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

The WSJ Law Blog finds easter eggs for consumers of financial products buried in the proposed financial regulation overhaul:

The [not-yet-created Consumer Fraud Protection Agency] should be directed to gather information and study mandatory arbitration clauses in consumer financial services and products contracts to determine to what extent, and in what contexts, they promote fair adjudication and effective redress. If the CFPA determines that mandatory arbitration fails to achieve these goals, it should be required to establish conditions for fair arbitration, or, if necessary, to ban mandatory arbitration clauses in particular contexts, such as mortgage loans.

...

Although arbitration may be a reasonable option for many consumers to accept after a dispute arises, mandating a particular venue and up-front method of adjudicating disputes – and eliminating access to courts – may unjustifiably undermine investor interests. We recommend legislation that would give the SEC clear authority to prohibit mandatory arbitration clauses in broker-dealer and investment advisory accounts with retail customers.

Business Insider worries about the unintended consequences:

That seems a clear way of increasing the costs of broker-dealer and investment advisory costs, which may mean that smaller customers find that brokerages are even less likely to deal with them than before. As usual, there seems to be very little thought given to how brokers will react to having the increased risk of litigation imposed upon them.

What's more, there are serious questions about whether it makes sense to burden the court system with additional litigation that a ban on mandatory arbitration will sure spur. In effect, a part of the costs of disputes between brokers and their customers are being transferred to the taxpayer who will pay the costs for the extra-burden on courts. It's far from clear why this shift in cost from the parties to the agreement to taxpayers is warranted. We can squint our eyes and see this as something of a bailout of customers who wind up unhappy with their broker.

Last I checked, "wind[ing] up unhappy with [your] broker" wasn't worth a dime in a court of law, at an arbitration, or anywhere else. The investors aren't "unhappy" because their broker didn't get them a cheese wheel for Christmas, they're "unhappy" because their broker breached their contractual and fiduciary duties and lost a ton of the investor's money. It takes an awful lot of "squinting" to see a months-or-years-long expensive lawsuit to get back the money that someone else lost as a "bailout."

Most "mandatory arbitration clauses in consumer financial services and products contracts" force the disputes be heard in FINRA's Dispute Resolution process. As The National Law Journal reported at the end of March,

FINRA — the Financial Industry Regulatory Authority — oversees nearly 5,000 brokerage firms, 173,000 branch offices and 659,000 registered securities representatives. It describes its chief role as protecting investors by maintaining the fairness of the U.S. capital markets. ...

"We don't have official projections for 2009, but if the trend continues, we're probably looking at a high that will match what we saw in '03 and '04," said FINRA spokesman Brendan Intindola.

Arbitration cases filed in 2003 and 2004 — the largest number in 14 years — almost reached the 9,000 mark and were driven by the bursting of the dot-com bubble and the subsequent decline in the equity markets. In 2007, slightly more than 3,000 cases were filed, and in 2008, nearly 5,000.

Lawyers who represent customers and industry members generally believe that FINRA will be able to manage the dramatic increase in its arbitration workload, but they are divided on whether its arbitration panels — charged with industry bias in the past — now provide a level playing field to those using the process.

"The general perception is it is very tilted," said one practitioner who asked for anonymity. "Even if only one-third of the panel is from industry, that's the person with alleged expertise and who has disproportionate sway on the panels."

Broker/Dealer arbitrations are common, but banning them wouldn't open the floodgates: financial products consumers file under 10,000 claims filed nationwide. Keep in mind that essentially every dispute you have with your broker/dealer is forced into FINRA arbitration, including no-brainer claims like the return of a promissory note, so these numbers may be inflated to some degree. It's hard to say what percent of these filings claim substantial losses due to malfeasance.

More importantly, though glossed over by Business Insider, full-fledged civil litigation in open court is not fun for anyone involved. Even within confidential arbitration, just last month FINRA quietly withdrew a proposal that would have permitted more extensive discovery into the financial records of investors bringing claims against their financial advisers, in light of numerous complaints that such a change would subject investors to a "financial colonoscopy." Moving these types of cases into the civil court system would permit defendant banks and investment advisers to dig very deeply into the personal and financial histories of investors bringing suit, far deeper than they would be permitted to do in an arbitration.

For most of the individual claims, I am not too concerned about the arbitration process, as it provides wealthy investors (who make up most of the filings) a simple, relatively convenient and very private way in which to seek redress for their losses, and they will be adequately represented by paid counsel throughout the process. The problems for everyone else, however, are twofold:

• It's not clear whether a group of injured inventors may pursue a class action against a broker-dealer, investment bank or investment adviser. FINRA's Code says it is not applicable to class actions, and an increasing number of courts have held in other contexts that bans of class actions are illegal, but the law here is not as clear as it should be.
   
• The selection process for these arbitrators is not transparent. @phila_lawyer is right that FINRA seems to prefer arbitrators familiar with the financial industry; that's not necessarily evidence of bias, but it's nonetheless problematic, since it exposes the process to 'capture' by the industry and, as noted above, such 'insiders' often hold undue sway on panels.

As such, it's certainly worth a look into the issue, which is all the Obama plan proposes.

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The National Law Journal fills us in on the whopping $4.1 billion wrongful termination arbitration award against an employer that fired an executive without cause, which was recently upheld by a trial court:

NLJ: How did this award get so big?

MY: It got this way because the defendant, the employer, first of all, apparently had terminated a high-level employee without cause. He [the ousted executive] then sued, and the defendant, who at that time had a lawyer, moved to compel arbitration.

At that point, the defendant made some mistakes. It appears the defendant neglected to, or decided not to, participate in discovery and withheld financial information not only asked for in discovery requests but ordered by the arbitrator.

...

And what happened next is really the telling part: The [retired] judge set the hearing for the arbitration, and the defendant wrote a letter to the arbitrator saying, "I'm not going to show up." When there wasn't any information forthcoming from the defendant, what the arbitrator did was look at what information was available about the financial situation of the company and applied adverse inferences against the defendant, essentially filling in the gaps in the story presuming it would come out in favor of the plaintiff. That was really where the numbers started to scale.

...

NLJ: What was special about this executive compensation agreement?

MY: This agreement said that the employee was going to be paid a commission structure of 5 percent of gross sales. What was significant about this one is that the agreement provided that if he is terminated without cause he is entitled to receive his commissions on an ongoing and permanent basis. ...

One big factor was trying to figure out what those gross sales were going to be. Because the defendant didn't provide any financial information, the arbitrator and plaintiffs didn't have a lot to go with in trying to predict where the company was going to go. They looked at a letter the defendant sent to shareholders talking about revenue in one month being $535,000 and then talking about the expected growth rates of 20 percent or 10 percent per month. It's not a realistic rate [that] the company really would grow 10 percent per month in perpetuity, but because the defendant didn't come forward with any evidence, because they didn't provide anything in discovery, these adverse inferences were then applied and the arbitrator essentially assumed that those figures were going to be correct. If you have a commission structure based on those kinds of growth numbers, you get up to the $1 billion pretty quickly. The punitive damage award was brought in at essentially triple the commission award.

And there you go. It seems like the defendant was destined to lose anyway, otherwise he or his lawyers would have been able to mount a defense initially.

The part that's odd is how he didn't seem to grasp the severe ramifications of the employment agreement, the same one he had used to entice the employee to work there in the first place. I can see the defendant not expecting a $4.1 billion award, but he had to expect a serious walloping from 5% of gross sales forever.

I'm betting the defendant could have reduced that award by far more than 90% if he had fought it. So we'll say that 99.99% of success is showing up.

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TortDeform points us to an excellent article in Mother Jones about systemic fraud in the franchise industry, an article which includes this passage:

Hoping to recoup their losses, Welshans and Williams sued in Maryland federal court. But Coffee Beanery struck back in Michigan; a federal judge there ordered the couple—as required in the fine print of their franchise agreement—to instead take their dispute to a private arbitrator selected by the company. (Such binding arbitration clauses are boilerplate in contracts for everything from cell phones to credit cards.) Welshans had to borrow another $100,000 from his brother-in-law just to proceed with the process, which required steep fees up front.

...

She ordered the couple to pay $187,452 in legal fees and arbitration expenses—not including their own legal tab or the cost of travel to and from Michigan. Among the charges: $16,800 for Barron's services, $35,571 for a court reporter and transcription, even $504 for the Beanery lawyers' lunches.

Arbitration has a place in the American legal system. It is no panacea, but for many businesses it enables a comparatively quicker and less painful (though often more expensive, given the arbitrator's fees) method for resolving disputes with other businesses.

But let's be real: anyone who demands they alone have the right to choose the arbitrator is trying to defraud you.

There is a huge roster of fair and impartial arbitrators who would be happy to hear your case, and multiple services (like AAA and JAMS) willing to provide you options. No business has good reason for demanding they be able to unilaterally choose the arbitrator in advance.

If the parties want to name a particular arbitrator in advance, that's fine, as the parties have an opportunity to explore who that person is, but leaving the option open for an unfettered choice down the line after the wrongful conduct has occurred is unreasonable and should be prohibited by the Federal Arbitration Act (keep in mind -- arbitration is not a "contractual" right, it's a statutorily-prescribed method of dispute resolution, making Congress complicit in these abuses).

I wouldn't buy the time of day from someone who proposed that and neither should you.

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It's an article of faith among many businesses and lawyers: Delaware. It doesn't matter what the question is. Where should you incorporate? What should the governing law of your contract be? 

Delaware! Delaware's good for business.

Right?

Not necessarily. Much ink has been spilled over why, exactly, businesses constantly incorporate in Delaware and/or insert Delaware into choice of law provisions in their contracts. Among the most common reasons is: Delaware has more developed and thus stable precedent than any other jurisdiction.

I'm not sure this reason stands even on its own merits. E.g., the law of malpractice and negligence is very well-developed and yet we still find plenty of legal issues to litigate, and still rarely settle until immediately before trial. 

This "stability" has long been under fire, most recently as noted by The Harvard Law School Corporate Governance Blog, addressing two recent Chancery Court opinions on shareholder suits against Citigroup and AIG:

These cases seem to support the claim by William Carney and George Shepherd in The Mystery of Delaware Law’s Continuing Success (William Carney & George Shepherd, 2009 U. ILL. L. REV. 1) that Delaware law is infected by costly indeterminacy. After these cases, where, exactly, does a duty of loyalty claim for breach ofCaremark duties stand?

The courts in these cases distinguished a claim that directors ignored the inadequate controls of patent business risks (Citigroup) from one that the directors ignored inadequate controls of insider wrongdoing (AIG). While these distinctions seem clear, and the cases seem rightly decided on their facts, the distinctions fray at the edges. Deliberately and knowingly ignoring either kind of risk can give rise to a claim. The defendants in Citigroup, even if careless, did not sink to that standard, while the AIG defendants did. So how does insider wrongdoing affect the determination? Must the flags be redder to trigger liability where there is no insider wrongdoing, but the risk could bring the company down? If so, how much redder? Is there a sliding scale for the degree of insider wrongdoing the defendants allegedly ignored. In AIG, the complaint supported an assertion that the insiders led, in Vice Chancellor Strine’s words, a “criminal organization.” Would the result be different if the alleged wrongdoing had been somewhat less pervasive? But does not the pervasiveness tie to the defendants’ knowledge, which leads back to square one?

 

In fairness, though, this does not necessarily support a criticism of Delaware law. As Chancellor Chandler wrote (with Anthony A. Rickey) in responding to Carney & Shepherd’s criticism in Manufacturing Mystery: A Response to Professors Carney and Shepherd’s “The Mystery of Delaware Law’s Continuing Success (2009 U. Ill. L. Rev. 95), Delaware is at least no more indeterminate than other jurisdictions.

Indeed, I argued in my own response to Carney & Shepherd, The Uncorporation and Corporate Indeterminacy, (2009 U. ILL. L. REV. 131), that indeterminacy is inherent in corporate law rather than specifically in Delaware jurisprudence. The solution is to turn to “uncorporate” law, which leads directly to my next two points.

 

Well said, and the whole post (as well as its references to Wachtell, Lipton, Rosen & Katz client memorandum posted here and Francis Pileggi's own comments here) are required-reading for those interested in shareholder derivative suits.

The overarching theme bears repeating -- the law is fundamentally "indeterminate." Businesses aren't going to be able to change that by just doing what every other business does because they think they should.

The problem is compounded by the way many businesses "choose" Delaware law, often in conjunction with an arbitration or choice of venue provision that ensures that Delaware law will be "applied" by a court or arbitrator with no experience in Delaware law. How "stable" and "determinate" can that possibly be?

 

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[Update -- I've posted a few followups: Are Facebook's New Terms of Use Enforceable?, What Do Facebook's New Terms of Use Mean for Your Content? and Facebook Rescinds Its New, Unfriendly Terms of Use in Favor of Its Old, Unfriendly Terms of Use. Finally, 25 Things About Facebook's Terms of Use and Your Rights, discussing the current problems and where we go from here.]

Facebook earned itself the wrath of Twitter by revising its Terms of Use (a/k/a Terms of Service) to grant itself a perpetual license to use all of your content (which is typical of social media sites), even if you leave the site (which is not typical).

We'll get to the substance of the change later. For now, a simple question: can Facebook unilaterally change terms of use without notifying users?

We get hints at the answer by comparing Facebook's old Terms, dated May 24, 2007, to the current Terms, dated February 4, 2009.

Here's what's really the most important change:

The old Terms:

By visiting or using the Site and/or the Service, you agree that the laws of the State of Delaware, without regard to principles of conflict of laws, will govern these Terms of Use and any dispute of any sort that might arise between you and the Company or any of our affiliates.

The new Terms:

You agree that all claims and disputes between you and Facebook that arise out of or relate in any way to the Terms or your use of the Facebook Service will be governed by the laws of the State of California (and United States federal laws applicable therein), without regard to principles of conflict of laws.

That's much better for Facebook users: California has some of the most pro-consumer laws in the nation.

Let's get back to Facebook's unilateral, stealth change.

Old Terms:

We reserve the right, at our sole discretion, to change, modify, add, or delete portions of these Terms of Use at any time without further notice. If we do this, we will post the changes to these Terms of Use on this page and will indicate at the top of this page the date these terms were last revised. Your continued use of the Service or the Site after any such changes constitutes your acceptance of the new Terms of Use. If you do not agree to abide by these or any future Terms of Use, do not use or access (or continue to use or access) the Service or the Site. It is your responsibility to regularly check the Site to determine if there have been changes to these Terms of Use and to review such changes.

New Terms:

We reserve the right, at our sole discretion, to change or delete portions of these Terms at any time without further notice. Your continued use of the Facebook Service after any such changes constitutes your acceptance of the new Terms.

Streamlined? Nope. The difference was probably Douglas v. United States Dist. Court, 495 F.3d 1062, 1066 (9th Cir. 2007), decided a month after Facebook's old Terms, which held:

Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side. Fn 1 Indeed, a party can't unilaterally change the terms of a contract; it must obtain the other party's consent before doing so. Union Pac. R.R. v. Chi., Milwaukee, St. Paul & Pac. R.R., 549 F.2d 114, 118 (9th Cir. 1976). This is because a revised contract is merely an offer and does not bind the parties until it is accepted." 

Fn 1: Nor would a party know when to check the website for possible changes to the contract terms without being notified that the contract has been changed and how. Douglas would have had to check the contract every day for possible changes. Without notice, an examination would be fairly cumbersome, as Douglas would have had to compare every word of the posted contract with his existing contract in order to detect whether it had changed.

That is to say, a month after Facebook claimed a unilateral right to modify its Terms without any notice to users of the change, the 9th Circuit (the Federal appellate court for California) ruled that companies were required to give notice. (Tech bloggers, like Ars Technica, picked this ruling up at the time, so I'm sure Facebook did, too.)

Arguably, Douglas does not directly apply to this circumstance, where Facebook and its users nominally agreed to permit such secret changes through the old contract, but it's unlikely such an argument would fly under California law, which often throws out unfair mass contract provisions like these for "unconscionability." See, e.g., Shroyer v. New Cingular Wireless Servs., 498 F.3d 976, 986 (9th Cir. 2007)(throwing out class arbitration waiver as "unconscionable and unenforceable under California law.")

Did I just mention a class arbitration waiver? Note that Facebook changed that part of their Terms, too.

Old:

To the fullest extent permitted by applicable law, NO ARBITRATION OR CLAIM UNDER THESE TERMS OF USE SHALL BE JOINED TO ANY OTHER ARBITRATION OR CLAIM, INCLUDING ANY ARBITRATION OR CLAIM INVOLVING ANY OTHER CURRENT OR FORMER USER OF THE SERVICE, AND NO CLASS ARBITRATION PROCEEDINGS SHALL BE PERMITTED.

New:

With respect to any claims or disputes you intend to bring on behalf of a class, you agree to arbitrate whether a class could be certified before bringing such action in a court of law. If the arbitrator refuses to certify the class, you will continue to resolve your individual claims or disputes through binding arbitration. If the arbitrator finds that a class should be certified, you may file the class action in a court of law provided you waive any right to a trial by jury. Claims for injunctive or other equitable relief may also be brought in a court of law.

Another changed required by law, particularly California law.

So, are these changes valid or not? The plaintiff in Douglas kept using the services for years without noticing the changes, and even so they weren't applied to him. The same may not be true to users, like you, who are aware of these changes and keep using Facebook.

But what about your old content? If you leave now, does Facebook still have an non-exclusive license to use your content?

Likely not, given Douglas above, which holds, in essence, that Facebook's new Terms don't apply to you until you have actually assented to them. Facebook knows that, which is why their new Terms don't have that " It is your responsibility to regularly check the Site" garbage anymore.

But you're going to need to make some choices soon, since your continued use might be considered "assent" to the new Terms. We'll talk about that more tomorrow, as well as the deeper meaning of the Terms, particularly in light of Facebook's response to the controversy.

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The American Lawyer describes the case:

Quinn Emanuel Urquhart Oliver & Hedges has been hit with a malpractice lawsuit that claims the firm botched a $48.8 million settlement even as it took in some $12 million in contingency fees.

... The complaint against Quinn Emanuel highlights how -- as a result of a contingency agreement that essentially guaranteed Quinn Emanuel half of any amount recovered up to $20 million and 20 percent thereafter -- the firm has received approximately $12 million in fees for representing Kurtin. That amount is equal to what Kurtin himself has gotten to date from the settlement, which was reached a little more than four months after Quinn Emanuel took on the case.

... An initial payment of $21 million, which Quinn Emanuel essentially split with Kurtin, was received. But, according to court documents, a payment due June 30, 2006, of $13.1 million, as well as an additional payment outlined in the settlement agreement, was never sent.

... Kurtin initially retained Quinn Emanuel again to try to enforce the settlement agreement through arbitration. The firm even offered up the services of litigation partners Ken Chiate, Jeff McFarland and Bruce Van Dalsem at its "half-rate" of $300 per hour. According to the amended engagement agreement, those partners usually bill out at between $650 and $775.

I've written about Quinn Emmanuel's contingency-fee practice before; it's not quite the plaintiff's firm writ large it's reputed to be, since the bulk of their work is not on a contingency fee.

I'm baffled by this new story. Under the fee agreement as described, Quinn is entitled to another 20% of the remaining $27.8 million, yet they were unwilling to enforce the agreement except on a discounted hourly rate?

Maybe I'm charitable, but I don't think I would need someone to pay me more by the hour to chase down $5.56 million in fees via arbitration of an iron-clad settlement agreement. In fact, it sounds like the additional hourly fees with be comparatively small even at >$650 -- you're arbitrating a settlement agreement you executed! -- and would cause more client dissatisfaction than they would be worth.

There's another wrinkle:

A public relations representative at SunCal Cos. did not return calls seeking comment. In an interview in March with the Orange County Register, a company executive said that Kurtin's suit was without merit and that the company had previously met all its obligations to him.

In general, a lawyer's comment to the media is one of three possibilities: 

1. The other side's case is frivolous garbage.
2. There may be legitimate issues, but I'll win.
3. No comment.

I would expect a party that was knowingly in default of a settlement agreement to go with #3 since a properly drafted settlement agreement should be easily enforceable. To hear the settlor go with #1 suggests they really don't think they are in default, which makes me wonder how the two parties to the settlement could have such radically differing views of their obligations. Sure, commercial litigation settlements can be complicated, but this settlement seemed pretty simple: it's just money instead of a continuing relationship.

Which leaves us to ponder only two explanations for Quinn Emmanuel's proposed hourly rates:

1. Quinn Emmanuel thought their client's settlement enforcement action had merit, but chose to let $5.56 million in their own fees sit unless they could bill $300 an additional hour recovering them.
2. Quinn Emmanuel thought their client's settlement enforcement action had no merit but were willing to fight it anyway, on a discount.

#1 does not make any sense. #2 could have a lot of possible explanations, none of them flattering.

Maybe the story is incorrect or incomplete. Maybe the case will reveal some more important facts. As it stands, this case does not look good for them.

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The blog "How Appealing" has plenty of links on the $90 million settlement of the donor-intent suit brought against Princeton University by the heirs to the Great Atlantic & Pacific Tea Co. (and now A&P supermarket) fortune, alleging misuse of a 1961 donation of $35 million which had swelled in value to over half a billion dollar.

The case was scheduled to go to trial in New Jersey state court in January. Pretrial litigation costs were $40 million for each side. Princeton expected its own trial costs to reach $20 million; it's fair to assume that the Robertson's trial costs would have been the same if not greater.

$80 million to litigate and another $40 million to try a breach of fiduciary duty, accounting and breach of contract dispute between two parties. No appeals, certs, or retrials included.

How could that be? Let's look at how those numbers compare to other complicated cases like patent infringement, white collar criminal defense, and antitrust.

According to the American Intellectual Property Law Association, the average per-party cost to take through litigation and trial a large (over $25 million at stake) patent infringement / dispute is $5 million. (For all patent cases, the average is $1 million). Patent cases are document intensive, involve numerous expensive experts, and typically require dozens of depositions and motions. They're often more complicated than large commercial litigation or breach of fiduciary duty cases.

Yet, the Robertson case would have cost twelve times what the biggest patent cases typically do.

Remember the white collar criminal defense that got WilmerHale sued? That "feeding frenzy" of billing was over $12 million in hourly fees, less than one-third what either side here charged, and it involved more than double the documents of Robertson.

So what happened in Robertson?

Sure, the case wasn't a slip-and-fall:

The university says it produced more than half a million pages of documents in pretrial discovery. The trial witness list had 124 names, 80 witnesses had been deposed, 3,000 pages of briefs were required and 5,000 trial exhibits were identified.

But it wasn't that big. Here's how the District Court described the Visa / Mastercard merchant and debit card antitrust case, which settled just before trial a few years ago:

Class Counsel have litigated this case -- which did not culminate in settlement until the eve of trial -- for seven years. During that time, there were almost 400 depositions of witnesses, including 21 experts who issued 54 expert reports; four rounds of class certification briefing (through the Supreme Court); 16 summary judgment motions, 31 motions in limine, and three Daubert motions; and a pretrial order identifying 230,000 pages of trial exhibits, 730 trial witnesses, and more than 17,000 deposition designations

In re Visa Check/Mastermoney Antitrust Litig., 297 F. Supp. 2d 503 (E.D.N.Y., 2003). Now that's big.

Yet, that much work -- several orders of magnitude larger than Robertson -- resulted in a "lodestar" (hours times prevailing rates) fee calculation of $62,545,603 for plaintiffs' counsel, or one and a half times each side's bill in Robertson.

The Robertson case was filed July 17, 2002. In the 6 years, 4 months, and 24 days leading up to the settlement announcement, the parties averaged $34,202.65 in costs every single day, or about the same as if each side had one of the most expensive partners in the country (each at $1,000 an hour) and two of the most expensive associates in the country ($600 an hour per associate) working every single day, including weekends and holidays, from 8am to 6pm, taking no more than 2.2 hours in their work day to do anything else, including eating, twittering or answering angry phone calls from their abandoned spouses.

Using more reasonable numbers, like an average rate of $348 an hour, and seven hours of actual, billable hours per day, we still end up with the ridiculous conclusion that each side had seven lawyers working full time for them every day, including weekends and holidays.

Some of these numbers may be unfair. For instance, both sides hired major accounting firms to prepare extensive expert reports. So let' s very generously assume that these firms performed the same level of accounting work as required for companies with under $1 billion in annual revenue to ensure complete Sarbanes-Oxley compliance: $2.8 million (which I think is a high estimate) for each side.

Let's also assume "costs," like copying, postage, phone calls and research equal about 5% of overall billing, as is often the case in business representation. I think that's actually generous here -- $2 million per side will get you an awful lot of copies.

Adding in those expert fees and costs drops the attorneys' fees to $70.4 million, or a mere $30,098.33 every single day. Using our "reasonable" hourly rates and billable hours, that's a team of six lawyers working full time every day, including weekends and holidays. For each side.

That's outrageous: other than the fees, Robertson was closer in size to complicated personal injury litigation than a large, complex commercial dispute like a patent, antitrust, or securities case.

Multi-defendant, multi-claim personal injury cases -- e.g., a catastrophic injury or wrongful death at a construction site that raises both product liability and negligence issues -- frequently exceed 100,000 documents, 100 potential witnesses, 50 depositions, and 1,000 trial exhibits. I can't judge what the article meant by 3,000 pages of "briefs," but, based on the motions and orders available online, I assume that number includes pleadings, motions and exhibits, which is not at all impressive.

Tomorrow we'll look at how not to spend $120 million bringing a case to trial.

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

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

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

Objection. Leading.

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

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

Objection

Leading, and calls for a legal conclusion.

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

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

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

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

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

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Courtesy of the complicated mess that is Sovereign Bank v. BJ's Wholesale Club, Inc., 533 F.3d 162 (3d Cir. 2008), in which credit card "Issuers" sued credit card "Acquirers" and "Merchants" (Acquirers are the companies that process transactions for the Merchants) after a bunch of credit card numbers were stolen from the Merchant.

The big issue is: are Issuers intended beneficiaries of the Merchant and Acquirer's agreement with the Visa network, which includes a number of anti-fraud regulations that the Merchant and Acquirer allegedly didn't follow?

Historically, under Pennsylvania law, "in order for a third party beneficiary to have standing to recover on a contract, both contracting parties must have expressed an intention that the third-party be a beneficiary, and that intention must have affirmatively appeared in the contract itself." Scarpitti v. Weborg, 530 Pa. 366, 609 A.2d 147, 149 (Pa. 1992) (citation omitted). Sovereign appropriately concedes that it is not an express third-party beneficiary of the Visa-Fifth Third Member Agreement. However, in Scarpitti, the Pennsylvania Supreme Court adopted § 302 of the Restatement (Second) of Contracts. Id. That provision allows an "intended beneficiary" to recover for breach of contract even though the actual parties to the contract did not express an intent to benefit the third party. Section 302 provides as follows:

Intended and Incidental Beneficiaries

 (1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intentions of the parties and either

(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or

(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.

(2) An incidental beneficiary is a beneficiary who is not an intended beneficiary.

Got all that? Summary judgment reversed, based upon a memorandum and deposition testimony indicating that the regulations were for the benefit of all the members, as discussed in the next post.

Update: for some reason, movable type ate most of my post, which has been corrected.

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What on earth were they doing?

 Following negotiations, on November 12, 2002, the parties entered into a settlement and release agreement (release agreement) ...

On November 8, 2004, [ESI] filed a praecipe for Writ of Summons. [ESI] thereafter filed a five count complaint on April 7, 2005. In their complaint, [ESI] asserted that the release agreement was invalid because [LSI] induced them to sign it by means of fraudulent misrepresentations. On May 1, 2006, by the consent of [ESI], the trial court issued an order discontinuing counts III, IV and V of their complaint. Accordingly, only counts I and II of [ESI's] complaint proceeded to resolution on summary judgment. ...

On August 7, 2006, the trial court granted LSI's motion for summary judgment and this Court affirmed that decision on October 1, 2007. ...

On October 18, 2006, counsel for ESI sent a letter to the American Arbitration Association (AAA), indicating that the CA entered into by the parties and two amendments to the CA provide for arbitration and that having received no response to its September 12, 2006 letter to counsel for LSI, ESI was "now request[ing] that the American Arbitration Association initiate the process through which an arbitrator will be appointed for the claim initiated by [ESI]." ...

By letter, dated October 30, 2006, ESI's counsel informed the AAA that its October 18th letter was not a formal demand for arbitration, but rather was a request for advice "as to how to proceed" and that if a case number had been assigned it should be voided. Thereafter, the AAA closed the matter, but on November 21, 2006, ESI again corresponded with the AAA and formally demanded that arbitration be initiated against LSI.  ...

LSI responded to ESI's November 21, 2006 letter, again asserting that the claim ESI was attempting to submit to arbitration was the same as the claim that ESI agreed to withdraw with prejudice during the pre-trial conciliation before Judge Scanlon and as memorialized by the May 1, 2006 court order. ...

Receiving no response to its December 1, 2006 letter, LSI filed a complaint on December 14, 2006, seeking "a declaratory judgment that [ESI] cannot re-litigate in arbitration a claim that was previously dismissed with prejudice…."

LSI Title Agency, Inc. v. Evaluation Servs., 2008 PA Super 126.

Big surprise: ESI lost. They can't arbitrate the same claims they permitted to be dismissed "with prejudice." (As an aside: they tried to get a new claim in by saying they were arbitrating "breach of the duty of good faith and fair dealing," which, the court reminded, is not an independent claim outside of breach of contract.)

It's simple: arbitration is not a parallel universe, where collateral litigation is but a passing fancy. If you submit your claim to one or the other, then that's that (like here). There are limited ways to preserve the options initially, but, once you go through the gauntlet, they're not going to let you try it again on the other side.

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Defendant here did a splendid job of waiving its rights and annoying Judge Pollak:

Second, defendant, in a footnote, suggests that this matter should be referred for arbitration in accordance with the grievance procedures outlined in the CBA. See Pl.'s Ex. 4, at § 1.05-09. Defendant's presentation of this argument is, to say the least, underwhelming. Whether a dispute is subject to mandatory arbitration is a question of too much consequence to be relegated to a one-sentence footnote in an opposition to a motion for summary judgment. Section 3 of the Federal Arbitration Act is instructive:

 If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the  terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

9 U.S.C. § 3 (emphasis added). Parties desiring an order compelling arbitration must make application to the court for such an order. The manner of this application should, in accordance with Rule 7(b) of the Federal Rules of Civil Procedure, be a formal motion. Such a motion should, in accordance with Local Rule 7.1(c), be accompanied by a memorandum explaining the grounds for the party's request. Here, rather than following these basic rules for requesting action from a federal district court, defendant has styled its request for relief as an alternative argument (that is, alternative to its main argument, which appears in the text of its opposition papers, that summary judgment is inappropriate on the merits) and tucked it into a footnote.

The court will deny defendant's alternative request for arbitration for three reasons.

First, the request is not made in the form of a motion, as Rule 7(b) requires, nor it is briefed, as Local Rule 7.1(c) requires. Few rules of civil procedure are as easy to follow as Rule 7(b) and Local Rule 7.1(c). All these rules require is a formal  [*21] motion and a statement of grounds. If defendant cannot be bothered to submit a formal motion and a statement of grounds, then it cannot be serious about the relief it purports to desire. Moreover, the court could not easily rule on defendant's request, as the court has not been provided a complete copy of the arbitration portion of the CBA. The copy submitted by plaintiffs does not include anything following the third line of § 1.09, which makes sense given that this section has nothing to do with plaintiffs' argument. Defendant, however, has not submitted a complete copy to accompany its footnote request, nor has it made any argument as to how the grievance procedure works or how it applies. Without providing a complete copy of the arbitration agreement and some explanation of why defendant believes it applies here, the court cannot find that defendant has adequately demonstrated that this dispute is subject to arbitration.

Second, defendant has waived any right to arbitration by not raising the issue in motions practice before now. Although waiver by delay is not favored, the Third Circuit has held that the right to arbitration is waived when defendant's delay causes prejudice. Hoxworth v. Blinder, Robinson & Co., 980 F.2d at 912, 926-27 (3d Cir. 1992). Here, defendant has, without a peep, submitted to full discovery in this matter. Discovery is now complete, and the case, having been pending for more than a year, is ready for disposition, either by summary judgment or by trial. Plaintiffs have doubtless spent substantial time, effort, and expense in getting this case ready for summary judgment practice and trial. The sheer number of exhibits and depositions submitted attests to plaintiffs' efforts, which, particularly considering that this is not a high-dollar-value case, are significant. Moreover, the arbitration procedure outlined in those portions of the CBA available to the court do not appear to contemplate discovery. Thus, having accepted the benefit of discovery from plaintiffs, and having put plaintiffs to the expense of discovery, defendant should not now be allowed to stay these proceedings and access an arbitral forum. See id. at 926. The court acknowledges that it appears that defendant raised the issue of arbitration in its answer, and that there has not been, before now, any other substantial formal motions practice 6 (aside from the motions practice associated with vacating defendant's default), id. at 927; nevertheless,  the court believes that, for the reasons just discussed, submitting this case to arbitration at this late stage would cause plaintiff prejudice, and should not be allowed.

Third, defendant's alternative request for an order compelling arbitration bears a striking resemblance to forum shopping. The thrust of its opposition to plaintiff's motion for summary judgment is that this court should deny plaintiff's motion on the merits. But, just in case the court disagrees, it attempts to preserve an argument for arbitration in a footnote. This form of argument is not attractive, nor is it persuasive.

Ibew Local Union No. 380 Health & Welfare Fund v. Travis Electric, Inc., 2008 U.S. Dist. LEXIS 58037 (E.D. Pa. July 31, 2008)(emphasis added).

What were they thinking? The only good explanation I can think of is that the defendant didn't actually want to arbitrate, and decided such long ago, yet tucked in the remark as some form of collateral persuasion, where you toss in barely-relevant arguments in the hopes that it will, by sheer inertia, carry your other arguments further.

Otherwise, someone dropped the ball, or perhaps never even picked up the ball since they were so busy churning the billable hours on the litigation...

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So sayeth 3si Sec. Sys. v. Protek, 2008 U.S. Dist. LEXIS 56283 (E.D. Pa. July 23, 2008), more routine commercial litigation:

The gist of the action doctrine "precludes plaintiffs from re-casting ordinary breach of contract claims into tort claims." eToll, Inc. v. Elias/Savion Adver., 811 A.2d 10, 14 (Pa. Super. Ct. 2002) citing Bash v. Bell Tel. Co., 601 A.2d 825, 829 (Pa. Super. Ct. 1992). The difference between a cause of action for tort and breach of contract is that "tort actions lie for breaches of duties imposed by law as a matter of social policy, while contract actions lie only for breaches of duties imposed by mutual consensus agreements between particular individuals." Bash, 601 A.2d at 829. A breach of contract may give rise to a tort claim only when defendant's wrongful conduct is the gist of the action, and the contract is collateral. Pittsburgh Constr. Co. v. Griffith, 834 A.2d 572, 582 (Pa. Super. Ct. 2003) citing Bash, 601 A.2d at 829)

To successfully prove a negligence claim a plaintiff must demonstrate the following elements: (1) a duty of care was owed by defendant; (2) defendant breached this duty; and (3) the breach resulted in injury. McCandless v. Edwards, 908 A.2d 900, 904 (Pa. Super. Ct. 2006) (citations omitted). Because Defendant's obligation to provide Plaintiff with FlexPac batteries arose from the contract and not from a general duty of care, Plaintiff's negligence claim should be barred by the gist of the action doctrine.

In Factory Market v. Schuller Intl, defendant guaranteed plaintiff it would install a watertight roof. 987 F. Supp. 387, 388 (E.D. Pa. Jan. 9, 1997). Defendant promised to pay for any repairs needed to maintain the roof in a watertight condition. Id. at 389. From the onset "the roof was plagued with leaking problems," which defendant attempted to fix on a number of occasions. Id. Upon various unsuccessful  attempts by defendant to repair the roof, plaintiff brought suit against defendant alleging breach of contract, negligence, and fraud. Id. at 391. The court held that plaintiff's negligence claim sounded more in contract than in tort. Id. at 394. Plaintiff merely alleged that defendant's repairs were negligently performed, and as a result the roof was not watertight despite defendant's guarantee. Id. at 394-95. The court ruled that defendant did not owe plaintiff a duty of care; rather defendant's obligation to repair the faulty roof was imposed by way of the contract, and without the contract plaintiff "simply would not have [had] a claim." Id. at 395. Therefore, the court barred plaintiff's negligence claim. Id.

(emphasis added).

Without fail, defendants raise the "gist of the action" doctrine in every single breach of contract case that also includes other claims. It doesn't matter if the other claim is unjust enrichment, tortious interference, fraud, defamation, professional malpractice, or any other entirely appropriate claim that can rest alongside a breach of contract. If there's a contract, and there's another claim, the preliminary objections / 12(b)(6) are inevitable.

And it's usually wrong.

The doctrine is simple: the "gist of the action" doctrine precludes negligence claims where, under the facts alleged, the defendant has no duty to the plaintiff except for those created by contract. The "gist" is contractual -- there are no duties between the parties except for those created by the contract.

A reminder: everyone has a duty not to defraud others. Everyone has a duty not to tortious interfere in others' business. Everyone has a duty not to defame others. If someone defrauded you, that's wrong; you don't need to first have a signed and sealed Agreement Not To Defraud Me.

Ergo, there's really only one instance in which, at the complaint stage, the "gist of the action" doctrine applies: where a complaint alleges breach of contract and negligence based solely upon that contract. That a plaintiff cannot do.

Fraud and breach of contract? That's fine -- indeed, they're usually entirely appropriate forms of alternative relief which a plaintiff should allege if they have the factual basis.

But if you're alleging negligence, there must be an independent duty outside from the contract itself.

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In response to shareholder upheaval, billions in losses, and a 60% fall in stock price, CitiGroup completely revamps its Board of Directors:

Board member John Deutch, who previously held no chairmanships, has been named to lead the audit and risk committee, Citigroup said in a July 22 press release. Richard Parsons, former chair of the compensation committee, will head the nomination committee, while former nomination panel chair Alain Belda will lead the compensation committee.

Whoa, there, slow down. That's a lot of change for just a year of failure.

Thank goodness they'll wait another year or two and see how it goes before rocking the boat again.

That's why "I still believe there will be a continuing move to private equity, [with] a corresponding rise in intra-company commercial litigation and arbitration there, as I wrote before."

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John F. Olson and Amy L. Goodman, partners at Gibson, Dunn & Crutcher LLP, follow up on Marty Lipton's article (which I previously discussed here):

In our upcoming paper, we will address some of the issues that deserve focus from shareholders, directors, business executives and other interested stakeholders.

• First, and not necessarily in order of importance, we need to develop effective methods of board/shareholder communication that build on new electronic capabilities but are not burdensome and do not increase liability risks.

• Second, boards and business executives need to effectively and regularly communicate corporate strategy and the board’s oversight role to investors, the business press and analysts, once again without fear of increased liability.

• Third, companies need to make good investor relations, and “good listening” a day to day corporate priority, and shareholders need to take advantage of these opportunities to present their views to business executives and directors.

• Fourth, shareholders need to think for themselves and reduce their reliance on proxy advisory services and be more transparent in their proxy voting decision-making processes.

• Fifth, companies, boards and their advisors need to figure out a way for directors to spend more time addressing strategy and risk and less time on compliance.

• Finally, while efforts to better educate directors about corporate governance and their fiduciary responsibilities has been salutary, we now need to shift our efforts to better educating directors in understanding the businesses, including the risks, of their companies.

Hey, that sounds like what I wrote:

I thus foresee over the next few years growth in mid-size and large private corporations where the investors have extensive access to the records in real-time; perhaps not the same level as in a small private company, but far more than investors and public companies now have. We've already started to see that trend with the recent explosion of private equity groups like Blackstone

But I don't think any of them will change the fundamental problem of the public corporation, in which the investor experiences a 'distance' from the nuts and bolts of the operation that is hard to accept in the rapid pace of the 21st century. Hence I still believe there will be a continuing move to private equity, which a corresponding rise in intra-company commercial litigation and arbitration there, as I wrote before.

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Fortune Legal Pad on the French eBay injunction:

On June 30, the Commercial Court of Paris granted a sweeping injunction sought by LVMH Moët Hennessy Louis Vuitton (LVMUY) that would not only require eBay to block all sales of counterfeit Louis Vuitton Malletier and Christian Dior Couture products on its site — a feat eBay has claimed is not technologically feasible — but  also to block all sales of genuine LVMH perfumes being sold there by unauthorized distributors.

The latter prohibition would effectively force eBay to block all sales of the specified perfumes — Christian Dior, Guerlain, Givenchy, and Kenzo — since no licensed LVMH distributor is authorized to sell over eBay. The practice of selling genuine products through unauthorized channels — sometimes called gray marketeering — is generally lawful in the United States because it is thought to benefit the consumer.

The commercial court also ordered eBay to pay various LVMH units $60.8 million in damages for past counterfeit or unauthorized sales. The key issues presented by the decision (available here in French) are well summarized in this New York Times article. (eBay’s official statement about the ruling is here; LVMH’s is here.)

The day the commercial court ruled, eBay asked the French Court of Appeals to stay the injunctive portion of it while it appealed the rest of the lower court’s ruling. Without the stay, the injunction — enforceable by daily fines of 50,000 euros (about $80,000) — takes effect as soon as copies of the decision have been formally delivered to eBay’s headquarters in San Jose, California, and its international subsidiary in Berne, Switzerland. (It’s unclear if that has happened yet.) LVMH has agreed to postpone enforcement, however, until the Court of Appeals rules on the stay application, according to an eBay spokesperson. That court told the lawyers today that it would rule Friday.

It's quite a fascinating case, particularly as it touches upon appealability in the European system, the distinction of internet service providers being merely a "host" versus a "broker," and Louis Vuittion's (I think outrageous) attempts to halt re-sale of their products.

My focus, however, is on how powerful the remedy here is -- the fine is huge and the equitable remedy requires eBay do something they claim they can't.

In normal commercial litigation, it is very rare for a court to order a losing defendant change their practices in a way that could potentially destroy the business. Normally, the defendant pays compensation for what they have done wrong and goes about their business again; indeed, in Pennsylvania and the general rule is that punitive damages are not available in breach of contract cases.

Such restraint vanishes in the realms of copyright and patent (particularly patent), where the very idea appears to be strong deterrence against either the defendant or anyone else behaving like that ever again.

The end result is, liking securities litigation, few copyright or patent claims actually reach a resolution on the merits, because the stakes are simply too high, and lawyers tend to believe that such cases are so complicated that there's a high likelihood jurors, judges or arbitrators will become confused even in a slam-dunk case, resulting in uncertainty about the outcome. (See this legal malpractice case arising from a large, complex commercial dispute where "The company claims Linklaters advised it that its case had a 70 percent chance of success if it were to go to arbitration, but at a later date reduced that to 50 percent. It says that, based on Linklaters' advice, it turned down three settlement offers.")

The initial application of bad for business lawyers is obvious, and, indeed, in most business lawyers will recommend their client cease and desist the moment there's any copyright or patent claim that isn't clearly frivolous.

But I think there is another lesson learned here. Big cases settle. Notice how eBay and LVMH are still trying to figure it out.

Except sometimes they don't. How about: big cases should settle; where the law forces the case to be big, it usually settles.

So how can we, as litigators and trial lawyers, make clear to the other side that our case is really big? I'll address that more in latter posts.

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The Unincorporated Business Law Prof Blog says:

Prof. Larry Ribstein has posted Reforming Limited Liability Company Fiduciary Litigation on SSRN.  He presented this paper at last week's LLCs at 20 symposium at Suffolk.  Here's the abstract:

Derivative suits are designed for publicly held corporations. In limited liability companies, the remedy creates significant costs and complications. These costs are unnecessary because more appropriate remedies member-authorized and direct suits are available. The application of the derivative remedy to LLCs is an example of lawmakers applying rules across business entities without adequately thinking through which rules belong in a coherent business association statute.

I'm not sure that I agree.  If nothing else, minority-member lawsuits are likely to get labeled at "entity" lawsuits, rather than direct, individual lawsuits.

(Note: Pennsylvania law (15 Pa.C.S. § 8992) permits derivative actions in limited liability companies.)

There are plenty of issues in an LLC that cannot be addressed appropriately by direct action. More importantly, retaining derivative actions answers two questions that have frustrated and confused a number of lawyers and judges: do individual members of an LLC have standing to sue when the majority of LLC members engage in tortious or intentional conduct, and, if so, what remedies are available?

Answering that question by reference only to contract law is usually impossible, because the vast majority of the LLC operating agreement have no provision for what should happen in the event of a breach, they just generally affirm the principle of majority rule. Viewed literally, most LLC operating agreements permit, by silence, the majority members to frustrate the reasonable expectations of the minority members and freeze them out of the business.

Courts are supposed to avoid absurd and unjust results, and most will not allow an operating agreement to cheat a minority member merely because of the absence of a "don't cheat" provision.

How do courts do then? There are a variety of options, including the common law proposition that "bad faith conduct" constitutes a breach of contract, regardless of whether the conduct specifically breaches the text of the agreement. But each one of those options relies heavily on discretion, resulting in inconsistent outcomes across similar cases before different judges.

I think the bigger question is: what's the harm of allowing a derivative action? A lawsuit is a lawsuit, and I fail to see how a derivative lawsuit in an LLC will result in any more discovery, costs, or anything else. In the context of an LLC, it's largely a different style of pleading.

Indeed, even if there is a harm, the American Law Institute’s Principles of Corporate Governance (2-7 § 7.01) says, in the case of a closely held corporation, the court in its discretion may treat an action raising derivative claims as a direct action, exempt it from those restrictions and defenses applicable only to derivative actions, and order an individual recovery, if it finds that to do so will not (i) unfairly expose the corporation or the defendants to a multiplicity of actions, (ii) materially prejudice the interests of creditors of the corporation, or (iii) interfere with a fair distribution of the recovery among all interested persons.

That, in essence, can make all derivative actions direct if the court is so inclined, creating an escape hatch for situations in which derivative actions are inappropriate. No corollary exception exists to permit derivative recovery where direct is inappropriate; that's why it needs to be there by statute.

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Martin Lipton, who knows a thing or two about corporations, presents:

On June 25, I presented a paper entitled “Shareholder Activism and the “Eclipse of the Public Corporation”: Is the Current Wave of Activism Causing Another  Tectonic Shift in the American Corporate World?” at the 2008 Directors Forum of The University of Minnesota Law School. The paper discusses the pressures that have been pervasively eroding the centrality of the board of directors and transforming its role in the governance structure of public companies, with the end game being a new conception of the corporate organization. Against the backdrop of the subprime and leveraged loan financial crisis and other recent events, the paper addresses what I regard as the crux of the issue affecting public companies today: whether the institution of the corporate board can cope with these pressures and survive as the vital governing organ of public companies. Or, will a forced migration from director-centric governance to shareholder-centric governance, along with a concomitant transformation of the role of the board from guiding and advising management to ensuring compliance and performing due diligence, simply overwhelm American business corporations?

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Kudos to David Boies:

Fresh off his depiction in “Recount” — the HBO movie about the 2000 election fiasco — David Boies, along with partner Don Flexner, have, on behalf of American Express, negotiated one of the largest antitrust settlements ever for an individual company: $1.8 billion. The settlement with Mastercard comes on the heels of a similar $2.25 billion settlement, also handled by Boies, between AmEx and Visa.

The background: The Supreme Court ruled in 2004 that Visa and MasterCard violated antitrust laws by prohibiting their member banks from offering credit cards that could be used on rival payment networks. AmEx and Discover sued. Here are reports from the WSJ and NYT.

Really, though, kudos to Mr. Feinberg:

Kenneth R. Feinberg, who handled the earlier settlement with Visa and who also oversaw administration of the 9/11 compensation fund, acted as arbitrator in the case during secret negotiations that lasted eight weeks.

And while we're at it, don't forget to review the AAA rules for large, complex commercial disputes. There are two myths about commercial arbitration worth dispelling while on the subject.

First, you are generally not entitled to three arbitrators; you can ask for them, but the only time you'll get them is if you and the other party cannot agree on arbitrators and the case is worth more than $1 million.

Second, there is no rule prohibiting discovery in commercial arbitration, there just isn't any entitlement to it. I frequently recommend following the Federal Rules of Civil Procedure with regard to written discovery, except for depositions, which are limited usually to just the principle witnesses.

Of course, the best part of arbitration from the plaintiff's perspective is the finality, where the pressure of an unappealable award strongly encourages settlement. When you litigate a case through the civil system, there is virtually no chance of settlement prior to scheduling of trial, and, indeed, a good number of cases have to get through verdict and at least some of the appeal before the offers become reasonable. That takes years.

As you can see from the AmEx arbitration, nearly $2 billion dollars changing hands took eight weeks.

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If you're looking for contact information, please go to my Contact page.

The Beasley Firm's main website also profiles our Areas of Expertise.

The Beasley Firm typically represents plaintiffs in civil litigation and trials in Pennsylvania, New Jersey, Delaware and, on occasion, Washington, DC, and New York City. We take difficult plaintiffs' cases and see them all the way through investigation, filing, pleadings, discovery and trial, and through appeal and re-trial, too.

The Beasley Firm is a full-service civil litigation and trial law firm with a forty-year history of excellence. Our reputation as trial lawyers is unparalleled, with multiple record-setting verdicts, and the record (held by the founder) for million-dollar verdicts by a single attorney. Slade McLaughlin and I set a new verdict record -- for punitive damages in a Pennsylvania medical malpractice case -- in May of 2008.

The Beasley Firm is unique in that it has many attorneys who specialize in particular areas like automobile accidents or medical malpractice, multiple appellate attorneys, and many general practitioners who focus on cases that don't fit the normal pattern, all under one roof that retains the nimble energy of a boutique firm where everyone knows each other and bounces ideas off one another. We adapt as the case demands; if a case needs a dozen attorneys and assistants, it gets them.

Most firms put up lists of the types of cases they work on; it's hard to do that for us. In the past year we've worked on automobile accidents, aviation accidents, breach of contract breach of fiduciary duty, business torts, civil rights, commercial litigation, copyright infringement, defamation, dram shop, employment discrimination, fraud, insurance coverage / bad faith denials, medical malpractice, private equity / shareholder disputes, personal injury, product liability, wrongful death, and wrongful use of civil proceedings / abuse of process cases.

We use alternative dispute resolution methods like mediation frequently and have experience in commercial arbitration, including large, complex commercial disputes.

My practice is largely unlimited -- at any given time, I generally have multiple cases representing people who have been physically injured in accidents or through medical malpractice, and multiple cases representing people and businesses who have been financially injured through breaches of contract, breaches of fiduciary duty, or downright fraud.

If you think you have a case, please contact our offices for a case review. We don't charge to review cases and we generally represent plaintiffs on a contingent fee, where our fee depends upon our success. Please see the Contact page for contact info.

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