As regular readers know, I’ve spent the last two weeks trying a case with Francis Malofiy. [If you googled in looking for him, skip to the bottom of this post.] Last Friday, after 15 hours of deliberations, the jury returned a verdict in favor of our client on all six questions — relating to the nature of the agreement, damages, whether our client breached his obligations, whether defendants would get a set-off, and when the statute of limitations began to run — and awarded him $4.17 million in damages. The vote was 10–2, which is good enough under Pennsylvania law. The judge kindly let the attorneys talk with the jurors (assuming they wanted to talk, of course), so I went back to figure out what happened with those two holdouts.

Post-verdict discussions with jurors often reveal a handful of surprising and insightful comments that sometimes make me re-think how I tried the case. Jurors tend to take their duties very seriously, and so lawyers can usually jump right into detailed questions about the facts and what they thought about various issues. We were fortunate to have a number of invigorated and candid jurors who were happy to talk to us about the case.

In our case — in which our client alleged that he was frozen out of his ownership interest in an industrial business after spending two years building the business’ physical plant — there were a lot of issues, from the disclosure requirements for SBA Loans to the right type of saw for a particular cutting machine, but one issue loomed large: the lack of a written agreement. We had documents (including one signed by all the parties) supporting our claims, they had documents (signed by them, but not our client; we alleged they were created after the lawsuit was filed) supporting their claims, but there was no single document that purported to be the agreement among the parties. It was mostly our client’s word against the defendants’ word, with each side portraying radically different circumstances surrounding the agreement, chiefly differences over the work our client did in those two years.


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The Sandusky child molestation scandal at Penn State continues to be the biggest legal news in Pennsylvania. One lawsuit against Penn State and the Second Mile has already been filed, presumably because the victim was either nearing, or had already passed, the statute of limitations. A civil lawsuit can be filed at any point after a criminal act, though in that case the civil litigation is usually put on hold until the criminal case is finished.

I’ve already discussed most of the issues in the cases that could be filed by sexual abuse survivors in my previous post, linked above, but a new issue has started to bubble up: what happens to former football coach Joe Paterno, president Graham B. Spanier, athletic director Tim Curley, and university vice president Gary Schultz. Paterno and Spanier avoided criminal prosecution but were swiftly fired by the Board of Trustees for their roles in the scandal. (Technically, Spanier was given an ultimatum: resign or be fired, an effective termination that may have been given to Paterno as well. Spanier chose to resign.) Curley and Schultz were indicted for perjury and failing to report child abuse, after which Curley voluntarily went on administrative leave and Schultz retired.

Plenty has been written about the criminal prosecution about Curley and Schultz. As this Reuters analysis points out, prosecution on the failure-to-report-abuse claim might be tricky, but perjury is perjury, and it’s Curley’s and Schultz’s word against Mike McQueary’s over what exactly McQueary told them.

Outside of the criminal aspect, there’s an important civil litigation aspect just starting to gain traction, and that’s whether Paterno, Spanier, Curley or Schultz might have their own claims against Penn State. Consider this article about the PSU Trustees and Pennsylvania’s Sunshine Law:

[Q]uestions arose about whether the board had complied with the state’s Sunshine Act, because there was no evidence of required public votes on the matters. So the executive committee – nine of the 32 board members – decided to hold a brief telephone conference call Friday morning to resolve questions and formally approve those three major decisions.

The changes in status for Spanier, Paterno, and Erickson were the result of the questionable handling of child-sexual-abuse allegations against former assistant football coach Jerry Sandusky, whose arrest came five days before the departures of Paterno and Spanier.

“Due to the extraordinary circumstances” during the week of Nov. 6, Penn State spokesman Bill Mahon said after the executive committee’s five-minute phone call, “the board of trustees needed to act swiftly and decisively regarding personnel. While the board believes immediate action was necessary [three weeks ago], it is holding this special, preannounced public meeting of the executive committee to reaffirm and ratify the board’s prior personnel decisions.”

He added that the trustees “wanted to dot all the I’s and cross all the T’s.”

He said the firing, the resignation, and the naming of the new president were effective the week of Nov. 6. The full board will meet in January to “reaffirm” the action taken by the executive committee Friday, he added.

Even apart from the Sunshine Act, there are issues here worth exploring: what legal rights, if any, might Paterno and Spanier have against Penn State? I’ve seen news stories indicating that, at least for Spanier, they are “working out” a “multi-million dollar” severance package. Let’s look a little more deeply into that. 
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Big news in the sporting and antitrust litigation worlds — which overlap considerably — on Friday when the U.S. Court of Appeals for the Eighth Circuit (which hears all appeals in federal cases filed in the states between North Dakota, Minnesota, Arkansas, and Nebraska), reversed a preliminary injunction imposed by the U.S. District Court for the District of Minnesota prohibiting the NFL owners from imposing a “lockout” on players.

The order is posted here; when I reference Opinion and Bye Dissent below, I’m referring to that PDF. Two judges, Colloton and Benton (both appointed by George W. Bush — hold that thought) voted in favor of dissolving the injunction while the third judge, Bye (Clinton), provided a lengthy dissent.

As with all sports law news, start with Michael McCann. Here’s his Sports Illustrated column on the ruling. It’s a good summary; I’m going to get more technical and legally opinionated than he can get in an SI column. (Short version of our conclusions: we both agree that a request for en banc review is unlikely, but I’m more sanguine on the players’ odds in a petition to the U.S. Supreme Court.) ESPN has a Q&A as well. Howard Bashman has a round-up of stories here.

It’s probably best to start with the court did not do: the court did not rule on any of the antitrust allegations made by the players. The antitrust case filed by the players can continue to go forward. The court didn’t even rule on whether the players were entitled to an injunction under antitrust law; rather, the court held that labor law precluded the current players from obtaining an injunction and restricted the type of injunction the prospective players could get.

That said, it seems unlikely that either the players or the teams (not to mention their coaches, most of whom live in a precarious existence in which they change teams every two years, and so sided with the players in the case in an amicus brief) have the stomach for years of antitrust litigation during a lockout. More likely, the players and the teams intend to use these preliminary rulings on injunctions and antitrust/labor law to inform their bargaining positions. As the New York Times reports:

According to one person briefed on negotiations, the timing of the court’s opinion — issued in the morning — was “awful” and “not helpful” to the talks, unsettling them just as the sides hoped to finish discussions on the revenue split, the heart of the dispute.

The decision emboldened the hawks among both parties, the person said, inspiring some owners to want more concessions from players, and some on the players’ side to want to press their case, with the prospect that the court could allow antitrust damages.

It seems more than a little strange that both sides could feel emboldened by the order, particularly because, on the most basic level, the players lost one of their most valuable bargaining chips, i.e., the District Court order enjoining the lockout. So let’s dig a little bit deeper into what the opinion actually held and what it holds for the future, both for the NFL and for everyday employees.

There’s a lot to unpack here. We’re going to do it with a lot of laterals, like The Play.

The Players’ Antitrust Trick Play

The most obvious question is: why are we talking about antitrust at all? For purposes of antitrust law, the players are all one big union, which makes the teams all one big employer, and so the teams — at least with regard to their dealings with players — are likely a “single entity” under antitrust law. The teams thus can’t, as a legal matter, set up a “contract, combination in the form of a trust or otherwise, or, conspiracy, in restraint of trade” as prohibited by § 1 of the Sherman Act. A “single entity,” as they say, can’t agree or conspire with itself.

The players tried to get around that by busting up their own union. Right before the players–teams agreement ran out, the players ended the NFLPA’s status as their collective bargaining representative. The NFLPA then amended its bylaws to prohibit collective bargaining with the teams and filed requests with the Department of Labor and the Internal Revenue Service to be reclassified as no longer being a union.

At that point, the teams cease to be a “single entity” and turn into 32 separate entities, and that likely subjects them to antitrust scrutiny. As the Supreme Court held last year in American Needle v. National Football League, a separate case:

The NFL teams do not possess either the unitary decision-making quality or the single aggregation of economic power characteristic of independent action.   Each of the teams is a substantial, independently owned, and inde­pendently managed business.

Thus, as the players have argued, the teams can be liable for engaging in anticompetitive practices that violate § 1 of the Sherman Act, including limiting compensation for just-drafted rookie players, capping salaries for current players, and imposing restrictions on free agents like the “franchise player” and “transition player” designations.

At least that’s the players’ theory. Will it work? Maybe not: despite the American Needle case, which came to the Supreme Court on a very narrow issue — that is, if it was legally possible for the teams to be sued under antitrust laws — the Supreme Court and other federal appellate courts have been notoriously hostile to antitrust claims over the past few years. Consider AT&T v. Twombly (I discussed it briefly here; Twombly kicked off the line of cases later generally referred to as Ashcroft v. Iqbal), which dismissed — before even allowing discovery, much less trial — a fairly compelling antitrust case against the telecommunications companies. Truth is, the Supreme Court just plain doesn’t like consumers and employees.

The players at this point have three options:

  1. Giving up on the injunction, and just moving forward with the antitrust case;
  2. Appealing the Eighth Circuit’s injunction opinion either to the full Eighth Circuit sitting en banc (the current opinion was just a three-judge panel); or,
  3. Appealing to the Supreme Court (which they can do even after an en banc appeal, though it takes longer, and if the Supreme Court accepts the case, though certiorari isn’t assured).

I don’t see why they wouldn’t do #2 or #3. My hunch is that they’ll skip straight to #3: the Eighth Circuit is the most Republican Circuit in the nation, with 9 of its 11 active judges appointed by Republican Presidents (7 by George W. Bush), and so they’re arguably the most hostile Circuit towards unions, employees and consumers. With the Supreme Court, the players at least have a chance.

So let’s figure out what happened in the opinion.


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[Update, December 2012: as predicted, case dismissed, and dismissal just affirmed by the Second Circuit. The court didn’t even reach the class action issue, it just denied it on the merits. “[P]laintiffs were perfectly aware that The Huffington Post was a forprofit enterprise, which derived revenues from their submissions through advertising. Perhaps most importantly,

Fred Wilson, the always inspiring venture capitalist, posted yesterday A Challenge To Startup Lawyers:

We closed an investment recently. It was a seed round. Our firm priced the round and we were joined by a number of small VCs and a few well known angels. We agreed to close on a standard set of "light preferred" documents without negotiation. There was no investor counsel on the transaction. We just signed the standard documents which were tweaked to reflect the round size, share price, and board provision in the term sheet.

The legal fees for this transaction were $17,000. I talked this over with the entrepreneur and we agreed to pay the legal bill. We are both big fans of the law firm involved and felt they earned their fees on this transaction.

But I’ve been thinking about this situation over the past week and I’d like to issue a challenge to startup lawyers. When you have a seed stage company that needs to incorporate and close a seed round where all parties are willing to close on a set of standard docs without negotiation and where the investors agree to go without counsel, I think the legal fees for such a transaction should be $5000 or less. I just don’t see why it should cost more than that.

Down in the comments, DGentry asked:

Why have a lawyer involved?

If the documents are standardized and previously vetted, then what value does the presence of a lawyer provide?

To which Fred replied, "maybe that’s what we have to do. but there are filings to be made, the charter, the state forms, etc. i think you need someone to do this stuff for you."

There’s an unspoken requirement in Fred’s reply: Fred doesn’t want just anyone to do that "stuff," or else he’d ask someone at his office to do it. He wants a lawyer to do it.

Why?


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The Wall Street Journal Law Blog points us to a typical deposition transcript out of Cleveland about a copy machine:

Plaintiffs’ lawyer: During your tenure in the computer department at the Recorder’s office, has the Recorder’s office had photocopying machines?

Deponent’s Lawyer: Objection.

PL: Any photocopying machine?

Deponent: When you say

 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

I’ve sued several multinational banks for breaches of fiduciary duty and breaches of contract, and have always been amazed their lack of any accountability or responsibility. It’s not just a handful of instances of banks selling a company’s loan to their competitor and bank lawyers lying to federal regulators. They live in a different

As The Legal Intelligencer reported,

The Muffin Man ImageWhen a top-level executive suddenly quits to take a job at a competing firm, the courts have the power to block the start of the new employment if the evidence shows that such an injunction is needed to prevent a likely misappropriation of trade secrets, the 3rd U.S. Circuit