There’s been a wave of antitrust class actions predicated on patent misuse by pharmaceutical companies of the past decade. The troublesome Illinois Brick decision prevents “indirect purchasers” — which means you, me, and our health insurance plans — from bringing federal antitrust claims, so plaintiffs’ lawyers have had to get creative in use of state law to obtain relief for companies that have been overcharged for their medication, like the Sheet Metal Workers tried to do with the Pennsylvania Unfair Trade Practices and Consumer Protection Law (PUTPCPL). Given decades of efforts by anti-competition legislatures and judges to undermine consumer fraud law, it can be a tough sell.

When the direct purchasers, who are really wholesale dealers several steps removed from patients, come in, though, it’s a different story entirely, like in the Neurotin decision last week from the District Court for New Jersey:

Plaintiffs in the instant action each directly purchased Neurontin, a brand-name version of the drug compound gabapentin anhydrous (‘gabapentin’), from Defendants Pfizer, Inc. and Warner-Lambert Company, LLC (collectively, ‘Warner-Lambert’). In their Amended Complaint, Plaintiffs allege that Warner-Lambert engaged in an overarching anticompetitive scheme to acquire and maintain monopoly power in the market for gabapentin products in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. Warner-Lambert is alleged to have carried out this scheme by:

(1) procuring two additional patents that it improperly listed in the Orange Book; (2) manipulating the patent approval process so that a third patent with claims so limited that they are impossible to accurately measure or distinguish from the prior art enabling the patent to be used to delay generic entry; (3) filing and prosecuting multiple sham lawsuits on these patents that no reasonable litigant could have expected to succeed; and (4) engaging in fraudulent off-label promotion to convince doctors to prescribe Neurontin for uses for which it was not approved.

DPNC Complaint ¶ 29. Plaintiffs claim that these actions were designed to, and did in fact, delay the entry of generic gabapentin into the market until late 2004. Plaintiffs allege that but for Warner-Lambert’s anticompetitive scheme, generic manufacturers would have entered the market at lower prices as early as 2000. As a result of this delayed entry, Plaintiffs contend that they and other direct purchasers of Neurontin were foreclosed from the opportunity of purchasing lower-priced generic versions of the drug for years, and were accordingly compelled to pay non-competitive prices for gabapentin. Plaintiffs seek damages for this overcharge pursuant to Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26.

Neurontin Antitrust Litig. v. Pfizer, Inc., 2011 U.S. Dist. LEXIS 7453, at *4–5 (D.N.J. Jan. 25, 2011). It’s a case made for class action status, a case in which a large company damaged dozens or hundreds (depending on who’s counting) of smaller companies through the same course of conduct.

But it’s defense lawyers job to raise issues, whether there are any or not, so they gave it the old college try in opposing class certification. As usual in class actions, the battleground was over Federal Rule of Civil Procedure 23(b) (23(b)(3), that is, rather than 23(b)(2), at issue in Dukes v. Wal-Mart) and whether plaintiffs could show that (1) ‘questions of law or fact common to class members predominate over any questions affecting only individual members,’ and that (2) ‘a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.’ Fed. R. Civ. P. 23(b)(3).

The drug company’s hook this time:

The critical disputed issue here concerns whether common questions predominate with respect to antitrust impact. As noted above, ‘impact’ or ‘fact of damage’ is an essential element of Plaintiffs’ claim, and requires proof that Plaintiffs suffered some injury that was caused by Warner-Lambert’s antitrust violation. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n.9, 89 S. Ct. 1562, 23 L. Ed. 2d 129 (1969). At the class certification stage, the Court’s concern is only whether Plaintiffs could prove impact through predominately class-wide evidence; not whether, in fact, they have. Hydrogen Peroxide, 522 F.3d at 311; Linerboard, 305 F.3d at 152.

In the instant case, Plaintiffs assert that Warner-Lambert’s scheme delayed the market entry of generic gabapentin, in turn delaying the ability of Class Members to substitute purchases of Neurontin with purchases of a generic alternative. Plaintiffs contend that their injury stems from the higher prices they paid for Neurontin as a result of being foreclosed from buying lower-priced generics (the ‘overcharge’). To show this injury, Plaintiffs plan to demonstrate that, absent Warner-Lambert’s anticompetitive conduct, Class Members would have purchased the lower-priced generic in place of Neurontin. Warner-Lambert has conceded that this is a cognizable theory of injury, recognizing that ‘class members suffered damages to the extent that each entity would have substituted generic gabapentin for its purchases of Neurontin.’

Frankly, I find this line of attack to be silly, since there’s no doubt that Plaintiffs could prove impact through predominately class-wide evidence — the only question is the extent to which that actually happened, which is a question for the jury — and I’m glad to see the District of New Jersey rejected it.

That’s all well and good, and would be somewhat standard for a direct purchaser antitrust class action, but the interesting part came in one of the Court’s footnotes discussing what evidence satisfies the “predominance” factor in class certification:

See, e.g., Relafen, 218 F.R.D. at 343 (finding predominance requirement met where direct purchasers relied on ‘governmental and academic studies, projections and analyses described in [defendant’s] and its competitors’ internal documents, and price and sales data for Relafen and its generic equivalents’); Wellbutrin, 2008 U.S. Dist. LEXIS 36719, 2008 WL 1946848, at *8 (approving Dr. French’s use of literature examining impact of generic entry into pharmaceutical market and analysis of public data collected on dispensation and purchases of prescription drugs to prove common impact); Cardizem, 200 F.R.D. at 308 (approving the use of academic studies, defendants’ internal sales documents, and marketplace sales data, to prove common impact); Nifedipine, 246 F.R.D. at 370 (noting that plaintiffs’ expert explained that common impact could be proved by studies of generic entry on the pharmaceutical industry, evidence obtained from defendants, and publicly available sales data, and concluding that ‘plaintiffs have offered a sufficient colorable method of proving class-wide impact with common evidence as to the issue of causation’); Tricor, 252 F.R.D. at 229 (same); Meijer, 246 F.R.D. at 308 (same); K-Dur, 2008 U.S. Dist. LEXIS 118396, 2008 WL 2669390, at *15 (same).

Neurontin Antitrust Litig. v. Pfizer, Inc., 2011 U.S. Dist. LEXIS 7453, at *30–31 n.16 (D.N.J. Jan. 25, 2011). Undoubtedly right on the merits — what better way to prove what a defendants’ customers did than to look at the actual sales? — and a good cite to remember next time you’re litigating a nationwide, multi-million dollar patent abuse lawsuit. Or, if you really want the scoop, Barry over at Blawgletter is hosting a Webinar on just these sorts of issues today.



Via Scott Greenfield, Radley Balko writes about the $2 million settlement of the Sal Culosi case:

Fairfax County detective, David Baucum, overheard [Culosi] and some friends wagering on a college football game at a bar. “To Sal, betting a few bills on the Redskins was a stress reliever, done among friends,” a friend of Culosi’s told me… “None of us single, successful professionals ever thought that betting 50 bucks or so on the Virginia/Virginia Tech football game was a crime worthy of investigation.” Baucum apparently did. After overhearing the wagering, Baucum befriended Culosi. During the next several months he talked Culosi into raising the stakes of what Culosi thought were friendly wagers. Eventually Culosi and Baucum bet more than $2,000 in a single day, enough under Virginia law for police to charge Culosi with running a gambling operation.

By this point, the story is already curious, if not outright disturbing. No county, not even Fairfax County, has so many police officers, and so many good leads, that it can investigate and prosecute every single crime. For better or for worse, police officers and prosecutors make discretionary decisions every day, decisions often based on the severity of the alleged crime. Some crimes are ignored. Some crimes result in a warning, other crimes result in an arrest on sight, and a small fraction of crimes result in a months-long investigation with undercover officers.

I am not sure where a single instance of betting more than $2,000 in a single day should land on that continuum — it strikes me of the sort of crime worthy of a warning at most — but a handful of bets among friends amounting to a few hundred dollars falls absolutely nowhere on that continuum. It is not a “crime.” There is nothing about it worthy of concern, much less arrest, much less an undercover investigation. It is awfully hard to prevail on the defense of entrapment, but I think Culosi might have done it: “Where the Government has induced an individual to break the law and the defense of entrapment is at issue . . . the prosecution must prove beyond reasonable doubt that the defendant was disposed to commit the criminal act prior to first being approached by Government agents.” Jacobson v. United States, 503 U.S. 540, 548-49, 112 S.Ct. 1535, 118 L.Ed.2d 174 (1992).

All of which is to say, it’s hard to understand why so much police attention was directed at Culosi in the first place.

I represent people with civil rights claims against the police. I’ve represented police officers with civil rights claims against other police officers, and I’ve defended police officers from claims unrelated to their work. Most police officers want to do an honest day’s work, hopefully make the world a better place, and then go home. There are, of course, many officers who are constitutionally unfit for the job, but there also are a fair share of incompetent or malicious lawyers, doctors, butchers, bakers, and candlestick makers. That’s life.

But police officers’ work makes their situation different. They are commissioned by the government to put themselves at risk are authorized to use deadly force. They are given a duty, and trained to have an ethos, of ensuring order. The combination has a way of getting out of hand:

On the night of January 24, 2006, Baucum called Culosi and arranged a time to drop by to collect his winnings. When Culosi, barefoot and clad in a T-shirt and jeans, stepped out of his house to meet the man he thought was a friend, the SWAT team moved in. Moments later, Bullock, who had had been on duty since 4 a.m. and hadn’t slept in 17 hours, killed him. Culosi’s last words: “Dude, what are you doing?”

When deadly force is involved, it doesn’t take much for a curious and disturbing situation to immediately become tragic. No single mistake, no mere negligence, will cause a 38-year-old optometrist to be gunned down by a SWAT team for doing nothing more than betting on college football and, through the encouragement of the police, betting just above the legal limit.

Why was the undercover operation approved? Who decided to forcibly arrest Culosi, instead of just calling him? Who decided a SWAT team was needed? Why was an office who hadn’t slept in nearly a day involved? Why did he have his weapon in an aggressive posture, with his finger on the trigger?

And for each of those, who else knew it was happening, and why didn’t they stop it?

For a respectable member of the community to be killed for no reason, the state itself must have failed him.

But you can’t sue the state for failing you. The state, a legal fiction, enjoys a legal fiction invented for royalty, that of sovereign immunity. Even the federal government can’t authorize suits against the state, as I wrote before. 42 U.S.C. 1983 provides:

Every person who, under color of any [state law], subjects… any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the [United States] Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress …

1983 enables plaintiffs to sue “persons” who, acting “under color of” state law, violate rights guaranteed by the U.S. Constitution. But 1983 doesn’t enable plaintiffs to sue states that violate constitutional rights. The Eleventh Amendment and “the structure of the original Constitution itself” recognize the sovereign immunity of the states from suits by private citizens, which Congress can’t overcome with merely a statute. See Alden v. Maine, 527 U.S. 706 (1999)(holding Congress generally cannot authorize private suits against the state even in state’s own courts).

You also can’t sue them for wrongful death, the way you can sue a doctor who botches a surgery, a drunk truck driver, or a careless manufacturer — since they’re governmental employees, they, too, are immune from normal tort suit.

The only way, then, that Sal Culosi’s survivors could bring suit is by suing the officers personally under 42 U.S.C. 1983 for violating constitutional rights “under color of state law.” It’s not really “personally,” of course, since the government — you know, the “under color of state law” part — will pay every penny of the defense and the judgment, but we call it “personally” as another legal fiction, to open up new defenses for the government, such as arguments that the officer can’t “personally” afford judgments above a certain size.

But even that’s not simple. There’s no constitutional right to a competent police force. Instead, there are only constitutional rights to deprivation of life without due process, and rights to be free of excessive governmental force.

How much “process” is “due?” Not a lot. How much “force” becomes “excessive?” A lot more than most people think.

Moreover, all those “personally” sued officers — who are sued “personally” only as a legal fiction — get special rights of appeal because they’re sued “personally.” Unlike virtually every other type of lawsuit in America, in which appeals have to wait until the case is over, government officers sued for violating constitutional rights get to appeal in the middle of the case and have an appellate court double-check the ongoing work of the trial court. It happened in Culosi’s case; the government got a freebie appeal even before trial was held. More work, most expenses, more risk, more delay.

As Balko notes, after Culosi’s parents settled the case, his mother posted a heartbreaking entry online the site set up for her son:

I’ll beg your forgiveness Son…because I am not able…to go the distance. They call it…settlement. I call it something else…and because of that…my heart…is not settled…and my hope for justice…and my promise to you…have both been compromised…I believe in my heart that we would have won in court but I was told to consider the risk of that not happening…Our family has already been through almost 5 years of pain, frustration, disappointments, and stress…and there was the opinion that even if we won the county would appeal and that would mean a few more years and resources fighting what could still be a losing battle.

As Greenfield says, although the settlement claims it’s not “an admission of liability,” it is exactly that. Fairfax County didn’t vindicate itself by paying out $2 million after pointlessly entrapping and killing an upstanding citizen in his prime.

But the case is a reminder of just how hard it is for plaintiffs, particularly those with claims against the government, to prevail, even in the most meritorious of cases. It took Culosi’s parents “5 years of pain, frustration, disappointments, and stress” just to get the point where their case could settle pre-trial. Vindication at trial and on appeal would undoubtedly have taken several more years and, indeed, could have resulted in a total loss — a vindication of Fairfax County’s conduct — if the courts didn’t think the legal fictions lined up the right way.

The civil legal system is, at best, a form of rough justice, one that knows only how to speak in terms of money. Fairfax County has spoken as loudly as they ever will: Sal died wrongly, needlessly, and illegally. We can only hope that, when the government’s money talks, they will listen to what it is saying.


If you’re a reader of this blog, you’re undoubtedly familiar with Bell Atlantic v. Twombly and Ashcroft v. Iqbal, a pair of Supreme Court cases which altered the pleading standards applicable to civil cases filed in federal court.

Defense lawyers have jumped all over those two opinions in an attempt to dismiss lawsuits — particularly complex commercial class actions, like antitrust cases — before any discovery can be taken. Every lawsuit, they claim, no matter how detailed and compelling, is "implausible" under Twombly and Iqbal. I taught CLEs to help other trial lawyers defeat those arguments.

Back when the Iqbal opinion first came out, I wasn’t impressed. Sure, the Supreme Court added the word "plausible" to the Rule 8 standard, but frankly I didn’t think Twombly or Iqbal would make Rule 8 and Rule 12(b)(6) any more dispositive than they already were. Before either of those cases were decided, if a judge read a plaintiff’s complaint and thought that the claim was "implausible," they would dismiss it under Fed.R.Civ.P. 12(b)(6) for failing to state a claim upon which relief could be granted. Twombly and Iqbal simply codified a practice that was already widespread in the federal judiciary.

That’s not to say I think the opinions do nothing — by way of their vague, ambiguous and amorphous language, they confuse a lot of judges into arbitrarily deeming certain allegations to be "conclusions" instead of "facts" (and even Judge Posner can’t figure out the "plausibility v. probability" distinction) — but the underlying legal principles are the same.

I said as much at the time. Time has proven me correct.

Almost exactly a year ago I posted Second Circuit Revives Digital Music Price-Fixing Case, Takes A Bite Out Of Twombly, noting a Second Circuit opinion which held:

Although the Twombly court acknowledged that for purposes of summary judgment a plaintiff must present evidence that tends to exclude the possibility of independent action, 550 U.S. at 554, and that the district court below had held that plaintiffs must allege additional facts that tended to exclude independent self-interested conduct, id. at 552, it specifically held that, to survive a motion to dismiss, plaintiffs need only “enough factual matter (taken as true) to suggest that an agreement was made,” id. at 556; see also 2 Areeda & Hovenkamp § 307d1 (3d ed. 2007) (“[T]he Supreme Court did not hold that the same standard applies to a complaint and a discovery record . . . . The ‘plausibly suggesting’ threshold for a conspiracy complaint remains considerably less than the ‘tends to rule out the possibility’ standard for summary judgment.”).

Defendants next argue that Twombly requires that a plaintiff identify the specific time, place, or person related to each conspiracy allegation. This is also incorrect. The Twombly court noted, in dicta, that had the claim of agreement in that case not rested on the parallel conduct described in the complaint, “we doubt that the . . . references to an agreement among the [Baby Bells] would have given the notice required by Rule 8 . . [because] the pleadings mentioned no specific time, place, or person involved in the alleged conspiracies.” 550 at 565 n.10. In this case, as in Twombly, the claim of agreement rests on the parallel conduct described in the complaint. Therefore, plaintiffs were not required to mention a specific time, place or person involved in each conspiracy allegation. 

The Second Circuit’s opinion was significant. The case was right up Twombly‘s alley — an allegation of an illegal agreement in violation of antitrust laws, the details of which were still known only to the defendants — and so the Second Circuit’s reinstatement of the case dealt a powerful blow to the defense lawyers who had been arguing that Twombly and Iqbal had slammed the courthouse shut on plaintiffs who couldn’t prove their whole case before even filing it.

The record companies in that case weren’t inclined to throw in the towel, so they filed a petition for certiorari to the Supreme Court arguing, as you would imagine, that the Second Circuit failed to follow Twombly and Iqbal.

A funny thing happened yesterday. Tucked in among pages and pages of summary orders at the Supreme Court was this:

The petition for a writ of certiorari is denied. The Chief Justice and Justice Sotomayor took no part in the consideration or decision of this petition.

The Second Circuit’s opinion thus stands firm. Even after Twombly and Iqbal, all a plaintiff needs to allege, even in a complex antitrust case, is “enough factual matter (taken as true) to suggest" the elements of the claim.

That’s the same as the Third Circuit recently held in In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 314 (3d Cir. 2010) and later applied to all cases, including complex cases, in W. Penn Allegheny Health Sys. v. UPMC, No. 09-4468, (3d Cir. November 29, 2010)(precedential).

In short, the Circuit Courts have taken a hard look at Twombly and Iqbal and have rejected the numerous attempts by big corporations to slam the courthouse doors shut on meritorious cases, and the Supreme Court hasn’t stopped those Courts from setting the record straight.

In celebration, below the fold are some plaintiff-friendly precedential opinions over the last year in various Courts of Appeals (in addition to the Second Circuit and Third Circuit opinions above). 

Continue Reading Another Twombly/Iqbal Victory for Plaintiffs: SCOTUS Denies Certiorari for Digital Music Price-Fixing Case

[UPDATELaw Librarian Blog and 3 Geeks and a Law Blog both have detailed coverage of the case and what it means for the publishing industry, and Jonathan Turley has background on the Campbell punitive damages case.]

[UPDATE II: As The Legal Intelligencer  reported, and as I predicted below, Judge Fullam cut the punitive damages verdict, holding “the constitutional limit in this case should be set at $110,000 for each plaintiff. When combined with the compensatory damages, this would result in a recovery of $200,000 for each plaintiff.” That’s roughly a 1:1 ratio of compensatory:punitive damages, which is low under recent precedent, even in non-personal injury cases.]

One of the big secrets about the legal world is that a huge portion of the work is performed by the newly-minted lawyers with little or no experience in anything, much less experience in the fields they are called upon to practice.

The Supreme Court (along with most federal and state courts) hires almost exclusively lawyers who have just graduated from law school. Expensive “BigLaw” corporate law firms churn through new graduates by the thousands, inflicting them on clients at $150–250 an hour to flail about through legal database searches and to endlessly review clients’ e-mails and documents to determine if they are arguably privileged.

Then there is the legal publishing industry. When all of these new lawyers are looking for answers in fields they barely understand, much less can practice in, they turn to textbooks, treatises, hornbooks, and guides that are supposed to give them all the answers or, at least, point them in the right direction. (Everyone expects hornbooks to be like a map, but, really, they’re meant more to be a compass.) Some of these guides are fantastic, written by seasoned professionals who explain, in simple but not too simple terms, what the relevant issues are and where a practitioner should go to answer further questions.

And then there is what happened to the Pennsylvania Criminal Procedure: Law, Commentary and Forms written by David Rudovsky (whose civil rights practice I’ve discussed here) of the University of Pennsylvania Law School and Leonard Sosnov of Widener Law School and published by West, one of the more prominent legal publishers. As The Legal Intelligencer recounted:

[T]he professors claimed that, because of a pay dispute, they stopped working on the project and therefore did none of the work on the December 2008 supplement, or “pocket part,” to their book…

West’s response, they claimed, was to publish a “sham” update that still carried the professors’ names, but included almost no case updates. …

But the supplement published in December 2008, Bazelon said, added just three new cases and failed to take note of any of the cases that had been reversed in the past year by the state Supreme Court.

The evidence, Bazelon said, showed that West assigned the task of writing an update to a woman who had graduated from law school one year before and then gave her just one week to do the work and never reviewed it before publication.

The law professors were understandably unhappy with their names being attached to a worthless supplement which not only failed to provide any new information, but which misled readers into thinking that the information contained in the textbook was more current than it actually was.

So they sued, as I previously described in How To Write Your Brief So That The Judge Will Hate You. As Rebecca Tushnet noted, the professors’ creative false advertising claims were dismissed before trial, leaving just the defamation.

Last week, a jury awarded them each $90,000 in compensatory damages and $2.5 million in punitive damages, for a total of $5.18 million. Not bad for a book that only made $17,000 in revenue.

Two issues jump out at me.

First, their punitive damages award has a math problem. As I noted in The Third Circuit’s 1:1 Punitive Damages Ruling: The Lingering Complications of State Farm v. Campbell, the Supreme Court has already indicated that it expects a “single-digit” ratio between compensatory damages and punitive damages in cases that do not involve physical injury, and the highest that the Third Circuit has approved to my knowledge is a one-to-seven ratio (in the CGB Occupational Therapy v. RAJ Health Services case cited in my post), which would limit the professors to $630,000 in punitive damages each.

Second, the trial court found that the publication was defamation per se because it “ascribes to another conduct or a condition that would adversely affect his fitness for the proper conduct of his lawful business.” Franklin Prescriptions, Inc. v. New York Times Co., 424 F.3d 336, 343 (3d Cir. Pa. 2005); see also Restatement (Second) of Torts § 573 (1977). It’s an important finding, since Plaintiffs then need only prove “general damages,” i.e., proof that one’s reputation was actually affected by the slander, or that he suffered personal humiliation, or both. Although I frankly agree with the law professors here (as you would expect, considering that I represent plaintiffs defamation cases), there is a good chance that the Third Circuit might not.

Nonetheless, the case is an important reminder to the legal publishing industry: if you are going to make her books the way you make sausage, just make sure the nominal authors of the books are on board with it.

Bormes v. U.S., 2009-1546 (Fed. Cir. November 16, 2010), isn’t the type of suit you see every day:

On August 9, 2008, Bormes, an attorney, filed a law-suit on behalf of one of his clients in the U.S. District Court for the Northern District of Illinois using its online document filing system. Bormes paid the filing fee using his credit card, and the transaction was processed through the government’s system. The govern-ment then provided Bormes with a confirmation webpage that appeared on Bormes’ computer screen. The confir-mation page contained the expiration date of Bormes’ credit card.

That’s a problem. 15 U.S.C. § 1681c(g)(1), part of the Fair Credit Reporting Act, provides:

Except as otherwise provided in this subsection, no person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.

Thus, Bormes filed suit, just as he could against any other vendor which disclosed too much information on a receipt:

Alleging that the display of his and similarly situated plaintiffs’ credit card information violated section 1681c(g)(1) of FCRA, Bormes filed a class action lawsuit against the government. Bormes seeks, among other things, statutory damages, attorney’s fees, and costs.

But there’s a problem: the United States government isn’t just any other vendor. It’s the sovereign, so you have to come up with some specific basis authorization for suing it:

In his complaint, Bormes alleged jurisdiction under both 28 U.S.C. § 1346(a)(2), commonly referred to as the Little Tucker Act, and FCRA’s own jurisdictional provision, 15 U.S.C. § 1681p.

The District Court dismissed, on the ground that FCRA did not waive the federal government’s sovereign immunity, and so jurisdiction under the Little Tucker Act was moot.

Normally, claims against the United States have to be filed in the United States Court of Federal Claims, but that’s quite a lot of work for people who have modest claims. The Little Tucker Act is, in essence, small claims court for claims against the United States:

The Little Tucker Act, 28 U.S.C. § 1346, gives the district courts jurisdiction, concurrent with the Court of Federal Claims, over “any other [than tax refund] civil action or claim against the United States, not exceeding $10,000 in amount, founded . . . upon any Act of Congress.” The Little Tucker Act is therefore a jurisdictional provision that also operates “to waive sovereign immunity for claims premised on other sources of law (e.g., statutes or contracts).” United States v. Navajo Nation, 129 S. Ct. 1547, 1551 (2009).

Which brings us to the issue at hand:

Because the Little Tucker Act operates to waive sovereign immunity, the district court erred in dismissing Bormes’ case without considering whether the Little Tucker Act provided an alternative basis for jurisdiction. If the Little Tucker Act authorizes the district court to hear this case, it also provides the waiver of sovereign immunity that the trial court found lacking in the FCRA itself. See United States v. Mitchell, 463 U.S. 206, 216 (1983) (“If a claim falls within the terms of the Tucker Act, the United States has presumptively consented to suit.”).

To support jurisdiction under the Little Tucker Act, the substantive law that provides the basis for the plaintiff’s claims must be “money-mandating.” Fisher v. United States, 402 F.3d 1167, 1172 (Fed. Cir. 2005). A source of law is money-mandating if it “can fairly be interpreted as mandating compensation by the Federal Government for the damage sustained.” United States v. White Mountain Apache Tribe, 537 U.S. 465, 472 (2003) (quotation omitted). This “fair interpretation” rule demands a showing “demonstrably lower” than the initial waiver of sovereign immunity: “It is enough . . . that a statute creating a Tucker Act right be reasonably amenable to the reading that it mandates a right of recovery in damages. While the premise to a Tucker Act claim will not be ‘lightly inferred,’ . . . a fair inference will do.” Id.

And, indeed, the FCRP is about as money-mandating as it gets; the FRCP “unquestionably provides for money damages” and “expressly defines the term ‘person’ to include ‘any . . . government.'”

You don’t need anything more than that to establish the waiver of sovereign immunity and jurisdiction under the Little Tucker Act. Dismissal vacated and remanded back to the District Court.

[UPDATE: The Supreme Court has since granted certiorari on the case, which should be interesting. Based on my understanding of how many government jobs work, this could present a big problem if the United States is exposed to, for example, liability for illegal background checks.]

[UPDATE: the District Court dismissed the charges mid-trial, as explained by the Compliance and Enforcement Register, which has a copy of the order. Subsequent reporting indicates there was considerable doubt within the US Attorney’s office over prosecuting the case.]

One of the benefits of being a contingent-fee plaintiffs’ lawyer is that I get to pick and choose my cases. The likelihood of winning isn’t the only issue — we take some cases because they should be brought, even if the bottom-line disagrees — but we have the liberty of rejecting cases of dubious merit and cases that present other problems.

The worst “other problem” of all? The lying client. If a client lies to me, or tries to get me to lie for them, I’ll drop their case like a bag of bricks. There’s no need to be black or white about it; if we get into a gray area, that’s enough for me to get out.

But it’s easy for me to say that. I only get paid if my clients win, and, well, liars never win and winners never lie.

It’s not so easy for in-house counsel — who has one client upon whom they depend for their livelihood — to do that. They don’t get to choose their battles. They don’t get paid to say “no” when trouble comes knocking.

They get fired.

I couldn’t help reflecting upon that when I saw what Corporate Counsel reported Wednesday:

Federal prosecutors on Tuesday indicted (pdf) Lauren Stevens, the former associate general counsel of GlaxoSmithKline LLC, on charges of obstruction and making false statements about off-label uses of a drug.

“There is a difference between legal advocacy based on the facts and distorting the facts to cover up the truth,” said Carmen Ortiz, U.S. Attorney for the District of Massachusetts, in a statement. “Federal agencies such as the FDA cannot protect the public health if the entities and individuals they regulate provide false information and conceal the true facts.”

The indictment states that in October 2002, the FDA asked for information as part of an inquiry into whether the company was promoting a prescription drug for non-approved uses such as weight loss.

Prosecutors allege that Stevens signed a series of letters from the company to the FDA that falsely denied that the company had promoted the drug for off-label uses, even though she knew that it had.

Denying, on behalf of your client, that the client did something wrong isn’t unethical, much less criminal. Defense lawyers routinely do it, but they do it for one of two reasons: first, because the client has denied doing anything wrong and the lawyer believes them or, second, because the client denied doing anything wrong.

These two situations aren’t one and the same; in the first, the lawyer genuinely believes the client’s story, whereas, in the second, the lawyer doesn’t think one way or another about the client’s story. The client gave a story and the lawyer — who doesn’t know the facts one way or the other — is advocating on behalf of the client.

Obviously it’s ethically easier to be in the first situation, to stand up righteously for an innocent defendant who did nothing wrong. But the second situation is not just permitted, but is expected by the rules governing lawyers conduct — the lawyer is obligated to zealously advocate, with unfettered loyalty, on behalf of their client. The only lawyer who has a duty to “do justice” is a prosecutor; criminal defense attorneys have only duties to their clients. Same goes for civil attorneys, despite a century-old debate between practitioners (who believe loyalty to one’s client comes first) and academics (who believe the truth and social justice come first).

There is, naturally, a big gray area when a lawyer is in this second situation. They can suspect their client is lying — consider when the coaching scene in Anatomy of a Murder, the ethics of which are still debated today — but they can’t know, and they certainly can’t help the client lie.

Which brings us back around to Lauren Stevens. Her problem, if the indictment is to be believed, was that she went one step further. She didn’t believe her client was innocent. She didn’t stay on the sidelines and remain in the dark as to whether her client was innocent. She investigated her client’s alleged wrongdoing, as the FDA asked her to, and then reported back to the FDA only a small piece of what she had learned, keeping the most incriminating parts to herself. She and other lawyers even came up with the “pros” and “cons” of producing the incriminating parts and then decided, well, you know, it’d be a whole lot easier if we just kept that to ourselves.

And that’s the one step too far.

The case has the potential to be a “teaching moment,” shall we say, for the ethics of representing the guilty, particularly guilty corporations, given what The AmLawDaily reported about it:

“Lauren Stevens is an utterly decent and honorable woman. She is not guilty of obstruction or of making false statements,” Stevens’s lawyers said in a statement to The Am Law Daily. “Everything she did in this case was consistent with ethical lawyering and the advice provided her by a nationally prominent law firm retained by her employer specifically because of its experience in working with the FDA. She looks forward to the day when a judge and jury can hear the true facts in the case, which will show that she has done absolutely nothing wrong.”

Emphasis mine. That sure sounds like an “advice of counsel” defense to me, which would amount to a waiver of attorney-client privilege. Consider Rhone-Poulenc Rorer Inc. v. Home Indem. Co., 32 F.3d 851, 863 (3rd Cir. 1994):

There is authority for the proposition that a party can waive the attorney client privilege by asserting claims or defenses that put his or her attorney’s advice in issue in the litigation. For example, a client may waive the privilege as to certain communications with a lawyer by filing a malpractice action against the lawyer. A defendant may also waive the privilege by asserting reliance on the advice of counsel as an affirmative defense. …

In these cases, the client has made the decision and taken the affirmative step in the litigation to place the advice of the attorney in issue. Courts have found that by placing the advice in issue, the client has opened to examination facts relating to that advice. Advice is not in issue merely because it is relevant, and does not necessarily become in issue merely because the attorney’s advice might affect the client’s state of mind in a relevant manner. The advice of counsel is placed in issue where the client asserts a claim or defense, and attempts to prove that claim or defense by disclosing or describing an attorney client communication.

As an initial matter, Stevens wasn’t the client, GlaxoSmithKline was, but given how deep they’re in it I doubt they’re going to hang their former VP out to dry and make themselves look worse in the process.

I don’t know what the U.S. Attorney’s were thinking, or if they expect to win, but this sure looks like a case that needed to be brought. A line has to be drawn somewhere; on which side Lauren Stevens and GlaxoSmithKline fall is a question that will need to be hashed out by the courts.

It’s no secret that oil companies like Chevron play hard ball; just a few years ago, Chevron paid $30 million to settle allegations that it had bribed Saddam Hussein’s regime in Iraq to participate in the UN’s oil-for-food program.

As most readers know, down in Ecuador Chevron is defending a civil case over alleged contamination of dozens of villages in the Lago Agrio; it’s no surprise there has been "a fierce lobbying effort by Chevron in Washington to strip Ecuador of American trade preferences" because the Ecuadorian President has expressed support for the Lago Agrio villagers.

Chevron similarly launched a sting operation to try to catch the President’s sister bribing the judge presiding over the case, and declared, once the operation was finished,  “We think this information absolutely disqualifies the judge and nullifies anything that he has ever done in this case.”

One tiny problem with the sting operation, in the words of the New York Times: "The recordings do not indicate whether Ms. Correa was aware of the efforts to include her in a bribery scheme. Nor is there confirmation that Mr. García was in fact in contact with her."

In other words, Chevron found nothing on the judge and nothing on the President, but they launched a public relations offensive on it anyway.

Keep that in mind while you consider the latest news:

In a strongly worded opinion released Friday, federal district judge Lewis Kaplan in Manhattan elaborated on his reasons for allowing Chevron Corporation to depose Steven Donziger, the U.S. plaintiffs attorney in the massive environmental tort litigation against Chevron in Ecuador. Earlier this fall, Chevron had moved to depose Donziger, claiming that the trial in Ecuador had been tainted by fraud by the plaintiffs; in an October 20 order, Kaplan allowed additional discovery from Donziger.

In Friday’s opinion, Kaplan concluded that "the need is extremely great" to depose Donziger. He based his decision on outtakes from a documentary on the litigation, Crude–footage that Chevron had subpoenaed and submitted in support of its fraud allegations.

Kaplan found "substantial reason to believe that [Richard] Cabrera, the supposedly neutral expert [appointed by the Ecuadorian court in Lago Agrio], worked in collusion with the plaintiffs." Breaking it down further, he points to "substantial evidence that (1) Cabrera was appointed as a result of Lago Agrio plaintiffs’ ex parte contacts with and pressure on the Ecuadorian courts, (2) at least part of his report was written by consultants retained by the Lago Agrio plaintiffs, and (3) the report was passed off as Cabrera’s independent work."

There was more bad news for Donziger. Chevron had been joined in its discovery motion by two lawyers who worked for Chevron’s predecessor Texaco. They are currently being prosecuted by Ecuador, along with seven government attorneys, for signing off on Texaco’s cleanup of oil sites when it left the country. The criminal case against them in Ecuador, Kaplan wrote, "appears to have been instigated by Donziger and others working with him for the base purposes of coercing Chevron to settle and undermining a significant element of its defense in Ecuador."

In Kaplan’s view, these and other episodes raise "substantial questions as to [Donziger’s] possible criminal liability and amenability to professional discipline."

As I wrote before (Chevron Allowed To Depose Plaintiff’s Counsel In Ecuador Toxic Tort Litigation), I agree with Judge Kaplan’s order permitting Donziger to be deposed.

But let’s not get ahead of ourselves here. Corporate Counsel posted the outtakes identified as the worst-of-the-worst. Judge Kaplan singled out three episodes (the language below is from Kaplan’s order and the quotes are Donziger on the tapes):

  1. “The only language that I believe this judge is going to understand is one of pressure, intimidation and humiliation. And that’s what we’re doing today. We’re going to let him know what time it is. . . . As a lawyer, I never do this. You don’t have to do this in the United States. It’s dirty. . . . It’s necessary. I’m not letting them get away with this stuff.” 

  2. Donziger told those present that the Lago Agrio plaintiffs needed to “do more politically, to control the court, to pressure the court” because Ecuadorian courts “make decisions based on who they fear most, not based on what the laws should dictate.” Donziger expressed concern that no one feared the plaintiffs, and he stated that the plaintiffs would not win unless the courts begin to fear them. Donziger described also his desire to take over the court with a massive protest as a way to send a message to the court of “don’t f— with us anymore – not now, and not – not later, and never.” He then proposed raising “our own army” to which Yanza interjected “a specialized group . . . for immediate action.” 

  3. Finally, Donziger participated in a dinner conversation about what might happen to a judge who ruled against the Lago Agrio plaintiffs. One or more other participants in the conversation suggested that a judge would be “killed” for such a ruling. Donziger replied that the judge “might not be [killed], but he’ll think – he thinks he will be . . . which is just as good."

A common objection, too, has been claims that Donziger met ex parte with the judge and the independent expert, but as far as I can tell that’s permitted in the Ecuadorian system. I haven’t seen anyone argue otherwise.

Michael Goldhaber at The American Lawyer had the most reasonable analysis of the ethical implications of the case back in September:

But even if one discounts as a joke the use of the word "army," and takes as hyperbole the expression of satisfaction that the judge may fear being "killed," one is left with a straightforward account of how plaintiffs have hired protesters outside the courthouse, and plan to do so again. It’s hard to read the transcripts filed by Chevron without concluding that Donziger’s intent in doing so was to put political pressure on the court.

When we asked Chevron’s lawyers what would be their next steps, Andrea Neuman of Gibson, Dunn & Crutcher chose her words carefully. "We’re taking a careful look at Chevron’s rights, including its rights under RICO," she said, "and we’re very cognizant of the responsibility of all lawyers to refer appropriate matters to the bar disciplinary committee."

In Corporate Counsel sibling publication The American Lawyer‘s Bar Talk section in October, we’ll examine Chevron’s RICO option. For this column, we asked two scholars to help assess the legal ethics. Both spot a host of ethical issues, including Chevron’s allegations, based on the first set of transcripts, that plaintiffs undermined justice through systematic ex parte contacts with the court-appointed damages expert. (Plaintiffs have argued that ex parte contacts are culturally accepted in Ecuador, and that they broke no rules.)

"It’s clear Donziger is crass, profane, and irreverent," said Nora Freeman Engstrom, a Stanford Law School expert on plaintiffs’ lawyer ethics. "Far less clear is whether he’s engaging in serious professional or criminal wrongdoing, although it’s possible." She added: "Our system does not require as precondition of advocacy absolute trust in one’s tribunal."

Catherine Rogers of The Dickinson School of Law at Penn State University, who studies global legal ethics, was more troubled by the transcripts. "If it turns out to be true they paid people to intimidate the court and make the judge fear for his life in a way that was designed to affect his judicial ruling, that’s nowhere close to the line of what is ethical," she said. "That’s thuggery, an interference with the administration of justice, and a gross violation of the ethical rules of every jurisdiction I am familiar with."

In her writings and lectures, Rogers has argued that U.S. ethical rules should generally be understood as applying to U.S. lawyers’ conduct in foreign tribunals and justice systems, and that the New York Lawyer’s Code of Professional Responsibility clearly does apply. Among the relevant rules in New York: Rule 3.5(a)(1) says that a lawyer shall not seek "to influence a judge, official or employee of a tribunal by means prohibited by law." New York Rule 8.4 says it’s misconduct to "engage in conduct that is prejudicial to the administration of justice." And Rule 3.3(f)(4) says a lawyer shall not "engage in conduct intended to disrupt the tribunal."

To be sure, those tapes of Donziger aren’t going to be played at CLEs any time soon as an example of model behavior. But do they show Donziger crossing the line from Engstrom’s view — i.e., being contemptuous of the tribunal isn’t necessarily criminal or unethical — over to Rogers’ view — i.e., threatening the presiding judge impairs the fairness of the court?

Donziger’s obviously a pugnacious lawyer prone to hyperbole, and there’s no doubt that he’s been more politically active than legally active in the case.

So what? Chevron launched a "fierce lobbying effort" to punish the whole country for the case and has never hesitated to impugn the integrity of the court in the press. There’s nothing unethical about any of that. Same goes with routinely complaining in private about the moral and ethical failings of the judge — something I’m sure Chevron’s lawyers do on a routine basis, since they’ve already done the same in public.

Donziger’s stray remark about "shutting down" the Court with a protest would certainly be a problem if he actually did it, but I haven’t seen any evidence of that, either — whereas we know for a fact that GOP operatives staged the "Brooks Brothers Riot" to interfere with the 2000 election recount, and we know all about Chevron’s bribes in Iraq, which resulted in nothing more than disgorging the wrongful profits and a modest fine. Assuming Donziger took the milder approach, hiring people to fake a genuine protest outside the courthouse sure is crass, but is it any worse than the "lawsuit abuse" propaganda campaigns funded by the U.S. Chamber of Commerce?

More to the point, is it actually illegal or unethical? I’ve never seen any Court in the U.S. find lawful political activism — like the staging of protests — to be illegal; likely since such a finding would almost certainly violate the First Amendment. It’s thus hard to see how paid-for political activism (so-called "astroturf"), crass as it might be, is unethical, and if it is, it’s hard to see how Chevron and the companies that make up the U.S. Chamber of Commerce aren’t just as guilty.

Or do we have one set of rules for those who advocate on behalf of the powerless and another for big corporations?

[UPDATE: In related news, a federal judge in San Francisco recently ignored a forum selection bylaw that tried to force derivative suits to be filed in the Delaware Chancery Court. “A bylaw unilaterally adopted by directors…stands on a different footing [from contractual forum agreements],” Judge Seeborg wrote. “Particularly where, as here, the bylaw was adopted by the very individuals who are named as defendants, and after the alleged wrongdoing took place, there is no element of mutual consent to the forum choice at all, at least with respect to shareholders who purchased their shares prior to the time the bylaw was adopted.”

UPDATE II: The Harvard Forum on Corporate Governance discusses the case here.]

The business litigation blogs have been buzzing since Prof. Joseph A. Grundfest (Stanford Law) gave the annual Francis G. Pileggi Lecture (titled, “Choice of Forum in Intracorporate Litigation,”), in which Grundfest argued:

Privately held firms might best adopt elective forum selection provisions prior to an IPO, and publicly traded firms can adopt forum selection provisions in their charters or bylaws. Obtaining majority shareholder support for a charter amendment may be easier than some observers expect. If a corporation determines that it prefers not to amend its charter, board action is sufficient to amend the bylaws, as recently demonstrated by Chevron. The benefits of adopting a forum selection provision will likely exceed the costs for most entities. If this calculus is correct, there should be a large increase in the incidence of intra-corporate charter or bylaw forum selection provisions in coming years.

Prof. Steven M. Davidoff (UConn Law), a/k/a The Deal Professor, comments here:

If adopted, public corporations would put in place a bylaw or charter provision to provide that all shareholder litigation must take place in the state of incorporation (e.g., Delaware). The provision would be phrased in one of two ways: as a requirement that all shareholder litigation would occur in the jurisdiction of incorporation or as an option for the corporation to elect that all shareholder litigation would occur in the state of incorporation.

This provision would only be effective for state law claims involving breaches of fiduciary duty and the like, not federal claims, including federal securities fraud charges.

Since a majority of public companies are incorporated in Delaware, the net effect of the provision would be to channel the bulk of this litigation to that forum. This would have important implications since there is at least some evidence that plaintiffs have been drifting away from bringing suit in Delaware because of fears of adverse judgments. These provisions would be a response to claims that these shareholder plaintiffs are forum-shopping, selecting the jurisdiction most favorable to their suit.

As Davidoff notes, these provisions have been around for a while, but have taken off since Vice Chancellor J. Travis Laster of the Court of Chancery casually noted in the Revlon opinion in March that “if boards of directors and stockholders believe that a particular forum would provide an efficient and value-promoting locus for dispute resolution, then corporations are free to respond with charter provision selecting an exclusive forum for intra-entity disputes.” Vice Chancellor Laster backed it up with a whopper of a footnote with supporting references for the idea.

Since that footnote a mere seven months ago, twenty-three companies have adopted such provisions, including giants like Chevron.

Let’s pause for a second and consider that important empirical fact. For nearly a century, Delaware has been the preeminent jurisdiction for incorporation and reincorporation of large companies with nationwide operations. Even private corporations, like Facebook, are drawn to it.

There’s a cottage industry of legal scholarship analyzing the preeminence of Delaware. Corporate officers and directors (and their defense lawyers) have maintained that Delaware is preferable because it has superior corporate law, in the sense that Delaware corporate law is more predictable — and thus less likely to result in litigation, and thus the expenses of defense and liability — than the laws of other jurisdictions. Activist shareholders (and their trial lawyers), in turn, have retorted that corporate officers and directors only prefer Delaware law because it is particularly friendly to them, and particularly unfriendly to shareholders alleging fraud, malfeasance, or breach of fiduciary duty.

There’s scholarship both ways; see, e.g., “The Mystery of Delaware Law’s Continuing Success,” which “challenges the widely held view that Delaware corporate law is dominant because it possesses superior traits, such as a well-understood statute, many judicial decisions interpreting the law, and wise and experienced judges administering that law.”

I don’t want to get into the details of that scholarship, but, like I said, we need to consider an important empirical fact: Delaware corporate law is so unpredictable that a mere footnote in a trial court opinion prompted nearly two dozen corporations to amend their charters or bylaws. If Delaware corporate law was really as clear as the officers and directors say it is, they wouldn’t have needed a court to tell them they could insert forum-selection clauses into their charters.

Which brings us to the issue at hand. Reflecting the inherent pro-management, anti-shareholder bias in much of the precedent and scholarship, nobody hesitates to call it “forum-shopping” when shareholders choose the jurisdiction most favorable to their suit, but it’s presumably “efficient and value-promoting” when officers and directors choose the jurisdiction most favorable to their defense.

Why would officers and directors want to have all litigation occur in Delaware? For the same reason that they want to incorporate in Delaware: because they believe Delaware to have some of the least-shareholder-favorable law in the country.

Such belief, although empirically questionable — as one minor example, as the unofficial court reporter for the Delaware Court of Chancery, Francis G.X. Pileggi, notes, there’s a “relative paucity of analysis” on the fiduciary duties of officers, one of the key issues affected by the forum-selection changes — is not unreasonable. With all that in mind, Davidoff drops a bombshell:

This is an odd thing to say, but litigation can have a social purpose.

It’s not an odd thing for trial lawyers like me to say. Indeed, none of what Davidoff says is odd:

I think Professor Grundfest is right, although I have a lingering concern over the effect of solidifying jurisdiction with Delaware.

We will most likely have less shareholder litigation and this will be viewed by many as a significant benefit, but this may also have effects in terms of limiting the ability of shareholder lawyers to bring suit when there is a real case. This decline in cases may also hamper the development of Delaware doctrine on the subject.

These days most deals face litigation. This is a cost, but there are benefits in terms of keeping the Delaware court consistently engaged in the evolving deal flow. Professor Grundfest comes out in favor of these opinions since he looks at both sides of the conflict and comes down in the face of consistency given both conflicts.

I think he has another good point here: Given the high quality of the Delaware judiciary and the need to keep the quality and consistency of its law, these clauses deserve a hard look. They might not change the landscape as much as plaintiffs’ lawyers fear because Delaware will still have incentives to keep litigation in its courts to keep its doctrine developing, albeit most likely at a lower pace to exclude clearly spurious suits.

This “development of Delaware doctrine” goes hand-in-hand with the predictability of Delaware law. Indeed, it wasn’t until last year, in Gantler v. Stephens, that the Delaware Supreme Court ruled that officers had the same fiduciary duties as directors. Lawsuits serve important social purposes beyond merely compensating injured parties — lawsuits are the only way in which the judiciary can speak on what the law actually is, thereby guiding future parties and settling the nature of relations.

Getting back to the overall point, though, why do we need these forum selection clauses in the first place? “Clearly spurious suits” in far-flung jurisdictions tend to be transferred to the correct jurisdiction or they die a quick death by dismissal, and there’s no empirical evidence to my knowledge of a real problem with “clearly spurious suits” alleging breaches of fiduciary duties by Delaware corporations. (The little bit of empirical evidence there is relating to shareholder lawsuits all involves federal securities class actions, which would be unaffected by the forum-selection clauses, and even that “evidence” sits on shaky ground.)

Grundfest weighs the pros and cons of the forum-selection clauses and comes up with:

Plaintiff counsel are susceptible to well known conflicts of interest:

Simple example: Plaintiff counsel prefer jurisdictions that award the highest attorneys fees (all other factors equal), even though those awards reduce net recoveries to investors.

Allowing plaintiff counsel to control forum selection therefore cannot invariably promote shareholder welfare.

It makes superficial sense, but “award [of] the highest attorneys fees” is often a low priority because the “other factors” are never equal. The primary factors considered by plaintiff’s counsel — typically compensated on a purely contingent fee basis, even in class action cases involving a lodestar analysis — when choosing the forum are (i) the likelihood of success; (ii) the likely size of recovery; and (iii) the likelihood of transfer to a different venue. On all three of those factors, their interests are aligned precisely with those of the shareholders. The possibility of higher fees in some jurisdictions may enter into plaintiff’s counsel’s mind, but it takes a backseat to the overall merits of the action, since the attorney’s fees in a losing case are not just “zero,” but in fact negative given the time and money spent on the case. Moreover, I wouldn’t be surprised if there was more variation in attorney’s fees awards among judges within a particular venue than across multiple venues.

In contrast, as Grundfest notes, “Management may want the case heard in the jurisdiction least likely to protect shareholder interests against management over-reaching.” Indeed, that’s the main reason why they want to choose Delaware for everything: to protect themselves, not to benefit the shareholders.

Which makes me wonder about the viability of these provisions when adopted without clear shareholder consent. As we saw in eBay v. Newmark, fiduciary duty cases in Delaware can have a serious bite, even when the majority ownership opposes the lawsuit. What’s going to happen when the board of directors adopts one of these resolutions, or pushes out to the shareholders an ambiguous amendment to the charter, but can’t show any non-speculative evidence that Delaware is an inherently better venue for shareholders?

Sounds like an invitation to (successful) litigation for me; so much for predicability and efficiency.

At The American Lawyer:

A federal judge in Manhattan has taken the extraordinary step of granting Chevron’s motion to depose a counsel for its adversaries in the massive toxic tort litigation over oil contamination in Lago Agrio, Ecuador.

Kaplan based his ruling on evidence Chevron produced from outtakes of the documentary "Crude," which chronicles the Lago Agrio case. He called the outtakes "extraordinarily revealing."

"The outtakes contain substantial evidence that Donziger and others were involved in ex parte contacts with the court to obtain appointment of the expert; met secretly with the supposedly neutral and impartial expert prior to his appointment and outlined a detailed work plan for the plaintiffs’ own consultants; and wrote some or all of the expert’s final report that was submitted to the Lago Agrio court and the Prosecutor General’s Office, supposedly as the neutral and independent product of the expert," Kaplan wrote.

Moreover, the judge concluded, the outtakes contained evidence that Donziger lobbied for criminal charges against the former Chevron lawyers in order to pressure Chevron in the Lago Agrio case.

Lawyers are trained from the day they arrive at law school to consider attorney-client privilege to be sacrosanct, and my initial reaction to this news was indeed surprise and outrage that a court would set that principle aside to benefit an oil company that spent years contaminating the drinking water of politically powerless people.

But the bigger picture needs to be considered. I’ve written before, back in discussing Mohawk Industries v. Carpenter (which considered whether attorney-client privilege issues are entitled to an interlocutory appeal) that attorney-client privilege is often overrated:

In one sense, the question we’re really asking is one of balance. Everyone would like to have every issue decided against them made immediately appealable. But we can’t do that; as the former judges’ brief notes, the courts are overworked as is, and, as the plaintiff’s brief notes, there are dozens of serious issues — like those affecting constitutional rights and criminal convictions — which are not immediately appealable.

Where does attorney-client privilege (involving discussions regarding a separate case) fit on the totem pole?

A little more than a year later, the Supreme Court decided that attorney-client privilege is important, but not that important: 

The crucial question, however, is not whether an interest is important in the abstract; it is whether deferring review until final judgment so imperils the interest as to justify the cost of allowing immediate appeal of the entire class of relevant orders. We routinely require litigants to wait until after final judgment to vindicate valuable rights, including rights central to our adversarial system. See, e.g., Richardson-Merrell, 472 U. S., at 426 (holding an order disqualifying counsel in a civil case did not qualify for immediate appeal under the collateral order doctrine); Flanagan v. United States, 465 U. S. 259, 260 (1984) (reaching the same result in a criminal case, notwithstanding the Sixth Amendment rights at stake). In Digital Equipment, we rejected an assertion that collateral order review was necessary to promote “the public policy favoring voluntary resolution of disputes.” 511 U. S., at 881. “It defies common sense,” we explained, “to maintain that parties’ readiness to settle will be significantly dampened (or the corresponding public interest impaired) by a rule that a district court’s decision to let allegedly barred litigation go forward may be challenged as a matter of favor.” Ibid.

We reach a similar conclusion here. In our estimation, postjudgment appeals generally suffice to protect the rights of litigants and assure the vitality of the attorney-client privilege. Appellate courts can remedy the improper disclosure of privileged material in the same way they remedy a host of other erroneous evidentiary rulings: by vacating an adverse judgment and remanding for a new trial in which the protected material and its fruits are excluded from evidence.

(Emphasis added.) A similar dynamic is at play in the Lago Agrio case. The plaintiff’s lawyer’s attorney-client privilege must be weighed against the fact that two former Chevron lawyers are facing criminal charges in Ecuador, and the fact that the evidence in possession of the plaintiff’s lawyer is apparently unavailable elsewhere.

Moreover, the order is apparently limited to the pertinent issues, and doesn’t permit a fishing expedition into the attorney’s impressions of the case or contacts with his clients:

If Southern District of New York Judge Lewis A. Kaplan’s ruling Wednesday in In re Application of Chevron Corp., 10 MC 00002, stands, Chevron’s counsel from Gibson, Dunn & Crutcher and counsel for two former Chevron lawyers facing criminal charges in Ecuador will be able to ask lead plaintiffs attorney Steven Donziger questions, under oath, about his alleged attempts to influence a supposedly neutral expert appointed by the Ecuadorean court to offer a global damages assessment. The judge also has ordered Donziger to produce documents related to his interactions with the expert.

My only hope is that this isn’t a one-shot, defendants-win, plaintiffs-lose deal. If these rules will be applied equally — and thereby permitting plaintiff’s lawyers to depose defendant’s lawyers when the circumstances warrant — then we’ll all benefit.

Indeed, plaintiffs would likely benefit from a relaxed view of attorney-client privilege; after all, multinational corporations usually have a lot more to hide than injured plaintiffs do.

More than a year ago, I blogged in Legal Malpractice Case Sends Dismissed Appeal Back To Appellate Court To Say What It Would Have Done about the malpractice case which came about in the wake of Kanter v. Epstein.

The whole thing was, in a word, ugly. Kanter v. Epstein was a bare-knuckled affair (I suppose that’s to be expected when all of the parties are themselves lawyers, most of them Philadelphia litigators) which ended only when the Superior Court threw out the defendants’ appeals entirely for raising too many issues on the post-trial level and thereby failing to preserve any of those issues.

Of course, that only “ended” the case briefly, and it arose from the dead as a malpractice suit by Epstein against the lawyers (Saul Ewing) for bungling the appeal. The opinion I discussed before was the Court of Common Pleas of Philadelphia County finding that, if the appeal had been done properly, the Superior Court would have reversed — at least in part — the verdict against the defendants.

Last week, the Superior Court affirmed that, yes, if they had heard the defendants’ appeal, they would have granted it:

When the Superior Court of Pennsylvania threw out Spector Gadon & Rosen’s and partner Alan Epstein’s appeal of a judgment against them in a referral fee dispute because the 104 issues complained of on appeal weren’t concise, Epstein sued his personal attorneys at Saul Ewing for malpractice.

That left Philadelphia Common Pleas Judge Frederica Massiah-Jackson to determine the “case within the case,” or whether Epstein and Spector Gadon would have won on the merits at the Superior Court level had the 1925(b) statement drafted by Saul Ewing not been tossed for its length. Massiah-Jackson found Epstein and Spector Gadon would have succeeded in reversing the trial judge’s decisions in the underlying case.

At the request of Saul Ewing, she certified the interlocutory order for immediate review. The Superior Court agreed last week in Epstein v. Saul Ewing that Epstein and Spector Gadon would have won on appeal if the court ever heard the case on the merits.

Like I wrote before, when the going gets weird, the weird turn pro. This litigation has been going on more than a decade, first with the foster parent abuse case, second with the fee dispute, and now, third, with the malpractice case; I guarantee you the legal fees expended so far on the latter two cases are more than double the attorney’s fee of $ 1,293,000 which begat them.

A copy of the Superior Court’s new opinion in the legal malpractice case is available here; the old opinion dismissing the fee dispute case is here.

Now I like schadenfreude as much as the next lawyer, and there’s something superficially gratifying about seeing a lawyer-party and their lawyers thrown thrown out for being over-litigious, but the old Superior Court opinion dismissing the fee dispute case deserves scrutiny.

No court is under any obligation to review, as the defendants initially raised to the trial court following the trial, one-hundred-and-four separate claimed errors.

But courts are obligated to review the fundamental merits of the action. With regard to the Superior Court, Pa.R.A.P. 105 provides:

These rules shall be liberally construed to secure the just, speedy and inexpensive determination of every matter to which they are applicable. In the interest of expediting decision, or for other good cause shown, an appellate court may … disregard the requirements or provisions of any of these rules in a particular case on application of a party or on its own motion and may order proceedings in accordance with its direction.

In the fee dispute case, the trial court didn’t exercise its own powers to reject the Pa.R.A.P. 1925(b) statements filed (the ones with the “104 issues”), it just went on to write an opinion. Even though, by the time the appeal got to the Superior Court, Epstein and his firm had whittled down their appeal to eleven issues, the Superior Court decided on its own to dismiss the whole appeal due to the initial overloading of the 1925(b) statements.

Would it have been so difficult for the Superior Court to have simply sanctioned the defendants instead of dismissing the appeal entirely? They could have ordered a sanctions fee be paid to the court, or could have bounced the briefs and limited the defendants to a particular number of issues. There are long-standing rules-of-thumb adhered to by appellate lawyers that appellants shouldn’t typically raise more than a handful of issues anyway, so why not simply order them to re-file their briefs raising only four issues each? That would have penalized them without deciding the case on the merits, and would have helped the court system recover some of the time wasted from the over-litigating of the case at the trial level.

After all, there were only six issues total decided in the appeal of the legal malpractice case:

Specifically, Judge Massiah-Jackson decided that if this Court had reached the merits, it would have: 1) upheld the award of $215,500 in compensatory damages because the evidence was sufficient for the jury to find an agreement to compensate Ms. Kanter for hours expended in the Tara M. matter and that that verdict represented payment for the amount of hours that Ms. Kanter believed that she had worked with respect to the Tara M. litigation; 2) determined that as a matter of law, Ms. Kanter was not entitled to a referral fee in the Tara M. case due to a impermissible conflict of interest resulting from her appointment as guardian ad litem and guardian of the estate of the child; 3) struck the trial court’s additur to the compensatory damages award; 4) reversed the award of punitive damages against Appellees; 5) vacated the award of fines for contempt; and 6) eliminated the award of attorneys’ fees to Ms. Kanter in connection with her pursuit of punitive damages.

The first issue wasn’t even the defendants’ issue, so we can ignore it. As the Superior Court just ruled, in a slim 32 pages, the defendants would have won on all five main issues. If the Superior Court had simply done that in the first place and focused on the “just, speedy and inexpensive determination of every matter,” it could have spared everyone, including the courts, another round of litigation.

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