Published By: Maxwell S. Kennerly, Esquire

For Law Students

Subscribe to For Law Students via RSS

Facebook, I wish I knew how to quit you. If we’re not discussing why Mark Zuckerberg won’t sue The Social Network, then we’re talking about you unilaterally changing your Terms of Use or your potential patent battle with Google over Foursquare. And now this:

Olympic rowing twins Cameron and Tyler Winklevoss are pushing ahead with another suit against Facebook, a day after they decided not to appeal [to the] U.S. Supreme Court [a] ruling [by the Ninth Circuit] upholding their $65 million settlement with Facebook and its founder Mark Zuckerberg.

I added the edits above because the original report was just wrong.

The continuation of the Winklevosses’ suit caught a lot of people off-guard: how can the Winklevosses continue a lawsuit in one court when another court has already held that they settled all of their claims?

Grab a cup of coffee and pick up your wands, we’re going beyond 1L Civil Procedure.

Some Background On The Two Lawsuits And The Settlement Agreement

A brief recap: there are two lawsuits involving the Winklevoss twins and Facebook, a lawsuit they filed in Massachusetts federal court (that’s the ConnectU case central to The Social Network) and a lawsuit Facebook filed against them in California federal court which, the Ninth Circuit summarized,

alleg[ed] that the Winklevosses and ConnectU hacked into Facebook to purloin user data, and tried to steal users by spamming them. The ensuing litigation involved several other parties and gave bread to many lawyers, but the details are not particularly relevant here.

Indeed. That Ninth Circuit opinion was quite boring by legal standards: it held that the one-and-one-third page term sheet that the ConnectU plaintiffs signed with the Facebook defendants following a mediation — in which the ConnectU plaintiffs released all their claims in exchange for cash and a piece of Facebook — was enforceable. The ConnectU plaintiffs came up with a couple clever arguments, like the claim that Facebook misrepresented its value and thus violated securities laws, but none of those really mattered: that one-and-one-third page term sheet was good enough to create an enforceable settlement.

That’s the opinion the Winklevosses were appealing to the Supreme Court. Not a bad idea to give that appeal up — their odds of success were minuscule, given that the case didn’t raise any particularly novel or interesting questions of law. It was your standard argument over whether or not a party would be bound by an initial settlement that was not reduced to a longer, finalized document to their satisfaction. (The answer is usually “yes.”)

The California case is thus done and gone, with a Ninth Circuit opinion affirming that the settlement included provisions under which:

The parties also agreed to grant each other “mutual releases as broad as possible,” and the Winklevosses represented and warranted that “[t]hey have no further right to assert against Facebook” and “no further claims against Facebook & its related parties.”

Ordinarily, there’s nothing more to do. The Winklevosses released and settled all of their claims, including the ones in Massachusetts. Typically, if there are multiple cases and one case ends with an agreement or opinion holding that all claims are released, the plaintiff files a praecipe or stipulation to dismiss the case. If they don’t, the defendant files a pro forma page-or-two motion moving to enforce the settlement and dismiss the case.

Using Fed.R.Civ.P. 60(b) To Revive A Lawsuit After You Lose

So, what gives? Can the Winklevosses really set aside the settlement agreement, despite the Ninth Circuit’s ruling enforcing it?

In relevant part, Federal Rule of Civil Procedure 60(b) states:

On motion and upon such terms as are just, the court may relieve a party … from a final judgment, order, or proceeding for the following reasons: … (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party….

As an April 20, 2011 status letter the Winklevosses filed with the Massachusetts court says:

The [ConnectU] Founders respectfully submit that Fed.R.Civ.P. 60(b) and Anderson v. Cryovac, Inc., 862 F.2d 910, 928-930 (1st Cir. 1988) warrant an inquiry into whether the Facebook Defendants intentionally or inadvertently suppressed evidence.

Ironically, if you’re in the United States, then you’re likely familiar with the case the Winklevosses rely on, Anderson v. Cryovac, Inc., 862 F.2d 910, 928-930 (1st Cir. 1988), even if you’re not a lawyer. It’s part of the appeal in the environmental contamination / toxic torts case that was the subject of A Civil Action.Continue Reading Fed.R.Civ.P. 60(b) And The Second Winklevoss Lawsuit Against Facebook

The NYTimes had an article this weekend about the growing number of e-discovery vendors who can go beyond mere keyword searches into linguistic and sociological reasoning about millions of pages of documents:

[T]hanks to advances in artificial intelligence, “e-discovery” software can analyze documents in a fraction of the time for a fraction of the cost. In January, for example, Blackstone Discovery of Palo Alto, Calif., helped analyze 1.5 million documents for less than $100,000.

Some programs go beyond just finding documents with relevant terms at computer speeds. They can extract relevant concepts — like documents relevant to social protest in the Middle East — even in the absence of specific terms, and deduce patterns of behavior that would have eluded lawyers examining millions of documents.

It often comes as a surprise to non-lawyers and law students, but the bulk of litigation work (measured in hours) performed at big law firms doesn’t really involve legal training or legal reasoning. The bulk of the work — which is performed by junior associates and contract attorneys as part of the “leverage” business model — involves the dreaded “document review.”Continue Reading The Scary New World Of E-Discovery Artificial Intelligence In Big Lawsuits

Read more about our law firm’s Pennsylvania sexual assault lawyers.

Yesterday the Third Circuit released a unanimous precedential opinion in Reedy v. Evanson:

While working as a cashier at a convenience store, nineteen-year-old Sara R. Reedy was sexually assaulted and robbed at gunpoint by a serial sex offender. She reported the crime to

…

The Los Angeles Times featured a story about the legal saga that has enveloped the Christian bestseller The Shack:

"The Shack," William Paul Young’s novel about a man rediscovering lost faith after the murder of his 5-year-old daughter, started out as a manuscript no one would touch. Finally, pastors Wayne Jacobsen and Brad Cummings

…

Today’s The Legal Intelligencer includes an article titled, "Limited Liability Law May Apply in Duck Boat Accident" about the effect of the Limitation of Liability Act of 1851 on claims arising from last’s weeks collision between a tugboat and a duck boat on the Delaware River.

The Limitation Act — which nominally limits the liability of a ship owner to the value of the ship itself — is a fascinating relic from a turbulent time in the United States, when whispers of war were beginning and the young agrarian nation was painfully converting to a steam-powered industrial society. The world’s first commercial oil well would not be built, in Poland, and the world’s first union railway station would not be built, in Indianapolis, for another two years.

With a lot of output, a big country, and not much transportation infrastructure, we needed investment in shipping, and lots of it.

Hence the Act.

Few would disagree that the Act has outlived its purpose, but it’s still on the books.

It’s just as well that the Legal article is subscription only, since it doesn’t tell us much other than that defense lawyers think the tugboat and duck boat are free and clear while plaintiff’s lawyers believe there are ways around it.

The press did a similar dance a few weeks ago, after Transocean invoked the same act to limit its liability following the catastrophic oil leak caused by the sinking of the Deepwater Horizon oil rig. Transocean’s use of the Act so bothered Congress that they’re trying to get the entire Act repealed; if that happens, this entire discussion will be rendered moot in the near future, as it should be: in our modern world of insurance, re-insurance, global finance, and limited liability companies, there’s no need to give vessel owners special treatment. Ships will still be built and used, regardless of the Act.

But the Act is still on the books. I’m with the plaintiff’s lawyers; there’s plenty of ways to get around the Act and get these types of maritime accidents back in the state courts where they belong.

First, the Act doesn’t apply if the liability of the vessel owner isn’t actually at issue:

In construing the Limitation Act, this Court long ago determined that vessel owners may contest liability in the process of seeking limited liability, and we promulgated rules to that effect pursuant to our "power to regulate . . . proceedings." The "Benefactor," 103 U. S., at 244; Supplementary Rule of Practice in Admiralty 56, 13 Wall., at xiii; Supplemental Admiralty and Maritime Claims Rule F(2). Thus, we agree with respondent that a vessel owner need not confess liability in order to seek limitation under the Act. The Act and the rules of practice, however, do not create a freestanding right to exoneration from liability in circumstances where limitation of liability is not at issue. In this case, petitioner stipulated that his claim for damages would not exceed the value of the vessel and waived any claim of res judicata from the state court action concerning issues bearing on the limitation of liability. The District Court concluded that these stipulations would protect the vessel owner’s right to seek limited liability in federal court. Then, out of an "abundance of caution," the court stayed the limitation proceedings so that it could act if the state court proceedings jeopardized the vessel owner’s rights under the Limitation Act. 31 F. Supp. 2d, at 1170-1171. We believe nothing more was required to protect respondent’s right to seek a limitation of liability.

Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438 (2001). Here, it’s already been reported that K-Sea had an insurance policy* in excess of $100 million; if the plaintiffs stipulate their damages don’t exceed that (which they reasonably could), then the Act’s purpose has been met.

Second, even where the Act applies, there are plenty of exceptions:

The Limited Liability Act allows a vessel owner to limit its liability for any loss or injury caused by the vessel to the value of the vessel and its freight.[6] "Under the Act, a party is entitled to limitation only if it is `without privity or knowledge’ of the cause of the loss."[7] If the shipowner is a corporation, "knowledge is judged by what the corporation’s managing agents knew or should have known with respect to the conditions or actions likely to cause the loss."[8] Once the claimant establishes negligence or unseaworthiness, the burden shifts to the owner of the vessel to prove that negligence was not within the owner’s privity or knowledge.[9]

In re Hellenic Inc., 252 F.3d 391 (5th Cir. 2001)(footnotes omitted, but they’re worth reading if you’re looking for more cases).

For anyone interested in the subject, the Admiralty and Maritime Law Guide has a couple cases on the Act. For anyone really interested, yesterday I went to a CLE on Boating Law and Liability — hosted, coincidentally, by Ride The Duck’s maritime lawyer — that included a thick book of materials on maritime law that can be purchased, even after the CLE.

As noted by those materials, "the knowledge of a corporation necessarily is measured by the knowledge of the corporation’s employees and agents." A clever plaintiff’s lawyer would point out that the knowledge and negligence of the mate — the one who took the Fifth and refused to testify — is imputed back to the owners of the vessel.

All of which is to say: as nice as the Act sounds on its face to defense lawyers, that tugboat company and its insurer aren’t going to just walk away from this tragedy.

If you have been seriously injured, contact a personal injury lawyer.Continue Reading The Duck Boat / Tugboat Crash And The Limitation of Liability Act

The Supreme Court released its opinion in Bilski v. Kappos this morning, which tested the sufficiency of a "business method" patent relating to the hedging of risk in investments.

Four Justices wanted to scrap "business methods" patents altogether. Five wanted to scrap just the patent at issue here.

Given the complexity of the issues involved, I’m…

As widely reported last week, the local Boy Scouts won a partial victory against the City of Philadelphia from a federal jury in the Eastern District of Pennsylvania:

A federal jury on Wednesday declared that the city of Philadelphia had violated the First Amendment rights of the local chapter of the Boy Scouts of America

…

At the Weekly Standard, art critic Lance Esplund has an essay decrying the upcoming move of the Barnes Museum from Lower Merion, Pa., to Philadelphia:

Now after years of litigation, Albert Barnes’s intentions have been subverted and his will broken. And the Barnes Foundation is scheduled to be moved. Galleries have already been closed. Ground

…

The University of Chicago Law School Faculty Blog is hosting a debate over a new paper, Ambiguity About Ambiguity: An Empirical Inquiry Into Legal Interpretation written by Ward Farnsworth, Dustin F. Guzior, and Anup Malani.

As the paper’s abstract says:

Most scholarship on statutory interpretation discusses what courts should do with ambiguous statutes. This paper

…