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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I've posted many times before about the economic realities of medical malpractice liability. Via The Pop Tort, a new study commissioned by the the Society of Actuaries has revealed the economic cost of medical malpractice in America:

SCHAUMBURG, Ill., (Aug. 9, 2010)–Findings from a new study released today estimate that measurable medical errors cost the U.S. economy $19.5 billion in 2008. Commissioned by the Society of Actuaries (SOA) and completed by consultants with Milliman, Inc., the report used claims data to provide an actuarially sound measurement of costs for avoidable medical injuries. Of the approximately $80 billion in costs associated with medical injuries, around 25 percent were the result of avoidable medical errors.

"This report highlights a singular opportunity for both improving the overall quality of care and reducing healthcare costs in this country," says Jim Toole, FSA, CERA, MAAA and managing director of MBA Actuaries, Inc. "Of the $19.5 billion in total costs, approximately $17 billion was the result of providing inpatient, outpatient and prescription drug services to individuals who were affected by medical errors. While this cost is staggering, it also highlights the need to reduce errors and improve quality and efficiency in American healthcare."

Medical errors are a significant source of lost healthcare funds every year. For example, the study found that $1.1 billion was from lost productivity due to related short-term disability claims, and $1.4 billion was lost from increased death rates among individuals who experienced medical errors. According to a recent SOA survey, which identified ways to bend the national healthcare cost curve, 87 percent of actuaries believe that reducing medical errors is an effective way to control healthcare cost trends for the commercial population, and 88 percent believe this to be true for the Medicare population.

"We used a conservative methodology and still found 1.5 million measureable medical errors occurred in 2008," says Jonathan Shreve, FSA, MAAA, consulting actuary for Milliman and co-author of the report. "This number includes only the errors that we could identify through claims data, so the total economic impact of medical errors is in fact greater than what we have reported."

(Emphases added.)

Compare that nearly $20 billion cost — a conservative estimate limited to the ascertainable economic harm, excluding any pain, suffering, embarrassment, humiliation, or mental anguish, caused by avoidable medical errors — to the mere $4.694 billion paid out to medical malpractice plaintiffs in 2008 (see Exhibit D).

That is to say, payouts to malpractice victims amount to less than one-quarter of the economic damage caused by the malpractice itself.

If someone told you that oil companies only paid twenty-three cents for every dollar of damage they negligently caused through avoidable oil spills, what would you say?

If someone told you that car, airplane or boat companies only paid twenty-three cents for every dollar of damage they negligently caused through defective designs and manufacturing, what would you say?

If someone told you that fast food companies only paid twenty-three cents for every dollar of damage they negligently caused through avoidable food poisoning, what would you say?

If someone told you that consumer appliance companies only paid twenty-three cents for every dollar of damage they negligently caused through electric shorts that caused fires, what would you say?

Would you say there was a liability "crisis" caused by an "explosion" of "frivolous" litigation?

Or would you say those companies weren't living up to their responsibilities?

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In The National Law Journal:

Sen. Arlen Specter, D-Pa., took to the floor of the Senate on Monday to talk about the vacancy on the Supreme Court, and while he was at it, one of his favorite Supreme Court topics: camera access.

"I believe Congress has the authority, should it choose to do so, to direct the Supreme Court to permit its proceedings to be televised," Specter said.

...

"If the public had access to what was going on in the Supreme Court," Specter said, "it seems to me there would be a clamor to have more openness, more transparency, and greater public appreciation of the fact that the Supreme Court is a battleground."

Congress is a highly deliberative body. Four-hundred thirty-five Representatives and one-hundred Senators, their personal staffs, the Congressional services, the public and, yes, even lobbyists for corporations and non-profits look over each and every bill dozens of times before it is passed. Dense parliamentary rules in the House and the Senate ensure that the bills receive — or at least should receive — thorough review as they move from introduction, to committee, to floor, to conference, and then back to the floor. It's a challenge even to understand, much less master, the rules.

The Executive is similarly embedded with multiple degrees of deliberation and review at every level. Before agencies change their policies, they go through extensive rulemaking, including a public notice-and-comment period — sometimes more than once — to ensure that scholars, activists, lobbyists and the public at large can review, consider, comment on and react to the proposed changes. Take a look at the thousands of proposed regulations just waiting for your comments.

Not so with the Supreme Court. It's a black box: after filing the lower court's opinion, an opening brief, a response brief, a reply brief, and then conducting an hour of argument total, the supreme law of the land comes out, fully formed. It cannot be rescinded. It cannot be simplified or clarified, not even when, like in Washington v. Davis, the Supreme Court laid down an "objective and quite workable" rule that was literally interpreted differently in every state in the union.

At best, flawed rulings can only be supplemented through an opinion in a years or decades later "case or controversy." 

As I wrote before:

Why wait until the damage has been done — why not invite public comment before the opinions become law?

[...]

Just how powerful is the public comment process?

Consider epidemiology. As Jennifer Gardy, the co-head of British Columbia Centre for Disease Control explains in this fascinating talk (via), when the SARS coronavirus pandemic began in 2003, it took 19 days just to sequence the virus's genome. This year, after the H1N1/09 influence was declared a pandemic, by the 19th day dozens of virus genomes had been sequenced, the origin and spread of the virus had been established, and a vaccine was already in the works. (Read more from Gardy here; see late-breaking H1N1 research in progress at the Public Library of Science's Currents.)

Indeed, open access / public commenting is how most of academia functions these days. Draft social science and law journal articles are posted on SSRN prior to publication. Draft papers on physics, mathematics, and other complex quantitative papers are posted on arXiv.org.

It's hard to think of any field of government or scholarship today in which work not subject to public scrutiny is considered worthy of use by others; in cryptography, for example, any encryption method which doesn't make its source code available for public scrutiny, like even the government's own encryption standard is available, is presumed worthless.

Individual collegiate evaluation worked for Henry Oldenburg when he was peer-reviewing the Philosophical Transactions of the Royal Society back in 1665. It doesn't work so well when nine Justices are supposed to decide cases of national importance involving hundreds of thousands of pages of briefs, precedent, statutes, regulations, and appellate records at a rate of one opinion issued every four or five days, every word of which will be pondered, analyzed, scrutinized, and, unfortunately, misinterpreted by courts every day.

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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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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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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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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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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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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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As Justice Oliver Wendell Holmes wrote,

Great cases, like hard cases, make bad law. For great cases are called great, not by reason of their importance in shaping the law of the future, but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment.

Northern Securities Co. v. United States, 193 U.S. 197, 400–401 (1904)(Holmes, J., dissenting).

That idea seems to be on David Feige's mind when he writes in Slate about the upcoming trial of admitted 9/11 mastermind Khalid Sheikh Mohammed:

No jury on this continent is going to acquit their client, the government is certain to insist on the death penalty, and KSM will almost certainly try to put the government on trial. So what's a team of hardworking criminal defense attorneys to do?

Everything they can, which, in this case, will mean a lot of futile maneuvering that will generate a tragic flood of bad law, rendering the defense team's valiant service not merely unsuccessful but actually hostile to the interests of all their other clients. ...

In an idealized view, our judicial system is insulated from the ribald passions of politics. In reality, those passions suffuse the criminal justice system, and no matter how compelling the case for suppressing evidence that would actually effect the trial might be, given the politics at play, there is no judge in the country who will seriously endanger the prosecution. Instead, with the defense motions duly denied, the case will proceed to trial, and then (as no jury in the country is going to acquit KSM) to conviction and a series of appeals. And that's where the ultimate effect of a vigorous defense of KSM gets really grim.

At each stage of the appellate process, a higher court will countenance the cowardly decisions made by the trial judge, ennobling them with the unfortunate force of precedent.

That's surely a possibility. The trial of the admitted mastermind of 9/11 is, due to "immediate overwhelming interest," most certainly "great" under Holmes' definition.

On the other hand, whatever apparent principles, rules or interpretations of law laid down by the courts in the prosecution admitted mastermind of 9/11 will be forever indelibly stamped with an annotation that the case involved no less than the admitted mastermind of 9/11.

Moreover, the courts, aware of the "greatness" and/or difficulty of the case, often make an extra effort to minimize the precedental value of their opinion.

Consider Bush v. Gore, certainly the "greatest" — at least in terms of immediate impact — legal ruling in recent memory, which openly instructed future courts to ignore it entirely: 

Our consideration is limited to the present circumstances, for the problem of equal protection in election processes generally presents many complexities.

Bush v. Gore, 531 U.S. 98, 109 (2000). Indeed, Bush v. Gore has been treated by many as a singular case that served a pre-determined goal rather than an evolutionary step in the progression of election law. For a number of courts, the case is downright radioactive due precisely to its "greatness."

Our Constitution's protections for the criminally accused were drafted by a generation among whom treason was commonplace, then sculpted over eleven score years of rebels, thieves, gangsters, murderers and even a protracted civil war followed by decades of reconciliation and the integration of oppressed minorities into equal society in the face of socially-approved violence. Those protections can handle a couple trials of admitted mass murderers.

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"Removal" is the process by which a defendant in a state court case "removes" the case to federal court. 28 U.S.C. § 1441(b) makes it sound so simple:

Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.

There are two ideas behind removal, each expressed in their own sentence above. (If you're in the mood for some light reading of 18th century constitutional debates, here's primary source material on federal court jurisdiction.)

The first idea (in the first sentence) is that defendants have the right to have claims made against them under federal law heard by a federal court. For example, if plaintiff brings a claim under the RICO Act, a claim for violation of federal constitutional rights, or a claim under the Lanham Act, then the defendant has the right to remove the case to federal court so that a federal court will preside over the federal claims.

The second idea (in the second sentence) dates to the beginning of our Republic: federal courts, where the judges were appointed by the President and confirmed by the Senate, were (and still are) perceived as being less likely to be biased in favor of local litigants than state courts, where the judges were either elected by the public or appointed by state officials. The "other such actions" described by 28 U.S.C. § 1441(b) refer to cases brought under "diversity" jurisdiction, which allows plaintiffs in one state to sue defendants in another state in federal court, regardless of the claims brought. Thus, out-of-state defendants concerned about bias in a plaintiff's home state can remove cases if the case could have been filed in federal court in the first place under "diversity" jurisdiction.

Diversity jurisdiction, however, is disfavored by the federal courts. Personally, I think the most simple reason for the federal courts' dislike for diversity jurisdiction is because, much like how we prefer federal courts preside over cases bringing federal claims (as reflected by the first part of 28 U.S.C. § 1441(b)), we prefer state courts preside over cases bringing state claims. Much like how a defendant has an interest in having federal law claims against them heard in federal court, a plaintiff has an interest in having their state law claims heard in state court.

The United States Constitution provides for a limited federal government, including a limited federal judiciary. Thus, the requirements for removal have been strictly construed, since loosely construing them would violate basic principles of federalism:

Because lack of jurisdiction would make any decree in the case void and the continuation of the litigation in federal court futile, the removal statute should be strictly construed and all doubts resolved in favor of remand." Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985) (citations omitted). If there is any doubt as to the propriety of removal, that case should not be removed to federal court. See Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990), cert. denied, 498 U.S. 1085, 111 S. Ct. 959, 112 L. Ed. 2d 1046 (1991).

Brown v. Francis, 75 F.3d 860, 864–865 (3d Cir. 1996). 

The latest "fad" among defense lawyers — more on the source of the word "fad" in a moment — is to hire companies to monitor state court dockets for suits against big corporations, particularly class actions alleging product liability. The moment a plaintiff files a lawsuit that includes any out-of-state defendants, the big corporations collude to have the out-of-state defendant file for removal, on the grounds that the in-state defendants haven't been "properly joined and served" yet.

It doesn't matter if the case involves 99 in-state defendants and 1 out-of-state defendant. It doesn't matter, if, quite obviously, the case could not have been filed in the first instance as a diversity case, since it involves in-state defendants, too. The big corporations found themselves a dubious loophole and decided to run with it.

And run with it they have: the defense gurus at Drug & Device Law have tallied a few dozen of these cases across the country. The defense argument is always the same: under the "plain meaning" of the statute, we can remove any case we want if the in-state defendants haven't been served yet.

It's a silly argument: the plain meaning rule does not permit a court to find a "plain" meaning “demonstrably at odds with the intentions of the drafters.” United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242 (1989). There is, of course, no indication that Congress intended to let defendants avoid the strict, centuries-old federal policies against diversity jurisdiction and against removal by setting up a computer program that downloads the state court dockets every 10 minutes.

The more compelling "plain meaning" of 28 U.S.C. § 1441(b) is that Congress wanted to ensure the in-state defendants were "proper" defendants, and thus prevent plaintiffs from adding bogus in-state defendants to a lawsuit.

The defendants' game worked for a while, but the tide is turning.

Via Gregory P. Joseph's Complex Litigation Blog, we see the Northern District of Ohio rejecting the "properly joined and served" silliness:

Comerica's interpretation of §1441(b) suggests that the language "properly joined and served" creates an exception to the forum defendant rule. This argument is not novel; in fact, it has been the topic of much jurisprudential debate with varying success across the country. I, however, have no need to survey such case law because the Northern District of Ohio recently rejected Comerica's argument in a case of first impression. In Ethington v. Gen. Elec. Co., 575 F. Supp. 2d 855, 861 (N.D. Ohio), my colleague, District Judge Dan Aaron Polster, engaged in a thorough review of available case law.

And what does Ethington say?

The Court further notes that the growing trend among district courts wrestling with this latest litigation fad is to grant a timely motion to remand. While a review of the Frick, Thomson, and Ripley cases indeed shows that the judges in those cases abided by the plain meaning interpretation of the forum defendant rule, the GE Defendants' assertion that the New Jersey federal district courts 'ha[ve] rejected Plaintiffs' argument' is disingenuous at best; it fails to acknowledge that Frick (issued February 23, 2006), Thomson (May 22, 2007), and Ripley (Aug. 16, 2007) were each issued well in advance of the more recent case law from the District of New Jersey -- starting with Judge Chesler's opinion in DeAngelo-Shuayto -- that in fact rejected the approach taken in those three earlier cases. See, e.g., DeAngelo-Shuayto, 2007 U.S. Dist. LEXIS 92557, at 5, 2007 WL 4365311, at *3 (finding that '§ 1441(b) must bar removal by a forum defendant, whether it has been served or not'); Fields, 2007 U.S. Dist. LEXIS 92555, at *12-13, 2007 WL 4365312, at *5 (rejecting the plain language approach because it would create an 'untenable result' that would 'eviscerate the purpose of the forum defendant rule,' and holding that 'the 'properly joined and served' language of § 1441(b) does not encompass the situation in which the removing party is a forum defendant, and that in such situations removal to federal court is improper.'). See also, Brown, 2008 U.S. Dist. LEXIS 55490, at *8, 2008 WL 2833294, at *5 (adopting magistrate judge's report and recommendation with additional analysis, explicitly embracing the reasoning provided in the R&R, DeAngelo-Shuayto, and Fields, and stating 'this Court agrees with [the conclusion] that § 1441(b) must be read to preclude removal by an in-state defendant whether it has been served or not.'); Brown v. Organon USA Inc. (hereafter 'Brown R&R'), 2008 U.S. Dist. LEXIS 50179, at *24-25, 2008 WL 2625355, at *8 (D.N.J. June 27, 2008) (M.J. Salas) (magistrate judge's R&R concluding that '[t]he Court agrees with DeAngelo-Shuayto' and finding 'that § 1441(b) bars a forum defendant from removing to federal court even if they have not been 'properly joined and served.''); Optec Displays, Inc. v. Am. Maint., Inc., 2008 U.S. Dist. LEXIS 47562, at *3, 2008 WL 2510633, at *2 (D.N.J. June 16, 2008) (J. Debevoise) (remanding removed case with forum defendant, and explaining that 'even if [defendant] was not properly joined and served, it is still precluded, as a forum defendant, from removing the action to federal court.') (citing DeAngelo-Shuayto, 2007 U.S. Dist. LEXIS 92557, at *15, 2007 WL 4365311, at *3)).).

Notably, these more recent New Jersey federal district court cases are not alone in adopting Judge Chesler's reasoning and analysis on the proper way to interpret § 1441(b). Other federal district courts as of late have likewise followed the reasoning articulated in DeAngelo-Shuayto. See, e.g., Allen, 2008 U.S. Dist. LEXIS 42491, at *13-15, 17-18, 2008 WL 2247067, at *4-6; Vivas v. Boeing Co., 486 F. Supp. 2d 726 (N.D.Ill. 2007) (J. Lefkow). (See also, ECF No. 30-2, Pls.' Rep. Mem., Ex. A to Aff. Dec. of Mitchell M. Breit, 1-6 (remand order in Evans v. GlaxoSmithKline PLC, Civ. A. No. 07-5046 (Jan. 10, 2008) (J. Brody); remand order in Hance v. GlaxoSmithKline PLC, Civ. A. No. 07-5047 (Jan. 10, 2008) (J. Brody); remand order in Malone v. GlaxoSmithKline PLC, Civ. A. No. 07-5048, 2007 U.S. Dist. LEXIS 97461 (Dec. 4, 2007) (J. Savage) (citing Oxendine v. Merck & Co., Inc., 236 F. Supp. 2d 517, 524-25 (D. Md. 2002)); remand order in Scott v. GlaxoSmithKline PLC, No. 07-CV-5049, Order of March 11, 2008, 2008 U.S. Dist. LEXIS 84490, n.1 (E.D. Pa. Mar. 11, 2008) (J. Joyner)).) But see Flores v. Merck & Co. (In re Fosamax Prods. Liab. Litig.), 2008 U.S. Dist. LEXIS 57473, at *37-38, 2008 WL 2940560, at *2 (S.D.N.Y. July 28, 2008) (a recent federal district court opinion invoking the plain language of § 1441(b) with little analysis to deny plaintiff's motion to remand).

After considering Sixth Circuit precedent on statutory interpretation and carefully reviewing case law on both sides of a federal district court split, the Court finds that applying the plain language of § 1441(b) would produce a result demonstrably at odds with Congressional intent underpinning the forum defendant rule, and specifically with the 'properly joined and served' language. Accordingly, the Court hereby joins the DeAngelo-Shuayto line of cases, and in so doing, the Court incorporates and adopts the well-reasoned, thorough analysis and holdings of Judge Chesler in DeAngelo-Shuayto as the basis for the instant ruling.

Ethington v. GE, 575 F. Supp. 2d 855, 864 (N.D. Ohio 2008). A "fad" that is "demonstrably at odds with Congressional intent." 

Told you so.

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One of the positive parts of being involved with The Philadelphia Inquirer's bankruptcy is, though I've had to slog my way through over 1,500 separate filings (most of which are irrelevant to my clients) since The Inquirer filed bankruptcy in February, I've also been privy to extraordinarily exhaustive briefings of what are, on the surface, "simple" issues.

A $300 million question in the bankruptcy is whether the banks that loaned the current owners the money to buy the company back in 2006 can use their existing debt to "bid" on its assets at the auction proposed by management. The question should be answered in the text of the Bankruptcy Code; unsurprisingly, both the banks and management have asserted that the text of the Bankruptcy Code clearly and unambiguously supports their position.

Such a dispute means it's time to pull out the old canons of statutory interpretation.

Judge Robreno's Order yesterday — in which Judge Robreno reversed Judge Raslavich's interpretation of when a debtor may deny secured creditors the ability to "credit bid" in a pre-confirmation auction — provided a remarkably thorough description of the plain meaning rule, which I post below in full so all can cherry-pick for their own cases within our great United States Court of Appeals for the Third Circuit.

(In case you're confused why Judge Robreno of the District Court is acting as an appellate court, note that the District Court initially hears appeals from Bankruptcy Court.)

* * *

It is often said that the polestar for interpreting a statute is to ascertain the intent of Congress. See White v. Lord Abbett & Co. LLC (In re Lord Abbett Mutual Funds Fee Litig.), 553 F.3d 248, 255 (3d Cir. 2009).  “The role of the courts in interpreting a statute is to give effect to Congress's intent.” Alston v. Countrywide Fin. Corp., --- F.3d ---, 2009 WL 3448264, at *4 (3d Cir. Oct. 28, 2009) (quoting United States v. Diallo, 575 F.3d 252, 256 (3d Cir. 2009)). In seeking to ascertain the intent of a statute, a court is bound to follow principles of statutory construction. See In re J.E. Brenneman Co., Inc., 277 F. Supp. 2d 518, 521 (E.D. Pa. 2003) (Yohn, J.) (recognizing that in interpreting the intent of Congress a district court follows established precepts of statutory interpretation).

“Because it is presumed that Congress expresses its intent through the ordinary meaning of its language, every exercise of statutory interpretation begins with an examination of the plain language of the statute.” Alston, --- F.3d ---, 2009 WL 3448264, at *4 (quoting United States v. Diallo, 575 F.3d 252, 256 (3d Cir. 2009) (internal quotation marks and citation omitted)); see also Lamie v. United States Tr., 540 U.S. 526, 534 (2004) (“[W]hen the statute's language is plain, the sole function of the courts . . . is to enforce it according to its terms.”). Thus, the necessary starting point in any attempt to discern congressional intent is the language of the statute itself. United States v. Abbott, 574 F.3d 203, 206 (3d Cir. 2009) (“As in all cases of statutory interpretation, our inquiry begins with the language of the statute and focuses on Congress' intent.”) (citing United States v. Whited, 311 F.3d 259, 263-64 (3d Cir. 2002)); In re Armstrong World Indus., Inc., 432 F.3d 507, 512 (3d Cir. 2005) (citing United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989)); Idahoan Fresh v. Advantage Produce, Inc., 157 F.3d 197, 202 (3d Cir. 1998).

This plain meaning rule dictates that where the meaning of the relevant statutory language is clear then no further inquiry is required. In re Armstrong, 432 F.3d at 512; Abdul-Akbar v. McKelvie, 239 F.3d 307, 313 (3d Cir. 2001) (en banc) (where the statutory language “admits of no more than one meaning the duty of interpretation does not arise and the rules which are to aid doubtful meanings need no discussion”) (internal quotation and citation omitted); Lancashire Coal Co. v. Sec'y of Labor, Mine Safety and Health Admin. (MSHA), 968 F.2d 388, 391 (3d Cir. 1992) (“[W]hen the statutory language is clear a court need ordinarily look no further.”).

Adherence to the plain meaning rule is not simply a matter of judicial craftsmanship. Faithfulness to the words Congress has used in enacting a statute promotes respect for Congress as the principal source of positive law in a democratic society. See Lamie, 540 U.S. at 536 (“We should prefer the plain meaning since that approach respects the words of Congress.”); Pub. Citizen v. U.S. Dep’t. of Justice, 491 U.S. 440, 470-71 (1989) (Kennedy, J., concurring) (recognizing that departure from the plain meaning rule, except in limited circumstances where completely necessary, would intrude upon the lawmaking powers of Congress). Furthermore, allegiance to the plain meaning rule also disciplines courts to avoid making policy choices where the intent of Congress is expressed in the language of the statute. Pub. Citizen, 491 U.S. at 471 (Kennedy, J., concurring) (noting that courts should act with self-discipline in refraining from nonchalantly applying exceptions to the plain meaning rule); Lamie, 540 U.S. at 538 (stating that the “unwillingness to soften the import of Congress' chosen words . . . results from ‘deference to the supremacy of the Legislature, as well as recognition that Congressmen typically vote on the language of a bill.’”) (quoting United States v. Locke, 471 U.S. 84, 95 (1985) (internal citation omitted)).

There is a hierarchical approach that courts must follow in construing a statute. First, the Court “determine[s] whether the language at issue has a plain and unambiguous meaning.” Dobrek v. Phelan, 419 F.3d 259, 263 (3d Cir. 2005) (citing Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 (2002)). In order to be ambiguous, the disputed language must be “reasonably susceptible of different interpretations.” Id. at 264 (quoting Nat’l R.R. Passenger Corp. v. Atchison Topeka & Santa Fe Ry. Co., 470 U.S. 451, 473 n.27 (1985)). The plain meaning approach requires a court to “read the statute in its ordinary and natural sense.” Harvard Secured Creditors Liquidation Trust, v. I.R.S. (In re Harvard Indus., Inc.), 568 F.3d 444, 451 (3d Cir. 2009) (internal quotation marks and citations omitted). If the language is clear, “‘Congress says in a statute what it means and means in a statute what it says there.’” Singer v. Franklin Boxboard Co. (In re Am. Pad & Paper Co.), 478 F.3d 546, 554 (3d Cir. 2007) (quoting Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6 (2000) (internal quotation marks and citation omitted)). If no ambiguity exists, then the plain meaning of the text is conclusive and the inquiry generally comes to an end. Lawrence v. City of Phila., Pa., 527 F.3d 299, 316-17 (3d Cir. 2008) (“The plain meaning of the text should be conclusive, except in the rare instance when the court determines that the plain meaning is ambiguous.”); AT & T, Inc. v. F.C.C., 582 F.3d 490, 498 (3d Cir. 2009)(finding that a determination that the statutory language was unambiguous negates consideration of arguments concerning statutory purpose, non-binding case law, and legislative history).

Second, if the statutory language appears to be unambiguous, a court must look beyond that plain language where a literal interpretation would lead to an absurd result, or would otherwise produce a result “demonstrably at odds with the intentions of the drafters.” United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242 (1989) (internal quotation marks omitted); In re Kaiser Aluminum Corp., 456 F.3d 328, 330 (3d Cir. 2006) ("A basic principle of statutory construction is that we should avoid a statutory interpretation that leads to absurd results.") (citing Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 575 (1982)); Mitchell v. Horn, 318 F.3d 523, 535 (3d Cir. 2003) ("We do not look past the plain meaning unless it produces a result demonstrably at odds with the intentions of its drafters . . . or an outcome so bizarre that Congress could not have intended it."). It is only in “rare cases” that a literal application will produce such results. See In re Mehta, 310 F.3d 308, 311 (3d Cir. 2002) (internal citation omitted); Abdul-Akbar, 239 F.3d at 313 (internal citation omitted).

Third, if application of the plain meaning approach dictates that the language is ambiguous or that application of the statute would lead to results demonstrably at odds with congressional intent, then the Court may employ other traditional tools of statutory interpretation.

Where the plain meaning approach does not clearly define the disputed language, the Court should construe the relevant provision in the context of the statute as a whole. Kaufman v. Allstate N.J. Ins. Co., 561 F.3d 144, 156 (3d Cir. 2009) (citing Dolan v. U.S. Postal Serv., 546 U.S. 481, 486 (2006)). It is inappropriate, however, to reference other statutory provisions in order to create an ambiguity where none would otherwise exist. See Dir., Office of Workers' Comp. Programs v. Sun Ship, Inc., 150 F.3d 288, 292 (3d Cir. 1998) (finding that related statutory sections could not be used to create an ambiguity where the language was clear).

Further, courts may resort to canons of statutory construction, such as ejusdem generis, when the plain meaning approach does not yield a conclusive result. Baltimore County, MD. v. Hechinger Liquidation Trust (In re Hechinger Inv. Co. of Del., Inc.), 335 F.3d 243, 254 (3d Cir. 2003) (concluding that even if section 1146 of the Bankruptcy Code was ambiguous, the court’s interpretation was supported by two canons of construction); Folger Adam Sec., Inc. v. DeMatteis/MacGregor JV, 209 F.3d 252, 258 (3d Cir. 2000) (applying canons of construction to ambiguous term “any interest” in section 363(f) of the Bankruptcy Code). These canons of construction only serve as rules of thumb and “are often countered ... by some maxim pointing in a different direction.” United States v. Cooper, 396 F.3d 308, 313 (3d Cir. 2005)

One tool often used in parsing out ambiguity in the language of the statute is legislative history. It is recognized that legislative history is a “useful and appropriate tool for [an] inquiry into congressional intent” when the plain statutory text is ambiguous. Francis v. Mineta, 505 F.3d 266, 270-71 (3d Cir. 2007); In re Harvard Indus., 568 F.3d at 451. Cf. Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 406 (3d Cir. 2004) (“The Supreme Court has repeatedly explained that recourse to legislative history or underlying legislative intent is unnecessary when a statute's text is clear and does not lead to an absurd result.”) (internal citation omitted). Based upon the inherent difficulty in distilling precise congressional intent from the amorphous nature of legislative history, however, the Third Circuit has instructed that “[f]or the vast majority of ambiguous statutory provisions, then, relying on legislative history to discern legislative intent should be done with caution, if at all.” Morgan v. Gay, 466 F.3d 276, 278 (3d Cir. 2006).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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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The AmLaw Daily reports:

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

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

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

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

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

Each party shall bear its own costs and attorney fees.

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

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

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

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

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

Opening Argument - Max Kennerly

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

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

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

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

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

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

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

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

Counter Argument - WhiteCoat

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

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

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

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

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

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

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

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

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For years, gender equality advocates have argued that Title VII's prohibition on sex discrimination in employment also prohibited discrimination on the basis of sexual orientation, because the latter is inherently sex discrimination, since it's based on preconceived notions of how men and women should act.

The theory has generally been rejected by federal courts, which have refused to incorporate sexual orientation discrimination into Title VII. Worse, a number of courts have used the rejection of the sexual orientation claims as a de facto prohibition on all claims brought by gay plaintiffs, even where the facts clearly showed discrimination on the basis of sex and sexual orientation.

Last week the Third Circuit reversed that trend:

On Friday, the U.S. Court of Appeals for the Third Circuit issued a ruling in Prowel v. Wise Business Forms, 07-3997 (3d Cir. Aug. 28, 2009), which states clearly that a plaintiff can bring a claim of gender stereotyping sex discrimination under Title VII even if there is coexisting evidence of sexual orientation discrimination.  This ruling is an important victory for women’s rights advocates and will have an especially helpful impact on women in nontraditional employment, who frequently suffer not only gender stereotyping discrimination, but also discrimination on the basis of their real or perceived sexual orientation.

...

In discussing Mr. Prowel’s gender stereotyping discrimination claim, Judge Hardiman writing for the unanimous appeals court panel reasoned:

[The employer] argues persuasively that every case of sexual orientation discrimination cannot translate into a triable case of gender stereotyping discrimination, which would contradict Congress’s decision not to make sexual orientation discrimination cognizable under Title VII.  Nevertheless, [the employer] cannot persuasively argue that because Prowel is homosexual, he is precluded from bringing a gender stereotyping claim.  There is no basis in the statutory or case law to support the notion that an effeminate heterosexual man can bring a gender stereotyping claim while an effeminate homosexual man may not.  As long as the employee–regardless of his or her sexual orientation–marshals sufficient evidence such that a reasonable jury could conclude that harassment or discrimination occurred “because of sex,” the case is not appropriate for summary judgment.

Judge Hardiman quoted language from the famous gender stereotyping case of Price Waterhouse v. Hopkins, 490 U.S. 228, 251 (1989) (plurality opinion): “We are beyond the day when an employer could evaluate employees by assuming or insisting that they matched the stereotype associated with their group, for ‘[i]n forbidding employers to discriminate against individuals because of their sex, Congress intended to strike at the entire spectrum of disparate treatment of men and women resulting from sex stereotypes.’”

The Women's Law Project here in Philadelphia submitted an amicus brief in the case, available at their blog.

Thus, as a result of the ruling, employers in the Third Circuit can discriminate on the basis of sexual orientation, but not on the basis of gender stereotypes. If anyone out there knows how defendants could ever prove that in court, there's a couple hundred employment discrimination defense lawyers in Philadelphia just dying to hear from you.

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On Tuesday, The New York Times reported:

The finger-pointing in Merrill Lynch’s bonus troubles shifted to a new target on Monday in two court documents that essentially said: blame the lawyers.

Responding to questions posed by a federal judge, Bank of America and the Securities and Exchange Commission said the bank had relied on its outside lawyers to fill in the fine print in that firm’s controversial marriage with Bank of America.

That meant that lawyers at two firms — Wachtell, Lipton, Rosen & Katz as well as Shearman & Sterling — handled a decision to keep Merrill’s $3.6 billion in bonus payouts a secret from Bank of America’s shareholders, according to the filings.

It is unclear if the responses will satisfy the judge who requested them, Judge Jed S. Rakoff of the Southern District of New York. He has the power to decide whether to approve a $33 million settlement reached between Bank of America and the S.E.C. over the bank’s failure to disclose the bonuses to its shareholders.

I was going to write a post about how that bothered me, because, as the AmLaw Litigation Daily noted:

"The preparation of the joint proxy statement, including the decision not to attach the disclosure schedule setting forth the agreement on...bonuses or otherwise disclose its contents in the proxy statement, was made by the lawyers at Wachtell, Shearman, Bank of America and Merrill," the SEC brief says, adding that statements in the proxy materials deliberately misled investors into believing Merrill bonuses would not be paid.

Bank of America did not waive attorney-client privilege for the SEC investigation, so the SEC says its knowledge of what the Wachtell and Shearman lawyers said is limited. The government contends, moreover, that the executives' reliance on their lawyers shields them from fraud accusations because it would be hard to prove scienter.

Bank of America's lawyers at Cleary Gottlieb Steen & Hamilton--Lewis Liman and Shawn Chen--offered precious few of the specifics Judge Rakoff seemed to be asking for at the August 10 hearing. The names of Kenneth Lewis and John Thain, for instance, appear nowhere in BofA's submission. And as for the role of the outside lawyers, the brief merely says: "The parties were represented throughout the process by two law firms with preeminent experience in the field of mergers and acquisitions." Cleary offered no details on who or what those preeminent firms advised about disclosure materials.

Judge Rakoff, however, beat me to it:

Federal judge Jed S. Rakoff fired a new shot in his challenge to a $33 million settlement by Bank of America Corp. over investor disclosures, saying the government's justification for letting individual executives off the hook is "at war with common sense."

The Securities and Exchange Commission reached the settlement with the bank last month. The agency charged that a Bank of America proxy statement in November misled investors about bonuses for employees at Merrill Lynch, which was about to be acquired by the bank.

The SEC has said it couldn't investigate individual executives' culpability because they said they relied on lawyers' advice. Unless the executives waived their right to keep the advice private, the SEC said it would face "substantial obstacles" to building a case.

Judge Rakoff, who must approve any settlement, criticized that reasoning. If that were the regulator's policy, "it would seem that all a corporate officer who has produced a false proxy statement need offer by way of defense is that he or she relied on counsel." He said if the company insists on attorney-client privilege, there is no way to test the assertion and determine whether executives or their lawyers were culpable.

Exactly right. Courts often hold that clients cannot use attorney-client privilege as both a sword and a shield. That is, clients can either use lawyers' advice as a "sword" to defend themselves or they can use the privilege as a "shield" to keep communications private, in which case they're off limits entirely.

But they can't have it both ways. If they could, every defendant would just blame their lawyers and call it a day.

(If you're interested in more, AmLawDaily dug a bit deeper into the ethics issues raised by the litigation.)

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I don't update the "productivity" topic you see to the right as often as I thought I would. As I wrote three months ago, in my most recent "productivity" post (about "batch processing"):

[L]ike Merlin Mann, after an extensive time following the productivity genre/industry in details, I have generally soured on the relentless gadgetry, listmaking, fickleness and obsessiveness of most productivity websites and communities ...

That's not to say studying productivity is a waste of time. Far from it; Benjamin Franklin did it, and look how productive he was.

Maira Kalman, who authors a whimsical biography blog at the New York Times, had a recent piece on Ben, including this fascinating scan from his Almanac:

But how does one arrange that "work" to enhance productivity?

I'm fond of establishing for each day at least one "Most Important Task," a task (or tasks) you absolutely must get done today. Like Zen Habits says, you should probably do your MIT first thing in the morning.

But not all MITs are the same. Some MITs involve mindless, repetitive tasks. Some involve casual conversations or status updates. Some involve reviewing materials to get a sense of them.

Some MITs, however, require real clarity, precision and concentration, like drafting briefs or preparing for depositions. For those, an important observation:

Professional writers spend most days of their adult lives writing. For those among them who specialize on long form non-fiction, their writing is not that different from the types of research papers that plague college students. Assuming that these writers do not want to spend most of the days of their adult lives hating what they are doing, it stands to reason that, over time, they have figured the least painful possible way to schedule a large amount of writing.

With this in mind, I dug up interviews with [ten] masters of long form non-fiction ...

I went through each interview extracting any discussions about the writer’s habits. ...

Nine out of ten writers discussed when during the day they write. All nine worked in the morning. Four also worked during the afternoon. Three worked during night. Only one worked in all three times. Several writers described the afternoon as a mental dead time useful only for exercising and, maybe, editing. ...

Five out of the ten writers provided a specific start time. The latest was 8:30 am. Four other writers who didn’t give a specific time said, in so many words, “in the morning.” No writer described starting their work in the afternoon or evening.

And it's as simple as that: divide up your work by doing the tasks that require the most thought in the morning. Save the calls, meetings and document review for the afternoon.

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[UPDATE: The Volokh Conspiracy, Concurring Opinions and TechDirt picked up on the case and this post as well. Volokh has substantial discussion in the comments, including links to law review articles on the issues of vacated and unpublished opinions, and a comment by the author of The Legal Intelligencer article, Shannon Duffy, noting that you can find the opinions themselves on the Eastern District of Pennsylvania's own website. I have also edited a line (the one quoted by Co-Op) for clarity.]

The Legal Intelligencer reports:

Ordinarily, the decision to settle a case while an appeal is pending means giving up the opportunity to set a legal precedent as well as forgoing the chance to win a reversal of any unfavorable published decisions handed down by the lower court.

But a team of defense lawyers fighting to overturn a $24 million verdict have figured out a way to have their settlement cake and eat their jurisprudence, too.

The confidential settlement in Klein v. Amtrak -- a case in which two trespassing teenagers climbed atop a parked train car and suffered serious burns when they got too close to a 12,000-volt catenary wire -- included an unusual provision that called for the trial judge to vacate all of his published opinions and have them removed from Lexis and Westlaw.

And it worked.

A few months after holding an hourlong oral argument, the 3rd U.S. Circuit Court of Appeals agreed in late July to remand the case to the trial judge, U.S. District Judge Lawrence F. Stengel, who, in turn, agreed to vacate eight of his published opinions and to "direct" Lexis and Westlaw to remove them from their databases.

...

Exactly how the lawyers went about persuading Stengel to take such an unusual step is impossible to say because all of the court papers are under seal and none of the lawyers will talk about it.

The verdict drew a lot of attention in the Philadelphia legal community, not least because of the size and the names of the defendants, most of whom often avoid premises liability on a variety of theories. It's no surprise the defendants want to re-write history to prevent future plaintiffs from finding or referring to the case.

As a citizen, I am a strong believer in open government and governmental accountability, including for the judiciary. As a lawyer, I do not believe a court can ever truly "unpublish" a decision, and I believe that law is made every time a court decides any issue.

As such, I am linking to the free and publicly-available RECAP copies of the "vacated" opinions:

(a) the District Court's March 31, 2008 Memorandum Order denying Defendants' post-trial motions [reported at 2008 WL 879968 and 2008 U.S. Dist. LEXIS 25990] (District Court Docket No. 208).

(b) the District Court's October 11, 2006 Memorandum Order denying Defendants' in limine motion regarding evidence of prior electrical contacts [reported at 2006 WL 2927280 and 2006 U.S. Dist. LEXIS 73940] (District Court Docket No. 130).

(c) the District Court's October 12, 2006. Memorandum Order denying Defendants' in limine motion regarding evidence of prior electrical contacts [reported at 2006 WL 3000955 and 2006 U.S. Dist. LEXIS 75942] (District Court Docket No. 145).

(d) the District Court's March 31, 2006 Memorandum Order denying Defendants' summary judgment motion [reported at 2006. WL 859442 and 2006 U.S. Dist. LEXIS 15331] (District Court Docket No. 58).

(e) the District Court's Memorandum Order, entered August 17, 2006, denying Amtrak's motion to certify pursuant to 28 USC 1292(b) [reported at 2006 WL 2385516 and 2006 U.s. Dist. LEXIS 57613] (District Court Docket No. 72).

(f) the District Court's October 2, 2006 Memorandum Order granting Plaintiffs' motion for reconsideration of the District Court's order of July 13,2006 with respect to Norfolk Southern's liability as a non-possessor of land [reported at 2006 U.S. Dist. LEXIS 80992; not reported in Westlaw] . (District Court Docket No. 111).

(g) the District Court's October 2,2006 Order denying Defendants' in limine motion regarding Amtrak's internal memorandum dated November 17, 1983 and Amtrak's June 20, 1984 letter [This Order is not reported in LexisNexis or Westlaw] (District Court Docket No. 119).

(h) the District Court's October 10, 2006 Memorandum Order denying Defendants' in limine motion regarding evidence of prior electrical contacts for the purpose of proving ·punitive damages [This Order is not reported in LexisNexis or Westlaw] (District Court Docket No. 129).

Law, once made, cannot be unmade.

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

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

It's not easy being green.

But I'm no longer alone.

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

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

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

Like Judge Frank Easterbrook:

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

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

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

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

And Judge Richard Posner:

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

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

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

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

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

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

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You might recall last week's post Hospital Sues Health Insurance Company For Cheating Patients Out of Emergency Care. The allegations were depressing and outrageous, nothing less than an insurance company intimidating patients into risking their own health and safety so that the insurer could cheat a hospital out of reimbursements.

This week it's time to look at the practice of "rescission," whereby the insurance company digs deep into ambiguous policy questionnaires to find any excuse to deny coverage after a large claim has been made.

Taunter Media has a detailed analysis everyone needs to understand when health insurers and their enablers say rescission is "rare," that it affects only one-half of one-percent of insureds:

Half of the insured population uses virtually no health care at all.  The 80th percentile uses only $3,000 (2002 dollars, adjust a bit up for today).  You have to hit the 95th percentile to get anywhere interesting, and even there you have only $11,487 in costs.  It’s the 99th percentile, the people with over $35,000 of medical costs, who represent fully 22% of the entire nation’s medical costs.  These people have chronic, expensive conditions.  They are, to use a technical term, sick.

* * *

If the top 5% is the absolute largest population for whom rescission would make sense [because the cost of care over time might substantially exceed premiums], the probability of having your policy canceled given that you have filed a claim is fully 10% (0.5% rescission/5.0% of the population).  If you take the LA Times estimate that $300mm was saved by abrogating 20,000 policies in California ($15,000/policy), you are somewhere in the 15% zone, depending on the convexity of the top section of population.  If, as I suspect, rescission is targeted toward the truly bankrupting cases – the top 1%, the folks with over $35,000 of annual claims who could never be profitable for the carrier – then the probability of having your policy torn up given a massively expensive condition is pushing 50%. One in two.  You have three times better odds playing Russian Roulette.

Of course rescission is targeted towards the most expensive claims; there's no point rescinding potentially profitable insureds, the point is to minimize payouts by the insurance company.

Every patient can be assured that, upon filing a major claim for chemotherapy or neurosurgery or the like, the insurance company will scour their medical records and application to find for any excuse to deny coverage.

The outrageous part is that half of these investigations of expensive claims result in rescission. Does anyone believe half of these people lied on their insurance forms? The insurance companies certainly don't, which is why the insurance companies refused Congress' suggestion they limit recission to cases of intentional fraud.

If you have health insurance, you have a 99% chance of never needing to worry about rescission because you won't end up costing the company much more than you pay in premiums.

But if you find yourself at any point in that 1% -- as hundreds of thousands of people in America will each year -- then your odds of actually having insurance when you need it are no better than a coin toss.

Patients on government-run Medicare or Medicaid need not worry about rescission.

Like I wrote before: keep these facts in mind next time someone tells you health care reform might involve "rationing." We've already got rationing, but right now it's done for profit, and done without any regard for your health or safety.

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All's fair in love, war and litigation:

An arbitrator cannot sue a lawyer for wrongful use of civil proceedings, the 3rd U.S. Circuit Court of Appeals has ruled, even if the lawyer allegedly lodged false accusations in court papers to have the arbitrator disqualified, because lawyers enjoy an "absolute privilege" that immunizes them from liability over any communication made in the course of litigation.

The five-page unpublished opinion is available here. It says:

The underlying litigation in this case began in 1995 when Anthony Patterson, a
member of the Church of the Lord Jesus Christ of the Apostolic Faith in Philadelphia, filed an action in state court against church leaders alleging that they had looted millions of dollars from the church’s bank accounts. In November 2006, the parties agreed to submit the case to binding arbitration. The parties selected Edward Naythons (“Naythons”), a retired United States Magistrate Judge in the Eastern District of Pennsylvania, as the neutral arbitrator. . . .

Naythons issued the final adjudication in October 2006, but dated it July 25, 2006,
the date he completed it. In November 2006, Stradley filed a motion to vacate the final arbitration award. In December 2006, Stradley filed a petition for a hearing on their petition to vacate, as well as their previous petition for recusal.

About ten months later, Naythons filed a complaint against Stradley. In it, Naythons alleged abuse of process and wrongful use of civil proceedings due to the “scorched earth” litigation strategy Stradley employed and the accusations Stradley leveled against Naythons in the course of making arguments for his recusal. Stradley moved to dismiss the case because Naythons, a non-party to the underlying litigation, lacked standing.

The Third Circuit agreed in a single paragraph of analysis:

Under Pennsylvania law, the District Court correctly dismissed Naythons’s claims
of abuse of process and wrongful use of civil proceedings. Stradley did not “use legal process” against Naythons. Naythons was the arbitrator in the state proceeding, not a party to the action, and the fact that he was named as a respondent in one of the state court petitions is of no import. Permitting Naythons to sustain either of these claims against Stradley would abrogate the doctrine of judicial privilege, whereby “pertinent and material” communications made in in the context of judicial proceedings are absolutely privileged from civil liability. Moses v. McWilliams, 549 A.2d 950, 956 (Pa. Super. Ct. 1988) (citing Post v. Mendel, 507 A.2d 351, 355 (Pa. 1986)). The proper recourse for any unethical conduct on behalf of Stradley is through judicial review of the arbitration proceedings, which could result in sanctions against Stradley if their conduct was as egregious as Naythons alleged in his complaint.

The claims were obviously a long shot -- an arbitrator isn't a party to the case they hear, so nothing is "used" or "initiated" against them.

Why didn't Naythons allege defamation? 

Ask his lawyer, George Bochetto. Bochetto was the plaintiff in the most recent Pennsylvania Supreme Court opinion on "judicial privilege," Bochetto v. Gibson,  which reaffirmed Post:

 Pursuant to the judicial privilege, a person is entitled to absolute immunity for 'communications which are issued in the regular course of judicial proceedings and which are pertinent and material to the redress or relief sought.' Post v. Mendel, 510 Pa. 213, 507 A.2d 351, 355 (Pa. 1986) (emphasis in original). This privilege is based on the 'public policy which permits all suiters, however bold and wicked, however virtuous and timid, to secure access to the courts of justice to present whatever claims, true or false, real or fictitious, they seek to adjudicate.' Id. As we explained in Post, 'to assure that such claims are justly resolved, it is essential that pertinent issues be aired in a manner that is unfettered by the threat of libel or slander suits being filed.' Id. Notably, this privilege is extended not only to parties so that they are not deterred from using the courts, but also to judges so that they may 'administer the law without fear of consequences,' 'to witnesses to encourage their complete and unintimidated testimony in court, and to counsel to enable him to best represent his client's interests.' Binder v. Triangle Publications, Inc., 442 Pa. 319, 275 A.2d 53, 56 (Pa. 1971).

Bochetto v. Gibson, 580 Pa. 245, 251, 860 A.2d 67, 71 (2004).

The Pennsylvania Supreme Court held the privilege did not apply to the facts alleged by Bochetto, however, as the defendant attorney had faxed a copy of the allegedly defamatory complaint to a reporter (at The Legal Intelligencer). Such faxing was not "in the regular course of judicial proceedings."

The lawyers at Stradley Ronon no doubt paid heed the lesson of Bochetto v. Gibson and kept all their allegations within the confines of the litigation. Hence Naythons' and Bochetto's creativity.

I don't know the merits of the allegations either way. Assuming, for a moment, that Naythons' allegations were true and Stradley injured him through "scorched earth " litigation tactics, the immunity granted to them from suit by Nathons is all the more reason that the district court needs its hands free to deal with lawyers and parties who misbehave, the exact issue pending before the Third Circuit in Grider v. Keystone Health.

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Although some physicians continue to claim medical malpractice liability is the biggest problem affecting access to health care (despite the total cost of medical malpractice premiums being $0.50 for every $100 spent on health care, and despite premiums being the lowest they've been in over forty years), the real problem, as alluded to by this American College of Surgeons report, is "declining reimbursement."

That's a euphemism for one of the ugliest businesses in America.

We got a glimpse into that ugly business last week, when Bayonne Hospital Center sued Horizon Blue Cross Blue Shield of New Jersey (hat tip: Movin' Meat), the largest health insurer in New Jersey, with just under 4 million insureds. The press release is mind-boggling:

The complaint, filed late yesterday in the U.S. District Court in Newark, New Jersey, provides a detailed account of Horizon’s business practices which run counter to the insurer’s contractual duties to its customers, its obligations under state law and its stated commitment to the interest of public health. Some of the most offensive Horizon practices detailed in the complaint include:

• A systematic campaign discouraging patients from seeking emergency care at BHC despite it being the closest and safest option for urgent care for the residents of Bayonne
• Intimidation of patients by threatening denial of coverage if they seek treatment at BHC
• Interference with care by sending couriers to BHC to tell patients undergoing medically necessary treatments to leave BHC and seek care at a hospital that is “in network”
• Indefensible denial of claims, often while the patient is still undergoing care
• Unilateral determinations by Horizon bureaucrats that emergency room patients are medically stable enough to be discharged to home or transferred to other in-network facilities without consulting the patient's attending physician

The complaint not only details Horizon’s atrocious behavior and policies with BHC, but also exposes Horizon’s multi-billion dollar financial success at a time when New Jersey’s hospitals cannot afford to provide healthcare to the communities which they serve. The complaint also reveals Horizon’s gold-plated executive compensation packages and its publicly stated plans for conversion to a “for profit” entity and initial public offering.

Keep than in mind next time someone tells you health care reform might involve "rationing." We've already got rationing, but right now it's done for profit, and done without any regard for your health or safety.

The complaint (a poorly rendered version is available here) alleges thirteen counts, which I break into four main types of claims: antitrust, ERISA, consumer fraud (including Lanham Act), and business torts.

I find that approach a little odd. Most cases involving fraudulent claims denials by insurance companies -- like Grider v. Keystone Health -- primarily allege racketeering ("RICO") claims. Antitrust continues to be notoriously hard to prove, and recent efforts to reform it have already run into trouble. ERISA is a wicked beast of a claim, with dozens of loops and curveballs, and though it quite clearly covers how employers administer the health benefits plans they run, it's not clear how it applies to the health insurance company itself.

That said, these cases aren't easy or simple, and I give the lawyers credit for creativity. They may end up making good law here, and perhaps they'll amend to allege RICO later.

Of course, let's not forget why Grider v. Keystone Health became so prominent: because the defense lawyers for the health insurance company, taking their cues from the client, brought the obstructionism and deception that pervades the health insurance industry into the courtroom, prompting severe sanction from the court.

Like I said: one of the ugliest businesses in America.

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How Appealing points to this Shannon Duffy article in The Legal Intelligencer:

Shockwaves reverberated through the civil defense bar in September 2007 when a federal judge imposed sanctions on several lawyers and their clients for engaging in discovery tactics that the judge said were designed to delay and drive up the costs, but that many lawyers say are nothing more than business as usual. * * *

The case has become a cause among defense lawyers who argue that if the sanctions imposed by U.S. District Judge James Knoll Gardner are not lifted, they will find it difficult to represent their clients properly.

The Philadelphia Bar Association took the rare step of filing an amicus brief in the appeal, saying Gardner's ruling, if upheld, threatens to "increase substantially the cost of civil litigation and to chill the zealous advocacy that is every attorney's duty and the cornerstone of our judicial system." * * *

In his September 2007 decision, Gardner imposed sanctions on attorneys John S. Summers of Hangley Aronchick Segal & Pudlin; Daniel B. Huyett and Jeffrey D. Bukowski of Stevens & Lee; and Sandra A. Girifalco of Stradley Ronon Stevens & Young.

Gardner's blistering 77-page opinion concluded that the lawyers and their clients -- a pair of insurance companies -- had acted in bad faith.

By way of background, as The Legal notes,

The underlying suit was brought by a class of doctors and alleged RICO claims against Capital Blue Cross, Highmark Inc. and their jointly formed HMO, Keystone Health Plan Central. The doctors claimed they were being cheated out of their rightful fees because the insurers "shave" capitation payments to doctors by under-reporting the number of patients enrolled in the doctors' practice groups. ... The suit also accuses the insurers of defrauding doctors by "manipulating" the medical service codes used to calculate reimbursements.

Simple, right? Sure, it's a lot of documents, but they're the defendants' own payment processing documents, so they should be readily accessible.

You can read the District Court opinion here. Let's highlight some of Judge Gardner's findings:

The corporate defendants have repeatedly denied that they have access to the requested information, and have misrepresented the nature of their roles in the claims submission process. Moreover, defense counsel have feigned misunderstanding of words, terms and phrases clearly understood by them and their clients. * * * 

As stated in Finding of Fact 26, on March 1, 2004 Attorney Summers sent a letter to the court attaching a series of Declarations which affirmatively represented to the court that plaintiffs’ allegations of bundling and downcoding lacked any factual basis, and that those claims were “without merit”. Thereafter, defendant Keystone, through its counsel, Attorney Summers, refused to produce the underlying documents and data compilations which supported the Declarations on a number of frequently changing bases. Initially, Attorney Summers withheld the underlying documents and data compilations because they allegedly constituted lay opinion. Next, Attorney Summers withheld the information on the basis that it was expert opinion and immune from discovery. Finally, Attorney Summers asserted
that the underlying information was privileged material pursuant to either the attorney-client privilege or the attorney work product doctrine.

As noted by my colleague Senior United States District Judge J. William Ditter, Jr., “It is not good faith for a lawyer to frustrate discovery requests...with successive objections like a magician pulling another and another and then still another rabbit out of a hat.” Massachusetts School of Law at Andover, Inc. v. American Bar Association, 914 F.Supp. 1172, 1177 (E.D.Pa. 1996). * * * 

The most egregious instance of late production involves Keystone’s late production of claims data. Keystone claimed for years that it was unable to provide claims data. During the same time that Keystone and its counsel were feigning an inability to produce claims data (which it owned according to the ASA agreement with Synertech), Keystone was using claims data for its own self-serving purposes (i.e., the Declarations sent to the court on March 1, 2005). * * *

This case is about claims processing. To deny plaintiffs the data which Keystone owns is equivalent to denying plaintiffs their day in court. Without this data it will be more difficult for plaintiffs to prove their claims. I conclude that this is exactly what defendant Keystone hoped to accomplish by thwarting discovery in this case.

From reading the opinion, it seems the defendants' strategy was two-pronged:

1. Thwart plaintiffs' discovery by repeatedly inventing new excuses for not producing the claims processing data, and,
2. Distract, delay, and overwhelm the court and the plaintiffs by repeatedly interjecting collateral issues through "declarations."

The beauty of this plan is that it rapidly snowballs: once you introduce a new issue through #2, you can then apply #1 to refuse any further discovery into it, complicating and delaying the case further, which is apparently what happened here:

After appointment of Special Discovery Master Blume, the parties spent a period of time productively dealing with discovery issues. Plaintiffs have accepted all the decisions of Special Discovery Master Blume. Defendants initially accepted many of her decisions, but reverted to a systematic routine of not only appealing to me most, if not all, of her substantive decisions, but also filing objections to the Master’s monthly reports which detail the proceedings before her and her impressions of the status of this case. The docket reveals the amount of activity this case has generated by virtue of nearly 850 docket entries since this cases’s inception on November 7, 2001.

The cost and difficulty of discovery, particularly in complex business cases like Grider, is one of the most important issues in American law today. Unfortunately, the institutions that should be offering solutions have failed us, typically preferring to propose heads defendants win, tails plaintiffs lose "reforms" in which defendants have neither an obligation to produce evidence on their own nor an obligation to answer anything but the most specific and limited of requests. See, for example, the American College of Trial Lawyers' Civil Discovery Report, which proposed giving defense lawyers a blank check to file frivolous discovery objections while also eliminating most of the tools available to plaintiffs for compeling production.

The Philadelphia Bar Association stepped into this vacuum by hiring two defense firms to prepare an amicus brief (see the brief here) which seizes upon the above to argue that Judge Gardner's sanctions create a "chilling effect" by forcing attorneys into

... a Hobson's choice: either represent their clients in discovery matters to the limits of zealous advocacy at the risk of incurring potentially draconian sanctions; or fail to assert (or stand by) well-founded objections to arguably overreaching discovery requests, regardless of how onerous the burdens such requests may impose on their clients, for fear of incurring highly punitive sanctions.

The PBA's amicus brief misses the point: the defendants' discovery objections were meritless and designed to frustrate the action. All of the requested discovery was either highly relevant (and accessible) or was interjected into the litigation by defendants themselves.

Just like with claims for abuse of process and wrongful use of civil proceedings, attorneys and parties are not shielded from liability when they use a proper procedure for an improper purpose. Whether the means were justified is a question of what the ends were.

Here, defense counsel used a variety of theoretically appropriate discovery means -- like objections, privilege assertions, declarations, appeals from discovery masters, and motions for reconsideration -- for the illegitimate end of thwarting discovery, overwhelming the court, and delaying the action.

Fact is, discovery is going to continue to be needlessly expensive and time-consuming up until defendants have an affirmative duty to produce relevant information, since the lack of such duty forces plaintiffs to engage in fishing expeditions if they want any information at all.

If plaintiffs can't even get sanctions for intentionally dilatory and obfuscatory conduct, then talk of "reform" is pointless, since the only "reform" on the table would give the keys to the courthouse doors to whichever defense lawyer was most willing to slam them shut.

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As The Philadelphia Inquirer reported on Friday:

An association of black police officers has sued the Philadelphia Police Department in federal court for allowing its officers to post "blatantly racist . . . and offensive" content on a popular Web site devoted to law enforcement topics.

The suit, filed Wednesday, says Domelights.com, which bills itself as "the voice of the good guys," was founded by a Philadelphia police sergeant who uses the screen name "McQ" and "encourages the racially offensive conduct."

...

Guardian Civic League attorney Brian Mildenberg said that black officers had long reviled the site and that complaints had been been lodged with current and past police administrations to no avail.

Even the word domelights, which normally refers to the police lights on top of cruisers, has taken on an "insulting connotation" among black officers, according to the lawsuit.

...

Mildenberg said white officers post and moderate the forums while on duty and on department computers, creating "a racially hostile environment."

"It's the same thing as you can't hang racist material in the workplace," he said.

Of interest is the response "McQ" posted at the website:

Domelights.com has two members (founders and co-owners) with global administration rights, along with several moderators of individual forums. I am the only current PPD employee among the moderators and administrators. I do not administer the site from work, and since the site is only lightly moderated, I barely administer the site from home (it is essentially an open forum to members). I have personally NEVER made a racist/sexist post on Domelights or anywhere else on the Internet.

...

Domelights.com has no association, official or otherwise, with the Philadelphia Police Department. It is just a semi-popular social networking site that is geared towards cops/firefighters. There are THOUSANDS of city employees with blogs, facebook pages, myspace pages, twitter accounts and even websites, with ALL kinds of content, offensive and otherwise. I just happen to run the site that gets the most hits (at least for now).

WHYY has a copy of the complaint, available here.

There are plenty of sites offering analysis of the comments posted at the site and quoted in the complaint. For the moment, let's assume that, consist with Third Circuit jury instructions on hostile work environments, the allegedly harassing conduct was not "generally harsh, unfriendly, unpleasant, crude or vulgar," but rather "could be objectively classified as the kind of behavior that would seriously affect the psychological or emotional well-being of a reasonable [member of plaintiff’s race]."

How could the Philadelphia Police Department, and thus the City of Philadelphia, be liable for posts on a website with "no association, official or otherwise, with the Philadelphia Police Department?"

Let's go back to 1866.

Plaintiffs allege three counts, two of which are only against "Sgt. 'McQ,' Domelights.com a/k/a Domelights Enterprises, LLC and JOHN/JANE DOES ## 1-10,000," the other of which is:

FEDERAL CIVIL RIGHTS VIOLATION/DISCRIMINATION
HOSTILE WORK ENVIRONMENT ON THE BASIS OF RACE
42 U.S.C. § 1981 as enforceable through § 1983
Plaintiffs, individually, and on behalf of all others similarly situated v.
The Philadelphia Police Department

The core language in 42 U.S.C. § 1981 was originally passed as part of the Civil Rights Act of 1866 (over President Johnson's veto), which included:

All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.

Such did little to halt the Ku Klux Klan's frustration of Reconstruction. In 1871, Congress passed (and President Grant signed) a bill colloquially referred to as "the Ku Klux Klan Act," which included:

[A]ny person who, under color of any law, statute, ordinance, regulation, custom, or usage of any State, shall subject, or cause to be subjected any person within the jurisdiction of the United States to the deprivation of any rights, privileges, or immunities secured by the Constitution of the United States, shall, any such law, statute, ordinance, regulation, custom or usage of the State to the contrary notwithstanding, be liable to the party injured in any action at law, suit in equity, or other proper proceeding for redress

The primary purpose of the Act was to create criminal penalties -- "a fine not less than five hundred nor more than five thousand dollars, or by imprisonment, possibly with hard labor, for not less than six months nor more than six years or by both fine and imprisonment" -- for a host of wrongful conduct, including witness intimidation, voter intimidation, obstruction of justice, and interference with federal government operations.

More than a century later, lawyers revived § 1981 to pursue discrimination actions against state governments, only to be shot down by Jett v. Dallas Independent School District, 491 U.S. 701 (1989). In January of this year, the Third Circuit "consider[ed] whether a private right of action against state actors can be implied under 42 U.S.C. § 1981," and held it could not. McGovern v. City of Philadelphia, 554 F.3d 114 (3d Cir. 2009).

But suit can be brought against "state actors," including municipalities themselves, by using § 1983 to apply § 1981. Yet, to recover against a municipality under § 1983 requires proving more than just purposeful discrimination that creates a hostile work environment; plaintiffs' complaint reveals how they intend to recover against the City specifically:

50. By and through their conduct, the Philadelphia Police Department has evidenced a
policy, practice or custom of allowing the use of their computers for a racially hostile purpose, and allowing its employee Police Officers to engage publically in racially offensive and hostile commentary and postings.

 The key words are "policy, practice or custom." As the McGovern case above noted,

In Monell v. New York Department of Social Services, 436 U.S. 658, 98 S. Ct. 2018, 56 L. Ed. 2d 611 (1978), the Supreme Court held that a municipality may not be held vicariously liable for the federal constitutional or statutory violations of its employees. See id. at 694. "Instead, it is when execution of a government's policy or custom, whether made by its lawmakers or by those whose edicts or acts may fairly be said to represent officially policy, inflicts the injury that the government as an entity is responsible under § 1983." Id.

McGovern at 121.

And that's what's going to pose the greatest challenge for the plaintiffs here. The City and Police Department are not vicariously liable for civil rights violations by their employees. Moreover, and perhaps most importantly, unlike in a typical case alleging a constitutional violation -- in which neither the City nor the plaintiff disputes that the defendant was acting in their official capacity when they crossed the line -- it seems unlikely the City would indemnify "McQ" or anyone else for comments made on a website with "no association, official or otherwise, with the Philadelphia Police Department."

That is to say, the City / Police Department are only liable if the plaintiffs can show that the government policy itself inflicted injury on the plaintiffs. Hence the references to the use of "Domelights" in the office as a pejorative term and the use of work computers.

Can they prove that? Ironically, since § 1981 lay dormant for so long, it never really had any "organic" development of case law and precedent. Thus, courts in recent years have simply taken the McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), framework for deciding cases under Title VII of the Civil Rights Act of 1964 and applied it wholesale to § 1981 employment discrimination cases.

The details of such a framework can fill -- and has filled -- shelves of books. For a glimpse, start at page 10 of the Third Circuit model jury instructions. Assuming McQ is right, it appears the core question will likely be if the Philadelphia Police Department should have taken action to stop off-the-job discriminatory remarks by its employees.

That's a tricky question; just ask Sonia Sotomayor, who dissented in the Pappas v. Giuliani, 290 F.3d 143, 154 (2d Cir. 2002) case, in which the New York Police Department fired an officer for off-the-job hate speech. The Second Circuit upheld the termination; Sotomayor would have held the termination violated the officer's free speech rights:

Today the Court enters uncharted territory in our First Amendment jurisprudence. The Court holds that the government does not violate the First Amendment when it fires a police department employee for racially inflammatory speech -- where the speech consists of mailings in which the employee did not identify himself, let alone connect himself to the police department; where the speech occurred away from the office and on the employee's own time; where the employee's position involved no policymaking authority or public contact; where there is virtually no evidence of workplace disruption resulting directly from the speech; and where it ultimately required the investigatory resources of two police departments to bring the speech to the attention of the community. Precedent requires us to consider these factors as we apply the Pickering balancing test, and each counsels against granting summary judgment in favor of the police department employer. To be sure, I find the speech in this case patently offensive, hateful, and insulting. The Court should not, however, gloss over three decades of jurisprudence and the centrality of First Amendment freedoms in our lives because it is confronted with speech it does not like and because a government employer fears a potential public response that it alone precipitated.

As Popehat notes,

Of course in some ways the Pappas case is easier than what’s alleged here.  Pappas’s speech was far more loathsome than the “locker room” casual redneck racism that’s complained of in Domelights.  But in others the Pappas case is harder.  There was no evidence Pappas’s speech was repeated on the job, while the Philly PD allegedly allows officers to post at Domelights from work computers.

This case, if its litigated fully (and it should be, as it presents interesting issues on the First Amendment and the Civil Rights Act), may wind up before Sonia Sotomayor one day.  If and when that happens, she may have the opportunity, in the most emphatic way, to reverse her Second Circuit colleagues.

An interesting case to follow.

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The Blog of The Legal Times talks about the Sotomayor confirmation hearings:

Under questioning from Sen. Ted Kaufman (D-Del.), she spoke in greater detail than she has before about her career as a commercial litigator. She said she learned the importance of predictability in business law when partners would revise the drafts of settlement agreements she had written. The partners, she said, replaced her plain language with what she considered "gobbledygook," in order to conform the agreements to court precedent.

"In business, the predictability of law may be the most necessary," she said, "in the sense that people organize their business relationships based on how they understand the courts interpret their contracts."

When I was a summer associate at a business and transactional firm, the managing partner told me a similar story. Back when he was an associate, a partner at the firm asked him to draft a real estate bill of sale. He did so, with considerable difficulty, and a considerable investment of time, and took it to the partner, who skimmed it and threw it away.

Why?

"Because I don't know what any of that means. I do, however, know what these old agreements I've been using mean. Their meaning hasn't changed in five hundred years."

It seems Sotomayor got the same lesson. Lots of lawyers do.

Let me tell you: the lesson is wrong.

It's not always wrong. In certain circumstances -- like some real estate transactions -- there is language used so frequently that it has become the standard against which all other grammar and syntax is measured. Any deviation will likely be interpreted against the person who suggested it.

If you have one of those situations, be sure you know what the "standard" language is. Otherwise, focus on making the text of the written agreement reflect the reality of the parties' understanding, not on adding in "gobbledygook" to make it look lawyerly.

But even where you have a "standard" contract, the lesson may lead you astray. Long ago, I lost track of the number of times a lawyer told me "court precedent" dictated the use of particular language yet couldn't produce any actual "court precedent" to back that up.

Do you think every partner who told Sotomayor how the contract "should" have been written actually reviewed that "court precedent" prior to rejecting Sotomayor's draft? I doubt it. I'm betting more than a few of those "replaced" agreements included "standard" language that meant something different from what their clients intended.

Pay heed your elders, but shepardize your cases.

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Following up on their own post a month ago, the dynamic defense duo at Drug & Device Law posted:

A couple of weeks ago, Herrmann noted in passing that, although many big firms now sponsor blogs, none of the ten firms with the highest profits per partner (that much-despised, but oft-cited metric) do. ...

Many folks contacted us, on or off-line, to suggest why lawyers at the most profitable firms don't blog.

Those ten most profitable large corporate firms -- Wachtell, Quinn Emanuel, Boies Schiller, Sullivan & Cromwell, Paul Weiss, Cravath, Simpson Thacher, Cleary, and Schulte Roth -- "have no apparent affiliation with any blogs at all."

D&D Law summarize the opinions offered to them as:

1. Lawyers at the most profitable firms are stupid.

2. Lawyers at the most profitable firms are too busy.

3. Lawyers at those firms won't stoop to blog.

4. Lawyers at those firms don't want to give away their product for free.

5. Lawyers at those firms lack the necessary skill set.

6. Lawyers at those firms believe that blogging is unlikely to yield a decent return on investment.

A little more detail at their site; sadly, they keep their conclusions to themselves. Maybe next time. Legal Blog Watch links to a few other arguments on the subject.

Let me take a page from another arena: content publishers. There's been a big hoopla in the blogosphere lately over Malcolm Gladwell's highly critical review in The New Yorker of Free, the new book by Wired Magazine's editor-in-chief Chris Anderson, whose blog ("The Long Tail") is here. If you're interested in that debate, Anderson's response is here, Seth Godin's take is here ("Malcolm is wrong"), and Clay Shirky's ruminations on the inevitable end of the newspaper is here.

More useful for our purposes is Michael Nielsen's thoughtful examination of the scientific publishing industry, in which he argues that "even smart and good organizations can fail in the face of disruptive change, and that there are common underlying structural reasons why that’s the case:"

[S]ome of the forces preventing change are strongest in the best run organizations. The reason is that those organizations are large, complex structures, and to survive and prosper they must contain a sort of organizational immune system dedicated to preserving that structure. If they didn’t have such an immune system, they’d fall apart in the ordinary course of events. Most of the time the immune system is a good thing, a way of preserving what’s good about an organization, and at the same time allowing healthy gradual change. But when an organization needs catastrophic gut-wrenching change to stay alive, the immune system becomes a liability.

Elite law firms' hostility to the concept of "blogging" is a function of those law firms' highly effective immune systems. The most profitable firms on those lists earned their way to the top by building effective, reputable practices that can command top fees for unique talent and experience. They are diversified, in demand, and have remained at the top of the field through multiple changes in leadership and in the marketplace. They have proven themselves.

Consequently, elite corporate law firms have built over time strong organizational immune systems, systems that, for example, quite literally reject foreign bodies from entering by way of resistance to lateral partners.

Mention blogging, social media, or the like and watch the immune system kick in. Why waste time messing with success? AmLawDaily picked up the phone, called the firms, and got exactly that answer:

[W]e put out calls to managing partners and spokesman at nine of the ten firms (we excluded Kirkland & Ellis, because, as Beck and Herrmann note, a Kirkland associate played a role in creating the popular Sports Law Blog) to ask them about their stance on blogging. The conversations we had centered on a general theme: The firms just don't see the point. They are already successful, so they don't feel the need to market themselves or prove their grasp of a particular subject matter in the limited spare time they have. 

We'll let Jonathan Schiller of Boies, Schiller & Flexner sum it up: "I think the lawyers here are just too busy," he says. "I'm too old to blog. I'd rather play golf if I have a bit of free time."

The real question is not why big firms don't "blog;" the answer is "because they don't want to blog." The immune system rejects blogging, much as it rejects changes to alternative fee arrangements and compensation structures.

The real question is if elite corporate law firms should blog and the answer is yes.

How do I presume to know that? Because, as the AmLawDaily further points out, most elite firms effectively blog and have blogged for some time:

We wonder, though, whether there is much difference between blogging and putting out so-called client memos and (often) displaying those memos on a firm's Web site. Wachtell, Lipton, Rosen & Katz, for instance, has about as austere a Web site as exists online anymore, and thus seems perhaps the least likely candidate in the Am Law 100 to produce an opinionated or less formal blog. But the firm regularly releases memos that are quite opinionated, including one in the fall that implored the SEC to reinstate the Uptick Rule to limit short-selling. That could just as easily have appeared on any high-brow economic law blog. (A firm spokeswoman and name partner David Katz did not respond to our messages seeking comment.)

You can read many of these Wachtell memos, along with memos from heavyweights at Cravath, Sullivan Cromwell, Latham Watkins, Gibson Dunn, et al, at The Harvard Law School Corporate Governance Forum, which refers to itself as a "blog." Skim down the list of "guest contributors" (not "guest bloggers") on the left side of the "Forum's" website -- might as well be a Wall Street Christmas party.

But they don't call it "blogging." They call it "updates" and "newsletters" and "forums" and "panels" and "discussions." 

The wording doesn't matter. They're out there every day showing off their expertise for free. Welcome to blogging, you blogging bloggers.

One more issue before we go. As Nielsen also noted:

The problem is that your newspaper has an organizational architecture which is, to use the physicists’ phrase, a local optimum. Relatively small changes to that architecture - like firing your photographers - don’t make your situation better, they make it worse. ... Unfortunately for you, there’s no way you can get to that new optimum without attempting passage through a deep and unfriendly valley. The incremental actions needed to get there would be hell on the newspaper. [Ed by MSK - more on this concept's application to business here]

Thus, the real real question is if this blogging or crypto-blogging is the major shift itself or merely a small experiment as part of a much larger "disruption" in the legal industry comprised of, inter alia, blogging, social media, transparency, alternative fee agreements, telecommuting, virtual workers, outsourcing, and collaborative / cooperative practice?

Put another way, are elite corporate law firms sitting in a "local optimum" that works now but keeps them from getting to where they want to be in the future? Elite firms are certainly considering the possibility, hence finding their "client memos," for free, alongside competitors' free "client memos," on a law school blog. They're also upending the structure of their compensation and associate training, even if clients don't believe them.

We may have to wait and see what the answer is. As described in Clay Shirky's piece linked above, in which he summarizes the turbulent transition following Gutenberg's invention of the printing press as "chaotic:"

When the Bible was translated into local languages some people saw it as an educational boon, others as the work of the devil. Erotic novels appeared, prompting the same sort of response. Copies of Aristotle and Galen circulated widely, but direct encounter with the relevant texts revealed that the two sources clashed, tarnishing faith in the Ancients. As novelty spread, old institutions seemed exhausted while new ones seemed untrustworthy; as a result, people almost literally didn’t know what to think. If you can’t trust Aristotle, who can you trust?

Only in retrospect were experiments undertaken during the wrenching transition to print revealed to be turning points. Aldus Manutius, a Venetian printer and publisher, invented the smaller octavo volume. What seemed like a minor change—take a book and shrink it—was in retrospect a key innovation in the democratization of the printed word. As books became cheaper, more portable, and therefore more desirable, they expanded the market for all publishers, heightening the value of literacy still further.

That is what real revolutions are like. The old stuff gets broken faster than the new stuff is put in its place. The importance of any given experiment isn’t apparent at the moment it appears; big changes stall, small changes spread. Ancient social bargains, once disrupted, can be neither mended nor quickly replaced, since any such bargain takes decades to solidify.

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At The National Law Journal, Nick Akerman, a partner at Dorsey & Whitney, has a thorough argument that the Computer Fraud and Abuse Act ("CFAA") should, and likely will, be applied against employees who leave with trade secrets or other proprietary / confidential information for use at their new jobs:

The Computer Fraud and Abuse Act, a federal criminal statute outlawing the theft of data, permits a company that "suffers damage or loss" by reason of a violation of the CFAA, to "maintain a civil action against the violator" for damages and injunctive relief. 18 U.S.C. 1030(g). Since [Pacific Aerospace & Electronics Inc. v. Taylor, 295 F. Supp. 2d 1188, 1196 (E.D. Wash. 2003)], there has developed a body of district court opinions that refuse to apply the CFAA against employees who steal their employer's data. This article will explain why these opinions are not likely to survive appellate review; it will also provide a strategy to avoid the application of these decisions.

Well worth reading if you come across trade secrets theft in your practice. Akerman may be the most experienced attorney in the country on this developing body of law, and it shows.

I agree with him, but for a more general reason. Since I practice in the Third Circuit (Pennsylvania, New Jersey and Delaware), I'll focus on the Third Circuit's most recent opinion on the CFAA:

The District Court focused on the criminal provisions and found it difficult to infer a civil application within the statutory framework and concluded that it could not do so, although the Court did acknowledge that several other courts had determined to the contrary. However, we conclude that not only the relevant case law, but also the plain language of the statute, militate in favor of the availability of a civil remedy, and specifically, the type of injunctive relief sought by the PC plaintiffs.

Numerous courts have recognized that a civil cause of action is apparent from the text of § 1030(g). Although we acknowledge the criminal thrust of the section in general, as it is found in Title 18, there is ample authority for permitting civil actions to proceed based on violations of the section pursuant to the language of § 1030(g). See, e.g., Theofel v. Farey-Jones, 359 F.3d 1066, 1078 (9th Cir. 2003) ('The civil remedy extends to 'any person who suffers damage or loss by reason of a violation of this section.'') (emphasis in original); I.M.S. Inquiry Mgmt. Sys., Ltd. v. Berkshire Info. Sys., Inc., 307 F. Supp. 2d 521, 526 (S.D.N.Y. 2004) (stating that § 1030(g) affords civil action for any violation of CFAA). Accordingly, we conclude that civil relief is available under § 1030(g).

P.C. Yonkers, Inc. v. Celebrations the Party & Seasonal Superstore, LLC, 428 F.3d 504, 511 (3d Cir. 2005).

In one sense, the above looks like a straightforward review of a criminal statute which permits a civil remedy. The statute says there's a remedy, so we'll enforce it.

In another sense, we're witnessing a big change in the way Circuit Courts and the Supreme Court interpret federal statutes which provide plaintiffs with civil relief for criminal conduct.

Like the CFAA, The Racketeer Influenced and Corrupt Organizations Act ("RICO") creates a civil remedy for those persons injured by racketeering activities, typically mail or wire fraud. Also like the CFAA, numerous District Courts have contorted the brief text of the RICO Act to enact confusing, complicated barriers to relief without much basis in the Act itself. For example, numerous District Courts required plaintiffs show "first-party reliance" on the alleged mail or wire fraud (rather than merely injury related to the racketeering as a whole) and required that the plaintiff prove the defendants used a formal racketeering structure.

In the past year, the Supreme Court has torn down both of these barriers. See Bridge v. Phoenix Bond & Indem. Co., 128 S. Ct. 2131, 2145 (2008)(eliminating the "reliance" requirement, noting "Whatever the merits of petitioners’ arguments as a policy matter, we are not at liberty to rewrite RICO to reflect their — or our — views of good policy. We have repeatedly refused to adopt narrowing constructions of RICO in order to make it conform to a preconceived notion of what Congress intended to proscribe."); Boyle v. United States, ___ U.S. ____, No. 07-1309, 2009 U.S. LEXIS 4159, at *22–23 (Jun. 8, 2009)(eliminating the "structure" requirement, noting "The fact that RICO has been applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It demonstrates breadth.”).

Like the RICO Act, the broad text of the CFAA "does not demostrate ambiguity[,] it demonstrates breadth." If the Circuit Courts and the Supreme Court interpret the CFAA the same way they've interpreted the RICO Act, we'll see a lot more of these claims in the future.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The sky has not fallen on business plaintiffs.

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The 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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After four days of trial, and a few hours of deliberations, the AP reports:

A federal jury ruled Thursday that Jammie Thomas-Rasset willfully violated the copyrights on 24 songs, and awarded recording companies $1.92 million, or $80,000 per song.

Thomas-Rasset's second trial actually turned out worse for her. When a different federal jury heard her case in 2007, it hit Thomas-Rasset with a $222,000 judgment.

Under our absurd (and possibly unconstitutional) copyright laws, the award per violation can range from $750 to $150,000, and the jury here roughly split the difference at $80,000 per song, about the same amount as a Manhatten jury will give you for losing the end of your pinky. The jury must have felt these particular duplicate copies of the songs were very dear to the poor record companies.

Why would twelve ordinary citizens do that?

A vigorous defense from Kiwi Camara and Joe Sibley was not enough to sway the jury, which had only to find that a preponderance of the evidence pointed to Thomas-Rasset. The evidence clearly pointed to her machine, even correctly identifying the MAC address of both her cable modem and her computer's Ethernet port. When combined with the facts about her hard drive replacement (and her failure to disclose those facts to the investigators), her "tereastarr" username, and the new theories that she offered yesterday for the first time in more than three years, jurors clearly remained unconvinced by her protestations of innocence.

Camara suspects that the jury thought Thomas-Rasset was a liar and were "angry about it," thus leading to the $80,000 per-song damages.

And there you go. Camara has it right; pity he couldn't get his client to stop lying at trial.

For comparison, not too long ago a jury awarded just $1 million in pain and suffering to this man:

After 63 days in the hospital (57 of them in a coma), 11 surgeries and 65 more days in a rehabilitation hospital, Robert Doviak was left totally and permanently blind, with a sense of touch that was seriously compromised, partial loss of hearing and no sense of smell or taste. Additionally, he had substantial orthopedic injuries including fractures of his left femur, several cervical vertebrae, both zygomatic arches and other bones in and about his face and eyes, his left hand and his right wrist.

The difference?

[D]uring summation, Doviak's attorney asked the jury to award Doviak $60,000,000 for pain and suffering, an amount Doviak's new attorneys say is preposterous and evidence of awful advocacy and which defense counsel says revealed the greed that served as the foundation of plaintiff's case[.]

Credibility matters. Who you are, what you do, and what you say matters. Don't treat the jury like they're stupid; don't try to get anything by them, and don't ask them to do or to believe something ridiculous. It will never work. If your case has a problem, concede it, deal with it, and move on.

And above all, never lie to the jury.

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At The Legal Intelligencer:

Moving beyond all the talk of alternative fee arrangements, Saul Ewing has put its fixed-fee programs in writing -- on its Web site at least.

 The firm launched this week its "cost certainty commitment" with two different programs in which either a fixed fee or a cost per-attorney, per-day will be used on specific types of matters the firm identified as lending themselves to such arrangements. ...

To start, Saul Ewing is offering a fixed, daily blended rate per attorney for due diligence work for investors, companies looking for capital and venture capital or private equity firms looking to have their portfolios evaluated.

The second program offers a fixed fee for representation at administrative hearings before the Pennsylvania Insurance Department. There are two packages under this plan, with the second having a higher cost to include some post-hearing work.

Antzis said the arrangements could be offered for certain types of labor and employment, intellectual property and litigation matters as well. ...

Law firms have been offering fixed fees for things like patent filings and the drafting of wills for years, Antzis said. But the firm's first significant foray beyond those areas came this year before the "cost containment commitment" had even been thought up.

Saul Ewing stole away work for a large grocery chain from a larger, national firm. Antzis said the chain brought its business to Saul Ewing because the firm agreed to a fixed cost for handling all of the chain's single-plaintiff employment discrimination claims in the region.

In other industries, they call this "meeting customer demand."

It has long been ridiculous to bill by the tenth of the hour for representation across hundreds of substantially similar matters which all follow the same procedures and all apply roughly the same law, like insurance regulator hearings. Large corporate law firms have inexplicably been able to resist billing and pricing reform for decades, but no longer, as revealed by that last quoted paragraph above.

Modern mid-size and large businesses are kept profitable in part by compartmentalizing costs and making them consistent over time. Just like how few businesses these days accept the risk of self-insurance or vertical integration, fewer and fewer will tolerate endless swings in legal costs they barely understand and can barely audit for performance.

The challenge for firms, then, is no longer figuring out the precise amount by which they can increase their hourly rate each year without driving off the client, but rather figuring out how to meet their clients' demand for bills that are regular and predictable.

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Via Overlawyered, the NYTimes says:

In closed-door talks, Mr. Obama has been making the case that reducing malpractice lawsuits — a goal of many doctors and Republicans — can help drive down health care costs, and should be considered as part of any health care overhaul, according to lawmakers of both parties, as well as A.M.A. officials.

It is a position that could hurt Mr. Obama with the left wing of his party and with trial lawyers who are major donors to Democratic campaigns. But one Democrat close to the president said Mr. Obama, who wants health legislation to have broad support, views addressing medical liability issues as a “credibility builder” — in effect, a bargaining chip that might keep doctors and, more important, Republicans, at the negotiating table.

The story (and apparently Obama) is exceedingly light on details, but suggests:

Mr. Obama has not endorsed capping malpractice jury awards, as did his predecessor, President George W. Bush. But as a senator, he advanced legislation aimed at reducing malpractice suits. And Dr. J. James Rohack, the incoming president of the medical association, said Mr. Obama told him at a meeting last month that he was open to offering some liability protection to doctors who follow standard guidelines for medical practice.

...

And any effort to restrict patients’ legal rights to sue will face tough opposition from the American Association for Justice, which represents trial lawyers and has met with Nancy-Ann DeParle, Mr. Obama’s point person for health reform, to express its concerns. Linda Lipsen, the association’s chief lobbyist, said practice guidelines were established by unregulated medical societies and “should not be conclusive” in a court of law.

What's that mean? I don't really know -- I suppose they want to make guidelines from the American College of Obstetricians and Gynecologists and the American College of Emergency Physicians have the force of law, or they want to incorporate them as a presumption of meeting the standard of care.

Without more detail, it's hard to comment on the effects of it. Yet, incorporating these guidelines could make the medical malpractice process even more litigious, since lawyers will argue over whether the guidelines applied and whether the doctor followed them.

With regard to the idea of incorporating them, as I wrote before discussing Comparative Effectiveness Research ("CER"), also pushed by Obama:

Put simply, CER will cut both ways. A doctor who does not utilize a CER-approved treatment will have a lot of explaining to do down the road if that treatment would have helped. Conversely, a plaintiff alleging a doctor should have used a CER-disapproved treatment will have a hard time convincing a jury that the doctor should have overridden the billion-dollar research.

From a liability / malpractice standpoint, doctors who abide by the standard of care should welcome the CER with open arms, as it will give them a powerful tool to wield when a plaintiff's lawyer later asks "why didn't you do _____?" They can quite honestly answer "because the CER says it's not effective."

That may apply the same to "College" guidelines. One problem, as mentioned above, is that the guidelines aren't necessarily set based on empirical data, and they're not reviewed by outside sources prior to publication. 

We'll have to wait and see for more information.

[UPDATE: Obama's speech to the American Medical Association included:

I recognize that it will be hard to make some of these changes if doctors feel like they are constantly looking over their shoulder for fear of lawsuits. Some doctors may feel the need to order more tests and treatments to avoid being legally vulnerable. That's a real issue. And while I'm not advocating caps on malpractice awards -- which I believe can be unfair to people who've been wrongfully harmed -- I do think we need to explore a range of ideas about how to put patient safety first, let doctors focus on practicing medicine, and encourage broader use of evidence-based guidelines. That's how we can scale back the excessive defensive medicine reinforcing our current system of more treatment rather than better care.

So he might be talking about CER after all. If so, I think that's a good thing for everyone. One problem for both physicians and plaintiffs is that, in many areas, the "standard of care" is frustratingly unclear. If CER can be used to create those standards, all the better.]

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Two posts on the same day. Sarah Randag at ABA Journal Law News Now:

Jordan Furlong wonders in a recent post at Law 21 if "we’ll soon be closing the book on one of the legal profession’s most-used and least-understood phrases of the last decade: 'work-life balance.' "

With 10,000 law firm jobs lost in 2009, not to mention waves of announcements of pay cuts and associate deferrals, work-life balance has become a touchy subject.

"Even the most active WLB boosters have toned down talk that might earn them the dreaded 'entitlement' label," Furlong writes. "Realist observers like Dan Hull and Scott Greenfield have gained the upper hand in the WLB discussion," perhaps referring to a InsideCounsel SuperConference panel at which those two lawyers took on Millennials.

...

"If WLB stood for anything, it was for the fact that we all have the right and the obligation to make that tradeoff on the terms we want."

But Furlong agrees with work-life balance proponents that in their first few years of practice, saddled with increasingly high debt, lawyers understandably feel compelled to seek jobs with heavy workloads. And "billable-hour targets for associates at more than a few firms simply can’t be achieved without damage to one’s health or ethics, or both," he writes.

Furlong worries, that now that the moment has passed, "WLB will be relegated to the status of a mere generational quarrel during a freak economy."

Denise Howell at The American Lawyer (at law.com):

It's thus tempting to view balance as a fair-weather topic, brought up only when lawyers feel secure about their jobs and alternatives. ...

It's nothing short of depressing, and things seem likely to get worse before they get better. But even in a recession it's important not to shelve these policies completely.

It may seem counterintuitive, but flexibility and balance-oriented policies are tools that can help firms survive the conflagration. "Eat what you kill" is traditionally associated with the most cutthroat, internally competitive firms. A compensation system where one's career survival depends directly and constantly on the dollars one brings in the door has been seen -- historically, anyway -- as inflexible. But "eat what you kill" and "work/life balance" (with its "work less, make less" compensation system) share one goal: to pay lawyers only for work that enhances the bottom line.

As a result, the two systems can live together very well. Layoffs cost firms, both financially (the lost investment in laid-off lawyers, and the premium often paid in ramping back up) and in terms of reputation (from "They're going under" to "Remember what they did to associates back in '09?"). When those costs are taken into account, scaling back lawyer hours starts to look better and better.

Deborah Epstein Henry, founder and president of consulting firm Flex-Time Lawyers, urges firms to open their eyes to the reality that, unlike layoffs, promoting reduced hours cuts costs now, prevents future recruiting and training expenses, engenders loyalty, improves morale and quells the burnout and lack of productivity that may otherwise plague those left in a fragmented workplace.

If there's one lesson from the latest disruption in the legal world, it's there is no one way to run a law firm. Whether that disruption is from technology, demographics, or economics, there comes a time when you have to start finding 1,000 ways not to build a light bulb.

The NYTimes is overstating the change -- "Big, as a business model (let alone as an expression of the national mood), seems bound for obsolescence." -- but so are critics of "WLB" suggesting that efficiency or value-based lawyer employment is gone.

Indeed, a clear lesson from the "risky, transient" nature of big firms I discussed yesterday, is the danger of expanding too quickly, particularly expanding high fixed costs or becoming too reliant on unstable practice areas. 

"Work-life balance" has never been about being lazy or overpaid -- it was about matching what workers had to offer with what the market needed. Right, it seems a lot of firms "need" a lot less than they thought, something which many employees are more than happy to offer.

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Buried in this NYTimes article about the massive layoffs at White & Case, and the general reductions at big corporate law firms, is this critical fact:

That wall [i.e., the slowdown of work after Lehman Brothers' collapse] was especially hard because — remarkably like such ventures as the Mafia or the ice-cream vendor — many large firms operate on a cash-in-hand basis, with insufficient reserves to weather a slump.

With Wall Street in a meltdown, Big Law suddenly found it not just indecorous but impossible to pay young lawyers six months out of law school $160,000 a year to stare at their hands. (Indeed, after offering jobs to dozens of third-year law students last fall, White & Case told 60 percent of them they would have to wait a year to start.)

That's an insult to ice-cream vendors, who at least recognize the seasonal nature of their product.

Law students and young lawyers, burn that fact into your brain and never forget it: big corporate law firms are transient, risky businesses. Your first sign of a problem may be a friend texting you "sorry to hear about your firm."

Indeed, it's often worse than cash-in-hand, with many firms going deeply into short-term debt at the end of the year to fund the bonuses, debt which they then pay down throughout the year.

Don't let the big buildings, fancy summer associateship, corporate clients, or even decades-old names fool you. To the extent these firms remain extant these days, it is by swiftly firing people just like you.

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

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

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

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

Larry Ribstein has the most thorough commentary on it:

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

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

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

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

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

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

Why?

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

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

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

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

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

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

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

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

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The Am Law Litigation Daily brings us important news:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(via Sentencing Law & Policy)

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

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Two interesting stories today.

Twittering Teens Terrorize the City:

A mob of tech-savvy teens tweeted their way into the same place in South Philly over the weekend and then went wild.

"It's kind of a new dynamic that's growing, with large groups of juveniles using the social networks to get out the word," said Philly police Lt. Frank Vanore. "We're not going to tolerate it."

Hundreds of teens who coordinated through MySpace and Twitter, hijacked a taxi at 12th and South Street, assaulted and yanked a woman and passenger out of their car and vandalized a convenience store at Broad and Catharine Streets.

Most of the teens were between the ages of 14 and 17.

Judge Reprimanded for Friending Lawyer and Googling Litigant:

A North Carolina judge has been reprimanded for “friending” a lawyer in a pending case, posting and reading messages about the litigation, and accessing the website of the opposing party.

Judge B. Carlton Terry Jr. and lawyer Charles Shieck both posted messages about the child custody and support case heard last September, the Lexington Dispatch reports. Terry also accessed the website of the opposing litigant and cited a poem she had posted there, according to the April 1 public reprimand (PDF) by the North Carolina Judicial Standards Commission.

The opinion says Terry and Shieck first discussed Facebook in chambers in the presence of the opposing lawyer in the case, Jesse Conley, who said she didn’t know what Facebook was and didn’t have time for it. After the discussion, Terry and Shieck friended each other. Shieck later posted a Facebook reference to the issue of whether his client had had an affair, saying “How do I prove a negative?” according to the opinion. Shieck also wrote, “I have a wise judge.”

...

The opinion says the ex parte communications and the independent gathering of information indicated a disregard of the principles of judicial conduct.

These feel like "new" issues, but they're not. The law of social media is the same as the law of everywhere else. Those aren't the first teens to vandalize an area, nor is Judge Terry the first to seek out information on litigants outside of the court.

The difference is, as Seth Godin put it, "everything goes on your permanent record."

Ten years ago, no one would have found any of the teens and the judge's prying would have gone unnoticed. Now it's plastered everywhere on the internet, or at least available through a quick subpoena.

Where will we be ten years from now?

Judge Sotomayor is getting grilled over a line in a speech several years ago. What if lurking in Google's permanent memory we saw that @soniasotomayor had been invited to 12th and South Street?

The New York Times' "Room for Debate" covered the concern about too much publicity and too much social media recently, with Clay Shirky at NYU writing:

Society has always carved out space for young people to misbehave. We used to do this by making a distinction between behavior we couldn’t see, because it was hidden, and behavior we could see, because it was public. That bargain is now broken, because social life increasingly includes a gray area that is publicly available, but not for public consumption.

Given this change, we need to find new ways to cut young people some slack. Privacy used to be enforced by inconvenience; you couldn’t just spy on anyone you wanted. Increasingly, though, privacy will have to be enforced by us grownups simply choosing not to look, since it’s none of our business.

This discipline isn’t just to protect them, it’s to protect us. If you’re considering a job applicant, and he has some louche photos on the Web, he has a problem. But if one applicant in 10 has similar pictures online, then you’ve got a problem, because you’ll be at a competitive disadvantage for talent, relative to firms that don’t spy.

Maybe we all need to cut each other a little more slack. Maybe we all need to hold ourselves to a higher standard.

Because the permanent record society is here to stay.

Google "Judge B. Carlton Terry Jr." Who knows who he was before, now he's "Judge reprimanded."

As for the teens, being between 14 and 17 means they can likely get their criminal records expunged as adults.

But not their Twitter records.

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

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

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

No, it doesn't.

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

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

What's a "tort?"

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

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

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

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

What's an LLC?

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

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

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

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

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

Here's what you probably don't know:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

No trickery needed, just some money and foresight.

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The Ninth Circuit just decided Barnes v. Yahoo! (link to PDF opinion). Here are the facts, as summarized by Anita Ramasastry at FindLaw:

The facts begin when plaintiff Cecilia Barnes learned that her ex-boyfriend – pretending to be her – had posted nude photos of her on Yahoo, along with her email address, work address and phone number, and an invitation to men to contact her for sexual purposes. The ex-boyfriend had also gone into Yahoo's member chat rooms to direct men to her profile. Soon, as the Ninth Circuit summarized it, "men whom Barnes did not know were peppering her office with emails, phone calls, and personal visits, all in the expectation of sex."

Yahoo's policy provides for the removal of fake profiles if the person making the request provides a copy of her driver's license, which Barnes says she did. However, Barnes alleges that when she contacted Yahoo on several occasions, in an effort to have the profile removed, the site did not remove them. She says that approximately three months after the first of these contacts, a Yahoo representative contacted her and advised her that Yahoo would now put a stop to this unauthorized profile – yet three more months passed, and Yahoo did nothing. Indeed, according to Barnes, Yahoo took no action to de-post the profile until she sued the company.

Unsurprisingly,

The court dismissed Barnes's negligence claim against Yahoo, based on Section 230 of the federal Communications Decency Act (CDA).

Nothing new about that.

However, it held that Yahoo's promises to her that it would de-post could give rise to a claim under the doctrine of promissory estoppel.

Interesting! Paul Levy at Consumer Law & Policy filed an amicus and attended the hearing, and fills us in on some context:

The argument also revealed that Barnes’ contention is that Yahoo!’s promise to take down her profiles came on the eve of a television report about her situation, after reporters contacted Yahoo! in an effort to avoid negative press, Yahoo! contacted her “on its own” to promise to take the material down, and that even though she could not have sued Yahoo!, there were other steps that she could have taken to obtain redress.  For example, she claims that, at Yahoo!’s direction, she did not testify before the Oregon Legislature about what had happened to her, because Yahoo! told her it would take the material down.  If Barnes proves such facts, one can see a real case here.

Daniel Solove at Concurring Opinions agrees with the result but looks on the horizon:

One of the potential problems with the court’s holding is that it may deter ISPs and other sites from having an explicit policy for removing tortious material.  Yahoo could be penalized with potential liability and a loss of its immunity by having a removal policy.  An ISP or site that has no such removal policy and that would say “get lost” to people who request takedowns would not be subject to promissory estoppel liability.  Is it fair to penalize those who have such policies?

But, Solove notes, we're not at that point quite yet, since the Court's holding was expressly limited, in that "Yahoo is liable not because it had a general removal policy, but because it made specific promises to Barnes." Evan Brown at Internet Cases sees ISPs changing their behavior nonetheless, in advance of the law:

Smart intermediaries (e.g. website operators) are likely to communicate less now with individuals who feel aggrieved, because the intermediary may fear that anything it says could be construed as a breakable promise putting it at risk for liability.

On a more technical issue, but one with big ramifications for the course of these case, Eric Goldman at Technology & Marketing Law Blog worries (much as Levy did) that the opinion on its face holds 230 immunity can not be raised on a motion to dismiss. That implicates the ISP's First Amendment rights to go about their business and permit online speech without fearing the cost of a long, meritless suit that's eventually dismissed anyway. Yahoo! has petitioned for rehearing on that issue alone.

In my humble opinion, I agree with everyone above. There is a very good reason not to apply section 230 immunity to an ISP interjecting itself into a private dispute to avoid negative publicity. At the same time, it does indeed create a precedent that makes other ISPs shy to intervene at all.

Yet, under section 230 immunity, the ISP already can choose to completely ignore anyone it wants to, and there is no good reason to "protect" Yahoo! for yanking Ms. Barnes' chain to avoid negative publicity. If an ISP promises to remove content, it should do so. If the ISP doesn't want to remove content, it shouldn't promise it will.

Simple enough.

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There is no shortage of productivity advice on the internet. Notable examples include Getting Things Done, 43 Folders (inventor of The Hipster PDA) and Zen Habits, and David Seah (inventor of  The Printable CEO).

Truth is, most of these systems are notoriously difficult to fully implement and, like Merlin Mann, after an extensive time following the productivity genre/industry in details, I have generally soured on the relentless gadgetry, listmaking, fickleness and obsessiveness of most productivity websites and communities, and so don't closely follow many of those blogs anymore. (Let me craft a specific exception for Lifehacker, which never claimed to offer readers a “system” but rather a digest of tools and possibilities.)

That said, the productivity industry has a lot to offer, and the odds are good that most readers will find something on these websites which they can integrate into their life for increased efficiency and decreased stress. One idea I’ve found useful is clustering similar tasks together, a.k.a. "batch processing."

Research has confirmed that multitasking does not work, and that the time it takes to shift mental gears between tasks causes multitasking workers to be less productive on the whole. It is easy to verify this finding empirically in the legal world: next time you are deep into a brief, jump over to discovery requests in another case, and note how long it takes for that stunned and confused feeling to go away.

The “mental gears” analogy can be extended to other circumstances, too, and most office workers feel a need to “warm up” when they begin work before they can be the most productive, hence the ubiquity of caffeine and the idealized Dunkin' Donuts world referenced in the video above, which is not too far from the truth.

Thus, many productivity gurus have recommended clustering tasks together and doing them in succession, as well as breaking up large tasks into multiple chunks each of which can be completed without interruption by another task.

The problem for lawyers is that the reality of law practice strongly encourages living by the calendar. The impulse is to adopt “first in, first out” system of completing tasks, with exceptions made for urgent matters.

For example, if in the past week four motions, six discovery requests, and ten phone calls came in, and in the next week a complaint and two dispositive motions are due, then the natural inclination for the lawyer is to arrange these tasks in the order they are due, making an effort to fit in other matters that should, but do not need, be done within that same time frame.

The end result is thus an assault from all directions, leading to the managed chaos present at most law firms and the much-lamented feeling of constantly “putting out fires.”

Nothing will ever make that feeling go away (you knew what the job entailed when you signed up), but it can be reduced through better practice management.

Don’t let the calendar determine how you schedule your work. Instead, take the little bit of time to schedule tasks so that you perform similar tasks at the same time, thereby reducing the loss of productivity due to switching mental gears.

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

Litigations and Trials:

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

Law Practice:

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

Current Events:

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

Recent Court Opinions: 

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

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

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

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

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

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

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

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

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

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

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

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

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

...

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

...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Elliott Wilcox at the Winning Trial Advocacy Techniques blog has a great post on “non-rulings” by trial judges:

Using a combination of body language, tone, and other non-verbal behaviors, judges subtly encourage lawyers to rephrase questions or move on to new topics. When you’re caught up in the heat of battle, it feels like the judge has issued a ruling, so you rephrase your question or move onto another topic. In reality, no ruling has been issued, because the judge hasn’t ordered you or your opponent to do anything. A common term for describing this type of action is called a “non-ruling.”

The most effective “non-ruling” judges you’ll encounter are often the friendliest judges you’ll encounter in your practice. These judges succeed at “non-ruling” by drawing upon your inner desire to be a consummate professional, while also creating a congenial courtroom attitude. By encouraging both litigators to just “go along and get along,” they can avoid issuing stern rulings (and also avoid a reversal from the appellate bench). Usually, “non-rulings” will be disguised as kindly suggestions, such as, “Why don’t you go ahead and rephrase your question, ok?” Since you don’t want to stir up the pot, you’re usually inclined to go along with the judge’s suggestion.

The post includes several great suggestions for how to respectfully and gracefully deal with these "non-rulings." New and experienced trial lawyers owe it to themselves to read the whole post.

Let me add a distinction. There are two main types of non-rulings: “move along” and “different question.” They warrant different responses.

“Different question” is usually an indication from the judge that they believe the subject matter of your question pertains to relevant and admissible evidence, but that the question itself is objectionable or prejudicial.

In a "different question" circumstance, you probably do not want to prompt a formal ruling from the judge, because the judge will likely sustain the objection yet give you no guidance as to how you should proceed, even if they believe the subject matter is probative and admissible.

The better course here it to stop, think, and find what is wrong with your question. Odds are, you have made a basic mistake like asking a leading or compound question, and by breaking it down and going through the issues step-by-step can avoid any further objections.

“Move along” is usually an indication that the judge believes the subject matter you are inquiring about is inadmissible or prejudicial.

In this circumstance, while you probably should initially attempt to rephrase your question (because the court might have misunderstood where you were going), you are probably going to be overruled no matter what you do.

As such, it makes more sense here to illicit a formal ruling from the judge, because you are going to need it post-trial and on appeal. My preferred response when I hear “move along” is to come up with a different question that will telegraph where I am trying to go to the judge. If the judge again tells me “move along,” then I request a sidebar on the record so that I can (1) determine the scope of what the court is trying to preclude and (2) obtain a formal ruling for purposes of appeal.

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

All he had to do was:

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

Simple, right? Apparently not:

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

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

Unfortunately, the above was in error because:

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

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

Id. Footnote 3 notes:

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

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

Oh.

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

A model of efficiency, class actions are not.

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

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

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

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A recent post at a prominent club / venue in San Francisco, DNA Lounge:

Several years ago, there was some kind of scuffle and one of our customers who was dancing on the stage fell off and hurt her ankle. She sued us. I'm not sure what exactly her reasoning was, but she did, because this is America, and you can sue anybody for anything. She claimed she had spent $4,000 on medical bills (chiropractors!) and asked for $500,000 in pain and suffering.

We learned in the discovery phase that this woman had also been in three automobile accidents in the previous two years, for which she had been going to chiropractors already. How about that.

We submitted this claim to our insurance company, like you do, and their lawyers handled it. They ended up settling the case by paying her around $11,000. And here's where it gets fun:

Our deductible was $10,000. So the lawyer, who was working for the insurance company, did right by the insurance company. It only cost them $1,000! But he didn't try to negotiate anything lower, because that would have been a waste of his time, since he wasn't working for us, and that was the part we would have to pay. Oh, but it gets better.

It turns out that the fine print on our insurance said, in longwinded, 4-point, incomprehensible legalese, that the rates we had been paying for years were merely "estimates". So after our claim, the insurance company "audited" us, and retroactively raised our rates for the last four years by $20,000 per year. So the fact that we filed a claim at all caused the insurance company to demand an additional $80,000 from us.

At that point, we hired our own lawyer who negotiated that $80,000 down to $40,000, paid out over a year instead of being due immediately. Plus several thousand more for the new lawyer, obviously.

Though the author heaps blame on the plaintiff for what happened here, the outcome would have been exactly the same if the claim had been legitimate: $10,000 out of pocket plus a retroactive bill raising the rates.

There were two causes of this expensive affair: an absurdly high deductible and an unethical, unregulated insurance company.

Every bricks and mortar business which invites customers onto its premises -- whether it's a nightclub, a coffee shop, a computer store, a hair salon, a gym, a jewelry store, a DVD shop, a law firm, whatever -- should expect paying its deductible from time to time to defend or to settle claims.

I know, you are perfectly safe, and flawless in your execution of all mundane asks like ensuring walkway cracks are repaired in a timely fashion.

Are your employees? Your customers? The building? The location? In the case above, a fight broke out; not necessarily the club's fault, but if they had inadequate security and did not react appropriately then indeed their responsibility, at least in part, which in many jurisdictions exposes them to potentially paying the whole judgment.

It's not like driving a car where you can take a handful of defensive driving steps and dramatically reduce your odds of being at fault. (Even there, you can still expect to cause an accident at some point.) Someone will get hurt, or at least claim they were hurt, at your premises. A nightclub that serves alcohol is continually exposed to liability from multiple sources, like slip and fall, premises security, and dram shop.

A $10,000 deductible sounds cheap when you pay the premium, and it is exactly that: cheap. You'll pay the deductible more than once. You might pay it every single year.

Moving on to the unethical insurance company, if the insurance company-appointed lawyer "didn't try to negotiate anything lower, because that would have been a waste of his time," call me. The policyholder's interests come first. Anything less is bad faith.

As for the "estimated" premium, perhaps this was during the Quackenbush era. That wouldn't fly in most jurisdictions these days and would form the basis of a fraud, deceptive trade practices, and consumer protection act class action lawsuit and an insurance commissioner investigation.

The post ends:

What's the lesson here, kids?

I think it's, "people are scum" and/or "never start a business."

No. A properly-insured business will find a slip and fall soft tissue case to be a minor annoyance for which they will be liable, if at all, a nominal sum.

The lesson is "don't skimp on your deductible" and/or "regulation of the insurance industry is important."

Did you choose a reasonable deductible? Have you called up your local, state and federal representatives lately to ask what they're doing to keep insurance companies honest?

And do you know who is trying to protect you right now? Trial lawyers. They're fighting every day to keep insurance companies from abusing policyholders the way DNA Lounge was abused.

You don't have to be a lawsuit horror story.

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This article in The Philadelphia Inqurier raised an eyebrow or two:

A federal appeals court has upheld the Philadelphia Police Department's policy that forbids officers to wear Muslim head scarves on the job.

The U.S. Court of Appeals for the Third Circuit ruling, issued Tuesday, affirmed a lower court's ruling in a 2005 lawsuit filed by Officer Kimberlie Webb of the 35th Police District. Webb, who became a Sunni Muslim two years after joining the force in 1995, contended that the ban on the scarves, known as hijabs, violated her civil rights.

In 2007, a federal judge ruled in the city's favor, and the Third Circuit said accommodating Webb would severely damage the department's appearance of "religious neutrality."

Certainly not the first religious discrimination case raised against the government. Some background:

Congress initially enacted the Religious Freedom Restoration Act (RFRA) in 1993 to counter the Supreme Court's decision in Employment Div., Dept. of Human Resources v. Smith, 494 U.S. 872, 110 S. Ct. 1595, 108 L. Ed. 2d 876 (1990), which held that neutral and generally applicable laws are not susceptible to attack under the Free Exercise Clause of the Constitution even if they incidentally burden the exercise of religion. RFRA provided that any legislation imposing a substantial burden on religion would be invalid unless it was the least restrictive means of furthering a compelling state interest. 42 U.S.C. § 2000bb et seq. Shortly thereafter, the Supreme Court in City of Boerne v. Flores, 521 U.S. 507, 117 S. Ct. 2157, 138 L. Ed. 2d 624 (1997), struck down RFRA as it applied to the States because it exceeded Congress's remedial power under Section 5 of the Fourteenth Amendment.

Lighthouse Inst. for Evangelism, Inc. v. City of Long Branch, 510 F.3d 253, 261 (3d Cir. 2007). In addition to the Constitutional / First Amendment claims, last year the Third Circuit pointed out that, even if the federal RFRA was struck down, there are still numerous protections:

Although there are differences among the various federal and state religious protection statutes, most contain, at their core, the same fundamental structure and purpose. They recognize that neutral laws of general applicability may burden religious exercise as significantly as laws intended to interfere with religious exercise. The federal statutes, Pennsylvania's [Religious Freedom Protection Act (RFPA)], and a majority of the state statutes also acknowledge the government need not justify every action having some effect on religious exercise. Under those statutes, only substantial burdens trigger heightened scrutiny. RFPA's four definitions of 'substantially burden' emphasize the importance of this threshold. See 71 Pa. Stat. Ann. § 2403 ('significantly constrains or inhibits'; 'significantly curtails'; 'denies . . . a reasonable opportunity to engage in activities . . . fundamental to the person's religion'; 'violates a specific tenet of a person's religious faith.') (emphasis added).

Combs v. Homer-Center Sch. Dist., 540 F.3d 231, 261–62 (3d Cir. 2008).

The problem in the Webb case just decided is that, apparently, plaintiff's constitutional, state religious freedom, and sex discrimination claims were all waived. As noted by the opinion,

On October 5, 2005, Webb brought suit against the City of Philadelphia,2 asserting three causes of action under Title VII—religious discrimination, retaliation/hostile work environment, and sex discrimination—and one cause of action under the Pennsylvania Religious Freedom Protection Act (RFPA), 71 Pa. Stat. Ann. § 2401. ...  The District Court granted summary judgment on all claims, finding Webb failed to exhaust her administrative remedies for the Title VII sex discrimination claim, failed to meet the statutory notice requirements for the RFPA claim, and failed to raise a genuine issue of material fact for the Title VII religious discrimination and retaliation/hostile work environment claims.

Webb appeals only the adverse judgments on the religious discrimination and sex discrimination claims. She also raises, for the first time on appeal, certain constitutional claims.

The Third Circuit affirmed on all counts, which is to say, except for the religious discrimination claim, all of plaintiff's claims were dismissed for procedural reasons, either because they were initially filed the wrong way or were not raised until appeal.

It is easy to blame the lawyers for the outcome here, but the fault really lies with the roadblocks raised by federal and state statutes for the primary purpose of making it harder to file these claims. Each type of claim that could be raised here -- Federal free speech, Title VII discrimination (of two different types), Pennsylvania discrimination, and Pennsylvania religious freedom -- must be filed in a different way.

A federal free speech claim is a lawsuit brought under 28 U.S.C. 1983, filed directly with the District Court. Each Title VII discrimination claim, however, must first be raised specifically in a complaint (generally drafted on-site without the assistance of an attorney) to the Equal Employment Opportunity Commission. The same is true of state discrimination claims before the Pennsylvania Human Relations Commission. The Pennsylvania RFPA, in turn, has its own independent statutory requirements for suing the government, requiring that the plaintiff

give written notice to the governmental entity by certified mail, informing that agency of all of the following:

(1) The person's free exercise of religion has been or is about to be substantially burdened by an exercise of the agency's governmental authority.

(2) A description of the act or refusal to act which has burdened or which will burden the person's free exercise of religion.

(3) The manner in which the exercise of the governmental authority burdens the person's free exercise of religion.

Webb v. City of Philadelphia, No. 05-5238, 2007 U.S. Dist. LEXIS 11762, at *11–12 (E.D. Pa. Feb. 20, 2007).

Got all that? Making matters worse, often times the EEOC will send you to the PHRC, and vice versa, depending on how overburdened they are.

In that context, it's not surprising to see plaintiffs inadvertantly waive claims -- that's just what the system was designed to do.

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Pop quiz for law students in Pennsylvania, New Jersey and Delaware. Other than pay, what's the difference between:

Ballard Spahr Andrews & Ingersoll; Blank Rome; Buchanan Ingersoll & Rooney; Cozen O'Connor; DLA Piper; Dechert; Dilworth Paxson; Drinker Biddle & Reath; Duane Morris; Eckert Seamans Cherin & Mellott; Fox, Rothschild, O'Brien & Frankel; Hangley Aronchick Segal & Pudlin; Klehr, Harrison, Harvey, Branzburg & Ellers; Klett Lieber Rooney & Schorling; Marshall, Dennehy, Warner, Coleman & Goggin; McCarter & English; Montgomery McCracken, Walker & Rhoads; Morgan, Lewis & Bockius; Obermayer, Rebmann, Maxwell & Hippel; Pepper Hamilton; Reed Smith Shaw & McClay; Saul Ewing; Schnader Harrison Segal & Lewis; Stevens & Lee; Stradley, Ronon, Stevens & Young; Thorp, Reed & Armstrong; White and Williams; Willig, Williams & Davidson; Wolf, Block, Schorr and Solis-Cohen; Woodcock Washburn Kurtz Mackiewicz & Norris; and, Zarwin, Baum, Devito, Kaplan.

I saw a hand go up in the back. Wolf Block dissolved last week.

Oh. And what indications did you have that was going to happen? They cut associate salaries the month before.

The Legal Intelligencer has an article today about the biglaw recession hitting Philadelphia:

Managing partners have been complaining for years about increasing associate salaries, though in Philadelphia it ultimately became a good marketing tool to be the first in town to raise them.

The same rules don't apply now that the pendulum is swinging the other way. The first to take an ax to associate compensation risks falling out of favor with law schools and future recruits. However, many see a compensation cut as an otherwise smart business decision that would serve as a "market correction" rather than an unfortunate result of the bad economy.

The article is filled with anonymous quotes from managing partners:

• One firm leader said, "I could see $145,000 go to $100,000 in a nanosecond," though he wouldn't be the first to do it.

• "I don't think it is cataclysmic," he said. "It's just a market correction. It's just the way, in merit-based compensation systems, some partners' [compensation goes] down even when the firm is doing well."

• "I think it just sends a bad signal," he said. "It's a lot easier to put in a zero increase than to put in cuts."

The "nanosecond" partner doesn't get it. If his firm drops salaries contemporaneously with anyone else, it won't matter who went "first," it will be translated by associates as a warning that the firm is in financial trouble.

The "cataclysmic" partner doesn't get it either. A merit-based compensation system that only adjusts downward, and only in times of economic distress, will not be construed as rewarding "merit." It is just a cost-savings measure aimed at less-productive associates; not necessarily a bad idea, but certainly not good from a marketing standpoint, and will also be translated by associates as reflecting stingy or distressed management.

And the reason why is reflected by the third quote. First, bonuses fall. Second, raises are postponed or frozen. Third, hiring is slowed. Fourth, associates are laid off. Fifth, new hires are delayed. Sixth, the firm starts cannibalizing its own resources. Do firms really want to broadcast to their current and potential associates that the firm has already gone through five different assaults on associates to no avail?

The BigLaw "leverage" business model lives and dies on churning through associates. Associates work the hardest, followed by equity partners, followed by income and non-equity partners. Without fresh blood, a BigLaw leverage-model firm stalls and crashes as rainmakers leap elsewhere.

I do not agree with this business model. I do not practice this business model. But I do know that wishing away its complexities and complications, such as the difficulty with which you reduce the salary of non-partners (a problem in every industry), will not make them go away.

Every firm that considers jumping on this bandwagon needs to understand that associates and potential associates will not see things as the partners do. You see prudent cost-cutting to clear a path for long-term success. They see Wolf Block.

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Maxwell S. Kennerly is a civil litigation and trial attorney at The Beasley Firm in Philadelphia, Pennsylvania.

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