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

From the bought-yourself-an-appeal department:

Citing multiple trial errors, a New Jersey appeals court has reversed an $18.9 million verdict against an obstetrician whose delay in ordering a Caesarean delivery a jury found to have caused cerebral palsy in the child.

The panel found that Monmouth County Superior Court Judge Louis Locascio failed to limit the testimony of a labor-and-delivery nurse, to issue the jury a contemporaneous limiting instruction on the nurse's testimony and to allow the defendant to admit into evidence a report that had exculpatory value for the obstetrician.

...

Zeh, the nurse on duty during plaintiff Bonnie Kowalski's labor at Riverview Medical Center in Red Bank, N.J., testified that she repeatedly told Dr. Aravid Palav, the obstetrician, that she was concerned about the dropping fetal heart rate and believed that Kowalski required a C-section without delay.

But Palav, who had ordered Kowalski admitted to the hospital due to severe stomach pains, believed she was likely suffering from appendicitis and that the baby was not in danger.

Zeh ended up "going over his head" and reporting the issue to her charge nurse and nursing supervisor, though they never relayed her concerns to the head of obstetrics.

Kowalski's child, Brandon, suffered an intraventricular hemorrhage because of a lack of oxygen, which the plaintiffs expert said could have been avoided had he been delivered a half-hour earlier. He is afflicted with cerebral palsy and will require full-time care for life.

At trial, Zeh was allowed to testify as to her concerns about the baby's heart rate that evening, though she admitted it often was unclear whether she was reading the baby's heart rate or that of Kowalski, who was writhing in pain and thus making the monitoring difficult.

In response to my post earlier this week about emulating great trial lawyers by pushing boundaries in the courtroom, John Day, who knows a thing or two about medical malpractice trials, commented:

Your ultimate goal - win the calls you should win, lose the ones you should lose (and you will want to lose some) and win the discretionary calls.

Why would you "want to lose some?"

There's an old saying among trial lawyers that they need to be careful about exactly what evidence they try to admit and what arguments they advance, because there is always the risk that the judge will let them go forward with an improper argument, thereby causing the trial lawyer to "buy themselves an appeal," or rather a reversal on appeal.

And that's what happened in New Jersey:

When Palav objected that the potential prejudicial effect of that evidence outweighed its probative value, Locascio determined that Zeh's testimony was relevant only to Zeh's decision to go up the chain of command to press for immediate delivery, not to Palav's alleged deviations from the standard of care.

Locascio said he would explain that distinction to the jury, but Riverview objected, arguing that the court should not draw attention to any one defendant.

Locascio told counsel that allowing the testimony without the limiting instruction would be "deadly" to Palav's case. Nevertheless, the hospital and the plaintiffs continued to object, leading the judge finally to say: "Good. Let the chips fall where they will. I'll say nothing. I'm not creating an Appellate issue. Dr. Palav, start digging your grave, sir, because this is going to kill [you]."

The trial judge ended up giving an instruction to the jury at the end of the trial anyway, but, by then — at least in the appellate court's opinion — it was too late, the damage had been done. The subsequent instruction could not rectify the prejudicial effect on the jury.

Was the nurse's testimony so prejudicial that a contemporaneous instruction obviously should have been given? Not at all. But it was close enough to the line that the plaintiff's lawyer should have been worried about it, and should not have objected to the instruction.

The fact that the hospital also objected to a contemporaneous instruction from the judge — likely because the hospital wanted to pin all the blame on the doctor — probably made the plaintiff feel like they were on solid ground.

But they weren't. Medical malpractice cases truly are different. Little issues that routinely happen in other trials, like a highly-knowledgeable witness slipping from factual testimony into opinion testimony, take on exaggerated importance in medical malpractice cases. When you've got an unqualified witness arguably opining on the standard of care — no matter how close they were to the action, no matter if they are also a "medical professional" — you should thank your lucky stars the testimony is going in at all and should be more than willing to accept a contemporaneous instruction in exchange for allowing the testimony.

Of course, hindsight is 20-20. It is a lot easier for me to tell the lawyers what they should have done, now that I know the consequences, than it is to make these judgment calls in the heat of battle.

One more thing: let's not forget that this case revolves around a seriously injured child, the apparent victim of blatant malpractice (Appendicitis? Didn't follow the heartbeat? Really?), who will need care for the rest of his life. I'm of course not privy to whatever settlement offers and demands have been made, but whoever's the unreasonable holdout needs to take a step back and consider the big picture.

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Over at the [non]billable hour, Matthew Homann posted a hilarious Venn Diagram for "What Lawyers Put In Their Biographies" vs. "What Clients Look For In Lawyer Biographies."

The diagram is so true it hurts to look at it. The first line in What Clients Look For — "will you return my calls?" — touches on an issue I have been thinking about again lately. Sometimes, I worry about the exaggerated importance placed on a lawyer's "responsiveness" to client contact.

I've written about client contact before. Maybe I'm so troubled by the issue because I represent most of my clients on a contingent fee; my job isn't to make them think that I'm a good lawyer (and thus justify paying me by the hour), my job is to win cases, and that takes precedence over everything else.

Don't get me wrong: a lawyer not only should keep their client informed about the status of their case, but in fact is ethically required to do so, and should get consent before making major decisions relating to the case. Similarly, if a client has an emergency, that's a different story entirely.

My worry doesn't relate to whether or not clients should be upset or concerned if they are kept totally in the dark — of course they should be upset and concerned — but rather relates to the amount of "responsiveness" that a client should expect of an attorney, and the extent to which "responsiveness" should be a factor in assessing the work performed by an attorney.

Two issues come to mind.

First, the speed at which a lawyer returns a call is no indication of that lawyer's quality. There are plenty of lawyers who, over the years, have developed a knack for smooth-talking clients into choosing courses of action that create the least amount of work for the lawyer while still creating the appearance of work and thus justifying the fee. The criminal defense lawyers who do little more than chat with the prosecutor to get a slightly better plea bargain offer; the plaintiffs' lawyers who never think twice about trial and rarely spend the time and money for thorough discovery and credible experts; the business attorneys who recommend a few pointless changes and spit out some legalese to the client over the phone. Many of these lawyers have learned to be available for clients 24/7, notwithstanding their poor work, and are quick-witted enough to have a soothing answer for every problem that arises during a case, right up until they tell the client that the jig is up and there's no hope but to accept a bad plea bargain, or a crummy nuisance-value settlement, or a contract that bears no resemblance to the transaction.

Second, I know it's blasphemy for me to say it, but client contact comes second. Not first. Second. First comes competent representation: meeting deadlines, developing the case, and facing problems in the case head-on by devoting all of your time, energy and attention to the problem until it is resolved or avoided. That type of dedication to each case necessarily impacts your ability to respond to all the other clients whose cases just aren't as urgent at the moment.

Is that ideal? Of course not. Ideally, a lawyer can juggle all of these balls at the same time, but let's be honest: few lawyers can really devote themselves to their work while simultaneously guaranteeing every client that they'll get a call back within 24, 48, or even 72 hours of a non-urgent call. Only two types of lawyers can do that: the types with few clients, and the types who are good only at sweet-talking clients.

But at least it's fair: I can say with a straight face that, for all of my clients, for every time when I did not respond to a client's non-urgent phone call or e-mail because I was focusing on a more urgent matter, there is a corresponding time when I was focusing on their case and not responding to someone else's non-urgent call.

Do I wish I could do better? Absolutely. Any lawyer who isn't always trying to do better shouldn't be practicing. But there are only so many hours in the day, and I have no intention of cutting back on my representation so that I can get better at my marketing.

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

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

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

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

And here's § 1962(c) of the RICO Act:

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

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

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

That's where Twombly and Iqbal come in. 

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

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

And with the type of RICO enterprise they alleged:

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

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

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

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

And the same problem hit the RICO claims:

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

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

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

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

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

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

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

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

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

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

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The internet has not been pleased with the proposed settlement reached between Lowe's — which denies ever selling any tainted Chinese drywall — and the plaintiff's attorneys in a Georgia state court class action.

There's two problems with the proposed settlement, which has not yet been approved by a judge. First, the settlement is a dreaded coupon settlement (i.e., a settlement in which the plaintiffs get only coupons or vouchers to buy more stuff from the defendant), one that will use particularly unreliable notice procedures for letting potential class members know about the settlement. For more, see ProPublica and the Fulton County Daily Report.

Second, there's already a federal multi-district litigation ("MDL") case ongoing in the Eastern District of Louisiana designed to consolidate all of the Chinese drywall cases into a single MDL case.

I was going to write more about the case, with an emphasis on the interplay between the overlapping state and federal court cases and the interesting issues of federalism they raise, when I came to this part of a motion filed by the MDL plaintiff's lawyers in opposition to the Georgia settlement: 

 The Georgia class action includes all of the plaintiffs within this Court’s jurisdiction in MDL 2047 and serves as an interference with and a roadblock to the Court’s management of and supervision over the resolution of Chinese Drywall cases. This Court has authority under the All Writs Act , 28 U.S.C. § 1651, to enjoin the Georgia proceedings as well as counsel associated with that conflicting case. Congress granted this MDL Court the power to enjoin state court proceedings where “necessary in aid of its jurisdiction, or to protect or effectuate its judgments.” Id.; 28 U.S.C. §2283. Courts liberally invoke the “necessary in aid of its jurisdiction” exception to the Anti-Injunction Act “to prevent a state court from so interfering with a federal court’s consideration or disposition of a case as to seriously impair the federal court’s flexibility and authority to decide that case.” Atlantic Coast Line R.R. v. Brotherhood of Locomotive Eng’rs, 398 U.S. 281, 295 (1970); In re Baldwin-United Corp., 770 F.2d 328, 337 (2nd Cir. 1985) (same); In re Corrugated Container Antitrust Litigation, 659 F.2d 1332, 1334 (5th Cir. 1981), cert. denied, 456 U.S. 936 (1982) (same); In re Joint E. & S. Dist. Asbestos Litig., 134 F.R.D. 32, 37 (E.&S.D.N.Y. 1990) (same); Martin H. Redish, The Anti-Injunction Statute Reconsidered, 44 U. Chi. L. Rev. 717, 754 (1977); In re Diet Drugs, 282 F.3d 220, 235 (3rd Cir. 2002) (recognizing “a category of federal cases for which state court actions present a special threat to the jurisdiction of the federal court”—namely, where “a federal court [is] entertaining complex litigation, especially when it involves a substantial class of persons from multiple states, or represents a consolidation of cases from multiple districts....”).

An injunction against the competing Georgia state court proceedings is appropriate here to allow this Court to “legitimately assert comprehensive control over [this] complex litigation.” United States v. International Brotherhood of Teamsters, 907 F.2d 277, 281 (2nd Cir. 1990); Standard Microsystems Corp. v. Texas Instruments Inc., 916 F.2d 58, 60 (2nd Cir. 1990); Carlough v. Amchem Prods., Inc., 10 F.3d 189, 204 (3rd Cir. 1993); Diet Drugs, 282 F.3d at 235; Corrugated Container, 659 F.2d at 1334; Newbe v. Enron Corp., 338 F.3d 467, 474-75 (5th Cir. 2003); Winkler v. Eli Lilly & Co., 101 F.3d 1196, 1202 (7th Cir. 1996); Class Plaintiffs v. City of Seattle, 955 F.2d 1268 (9^th Cir.), cert. denied, 506 U.S. 953 (1992); White v. National Football League, 41 F.3d 402, 409 (8^th Cir. 1994), cert. denied, 515 U.S.1137 (1995); James v. Bellotti, 733 F.2d 989, 994 (1st Cir. 1984); Battle v. Liberty National Life Ins. Co., 877 F.2d 877, 882 (11th Cir. 1989); In re Granada Partnership Sec. Litig., 803 F.Supp. 1236, 1246 (S.D. Tex. 1992); Joint E. & S. Dist. Asbestos Litig., 134 F.R.D. at 37. 

Seriously?

It's almost like the lawyers didn't realize that Writing Bad Briefs: How To Lose a Case in 100 Pages or More, by Judge Gerald Lebovits, was satire:

String cite whenever possible. If you have 20 cases for the same proposition, add them all. To show that you’re smarter than the judge — a losing and therefore effective strategy — cite after every proposition in your brief, even for obvious statements. But don’t cite the record below. Pointless.

...

If you cite, don’t explain why your citations are relevant. Mention that the
cases are on point, but don’t say why. If you try to explain the case, make the case
more complicated than it is. If you want to be analytical and fancy, start every
paragraph with “My adversary’s argument is mendacious and ridiculous.” And never use parenthetical explanations after citations. Parentheticals just throw judges a curve.

What were those lawyers thinking?

Did they think Judge Fallon genuinely didn't know that he could invoke the Anti-Injunction Act “to prevent a state court from so interfering with a federal court’s consideration or disposition of a case" or that he should “legitimately assert comprehensive control over [this] complex litigation,” and so needed a dozen-and-a-half cases as a reminder of those basic principles of federalism and MDL litigation?

If not, then what's the point of all those string cites without even the slighest indication as to their relevance? Did they just cut-and-paste every arguably useful case, presuming that Judge Fallon would ask his clerks to fish through all eighteen cases (and one law review article) to find which one of them might actually pertain to this situation? Did they not realize that, since the docket in the MDL case had 5,156 entries, Judge Fallon and his clerks might have more pressing tasks than figuring out what relevance a law review article from 1977 — before most of the clerks were born — had to this situation?

There's an old saying they taught me at Temple Law School: make it easy for the judge to rule in your favor. A long list of unexplained string cites doesn't do that.

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As widely reported by every tech site on the internet, last week Oracle (which recently acquired Sun Microsystems) sued Google for infringing upon a variety of software patents Sun obtained while developing the Java software platform.

For the facts, I can't improve upon the fine commentary at Groklaw, CNet, and tech-specific sites like RedMonk. James Gosling, inventor of Java programming language, has even commented on it.

Two conclusions are inescapable:

• Sun could have, but chose not to, sue over the same patents, likely (at least in part) to preserve goodwill with the developers who used the Java framework;
• There's a real chance that all of the patents are invalid under Bilski v. Kappos, since they represent, as most, mere ideas.

Thus, the lawsuit represents a substantial business risk not just for Google, but also for Oracle. Oracle runs not just a risk that they'll lose the suit, but also a risk that they'll be worse off than where they started by squandering much of Sun's goodwill and invalidating patents so valuable that back in 2004 Microsoft paid Sun $900 million to settle an infringement suit over them.

The stakes are high.

So high that the case seems unlikely to settle, and thus may change patent law nationwide.

In some lawsuits, both sides generally agree from the onset that the case has merit. In the Deepwater Horizon spill, for example, there's no doubt that BP is liable to someone for some amount — the questions are to whom and for how much, and in many ways the litigation is nothing more than a continuation of negotiation by other means.

In most cases, however, it takes some time before the parties come to similar understandings of the merits and value of the claim. That's why so few cases settle before the close of discovery even though the vast majority eventually do settle.

The key point here, however, is that most cases eventually become negotiations by other means. In most cases, expert reports, summary judgments, motions in limine — sometimes even trials and appeals — are all just steps in that complicated dance, conceptually no different from a business negotiation.

A handful of cases, though, are anything but negotiation by other means; they are total war. The lawsuit will continue until all motions, trials, and appeals have been concluded and the sheriff has been called to enforce the judgment.

And so it seems to be the case with Oracle v. Google. Oracle isn't stupid — even if they were, David Boies, their lead counsel on the case, isn't stupid — and isn't going to suddenly realize that the Bilski opinion effectively killed the precedent upholding the validity of software patents, leaving the question of their validity wide open. Oracle knew that going in. Oracle is also not going to suddenly realize that Sun had good reasons for not suing Google over these same patents. Oracle knew that going in.

In other words: Oracle has launched total war.

Same goes for Google: unless Oracle effectively abandons the case and offers to settle it for little more than the cost of defense — which is unlikely — then Google has too much to lose by settling. More importantly, Google has too much to gain by winning, namely the invalidation of Oracle's (and potentially other companies') patents.

Which is why this case — and the central question of whether or not Sun's patents are valid — might make it all the way through up to the Court of Appeals for the Federal Circuit and possibly the Supreme Court. It's no stretch to say that billions of dollars hang on the answer.

(Thankfully, we might get an answer sooner rather than later. The Northern District of California, where the suit was filed, pioneered the use of local patent rules to expedite patent suits, making patent infringement suits much quicker to litigate and to decide, even cases of this scale.)

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

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

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

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

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

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

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

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

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

Reedy, unsurprisingly, sued.

Unlawful seizure was her primary claim:

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

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

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

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

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

The Court goes on to describe each in detail.

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

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

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

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

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

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

The Third Circuit adopted that argument almost entirely:

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

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

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

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

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

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

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

and no proof of specific intent to defraud is required.

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

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

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

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

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

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

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

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

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

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

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[Update: I somehow missed Ron Coleman's earlier take on the article, but it's required reading if you're interested in the subject. Coleman and Walter Olson both seem on board with, as Olson words it, "steering rights owners into agency complaints or arbitration as an alternative, or at least precondition, to court action."] 

Via Kevin Drum, Wired's Threat Level has a profile of Steve Gibson, CEO of Righthaven, a company which has applied the much maligned — but often quite lucrative — "patent troll" model to copyright litigation on behalf of publishers:

Borrowing a page from patent trolls, the CEO of fledgling Las Vegas-based Righthaven has begun buying out the copyrights to newspaper content for the sole purpose of suing blogs and websites that re-post those articles without permission. And he says he’s making money. ...

Gibson’s vision is to monetize news content on the backend, by scouring the internet for infringing copies of his client’s articles, then suing and relying on the harsh penalties in the Copyright Act — up to $150,000 for a single infringement — to compel quick settlements. Since Righthaven’s formation in March, the company has filed at least 80 federal lawsuits against website operators and individual bloggers who’ve re-posted articles from the Las Vegas Review-Journal, his first client. ...

Gibson says he’s just getting started. Righthaven has other media clients that he won’t name until the lawsuits start rolling out, he says.

“Frankly, I think we’re having tremendous success at a number of levels,” Gibson says. “We file new complaints every day.”

They sure do; a search on Justia Dockets for "Righthaven" shows a handful of new suits every week, including a recent suit against those scourges of American society, the American Society of Safety Engineers. Here's the complaint, in which Righthaven requests the Court, e.g.,

3. Direct Network Solutions and any successor domain name registrar for the Domain to lock the Domain and transfer control of the Domain to Righthaven;

4. Award Righthaven statutory damages for the willful infringement of the Work, pursuant to 17 U.S.C. § 504(c);

5. Award Righthaven costs, disbursements, and attorneys’ fees incurred by Righthaven in bringing this action, pursuant to 17 U.S.C. § 505;

Apparently either the ASSE or one of its chapters (the complaint references the Central Florida Chapter of the ASSE) cut and pasted into their newsfeed a copy of an article from the Las Vegas Review-Journal titled, “Bill would help regulators better enforce safety rules."

Cutting-and-pasting someone else's article isn't kosher, but look at the harsh relief claimed by Righthaven.

I'm doubtful of the demand in #3 that Righthaven be given control of asse.org, considering that they raise solely a copyright claim, not a cyber-squatting claim, and "Copyright law does not protect domain names." I suppose the Court has the power to enjoin defendants from further infringing activity, but that's a far cry from locking someone's entire website and transferring it simply because there was, at some point, an infringing work on it.

#4 and #5 are standard in copyright litigation: the plaintiff can elect "statutory damages" of up to a whopping $150,000 per incident, just shy of three times the median annual household income, plus the costs (including attorneys' fees) of suit.

Putting aside those substantial damagins, just hiring an attorney to defend the case will cost a couple thousand dollars, even if they are on a flat fee with someone who specializes in copyright defense.

As Kevin Drum and Wired both note, the notion of litigation "trolling" — whether on behalf of patents or copyright — is not without its critics. That said, as well-intentioned as the ASSE may have been, truth is, it wasn't their content, and they shouldn't have posted it. So long as the claims are meritorious, the settlement demands are not extortionate, and the practice of trolling is limited to companies, rather than individuals — the primary target of the RIAA's hopelessly failed litigation campaign — then I'm not that worried about due process or "SLAPP" concerns.

But two aspects of the practice as applied to publishing copyrights bother me.

First, there is no doubt that copyright law and copyright norms affect culture. Consider this fascinating article at Ars Technica about how comedy routines changed dramatically once it became taboo to steal other comedian's jokes. When it comes to copyright trolls, I worry that legitimate fair use of portions of articles will be chilled by litigation concerns, as is already the case in the world of film.

Second, if we assume — as I do — that the bulk of these cases involve minor infractions that can and should be settled for less than $10,000, that raises a basic question of fairness. One of the least-discussed aspects of the civil justice system is how we have completely different systems for the most common types of claims, i.e. employment discrimination claims and minor injuries.

In many states, including Pennsylvania, if you want to sue an employer for employment discrimination, you can't. Instead, you need to file an agency complaint — which you must do within 180 days, much sooner than you must file any other type of lawsuit — and then you must work your way through the agency process before you can even begin your lawsuit in court.

Similarly, as the Court of Common Pleas of Allegheny County here in Pennsylvania pioneered, a number of jurisdictions enforce compulsory arbitration for claims of low value. If you have one of those low-value claims, the full powers of the civil justice system aren't available to you, at least not initially.You need to go through the compulsory arbitration system first, thereby delaying your relief and making it harder for you to prosecute it.

Are agency investigations and compulsory arbitration bad ideas? Not necessarily. Both of them do, in fact, save defendants a tremendous amount of time and money, and sometimes they facilitate a resolution of the case in a much cheaper and more expedient manner than the full-fledged trial courts.

But if our purpose in setting up those parallel legal systems is to lessen the burden on the defendant for comparatively small claims, why not set up as a similar system for comparatively small copyright infringement claims like those brought by Righthaven? Is there some reason that a claim arising from a single copying of a single newspaper article should be entitled to start immediately in the federal district courts while a claim arising from the wrongful termination of an employee for discriminatory reasons should have to go through a year or more of agency investigation?

It would seem to me that the terminated employee — who may have wrongfully suffered a grievous economic injury — should have a stronger entitlement to immediate relief than a well-funded company that exists solely to carry out litigation. 

[As I commented at Overlawyered following Walter's link here] I think these types of copyright claims are more appropriate for agency investigation or arbitration than employment discrimination or personal injury suits. The latter two are typically dependent upon oral testimony (and thus the credibility of the witnesses, which needs to be assessed through live testimony), while the former could reasonably be evaluated solely on the documents.

Just taking that ASSE case as an example, all the agency would really need, other than the complaint filed, is an answer from the defendant admitting or denying the material facts about the extent and nature of republication.

And that would be it; the investigator or arbitrator could then look at those documents, the core of which would be fewer than 20 pages, and start discussing with the parties a reasonable settlement. That would obviate the need to bring on attorneys for hundreds of dollars an hour, and would keep these small potatoes matters from clogging our federal courts.

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At The American Lawyer:

Two separate classes of retired NFL players have sued the two firms, Manatt, Phelps & Phillips and McKool Smith, alleging that they left some retirees out of the settlement and blew the chance for much greater damages, according to a copy of the complaint. The original class action accused the NFL players' union of intentionally excluding retired players from licensing deals, including the ultra-lucrative deal through which the video game maker Electronic Arts purchased the right to use player names and images in its popular John Madden franchise. The union, represented by Dewey & LeBoeuf, denied the allegations, but a sympathetic jury delivered the $28 million verdict, which was to be distributed to about 2,000 retired players. (The two sides eventually settled for just over $26 million.)

In short, the players claim their attorneys botched the trial of the case in two ways:

• by failing to effectively introduce a series of emails — or a witness testifying about the same point — in which an Electronic Arts executive complains that the players' union refused to include retired NFL players in the licensing negotiations; and,
• by failing to introduce sufficient evidence demonstrating the extent of damages caused by the players' unions breach of fiduciary duty, which was the only claim the jury actually accepted.

I litigate legal malpractice cases, and let me tell you: the deck is stacked in favor of the defendant.
Even where the defendant outright fails to do a basic task — like fail to file a claim within the statute of limitations — the plaintiff still must prove they would have won the "case within the case."* That is, of course, just as hard as winning the case in the first place, and then you also have to win the malpractice case, too.

Let's put aside the second error raised by the retired NFL players, the proof-of-damages issue. While it would certainly be less-than-ideal for a lawyer not to cover all of their bases at trial, analysis of such an issue is necessarily very fact-intensive. No time for that; this is a blog, after all.

The complaint portrays the first error as garden variety malpractice, since the emails were "obvious hearsay," and so couldn't be introduced without (a) an EA employee providing testimony that triggered the "business records" exception to hearsay or (b) the author of the email testifying about the email itself.

The admissibility problems of email aren't anything new; Gregory Joseph wrote a thorough article about them two years ago. Although not every email by a non-party is admitted into a civil trial — many, probably most, aren't — It would indeed be garden-variety malpractice to not know your way around the Federal Rules of Evidence well enough to even try to get the email in. The complaint's allegations on this point, however, don't make sense to me:

At the final pretrial conference the District Court requested supplemental briefing on the extent to which Strauser's internal EA e-mail statements were admissible. Defendants promised to provide a brief because the admissibility of this document was "critical." Following submission of the briefs, the District Court found that the proper foundation had not been laid for admitting the Strauser portions of the e-mail into evidence.

I'd assume those briefs would cover most of the bases claimed now as malpractice; did the lawyers really not even mention the business records exception or the possibility of calling Mr. Strauser?

The question bothered me enough that I looked up the relevant briefs on admissibility; here's the plaintiff's brief and here's the defendant's brief. Sure enough, there was ample briefing on the business records exception; plaintiffs apparently just plain lost that one. That's not, in itself, surprising; Gregory Joseph's article mentions plenty of cases holding the same (though plenty of cases holding otherwise).

The plaintiff's lawyers tried to call the email a "business record" and tried to call the email a "present sense impression" of the EA executive, and lost on both. Losing an argument before the judge is not same thing as malpractice.

That leaves the question of calling Strauser to the stand. At one of the hearings, the Court and the plaintiff's lawyer had the following exchange:

THE COURT: Why don't you bring in Strausser, who's
the guy, and let him be cross-examined?
MR. HUMMEL: I would love to. I understand he lives
in Florida. We did not depose him in the case. We will have
Mr. Linzner here under subpoena, and Mr. Linzner can testify as
to Mr. Strausser's position, and his authority to speak within
the context of the EA.

Mr. Hummel's predicament is understandable; "the subpoena power of a court cannot be more extensive than its jurisdiction." U.S. Catholic Conf. v. Abortion Rights Mobilization, Inc., 487 U.S. 72, 76, 108 S.Ct. 2268, 2270, 101 L.Ed.2d 69, 76 (1988). As the Southern District of New York noted (in evaluating service of subpoenas on members of the PLO):

Service of a subpoena, even if properly effected, is only valid if served on a party who is subject to personal jurisdiction within this district. The Due Process Clause of the Fourteenth Amendment limits the exercise of personal jurisdiction to persons having certain "minimum contacts" with the forum. Ina Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102 (1945). A court may exercise personal jurisdiction only over a defendant whose "conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (1985) (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980)).

Since Strauser apparently lived (and worked?) in Florida, any subpoena served by the attorney wouldn't have been effective.

I don't know enough about Mr. Linzner's role to say if he was indeed the best witness to call to authenticate the email and provide testimony that would trigger a hearsay exception. It sure seems like the plaintiff's lawyer thought he was the most knowledgeable witness they could subpoena.

There is another issue that needs explanation, though: Electronic Arts quite obviously transacts substantial business in the Northern District of California, and so would have been subject to service under Rule 45(b). Why not subpoena them to produce the witness most familiar with the email in question? That'd be a backdoor method of getting Strauser on the stand, and the failure to do so demands some explanation.

Then again, as shown by the transcript, the Court itself accepted at face value counsel's inability to call Strauser, and so many have implicitly accepted that the backdoor method was either unreasonable or also not available for some reason. That makes me wonder why the email wasn't admitted under Rule 807:

A statement not specifically covered by Rule 803 or 804 but having equivalent circumstantial guarantees of trustworthiness, is not excluded by the hearsay rule, if the court determines that (A) the statement is offered as evidence of a material fact; (B) the statement is more probative on the point for which it is offered than any other evidence which the proponent can procure through reasonable efforts; and (C) the general purposes of these rules and the interests of justice will best be served by admission of the statement into evidence.

That seems to be precisely the situation here; no one genuinely doubted the email was authentic, or that it represented the actual thoughts and perception of Strauser. The issues preventing its admission were all legal technicalities.

I don't know if the plaintiff's referenced that exception, but I also don't know if it matters — the Court knows the Rules just as well, and likely better, than the attorneys. It seemed the Court was intent on excluding that email no matter what the plaintiffs said, which makes me wonder if it was really malpractice not to get the email admitted. Put simply, if a judge wants to rule one way, it's usually not the lawyer's fault if they can't convice the judge otherwise

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Via the WSJ Law Blog, the Ninth Circuit, in a significant published opinion with ramifications for copyright litigators, vacated the $10 million verdict — and, more importantly, the constructive trust and injunction — that Mattel won against MGA.

Unusually, the panel summed up its own findings at the end:

[Carter] Bryant’s employment agreement may not have assigned his ideas for the names “Bratz” and “Jade” to Mattel at all, and the district court erred by holding that it did so unambiguously. Even if Bryant did assign his ideas, the district court abused its discretion in transferring the entire Bratz trademark portfolio to Mattel. We therefore vacate the constructive trust, UCL injunction and declaratory judgment concerning Mattel’s rights to the Bratz trademarks. The district court may impose a narrower constructive trust on remand only if there’s a proper determination that Mattel owns Bryant’s ideas.

The district court also erred in holding, at summary judgment, that the employment agreement assigned works created outside the scope of Bryant’s employment. We therefore vacate the copyright injunction. On remand, Mattel will have to convince a jury that the agreement assigned Bryant’s preliminary sketches and sculpt, either because the agreement assigns works made outside the scope of employment or because these works weren’t made outside of Bryant’s employment. And, in order to justify a copyright injunction, Mattel will have to show that the Bratz sculpts are virtually identical to Bryant’s preliminary sculpt, or that the Bratz dolls are substantially similar to Bryant’s sketches disregarding similarities in unprotectable ideas.

There's no two ways to slice it: the opinion is a major loss for Mattel. Even if they win on remand and retrial, they've lost their biggest weapons.

Sure, Mattel gets another crack at showing misappropriation by Bryant and MGA, and it has decent odds of proving "the agreement assigned Bryant’s preliminary sketches and sculpt, either because the agreement assigns works made outside the scope of employment or because these works weren’t made outside of Bryant’s employment." There was certainly evidence at trial supporting that.

But where will that get them? As I wrote back when the verdict came out, "The jury essentially found that MGA was entitled to 95% of the Bratz empire's profits," despite finding extensive wrongful conduct by Bryant and MGA.

The problem for Mattel is that, even they succeed the next time around, the Ninth Circuit has obliterated their two most powerful remedies: the constructive trust over the Bratz profits and the injunction prohibiting MGA from producing more Bratz dolls. The Bratz empire has earned over $1 billion in profits; a $10 million award — even a $100 million award — has only a fraction of the value to Mattel as a constructive trust or an injunction, both of which would cripple MGA and award the Bratz empire to Mattel.

Back when the verdict came out, I thought the sort of windfall proposed by Mattel bothered the jury:

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

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

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

It seems the Ninth Circuit took a similar view:

“When the defendant profits from the wrong, it is necessary to identify the profits and to recapture them without capturing the fruits of the defendant’s own labors or legitimate efforts.” Dan B. Dobbs, Dobbs Law of Remedies: Damages-Equity-Restitution § 6.6(3) (2d ed. 1993). This is because “the aim of restitution has been to avoid taking the defendant’s blood along with the pound of flesh.” Id. § 6.6(3) n.4. A constructive trust is therefore “not appropriate to every case because it can overdo the job.” Id. § 4.3(2).

When the value of the property held in trust increases significantly because of a defendant’s efforts, a constructive trust that passes on the profit of the defendant’s labor to the plaintiff usually goes too far. For example, “[i]f an artist acquired paints by fraud and used them in producing a valuable portrait we would not suggest that the defrauded party would be entitled to the portrait, or to the proceeds of its sale.” Janigan, 344 F.2d at 787. Even assuming that MGA took some ideas wrongfully, it added tremendous value by turning the ideas into products and, eventually, a popular and highly profitable brand. The value added by MGA’s hard work and creativity dwarfs the value of the original ideas Bryant brought with him, even recognizing the significance of those ideas. We infer that the jury made much the same judgment when it awarded Mattel only a small fraction of the more than $1 billion in interest-adjusted profit MGA made from the brand.

The whole opinion is worth reading for anyone with copyright infringement cases claiming a constructive trust or seeking an injunction for misappropriated work.

Of course, with all of these children's and adolescent toys afoot, Judge Kozinski couldn't resist dropping in a Twilight reference:

Assuming that Mattel owns Bryant’s preliminary drawings and sculpt, its copyrights in the works would cover only its particular expression of the bratty-doll idea, not the idea itself. See Herbert Rosenthal Jewelry Corp. v. Kalpakian, 446 F.2d 738, 742 (9th Cir. 1971). Otherwise, the first person to express any idea would have a monopoly over it. Degas can’t prohibit other artists from painting ballerinas, and Charlaine Harris can’t stop Stephenie Meyer from publishing Twilight just because Sookie came first. Similarly, MGA was free to look at Bryant’s sketches and say, “Good idea! We want to create bratty dolls too.”

As the opinion concludes,

America thrives on competition; Barbie, the all-American girl, will too.

She'll need to after this opinion.

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

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

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

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

To recap the underlying facts here:

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

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

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

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

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

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

Certainly.

Two words: Richard Jewel.

What came to mind when you read that?

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

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

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

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

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

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

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

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

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

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

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

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

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Kenneth Feinberg, whose pro bono publico work in the 9/11 Compensation Fund was widely lauded, is back again administering the $20 billion BP Compensation Fund and is in the middle of a publicity tour on the Gulf of Mexico. C-SPAN just posted a video of him discussing the Fund and his work on it this morning.

Unlike with the 9/11 Fund, though, this time Feinberg is getting paid, and that raises a few questions.

Nobody questions Feinberg's integrity, but the whole point of having a nation of law, not men, is to make everyone accountable to that law, and Professor Byron Stier at the Mass Tort Litigation Blog raises the right issues:

The issue of Feinberg's compensation is interesting. Feinberg worked pro bono on the 9/11 victim compensation fund -- a remarkable and laudable commitment given the substantial time involved. I'm not suggesting that Feinberg should go on doing such monumental administrative tasks pro bono -- but is it appropriate for him to keep his compensation from BP confidential?

As with the 9/11 fund, Feinberg will likely have tremendous discretion in fashioning the administrative claim mechanism for the BP compensation fund. His exercise of discretion could possibly result in BP saving substantial funds, especially if any remainder of the $20 billion fund is to be returned to BP. Accordingly, a fair process at a minimum requires that both the amount of his compensation, and the method of compensation be disclosed publicly. If BP has the ability to review and cut his billable hours or his billable-hour rate, for example, Feinberg might have a conflict of interest that could lead him unconsciously to favor BP in structuring the administrative fund or making awards.

Andrew Perlman at Legal Ethics Forum follows up:

I haven't followed the details of the BP fund, but if there is little or no chance that there will be money in the fund after the awards are made (a seemingly plausible assumption), I'm not sure I see how Mr. Feinberg's behavior could be impacted (consciously or unconsciously) by his compensation.  BP is out the $20 billion regardless of how the proceeds are distributed.  Are there other ways in which Mr. Feinberg's conduct might be affected by how his compensation is structured?

I'm not Feinberg's accountant, but from the little bit I know about his practice — like his role in resolving the multibillion-dollar antitrust suit by AmEx against MBNA — I'm confident that Feinberg is doing quite well financially, and isn't planning on making this Fund into his own retirement. Similarly, in light of his unpaid commitment to the 9/11 Fund, I imagine he values his reputation, not to mention his dignity and integrity, over any quibbling over billable hours that he might get from BP.

On paper, there's no obvious reason for concern. But Roger Ebert's rules for critics comes to mind:

No commercial endorsements. This used to be a given in journalism ethics. A critic must be especially vigilant. If you express approval of a product, you must sincerely believe what you are saying. How will we know you're sincere? Because you have (1) accepted no money, (2) or donated the money to a charity, and (3) have not accepted a free example of the product, except in such cases as foodstuffs, where the difficulties are apparent. You gotta eat 'em to review 'em. The Sun-Times has a policy: All Christmas gifts must be returned, except for perishables like papayas, etc. Candy is not a perishable. Neither, to the incredulity of many reporters, is liquor. Back to endorsements. Were I to recommend, say, a rice cooker, that must not imply I obtained it for free, or that 100 lb. sacks of rice were being dropped at my door. I mention this because I may be compelled to recommend a rice cooker in the very near future, in defense of my Who's Who entry, which claims I can cook almost anything in a rice cooker.
...

No advertisements. Gene Siskel, who I frequently quote as a fierce paragon of high standards, used to quote what someone, maybe it was David Mamet, told him: "As a critic, everything you say depends on your credibility. When you sell that, somebody else owns it." Gene and I (regretfully) turned down offers in the extremely low seven figures  from a fast food chain and an airline. "After we retire, then it would be okay," we speculated. Even then, maybe not. Look at Fred Astaire. How many people thought they were paying him for their dance lessons? They look at "Swing Time" on TCM, and say, "There's that bastard who overcharged me for the mambo."

The emphasis of Mamet's quote is mine. Fact is, Feinberg is being paid by BP to run the Fund, and being paid by BP to promote the Fund. That's enough to create the appearance of impropriety.

Among judges, it is unnecessary to demonstrate the reality of impartiality; the paramount concern is the appearance of impropriety:

The goal of section 455(a) is to avoid even the appearance of partiality. If it would appear to a reasonable person that a judge has knowledge of facts that would give him an interest in the litigation then an appearance of partiality is created even though no actual partiality exists because the judge does not recall the facts, because the judge actually has no interest in the case or because the judge is pure in heart and incorruptible. The judge's forgetfulness, however, is not the sort of objectively ascertainable fact that can avoid the appearance of partiality. Hall v. Small Business Administration, 695 F. 2d 175, 179 (5th Cir. 1983). Under section 455(a), therefore, recusal is required even when a judge lacks actual knowledge of the facts indicating his interest or bias in the case if a reasonable person, knowing all the circumstances, would expect that the judge would have actual knowledge." 796 F. 2d, at 802.

Liljeberg v. Health Services Acquisition Corp., 486 US 847, 860-862 (1988)(quoting the Second Circuit).

So it goes with Ken Feinberg.

What will it take to fix that? Personally, I don't think we need to know every detail, but we do need to know more.

I don't need to know exactly how much he is being paid, but I do want to know if it is (a) hourly or fixed and (b) if it is significantly above or below his normal rate. Those two elements could, potentially, create an incentive either to draw out the work or to hurry through the claims to get back to his more profitable work.

Do I think he will do that? No, but that's not the issue: the issue is if it appears that his judgment could be affected by his compensation, and I think it's fair to say such an appearance exists. The victims of the spill — the ones who are being asked to trust his judgment — deserve to know a little more before they sign on.  

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At the WSJ Law Blog:

The U.S. Chamber of Commerce’s Legal Newsline reported on Wednesday that the U.S. Department of Treasury may be about to grant plaintiffs’ attorneys long-sought tax write-offs for the costs associated with fronting contingency-fee lawsuits.

...

Apparently at the heart of the matter is an April letter Sens. Max Baucus (D., Mont.) and Richard Durbin (D., Ill.) sent to Michael Mundaca, assistant secretary for tax policy seeking clarity on the 9^th Circuit ruling in the 1995 case of Boccardo v. Commissioner.

In the Boccardo case, the IRS asserted that out-of-pocket expenses incurred by attorneys on behalf of clients while prosecuting contingency cases are not deductible because the law firm expects reimbursement upon getting a settlement or judgment. The Tax Court agreed.

The 9^th Circuit took up the matter. The letter sums up the ruling like this:

The court “held that attorneys who represent clients in contingency fee cases may treat litigation costs that are paid by the attorneys, such as filing fees and witness expenses as deductible ordinary and necessary business expenses . . . when the attorney and client agree to a specific fee arrangement known as a gross fee contract.”

The IRS issued a memo saying that the ruling applied only to attorneys in the 9^th Circuit. But the Tax Court has since recognized the validity of the decision in at least one other case, according to the letter.

Of course, every other business in American gets to deduct its expenses. Some favored industries, like oil companies, get to deduct more than just their expenses:

Percentage depletion allows an independent oil company to deduct from its taxes about 15 percent from the revenue generated from a well, even if that amount exceeds the well’s total value. This means that oil companies take a deduction as long as a well is producing oil, without regard to how much, or whether, the well is still declining in value. Companies in other industries are only allowed to deduct an amount that represents the decline in their investment’s value that year. The administration expects that eliminating this subsidy to produce budget savings of about $10 billion over 10 years.

That's just one of the goodies Congress doles out to upstanding corporate citizens like BP, which will pay at least $10 billion less in taxes as the result of its own oil spill, since it gets to deduct all of the cleanup costs, the compensation it pays out to victims, and the loss in value of the well.

But not plaintiff's lawyers. The IRS requires that we treat expenses on our cases as actually being profits, since we might, years down the road, recover those costs. (Nevermind that, even then, it's not profit, it's just a recovery of expenses.)

Since small businesses (like law firms) have an effective tax rate around 20-25%, such disparate tax treatment ends up making the costs on plaintiff's litigation one-fifth to one-quarter more than the costs of any other business, including the business of defending the exact same lawsuit.

A little over a year ago I posted about Contingent Fee Business Lawyers As Venture Capitalists, giving a few sample numbers:

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).

As I wrote then, 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.

The Duck Boat accident, for example, was a major maritime accident with two wrongful deaths and more than two dozen personal injury claims that will involve two primary defendants (K-Sea and Ride The Ducks) and a handful of their employees. Litigating the Limitation of Liability Act issues like "seaworthiness" will probably take at least a year or two, after which the litigation will begin in earnest, probably lasting another two-to-five years (though possibly more), with costs of at least $1,000,000. Those costs could be doubled or tripled if there's a need to do extensive testing on the seaworthiness of the tugboat or the duck boat. Some sample potential costs:

• renting an identical tugboat and barge to do visibility tests;
• buying a duck boat and then ramming it to see how easily it sinks; and,
• buying a dozen duck boat engines and running them day and night to see how long it takes for them to overheat.

None of that would be unusual or unexpected. Cases against car manufacturers that allege inadequate "crashworthiness" routinely require the destruction of a few identical cars to see how they holdup and how alternative designs would have worked better.

That's where the lack of a tax deduction has a big bite: when most businesses think of "$1 million in costs," they think of them in terms of deductible costs. For a plaintiff's lawyer, then, they have to see "$1 million in costs" as being more like "$1.25 million in costs" to any other business, since the plaintiff's lawyer will be taxed on the costs. Given the time value of money, if we assume the case takes five years, and that the taxes paid could have been invested at a modest 5% annual return, then the lack of a tax deduction adds an additional $320,000 in costs to that $1 million in expenses. If the case costs $3 million on paper, it'll cost $4 million once the lack of a tax deduction is figured in.

In contrast, the defendants and their insurers will be able to immediately deduct every penny they spend on their defense.

Is that fair? Of course not, but it's been the law for years, just another way in which the deck is stacked against plaintiff's lawyers, another reason why we have to be so selective about cases and charge such a large contingent fee.

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

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

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

Hence the Act.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

As described by the Court:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thrilling.

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

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

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

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

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

"And dark?"

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

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

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

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

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

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

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

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

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

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

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

So what's going on here?

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

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

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

Emphasis mine.

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

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

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

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

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

They can depose his mom.

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

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

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

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

It seems Zuckerberg has decided to respond via public relations:

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

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

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

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

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

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

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

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

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

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

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

Slip op., 4.

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

Slip op., 5.

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

Slip op., 15.

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

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

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

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

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

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

Techies (and techie lawyers) are also similarly annoyed:

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

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

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

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

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

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

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

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

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

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

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

Slip op., 5.

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

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

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

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Judicial supremacy made an unexpected comeback this week with Martin Feldman of the Eastern District of Louisiana, a "fair" and "terrifying" judge (who, for what it's worth, dismissed one of my cases a few months ago — no hard feelings), granting an injunction against the Secretary of the Interior from enforcing the Obama administration's moratorium on deepwater oil drilling because the moratorium was "arbitrary and capricious:"

After reviewing the Secretary’s Report, the Moratorium Memorandum, and the Notice to Lessees, the Court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium. The Report, invoked by the Secretary, describes the offshore oil industry in the Gulf and offers many compelling recommendations to improve safety. But it offers no time line for implementation, though many of the proposed changes are represented to be implemented immediately. The Report patently lacks any analysis of the asserted fear of threat of irreparable injury or safety hazards posed by the thirty-three permitted rigs also reached by the moratorium. It is incident specific and driven: Deepwater Horizon and BP only. None others. While the Report notes the increase in deepwater drilling over the past ten years and the increased safety risk associated with deepwater drilling, the parameters of “deepwater” remain confused. And drilling elsewhere simply seems driven by political or social agendas on all sides. The Report seems to define “deepwater” as drilling beyond a depth of 1000 feet by referencing the increased difficulty of drilling beyond this depth; similarly, the shallowest depth referenced in the maps and facts included in the Report is “less than 1000 feet.” But while there is no mention of the 500 feet depth anywhere in the Report itself, the Notice to Lessees suddenly defines “deepwater” as more than 500 feet.

... The Shallow Water Energy Security Coalition Presentation attempts at some clarification of the decision to define “deepwater” as depths greater than 500 feet. It is undisputed that at depths of over 500 feet, floating rigs must be used, and the Executive Summary to the Report refers to a moratorium on drilling using “floating rigs.” Other documents submitted summarize some of the tests and studies performed. For example, one study showed that at 3000psi, the shear rams on three of the six tested rigs failed to shear their samples; in the follow up study, various ram models were tested on 214 pipe samples and 7.5% were unsuccessful at shearing the pipe below 3000psi. How these studies support a finding that shear equipment does not work consistently at 500 feet is incomprehensible. If some drilling equipment parts are flawed, is it rational to say all are? Are all airplanes a danger because one was? All oil tankers like Exxon Valdez? All trains? All mines? That sort of thinking seems heavyhanded, and rather overbearing.

... While the implementation of regulations and a new culture of safety are supportable by the Report and the documents presented, the blanket moratorium, with no parameters, seems to assume that because one rig failed and although no one yet fully knows why, all companies and rigs drilling new wells over 500 feet also universally present an imminent danger.

On the record now before the Court, the defendants have failed to cogently reflect the decision to issue a blanket, generic, indeed punitive, moratorium with the facts developed during the thirty-day review. The plaintiffs have established a likelihood of successfully showing that the Administration acted arbitrarily and capriciously in issuing the moratorium.

Ashby Jones at the WSJ Law Blog has been all over the story, with lots of followup links and questions about Judge Feldman's oil industry investments.

I don't agree with the ruling; the government's assumption, as worded by Judge Feldman, "that because one rig failed and although no one yet fully knows why, all companies and rigs drilling new wells over 500 feet also universally present an imminent danger" is sound. We still don't know why the "failsafe" measures on the Deepwater Horizon failed to be safe. Although the government's conclusions included a number of inconsistencies, it's hard to argue that the government's chosen remedy — the moratorium — was not rationally related to the compelling national interest of limiting the amount of oil in the Gulf of Mexico to the millions of gallons already there.

But let me play devil's advocate for a moment. From a purely legal standpoint, the order isn't extraordinary. Although the writ of habeas corpus is rightly called "the Great Writ" by virtue of its ability to force the federal and the states' governments alike to release an individual from confinement, the Great Writ's less heralded cousin civil context is the Administrative Procedures Act, which is almost constitutional in its breadth and power:

 To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall—

 

(1) compel agency action unlawfully withheld or unreasonably delayed; and

(2) hold unlawful and set aside agency action, findings, and conclusions found to be—

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

(B) contrary to constitutional right, power, privilege, or immunity;

(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;

(D) without observance of procedure required by law;

(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or

(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court. 

5 U.S.C. § 706.

There it is, plain as day, a statute enacted by the Congress the President empowering (commanding, some might say) federal judges to set aside any decision by any federal agency — the means by which the President and his Cabinet effectuate their policies — if they find that agency action to be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law."

That's why the exercise of this power is not, by itself, noteworthy: it's exactly how our government's checks and balances are supposed to function. As another check on the system, despite some suggestions otherwise, federal appellate courts (like the Fifth Circuit) can and do engage in a searching analysis of injunctions. See Karaha Bodas v. Perusahaan Pertambangan Minyak, 335 F. 3d 357, 363-364 (5th Cir. 2003)(Reversing injunction, noting "Even though the ultimate decision whether to grant or deny a preliminary injunction is reviewed only for abuse of discretion, a decision grounded in erroneous legal principles is reviewed de novo. ... We have cautioned [that] a preliminary injunction is an extraordinary remedy which should only be granted if the party seeking the injunction has clearly carried the burden of persuasion on all four requirements. As a result, the decision to grant a preliminary injunction is to be treated as the exception rather than the rule.")

As favorable as the Fifth Circuit sometimes is to oil interests, there's good odds they would likely have reversed this injunction and sent it back for the District Court to craft a more limited remedy that preserved the moratorium against any oil platforms that were comparable to, or had comparable risks of, the Deepwater Horizon.

But the main point here is what happened as a result of the order: the Secretary of the Interior announced he would issue a new, more detailed, possibly more narrowly-crafted moratorium. And that's just what the APA was designed to do: to limit the ability of the federal government's agencies to impose their will on people, to force them to "refine" their actions when necessary. Moreover, at the moment, no additional damage is being done to the Gulf, and Judge Feldman has scheduled a conference call this morning to consider staying his injunction while the Department of the Interior appeals his ruling and issues a new moratorium.

Thus, as critical as I might be of the reasoning of the order, the fact of the order is something to herald: for once, your government is functioning the way it is supposed to.

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As part of a series on anosognosia (which was also one of the themes of Mike Rowe's TED Talk), the NYTimes' Opinionator has a new post on the Dunning-Kruger Effect, briefly stated as:

Dunning wondered whether it was possible to measure one’s self-assessed level of competence against something a little more objective — say, actual competence.  Within weeks, he and his graduate student, Justin Kruger, had organized a program of research.  Their paper, “Unskilled and Unaware of It: How Difficulties of Recognizing One’s Own Incompetence Lead to Inflated Self-assessments,” was published in 1999.

Dunning and Kruger argued in their paper, “When people are incompetent in the strategies they adopt to achieve success and satisfaction, they suffer a dual burden: Not only do they reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the ability to realize it.  Instead, like Mr. Wheeler, they are left with the erroneous impression they are doing just fine.”

It became known as the Dunning-Kruger Effect — our incompetence masks our ability to recognize our incompetence.

Ignorance is sometimes a known unknown; we know that we don't know something. Incompetence, however, can mask our ignorance, making it an unknown unknown. As Morris writes,

Unknown unknown solutions haunt the mediocre without their knowledge. The average detective does not realize the clues he or she neglects.  The mediocre doctor is not aware of the diagnostic possibilities or treatments never considered.  The run-of-the-mill lawyer fails to recognize the winning legal argument that is out there.  People fail to reach their potential as professionals, lovers, parents and people simply because they are not aware of the possible.  This is one of the reasons I often urge my student advisees to find out who the smart professors are, and to get themselves in front of those professors so they can see what smart looks like.

Indeed, as shown by a psychology paper published last month, lawyers are so incompetent they not only miss winning legal arguments, they can't reliably predict how their cases will end:

[L]awyers aren't so good at evaluating those odds, according to a new paper published in Psychology, Public Policy, and Law. That's because they're biased in favor of their own chances; they think they're going to win, and often they're wrong. The study surveyed nearly 500 lawyers and had them predict the outcome of an active case and then compared those predictions with what actually happened. From the paper:

Lawyers frequently made substantial judgmental errors, showing a proclivity to overoptimism. The most biased estimates were expressed with very high initial confidence: In these instances, lawyers were extremely overconfident.

But, surely, more experienced lawyers have a better sense of who's going to win, right? Nope. In fact, "the data provided no support for the hypothesis that lawyers with more practical experience are better calibrated than lawyers with less experience." So much for the Matlock Effect.

I like Morris' explanation of the phenomenon:

I found myself still puzzled by the unknown unknowns.  Finally, I came up with an explanation.  Using the expressions “known unknowns” and “unknown unknowns” is just a fancy — even pretentious — way of talking about questions and answers.  A “known unknown” is a known question with an unknown answer.  I can ask the question: what is the melting point of beryllium?  I may not know the answer, but I can look it up.  I can do some research.  It may even be a question which no one knows the answer to.  With an “unknown unknown,” I don’t even know what questions to ask, let alone how to answer those questions.

But there is the deeper question.  And I believe that Dunning and Kruger’s work speaks to this.  Is an “unknown unknown” beyond anything I can imagine?  Or am I confusing the “unknown unknowns” with the “unknowable unknowns?”  Are we constituted in such a way that there are things we cannot know?  Perhaps because we cannot even frame the questions we need to ask?

But he can't claim credit for the concept; framing questions the right way was what made Newton and Einstein great. 

It's enough to make you wonder why we hire lawyers at all if everyone, lawyers included, is so incompetent they don't even know it.

Truth is, trial lawyers' inability to predict the outcome of their cases is a known unknown. While it's quaint to see their failures as prognosticators spelled out with empirical data, lawyers know it's foolish to confidently predict the outcome of a case. (That doesn't stop some of them from doing it, and thereafter watching their clients cases go down in flames.) That's why clients have to wrestle predications out of them, and even then only get them with dozens of caveats.

There are just too many unknown unknowns in litigation and trial, which is, ironically, why you hire lawyers and in the first place: to grapple with the unknown. Most litigation is done blind: even with liberal discovery rules permitting lengthy depositions and extensive forensic investigation of documents and electronically-stored information, lawyers still can't be sure how a claim or defense will be proven until they actually see it. They can't even be sure they investigated the right witnesses, asked the right questions, and requested the right documents. The main point of hiring them is to have them reduce as many "known unknowns" to "knowns" as possible, and to be prepared for the "unknown unknowns."

How do they do that? As Socrates wrote (and as Morris quoted), that “the only true wisdom is to know that you know nothing.” 

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At Business Week, it seems Oracle isn't living up to its namesake:

Oracle Corp., the world’s second- biggest software maker, faces a lawsuit brought by a whistleblower and the U.S. Justice Department claiming it overcharged the government by tens of millions of dollars.

As the Complaint summarizes,

This lawsuit is based on a scheme by Defendant Oracle Corporation ("Oracle") to defraud the United States by failing to disclose deep discounts Oracle offered to commercial customers when Oracle sold software products to federal government agencies through a General Services Administration Multiple Award Schedule. Oracle's failure to disclose the discounts it offered to its most favored customers resulted in overcharges to the federal Government totaling tens of millions of dollars.

Failing to give the government most-favored-customer deals in a GSA contract puts you on the fast track to a qui tam suit, since the GSA damages (and the per-claim penalty) add up rapidly with each new fraudulent order placed by the government.

It seems Oracle is quite experienced in the specific fraud at issue here:

In October 2006, Oracle paid $98.5 million to settle a False Claims Act lawsuit over GSA Multiple Award Schedule pricing disclosures at PeopleSoft Inc., a software maker. Oracle bought PeopleSoft in January 2005 for $10.3 billion.

The complaint, filed in 2003 by whistleblower James Hicks, was joined in 2006 by the Justice Department.

PeopleSoft Case

PeopleSoft was accused of understating the discounts it provided to commercial customers, including one that got up to 74 percent off the listed price.

“Because PeopleSoft did not give GSA accurate pricing information, it negotiated higher prices for its products and services than it would have obtained if GSA had known the truth,” Rod Rosenstein, the U.S. Attorney in Maryland, said in a statement at the time. 

How ironic.

One fact worth pointing out: the present case was originally filed more than three years ago yet only recently unsealed and served upon Oracle. Per the False Claims Act, once the Complaint was filed, it then sat silently, under seal, while the U.S. Attorney's office for the Eastern District of Virginia investigated whether or not they would intervene in support of the case. (They did.)

That's not to criticize the fine folks at the USAO there — these cases are massive and require an extraordinary amount of complicated work. The USAO is also quite rightly very selective in deciding whether or not to intervene in a case. Further, the most effective part of a qui tam investigation is typically the initial part done in secret prior to the unsealing of the suit.

Putting all of that together means one thing: a lot of time, money and effort spent on the investigation before the lawsuit itself really gets going. It's hard to tell in these cases how much of the investigation was done by the USAO, and how much was done by the relator's lawyer, but I'll tell you this: if you dump an unprepared case on the USAO's lap or don't pull your weight in the initial investigation, they'll show you the door.

Something to keep in mind next time you read another attempt to deny whistleblowers their due under the False Claims Act.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But a few issues come to mind.

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

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

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

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

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

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

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

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

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

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

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

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

. . . .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"Certain expectations about liability?"

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

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

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

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

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

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

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

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At Electronic Discovery Law:

Last month, the Seventh Circuit’s Electronic Discovery Pilot Program Committee released its report on phase one of its Electronic Discovery Pilot Program.  Initiated as a “multi-year, multi-phase process to develop, implement, evaluate, and improve pretrial litigation procedures that would provide fairness and justice to all parties while seeking to reduce the cost and burden of electronic discovery consistent with Rule 1 of the Federal Rules of Civil Procedure”, the first phase of the program ended on May 1, 2010, after a seven month period in which the committee’s Principles Relating to the Discovery of Electronically Stored Information were tested in practice. ...

Too lengthy to summarize, the full report is available here.

I had my fingers crossed for something better than the electronic discovery report released last year by the American College of Trial Lawyers, which, if adopted, would do little more than encourage frivolous discovery objections.

The Seventh Circuit report is far better; I've posted on Scribd a copy of their proposed standing electronic discovery order.

I am concerned, though, by the heavy reliance upon having attorneys meet-and-confer to discuss issues relating to electronically-stored information.

Sometimes attorneys aren't so candid when it comes to ESI, like in Grider v. Keystone Health:

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.

The District Court sanctioned them, but sanction is more the exception than the rule, and the Third Circuit eventually reversed the sanction anyway, even though it found the conduct sanctionable.

Fact is, if defense counsel doesn't have enough of an incentive to be candid in discussing the availability of ESI — like if they face no real threat of sanction or a spoliation ruling — then odds are they won't be. 

If the Seventh Circuit wants parties to successfully meet-and-confer, they should require the parties to submit to each other affidavits discussing the available sources of ESI to the best of the party's information, knowledge and belief. That will mean a lot more, and will be a lot more useful in the litigation, than a phone call or letter from an attorney whose primary goal is to conceal evidence.

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

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

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

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

Problem is, Esplund's having the wrong debate:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Norm Pattis is weary of questions:

I realize this sounds harsh, but I am simply undone by the sorrow, the rage, the anger and sometimes the sheer irrationality of folks caught within the law's vice. My firm is a small shop, but we have one paralegal whose job it is to serve as the communication point for clients. He engages in a sort of triage with the thousand and one questions that arise in a day. Still, there are needs that go unmet, clients who believe that we do not pay enough attention to their needs.

The trickiest part of being a lawyer is knowing which cases to take. No lawyer can get along with everyone. There are simply bad marriages. I've had more than a few. I have moved to withdraw when some client's needs overwhelm me and my firm. We once represented a person who insisted they be consulted on each media call. The client wanted to write what lines we should recite when a reporter called. When we decided simply not to respond to media inquiries, fur flew. We were soon accused of working to undermine the client's interest. It was time to get out, and so we did. It was an unhappy parting.

In another case, I did not consult my client on each move in the case. I withdrew certain counts of a civil case when it became apparent to me that I could [not?] meet my burden of proof. I did not consult the client, who, early in the course of the litigation, started asking questions about whether the proceeds of the litigation were taxable. The client was counting chickens before they hatched; I was worried about the fox. I was grieved by the client in that case, and the federal grievance committee found probable cause to believe I had failed in my duty to communicate adequately. I moved to withdraw from that case as well. A later hearing before a District Court judge resulted in no discipline. The client now believes I was engaged in some [broad] and far-reaching conspiracy.

As Norm concedes, this failing makes him a "less than perfect lawyer." It does. A perfect lawyer informs the client of each and every event in the case, including informal correspondence with third parties or with opposing counsel.

But there are only so many hours in the day. Even if a lawyer obsessed about their cases every hour of the day — which we don't want them to do, since it will cloud their judgment — they still wouldn't be able to explain every hypothetical possibility to the client.

Fact is, if a client wants a perfect lawyer, they need to find one willing to devote their entire practice and personal life to their case alone.

The rest of us imperfect lawyers use two techniques: triage and ticklers.

Triage is just like in the hospitals: we attend to the most pressing matters first. David Dow, who represents defendants on Texas' death row, is one of the most respected lawyers in America, yet his The Autobiography of an Execution concedes letting cases go by the wayside for months, sometimes years. He's a less than perfect lawyer, and understandably so: he can't hunt down every trace of exculpatory evidence for a client whose execution is years away when another one of his clients is weeks, days or hours away from death. My triage in civil litigation doesn't carry as much gravity, but it's no less real: I must prioritize the most urgent matters. I do the same for every client when their matter becomes the most urgent matter.

A "tickler" (part of a "tickler file") is a funny name that lawyers dreamed up for "reminder." Litigators in particular are always on some sort of deadline, either by way of the statute of limitations, a deadline for filing or responding to a motion, the closing of discovery, the submission of expert reports, the preparation for a hearing, the taking of a deposition, or trial. Sometimes, the necessary work can be done in minutes. Sometimes it will take weeks. The ticklers are ways of interrupting the triage to point out that work due later needs to be started now.

In theory, it should be easy to incorporate client contact into this system by making ticklers for client conduct. There are, however, only so many hours in the day. More importantly, attention, like time, is a limited resource. I can only give a client a status update when I am in the office, which is only when I'm not at a court conference, a hearing, a deposition, on trial, or otherwise out. But when I'm in the office, I'm bombarded every day with dozens of calls, emails, letters, filings and, yes, ticklers for other matters. More distractions equals less attention.

I don't know the specifics of Norm's practice, but I presume that he, like most criminal defense lawyers, represents clients on a fixed fee. I represent clients on a contingent fee, and I bet Norm does, too, when he files civil suits. We are thus both not paid for our time, not paid to consult, not paid to teach; we are paid to fight the whole battle from start to finish.

If you want someone to teach you the intricacies and contradictions of the law, that's available, just be ready for $60 for each courtesy email. But if you've hired someone on a contingent or fixed fee to do battle, it's not unreasonable for them to contact you only as necessary and as useful for your case.

For my clients, if you haven't heard in a while and don't know the status, please write or call, and we'll put your call in the triage and the tickler file and get back to you. If we don't get back to you in a few days, call again. (Email is even better, since I get it outside the office.) If you've learned of or thought something interesting, please write or call, and I'll consider it. Otherwise, I'll contact you when necessary and useful for your case, such as when you need to review an allegation, prepare for discovery, or consider an offer, and I'll forward you the court filings I made on your behalf.

Norm considers this "harsh." I don't. The vast majority of my clients appropriately contact me when they genuinely have questions about the status of their case, then ask me a handful of questions. We discuss it until they understand, and then I get back to work. That's fine. It's reasonable and appropriate for clients to expect it.

My clients are, by and large, polite people with reasonable expectations. Indeed, some cases require substantial investigation pre-suit, are on appeal, or are delayed by the defendant's bankruptcy, leading to months of inactivity, and yet some of those clients apologize to me for interrupting my work when they check in after a few weeks. They don't have to; it's their case, their right.

Only a tiny fraction wear out their welcome. For those, there really isn't a question as to what should be done. The lawyer is unhappy with the client and the client is unhappy with the lawyer. Representation should not be undertaken or should be ended as soon as possible. Easy to say, hard to do.

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Via the Am Law Daily, the Wall Street Journal had an article about an effort by Bank of America's lawyers — at Wachtell, Davis Polk, and Cleary Gottlieb — to keep Judge Jed Rakoff from presiding over a shareholder class action against them:

Bank of America Corp. tried to keep cases pending against it from landing with U.S. District Judge Jed Rakoff, in the hopes of avoiding another dramatic confrontation with the judge over the bank's handling of the Merrill Lynch & Co. takeover.

It got the outcome it wanted, though not necessarily thanks to its efforts.

The nation's largest bank by assets sent a letter on April 22 to U.S. District Judge Denny Chin—who was leaving to become an appeals-court judge—that asked that about 15 civil shareholder lawsuits pending before him be reassigned randomly and not handed to Judge Rakoff.

Judge Rakoff has been, shall we say, insufficiently deferential to the poor officers and directors at places like Bank of America. He famously rejected Bank of America's / Merrill Lynch's initial settlement with the Securities Exchange Commission over misleading proxy statements about the merger. He less-famously enjoined J.P. Morgan from selling a loan to Mexican telecommunication company's chief competitors.

You can imagine the talk on Wall Street. Who does this guy think he is? A judge?

So what can they do when there's a chance he might end up hearing another case against a big bank?

Normally, the last thing a lawyer will do is complain about a judge.

In one respect, lawyers complain about judges all the time. Every time a lawyer appeals a case, they complain about the judge's ruling, which was wrong because of (a), (b), (c) and (d). (Don't go beyond (d). Going beyond (d) is the kiss of death.) Sometimes a lawyer complains right to a judge's face through a motion for reconsideration.

But that's just part of the process. The system is set up to allow that, to (hopefully) correct mistakes.

When it comes to real complaints, like complaints about a judge's fairness, the type of complaints that the banks have against Judge Rakoff, some lawyers, particularly young lawyers, worry that complaining about a judge to anyone — be it the judge, another judge, or anyone who can't keep a secret — will prompt the judge to retaliate against them personally.

Other lawyers, particularly older lawyers, worry that criticism of a judge will make them (the lawyer) look unprofessional, regardless of the merits of the complaint.

And some lawyers consider complaining about judges akin to complaining about the weather. It's raining as I write this post, and will keep raining no matter what I think or say. Unless you can show that, say, the prosecutor is sleeping with the judge — and apparently not even then — complaining isn't going to get you anywhere.

Whatever the reason, this much is true: lawyers don't complain about judges.

So how do you complain about a judge without, you know, complaining about a judge?

Simple: you make up a reason.

Like Bank of America's lawyers did:

[T]he use of comments made by Judge Rakoff in his order on February 22, 2010 (the "February 22 Order") in the course of approving the settlement that resolved the SEC Actions, is already a subject of litigation in the BofA Civil Cases. For example, in their February 24 letter, Lead Plaintiffs variously contended that Judge Rakoff "held," or "determined," or "found" certain matters in the course of his approval of the settlement of the SEC Actions. including that the merger proxy statement "failed adequately to disclose" the bonus cap provision of the merger agreement and Merrill's interim losses during the fourth quarter of 2008 and that these allegedly undisclosed facts were "material." Needless to say, these hotly contested issues are central to the BofA Civil Cases.

...

Also relevant is an issue Judge Rakoff himself described as potentially problematic, but which he concluded was ultimately mooted by his approval of the settlement in the SEC Actions. In summary, Judge Rakoff obtained ex parte evidence bearing on the merits - specifically, selected portions of investigatory depositions conducted by the New York Attorney General's Office, which were not available to the Bank or to the SEC. See March 8 Submission at 4, 11. Both the Bank and the SEC objected. While Judge Rakoff overruled those objections. he acknowledged that it was "[m]ore problematic, perhaps" that these materials had been considered by him "on an ex parte basis" and that there was "a legitimate concern that the Court's determinations be made on a record fully available for the parties' scrutiny. Judge Rakoff concluded that the decision to approve the settlement of the SEC Actions rendered the ex parte issue "moot." But that issue would be resuscitated if the BofA Civil Cases were transferred Judge Rakoff.

The first "issue" there is a reason why Judge Rakoff should have the cases assigned to him: he, and only he, can say definitively what he did or did not hold in the prior SEC case. The bulk of courts in the United States hold that a judge who issued a ruling is best suited to interpret that ruling; indeed, a number of courts follow the "coordinate jurisdiction" rule, in which a later judge of the same court can't overrule a prior order by a judge of that court, only the judge who wrote the prior order can.

The second "issue" is not an issue at all. Courts see ex parte information all the time when they perform in camera reviews of privileged materials. Moreover, the cure for such a "problematic" issue is pretty simple: let the lawyers see the documents and then argue about them. Big deal. The only reason Judge Rakoff didn't do that before is because it wasn't necessary in that case. If it's necessary to resolve that in this case, then do it.

When all was said and done, the sound and fury signified nothing:

In the end, random assignment wasn't used. Rather, Loretta Preska, chief judge of the U.S. district court, decided to give the cases to U.S. District Judge Kevin Castel, she said in an interview. The decision was hers to make, versus random assignment, because the matter involves several cases transferred from different districts, she said.

The April 22 letter to Judge Chin, she added, didn't influence her decision. "I don't recall seeing it; I don't recall hearing of it," she said.

That's probably how most courts deal with complaints by lawyers about judges: they ignore them.

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

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

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

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

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

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

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

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

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

And that's just what happened:

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

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

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

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

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

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

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

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

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

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

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The Wall Street Journal (and their Law Blog) had an amusing piece recently about the jockeying underway for the position of lead counsel in the Toyota Motor Corporation Unintended Acceleration Marketing, Sales Practices, and Products Liability Multidistrict Litigation, which has been consolidated in the Central District of California:

Lawyer Daniel Becnel Jr. of Reserve, La., donated a kidney to his sick brother. Alexandria, La., attorney Richard Arsenault organized a symposium featuring a lawyer played by John Travolta in the movie "A Civil Action." New York lawyer Anita Jaskot's father is a doctor. She is also single and speaks Polish.

These are among the many personal morsels lawyers hope will help them win a lead spot in the litigation against Toyota Motor Corp., which has been consolidated in a Santa Ana, Calif., courtroom. ...

For the Japanese auto maker, which declined to comment for this story, billions of dollars in legal liability could be at stake as it fights suits tied to its recalls of vehicles because of sudden-acceleration issues. The lawyers' quest is a pot of as much as $500 million in fees. Only a few will share it.

For reference, here's David Becnel's, Richard Arsenault's, and Anita Jaskot's applications.

You can't blame them for pulling out all the stops. Judge James V. Selna specifically ordered:

[T]he Court presently intends to appoint plaintiffs’ lead counsel and liaison counsel. Applications for these positions must be filed with the clerk’s office on or before April 30, 2010. The Court will only consider attorneys who have filed an action in this litigation. The main criteria for these appointments are (1) knowledge and experience in prosecuting complex litigation, including class actions; (2) willingness and ability to commit to a time-consuming process; (3) ability to work cooperatively with others; and (4) access to sufficient resources to prosecute the litigation in a timely manner. Where appropriate, applications should also set forth attorney fee proposals, rates, and percentages that applicants expect to seek if the litigation succeeds in creating a common fund.

How intense and expensive can these cases get? 

Consider the class action filed back in 1996 on behalf of 300,000 Native Americans alleging the U.S. Department of the Interior mismanaged trust accounts and land under the Dawes Act of 1887. The suit tentatively settled for $3.4 billion a few months ago, but approval is being held up by the political process.

The case was driven by a team at Kilpatrick Stockton, which sunk more than $22 million in legal fees and expenses into the suit, through fourteen years of litigation, seven trials (totaling almost 28 weeks in trial), and 10 rounds of appeals against the most well-funded defendant in the world: the United States government.

But they weren't lead counsel.

That honor went to Dennis Gingold, a solo practitioner who used to represent big banks.

It wasn't easy:

Mr. GINGOLD: We gave [Blackfeet tribe leader and lead plaintiff Elouise Cobell] a commitment that no matter what it took, we would do what needs to be done to resolve this for the individual Indians, because it's the dark side of American history and we as lawyers have an obligation to correct it if we can.

SHAPIRO: How much of your time has this case taken up as a percentage of your total practice in the last 14 years?

Mr. GINGOLD: A hundred percent.

SHAPIRO: Really, this has been your sole case for the last 14 years?

Mr. GINGOLD: I haven't had a vacation since December of 1998. I've generally worked seven days a week on this case.

Twenty years ago Gingold organized the takeover of Baltimore Bancorp. That massive, hostile deal was like a vacation compared to the Indian Land Trust case, which swallowed up his whole professional and personal life for more than a dozen years.

But he did it, and did it well. You can't say he did the whole case by himself — Kilpatrick's $22 million contribution was essential — but you can say he managed the litigation by himself.

So what does it take to be lead counsel on a multidistrict class action? They need access to money, sure, but that can be effectively guaranteed by appointing multiple plaintiff's firms to the case.

What it really takes is dedication. As much as I'd like to see the Court adopt Philip Thomas' suggestion that the lawyers compete on an obstacle course — a process that would probably yield similar or better results to relying on the whimsical applications — my hope is that the most dedicated lawyer is chosen.

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Did Halliburton improperly cement the drill hole at Deepwater Horizon? Did Transocean fail to activate the blowout preventer — or were the shear rams too weak to crimp pipes designed for deepwater drilling? Why didn't BP have any contingency planning in place for a spill of this magnitude?

Whatever the cause, my hometown of Ocean Springs, Mississippi, already smells like crude oil, and the oil itself is on the way.

That wasn't supposed to happen, not in a supposedly high-tech, sophisticated, safety-conscious industry with redundant environmental protections in place.

So what next?

If you've been affected, you don't need a lawyer to pursue some of your claims. As the White House Blog posted yesterday:

BP is now accepting claims for the Gulf Coast oil spill. Please call BP’s helpline at 1-800-440-0858. A BP fact sheet with additional information is available here. For those who have already pursued the BP claims process and are not satisfied with BP’s resolution, can call the Coast Guard at 1-800-280-7118. More information about what types of damages are eligible for compensation under the Oil Pollution Act as well as guidance on procedures to seek that compensation can be found here. 

The Coast Guard website has a little bit more detail about the types of compensation available here. If you're on the Gulf Coast, you should start keeping a journal of any expenses / damages you have due to the oil spill that fit those criteria.

You don't need a lawyer, but you should have one, in my opinion. The Oil Pollution Act doesn't cover personal injury or non-economic damages. Moreover, BP has every incentive to low-ball their estimates of the claims. BP already has been running around trying to trick people — including people volunteering to help the cleanup effort — into signing away their rights for less than $5,000.

Though you can call the Coast Guard if you don't like BP's estimate, and though the Coast Guard wants to be fair to you, truth is, it's not their job to advocate for you.

That would be your lawyer's job. Your lawyer will raise questions like: how can BP claim they will fairly value your claim when most of the damage has yet to be done?

Which brings us to the lawsuits. Dozens of putative class actions have already been filed. Let's take a look at the claims being advanced.

Gulf Shores West Beach Investments et al. v. BP, Transocean, Halliburton, and Cameron International, in the Southern District of Alabama, alleges negligence, "wantonness," nuisance, and strict liability.

Carrone and Landry v. BP et al., in the Eastern District of Louisiana, alleges negligence and violation of the Oil Pollution Act. 

Parker et al. v. Transocean et al., in the Southern District of Mississippi, alleges "negligence, gross negligence, willfully, wanton and careless disregard for the plaintiffs" (as a single claim) and strict liability.

You might be wondering: why are all the claims different? Don't the lawyers know what they're doing?

In short: the lawyers don't care if they get the claims right at this point. They want to be appointed the lawyers for the whole class of plaintiffs, and to try to get that they're in the oft-derided "race to the courthouse." 

Alabama, Louisiana and Mississippi are all in the Fifth Circuit, where, as a general matter:

The first-to-file rule is based on "principles of comity and sound judicial administration." Save Power Ltd. v. Syntek Fin. Corp., 121 F.3d 947, 950 (5th Cir. 1997). It "requires federal district courts — courts of coordinate jurisdiction and equal rank — to exercise care to avoid interference with each other's affairs." West Gulf Maritime Ass'n v. ILA Deep Sea Local 24, 751 F.2d 721, 728 (5th Cir. 1985).

"Under the first-to-file rule, when related cases are pending before two federal courts, the court in which the case was last filed may refuse to hear it if the issues raised by the cases substantially overlap." Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 603 (5th Cir. 1999) (citing Save Power, 121 F.3d at 950; West Gulf Maritime, 751 F.2d at 728). The rule vests in the court in which the first of the two related actions was filed the responsibility of "determin[ing] whether subsequently filed cases involving substantially similar issues should proceed." Sutter Corp. v. P & P Indus., Inc., 125 F.3d 914, 920 (5th Cir. 1997). Therefore, the second-filed court should usually stay, dismiss, or transfer the action over which it is presiding in deference to the first-filed court. See West Gulf Maritime, 751 F.2d at 729 & n.1, 730. This enables the court in which the first related action was filed to "decide whether the second suit filed must be dismissed, stayed or transferred and consolidated." Sutter Corp., 125 F.3d at 920.

Twin City Insurance Company v. Key Energy Services, C.A. H-09-0352 (United States District Court, S.D. Texas, Houston Division)(2009).

Some lawyers read language like the above and, as a matter of habit, throw together a slapdash complaint the moment they see bad news in the papers.

This strategy used to work, and there are indeed old cases in which the class counsel was chosen almost entirely on the basis of the first-to-file.

But those days are behind us, and the first-to-file rule has little influence in the selection of class counsel these days. As the Third Circuit's Task Force Report on the Selection of Class Counsel quoted from a Delaware securities fraud case,

Although it might be thought, based on myths, fables, or mere urban legends, that the first to file a lawsuit in this Court wins some advantage in the race to represent the shareholder class, that assumption, in my opinion, has neither empirical nor logical support.

Too often judges of this Court face complaints filed hastily, minutes or hours after a transaction is announced, based on snippets from the print or electronic media. Such pleadings are remarkable, but only because of the speed with which they are filed in reaction to an announced transaction. It is not the race to the courthouse door, however, that impresses the members of this Court when it comes to deciding who should control and coordinate litigation on behalf of the shareholder class.

Indeed, with the Class Action Fairness Act — which puts class actions worth more than $5 million (with a few additional requirements) in federal court — the governing rule for most major class actions these days is Federal Rule of Civil Procedure 23(g), which says:

(g) Class Counsel.

(1) Appointing Class Counsel.

Unless a statute provides otherwise, a court that certifies a class must appoint class counsel. In appointing class counsel, the court:

(A) must consider:

(i) the work counsel has done in identifying or investigating potential claims in the action;

(ii) counsel's experience in handling class actions, other complex litigation, and the types of claims asserted in the action;

(iii) counsel's knowledge of the applicable law; and

(iv) the resources that counsel will commit to representing the class;

(B) may consider any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class;

Nothing about first-to-file.

Considering that the courts are supposed to evaluate "counsel's knowledge of the applicable law," I have to wonder how lawyers think the courts in these oil pollution cases will react when they see lawyers file slapdash complaints that, like two examples of the above, don't even cite the Oil Pollution Act? (Mistakes abound on that Act, too, like among the lawyers quoted this Business Week article, who ignored the limitations of the Oil Pollution Act, such as the absence of personal injury damages and the caps on damages unless the plaintiffs prove misconduct.)

* * *

One of the best parts of being a plaintiff's lawyer is that you get to be selective with your cases. You can take cases that inspire you. We've been in touch with environmental lawyers down on the Gulf Coast about the prosecution of these cases — it takes a lot cooperation, resources and determination to take on companies with combined annual revenues around a quarter-trillion dollars — and are setting up triage for cases here.

If you're looking for a couple quick bucks out of BP, call 1-800-440-0858.

If you're looking to fight for full, adequate and just compensation, drop me a line.

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

As the paper's abstract says:

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

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

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

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

Here's a selection from the paper:

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

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

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

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

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

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

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

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

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

As Judge Frank Easterbrook commented,

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

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

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

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

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

Judge Richard Posner's remarks exemplify the problem:

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

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

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

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

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

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

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

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

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

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Marcia Lowry and Ira Lustbader are extraordinary lawyers. They are the public interest lawyers at Children's Rights who, with the assistance of Don Keenan (remember him?) and attorneys at Bondurant, Mixson & Elmore, sued the State of Georgia:

In June 2002, Children’s Rights filed a class action against state and county officials responsible for the foster care system in metropolitan Atlanta, on behalf of the approximately 3,000 children in foster care in Atlanta. The federal complaint cites numerous systemic problems with dangerous consequences for children, among them:

• Children languish for months in dangerous emergency shelters without necessary treatment and services, exposed to violence, sexual assault, and other illegal activity;
• Children in foster care experience high levels of abuse and neglect;
• Children are routinely shuffled from foster home to foster home, spending many years in state custody; and
• Children in foster care receive inadequate health care and educational services.
• Children in foster care are denied adequate legal representation in the Juvenile Courts due to high caseloads of attorneys assigned to represent children.

Case overview here. Complaint here.

Together, the attorneys and their staff put over 30,000 hours into the case, including reviewing a half-million documents and conducting 60 depositions. In addition to the time spent on the case, they incurred $1.65 million in out-of-pocket costs.

With that devotion and investment, they achieved an extraordinary result:

A settlement agreement was reached with Georgia officials in July 2005, requiring infrastructure changes, service guarantees, and improved oversight over child safety; and requiring the state to meet 31 specific benchmarks in reforming the child welfare system. The federal court approved the settlement in October 2005 and appointed two independent monitors to report on the state’s performance in implementing the required reforms.

Two additional settlements were subsequently reached with Fulton and DeKalb counties (metro Atlanta) which guarantee every child the right to effective legal representation throughout their involvement with the child welfare system. In May 2006, the federal court approved the right-to-counsel settlements and appointed two separate, independent monitors for Fulton and DeKalb counties, respectively. The reports issued by those independent monitors reflect how legal representation for children has improved as a result of the right-to-counsel settlements. In Fulton County, caseloads have been reduced and an independent Child Advocate Attorney’s Office has been created, but the County still has far to go to implement the required reforms. However, the legal representation of foster children in DeKalb County has improved so dramatically that in October 2008, the federal judge ended court oversight of the County’s compliance, following the monitor’s finding that DeKalb was meeting or exceeding all of the requirements of the settlement.

It's no stretch to say those lawyers single-handedly reformed the foster care system in metropolitan Atlanta.

And they did that by spending their own money and putting in their own time, with no guarantee they would recoup any of their out-of-pocket costs, much less get paid a fee for their services. Had they been paid by the hour as they went along, their services would have been worth more than $7 million.

But they weren't paid by the hour to pursue the case. They were paid nothing at all; instead, they paid money — $1.65 million — for the privilege of cleaning up abuse and neglect in the foster care system.

As Blawgletter explains, there's a big difference between getting paid to defend a case and paying to pursue one. The former is safe and simple and can be done in perpetuity. The latter is risky and complicated and can only be done for as long as funds are available. 

Class actions are, by their nature, extraordinary. Few firms pursue them; they're too expensive, too time-consuming, and too risky. Just ask Jan Schlichtmann. We do them and, like most plaintiffs' firms, are very selective about which ones we take.

The District Court that oversaw the litigation against the State of Georgia recognized that risk, recognized the protracted and contentious nature of the litigation, and recognized that the plaintiffs' attorneys had displayed "a higher degree of skill, commitment, dedication, and professionalism . . . than the Court has seen displayed by the attorneys in any other case during its 27 years on the bench." The District Court also recognized that, "[a]fter 58 years as a practicing attorney and federal judge, the Court is unaware of any other case in which a plaintiff class has achieved such a favorable result on such a comprehensive scale.”

Accordingly, the District Court, pursuant to 42 U.S.C. § 1988, awarded the plaintiffs' attorneys their costs, their $7 million or so in hourly fees, and then gave them an "enhancement" of $4.5 million.

Not so fast, the Supreme Court said yesterday in Perdue v. Kenny A.

Despite the risk and expense, the Court said, the plaintiffs' attorneys should only receive a fee "that roughly approximates the fee that the prevailing attorney would have received if he or she had been representing a paying client who was billed by the hour in a comparable case." Slip op., 7.

Such is commonly known as the "lodestar" analysis. The "lodestar" analysis instructs District Courts to ignore the fiscal reality of contingent fee litigation — like, as here, civil rights class actions — and pretend, after the fact, that the plaintiffs' lawyers had been paid the whole time, just like the defense lawyers, and that the plaintiffs' lawyers didn't advance a dime on the case.

It's a legal fiction, of course, adopted for a specific purpose: to penalize lawyers who pursue class action cases, despite Congress' laws and the discretion District Courts are afforded in determining fee awards.

Sure, the Supreme Court made a few remarks about how departures from the "lodestar" could be allowed in "extraordinary" situations, and it allowed the plaintiffs' lawyers to take another shot at "enhancement,"  but it also didn't provide much explanation for what would make a particular case "extraordinary," other than to say that it's "rare."

Which begs the question: if these lawyers aren't extraordinary, then who is?

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"Once the lawyers get involved..."

There are a hundred ways to end that sentence. Once the lawyers get involved, everything falls apart. It takes ten times as long to finish a deal. A lawsuit is inevitable. The hysterics start.

Few of the potential endings are favorable towards lawyers. Perhaps the most common sentiment is: once the lawyers get involved, the truth gets buried.

To some extent, it's true. The first thing a criminal defense lawyer says to a new client? Remain silent. The first thing a litigator says to a new client? Let's get your story straight. The first thing a transactional lawyer says to a new client? Let me do the talking.

Once the lawyers get involved, everything goes through a filter. The truth comes out, but in a sanitized and selective manner. Sometimes only part of the truth comes out. Sometimes a little more than the truth comes out.

But it's not a problem limited to lawyers. It's a problem of middlemen.

Where there's a middleman, there's deniability. There's confusion. There's misunderstandings. There's excuses. There's a way for one side to throw its hands up and say, hey, it wasn't me. There was a middleman. Something went wrong in the middle.

And that seems to be the case with two hot stories lately, the SEC's enforcement action against Goldman Sachs and the "lost" prototype iPhone that Gizmodo disassembled on their webpage.

Take your pick for sources on both stories. Felix Salmon has a lot to say on Goldman Sachs. Daring Fireball has a lot to say on the iPhone saga.

Don't let the volume of paper produced about these stories fool you: both stories are very simple.

Goldman Sachs was paid $15 million to push a crummy deal, which they did by concealing how the whole deal had been structured by someone betting against it, someone who walked away with $1 billion when all was said and done. Gawker Media, publisher of Gizmodo, paid $10,000 to the "finder" of a "lost" prototype iPhone.

Don't blame them, of course. Something went wrong in the middle.

Does the law provide for relief when that happens?

Sometimes so, sometimes not. There's no unambiguous rule that says Gawker is, or is not, liable for theft or that Goldman Sachs is, or is not, liable for fraud when they filter the deception through a middleman.

Answering that question is why we have lawyers and courts.

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

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

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

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

Here's why. As I wrote before:

[W]e already have an industry in which billions (potentially trillions) of dollars of investments are pooled to fund litigation directed towards a particular result. We call it "insurance."

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

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

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

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

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

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

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

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

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

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The newspapers Friday were filled with disturbing revelations:

The Lower Merion School District today acknowledged that investigators reviewing its controversial laptop tracking program have recovered "a substantial number of webcam photos" and that they expect to soon start notifying parents whose children were photographed.

Responding to a motion filed Thursday as part of a lawsuit brought by the family of a Harriton High School sophomore, School Board President David Ebby said the district's lawyers have proposed enlisting Chief U.S. Magistrate Judge Thomas Rueter to supervise a system by which parents are to be notified and allowed to view the photos.

"We hope to start that process shortly," Ebby said in a statement addressed to parents and guardians and posted on the district's website. "During that process the privacy of all students will be strongly protected."

(See the longer Inquirer story here.)

It's a cold comfort to hear that the institution which systematically took surreptitious pictures of children in their home will "strongly protect" the children's privacy the second time around. 

So where's this case going? As the Plaintiffs' motion for sanctions against Carol Cafiero, the technology coordinator at Lower Merion, pointed out, Cafiero asserted her Fifth Amendment right against self-incrimination in response to every single question asked at her April 9, 2010 deposition.

Smart move in the big picture, since she's also being investigated criminally. Criminal defendants do themselves no favors by doing all the talking upfront; best to wait to see what the prosecutors uncover before you start talking, if you talk at all.

For the civil suit, it's a disaster. She can't claim she was only doing her job in good faith when she's not claiming anything at all.

But there's a bigger problem lurking in the plaintiff's motion:

For instance, in one email, when one IT person commented οn how the νiewing of the webcam pictures and screen shots from a student's computer was like "a little LMSD soap opera", Cafiero responded "Ι know, Ι love it!"

Back when the lawsuit was first filed, some argued:

If Harriton High School actually gave its students laptop computers with webcams for the surreptitious purpose of spying on them, maybe they should be monetarily punished. If it was simply the action of an overzealous administrator of the program, then appropriate disciplinary action should be taken and procedures put in place to ensure it never happens again - and maybe leave it at that.

With the last revelation, we know it wasn't just "an overzealous administrator" — at the very least, the IT personnel, too, knew about and enabled the secret "soap opera" Cafiero was watching for her own amusement. I doubt that IT person was alone in knowing of the program. Cafiero certainly wasn't alone in watching the "soap opera;" the whole scheme was inadvertently brought down by an Assistant Principal.

Indeed, the most perplexing part of this story is how it came to light. As the complaint alleges, the school district unabashedly "informed minor Plaintiff that the School District was of the belief that minor Plaintiff was engaged in improper behavior in his home, and cited as evidence a photograph from the webcam embedded in minor Plaintiffs personal laptop issued by the School District."

They didn't even consider that, just maybe, the parents wouldn't be grateful to learn a school administrator was peeping on their child.

That's a problem for the school district. They didn't have an employee go rogue; they had multiple employees intentionally establish a hopelessly illegal policy of spying upon children — including taking photographs and monitoring communications — in their own homes.

The plaintiffs raised seven claims in their Complaint, seeking class action status:

1. Interception of electronic communications in violation of the Electronic Communications Privacy Act;
2. Theft of intellectual property in violation of the Computer Fraud and Abuse Act;
3. Unauthorized access of an electronic communications service in violation of the Stored Communications Act;
4. Deprivation of constitutional rights to privacy (under 42 U.S.C. 1983);
5. Invasion of privacy in violation of the Fourth Amendment;
6. Communication interception in violation of Pennsylvania's Wiretapping and Electronic Surveillance Act;
7. Invasion of Privacy (under the Pennsylvania common law).

I harbor doubts about the second, third and fourth claims (the fifth raises vicarious liability issues too complicated to go into here), but they've got winners in at least the first, sixth and seventh claims. If the Plaintiffs want to fight this case through litigation and trial up to a jury verdict, they've probably got the law and the facts to do it.

The latest Order of the Court, entered April 14 by agreement, indefinitely extends the time in which the Defendants have to answer the Complaint, based in part upon a prediction that the School District's investigation will be concluded by May 4, 2010. A week thereafter, the original Plaintiffs will have to respond to the motions other parents filed to intervene in the case. (That's not really a fight over which parents and children have viable claims or if one of their claims is worse than another's; it's a fight over whose lawyers will control the litigation.)

Based on that Order, I don't understand how the School District came up with this press release:

On April 14, 2010 -- two days ago -- the Court issued an Order mapping out the events that we hope will lead to a resolution of the litigation. All parties agreed to the framework set forth in the Court's Order. Indeed, a meeting among the Robbins' counsel, the proposed interveners' counsel and our counsel is scheduled for this afternoon.

The Court issued nothing of the sort; it issued an Order ensuring the photographs were kept as private as they can be at this point, and granting everyone a little bit more time before they have to start filing briefs against one another. There's nothing at all about "a resolution of the litigation."

Similarly:

We do not feel it is appropriate for anyone other than the investigators to dictate the timing of the investigation and the release of complete findings. As we have made clear since day one, we are committed to providing all of the facts -- good and bad -- at the conclusion of the investigation.

The School District gave up the right to complain about premature forensic examinations when it spied on the students in the first place. The parents and children understandably need to know if they, too, were involved, and understandably don't trust the School District to investigate the matter itself. Correspondingly, the Court already allowed the Plaintiffs' discovery to begin, hence the Cafiero deposition, three other depositions, and "tens of thousands of pages of documents and e-mails."

So what's next? It depends on the investigation. If the School District comes clean, then a permanent order can be entered against them prohibiting them from using the software, and the students actually spied upon — hopefully not many — can press forward on their claims for compensation, if they want. Some probably won't; litigation takes a toll on everyone, particularly people trying to move on with their lives, like teenagers going off to college.

The signs aren't looking good at this point, though. As the press release continues:

[T]he plaintiffs' Motion suggests that the LANrev tracking feature may have been used for the purposes of "spying" on students. While we deeply regret the mistakes and misguided actions that have led us to this situation, at this late stage of the investigation we are not aware of any evidence that District employees used any LANrev webcam photographs or screenshots for such inappropriate purposes.

They just don't get it. Watching someone at home, without their knowledge, for your private "soap opera" is the essence of "spying." Hearing that the spying was "loved" by the technology coordinator, enabled by another IT staff member, and revealed by (and thus known about) by an administrator implies that many more knew about and condoned the spying. Trouble loves company.

Until the School District accepts and confronts that, a "resolution of the litigation" will be out of sight for years to come as the Plaintiffs and other parents conduct their own investigations through the civil justice system.

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Scott Greenfield isn't happy with people wasting his time:

Marketers teach lawyers who turn to them because they need business ways to "sell" the client.  We offer free consultations, which clients interpret as a free hour of a lawyer's time to provide free legal advice which they can then take away and use.  I get many inquiries from people asking if I give free consultations.  There's only one reason for them to ask.  I don't.  But they expect lawyers to do so, and will be happy to enjoy a free consultation when they need answers from a lawyer.  This is because we teach them to expect free consultations.

Clients call or write for a free answer to a legal question.  They've been taught to expect that too.  Think Avvo Answers.

When a question or consultation won't suffice, they want to negotiate, or pay the fee over time, as they would on replacement windows.  Many lawyers will negotiate their fees, lest a potential client walk away. Others will take payments over time, praying that the second, then third payment will come. 

The questions that Brian writes about are rarely a problem for me anymore.  I vet potential clients before making an appointment with them.  It's quite common for callers to tell me that they have a problem and would like an appointment.  I ask them what the problem is.  Most are refused an appointment.  There's no reason to sit down with someone when there is no possibility of my taking their case, whether because the nature of the case isn't suited to my practice or they aren't able to pay the legal fee. 

Callers are shocked that they can't have an appointment; they have been taught to believe they are entitled to one.

As Abraham Lincoln said, "a lawyer's time and advice is his stock in trade."  (I've always seen that attributed to Lincoln but have never seen it verified.  As Lincoln also said, "the problem with quotes on the Internet is that it is very hard to authenticate them.")

Lincoln was, like Greenfield, a defense lawyer, though Lincoln was a civil defense lawyer.  In both situations, it's a misnomer to call the initial client contact a "consultation." There is little upon which the potential client needs "consultation:" the potential client has been sued or indicted, and has no choice but to enter the legal system and defend themselves. If they're going to defend themselves at all, they're going to need a lawyer for a lot more than a mere "consultation."

Lincoln and Greenfield thus have every reason to demand compensation for all of the time and advice they contribute to a potential client's cause: that's their business.

The same isn't true for contingent fee plaintiff's litigation, like personal injury, medical malpractice, class actions, antitrust, false claims act, copyright / patent infringement, business torts, and the dozens of other claims available to vindicate the legal rights of the injured. In those cases, there is an issue worthy of "consultation:" whether or not a lawsuit should be initiated.

In contingent fee litigation, the attorney has chosen to offer as their stock in trade something other than their time and advice. Instead, the lawyer offers their firm's resources. The contingent fee lawyer agrees to provide all attorney attention and firm funds available as the lawyer believes is necessary and appropriate to achieve a financial recovery that is satisfactory to the client. 

My time is, for better or worse, irrelevant. This bargain is immensely profitable when I achieve a large recovery with a comparatively small investment of time and money; this bargain is also profoundly unprofitable when I'm forced to litigate a case for years without end, paying costs the entire time, without any recovery at all. At the initial "consultation," I try to figure out which the case is likely going to be.

That's the nature of the business.  In such a business, it's foolish for me to charge for consultations, since the money I would recover from that initial fee would be trivial in comparison to the overall profit or loss. For us, a consultation fee is little more than a barrier between me and potential clients — many of whom have minimal resources due to the injury in question — who know they have been wronged, but do not know if they have any legal rights or remedies, and so are indeed in need of a "consultation."

Thus, I suppose I am guilty as charged by Greenfield: though I have never told anyone they can get criminal defense advice for free, I have contributed to the impression that a lawyer's time is not a central component of their representation. To me, it isn't.

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Trial lawyers — both defense-side and plaintiff's-side — are always looking for an edge.

Every aspect of the trial has to be planned in advance, with multiple levels of contingency planning for when testimony, rulings or evidence goes awry. That's a given, but it's not enough.

There's a whole cottage industry of jury consultants built upon trial lawyers' insecurities, some reputable, some not so much, all of it quite pricey.

Most of it strikes me as pointless. Sure, a mock jury or consultant review can expose weaknesses in your case and reveal the importance of issues that you hardly considered — but so can a discussion with one of your colleagues. So can mere contemplation; if a case is prepared long enough in advance, it will take on new dimensions over time.

The trial consulting out there isn't all bad. David Ball's Damages holds a singular place in the canon of trial advocacy.

His latest work, written with Don Keenan — Reptile: The 2009 Manual of the Plaintiff's Revolution — goes astray.

It's not a bad book. Far from it. It's a great book, with a lot of useful ideas for trial lawyers. And it certainly didn't say anything that would warrant introducing it into one of Keenan's trials.

The problem is with the "hook" the authors use:

Learn about the reptile brain, and how and why jurors make the decisions they do. This groundbreaking new research from Ball, Keenan, Jim Fitzgerald, and Gary C. Johnson teaches you how to make tort reform have only a negligible impact on juries. Using the jurors’ most primitive instincts of safety and self-preservation, you can show jurors that your case isn’t only about getting justice for your plaintiff, but about the livelihood of each individual juror and their communities.

Count me unimpressed. I'm happy to read about what those folks have to say about persuading juries.

But the "groundbreaking new research?" The "reptile brain?"

It reminds me of another field looking for The Next Big Thing:

A recent Times article described the use of neurological research and cognitive science in the field of literary theory.

“At a time when university literature departments are confronting painful budget cuts, a moribund job market and pointed scrutiny about the purpose and value of an education in the humanities, the cross-pollination of English and psychology is providing a revitalizing lift,” the article said.

Does this research — “neuro lit” is one of its nicknames — energize literature departments, and, more broadly, generate excitement for the humanities? Is it yet another passing fad in liberal arts education? If the answer is both, why does theory matter, even if we sometimes don’t understand what the scholars are saying?

The distinguished panel brought together by the Times' is unimpressed. "The search for 'the next big thing' has seduced, and then bedeviled, literary studies for some time," says one. "New approaches to literature are always welcome, but, in general, they only provide a few jobs for the leaders of the movement and the first generation of acolytes," says another.

So it goes with trial law and neuroscience.

It's a gimmick.

Last month the ABA Section on Litigation's monthly magazine (titled, surprisingly, Litigation) published Classical Rhetoric and the Modern Trial Lawyer (subscription required to read it). The article focused on Artistole's Rhetoric, published nearly two and a half millenia ago.

"Groundbreaking new research" it is not. "Withstood the test of time" is more like it. Here's the full text of Rhetoric online. A sample:

There are, then, these three means of effecting persuasion. The man who is to be in command of them must, it is clear, be able (1) to reason logically, (2) to understand human character and goodness in their various forms, and (3) to understand the emotions-that is, to name them and describe them, to know their causes and the way in which they are excited.

Another:

No systematic treatise upon the rules of delivery has yet been composed; indeed, even the study of language made no progress till late in the day. Besides, delivery is -- very properly -- not regarded as an elevated subject of inquiry. Still, the whole business of rhetoric being concerned with appearances, we must pay attention to the subject of delivery, unworthy though it is, because we cannot do without it. The right thing in speaking really is that we should be satisfied not to annoy our hearers, without trying to delight them: we ought in fairness to fight our case with no help beyond the bare facts: nothing, therefore, should matter except the proof of those facts. Still, as has been already said, other things affect the result considerably, owing to the defects of our hearers. The arts of language cannot help having a small but real importance, whatever it is we have to expound to others: the way in which a thing is said does affect its intelligibility. Not, however, so much importance as people think. All such arts are fanciful and meant to charm the hearer. Nobody uses fine language when teaching geometry.

Getting an edge is great, but don't forget the basics.

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

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

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

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

Hence checklists.

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

1. Did you check the rules?

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

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

Count the prayer beads.

Check the checklist.

Every time.

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

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

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

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

A few hours later, another call:

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

So I did.

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

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

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

Every time.

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The New Colossus:

Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
"Keep, ancient lands, your storied pomp!" cries she
With silent lips. "Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed to me,
I lift my lamp beside the golden door!"

But what of the tired and poor of our own shores?

WASHINGTON — With a client list that reads like a roster of Fortune 500 firms, a little-known company with an odd name, the Talx Corporation, has come to dominate a thriving industry: helping employers process — and fight — unemployment claims.

Talx, which emerged from obscurity over the last eight years, says it handles more than 30 percent of the nation’s requests for jobless benefits. Pledging to save employers money in part by contesting claims, Talx helps them decide which applications to resist and how to mount effective appeals.

The work has made Talx a boom business in a bust economy, but critics say the company has undermined a crucial safety net. Officials in a number of states have called Talx a chronic source of error and delay. Advocates for the unemployed say the company seeks to keep jobless workers from collecting benefits.

“Talx often files appeals regardless of merits,” said Jonathan P. Baird, a lawyer at New Hampshire Legal Assistance. “It’s sort of a war of attrition. If you appeal a certain percentage of cases, there are going to be those workers who give up.”

Like Gerald Grenier:

Advocates for the unemployed cite cases like that of Gerald Grenier, 47, who spent four years as a night janitor at a New Hampshire Wal-Mart and was fired for pocketing several dollars in coins from a vending machine. Mr. Grenier, who is mentally disabled, told Wal-Mart he forgot to turn in the change. Talx, representing Wal-Mart, accused him of misconduct and fought his unemployment claim.

After Mr. Grenier waited three months for a hearing, Wal-Mart did not appear. A Talx agent joined by phone, then seemingly hung up as Mr. Grenier testified. The hearing officer redialed and left an unanswered message on the agent’s voice mail. The officer called Mr. Grenier “completely credible” and granted him benefits.

Talx appealed, claiming that the officer had denied the agent’s request to let Wal-Mart testify by phone. (A recording of the hearing contains no such request.) Mr. Grenier won the appeal, but by then he had lost his apartment and moved in with his sister.

Mentally-disabled, but still working the night shift to pay his way, just so some morally-disabled companies can fire him and deny him his due.

I can't take these cases. No private lawyer can. The potential client has no way to even pay the costs, much less an attorney's fee.

In a perfect world, the government would intervene to stop major corporations from trampling on the rights of the powerless. 

Sometimes they do, but it depends on the people who represent the government:

[Ohio Attorney General Richard] Cordray is instead focused on using his authority to protect consumers from predatory lending and fraud. He has organized numerous legal challenges of banks and lenders, recently held a summit dedicated to combating consumer fraud that included 300 Ohio consumer advocates, and has been working with other state AGs and the Obama administration to "report trends in fraud and illegal conduct to Treasury to help develop a coordinated and effective national response" and argue in favor of effective financial reform.

A dozen other state AGs are too busy filing lawsuits against health care reform — suits that virtually no one believes will succeed — to care about a couple hundred thousand unemployed citizens being held down in poverty by a former employer too cheap to pay its dues and a frivolous-objection-filing machine.

Even AGs who do care don't have the resources to prosecute every company that systematically cheats its employees, former employees, and consumers. There's simply too much cheating out there.

Same goes for public interest / legal aid firms. They do great work, but even the ones in major cities labor under "shoestring budgets" and the beneficence of big firms with whom they partner, big firms which represent those same companies. 

Who, then, could take up the banner?

Not law school clinics, not anymore:

ANNAPOLIS, Md. — Law school students nationwide are facing growing attacks in the courts and legislatures as legal clinics at the schools increasingly take on powerful interests that few other nonprofit groups have the resources to challenge.

[...]

Law clinics at other universities — from New Jersey to Michigan to Louisiana — are facing similar challenges. And legal experts say the attacks jeopardize the work of the clinics, which not only train students with hands-on courtroom experience at more than 200 law schools but also have taken on more cases against companies and government agencies in recent years.

“We’re seeing a very strong pushback from deep-pocket interests, and that pushback is creating a chilling effect on many clinics,” said Robert R. Kuehn, a law professor at Washington University in St. Louis, citing a recent survey he conducted that found that more than a third of faculty members at legal clinics expressed fears about university or state reaction to their casework and that a sixth said they had turned down unpopular clients because of these concerns.

A bill is pending in Louisiana that would "forbid law students at clinics that receive any public money from suing government agencies, companies or individuals for damages unless exempted by the Legislature." The bill is "a response to a suit brought by the Tulane Law School clinic on behalf of an environmental group against federal and state environmental regulators, seeking greater enforcement of air quality standards in the Baton Rouge area."

That's right: we passed these laws, but we don't want anyone out there actually enforcing them.

Just like the unemployment compensation: it's on the books, but heaven forbid you get any of it.

The government can fix these problems in a blink. Leave the clinics alone. Provide more funding to public interest law firms. Make unemployment compensation objections subject to qui tam laws with treble damages for violations, a per-violation fine, and an award of attorney's fees.

If we're not going to have enough attorneys general to enforce the laws on the books, then we need to make a market for private ones.

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

On the whole, the issue was quite simple:

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

The answer was no: 

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

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

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

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

Yikes.

Let's break that down.

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

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

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

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

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

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

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

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

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

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

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

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

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

Why not? We may never know.

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

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

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

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

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

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

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

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

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

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

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

Snyder sued.

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

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

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

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

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

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

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

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

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

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

Civil it may be, but justice it is not.

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Trial is theater. (Trial is not theatre, at least not in America.)

A trial lawyer is thus the producer, director, screenwriter and narrator of her case. She is not the protagonist: that is the client.

She is responsible for the budgeting, scheduling, and presentation of her case, which must:

• tell the client's story;
• tell the client's story coherently;
• tell the client's story concisely;
• tell the client's story persuasively; and,
• introduce all evidence necessary to the claim or defense in compliance with the rules of evidence;

One witness at a time.

It's theater, with limitations. Imagine Hamlet as a series of question-and-answer sessions with the characters.

Television dramas, too, have their limitations. How do you give the audience all the information they need to know without making the show boring and unwatchable?

Enter David Mamet, producer of, among other shows, The Unit. His memo to the show's screenwriters recently surfaced:

TO THE WRITERS OF THE UNIT

GREETINGS.

AS WE LEARN HOW TO WRITE THIS SHOW, A RECURRING PROBLEM BECOMES CLEAR.

THE PROBLEM IS THIS: TO DIFFERENTIATE BETWEEN DRAMA AND NON-DRAMA. LET ME BREAK-IT-DOWN-NOW.

...

THE AUDIENCE WILL NOT TUNE IN TO WATCH INFORMATION. YOU WOULDN’T, I WOULDN’T. NO ONE WOULD OR WILL. THE AUDIENCE WILL ONLY TUNE IN AND STAY TUNED TO WATCH DRAMA.

QUESTION:WHAT IS DRAMA? DRAMA, AGAIN, IS THE QUEST OF THE HERO TO OVERCOME THOSE THINGS WHICH PREVENT HIM FROM ACHIEVING A SPECIFIC, ACUTE GOAL.

SO: WE, THE WRITERS, MUST ASK OURSELVES OF EVERY SCENE THESE THREE QUESTIONS.

1) WHO WANTS WHAT?
2) WHAT HAPPENS IF [THEY] DON’T GET IT?
3) WHY NOW?

THE ANSWERS TO THESE QUESTIONS ARE LITMUS PAPER. APPLY THEM, AND THEIR ANSWER WILL TELL YOU IF THE SCENE IS DRAMATIC OR NOT.

IF THE SCENE IS NOT DRAMATICALLY WRITTEN, IT WILL NOT BE DRAMATICALLY ACTED.

...

EVERY SCENE MUST BE DRAMATIC. THAT MEANS: THE MAIN CHARACTER MUST HAVE A SIMPLE, STRAIGHTFORWARD, PRESSING NEED WHICH IMPELS HIM OR HER TO SHOW UP IN THE SCENE.

THIS NEED IS WHY THEY CAME. IT IS WHAT THE SCENE IS ABOUT. THEIR ATTEMPT TO GET THIS NEED MET WILL LEAD, AT THE END OF THE SCENE,TO FAILURE - THIS IS HOW THE SCENE IS OVER. IT, THIS FAILURE, WILL, THEN, OF NECESSITY, PROPEL US INTO THE NEXT SCENE.

ALL THESE ATTEMPTS, TAKEN TOGETHER, WILL, OVER THE COURSE OF THE EPISODE, CONSTITUTE THE PLOT.

ANY SCENE, THUS, WHICH DOES NOT BOTH ADVANCE THE PLOT, AND STANDALONE (THAT IS, DRAMATICALLY, BY ITSELF, ON ITS OWN MERITS) IS EITHER SUPERFLUOUS, OR INCORRECTLY WRITTEN.

YES BUT YES BUT YES BUT, YOU SAY: WHAT ABOUT THE NECESSITY OF WRITING IN ALL THAT “INFORMATION?”

AND I RESPOND “FIGURE IT OUT”...

A good read for trial lawyers — the jury must see all of the evidence necessary to the case, but if the testimony is not propelling the jury forward with a simple, straightforward purpose, then it is either superfluous or incorrectly prepared.

The trial lawyer's job is to "figure out" how to make all this happen within the constraints of the trial.

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Kevin LaCroix at The D&O Diary reports,

On March 24, 2010, Cornerstone Research released its annual study of securities class action lawsuit settlements. The most recent study, which is entitled "Securities Class Action Settlements: 2009 Review and Analysis" and is written by Ellen M. Ryan and Laura E. Simmons, can be found here. Cornerstone’s March 24, 2010 press release concerning the study can be found here.

The study reflects a number of interesting observations about median and average securities class action lawsuit settlements that were approved during 2009. The study also includes a useful analysis of the factors that affect settlement size, and concludes with some commentary about likely future settlement trends.

The WSJ Law Blog has more links here.

Though the overall settlement numbers get the headlines — Bloomberg titles their report, "Securities Class-Action Settlements Rose 39% to $3.8 Billion" — those numbers are always skewed by the two or three biggest cases of the year, which generally comprise one-third to one-half of the total, and so don't tell us much about the industry as a whole.

More interesting to me are the factors correlated with a successful settlement, including:

Institutional Investors Plaintiffs: Cases involving institutional investors as lead plaintiffs are associated with significantly higher settlements. The higher settlements are associated with cases involving public pension plans as lead plaintiffs as opposed to union funds or other institutional investors. These larger settlements may be due to the fact that the sophisticated investors get involved in the stronger cases and the larger cases. However, even when controlling for case size and other factors the presence of a public pension plan as lead plaintiff is still associated with a statistically significant increase in settlement size.

That's important, given the never-ending chorus complaining that "pay-for-play" drives public pension plan securities fraud class actions. The Cornerstone Research study confirms that public pension plans don't file frivolous lawsuits because some trial lawyer contributed to a politician's campaign; the public pension plans file and join the strongest cases. 

Coincidentally, a recent analysis of public pension plans' securities litigation from 2003 through 2006 — when most of the suits settled in 2009 were originally filed — concluded:

“[P]ay-to-play” is, at most, a marginal factor in the funds’ participation in securities class actions.

[...]

(1) politicians and political control of pension fund boards negatively correlate with lead plaintiff appointments;

(2) beneficiary board members—and outright beneficiary control of the board—positively correlate with such appointments; and

(3) the degree of a pension fund’s underfunding positively correlates with lead plaintiff appointments, particularly when the fund is controlled by beneficiaries.

This evidence suggests that beneficiary board members, not politicians, drive these cases for reasons having to do with the financial soundness of the fund.

Fact is, it doesn't matter how much "pay-for-play" is going on among the public pension plans: to get a securities fraud settlement out of a major corporation, you still need a viable lawsuit. No amount of campaign contributions or fancy dinners can buy a trial lawyer that.

The Cornerstone Research study confirms, once again, that the primary drivers of securities fraud class actions are the merits of the cases, which is why SEC Enforcement — as good a proxy as any for the merit of the case — was also positively correlated with higher settlements.

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

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

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

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

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

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

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

The Federal Circuit, however, is even smarter still:

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

[...]

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

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

Specific to the patent at issue,

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

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

Thus, the patent was invalid.

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

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

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

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

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

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

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

Hartnett's idea was eminently reasonable:

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

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

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

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

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

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

How could anyone think that was unfair?

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

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

...

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

Oh, snap.

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

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

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

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

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

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

fact: an actual occurrence

conclusion: a reasoned judgment

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

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

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

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

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

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

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

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

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

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

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

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

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

The relevant briefs and opinions are available at SCOTUSBlog.

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

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

The Supreme Court will tell us which Court was right.

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

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

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

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

Wyeth Brief, pp. 17-18.

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

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

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

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

One.

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

A "deluge" of one, I suppose.

And what will likely happen in that single case?

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

Consider this passage from the Cedillo opinion:

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

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

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

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

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

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

Here's the abstract:

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

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

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

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

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

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

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

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

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

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

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

And it sounds like a heckuva game to play.

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

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

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

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

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

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

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

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

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

BoingBoing, having no other options, sues MagicJack.

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

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

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

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

The law of unintended consequences, as they say.

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

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

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

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

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

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

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

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

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

[…]

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

Renner drinking alcohol after successful missions;

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

As THR, Esq. notes,

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

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

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

Hence, the complaint continues:

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

The Complaint alleges seven counts:

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

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

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

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

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

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

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

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

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

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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.