Over the Governor’s veto, the New Hampshire legislature passed an “early offers” law for medical malpractice claims. Tort reformer Walter Olson rounds up some commentary, most notably Torts Professor Christopher J. Robinette’s support, but intentionally excluding (dismissing it as “error-filled screed in a Litigation Lobby outlet”) The Pop Tort’s critical piece. In short, the new law sets up a process under which patients can request an “early offer” of a settlement prior to full-blown litigation that is supposed to cover their “economic loss” and then provide a modest sum for pain and suffering.

That sounds like a reasonable idea in theory, but, if the patient turns down the “early offer,” the plaintiff faces a number of penalties, including the requirement that, if they don’t obtain a verdict for 125% or more of the early offer, then they pay the doctor’s or hospital’s full defense costs. Indeed, the patient has to post a bond for the potential value of those defense costs before filing the case. In essence, if a plaintiff asks for the “early offer” but doesn’t accept it, they are then precluded from filing suit, because a lawsuit would simply be too expensive and too risky.

Here’s the critical information you need to know: Olson, Robinette, and other supporters like Dr. Kevin Pho have misunderstood the bill. Here is how they each describe it:

  • Olson: “The law establishes incentives for defendants to make offers early in the litigation process that cover plaintiff’s economic losses such as medical bills and lost wages.”
  • Robinette: “If extended, the offer must cover all economic loss—medical bills and lost wages. … [F]or the most severely injured patients, the recovery of full economic loss, which is mandatory under early offers, would be an improvement.”
  • Pho: “Medical costs and lost wages would be covered.”

These interpretations are all wrong. An “early offer” under the bill would not cover “plaintiff’s economic losses,” it would only cover a small portion of them. It certainly does not cover the patient’s “full economic loss,” it covers a tiny fraction of it.  It does cover “lost wages,” but not as any rational person would understand them — it only covers lost wages in the past, and not lost wages going forward due to the patient’s inability to work. 
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It’s no secret that patent infringement is one of the hottest areas in which to practice law these days.  The inventor-friendly principles that governed the original United States Patent Office back when Thomas Jefferson ran it (though he personally wasn’t too much a fan of patents) are still the law today, even though the scope of prior art in most industries has expanded far beyond the point where any patent examiner could reasonably review it, much less ensure an inventor in an ex parte proceeding fairly describes it.

These days, if an inventor has enough determination, or enough funds to pay for his or her patent registration attorneys to go the whole nine yards, then they can likely obtain a patent even if their invention is at beast only arguably novel or useful. Once granted, the patent has immense value, and is protected against all but the strongest invalidity challenges thanks to the Supreme Court’s opinion in Microsoft v. i4i last summer.

As a matter of law, from the plaintiff’s perspective patent infringement claims are a sweet deal (assuming your claims aren’t totally meritless, in which case the sanctions can be quite severe). Patent infringement cases are less of an uphill climb than, say, anti-trust, drug or medical device product liability, or any claims dependent upon a class action, all of which have been under attack by the Supreme Court for years.  It’s no surprise that defendants facing patent infringement claims often run scared to large corporate defense firms, asking them to pull out all the stops to defend them.

As a practical matter, though, patent infringement cases are a little more complicated than that. 
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[Update: The Delaware Supreme Court affirmed the award.]

Back in October, I never got around to writing about the whopping $1.2 billion dollar award in the shareholder derivative action In re Southern Peru Copper Corporation Shareholder Derivative Litigation, C.A. No. 961-CS because so many substantive articles had been written about it already. Francis Pileggi summed it up, as did Kevin LaCroix, Alison Frankel, and Steven Davidoff, Business Law Prof, and some Gibson Dunn lawyers over at the Harvard Law School Forum.

The merits have been covered from tip-to-tail, but some of the background is important to know in order to understand the latest development involving the plaintiffs’ attorneys’ fees. In short, minority shareholders in Southern Peru Copper Corporation, a NYSE-listed mining company, claimed that the company was cheated when the Board of Directors approved the exchange of $3.1 billion dollars of its shares to buy Grupo Mexico’s controlling interest in a Mexican mining company, Minera. They asked the Delaware Chancery Court to review the “entire fairness” of the transaction, per Kahn v. Tremont Corp., 694 A.2d 422 (Del. 1997).

Did I mention that Grupo Mexico, the seller, owned more than 50% of Southern Peru Copper, the buyer, and that Minera was really worth only $2.4 billion? That the “special committee” formed to “independently” review the sale (because Grupo Mexico was quite obviously a controlling shareholder) used a preposterously foolish “relative valuation” method that inexplicably de-valued Southern Peru’s own publicly-traded stock to justify the sale?

As Chancellor Leo Strine of the Delaware Court of Chancery concluded,

[W]hat remained in real economic terms was a transaction where, after a bunch of back and forth, the controller [Grupo Mexico] got what it originally demanded: $3.1 billion in real value in exchange for something worth much, much less – hundreds of millions of dollars less.

Despite Chancellor Strine’s misplaced affection for James Taylor — like Strine’s predecessor, former Chancellor Chandler, I’d rather roll with 50 Cent — Strine is a good and fair jurist, so he did the right thing: socked Grupo Mexico, the Grupo Mexico-affiliated directors of Southern Peru, and the members of the Special Committee with a judgment for the difference in price.

Then came the plaintiff’s petition for attorney’s fees. (Even in the absence of a class action or a derivative claim, “counsel fees may be awarded to an individual shareholder whose litigation effort confers a benefit upon the corporation, or its shareholders” under Tandycrafts, Inc. v. Initio Partners, 562 A.2d 1162 (Del. 1989). 
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 You know what’s cool? Apparently a billion dollars isn’t cool, according to Sean Parker, no matter what Justin Timberlake in The Social Network might have to say about it.Not a personal injury lawyer.

But what is cool is third-party litigation financing. Don’t believe me? Binyamin Appelbaum at the NYTimes and the Center for Public Integrity did a whole

Huge corporate law firms with hundreds of lawyers do two things well: represent corporate clients in billion-dollar matters (like mass torts defense and mergers and acquisitions) and provide one-stop-shopping for corporations with ten or eleven figure annual bills for legal services.

For example, if you’re one of the largest oil companies in the world, and

[Update, February 26, 2014: Discovery in the DiDonato v. Ung case has been completed, and the matter set for trial in April. There was an interesting and long diversion into insurance coverage law: apparently, during Ung’s deposition, DiDonato’s lawyers told him that he could potentially be covered by his parents’ homeowners insurance

I first blogged about the Lycoming Engines class action case back in April 2009, when the Third Circuit reversed Judge Savage’s order granting certification on plaintiffs’ unjust enrichment and implied warranty of merchantability claims. As I wrote then:

A model of efficiency, class actions are not.

I don’t have an easy answer for

[UPDATE: Complicating matters, on June 29th, 2011, a Third Circuit panel ruled in the Tristani v. Richman case (PDF) that Medicare / Medicaid has the right to assert liens, and that the default medical expenses apportionment scheme under 55 PA. CODE § 259.2 is appropriate. Expect more litigation and appeals to follow, likely

One of the great things about being a lawyer is that, like a sports fan watching a play unfold, you can foresee lawsuits before they’re even filed.

Nutella is delicious, creamy, and chocolaty, but one thing it is not: healthy. That didn’t stop Ferrero, the makers of Nutella, from starting up a healthy-for-kids advertising campaign last year in Europe, as profiled by the nutrition researchers at Obesity Panacea:

Although this may surprise some of our readers, I really like junk food. I eat far too much pizza, I love chicken wings, and Nutella, the original chocolate hazelnut spread, is one of my favourite breakfast condiments (it’s tasty on a bagel, but its unbeatable inside a fresh crepe with whipped cream and bananas). The interesting thing about Nutella is that its commercials seem to suggest that it is some sort of health food.

Now that commercial implies several things. First off, it implies that Nutella is a great source of energy, especially for kids. Well it should be a great source of energy – the first ingredient is sugar. In fact, in a 19 gram serving of Nutella, 11 grams are sugar. Of course that energy won’t last very long before an insulin spike kicks in and makes the kids lethargic, so they are likely to need something more substantial if they plan to "discover the world" for more than an hour or so.

The commercial also implies that Nutella is mainly hazelnuts and milk. However, hazelnuts only make up 13% of Nutella, and skimmed milk makes up less than 7%. …

Many Nutella ads, including those on their American website which can be found here, suggest that Nutella is not only a great source of energy, but is also a nutritious way to start your day. What type of nutrients? After sugar, the second most common ingredient in Nutella is palm oil. The same palm oil which is high in palmitic acid, a fatty acid which the World Health Organization claims is convincingly linked to increased risk of cardiovascular disease (see the report here, and skip to page 98 for the info on palmitic acid). In fact, roughly half the calories in Nutella are from sugar, and the other half are from fat. Only about 4% of the calories are from protein. The Nutella website also suggests that Nutella is healthy because it "is made with hazelnuts which are a great source of vitamins." Note that they don’t say that Nutella is a great source of vitamins, because it’s not – a single serving has 0% of the recommended daily intake of Vitamins A and C, and just 10% of the recommended intake of Vitamin E.

 

It didn’t take long for the campaign to come to the United States. Sure enough, watching The Weather Channel one morning (admit it, that’s how you start the day, too), I saw one of these Nutella commercials, started laughing, and told my wife: "they’re going to get sued." Those sort of ridiculous claims are bread and butter — or should I say hazelnuts and milk sugar and palm oil? — to consumer class action attorneys.

Sure enough, the consumer class action was just filed:

The maker of Nutella is the target of a consumer class action filed on Tuesday alleging the company falsely markets its hazelnut spread as healthy for children even though the product is loaded with saturated fat and processed sugar.

Filed in the U.S. District Court for the Southern District of California, the lawsuit alleges that Ferrero USA Inc. violates California consumer protection laws by representing that the spread is a healthy, nutritious and balanced breakfast for children. The name plaintiff, Athena Hohenberg, is the mother of a four-year-old child.

The lawsuit claims violations of California’s laws pertaining to unfair competition and false advertising. It also alleges breach of warranty and seeks injunctive relief and compensatory and punitive damages. The purported class comprises all consumers who purchased Nutella beginning in January 2000.

(The WSJ Law Blog also picks up on it here.) 

The key word is California. A quick review of some consumer fraud class action cases over the past few years show them being dismissed, time and time again, for one reason: "justifiable reliance."

Like Hunt v. US Tobacco Co., 538 F.3d 217 (3d Cir. 2008):

We believe the Pennsylvania Supreme Court has effectively answered the question presented in this case. That Court has categorically and repeatedly stated that, due to the causation requirement in the Consumer Protection Law’s standing provision, 73 Pa. Cons.Stat. § 201-9.2(a) (permitting suit by private plaintiffs who suffer loss "as a result of" the defendant’s deception), a private plaintiff pursuing a claim under the statute must prove justifiable reliance. See, e.g., Schwartz v. Rockey, 593 Pa. 536, 932 A.2d 885, 897 n. 16 (2007) (stating that "the justifiable reliance criterion derives from the causation requirement which is express on the face of section 9.2[, the statute’s private-plaintiff standing provision]"); Toy, 928 A.2d at 202 ("[A] plaintiff alleging violations of the Consumer Protection Law must prove justifiable reliance."); Yocca v. Pittsburgh Steelers Sports, Inc., 578 Pa. 479, 854 A.2d 425, 438 (2004) ("To bring a private cause of action under the [Consumer Protection Law], a plaintiff must show that he justifiably relied on the defendant’s wrongful conduct or representation and that he suffered harm as a result of that reliance."). It has not recognized any exceptions, and has applied this rule in a variety of situations. These include, in Yocca, a claim— like Hunt’s claim here—under the post-1996 catch-all provision. See Plaintiffs[‘] Third Amended Class Action Complaint in Civil Action at 18-19, Yocca, No. GD XX-XXXXXX (Pa.Ct.C.P.2001) (accusing defendant of, inter alia, "[e]ngaging in any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding"). The Pennsylvania Superior Court has applied the Supreme 222*222 Court’s standing rule to the post-1996 catch-all provision, see Debbs v. Chrysler Corp., 810 A.2d 137, 156-58 (Pa.Super.Ct.2002); Sexton v. PNC Bank, 792 A.2d 602, 607-08 (Pa.Super.Ct.2002), and our Court has interpreted the rule to apply to all Consumer Protection Law subsections, see Santana Prods., Inc. v. Bobrick Washroom Equipment, Inc., 401 F.3d 123, 136 (3d Cir. 2005). Given this significant authority on statutory standing, we think the Pennsylvania Supreme Court would require justifiable reliance where a private plaintiff alleges deceptive conduct under the post-1996 catch-all provision.

That’s not a problem by itself, except that many courts have held that you simply can’t have a class action where the claims include justifiable reliance as an element. I think those rulings are crazy — of course you can show, by a preponderance of evidence, that members of a class relied on false advertising, it’s just a question of degree and thus a question for the jury — but it’s the law in a lot of places.

But not California, which has a lot of exceptions to the rule, including an exception that presumes consumers rely, to some extent, on written advertising. Hence the Nutella suit being brought in California first; California’s one of the best places to file it.

Which really makes you wonder about the quality of other state’s laws. Those state’s technically make false advertising illegal, but it’s a hollow remedy, since it’s never enforced. Without the ability to create a class action, no consumer class action lawyer would spend thousands of hours and dollars fighting a case worth no more than a single jar of Nutella.


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The Limited Scope Of Inventors’ and Creators’ Rights Under Copyright, Trademark, and Patent Infringement Law

The business lawsuits actually filed, and defamation lawsuit not filed, surrounding Mark Zuckerberg and Facebook have inspired some of my more popular posts. But there is one litigious part of the Facebook story that I did not cover,