supreme Court held that a municipality may not be held vicariously liable for the federal constitutional or statutory violations of its employees. See id. at 694. "Instead, it is when execution of a government's policy or custom, whether made by its lawmakers or by those whose edicts or acts may fairly be said to represent officially policy, inflicts the injury that the government as an entity is responsible under § 1983." Id.

McGovern at 121.

And that's what's going to pose the greatest challenge for the plaintiffs here. The City and Police Department are not vicariously liable for civil rights violations by their employees. Moreover, and perhaps most importantly, unlike in a typical case alleging a constitutional violation -- in which neither the City nor the plaintiff disputes that the defendant was acting in their official capacity when they crossed the line -- it seems unlikely the City would indemnify "McQ" or anyone else for comments made on a website with "no association, official or otherwise, with the Philadelphia Police Department."

That is to say, the City / Police Department are only liable if the plaintiffs can show that the government policy itself inflicted injury on the plaintiffs. Hence the references to the use of "Domelights" in the office as a pejorative term and the use of work computers.

Can they prove that? Ironically, since § 1981 lay dormant for so long, it never really had any "organic" development of case law and precedent. Thus, courts in recent years have simply taken the McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), framework for deciding cases under Title VII of the Civil Rights Act of 1964 and applied it wholesale to § 1981 employment discrimination cases.

The details of such a framework can fill -- and has filled -- shelves of books. For a glimpse, start at page 10 of the Third Circuit model jury instructions. Assuming McQ is right, it appears the core question will likely be if the Philadelphia Police Department should have taken action to stop off-the-job discriminatory remarks by its employees.

That's a tricky question; just ask Sonia Sotomayor, who dissented in the Pappas v. Giuliani, 290 F.3d 143, 154 (2d Cir. 2002) case, in which the New York Police Department fired an officer for off-the-job hate speech. The Second Circuit upheld the termination; Sotomayor would have held the termination violated the officer's free speech rights:

Today the Court enters uncharted territory in our First Amendment jurisprudence. The Court holds that the government does not violate the First Amendment when it fires a police department employee for racially inflammatory speech -- where the speech consists of mailings in which the employee did not identify himself, let alone connect himself to the police department; where the speech occurred away from the office and on the employee's own time; where the employee's position involved no policymaking authority or public contact; where there is virtually no evidence of workplace disruption resulting directly from the speech; and where it ultimately required the investigatory resources of two police departments to bring the speech to the attention of the community. Precedent requires us to consider these factors as we apply the Pickering balancing test, and each counsels against granting summary judgment in favor of the police department employer. To be sure, I find the speech in this case patently offensive, hateful, and insulting. The Court should not, however, gloss over three decades of jurisprudence and the centrality of First Amendment freedoms in our lives because it is confronted with speech it does not like and because a government employer fears a potential public response that it alone precipitated.

As Popehat notes,

Of course in some ways the Pappas case is easier than what’s alleged here.  Pappas’s speech was far more loathsome than the “locker room” casual redneck racism that’s complained of in Domelights.  But in others the Pappas case is harder.  There was no evidence Pappas’s speech was repeated on the job, while the Philly PD allegedly allows officers to post at Domelights from work computers.

This case, if its litigated fully (and it should be, as it presents interesting issues on the First Amendment and the Civil Rights Act), may wind up before Sonia Sotomayor one day.  If and when that happens, she may have the opportunity, in the most emphatic way, to reverse her Second Circuit colleagues.

An interesting case to follow.

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The Blog of The Legal Times talks about the Sotomayor confirmation hearings:

Under questioning from Sen. Ted Kaufman (D-Del.), she spoke in greater detail than she has before about her career as a commercial litigator. She said she learned the importance of predictability in business law when partners would revise the drafts of settlement agreements she had written. The partners, she said, replaced her plain language with what she considered "gobbledygook," in order to conform the agreements to court precedent.

"In business, the predictability of law may be the most necessary," she said, "in the sense that people organize their business relationships based on how they understand the courts interpret their contracts."

When I was a summer associate at a business and transactional firm, the managing partner told me a similar story. Back when he was an associate, a partner at the firm asked him to draft a real estate bill of sale. He did so, with considerable difficulty, and a considerable investment of time, and took it to the partner, who skimmed it and threw it away.

Why?

"Because I don't know what any of that means. I do, however, know what these old agreements I've been using mean. Their meaning hasn't changed in five hundred years."

It seems Sotomayor got the same lesson. Lots of lawyers do.

Let me tell you: the lesson is wrong.

It's not always wrong. In certain circumstances -- like some real estate transactions -- there is language used so frequently that it has become the standard against which all other grammar and syntax is measured. Any deviation will likely be interpreted against the person who suggested it.

If you have one of those situations, be sure you know what the "standard" language is. Otherwise, focus on making the text of the written agreement reflect the reality of the parties' understanding, not on adding in "gobbledygook" to make it look lawyerly.

But even where you have a "standard" contract, the lesson may lead you astray. Long ago, I lost track of the number of times a lawyer told me "court precedent" dictated the use of particular language yet couldn't produce any actual "court precedent" to back that up.

Do you think every partner who told Sotomayor how the contract "should" have been written actually reviewed that "court precedent" prior to rejecting Sotomayor's draft? I doubt it. I'm betting more than a few of those "replaced" agreements included "standard" language that meant something different from what their clients intended.

Pay heed your elders, but shepardize your cases.

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[Update II -- Anne Marie Green of CBS3 (KYW) News Philadelphia also spoke with me about case, particularly the relief available to the day camp members. Video available here.

Update -- Jon Elliott on San Diego 1700AM interviewed me on the incident and the law. List of their podcasts here (I'm "7/10/09 2nd Hour, 07/10/09 4:00pm"), direct link to 36MB MP3 here. Best part is when a spaceship lands in the middle of my interview.]

You've probably heard by now about the Valley Swim Club / Creative Steps Day Camp incident, in which a Huntingdon Valley "private" swim club apparently refused to let 65 African-American and Hispanic children who had paid $1950 for a weekly membership swim in the pool.

For a legal introduction, see my post yesterday, Philadelphia Swim Club Refuses Black Children Because Of Their "Complexion." In short, the Pennsylvania Human Relations Act prohibits racial discrimination in "public accommodations" like "swimming pools" unless those entities are "distinctly private." Odds are, the Valley Swim club is not "distinctly private" because the PHRA and the case law imply "distinctly private" applies only to bona fide fraternal organizations that do not let nonmembers use their facilities at all, not the simple paid-your-membership-dues-and-swim system the Valley Swim Club used.

Today let's talk about the upcoming legal procedure, the disputed facts, and the core issues to be resolved.

The Legal Procedure:

Discrimination lawsuits (whether based on race, gender, age, or disability) don't begin like most lawsuits; before filing in court, the victim of discrimination must file a complaint with either the Pennsylvania Human Relations Commission (PHRC) or, if related to employment, the federal Equal Employment Opportunity Commission (EEOC).

Also unlike almost every other field of law, most of which allow plaintiffs one year, two years, or possibly more to file their claim under the 'statute of limitations,' discrimination complaints must be filed within 180 days of the discrimination or they are forever waived. 

Based on a NAACP complaint, the PHRC has already opened an investigation. Typically, these investigations take months, and can take up to a year; by state law, victims of discrimination are prohibited from suing until the investigation is completed or a year from when they filed the complaint, whichever comes first. The PHRC has said they will conduct an "expedited" investigation here.

The PHRC process is flexible and analogous to a police investigation, in that the bulk of the process is not lawyers arguing with one another, but rather a PHRC investigator talking with the complainant, the respondent, and important witnesses. Eventually, the PHRC will either dismiss the case for lack of probable cause (after which a normal lawsuit can be initiated) or:

If probable cause is found in your case, the Commission will attempt to settle the case. The respondent will be asked to stop the discriminatory actions, begin any new programs or make financial payment to settle your case. If this conciliation process is unsuccessful, a public hearing will be held on your case.

At the public hearing, testimony is given under oath and evidence in your case is submitted. If you do not have an attorney, a Commission attorney will represent your complaint. After your case is presented, the Commissioners will vote either to agree that discrimination did occur and approve a settlement, or dismiss the complaint, if they decide discrimination did not occur.

The idea here is similar to small claims court and arbitration of motor vehicle accidents: presumably, if the parties go through the process once and one side clearly loses, this will encourage settlement.

Unfortunately, except where the damages are small, PHRC decisions, like compulsory arbitration decisions, are typically appealed to state court. Unless the Valley Swim Club and the Day Camp can come up with a solution, then, regardless of what the PHRC finds, this case will likely be appealed and litigated in the Montgomery County Court of Common Pleas, since the pool was in Montgomery County.

The Facts That Will Be Disputed:

The core allegations by the plaintiffs are simple: we paid $1950 to swim at a club, got there, heard a number of racist remarks, then, the next day, had our money refunded and told not to come back because of "complexion" and "atmosphere."

The Valley Club has replaced its entire website with:

The Valley Club is deeply troubled by the recent allegations of racism which are completely untrue.

We had originally agreed to invite the camps to use our facility, knowing full well that the children from the camps were from multi-ethnic backgrounds. Unfortunately, we quickly learned that we underestimated the capacity of our facilities and realized that we could not accommodate the number of children from these camps. All funds were returned to the camps and we will re-evaluate the issue at a later date to determine whether it can be feasible in the future.

Our Valley Club deplores discrimination in any form, as is evidenced by our multi-ethnic and diverse membership. Whatever comments may or may not have been made by an individual member is an opinion not shared by The Valley Club Board.

Plausible, but disputed:

HUNTINGDON VALLEY, Pa. - A suburban Philadelphia swim member tells the AP she didn't see inner-city kids misbehaving at a pool they were later barred from.

Amy Goldman said she's been a member of the Valley Club for two years. She said the pool wasn't particularly crowded and the children from Creative Steps daycare were "well behaved and respectful."

She said there had been black members at the club in the past, though she couldn't remember seeing any this year.

We see hints of a "no good deed goes unpunished" defense in the works:

The statement says the day campers were turned away because they overwhelmed the 110,000-gallon pool.

"We quickly learned that we underestimated the capacity of our facilities, and realized that we could not accommodate the number of children from these camps," the statement says.

A worker at another Northeast Philadelphia day camp that had an agreement to use Valley Club this summer, Storybook Children's Center, said she believed the club's account. Monica Scanlon said she took 25 children of diverse ethnicities to its pool this summer, but the noise had clearly been too much for comfort.

Valley Club president John Duesler apologetically refunded Storybook's money, as he did for Creative Steps.

"He was trying to help us out, because there weren't supposed to be city pools open this year," said Scanlon, who contacted The Inquirer after learning of the controversy.

These sorts of factual disputes are precisely why we have courts and juries and why cases take so long.

What Creative Steps Day Camp Has To Prove And What The Valley Swim Club Has To Explain:

This incident is intriguing, legally, because it asks a basic question that hasn't really been raised in more than forty years: what does a complainant have to prove to show they were the victim of racial discrimination?

Do they have to show that race had some effect in excluding them from a public accommodation? That race was the only factor in their exclusion? What happens if the jury finds that race impacted the decision by the Club but that the Club would have refunded the money anyway for other reasons?

These questions have been answered in the employment context, where they come up all the time, but not in the public accommodation context, where there have been few lawsuits alleging racial discrimination for decades.

Based on the minimal Pennsylvania case law out there, I believe the PHRC and any later court would set a fairly low bar. Back in the 1970s, The Pennsylvania Supreme Court recognized "In trying to eradicate other manifestations of racial discrimination, courts, including the Supreme Court of the United States, have recognized that statistics alone can establish racial discrimination. " Pennsylvania Human Relations Comm'n v. Chester Housing Authority, 458 Pa. 67, 80, 327 A.2d 335, 342 (1974).

If statistics alone can prove discrimination, without concrete proof of racial motive or that race was a necessary factor, then odds are the eventual jury that hears this case will only be asked to decide if the Club "den[ied] to any person because of his race" "any of the accommodations, advantages, facilities or privileges of such public accommodation," just as the Human Relations Act says.

So how do we show denial because of their race?

Let's assume, for the moment, that everything the Club said is true. There's still a big unanswered question: once they realized they were overbooked, how did they choose which money to refund?

The most recent members? Did they do that for individual white members, too? What about predominantly white day camps?

On its face, the Storybrook Day Camp story sounds favorable to the Valley Swim Club's position, but upon closer inspection it's another diverse day camp whose money was refunded after they showed up. Like the "statistics" described by the Pennsylvania Supreme Court, the presence of another minority Day Camp which was excluded might be very damaging to the Swim Club's defense, unless they can show similar exclusions / refunds of white camps or members.

But I think they've got an even bigger problem: we're having a debate they obviously did not have when they refunded the money. The concern stated at the time was over "complexion" and "atmosphere."

That's not the same thing as their website says, that they "quickly learned that we underestimated the capacity of our facilities and realized that we could not accommodate the number of children from these camps."

And it gets worse:

Apparently, the way Duesler handled it was to refund Wright's check and tell her that the club membership overthrew his decision "by voting to disinvite us," Wright said.

Well, that's news to Valley Club member Jim Flynn. Standing in front of the club - which was padlocked yesterday - Flynn seethed over the way he said Duesler has handled things.

"To my knowledge, the members were not involved in any of the decisionmaking," says Flynn, 41, a Fox Chase resident who pays a $700 membership for a family of four. "As far as I know, all we recommended was to change the time that [the campers] came, from the afternoons to a nonpeak time. We never recommended to disinvite them."

As for Duesler's "complexion" comment, he said, "I couldn't believe he said that. . . . It was insensitive and inflammatory. Look, I'm not naive enough to think that racism doesn't exist here, but I don't want the good people's names at this club to be smeared."

And that's what will probably sink the Swim Club's defense: they can't get their stories straight. At some point, even the most open-minded juror can tell you're just treading water. 

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[You may wish to see my follow-up post, How The Valley Swim Club Racial Discrimination Lawsuit Will Go Down]

NBC Philadelphia says:

More than 60 campers from Northeast Philadelphia were turned away from a private swim club and left to wonder if their race was the reason.

"I heard this lady, she was like, 'Uh, what are all these black kids doing here?' She's like, 'I'm scared they might do something to my child,'" said camper Dymire Baylor.

The Creative Steps Day Camp paid more than $1900 to The Valley Swim Club. The Valley Swim Club is a private club that advertises open membership. But the campers' first visit to the pool suggested otherwise.
 
"When the minority children got in the pool all of the Caucasian children immediately exited the pool," Horace Gibson, parent of a day camp child, wrote in an email. "The pool attendants came and told the black children that they did not allow minorities in the club and needed the children to leave immediately."
 
The next day the club told the camp director that the camp's membership was being suspended and their money would be refunded.

Bad enough. Then comes the kicker:

The explanation they got was either dishearteningly honest or poorly worded.
 
"There was concern that a lot of kids would change the complexion … and the atmosphere of the club," John Duesler, President of The Valley Swim Club said in a statement.

Wow.

Refusing access to a public pool because of someone's "complexion" is illegal, a violation of the Pennsylvania Human Relations Act, specifically 43 P.S. § 955(i)(1):

§ 955.  Unlawful Discriminatory Practices

It shall be an unlawful discriminatory practice, unless based upon a bona fide occupational qualification, or in the case of a fraternal corporation or association, unless based upon membership in such association or corporation, or except where based upon applicable security regulations established by the United States or the Commonwealth of Pennsylvania:

* * *

(i) For any person being the owner, lessee, proprietor, manager, superintendent, agent or employee of any public accommodation, resort or amusement to:
 
(1) Refuse, withhold from, or deny to any person because of his race, color, sex, religious creed, ancestry, national origin or handicap or disability, or to any person due to use of a guide or support animal because of the blindness, deafness or physical handicap of the user or because the user is a handler or trainer of support or guide animals, either directly or indirectly, any of the accommodations, advantages, facilities or privileges of such public accommodation, resort or amusement.

The key term there is "public accommodation." Does that include a nominally private swim club which leased access to nonmembers then refused to honor it?

The Human Relations Act defines "public accommodation" as:

(l) The term "PUBLIC ACCOMMODATION, RESORT OR AMUSEMENT" means any accommodation, resort or amusement which is open to, accepts or solicits the patronage of the general public, including but not limited to inns, taverns, roadhouses, hotels, motels, whether conducted for the entertainment of transient guests or for the accommodation of those seeking health, recreation or rest, or restaurants or eating houses, or any place where food is sold for consumption on the premises, buffets, saloons, barrooms or any store, park or enclosure where spirituous or malt liquors are sold, ice cream parlors, confectioneries, soda fountains and all stores where ice cream, ice and fruit preparations or their derivatives, or where beverages of any kind are retailed for consumption on the premises, drug stores, dispensaries, clinics, hospitals, bathhouses, swimming pools, barber shops, beauty parlors, retail stores and establishments, theatres, motion picture houses, airdromes, roof gardens, music halls, race courses, skating rinks, amusement and recreation parks, fairs, bowling alleys, gymnasiums, shooting galleries, billiard and pool parlors, public libraries, kindergartens, primary and secondary schools, high schools, academies, colleges and universities, extension courses and all educational institutions under the supervision of this Commonwealth, nonsectarian cemeteries, garages and all public conveyances operated on land or water or in the air as well as the stations, terminals and airports thereof, financial institutions and all Commonwealth facilities and services, including such facilities and services of all political subdivisions thereof, but shall not include any accommodations which are in their nature distinctly private.

A "swimming pool" is thus by definition a public accommodation unless it is "in [its] nature distinctly private."

Though nearly forty years old by this point, one of the key cases before the Pennsylvania Supreme Court held a dining hall connected to a fraternal organization was a public accommodation because:

We believe that the Superior Court dissenters were correct in concluding that 'by its practice of opening its dining room to non-members, subject only to the limitation that they be of the Caucasian race and invited by a member, [the lodge] has brought itself within the ambit of a 'public accommodation' as defined by the act.' Having done so, it has also brought itself within the prohibition of § 5, as above set out, at least to the extent of its dining and bar facilities. ... The lodge concedes that any member of the general public who is of the Caucasian race and who is invited by a member of the lodge is welcome in its dining room. As aptly stated by the Superior Court dissenters: 'The interests of privacy and exclusiveness of association which the Act acknowledged by creating its exclusion for fraternal organizations have been compromised by the policies of the organization itself. Any member of the public, regardless of affection or disaffection for the [lodge] and regardless of eligibility for membership (as in the case of women and children) may intrude upon the privacy and exclusiveness of the Moose dining room, so long as there is some member of the Moose who will stand accountable for his conduct while on the premises . . . that is, any Caucasian member of the public.'

...

There is, of course, no question that when the lodge leases its facilities to nonmembers, a place of public accommodation exists and the lodge does in fact follow a nondiscriminatory policy in such circumstances. The opening of the facilities to guests of members is a difference in degree rather than in character, and each constitutes a step beyond the limited area of immunity granted by the Human Relations Act.

Commonwealth Human Relations Comm'n v. Loyal Order of Moose, 448 Pa. 451, 458–59, 294 A.2d 594, 597–98 (1972).

Take a look at The Valley Club's membership applications. There doesn't appear to be any membership "eligibility" issues at all; at most, "membership" is simply paying one's dues. There's good odds a court would say the pool is always a public accommodation, regardless of the "membership."

But they've got a bigger problem than that: as the Pennsylvania Supreme Court held, "There is, of course, no question that when the lodge leases its facilities to nonmembers, a place of public accommodation exist."

That's exactly what happened here: The Valley Club leased access to the pool to The Creative Steps Day Camp. There's "no question" they were not permitted to discriminate on the basis of race.

See you in court, guys.

[UPDATE: Two issues have come up since the initial story.

First, the Camp apparently paid $1950 for memberships, so "leasing" isn't the issue. However, as noted above, and unlike the fraternal organizations protected by the Act, the Swim Club doesn't appear to have any "membership" requirements at all -- pay your dues and you're in. As such, they likely "compromised" any "interests of privacy and exclusiveness of association" they may have had as a "distinctly private" entity, and so are a "public accommodation" nonetheless.

Second, the Inquirer notes:

Several parents and the camp are looking into possible legal action against the club, said Staci Morgan, a Creative Steps board member and Philadelphia social worker.

Their options depend on whether the state Human Relations Commission has jurisdiction over the club's operations, said Michael Hardiman, a lawyer with the commission. Organizations that are "distinctly private" do not fall under that jurisdiction.

Hardiman would not say whether the Valley Swim Club met the commission's criteria for investigation.

The Pennsylvania Human Relations Commission has jurisdiction to investigate the club's operations and to determine for itself if the swim club is "distinctly private." The primary case, ironically, also involves a swim club:

If the Swim Club is a 'place of public accommodation,' it is subject to the Act and within the jurisdiction of the Commission, and it may not deny membership to persons on the basis of their race, color or ancestry. Beyond this, the language of the statute provides little guidance. A swimming pool may be a 'place of public accommodation' if it 'accepts . . . the patronage of the general public' and is not in its nature 'distinctly private.' These references to the general concepts of 'public' and 'private' take on meaning only as applied to specific factual situations. The appropriate body to make such applications is the Commission, which is charged by the Legislature with administering the Act and is empowered not only to promulgate rules and regulations but also to formulate policies to effectuate the provisions and purposes of the Act.

Commonwealth, Pennsylvania Human Relations Comm'n v. Lansdowne Swim Club, 515 Pa. 1, 7–8, 526 A.2d 758, 761 (1987).

As I noted above, the Valley Swim Club has likely forfeited whatever interests it had in exclusivity by not actually being exclusive and by taking the Camp's money in the first place.

A simple question that could settle the issue entirely is: does the Club permit members to bring nonmembers with them? If so, then Loyal Order of Moose would hold that, as a matter of law, the Club is a "public accommodation."] 

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At The National Law Journal, Nick Akerman, a partner at Dorsey & Whitney, has a thorough argument that the Computer Fraud and Abuse Act ("CFAA") should, and likely will, be applied against employees who leave with trade secrets or other proprietary / confidential information for use at their new jobs:

The Computer Fraud and Abuse Act, a federal criminal statute outlawing the theft of data, permits a company that "suffers damage or loss" by reason of a violation of the CFAA, to "maintain a civil action against the violator" for damages and injunctive relief. 18 U.S.C. 1030(g). Since [Pacific Aerospace & Electronics Inc. v. Taylor, 295 F. Supp. 2d 1188, 1196 (E.D. Wash. 2003)], there has developed a body of district court opinions that refuse to apply the CFAA against employees who steal their employer's data. This article will explain why these opinions are not likely to survive appellate review; it will also provide a strategy to avoid the application of these decisions.

Well worth reading if you come across trade secrets theft in your practice. Akerman may be the most experienced attorney in the country on this developing body of law, and it shows.

I agree with him, but for a more general reason. Since I practice in the Third Circuit (Pennsylvania, New Jersey and Delaware), I'll focus on the Third Circuit's most recent opinion on the CFAA:

The District Court focused on the criminal provisions and found it difficult to infer a civil application within the statutory framework and concluded that it could not do so, although the Court did acknowledge that several other courts had determined to the contrary. However, we conclude that not only the relevant case law, but also the plain language of the statute, militate in favor of the availability of a civil remedy, and specifically, the type of injunctive relief sought by the PC plaintiffs.

Numerous courts have recognized that a civil cause of action is apparent from the text of § 1030(g). Although we acknowledge the criminal thrust of the section in general, as it is found in Title 18, there is ample authority for permitting civil actions to proceed based on violations of the section pursuant to the language of § 1030(g). See, e.g., Theofel v. Farey-Jones, 359 F.3d 1066, 1078 (9th Cir. 2003) ('The civil remedy extends to 'any person who suffers damage or loss by reason of a violation of this section.'') (emphasis in original); I.M.S. Inquiry Mgmt. Sys., Ltd. v. Berkshire Info. Sys., Inc., 307 F. Supp. 2d 521, 526 (S.D.N.Y. 2004) (stating that § 1030(g) affords civil action for any violation of CFAA). Accordingly, we conclude that civil relief is available under § 1030(g).

P.C. Yonkers, Inc. v. Celebrations the Party & Seasonal Superstore, LLC, 428 F.3d 504, 511 (3d Cir. 2005).

In one sense, the above looks like a straightforward review of a criminal statute which permits a civil remedy. The statute says there's a remedy, so we'll enforce it.

In another sense, we're witnessing a big change in the way Circuit Courts and the Supreme Court interpret federal statutes which provide plaintiffs with civil relief for criminal conduct.

Like the CFAA, The Racketeer Influenced and Corrupt Organizations Act ("RICO") creates a civil remedy for those persons injured by racketeering activities, typically mail or wire fraud. Also like the CFAA, numerous District Courts have contorted the brief text of the RICO Act to enact confusing, complicated barriers to relief without much basis in the Act itself. For example, numerous District Courts required plaintiffs show "first-party reliance" on the alleged mail or wire fraud (rather than merely injury related to the racketeering as a whole) and required that the plaintiff prove the defendants used a formal racketeering structure.

In the past year, the Supreme Court has torn down both of these barriers. See Bridge v. Phoenix Bond & Indem. Co., 128 S. Ct. 2131, 2145 (2008)(eliminating the "reliance" requirement, noting "Whatever the merits of petitioners’ arguments as a policy matter, we are not at liberty to rewrite RICO to reflect their — or our — views of good policy. We have repeatedly refused to adopt narrowing constructions of RICO in order to make it conform to a preconceived notion of what Congress intended to proscribe."); Boyle v. United States, ___ U.S. ____, No. 07-1309, 2009 U.S. LEXIS 4159, at *22–23 (Jun. 8, 2009)(eliminating the "structure" requirement, noting "The fact that RICO has been applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It demonstrates breadth.”).

Like the RICO Act, the broad text of the CFAA "does not demostrate ambiguity[,] it demonstrates breadth." If the Circuit Courts and the Supreme Court interpret the CFAA the same way they've interpreted the RICO Act, we'll see a lot more of these claims in the future.

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The Conglomerate catches a political bait-and-switch afoot in the TARP regulations:

After the hullabaloo about the $440,000 AIG retreat in October 2008, and news in January of John Thain's $1.2 million office renovations, and the Citigroup plane fiasco, the luxury expenditures section of ARRA was inevitable.  The Act requires that the boards of TARP recipients adopt "a companywide policy regarding excessive or luxury expenditures ..." . . .

Buried in Treasury's June 15 interim final rule on TARP Standards for Compensation and Corporate Governance is a requirement that the boards of TARP recipients by September 19th "adopt an excessive or luxury expenditures policy, provide this policy to Treasury and its primary regulatory agency, and post the text of this policy on its Internet website, if the TARP recipient maintains a company website.  After adoption of the policy, the TARP recipient must maintain the policy during the remaining TARP period." 

As the executive summary explains, Sarbanes-Oxley provided a similar method of disclosure of codes of ethics under Section 406.  this doesn't work.  Letting companies make up their own rules and then disclose when they break them is a bad idea.  Clearly the incentive for the company is to make the policy as weak as possible.  

Note that these regulations, unlike Section 406, don't require disclosure of any waivers granted from the policy, just the policy itself and any amendments to it. 

It's just part of the modern Orwellian trend among corporations in which policies are given names describing them as the exact opposite of what they really are.

"Document retention" policies usually say little about retaining documents and a whole lot about destroying them. "Employee leave" and "sexual harassment" policies typically create Byzantine procedures for taking leave and filing complaints designed to provide a basis for terminating the employee or ignoring the harassment.

No surprise to see the government getting in on the act.

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Professor Richard Epstein of the University of Chicago published an opinion piece in yesterday's Wall Street Journal on medical malpractice.

"Embarrassingly ignorant" would be a charitable description. Eric Turkewitz calls it "flat out false."

How bad was it? Turkewitz caught two outright falsehoods:

American courts commonly think it proper for juries to infer medical negligence from the mere occurrence of a serious injury.

and

American plaintiffs are sometimes spared the heavy burden of identifying particular acts of negligence, or of showing the precise causal connection between a negligent act and an actual injury.

Neither of these are true, as described in Turkewitz's article.

But it doesn't even end there. Here's another line:

American judges frequently let juries decide whether honest mistakes are negligent.

It is hard to put into words how embarrassing, shocking and insulting it is to see a law professor who has written textbooks on torts question how we (or who we let) "decide whether honest mistakes are negligent."

An "honest mistake" is negligent. It's what it means to have been negligent: you made a mistake. You neglected your duty. You failed to exercise the care that a reasonable, prudent person would exercise under the same circumstances. If a physician had intended the harm, it wouldn't be medical malpractice, it would be battery, an intentional tort.

And that is how it should be: a physician should be responsible for damages they caused the patient by neglecting their duty. If the patient neglected to drive safely, ran a red light, and injured the physician, the patient would be responsible for the damages they caused the physician. It's why we have insurance: to pay for the damages we mistakenly cause others.

Putting aside Professor Epstein's "honestly mistaken" description of medical malpractice law, let's consider his solution to the "disturbing" medical malpractice system (which he vaguely and ridiculously concludes causes a full 10% of US health costs by way of defensive medicine):

What is needed is the replacement of juries with specialized commissions like those in France, which help reduce litigation expenses and promote uniformity in case outcomes across regions.

Naturally, Epstein doesn't go into any detail about his proposal, so there's nothing even to critique.

On the subject, however I recently noted that Philip K. Howard's health courts proposal (in the New York Times) was "unlikely to make results any more 'reliable' than now, unless you presume that judges are systematically biased in favor of one side or the other" and that "Howard's process for choosing a 'neutral' expert and the materials they opine on will probably make medical malpractice litigation more contentious, expensive, and uncertain."

Epstein's ephemeral proposal would likely suffer the same problems if he actually spelled out the details. But he has no need to worry about that, he can just 'negligently' draft a new column filled with errors about some other field of law.

Finally, he concludes:

The best reform would be to allow physicians, hospitals and patients to contract out of the liability mess by letting the parties reject state-imposed malpractice rules. They could, for example, choose to arbitrate, to waive jury trials, or to limit damage recovery. Stiff competition and the need to maintain reputation should keep medical providers in line in such a system.

That is to say, Epstein wants to transplant to medicine the same fine extrajudicial system we use for credit cards, used car buying, and check-cashing.

Thanks, but no thanks.

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The American Constitution Society's blog reports:

The Supreme Court ruled today that Arizona public school officials violated the constitutional rights of a teenage girl when they searched her for prescription-strength ibuprofen.

"The issue here is whether a 13-year-old student's Fourth Amendment right was violated when she was subjected to a search of her bra and underpants by school officials acting on reasonable suspicion that she had brought forbidden prescription and over-the-counter drugs to school," Justice David Souter wrote for the 8-1 majority in Safford Unified School District v. Redding. "Because there were no reasons to suspect the drugs presented a danger or were concealed in her underwear, we hold that the search did violate the Constitution ...." The justices, however, overturned a federal appeals court decision that found the school official who performed the search could be held personally liable.

Here's the background, from The Blog of the Legal Times:

The case involved Savana Redding, then 13, who attended a public school with a zero tolerance policy toward possession of all drugs. Acting on reports that the girl had prescription-strength ibuprofen pills, an assistant principal ordered the search to be conducted by the school nurse. She was told to strip to her underwear and pull out her bra and underpants to show that she was not hiding individual pills. None were found. Her mother sued the school district claiming a Fourth Amendment violation, and last year an en banc ruling by the U.S. Court of Appeals for the 9th Circuit found that the search was unconstitutional and the assistant principal was not immune from liability.

I wrote recently about "qualified immunity" in the California Proposition 8 lawsuit, the doctrine which establishes that government agents are not liable for constitutional violations unless the right they allegedly violated was "clearly established" at the time it was allegedly violated. The Supreme Court held today that student's right not to be strip-searched without cause was not previously clearly established, but is now clearly established.

Jonathan Turley highlights Justice Souter writing for the Court (in what is likely his last opinion), showing that he truly understood the core privacy issues:

Savana’s subjective expectation of privacy against such a search is inherent in her account of it as embarrassing, frightening, and humiliating. The reasonableness of her expectation (required by the Fourth Amendment standard) is indicated by the consistent experiences of other young people similarly searched, whose adolescent vulnerability intensifies the patent intrusiveness of the exposure. ... The common reaction of these adolescents simply registers the obviously different meaning of a search exposing the body from the experience of nakedness or near undress in other school circumstances.

Changing for gym is getting ready for play; exposing for a search is responding to an accusation reserved for suspected wrongdoers and fairly understood as so degrading that a number of communities have decided that strip searches in schools are never reasonable and have banned them no matter what the facts may be ...

SCOTUSBlog's quick update (I'm sure they'll write more later) takes issue with the vague nature of the new rule:

The ruling in Safford United School District v. Redding (08-479) made clear that, while the Court seriously frowns on strip searches of students, those have not been forbidden totally; it depends, in other words.

The other constitutional rule — searches of public school students’ backpacks, notebooks, other belongings, outer clothing, and pockets are generally allowed if they are based on “reasonable suspicion” — remains as it has for a quarter-century, but with a small amount of refinement, the exact scope of which is not quite clear.

We're guaranteed to see more such Fourth Amendment school lawsuits in the future, particularly in light of the removal of qualified immunity for future defendants. Hopefully, we'll also see better behavior by school administrators.

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The WSJ Law Blog finds easter eggs for consumers of financial products buried in the proposed financial regulation overhaul:

The [not-yet-created Consumer Fraud Protection Agency] should be directed to gather information and study mandatory arbitration clauses in consumer financial services and products contracts to determine to what extent, and in what contexts, they promote fair adjudication and effective redress. If the CFPA determines that mandatory arbitration fails to achieve these goals, it should be required to establish conditions for fair arbitration, or, if necessary, to ban mandatory arbitration clauses in particular contexts, such as mortgage loans.

...

Although arbitration may be a reasonable option for many consumers to accept after a dispute arises, mandating a particular venue and up-front method of adjudicating disputes – and eliminating access to courts – may unjustifiably undermine investor interests. We recommend legislation that would give the SEC clear authority to prohibit mandatory arbitration clauses in broker-dealer and investment advisory accounts with retail customers.

Business Insider worries about the unintended consequences:

That seems a clear way of increasing the costs of broker-dealer and investment advisory costs, which may mean that smaller customers find that brokerages are even less likely to deal with them than before. As usual, there seems to be very little thought given to how brokers will react to having the increased risk of litigation imposed upon them.

What's more, there are serious questions about whether it makes sense to burden the court system with additional litigation that a ban on mandatory arbitration will sure spur. In effect, a part of the costs of disputes between brokers and their customers are being transferred to the taxpayer who will pay the costs for the extra-burden on courts. It's far from clear why this shift in cost from the parties to the agreement to taxpayers is warranted. We can squint our eyes and see this as something of a bailout of customers who wind up unhappy with their broker.

Last I checked, "wind[ing] up unhappy with [your] broker" wasn't worth a dime in a court of law, at an arbitration, or anywhere else. The investors aren't "unhappy" because their broker didn't get them a cheese wheel for Christmas, they're "unhappy" because their broker breached their contractual and fiduciary duties and lost a ton of the investor's money. It takes an awful lot of "squinting" to see a months-or-years-long expensive lawsuit to get back the money that someone else lost as a "bailout."

Most "mandatory arbitration clauses in consumer financial services and products contracts" force the disputes be heard in FINRA's Dispute Resolution process. As The National Law Journal reported at the end of March,

FINRA — the Financial Industry Regulatory Authority — oversees nearly 5,000 brokerage firms, 173,000 branch offices and 659,000 registered securities representatives. It describes its chief role as protecting investors by maintaining the fairness of the U.S. capital markets. ...

"We don't have official projections for 2009, but if the trend continues, we're probably looking at a high that will match what we saw in '03 and '04," said FINRA spokesman Brendan Intindola.

Arbitration cases filed in 2003 and 2004 — the largest number in 14 years — almost reached the 9,000 mark and were driven by the bursting of the dot-com bubble and the subsequent decline in the equity markets. In 2007, slightly more than 3,000 cases were filed, and in 2008, nearly 5,000.

Lawyers who represent customers and industry members generally believe that FINRA will be able to manage the dramatic increase in its arbitration workload, but they are divided on whether its arbitration panels — charged with industry bias in the past — now provide a level playing field to those using the process.

"The general perception is it is very tilted," said one practitioner who asked for anonymity. "Even if only one-third of the panel is from industry, that's the person with alleged expertise and who has disproportionate sway on the panels."

Broker/Dealer arbitrations are common, but banning them wouldn't open the floodgates: financial products consumers file under 10,000 claims filed nationwide. Keep in mind that essentially every dispute you have with your broker/dealer is forced into FINRA arbitration, including no-brainer claims like the return of a promissory note, so these numbers may be inflated to some degree. It's hard to say what percent of these filings claim substantial losses due to malfeasance.

More importantly, though glossed over by Business Insider, full-fledged civil litigation in open court is not fun for anyone involved. Even within confidential arbitration, just last month FINRA quietly withdrew a proposal that would have permitted more extensive discovery into the financial records of investors bringing claims against their financial advisers, in light of numerous complaints that such a change would subject investors to a "financial colonoscopy." Moving these types of cases into the civil court system would permit defendant banks and investment advisers to dig very deeply into the personal and financial histories of investors bringing suit, far deeper than they would be permitted to do in an arbitration.

For most of the individual claims, I am not too concerned about the arbitration process, as it provides wealthy investors (who make up most of the filings) a simple, relatively convenient and very private way in which to seek redress for their losses, and they will be adequately represented by paid counsel throughout the process. The problems for everyone else, however, are twofold:

• It's not clear whether a group of injured inventors may pursue a class action against a broker-dealer, investment bank or investment adviser. FINRA's Code says it is not applicable to class actions, and an increasing number of courts have held in other contexts that bans of class actions are illegal, but the law here is not as clear as it should be.
   
• The selection process for these arbitrators is not transparent. @phila_lawyer is right that FINRA seems to prefer arbitrators familiar with the financial industry; that's not necessarily evidence of bias, but it's nonetheless problematic, since it exposes the process to 'capture' by the industry and, as noted above, such 'insiders' often hold undue sway on panels.

As such, it's certainly worth a look into the issue, which is all the Obama plan proposes.

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The National Law Journal fills us in on the whopping $4.1 billion wrongful termination arbitration award against an employer that fired an executive without cause, which was recently upheld by a trial court:

NLJ: How did this award get so big?

MY: It got this way because the defendant, the employer, first of all, apparently had terminated a high-level employee without cause. He [the ousted executive] then sued, and the defendant, who at that time had a lawyer, moved to compel arbitration.

At that point, the defendant made some mistakes. It appears the defendant neglected to, or decided not to, participate in discovery and withheld financial information not only asked for in discovery requests but ordered by the arbitrator.

...

And what happened next is really the telling part: The [retired] judge set the hearing for the arbitration, and the defendant wrote a letter to the arbitrator saying, "I'm not going to show up." When there wasn't any information forthcoming from the defendant, what the arbitrator did was look at what information was available about the financial situation of the company and applied adverse inferences against the defendant, essentially filling in the gaps in the story presuming it would come out in favor of the plaintiff. That was really where the numbers started to scale.

...

NLJ: What was special about this executive compensation agreement?

MY: This agreement said that the employee was going to be paid a commission structure of 5 percent of gross sales. What was significant about this one is that the agreement provided that if he is terminated without cause he is entitled to receive his commissions on an ongoing and permanent basis. ...

One big factor was trying to figure out what those gross sales were going to be. Because the defendant didn't provide any financial information, the arbitrator and plaintiffs didn't have a lot to go with in trying to predict where the company was going to go. They looked at a letter the defendant sent to shareholders talking about revenue in one month being $535,000 and then talking about the expected growth rates of 20 percent or 10 percent per month. It's not a realistic rate [that] the company really would grow 10 percent per month in perpetuity, but because the defendant didn't come forward with any evidence, because they didn't provide anything in discovery, these adverse inferences were then applied and the arbitrator essentially assumed that those figures were going to be correct. If you have a commission structure based on those kinds of growth numbers, you get up to the $1 billion pretty quickly. The punitive damage award was brought in at essentially triple the commission award.

And there you go. It seems like the defendant was destined to lose anyway, otherwise he or his lawyers would have been able to mount a defense initially.

The part that's odd is how he didn't seem to grasp the severe ramifications of the employment agreement, the same one he had used to entice the employee to work there in the first place. I can see the defendant not expecting a $4.1 billion award, but he had to expect a serious walloping from 5% of gross sales forever.

I'm betting the defendant could have reduced that award by far more than 90% if he had fought it. So we'll say that 99.99% of success is showing up.

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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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Buried in this NYTimes article about the massive layoffs at White & Case, and the general reductions at big corporate law firms, is this critical fact:

That wall [i.e., the slowdown of work after Lehman Brothers' collapse] was especially hard because — remarkably like such ventures as the Mafia or the ice-cream vendor — many large firms operate on a cash-in-hand basis, with insufficient reserves to weather a slump.

With Wall Street in a meltdown, Big Law suddenly found it not just indecorous but impossible to pay young lawyers six months out of law school $160,000 a year to stare at their hands. (Indeed, after offering jobs to dozens of third-year law students last fall, White & Case told 60 percent of them they would have to wait a year to start.)

That's an insult to ice-cream vendors, who at least recognize the seasonal nature of their product.

Law students and young lawyers, burn that fact into your brain and never forget it: big corporate law firms are transient, risky businesses. Your first sign of a problem may be a friend texting you "sorry to hear about your firm."

Indeed, it's often worse than cash-in-hand, with many firms going deeply into short-term debt at the end of the year to fund the bonuses, debt which they then pay down throughout the year.

Don't let the big buildings, fancy summer associateship, corporate clients, or even decades-old names fool you. To the extent these firms remain extant these days, it is by swiftly firing people just like you.

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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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Two interesting stories today.

Twittering Teens Terrorize the City:

A mob of tech-savvy teens tweeted their way into the same place in South Philly over the weekend and then went wild.

"It's kind of a new dynamic that's growing, with large groups of juveniles using the social networks to get out the word," said Philly police Lt. Frank Vanore. "We're not going to tolerate it."

Hundreds of teens who coordinated through MySpace and Twitter, hijacked a taxi at 12th and South Street, assaulted and yanked a woman and passenger out of their car and vandalized a convenience store at Broad and Catharine Streets.

Most of the teens were between the ages of 14 and 17.

Judge Reprimanded for Friending Lawyer and Googling Litigant:

A North Carolina judge has been reprimanded for “friending” a lawyer in a pending case, posting and reading messages about the litigation, and accessing the website of the opposing party.

Judge B. Carlton Terry Jr. and lawyer Charles Shieck both posted messages about the child custody and support case heard last September, the Lexington Dispatch reports. Terry also accessed the website of the opposing litigant and cited a poem she had posted there, according to the April 1 public reprimand (PDF) by the North Carolina Judicial Standards Commission.

The opinion says Terry and Shieck first discussed Facebook in chambers in the presence of the opposing lawyer in the case, Jesse Conley, who said she didn’t know what Facebook was and didn’t have time for it. After the discussion, Terry and Shieck friended each other. Shieck later posted a Facebook reference to the issue of whether his client had had an affair, saying “How do I prove a negative?” according to the opinion. Shieck also wrote, “I have a wise judge.”

...

The opinion says the ex parte communications and the independent gathering of information indicated a disregard of the principles of judicial conduct.

These feel like "new" issues, but they're not. The law of social media is the same as the law of everywhere else. Those aren't the first teens to vandalize an area, nor is Judge Terry the first to seek out information on litigants outside of the court.

The difference is, as Seth Godin put it, "everything goes on your permanent record."

Ten years ago, no one would have found any of the teens and the judge's prying would have gone unnoticed. Now it's plastered everywhere on the internet, or at least available through a quick subpoena.

Where will we be ten years from now?

Judge Sotomayor is getting grilled over a line in a speech several years ago. What if lurking in Google's permanent memory we saw that @soniasotomayor had been invited to 12th and South Street?

The New York Times' "Room for Debate" covered the concern about too much publicity and too much social media recently, with Clay Shirky at NYU writing: