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

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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At the Fulton County Daily Report:

For $95, plaintiffs lawyers can buy a book that teaches them how to appeal to jurors' basic survival instincts, those that emanate from humans' "Reptilian" brains. ...

But in a DeKalb County wrongful death trial last month, [Plaintiffs lawyer Don] Keenan found that defense lawyers will also buy the book, "Reptile: The 2009 Manual of the Plaintiff's Revolution" -- and use it against him.

Representing a movie theater and a security company accused of not doing enough to prevent a fatal gang shooting in the theater parking lot, W. Winston Briggs and Matthew G. Moffett read from the book and referred to it during closing arguments.

One of their PowerPoint slides read, "Let's see if we can scare them/It could have been anyone killed out there ... because it's a public danger there ... but if you give us $ that will somehow eliminate this danger/They call this their 'reptile' strategy."

The jury rendered a defense verdict.

Here's what I don't understand: how is a book written by the plaintiff's lawyer relevant to the facts of the case?

The Georgia Rules of Evidence provide:

Evidence must relate to the questions being tried by the jury and bear upon them either directly or indirectly. Irrelevant matter should be excluded.

The jury wasn't asked their thoughts and feelings about Mr. Keenan's advocacy methods. They weren't compelled, by force of the state, to leave their work and their families to render a verdict on the Reptile book. They were there because, as the article says, "21-year-old Jesus Silencio was shot to death in the parking lot of the Regal Hollywood 24 movie theater on Interstate 85" and his father, on Mr. Silencio's behalf, brought suit against the theater and its security company.

Reptile has nothing to do with those facts. If the book suggests lawyers do anything inappropriate, that, too, is irrelevant: if a lawyer uses improper advocacy methods at trial, the judge will give corrective instructions to the jury or, if need be, declare a mistrial.

The case was about, and should have remained about, Mr. Sliencio's claims against the theater. Somehow, it became a referendum on Mr. Keenan, and an unfair one at that. Was Mr. Keenan allowed to show the jury how many times the defense lawyers have been threatened with sanctions for spoliating evidence? Could he have copies of all the seminars at the Defense Research Institute that the defense lawyers attended? Was he allowed to introduce evidence establishing how insurance companies — including the Defendants' insurer, the real party at interest — spend millions every year on propaganda to taint juror's perceptions of the civil justice system?

Or were the defense lawyers allowed to cast stones from their glass houses?

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One of the true gems of the Internet is TED (Technology, Entertainment, Design), a nonprofit that invites luminaries from a wide variety of fields to give brief presentations about their signature ideas. A quick googling of "Best TED Talks" is well worth the hours of education and inspiration that will ensue.

I was thus disappointed to see that TED invited Philip K. Howard to talk about "Four ways to fix a broken legal system."

I have debunked Mr. Howard's work before (see my thoughts on his "Life Without Lawyers," his "health courts," and his claims about public support for tort reform). The bulk of his talk presents more of the same argument-by-anecdotes and generalized assertions that don't withstand a moment's scrutiny. Despite his claim around the 14:00 mark, I can safely assure my readers that we, as a society, do in fact still have seesaws, swingsets, and jungle gyms. Moreover, his overall argument that these problems are so insidious that you don't even notice them is, to me, unpersuasive.

About halfway through, Mr. Howard moves onto his four propositions, which are:

1. Judge law mainly by its effect on society, not individual situations
2. Trust in law is an essential condition of freedom. Distrust skews behavior towards failure
3. Law must set boundaries protecting an open field of freedom, not intercede in all disputes
4. To rebuild boundaries of freedom, two changes are essential: simplify the law and restore authority to judges and officials to apply law.

To call these propositions "vague" is an understatement.

That said, I generally agree with the first three. Indeed, it seems the irony of Mr. Howard's first proposition was lost on him; although his talk only mentions the former, for each funny story of a fishing lure with a warning label, there's a car manufacturer that bragged about avoiding a recall and ended up needlessly and carelessly endangering millions of people.

The fourth proposition, however, is where Mr. Howard and I diverge. It's not that I believe the law shouldn't be simple or that judges shouldn't apply the law; of course I do. I just don't believe it how he means it, which is to deny individuals the right to a jury trial.

But there's a bigger problem with his talk: the "authority to judges and officials to apply law" he claims should be "restored" never existed, and for good reason.

As part of his simplification argument, Mr. Howard gives, as an example, the United States Constitution. It's "only 16 pages" yet "worked well for over 200 years." Let's take a look at the Seventh Amendment thereto:

In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.

(See the link for primary sources on the Amendment.)

I don't know what Mr. Howard thinks the words "common law" and "rules of the common law" mean there, but to the Framers of the Constitution, "common law" referred to hundreds of years of confusing — and sometimes contradictory — English court opinions.

So much for simplification.

But simplification isn't really what Mr. Howard wants; he wants to get rid of "the right of trial by jury."

That's not "rebuilding" freedom, nor is it "restoring" the way the Founders intended the civil justice system to work. It is a rescission of the freedoms guaranteed by the Seventh Amendment, which expressly preserved the same right to jury trial that was embodied in the Magna Carta and was recognized long before.

Indeed, the English "common law" of which the Framers were so enamored did not give judges any "authority" to usurp the fact-finding role of the jury. Mr. Howard claims that he wants to give judges the power "to apply law," but they have always had that power -- what Mr. Howard really wants is to give judges the power to determine facts, a power that the Framers of the Constitution expressly denied them.

Mr. Howard doesn't want to fix the legal system, he wants to break it.

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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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As The Recorder reported,

Four states and dozens of California cities and water districts have joined a qui tam lawsuit, unveiled this week, seeking millions of dollars in damages against a company for allegedly supplying customers with substandard PVC pipe.

The suit, brought against J-M Manufacturing Co. and its former parent company, Formosa Plastics Corp., alleges that J-M sold PVC pipe that had tensile strength below industry standards, and that the company deceived customers by choosing stronger samples for independent certification of its product. The suit also contends that under the company president, Walter Wang, it "implemented a series of 'cost-cutting' measures that undermined the quality of J-M's PVC pipe products," including filling supervisory positions with less experienced managers.

In one corner, we have the Defendants:

"At JM Eagle, we stand 100 percent behind the quality of our products," said spokesman Marcus Galindo. "Any claim that Mr. Wang or anyone at JM Eagle sacrificed the quality of our product for profit is ludicrous. We're a company that cares about more than just the bottom line."

According to the complaint, Hendrix was fired a week after he wrote a memo informing management that the tensile strength of the PVC pipe was below the standard required by independent certification agency Underwriters Laboratories Inc.

Galindo discounted that claim, saying outside agencies make unannounced visits to the company's plants to perform regular audits of its products.

Further, Galindo noted, over the three years that the federal government investigated the claim, it "never stopped purchasing pipe from us. They have decided not to move forward and intervene in this case."

In the other corner, we have Phillips & Cohen LLP's press release:

Nevada, Virginia, Delaware, Tennessee, San Diego, Sacramento, San Jose, the Los Angeles Department of Water and Power and 39 other California municipalities and water districts have joined a whistleblower lawsuit seeking millions of dollars in damages from JM Eagle and its former parent company, Formosa Plastics Corp. (USA), for supplying their water and sewer systems with pipes that JM knew were substandard. ...

"The decisions by so many states, cities and water districts to join this case show just how serious these allegations are," said Mary A. Inman, a San Francisco attorney with Phillips & Cohen LLP, which represents the whistleblower, the Commonwealth of Virginia, the State of Tennessee and 25 California cities and water districts. "With government entities struggling to meet their budgets, it's particularly important for them to recover their losses from any fraud."

As a result of the investigation into the quality of PVC pipe that JM Eagle has provided, the Nevada Department of Public Works, the cities of San Diego and Sparks, Nevada, as well as at least three water districts in Nevada and California (Truckee Meadows Water Authority, North Marin Water District and Alameda County Water District) have removed JM products from their approved-products lists for purchases.

In a case of this size, a government's decision to intervene or not is more political than legal. I don't mean that in a pejorative sense: when a government brings a multi-million-dollar lawsuit against one of its major suppliers, there's a lot more at stake than a settlement or judgment.

It's thus hard to read the tea leaves on the differing federal and state decisions. I'm sure the plaintiff's lawyers are quick to remind that the federal government usually does not intervene, and that the non-intervention is likely a product of limited resources and the federal government's belief that the state intervention (and the experience of the plaintiff's counsel) will ensure the claims are prosecuted in a diligent and thorough manner.

On the flip side, I'm similarly sure the defendants' lawyers consider the state interventions nothing more than cash-strapped states looking for "jackpot justice" from a profitable business.

An interesting one to watch, not least because the plaintiff's claims are predicated entirely upon violation of third-party standards and codes (e.g., Underwriters Laboratories, American Water Works Association, American Society for Testing and Materials, and FM Approvals) that are incorporated into the government contracts.

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Matthew Belloni at The Hollywood Reporter, Esq., has a copy of the 'Tonight Show' contract that's been the subject of much speculation over the past few weeks. He can't post the contract itself (I asked), but he described with considerable detail the parties' positions:

[W]e've finally tracked down a copy of the O’Brien contract, and -- lo and behold -- NBC did define “Tonight” as the series that airs at 11:35 as far back as 2002. However, what may have emboldened NBC to move the program anyway was the absence of that key language from later amendments to the deal.

Read the whole piece for more.

As Belloni continues,

Insiders familiar with settlement negotiations say NBC jumped on that fact to argue that the "operative" deal was silent on the timeslot issue and even contained some NBC profit-participation boilerplate allowing NBC discretion to move shows as it chooses. 

One problem with that argument: Any lawyer worth his 5% commission knows you've got to read an amended contract in the context of all other prenegotiated elements. O'Brien's 2004 deal incorporated by reference and ratified all the terms of his prior deals -- including the "Tonight Show" definition -- and says any conflicts between NBC's standard terms and the negotiated terms are governed by what's been negotiated.

Fact is, an amendment is still an amendment, not a new deal, even if you also call it a separate agreement. NBC's argument that the amendment — which specifically incorporated the old deal — was nonetheless actually a wholly-new deal would have been charitably described as "novel," which in the law is often synonymous with "bad." I don't doubt that O'Brien's lawyers saw right through NBC's argument and held firm throughout the negotiations.

Most importantly, congratulations to O'Brien and his lawyers for keeping their eye on the ball for all these years: they contracted for — and this is the language in the contract — the "Tonight Show" defined as the "series that airs at 11:35," more specifically the "second network series after the end of primetime."

As I wrote in Time-Tested Advice For Young Lawyers About Contracts Which They Should Ignore, 

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.

O'Brien's lawyers realized that and didn't contract just for a particular name or for a bunch of legal gibberish, they contracted for a particular slot in the evening lineup. They understood the client's goals, recognized the potential risk, and dealt with both in the contract in a clear, unambiguous manner that withstood a serious challenge.

Crack open a bottle of champagne, Patty Glaser and Leigh Brecheen, and charge it to Conan's account. You earned it.

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All the signs were there:

[Dr. Rolando G. Arafiles Jr. had] a pattern of improper prescribing and surgical procedures — including a failed skin graft that Dr. Arafiles performed in the emergency room, without surgical privileges. He also sutured a rubber tip to a patient’s crushed finger for protection, an unconventional remedy that was later flagged as inappropriate by the Texas Department of State Health Services. ...

Dr. Arafiles was sending e-mail messages to patients about an herbal supplement he sold on the side. ...

The hospital administrator, Stan Wiley, said in an interview that Dr. Arafiles had been reprimanded on several occasions for improprieties in writing prescriptions and performing surgery and had agreed to make changes. Mr. Wiley, who said it was difficult to recruit physicians to remote West Texas, said he knew when he hired Dr. Arafiles that he had a restriction on his license stemming from his supervision of a weight-loss clinic.

In a surprise inspection last September, state investigators found several violations by Dr. Arafiles ...

Most doctors are competent and diligent professionals who, over the course of their careers, might breach the standard of care in a manner that causes significant harm to patients only a handful of times.

As I have written before, however, "Fact is, there is a small minority of doctors who are simply terrible at their jobs." The nationwide malpractice settlement numbers don't lie:

A few physicians were responsible for a large proportion of malpractice payment dollars paid: The 1 percent of physicians with the largest total payments in the NPDB were responsible for about 11.7 percent of all the money paid for physicians in malpractice judgments or settlements reported to the NPDB. The 5 percent of physicians with the largest total payments in the NPDB were responsible for just under a third (31.4 percent) of the total dollars paid for physicians. Eleven percent (11.6 percent) of physicians with at least one malpractice payment were responsible for half of all malpractice dollars paid from September 1, 1990 through December 31, 2006.

It looks like Dr. Arafiles was among the bottom-of-the-class physicians who shouldn't practice medicine at all.

At least that's what Anne Mitchell, the hospital's compliance officer, and two other nurses (one of them the hospital's quality improvement officer) thought, so they, as Texas law requires them to do, filed an anonymous complaint with the Texas Medical Board.

And what did they get in return for reaching out — through the appropriate, confidential, state-required channels — to protect patients?

They were fired then criminally prosecuted:

When she was fingerprinted and photographed at the jail here last June, it felt as if she had entered a parallel universe, albeit one situated in this barren scrap of West Texas oil patch.

“It was surreal,” said Mrs. Mitchell, 52, the wife of an oil field mechanic and mother of a teenage son. “I said how can this be? You can’t go to prison for doing the right thing.”

But in what may be an unprecedented prosecution, Mrs. Mitchell is scheduled to stand trial in state court on Monday for “misuse of official information,” a third-degree felony in Texas.

I wish I could say I was surprised, but I'm not: Texas is perhaps the most patient-unfriendly state in the union. Just last year, the American College of Emergency Physicians gave Texas an "A" for tort reform and an "F" for access to emergency care. That's no surprise: as tort reform goes up, care goes down. 

Tort reform wasn't enough, though. The doctors in Texas are apparently so bad they need not just special civil protections from patients and their lawyers, but also the threat of criminal prosecution looming over nurses and hospital compliance / quality improvement officers. 

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

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

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

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

So how did that happen?

Different facts.

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

At the Third Circuit, the Layshock panel noted:

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

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

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

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

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

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

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

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

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

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

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

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

Let me explain.

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

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

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

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

All of that happens on a lawyer's desk.

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

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

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

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

Merits Brief, pp. 17–18.

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

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

Id., pp. 44–47.

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

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

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

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

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

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

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The Racketeer Influenced and Corrupt Organizations Act ("RICO") is not all that complicated.

Section 1962(c) provides:

It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.

In case you think "racketeering activity" is too vague, don't worry — the RICO Act defines it specifically. If the plain meaning rule was applied as strictly as courts say it should be, then we would see these claims prevail in every case involving a systematic fraud.

Instead, over the years defense lawyers and activist courts have imposed a broad swath extra-statutory requirements on RICO claims, such as two separate requirements of "distinctiveness." A plaintiff alleging RICO claims must allege that the "enterprise" at issue is "distinct" from the "persons" in the enterprise, and must allege that the "enterprise" has a "distinct" structure separate from the racketeering.

Of course, if we applied the dual "distinctiveness" requirements the way defense lawyers say we should, then Al Capone and his organization couldn't be prosecuted for racketeering, because Capone's organization was not "distinct" from itself and because Capone and his organization had no structure "distinct" from the racketeering itself.

Thankfully, after a handful of recent Supreme Court cases recognizing the broad language of the RICO Act (e.g., the Cedric Kushner and Boyle cases) , common sense is beginning to prevail again in the federal courts:

In a major setback for several title insurers, a federal judge has refused to dismiss a trio of class action consumer RICO suits that accuse the companies of engaging in a pervasive pattern of overcharging for title insurance by systematically ignoring entitlement to statutory discounts.

Although title insurers have been battling a wave of consumer litigation in recent years, the three decisions by U.S. District Judge Joel H. Slomsky mark the first time that a court has green-lighted RICO claims.

Defense lawyers had urged Slomsky to dismiss the RICO claims, arguing that the plaintiffs failed to plead a proper RICO enterprise since an insurer and its agents cannot be considered legally "distinct."

Slomsky disagreed, saying "plaintiffs have satisfied the minimum 'person' and 'enterprise' distinctiveness requirement because the combination of Commonwealth Land and the title agents constitute a single 'enterprise' separate and distinct from the 'person' of defendant Commonwealth Land and this combination is permissible under RICO jurisprudence."

The opinion is a victory for common sense. Will the plaintiffs prevail? Beats me. But a plaintiff who can marshal plausible allegations of systematic mail and wire fraud should not have the courthouse doors closed to them on grounds of sophistry.

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Shepard Fairey, creator of the iconic "Hope" poster during Obama's Presidential campaign, is not perfect.

After the Associated Press claimed that Fairey's use of one of their images for the poster required authorization, Fairey — represented by the Fair Use Project at Stanford University — pre-emptively sued to establish (by way of a declaratory judgment action) that his transformation of the original image constituted "fair use" and thus did not infringe on their copyright.

Frankly, I thought he had a good case, but the suit hasn't gone well: last October, Fairey was forced to admit he spoliated and fabricated evidence:

"Throughout the case, there has been a question as to which Mannie Garcia photo I used as a reference to design the HOPE image," Fairey said. "The AP claimed it was one photo, and I claimed it was another."

New filings to the court, he said, "state for the record that the AP is correct about which photo I used...and that I was mistaken. While I initially believed that the photo I referenced was a different one, I discovered early on in the case that I was wrong. In an attempt to conceal my mistake I submitted false images and deleted other images."

You may be shocked to learn that people sometimes lie in civil litigation.

It's true. Just this week, I received a big stack of documents that the defendant in one of my cases thought I'd never see. Sure enough, they prove the defendant repeatedly lied under oath.

But no one outside of the case itself will care. If I take it to the U.S. Attorney's office, they will tell me to take it up with the judge in my case.

Unless, apparently, the Associated Press is involved:

Fairey sued the AP last February, asking a judge to declare that Fairey's artwork does not infringe any copyrights held by the AP. A month later, the AP countersued, saying the uncredited, uncompensated use of one of the news cooperative's photos violated copyright laws and signaled a threat to journalism.

The U.S. Attorney's office had a grand jury begin an investigation after Fairey said he erred about which AP photo he used as the basis for "HOPE" and had submitted false images and deleted other images to conceal his mistake.

Last I knew, the U.S. Attorney's office in every district had an unwritten policy of ignoring perjury in civil cases. Though such restraint often pains me — as the plaintiff's lawyer, I'm often the one who was lied to — I understand it. They have better things to do (e.g., prosecuting human trafficking), and the civil justice system already has methods for dealing with evidence tampering.

Which makes the investigation, at taxpayer expense and at the cost of valuable prosecutorial time and resources, all the more disturbing. Is the Associated Press more deserving of justice than my clients and the thousands of other litigants who every day endure the indignity of watching their adversary lie under oath? Doesn't the U.S. Attorney's Office for the Southern District of New York have something better to do?

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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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I was going to write about how the Securities Industry and Financial Markets Association (SIFMA) had hired Carter Phillips of Sidley Austin — perhaps the most experienced Supreme Court advocate in the country — to "study" the constitutionality of President Obama's proposed tax on the big banks, which is really just code for "SIFMA hired Phillips to create grounds for a 5-4 Supreme Court decision invalidating the tax."

Then something funny happened.

When I typed "Carter Phillips" into Google News to find an article about the SIFMA representation, I saw another story posted around the same time, "Joe Arpaio's Lawyer for Records Dispute Costing Taxpayers $990 -- Per Hour."

The $990 per hour lawyer for Sheriff Joe Arpaio is, indeed, Carter Phillips.

For those of you who don't know about Sheriff Joe Arpaio, here's an introduction:

A federal grand jury is investigating Joe Arpaio, the Arizona sheriff known for his aggressive stance on illegal immigration, for possible abuses of power in launching investigations of local officials who disagree with him, authorities said Friday.

Two Maricopa County officials have been subpoenaed to appear before the grand jury to testify about Arpaio's actions against county officials since they moved to cut his budget in late 2008.

Since then Arpaio and County Atty. Andrew Thomas, an ally, have filed criminal charges against two county supervisors, have said dozens of other county workers are under investigation and have filed a federal racketeering lawsuit accusing the entire county political structure of conspiring against them.

A walk through the "Joe Arpaio" tag at the Phoenix New Times will appall you for hours.

The United States Constitution rightly ensures criminal defendants the right to assistance of counsel. Common law in all fifty states rightly holds the attorney-client relationship to be as sacred and protected as any other. And we all have bills to pay, even Jay Leno, even top-drawer Supreme Court lawyers.

I'd understand if Phillips was part of Arpaio's criminal defense team. But he's not: Phillips represents Arpaio in a vindictive attempt to dig into Maricopa County judges' and administrators' emails following their investigation into his abuses. There's no right to that.

We can't judge a lawyer by their clients — consider public defenders, the unsung guardians of liberty — but a lawyer is only as good as the causes he or she represents.

No matter how effective Carter Phillips is as an advocate or counselor, he'll never be a great lawyer.

Not while doing Joe Arpaio's dirty work.

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

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

As Bruce Merenstein posted on The Legal Intelligencer Blog yesterday:

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

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

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

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

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

 Let's start with the first sentence:

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

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

The Sidley Austin lawyers could have just as easily written:

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

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

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

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

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

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

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

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

Always draft angry briefs. Never file them.

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JURIST Paper Chase reports:

US security firm Blackwater [JURIST news archive] on Wednesday reached a settlement agreement in seven federal lawsuits filed by Iraqi citizens. The suits claimed that Blackwater, now known as Xe, created a reckless culture [AP report] that resulted in numerous deaths, including the deaths of 17 Iraqi civilians [JURIST reports] in September 2007 and the 2006 killing of an Iraqi guard. The suits accused Blackwater founder Erik Prince of personal responsibility. The terms of the settlement have not been made public, but Xe said in a statement that it is "pleased" with the resolution.

The settlement comes just a week after after a US judge dismissed charges [JURIST reoprt] against five guards indicted for their involvement in the September 2007 killings. Judge Richardo Urbina of the US District Court for the District of Columbia [official website] dismissed [opinion, PDF] voluntary manslaughter and weapons charges against the five guards, finding that statements were obtained in violation of the Constitution.

Susan Burke, who represents the plaintiffs, previously posted her response to Blackwater's motion to dismiss in the case online.

To say the allegations are shocking would be an understatement:

These Complaints allege that Mr. Prince acted contrary to, and in violation of, United
States government policies and instructions. Through their actions, Blackwater seriously harmed the United States and violated the law. See, e.g., Abtan/617 Compl. ¶ 60.

These Complaints allege that Mr. Prince fostered a culture of lawlessness, and encouraged employees to act in the company’s financial interests at the expense of innocent human life. See, e.g., Sa’adoon/615 Compl. ¶¶ 16, 18, 25-29; Albazzazz/616 Compl. ¶¶ 13, 14; Abtan/617 Compl. ¶¶ 2, 3, 49-57; Hassoon/618 Compl. ¶¶ 31-35, 46, 47, 80-85; Rabea/645 Compl. ¶¶ 1, 13-21. Collectively, these Complaints describe with specificity multiple examples of Mr. Prince’s men killing and wounding innocent Iraqis. For example, the Hassoon/618 Complaint describes a killing as follows: “On July 1, 2007, a driver named Wala’a was driving a minibus for three related families who were going to Baghdad airport to apply for passports. The three families included parents with four children, including a three-month old baby; an uncle; and a cousin and his wife. As the families were returning from the airport, six Xe-Blackwater vehicles, including three with turrets, surrounded the minivan and opened fire for absolutely no reason. The Xe-Blackwater shooters killed the nine-year boy. The Xe-Blackwater shooters shot the mother in the back as she bent over, trying to protect the three-month old daughter from being shot. She was unsuccessful, as the baby was shot in the face. The Xe-Blackwater shooters hit the father and the uncle. They shot at, but missed, the two other children. The Xe-Blackwater shooters also hit the cousin, Sadiq Ahmed Ali. They shot at but missed his wife, Khalida Jasim Mohammed, and the driver. Hassoon/618 Compl. ¶¶ 50-56. The other Complaints are to like effect, spelling out in detail the dates and times of the killings. For example, the Abtan/617 Complaint describes the Nisur Square shootings: “On September 16, 2007, heavily-armed Blackwater mercenaries (known in Blackwater parlance as “shooters”) working in Iraq began firing on a crowd of innocent civilians without justification, resulting in multiple deaths and injuries.” Abtan/617 Compl. ¶ 2. The acts against each Plaintiff are detailed. See, e.g., Abtan/617 Compl. ¶ 17 (stating “Plaintiff Haider Ahmed Rabe’a is a 32-year old Baghdad resident who was seriously injured by Xe-Blackwater shooters when they shot him in both legs as he was trying to flee from his car to escape the gunfire.”) Abtan/617 Compl. ¶ 17

...

As testified to under penalty of perjury by John Doe No. 2, Mr. Prince views himself as a Christian crusader tasked with eliminating Muslims and the Islamic faith from the globe. Decl. John Doe No. 2 ¶ 9. Mr. Prince intentionally deployed to Iraq certain men who shared his vision of Christian supremacy, and encouraged them to kill Iraqis. Decl. John Doe No. 2 ¶¶ 10-11. In addition to his Christian supremacist views, Mr. Prince was also motivated by greed. He knowingly deployed unsuitable candidates for carrying lethal weaponry because deployments meant more money. Decl. John Doe No. 2 ¶ 12. Mr. Prince ignored the advice and pleas from certain employees, who sought to stop the deployments and resulting killings of innocent Iraqis. Decl. John Doe No. 2 ¶ 13. See also Decl. John Doe No. 1 which describes additional deaths; and Exhibit C, in which one of Mr. Prince’s men admits to killing innocent Iraqis.

Plaintiffs brought suit under three statutes: Racketeer Influenced and Corrupt Organizations Act (“RICO”), Alien Tort Statute ("ATS"), and War Crimes Act ("WCA"). Blackwater's motion to dismiss was still pending when the case was settled.

Dismiss? How could someone get away with shooting a baby in the face?

Judicial politics. It doesn't matter if Congress passed at least three separate acts (RICO, ATS, WCA) making organized murder abroad illegal. It doesn't matter if two successive Presidents — one Republican, one Democratic — refused to grant private contractors immunity.

All a private contractor needs is a conservative judicial activist and even a dozen Iraqis who "were beaten, electrocuted, raped, subjected to attacks by dogs, and otherwise abused by private contractors" will have their case dismissed, like in Saleh / Ibrahim v. Titan Corporation et al.

Ironically, the dismissal of the criminal case probably encouraged Blackwater to settle. Plaintiffs' lawyers normally welcome simultaneous criminal prosecution of the defendants (for a host of reasons), and I imagine Burke did, too. Here, however, in light of the extraordinary circumstances, Blackwater may have felt the dismissal of the criminal charges offered them an opportunity to wrap everything up and retreat back into the shadows.

Where they can get back to business as usual.

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There's a myth — promoted by vested interests — that the United States is a free market economy.

Don't believe it. Even in the smallest of transactions, monopoly power still rules, dutifully skimming its unearned share.

"How Visa, Using Card Fees, Dominates a Market":

Competition, of course, usually forces prices lower. But for payment networks like Visa and MasterCard, competition in the card business is more about winning over banks that actually issue the cards than consumers who use them. Visa and MasterCard set the fees that merchants must pay the cardholder’s bank. And higher fees mean higher profits for banks, even if it means that merchants shift the cost to consumers.

Seizing on this odd twist, Visa enticed banks to embrace signature debit — the higher-priced method of handling debit cards — and turned over the fees to banks as an incentive to issue more Visa cards. At least initially, MasterCard and other rivals promoted PIN debit instead.

As debit cards became the preferred plastic in American wallets, Visa has turned its attention to PIN debit too and increased its market share even more. And it has succeeded — not by lowering the fees that merchants pay, but often by pushing them up, making its bank customers happier.

In an effort to catch up, MasterCard and other rivals eventually raised fees on debit cards too, sometimes higher than Visa, to try to woo bank customers back.

“What we witnessed was truly a perverse form of competition,” said Ronald Congemi, the former chief executive of Star Systems, one of the regional PIN-based networks that has struggled to compete with Visa. “They competed on the basis of raising prices. What other industry do you know that gets away with that?” 

As an old friend of mine wrote,

The present conditions of business cannot be accepted as satisfactory. There are too many who do not prosper enough, and of the few who prosper greatly there are certainly some whose prosperity does not mean well for the country. ... [W]e heartily approve the prosperity, no matter how great, of any man, if it comes as an incident to rendering service to the community; but we wish to shape conditions so that a greater number of the small men who are decent, industrious and energetic shall be able to succeed, and so that the big man who is dishonest shall not be allowed to succeed at all. ...

Wherever in any business the prosperity of the business man is obtained by lowering the wages of his workmen and charging an excessive price to the consumers we wish to interfere and stop such practices. We will not submit to that kind of prosperity any more than we will submit to prosperity obtained by swindling investors or getting unfair advantages over business rivals. ...

It is utterly hopeless to attempt to control the trusts merely by Antitrust Law, or by any law the same in principle, no matter what the modifications may be in detail. In the first place, these great corporations cannot possibly be controlled merely by a succession of lawsuits. The administrative branch of the Government must exercise such control.

Theodore Roosevelt said those words ninety-eight years ago. He was right then and is right today.

But these are different times; we can't rely on the administrative branch of the Government to exercise control, even when it claims it will. 

The process had only just started in Teddy Roosevelt's day:

The first federal regulatory agency, the Interstate Commerce Commission, was set up to regulate railroad freight rates in the 1880s. Soon thereafter, Richard Olney, a prominent railroad lawyer, came to Washington to serve as Grover Cleveland's attorney general. Olney's former boss asked him if he would help kill off the hated ICC. Olney's reply, handed down at the very dawn of Big Government, should be regarded as an urtext of the regulatory state:

"The Commission . . . is, or can be made, of great use to the railroads. It satisfies the popular clamor for a government supervision of the railroads, at the same time that that supervision is almost entirely nominal. Further, the older such a commission gets to be, the more inclined it will be found to take the business and railroad view of things. . . . The part of wisdom is not to destroy the Commission, but to utilize it."

Today, regulatory capture infects — literally infects — every aspect of our lives.

"Safety of Beef Processing Method Is Questioned":

 Officials at the United States Department of Agriculture endorsed the company’s ammonia treatment, and have said it destroys E. coli “to an undetectable level.” They decided it was so effective that in 2007, when the department began routine testing of meat used in hamburger sold to the general public, they exempted Beef Products.

With the U.S.D.A.’s stamp of approval, the company’s processed beef has become a mainstay in America’s hamburgers. McDonald’s, Burger King and other fast-food giants use it as a component in ground beef, as do grocery chains. The federal school lunch program used an estimated 5.5 million pounds of the processed beef last year alone.

But government and industry records obtained by The New York Times show that in testing for the school lunch program, E. coli and salmonella pathogens have been found dozens of times in Beef Products meat, challenging claims by the company and the U.S.D.A. about the effectiveness of the treatment. Since 2005, E. coli has been found 3 times and salmonella 48 times, including back-to-back incidents in August in which two 27,000-pound batches were found to be contaminated. The meat was caught before reaching lunch-rooms trays.

The last election has changed matters somewhat, including in terms of Antitrust. But make no mistake: the administrative branch of the Government is loathe to exercise control over the great corporations, and will just as often empower the great corporations against competitors and consumers as it will restrain them.

Thus, the primary method we have to control great corporations — whether to ensure a level playing field for competition or to protect ourselves from personal or financial injury — is "merely a succession of lawsuits."

Yet, a succession of lawsuits barely works to restrain corporate abuse and malfeasance. Consider Visa/Mastercard, which already paid $2 billion for manipulating merchants' processing fees, yet keep doing it. Jack-in-the-Box was nearly bankrupted by lawsuits following a multi-fatality outbreak of O157:H7 E. coli, yet it's still around, and E. coli still runs rampant in our food, particularly ground beef.

Today, however, we're forgotten what Teddy Roosevelt knew a century ago. Today, many of those same vested interests argue that the feeble option of the "mere succession of lawsuits" is too much. That even the involvement of the owners of corporations in corporate affairs is too much. That corporations are people, too, entitled to "speak" in elections just like you or me.

Don't believe it.

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Via WhiteCoat, I see there's a new line of attack on patients' rights: blame lawyers for making patients sick in the first place. As Time's Wellness blog describes it,

The growing number of Methicillin resistant Staphylococcus aureus (MRSA) infections in hospitals may in part be driven by physicians' tendency to over-prescribe antibiotics to avoid being sued by disgruntled patients, according to a study published this past fall in the American Journal of Therapeutics.

And how did the study reach that conclusion? Here's the abstract of the study, Relationship Between Population Density of Attorneys and Prevalence of Methicillin-Resistant Staphylococcus aureus: Is Medical-Legal Pressure on Physicians a Driving Force Behind the Development of Antibiotic Resistance?:

We performed a hypothesis-generating study evaluating the perceived threat of lawsuits among physicians and methicillin resistance in Staphylococcus aureus. We found a correlation between the prevalence of methicillin resistance among clinical S. aureus isolates and both antibiotic prescriptions per capita and density of attorneys in countries in Europe and North America. We did not find a correlation between prevalence of methicillin resistance and physician density. Further investigation is warranted to study whether physicians' perceived fear of lawsuits, of which attorney density may be a crude surrogate marker, results in antibiotic prescription practices that contribute to the emergence of antimicrobial resistance among virulent pathogens such as S. aureus, with global implications on the ethics of the delivery of quality health care to all members of society.

Although there can be merit to a preliminary investigation of data, a "hypothesis-generating study" is, by definition, unscientific. The scientific method requires the investigator form the hypothesis before performing the experiment.

There's good reason for that; e.g., following the method helps guard against bias, which can cause investigators to draw spurious relationships from data.

Like the spurious relationship claimed between the "density of lawyers" in a given area and MRSA.

Despite the headline-grabbing conclusion in the abstract, Drs. Sakoulas, Wormser, Visintainer, Aronow, and Nadelman didn't actually find much evidence with which to blame lawyers for MRSA. As the study — which you have to pay to read, and thus the vast majority of people can't or won't read —  says:

Using the nonparametric test for trend, we noted a trend of increased lawyers per capita in states with higher percentages of MRSA, but this did not achieve statistical significance (P = 0.215). When analyzed in 2 groups, states with a prevalence of .40% MRSA in ICUs tended to have more attorneys per capita than those with a prevalence of ,40% MRSA (mean 347 vs. 288 per 100,000; mean rank 23.4 vs. 16.5; P = 0.08). The difference in physician density was less significant (300 vs. 257 per 100,000; mean rank 22.1 vs. 19.0; P = 0.42).

That is to say, the authors found no relationship between lawyers per capita and MRSA.

Instead, the authors found a relationship between lawyers per capita and MRSA after they narrowed the definition of "MRSA" to mean an abnormally high prevalence of MRSA in ICUs.

Does that mean that more lawyers in a given area causes an abnormally high prevalence of MRSA in ICUs?

No.

As every good scientist knows, correlation does not imply causation. This logical fallacy is so common, and so thoroughly disproven, that it has its own fancy Latin name: cum hoc ergo propter hoc.

The authors know that. As the study — that is, the part not available to the public — admits:

This study has a number of limitations, and therefore, its conclusions must be interpreted with caution. ... The relationships that emerged should only be considered as crude, not causal, associations because practice behavior was not assessed at the individual level and adjustment for confounders or other covariates was not conducted.

So let's recap what the "study" did:

1. Disregarded the scientific method; then,
2. Played around with data in the hopes of finding a link between lawyers and antibiotic-resistant bacteria; then,
3. Failed to find such a link; then,
4. Admittedly cherry-picked data until they could claim a weak correlation; then,
5. Admittedly made numerous assumptions about the link between "density of lawyers" and physicians' behavior; and finally,
6. Admittedly did not evaluate any other variables that could explain the correlation.

Nobel-worthy this is not.

But that's not what bugs me about the "study."

What bugs me is how supposedly objective researchers don't even try to conceal their motives anymore:

George Sakoulas, M.D., assistant professor of medicine and lead author of the study, concluded, "The findings suggest that more research is needed to evaluate the potential impact of medical liability concerns on the medical care system. The study findings hint toward the importance of medical tort reform as a way to reduce healthcare costs and improve quality. Another way might be to foster more judicious prescription of antibiotics based on science and evidence rather than on risk aversion."

Remember: Dr. Sakoulas didn't have any "findings [that] hint toward the importance of medical tort reform as a way to reduce healthcare costs and improve quality." He cherry-picked data until he found a weak correlation between lawyers per capita and an abnormally high prevalence of MRSA in intensive care units, a correlation he admitted could be entirely meaningless since he chose not to investigate other possible explanations.

That, however, is enough for him to jump right to "the importance of medical tort reform as a way to reduce healthcare costs and improve quality."

Sure.

Worse, we already know there's a better explanation for the weak correlation between lawyers and MRSA, an explanation that requires far fewer leaps in logic.

There's another fancy Latin phrase scientists use when faced with competing explanations: entia non sunt multiplicanda praeter necessitatem. The principle is better known as Occam's razor: 

Occam's razor states that the explanation of any phenomenon should make as few assumptions as possible, eliminating those that make no difference in the observable predictions of the explanatory hypothesis or theory. The principle is often expressed in Latin as the lex parsimoniae (translating to the law of parsimony, law of economy or law of succinctness). When competing hypotheses are equal in other respects, the principle recommends selection of the hypothesis that introduces the fewest assumptions and postulates the fewest entities while still sufficiently answering the question.

When faced with data suggesting a correlation between the "density of lawyers" and a high prevalence of MRSA in ICUs, there are at least two possible explanations:

1. The "density of lawyers" in a given area —  including lawyers who work for hospitals, lawyers who have devoted their careers to defending doctors, and lawyers who have never touched a medical malpractice file — specifically makes physicians more concerned about malpractice liability than they otherwise were, leading them to over-prescribe antibiotics; or,
2. The "density of lawyers" and a high prevalence of MRSA in ICUs are both determined by one or more common factors.

The first explanation — the one adopted by Dr. Sakoulas — requires making a lot of assumptions, such as (a) doctors know how "dense" their area is for lawyers; (b) that the "density" of lawyers really is "a crude surrogate marker" for the fear of a lawsuit, even though the authors themselves admit "there was no significant relationship between attorney density and number of paid malpractice claims per 1000 physicians at the state level;" and, (c) concern about malpractice liability specifically increases the likelihood that a physician will prescribe one of the antibiotics tied to increase MRSA development, over and above the numerous other factors that encourage the physician to prescribe the antibiotic.

That's an awful lot of assumptions.

The second explanation requires making a single assumption: that there is at least one factor that can lead to both a higher density of lawyers and a higher prevalence of MRSA in a given area.

One such factor comes to mind: the degree of urbanization.

MRSA is primarily an urban disease: it was first diagnosed in large, urban hospitals, thereafter spread faster in urban areas, and today is more prevalent in urban areas than in rural areas. The more urbanized an area is, the more prevalent MRSA will be.

Lawyers, too, are an urban phenomenon: the states with the highest "density" of lawyers (D.C., New York, Delaware, Massachusetts) are also the most urbanized, while the states with the lowest "density" of lawyers (North Dakota, Arkansas, South Dakota, Kansas, Idaho) are the least urbanized. The more urbanized an area is, the more lawyers it will likely have.

An increase in lawyers doesn't cause an increase in MRSA; urbanization causes both. Quod erat demonstrandum.

I don't doubt the authors — who included an infectious disease specialist and an epidemiologist — knew the relationship between a high prevalence of MRSA and urbanization. I also don't doubt the authors suspected the relationship between lawyer density and urbanization.

They just didn't want to let science get in the way of politics.

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That's one way to lose millions of dollars:

Disbarred lawyer Kenneth Heller's refusal to turn over files in a matter that ultimately was resolved with a $3.7 million settlement was "symptomatic" of a 24-year record of "utter contempt for the judicial system," Southern District Bankruptcy Judge Stuart M. Bernstein wrote, quoting from an opinion of the appeals court in Manhattan that disbarred Heller in 2004.

Bernstein's ruling in In re Ruby G. Emanuel, 97-44969, denied Heller any share in the $1.2 million the judge had awarded to the law firm of Jacoby & Meyers, which took over from Heller the wrongful death case of James Emanuel, a stevedore who was fatally injured in a 1992 accident at the Brooklyn Navy Yard.

...

Following Heller's disbarment [for misconduct in an unrelated case], Ms. Emanuel retained Jacoby & Meyers to handle the retrial in state court.

The law firm asked Heller to forward his files in the matter, but Heller refused, even though, Judge Bernstein noted, "terminated lawyers normally send their files promptly to new counsel to be sure that the interests of the client are protected."

In resisting the surrender of his files, Bernstein recounted, Heller provided different estimates of the value of his work for Ms. Emanuel.

During Jacoby & Meyers' 2 1/2 year quest to secure the files, Heller offered various explanations as to what had happened to them -- lost in a house upstate, damaged by a flood, discarded by workers -- as the case was passed among five judges in Manhattan and the Bronx.

Eventually, the court declared Heller in contempt and issued sanctions, causing Heller to flee, after which deputies raided his office looking for the files, to no avail.

$3.7 million doesn't come close to the actual damages. The decedent was paralyzed from the neck down after a 45-foot fall and spent 20 months in the hospital before he died. In the original trial (in which Heller represented the plaintiff), a jury unsurprisingly awarded $25 million.

But because Heller didn't turn over the file:

Jacoby & Meyers only had the record on appeal to work with in negotiating a settlement, Michael S. Feldman, the firm's lead attorney on the case, said in an interview.

Heller's files consisted of 43 boxes of material, while the record on appeal filled only two boxes, Feldman said. The defendant's records in the underlying death case had been destroyed in the Sept. 11 attack on the World Trade Center where its law firm, Hill Betts & Nash, had its offices, Feldman added.

"We had to proceed without videos and photographs of Mr. Emanuel" who was paralyzed from the neck down as a result of a 45-foot fall as he was repairing a barge, Feldman said.

Switching attorneys in the middle of contingent fee litigation can cause a dicey situation. It is never easy for the exiting attorney — after pouring years of blood, sweat, tears and money into the case — to set the file down and walk away without securing a fee, as they would before voluntarily referring a case to another attorney.

But walk away they must. An attorney can't dangle the client's case over the new counsel's head as a negotiation tool.

The flip side is that, if the lawyer does the right thing and ensures the timely transfer of representation, the law will protect them. At the resolution of a case, prior contingent fee attorneys are generally entitled to recoup their reasonable costs and the quantum meruit — the fair value — of the work they did.

Except, however, where the attorney has breached their fiduciary duties to the client, in which case most states will deny the award of fees. Indeed, the issue isn't just a concern for contingent fee attorneys: in some states, if a professional breaches their fiduciary duties, the court can order the disgorgement of any fees previously paid.

Some people need to learn lessons the hard way. For the rest of us, take note: there's millions of reasons not to play games with client's files.

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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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Overlawyered passes along a misleading description of the "tort reform" provisions in the Senate health care bill from an anonymous Capitol Hill source:

The “tort reform” section of Senator Reid’s substitute amendment is not merely meaningless, but is actually a significant giveaway to the trial lawyers. It is essentially a 5-year, 50-million dollar grant program to encourage states to develop more plaintiff-friendly alternatives to the current medical liability system.

Section 10607 (p.344 of the Manager’s) establishes a 5-year grant program. The program is administered by the HHS Secretary (Sebelius), in consultation with a review panel. The review panel is structured to ensure that trial lawyers are amply represented, with seats specifically reserved for “patient advocates,” “attorneys with expertise in representing patients,” and “patient safety experts.”

Of course, the unnamed source fails to note that health care companies, defense lawyers and insurance companies are "amply represented," too. Read the bill yourself: alongside the patient advocates on those panels are "Health care providers and health care organizations,” “Attorneys with expertise in representing patients and health care providers,” and “Medical malpractice insurers.”

The source also says:

Nothing about this language requires that the “alternative to litigation” decreases litigation costs.

Nonsense. In order to receive a grant, states have to show how their plan “improves access to liability insurance." After they receive a grant, states' plans will be evaluated by factors such as “the disposition of disputes and claims, including the length of time and estimated costs to all parties” and “the medical liability environment.”

The Pop Tort has a more reasonable view:

Here is some of what we like about it: it proposes to give money to states to consider litigation alternatives, but only programs that are shown to improve patient safety, are voluntary and allow patients to opt, and do not limit a patient’s legal rights.  Clearly, if this passes (the House bill currently has something similar), we will have our battles at the state level as certain well-funded forces try to impose anti-patient measures like “Health Courts.”  But we’ll cross that bridge, as they say….

Whatever is done, we hope it works to reduce errors, but not just in hospitals, (here, here, here, for example) but also those of incompetent individual doctors, who by the way already have more liability protections for their negligence than any other profession in the country. 

Frankly, the biggest problem in the debate over medical malpractice liability in this country is the absence of concrete data. There's no agreement on how much medical malpractice occurs or how much damage it causes, nor any agreement on the effect of health care providers' insurance premiums on access to medical care. There's also only one major study on the reliability of the medical malpractice system, which tort reformers and trial lawyers both read to say whatever they want it to say.

Much like with the Comparative Effectiveness Research proposals, the biggest benefit of these "demonstration programs" will likely not be the discovery of a perfect recipe for the medical malpractice system, but rather the accumulation of data that will inform future debates.

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The ABA Journal reports about Mohawk Industries v. Carpenter:

Personal injury associate J. Craig Smith couldn’t turn down his father’s request to take on the case of his cousin Norman, who was fired from his job as a supervisor in a carpet manufacturer after alleging the company was hiring undocumented aliens.

"When my father called me from Georgia [in 2006] about Norman being fired, I didn't know if I could do anything for him," Smith told the Connecticut Law Tribune. "But my Dad said, 'Remember who you are, and where you're from--we stick by our own.' I knew I had to do right by Norman.”

Smith stuck with cousin Norman Carpenter, all the way to a U.S. Supreme Court victory on a privilege issue.

At the time of the call, Smith was a fourth-year associate at personal injury law firm Koskoff, Koskoff & Bieder in Connecticut. He worked on the case along with a two-person employment law firm in Atlanta—until cert was granted. Smith began getting calls from Supreme Court specialists, who warned he wouldn’t stand a chance unless they got involved, the story says. Smith turned them down and hired Yale law professor Judith Resnik; they sat together at the counsel table when the case went to the Supreme Court.

Lawyers like to believe we're really smart. We like to believe that we can predict which case will make a lot of money. We like to believe we can tell which cases are really important. We like to believe we can tell when a landmark unanimous Supreme Court opinion has walked in the door.

James E. Beasley, Sr., the late founder of our firm, believed that, if lawyers did the right thing, everything else would take care of itself. He took a lot of cases that offered little more upon presentation than years of bruising litigation, despite the risk and the cost, because he believed that taking up that person's cause was the right thing to do.

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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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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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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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Following up on my post of two weeks ago on judicial immunity in the "kids for cash" Luzerne County scandal, Judge Caputo of the Middle District of Pennsylvania issued his ruling yesterday, which holds in pertinent part:

For judicial immunity to apply, only two requirements need to be met: jurisdiction over the dispute, and a judicial act. As to the first, a judge is not immune only when he has acted in the “clear absence of all jurisdiction." Stump 435 U.S. at 349 (citation omitted). Second, a judicial immunity extends only to “judicial acts,” not administrative, executive, or legislative ones. Id. at 360-61.

...

The Plaintiffs argue that because Ciavarella’s acts contravened the Constitution of the United States, he was acting in the “clear absence of jurisdiction” and therefore is not immune from suit. The Plaintiffs cite no authority for this proposition, nor is there any. They allege that Ciavarella violated the constitutional rights of the juveniles brought before him in the following ways: (1) his court or tribunal was not impartial; (2) he failed to advise them of the right to counsel and therefore assure that any waiver of counsel was knowing and voluntary; and (3) he failed to determine that the pleas of guilty were knowing and voluntary. While these acts constitute egregious, unjustifiable judicial behavior, they do not make out a case for the absence of jurisdiction. If unconstitutional acts by a judge deprived the court of jurisdiction, and hence eliminated judicial immunity, it could be argued that all erroneous decisions in constitutional tort cases would subject the judge to civil liability. Such is not, and should not be, the case. As to their courtroom behavior, I conclude that both Ciavarella and Conahan had jurisdiction.

...

Conahan’s issuance of an injunction for an alleged corrupt motive is identical to the conduct the Supreme Court considered when granting immunity in Dennis v. Sparks. Dennis, 449 U.S. at 28 (illegal injunction allegedly based upon corruption). As to Ciavarella, focusing only on the nature of the act performed, as I am required to do by law, I also find that the determinations of delinquency and the sentences imposed were judicial acts. As the Supreme Court has made clear, the alleged motivations, be they corrupt or with malice, are irrelevant to this determination. As to the courtroom acts of Conahan and Ciavarella, I find that they are protected by judicial immunity.

That is not to say, however, that every act alleged of the two was judicial in nature. For example, Conahan’s signing of a “Placement Agreement” would be an administrative, not a judicial act. Similarly, any acts in making budget requests to the Luzerne County commissioners would also be administrative or executive in nature. And the actions of Conahan and Ciavarella in coercing probation officers to change their recommendations is outside of the role of a judicial officer. Probation officers are to advise the court, not the other way round, on sentencing matters. The nature of these acts are not judicial in nature, and therefore judicial immunity does not shield such conduct.

(Emphasis added.)

I disagree, but Judge Caputo's ruling has strong support in precedent and policy going back well before the founding of our nation and the founding of Pennsylvania.

Also, even though Judge Caputo in general accepted the judicial immunity of the defendants, there's also a strong argument to be made that Judge Caputo had to rule this way, for he had no appellate court precedent supporting a ruling otherwise, no matter how persuasive the plaintiffs' arguments may have been to him. Some questions are not for the District Court to decide in the first instance.

The opinion — which is very clear and concise — is worth reading by anyone interested in the subject. An article that will appear in Monday's The Legal Intelligencer is available here.

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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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Ashby Jones at the Wall Street Journal reports on absolute judicial immunity:

In January, federal prosecutors filed fraud charges against Mark A. Ciavarella and Michael T. Conahan, judges on the Luzerne County, Pa., Court of Common Pleas. Prosecutors alleged that the judges sent numerous juveniles to detention centers over several years in exchange for more than $2.6 million in kickbacks from the former co-owner of two centers.

After the criminal charges, several lawyers filed civil suits seeking monetary damages on behalf of dozens of children and their families against the judges and other defendants. They alleged, among other things, that the judges violated their civil rights.

...

In filings, the judges argued that judicial immunity insulated them from suits. A ruling on the motions is pending. Both judges declined to comment.

Legal experts say the plaintiffs face an uphill battle in piercing the immunity shield. Dating to 1872, the U.S. Supreme Court has repeatedly supported the notion that judges should express their legal convictions without having to worry about personal consequences. In perhaps the most widely cited Supreme Court case on judicial immunity, the court in 1978 rejected a suit filed by a woman against an Indiana judge who had years earlier ordered the woman -- who was then 15 and allegedly mentally impaired -- sterilized without her knowledge.

According to Arthur Hellman, a law professor at the University of Pittsburgh, judicial immunity doesn't protect judges from suits stemming from administrative decisions made while off the bench, like hiring and firing decisions. But immunity generally does extend to all judicial decisions in which the judge has proper jurisdiction, he says, even if a decision is made with "corrupt or malicious intent."

In Mr. Hellman's mind, the rule makes sense. Without it, the courts might be stacked with baseless lawsuits filed against judges. "On one level, it seems outrageous to ban someone from suing a corrupt judge," he says. "But if you allow plaintiffs to pierce the immunity by alleging bad motive, it opens the floodgates."

There is good reason for judicial immunity. Judges, more than any other government officials, determine who wins and who loses in our legal system. They do not pass general laws applicable to everyone like the legislature. They do not enforce the laws in general through multiple levels of supervision, collaboration, and procedures like the executive.

They spend weeks, months and years right in front of citizens with a lot to lose and then tell those citizens to their faces if they win or lose. It is very easy to blame a judge for a citizen's loss in a civil or criminal trial: the judge was the one who made it happen.

We thus cannot have judges hesitating in their good faith decisions about who loses because they fear litigation. The system just will not work; it's the judge's job to determine the loser.

That said, the Luzerne County case is different. We don't need to dive into the bigger questions of when and how immunity should be denied, because it's quite clear it should be denied here, for the two reasons raised by a group of former judges who filed an amicus brief in the case:

Application of immunity to judges who admitted under oath to engaging in a criminal scheme that lasted for years would indeed be "monstrous." [Quoting Judge Learned Hand in Gregorie v. Biddle, 177 F.2d 579 (2d Cir. 1949)] To find immunity would denigrate the respect of the public for the judiciary, which is dependent upon judges making decisions based on the law and the facts, rather than personal, corrupt motives. Moreover, denying Conahan and Ciavarella the privilege ofjudicial immunity in this case would not risk a flood of civil claims against other judges.

...

There is simply no way that Conahan's and Ciavarella's admittedly criminal arrangements with the detention facilities or their predetermination to detain juvenile offenders before any judicial proceeding even existed, can be considered judicial acts. Conahan's and Ciavarella's arguments to the contrary are disingenuous. They necessarily conceded that they acted non-judicially when they admitted to criminal conduct in violation of their judicial oath. Those admissions cannot be reconciled with their present assertion that they acted in a judicial capacity.

Exactly. Wherever it may be that judicial immunity should lie, we know it should not lie where a judge (1) admitted (or were convicted of) corruption or (2) acted wrongfully outside their judicial function.

The "immunity" underlying judicial immunity is — like qualified immunity for executive officials — an "immunity" from being sued. It is a deliberate policy choice to deny some worthy cases even a shot at proving entitlement to relief in exchange for ensuring unworthy cases do not waste judicial time or cause hesitation in the judicial process.

Here, there is no doubt as to the worthiness of plaintiffs' claims: the judges admitted corruption. There is also no doubt that the problem at here was not solely judicial, for there is nothing "judicial" about receiving payments under the table from a private party.

The United States Supreme Court is already considering a related issue, the extent of immunity for prosecutors who fabricate evidence, in Pottawattamie County v. McGhee. They will see this case coming down the pipeline; let's hope they understand the robes cloak only those decisions made for the right reasons.

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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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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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Yesterday, after posting a link to a productivity guide recommending email be checked twice daily, I saw this leaked email from a big name at a litigation powerhouse:

Now more than ever there are many talented lawyers and law firms competing for our business. Doing really good legal work is not enough. Clients expect that and well they should given what we charge for our services You must all realize that we are in a service business. In this day and age of faxes, emails, internet, etc. clients expect you to be accessible 24\7. Of course, that is something of an exaggeration—but not much.

LESSON NUMBER ONE: You should check your emails early and often. That not only means when you are in the office, it also means after you leave the office as well. Unless you have very good reason not to (for example when you are asleep, in court or in a tunnel), you should be checking your emails every hour. One of the last things you should do before you retire for the night is to check your email. That is why we give you blackberries. I can assure you that all of our clients expect you to be checking your emails often. I am not asking you to do something we do not do ourselves. I can assure you that [other big names at the firm], etc. all check their emails often.

I check my email frequently except when I don't.

There's two reasons for those times that I don't.

First, to follow the advice of Seneca, himself a great trial lawyer, on keeping a law practice in perspective:

Look at those whose prosperity men flock to behold; they are smothered by their blessings. To how many are riches a burden! From how many do eloquence and the daily straining to display their powers draw forth blood! How many are pale from constant pleasures! To how many does the throng of clients that crowd about them leave no freedom! In short, run through the list of all these men from the lowest to the highest—this man desires an advocate, this one answers the call, that one is on trial, that one defends him, that one gives sentence; no one asserts his claim to himself, everyone is wasted for the sake of another.

But there are also less lofty reasons to avoid the siren song of the crackberry.

The second reason I take time off from email — both scheduled time and time as needed — is to follow Sun Tzu's command: "Ponder and deliberate before you make a move."

Cognitive science agrees:

After a 30-minute study period, the students were separated into three groups to test their understanding of the larger "big picture" relationship between the individual patterns: Group One was tested after a period of 20 minutes; Group Two was tested after a 12-hour period; and Group Three was tested after a 24-hour time span. In addition, approximately half of the students in Group Two slept during the 12-hour period, while the other half remained awake. All of the students in Group Three had a full night's sleep.

The test results showed striking differences among the three groups, especially between the students who had a period of sleep and those who remained awake.

"Group One, the students who were tested soon after their initial learning period, performed the worst," says Walker. "While they were able to learn and recall the component pieces [for example, Shape A is greater than Shape B, Shape B is greater than Shape C] they could not discern the hierarchical relationships between the pieces [Shape A is greater than Shape C] -- they couldn't yet see 'the big picture.'"

Groups Two and Three, on the other hand, demonstrated a clear understanding of the interrelationship between the pairs of shapes.

"These individuals were able to make leaps of inferential judgment just by letting the brain have time to unconsciously mull things over," he says. But, perhaps most notable, he adds, when the inferences were particularly difficult, the students who had had periods of sleep in between learning and testing significantly outperformed the other groups.

Strategic planning and tactical maneuvering in litigation requires a lot of thought, including the serious application of inferential judgment and relational memory, the types of cognitive work that demand contemplation and downtime.

Make room for that cognitive work. The crackberry can wait.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Like Dr. Woo:

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

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

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

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

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

And won:

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

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

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

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Via Atrios, we have Stanley Fish's recent NYTimes column, The Rise and Fall of Academic Abstention:

As recently as 1979, legal academics Virginia Nordin and Harry Edwards were able to say that “historically American courts have adhered fairly consistently to the doctrine of academic abstention in order to avoid excessive judicial oversight of academic institutions” (Higher Education and the Law). Academic abstention is the doctrine (never formally promulgated) that courts should defer to colleges and universities when it comes to matters like promotions, curricula, admission policies, grading, tenure, etc. The reasoning is that courts lack the competence to monitor academic behavior; they should get out of the way and let the professionals do the job. “Courts are particularly ill-equipped,” Chief Justice Rehnquist declared in 1978, “to evaluate academic performance.” (Board of Curators of the University of Missouri v. Horowitz)

In 2009, courts still pay lip service to this doctrine but in practice, Amy Gajda tells us in her terrific new book, “The Trials of Academe,” they now boldly go where their predecessors feared to tread. Once, “if a student or faculty member had the temerity to bring a grievance to court, is was likely to be bounced out in short order.” Now, however, “courts feel free to enter . . . from the ground up, parceling out the right and obligations of each disputant down to the last dollar.” Indeed, “litigation and ‘rights talk’ have permeated every crease and wrinkle of academic life.”

Fish concludes,

When I began teaching in 1962 at the University of California in Berkeley, I asked older colleagues about the decorums and rules of the classroom. In response, I was given the Myron Brightfield rule. Brightfield was then a very senior member of the department. His rule (and I paraphrase) was, When you close the door, there’s nothing they can do to you. Those were the days, and they had their injustices as well as their advantages. Now we have justice, or at least the demand for justice, all the time and it may, Gajda suggests, be killing us.

Rubbish.

Fish highlights several cases to make his argument-by-anecdote. Let's look at his "favorite:"

My favorite (and Gajda’s, too) involves a student in osteopathic medicine who, after failing an important rotation, was dismissed because “he didn’t have the basic understanding that he should have as a fourth-year medical student.” The student sued on the grounds that he had been promised a degree by a phrase in a student handbook that described the program he was enrolled in as “a four-year curriculum leading to the DO degree.”

Anyone with the slightest familiarity with the way universities work would know that ‘”leading to” included the qualification “provided that the requirements for graduating were met” — a medical degree is not equivalent to the certificate you get for having completed six weeks of a summer camp — but the courts were persuaded to a more literal (and perverse) reading and awarded the plaintiff a partial tuition reimbursement. But he wanted more and he got it by arguing that he should receive an amount commensurate with the earnings he would have accumulated had the “promised” degree been conferred. Jurors ordered the medical school to pay him $4.3 million.

The case is Sharick v. Southeastern Univ. of the Health Scis., 780 So. 2d 136, (Fla. Dist. Ct. App. 3d Dist. 2000).

Indeed, as Fish says, anyone with "the slightest familiarity" with academia knows that the award of a degree is predicated on meeting the school's requirements — except, of course, for the school in question, which argued the student "contracted with [the school] solely to provide an education in exchange for payment of tuition." Id., 139 (emphasis added).

Got that? The school's argument was that, regardless of whether the student met the requirements, all the school contracted to do was "provide an education" and not actually award the degree. That is to say, the school argued that it was free to destroy the student's career for any reason, a bad reason, or no reason, so long as it had "educated" him in a way the student couldn't possibly use without the actual degree. The court disagreed. So do I. So, too, apparently, does Fish.

Contrary to Fish and Gadja's description, the student didn't allege the school "promised" a degree but didn't give it because he failed, he alleged that "Southeastern's decision to dismiss him [two months before his graduation] was arbitrary, capricious, and/or lacking any discernable rational basis." Id., 138. It's the only way he could recover under Florida law, in light of the "academic abstention" doctrine that Fish claims has been "increasingly narrowed to the point that it is in danger of vanishing."

A jury agreed with the student. In fact, the evidence against the school was so overwhelming that Southeastern didn't even appeal the jury's findings. The school only appealed the trial judge's rejection of their ridiculous and insulting "solely to provide an education" argument.

Let me tell you, as a plaintiff it's not easy to prove "arbitrary and capricious" behavior. It's one of the highest bars a plaintiff can ever face, and typically results in the plaintiff losing. Do you have any doubt that, if Southeastern had any credible defense at all, it would have appealed the jury's findings? All they had to show was some reason — any reason — justifying the student's dismissal and the verdict would have been overturned.

Yet, they didn't even try, presumably because they knew they couldn't. Rather than making things right, however, they forced him into over fifteen years of litigation, litigation which is still going on. See the most recent appeal, Nova Southeastern Univ. of the Health Scis., Inc. v. Sharick, 2009 Fla. App. LEXIS 12494 (Fla. Dist. Ct. App. 3d Dist. Aug. 26, 2009)

How are we to take Fish or Gadja seriously when their "favorite" example shows why academic institutions should not be above the law?

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SCOTUSBlog reports:

The Supreme Court agreed on Tuesday to rule on claims that “searing media attacks” on longtime Enron executive Jeffrey K. Skilling tainted his criminal trial and conviction on various fraud charges.  The case of Skilling v. U.S. (08-1394) also raises an issue on the scope of the federal law punishing the failure to provide “honest services” as a corporate executive.

In his petition to the Supreme Court, Skilling argued,

In closing argument, the government declared that Skilling and Lay committed honest-services fraud because they violated a duty to Enron’s “employees”—a duty the government described as “a duty of good faith and honest services, a duty to be truthful, and a duty to do their job, ladies and gentlemen, to do their job and do it appropriately.”

Of critical importance here, the government argued that Skilling committed every alleged act of misconduct with the specific intent to advance Enron’s interests—by increasing reported earnings, maintaining an investment-grade credit rating, and improving the price of Enron’s stock. ... The government did not contend, and the record did not suggest in any way, that Skilling intended to put his own interests ahead of Enron’s. To the contrary, the government’s stated theory was that its evidence needed only to show—and did only show—“a material violation of a fiduciary duty that defendants owed to Enron and its shareholders.”

...

The Fifth Circuit erred in holding that a conviction under § 1346 is valid even where the defendant did not seek to elevate material private interests over his employer’s. Even that limitation may not suffice to save the statute from unconstitutional vagueness, but it at least establishes some reasonably clear and intelligible boundary to the statute. It also reflects the pre-McNally understanding of honest-services fraud Congress sought to adopt in § 1346.

As Justice Scalia recently observed, the statute on its face sweeps in a breathtaking range of conduct. Sorich, 129 S.Ct. at 1310. The phrase “honest services” itself provides no clear guidance as to “how far the intangible rights theory of criminal responsibility really extends.” Bloom, 149 F.3d at 656; see Sorich, 523 F.3d at 707 (§ 1346 is “amorphous and open-ended”); Urciuoli, 513 F.3d at 294 (“the concept of ‘honest services’ is vague and undefined”); Brown, 459 F.3d at 520 (§ 1346 is a “facially vague criminal statute”); Murphy, 323 F.3d at 116 (“the plain language of § 1346 provides little guidance as to the conduct it prohibits”); U.S. v. Handakas, 286 F.3d 92, 105 (2d Cir. 2002) (“the text of § 1346 simply provides no clue to the public or the courts as to what conduct is prohibited”), overruled in part by Rybicki, 354 F.3d at 144; U.S. v. Brumley, 116 F.3d 728, 736 (5th Cir. 1997) (Jolly & DeMoss, JJ., dissenting) (§ 1346 is “general, undefined, vague, and ambiguous”). ...

Several lower courts, however, have sought to resolve the problem of the statute’s facial ambiguity by reading into the text limitations on “honest services” fraud. The “private gain” requirement is among the clearest of those limitations, and it is drawn directly from the pre-McNally cases that created the concept of honest-services fraud. McNally itself stated the rule: “Under [the prior honestservices] cases, a public official owes a fiduciary duty to the public, and misuse of his office for private gain is a fraud.” Id. at 355 (emphasis added).

Applying a private-gain limitation to honest services fraud is the only way to even arguably “avoid the constitutional question” raised by the vagueness of the phrase “honest services.” Jones v. U.S., 529 U.S. 848, 858 (2000). Absent that limitation, the statute is nothing more than a common-law fiduciary-breach statute, impermissibly criminalizing whatever wrongful or unethical corporate acts a given prosecutor decides to attack. Brown, 459 F.3d at 521-22; Bloom, 149 F.3d at 654.

 Here's the whole statute at issue:

For the purposes of this chapter, the term “scheme or artifice to defraud” includes a scheme or artifice to deprive another of the intangible right of honest services.

It defines part of the statute for "fraud by wire, radio, or television:"

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. ...

He may be on to something.

Then again, is there really any "vagueness" to the notion that fraud is criminal? Does anyone really throw their hands up into the air and proclaim that they don't know if it's illegal to defraud investors for the benefit of a company that pays that person millions every year, a company of which they own millions of dollars worth of shares?

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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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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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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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Walter Olson at Point of Law refers us to a proposal by a Democratic legislator in Maryland:

Primary-care providers who practice at federally qualified health centers do not need to purchase medical malpractice insurance. Why? The government promises to cover any claims against them under the Federal Tort Claims Act. If a patient has a successful malpractice case against the health center provider, the government becomes the insurer and agrees to pay the claim.

The national health reform debate should include a proposal to expand Federal Tort Claims Act coverage to all primary care providers, regardless of where they practice, and to certain specialists (such as obstetricians) where access to care is threatened. Doing so would have multiple benefits: Doctors, nurse practitioners and other primary care providers would be freed from the burdens of finding and paying for costly malpractice insurance; future medical students would have an incentive to choose primary care, addressing a critical shortage; and we would finally begin to bend the "cost curve" in health care.

A number of states, including Pennsylvania, already have state-administered medical malpractice insurance. In Pennsylvania,

32. What is Mcare?

“Mcare” stands for the Medical Care Availability and Reduction of Error Fund. It was created under Act 13 of 2002 and is the successor to the Medical Professional Liability Catastrophe Loss Fund, better known as the “CAT Fund.”

33. How does Mcare work?

Currently, Pennsylvania law requires physicians to carry a minimum of $1 million of medical malpractice coverage per incident, and physicians must have this coverage in order to be licensed. The first $500,000 of medical professional liability coverage per incident, which is called the basic or primary insurance layer, is obtained through the private insurance market. The second $500,000 of coverage per incident is provided by the state-administered Mcare Fund. Hospitals must also maintain medical malpractice coverage and their required amounts are higher -- $1 million worth of coverage for each incident and $4 million total coverage per year.

The fund is paid for primarily by a $.25 tax on every pack of cigarettes sold in Pennsylvania. Right now, the fund has a whopping $414 million surplus. All though the fund says that the surplus was caused by "the improvement in the medical malpractice climate in Pennsylvania," that's not the whole story.

Government-administered casualty insurance programs run the gambit from fair and equitable, like the September 11 fund administered by Kenneth Feinberg, to hostile and vexatious, like the Pennsylvania Property and Casualty Insurance Guaranty Association (intended to cover insurance claims against insurers that have become insolvent), which has been reprimanded by the Pennsylvania Supreme Court for its "slash and burn approach to protecting PPCIGA’s assets."

Pennsylvania's MCARE fund sits somewhere in the middle, and is not without its faults. Let me give you an example.

Not too long ago, I attended a court-ordered settlement conference in a medical malpractice action brought against two physicians and a hospital. The case was quite serious, with seven-figure damages, the absence of any good explanation for why the defendants did what they did, and highly damaging testimony by another physician at the hospital who had recognized the problem in a timely manner and yet had their recommendations for emergency treatment overruled.

The federal judge hearing the case (we were in federal court because the plaintiffs did not live in Pennsylvania) ordered the parties come to the conference with authority from the insurance carriers to settle. Such naturally included MCARE, which often ends up matching the contributions of the physicians and/or hospitals in a suit.

At the settlement conference one physician showed up ready to tender policy limits. The other physician and the hospital showed up with substantial authority and a willingness to negotiate.

MCARE sent a representative with little knowledge of the case and no authority to even begin negotiations, much less offer money. Such was, of course, a blatant violation of the court's order requiring the insurance carriers appear with authorization.

The judge was not amused, and so requested the MCARE representative phone home until they reached someone who could authorize a settlement.

The representative's efforts failed; not only did the representative not have any authority, but they couldn't find anyone who did. Such would have been a typical example of settlement-conference rope-a-dope but for the authorization phrase in the court's order. After the representative couldn't find anyone, the judge started making the calls, until they found the highest-ranking officer who was available, who they calmly informed was in violation of a federal court order, and as such should prepare for a visit by U.S. Marshals.

After that, MCARE changed its tune, and we settled the case by the end of the day. Like I said: MCARE is somewhere in the middle. Had it been PP&CIGA, I wouldn't have been surprised if they just dared the judge to send the Marshals out.

All of which is to say, it's not crazy to think that the government can run a liability insurance company, but the devil is in the details (Feinberg wrote a book about the difficulties of evaluating damages in 9/11 Fund), because government-administered casualty insurance programs have the same institutional incentives to thwart claimants, but don't have the same disincentives (such as the potential for bad faith lawsuits) against dilatory and obdurate conduct.

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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 AmLaw Daily reports:

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

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

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

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

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

Each party shall bear its own costs and attorney fees.

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

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

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

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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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Philip K. Howard, whose nonsense medical malpractice "health courts" idea I've panned before, is back pushing more hooey from two insurance and corporate front groups, Common Good and the Committee for Economic Development:

Because modern medicine is so complex, reliability almost certainly requires some kind of special court.  This country has a long history of such courts, such as bankruptcy courts, and it's hard to imagine an area of society in greater need of special judicial expertise than health-care.  That's why a broad coalition has come out for pilot projects--including AARP, the AMA, the American College of Obstetricians and Gynecologists, the Joint Commission on the Accreditation of Health-care Organizations, and many others

That's what the American people want as well.  Today, Common Good and the Committee for Economic Development released a survey that showed an astonishingly high 83 percent of voters want Congress to address reform of the medical malpractice system as part of any health-care reform plan.  Moreover, even though the survey found that most Americans generally favor jury trials, for health-care disputes they overwhelmingly support special health courts--an extraordinary 67 percent support a new court system for health-care.

83% of voters want Howard's brand of tort reform? That's certainly the impression you get from his article.

Read the actual survey. I dare you.

Here's the extraordinarily vague question they asked:

DO YOU AGREE OR DISAGREE WITH THIS STATEMENT: As part of any health care reform plan, Congress needs to change the medical malpractice system so that cases are resolved quicker, and more reliably, on behalf of those who are in the right.

Like that 83%, I, too, agree with that statement, as would every trial lawyer, consumer advocate, and patient I know. Our clients wait years just to have their cases heard in court, where they are subject to a variety of "unreliable" variables, including biased defense experts who invent "medicine" out of whole cloth. 

But it doesn't mean a thing about tort reform. It means the people generally want "to secure the just, speedy, and inexpensive determination of every action and proceeding," which nobody opposes.

Nice try; while you insurance companies are at it, perhaps you'd like to explain why you trust voters to decide health care policy issues but not sit on medical malpractice juries?

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As Ashby Jones at the WSJ Law Blog notes:

For all those who’ve made lists of cases to watch heading into the fall, may we kindly suggest adding the Google Books case, if you haven’t already.

The backstory: Manhattan judge Denny Chin is currently sitting on a settlement reached last year between the search engine giant and publishers that would allow Google to sell digital books online. (A hearing on the case is scheduled for Oct. 7.)

Since the settlement was announced, a chorus of objectors has emerged, many of whom have howled that, were the deal allowed to go forward, Google would be allowed a near-monopoly on the publication of out-of-print books and other titles.

You can read the Google Books Settlement press release and proposed settlement here, where I casually described it as "good news for everyone," largely on the assumption that the Author's Guild had reached a settlement that would both make orphan works more accessible and provide compensation for such use. Such was how the settlement was described.

But the settlement is much bigger than that. Walter Olson at Overlawyered rounds up some criticism:

One blogger turns thumbs down on Google Books settlement [Patrick at Popehat] “Laundering orphan works legislation through a class action lawsuit”? [James Grimmelmann, ACS Blog via Mass Tort Lit] Much more: Lynn Chu/Writer’s Reps (who, I should note, has represented my literary interests on matters unrelated to this); WSJ Law Blog; Pasquale/ConcurOp.

The objections are worth considering. Principally, the objection is, as Chu writes,

The Google Book Settlement far exceeds any mere litigation settlement. Settlement is about damages for specific, past harms. This, by contrast, is a business proposal. The plaintiffs' claim was about the harm from Google’s book copying before January 5, 2009. After four years of self-serving business planning, what the parties now place before the court is no “settlement” of this claim at all, but a 335 page publishing and union contract—a proposal for a business venture they wish to present to the class.

Google, although generally a good corporate citizen, has often been cavalier about the rights and interests of individuals, particularly with regard to privacy and copyright, which, like the book settlement, affect the ability of individuals to control the content they produce. As such, there is reason to be suspicious.

One issue, however, seems to be missing from the debate so far: a general principle of governance is that, in the absence of regulation, social policy issues will be determined by litigation.

It is the second half of 2009.  He have affordable technology to unlock much of the collective wisdom of humanity and make it immediately accessible anywhere in the world. Indeed, we even have a well-regarded company ready and willing to do it for free.

That is not a mere business proposal. That is a social policy issue of considerable importance, one will may affect us for generations to come, particularly if, as academics have warned, the inaccurate metadata used by Google Books represents a "train wreck" for scholars. It should be the subject of legislative and executive attention; that is why we have representative government in the first place, to assess and to act upon (or intelligently decide not to act upon) social policy issues.

But it is not the subject of much legislative or executive attention, likely because our intellectual property regime is captive to a handful of corporations that believe they can and should control the bulk of culture forever. They like how things are going for them. They're not going to rock the boat over mere books; indeed, they probably like seeing Google centralize control over publishing the way the RIAA and MPAA have centralized control over music and film.

One consequence of this laissez-faire approach by the government is, as we see in the Google Books settlement, creation of "policy" by the judicial branch by way of litigation. Litigation, however, is particularly ill-suited to solve these problems, for the very reasons mentioned by the objectors, such as the lack of notice to, and participation by, millions of interested parties, including parties which will become interested in the future.

As such, we're stuck. An internationally-and-instantly-accessible, free-of-charge Library of Alexandria is, in theory, a wonderful idea. But so is reasonable protection for the rights of authors (and so is the assurance that appropriate metadata has been captured). And who will decide the wisdom of the new Library of Alexandria?

Judge Denny Chin. I have nothing against Judge Chin -- he may issue a ruling far superior to that which could have been produced by any Congressional subcommittee -- but I can assure you that the Framers of the Constitution had no intention of leaving such matters to him alone.

[UPDATE: Ask, and ye shall receive. The House of Representatives' Committee on the Judiciary is holding a hearing entitled, "Competition and Commerce in Digital Books." Hopefully, prepared remarks will be available on the site soon.]

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The print edition of September's Emergency Physicians Monthly features a debate between yours truly and WhiteCoat, EPM's in-house blogger on the subject, "Does Medical Malpractice Liability Impact Access To Emergency Care?"

I've posted the debate below, with footnotes added to show my sources. I believe WhiteCoat will update his with sources when he gets a chance; you can find his post here.

Opening Argument - Max Kennerly

 A 2006 American College of Surgeons report[1] concluded, "the single most important factor shaping the [emergency] surgical workforce today is declining reimbursement," a euphemism for cutthroat health insurer tactics. Last month, Bayonne Hospital sued Horizon Blue Cross Blue Shield for a parade of horribles, such as calling patients, lying about their coverage, and instructing them to leave the ED prior to screening or stabilization.[2]

Against this backdrop, malpractice premiums are at a per-physician thirty-year low. Unbiased analysis of their effect, however, is in short supply. A.M. Best, which rates insurers' creditworthiness for banks, says premiums represent 0.45% of national health care expenditures[3; see also *]; Towers Perrin, an insurance consulting firm, says 1.5%.[4] Least credible is the American Hospital Association, which relies on the Lewin Group[5], part of Ingenix, a UnitedHealth subsidiary that recently agreed to a $400 million settlement for manufacturing phony fees data to short-change physicians.[6]

After a decade of declining premiums and claims payments in the 1990s, the stock market collapsed, prompting insurers to raise premiums rapidly. In 2003, the peak of the increases, the General Accounting Office surveyed five states with "reported malpractice-related problems" (including Nevada and Mississippi) and four without for the impact of liability on access to care[7]. The GAO found no impact in the latter and "scattered" reductions in the former by providers of ER surgical coverage and obstetricians, most of whom also faulted other "long-standing factors" like reimbursement.  The GAO concluded most reports were "unsubstantiated" and that malpractice liability "did not widely affect access to health care."

The same report found little evidence of "defensive medicine," criticizing a widely-cited Health & Human Services report (the source of that "$300 billion" figure) for its transparently flawed generalization from two narrow examples of elderly heart disease treatment. In 2004, the Congressional Budget Office followed up on the H&HS report[8], even using the same methods, yet "found no evidence that restrictions on tort liability reduce medical spending," deeming the evidence for defensive medicine "weak or inconclusive" and noting "some so-called defensive medicine may be motivated less by liability concerns than by the income it generates for physicians or by the positive (albeit small) benefits to patients."

Such did little to stop a wave of "tort reform" in many states, like capping noneconomic damages and eliminating joint and several liability. Several years later, we have control and experimental groups in our laboratory of democracy.

The 2009 American College of Emergency Physicians' Report Card on the State of Emergency Medicine[9] is a revelation: of the ten states with an "A" or "B" grade for their "medical liability environment" (the most hostile to patients), six had an "F" for "access to emergency care," one had a "D-," two had a "C-," and one had a "B-," together averaging below a "D-."  Mississippi and Nevada, too, took WhiteCoat's "tort reform" advice: years later, they have, respectively, a "C" and "C+" for liability and a "C-" and an "F" for access to care. Conversely, the nine states with an "F" for liability earned the only "A," had only one "F," and averaged a "C" for access to care, better than the national average of "D-."

But, tort reformers say, there are other factors. That's my point: the impact of malpractice liability on access to care is so small it appears positive because it is dwarfed by other factors such as Aetna, Cigna and WellPoint, all of whom the AMA recently sued[10] for also using the bogus Ingenix database, and the increase in uninsured or underinsured patients. The big change in the past generation has not been an increase in malpractice premiums or claims (both are at historic lows in inflation-adjusted dollars [see 1]) but an extraordinary decrease in reimbursement.

A 2003 AMA report[11] found physicians lost $4.2 billion in annual revenue providing unreimbursed emergency care; compare that loss in a single field to the $4.7 billion paid in 2008 to resolve all malpractice claims nationwide[see 1]. The same study said emergency physicians incurred an annual average of $138,300 in uncollectable fees, double the average insurance premium for specialists and nine times the average premium for primary care physicians. It seems an ounce of reimbursement is worth a pound of tort reform.

Counter Argument - WhiteCoat

Doctors fear malpractice liability. And why shouldn’t they? Last month a woman was awarded $60 million dollars after a cosmetic surgeon allegedly botched her thigh lift. Medical malpractice law firms proudly display news releases about their multimillion dollar malpractice verdicts against physicians.

Does malpractice liability affect access to medical care, though? Access to medical care is limited by two factors: Available providers and willing providers. The best vascular surgery program in the world can’t help you if there’s no surgeon available or if you’re 150 miles away when your aortic aneurysm ruptures. Similarly, an abundance of nearby neurosurgeons helps no one with a brain hemorrhage if none of those neurosurgeons is willing to perform brain surgery.

What factors affect whether a provider is available or willing to provide services? Money undoubtedly affects access to care. Even though patients with Medicaid ostensibly have a means to pay for their care, they often have difficulty finding a physician to treat them because payments do not cover the costs of providing care. In this case, physicians may be available, but they are unwilling to provide care for the proposed payment. Conversely, patients with commercial insurance don’t seem to have such problems.

Liability also affects access to care. At first glance, it is easy to discount that effect. How could something that amounts to only 1.5% of total healthcare expenditures affect a physician’s willingness to provide care? The answer is that direct liability costs are only a small piece of the puzzle. Fear of liability creates a tremendous ripple effect. No physician wants to be at the receiving end of the next $60 million verdict. Residents in high-risk fields cite malpractice costs as by far the largest reason for leaving one state in favor of another. More than half of hospitals in medical liability crisis states have difficulty recruiting physicians, resulting in less physician coverage for their EDs. A survey of some Nevada Ob/Gyns showed that 60% planned to drop obstetrical coverage due to malpractice premium increases. Similarly, many Mississippi Ob/Gyns have dropped obstetrical care due to malpractice liability, leaving some counties with no obstetrical care at all. Trauma centers in several states have temporarily closed due to malpractice issues.

Texas tort reform shows that liability reduction can increase access to healthcare. Since tort reform was passed in Texas six years ago, the number of applications for physician licenses has increased dramatically. The number of emergency physicians has increased in 76 Texas counties – many of which were considered “underserved” for emergency care before tort reform. The number of malpractice insurers in Texas increased from 4 to more than 30 and insurance premiums dropped more than 40%. One Texas health system was able to spend $100 million extra dollars helping poor patients. That money had previously been held in reserves for legal defense fees and insurance premiums.

Some might try to draw conclusions by comparing metrics on ACEP’s Report Card. Doing so does not take into account multiple other factors affecting each metric. We cannot directly compare better access to higher liability any more than we can directly compare better access to colder climate. After all, states that scored worst in “access to care” were exclusively in the South and West United States – which generally have warmer climates.

Finally, defensive medicine costs our system up to $300 billion each year. Eliminating defensive medicine could provide each one of the 46 million uninsured patients in the US with $6500 in health care. Unfortunately, there is little tolerance for errors or misdiagnosis in medicine. While no lawyer will ever admit an expectation that medical care should be perfect, I still haven’t found a lawyer who will give me an example of a heart attack, a ruptured appendix, or a leaking cerebral aneurysm that it is OK to misdiagnose. Instead, doctors perform one low-yield test after another to “prove” that every haystack really doesn’t have a needle in it.

I respect Max and I respect his opinions. It just seems ironic that some of the strongest supporters of the notion that we can “sue our way to better health care” are those who stand to benefit the most from trying to do so.

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

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

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

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

No doubt. On the other hand,

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

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

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

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

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

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

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

Hello,

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

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

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

Sincerely,

The Google AdSense Team

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

So, can they sue?

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

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

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

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

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

So the question isn't so simple:

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

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

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

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

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

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

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

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The Inquirer reports on a hearing I attended on Tuesday in The Inquirer's bankruptcy:

In a scathing rebuke, the judge overseeing the bankruptcy of Philadelphia Newspapers L.L.C. yesterday described the investigation of an unauthorized taping of a meeting between the company and its senior lenders as a "fine mess."

The investigation of the taping, done by one of the officers of the largest creditor, was directed by a committee of the unsecured lenders, or second-tier creditors. By failing to take sworn depositions and seek key e-mails, the committee left its interim report on the taping open to questions and criticism, Superior [ed - I don't know what they mean by "Superior," though he is the Chief] Bankruptcy Court Judge Stephen Raslavich said.

* * *

[The investigation] stems from a meeting between the company's senior lenders and its top managers at Philadelphia Newspapers' offices at 400 N. Broad St. on Nov. 17, 2008. Vincent DeVito, a managing director of CIT Group Inc., was found taping the meeting without the knowledge or permission of everyone in the room, a violation of Pennsylvania law.

Philadelphia Newspapers, in court filings, contends that its relationship with its senior lenders deteriorated dramatically after its officials made an issue of the taping. The company has asked the court for permission to hire the firm of Elliott, Greenleaf & Siedzikowski P.C. to investigate the incident to see if its interests had suffered.

That request was initially rebuffed by the court, which appointed the committee of unsecured creditors to conduct the investigation. The company asked the court to reconsider, given what it contended were inadequacies in the investigation directed by former Pennsylvania Superior Court Judge Robert A. Graci, who now works for the firm that represents the unsecured creditors' committee.

Yesterday, Raslavich made it clear that he shared those concerns, dressing down Graci for failing to take sworn depositions and issuing his interim report before seeing key e-mail files requested from DeVito.

An important piece of background that Graci himself brought up, albeit fairly late in his colloquy with Judge Raslavich: Graci's background is in criminal work, specifically in representing the Commonwealth of Pennsylvania in appeals.

Civil litigators wouldn't dream of conducting an investigation through unsworn interviews, and most litigators start with requests for important documents, like emails, then follow up with depositions. Typically, only one deposition is permitted for each witness, so you need to make it count. From that perspective, Graci's investigation looks like a joke.

Yet, most criminal investigations are performed exactly the opposite way, through informal interviews followed by document requests and possibly more interviews. Typically, prosecutors don't even get to talk to the defendant at all, given the defendant's right to remain silent, much less depose them.

That's what Graci's used to. As he said at the hearing, he initially contemplated using depositions or sworn statements, then figured that would have added another layer to the proceedings (such as endless objections by the attorneys representing the witnesses) and would have delayed everything without providing any clear benefit. So he switched gears and conducted it like a criminal investigation.

That is to say, his technique was in no way evidence that the investigation was a sham, in bad faith, or the result of incompetence. Judge Raslavich told him as much.

But there's a problem: Graci wasn't there just to get to the bottom of what happened, but to ensure the appearance of propriety. As it stands now, Judge Raslavich has to grapple with the Inquirer's legitimate complaint that, whatever the merits of the investigation, there's no record for them and their lawyers to review, just the conclusions.

The odds of there being an inadequacy or impropriety in the investigation are slim, but they're not zero, which may render the whole thing a nullity.

A good lesson and question for all lawyers -- what does your paper trail look like?

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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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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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In today's Wall Street Journal:

Good news: The Pennsylvania Supreme Court has agreed to hear an unusual but important legal challenge in a case involving Governor Ed Rendell’s hiring of a contingency fee law firm to sue a drug manufacturer on behalf of the state.

The lawsuit—which we first wrote about in April—concerns Bailey Perrin & Bailey, a Houston law firm tapped by the Rendell administration to prosecute Janssen Phamaceuticals over the marketing of its antipsychotic drug Risperdal. When states lack the resources or expertise to bring certain suits, it’s not uncommon for them to seek help from private lawyers. ...

In agreeing to hear the challenge, the state Supreme Court said it will consider, among other things, “whether Bailey Perrin Bailey, LLP, should be disqualified because the due process guarantees of the United States and Pennsylvania Constitutions prohibit the Commonwealth from delegating the exercise of its sovereign powers to private counsel with a direct contingent financial interest in the outcome of the litigation.”

The WSJ makes a big deal out of donations the firm made to Governor Rendell's campaign while negotiating the contract. If there's an issue there, this appeal won't address it.

Drug & Device Law has a copy of the petition for review, which bizarrely claimed companies accused of ripping off taxpayers have a due process right to force the government to hire only lawyers who are "impartial."

Of course, everyone wants government officials to be "impartial." But once those impartial officials have made the decision to sue, common sense dictates they hire lawyers who will "act with commitment and dedication to the interests of the client and with zeal in advocacy upon the client’s behalf," as required by the Pennsylvania Rules of Professional Conduct.

The real issue is whether the Commonwealth may hire lawyers on the same terms as businesses and individuals do every day or if the Commonwealth is forced to use a particularly wasteful system invented by corporate lawyers that came to prominence in the 1970s (and is being rejected today) as a means of extracting greater profits from business clients by creating unnecessary work for recent law graduates.

You can guess what I think: the appeal is a blatant attempt to make litigation more expensive for the government, thereby making it harder for the government to sue companies when they cheat or injure taxpayers.

If there was pay-for-play, that's obviously illegal and unethical, but contingent fee litigation itself is a win-win for taxpayers, as it protects the public coffers (no fee if they lose), preserves state cash for other use (no billables to pay at the end of each month), and ensures the matter will be prosecuted in a prompt and efficient manner, rather than through the relentless fee churning that characterizes complex litigation billed by the hour.

Examples of waste by the hour aren't hard to find: the litigation (excluding trial) of a few trust documents at Princeton was reached $40 million for each side. The white collar criminal defense of an executive for accounting fraud was a "feeding frenzy" of $12 million. Compare that to the $0.00 that Pennsylvania taxpayers have paid so far for the prosecution of Commonwealth of Pennsylvania v. Janssen Pharmaceutica, Inc.

It should be noted that the "among other things" to be considered by the Pennsylvania Supreme Court are:

A. Whether 71 P.S. § 732-103 dictates that Petitioner lacks standing to
seek disqualification of Bailey Perrin Bailey, LLP on the basis of alleged
violations of constitutional law.

B. Whether the Attorneys Act, 71 P.S. § 732-101 et seq., authorizes the Office
of General Counsel’s contingent fee arrangement with Bailey Perrin Bailey, LLP.

C. Whether Bailey Perrin Bailey, LLP, should be disqualified because the
General Assembly did not authorize the contingent fee arrangement between
the Office of General Counsel and the law firm, such that the agreement
violates Article III, § 24 and the separation of powers mandate of the
Pennsylvania Constitution.

The first question is a substantial one. 71 P.S. § 732-103 reads in full:

No party to an action, other than a Commonwealth agency including the Departments of Auditor General and State Treasury and the Public Utility Commission, shall have standing to question the authority of the legal representation of the agency.

Such would appear to be a clear indication by the General Assembly that choice of counsel is a political question.

Nonetheless, an interesting and important case to watch. Will Pennsylvania taxpayers be required to open their wallets again?

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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 WSJ Law Blog spots an interesting development:

In June, as we blogged here, a San Francisco federal judge ruled that convicted terrorist Jose Padilla can sue Yoo, the Bush administration lawyer who authored some of the now famous war-on-terror memos, including one that opined the military can use “any means necessary” to hold suspected terrorists. ...

Yoo has now turned for help to Miguel Estrada, the powerhouse Gibson Dunn appellate litigator who was nominated by Bush to serve on the D.C. Circuit Court of Appeals. Estrada’s nomination was scuttled by Democrats, a point repeatedly harped on by Republican senators in the Sotomayor confirmation hearings. (Okay, we can only turn away from Sonia for so long.)

The Justice Department had been defending Yoo in the Padilla suit, but DOJ has agreed to foot the bill for Estrada’s services, according to an article today in The Recorder. Conflicts of interest are behind the change in counsel, ethics experts say.

“The department so far has been able to provide direct representation in this case by arguing that the lawsuit should be dismissed for qualified immunity reasons, and that remains the department’s position,” a Justice spokeswoman told the Recorder. “But as this case moves forward, the defendant deserves the opportunity to retain defense counsel that can make any and all arguments available on his behalf.”

I've discussed qualified immunity before on this blog. In short, as described by Harlow v. Fitzgerald, 457 U.S. 800 (1982):

government officials performing discretionary functions[] generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.

For more on the specific ruling in the case against Yoo, see this post by Jonathan Turley. Up until now, the Department of Justice (under Obama) had conducted Yoo's defense, and had angered civil libertarians by requesting the court dismiss Padilla's case on several grounds, including qualified immunity.

It's typical for federal government officials to be represented by the U.S. Attorneys and the Department of Justice, since the United States indemnifies its officials for damages awarded against them for conduct taken as part of their office, including for constitutional violations.

A "conflict of interest" isn't the right way to describe what happened here. The Department of Justice and Yoo have the same interest, which is to dismiss the case promptly or to minimize their liability.

What really happened here is revealed by the bolded quote above. It appears Yoo is going to make arguments on his behalf that the Department of Justice itself is unwilling to support.

That's good news for civil libertarians. Even though the Department of Justice initially sought to dismiss the suit on standard "qualified immunity" grounds, it appears the Department of Justice will not support Yoo's actual constitutional arguments, like how the President is "free from the constraints" of the Fourth Amendment (and the rest of the Bill of Rights) even when ordering domestic military action. (If the Department of Justice agreed, there would be no need to withdraw.)

Indeed, the Department of Justice might end up admitting that Yoo's opinions were erroneous and did not accurately state the law. Were I Padilla's lawyers, the first discovery I'd send would be a request for admission to the the United States establishing that.

A important case to watch, and perhaps the only vehicle by which we'll have a legal accounting of what really happened behind closed doors in the Bush years.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The sky has not fallen on business plaintiffs.

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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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When the going gets weird, the weird turn pro.

Here's how it starts:

Nancy Kanter, Esquire ("Kanter") referred a case to Alan B. Epstein, Esquire ("Epstein"). The case involved a claim by a child in the foster system who was abused by her prospective adoptive foster parents (the "Tara M. case"). Kanter had served as a guardian ad litem for the child. When Kanter referred the case to Epstein, he agreed to pay her a referral fee. However, this agreement was not reduced to writing. Subsequently, Epstein joined the firm of Spector Gadon and Rosen, P.C. ("SGR") while he was handling the Tara M. case. Eventually, the Tara M. case was settled for $ 4,310,000. From that amount, Epstein realized attorney's fees of $ 1,293,000. Kanter claimed that she was entitled to a referral fee of $ 431,000. However, Epstein and SGR refused to pay Kanter a referral fee.

Kanter v. Epstein, 2004 PA Super 470, 866 A.2d 394, 395–96 (Pa. Super. Ct. 2004).

Kanter sued and won $215,500 at trial, exactly half what she claimed. The jury then considered, and declined, punitive damages.

Then things got ugly:

On August 16, 2002, counsel for SGR informed the court that she would be taking a pre-paid vacation and requested that the briefing schedule be adjusted to accommodate her vacation. ... Following on-the-record discussions, the trial court summarized the agreement of all parties that the Rule 227.4 deadline [the time at which judgment can be entered and appeals taken] would be extended until March 14, 2003. ...

Despite the fact that they had executed a written agreement and had agreed on the record to extend the Rule 227.4 deadline until March 14, 2003, the Defendants filed a praecipe to enter judgment on January 8, 2003, and judgment was entered that same day.

Why did defendants' counsel jump the gun on their own extension? Who knows. Either way, after filing the judgment, defendants filed two appeals.

Bad idea. The Superior Court later knocked out these first two appeals because:

Accordingly, the judgment entered on January 9, 2003 was improvidently entered as a result of the Defendants' breach of their agreement to extend the Rule 227.4 deadline. As a result, Defendants' appeal of the trial court's December 30, 2002 contempt Order was interlocutory and not appealable at the time that the Defendants filed their appeals at 186 and 187 EDA 2003. Accordingly, the appeals filed at Nos. 186 and 187 EDA 2003 are quashed.

Back at the trial court, after the premature appeal things got uglier:

The trial court ultimately issued an Order dated March 10, 2003, in which the trial court denied the Defendants' post-trial Motions and granted Kanter's post-trial Motion, in part. Essentially, the trial court granted: (1) Kanter's request for additur, increasing the award to $ 431,000; (2) pre-and post-judgment interest; (3) Kanter's request for punitive damages; and (4) Kanter's Motion for sanctions.

Let me fill in the amounts. Interest bumped the compensatory award to $461,429, then punitive damages added another $ 645,000, and then sanctions (for attorney's fees) topped it off with another $124,219.86, bringing Kanter's total to $1,230,648.86, about $60,000 less than the total fee collected by Epstein in the first place.

Defendants appealed that, too.

In the Pennsylvania Superior Court, things got even uglier:

In this case, the trial court ordered the Defendants to file concise statements of the issues to be raised on appeal. However, the Rule 1925(b) Statements filed by the Defendants were anything but concise. SGR's fifteen-page Rule 1925(b) Statement included fifty-five issues that it purportedly sought to raise on appeal and also incorporated by reference the forty-nine issues raised by Epstein in his Rule 1925(b) Statement. Likewise, Epstein filed a fifteen-page Rule 1925(b) Statement that raised the forty- nine issues, and also incorporated by reference the fifty-five issues raised by SGR. 7 In total, the Defendants identified 104 issues in their Rule 1925(b) Statements. Furthermore, we note that many of the issues identified by each of the Defendants also included multiple sub-issues.

Kanter v. Epstein, 2004 PA Super 470, 866 A.2d 394, 400–401 (Pa. Super. Ct. 2004).

The Superior Court dismissed that appeal as well, leaving defendants with nothing. The Pennsylvania Supreme Court and United States Supreme Court both denied certiorari.

So defendants sued their appellate lawyers.

There's an old saying that legal malpractice cases are hard to win because they require the plaintiff prove a "case within the case;" i.e., the plaintiff have to prove they would have won the original case in order to prove the malpractice case.

How do you do that for a bungled appeal? Do you try to convince a jury of non-lawyers what an appellate court would have done with 104 distinct legal issues?

My preferred quote for describing legal malpractice cases is, when the going gets weird, the weird turn pro.

As the Court of Common Pleas for Philadelphia County held last winter:

Whereas, the Kanter action appeal was quashed by the Superior Court of Pennsylvania without reaching a decision on the merits of the appeal;

Whereas, this action is based on the contention the Kanter action appeal was quashed due to the alleged malpractice by defendant, Saul Ewing;

Whereas, the existence of actual loss sustained by plaintiffs to the malpractice by defendant depends on the outcome of the “case within the case” and whether plaintiffs would have received appellate relief and the extent of appellate relief in the Kanter action if plaintiffs’ appeal had not been quashed by the Superior Court;

Whereas, the parties agree that the “case within the case” presents questions of law for the Court to decide and not a jury trial issue;

Whereas, the parties agree to bifurcate the proceedings to present the “case within the case” to the court for decision prior to a trial (if necessary) on the remaining issues for plaintiffs’ malpractice claim and defendant’s counterclaim. …

It is hereby ordered that … the “case within the case” is bifurcated from the other issues in this action and the Court will decide whether and the extent to which plaintiffs would have received appellate relief if their appeals had not been quashed in the Kanter Action … Following the Court’s decision of the “case within the case,” the court will entertain a request for immediate appeal of the decision of the “case within the case” if the decision is not a final order and no party shall oppose the request of another party to immediately appeal the court’s decision of the “case within the case” even if not a final order to resolve the “case within the case” prior to trial of other issues.

Good idea! Three weeks ago, the trial court issued its full order for the inevitable appeal:

A reading of the Trial Judge's Opinion, dated February 26, 2004, reflects his disappointment with the persistently adversarial, over-zealous, and non-cooperative posturing among all trial counsel for more than two years under his jurisdiction, and in his courtroom. As a result, this distinguished jurist may have inadvertently ordered overlapping financial sanctions for punitive damages, additur, Contempt and attorneys fees. An objective review brings a different result. With that in mind, the Superior Court most probably would be constrained to reverse. ...

This Reviewing Court believes that the Superior Court would be unable to find support in this record for the sua sponte alternative. Delaying tactics during trial, including objections and side bar conferences are annoying, but not the sort of wanton or reckless conduct that meet the criteria for a punitive damage award. ...

Ms. Kanter's request for additur was premised on her belief that the triers of fact were required to award her the full amount of her claim. The Superior Court would have reviewed the record and determined that the triers of fact are free to believe all or part or none of the testimony. ...

The Trial Court ordered attorneys fees and contempt as sanctions "relating to punitive damages only" (emphasis in original), however, for all the reasons set forth above finding that conversion and punitive damages should not have been part of this case, the Superior Court would not have remanded the record to the Trial Court for a hearing.

Epstein v. Saul Ewing, LLP, 2009 Phila. Ct. Com. Pl. LEXIS 83 (Pa. C.P. 2009).

And so back they go to the Superior Court, to rule on what it would have done had it considered the original appeal.

The weird have definitely gone pro.

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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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The WSJ Law Blog points us to a Gawker reference to an AP article that says:

Richelle Olson sued [Sacha Baron Cohen] and NBC Universal on May 22, claiming an incident at a charity bingo tournament that was filmed for the upcoming "Bruno" left her disabled.

Olson claims she was severely injured after struggling with Cohen and his film crew at the event, held in Palmdale, Calif., two years ago. The lawsuit states she now needs a wheelchair or cane to move around.

The lawsuit seeks unspecified damages of more than $25,000.

Gawker wonders aloud:

We would hope that if this lady genuinely suffered brain bleeding that left her in a wheelchair that she's a asking for much more than $25,000 in damages, but why she waited two years to file the suit is anyone's guess—-Some would say probably because it's all a bunch of BS.

Don't blame Gawker, they don't claim to be legal experts.

The suit was filed in Lancaster, California, which is in Los Angeles County.

As you can see from this fee schedule (PDF), the Superior Court of California, County of Los Angeles, has a "limited civil case" program for those cases valued at less than $25,000. It likely has different rules and different judges, much like Philadelphia's mandatory arbitration for cases below $50,000 and Pennsylvania's municipal court for cases below $8,500 (or $10,000 in Philadelphia).

Most states have in place a "small claims court" of some sort for claims below a certain value, to conserve judicial resources while still giving parties access to substantial justice.

Thus, a suit that "seeks unspecified damages of more than $25,000" could be worth millions or billions of dollars. That allegation is nothing more than a legal term inserted in the complaint by the plaintiff's lawyer to let the clerk know that the case should be assigned to the full-fledged civil trial court and not the small claims court.

As for the two years, I doubt that has anything to do with the plaintiff herself. It takes time to prepare a case, and it's not surprising to see a case filed right as the statute of limitations is about to expire. Perhaps the lawyers have been discussing settlement. Perhaps the plaintiff was hoping to avoid suing and was seeing if they would get better, but, due to the statute of limitations, has to sue now or never.

[UPDATE: Daniel A. Reisman, a Los Angeles business lawyer, fills in the details, noting how (like in Pennsylvania), plaintiffs in personal injury suits are prohibited from stating specific damages in their complaint.]

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JURIST's Paper Chase reports an interesting development:

Former US solicitor general Ted Olson and prominent litigator David Boies [professional profiles] announced [video] Wednesday that they have filed suit [complaint, PDF] challenging California's constitutional amendment banning same-sex marriage [JURIST news archive], Proposition 8 [text, PDF], on federal Constitutional grounds. The complaint, filed Friday in the US District Court for the Northern District of California [official website], seeks to enjoin enforcement of the ban on the grounds that California state officials, including Governor Arnold Schwarzenegger and Attorney General Edmund Brown [official websites], would be liable under 42 USC § 1983 [text] for violating the Due Process and Equal Protection Clauses of the Fourteenth Amendment [text] if they were to restrict civil marriages to those "between a man and a woman." The complaint alleges that denying same-sex couples the right to marry is a Fourteenth Amendment violation because it stigmatizes gay and lesbian couples by creating "separate but unequal" domestic partnerships designation, and because it "treats similarly-situated people differently by providing civil marriage to heterosexual couples, but not to gay and lesbian couples."

Theodore Olson and David Boies were the respective lead lawyers in a little case called Bush v. Gore. Other links available at Above The Law, including quotes from (understandably) almost speechless liberals activists amazed by Olson's involvement.

The complaint in Perry alleges three claims: due process, equal protection, and "42 U.S.C. 1983." 42 U.S.C. 1983 is a federal statute that provides:

Every person who, under color of any [state law], subjects... any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the [United States] Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress ...

1983 enables plaintiffs to sue "persons" who, acting "under color of" state law, violate rights guaranteed by the U.S. Constitution.

Note how 1983 doesn't enable plaintiffs to sue states that violate constitutional rights. The Eleventh Amendment and "the structure of the original Constitution itself" recognize the sovereign immunity of the states from suits by private citizens, which Congress can't overcome with merely a statute. See Alden v. Maine, 527 U.S. 706 (1999)(holding Congress generally cannot authorize private suits against the state even in state's own courts).

Indeed, the Perry suit does not name the State of California among its defendants, but instead:

ARNOLD SCHWARZENEGGER, in his official capacity as Governor of California; EDMUND G. BROWN, JR., in his official capacity as Attorney General of California; MARK B. HORTON, in his official capacity as Director of the California Department of Public Health and State Registrar of Vital Statistics; LINETTE SCOTT, in her official capacity as Deputy Director of Health Information & Strategic Planning for the California Department of Public Health; PATRICK O'CONNELL, in his official capacity as Clerk-Recorder for the County of Alameda; and DEAN C. LOGAN, in his official capacity as Registrar-Recorder/County Clerk for the County of Los Angeles[.]

Odd, no? You can sue every office through whom the state acts, from the Governor to the "Registrar-Recorder/County Clerk," but not the state itself? That's the rule laid down by two 101-year-old companion cases, Ex parte Young, 209 U.S. 123 (1908) and General Oil Co. v. Crain, 209 U.S. 211 (1908):

It seems to be an obvious consequence that as a State can only perform its functions through its officers, a restraint upon them is a restraint upon its sovereignty from which it is exempt without its consent in the state tribunals, and exempt by the Eleventh Amendment of the Constitution of the United States, in the national tribunals. The error is in the universality of the conclusion, as we have seen. Necessarily to give adequate protection to constitutional rights a distinction must be made between valid and invalid state laws, as determining the character of the suit against state officers. And the suit at bar illustrates the necessity. If a suit against state officers is precluded in the national courts by the Eleventh Amendment to the Constitution, and may be forbidden by a State to its courts, as it is contended in the case at bar that it may be, without power of review by this court, it must be evident that an easy way is open to prevent the enforcement of many provisions of the Constitution … .

In short: A state is immune from suit, but a state officer can be sued for attempting to enforce an "invalid" law. It's a legal fiction: you sue the state by suing the officers.

Except, you can't sue the officers:

Obviously, state officials literally are persons [under 42 U.S.C. 1983]. But a suit against a state official in his or her official capacity is not a suit against the official but rather is a suit against the official's office. Brandon v. Holt, 469 U.S. 464, 471 (1985). As such, it is no different from a suit against the State itself. See, e. g., Kentucky v. Graham, 473 U.S. 159, 165 -166 (1985);

Will v. Michigan Dept. of State Police, 491 U.S. 58 (1989).

So what's the difference between the Young / Crain rule in 1908 and the Will rule 81 years later?

Money.

The Perry suit only seeks an injunction against the officials preventing them from enforcing Proposition 8 to deny same-sex marriage. It thus gets the Young / Crain rule. The Will rule only applies to suits for monetary damage.

Why the distinction? Neither the Constitution nor 42 U.S.C. 1983 draws any distinction between suits for injunctive relief and suits for money damages. 1983 specifically says the person "shall be liable to the party injured in an action at law." The Supreme Court, however, thought it prudent to create such a distinction where none existed.

One more issue then we're done: why not also sue Schwarzenegger and the rest personally to obtain money damages? The problem is suits for money damages against individuals must also overcome the hurdle of "qualified immunity," as described by Harlow v. Fitzgerald, 457 U.S. 800 (1982):

government officials performing discretionary functions[] generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.

The right to same-sex marriage is indisputably not "clearly established" -- the Perry case seeks to establish the right. As such, there's no chance of recovering monetary damages, and no use in complicating the case that way.

If the Perry plaintiffs succeed, however, they "may" recover "a reasonable attorney's fee" "in [the court's] discretion." 42 U.S.C. 1988.

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Among the many creative “legal” ideas floating around on the internet is:

If you set up an LLC for yourself and conduct all your business through it, the LLC will be liable in a lawsuit but you won't.

Last week, I was asked if this "asset protection strategy" worked.

No, it doesn't.

Conducting your personal business through an LLC provides no protection against a tort verdict, the type of liability that most people are worried about. The use of corporate forms -- like LLCs, S-Corporations, or Incorporation -- has many important purposes, but avoiding personal tort liability for your own conduct is not one of them.

To see why, let's start with some background.

What's a "tort?"

"Tort" is the Norman word for "wrong." There are three main types of legal wrongs: criminal wrongs, contractual wrongs, and tort wrongs.

A "criminal" wrong is an offense against the state: we as a society made it illegal to smoke pot, you did it anyway, here's your punishment. A "contractual" wrong is a failure to do something you agreed to do: I gave you $20 to mow my lawn, you didn't do it, I want my money back.

Everything else is a "tort" wrong. The most common tort is "negligence," which includes most lawsuits, like car accidents, medical malpractice, or slip and fall. In negligence, you had a general duty to do something in a reasonable way (like drive your car safely) and you messed up, so you have to pay for the harm you caused. Another type of "tort" is an intentional tort, like defamation or tortious interference with business relations: you purposefully hurt me, so you should pay for the damage.

When most people say they're worried about "getting sued," they're usually talking about being responsible a large tort verdict arising from a catastrophic injury or wrongful death.

What's an LLC?

A limited liability company is a type of business association recognized by state and federal governments as a legal entity independent of its owners and employees. On behalf of the owners, the company can, for example, own property and enter into contracts.

For our purposes here, we do not need to go into the differences between a limited liability company, an S-corporation, full incorporation, or a limited partnership. (I exclude general partnership and sole proprietorship because neither claims to limit liability at all.) All of them serve the same basic purpose, which is to protect investors from incurring any liability greater than the amount they invested into the company. The Economist described the purpose of limited liability a couple years ago:

Before limited liability, shareholders risked going bust, even into a debtors’ prison maybe, if their company did. Few would buy shares in a firm unless they knew its managers well and could monitor their activities, especially their borrowing, closely. Now, quite passive investors could afford to risk capital—but only what they chose—with entrepreneurs. This unlocked vast sums previously put in safe investments; it also freed new companies from the burden of fixed-interest debt. The way was open to finance the mounting capital needs of the new railways and factories that were to transform the world.

How does tort liability work in the context of an LLC?

Most everyone knows, although not by name, "vicarious liability" and "the doctrine of respondeat superior." If, in the course and scope of your employment, you cause someone else harm, then your employer is liable for your conduct. 

Here's what you probably don't know:

An agent is subject to liability to a third party harmed by the agent's tortious conduct. Unless an applicable statute provides otherwise, an actor remains subject to liability although the actor acts as an agent or an employee, with actual or apparent authority, or within the scope of employment.

Restatement of the Law, Third, Agency § 7.01 (emphasis added).

(An aside about The Restatement: The Restatement is an intense effort of lawyers, professors and judges organized by the American Law Institute to reduce to writing the legal community's consensus regarding general principles of law applied across the country. "Agency" is the subject of this particular Restatement, and "Third" means it's the third version, which was published in 2006. For reference of how intense these efforts are, the Second version was published in 1958. In case you're wondering, the Second version also said “[a]n agent who does an act otherwise a tort is not relieved from liability by the fact that he acted at the command of the principal or on account of the principal …")

An "agent" is a broader definition of "employee:" it's anyone acting on behalf of the company.

Let me reiterate what that all means: the general legal rule across the country is that individuals acting on behalf of a company are personally liable for their tortious conduct, even if they did so on behalf of the company.

Don't believe this "Restatement?" Want some case law? Here's a case from the Virgin Islands less than a month ago, noting in passing the cases it found with minimal research:

Terr. of the U.S.V.I. v. Goldman, Sachs & Co., 937 A.2d 760, 794 n.153 (Del. Ch. 2007) ('Officers and directors may be held individually liable for personal participation in tortious acts even though performed solely for the benefit of the corporation[.]') (quotation omitted); Armed Forces Ins. Exch. v. Harrison, 2003 UT 14, 70 P.3d 35, 41 (Utah 2003); Miller v. Keyser, 90 S.W.3d 712, 717 (Tex. 2002); Saltiel v. GSI Consultants, Inc., 170 N.J. 297, 788 A.2d 268, 273 (N.J. 2002); Haupt v. Miller, 514 N.W.2d 905, 909 (Iowa 1994); Camacho v. 1440 Rhode Island Ave. Corp., 620 A.2d 242, 246-47 (D.C. 1993); Weir v. McGill, 203 Ga. App. 431, 417 S.E.2d 57, 59 (Ga. 1992); Hecker v. Ravenna Bank, 237 Neb. 810, 468 N.W.2d 88, 95 (Neb. 1991); Ingram v. Machel & Jr. Auto Repair, Inc., 148 A.D.2d 324, 325, 538 N.Y.S.2d 539 (N.Y. App. Div. 1989); Mississippi Printing Co. v. Maris, West & Baker, Inc., 492 So. 2d 977, 978 (Miss. 1986); Wyatt v. Union Mortg. Co., 24 Cal. 3d 773, 157 Cal. Rptr. 392, 598 P.2d 45, 52 (Cal. 1979); Jabczenski v. Southern Pac. Memorial Hosp., 119 Ariz. 15, 579 P.2d 53, 57 (Ariz. Ct. App. 1978); Taylor v. Alston, 79 N.M. 643, 447 P.2d 523, 525 (N.M. Ct. App. 1968); New Eng. Box Co. v. Gilbert, 100 N.H. 257, 123 A.2d 833, 835 (N.H. 1956)."

Addie v. Kjaer, 2009 U.S. Dist. LEXIS 36110, at *21–12 (D.V.I. Apr. 28, 2009)(noting, "The Court has come across no jurisdiction that applies a contrary rule.").

Insurance and employee indemnification are so common today that this distinction is not often appreciated, but it's still the law. If Warren Buffet defrauded Mom and Pop’s Ice Cream Stand wholly for the benefit of Berkshire Hathaway, he would personally be on the hook for the damage just the same as Berkshire.

Let's go back to your personal LLC. Assume you hit a pedestrian with a car, defame someone in a blog post, or cause a building fire. It doesn't matter if you were "employed" by your LLC when you did it -- you will still be personally liable, as will the LLC that "employed" you.

Thus, in order to "protect your assets," you need to put enough money into the LLC that it can completely pay any tort judgment against you, or else the injured person can go for your assets long after it has bankrupted the LLC. That just defeats the nominal purpose of the LLC (to avoid liability), since you'll have to pay the same amount anyway, just through the LLC.

Again, there are plenty of reasons for setting up an LLC, such as protecting investors, limiting contractual liability, limiting liability arising from employee's conduct, and a host of business and tax uses, but avoiding personal liability for your own conduct isn't one of them.

There's an easier and more effective way. Buy good personal liability insurance and buy an umbrella liability insurance policy. If you're running a business, buy a good business insurance policy (including liability) and an umbrella policy for it, too. If your business is unusual, or you're worried about a particular risk, look for risk-specific insurance, like media policies which cover defamation. Don't skimp -- get at least $1 million in coverage, or more depending on your own risks.

Then you'll be covered for most tort verdicts (keep in mind some states prohibit insuring intentional conduct, and insurance policies can carve out whatever exceptions / exemptions they want).

No trickery needed, just some money and foresight.

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At The Legal Intelligencer Blog:

State Supreme Court Chief Justice Ronald D. Castille, the liaison justice to the First Judicial District who is in charge of appointing administrative judges of the court's divisions, said in an interview Thursday that the FJD may have to sue to secure a necessary level of funding in the next fiscal year.

...

An inadequate level of funding for the courts that sabotages the courts' ability to function could necessitate a lawsuit, Castille said.

"We don't want a constitutional confrontation but that will most likely end up before the Supreme Court," Castille said. "And we'd have to do what's right by the Constitution. And the counties and the state are required to adequately fund the respective judicial systems."

...

If the shortfall between the court's budget request and the proposal from Gov. Edward G. Rendell is not closed, Castille said he might have to tell judges --  who will be elected to new judgeships created, but not funded, by the General Assembly  -- that the court system can't pay them and they'll have to sue the executive and legislative branches in order to get paid.

We've been down this road before.

Until 1987, Pennsylvania state statutory law required counties assume financial responsibility for their own courts, and required those courts be adequately funded. In 1985, the County of Allegheny (home of Pittsburgh, and thus the second largest court system in the state) sued the Commonwealth of Pennsylvania, demanding that the Commonwealth, rather than the individual counties, fund the state's trial courts as part of the "unified" system specified in the Pennsylvania Constitution.

The Pennsylvania Supreme Court agreed:

While it is true that the 1968 Constitution of Pennsylvania does not specify the manner in which courts are to be funded, the constitution does require that the judicial system shall be unified. It is inconceivable that unity, in any meaningful sense of that word, can be attributed to a court system characterized by management and fiscal disagreements which periodically culminate in litigation in which the various counties and the courts within them are set off against each other as antagonists.

...

Our interpretation of the concept 'unified judicial system' depends, as does virtually all constitutional construction, not only upon a literal meaning of words, but also upon an awareness of the legal and constitutional implications of those words. In addition to the concerns already discussed, two additional matters should be mentioned.

First, the employment of staff. The purpose of a unified judicial system is to provide evenhanded, unbiased and competent administration of justice. The expectation is that cases will be processed as well in one county as another. In order to meet this expectation, however, judicial resources and staffing must be proportionately similar in all judicial districts. There must be uniform hiring practices and standards, and judges must be free to hire competent staff, not merely those referred by local political figures. If the staffing of court-related positions is treated as an opportunity to repay political debts rather than as an opportunity to serve the public by hiring qualified people who are able to make the system work efficaciously, the system will be neither evenhanded nor competent.

A second matter is the public's perception of the judicial system. The citizens of this Commonwealth have a right not only to expect neutrality and fairness in the adjudication of legal cases, but also, they have a right to be absolutely certain this neutrality and fairness will actually be applied in every case. But if court funding is permitted to continue in the hands of local political authorities it is likely to produce nothing but suspicion or perception of bias and favoritism. As the framers of our constitution recognized, a unified system of jurisprudence cannot tolerate such uncertainties. All courts must be free and independent from the occasion of political influence and no court should even be perceived to be biased in favor of local political authorities who pay the bills.

For the foregoing reasons we hold that the statutory scheme for county funding of the judicial system is in conflict with the intent clearly expressed in the constitution that the judicial system be unified. The order of Commonwealth Court is vacated and judgment is entered for the County.

However, because this order entails that present statutory funding for the judicial system is now void as offending the constitutional mandate for a unified system, we stay our judgment to afford the General Assembly an opportunity to enact appropriate funding legislation 2 consistent with this holding. Until this is done, the prior system of county funding shall remain in place.

County of Allegheny v. Commonwealth, 517 Pa. 65, 74–76, 534 A.2d 760, 764–65 (1987).

Unsurprisingly, the General Assembly did not rush to create a new funding system. Unsurprisingly, the Pennsylvania Association of County Commissioners sued to make them do it.

And thus came the sequel:

A lawsuit to compel legislative action normally would be barred by the speech and debate clause. Litigants may not sue in court to compel the legislature to enact a law.

In this case, however, where the legislature has been directed by this court to act in order to remedy a constitutional defect in the scheme which funds the court system, funding of which is necessary for the continued existence of the judicial branch of government, the legislature is not insulated from suit by the speech and debate clause. If it were, this court's duty to interpret and enforce the Pennsylvania Constitution would be abrogated, thus rendering ineffective the tripartite system of government which lies at the basis of our constitution.

...

Because this court has attempted to act cooperatively with the General Assembly and has denied prior petitions for enforcement, allowing the General Assembly a period of nine years to enact a funding scheme which would provide the necessary financial support for state courts, and because the General Assembly has failed to act within this extended reasonable period of time, we now grant petitioner's request for a writ of mandamus. Pursuant to this writ, jurisdiction is retained and by further order a master will be appointed to recommend to this court a schema which will form the basis for the specific implementation to be ordered.

Pennsylvania State Ass'n of County Comm'rs v. Commonwealth, 545 Pa. 324, 331, 681 A.2d 699, 702 (1996).

Former Supreme Court Justice Frank J. Montemuro, Jr., was appointed the special master to resolve the dispute, and he issued a report on July 30, 1997.

Over the past ten years, here's all that's happened, according to the Pennsylvania State Association of County Commissioners:

Only the first phase of the Montemuro report, which involved the transfer of approximately 200 court employees to the state – chiefly court administrators and deputy administrators – was accomplished in 1999. Transfer and funding of other judicial functions such as support staff for common pleas judges and magisterial district justices, court-related row offices, domestic relations, and juvenile and adult probation and parole are among those issues yet to be addressed. For twenty-one years, the state has failed to Court Administration / District Attorney Funding take steps to implement the rulings of the court, and this has been to the detriment of local taxpayers.

In spite of the Allegheny decision and the Montemuro report, county responsibility for court funding has actually increased, including Act 57 of 2005 which makes district attorneys full-time (prior to the law more than half were part time), and requires the commonwealth to fund 65 percent of the cost of those salaries. The 2008-2009 commonwealth budget contained no funding for cover the commonwealth obligation, leaving counties to shoulder the state’s responsibility.

The state currently reimburses counties $70,000 per judicial position for court costs. This amount has not been increased since 1981 and, if adjusted for inflation, the state would need to reimburse counties $166,000 to have the same purchasing power as
the reimbursement had when it was first enacted in 1981.

So the Pennsylvania State Association of County Commissioners is suing again, bringing another writ of mandamus to compel action by the General Assembly.

Philadelphia, however, has not yet joined the new suit, for reasons concisely summed up by the Inquirer:

In 1987, the state Supreme Court ordered that the state government pick up the tab for county judicial costs. The state has not obeyed that order. A legal effort launched in December is trying to force the state to honor the order, but so far the city has not joined the lawsuit. It is unclear how helpful it would be for the city to join the suit, given the level of anti-Philadelphia animosity in much of the state.

Thus, since the case is already proceeding along -- and the case has already been decided on the merits twice in favor of Philadelphia and the other counties -- the question of Philadelphia's First Judicial District joining the lawsuit is one of pure politics, a question of whether Philadelphia's intervention would make it more or less likely the Supreme Court would order relief of the General Assembly would finally provide funding.

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Since I don't have access to President Obama's "shortlist," I'll rely on Intrade to tell me the most likely nominees for fill Justice David Souter's seat on the Supreme Court.

Right now, five candidates break double-digit odds (links are to Wikipedia): 

• Sonia Sotomayor
• Diane Pamela Wood 
• Elena Kagan 
• Kim McLane Wardlaw
• Jennifer Granholm

[edit -- if this AP article is correct, then Wardlaw's not under consideration, but Janet Napolitano and Carlos Moreno are. I've thus added a dissent by Justice Moreno.]

Since he's the one doing the choosing, let's quote Obama on the Supreme Court:

[I]n the overwhelming number of Supreme Court decisions, [intellect is] good enough. Good intellect, you read the statute, you look at the case law and most of the time, the law’s pretty clear. Ninety-five percent of the time. Justice Ginsberg, Justice Thomas, Justice Scalia they’re all going to agree on the outcome.

But it’s those five percent of the cases that really count. And in those five percent of the cases, what you’ve got to look at is—what is in the justice’s heart? What’s their broader vision of what America should be?

As all five are still with us, I assume the answer to the former is "oxygenated blood."

The latter, however, can be answered in part by exploring how these potential nominees previously ruled in those "five percent of the cases that really count."

Three are currently judges (Sotomayor, Wood and Wardlaw) and so give us examples -- in the form of dissents -- for how they decide controversial cases.

Why dissents? Because a dissent is one of the few times in which a judge, having seen what the majority (and thus precedential) result will be, is openly trying to change the direction of the law. The primary purpose of a dissent is to limit the impact of the majority opinion, to direct future courts, lawyers and policymakers to conclusions different from those reached by the majority. They're the best glimpse into what judges are "really" thinking, because they show where the judge "really" wants the law to go.

I've picked out [four] cases in which there was insufficient precedent to guide the majority or dissent jurists to a clear conclusion, thereby requiring the judges draw on their "broader vision of what America should be" to decide.

Here's Sotomayor, standing up for the First Amendment rights even of a bigoted police officer fired for anonymous hate speech:

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.

Pappas v. Giuliani, 290 F.3d 143, 154 (2d Cir. 2002).

Here's Wood balancing the difficulty of, yet clear Congressional support for, permitting the victims of terrorism to pursue alleged enablers of terrorism through civil litigation:

This is a heart-breaking case. No parent can fail to empathize with Joyce and Stanley Boim, who lost their son to the evil of terrorism just as he was on the brink of all of life's promise. Nothing can bring David Boim back, but the Boims have taken advantage of a statute that Congress passed that was designed to provide some degree of accountability for those who commit such awful acts. See 18 U.S.C. § 2333(a). In Boim v. Quranic Literacy Inst. & Holy Land Found., 291 F.3d 1000 (7th Cir. 2002) ('Boim I'), this court decided that the set of possible defendants in such an action includes not only the direct actors (here, Amjad Hinawi and Khalil Tawfiq Al-Sharif) and the organization to which they belonged and that directed their actions (here, said to be Hamas), but also organizations that aid and abet the former two. When all is said and done, the en banc majority has reaffirmed the latter ruling, though it does so under a slightly different rubric. But, in our zeal to bring justice to bereaved parents, we must not lose sight of the need to prove liability on the facts that are presented to the court. Assumptions and generalizations are no substitute for proof. Particularly because, unfortunately, this probably will not be the last case brought by a victim of international terrorism, it is crucial that we be as clear as we can in fleshing out the statutory requirements and that we do not rush to judgment. Because I do not agree with the majority's articulation and application of some of the governing legal standards, and I find too many central facts to be in dispute, I am still of the view that this case needs to be remanded for further proceedings.

Boim v. Holy Land Found. for Relief & Dev., 549 F.3d 685, 719 (7th Cir. 2008)(PDF here).

Here's Wardlaw arguing the Federal Americans With Disabilities Act's broad authorization of injunctive relief trumps circuit-to-circuit comity concerns and thus empowers a district court to enter a nationwide injunction against a discriminating company so long as that court's relief is appropriate for the plaintiffs involved:

In light of the 'considerable discretion' a district court has 'in fashioning suitable relief and defining the terms of an injunction,' our precedent commands 'correspondingly narrow' appellate review. Lamb-Weston, Inc. v. McCain Foods, Ltd., 941 F.2d 970, 974 (9th Cir. 1991) (internal quotation marks omitted). Unfortunately, the majority's review is far from narrow. Instead, based on a tenuous apprehension of 'substantial interference' with the law of the Fifth Circuit, the majority vacates the district court's injunction without ever explaining how that remedial order was an abuse of discretion. Because the district court's injunction did not exceed the specific harm alleged, it cannot have been overbroad. See id.; see also Bresgal, 843 F.2d at 1170-71 ('[A]n injunction is not necessarily made over-broad by extending benefit or protection to persons other than prevailing parties in the lawsuit--even if it is not a class action--if such breadth is necessary to give prevailing parties the relief to which they are entitled.' (emphasis omitted)). Moreover, because the relevant comity cases actually support the scope of the district court's injunction, it is clear that the district court did not rely on erroneous legal principles. Confronting AMC's nationwide violations of § 4.33.3, and keeping in mind the ADA's stated purpose 'to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities,' 42 U.S.C. § 12101(b)(1), the district court was well within its discretion in granting nationwide relief. Thus, I dissent."

United States v. AMC Entm't, Inc., 549 F.3d 760, 781 (9th Cir. 2008)(PDF here).

[As described above, Wardlaw is apparently not under consideration, but another Judge, Carlos Moreno, is.] Finally, here's Moreno, arguing due process protections require, even in the absence of clear prejudice, reversing several criminal convictions due to the trial court's failure to disqualify the local prosecutor's office, where one of the defendant's parents worked:

The pattern of conduct by the prosecutor in this case established that Vasquez was treated differently and less favorably than another defendant in his position would have been who did not have Vasquez's family connection to the LACDA. This disparate treatment of Vasquez violated the duty imposed on prosecutorial offices to exercise their discretion in an impartial and evenhanded manner 'born of objective and impartial consideration of each individual case.' (People v. Superior Court (Greer) (1977) 19 Cal.3d 255, 267 [137 Cal. Rptr. 476, 561 P.2d 1164].) As we stated in Greer, '[i]ndividual instances of unfairness, although they may not separately achieve constitutional dimension, might well cumulate and render the entire proceeding constitutionally invalid.' (Id. at p. 265.) That point was reached by the time of the second motion to recuse because by then there was demonstrable evidence that the prosecutor's discretionary decisions were being driven by the LACDA's concern that it not be perceived as showing any favoritism to Vasquez due to his family connection to the office. Because 'we do not know and cannot now ascertain what would have happened if the prosecuting attorney had been free to exercise the fair discretion which he owed to all persons charged with crime in his court' (Ganger v. Peyton (4th Cir. 1967) 379 F.2d 709, 714), I am unable to conclude that the constitutional violation was harmless beyond a reasonable doubt. (Ibid., citing Chapman v. California (1967) 386 U.S. 18 [17 L. Ed. 2d 705, 87 S. Ct. 824].) Accordingly, I would reverse defendants' convictions."

People v. Vasquez, 39 Cal. 4th 47, 72–73, 137 P.3d 199, 215–16, 45 Cal. Rptr. 3d 372, 391 (2006).

The cases are long and complicated, but worth reading because they touch upon basic -- yet unresolved -- questions of American law and governance, from the protections of anonymous (and hate) speech, to the intersection of civil recovery and national security, to the reach of the powers of a single district court in our federal system. The decisions reached by the majorities in each case have ample support in precedent and political theory, yet were not persuasive to judges Sotomayor, Wood, Wardlaw and Moreno.

It's worth seeing why not, and what they believed should have been done instead.

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New to the site? Haven't been here in a while? Here are some of the most popular posts over the past few weeks.

Litigations and Trials:

• Three Ways To Lose Your Business Lawsuit - Wachtell and The Failed Hexion / Huntsman Merger
• Does The Fumo Juror's Twittering Warrant A Mistrial?
• Harvard Law Professor Bungles Rules of Civil Procedure for Deposing Third Parties
• American College of Trial Lawyers Report Encourages Frivolous Civil Discovery Objections
• Another Preventable Small Business Lawsuit Horror Story

Law Practice:

• How To Write Your Brief So That The Judge Will Hate You
• "How Low Could Associate Salaries Go?" Depends On How Desperate Firms Want To Appear
• Contingent Fee Business Lawyers As Venture Capitalists
• A Great Trial Lawyer, Lucius Seneca, On Keeping Your Law Practice In Perspective
• How To Deal With A "Non-Ruling" By A Trial Judge

Current Events:

• Another Mangled Prescription for Health Courts to Evaluate Medical Malpractice Claims
  
• How AIG Shareholders (Like the US Gov't) Can Sue to Get Back The Bonuses
• "The 'Hot News' Tort and the New Media" -- It's Too Late For Copyright To Sink Blogs
• LinkedIn's Terms of Use: We Own All Content, Ex-Users Agree To Update Our Database Forever 

Recent Court Opinions: 

• Third Circuit Predicts Pennsylvania Supreme Court Would Require Independently Actionable Conduct To Prove Tortious Interference With Contractual Relationships
• Third Circuit Upholds Philadelphia Police's Ban On Headscarves Without A Word On The First Amendment
• E.D.Pa. Threads The Needle On "Gist of the Action" and "Parol Evidence Rule" In Mixed Fraud / Breach of Contract Cases
• Ricci v. DeStefano: The Problem of Granting Certiorari After Summary Judgment

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In the middle of an otherwise good article in The Legal Intelligencer about the creative solutions local biglaw firms (Eckert Seamans, Ballard Spahr, Fox Rothschild) have taken to the shrinking supply of corporate legal work is this absurdity:

In response to the current economy and a clear shift to a buyer's market, firms are moving from the pyramid model of a few partners at the top and hoards of associates at the bottom to a diamond shape in which several senior associates and junior partners make up the bulk in the middle in an effort to maximize value for the client.

When you bill by the hour, the last thing you want to do is "maximize value for the client." It translates directly into "minimize profit for the law firm."

And that's what's so wrong with the "leverage" model, which is built on hourly billing: just like a "cost-reimbursement" (aka "cost-plus") contract, it creates a disincentive towards productivity, which is why the government has moved away from them. The incentive is to continually add resources -- particularly resources with a big spread between billing to client and cost to firm, like junior associates -- up until the very highest point tolerated by the client, and then to keep the matter going as long as possible.

Fact is, even when business is modest, junior associates at corporate law firms are very profitable. A top-of-the-market junior associate making $150,000 annually plus bonus will still, after bonus, benefits, malpractice insurance premium, and even 'lost opportunity' costs like office space, still need only bill a modest 1,750 hours annually at an abysmal $150/hour to return a substantial profit. Keep in mind that's a low rate for an associate working nowhere near the 2,000 hours most firms expect these days. Most do much better, frequently returning 30% profit margins or better on the firm's expenses on them.

The problem now is that businesses are unwilling to let firms overwork cases like before, leaving the hours available for the junior associates uncertain. The firm can no longer "make work" for them.

So, what to do? Simply removing the excess capacity is one solution, but it won't generate the same profits as before.

Hence the interest in alternative fee arrangements like fixed billing and the unique methods for dealing with first year associates. Particular credit goes out to those who, looking back to the history of the profession, have restored the "apprenticeship" model, which is likely fairer to clients and more useful for associates. (I've known many biglaw associates who, for their first year, learned absolutely nothing as they did "document review," often nothing more than unnecessary checks for attorney-client privilege among thousands of banal, irrelevant documents.)

There will always be a market for companies like, say, Comcast, hiring an armada to repel a legal invasion. We're not talking about them.

The million-dollar profit-per-partner question for everyone else, for the lawyers who represent companies with "only" millions in annual revenue is: who in biglaw can go from a culture of excess to a culture of frugality? Adopt the 'lean and mean' approach that contingent fee firms have been doing for years, thereby earning their profits the way most businesses do, through improve productivity?

Who, and how quickly?

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I'm somewhat surprised this issue comes up as often as it does:

"Scholarly commentary has recognized that Pennsylvania law has been riven with 'considerable confusion as to the nature of the covenant of good faith, when that covenant is implicated, and how claims arising from a breach of the covenant are enforced.' Seth William Goren, Looking for Law in all the Wrong Places: Problems in Applying the Implied Covenant of Good Faith Performance, 37 U.S.F. L. Rev. 257, 258 (2003). As the parties' discussion of the law illustrates, it has not always been clear 'whether the covenant is implicated in every contractual relationship or only some . . . and whether a breach of the covenant of good faith gives rise to an independent cause of action or is merely a tool of contract interpretation.' Id. at 260. According to Goren this confusion 'derived from confusing the contract-tort of bad faith with breaches of the general covenant [of good faith] present in all contracts.' Id. at 303. Whatever its source, this confusion has largely been resolved: 'The majority of Pennsylvania cases through the 1990s to today . . . have refused to permit independent claims for breach of the covenant of good faith outside of an insurer-insured relationship. Thus, in general, a 'breach of such covenant is a breach of contract action, not an independent action for a breach of a duty of good faith and fair dealing.'' Id. (footnote omitted) (quoting Seiple v. Comty. Hosp. of Lancaster, No. 97-cv- 8107, 1998 U.S. Dist. LEXIS 5093, 1998 WL 175593, at (E.D. Pa. April 14, 1998) ('Pennsylvania does not recognize a claim for breach of covenant of good faith and fair dealing as an independent cause of action.')).

Recent case law confirms this as the prevailing rule in Pennsylvania. See, e.g., LSI Title Agency, Inc. v. Eval. Servs., Inc., 2008 PA Super 126, 951 A.2d 384, 391 (Pa. Super.2008), appeal denied, 960 A.2d 841 (Pa.2008) (citing cases holding that Pennsylvania does not recognize separate breach of contractual duty of good faith and fair dealing where that claim is subsumed by separately pled breach of contract claim.); JHE, Inc. v. SEPTA, No. 1790 NOV. TERM 2001, 2002 Phila. Ct. Com. Pl. LEXIS 78, 2002 WL 101894,1 at (Pa. Com. Pl. May 17, 2002) (''[T]he implied covenant of good faith does not allow for a claim separate and distinct from a breach of contract claim . . . [A] claim arising from a breach of the covenant of good faith must be prosecuted as a breach of contract claim, as the covenant does nothing more than imply certain obligations into the contract itself.') (collecting cases from other jurisdictions adopting same rule) (emphasis in original); Commonwealth v. BASF Corp., No. 3127, 2001 Phila. Ct. Com. Pl. LEXIS 95, 2001 WL 1807788, at (Pa. Com. Pl. Mar.15, 2001) ('Pennsylvania law does not allow for a separate cause of action for breach of either an express or implied duty of good faith, absent a breach of the underlying contract.').

Federal courts construing Pennsylvania law have adhered to the same rule. See e.g., Chanel, Inc. v. Jupiter Group, Inc., Civ. No. 3:04-CV-1540, 2006 U.S. Dist. LEXIS 43363, 2006 WL 1793223, at (M.D .Pa., June 27, 2006) (agreeing and citing cases holding that claim for breach of good faith and fair dealing is not independent cause of action, but part of a breach of contract claim); In re K-Dur Antitrust Litig., 338 F. Supp.2d 517, 549 (D.N.J. 2004) ('Although Pennsylvania imposes a duty of good faith and fair dealing on each party in the performance of contracts, there is no separate cause of action for breach of these duties . . . .') (citations omitted); Blue Mt. Mushroom Co. v. Monterey Mushroom, Inc.., 246 F. Supp. 2d 394, 400-01 (E. D. Pa. 2002) ('Pennsylvania law does not recognize a separate claim for breach of implied covenant of good faith and fair dealing.'); McHale v. NuEnergy Group, No. Civ. A. 01- 4111, 2002 U.S. Dist. LEXIS 3307, 2002 WL 321797, at (E.D. Pa. Feb.27, 2002) (internal citations omitted) (same)."

McHolme/Waynesburg, LLC v. Wal-Mart Real Estate Bus. Trust, No. 08-961, 2009 U.S. Dist. LEXIS 38934, at *5–8 (W.D. Pa. May 7, 2009).

I suppose from the plaintiff's perspective it is an issue of "why not? If the claim is recognized, it could have been malpractice for me not to include it," but I wonder about the ramifications if a plaintiff actually gets one of these "independent" good faith claims through trial.

What are the elements of proving it? What are your damages? Do they overlap your breach of contract damages? Can you recover twice? 

Is there any doubt the defendant will appeal such a verdict? Any doubt it will get your case reversed and re-tried?

I think the down side including such a claim -- particularly the distraction from the real issues in the case and the loss of some credibility with the court -- outweigh any potential benefits.

Just include it as more evidence of the breach of contract.

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The case filed by the family of Staff Sergeant Ryan D. Maseth (an Army Ranger, Green Beret and combat veteran) got a lot of press when it was first filed: 

On Jan. 2 of this year, Sgt. Maseth, of Shaler, stepped into the shower at his quarters in Baghdad's safe Green Zone and was electrocuted.

...

According to the Army Criminal Investigation Division, Sgt. Maseth died when the electricity in the shower facility short-circuited because an electric water pump on the rooftop was not properly grounded.

...

Yesterday, in a quest for someone to be held accountable, Sgt. Maseth's parents sued KBR Inc., the multibillion-dollar contractor hired to maintain and repair the electrical infrastructure at the Radwaniyah Palace complex in Baghdad, a former estate of Saddam Hussein, where Sgt. Maseth was killed.

Attorney Patrick K. Cavanaugh said the military and the contractor had known about the electrical problem since February 2007, yet it went uncorrected.

"The Defense Contract Management Agency, we believe, authorized [the contractor] to the tune of millions of dollars to make the repairs. And they never made the repairs," Mr. Cavanaugh said. "And we don't know why. A simple repair -- just ground the building -- and Ryan would be alive today."

A little over a month ago, United States District Judge Nora Barry Fischer of the Western District of Pennsylvania denied Defendant's motion to dismiss, which raised two defenses irrelevant to blatant negligence by a civilian electrical contractor working on a military base: the "political question doctrine" and the "combatant activities" exception to the Federal Tort Claims Act ("FTCA"). 

After they lost the motion to dismiss, Defendant KBR moved to halt the litigation so they could file an interlocutory appeal with the Third Circuit. (Normally, appeals must await a "final order" on the case that resolves all the issues, such as a dismissal or judgment.)

Here's the standard for an interlocutory appeal, as recited by the Court:

28 U.S.C. § 1292, entitled "Interlocutory decisions," provides:

When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference in opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order.

28 U.S.C. § 1292(b). Section 1292(b) grants the Court of Appeals jurisdiction to review the District Court's interlocutory order. "Certification pursuant to § 1292(b) should be granted 'sparingly' and only when three conditions are met: (1) where immediate appeal may avoid protracted and expensive litigation, (2) the request involves a controlling question of law, and (3) where there is a substantial basis for differing opinion." The party seeking the interlocutory appeal has the burden to establish that all three conditions are met. However, this Court has discretion to deny an interlocutory appeal even if that party meets its burden. See Bachowski v. Usery, 545 F.2d 363, 368 (3d Cir. 1976)("The certification procedure is not mandatory; indeed, permission to appeal is wholly within the discretion of the courts, even if the criteria are present.").

(citations without quotes omitted) Harris v. Kellogg, Brown, & Root Servs., 2009 U.S. Dist. LEXIS 36253 * 2-3 (April 30, 2009).

Defendant KBR argued, in essence, that an appeal was warranted because "there is a lack of precedent within the Third Circuit" on these issues. That, however, is not grounds for a "substantial basis of differing opinion," since a lack of precedent is not the same thing as differing precedent. The Court accordingly rejected defendant's argument.

Defendant KBR then waved the bloody shirt of "costly discovery" (after litigating the heck out of the case so far with "voluminous" submissions) and piously claimed years of delay would not prejudice the plaintiffs, prompting the following refreshing course in reality:

First, Staff Sergeant Maseth died on January 2, 2008 and only limited discovery relevant to KBR's motion to dismiss has been permitted to this point, nearly a year and a half later. At the outset of this case, KBR took the position that despite its submission of voluminous evidence in support of its motion to dismiss that no discovery was necessary prior to the Court's resolution of its motion. (See Docket No. 56). Alternatively, KBR requested that the Court permit only limited discovery related to the issues raised in its motion. (Id.). The Court acquiesced to KBR's request, finding that the justiciability issue raised by KBR should be resolved prior to any further discovery being conducted. Now that KBR's motion to dismiss has been denied, Plaintiffs should have the opportunity to conduct discovery relevant to their claims on liability without the further delay which would be caused by any appeal. To that end, it is axiomatic that over time witnesses' memories may fade, they may become unavailable and/or physical evidence may be lost, destroyed or misplaced.

Second, due to the nature of this case and based on representations by counsel to the Court, many prospective witnesses are literally located around the globe and are potentially serving in the military or working for private military contractors in war zones where they may be at risk of serious injury or death. Again, any further delay in permitting discovery of these individuals could prevent both parties from discovering information relevant to their claims and/or defenses.

Third, to the extent that KBR, a multi-billion dollar international corporation, argues that an appeal is warranted based on financial concerns due to the potential avoidance of "costly discovery in this litigation," (see Docket No. 162 at 6), the Court is certainly mindful of the costs of litigation. However, in light of the fact that the individual Plaintiffs have not raised any such concerns, the Court is not persuaded.

Finally, as discussed above, KBR's motion was denied, without prejudice, and its counsel has already represented to the Court that it intends to re-file its motion and/or a summary judgment motion based on the political question doctrine and/or the combatant activities exception, once all discovery is complete.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Judge Timothy J. Savage of the United States District Court for the Eastern District of Pennsylvania had a straightforward job.

All he had to do was:

• survey the laws of all fifty states with regard to unjust enrichment and breach of the implied warranty of merchantability,
  • Huber v. Taylor, 469 F.3d 67, 82-83 (3d. Cir. 2006) (consideration of the requirements for certification must be conducted in light of the correct jurisdiction's law); see also In re Sch. Asbestos Litig., 789 F.2d 996, 1010 (3d Cir. 1986).;
• determine whether there were actual or real conflicts between those laws,
  • Hammersmith v. TIG Ins. Co., 480 F.3d 220, 230-31 (3d Cir. 2007)
• where there was such a conflict, assess which state has the greater interest in the application of its law to determining the liability for defective aircraft crankshafts that were allegedly more vulnerable to stresses in their ordinary and foreseeable use,
  • Cipolla v. Shaposka, 439 Pa. 563, 267 A.2d 854, 856 (Pa. 1970); Melville v. Am. Home Assurance Co., 584 F.2d 1306, 1311 (3d Cir. 1978)
• and consider whether applying that law to all plaintiffs and class members violates the Due Process and Full Faith and Credit Clauses through individualized scrutiny of the claims asserted by each member of the plaintiff class.
  • Allstate Ins. Co. v. Hague, 449 U.S. 302, 312-13, 101 S. Ct. 633, 66 L. Ed. 2d 521 (1981) (plurality opinion); see generally, 1 Joseph M. McLaughlin, McLaughlin on Class Actions: Law and Practice § 5:46 (4th ed. 2007).

Simple, right? Apparently not:

Our review of the record persuades us that the choice-of-law examination here had its shortcomings. As one instance, the District Court observed in its unjust enrichment analysis that a true conflict existed between the relevant states' laws because Pennsylvania and some others preclude recovery if the parties had an express contract.  Believing unjust enrichment to be a hybrid of contract and tort law, the Court purportedly weighed the factors from sections 188 (concerning contracts) and 148 (relating to torts involving fraud and misrepresentation) of the Restatement (Second) Conflict of Laws and concluded that Pennsylvania 'has the most significant relationship to the transaction and the parties.' Defendants were sued in Pennsylvania, manufactured the crankshafts there, 'issued service bulletins and instructions . . . about the crankshafts . . . in Pennsylvania, and plan[] to replace [them] [t]here.'"

Powers v. Lycoming Engines, No. 07-4710, 2009 U.S. App. LEXIS 6785, at *10–12 (3d Cir. Mar. 31, 2009).

Unfortunately, the above was in error because:

Pennsylvania, however, does not consider unjust enrichment to be either an action in tort or contract. Unjust enrichment, rather, an equitable remedy and synonym for quantum meruit, is 'a form of restitution.' Mitchell v. Moore, 1999 PA Super 77, 729 A.2d 1200, 1202 n.2 (Pa. Super. Ct. 1999); see also Ne. Fence & Iron Works, Inc. v. Murphy Quigley Co., 2007 PA Super 287, 933 A.2d 664, 667 (Pa. Super. Ct. 2007); Sack v. Feinman, 495 Pa. 100, 432 A.2d 971, 974 (Pa. 1981) (citing Restatement of Restitution § 1 (1937) as a source for the elements of an unjust enrichment claim); Meehan v. Cheltenham Twp., 410 Pa. 446, 189 A.2d 593, 595 (Pa. 1963) (same). The Restatement views restitution as an area of the law 'which is neither contract nor tort.' Restatement (Second) of Conflict of Laws § 221 introductory note (1971)."

If there is a claim under Pennsylvania law that falls within the scope of restitution under the Restatement (Second) Conflict of Laws, [Fn 3] the following factors should have been addressed in the choice-of-law examination: (1) the place where the parties' relationship was centered; (2) the state where defendants received the alleged benefit or enrichment; (3) the location where the act bestowing the enrichment or benefit was done; (4) the parties' domicile, residence, place of business, and place of incorporation; and (5) the jurisdiction "where a physical thing . . . , which was substantially related to the enrichment, was situated at the time of the enrichment." Id. § 221(2) (1971).

Id. Footnote 3 notes:

Although we have found no instance in which Pennsylvania has adopted section 221, our case law, in explaining the state's choice-of-law approach, directs courts to "use the Second Restatement of Conflict of laws as a starting point." Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455, 463 (3d Cir. 2006). "[T]o properly apply the Second Restatement and remain true to the spirit of Pennsylvania's 'flexible approach,' [courts] must . . . characterize the particular issue . . . in order to settle on a given section of the Restatement for guidance." Id. Because Pennsylvania considers unjust enrichment to be a form of restitution, we believe applying section 221 would be proper.

In other words, Judge Savage, having no Pennsylvania precedent at all to rely on, incorrectly predicted which way Pennsylvania would go in making the archaic distinction between claims in law and claims in equity in the choice of law context. The Third Circuit predicted that, if Pennsylvania courts had to decide if unjust enrichment was a tort or contract claim, the Pennsylvania courts would say, "neither, it's a claim in equity," and so should be evaluated under different standards in determining which state's laws should be evaluated for potential application in a class action filed in Pennsylvania.

Oh.

Nonetheless, in light of Judge Savage's lengthy opinion analyzing most of the relevant issues under the similar, but erroneous, standard he used, it's hard to see how the outcome will change by this ruling.

A model of efficiency, class actions are not.

I don't have an easy answer for how class actions should be prosecuted and evaluated. Judge Savage and the Appellate Judges (Ambro, Weis and Van Antwerpen) clearly did the best they could; fact is, class actions are complicated, time-consuming, expensive and just plain hard to litigate and to decide. It's not uncommon to bounce back and forth between the trial court and the appellate court several times prior to even beginning discovery, much less trial. Then comes the "real" post-trial appeal from a final order.

Plaintiff's complaint was filed July 10, 2006, more than two-and-a-half years ago. Plaintiff and his lawyers have gone essentially nowhere since then, and still have years of litigation ahead, all at substantial time and expense to the plaintiff's counsel, who likely represents plaintiff on a contingent fee, a fee that will depend not only on winning, but on the judge's own evaluation of whether the claimed fee is fair and reasonable. All years down the road.

Something to keep in mind when you hear about all these "unfair" counsel fees in class actions.

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Tim Ferriss, author of The 4-Hour Workweek, has been covering Soticism lately, most recently with a post on Seneca's "On The Shortness Of Life," including this passage:

Vices beset us and surround us on every side, and they do not permit us to rise anew and lift up our eyes for the discernment of truth, but they keep us down when once they have overwhelmed us and we are chained to lust. Their victims are never allowed to return to their true selves; if ever they chance to find some release, like the waters of the deep sea which continue to heave even after the storm is past, they are tossed about, and no rest from their lusts abides.

Think you that I am speaking of the wretches whose evils are admitted? Look at those whose prosperity men flock to behold; they are smothered by their blessings. To how many are riches a burden! From how many do eloquence and the daily straining to display their powers draw forth blood! How many are pale from constant pleasures! To how many does the throng of clients that crowd about them leave no freedom! In short, run through the list of all these men from the lowest to the highest—this man desires an advocate, this one answers the call, that one is on trial, that one defends him, that one gives sentence; no one asserts his claim to himself, everyone is wasted for the sake of another.

Ask about the men whose names are known by heart, and you will see that these are the marks that distinguish them: A cultivates B and B cultivates C; no one is his own master. And then certain men show the most senseless indignation—they complain of the insolence of their superiors, because they were too busy to see them when they wished an audience! But can anyone have the hardihood to complain of the pride of another when he himself has no time to attend to himself?

After all, no matter who you are, the great man does sometimes look toward you even if his face is insolent, he does sometimes condescend to listen to your words, he permits you to appear at his side; but you never deign to look upon yourself, to give ear to yourself. There is no reason, therefore, to count anyone in debt for such services, seeing that, when you performed them, you had no wish for another’s company, but could not endure your own.

What Seneca would think of Above The Law's 2008 survey, in which more than half of ATL's BigLaw associate readers broke 2000 billable hours?

The Attorney Work / Life Balance Calculator shows that, assuming two weeks vacation, eleven holidays, five personal days, a half-hour commute and an unbillable hour a day (lunch, administration, water cooler, etc), then those associates are spending at least the 10.5 best hours of every workday in the office, car, courtroom, or conference room.

Throw in 6.7 hours of sleep every workday, a quarter-hour getting ready before and a quarter-hour decompressing after, a half-hour finding or making dinner, and they're left with, at the most generous, 5.8 tired hours a weekday to themselves, plus the weekends, unless the partner calls them in.

Maybe that's enough. Maybe they like what they do and where they're going, they owe no apologies for that. I like what I do. So do many lawyers.

But life's too short to do anything because you "should."

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Via @walterolson, CQ Politics reported yesterday:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

...

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

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

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

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

Here's part of the introduction:

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

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

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

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

Here's how the respective sections end:

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

(Emphasis mine).

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

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

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Not too long ago, I believe at the recommendation of Walter Olson at Overlawyered, I started reading WhiteCoat Rants (renamed WhiteCoat's Call Room when he moved to Emergency Physicians Monthly), an anonymous blog authored by a voluble ED doctor.

I have over 300 feeds in my Google Reader, including venture capitalists, scientists, professors, economists, security professionals, and ship captains, and while I frequently read Grand Rounds, I didn't regularly follow many practicing physicians.

So, what the heck.

I didn't expect to comment or to debate, just get another perspective. I have my own blog in part to channel the temptation to respond when Someone Is Wrong On The Internet into a more productive form. That said, I think it's worthwhile to chime in on another blog when I think it will add value to the discussion, which is what happened with WhiteCoat's defensive medicine post, my response, his reply, and my sur reply.

Defensive medicine is a controversial topic made worse by the absence of good empirical data about its existence or prevalence. A GAO study in 2003 found the effect to be minimal and possibly non-existent, and I think the whole idea of "defensive" medicine is conceptually flawed, but it's such a broad, hot-button subject that I don't expect many minds to change one way or another over it.

I didn't expect the same for EMTALA.

Here's the American Academy of Emergency Medicine (AAEM):

The Emergency Medical Treatment and Active Labor Act (EMTALA) was included in the COBRA legislation of 1986. It was promulgated to combat the discriminatory practice of some hospitals transferring, discharging, or refusing to treat indigent patients coming to the emergency department because of the high cost associated with diagnosing and treating these patients with emergency medical conditions. While the Act applies to all Medicare participating hospitals, it protects anyone coming to a hospital seeking emergency medical services, not just Medicare beneficiaries. EMTALA imposes strict penalties including fines and exclusion from the Medicare program for violations of the Act. The Act imposes three primary requirements on Medicare participating hospitals that provide emergency medical services.

• The hospital must provide an appropriate medical screening exam to anyone coming to the ED seeking medical care;

• For anyone that comes to the hospital and the hospital determines that the individual has an emergency medical condition, the hospital must treat and stabilize the  emergency  medical    condition, or the hospital must transfer the individual; and

• A hospital must not transfer an individual with an emergency medical condition that has not been stabilized unless several conditions are met that includes effecting an appropriate transfer.

Emphasis mine to highlight some issues.

In my view, EMTALA reflects the way that most people expect an emergency department to function. If you go to an emergency department, they will check to see if you have an emergency and, if so, will treat you until you no longer have an emergency. The outrage that follows every "patient dumping" story supports this view; it's also no small matter that the winning Presidential candidate explicitly endorsed medical care as a "right." (EMTALA implicitly creates a "right" to emergency medical screening and stabilizing at Medicare-recipient hospitals by permitting patients to sue if they are denied that "right.")

I'm not surprised that emergency physicians dislike a law that requires they spend their time (and hospital resources) screening and stabilizing individuals who often can't or won't pay, at least not pay enough, particularly as emergency departments increasingly become the de facto primary care physicians for millions of Americans. It gives them the burden of being a first-responder without the benefit of stable salaries and guaranteed government funding.

What surprised me was the anathema was directed at the concept of EMTALA rather than the execution, even as the physicians spoke of wanting to ensure access to healthcare for all.

Just as most people expect the ED to check them out when they have a problem, most people expect that the ED will be funded in some reasonable fashion. If you have private insurance, your insurance will be billed. If you are on Medicare, Medicare will cover. If you are impoverished, Medicaid will cover, even for undocumented aliens.

But that's not how it works in the real world. There's a reason that an industry like "professional coding" -- not even middlemen, but people who input data for use by middlemen! -- exists. Health insurance companies routinely deny reasonable care already performed. Medicare reimbursements are low and difficult to process, and Medicaid is worse than Medicare and not even fully funded in the first place.

Some suggestions for reforming the economics behind emergency medicine make sense, like this one from the American College of Emergency Physicians:

Some health insurance plans deny claims for legitimate emergency departments visits, based on a patient's final diagnosis, rather than the presenting symptoms (e.g., when chest pain turns out not to be a heart attack). Some also attempt to require preauthorization before a patient can seek emergency medical care, resulting in denied payment. These managed care practices endanger the health of patients and threaten to undermine the emergency care system by failing to financially support America's health care safety.

ACEP advocates for a national prudent layperson emergency care standard that provides coverage based on a patient's presenting symptoms, rather than the final diagnosis. In addition, health insurers should cover EMTALA-related services up to the point an emergency medical condition can be ruled out or resolved.

 But for every specific, reasonable proposal like that, you get a complaint like this (also from ACEP):

According to a May 2003 American Medical Association (AMA) study, emergency physicians annually incur, on average, $138,300 of EMTALA-related bad debt. Approximately 95.2% of emergency physicians provide some EMTALA mandated care in a typical week and more than one-third of emergency physicians provide more than 30 hours of EMTALA-related care each week.

Sounds bad, but those figures are useless since they're a mish-mash of several distinct problems.

What does "EMTALA-related" mean? A prior paper of ACEP's defined "uncompensated care" and "bad debt" as any care where the physician or hospital collected less than they billed, which means every denied private insurance claim, every denied Medicare claim, and every denied Medicaid claim in addition to the totally unreimbursed care most people assume is meant by "EMTALA-related."

Which means the "EMTALA-related" figure above conflates every single billing issue affecting emergency departments into "EMTALA-related bad debt," even where most of it has nothing to do with EMTALA.

Combine that with self-congratulatory, self-contradictory praise like "Emergency physicians are proud to serve as an essential part of the nation's health care safety net, open 24/7, caring for everyone, regardless of ability to pay or insurance status," and you have to wonder if anything's actually wrong with the system if they "proudly" follow EMTALA's dictates yet blatantly manipulate numbers to oppose EMTALA itself.

That's what I wanted to describe to WhiteCoat when he again raised the specter of EMTALA as the cause of several ED stories, including the closing of the ED at Northeastern Hospital here in Philadelphia. I posted a comment.

He took it to heart.

I don't agree with his conclusions (no surprise), and a discussion on the merits is best left until later, but it's gratifying to see that I could offer him and his readers a different perspective, just as they've offered me.

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 You may have seen this article in The American Lawyer:

Simpson Thacher & Bartlett partner Barry Ostrager isn't exactly mincing words in his assessment of the counsel that guided Chubb Insurance to the U.S. Supreme Court, where on Monday it will square off against Ostrager's insurance company client, Travelers Indemnity. "Whoever has been advising Chubb," he told the Litigation Daily on Friday, on a train en route to Washington, "gave them the worst advice any lawyer ever gave a client." ...

Way back in 1986, Manhattan federal bankruptcy court judge Burton Lifland confirmed the Chapter 11 reorganization plan of the granddaddy of all asbestos companies, Johns-Manville Corp. The plan was groundbreaking. It created a trust, to be funded by Johns-Manville and its insurers, through which all asbestos claims against the company would be processed. ...

Fast-forward to 2001, when asbestos plaintiffs lawyers began testing new theories of liability against insurance companies. They filed tortious interference suits -- which have become known as "direct action" claims -- asserting that insurers had an independent duty to warn potential victims of the dangers of asbestos. In 2002, Travelers asked Judge Lifland -- the Manville bankruptcy judge -- to enjoin the "direct action" cases. ...

At this point, Chubb became involved. Chubb hadn't been part of the Manville deal but it was worried that if Judge Lifland approved the Travelers settlement, it would be precluded from suing Travelers in cases in which they shared liability. Chubb aligned with the asbestos plaintiffs lawyers to challenge the bankruptcy court's power to enjoin suits against parties other than the debtor. (That's the decision that Ostrager has scorned.)

That bothered Stephen Cozen enough that he wrote a letter to The American Lawyer, deriding Ostranger as a "noncredible source ... launching ad hominem attacks."

The irresistible part is that this feud involves none other than the In re Johns Manville Corp. constellation of cases, including 06-2320 (2nd Cir., Jan. 17, 2007), in which Mr. Ostrager's cross-appeal was rejected because:

Travelers had 14 days to file its notice of cross-appeal. However, the firm calculated the 14 days from the date it received the notice, not from the date the notice was actually filed. The district court denied Traveler’s motion to extend the deadline by one day, explaining that this was a case of “garden variety attorney inattention” and not excusable neglect. The Second Circuit affirms.

Doh! But let's focus on the supposed worst advice ever.

The Travelers / Simpson argument is that Chubb / Cozen should have kept their mouths shut and not attempted to intervene, because the arguments they made (or the precedent created) in support of intervention could be used by plaintiffs attempting to sue Chubb in a later "direct action" case involving an asbestos trust.

There is something to be said for not putting forth your best argument in a particular case as part of a broader strategy involving other cases. That something is: you should not sandbag your own arguments in one case unless there is clear and convincing evidence that it will help you in other cases.

The law of unintended consequences applies to the practice of law just as it applies to everything else. What, exactly, did Travelers / Simpson believe would happen in the absence of the Chubb / Cozen intervention? That the billion-dollar asbestos plaintiffs lawyers industry would not realize a bankruptcy court's injunction protecting a non-debtor raised serious statutory and constitutional concerns?

We already know exactly the opposite is true, and that the asbestos plaintiffs lawyers were already challenging the power of the court to enjoin the "direct action" cases against insurance companies. These issues were already destined for the Circuit Courts and the Supreme Court. The difference was the names on the briefs.

Where then would that have left Chubb if Cozen had told them to sit on their rights and not intervene? Had the Supreme Court denied certiorari for the appeal, or if the Supreme Court agrees with the Second Circuit in prohibiting the bankruptcy court from enjoining these suits, then Chubb would have been left out in the cold, potentially precluded from raising issues relating to hundreds of millions of dollars in insurance coverage and tort liability.

Could that be in the running for the worst advice a lawyer ever gave a client?

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The WSJ Law Blog points us to an Op-Ed in the NYTimes:

Restoring a foundation of trust requires a new system of medical justice. Medical cases are now decided jury by jury, without consistent application of medical standards. According to a 2006 study in the New England Journal of Medicine, around 25 percent of cases where there was no identifiable error resulted in malpractice payments. Nor is the system effective for injured patients — according to the same study, 54 cents of every dollar paid in malpractice cases goes to administrative expenses like lawyers, experts and courts.

America needs special health courts aimed not at stopping lawsuits but at delivering fair and reliable decisions. A special court would provide expedited proceedings with knowledgeable staff that would work to settle claims quickly. Trials would be conducted before a judge who is advised by a neutral expert, with written rulings on standards of care.

With a special health court, damages would consist of all lost income and medical costs, plus “pain and suffering” based on a set schedule depending on the severity of the injury. All information about each incident, including details learned in settlements, would be compiled and disseminated so that doctors and hospitals could learn from their errors. Proponents of special health courts have estimated that the total cost of such a new liability system would be about the same as the existing system — less than 2 percent of America’s total health care costs. One benefit would be that the quicker, streamlined system would compensate far more people, with drastically lower legal costs. Most important, it would restore faith in the reliability of medical justice.

The author is none other than Philip Howard, whose latest screed, Life Without Lawyers, cautioned Americans against the devastating effect warning labels have had on our quality of life.

His column is loaded with unsupported references to standard boogeymen like defensive medicine, but let's just focus on the special health courts. Though described in bombastic terms, Howard's proposed system is different in only three respects:

1. the jury is removed and medical malpractice becomes a bench trial before judges;
2. independent experts are (apparently) removed and replaced by a single "neutral" expert chosen by an unspecific procedure; and,
3. the judge is limited in the damages they can award to "lost income and medical costs, plus 'pain and suffering' based on a set schedule depending on the severity of the injury."

I do not see how the first and second part would "free[] doctors from worries about unnecessary and unreasonable malpractice claims." I have known many judges who have presided over many medical malpractice cases, but I have never heard a judge say they felt they personally had the expertise to evaluate whether the standard of care was breached or not any better than a jury. In fact, I have frequently heard the opposite.

Bearing that in mind, would such a system result in more "reliable" malpractice results than our current jury system?

Let's go back to that "2006 study in the New England Journal of Medicine" Howard references, which was unveiled to the public through a press release from the researchers titled "Study Casts Doubt on Claims That the Medical Malpractice System Is Plagued By Frivolous Lawsuits." Here's what they found:

The researchers analyzed past malpractice claims to judge the volume of meritless lawsuits and determine their outcomes. Their findings suggest that portraits of a malpractice system riddled with frivolous lawsuits are overblown. Although nearly one third of claims lacked clear-cut evidence of medical error, most of these suits did not receive compensation. In fact, the number of meritorious claims that did not get paid was actually larger than the group of meritless claims that were paid. The findings appear in the May 11, 2006 issue of The New England Journal of Medicine.

“Some critics have suggested that the malpractice system is inundated with groundless lawsuits, and that whether a plaintiff recovers money is like a random ‘lottery,’ virtually unrelated to whether the claim has merit,” said lead author David Studdert, associate professor of law and public health at HSPH. “These findings cast doubt on that view by showing that most malpractice claims involve medical error and serious injury, and that claims with merit are far more likely to be paid than claims without merit.”

...

Most claims (72%) that did not involve error did not receive compensation. When they did, the payments were lower, on average, than payments for claims that did involve error ($313,205 vs. $521,560). Among claims that involved error, 73% received compensation. “Overall, the malpractice system appears to be getting it right about three quarters of the time,” said Studdert. “That’s far from a perfect record, but it’s not bad, especially considering that questions of error and negligence can be complex.” The 27% of cases with outcomes that didn’t match their merit included claims that went unpaid even though the injury was caused by an error (16%); claims that were paid but did not involve error (10%); and claims that were paid but did not appear to involve a treatment-related injury (0.4%).

So our current system gets it right "three quarters of the time," and, when it gets it wrong, favors the doctors -- would Howard's system beat that?

Probably not; such a system is 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. The judges in Howard's proposal -- none of whom have particular expertise in medicine -- will be wholly dependent upon the "neutral expert" for their understanding of the medicine. Worse, unlike the jury in a medical malpractice action today, they will not have the benefit of seeing a cross examination or in considering the views of multiple experts. 

Ironically, Howard's process for chosing a "neutral" expert and the materials they opine on will probably make medical malpractice litigation more contentious, expensive, and uncertain because it will at best resemble the Markman process used in evaluating patent disputes. Markman hearings often involve the selection of a "neutral expert" in helping the judge determine the meaning of a patent, a process loathed by patent attorneys for adding "a whole new level of lawyering, cost, delay and, some say, uncertainty to patent litigation." So there goes parts 1 and 2.

That leaves Howard with a single proposal: limiting damages, for which he proposes a system like workers' compensation, which covers economic losses and provides a pre-set amount for particular damages. [We'll put aside for this post the fact that, as a practical matter, medical malpractice cases are already typically limited by the size of the defendant's insurance policy;  very rarely do plaintiffs ever collect or even attempt to collect amounts over that.]

The problem here is that workers' compensation is, and always has been, construed as a bargain: in exchange for reliable compensation, the workers give up their right to a jury trial on damages. But Howard doesn't propose any quid to go along with his quo -- patients are just supposed to give up their rights to damages without receiving any increased certainty in their compensation if they are injured.

If Howard really wanted to create "fair and reliable" results, he'd propose something along the lines of the National Vaccine Injury Compensation Program, which, inter alia, provides compensation for the plaintiff's attorneys even if a meritorious suit does not prevail, thereby ensuring no one is left behind by the process.

But that's not what Howard really wants.

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You can't click two links on a law practice website these days without getting a good dose of how important it is that lawyers get up to speed with social media. Kevin O'Keefe, head of LexBlog (which hosts this site), suggests focusing on the big three: blogs, Twitter, and LinkedIn.

I got my blog. I got my Twitter.

LinkedIn?

Here's how Gina Rubel, as part of her extensive "Social Media for Lawyers" series at The Legal Intelligencer's blog, described LinkedIn:

Linkedin is one of the oldest and most established professional networking sites on the Web. ... Linkedin is conservative, professional, adheres to a strict set of rules, business-oriented, highly visible in search engines and an easy point of entry for lawyers. For the most part, it serves as an online curriculum vitae (C.V.) or resume which can be linked to your firm’s Web site.

True. It's also true that LinkedIn treats users with same respect in drafting its terms of service that consumers have come to expect from used car dealers, credit card companies, and subprime lenders.

Read their User Agreement:

1.  Your Obligations — What You Must Do

License and warrant your submissions: You do not have to submit anything to us, but if you choose to submit something (including any User generated content, ideas, concepts, techniques and data), you must grant, and you actually grant by concluding this Agreement, a nonexclusive, irrevocable, worldwide, perpetual, unlimited, assignable, sublicenseable, fully paid up and royaltyfree right to us to copy, prepare derivative works of, improve, distribute, publish, remove, retain, add, and use and commercialize, in any way now known or in the future discovered, anything that you submit to us, without any further consent, notice and/or compensation to you or to any third parties. By submitting any information to us, you represent and warrant that such submission is accurate, is not confidential, and is not in violation of any contractual restrictions or other third party rights. You further agree to inform LinkedIn in the event that any such information has changed since your registration with LinkedIn and, if appropriate, you agree to make such modifications yourself to your profile.

It's just as bad as Facebook's hated and rescinded Terms of Use, which claimed to own all of your content forever, with an added bonus in the last two sentences: you agree that everything you submitted is accurate and you agree to keep LinkedIn's information up-to-date.

Got that? Apparently most people don't; I found only one blog post on the subject, a month ago at Web.Tech.Law. Technorati says no one has linked to it. I found one link on a "social media roundup."

That needs to change.

LinkedIn is building its Web 2.0 Yellow Pages, and by ever submitting anything -- like your name, address, place of business, connections, recommendations and content like forum posts -- you agree to let LinkedIn use it forever and that you will take the initiative to update all of it if any of it ever changes.

But what if I terminate my account?

You granted them an "irrevocable" and "perpetual" license to all content and information you ever submit to the site, and imposed a duty on yourself to keep that content and information accurate and current, so what makes you think it could really be a "revocable" or "limited duration" license?

Before you turn those wheels, note that their User Agreement details exactly what happens when you terminate:

7.  Consequences of Termination

Upon termination, you lose access to LinkedIn. The terms of this Agreement shall survive any termination, except Sections 2 and 3 hereof.

The perpetual duty for users to supply accurate and current information for LinkedIn's business is in Section 1. It "survives."

What gets terminated? Section 2, "Your Rights — What You May Do" and Section 3, "Our Rights and Obligations — What We Must And May Do." Termination ends only "Your Rights" and Their "Obligations."

Will LinkedIn ever exercise these rights in an adversarial fashion? 

Probably not. Like I wrote yesterday, "A right with a remedy worse than the harm is not a right anyone will enforce." Trying to enforce these rights would likely cause a mass exodus from the platform.

But that's just theory, contradicted by the plain meaning of the words in the agreement. Moreover, all bets are off if the company goes into distress. Regardless, the core question remains: if LinkedIn doesn't plan on compelling users to keep its professional database accurate and current or to use its users' content commercial without permission, then why does it need these terms?

Ask a used car dealer.

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The New York Law Journal has an excellent, detailed article by Stephen M. Kramarsky on a recent 2nd Circuit opinion:

An overly narrow view of the scope of copyright protection risks harming the commercial market for entire classes of works; an overly broad view risks chilling creativity and creating impermissible monopolies on facts. Courts examining the line between fact and expression must keep these concerns in mind, particularly when considering cases that lie entirely outside of the traditional scope of copyright protection, as the court did recently in Associated Press v. All Headline News Corp.

...

The [Associated Press] asserts that it is particularly focused on providing reports of "breaking" news. Among other things, the AP makes its stories available to clients for use on their Web sites. Each story contains written copyright information that identifies the AP as author and/or owner of the story, and the AP registers copyrights in its news stories and photographs (a prerequisite to suit and certain kinds of statutory damages).

All Headline News Corp., according to the complaint, does not undertake any original reporting. Instead, its employees search the Internet for stories that they rewrite or repackage for republication (either in full or as excerpts). Some of AHN's stories are based on AP articles, but they are marketed to AHN's clients as originating with AHN. AHN distributes its articles to paying clients who publish them on their sites.

AP filed suit against AHN based on its alleged "free riding" on AP's original reporting, asserting claims for copyright infringement, violations of the Digital Millennium Copyright Act, misappropriation of "hot news" and various Lanham Act violations.

If you're interested in New York law, read the article for the scoop on the "hot news" state law tort, which has surprisingly thrived this long without being ruled as completely pre-empted by Congress' copyright legislation. Kramarsky concludes:

All of this aggregation and customization is becoming mainstream precisely because the Internet has greatly increased the number of information sources available, and consumers are struggling to work out how to package it.

Any limitations on that conduct are likely to harm not only consumers, but their information suppliers as well. Although the Associated Press court can hardly be faulted for its reading of New York law, its careful decision may have considerable unintended repercussions.

Keep in mind the facts of that case, which a respected practitioner in a nationally-published law journal has argued nonetheless goes too far, and focus on the bigger picture here, the federal copyright and DMCA issues (the DMCA, Kramarsky notes, "prohibits intentionally removing or altering any "copyright management information" or trafficking in works with removed or altered copyright management information." There's almost no case law on that section.).

A month ago Whet Moser at the Chicago Reader's Chicagoland bemoaned the "aggregation" done by Huffington Post, which exploited the inverted triangle followed by reporters:

On the left side [of HuffPo] there is a blog. Aside from the generic complaint about people who write for free, most people have come to accept that there are bloggers who quote things and link to them.

On the right side there are headlines. Here's where it gets tricky so pay attention and hopefully I won't have to explain this ever again. If you click on the headline, you go to another site--fine. If you click on "Quick Read," you get a piece of the article that the headline goes to, with an ad. If you click on "comment" you get that piece of the article with a comment box. ...

Those first couple paragraphs are written by a person who is paid to write that, often at great expense and with generous health benefits.

So: why do I think bloggers should get away with that? Why is the left side of ChuffPo fine and the right side questionable? People should be able to write about things. They should have the right to use them for: "purposes such as criticism, comment, news reporting, teaching." The person blogging about news things at ChuffPo is doing something unique, whether that person is insightful or an idiot. There's societal value to both. It's a tremendously important freedom and it's why the blogosphere is so rich. On the other hand, just slapping up a quote above a comments section--which, odds are, the other site has as well--feels cheap (and, technically, is cheap, that's the business model).

I don't know of anyone who says authors shouldn't be able to sue those who simply cut-and-paste without adding value, as is apparently the case with the "right side" of those Huffington Post "blogs." The issue there is one of degree.

The bigger question for bloggers (the "left side"), all of whom strive to add more value than they copy in their quest for credibility, is: does quoting some of an article as part of my larger work trigger copyright liability?

Just nine months ago the Associated Press tried to answer "yes," started enforcing per-word quotation licensing on bloggers, and got trashed everywhere. So they gave up.

The market has moved -- we're almost 15 years into the attention economy -- and there's no stopping it now. The AP's policy nominally requires paid licensing for quotes shorter than a tweet on twitter.

That won't do these days. Not when information is everywhere, when the best way you can make money is through permission marketing, getting the people who other people trust to say they trust your product or service. Not when Robert Scoble is arguing that even Twitter isn't the future of business advertising, that you need to get closer and more personal with people.

The big content producers "know" that, or at least know what they're doing isn't going to work much longer, and they're slowly getting it. Lawsuits won't "protect" their content, it will render that content invisible.

Which is why blogs will be fine, even with laws on the books that, arguably, permit a cause of action against them defended only by a vague "fair use" exception. A right with a "remedy" worse than the harm is not a right anyone will enforce.

[UPDATE: Just a few days after this post, the Associated Press announced it would "take legal action against Web sites that use newspaper articles without legal permission, the group said on Monday, in a clear shot at aggregators like Google." I do not think their chances of success are very high, for the reasons above. Moreover, this strategy -- going for the 800-lbs gorilla first, instead of low-hanging fruit -- is more evidence of a conscious decision not target bloggers, who are more likely to cause controversy.]

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At The National Law Journal (via How Appealing):

In a case stemming from an employer's theft of e-mails from the personal account of an employee who had sued him for sexual harassment, a panel of the 4th U.S. Circuit Court of Appeals recently became the first circuit to hold that plaintiffs must prove actual damages in order to be eligible for an award of statutory damages under the federal Stored Communications Act.

But the unanimous panel, led by Chief Judge Karen Williams, also ruled that a showing of actual damages is not required for awards of punitive damages or attorney fees. Van Alstyne v. Electronic Scriptorium Ltd., No. 07-1892.

The panel decision reversed a jury award of $150,000 against Bonnie Van Alstyne's employer, Edward Leonard, and $25,000 against Electronic Scriptorium Ltd., of which Leonard was president. The decision leaves intact a $75,000 punitive damages award against Leonard; a $25,000 punitive damages award against ESL; and an award of $135,723.56 in attorney fees and costs to Van Alstyne.

I don't think most non-lawyers recognize they can recover for conduct like this:

During discovery in ESL's suit, Van Alstyne became suspicious that several e-mails presented by Leonard were from her personal account. In a deposition, he admitted he had accessed Van Alstyne's AOL account after she left the company ...

Let's look a little closer at the law, as explained in the opinion (PDF):

Section 2701 of the SCA creates a criminal offense for whoever "intentionally accesses without authorization a facility through which an electronic communication service is provided" or "intentionally exceeds an authorization to access that facility," and by doing so "obtains, alters, or prevents authorized access to a wire or electronic communication while it is in electronic storage in such system." 18 U.S.C.A.
§ 2701(a)(1-2).

Section 2707 provides a private cause of action for "any . . . other person aggrieved" by a violation of § 2701. 18 U.S.C.A. § 2707(a). Under § 2707, a district court may award equitable or declaratory relief, a reasonable attorney’s fee and other costs, and "damages under subsection (c)." 18 U.S.C.A. § 2707(b). Subsection (c) provides:

The court may assess as damages in a civil action under this section the sum of the actual damages suffered by the plaintiff and any profits made by the violator as a result of the violation, but in no case shall a person entitled to recover receive less than the sum of $1,000. If the violation is willful or intentional, the court may assess punitive damages. In the case of a successful action to enforce liability under this section, the court may assess the costs of the action, together with reasonable attorney fees determined by the court.

Id. § 2707(c).

In the face of the plain meaning of the statute, why was the "actual damages" limitation even contested on appeal?

Likely because the defendant argued that, without actual damages, the plaintiff couldn't recover at all. Not punitive damages, not attorney's fees, not anything. The Court disposed of that summarily:

Although "[t]here is no established federal common law rule that precludes the award of punitive damages in the absence of an award of compensatory damages," People Helpers Found., Inc. v. City of Richmond, 12 F.3d 1321, 1326 (4th Cir. 1993), we have held, in accordance with "the majority rule" that, absent statutory language to the contrary, punitive damages are not recoverable absent proof of actual damage, id. at 1327.

The SCA, we believe, provides such language. Section 2707(c) states, "[i]f the violation [of the SCA] is willful or intentional, the court may assess punitive damages." 18 U.S.C.A. § 2707(c). This sentence lacks the limiting language associated with an award of actual damages and statutory damages, with no references to persons "entitled to recover." The sole limitation is that the violation of the SCA be "willful or intentional," a threshold which the jury found to be met in this case.

Accordingly, we find no error in the district court’s award of punitive damages absent a showing of actual damages. See Saunders, 526 F.3d at 152-155 (approving award of punitive damages under the Fair Credit Reporting Act without award of actual damages); Yohay v. City of Alexandria Employees Credit Union, Inc., 827 F.2d 967, 972 (4th Cir. 1987) (noting "[a]ctual damages are not a statutory prerequisite to an award of punitive damages under the [Fair Credit Reporting Act]"). We must vacate and remand this award, however, for the district court to reevaluate in light of our ruling above that Van Alstyne was not entitled to statutory damages in this case absent proof of actual damages.

So there you go.

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Fresh off the presses is Acumed LLC v. Advanced Surgical Servs., 2009 U.S. App. LEXIS 5854 (3d Cir., March 20, 2009), a charming setup in the insanely hostile and competitive world of medical devices:

Acumed is a manufacturer of surgical implants and related devices, and appellant [Morris] and [Advanced Surgical Services] are in the business of distributing surgical implants and other medical devices for various manufacturers, including Acumed, to hospitals and surgeons. ... At the trial, Ryan Crognale, a sales representative for appellant, explained his view of the events that Casey described at Nazareth Hospital. Crognale testified that Morris directed him to deliver the implants to Nazareth and to attend the surgery. He then stated that after his earlier delivery of Acumed implants, he returned to the hospital and saw Casey in the operating room and observed that the physician doing the procedure was "not using my stuff anyway." Consequently, Crognale took the tray of instruments he previously had delivered and left the operating room. Thus, it appears that the physician performing the procedure used materials Acumed supplied through Surgical, its authorized representative.

As Crognale was leaving the surgery center, he encountered Casey, and an argument between the two representatives ensued. Appellant contends that during the argument Casey loudly accused Crognale of illegally selling Acumed inventory, an incident that appellant contends led Dr. Robert Frederick, a doctor at Nazareth, to stop doing business with it. Moreover, appellant contends that because of Dr. Frederick's connection with a large group of physicians in Philadelphia, the confrontation was a factor in a decision by Jefferson Hospital in Philadelphia to exclude Morris from its operating theater for one year. As a result of the incident at Nazareth Hospital, Acumed sent another notice to its customers stating that Surgical was its only authorized representative in eastern Pennsylvania and southern New Jersey.

Can you guess what happened next?

Appellees filed the complaint in this action against appellant in the District Court charging it with violation of the Lanham Act, 15 U.S.C. § 1125, violation of Pennsylvania's Anti-Dilution statute, 54 Pa. Cons. Stat. Ann. § 1124 (West 1996), unfair competition, breach of a non-disclosure provision in the Advanced-Acumed Agreement, conversion, unjust enrichment, and tortious interference with existing or prospective contractual relationships.

...

Appellant filed a four-count counterclaim against appellees. In counts I, II, and III appellant charged that Acumed breached its contract with appellant by not providing timely notice of termination of their relationship and by failing to pay the contractually required buy-out fee that became due to appellant when Acumed terminated their relationship. In addition, appellant charged that Acumed's failure to pay the buy-out fee violated the Pennsylvania Commissioned Sales Representatives statute, 43 P.S. §§ 1471 et seq. (West 1991). In count IV ("counterclaim IV") appellant alleged that Acumed and Surgical ". . .converted property belonging to Advanced, defamed and disparaged Advanced maliciously and falsely, intentionally interfered with Advanced's contractual and business relationships and competed unfairly against Advanced."

After a little more than a week of trial...

The jury returned a verdict on March 21, 2007, finding for appellees on their count against appellant for tortious interference with existing or prospective contractual relationships with appellees' customers. The jury, however, rejected appellees' claim that appellant had tortiously interfered with Acumed's and Surgical's contractual relationship between themselves and also rejected appellees' other claims, including appellees' Lanham Act claims. The jury also found against appellant on the portions of its counterclaims that had survived the District Court's dismissals, i.e., the claims predicated on breach of contract and violation of the Pennsylvania Commissioned Sales Representatives statute. The jury awarded $ 20,000 in compensatory damages to Surgical and $ 0 in compensatory damages to Acumed on the tortious interference claim but found that both Acumed and Surgical were entitled to punitive damages. ... The jury then returned a verdict awarding $ 1 in nominal damages to Acumed and punitive damages to both Acumed and Surgical Resources in the amount of $ 100,000 each.

Uh oh.

As we indicated above, to recover on a tortious intentional interference with existing or prospective contractual relationships claim in Pennsylvania, a plaintiff must prove that the defendant was not privileged or justified in interfering with its contracts: "While some jurisdictions consider a justification for a defendant's interference to be an affirmative defense, Pennsylvania courts require the plaintiff, as part of his prima facie case, to show that the defendant's conduct was not justified." Triffin v. Janssen, 426 Pa. Super. 57, 626 A.2d 571, 574 n.3 (Pa. Super. Ct. 1993) (citing Thompson Coal 412 A.2d at 471 n.7); Silver v. Mendel, 894 F.2d 598, 602 n.6 (3d Cir. 1990). We hasten to add, however, that our conclusion does not depend on the allocation of the burden of proof on the privilege issue, as we would reach our result even if appellant had the burden of proof to establish the privilege as a defense, because the evidence established conclusively that appellant did so.

Pennsylvania has adopted section 768 of the Restatement (Second) of Torts, which recognizes that competitors, in certain circumstances, are privileged in the course of competition to interfere with others' prospective contractual relationships. See Gilbert v. Otterson, 379 Pa. Super. 481, 550 A.2d 550, 554 (Pa. Super. Ct. 1988). The law necessarily recognizes this privilege because if more than one party seeks to sell similar products to prospective purchasers, both necessarily are interfering with the other's attempt to do the same thing. Moreover, even if an entity has an existing contractual relationship with another entity, a stranger to the relationship must be privileged to seek to replace one of the entities lest competition be stifled. Thus, under section 768: "[o]ne who intentionally causes a third person not to enter into a prospective contractual relation with another who is his competitor or not to continue an existing contract terminable at will does not interfere improperly with the other's relation if: (a) the relation concerns [*37] a matter involved in the competition between the actor and the other; (b) the actor does not employ wrongful means; (c) his action does not create or continue an unlawful restraint of trade; and (d) his purpose is at least in part to advance his interest in competing with the other."

...

Comment e to section 768 elaborates on the type of conduct that constitutes wrongful means: "If the actor employs wrongful means, he is not justified under the rule stated in this Section. The predatory means discussed in § 767, Comment c, physical violence, fraud, civil suits and criminal prosecutions, are all wrongful in the situation covered by this Section." Courts relying on comment e have interpreted the wrongful means element to require that a plaintiff, to be successful in a tortious interference action, demonstrate that a defendant engaged in conduct that was actionable on a basis independent of the interference claim. See Brokerage Concepts, 140 F.3d at 531 (citing DP-Tek, Inc. v. A T & T Global Info. Solutions Co., 100 F.3d 828, 833-35 (10th Cir. 1996)). Moreover, we noted in 2000 that even though the Pennsylvania courts have not interpreted the "wrongful means" element of section 768, it is likely that the Pennsylvania Supreme Court would adopt this meaning, that is, for conduct to be wrongful it must be actionable for a reason independent from the claim of tortious interference itself. See Nat'l Data Payment Sys., Inc. v. Meridian Bank, 212 F.3d 849, 858 (3d Cir. 2000); see also CGB Occupational Therapy, Inc. v. RHA Health Servs. Inc., 357 F.3d 375, 389 (3d Cir. 2004). Nothing in later Pennsylvania Supreme Court decisions to which the parties have directed our attention or of which we are aware leads us to change our view of this issue.

I'm sure you can imagine what happened next.

We therefore will reverse the District Court's order of May 21, 2007, to the extent that it denied appellant a judgment as a matter of law on the tortious interference claim, and will remand the case to the District Court for it to enter judgment as a matter of law in favor of appellant on that claim and to set aside the prior judgment on the claim. As a result, we also will reverse the jury's award of compensatory and punitive damages against appellant and the District Court's grant of an injunction in appellees' favor.

That's why business contingent fee cases demand such a high fee and why commercial litigators have to be so selective in the cases they take. On the most basic level, appellees won in the District Court and at trial and post-trial after years of complicated, intense litigation and trial.

How complicated? The Third Circuit Court of Appeal's opinion is a whopping 18,785 words, about one-fifth the length of a typical paperback novel. The briefs from the complaint to the appeal no doubt exceeded 100,000 words.

And the plaintiffs walked away with nothing.

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The top officials at Treasury have already set aside all of the broad governmental powers available (claiming we are a "nation of laws"), so let's look at the United States purely as an angel investor which saw a large company faltering and swooped in with an 80% equity investment. Uncle Sam has just learned about the following (AIGFP is the “Financial Products” division of AIG, the morons responsible for wiring the global economy to explode by writing trillions of dollars in undercapitalized “credit default swap” policies):

In the first quarter of 2008 [a few months prior to the equity purchase], AIGFP adopted a retention plan for about 400 employees that provided guaranteed payments to employees if they worked through specified payment dates (or either resigned for good reason or was terminated without cause before the relevant dates). At the time, AIGFP was expected to have a valuable, on-going role at AIG. The plan was implemented because there was a significant risk of departures among employees at AIGFP, and given the $2.7 trillion of derivative positions at AIGFP at that time, retention incentives appeared to be in the best interest of all of AIG’s stakeholders. The program was evidenced by a written plan distributed to employees and by individual agreements executed by them.

For senior management the plan provides that 2008 and 2009 compensation will be 75% of 2007 expected compensation levels. Other participants are set at the full 2007 level. This resulted in a $313 million total for 2008 and a $327 million total for 2009 (because some employees who had other guaranteed compensation for 2008 were excluded for that year).

Frustratingly, had AIG merely gone bankrupt instead being saved by the investment, then these would likely be voidable by the trustee as excessive insider transactions under 11 USC § 547. (Indeed, if AIG goes bankrupt soon, we’re still within the “1 year and 90 days” window to use § 547.)

At the moment, we don’t have the text of the contracts, and so can’t determine if any of the doctrines listed in this exhaustive Concurring Opinions post would apply. Personally, I think commercial impracticability / frustration of purpose are realistic options here given AIG’s total dependence upon the government’s grace.

But let’s assume the contract is, on its face, iron-clad, properly drafted, formed, accepted, and with all conditions met.

What’s a cheated shareholder to do?

Unsurprisingly, American International Group, Inc., was incorporated in Delaware, the least-shareholder-friendly jurisdiction in the country (which is why management loves it), so we’ll look to Delaware law.

Generally, prior to launching a derivative suit on behalf of the company, a shareholder must send a demand letter to the board of directors, demanding they, in this instance, not go through with the transaction. Here, however, a court would likely find the demand letter requirement excused as “futile” given AIG CEO Edward Liddy’s letter to Treasury Secretary Geithner asserting that AIG intended to go through with the payments despite his complaints.

So we’re past the first hurdle, and can sue on behalf of AIG, as shareholders at the time this payment is being made. But the bar is set quite high for us. Unsurprisingly,

The AIG certificate of incorporation has a § 102(b)(7) clause that insulates AIG's directors from liability for monetary damages for any harm flowing from their gross negligence. See Malpiede v. Townson, 780 A.2d 1075, 1095-96 (Del. 2001) (affirming the dismissal of a duty of care claim where the corporation's charter had an exculpatory provision).