[UPDATE: Drug and Device Law goes Jersey Shore on me and "creates a situation," as they say. I replied in the comments there, although my comment seems to disappear at times. Perhaps their commenting/moderating software is as frustrating and difficult as mine. I’ve cut and pasted my comment below the fold here.]

I’ve discussed the problems with the Illinois Brick decision before. In short, since "indirect purchasers" cannot bring federal antitrust claims — even if they were injured by antitrust violations — "indirect purchasers" like third-party payors and retailers have to resort to state law. It is not uncommon to see lawsuits filed in a single federal district court that allege violations of the antitrust and unfair trade practices laws in dozens of states, sometimes all 50 states.

Which brings us to Sheet Metal Workers Local 441 Health & Welfare Plan et al. v. GlaxoSmithKline, PLC, et al., 2010 U.S. Dist. Lexis 93520 (E.D. Pa. Sept. 8, 2010). The pension plans have an interesting theory of the case:

In this putative class action, the End-Payor Plaintiffs allege that: (1) GSK unlawfully extended its monopoly over Wellbutrin SR by making fraudulent assertions to the United States Patent and Trademark Office and by engaging in "sham" litigation against generic drug manufacturers seeking to market less expensive versions of the drug; and (2) because the litigation delayed the market entry of generic versions of Wellbutrin SR, the class members were forced to pay unnecessarily  high prices for the drug because no generic alternatives were available for nearly two years after GSK’s patent monopoly would have expired.

Since the pension plans are indirect purchasers of the drugs, they can’t bring monopolization claims under Illinois Brick, and so instead have brought a single suit (in Pennsylvania, where GSK is headquartered) alleging a variety of state law claims, including violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (PUTPCPL), 73 Pa. Stat. Ann. §§ 201-1, et seq.

As the defense lawyers at Drug and Device Law note, while blasting Judge Stengel’s opinion denying dismissal of those claims, when a federal court interprets a question of state law,

[F]ederal courts may not engage in judicial activism.  Federalism concerns require that we permit state courts to decide whether and to what extent they will expand state common law.  Our role is to apply the current law of the appropriate jurisdiction, and leave it undisturbed. . . .  Absent some authoritative signal from the legislature or the state courts, we see no basis for even considering the pros and cons of innovative theories.  We must apply the law of the forum as we infer it presently to be, not as it might come to be.

City of Philadelphia v. Lead Industries Ass’n, 994 F.2d 112, 123 (3d Cir. 1993).

Frankly, I’ve never known what to make of that dictum; it sounds suspiciously similar to "keep your eye on the ball." Of course the federal courts are bound to apply the current law of the state, but, outside of express rulings by a state supreme court, one lawyer’s "extension of the law" is their opponent’s "current law." I’m sure the Sheet Metal Workers’ lawyers take the position that they can recover under "current law."

The folks at Drug and Device Law confidently assert that the dictum means that federal courts should bend over backwards to dismiss state law claims whenever possible — nevermind that the federal appellate courts have never described the principle that way.

To the extent that dictum means something more than "don’t overrule the state’s supreme court," it is an instruction that federal district courts apply the rule of parsimony when interpreting questions of state law. Since Drug and Device Law brought scientific maxims into the case, I will cite one in return: Occam’s Razor. The federal district court should make their analysis of state law "as simple as possible, but not simpler."

If we do that, the PUTPCPL question at issue in Sheet Metal Workers is simple: did the plaintiffs appropriately allege "deceptive conduct" that caused an "ascertainable loss of money or property" to a "person who purchase[d] or lease[d] goods or services primarily for personal, family or household purposes?"

Even if we simply read the word "deceptive" right out of the act — as D&D Law says we should — Pennsylvania uses a broad definition of "fraud," a definition that includes deception. See Moser v. DeSetta, 589 A. 2d 679 (Pa. 1991)("It is well established that fraud consists of anything calculated to deceive, whether by single act or combination, or by suppression of truth, or suggestion of what is false, whether it be by direct falsehood or by innuendo, by speech or silence, word of mouth, or look or gesture."). The Sheet Metal Workers opinion is thus right on the money: the plaintiffs are "persons" who were "deceived" into "purchase[ing] or lease[ing] goods or services primarily for personal, family or household purposes," thereby causing them an "ascertainable loss of money or property."

Simple, right? "Don’t be a pioneer" and all that.

But D&D Law doesn’t like simplicity. Instead, they argue a federal district court is bound to exceed the plain meaning of a state statute and perform a several steps of analytical gymnastics to divine that the Pennsylvania Supreme Court would somehow find that a party which was deceived into purchasing a consumer good nonetheless cannot bring a claim under the state’s consumer deception statute.

There is just one problem: neither of the Pennsylvania Supreme Court decisions they referenced held anything of the sort.

Weinberg v. Sun Co., Inc., 777 A. 2d 442 (Pa. 2001) held that it was not error for a trial court to deny, as is its discretion, to certify a class action.

We’re not at certification yet: the District Court expressly said that it would reserve class certification issues for a later date. The issue here wasn’t if the plaintiffs could certify a class — the actual issue in Weinberg — but if the named plaintiffs themselves adequately alleged individual violations. The District Court held they did, consistent with the elements laid out by the statute and by Weinberg.

Simple.

Toy v. Metropolitan Life Ins. Co., 928 A. 2d 186 (Pa. 2007) is similarly irrelevant; Toy merely held that "justifiable reliance" was an element of PUTPCPL claims. Here, that’s indisputable; the plaintiffs alleged that specifically.

Simple.

But let’s dive deeper into that as-yet-undecided class certification issue. Drug and Device Law claims that the judge "violated fundamental principles of federalism" by not following state court precedent in considering the certification of class claims in this federal litigation.

Put aside that Weinberg didn’t say plaintiffs could never certify a consumer fraud class action, but rather affirmed a trial court holding it couldn’t certify that particular consumer fraud class action. See anything wrong with the claimed federalism issue?

How about Shady Grove v. Allstate, in which the United States Supreme Court expressly held that Federal Rule of Civil Procedure 23 — which provides the standards for class certification in federal district courts — trumps state law, even state law specific to class certification of state claims.

Sure, prior to Shady Grove, some federal courts have looked to state law (e.g., Iorio v. Allianz Life Ins. Co. of N. Am., 2008 U.S. Dist. LEXIS 118344, at *87 (S.D. Cal. July 8, 2008)("the California Supreme Court has applied a presumption of reliance where the misrepresentation appeared in a document that class members were required to sign."), but other courts — including the Third Circuit — have established their own precedent in interpreting the propriety of class action certification, like so:

As the Supreme Court noted in Amchem, "[p]redominance is a test readily met in certain cases alleging consumer or securities fraud or violations of the antitrust laws …. [e]ven mass tort cases arising from a common cause or disaster may, depending upon the circumstances, satisfy the predominance requirement." [Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997)], 117 S.Ct. at 2250 (citing Adv. Comm. Notes, 28 U.S.C.App., p. 697). This case, involving a common scheme to defraud millions of life insurance policy holders, falls within that category. The district court’s opinion sets forth a litany of common issues which the class must demonstrate in order to prevail. See supra § IV.B.1 and n. 47-48. While individual questions may arise during the course of this litigation, we agree with the district court that the presence of individual questions does not per se rule out a finding of predominance. In particular, the "presence of individual questions as to the reliance of each investor does not mean that the common questions of law and fact do not predominate." Eisenberg v. Gagnon, 766 F.2d 770, 786 (3d Cir.1985).

In re Prudential Ins. Co. America Sales Litigation, 148 F.3d 283, 314-315 (1998).

Thus, when the District Court gets around to the class certification issue, there is indeed a "fundamental principle of federalism" at stake — if the District Court expressly chooses Weinberg over Shady Grove and In re Prudential, it just might violate the Supremacy Clause, the same Supremacy Clause defense lawyers trot out every time they want to assert implied preemption of state law claims.

Let’s hope that the District Court continues to apply Pennsylvania consumer deception law as it currently stands, rather than "expanding" it into an unenforceable nullity to suit the defense bar.

Continue Reading Sheet Metal Workers v. GlaxoSmithKline: How To Use State Consumer Fraud Laws To Bring Indirect Purchaser Antitrust Class Actions

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

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

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

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

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

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

Seriously?

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

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

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

What were those lawyers thinking?

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

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

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

 

The Blog of the Legal Times reported yesterday:

David Leitch, the general counsel of Ford Motor Co., is the new chairman of the board of directors of the National Chamber Litigation Center. Leitch succeeds James Comey, who until recently was senior vice president and general counsel of Lockheed Martin Corp.

And what is "the National Chamber Litigation Center," you ask? It’s the litigation arm of the U.S. Chamber of Commerce, one of the most loathsome enterprises in the nation:

I asked [U.S. Chamber of Commerce President and CEO Tom] Donohue what, exactly, the Chamber does. “Two fundamental things,” he replied. “We’re advocates. Sure we do studies, sure we do events, sure we do meetings, sure we have all kinds of stuff, but we’re advocates.” And then he surprised me again with his candor. “The second thing we do is really more interesting,” he said. “We’re the reinsurance industry for individual industry associations and state chambers of commerce and people of that nature.” An example, said Donohue, was when Wall Street found itself on the defensive in opposing new banking regulations. “They can’t move forward, they can’t move back, or maybe they’re being overrun, and they’ll come to us and say, ‘Can we collect our reinsurance?’” he explained. “And then we build coalitions and go out and help them.”

In other words, a large part of what the Chamber sells is political cover. For multibillion-dollar insurers, drug makers, and medical device manufacturers who are too smart and image conscious to make public attacks of their own, the Chamber of Commerce is a friend who will do the dirty work. “I want to give them all the deniability they need,” says Donohue. That deniability is evidently worth a lot. According to a January article in the National Journal, six insurers alone—Aetna, Cigna, Humana, Kaiser Foundation Health Plans, UnitedHealth Group, and Wellpoint—pumped up to $20 million into the Chamber last year.

That’s right: if you’re a multi-billion-dollar business trying to attack your own consumers, but you don’t want to get caught, call up the U.S. Chamber of Commerce. Dirty deeds, done dirt cheap.

Just today, contemporaneously with Leitch’s elevation, the National Chamber Litigation Center filed a brief with the Supreme Court (in AT&T v. Concepcion) arguing that large corporations should be allowed to slip class-action waivers into everyday consumer contracts, in spite of state laws and court decisions prohibiting the practice.

Why would they want such a thing?

As their own brief admits — while disingenuously claiming that class-action waivers are good for consumers — it’s well-known that:

[I]n small-stakes cases, other than those amenable to litigation in small claims court, such litigation is also a dead end. As one court colorfully put it, “only a lunatic or a fanatic sues for $30.” Carnegie v. Household Int’l, Inc., 376 F.3d 656, 661 (7th Cir. 2004).

Precisely. The Chamber of Commerce wants to bend the rules for large corporations so that those large corporations can adopt practices that harm millions of consumers in small amounts, amounts small enough that it’s simply not worth it to each individual consumer to bring a lawsuit, like when Wells Fargo fraudulently manipulated the order of debit transactions to increase the overdraft fees charged. (Small businesses generally don’t try this nonsense: their customers aren’t as captive, reputation is more important, and the money just isn’t there if you’ve only got a few hundred or thousand regular customers.)

That’s why class actions are so important — they tip the scales a back towards the consumers, making viable claims out of these cases involving a multitude of small harms — and why the Chamber of Commerce is fighting so hard to get rid of them.

That’s just one example of the the National Chamber Litigation Center’s work, an example plucked from the very same day that Leitch’s elevation was announced.

Which raises two important questions: why is Ford closely associating itself with an anti-consumer lobbying group? and why should consumers buy a product from a company secretly fighting to take away their rights?

Hindsight is 20–20, or so defense lawyers like to say when their clients are caught poisoning thousands, sometimes millions, of people.

Such will almost certainly be the case once the class-action litigation over BPA finally heats up. The latest product to be found guilty of leeching the toxic pseudo-hormone into unknowing customers is ordinary point-of-sale receipts:

Cash register and other receipts may expose consumers to substantial amounts of bisphenol A, a hormone-mimicking chemical that has been linked with a host of potential health risks, according to a trio of recent studies.

On July 28, Warner and his colleagues at the Warner Babcock Institute for Green Chemistry in Wilmington, Mass., formally published their first data based on 10 receipts recently collected in the Boston area. Six contained 1.09 to 1.70 percent BPA by mass. Another two contained 0.30 to 0.83 percent BPA; the final pair had no measurable amounts. Their findings appear online in Green Chemistry Letters and Reviews.

A Swiss study published online July 11 in Analytical and Bioanalytical Chemistry assayed 13 European sales receipts. Eleven contained BPA in quantities ranging from 0.8 to 1.7 percent of the paper’s mass.

And that BPA rubbed off easily, notes study coauthor Koni Grob, an analytical chemist with the Official Food Control Authority of the Canton of Zurich. Just holding receipt paper deposited substantial BPA onto dry fingers.

Thankfully, it’s a minor problem:

Indeed, Grob says, “I think it’s a scandal that you can have people touching thermal paper all day long,” since the concentration of BPA in its surface coating could approach 10 percent pure BPA.

Frederick vom Saal of the University of Missouri in Columbia, who performed the BPA assays for a recent study by the Washington, D.C–based nonprofit Environmental Working Group, agrees with Grob.

“I won’t touch receipts now,” vom Saal says.

Or not.

So what are we supposed to do now, go about our daily lives wearing disposable latex gloves? Frankly, I wouldn’t mind that during cold and flu season, but something tells me cashiers are a bit suspicious of customers who don’t leave behind any fingerprints.

Hindsight, as they say, is 20–20. All of this research connecting BPA on receipts only came out last month, right?

Appleton Papers of Appleton, Wis., switched to one of them — bisphenol sulfonate — in 2006, notes Kent Willetts, a company vice president. As a steady stream of toxicity reports and research papers began pointing to potential health threats posed by BPA, “We decided that’s not a chemical we want to use.” EPA’s new partnership program lists the sulfonate as a potentially acceptable substitute, he notes.

Apparently not. Apparently some of the receipt manufacturers — for convenience, let’s call them the responsible manufacturers — recognized the danger more than four years ago, and so chose to make their receipts with a less toxic and less dangerous substitute.

And what was everyone else — for convenience, we’ll call them the irresponsible manufacturers — doing?

Attendees suggested using fear tactics (e.g. “Do you want to have access to baby food anymore?”) as well as giving control back to consumers (e.g. you have a choice between the more expensive product that is frozen or fresh or foods packaged in cans) as ways to dissuade people from choosing BPA-free packaging.

The committee doubts social media outlets, such as Facebook or Twitter, will work for positive BPA outreach. The committee wants to focus on quality instead of quantity in disseminating messages (e.g. a young kid or pregnant mother providing a positive quote about BPA, a testimonial from an outside expert, providing positive video, advice from third party experts, and relevant messaging on the GMA website). Members noted traditional media outreach has become too expensive (they have already spent hundreds of thousands of dollars) and the media is starting to ignore their side. The committee doubts obtaining a scientific spokesperson is attainable. Their “holy grail” spokesperson would be a “pregnant young mother who would be willing to speak around the country about the benefits of BPA.”

I see.

And they wonder why people want to sue them.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Andrew Perlman at Legal Ethics Forum follows up:

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

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

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

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

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

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

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

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

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

So it goes with Ken Feinberg.

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

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

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

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

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

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

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

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

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

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

As described by the Court:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
(B) contrary to constitutional right, power, privilege, or immunity;
(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;
(D) without observance of procedure required by law;
(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or
(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court. 

5 U.S.C. § 706.

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

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

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

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

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

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

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

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

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

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

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

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

"Certain expectations about liability?"

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How intense and expensive can these cases get? 

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

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

But they weren’t lead counsel.

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

It wasn’t easy:

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

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

Mr. GINGOLD: A hundred percent.

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

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

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

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

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

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