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September 30, 2016

Third Circuit Reinstates Dismissed Case Based on "Unmentioned" Exhibits

In a recent decision in the Third Circuit Court of Appeals, the court reinstated a dimissed case where it found exhibits to the complaint (which were not mentioned or explained in the complaint itself) supplied the needed allegations to survive a 12(b)(6) motion.

In Carpenters Health and Welfare Fund of Philadelphia and Vicinity v. Management Resource Systems, Inc, (15-2508, Decided: September 13, 2016), plaintiffs, union and management sponsored trust funds and employee benefit plans that represent construction industry employees, filed suit against Management Resource Systems (MRS), seeking injunctive relief to force an audit on MRS. The plaintiffs alleged in their complaint that they are “without sufficient information or knowledge to plead the precise nature, extent and amount of the Defendants’ delinquency since the books, records and information necessary to determine this liability are in the exclusive possession, custody and control or knowledge of the Defendants.” MRS moved to dismiss under rule 12(b)(6), which the district court granted.

In this case, the plaintiffs’ complaint failed to have essential allegations to support its claims. Instead, the plaintiffs simply attached documents to the complaint without explanation. The Third Circuit held, “[A]lthough the complaint did not specifically allege the existence of the evergreen clause in so many words, when the complaint is read in context with the attachments, the nature of the claim for relief is obvious.” A complaint need only contain allegations to give “the defendant fair notice of what the . . . claim is and the grounds upon which it rests.”

The Third Circuit also held that the complaint also satisfies the demanding requirement of plausibility. The court held the documents attached to the complaint were “common contractual provisions in the construction industry.” The allegations are, therefore, more credible because they are consistent with prevailing collective bargaining practices, which was the subject of the litigation.

While practitioners should never fail to identify and incorporate exhibits attached to the complaint, this case may prove helpful in preparing for a motion to dismiss hearing.

John Austin, Austin Law Firm, Raleigh, NC


September 30, 2016

5 Tips for First-Time Depositions

New lawyers and associates will eventually be called to handle a deposition on their own for the first time. These tips are designed to help those new lawyers in preparation and execution of that often overwhelming task. A common misconception among young attorneys is that they will make a mistake at the deposition that will seriously harm their client's case. While in the practice of law there is a short list of mistakes that cannot be unwound, depositions are not one of them. It is more important to be relaxed than scared to make a mistake.

Outline your field of questions instead of writing them. No one wants to sound inarticulate or unprepared, particularly the new attorney mindful that his or her supervising partner or client will ultimately review the deposition transcript. However, if the lawyer writes out each and every question, is that instead of listening to the answer of the deponent, the attorney is already thinking of reading his next question. Instead of listening and reacting to the witness’s answer with an appropriate follow up question, the new attorney will be more concerned with the phrasing of the next question. A thin but comprehensive outline is all that is needed. Rather than having a perfectly formed, written-out question, a few words to evoke a question are all that is necessary (e.g. “Date Contract Signed”). The outline allows the attorney to read the notes, look up from his or her notes, form a question, listen to the question, analyze whether the witness has really answered the question, and form a follow-up question, if warranted.

Know the facts of the case. Preparation is obviously important, but it also the great equalizer. While new attorneys cannot hope to match a veteran’s intuition and facility that have been honed over hundreds of depositions, the new attorney can be more prepared than the veteran and, thus, help level the playing field. Extensive preparation may not be warranted for every deposition, but where there has been extensive discovery produced, the new attorney should be very familiar with responses and documents produced. Moreover, the new attorney should carefully interview his or her client to fully understand the case and ask questions the client (and the case) need answered.

Know the rules of procedure. A new attorney must know the rules under which the deposition is being conducted. Often, veteran attorneys will agree to the “standard stipulations”. Be aware of what those stipulations are prior to the deposition. First, read - and then re-read - the applicable court rules on depositions. For example, under the Federal rules, depositions are limited to seven hours. A new attorney may be surprised to find that his expansive time spent on the biographical history of the deponent does not have sufficient time to inquire about the knowledge of the witness regarding the case at hand.

Appear confident and competent. Make sure you have secured a conference room or place for the deposition and a court reporter. Arrange the conference room several hours before the deposition. Be ready when people arrive. Control the room from the beginning: Escort the court reporter into the room and tell him where to set up; set yourself up in the area of the conference room where you feel most comfortable; only allow in the witness and his counsel when you are ready. You should decide when it commences, and - most importantly - you should decide when it ends. Your first few depositions may last longer than the opposing attorneys or the witnesses think they should, and you may receive some groans or even on-the-record protests as you probe the witness’ knowledge. Don't let older attorneys rattle you.

Deal with objections. First, do overreact to opposing counsel’s objections. Never debate your opponent on the record. Always remember these three actions when faced with an objection:

  • Ask your opponent to clarify his objection if you don’t understand the basis of the objection.

  • Rephrase your question if the objection is to “form.”

  • Simply ignore the objection and press the question if you believe that the objection is not valid. Arguing with opposing counsel just wastes valuable time. Moreover, you may not want your argument against a veteran attorney recorded for your supervising attorney and clients to see.

John Austin, Austin Law Firm, Raleigh, NC


August 31, 2016

Litigator's Guide to Data on Mobile Devices

People conduct increasingly more business and personal communications on mobile devices, and litigators now target those devices and the data on them for production. Lawyers need to know what information can be found and produced from a smartphone or tablet so that they can either ask for that information or provide it when requested. There’s more information stored there than meets the eye, including metadata and data that one would think has been deleted.

Data Available
People use smartphones and tablets for tasks every day, which means there are more types of data stored on these devices than there are on “flip” phones. Plus, the types of data vary based on the user’s apps and preferences. Apps that use location data, including the camera on the device and chat apps like WhatsApp also maintain a record of that information. Photos are automatically geo-tagged when they are taken, unless the user have disabled location information. Even supposedly secure chat apps may leave a record that can be collected from the phone.

Location Information
Mobile devices keep a plethora of location data. The location of every call is stored because the device has to communicate with cell phone towers. Every Wi-Fi network joined is recorded, along with the date(s) that network was accessed.

One may think that deleting a text message gets rid of the record, but the message and its time stamp may still be collected from a device. Deleted messages are eventually overwritten when that part of the memory is later used for newer messages. Generally, the farther back in time the message was sent, the smaller the chance the digital forensics team will be able to recover it.

Snapchat, which sends messages that “disappear” from the user’s phone after the message is viewed, produces messages that may remain on the device. Even if the image isn’t saved by a screenshot, it may be collected from the device.

Other Data
The browsing history on mobile devices works similarly to computers: Even if you have deleted your record of past site visits, the full browsing history can be restored. When a user deletes the history, those file records are marked in the database to not display, but they are still kept on the device.

John Austin, Austin Law Firm, Raleigh, NC


August 31, 2016

5 Tips for Civil Litigation Discovery

Discovery is often intimidating for litigators, especially young lawyers. The key to discovery is to stay ahead of the deadlines. Here are five simple tips to keep your discovery organized and moving

1. Create a Realistic Schedule and Stick to It
First, you must create a realistic timeline for discovery. The timeline should contemplate initial written discovery to the parties and subpoenas for third parties. In some cases, you may need to get releases for medical and bank records from your clients in anticipation of your document production. The schedule then needs to address the receipt and digestion of discovery responses prior to deposing factual and expert witnesses. Obviously, the schedule should be added to your calendar and tickler system. Finally, it needs to contemplate the needs and restraints of your client. Confer with your client before finalizing a schedule to address any time restraints such as vacation or surgery and their limitations such as staff, who will help you gather the documents.

2. Start Discovery as Soon As Possible
First, invest the time in creating a road map for the information and documents you will need to prove the essential elements of your claims or for your defenses. Advise your client about the discovery, either prior to filing suit or upon receipt of a complaint. They need to begin collecting documents immediately as well as safeguarding electronic files.

3. Date, Source, and Stamp Each Delivery of Documents
You will receive documents from your client, third parties, and other parties via email, mail, hand-delivery in your office, flash drive, and/or CDs/DVDs. Make sure you identify the source and date of each delivery. If the pages are not Bates-stamped, begin that process. Keep records of the physical location of CDs and flash drives if they are not kept in the file.

4. Prepare Privilege Log
Develop a protocol as to how to conduct a review of privileged documents. When a client sends you documents, these documents may contain notes and comments meant for the attorney. They also may contain other attorney-client or work product that should not be produced as they are privileged documents. It is important to assign one or more people to conduct regular privilege reviews of your clients’ documents when they come in. It is also important to make sure that everyone on the team, from legal assistants to paralegals and associates understand how to keep track of withheld attorney-client and work product materials.

5. Understand the New Federal Rules
Last year, the federal rules regarding discovery have changed significantly. You need to understand how the changes (and any future changes) affect the breadth and scope of your discovery. Know the rules!

John Austin, Austin Law Firm, Raleigh, NC


August 31, 2016

Ninth Circuit Holds "Fraudulent Joinder" Doctrine Misapplied

The Ninth Circuit recently overturned a district court’s application of the “fraudulent joinder” doctrine, where the party was properly joined because she had an interest in the real estate. In Weeping Hollow Avenue Trust v. Spencer, 13-16060 (9th Circuit), the court found that the “joined” party had a viable claim in the matter.

Weeping Hollow Avenue Trust purchased Ashley Spencer’s house a HOA foreclosure sale. Two months after the foreclosure sale, Wells Fargo Bank, NA filed a foreclosure action on the property under its deed of trust with Spencer. Weeping Hollow filed a quiet title action in Nevada state court, and Wells Fargo removed the case to federal court based on diversity jurisdiction. Weeping Hollow and Spencer were both citizens of Nevada. The district court concluded it could nonetheless exercise diversity jurisdiction because Weeping Hollow had fraudulently joined Spencer as a defendant where the court determined Spencer no longer had an interest in the property.

Under the fraudulent-joinder doctrine, “[j]oinder of a non-diverse defendant is deemed fraudulent, and the defendant’s presence in the lawsuit is ignored for purposes of determining diversity, ‘[i]f the plaintiff fails to state a cause of action against a resident defendant, and the failure is obvious according to the settled rules of the state.’” Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001) (quoting McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987)). A showing of actual fraud would be sufficient to invoke the doctrine; however, that is rare. In most cases, the focus will be on whether the plaintiff can “state a reasonable or colorable claim for relief under the applicable substantive law against the party whose presence in the action would destroy the district court’s subject matter jurisdiction.” 13f c. Wright & A. Miller et al., fed. Prac. & Proc. Juris. § 3641.1 (3d ed.). Courts employ a general presumption against fraudulent joinder.

Given that Weeping Hollow needed to show it had superior claim to all others, the Ninth Circuit concluded (as opposed to the district court) that it was reasonable for Weeping Hollow to join Spencer as a defendant. While the district court correctly determined that Weeping Hollow’s purchase of the property at the foreclosure sale extinguished Spencer’s property rights, Spencer could challenge the foreclosure sale from which Weeping Hollow gained title on grounds “of fraud, unfairness or oppression.”

John Austin, Austin Law Firm, Raleigh, NC


August 31, 2016

First Circuit Affirms Lower Court’s Substitution of Parties Post Judgment

Following the lead of the Eleventh Circuit, the Tenth Circuit has recently held that an Indian tribe does not waive its sovereign immunity from suit by exercising its right to remove to federal court a case filed against it in state court. The decision in Bodi v. Shingle Springs Boand of Miwok Indians, 14-16121 (9th Circuit), cures the divide in its lower districts.

The Shingle Springs Band of Miwok Indians, a federally recognized Indian tribe located in California, owned and operated a full-service health clinic. The plaintiff filed a complaint in state court, alleging violations of the Family Medical Leave Act (the FMLA), among other claims.

First, the tribe removed the action to federal district court and then moved to dismiss on the basis of tribal immunity. The district court denied the tribe’s motion on the grounds that the tribe had unequivocally waived its immunity by removing the action to federal court. Because it found waiver on the basis of removal, the court interestingly did not reach what could be substantial grounds for loss of tribal immunity: The FMLA had abrogated tribal immunity and the tribe had waived its immunity through its resolutions to obtain federal funding to build the health clinic.

The doctrine of tribal sovereign immunity derives from the status of Indian tribes as “separate sovereigns preexisting the Constitution.” A tribe may lose its immunity by two ways: Congress may abrogate tribal immunity because “the tribes are subject to plenary control by Congress” or, a tribe may itself waive immunity. No party asserted the tribe intentionally waived its immunity when it removed the case. Indeed, it moved to dismiss the case based on that issue. The plaintiff instead argued that the voluntary act of removal is tantamount to an express waiver of tribal immunity.

The court noted that nothing in the removal statute, U.S. Code Title 28, Section 1441, abrogates tribes’ sovereign immunity. And the absence of a dedicated removal provision for tribes says nothing about whether a tribe’s decision to invoke its general removal right constitutes a clear waiver of immunity.

To resist this result, the plaintiff advanced the Supreme Court’s decision in Lapides v. Board of Regents of the University System of Georgia, 535 U.S. 613 (2002), in which the court held that the defendant state waived its Eleventh Amendment immunity through the “affirmative litigation conduct” of “remov[ing] a case to federal court,” Id. at 616–17. However, the Lapides court expressly limited that decision on the basis of the odd nature of the facts in that case. In that case, Georgia had removed the case to federal court and sought immunity against a state law it had passed that waived immunity.

John Austin, Austin Law Firm, Raleigh, NC


July 31, 2016

Fourth Circuit Allows Appeal Where Appellant Gives "Functional" Notice of Appeal

On July 12, 2016, the Fourth Circuit Court of Appeals held that a document filed by a pro se litigant as an extension of time to request a certificate of appealability qualifies as the notice of appeal required by Rule 3 of the Federal Rules of Appellate Procedure. Clark v. Cartledge, No. 15-6248, decided: July 12, 2016.

In 2006, a jury convicted Keith Alan Clark guilty of kidnapping and assault with intent to commit criminal sexual conduct. He was sentenced to concurrent sentences of 30 years. After a series of unsuccessful appeals and post-conviction procedures in South Carolina courts, Clark filed a pro se petition for writ of habeas corpus in the U.S. District Court for the District of South Carolina, pursuant to 28 U.S.C. § 2254, alleging several constitutional violations stemming from his conviction, including, among others, that he received ineffective assistance of counsel in violation of the Sixth Amendment. On December 4, 2014, the district court granted summary judgment for the defendant. In that same order, the district court denied Clark a certificate of appealability, finding that he failed to meet 28 U.S.C. § 2253(c)’s standard for issuance of such a certificate. On December 18, 2014, Clark, still pro se, filed a motion for extension of time to request a certificate of appealability.

Federal Rule of Appellate Procedure 3(c) requires that a “notice of appeal must specify the party or parties taking the appeal; designate the judgment, order or part thereof being appealed; and name the court to which the appeal is taken.” Fed. R. App. P. 3(c). The requirements of Rule 3 are mandatory and “jurisdictional in nature.”

Here, the Fourth Circuit held that “functional” rather than formalistic compliance is all that is required. The Fourth Circuit, has previously held that the policy of construing notices of appeal liberally applies “especially” to pro se filings. “Therefore, as long as the pro se party's notice of appeal provided the notice required by Rule 3, evinced an intent to appeal an order or judgment of the district court, and the appellee was not prejudiced or misled by the notice, then the notice's technical deficiencies will not bar appellate jurisdiction.”

Appellant attorneys, who are asked to review a recently dismissed pro se appeal, may seek refuge in "function" rather than form.

John Austin, Austin Law Firm, Raleigh, NC


July 31, 2016

First Circuit Affirms Lower Court’s Substitution of Parties Post Judgment

Where the judgment debtor purportedly transferred its interest in intellectual property belonging to the debtor to the mother of the president of the debtor, Malek Benin, prior to the lawsuit, the First Circuit Court of Appeals held that the district court properly employed rule 25(c) to substitute the mother and subsequently incorporated company as joint judgment debtors to the original party. Rodriquez-Miranda v. Benin et al, Nos. 14-1334, 14-1518, decided July 13, 2016.

Nearly a year after obtaining the original judgment, Rodríguez filed a motion asking the district court to order the sale of Coquico’s assets to satisfy the judgment, which was approved by the Court. Three days prior to the sale, Benin’s mother, Acquanetta Benin sought to intervene in the collection action and to stay execution, claiming that she was the record owner of the property set for sale having previously purchased the relevant intellectual property from Coquico years before. Benin moved to stay the sale of the intellectual property, arguing, for the first time, that Acquanetta was an “indispensable party to the action” because she, not Coquico, owned the property. Throughout the previous action, Benin represented “that Coquico—not Acquanetta—was the owner of the copyrights. Now, Benin alleged his mother “purchased” the intellectual property back in 2006. The district court denied both Acquanetta’s motion to intervene and Benin’s motion to stay the sale.

On appeal, Benin argued that “the district court erred in using rule 25(c) to hold them liable for the judgment entered in favor of Rodríguez.” Rule 25(c), which governs the substitution of parties, provides, in relevant part:

(c) Transfer of Interest. If an interest is transferred, the action may be continued by or against the original party unless the court, on motion, orders the transferee to be substituted in the action or joined with the original party.

Although rule 25(c) applies only to actions that are “pending,” it “does not preclude substitution during subsequent proceedings brought to enforce a judgment.” A proceeding to enforce a judgment is “pending again, and Rule 25 applies.” The court found the debtors’ arguments “disingenuous, to say the least, . . . to argue now that the district court erred in its application of Rule 25(c) because the transfer of interest occurred after judgment had been entered,” given their prior representations and claims.

In addition to using a fraudulent conveyance claim, creditor rights’ practitioners can also look for relief under rule 25(c) where debtors allege valuable assets have been transferred to third parties.

John Austin, Austin Law Firm, Raleigh, NC


July 31, 2016

Skype Not Confirmed Secure for Attorney-Client Communications

In our fast-paced age of technology, more attorneys turn to cloud-based means of communicating with clients. One such technology is Skype. However, is “skyping” a secure form of communicating confidential attorney-client information? According to Microsoft, which now owns Skype, the answer is unclear, mostly because it refuses to answer.

At first, Skype worked on peer-to-peer technology, which essentially allowed a desktop to communicate more or less directly with the computer on the other end of the conversation. However, it did not employ encryption between the two computers, allowing such communications to be intercepted and revealed. In 2013, The Guardian newspaper reported, based on documents provided by NSA whistleblower Edward Snowden, that the NSA had dramatically increased its ability to collect data from Skype several months after the Microsoft acquisition.

After acquiring Skype, Microsoft has moved Skype to a “cloud” platform but has not indicated whether it has (or will have) encryption. As of this writing, Microsoft still has not confirmed encryption. Until such encryption is confirmed, attorneys should presume that communications with clients on Skype is akin to talking to clients in a coffeehouse.

John Austin, Austin Law Firm, Raleigh, NC


July 31, 2016

Second Circuit Affirms Decertification of Class after Jury Trial but Before Judgment

On July 15, 2016, the Second Circuit Court of Appeals affirmed the U.S. District Court of the Southern District of New York's grant of defendant's post-verdict motion to decertify a class that was previously certified pursuant to rule 23(a) and (b)(3) where (1) a district court has power, consistent with the Seventh Amendment and rule 23, to decertify a class after a jury verdict and before the entry of final judgment; (2) in considering such decertification (or modification), the District Court must defer to any factual findings the jury necessarily made unless those findings were “seriously erroneous,” a “miscarriage of justice,” or “egregious”; and 3) the district court did not abuse discretion in determining that Rule 23’s requirements were not met and in decertifying the class. Mazzei v. The Money Store et al, Docket No. 15-2054, decided July 15, 2016.

Plaintiff-appellant Joseph Mazzei initiated a class action against The Money Store, alleging overcharge of late fees on mortgages. Mazzei contended that the promissory note contemplated the imposition only of pre-acceleration late fees, and that the imposition of post-acceleration late fees violated the agreement. The court later certified the class in January 2013. The class definition was later amended on consent to exclude borrowers who signed loan mortgage agreements after November 1, 2006. After trial, and before the entry of judgment, The Money Store moved for decertification of the class pursuant to Federal Rule of Civil Procedure 23(c)(1)(C). The amended certified class consisted of “borrowers whose loans were either owned by The Money Store (via origination or assignment) or serviced by it.” The Money Store grounded its motion on the class representative’s “failure to prove class-wide privity of contract between The Money Store and those borrowers whose loans it only serviced and did not own.” The district court agreed that Mazzei’s failure to prove privity with respect to such absent class members defeated class certification on grounds of typicality and predominance. The district court granted the motion.

Federal Rule of Civil Procedure 23(c)(1)(C) provides that “[a]n order that grants or denies class certification may be altered or amended before final judgment.” Mazzei argued that a class may not be decertified after a jury verdict in its favor because such decertification is tantamount to overturning a jury verdict, and decertification would violate the class members’ Seventh Amendment right to a jury trial.

The circuit court rejected this argument based on the language of rule 23 and case law allowing such decertification. “Because the results of class proceedings bind absent class members . . . , the district court has the affirmative ‘duty of monitoring its class decisions in light of the evidentiary development of the case,’” wrote the court, citing the Fifth Circuit case, Richardson v. Byrd, 709 F.2d 1016, 1019 (5th Cir. 1983) (“The district judge must define, redefine, subclass, and decertify as appropriate in response to the progression of the case from assertion to facts.”). The Second Circuit also cited Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812 (1985) for the proposition that “the Due Process Clause of course requires that the named plaintiff at all times adequately represent the interests of the absent class members.”

In rejecting Seventh Amendment argument, the Court held:

[T]here is no Seventh Amendment issue at all. Mazzei will receive damages on his individual claim in the amount awarded him by the jury. And he has no constitutional right to represent a class; whether he may do so is purely a matter of Rule 23.

Litigators representing class action plaintiffs should, throughout the trial, be mindful of maintaining the class. On the other hand, defense counsel may want to challenge the class certification, prior to the entry of judgment, and thereby minimize the damage to their clients.

John Austin, Austin Law Firm, Raleigh, NC


June 30, 2016

New Mexico Supreme Court Holds Skype Testimony Violates Sixth Amendment

In a recent opinion, the New Mexico Supreme Court held that witness testimony, via two-way video conferencing such as Skype, violates a defendant’s right of confrontation under the Sixth Amendment.

In New Mexico v. Thomas, Truett Thomas was charged with first-degree murder and first-degree kidnapping. During his trial, one of the prosecution’s witnesses, who had moved out of the state since the defendant’s arrest, delivered his courtroom testimony via Skype two-way video conferencing.

The defense initially agreed, believing the testimony to be solely related to determining the chain of custody. They announced their misgivings a week later, believing the video testimony would violate defendant’s right to confrontation as guaranteed by the Sixth Amendment. The district court judge later stated he believed defendant’s right to object had been waived, though nobody had discussed waiving confrontation rights with the defendant.

The New Mexico Supreme Court found that as no one had addressed the defendant’s confrontation rights with him, writing “there is no evidence that Defendant understood those rights or that he voluntarily agreed to waive them.” Then, having determined the defendant maintained his confrontation rights, the court applied the requirement in the Supreme Court of the United Sates case Maryland v. Craig to demonstrate “an important state interest” in using video testimony to two-way video transmission, as present in this case.

Here, the court found that prosecution failed to demonstrate that the use of two-way video was “necessary to further an important public policy.” Writing for the court, Chief Justice Charles W. Daniels stated, “Inconvenience to the witness is not sufficient reason to dispense with this constitutional right.”

Connor Choate, summer intern, Austin Law Firm, Raleigh, NC


June 30, 2016

Second Circuit Joins Other Circuits in National Bank Citizenship Determination

In the case of OneWest v. Melina, (15-3063), the Second Circuit Court of Appeals joins the majority of the other circuit courts in holding that a national bank is a citizen only of the state in which its main office is located.

OneWest Bank filed a foreclosure action on Melina’s property located in New York in the U.S. District Court for the Eastern District of New York, invoking diversity jurisdiction. OneWest Bank moved for summary judgment, and the defendant cross-moved to dismiss for lack of subject matter jurisdiction. The district court granted the plaintiff’s motion for summary judgment and denied the defendant’s motion. The defendant appealed the district court’s holding that “a national bank is a citizen only of the state in which its main office is located” and that OneWest had standing.

Diversity jurisdiction applies only when diversity is “complete” between the parties and no plaintiff and defendant are citizens of the same state. A national bank, according to 28 U.S.C § 1348, are “citizens of the States in which they are respectively located.” In Wachovia Bank v. Schmidt, 546 U.S. 303 (2006), the U.S. Supreme Court left open the question of citizenship for a national bank. Now, the Second Circuit has, like its sister circuits, determined that national banks are “located” in the state included in its articles of association as its main office, and therefore a national bank is only a citizen of that state. Since OneWest’s main office is located in California, the court maintained that OneWest was a citizen of California, not New York, as the defendant argued.

The defendant contended that because OneWest’s parent company was being purchased by a company headquartered in New York, the main office and principal place of business moved to New York. The court disagreed. As the court wrote, “it is well established… that a ‘subsidiary corporation has its own principal place of business for purposes of diversity of citizenship jurisdiction.’”

Connor Choate, summer intern, Austin Law Firm, Raleigh, NC


June 30, 2016

Franchise Activities Result in Personal Jurisdiction over Franchisee

The First Circuit Court of Appeals recently held that a Massachusetts’ district court had personal jurisdiction over an Oregon company in a franchise dispute under the purposeful availment doctrine where the company had taken advantage of the benefits offered by the Massachusetts’s franchiser.

Alpenrose Dairy, Inc., headquartered in Oregon, entered into a territorial franchise agreement with Baskin-Robbins, at which time Baskin-Robbins was headquartered in California, allowing Alpenrose to operate Baskin-Robbins franchises in Washington and Oregon. The agreement lasted for six years and written notice of its renewal was given by Alpenrose at least one year before the six-year expiration. Alpenrose renewed the agreement five times without incident, and when Baskin-Robbins moved their headquarters to Massachusetts, Alpenrose sent the notice of renewal to Baskin-Robbins’s Massachusetts headquarters twice.

In 2013, Alpenrose notified Baskin-Robbins of their intent to not renew the agreement, after which negotiations began and soon stalled surrounding the transition out of the agreement. Alpenrose then notified Baskin-Robbins that they wanted to renew instead, though they were past the required date to give a year’s notice. Baskin-Robbins rejected their attempt to renew and denied that they owed Alpenrose any compensation for that denial.

Baskin-Robbins sought a judicial declaration in the U.S. District Court for Massachusetts that the agreement ended when its current term expired, and Alpenrose moved to dismiss for lack of personal jurisdiction and improper venue, or to alternatively move the case to Washington. The court dismissed the case for lack of in personam jurisdiction. Baskin-Robbins appealed.

With a diversity case, the district court’s “assertion of personal jurisdiction over Alpenrose… [must] satisfy the requirements of both the Due Process Clause of the federal Constitution and the Massachusetts long-arm statute.” In accordance with these jurisdictional requirements, the First Circuit assessed Baskin-Robbins’s claim of specific jurisdiction, which gives a court jurisdiction over a case such that the “case relates sufficiently to, or arises from, a significant subset of contacts between the defendant and the forum.”

The circuit court found that the letters of intent sent from Alpenrose to Baskin-Robbins’s Massachusetts office did not by themselves satisfy a minimum-contacts analysis. However,  Alpenrose’s interactive business relationship with Baskin-Robbins while they were headquartered in Massachusetts, and repeated contacts between both parties, in which Baskin-Robbins performed services in Massachusetts on Alpenrose’s behalf, was “vital to the continuation of the franchisor-franchisee relationship.” Such actions show that Alpenrose purposefully availed itself to the jurisdiction of the Massachusetts’ courts.

In assessing whether the exercise of jurisdiction over Alpenrose is fair and reasonable, the First Circuit concluded that it was, as there was no “unusual burden” on Alpenrose. For these reasons, the court held that jurisdiction over Alpenrose in Massachusetts is consistent with due process and reversed the district court’s dismissal.

Connor Choate, summer intern, Austin Law Firm, Raleigh, NC


June 30, 2016

Dismissal of Claims under Anti-SLAPP Statute Not Immediately Appealable

In Hyan v. Hummer, the Ninth Circuit Court of Appeals recently held that the dismissal of a claim under California’s anti-SLAPP statute against was not a “final decision” under Federal Rule of Civil Procedure 54(d). Despite case law holding that the denial of a motion to strike claims under the statute is immediately appealable, the court, citing the Federal Rules of Civil Procedure, wrote “‘any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties’ is not final.”

In Hyan, the plaintiff alleged defendants hindered him from collecting on a legal malpractice judgment. One of the defendants filed a motion to strike claims under California’s anti-SLAPP statute, which the district court granted. However, Hyan’s case continued against the last defendant. Hyan appealed.

On appeal, Hyan argued the district court’s anti-SLAPP order was a “final decision,” and the Ninth Circuit therefore had jurisdiction. The court, however, held the order did not constitute a “final decision” as it dismissed only two of the defendants, while one remained in district court.

In previous cases where the Ninth Circuit reviewed anti-SLAPP orders, all of the defendants were dismissed by the district court’s order, unlike Hyan’s case. Distinguishing cases where the court had held that the denial of an anti-SLAPP motion to strike is appealable, the court held the denial of an anti-SLAPP motion to strike is an important right granting immunity from suit and is, therefore, immediately appealable.

Connor Choate, summer intern, Austin Law Firm, Raleigh, NC


May 31, 2016

First Circuit Denies Fourth Appeal on Enforceability of Order in Contempt Case

In AngioDynamics Inc v. Biolitec AG, AngioDynamics, Inc (ADI) secured a $23 million judgment against Biolitec, Inc (BI). Subsequent to the judgment, ADI then brought a suit against BI, its president, Biomed Technology Holdings, and Biolitec AG (BAG). (The latter two are affiliated companies.) The second suit alleged that BI was fleecing BI of millions of dollars and taking multiple actions to avoid payment, including a merger with a subsidiary that would prevent ADI from securing payment. The district court prohibited the defendants from merging with their subsidiary and denied a motion for reconsideration. On appeal, the district court’s decision was affirmed, but the defendants had already carried out the merger, in violation of the district court’s injunction.

The plaintiff moved to hold the defendants in contempt, which, after the defendants refused to attend a hearing on the subject, was met with the district court’s order of contempt, including monthly fines against the defendants and an arrest warrant for the company’s president. After the defendants again refused to comply with the order, the district court entered a default judgment that the defendants then appealed. The First Circuit affirmed the decision and remanded for the district court to determine an accrued final amount for the fines. After the district court entered a revised contempt order with a fine cap, defendants once again appealed, arguing the district court could not enforce a preliminary injunction that “expired” on the day the district court entered its final judgment.

On May 6, 2016, the First Circuit rejected their fourth challenge on the basis of the defendants’ “failure to raise the argument in prior appeals,” when they had sufficient opportunity to do so. Defendants violated the terms of the order before its “expiration,” and the court maintained jurisdiction to address the situation. The court rejected their appeal, stating, “It is unclear whether the Defendants’ failure to raise this argument in their prior appeals was the result of inadvertence or tactical reserve or procedural gamesmanship. Either way, we decline to address their challenge now.”

While posturing and gamesmanship may impress clients, it appears to have no audience in the First Circuit.

Connor Choate, summer intern, Austin Law Firm, Raleigh, NC


May 31, 2016

Plaintiffs Suing Drug Manufacturer Stung by Standing in First Circuit

The First Circuit Court of Appeals dismissed a case on the basis of lack of standing where plaintiffs alleged non-specific injuries due to a shortage of a drug to treat Fabry disease, called Fabrazyme. In Hochendoner v. Genzyme, the plaintiffs complaints involved the progression of the disease on a lower dose of Fabrazyme, an accelerated progression of the disease induced by the lower dose, and harm incurred from particulate matter found in one of the batches.

In breaking down the claims into three types (progression claims, acceleration claims, and contaminant claims) and then rejecting all three claims, the District Court of Massachusetts held that the plaintiffs—in regard to the acceleration and contaminant claims—did not provide sufficient notice to Genzyme of which plaintiffs suffered harms. Though they did provide sufficient notice for the progression claim, the court rejected the plaintiffs’ contention that Genzyme had a duty to supply the market with the drug and dismissed those claims as well. The district court did not address standing.

On appeal, the First Circuit looked only at the acceleration and contaminant claims to determine whether the plaintiffs had standing. Adopting the majority rule of a “plausibility standard” for a determination of standing, the court concluded that the plaintiffs’ standing depended on “the presence or absence of a plausibly pleaded injury in fact”—an injury that must be “concrete” and “particularized,” or an actual injury that has affected specific individuals. In sum, Judge Bruce Selya, writing for the court in his usual style, stated, “[T]he party asserting standing must not only allege injurious conduct attributable to the defendant but also must allege that he, himself, is among the persons injured by the conduct.”

On May 23, 2016, the First Circuit held that the plaintiffs failed, in both claims, to attach acceleration and contaminant injuries to specific individual plaintiffs. Standing required a “plaintiff-by-plaintiff” and “claim-by-claim” analysis, assessing whether each individual has standing to present their claim. As the plaintiffs (except for James Moody) failed to specifically link the lower doses and contamination with injuries suffered by individual plaintiffs, the court affirmed the district court’s order for dismissal but under Article III standing rather than Rule 12(b)(6). The court found that Moody had properly asserted standing and remanded Moody’s claims for further findings under a Rule 12(b)(6) analysis.

For federal practitioners, Article III standing requires specificity and attention and cannot be granted “in gross.” To avoid similar dismissals, attorneys should ensure each act or omission is sufficiently linked to a recognizable injury to withstand this analysis.

Connor Choate, summer intern, Austin Law Firm, Raleigh, NC


May 31, 2016

References to Police Report in Civil Rights Claim Almost Proves Fatal to Claims, Saved by the Fourth

On May 9, 2016, the Fourth Circuit reversed a lower court’s dismissal of claims against police officers, where the lower court held that the plaintiff had adopted the statements of the officers in the report as true.

In Goines v. Valley Community Services Board, the plaintiff was involuntarily detained for a mental health evaluation after attempting to report the theft of his cable at the police station. The plaintiff sued the police officers that detained him, his mental health evaluator, and their employer, alleging the seizure without probable cause violated the Fourth and Fourteenth Amendments. The district court dismissed the entire complaint for failure to state a claim under Rule 12(b)(6). In particular, the district court employed the “exhibit-prevails rule,” thereby imputing the veracity of the statement of the police officers, to allow the dismissal against them.

The district court, in dismissing the complaint against the officers, looked to the incident report filed with the defendants’ motion to dismiss, though not attached to the plaintiff’s complaint. On appeal, the Fourth Circuit affirmed the district court’s dismissals, except for the officers. There, the court reviewed the district court’s reliance on the “exhibit-prevails rule.” The court held that, because the plaintiff did not argue the document was not integral to the complaint, the plaintiff had neither adopted its contents as being true nor incorporated the document into his complaint. Because the plaintiff included references to the document for “purposes other than truthfulness,” the court held that treating the contents of the document as true, as the district court did, was reversible error. The court looked at the incident report as “assertations made by the officers,” as opposed to truth, and therefore held that the plaintiff’s claims against the officers should not have been dismissed.

The complaint against the evaluator and their employer, however, was based on a report the that the plaintiff argued was not sufficient probable cause. The plaintiff did not argue the report was not truthful. Because the plaintiff accepted the information as truthful, and that information established probable cause, the Fourth Circuit affirmed the district court’s dismissal of these particular claims.

Plaintiff attorneys must be mindful to the exhibits they attach to complaints and even references to such documents to avoid a court from applying the exhibit-prevails rule or otherwise imputing the document's "truthfulness" to the claims in the complaint. Thoughtlessly attaching a document or even relying heavily on it may prove fatal to the underlying claims.

Connor Choate, summer intern, Austin Law Firm, Raleigh, NC


May 31, 2016

Virginia Congressmen Lack Standing in Voting District Suit

Voters from Virginia’s Third Congressional District filed suit challenging Virginia’s redistricting plan, arguing the redrawing of their district was racial gerrymandering. Republican members of congress from Virginia intervened to defend the plan. After the district court struck down the plan in Wittman v. Personhuhallah, Republican Congressmen Rob Wittman, Dave Brat, and J. Randy Forbes appealed to the Supreme Court, which remanded the case in light of Alabama Legislative Black Caucus v. Alabama, 575 U.S. _____ 2015. The district court once again struck down the redistricting plan as it related to District 3, and the Congressmen once again appealed.

Given that none of the congressmen lived in District 3, the Supreme Court sought to determine whether they had standing under Article III. Article III requires, in this case, the congressmen to have suffered “injury in fact” that is “traceable” to the Court’s rejection of the redistricting plan and would be “redressed” by the reversal of the lower court’s decision. 

The Supreme Court found that two of the appellants, Wittman and Brat, failed to produce any evidence the plan has harmed their chances at reelection and, therefore, did not satisfy Article III’s requirements of “injury in fact.”

The third appellant, Forbes, despite giving evidence to demonstrate how his election chances were harmed by the decision, stated he would run in the same district regardless of the opinion, meaning his injury would not be “redressed” by any opinion of the court. For these reasons, the Supreme Court dismissed the appeal of all three based on lack of Article III standing.

In short, while these appellants have Article 1 positions, they can’t stand Article III.

Connor Choate, summer intern, Austin Law Firm, Raleigh, NC


April 30, 2016

Cost Award Reversed in Truck Driver Negligence Case

In a wrongful death action before the Court of Appeals of California, Toste v. CalPortland Construction, 245 Cal. App. 4th 362 (Cal. App. 2d Dist. 2016), the court addressed whether a construction truck driver’s negligence was a substantial factor in a contractor’s death and whether the accident would have happened whether the driver was under the influence of marijuana or not. The plaintiff filed suit against the driver, the driver’s employer, and an asphalt supplier that hired the employer. The jury found that the truck driver, Paul Michaelson, was negligent when he backed up and hit the contractor, Dan Toste, but that his negligence was not a substantial factor that cased the death. The trial court entered judgment for the defendants and awarded expert witness fees based on settlement offers.

Facts of the Case
On June 17, 2010, Michaelson backed up his truck and ran over Toste at an asphalt overlay project. Toste, the general contractor for the project, was standing behind the truck it its blind spot. After the accident, Michaelson, when asked to take a drug test, admitted that he had smoked marijuana to treat a headache two days before the accident. His urine test showed a high level of marijuana metabolite.

During settlement talks, Michaelson and V&J Rock Transport offered $200,001 and $750,001, but both were rejected by the appellant. In addition CalPortland offered a $15,000 compromise, which the appellant also rejected.

The case was tried on negligence and negligence per se theories. As it concerned negligence per se, the jury received instructions that the Federal Motor Carrier Safety Administration regulation (49 C.F.R. § 382.213 (2015)) prohibited truck drivers from using marijuana. The jury also received instruction that Vehicle Code section 23152 prohibited a person from driving under the influence of a drug. As it concerned the negligence, the appellant claimed that the driver had a truck with an inaudible backup alarm and that the driver backed up in a negligent manner.

Procedural Posture
The appellant moved for a new trial on the basis of insufficient evidence and juror misconduct. The trial court denied the motion for a new trial and awarded Michaelson and V&J Rock Transport $98,645 in costs and $67,497 in expert witness fees. CalPortland was awarded $25,341 in costs and $17,034 in expert witness fees. The appellant appealed.

The appellant claimed that the evidence proved that Michaelson’s negligence was a substantial factor in causing the death. He also claimed that the parties stipulated that Michaelson “caused” the death. The court disagreed and explained that the stipulation was that Toste died by a blunt force trauma when he was run over by the truck. The court further explained that had Michaelson stipulated to causation, it would have basically been an admission of liability. The court did not find that Michaelson’s having marijuana in his system was a breach of duty that was a substantial factor in bringing about the death of the contractor.

Negligence Per Se
The appellant’s main theory of Michaelson’s liability was negligence per se. The appellant argued that Michaelson must be found negligent if the Federal Motor Carrier Safety Administration regulation 49 Code of Federal Regulations part 382.213 (2015) prohibits a truck driver from using marijuana if it was found that “the violation was a substantial factor in bringing about the harm.” The appellant, however, still had to prove causation after proving duty of care.

The jury did not find that Michaelson’s use of marijuana was a substantial factor in causing the death because he was not impaired at the time of the accident. A coworker, who was on the scene shortly before the accident stated that he noticed no signs that Michaelson was impaired. In addition, during a post-accident interview with California Highway Patrol Officer Anthony Villanti and CalPortland safety manager Treena Leonard, neither noticed any signs of impairment.

The evidence also showed that Michaelson used safety precautions before backing up. He looked in his mirrors and backed up at about half the walking speed of an adult. The backup alarm on his truck was audible. Therefore, Toste should have been more attentive in paying attention to the backup alarm and sensing the movement of the truck as it jostled.

The court referred back to its former opinion when deciding that Toste did not care for his own safety in Jonkey v. Carignan Construction Co., 139 Cal. App. 4th 20, 22 (2006), where it stated “A construction site can be a dangerous place. There are some people who are keenly aware of this danger—construction workers. Seasoned and mature construction workers who have risen to the top of this industry and who are supervisors, managers, and owners are not only keenly aware of the dangers; they also teach and are responsible for construction safety. . . . Of all people at a construction site, appellant was and is chargeable with caring for his own safety.”

2016 Amendment of the Code of Civil Procedure Section 998
The appellant argued that the 2016 amendment to section 998 precluded an award of pre-offer expert witness fees. Section 998, subdivision (c)(1), now provides in pertinent part: “If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her post-offer costs and shall pay the defendant's costs from the time of the offer. In addition, … the court or arbitrator, in its discretion, may require the plaintiff to pay a reasonable sum to cover post-offer costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial or arbitration, or during trial or arbitration, of the case by the defendant.”

The court, in analyzing the amendment, explained that the amendment, which became effective January 1, 2016, specifically applied to cases pending on appeal; therefore, expert witness fees that were incurred before a valid offer to compromise could not be awarded. Accordingly, the court concluded that the amendment did not affect CalPortland’s award for costs because it served its settlement offer on November 25, 2013 and its expert witness fees were incurred from December 2013 through February 2014. The court decided that the appellant did not show that CalPortland was awarded pre-offer expert witness fees and affirmed CalPortland’s awards.

The court reversed the cost award to Michaelson and V&J Rock Transport, however, because the first offer to settle was served on July 31, 2013. The court stated that that offer was conditional and as a result invalid. The second settlement offer, the court explained, which was served on January 17, 2014, complied with section 998 and permitted the court to award post-offer expert witness fees. The amount of the expert witness fees incurred from July 31, 2013, to January 17, 2014, was unknown. Thus the court reversed and remanded the cost award to Michaelson and V&J Rock Transport for reconsideration in light of the recent amendment to section 998.

The court refused to consider the appellant’s remaining arguments and affirmed and awarded CalPortland’s costs. The court reversed and remanded Michaelson and V&J Rock Transport’s costs pursuant to the amended section 998, subdivision (c)(1). The remainder of the judgment was affirmed and the court ruled that the appellant and respondents would have to bear their own appeal costs.

Farrah Champagne, Champagne Law, Catonsville, MD


April 30, 2016

Proceedings Stay for Discovery and Mediation Fails to Qualify for Trial Tolling

In Supreme Court of California case Gaines v. Fidelity National Title Ins. Co., the plaintiff’s lawsuit was dismissed because she failed to comply with Code of Civil Procedure section 583.310, which requires that an action “be brought to trial within five years after the action is commenced against the defendant.”

Fannie Gaines and her husband Milton owned a home in Los Angeles, California, holding over $500,000 in equity in the property. They fell behind on their mortgage payments and failed to refinance. With the threat of foreclosure hanging over their heads, they agreed to sell the property to Tornberg, Johnson, and Ray Management (hereinafter “Tornberg”) with an option to lease and repurchase the property. The complaint against Tornberg alleged negligence, fraud, intentional infliction of emotional distress, and failure to follow home equity contract requirements. Because Milton died before the suit was filed, Mrs. Gaines sought rescission and cancellation of the deed that transferred ownership of the property.

Complaints, amended complaints, and answers were filed. In November 2009, however, Mrs. Gaines died. Her son Milton Gaines became the successor in interest.

Trial was scheduled for August 6, 2012. On May 19, 2012, Fidelity National Title Insurance Company moved to dismiss for failure to bring the action within the five-year time period as required by section 583.310.

Gaines opposed the motion to dismiss, claiming that the five-year period had tolled several times. The court excluded from the period of pendency: two months to account for delay resulting from Mrs. Gaines’s death and 125 days when the plaintiff sought relief from one of the defendant’s bankruptcy stays.

The court did not, however, exclude the time where it ordered a 120-day stay of proceedings to allow the parties to engage in mediation.

The court dismissed the case concluding that engagement in mediation did not support tolling and therefore the trial date exceeded the five-year limitation by 82 days.

The court of appeal affirmed the decision and the plaintiff appealed.

Submitting an Action to Mediation under Section 1775.7
Section 1775.7 addresses the effect of mediation on the running of the five-year period. The section provides that when an action is submitted to mediation it shall not toll the running of the five-year period except when the period of mediation is or remains submitted more than four years and six months after the action is filed. Howard v. Thrifty Drug & Discount Stores, 10 Cal.4th 424, 434 (Cal. 1995). The mediation at issue in this case occurred in the second year of litigation; thus the court stated it did not qualify for tolling under Section 1775.7.

Time When Prosecution or Trial Was Stayed (§ 583.340(b))
Gaines argued that the conditions ordered by the court, which stated that the scheduled trial date of September 22, 2008, “stayed [the case] for a period of 120 days except that [the] parties are to respond to all previously served and outstanding written discovery” and “are directed to participate in good faith in a mediation of all claims in this case within the next 90 days,” triggered the exception codified in section 583.340(b). Section 583.340(b) requires the court to exclude the time when “[p]rosecution or trial of the action was stayed or enjoined.” The court rejected the claim put forward by Gaines stating, “Neither condition applied.”

Distinguishing Between a Stay and Continuance
To decide whether 583.340(b) applied, the court distinguished between a stay and a continuance. Under the section, a stay of the trial halts the running of the five-year period, whereas a continuance does not. Bruns v. E-Commerce Exchange, Inc. 51 Cal.4th 717, 725 (Cal. 2011). The court stated that labels are not dispositive, but what matters is whether the order acted as a stay or a continuance.

The court defined a stay in the context of the five-year statute as a postponement that froze a proceeding indefinitely, until an extrinsic event beyond the control of the plaintiff occurred. The court defined a continuance as an occurrence that was not tied to a matter outside of the control of the parties under section 583.330. That section provides that “the parties may extend the five-year period during which an action must be brought to trial by written stipulation or oral agreement made in open court.”

The court concluded that although there was no written stipulation or oral agreement in this case that the order striking the trial date should be construed as a continuance and not a stay. The court explained that the strike of the trial date was not indefinite; rather there were contingencies involved, which included a 90-day period for mediation and a 120-day stay of the proceedings. The contingencies were not extrinsic but were agreed on by the parties and within the control of the parties.

The court explained that there was a stipulated postponement of the trial, which was not extrinsic to the proceeding, and therefore it did not qualify for automatic tolling.

The Stay of the Prosecution
The court in Bruns v. E-Commerce Exchange addressed the meaning of a stay of the prosecution under section 583.340(b). The court held that “the prosecution of an action is stayed under subdivision (b) only when the stay encompasses all proceedings in the action.” Prosecutions such as these stop the prosecution completely and make it impossible to bring the action. The order in this case stayed the case for 120 days, which provided that the case would move forward with responding to discovery and participating in mediation.

The court explained that the term prosecution comprises every step in an action from beginning to end and that discovery is a step in the prosecution. The court went on to state that complying with discovery and submitting the action to mediation constituted a “step in the action.” Ray Wong v. Earle C. Anthony, Inc. 199 Cal. 15, 18 (Cal. 1926). The court distinguished the case at hand from Marcus v. Superior Court, 75 Cal. App. 3d 204, 212–213 (Cal. App. 4th Dist. 1977) where the court stated that a stay concerned “all issues, as to all causes of action, and as to all parties, until arbitration is concluded.’ The distinguishing feature was the fact that contractual arbitration and mediation are not the same, in that arbitration is a remedy that is distinct from a legal action and mediation is an event that assists in the settlement of a lawsuit.

The court concluded that the April 3, 2008 order was not a stay, which was “used to stop the prosecution of the action altogether.” Bruns v. E-Commerce Exchange, Inc. 51 Cal.4th 717, 730 (2011). The court concluded that section 583.340(b) was inapplicable in this case. The court explained that a plaintiff who wants tolling could obtain a written stipulation or express oral agreement in court.

Estoppel and Impossibility
The court rejected Gaines’s arguments regarding equitable estoppel and concluded that the mediation proceedings and partial stay were not so exceptional to qualify under section 583.340(c) as impossible, impracticable, or futile.

The court concluded that the case was properly dismissed under section 583.360, thus bringing an end to the plaintiff’s suit for noncompliance with the five-year statute. The court stated that it encourages and lauds cooperation among litigants. However, there is still the obligation to prosecute claims within the statutory guidelines.

Farrah Champagne, Champagne Law, Catonsville, MD


April 30, 2016

NJ Defense Attorneys Snooping on Facebook Face Ethics Probe

When two New Jersey defense attorneys told their paralegal to send a Facebook friend request to a plaintiff, they found themselves on the wrong side of a case of first impression. At first, the Supreme Court of New Jersey refused to rule on the case; however, when the New Jersey Office of Attorney Ethics voiced its concerns over the actions, the court moved the case forward.

The defense attorneys argued that they operated in “good faith” and were unaware of the different privacy settings on Facebook. The Office of Attorney Ethics accused the two lawyers of, inter alia, communicating with a represented party without proper consent and engaging in conduct “involving dishonesty, fraud, deceit or misrepresentation.”

On April 17, 2016, the New Jersey Supreme Court ruled the Office of Attorney Ethics could prosecute the two attorneys, despite the case being dismissed earlier by a regional disciplinary body. Writing for the court, New Jersey Chief Justice Stuart Rabner noted, “No reported case law in our State addresses the sort of conduct alleged.” The court went on to cite a lack of “playbook or precedent for how these attorneys should have dealt with the circumstances they were confronted with in 2008.”

Attorneys should consult their state’s rules and recent ethical opinions relating to monitoring social media sites of opposing parties and witnesses. A word of advice: Take the high road. If you or your paralegal are snooping and creating fake social media pages, you may find yourself the subject of a case of first impression in your own jurisdiction. You will not “like” that.

John Austin, Austin Law Firm, Raleigh, NC


April 30, 2016

First Circuit Refuses to Grant City Chance to Clarify Offer under Rule 68

In the case of LaPierre v. City of Lawrence, the plaintiff alleged she was sexual assaulted by police officers. Shortly prior to a motion for summary judgment was to be heard, the city made an offer of $300,000, under rule 68 of Federal Rules of Civil Procedure. The offer made no mention of the issue of costs. Shortly after making the offer, the city attempted to “clarify” its offer by making an “amended offer” that addressed costs. The amended offer stated the amount included costs and fees incurred to date, including attorney fees.” Within 14 days of the original offer, the plaintiff accepted the original offer, despite having communications and negotiations regarding the issue of costs and the amended order.

At the hearing for summary judgment, the district court heard the following issues: the enforceability of the original offer and acceptance enforceable, and if it is not, then whether summary judgment should be granted. Given the back and forth between the parties, the district court ruled that there was no “meeting of the minds” as it related to the offer of judgment. Therefore, it was not enforceable. The court then held that the police officer could not be acting “under color of state law” when he assaulted and raped LaPierre.

On April 26, 2016, the First Circuit Court of Appeals took a different view. Because rule 68 does not require the offeror address costs, can the court consider extrinsic evidence in interpreting the original offer? Courts “must” enter judgment of an accepted rule 68 offer once it has been filed with the court along with the acceptance and proof of service. The city argued that courts often allow offers to be clarified and that the amended offer made that clarification. The first circuit disagreed.

The first circuit did not find the original offer incomplete or ambiguous. Therefore, it did not need to be “clarified” and extrinsic evidence should not have been considered by the district court. Consequently, it vacated the lower court’s dismissal and remanded it with instructions to have the judgment entered according to the original offer of judgment.

Costs and fees typical present a very serious issue with all offers of judgment under rule 68, either under state or federal law. Litigators should also consult the applicable rule 68 and case law to address this potential and costly pitfall.

John Austin, Austin Law Firm, Raleigh, NC


March 31, 2016

Defense Attorneys: Don't Re-Victimize the Victim

The tactics employed by defense attorneys in the civil action by sportscaster Erin Andrews led to a serious backlash by the jury against their clients. During what can only be described as “re-victimizing” of the plaintiff during her cross-examination, defense counsel left Andrews crying on the witness stand in a Nashville courthouse in early March.

The cross-examination revealed unsavory opinions of the defense: that Andrews was the provocateur and beneficiary of the crime committed by Michael David Barrett, who secretly filmed Andrews in her hotel room, with the unknowing assistance of hotel staff. Andrews sued Barrett, as well as the franchise owners of the Nashville Marriott at Vanderbilt University West End Hotel Partners and Windsor Capital Group, who manages the hotel.

The Nashville hotel’s defense attorney, Marc Dedman, attempted to minimize Andrews’ damages by suggesting she benefitted from the exposure. Dedman asked Andrews about her increasing salary at ESPN and Fox Sports. He then asked about her endorsements with Reebok, Degree deodorant, Mountain Dew and Victoria's Secret. Dedman’s tactic was anything but subtle: Andrews financially benefited from having a stranger film her nude. The tactic turned disastrous, resulting in a $55 million jury verdict for Andrews.

While defense attorneys have difficult arguments to make in cases where there is a clear victim, they need to avoid “re-injuring” the plaintiff in front of the jury. Perhaps if defense counsel had presented emails, interviews, or other documentary evidence in which Andrews admitted to, or at least alluded to, some financial benefit from the crime, the jury may not have had such negative reaction, and instead, may have considered the theory. At the very least, the defense counsel should have forecast such a theory in their opening, instead of springing it on the jury during such an important moment of trial. Finally, given the potential for backfire, one can only hope that defense counsel had employed jury consultants to determine how such a theory would play with a Nashville jury.

John Austin, Austin Law Firm, Raleigh, NC


March 31, 2016

Forum non Conveniens Movants Must Demonstrate Adequacy of Alternative Forums

The Federal Circuit Court of Appeals reverses a dismissal of forum non conveniens where the movants failed to provide sufficient evidence for the motion and the lower court granted the motion on “mere speculation.” In Halo Creative & Design Ltd, v. Comptoir Des Indes, Inc., (No. 2015-1375, decided March 14, 2016), the court found that the movants had provided no evidence to support their own motion. It also reversed the lower court’s order and threw in some harsh criticism of the lower court’s analysis.

Halo, a Hong Kong private company that designs and sells high-end modern furniture, sued Comptoir, a Canadian corporation that also designs and markets high-end furniture, alleging infringement of its U.S. design patents, copyrights, and trademark. In a suit filed in the Northern District of Illinois, Halo also alleged that Comptoir had violated Illinois consumer fraud and deceptive business practices statutes. Comptoir moved to dismiss on forum non conveniens grounds, contending that Canada, where the defendants reside, “is a far superior forum in which to resolve this dispute.”

Asserting that the plaintiff had an adequate remedy under Canadian law, defendants only provided the court with a webpage that explained that the Federal Court of Canada has jurisdiction to adjudicate “intellectual property rights, including copyright, industrial design, patents, and trade-marks.” The defendants did not offer expert testimony regarding the adequacy of the Federal Court of Canada as an alternative forum. Halo opposed the motion, arguing both that Canada would not be an adequate forum to resolve its United States intellectual property dispute and that private and public interests militated against dismissal.

Despite the lack of evidence, the district court concluded that Canada would be an adequate forum citing that Canada, Hong Kong, and the United States are all signatories of the Berne Convention. The Berne Convention requires “national treatment,” which means that “authors should enjoy in other countries the same protection for their works as those countries accord their own authors.” The court did not address Halo's design patent, trademark, or state law allegations. The district court then balanced the private and public interests, determining that they weighed in defendants’ favor. Accordingly, the district court dismissed the complaint.

Although transfer between federal courts was codified in 28 U.S.C. § 1404(a), forum non conveniens concerning foreign and state venues has always been a common-law doctrine. Forum non conveniens allows a federal district court to dismiss a suit over which it would normally have jurisdiction if trial in a foreign forum would “best serve the convenience of the parties and the ends of justice.” Whether dismissal would promote convenience and justice should be determined by weighing various private and public interest factors. Such private interest factors include

  • the relative ease of access to sources of proof, and

  • the availability of compulsory process for attendance of unwilling, and the cost of obtaining the attendance of unwilling, witnesses and the possibility of view of the premises.

Public interest factors include

  • congestion of the courts,

  • the burden of jury duty imposed upon a community which has no relation to the litigation,

  • a local interest in having localized controversies decided at home, and

  • the potential for a “conflict of laws.”

The district court apparently based its adequacy analysis exclusively on Halo’s copyright claims. The district court offered two reasons for its opinion: first, because Canada, Hong Kong, and the United States are all signatories to the Berne Convention, Halo is “entitled to all of the protections offered by Canadian [copyright] law to Canadian citizens;” and second, that “the United States has recognized the potential of applying the copyright laws of other nations and perhaps Canada could do likewise.” The circuit court reprimanded the lower court for basing its conclusions without substantial evidence and instead on speculation. In reversing and remanding the order, the circuit court held:

It is particularly important that a forum non conveniens movant demonstrate the adequacy of an alternative forum when the dispute implicates the enforcement of intellectual property rights. The policies underlying United States copyright, patent, and trademark laws would be defeated if a domestic forum to adjudicate the rights they convey was denied without a sufficient showing of the adequacy of the alternative foreign jurisdiction. It is largely for this reason that district courts have routinely denied motions to dismiss on forum non conveniens grounds when United States intellectual property rights form the crux of the dispute.

John Austin, Austin Law Firm, Raleigh, NC


March 31, 2016

Court Finds Personal Jurisdiction Based on “Suit-Related” Activities in Forum State

The Federal Circuit Court of Appeals upheld a defendant’s challenge to specific personal jurisdiction, finding the defendant’s activities within the forum state, were “suit-related” and had a “substantial connection” to the litigation.

In two appeals in the Federal District Court from the District of Delaware involving suits between Acorda Therapeutics, Inc., and Mylan Pharmaceuticals, Inc. (Nos. 2015–1456, 2015–1460; decided March 18, 2016), Mylan appealed from two orders, from two separate district court judges who held that the court had personal jurisdiction over generic drug manufacturer Mylan Pharmaceuticals.

In both cases, the plaintiffs brought the actions under 35 U.S.C. § 271(e)(2), alleging that their patents cover drugs that Mylan has sought permission from the Food and Drug Administration (FDA) to manufacture and market. In both cases, Mylan moved to dismiss on the ground that Delaware could not exercise personal jurisdiction—either general or specific personal jurisdiction—over Mylan. The district court judges separately and independently denied the motions. Although they reached different conclusions about whether Delaware could exercise general personal jurisdiction over Mylan based on consent given in registering to do business in the state, they both concluded that Delaware could exercise specific personal jurisdiction, based on Mylan's suit-related contacts with Delaware. On interlocutory appeal, the circuit court affirmed, holding that Mylan is subject to specific personal jurisdiction in these cases. We do not address the issue of general personal jurisdiction.

The parties did not dispute the material facts as to jurisdiction: Mylan is incorporated in West Virginia and has its principal place of business there. Mylan submitted its ANDAs to the FDA in Maryland, and it did much if not all of its preparation of its ANDA filings in West Virginia. Regarding the notices required by 21 U.S.C. § 355(j)(2)(B)(iii), Mylan sent notices, among other places,  its client’s subsidiary in Delaware.  Mylan has registered to do business and appointed an agent to accept service in Delaware. And, of particular importance, Mylan intended to direct sales of its drugs into Delaware, among other places, once it has the requested FDA approval to market them. After considering this evidence, both judges concluded that Delaware had sufficient contacts related to the subject of these cases that it could exercise specific personal jurisdiction over Mylan.

The circuit court focused on the fact that Mylan had taken “the costly, significant step of applying to the FDA for approval to engage in future activities—including the marketing of its generic drugs—that will be purposefully directed at Delaware”  (and, it is undisputed, elsewhere). If Mylan had already begun its deliberate marketing of these drugs in Delaware, the court said personal jurisdiction would be clear. But standing alone, these acts would not have conveyed personal jurisdiction. However, in this case the acts directly related to the claims aand damages alleged in the complaint. “In our view, the minimum-contacts standard is satisfied by the particular actions Mylan has already taken—its ANDA filings—for the purpose of engaging in that injury-causing and allegedly wrongful marketing conduct in Delaware.” Consequently, Mylan’s conduct is “suit-related” and has a “substantial connection” with Delaware.

John Austin, Austin Law Firm, Raleigh, NC


March 31, 2016

District Court Exceeds Authority by Remanding Case Due to Procedural Defect

In the recent case of Doe v. Blair, Case No. 15-1211 (4th Cir., issued March 21, 2016), the Fourth Circuit held that a district court exceed its authority when it remanded a case, sua sponte, based on a procedural defect in the removal.

In this case, the plaintiffs filed a complaint in West Virginia state court against Matt Blair and Res-Care, Inc. Res-Care removed the case to federal court. It did so asserting subject matter jurisdiction on the basis of the diversity of citizenship; however, it failed to allege the state in which it had its principal place of business. The plaintiffs did not oppose the removal.

Then, 191 days after Res-Care removed the case, the district court sua sponte remanded the case to state court because “federal diversity jurisdiction has not been established.” The court determined that “[a]bsent some assertion from either party as to ResCare's principal place of business, th[e] Court lacks jurisdiction.” Defendants filed a motion under Federal Rules of Civil Procedure 59 and 60, alleging Res-Care's principal place of business is Louisville, Kentucky. The plaintiffs did not oppose the motion. The district court denied the motion and Res-Care and Blair timely appealed.

First, the court determined whether it had jurisdiction to review the district court's remand order. Title 28 U.S.C. § 1447(d) provides that remand orders are generally “not reviewable on appeal or otherwise.” When a district court remands a case sua sponte for lack of subject matter jurisdiction under 28 U.S.C. § 1447(c), the order is not reviewable. However, a remand based on a procedural defect (other than lack of subject matter jurisdiction) can be reviewed. Here, the court determined that the defendant’s failure was procedural, instead of a lack of subject matter jurisdiction, citing three other jurisdictions that came to the same conclusion. In re Allstate Ins. Co., 8 F.3d 219, 221 (5th Cir.1993); Corp. Mgmt. Advisors, Inc. v. Artjen Complexus, Inc., 561 F.3d 1294, 1296 (11th Cir. 2009); Harmon v. OKI Sys., 115 F.3d 477, 479 (7th Cir.1997).

The court’s conclusion that it had jurisdiction to review the district court’s remand order forecasted the outcome in this case. The court held simply, “[T]he fact that we can review the district court's remand order because it fell outside the scope of § 1447(c) leads to the conclusion that the order fell outside the district court's authority to order remand.” The court held that “Section 1447(c) effectively assigns to the parties the responsibility of policing non-jurisdictional questions regarding the propriety of removal, permitting them to assert a procedural defect or to waive the defect if they choose to remain in the federal forum.” Therefore, the court held the district court exceeded its statutory authority when it remanded a case sua sponte based on a procedural defect absent a motion from a party.

John Austin, Austin Law Firm, Raleigh, NC


February 29, 2016

Change in Plaintiffs’ Status Leads to Dismissal Based on Mootness

The wise practitioner should never take subject matter jurisdiction for granted. The Fourth Circuit Court of Appeals dismissed two claims of political committee plaintiffs as “moot” when the plaintiffs would no longer be subject to the law they were challenging. The court also refused to apply an exception to the “capable of repetition, yet evading review” doctrine requirement of “same complaining party” announced in a dissent from recently deceased Justice Antonin Scalia.

In a case challenging the constitutionality of the Federal Election Campaign Act of 1971 (FEC), three political committees sued the Federal Election Commission, alleging disparate treatment under the law. Plaintiffs Stop Reckless Economic Instability Caused by Democrats (Stop PAC), Tea Party Leadership Fund (TPLF), and Alexandria Republican City Committee (ARCC), filed their initial complaint against the FECA on April 14, 2014. In a later amended complaint, Stop PAC’s first count alleged that that donation limit, as applied to Stop PAC, “violates the equal protection component of the Fifth Amendment’s Due Process Clause because FECA applies a higher limit to multicandidate political committees (or “MPCs”) than it does to political committees that have not completed the waiting period but have satisfied the other MPC criteria.” In its second count, Stop PAC alleged “the waiting period, as applied to Stop PAC, violates its First Amendment rights to free speech and free association.” The claims of ARCC and the TPLF are contained in the third and final count and were dismissed on other reasons.

On September 19, 2014, before the district court ruled on the plaintiffs’ joinder motion to add a fourth plaintiff, the parties filed cross-motions for summary judgment. In support of its motion, the FEC, in addition to arguing that none of the challenged limitations were unconstitutional, asserted that the district court lacked subject-matter jurisdiction over Stop PAC's claims because it became an MPC on September 11, 2014, and was thus no longer subject to the limit that it challenged and never would be again. While the parties waited for the district court to rule on their summary judgment motions, the FEC filed a notice with the district court, informing the district court that on February 11, 2015, American Future, the party seeking joinder, had also become an MPC. As with the Stop PAC case, the FEC argued “American Future, as an MPC, was no longer affected by the limit it was challenging and never would be again.”

Although the district court dismissed all claims, the Fourth Circuit admonished the lower court for not conducting a subject matter jurisdiction inquiry prior to leveling a ruling on summary judgment. Citing Arizonans for Official English v. Arizona, 520 U.S. 43, 67 (1997), the court said, “To qualify as a case fit for federal-court adjudication, an actual controversy must be extant at all stages of review, not merely at the time the complaint is filed.” A case is moot “when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.” Chafin v. Chafin, 133 S.Ct. 1017, 1023 (2013).

The plaintiffs urged the court to apply the “capable of repetition, yet evading review” doctrine, which demands two requirements: (1) that the challenged action was in its duration too short to be fully litigated prior to its cessation or expiration and (2) that there was a reasonable expectation that the same complaining party would be subjected to the same action again. Weinstein v. Bradford, 423 U.S. 147, 149 (1975) (per curiam).

Here, the Fourth Circuit court held that “Counts I and II became moot once Stop PAC and Intervenor American Future became MPCs, since that change in status ensured that they would never again be bound by the limit they are challenging.” As to the “capable of repetition, yet evading review” doctrine, the plaintiffs did dispute the fact that there was no longer any reasonable expectation that they would be subject to the same limit again. Rather, relying primarily on Justice Scalia's dissent in Honig v. Doe, 484 U.S. 305, 335–36 (1988), they maintain that in election-related cases, the same-complaining-party element need not be satisfied. In the dissent, Justice Scalia cited abortion and election cases in which he argued the Court had “dispens[ed] with the same-party requirement” and “focus[ed] instead upon the great likelihood that the issue will recur between the defendant and the other members of the public at large.” Id.

The court rejected the argument on the basis of Scalia’s dissent. Citing a number of cases from the Supreme Court as well as various districts, the Court found a disparity of holding but refused to adopt an exception to the doctrine based on sub silencio argument.  “[W]ere we to conclude that the Supreme Court has actually sub silencio excused compliance with the rule in some election cases, we would be obligated to follow the rule that the Court has actually articulated. Moreover, the Court cited two other recent cases where the Supreme Court applied the same-complaining-plaintiff rule in election cases.

John Austin, Austin Law Firm, Raleigh, NC


February 29, 2016

Court Asks "Where's the Beef?!" for Personal Jurisdiction over Foreign Firm

Perdue Foods, LLC, the international poultry producer, has a beef with BRF, SA, an exporter of poultry meats headquartered in Brazil. It seems that BRF sells poultry using the mark "PERDIX," which Perdue alleges may be confusing with "PERDUE."

When this controversy first erupted in 2002, Perdue and BRF entered into a “Worldwide Coexistence Agreement,” whereby Perdue agreed to refrain from registering its PERDUE mark in Brazil, and BRF agreed to abandon a version of its PERDIX mark worldwide. The parties also agreed to withdraw opposition worldwide to each other's marks that complied with the agreement. The agreement also included a Maryland choice-of-law clause.

Subsequent to executing the agreement, Perdue purchased approximately 715,000 pounds of chicken from BRF; however, upon instruction by Perdue, BRF shipped the chicken from Brazil to Tanzania. Except for these two contacts, BRF had no other dealings in Maryland. Now fast forward to 2014.

In 2014, Perdue filed a complaint alleging BRF breached the Worldwide Coexistence Agreement by pursuing new applications for trademark registrations in Argentina, Morocco, São Tomé & Príncipe, and Uruguay and by refusing to abandon existing trademark registrations in Canada, China, Hong Kong, Kuwait, Lebanon, Argentina, Bolivia, Paraguay, and Uruguay. Pursuant to Fed.R.Civ.P. 12(b)(2), BRF moved to dismiss Perdue’s suit for lack of personal jurisdiction. The district court held that Perdue had failed to allege facts sufficient to establish that BRF had the requisite minimum contacts with Maryland and dismissed the case due to lack of personal jurisdiction.

In upholding the dismissal, the Fourth Circuit Court of Appeals considered whether the Maryland Court had specific jurisdiction over BRF Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985).  To determine whether specific jurisdiction lies in the forum state, the plaintiff must show each of the following prongs: (1) the extent to which the defendant purposefully availed itself of the privilege of conducting activities in the State; (2) whether the plaintiffs' claims arise out of those activities directed at the State; and (3) whether the exercise of personal jurisdiction would be constitutionally reasonable. The Fourth Circuit held that Perdue failed to establish the first prong.

Perdue alleged few facts in support of personal jurisdiction: it could only point to the agreement itself and that the agreement included a Maryland choice-of-law clause. On the other hand, BRF employs no Maryland officers or agents or owns any property in the state. BRF did not initiate the negotiations that led to the agreement, and no BRF employee traveled to Maryland in connection with the agreement. BRF conducts no business in Maryland: it does not import any products into or sell or ship products to any clients in Maryland, and it has no contract with any entity in Maryland other than Perdue. BRF’s alleged breach of the agreement occurred not in Maryland, but instead abroad. In fact, the agreement itself does not even require Perdue to perform any contractual duties in Maryland.

Perdue urged the court to rely on Burger King, where the court held that, although the defendant lacked other contacts with the forum state, a single contract provided a sufficient basis for personal jurisdiction. Id. at 478–80. However, the court distinguished that contract as a franchise agreement between the Burger King Corporation, headquartered in Florida, and a franchisee citizen of Michigan that contemplated a 20-year relationship with numerous contacts in the forum state.

In contrast, the agreement in this case, according to the court, did not establish a series of continuing contacts between BRF and Perdue in Maryland. It did not require “any ongoing collaboration or promise frequent interactions between these two companies.” Instead, the court found it “expressly prevents BRF from doing business in Maryland with a version of its trademark.” In dismissing Perdue’s attempt to equate its case to Burger King with “a handful of intermittent chicken orders as evidence of a collaborative, long-term relationship,” the court noted that these contacts “are far more attenuated than the frequent and important contacts that the Burger King franchise agreement contemplated.”

While recognizing that “physical presence in the forum state is not essential,” the court held “to justify the exercise of personal jurisdiction over a non-resident defendant, the defendant's contacts with the forum state must have been so substantial that they amount to a surrogate for presence and thus render the exercise of sovereignty just” (citing Consulting Eng'rs Corp. v. Geometric Ltd., 561 F.3d 273, 277–78 (4th Cir. 2009).

John Austin, Austin Law Firm, Raleigh, NC


February 2, 2016

Flint Residents File Suits Regarding Contaminated Water

Residents of Flint, Michigan, have already filed two lawsuits in Michigan state court and one in federal court. The two state court actions take aim at Governor Rick Snyder and the Michigan Department of Health and Human Services (MDHHS). One seeks an injunction over planned water shutoffs as well as economic damages for past and future water bills. The second case is a class action against the MDHHS, seeking financial damages for the Flint’s “man-made catastrophe.”

Both state suites alleged MDHSS had knowledge of the lead contamination but failed to act on that knowledge. The class action suit alleges that MDHHS failed to act for more than 10 months, despite having knowledge that children in Flint continued to suffer lead exposures of acceptable norms. Discovery in the lawsuits seek city and state emails regarding Flint’s lead contamination, according to the Detroit News. Although Governor Snyder has released some emails that are not covered by the state public records law, the emails have been heavily redacted.

The federal suit focuses on the role of Michigan's Department of Environmental Quality (DEQ). Along with the governor, it names former DEQ director Daniel Wyant and former chief of the Office of Drinking Water Liane Shekter Smith. In asserting a violation of the plaintiffs’ constitutional rights, the complaint alleges DEQ “took safe drinking water from them and replaced it with what they knew to be a highly toxic alternative solely for fiscal purposes.”

Without a doubt, additional plaintiffs (and defendants) will enter the fray as the underlying facts are discovered.

John Austin, Austin Law Firm, Raleigh, NC


February 2, 2016

Colorado Supreme Court Reaffirms "Strict Privity" Rule in Attorney Malpractice Case

In a case in which dissatisfied beneficiaries of a testator’s estate have standing to bring legal malpractice or contract claims against the attorney who drafted the testator’s estate planning documents, the Colorado Supreme Court rejected an appellant’s request to abandon what has come to be called the “strict privity rule” and to allow plaintiffs to bring malpractice and contract claims against the attorneys retained by their father to prepare his estate plan. In Baker v. Wood, Ris & Hames, 2016 CO 5 (issued January 19,  2016), the Colorado Supreme Court reaffirmed that where non-clients are concerned, an attorney’s liability is generally limited to the narrow set of circumstances in which the attorney has committed fraud or a malicious or tortious act, including negligent misrepresentation.

The court declined to adopt the so-called California Test, which was first articulated in Lucas v. Hamm, 364 P.2d 685, 687 (Cal. 1961). In Lucas, the California Supreme Court established the following approach for determining whether a beneficiary of an estate is entitled to bring an action against a testator’s attorney for negligence in the drafting of a will:

[T]he determination whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury, and the policy of preventing future harm.

The Colorado court held, “We further believe that the strict privity rule strikes the appropriate balance between the important interests of the clients, on the one hand, and non-clients claiming to be injured by an attorney’s conduct, on the other.”

John Austin, Austin Law Firm, Raleigh, NC


December 30, 2015

Photography and Intellectual Property: No Monkey Business

When a photographer takes a picture, he or she has used an item of his or her own personal property to create a piece of art, and that art becomes the intellectual property of the photographer who captured the photograph. But to whom does a photograph belong when a monkey uses a photographer’s camera to take a self-portrait?

District Judge William Orrick decided Wednesday that the answer to this obscure question, for now, must be “not the monkey.” Judge Orrick found the question before him after the People for the Ethical Treatment of Animals (PETA) filed suit against David Slater, the owner of the camera that snapped the photo. PETA sued in pursuit of the rights of the Indonesian black-crested macaque (which the plaintiff named Naruto) to the possession and overall use of the self-portrait that it took with Slater’s camera.

The debate surrounding the photo consists largely of three opinions: PETA’s argument that the picture belongs to Naruto, the monkey, because it was the one who took the image; Slater’s own argument that he manufactured the situation allowing for the shot and owned the instruments used in the picture’s production makes it his property; and the third view that because the picture was taken by a monkey, it should rightfully belong to no one.

Slater is reportedly in possession of a British copyright stating that the picture belongs to him and is rightfully his own intellectual property. However, the U.S. Copyright Office has weighed in on the matter by issuing express guidelines that it will not register any intellectual property materials created by nonhuman parties, such as pictures taken by monkeys or paintings crafted by elephants. Copyright protections simply do not exist for such pieces.

Judge Orrick settled the matter for now in an opinion stating that the field of application for the Copyright Act exclusively encompasses only intellectual property created by humans. Taking a chance to comment on the nonsensical nature of a monkey suing for its intellectual property rights, Orrick commented during trial that he was, “not the one to weigh in on this [issue],” and that “[t]his is an issue for Congress and the President” to decide.

—Brandon Wheeler, Austin Law Firm, Raleigh, NC


December 30, 2015

Spoliation Results in Judge Setting Aside $21.5 Million Judgment

A verdict awarding an Illinois man damages of $21.5 million for injuries he allegedly sustained while on a worldwide cruise was set aside by a U.S. District Judge Barbara Rothstein of Seattle, Washington, after a hearing on the matter revealed information suggesting that the plaintiff, Mr. James Hausman, had committed spoliation in regard to a multitude of e-mails that would have been harmful to his case. Shortly after the two-week trial ended in Hausman’s favor, his former personal assistant, Ms. Amy Mizeur, came forward alleging that she had personal knowledge of acts taken and/or delegated by Mr. Hausman to delete e-mails with information contradictory to that which was testified to at trial. The e-mails came from multiple accounts, one of which was entirely undisclosed during discovery proceedings.

After a hearing in which both Ms. Mizeur and Mr. Hausman were heard, Judge Rothstein elected to set aside the judgment and ordered a retrial on Mr. Hausman’s case. Despite Mr. Hausman’s contentions that the e-mails were deleted during the normal course of business and in no effort to conceal information from the court, the evidence presented by Ms. Mizeur weighed more heavily in the mind of Judge Rothstein. Ms. Mizeur testified that she was instructed to delete e-mails by Mr. Hausman and produced for the court copies of salvaged e-mails completely opposite of what Mr. Hausman had led the court to believe.

Judge Rothstein said her ruling was based on a belief that Mr. Hausman had “substantially interfered with defendants’ ability to fully and fairly prepare for and proceed to trial.” While it remains to be seen what the final outcome will be, it appears that the court’s extreme detest for bad faith by parties in the course of trial has prevailed in this case.

“As a witness, he came across evasive and untrustworthy,” the judge wrote. “He appeared to weigh each answer, not for its truthfulness, but to assess whether it would damage his case. Mr. Hausman also seemed to capitalize on his alleged brain injury when it was convenient for him. He was confused or claimed memory loss when confronted with a question or exhibit that appeared to undermine his claims, yet was animated and full or information when his testimony supported his case.”

Our rules governing discovery and evidence are derived from a long-standing belief in its ability to set aside things that are unreliable and irrelevant so that only material, truthful information is heard and, ultimately, the truth can be discovered.  These ideals are manifested most clearly in many aspects of the Federal Rules of Evidence by the careful balancing of how certain, inherently unreliable and/or privileged information is excluded.  Oftentimes, considerations of public policy also factor into what is allowed to be heard in the court of law, as evidence such as the existence of liability insurance or subsequent remedial measures may discourage actions that we would normatively encourage the public to pursue. 

However, the concept of ensuring that the truth be found and that the ideals “justice” are realized remains paramount in regard to the exclusion of evidence, and evidence that would otherwise be excluded is allowed to come in during a trial when immoral measures are taken by the opposing party to shape the trial in his/her own favor.  If, for example, a witness elects to perjure his or herself on the stand, or a party procures the absence of a witness to keep that witness from offering testimony at trial, such actions serve as bypass to the rules of exclusion and evidence that would otherwise be excluded may come in to negate efforts made in bad faith and ensure that the truth is indeed realized.

These concerns span more than the admissibility of evidence and, as in here, can even result in the outcome of an entire trial being set aside. 

—Brandon Wheeler, Austin Law Firm, Raleigh, NC


December 30, 2015

E-Discovery Becomes Big Business for Firms

While the law itself can be very stubborn when it comes to change, the tools and strategies associated with the everyday practice of law grow and shift with each new generation. One relatively recent change in how litigation is carried out has come in the form of electronic discovery (e-discovery), and change is one of exponential proportions. As society becomes more and more technologically minded, it only seems natural that the compilation, composition, and transfer of documents for and through discovery procedures would move in the same direction.

With any form of professional service, the trend is that a specialized practitioner can provide a particular service at a more efficient cost and a higher quality than a practitioner focusing on a wider array of matters, or one that would simply categorize the specified service within the lower echelon of necessary business tasks. E-discovery is no different. Technology is steadily increasing and evolving, while the law remains very much the same. Lawyers, on the broadest scale, may be disinclined to learn the techniques necessary to effectively practice e-discovery in an ever-changing arena, resulting in the emergence of a niche profession of individuals specializing in the efficient production of e-discovery. This seems to be the case, as more and more e-discovery businesses have formed, and it is becoming a more popular choice for firms and their clients to farm out the collection of electronic discovery.

The silver lining here is that this trend frees up the time and work associated with an attorney’s duties in ensuring that discovery goes as required, in some respects. However, the lining surrounds a dark cloud in the form of financial losses. With the steady rise of e-discovery comes an increase in its associated finances, which the International Data Corporation has recently stated to be a $10 billion industry worldwide. E-discovery services by specialized professionals make up about 80 percent of that industry, with the development of software making up the other 20 percent.

The problem? All profits to be had in this booming industry may be lost to those in the legal profession as e-discovery consulting services begin to take up the traffic. The question now is whether this is a change for the better, and the answer probably depends on whether you think the time spent conducting discovery is worth the money earned, or if that time can now be spent on more productive tasks.

—Brandon Wheeler, Austin Law Firm, Raleigh, NC


December 30, 2015

Eight of the Best Apps for Litigators

As technology has grown and developed, its use in the practice of law has expanded. Today, there are hundreds of apps that can assist attorneys throughout the litigation process. A range of tasks, such as document management and trial preparation, can be accomplished with these apps on tablets or smartphones. Below is a sampling of apps that can help attorneys in their practice.

Chrome Remote Desktop (Price: Free): This mobile remote desktop app gives access to desktop files anytime an internet connection is available on an Apple or Android device. It is necessary that the app be installed on both the desktop and the device that will be accessing it.

DocketLaw (Price: free with subscription option): DocketLaw enables the user to calculate event dates and deadlines based on the Federal Rules of Civil Procedure.

Fastcase (Price: Free): Available for Apple and Android devices, this app is a free alternative to the apps provided by Lexis Nexis and WestLaw. With Fastcase, users can search cases and statutes from the federal government and all 50 states. These searches can be done by citation, keyword, or Boolean search. Also, while not a complete replacement for shepardizing, the app includes an “authority check” feature that will list later citing cases and it will put a red flag by cases to indicate negative treatment.

GoodReader (Price: $4.99): This app provides users with the ability to read, annotate, and sign PDF documents on Apple devices. It also enables the management of PDF pages by adding, rearranging, deleting, rotating, and extracting individual pages, as well as splitting or merging files. Through this app, saved documents can be mailed, stored in a folder, or uploaded to a cloud storage service such as Google Drive.

iJuror (Price: $14.99 for iPad, $9.99 for Android): iJuror allows the user to record juror information, responses to questions, and rank jurors. With this app, users can color code a juror based on their assessment of the juror’s favorability (e.g., green for “like,” red for “dislike,” and yellow for “uncertain”). iJuror also includes a “drag” feature that keeps track of which jurors have been removed and will “seat” the final jury once it has been impaneled. Also, an optional “iJuror Stickies” add-on (for $4.99) provides the function of electronic post-it notes for individual jurors.

OneNote (Price: Free): OneNote is an app for Apple, Windows, and Android devices that lets users type or handwrite notes, record audio or video, save pictures, and import documents. This information can be organized into “notebooks” within the app, and the app can search files for anything that has been saved. The app also allows the sharing of notebooks with others for viewing or editing.

Timeline 3D (Price: $9.99): While not originally designed for courtrooms, this app, available for Apple devices, can be a valuable tool for creating a visual representation of events in cases with disputed dates or complicated chronologies. This is done by entering events and adding any supporting media into the app, and then it automatically generates a visual timeline. This timeline can be exported to PowerPoint or similar programs and can be shared by email as well.

TrialPad (Price: $129.99): TrialPad organizes and presents evidence from an iPad. Its features include editing and showing video clips, creating side-by-side document comparisons, adding exhibit stickers to documents, and highlighting or redacting documents. With TrialPad, users can annotate or zoom in on evidence during an argument, and if a particular exhibit stands out to the judge or jury, it can be designated as a key document, allowing it to be quickly recalled at a later time during the trial.

David E. Moore, Jesse L. Noa, and Sarah H. Morrissey, Potter Anderson & Corroon LLP, Wilmington, DE. Note: This posting should not be construed as an ABA or Section of Litigation endorsement of the products listed.


November 30, 2015

Changes to Federal Rules of Civil Procedure Effective This Month

Starting December 1, 2015, amendments to the Federal Rules of Civil Procedure will have significant impact on civil practice in federal courts. In revising rule 26, instead of the low threshold of “relevance,” the amended rule will now focus on proportionality. Now a party is entitled to discovery that is relevant to claims and defenses and “proportional to the needs of the case.” The rule limits the scope of discovery based upon the importance of a particular contraverted issue in the case, the amount in controversy, the parties’ access to information, their resources, and whether the expense of the proposed discovery outweighs the likely benefit.

Amendments to rules 4 and 16 also expedite service (by dismissing cases where the complaint has not been served in 90 days) and the initial scheduling conference (by requiring a scheduling order 30 days earlier) respectively. Rule 16 also states that the court may order that the parties request a court conference prior to filing a motion to compel, which should save additional time and expense.

To bring Section of Litigation members up to speed on the new changes, the Section, in conjunction with the Duke Law Center for Judicial Studies, has developed a Rules Amendments Roadshow, entitled: “Hello ‘Proportionality,’ Goodbye ‘Reasonably Calculated’: Reinventing Case Management and Discovery Under the 2015 Civil Rules Amendments.” The roadshow is a 13-city program designed to highlight the new rules. The roadshow began in November 2015, and has the following remaining schedule:


8:30 a.m.

St. Louis, MO (E.D. Mo. Courthouse)


8:30 a.m.

Atlanta, GA (N.D. Ga. Courthouse)


2:00 p.m.

Chicago, IL (N.D. Ill. Courthouse)


3:00 p.m.

Washington, D.C. (D.D.C. Courthouse)


8:30 a.m.

Los Angeles, CA (C.D. Ca. Courthouse)


8:30 a.m.

San Francisco, CA (N.D. Ca. Courthouse)


8:30 a.m.

Phoenix, AZ (D. Ariz. Courthouse)


8:30 a.m.

Denver, CO


8:30 a.m.

Dallas, TX (N.D. Tx. Courthouse)


8:30 a.m.

Miami, FL

The cost for Section members is only $60 while the cost for the general public is $100. Learn more and register now!

John Austin, Austin Law Firm, Raleigh, NC


November 23, 2015

What New Challenges Do Millennial Lawyers Face?

According to a recent survey conducted for the ABA’s Bar Leader, 75 percent of Generation Y (Gen Y) law school graduates felt that their law schools failed to provide with much practical training and the “nuts and bolts” of the practice of law. More telling, 66 percent of those surveyed had “significant clinical experience” while in law school yet they felt under-prepared to practice.

Gen Y lawyers want to learn small practice, marketing, client development, collaboration, and networking skills. The North Carolina Bar Association started special discussion forums for young lawyers looking for help with start-up, marketing, and technology issues. “They need to hear real-life experiences on what to do or what not to do,” says Michael Wells Sr., the YLD Chair of the NCBA in the Bar Leader. “We help them take advantage of the collective wisdom of lawyers across the state.”

Young lawyers are faced with challenges, including information overload, work and life balance, poor cross-generational communication and understanding , keeping up with technology, especially the cloud; finding career guidance; and understanding the benefits of social media.

The Bar Association of San Francisco provides a Mind the Gap program. This is to help its young members with training, pro bono work experience, mentorship, and debt reduction. In response to the growing number of young lawyers who come out law school without the proper business skills needed in the marketplace, as well as the dearth of jobs at larger firms, the bar plans to offer training to those young lawyers opening their own practice.

John Austin, Austin Law Firm, Raleigh, NC


November 23, 2015

Small-Claims Actions Provide Experience to New Lawyers

According to the U.S. Department of Justice, 97 percent of all cases are settled before trial. A question then arises: Where do attorneys find civil trial experience? The answer may be right at the courthouse steps: the small-claims court.

While experienced attorneys may dismiss small-claims cases as a waste of their resources and their expertise, a small-claims case may provide an inexperienced lawyer a good way to increase valuable courtroom experience while providing a service that many clients may not be able to afford otherwise.

In a small-claims action, the lawyer will handle the case from start to finish. Opposed to large cases with large firms where an associate may only work on a small portion of the case or may never see the beginning or the end of the litigation, the small-claims action affords a lawyer a condensed case on a short timeline with all the aspects of evidence, trial techniques, persuasion, and a ruling. Because the amount of the controversy is low, these cases typically tend to be tried.

New attorneys who open their own practices can find small-claims actions fertile soil for new clients. Although an exclusive small-claims practice is not a viable business model, small claims can be a means of earning some extra money while earning courtroom experience. Lawyers should charge a small but reasonable amount to prepare a client for trial, which could, with sizeable caseload, build to significant earnings each month.

In most jurisdictions, small-claims actions are appealable de novo to a trial court. Assuming the client is satisfied with your work in small claims, the new trial could provide additional work (and again additional experience).

Before entering the realm of small-claims actions, lawyers should be aware that tardiness to a small-claims case could result in dismissal or default. Conversely, lawyers should be ready to expect long delays, perhaps hours, before the case is called. The efficient lawyer will bring additional work to complete while waiting.

Finally, case and client selection is crucial. Some cases may have inconsequential damages or may involve an inordinate amount of work. Also clients should be fully apprised that your time in their case will be limited. No attorney needs an overly demanding client for a small flat fee.

Small-claims court provides an excellent venue for new attorneys to practice their skills with real courtroom experience. The practice will build the lawyers’ skills and may build practices and client bases.

John Austin, Austin Law Firm, Raleigh, NC


October 30, 2015

5 Tips for Engaging Opening Statements

The opening statement provides the first impression of the case and shapes the impressions of the jury. An opening statement forecasts to the jury the evidence they will see and hear during the trial—it allows the jury to know what to expect and to be able to understand the evidence when it is presented. The opening statement should not contain argument; rather, it should be a factual statement that lasts from 10 to 30 minutes.

Present Your Theme of the Case
Lawyers should have a one-sentence theme for their cases. Emotionally based themes often serve as anchors, creating impressions for the jury that linger until the time the verdict is decided. Themes keep the jury’s attention and help them organize information. Relying on a theme and hearing a story that incorporates the theme helps make the information enjoyable and easier to comprehend. Lawyers should engage their audience during trial, and effective themes combined with engaging stories can fight juror boredom. Lawyers have a better chance later of persuading the jury if the jury likes their opening statements. For example, a defense attorney may focus on a self-defense based theme: “This case involves a traumatic experience where a young lady lost her life and a young man is struggling to keep his.”

Present your theme immediately and catch the jury’s attention. For example:

This is a case about a man who has been harassing, stalking, and threatening my client, Kelly Sanders, after she ended a romantic relationship with him. Ms. Sanders lived with the Respondent for about three years, and they share a 2-year-old child together. Ms. Sanders came into the relationship with another child who is now 6 years old. They separated a few weeks ago because the Respondent began drinking much more than usual, threatening her life, insulting her, and encouraging the kids to join him. That is why we are here today, ladies and gentlemen of the jury. My name is Jack Jill, and I represent Ms. Sanders. In this trial, we ask you to grant her request for a Civil Protection Order.

Tell a Story
Themes and storytelling are what make opening statements engaging and effective. The story of the case tells the jury what happened chronologically either from the viewpoint of the plaintiff or defendant. When giving an opening statement, the lawyer should place her side in the best possible light and tell a story that will make the jury want to decide in her favor. Jurors often base their decisions about the case on the impression received during the opening statement.

Lawyers can connect with the jury by telling an enjoyable story. These stories are persuasive and become embedded in a juror’s mind when they make sense, are stated in plain language, and have a beginning, middle, and an end. For example, tell the jury how they will learn about the plaintiff’s lack of knowledge. Tell them about how the plaintiff was not at the restaurant when the incident occurred. Explain that the evidence will support the employee’s testimony and the jury will see that the employee was acting professionally as stated in the employment contract. Tell them they will hear from the other employees who were at the restaurant on the night in question and they will put the actions in context. Present the people and the evidence in story form and the jury will be sitting on the edge of their seats in eager anticipation.

In addition, metaphors and sensory language help engage jurors. Vivid words like rowdy or steamy and words that describe activity, such as dancing or singing, activate the senses and make the listeners feel as though they were actually participating in the experience. A jury will become more engaged if they are induced by language to become a participant in the story.

Assemble the Facts Persuasively
Present the facts in the order that will advance your conclusion. If you want to convey that the person fell after the milk had spilled, present the events by describing the puddle of milk on the floor, and follow immediately with the slip and fall. Communicate the connection or lack thereof between the spill and the fall, with the timing and sequence of your presentation. Let the facts speak for themselves.

Bad Facts
When should you let the bad facts out? Do you talk about them in the opening if they are likely to come out at trial? There are several options.

You can address bad facts in your opening to “cut the sting” before they are raised by opposing counsel. You can present all of the issues in your opening for credibility purposes. If the jury believes that you are willing to expose the problems with your case, you may seem more credible.

The other way to address the harmful information is to wait until the information comes out. If a lawyer exposes the harmful information, it may taint the case and draw greater attention to the information. The trial will provide the lawyer with the opportunity to address any charges that the other side will make.

A lawyer must essentially make a determination on a case-by-case basis as to whether to introduce the bad facts. If plaintiff’s counsel introduces the negative information, it may not be necessary for defense counsel to bring it up again in her opening statement.

Make a Connection with the Jury—Do Not Read Your Opening
Do not read your opening statement. Instead, practice several times and speak directly to the jury. Making eye contact with individual jurors shows that the lawyer believes in her case and is familiar with the events at issue. An outline of the case is more permissible if referred to sparingly, but leave the script at home. Also, be friendly. Do not be afraid to smile.

Conclude your opening by telling the jury what you would like them to do at the end of the case: “I just ask that you please keep an open mind about this case until you hear all of the evidence. I also ask that you return a verdict of not guilty for the defendant, Officer Dally. Thank you for your attention.”

Conclude confidently with a clear message and be sure that the jury understands your position about the facts of the case and their role for the remainder of the trial.

Opening Statement Checklist

  • State your theme immediately in one sentence.

  • Tell the story of the case without argument.

  • Persuasively order your facts in a sequence that supports your theme.

  • Decide whether to address the bad facts in the opening or not.

  • Do not read your opening statement. Practice, practice, practice.

  • Bring an outline, if necessary.

  • Ask the jury to rule in your favor.

Keywords: litigation, trial practice, tips for young lawyers, opening statements

—Farrah Champagne, The Law Office of Farrah Champagne, Catonsville, MD


October 30, 2015

Indiana Court "Benchslaps" Appellate Counsel

In what can only be described “benchslap,” the Indiana Court of Appeals in Brazier v. Maple Lane Apartments I offered a harsh rebuke of mistakes committed by appellate counsel. After receiving a first attempt of an appellate brief, the court allowed appellant’s counsel to file a “corrected Brief.” Appellant counsel then filed a “corrected Brief” that angered the court more than the first. The court admonished:

Counsel’s failures to follow even the simplest rules regarding the content of an appellate brief have made our review of this case unnecessarily difficult. We commend Maple Lane for largely refraining from comment on the quality of the brief and endeavoring to respond to the legal arguments. Were it within our purview to do so, we would order Brazier's counsel to verify to this court her attendance at a continuing legal education program regarding appellate practice before submitting any further briefs to this court. Although it would be within our purview to order counsel to show cause why she should not be held in contempt for willful violation of this court's order granting leave to amend the brief to correct technical errors only and specifically prohibiting any substantive changes, counsel does not appear to frequently represent clients on appeal nor has she been previously cited for poor briefing practices. Therefore, we have chosen not to take such extreme measures at this juncture. Nonetheless, we admonish counsel in the strongest possible terms to carefully review the appellate rules and fully conform her briefs to their requirements in the future.

Here, the takeaway is to know the rules prior to entering a court. Not only is it important to your client’s welfare, but you are under an ethical obligation to represent your client competently. It certainly is not good for counsel’s reputation.

John Austin, Austin Law Firm, Raleigh, NC


October 27, 2015

7 Tips for Developing a Civil Relationship with Opposing Counsel

Do as adversaries do in law, strive mightily, but eat and drink as friends.”
—William Shakespeare, The Taming of the Shrew

Some lawyers believe they must be unreasonable and extremely adversarial to opposing counsel to provide a high-quality service to their clients. This sometimes includes yelling, engaging in personal attacks, lying, and hiding pertinent information. Lawyers who practice these tactics often believe that these behaviors will help them gain an advantage in the case.

The reality is, however, that when lawyers get along with one another during litigation, both their clients and the courts reap the benefits. When lawyers are civil and professional, the process of litigation runs smoother and makes positive differences in scheduling conferences, settlement negotiations, discovery, hearings, and trials. High levels of professionalism between lawyers also positively affect court administrators, magistrates, and judges.

The following are some tips for building and maintaining civil relationships with opposing counsel.

1. Start Off With an Introductory Phone Call
Pick up the phone. It is not difficult to get off to a good start with opposing counsel. A simple introductory phone call to opposing counsel can promote good relations. Setting a positive tone will encourage cooperation and promote trust. Be polite and courteous during the phone call while assessing the lawyer’s personality and demeanor. Try to learn about where she stands in the case and attempt to find commonalities. In addition, try to call before sending an email because tone and other nuances can often be misinterpreted through email. An email or text message conversation can quickly turn hostile, whereas a phone call can help lawyers convey delight, confusion, and cooperation through tone and other verbal cues.

2. Establish Rapport Early
Have lunch. Get to know opposing counsel by taking them to coffee or lunch. When talking on the phone, break the ice before getting right down to business. Making a personal connection will benefit everyone involved both directly and indirectly. Make an attempt to understand opposing counsel’s difficulties and explain your challenges with the case. When another attorney understands you and your client’s situation, your client will feel more comfortable.

3. Be as Cooperative as Possible
Cooperation counts. There is nothing wrong with working amicably on a settlement agreement. If you have drafted a document, offer to send it to opposing counsel and let them know that you appreciate and will consider their additions or suggestions. During the process of responding to complaints, be flexible if the other lawyer needs a few extra days. Extend professional courtesies as long as your client is not negatively affected. Make a commitment to be cooperative even if the other party is not easy to get along with.

4. Be Polite
Play nice. Common courtesy goes a long way. When making a request for a favor, say “please.” If granted the request be appreciative thank the opposing counsel. Remember, lawyers are not obligated to provide favors, so it’s important to show gratitude for any received. Favors can include foregoing a subpoena with arrangements for a client’s employer to appear or allowing extra time for an answer to a complaint. When you show gratitude, people tend to want to help you more.

5. Be Reliable and Punctual
Show up early or on time. If you have an issue with being able to deliver on a promise, let the other attorney know in advance. Be willing to discuss options and preferences for issues that may arise. If you make a mistake, apologize and try to make up for it. Complete documents promptly and try to accommodate requests for responses in a timely fashion. There is no need to keep someone waiting if you have completed the task. Just send it.

6. Don’t Play Dirty Tricks
Be ethical. Remember, reputation is everything. Lying or hiding information will hurt your case and your client. Violations of ethics rules, which require that a lawyer be truthful, will anger opposing counsel and the judge. If lawyers are not candid, they risk losing respect and even their law license.

7. Don’t Start Fights—Know Your Triggers
Know yourself. What do you do when opposing counsel starts a fight with you? Stop and think. Some lawyers bully others as a tactic to get the other lawyer off track. Learning what your trigger points are will help you avoid harmful confrontations. Rather than responding in kind to cheap shots or other misbehavior, say, “Let’s agree to disagree,” or “Since we can’t seem to make headway and come to a resolution, let’s see what the judge has to say.”

During litigation, apply the Golden Rule. Treat opposing counsel the way you would like to be treated. By following that simple rule in combination with the specific ways to apply it listed above, you will develop and maintain a respectable professional reputation.

Keywords: trial practice, tips for young lawyers, opposing counsel, Rules of Ethics

—Farrah Champagne, The Law Office of Farrah Champagne, Catonsville, MD


October 27, 2015

Million-Dollar Default Judgment in California Set Aside on Due Process Grounds

In Behm v. Clear View Technologies, issued October 8, 2015, the California Court of Appeals upheld a lower court’s ruling, vacating a default judgment for $1,264,668.83, including $924,000 in punitive damages, because the court had failed to provide the defendant sufficient due process. Due process requires that when a plaintiff moves for discovery terminating sanctions and seeks punitive damages under California law, a statement of the damages must be served a reasonable time before obtaining those sanctions. Notice must be sufficient to afford a defendant the opportunity to fairly appraise the full amount of damages sought by the time he or she needs to respond and oppose the motion.

In this case, Behm filed suit against Clear View alleging fraud and seeking “compensatory damages of no less than $200,000, plus interest, or in such additional amount as is proven at trial.” When the defendant’s attorney failed to comply with numerous discovery requests, the plaintiff moved to compel, and the court ordered the defendant to produce and awarded monetary sanctions. When the defendant’s counsel failed to comply with the court’s order, the court struck the defendant’s answer and entered default against it. The plaintiff then moved for a default judgment against Clear View, requesting $1,264,668.83 in damages, which comprised of $200,000 in compensatory damages, $108,000 in emotional distress damages and lost wages, $32,487.67 in prejudgment interest, $924,000 in punitive damages, and $181.16 in court fees, which the court granted a few weeks later. The defendant timely filed a motion to set aside the default and the default judgment. The defendant argued that the award of damages to Behm violated its due process rights, because it was not adequately informed of the amount of compensatory and punitive damages that Behm would seek. The court granted the defendant’s motion in part, vacating the default judgment on the basis that the award of compensatory and punitive damages in excess of the amount pleaded in the complaint violated Clear View’s due process rights.

 Under California law, due process requires that defendants be provided with sufficient notice of the relief a plaintiff seeks prior to entry of a default. “‘The logic underlying this principle is simple: a defendant who has been served with a lawsuit has the right, in view of the relief which the complainant is seeking from him, to decide not to appear and defend. However, a defendant is not in a position to make such a decision if he or she has not been given full notice.’” Van Sickle v. Gilbert, 167 Cal. App. 4th 1495, 1520 (2011). “To effectuate this due process principle, California law provides that where a plaintiff seeks to recover money or damages, the amount sought generally must be stated in the complaint.” Id. Although the court relied on specific statutory authority for vacating the judgment, the court also found support for due process violations in the Fourteenth Amendment of the Federal Constitution and the California Constitution contain due process guarantees.

Although Behm can be read to be applicable only to California because of the statutory requirement of providing notice of the damages, the court also relied on the United States Constitution. Litigators faced with the task of setting aside a default judgment may argue due process considerations if the judgment exceeds the demand in the complaint. On the other hand, to avoid having a phenomenal judgment set aside, sagacious litigators should provide notice of the exact damages sought in their motions for default judgment.

John Austin, Austin Law Firm, Raleigh, NC


September 30, 2015

Appellate Jurisdiction in Ninth Circuit Becomes More Flexible

On September 11, 2015, the Ninth Circuit expanded what might be called “a flexibility test” in determining the finality of orders coming from bankruptcy courts. In a nod to both Chief Justice John Roberts and the recently passed Yogi Berra, the Ninth Circuit Court of Appeals quoted (and relied on) the SCOTUS opinion in Bullard v. Blue Hills Bank (In re Bullard), 135 S. Ct. 1686, 1693 (2015), in which Chief Justice Roberts quoted Berra: “It ain’t over till it’s over.”

The Landmark Fence case began in 2003 as a putative class action case involving wage-and-hour claims in California. In 2007, a California state court certified the class action status of former and current employees. Before the case could go to trial, Landmark Fence filed bankruptcy. After a six-day trial on the merits of wage claims, the bankruptcy court found that Landmark had committed several violations of California wage laws and awarded the plaintiff class approximately $15 million in unpaid wages, interest, and penalties. The court concluded that California law required Landmark to pay class members a prevailing wage for the time they spent traveling to and from public worksites fabricating parts. Landmark appealed the decision to the district court pursuant to 28 U.S.C. § 158(a)(1).

The district court affirmed the bankruptcy court’s ruling regarding the time spent; however, the district court held that the bankruptcy court applied an incorrect legal standard for assessing whether Landmark was required to pay prevailing wages for the time class members spent traveling to and from public worksites. The district court remanded the case for “additional fact finding” on “[t]he terms of Landmark’s public works contracts and the practical conditions of the jobsite” to determine what damages might be justified. This time, the plaintiffs appealed to the Ninth Circuit, alleging that the district court’s ruling on travel time was erroneous and asking us to reinstate the bankruptcy court’s damages award. Landmark then cross-appealed the district court’s determination.

 The district court exercised appellate jurisdiction over the bankruptcy court. The Ninth Circuit first had to determine if it had jurisdiction over this appeal and cross-appeal. Under 28 U.S.C. § 148(d)(1), the Circuit Court could only hear the case if the district court’s order vacating the bankruptcy court’s judgment and remanding for further fact-finding was a “final decision[], judgment[], order[], [or] decree[].” In short, the Court held it did not and dismissed the appeal for lack of jurisdiction.

In most cases, an order from a district court is not final until it “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 373–74 (1981) (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 467 (1978)). Because the district court remanded the case for further “fact-finding”, the order does not fit this standard. However, because the Ninth Circuit has held “that the fluid and sometimes chaotic nature of bankruptcy proceedings necessitates a degree of jurisdictional flexibility,” citing Cannon v. Hawaii Corp. (In re Hawaii Corp.), 796 F.2d 1139, 1141 (9th Cir. 1986). Ninth Circuit courts, “in assessing jurisdiction over an appeal from a non-final order in the bankruptcy context,” consider four factors:

(1) the requirement to avoid piecemeal litigation
(2) judicial efficiency
(3) the interest in preserving the bankruptcy court’s role as the finder of fact
(4) whether delaying review would cause either party irreparable harm

It should be noted that the Ninth Circuit candidly admitted that “this flexible test is arguably in conflict with the Supreme Court’s decision in Connecticut National Bank v. Germain, 503 U.S. 249, 253 (1992).” However, no Ninth Circuit case since then has shown “that our earlier precedent must be overturned.” The Ninth Circuit seized upon language in the Supreme Court’s recent opinion in In re Bullard that acknowledged that the rules of finality “are different in bankruptcy,” but the opinion cautioned against exercising jurisdiction over appeals in which the “parties’ rights and obligations remain unsettled.” 135 S. Ct. at 1692–93.  After weighing the four factors, the court concluded that it did not have jurisdiction over the case as it was not a final order.

Litigators practicing in bankruptcy court within the Ninth Circuit should be aware (and perhaps wary) of this flexibility test. Litigators in other circuits may want to urge their circuit courts to adopt (or reject) such a test.

John Austin, Austin Law Firm, Raleigh, NC


August 31, 2015

FL Judge Hits Plaintiff with Costs for Failure to Properly Review and Classify Documents

In a case that will serve as a warning to those who rely on third-party vendors to review and classify documents in discovery, Florida Judge Jonathan Goodman recently hit a plaintiff with a big bill for the opposing party’s attorney fees because the plaintiff utilized a third-party vendor that overdesignated thousands of documents as “highly confidential” in what the judge ruled was an abuse of the discovery process. Procaps, S.A. and Patheon, Inc. are each soft-gel manufacturers involved in an ongoing anti-trust suit. Procaps, S.A. v. Patheon, Inc., No. 12-24356-CIV-GOODMAN [CONSENT CASE], 2015 U.S. Dist. LEXIS 94010 at *5 (S.D. Fla. Jul. 20, 2015). Id. at *6.  To protect the respective parties’ business interests, Procaps and Patheon each agreed to a stipulated confidentiality order relating to discovery separating material into “confidential” material that could be produced to a client during a deposition and “highly confidential” material that, although produced to opposing counsel, could not be produced to a client during a deposition. Id. at 6–7. 

During the course of litigation, Procaps marked over 95 percent of the documents it produced from a forensic analysis of electronically stored information as “highly confidential.” Id. at *3.  Patheon filed a motion to compel re-review and re-designation of the documents, arguing that Procaps had abused the designation of “highly confidential” and requested costs of its review of the documents from Procaps and permission for its client to review all documents, regardless of designation, for impending depositions if Procaps did not undertake re-review. Id.  Procaps admitted that it had overdesignated documents as being “highly confidential” but blamed the issue on an outside vendor it used for document review. Id. at *24–25.

The court granted Patheon’s motion and held that none of the documents would be considered “highly confidential” unless Procaps undertook a re-review and re-designation of the documents within 10 calendar days from the date of the order. Id. at *28.  The court found Procaps’s attempt to place the blame on a third-party vendor as unpersuasive and further ordered Procaps to pay $25,000 in attorney fees for Patheon’s costs in reviewing documents and preparing the motion. Id. at *34.

John H. "Jack" Miller, Irelan McDaniel, Houston, TX


August 31, 2015

Advisory Committee on Evidence Rules Proposes Abrogation of "Ancient Documents" Exception to the Hearsay Rule

Trial attorneys may soon have one fewer rule under which to seek admission of a host of old evidence.  The Advisory Committee on Evidence Rules recently issued a memorandum seeking approval of a proposed amendment to the Federal Rules of Evidence that would abrogate the ancient documents exception to the hearsay rule.  Report of the Advisory Committee on Evidence Rules, May 7, 2015, excerpt from Preliminary Draft of Proposed Amendments to the Federal Rules of Bankruptcy Procedure and the Federal Rules of Evidence at pg. 17, available at http://www.uscourts.gov/rules-policies/proposed-amendments-published-public-comment.

The “ancient documents” exception to the hearsay rule permitted statements from a document that is at least 20 years old and whose authenticity is established to be admitted. Fed. R. Evid. 803(16). The Committee noted that the rule was originally intended to permit ancient documents in real property-related disputes to ease proof of title. Report of the Advisory Committee at pg. 17.  The rule was subsequently expanded to all kinds of cases in which the rule might be relevant. Id. at pg. 18. 

The Committee recommended abrogation of the rule over other alternatives because of a potential tidal wave of electronically stored information that would soon turn 20 years old might soon make invocation of the ancient documents exception far more commonplace. Id. at 17. The Committee concluded that reliable ancient documents could still be authenticated and admitted under other existing rules of evidence and that abrogation of the ancient document exception would not prevent or hinder admission of such evidence. Id. at 18.

Public comment on the proposed rule abrogating the ancient documents exception ends February 16, 2016.

John H. "Jack" Miller, Irelan McDaniel, Houston, TX


August 28, 2015

First Circuit Addresses West v. Bell Helicopter Textron, Inc.

In an appeal before the First Circuit Court of Appeals, West v. Bell Helicopter Textron Inc., 14-2168 (Decided August 21, 2015), the court addressed whether a plaintiff may be awarded a new trial for “misconduct” during discovery under F.R.C.P. 60(b)(3). The plaintiffs filed the motion pursuant to F.R.C.P Rule 60(b)(3) because it asserts that the defendants failed to disclose their knowledge of the helicopter engine’s propensity to fail due to a phenomenon as false overspeed solenoid activation (FOSSA).

A few months after a defense verdict came back on September 30, 2013, Rolls-Royce issued a “commercial engine bulletin” that could be applied to the type of engine in West's Bell 407 helicopter. The engine bulletin identified a new “adapter” that the defendants had developed that addressed the FOSSA problem and which should be installed on Bell 407s. The adapter “modifies the overspeed protection system to reduce the likelihood of a false overspeed activation,” and its “[t]echnical aspects are FAA approved.” Bell then sent an “alert service bulletin” for its 407s, also addressing the FOSSA issue.

West argued “that the fix described in the Bulletins demonstrated that a ‘circuit design error’ existed at the time of West's accident and which rendered Bell 407s ‘susceptible to FOSSA.’ ” West then argued “that the technical nature of the information in the Bulletins, combined with the detailed fixes described therein and government approval of them, ‘compels’ an inference that one or more of the defendants knew about the defect but failed to disclose it during discovery or at trial.” In sum, “the passage of time between the end of trial and the issuance of the [Bulletins] is simply too short for the problem to have been discovered, a solution found and tested, and the [Bulletins] issued.”

In denying the motion, the district court made the assumption that “West could prove, by clear and convincing evidence, that the defendants culpably withheld relevant documents.” However, after making the assumption that defendants had engaged in discovery misconduct, the district court held that West may not prevail unless he “also proves by a preponderance of the evidence that this misconduct ‘substantially interfered with [his] ability fully and fairly to prepare for, and proceed at, trial.’” Apparently the district court skipped and assumed the first prong of the test as it would require a multi-part showing. However, in making that assumption of misconduct, the court failed to then shift the burden to the non-disclosing defendants.

Under case law in the First Circuit, the district court should have gone on to presume the defendants' misconduct substantially interfered with West's trial preparation. “Rather than shift the burden to the defendants to prove by clear and convincing evidence that the withheld material was inconsequential . . ., the judge erroneously placed the burden on West to show that disclosure of the information would likely have made a difference in the trial's outcome.”

The court then took an admonishing view of defendants’ reason for non-disclosure, which they assert the information was part of investigation and was not final. The court flatly rejected this reason for non-disclosure and remanded the case back to the district court so that it may properly shift the burden of showing the material “inconsequential” on the defendants.

John Austin, Austin Law Firm, Raleigh, NC


May 6, 2015

Supreme Court Upholds Ban on Personal Solicitation for Campaign Funds by Judicial Candidates

Canon 7C of Florida’s Code of Judicial Conduct prohibits candidates for judicial office from personally soliciting campaign funds, although judicial candidates may establish committees to do so. Williams-Yulee v. The Florida Bar, __ U.S. __, 2015 WL 1913912 (2015).

A referee appointed by the Florida Bar found that Lannell Williams-Yulee violated Canon 7C by personally soliciting campaign funds while running for judicial office. The referee recommended that Williams-Yulee be publicly reprimanded and ordered to pay costs in the amount of $1,860. Although Williams-Yulee argued that she could not be disciplined because the First Amendment protected a judicial candidate’s right to solicit campaign funds, the Florida Supreme Court adopted the referee’s recommendations. Id. at *6. The case was appealed to the U.S. Supreme Court.

Because it was undisputed that Canon 7C restricted Williams-Yulee’s speech on the basis of its content, the Supreme Court determined that Florida could restrict a judicial candidate’s speech only if the restriction was narrowly tailored to serve a compelling interest. Id. at *7–8.

The Supreme Court found that Canon 7C advanced Florida’s compelling interest in preserving public confidence in the integrity of the judiciary, and that it did so through means narrowly tailored to avoid unnecessarily abridging speech. Id. at * 8.

The Supreme Court reasoned that “States may regulate judicial elections differently than they regulate political elections, because the role of judge differs from the role of politicians.” Id. at * 9. “[I]t is the regrettable but unavoidable appearance that judges who personally ask for money may diminish their integrity.” Id. at * 10.

Moreover, the Supreme Court found that Canon 7C was narrowly tailored to preserve Florida’s interest in preserving the integrity of judicial elections. “Florida has concluded that all personal solicitations by judicial candidates create a public appearance that undermines confidence in the integrity of the judiciary; banning all personal solicitations by judicial candidates is narrowly tailored to address that concern.” Id. at *14.  

Jim Shelson, Phelps Dunbar, LLP, Jackson, MS


May 6, 2015

Punitive Damages Award of $20 Million Vacated in Tobacco Case

Judith Berger, a smoker of cigarettes, developed congestive obstructive pulmonary disease, and sued Philip Morris USA, Inc. (PMUSA) in the United States District Court for the Middle District of Florida. The jury found in Berger’s favor and awarded her $6.25 million in compensatory damages (with a 40 percent comparative fault finding), and $20 million in punitive damages based on Berger’s fraud and conspiracy claims. PMUSA filed a motion for judgment as a matter of law on Berger’s fraud and conspiracy claims. Berger v. Philip Morris USA, Inc., __ F.Supp.3d __, 2015 WL 1865757 at * 1 (M.D. Fla.).

The dispositive issue before the court was whether Berger “produced sufficient evidence to sustain the jury’s finding that she relied on the tobacco companies’ conspiratorially engendered fraudulent misrepresentations and misleading failure to disclose known and material facts about the addictive nature and health hazards of smoking.” Id. at * 6.

Crucial to the court’s decision was its determination that Berger was required to prove individualized reliance on the fraudulent misconduct. Although the court found that the evidence “amply confirmed the tobacco companies decades-long fraudulent conduct,” “that evidence alone without an additional link to Mrs. Berger’s individual detrimental reliance, is not enough to sustain her fraud and conspiracy claims.” Id. at *8. Berger was required to prove that “PMUSA’s conduct helped lure her to begin and/or continue smoking despite the jeopardy into which she placed herself.” Id.  

The court found that Berger did not sufficiently prove detrimental reliance because the evidence did not create a link between awareness of the fraudulent conduct and acting on that conduct. “Berger expressly attributed her decision to begin smoking to peer pressure alone. Furthermore, her decisions to use filtered and ‘light’ cigarettes and to switch from Marlboro to Parliaments were solely a matter of personal preference based on comfort…and the less harsh taste she found in those cigarettes. Indeed, Mrs. Berger’s decision to smoke ‘light’ cigarettes was not attributable to healthfulness…. This is strong—indeed, conclusive—evidence that the disinformation campaign played no role in her decisions as they related to the addictive nature and health effects of smoking.” Id. at *11.

The court vacated the punitive damages award and conditionally granted a new trial. Id. *13.

Jim Shelson, Phelps Dunbar, LLP, Jackson, MS


March 26, 2015

Palestinian Authority Held Liable for Acts of Terrorism under U.S. Anti-Terrorism Act

A federal jury held the Palestinian Authority and the Palestine Liberation Organization liable for supporting acts of terrorism in a decision on February 23, 2015. In Sokolow v. Palestine Liberation Organization, brought under the Anti-Terrorism Act, the jury returned a $218.5 million verdict for the deaths and injuries of American citizens in six acts of terrorism in Israel, including bombings and shootings, between 2002 and 2004. The attacks killed 33 people and injured an additional 450 people.  Under the act, those damages could triple to $655 million. 

The Palestinian Authority responded that the litigation was an attempt by “anti-peace factions in Israel” to “advance their narrow and political ideological agenda.” The deputy minister of information for the Palestinian Authority, Dr. Mahmoud Khalifa, dismissed the charges as “baseless” and stated they would appeal the verdict.

At trial, the plaintiffs showed that the defendants supported acts of terrorism by employing individuals convicted of terrorist acts, paying salaries of terrorists imprisoned in Israel, and making payments to the families of suicide bombers. The jury also found that many of the individuals convicted of terrorism were acting “within the scope” of their employment with the Palestinian Authority and were even promoted in rank. The evidence at trial included an internal 2002 Palestinian Authority report praising acts of terrorism, records providing fuel and arms for acts of terrorism, statements by Palestinian government officials praising terrorist attacks, and employment records of known terrorists.

The verdict carries important implications and consequences amid continued peace talks between Israel, the Palestinian Territories, and the United States. The Palestinian Authority today is generally seen as vastly different from the government led by Yasser Arafat, who controlled the Palestinian Authority during the years covered in the Sokolow lawsuit. President Mahmoud Abbas is credited with ending the intifada during which these attacks took place and with eliminating the entities that organized these terrorist attacks. 

In 2009 during a similar lawsuit, Gilmore v. Palestinian Interim Self-Government Authority, the Department of Justice issued a statement: “The United States supports just compensation for victims of terrorism from those responsible for their losses and has encouraged all parties to resolve these cases to their mutual benefit. At the same time, the United States remains concerned about the potentially significant impact that these default cases may have on the defendants’ financial and political viability.”

The plaintiffs lawyers suggested freezing the Palestinian Authority’s bank accounts, requiring them to turn over real estate and other property, and have begun withholding more than $100 million in tax revenue which it collects on behalf of the Palestinian Authority.

This case is not the first to award damages to victims of terrorism. The Anti-Terrorism Act, which allows U.S. citizens who are victims of international terrorism to recover damages in U.S. courts, was used in a previous case last fall in which a court found Arab Bank liable for supporting acts of terrorism by Hamas. The Palestinian Authority and PLO also faced similar liability in two previous anti-terrorism cases, Ungar v. Palestinian Authority in 2000, and Knox v. Palestine Liberation Organization in 2003, each of which rendered judgments of over $100 million.

Haseeb S. Fatmi, Littleton Joyce Ughetta Park & Kelly LLP, New York City, NY


Alabama Federal Judge Finds Same-Sex Marriage Ban Unconstitutional

Cari Searcy and Kimberly McKeand, a same-sex couple, were married in California, but later moved to Alabama. Searcy v. Strange, __ F.Supp.3d __, 2015 WL 328728 (S.D. Ala.).  Searcy sought to adopt McKeand’s biological son under a provision of Alabama’s adoption code that permits a person to adopt her “spouse’s child.”  Id. at *1. Alabama law does not recognize Searcy’s and McKeand’s marriage because Alabama defines marriage “as a unique relationship between a man and a woman.” Id. at *1–2. Because Searcy does not qualify as a “spouse” for adoption purposes, her adoption petition was denied in Alabama state court. Id. at *2.

Searcy and McKeand challenged the constitutionality of Alabama's Sanctity of Marriage Amendment and the Alabama Marriage Protection Act in Alabama federal district court. The federal court found that marriage is a fundamental right protected by the Constitution, and so Alabama was required to show "that its laws restricting the fundamental right to marry serve a compelling state interest." Id. at *4.

The federal court found that Alabama failed to make this showing. Alabama "fails to demonstrate any rational, much less compelling, link between its prohibition and non-recognition of same-sex marriage and its goal of having more children raised in the biological family structure the state wishes to promote." Id. at *4. The court further found that “[t]hose children currently being raised by same-sex parents in Alabama are just as worthy of protection and recognition by the State as are the children being raised by opposite-sex parents.” Id. at *5. 

The federal court noted that the U.S. Supreme Court recently granted certiorari to review these two questions: “(1) Does the 14th Amendment require a state to license a marriage between two people of the same sex? and (2) Does the 14th Amendment require a state to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-state?” Id. at n. 1.

Jim Shelson, Phelps Dunbar, LLP, Jackson, MS


February 9, 2015

Zoloft MDL Expert Excluded

The plaintiffs in an MDL proceeding in Pennsylvania federal district court offered Dr. Anick Bėrard, an epidemiologist, as an expert regarding general causation. In re Zoloft, __ F.Supp.3d __, 2015 WL 314149 (E.D. Pa.). In June 2014, the court excluded Dr. Bėrard’s testimony for several reasons, “including her inattention to the principles of replication and statistical significance, her use of certain principles and methods without demonstrating either that they are recognized by her scientific community or that they should otherwise be considered scientifically valid, . . . and Dr. Bėrard’s failure to reconcile her currently expressed opinions with her prior opinions and her published, peer-reviewed research.” Id. at *1.

The plaintiffs filed a motion for reconsideration, contending the court erred by excluding “a general causation expert for drawing conclusions about causation in the absence of replicated, statistically significant associations.” Id. at *1.

The court denied the plaintiffs’ motion because the court did not hold that there is any such requirement. “Rather, the court set forth its factual findings that epidemiologists, such as Dr. Bėrard, who are examining potential teratogens generally will not draw causal conclusions in the absence of replicated statistically significant findings and application of the Bradford-Hill criteria.” Id. at *2. The Bradford-Hill criteria are well-established causation criteria used by epidemiologists.” Id. at *2.

The court considered statistical significance to be one important indicator of reliable methodology, and then assessed Dr. Bėrard’s methodology under Daubert. Id. at *2. The court concluded that Dr. Bėrard’s methodology did not satisfy Daubert and excluded her opinions.   

Jim Shelson, Phelps Dunbar, LLP, Jackson, MS


January 15, 2015

Jury Sides with Apple in iPod Antitrust Class Action

After only three hours of deliberations, an eight-person federal jury unanimously sided with Apple on December 15, 2014, finding that Apple did not violate antitrust laws in a $351 million class action lawsuit.  

The nine-year-old lawsuit involved iPods sold between September 2006 and March 2009 affecting a class of approximately 8 million iPod customers. The plaintiffs alleged that the then-new iTunes 7.0 update used DRM (digital rights management) to create a monopoly in the digital music market by forcing iTunes customers into buying iPods rather than cheaper alternatives and preventing iPod users from purchasing music from other Internet music companies. The jury found that the updates constituted “genuine product improvements” that did not violate the Sherman Act.

The plaintiffs’ antitrust expert, Professor Roger Noll of Stanford University, testified that the iTunes updates blocked music obtained from RealNetworks from working on Apple devices and prevented music obtained through iTunes from working on non-Apple devices. This created a “walled garden” that forced iPod customers to use only iPods and prevented them from purchasing other products. The alleged monopoly allowed Apple to charge more for its devices, and consumers paid 7.45 percent more ($16.32) per device, and resellers paid 2.38 percent more ($4.13) per device, according to Noll.

Apple defended the software updates by stating that they included security enhancements to prevent people from hacking Apple software and that iTunes hacks subjected Apple to contractual violations with music companies that would cause music labels to withhold their music from Apple users. The updates also included video enhancements allowing iPod users to play movies and television on their devices, improved video resolution, and added the ability to view album cover art. 

The background of the lawsuit began with a dispute between Apple and RealNetworks, an Internet media streaming service that created a workaround to allow songs purchased from RealNetworks to be played on Apple devices and other media players.  In 2004, Apple issued a statement accusing RealNetworks of hacking Apple software and warned that future iTunes updates may prevent songs purchased from RealNetworks from being played on Apple devices.

At trial, the two weeks of testimony included statements from Apple marketing vice president Phil Schiller DRM chief Augustin Farrugia, Internet software vice president Eddy Cue, former security engineer Rod Schultz, and video testimony from former Apple CEO Steve Jobs taken shortly before his death. While Apple executives stood by the updates as genuine product improvements, Schultz testified that the updates were specifically designed to stifle competitors. Jobs stated that the updates “might screw up the Real technology anyway, as collateral damage.”

The plaintiffs’ case was not without procedural speed bumps. The court found that two of the named plaintiffs did not buy iPods in the relevant period and therefore did not adequately represent the class. The court appointed Barbara Bennett as the new named plaintiff just hours before the case was handed to the jury.

Over the weekend before the verdict, the plaintiffs’ attorneys tried to add a new argument to their case: that Apple colluded with online retailer Amazon to block other companies’ products.  U.S. District Court Judge Yvonne Gonzalez Rogers threw out the argument saying, “You know, lawyers, you overreach, and by overreaching, I don’t trust you.” 

This verdict essentially found that Apple’s use of DRM technology did not violate antitrust laws. This decision will likely not have any impact on the music or software businesses because a significant number of companies have stopped using DRM.

Haseeb S. Fatmi, Littleton Joyce Ughetta Park & Kelly LLP, New York City, NY


January 5, 2015

Juror Not Disqualified By Mistaken Belief as to the Law

In Marshall v. City of Chicago, 762 F.3d 573 (7th Cir. 2014), the plaintiff sought to exclude a potential juror and to expand the size of the jury during voir dire.

In April 2010, Chicago police officers executed a search warrant on a residence and discovered a shotgun in one of the bedrooms. Earlier, Kenneth Marshall, who was present in the residence, had suggested that the bedroom was his. Marshall was a convicted felon, and the officers took him into custody, believing that he unlawfully constructively possessed a firearm.

Marshall sued the City of Chicago and the officers involved in his arrest alleging that the arrest was not supported by probable cause. A jury returned a verdict in favor of the defendants and Marshall appealed.

On appeal, Marshall argued that the district court abused its discretion by denying his motion to excuse a prospective juror for cause on the grounds that she held a prior belief concerning the possession of firearms by convicted felons.

Marshall also argued that the district court erred by refusing to agree to an alteration of the parties’ agreed upon jury selection procedures to ensure that the jury would include jurors of a certain race.

The court of appeals observed that a fair trial requires an impartial trial with a jury capable and willing to decide the case solely on the evidence before it.

Nevertheless, prospective jurors regularly come to voir dire carrying preconceptions about what the law does and does not require.  A preconception about the law cannot warrant per se disqualification, because if it did, it would be hard to find qualified jurors.

The court of appeals has recommended a two-step process to assist district judges in determining which prior beliefs warrant for-cause dismissal and which do not. First, the court must determine whether a prospective juror manifests a prior belief that is both material and “contestable,” meaning a rational person could question its accuracy.

If a prior belief is not material to the issues the juror will be asked to decide, then the existence of that belief prejudices neither party and the juror need not be excused. If a prior belief is uncontestable—again, meaning unquestionably correct—then there simply is no "bias."

Where a prior belief is both material and contestable, the court must determine whether the juror is capable of suspending that belief for the duration of the trial.

The requirement is satisfied by a juror’s affirmation, that she can set aside any opinion she might hold, relinquish her prior beliefs, or lay aside her biases or her prejudicial personal experiences.

Here, the prospective juror’s alleged bias was immaterial because it had no bearing on the issues to be tried. The prospective juror was under the impression that her son’s parole conditions prohibited any person from possessing a firearm in the house. Yet the case was not about Marshall’s parole conditions but rather constructive possession.

Even if the prospective juror had carried some misguided preconceptions about the truly relevant issues, she repeatedly affirmed that it would not affect her judgment in the case.

Marshall’s second argument was unusual but ultimately rejected. The parties had agreed to try the case to a jury of eight, which would be selected from a venire of 20. The order in which veniremen were called for voir dire was randomly assigned, with no knowledge of race, by the clerk’s office. None of the 12 veniremen whom were not excused for cause were black.

Marshall’s counsel noticed that three of the six remaining veniremen were also black, and moved the court to expand the size of the jury to 10 in the hope of getting one of them on the jury.

A litigant, however, has no right to a jury that contains members of his race or which fairly represents a cross-section of the community.

Marshall did have a right to a jury venire composed of a fair cross-section of the community, but he was not challenging the composition of the venire. He also had a right to see that no state actor intentionally excluded any person from the petit jury on account of their race but did not claim that any state actor did so.

Marshall openly asked the court to be "race conscious" in jury selection—specifically, to expand the size of the jury beyond what the parties originally agreed for the express purpose of increasing the chances that Marshall would try his case to at least one black juror. But the Constitution prohibits all forms of purposeful racial discrimination in the selection of jurors.

Michael R. Lied, Howard & Howard Attorneys PLLC, Peoria, IL


November 17, 2014

Teeth-Whitening Case Could Significantly Impact States’ Ability to Regulate Professions

On October 14th, the Supreme Court heard oral arguments in North Carolina State Board of Dental Examiners v. Federal Trade Commission, a case arriving from the Fourth Circuit, which will require the Court to decide if a state agency composed of private industry participants is exempt from federal antitrust laws pursuant to the “state action doctrine” where the state did not actively supervise the agency’s actions. 

The Regulation of Teeth Whitening in North Carolina
The North Carolina Board of Dental Examiners (the Dental Board) is designated a state agency by North Carolina statute, and except for one consumer member, it is composed of private dentists and dental hygienists—none of whom are appointed by the governor or elected by the public. North Carolina imbued the Dental Board with authority to enforce North Carolina’s Dental Practice Act, which governs the licensing of dentists and their professional conduct. Like other state occupational statutes, the North Carolina statute permits only licensed dentists to practice dentistry. 

The case originated when the Dental Board received complaints from dentists contending that non-licensed persons were offering teeth-whitening services and were therefore violating the Dental Practice Act. This was of particular concern to the dentists because the “non-dentists” were charging less for teeth-whitening services, and of course, they were also performing these services without any formal dental training and education. The board responded by ordering the non-dentists to stop whitening teeth—an order which was not subject to review by another state official or body.

The FTC responded by filing suit against the board alleging that their actions violated the Sherman Act because they excluded non-dentists from the market for teeth-whitening services and the dentists who sat on the board stood to gain from this exclusionary conduct. The FTC alleged, and the Fourth Circuit agreed, that the board’s actions were not protected by the state action doctrine because North Carolina did not “actively supervise” the board’s actions—the second prong of the Supreme Court’s test used to determine whether private action warrants antitrust immunity. The board argued in response that because it is a bona fide agency, another part of the state government need not actively supervise its actions in order to qualify for antitrust immunity.   

The State Action Doctrine
Since Parker v. Brown in 1943, the Supreme Court has exempted state action from federal antitrust scrutiny because of states’ sovereign power to regulate their own economies—a power which the Sherman Act did not expressly restrain.  317 U.S. 341 (1943).  The Supreme Court later extended that principle, known as the “state action doctrine,” to state-authorized private action so long as the challenged conduct satisfied a two-prong test: (1) the state must have clearly articulated an anti-competitive policy that justified the action; and (2) the state “actively supervised” the implementation of that policy.  After the Supreme Court adopted this test, it held that municipalities’ actions are exempt under the state action doctrine so long as the first prong is met.  The second prong—active supervision—is not required because municipalities are presumed to act in the public interest.  Thus, the question in the current case before the Supreme Court is whether the Dental Board is akin to a municipality and therefore exempt from federal antitrust laws without active state supervision.

Potential Impact
According to a recent article by Professors Aaron Edlin and Rebecca Haw, which argues against exempting state boards from antitrust scrutiny, professional licensing boards comprised of private industry members are pervasive throughout the United States and are now responsible for regulating a broad swath of professions, including less obvious regulatory targets such as floral designers, fortune tellers, hair braiders, and eyebrow threaders.  As a result, any decision in the FTC’s favor will likely alter significantly how states organize and oversee professional licensing boards and restrict state agencies’ ability to take unilateral, anti-competitive action. 

—Jeremy T. Brown, Milby PLLC, Dallas, TX


November 17, 2014

Parents Can Be Held Liable for Children's Defamatory Social Media Posts

A Georgia appellate court ruled recently that a minor’s parents could be held liable for the defamatory content their child posted on Facebook when they failed to take any action to remove the content after learning of its existence. Boston v. Athearn, No. A14A0971 (Ga. Ct. Ap. Oct. 10, 2014). The case arose when the Athearns’ son and a friend created a fake Facebook profile page of a female student at their school. The two boys posted a doctored profile picture of their classmate that made her look obese and added information to the unauthorized page, including racist viewpoints and a homosexual orientation. Id. at 3. The boys  also caused the account  to post status updates and comments on others’ Facebook pages—some of which were sexually graphic, racist, or otherwise offensive—and falsely stated that the student took mental health medication and illegal drugs. Id

The girl’s parents soon reported the incident to their son’s principal.  When the principal confronted the two boys, they admitted they had created the page and the content attributed to it. The principal then alerted the Athearns, who disciplined their son by forbidding him from seeing his friends after school for a week. Almost a year later, the girl’s parents filed suit against the Athearns alleging that the content constituted libel for which the Athearns were jointly responsible. Soon after, Facebook officials deactivated the account. 

The Athearns successfully moved for summary judgment in the trial court. On appeal, the girl’s parents argued that there were questions of material fact as to whether the Athearns, as parents, were negligent in failing to compel their son to remove the page once they learned of its existence. The Athearns argued that they could not be held liable for their son’s actions because they had no reason to anticipate that he would engage in the conduct until after they received notice from the school. In the court’s view, this missed the point: “While it may be true that [the student] was harmed, and the tort of defamation had accrued, when even one person viewed the false and offensive postings, it does not follow that the Athearns’ parental duty of reasonable supervision ended with the first publication.” Id. at 11–12. 

During the 11 months between being alerted to the page and its deactivation, the Athearns “made no attempt to view the unauthorized page, and they took no action to determine the content of the false, profane, and ethnically offensive information that [their son] was charged with electronically distributing.” Id. at 5. They also did not tell their son to delete the page and made no attempt to determine whether the content could be corrected, deleted, or retracted. Id. Because libelous content can continue to cause harm when it is viewed by additional members of the public after original publication, the court concluded that a reasonable jury could find that the Athearns failed to exercise due care in supervising and controlling such activity after they learned of its existence and this failure proximately caused at least some part of the injury caused by their son’s actions. Id. at 12–13. 

The plaintiffs also argued that the Athearns could be held liable as landowners, rather than parents, for failing to remove the defamatory content. The court rejected this theory, however, because the plaintiffs “failed to identify any evidence that, apart from exercising their parental power to control [their son’s] conduct, they had the ability to remove the defamation.” Id. at 14–15.

—Jeremy T. Brown, Milby PLLC, Dallas, TX


November 6, 2014

Second Circuit Denies Intervention by Police Unions in NYC's Stop-and-Frisk Cases

The Second Circuit Court of Appeals has denied various police unions’ motions to intervene in the controversial case of Floyd, et al. v. City of New York, et al., a federal class action lawsuit filed against the New York City Police Department (NYPD) and the City of New York that challenges the NYPD's practices of racial profiling and stop-and-frisks. The appeal resolves, at least for now, the “important question of whether public-sector unions may intervene into litigation where the actual parties to that litigation, including the newly-elected mayoral administration, have agreed to settlement,” wrote the court in its October 31, 2014, decision. The police unions had asserted that they could better protect the legal interests of their members in relation to their reputations and work duties.

The class action complaint alleged that the NYPD’s and the city’s stop-and-frisk policy had led to a dramatic increase in the number of suspicion-less stop-and-frisks per year in the city, with the majority of stops in communities of color. On January 8, 2013, on the basis of empirical data showing that “blacks are likely targeted for stops based on a lesser degree of objectively founded suspicion than whites,” United States District Court Judge Shira A.Scheindlin entered a preliminary injunction on January 8, 2013, against the defendants in the companion case, Ligon v. City of New York. Judge Scheindlin found the plaintiffs had shown “a clear likelihood of proving at trial” that the NYPD had a practice of stopping residents and visitors of a privately owned residential building in the Bronx.

On August 12, 2013, after a bench trial in Floyd v. City of New York, Judge Scheindlin found that the city had violated the constitutional rights of the plaintiffs with “deliberate indifference” in regard to the actions of the NYPD and by adopting the NYPD’s “policy of indirect racial profiling by targeting racially defined groups.” Judge Scheindlin then ordered a number of reforms and remedial steps to be taken by the defendants. The defendants appealed the action.

A month later, various police unions filed notices of appeal and motions to intervene in the cases, asserting they needed to protect their members’ interest in their reputations and for collective bargaining purposes. During the appeal, the city had a municipal election, in which a new administration was elected. The city, under a new mayor, agreed to settle the matter under certain conditions, including reforms, in March 2014. On the other hand, the police unions wanted to continue the litigation; however, the court denied their motions to intervene on July 30, 2014, finding them untimely and that they did not assert a “legally protectable interest.”

In its ruling, the Second Circuit confirmed the lower court’s ruling. The Second Circuit held the police unions “knew or should have known” to assert their rights well before September 2013, given the high profile of these and other similar cases, both in the law and the media. While the Second Circuit admitted that the police unions may have defended the reputation of their members better than the city and that no one would have anticipated that the change in administration would lead to a settlement, the events here do not constitute an “unusual circumstance” mitigating in favor of finding timeliness.

In regard to the police union’s argument that it was asserting a “legally protectable interest,” the Second Circuit stated that Rule 24 requires the interest to be “cognizable,” meaning “[a]n interest that is remote from the subject matter of the proceeding, or that is contingent upon the occurrence of a sequence of events before it becomes colorable, will not satisfy the rule.” The police unions failed to show, according to the court, how the reforms would have any “practical impact” on the union and its collective bargaining rights.

John Austin, Austin Law Firm, Raleigh, NC


October 28, 2014

Texas Jury Decides in Favor of DePuy in Bellwether Hip Implant Case

DePuy’s Pinnacle hip implants are not defectively designed, according to a Texas jury. After more than 12 hours of deliberations, the jurors found in favor of Johnson & Johnson’s subsidiary DePuy on all counts, including negligence, violation of the Montana Consumer Protection Act, and strict liability based on design defect and inadequate warning. Herlihy-Paoli v. DePuy Orthopedics Inc., 3:12-cv-04975-K, U.S. District Court, Northern District of Texas.

Plaintiff Kathy Herlihy-Paoli, a Montana resident, received two Pinnacle implants in 2009.  She alleged that the implants polluted her blood with cobalt and chromium and had to be surgically removed in 2011. Ms. Herlihy-Paoli further alleged that DePuy led a misleading marketing campaign regarding the implant’s safety, even though it was well aware that the grinding of the implant’s components could lead to metal poisoning. DePuy countered that the fault lay in the surgeon’s positioning of the implants, not the devices themselves, which had been thoroughly tested and approved by the FDA before DePuy placed them in the market.

More than 6,500 lawsuits have been filed over the Pinnacle hip implants. Many experts believe the verdict does not bode well for the remaining cases. DePuy officials certainly hope so.  But they should not pop the champagne bottles yet. Last year, DePuy was sued over another line of hip implants known as ASR. Ultimately, Johnson & Johnson had to spend over $2.5 billion to settle those suits. The settlement, which resolved some 8,000 ASR suits against DePuy, was preceded by mixed jury verdicts. For instance, in March 2013, a California jury awarded a plaintiff over $8 million in damages. Only a month later, an Illinois jury rejected a similar claim. 

No two juries are alike, and the Herilhy-Paoli case could just be the first of many battles in a long and expensive war. Herlihy-Paoli’s attorney, Mark Lanier, promises nothing less.

Dejan Kezunovic, Littleton Joyce Ughetta Park & Kelly LLP, New York, NY



October 24, 2014

Second Circuit Refuses to Sanction Plaintiff's Attorney in Fosamax Case

On October 20, 2014, the Second Circuit vacated a judgment by Judge John F. Keenan of the United States District Court for the Southern District of New York, which had imposed sanctions on attorney Gary J. Douglas for his behavior during a high-profile trial. Hollon v Merck & Co., Inc., 2014 WL 5314609 (2d Cir. 2014).

At the trial, Douglas represented the plaintiff, Shirley Boles, who brought an action against Merck & Co. Inc., alleging defective design of its Fosamax drug. The attorney's conduct at issue occurred during the closing arguments, when Douglas urged the jury to "say something to Merck" for its "reprehensible and disgusting" behavior. The attorney's manner, according to Judge Keenan, was "aggressive and boisterous," even "manic," and his argument delivered while "scuttling about the well of the courtroom, oddly gesturing, singing, and laughing."

Angered by Douglas's rhetorical style, as well as by his disregard for the court's ruling that punitive damages would not be available, Judge Keenan imposed a $2,500 sanction against Douglas. The attorney appealed.

Reviewing the district court's decision under a standard "more exacting" than the ordinary abuse-of-discretion standard, the Second Circuit found that Douglas's remarks were "not self-evidently improper" and that the district court failed to make "the requisite factual findings of bad faith . . . characterized by a high degree of specificity." Id. (citing Schlaifer Nance & Co. v Estate of Warhol, 194 F3d 323, 337 (2d Cir. 1999)).

The opinion cautioned that a court must exercise restraint when sanctioning an attorney, particularly because "the trial court imposing sanctions may act as accuser, fact finder and sentencing judge all in one[.]" Id. (citing Emon v Prospect Capitol Corp., 675 F3d 138, 143 (2d Cir. 2012)).

Dejan Kezunovic, Littleton Joyce Ughetta Park & Kelly LLP, New York, NY



August 19, 2014

Supreme Court: Aereo, Inc., Infringes on Copyrighted Works

The Transmit Clause of the Copyright Act of 1976 (17 U.S.C. § 101) provides an “exclusive right” to provide certain copyrighted materials to the public.  Am. Broad. Companies, Inc. v. Aereo, Inc., 134 S. Ct. 2498, 2502-03 (2014). The Aereo case revolved around Aereo’s internet service, which streamed broadcast television content—including copyrighted content—for a fee.  Id. at 2503.

Various media entities filed for a preliminary injunction on the grounds that Aereo was violating the Copyright Act’s Transmit Clause. Id. at 2503–04. In a 6–3 decision (Justice Clarence Thomas and  Justice Samuel Alito joined Justice Antonin Scalia’s dissent) written by Justice Anthony Breyer, the Court held that “Aereo, Inc., infringes this exclusive right by selling its subscribers a technologically complex service that allows them to watch television programs over the Internet at about the same time as the programs are broadcast over the air.” Id. at 2503.

In the wake of the Supreme Court’s decision, Aereo suspended its business operations.  However, it appears Aereo is digging in for an arduous battle, as it is attempting to reestablish itself and be treated like a cable television system.

As more and more people ditch traditional media like cable and landline telephones, it will be interesting to see how the law responds to these changes.

Michael Sugarman, Law Offices of Steven Goldsobel, APC, Los Angeles, CA



August 19, 2014

Second Circuit Narrows Judicial Review of Agency Actions

The Securities and Exchange Commission and Citigroup Global Markets, Inc. sought to settle a federal fraud case with, among other things, Citigroup paying $285 million in fines. U.S.S.E.C. v. Citigroup Global Markets, Inc., 752 F.3d 285, 289 (2d Cir. 2014).  The district court rejected and criticized the settlement for a variety of reasons, noting in particular the lack of an “evidentiary basis” in the proposed settlement. Id. at 289–91. After dispensing with arguments related to jurisdiction and the scope of the settlement, the court focused on the scope of deference the district court was required to show the settlement.  Id. at 291–98.

The Second Circuit explicitly rejected “‘adequacy’” from its standard when it held

that the proper standard for reviewing a proposed consent judgment involving an enforcement agency requires that the district court determine whether the proposed consent decree is fair and reasonable, with the additional requirement that the “public interest would not be disserved,” [Citation] in the event that the consent decree includes injunctive relief. Absent a substantial basis in the record for concluding that the proposed consent decree does not meet these requirements, the district court is required to enter the order.

Id. at 294.

The court further explained what the minimum qualifications for what is “fair and reasonable” but required the “focus of the inquiry…be on ensuring the consent decree is procedurally proper” and emphasized deference to the SEC’s settlement authority.  Id. at 294–95. Moreover, the court held that while the district court on remand was allowed to seek to address certain factual issues, SEC settlements did not need to contain factual admissions to be valid, relying on concerns laid in "pragmatism."  Id. at 295–96.

Finally, the court further defined the nature of judicial review by addressing the district court’s assessment of the public’s interest in the proposed injunction, the SEC’s discretionary decisions about whom to charge and what avenues the SEC chooses to utilize in exercising its enforcement powers.  Id. at 296–98.

Michael Sugarman, Law Offices of Steven Goldsobel, APC, Los Angeles, CA



July 15, 2014

New Trial Ordered in BP Obstruction of Justice Case Due to Juror Misconduct

Judge Stanwood Duval, Jr., in the U.S. District Court for the Eastern District of Louisiana vacated Kurt Mix's guilty verdict last month after finding that a juror had introduced extrinsic evidence after the jury was deadlocked. In vacating the verdict, Judge Duval balanced "judicial aversion to, if not prohibition of, counsel's post-trial interviewing of jurors without the Court's supervision, particularly as it relates to their deliberations," and the court's duty to ensure that verdicts are rendered based on the information presented at trial.

Kurt Mix's trial began on December 2, 2013. Mix stood accused of two counts of obstruction of justice by allegedly deleting text messages relating to the BP oil spill. After the jury had been seated, the jury was instructed to inform the court if a jury member overheard remarks relating to the case. On December 17, the jury informed the court that the deliberations had reached a deadlock. On December 18, the jury rendered a verdict finding Mix guilty.

On January 2, 2014, Mix moved to vacate the verdict due to jury misconduct. The motion alleged that after the trial, Mix's counsel had interviewed the jurors to "understand where [they] had gone wrong as counsel." In the course of the interviews, Mix's counsel found that on December 18 one of the juror’s had stated that she had heard remarks in the elevator that reaffirmed her intention to find Mix guilty. Mix's counsel argued that this extrinsic information effectively deprived him of his Sixth Amendment right to a fair jury trial.

In response to the motion, Judge Duval conducted a series of individual interviews with the jurors. The court found that five jurors remembered a juror stating that she heard remarks about the case after the deadlock, and that the remarks had comforted the juror in finding Mix guilty.

Judge Duval's order primarily addressed whether, notwithstanding the apparent misconduct, Mix's motion should be denied because Mix's counsel conducted post-verdict juror interviews in violation of local rules. Mix's counsel cited two main reasons why the juror interviews were proper.

First, Mix's counsel argued that the evidence of misconduct only incidentally came to light in the course of interviewing the jurors about counsel’s performance. The court found this argument unpersuasive because Mix's counsel should have stopped the interview and informed the court as soon as the information came to light. Instead, Mix's counsel conducted its own investigation prior to filing the motion to vacate the verdict.

Second, Mix's counsel argued that the law was silent on the propriety of such juror interviews in criminal cases. The court similarly found this argument unpersuasive because "a quick Westlaw search" would show that the court prohibited such interviews, consistent with most jurisdictions.

Ultimately, the court granted Mix's motion to vacate the verdict. In finding that a juror had been exposed to extraneous information, the court found, "She struggled with that information. She failed to inform the Court that she had heard that extraneous information which prevented the Court from addressing this circumstance in a timely manner. By her own testimony at the evidentiary hearing, she opined that the extraneous information bothered her and she was unable to get it out of her mind."

The court concluded that, based on the testimony, the juror "was unable to follow the Court's instruction to consider only the evidence presented in Court" and "her deliberations and verdict were probably tainted and present an objectively reasonable possibility of prejudice."

Jarrad Wood, American University, Washington College of Law, Washington, D.C.


June 24, 2014

Second Circuit Vacates Order Refusing to Approve SEC's Citigroup Settlement

On June 4, 2014, the U.S. Court of Appeals for the Second Circuit held that the district court abused its discretion in refusing to approve a settlement between the Securities and Exchange Commission (SEC) and Citigroup Global Markets Inc. (Citigroup). S.E.C. v. Citigroup Global Markets, Inc., 2014 WL 2486793 (2d Cir. 2014). At issue was a hotly debated decision by Judge Jed Rakoff refusing to grant the parties' settlement agreement; he concluded that the parties' lack of evidence rendered the agreement "neither fair, nor reasonable, nor adequate, nor in the public interest." Circuit Judge Rosemary Pooler announced the decision, writing that Judge Rakoff applied an incorrect legal standard in assessing the settlement agreement.

The underlying facts relate to an SEC investigation into whether Citigroup illegally benefited from structuring and managing a billion-dollar fund in which it took a short position. In 2011, the SEC filed a complaint alleging that Citigroup misrepresented its position with regard to the fund, thereby violating Sections 17(a)(2)–(3) of the Securities Act of 1933. The SEC alleged that the fund's poor performance yielded Citigroup approximately $160 million in profits. Soon after, the parties requested approval of a settlement providing for Citigroup to pay $285 million without having to admit or deny guilt.

In response to the proposed settlement, Judge Rakoff presented the parties with a list of questions including "Why should the Court impose a judgment in a case in which the S.E.C. alleges a serious securities fraud but the defendant neither admits nor denies wrongdoing?" and "How can a securities fraud of this nature and magnitude be the result simply of negligence?" After reviewing the parties' responses, Judge Rakoff refused to approve the settlement due to insufficient evidence. In a strongly worded opinion, Judge Rakoff found that approving the agreement with insufficient evidence would render the court a "mere handmaiden to a settlement privately negotiated on the basis of unknown facts, while the public is deprived of ever knowing the truth in a matter of obvious public importance."

Judge Rakoff's decision sparked debate as to the future of SEC settlements allowing parties to avoid admitting or denying guilt. Writing for the ABA's Business Law Today, Eric Rieder, Paul Huey-Burns, and Nikki A. Ott questioned whether Judge Rakoff's decision would catalyze a sea change. While the authors noted that the Second Circuit would likely vacate the decision, they noted several district court judges who bucked the trend of approving SEC settlement agreements in which the defendant avoided admitting or denying culpability. The authors also noted former SEC enforcement director Robert Khuzami's public statement criticizing the decision: "[Judge Rakoff's decision] disregards the fact that obtaining disgorgement, monetary penalties, and mandatory business reforms may significantly outweigh the absence of admission when that relief is obtained without the risks, delays, and resources required at trial."

Moving forward, it is unclear whether the Second Circuit's decision will stifle any movement toward requiring admissions or denials of guilt in SEC settlements. What is clear is that practitioners and litigants will watch the courts closely to see which way the tide moves.

Jarrad Wood, American University, Washington College of Law, Washington, D.C.



May 27, 2014

Akin Gump Withdraws from Case, Citing Client's Evidence Falsification

Akin Gump Strauss Hauer & Feld has filed a motion to withdraw as counsel from a federal trade secret case on the grounds that its client admitted to falsifying evidence. The firm secured a nearly $25 million verdict in the case earlier this year.

On May 14, defendant ISOL Technology, Inc. served an emergency motion for sanctions alleging that Akin Gump's client, LBDS Holding Company, LLC, "committed a fraud upon this Court" and asked for the verdict to be set aside. On a phone call with an LBDS principal and trial witness the following day, Akin Gump partner Sanford Warren says he was told that the allegations in the motion were "essentially correct," including allegations of forged contractual provisions and fake emails. The motion to withdraw states the firm was unaware of any such falsification prior to May 15.

The applicable Texas Disciplinary Rule of Professional Conduct requires a lawyer who comes to know of the falsity of evidence to make a good-faith effort to persuade the client to correct or withdraw the evidence, and, failing that, to take "reasonable remedial measures," including disclosure of the true facts. The motion to withdraw argues that because LBDS failed to correct or withdraw the evidence, Akin Gump was required to "disclose the existence of this deception to the Court" and permitted to withdraw as counsel.

Sarah Anna Santos, Hunton & Williams LLP, Charlotte, NC


May 15, 2014

Supreme Court Upholds EPA's Cross-State Air Pollution Rule

To address the problem of air pollution emitted in one (upwind) state that causes harm in other (downwind) states, Congress included the Transport Rule, now known as the "good neighbor rule," in the Clean Air Act. That provision instructs states to prohibit in-state sources "from emitting any air pollutant in amounts which will....contribute significantly" to downwind states' "nonattainment..., or interfere with maintenance," of any EPA-promulgated national air quality standard.  42 U.S.C. § 7410(a)(2)(D)(i). Environmental Protection Agency v. EME Homer City Generation, L.P., ___ S.Ct. ___, 2014 WL 1672044 at * 6 (2014).

In connection with the good neighbor provision, the EPA adopted the Cross-State Air Pollution Rule. “The rule calls for consideration of costs, among other factors, when determining the emission reductions an upwind State must make to improve air quality in polluted downwind areas.” Id.

A group of state and local governments and industry and labor groups petitioned for review of the rule in the U.S. Court of Appeals for the D.C. Circuit. The court vacated the rule in its entirety. Id. at * 11.

The Supreme Court reversed.  It held that "EPA's cost-effective allocation of emission reductions among upwind States...is a permissible, workable, and equitable interpretation of the Good Neighbor Provision." Id. at *21.

Jim Shelson, Phelps Dunbar, LLP, Jackson, MS



May 15, 2014

Supreme Court Upholds Michigan Law Banning Affirmative Action

A divided Supreme Court upheld a law approved by Michigan voters that bans affirmative action in university admissions. Schuette v. Coalition to Defend Affirmative Action, ___ S.Ct. ___, 2014 WL 1577512 (2014).

In 2006, Michigan voters adopted an amendment to the state constitution that prohibited “state and other governmental entities in Michigan from granting certain preferences, including race-based preferences, in a wide range of actions and decisions. Under the terms of the amendment, race-based preferences cannot be part of the admissions process for state universities.” The ballot proposal, commonly called Proposal 2, passed at the ballot box by a margin of 58 percent to 42 percent. Id. at *7.

Justice Anthony Kennedy wrote the opinion. Justices John Roberts and Samuel Alito joined Justice Kennedy’s opinion. Justices Kennedy, Roberts, and Alito concluded that “[t]his case is not about how the debate about racial preferences should be resolved. It is about who may resolve it. There is no authority in the Constitution of the United States or in this Court’s precedents for the Judiciary to set aside Michigan laws that commit this policy determination to the voters.” Id. at *17.

Justices Antonin Scalia, Clarence Thomas, and Stephen Breyer concurred, but on different legal grounds. Justice Scalia, joined by Justice Thomas, wrote that “the question in this case, as in every case in which a neutral state action is said to deny equal protection on account of race, is whether the action reflects a racially discriminatory purpose.” Justice Scalia found that Proposal 2 did not do so. Id. at *27.

Justice Breyer agreed with the plurality that Proposal 2 is consistent with the Federal Equal Protection Clause. He reasoned that the "Constitution allows local, state, and national communities to adopt narrowly tailored race-conscious programs designed to bring about greater inclusion and diversity. But the Constitution foresees the ballot box, not the courts, as the normal instrument for resolving differences and debates about the merits of these programs." Id. at *28.

Justice Sonia Sotomayor, joined by Justice Ginsburg, dissented. She found that, as a result of Proposal 2, “there are now two very different processes through which a Michigan citizen is permitted to influence the admissions policies of the State’s universities: one for persons interested in race-sensitive admissions policies and one for everyone else….Our precedents do not permit political restructurings that create one process for racial minorities and a separate, less burdensome process for everyone else.” Id. at 32.

Jim Shelson, Phelps Dunbar, LLP, Jackson, MS



April 30, 2014

Why Some People Can Never Be "Friends"

Since our ethics classes in law school, we have been taught to never communicate ex parte with potential or current jurors as proscribed by Model Rule 3.5(b) ("A lawyer shall not … (b) communicate ex parte with such a person [juror] during the proceeding unless authorized to do so by law or court order."). But what does "communicate ex parte" mean in the context of Facebook, LinkedIn, MySpace, Twitter, blogs, and other social networking websites where, seemingly innocuous communications can occur between strangers as easily as clicking a mouse or swiping a screen? Are attorneys actually violating ethical rules by "checking out" a potential or current juror’s virtual profile in the spirit of conducting due diligence? Last week, the ABA issued an opinion providing tangible guidance on these issues.

The ABA's Formal Opinion 466 dated April 24, 2014 provides that the following acts constitute ex parte communication that would violate Model Rule 3.5(b):

  • 1. Making a "friend request" on Facebook, "connection" request on LinkedIn, or other similar requests to access one's private profile;

  • 2. "Following" a Twitter account;

  • 3. Sending a private message;

  • 4. Initiating a chat; or

  • 5. Subscribing to a blog's RSS.

According to the opinion, these are examples of "active lawyer review":  The lawyer is directly communicating with the juror and the juror knows about it. The ABA has compared such acts to a lawyer driving to a juror's house, knocking on the door, and going inside to look around.  It constitutes unethical and impermissible ex parte communication.  (However, ethics opinions from the New Hampshire and Philadelphia Bar Associations have concluded otherwise, positing that a lawyer can request access to a juror's social networking site so long as the lawyer correctly identifies oneself first. See N.H. Bar Ass'n, Op. 2012-13/05; Phila. Bar Ass'n, Advisory Op. 2009-02.)

On the other hand, the following acts do not violate the Rule:

  • 1. Viewing a juror's social networking site that is made available to the public.

According to the Opinion, this constitutes “passive lawyer review”:  the juror does not know that the lawyer has reviewed his or her social networking site.  ABA has compared this act to a lawyer driving down the street where the juror lives, simply to check out the area.

  • 2. Viewing a juror's social networking site in such a way that the juror will receive an automatic, network-generated notification that somebody has viewed his or her site.  (This is a common function on LinkedIn.)

According to the opinion, item 2 is technically an ex parte communication because the juror will know that somebody has viewed his or her site.  However, because the social network sends the "communication" (or notification), not the lawyer, this act does not violate the Rule. The ABA has compared this to a lawyer driving down the street where the juror lives and a neighbor tells the juror, "I just saw that lawyer driving around here."  (Note to New York practitioners:  Two ethics committees have concluded that this act violates the Rule.  See The Association of the Bar of the City of New York Committee on Professional Ethics, Formal Opinion 2012–2; The New York County Lawyers' Association Committee on professional Ethics, Formal Opinion 743.).

The takeaway point is that a lawyer must not seek to communicate ex parte with a potential or a current juror, because doing so would inevitably influence the juror's objectivity during the course of a proceeding.  An impartial jury is always the standard, and it requires team work of everyone involved in a proceeding—the judge, the lawyers, and the jurors alike—in order to preserve this lofty standard.  While lawyers have a duty to disengage from ex parte communication as set forth above, the Opinion also emphasizes jurors’ duty to refrain from discussing a proceeding on their social networking sites.  The opinion also emphasizes judges’ duty to enforce the prohibition of ex parte communications on social media outlets.  The opinion recommends that judges clearly and actively set forth social media guidelines in the form of court orders and daily jury instructions. 

As a side note to those practitioners who are not too tech savvy:  Do not think that this opinion does not apply to you, for all lawyers have duty to keep abreast of technology.  See Comment [8] to Model Rule 1.1 (explaining that a lawyer "should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology").

Ian Park, Littleton Joyce Ughetta Park & Kelly LLP, New York, NY



March 28, 2014

A Generation Y Perspective on Juries and Social Media

In an informal study on juror attitudes toward social media, U.S. District Judge Amy J. St. Eve of the Northern District of Illinois, Judge Charles P. Burns of the Circuit Court of Cook County, and Jones Day associate Michael A. Zuckerman, have surveyed 538 jurors to date. The study began with a small pool of federal jurors in 2011 and has been expanded by several hundred jurors, including state court jurors. The updated findings are published in the Duke Law & Technology Review, in an article titled "More From The #Jury Box: The Latest on Juries and Social Media." The authors urge the judiciary to employ specialized instructions strongly, and frequently, in order to combat the risks of juror misconduct. But is this enough?

According to Judge St. Eve, "a small but significant number of jurors . . . were tempted to communicate about the case through social media. Almost all of these jurors ultimately decided not to do so because of the court's social media instruction."


That finding is telling considered against present practices and the future jury pool.

As one reputable blog noted in May 2012, model instructions prohibiting the use of social media to research or communicate about a case were distributed to the federal bench in 2010. In a study conducted by the Federal Judicial Center in late 2011, nearly all (94 percent) of the responding judges indicated they were aware of the model instruction.  Yet, astoundingly, almost half (40 percent) of the judges reported that they do not routinely issue the instruction.

That silence is startling in view of Judge St. Eve's findings.


When "asked what 'prevented' them from communicating about the case on social media," the vast majority of jurors cited "the court's social-media instruction."  For example, one juror reported that she "wanted to talk about the case on Facebook," but refrained from doing so "because of 'the Judge's orders.'"  Those sentiments were echoed by other jurors who credited an explicit instruction with their decision to refrain from social media (i.e., "Because the Judge instructed us not to," "We were told not to," and "I was tempted but told not to, so I followed the rules").

With an eye toward the future, Judge St. Eve urges courts to institute "best practices" in order to ensure an impartial jury in the age of Facebook and Twitter.  She notes that repetition is important, particularly in lengthier trials, quoting jurors who attributed their restraint to the judge's "daily warnings," and "repeated directions not to communicate about the case on social media."

Additionally, Judge St. Eve sheds light on the tip of a potential iceberg.

The average juror in the United States is over 35. As such, jurors are overwhelmingly comprised of baby boomers and Gen Xers. Those generations were not raised on modern technology or social media but have adapted. Yet they are able to recall a world without mobile phones and Facebook. As the jury pool cycles to include Generation Y and millennials, that will not be the case. The jury pool will eventually be comprised of generations who have never known a world without social media, likely held their first tablet as a toddler, and obtained their grade school homework via Twitter.

As strong as a verbal instruction may be, the mere request to eliminate a formative, self-defining facet of one's life may not be enough. Just as social media is a learned behavior and cultural expression, so too is hand gesturing and eye contact. If someone, even a judge, asked you to cease all hand movements while speaking, could you do that? Have you tried? At some point, deeply engrained cultural behaviors become so entwined with our ability to function that stopping is not an option, even if desired. The task of isolating a habitual, "reflexive" behavior is complex.

In response, courts in New Jersey have begun to institute practices of their own. For example, in Mercer County, one jury manager collects all laptops and tablets at the door, and ensures that jurors to turn off their mobile phones before entering the courtroom. A judge in the same court has instituted a pledge in which jurors agree in writing, under penalty of perjury, not to engage in any online communication pertaining to their trial.

While best practices may require a more invasive intervention, Judge St. Eve's words resound: “Born out of a common-law tradition and guaranteed by the U.S. Constitution, the impartial jury is one of the most fundamental American institutions. It is also one of the most resilient. The impartial jury has survived the telephone, the radio, the automobile, and the television. There is no reason why it cannot survive Facebook and Twitter."

Christine M. Emery, Littleton Joyce Ughetta Park & Kelly LLP, Red Bank, NJ



March 25, 2014

Lawyers for Colorado Shooter Stymied by New York's Shield Law

Lawyers for James Holmes, the Aurora, Colorado, movie theater mass murderer, petitioned the Supreme Court of the United States to force Fox News reporter Jana Winter to testify regarding her story that the accused has mailed a notebook containing violent images to his psychiatrist in advance of the shooting.

Holmes's defense attorneys subpoenaed Winter last March because they allege Winter violated a gag order and that Winter’s evidence, a unnamed source from law enforcement, is crucial to Holmes's case.

Holmes "sought a certificate under Colorado's version of the Uniform Act to Secure the Attendance of Witnesses from Without the State in Criminal Proceedings (Colo. Rev Stat § 16-9-203)—the first step in the two-part process for compelling an out-of-state witness, such as Winter, to testify or otherwise provide evidence in Colorado. Holmes explained that he sought Winter's testimony and any notes she had created in relation to the article because she  'appears to be the only witness that can provide the court with the name of the law enforcement agents that leaked privileged information.'" See In Re Holmes v. Winter, slip op. pp. 3–4 (December 10, 2013). The Colorado District Court issued the certificate in January 2013.

Holmes and his attorneys predicted that Winter would stand behind the New York Shield Law and relied on the decision In Matter of Codey v. Capital Cities, Am. Broadasting Co., 82 NY2d 521 (1993) "for the proposition that any issue relating to a claim of privilege could not be decided by a New York court when New York is the 'sending state' under CPL 640.10(2). Instead, Holmes maintained that privilege issues should be addressed exclusively by the Colorado court, the 'demanding state,' upon Winter's appearance there." See In Re Holmes v. Winter, slip op. pp. 4–5 (December 10, 2013). On the hand, Winter’s attorneys argued she should be able to rely on New York's Shield Law. The Supreme Court of New York granted the application in favor of Holmes, and it was affirmed by the Appellate Division.

 On December 10, 2013, in a 4–3 decision, the New York Court of Appeals reversed the lower courts, striking down the petition under the New York Shield law. The court held, "New York public policy as embodied in the Constitution and our current statutory scheme provides a mantle of protection for those who gather and report the news—and their confidential sources—that has been recognized as the strongest in the nation. And safeguarding the anonymity of those who provide information in confidence is perhaps the core principle of New York's journalistic privilege, as is evident from our colonial tradition, the constitutional text and the legislative history of the Shield Law." See In Re Holmes v. Winter, slip op. p. 13 (December 10, 2013). The court distinguished the Codey case, where the information sought was not the identity of a confidential informant but video out-takes from an interview.  Because Winter knew and relied on the Shield Law when giving assurances of confidentiality, the Court reasoned that she should not be compelled to testify and break that agreement.

Holmes' attorneys, in a filing submitted to the Supreme Court, argued that the New York court's ruling "eviscerated" the Uniform Act to Secure the Attendance of Witnesses. The petition also warns of the "slippery slope of exceptions" that could deny defendants fair rights.

John S. Austin, Austin Law Firm, Raleigh, NC



March 13, 2014

The Death of the Attorney-Client Privilege

Red Vision Systems, Inc. v. National Real Estate Information Services, L.P., Allegheny County (Pennsylvania) C.P. No. GD-13-8572 involves what at first blush would seem to be a fairly ordinary situation.  The plaintiffs alleged that they had provided services to the defendants but had not been paid. They further alleged that the defendants had transferred assets to avoid creditors’ claims. They therefore sought to depose the defendants’ former general counsel so that they could ask what had become of the defendants’ assets.  The former general counsel, not surprisingly, asserted the attorney-client privilege.

Although at first glance this case would seem to be open and shut, Judge Stanton Wettick (who has presided over discovery matters in Pittsburgh for decades and whose opinions on discovery matters have been found to be very persuasive by many other Pennsylvania judges) noticed a very important distinction. The defendants were companies that were no longer doing business. Judge Wettick therefore asked the question of whether a defunct company could assert the attorney-client privilege. He concluded that it could not, both because the company no longer had any interests to protect, and because assets of defunct companies (including what would otherwise be privileged material) are often acquired by others. Judge Wettick therefore held that there would be no purpose to allowing the assertion of the privilege. He contrasted this situation to that in which an attorney can assert the privilege on behalf of a deceased client. Judge Wettick observed that an individual’s privilege cannot pass to a successor, and there are many confidential matters that individuals would not want discussed even after their death. Companies, according to Judge Wettick, do not have an interest in protecting their reputations (such as they are) after they cease to do business, and Judge Wettick did not believe any conversations between a company and its lawyers would be “chilled” by the threat that they might become public after the company went out of business.

 Corporations never die. But their right to claim the attorney-client privilege does fade away. Litigators should keep that in mind when they draft—or oppose–discovery.

Aaron Krauss, Cozen O'Connor, Philadelphia, PA



March 11, 2014

Former New Jersey Mayor Loses Fight to Remain in Office

Tony Mack, the former mayor of Trenton, New Jersey, who refused to resign following his February 2014 conviction in federal court on conspiracy and fraud charges, was removed from office by New Jersey Superior Court Judge Mary C. Jacobson on February 26. Mack had refused to resign following his conviction, arguing he should remain in office until his scheduled May 2014 sentencing or while his motion for a new trial was still pending before the federal district court that convicted him. Mack's removal turned on the interpretation of New Jersey Statute 2C:51-2 (Forfeiture of Public Office, Position, or Employment), which provides that a person holding any public office under the state government or any of its political subdivisions who is convicted of an offense "shall forfeit" the office if convicted "under the laws of this State of an offense involving dishonesty...or under the laws...of the United States of an offense or a crime which, if committed in this State, would be such an offense or crime…."  N.J.S.A. 2C:51-2.

The statute further provides that a New Jersey court "shall enter" an order of forfeiture immediately upon a finding of guilt for offenses tried in New Jersey state courts. However, when the forfeiture is based on a conviction of an offense under federal law, the order can only be granted upon application of the county prosecutor or state attorney general. The statute allows a court to grant a stay pending appeal of a conviction, if the court is "clearly convinced" that there is a substantial likelihood of success on the merits. The law also allows for any official action taken by a convicted officeholder to be voidable by the officeholder’s successor for 60 days following the date of forfeiture of office.

Deputy Attorney General Steven A. Yomtov argued that the court should immediately remove Mack from office, noting that Mack was convicted of crimes of dishonesty that sullied his office. "It doesn't serve the public interest to have the defendant remain in office as mayor," he said.  He also noted that the statute is intended to be harsh, and cited the public outcry resulting from a convicted felon continuing to hold office. Yomtov expressed concern that Mack's official actions following his conviction could be void, arguing that only Mack's interests were served by keeping him in office until his sentencing: "That is not the proper balance.  The proper balance should fall on the side of the greater public interest."

Mack's attorney, Mark Davis, explained that the statute allowed the court to issue a stay delaying the forfeiture. He argued that Mack’s motion for a new trial filed in the federal court "has teeth" and "could result in a new trial," in an attempt to convince the court that the motion had a substantial likelihood of success. Davis also attempted to differentiate the cases cited by Yomtov, which dealt with a stay pending appeal of a conviction. "That is not what we are asking here," he clarified. "If Mr. Mack's motion is denied we would concede that there would be a forfeiture of office." Davis further argued that the official business Mack would continue to conduct if allowed to remain in office was voidable but not void. Under Davis's interpretation, the statute provided that Mack’s successor could determine which actions taken by Mack would be voided, if Mack were eventually removed from office owing to his conviction.

Judge Jacobson directly addressed Davis's argument that Mack's actions following his conviction were voidable but not void, expressing concern about this portion of the statute and citing a possible negative impact on Trenton should Mack continue to make voidable decisions on behalf of the city. She explained that Mack's conviction clearly touched upon his office, but the more difficult issue was the definition of conviction. She recognized the difference between a conviction in federal court rather than state court and acknowledged she did not have extensive knowledge of the federal verdict's strength or possible appellate issues.  Nevertheless, the conviction was a final judgment, and thus the presumption of innocence no longer existed, replaced by the "stigma and shadow" of guilt. Judge Jacobson noted that it made no sense to interpret the forfeiture statute to allow a convicted official to continue in office for a period of more than three months, explaining that the legislature clearly authorized the attorney general to apply to the court for removal of a corrupt official, effective on the date of conviction. "While we certainly could wait until sentencing, there is absolutely no reason that we have to," she said.  Despite Davis's creative arguments, Judge Jacobson ruled that the statute demands a forfeiture of public office and ordered Mack's immediate removal.

Samuel Waltzer, Pepper Hamilton LLP, Philadelphia, PA


March 5, 2014

Supreme Court Resolves Circuit Court Split Regarding CAFA

The State of Mississippi sued a number of manufacturers of liquid-crystal displays (LCDs). The state alleged that defendants formed an international cartel to restrict competition and raise prices in the LCD market. The state claimed that these alleged actions violated the Mississippi Antitrust Statute and the Mississippi Consumer Protection Act. Among other things, the state sought restitution for its own purchases of LCD products as well as the purchases of its citizens. Hood v. AU Optronics Corp., 571 U.S. ___, 134 S.Ct. 736, 740 (2014).

The state filed suit in state court, but defendants removed the suit to federal court under the Class Action Fairness Act of 2005 (CAFA), claiming it was a "mass action" under CAFA. The state disagreed and moved to remand the suit to state court.

CAFA defines "mass action" to mean "any civil action…in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs' claims involve common questions of law or fact." Id. at 740.

The Fifth Circuit found that the suit qualified as a "mass action" because the real parties in interest included more than 100 individual citizens who purchased LCD products in Mississippi. But three other Courts of Appeals determined that similar lawsuits were not mass actions. Id. at 741.

The issue before the Supreme Court was "whether a suit filed by a State as the sole plaintiffs constitutes a 'mass action' under CAFA where it includes a claim for restitution based on injuries suffered by the State's citizens." Id. at 739.

Defendants argued that the definition of "mass action" in CAFA covered the state’s suit "because 'claims of 100 or more persons' refers to 'the persons to whom the claim belongs, i.e., the real parties in interest to the claims, regardless of whether those persons are named or unnamed."  Id. at 742.

The Supreme Court disagreed. It noted that CAFA says "100 or more persons," not "100 or more named or unnamed real parties in interest." Id. "More fundamentally, [defendants'] interpretation cannot be reconciled with the fact that the '100 or more persons' referred to in the statute are not unspecified individuals who have no actual participation in the suit, but instead the very 'plaintiffs' referred to later in the sentence—the parties who are proposing to join their claims in a single trial." Id.

This led the Supreme Court to conclude that the “better understanding is that Congress meant for the ‘100 or more persons’ and the proposed ‘plaintiffs’ to be one and the same.” Id. Accordingly, the Supreme Court found that the state’s suit was not a “mass action.”

Jim Shelson, Phelps Dunbar, LLP, Jackson, MS



March 5, 2014

Supreme Court Limits General Jurisdiction in DaimlerChrysler Case

In 2004, 22 residents of Argentina sued DaimlerChrysler Aktiengesellschaft (Daimler) in federal court in California. Daimler v. Bauman, 571 U.S. ___, 134 S.Ct. 746, 750 (2013). The complaint alleged that during Argentina’s 1976–1983 "Dirty War," Daimler’s Argentina subsidiary, MB Argentina, collaborated with state security forces to kidnap, detain, torture, and kill Mercedes-Benz's Argentina workers. Id. at 750–51.

Mercedes-Benz USA, LLC (MBUSA) is a subsidiary of Daimler. MBUSA distributes vehicles manufactured by Daimler to dealerships throughout the United States, including California. Id. at 751. The plaintiffs alleged that jurisdiction was proper in California because MBUSA was Daimler’s agent for jurisdictional purposes, so MBUSA’s California contacts were attributable to Daimler. Id.

Daimler moved to dismiss the plaintiffs' complaint on the ground that the court lacked personal jurisdiction over Daimler. The district court granted Daimler’s motion, but the Ninth Circuit reversed. Id. at 752–53.

The Supreme Court noted that there are two categories of personal jurisdiction: specific and general. Specific jurisdiction exists where the defendant has continuous and systematic contacts with the forum, and the suit arises out of or relates to the defendant’s contacts with the forum.  Id. at 754 (citations omitted). On the other hand, general jurisdiction exists where the defendant’s contacts with the forum are so "continuous and systematic" as to essentially render the defendant "at home" in the forum State. Id. (citations omitted).

The plaintiffs did not allege specific jurisdiction existed, so the Supreme Court focused on general jurisdiction. Id. at 758. The Supreme Court did not “pass judgment on invocation of an agency theory of jurisdiction in the context of general jurisdiction, for in no event can the appeals court’s analysis be sustained. Id. at 759.

The Supreme Court found that the proper inquiry is whether the corporation’s "affiliations with the State are so 'continuous and systematic' as to render [it] essentially at home in the forum State."  Id. at 761 (citation omitted).  The Supreme Court concluded that "claims by foreign plaintiffs having nothing to do with anything that occurred or had its principal impact in California were insufficient to render Daimler, even with MBUSA’s contacts attributed to it, "at home" in California. Id. at 762. As a result, Daimler was not subject to general jurisdiction in California.

Jim Shelson, Phelps Dunbar, LLP, Jackson, MS


March 5, 2014

Judge Declares $9.5 Billion Chevron Judgment Invalid Under RICO

A federal judge ruled on March 4, 2014, that the $9.5 billion judgment awarded against Chevron by an Ecuadorean court was invalid under the Racketeer Influence and Corrupt Organizations Act (RICO Act). The case is Chevron Corp. v. Donziger et al., case number 1:11-cv-00691, in the U.S. District Court for the Southern District of New York.

In a sharply critical 497-page opinion, U.S. District Judge Lewis A. Kaplan condemned the legal tactics used by environmental attorney Steven Donziger in securing the award as corrupt and fraudulently manipulative of the Ecuadorean justice system.

“If ever there were a case warranting equitable relief with respect to a judgment procured by fraud, this is it,” Kaplan said.

The judgment was awarded in a lawsuit filed by Donziger 20 years ago on behalf of Ecuadorean farmers and fishermen for damages caused by Texaco’s drilling pollution in the Amazon rainforest from 1964 to 1992. Chevron acquired Texaco in 2001. Originally $19 billion, the judgment was cut in half last year by Ecuador’s highest court. 

While the federal ruling prohibits enforcement of the award in the United States, it is unclear how foreign courts will treat the decision.

Sarah Anna Santos, Hunton & Williams LLP, Charlotte, NC


February 28, 2014

Amidst Preparation for Third Patent Trial, Apple and Samsung Juggle Court-Ordered Mediation

Apple and Samsung Electronics Co. have already gone to trial twice over patent infringement and invalidity claims concerning Samsung’s phones and handheld devices. A third high-profile trial is scheduled for next month, with this latest round centering on Apple’s claims over newer products such as the iPhone 5. Pretrial motions and filings continue at a steady clip.

But intensive trial preparation is not the only item on the parties’ respective agendas.  Both sides are also committed—or, more accurately, obliged—to undertake court-ordered mediation in advance of the March trial. And a recent filing reveals the extent to which mediation requirements can consume time and energy, even at the top of the corporate pyramid.

In November, U.S. District Judge Lucy Koh, presiding over the patent actions in the Northern District of California, ordered the parties to lay out a plan for settlement negotiations. In response, Apple and Samsung jointly submitted a mediation scheme to the court. The plan called for a mediator with “experience mediating high profile disputes.” It also stated that each side’s CEO and in-house lawyers would attend the mediation, with no outside attorneys present. 

The inclusion of each company’s top executive was prompted by a specific request from Judge Koh, who solicited the high-level participation despite broad pessimism regarding the prospects for the mediation. “You don’t have to laugh at me, but even my chambers laughs at me when I mention settlement,” she told attorneys at a hearing.      

The humor may have been lost on Apple and Samsung executives, who met for a full-day negotiation session during the first week in February. Apple sent CEO Tim Cook, its general counsel Bruce Sewall, and Noreen Krall, a vice president and head of litigation, among others, to the mediation. Samsung was represented by JK Shin, CEO of the company’s IT and mobile communications arm, along with five other executives. According to a notice filed by the parties last week, “[t]he parties did not reach an agreement at that session.”

That day-long session, however, was hardly the full extent of the parties’ commitment.  According to the notice filed with the court, Apple’s high-level executives conducted more than six additional calls with the mediator over the next several weeks.  Samsung’s representatives made more than four additional calls and other communications with the mediator as well.

Despite these efforts, the sides have not yet been able to reach an acceptable settlement. This result was not particularly surprising to many observers. An earlier round of court-ordered settlement talks failed in 2012, before the parties’ first patent trial. So too did exploratory discussions to settle their differences before the U.S. International Trade Commission.

The parties did represent to Judge Koh that they “remain willing to work through the mediator jointly selected by the parties.” It is unclear, though, how much additional effort the companies can or will devote to court-ordered settlement talks when trial—and potentially billions of dollars of damages— looms ever closer on the calendar.        

Ben Fleming, Hogan Lovells US LLP, New York, NY


February 19, 2014

California Judge Increases Verdict by $50M, Citing Need for Further Abatement

On January 7, 2014, a California Superior Court Judge increased a final verdict by $50 million against Atlantic Richfield Company, Sherwin Williams, NL Industries, ConAgra and DuPont to better fund a lead abatement program in the state. Judge James P. Kleinberg ordered defendants to pay $1.15 billion into a fund for lead paint abatement from homes in various counties and cities in California. Banned in 1978, lead paint remains in millions of homes in various California counties and cities.

The court increased the final verdict and judgment from the tentative $1.1 billion to $1.15 billion, citing the costs of remediation. This decision, arriving after 13 years of litigation, is the largest public nuisance award in California’s history.

Judge Kleinberg wrote, "The Defendants knew or should reasonably have known that exposure to lead at high levels, including exposure to lead paint, was fatal or at least detrimental to children's health. That knowledge alone should have caused the Defendants to cease their promotion and sale of lead pigment and/or lead paint for home use." Statement of Decision, p. 14.

Judge Kleinberg also cited an internal Sherwin Williams report written in 1900: "It is also familiarly known that white lead is a deadly cumulative poison, while zinc white is innocuous. It is true, therefore, that any paint is poisonous in proportion to the percentage of lead contained in it." Statement of Decision, p. 18. The court also found that lead paint exposure disproportionally impacts low income and minority children due to the prevalence of lead paint in low-income housing. Id.

"All Californians should be outraged by the Lead Paint Industry's sour grapes statement that California is out of step with the country," stated Joseph Cotchett of Cotchett, Pitre & McCarthy to the Associated Press. “The removal of lead paint will have a dramatic effect on the health of young children who live in homes in these counties. The removal will prevent this toxic metal from damaging the children's kidneys, brains and nervous systems. The decision affects largely minority children of color as the houses affected are in poor neighborhoods throughout the state.”

The court rejected the arguments that abatement must be "at a reasonable cost by reasonable means," holding that standard is only applicable to private nuisances, not public nuisances. "The distinction between permanent and continuing private nuisances affects the remedy and statute of limitations,” the Court stated. Statement of Decision, p. 86. The only remedy for a public nuisance claim is abatement, and California has no statute of limitations for a public nuisance claim.

The paint companies made further arguments after the judge’s tentative ruling, but they were rejected. Judge Kleinberg stated, "Consistent with their arguments throughout the trial the Defendants rely on statistics and percentages. When translated into the lives of children that is not a persuasive position. The Court is convinced there are thousands of California children in the Jurisdictions whose lives can be improved, if not saved through a lead abatement plan.”

The case is The People of the State of California v. Atlantic Richfield et al., Santa Clara Superior Court Case No. CV-788657.

John S. Austin, Austin Law Firm, Raleigh, NC


February 11, 2014

Law Firm Under Fire for Arguing Opposite Positions

Gibson, Dunn & Crutcher is under fire by its opposing counsel for arguing opposite positions on federal anti-racketeering law in different cases.

Following an Ecuadorean court’s $9.8 billion judgment against Chevron in connection with an oil-spill in the Amazon, Gibson Dunn sought an injunction under RICO in the Southern District of New York to prevent collection of the award, denouncing it as extortionate.  Lawyers for the Ecuadoreans argue that even if Chevron’s claims were true, RICO law does not provide for private injunctive relief—the very position that Gibson Dunn has adopted in an unrelated case defending debt-collectors.

In the case of Monique Sykes v. Mel Harris and Associates LLC, Gibson Dunn argued in its brief to the Second Circuit that “the text and history of the RICO statute show that Congress affirmatively decided not to authorize private injunctive claims[.]” Oral arguments in this case were heard Friday morning. According to the Ecuadorean lawyers, a win for Gibson Dunn in Sykes could force U.S. District Judge Lewis Kaplan to dismiss Chevron’s case. 

Chevron denied that a separate Gibson Dunn team in a different case with a different client would affect its RICO claims, and said the legal community is well aware of both sides of the issue of private RICO injunctions.

Sarah Anna Santos, Hunton & Williams, Charlotte, NC


February 7, 2014

SCOTUS Rules in Nun Group's Exemption from Obamacare Case

Is the requirement of completion of a governmental form a violation of a citizen’s First Amendment liberties? Little Sisters of the Poor, a traditional order of Catholic nuns, insist it does, and Supreme Court Justice Sonia Sotomayor agreed to enter a temporary restraining order on December 31, 2013, enjoining the United States from requiring the nuns to complete the form. Little Sisters of the Poor, et al. v. Sebelius, Sec. of H&HS, et al, 13A691.

Even though the Affordable Care Act exempts such religious non-profit organizations through EBSA Form 700, the Little Sisters of the Poor argue that its members’ freedom from state-sponsored religion is violated by merely filling out Form 700.

What the Little Sisters, and similar organizations, found most objectionable about Form 700 is that it is legally required before any plan operator may provide the free contraceptive services.  Form 700 states it is "an instrument under which the plan is operated." Hence, the Little Sisters nuns object to even signing the form.

Last week, the Court finally issued an order in pending case, further illuminating its position. According to the January 24 order, the plaintiffs will not need to complete the form, but that does not end their reporting requirements:

If the employer applicants inform the Secretary of Health and Human Services in writing that they are non-profit organizations that hold themselves out as religious and have religious objections to providing coverage for contraceptive services, the respondents are enjoined from enforcing against the applicants the challenged provisions of the Patient Protection and Affordable Care Act and related regulations pending final disposition of the appeal by the United States Court of Appeals for the Tenth Circuit. To meet the condition for injunction pending appeal, applicants need not use the form prescribed by the Government and need not send copies to third-party administrators.

Instead of requiring the nuns to fill out the form, the Court is only requiring them to notify the Secretary of Health and Human Services in writing that "they are non-profit organizations that hold themselves out as religious and have religious objections to providing coverage for contraceptive services." Ultimately, the Court requires only a letter.

The Court offers a creative solution that is not part of the Code. However, the order begs the question: Does writing a letter constitute participation in the system?

John S. Austin, Austin Law Firm, Raleigh, NC


February 4, 2014

Verdict Coming Soon in Chevron's RICO Trial

Observers continue to await a verdict in last year's blockbuster racketeering trial involving a $9.5 billion Ecuadorian judgment, allegations of judicial bribery, and complex issues of international comity and environmental stewardship. The parties, the Chevron Corporation and American attorney Steven Donziger, continue to snipe at one another in the press. Judge Lewis Kaplan, who presided over the nonjury trial, is expected to release a decision soon. Given the sheer amount of evidence, trial attorneys might draw lessons from how Judge Kaplan sorts through it and which witnesses he finds credible.

In its closing argument on November 26, Chevron made a final attempt to persuade Judge Kaplan that the massive Ecuadorian judgment is the unenforceable product of a racketeering scheme. During the six-week RICO trial, Chevron marshaled over a dozen witnesses, years of the opposing parties’ emails, and outtakes from a documentary—all of which, Chevron argued, demonstrated the use of bribery and evidence-tampering to secure the groundbreaking environmental damage judgment.

Donziger and his codefendants maintained that the Ecuadorian judgment is sound and enforceable, as reflected by the Ecuadorian Supreme Court’s recent decision to uphold it. They argued that Chevron's case hinges on the testimony of a former Ecuadorian judge who is an "admitted liar" and was removed from the bench for unrelated and undisputed illegal conduct. The RICO defendants vehemently objected to the trial altogether, arguing that Chevron was misusing RICO and violating international law by treating the Southern District of New York as an appellate court for Ecuador’s verdict.

Critical to Judge Kaplan's decision will be the reconciliation of the directly contradictory testimony of two Ecuadorian judges on the central issue of bribery. Nicolas Zambrano, who presided over the trial in Ecuador, testified that he wrote the decision alone and that there was no bribery involved. However, Chevron presented Alberto Guerra, a former Ecuadorian judge, who testified that he accepted bribes on behalf of Zambrano from the RICO defendants in return for ruling in their favor. While Chevron attacked Zambrano’s credibility by asking very specific questions he was at times unable to answer, the RICO defendants attacked Guerra’s credibility by highlighting his criminal history and the significant compensation he received from Chevron.

Chevron used multiple witnesses to support its claim that Donziger impermissibly influenced an independent scientific report submitted to the Ecuadorian court. Donziger conceded under cross-examination that he was involved with the report in a manner that he believed was permitted in Ecuador but would have been impermissible in the United States. However, Donziger and his codefendants insisted the report was irrelevant because Zambrano did not rely on it.

Both parties anticipate a contentious appeal in the Second Circuit. The RICO defendants have stated their intention to argue that the suit should not have been entertained because overseas environmental damage decisions do not fit within RICO and the injunctive relief sought is only available in RICO suits brought by the government. Chevron, however, insists that the alleged fraud fits squarely within RICO, because "Donziger's a U.S. lawyer working with other U.S. lawyers and U.S. funders to target a U.S. company," as a Chevron attorney told Forbes magazine.

Most recently, the parties submitted dueling post-trial briefs over whether Chevron forfeited standing due to its post-trial decision to shift the type of injunction it seeks from Judge Kaplan. Rather than its initially proposed global anti-enforcement injunction (a type of injunction that the US Court of Appeals for the Second Circuit has questioned in other contexts), Chevron’s new proposed injunction would divest Donziger and his codefendants of a financial stake in the tainted judgment. According to Donziger's brief, this injunction would not cure Chevron’s alleged injury—having to defend a multitude of international enforcement suits. Chevron contends that it still faces a threat of continuing injury from pending enforcement actions. Multinational corporations and environmental lawyers remain attentive. With its record-setting judgment and extensive international media coverage, this case might greatly influence the way corporations defend against mass litigation and resolve cross-border disputes over enforcement.

—Cristina Rodrigues, Hogan Lovells US LLP, New York, NY


December 6, 2013

Sixth Circuit Rejects Classwide Arbitration Against LexisNexis

Craig Crockett’s law firm signed a contract with LexisNexis. The contract contained an arbitration clause. Under the arbitration clause, any dispute regarding LexisNexis’ charges must occur in the city where LexisNexis is located.  According to the Sixth Circuit, “[t]hat provision and others made arbitration of Crockett’s individual claims economically unfeasible, so Crockett filed an arbitration demand on behalf of himself and a putative class of other LexisNexis customers,” but the arbitration clause said nothing about classwide arbitration. Reed Elsevier, Inc. v. Crockett, ___ F.3d ___, 2013 WL 5911219 at *1 (6th Cir.).

The Sixth Circuit, applying precedent from the U.S. Supreme Court, found that issue of whether the arbitration agreement provided for classwide arbitration was for the court and not the arbitrator. Id. at *2–4. The Sixth Circuit next determined that “[t]he principal reason to conclude that this arbitration clause does not authorize classwide arbitration is that the clause nowhere mentions it.” Under controlling Supreme Court precedent, an implicit agreement to authorize class action arbitration should not be inferred solely from the fact of the parties’ agreement to arbitrate. Id. at *5.

The Sixth Circuit also considered whether the LexisNexis arbitration agreement was unconscionable. The Sixth Circuit found that the “clause is indeed as one-sided as Crockett says:  the clause favors LexisNexis at every turn, and as a practical matter makes it economically unfeasible for Crockett or any other customer to assert the individual claims that Crockett seeks to assert here.” But the Sixth Circuit found that the clause is not unconscionable because the Supreme Court has held that the absence of a class action right does not make an arbitration agreement unenforceable. Id.

Jim Shelson, Phelps Dunbar, LLP, Jackson, MS


December 5, 2013

Centuries-Old Gold Tablet Returned to Berlin Museum

In 1926, a gold tablet was shipped to the Berlin Museum (now the Vorderasiatisches Museum).  A team of German archeologists found the 3,000-year-old tablet while excavating in Iraq. In 1939, the museum was closed because of World War II. When the war ended in 1945, the gold tablet was missing. In re Flamenbaum, __ N.E.2d __, 2013 WL 6008911 (N.Y. Slip Op. 07510).

Riven Flamenbaum was a Holocaust survivor and resident of Nassau County, New York. Following Riven’s death in 2003, the gold tablet was discovered among his possessions. In the ensuing estate proceeding, Riven’s daughter listed a “coin collection” as an asset of Riven’s estate. Riven’s son objected to the accounting and claimed that what was actually the gold tablet was “the property of a museum in Germany.” The museum appeared in the estate proceeding to recover the tablet.

The estate claimed that the museum could not recover the gold tablet under the doctrine of laches and a “spoils of war” theory. The court rejected the estate’s laches defense, finding that, even if the museum had taken affirmative steps to locate the gold tablet, the estate failed to prove the museum would have discovered that the tablet was in Riven’s possession before his death.

The court also rejected the estate’s "spoils of war" theory—the notion that the Russian government gained title to the museum’s property when it invaded Germany—and subsequently transferred title to the gold tablet to Riven. The court found that this theory “rests entirely on conjecture,” as the estate failed to prove that the Russian government ever had possession of the gold tablet. Moreover, the court found that, even if there were such proof, the court declined “to adopt any doctrine that would establish good title based upon the looting and removal of cultural objects during wartime by a conquering military force.” 

Jim Shelson, Phelps Dunbar, LLP, Jackson, MS



October 31, 2013

Judge's Testimony at Chevron RICO Trial Tests Limits of Witness Compensation

A former Ecuadorian judge took the stand in a high-profile RICO action in a New York federal court and detailed his role in a bribery scheme he claims produced a record-setting $19 billion judgment against Chevron Corporation. Alberto Guerra testified over the course of two days on October 22 and 23, 2013, that he received thousands of dollars from the plaintiffs' lawyers during the underlying environmental contamination trial in Ecuador (those plaintiffs are now the defendants in the RICO action). In return, Guerra “ghostwrote” favorable orders. According to Guerra, the RICO defendants' lawyers paid $500,000 to draft the final judgment themselves. During its cross-examination, the legal team for the RICO defendants hammered Guerra on the financial benefits Chevron is providing him in return for his testimony.

Guerra is the star witness in Chevron's RICO suit against the Ecuadorian plaintiffs and their American lawyer, Steven Donziger, currently underway in the U.S. District Court for the Southern District of New York. Chevron argues that the $19 billion foreign judgment should be declared invalid because it is the product of fraud and extortion. The RICO defendants, who maintain that Chevron’s oiling activities in the Amazon region caused environmental damage and illness, deny that any bribery occurred.

In 2003, Guerra presided over the Chevron trial. The trial rotated to Judge Nicolas Zambrano's docket. According to Guerra, he continued writing court decisions—illegally—in return for $1,000 weekly payments he divided with Zambrano. Guerra explained that occasionally decisions were favorable to Chevron so that, “it could not seem as though all of the orders were being issued for the benefit of the plaintiffs . . . the idea was to not have it look suspicious.” Zambrano denies that any bribery occurred.

Guerra's testimony and the subsequent cross-examination raise important questions regarding the permissible limits for compensating a fact witness. Guerra confirmed during the cross-examination that Chevron financed his family’s move to the United States, hired an immigration attorney, and is providing housing, a monthly stipend of at least $10,000, health insurance, a car, and an independent attorney. The examination established that Chevron paid Guerra exorbitant sums for certain documents, including $10,000 for one document. The RICO defendants estimate Guerra's financial rewards will surpass $300,000. As Donziger said outside the federal court following Guerra's testimony, "Chevron is essentially bribing a judge to say I bribed a judge."

Moreover, under oath, Guerra confirmed that he knowingly and repeatedly violated Ecuadorian law during his judgeship and was fired in 2008 due to allegations of improper conduct. Lawyers for the the RICO defendants argue that Guerra has no credibility. Following Guerra’s testimony, Donziger spokesperson Chris Gowen said, "Mr. Guerra may be the least credible witness to ever take the stand in the Southern District of New York." And on October 30, 2013, Donziger followed up on his claims and moved to strike Guerra’s testimony on the grounds that Chevron “crossed the line” in its financial support of the former judge.

Chevron maintains that Guerra is merely receiving compensation for his time. Chevron notes that Guerra’s participation in the case renders Ecuador unsafe for him while his immigration status here prohibits him from working. Chevron also insists that compensation for physical evidence is permissible.

This case demonstrates that the question of compensating fact witnesses is not exclusively a legal one. A strategic question runs parallel: at what point, if any, does compensation destroy a witness’s credibility? Given the stakes involved, the resolution of this case may provide one powerful answer to that question.

As of this writing, the trial is currently scheduled to resume on October 31, 2013.

—Cristina Rodrigues, Hogan Lovells US LLP, New York, NY


September 19, 2013

Chevron Drops Money Claims Against Two Defendants in Ecuador RICO Case

In a notice of waiver of money damages filed by its attorneys on September 8, Chevron Corp. told a federal judge in the Southern District of New York it would not pursue monetary damages against two Ecuadoreans named in its Racketeer Influenced and Corrupt Organizations Act (RICO) suit over a $19 billion pollution judgment.

Although Chevron has dropped its monetary damages, it still seeks equitable relief against Hugo Gerardo Camacho Naranjo and Javier Piaguaje Payaguaje, the Ecuadoreans Chevron claims engineered the massive judgment over its purported liability for pollution in the Amazon rainforest.

Chevron has not decided for certain if it will drop damages claims against New York attorney Steven Donziger, the Ecuadoreans’ lawyer, and his firm. “The liability of Defendants Steven R. Donziger, The Law Offices of Steven R. Donziger, and Donziger & Associates PLLC on all claims shall be tried to a jury,” Chevron’s attorneys stated in a motion to bifurcate submitted the same day. “Upon a verdict of liability, the amount of compensatory and punitive monetary damages owed to Chevron Corporation by the Donziger Defendant shall be tried to a jury.

“Upon conclusion of the jury proceedings, and to the extent the Court deems necessary based on the outcome of the jury proceedings, the liability of Defendants Hugo Gerardo Camacho Naranjo and Javier Piaguaje Payaguaje on all claims to which they are defendants (as to which Chevron now seeks only equitable relief against them), all equitable relief and equitable defenses, and the personal jurisdiction and collateral estoppel defenses, will be tried to the Court without a jury,” the motion states.

“Chevron has uncovered extensive evidence that the 2011 Ecuadorian judgment was fraudulently obtained by [Naranjo and Payaguaje],” Morgan Crinklaw wrote in an email earlier this month to Bloomberg.com. “However, their international campaign to enforcement that judgment has not gained much traction to date.

“The equitable relief Chevron continues to seek against [Naranjo and Payaguaje] will enable us to protect our assets, and those of our subsidiaries, from being seized by [them] or in their name.”

Chevron sued Donziger and the Ecuadoreans in New York under the RICO Act. It alleged fraud and extortion to craft the disputed judgment. The suit claims the defendants wrongfully filed a suit in Ecuador, alleging Texaco, which merged with Chevron in 2001, dumped crude oil in the Amazon rainforest, caused residents to develop cancer, and destroyed natural resources. An Ecuadorean court subsequently entered the unprecedented $19 billion judgment against Chevron, which denied all liability and argued the suit was a criminal scheme masterminded by Donziger, Naranjo, and Payaguaje.

 “Chevron has shown over and over that its only legal strategy is to outspend everyone and continue to run from the law for another 20 years,” Chris Gowen, an attorney advising Donziger, Naranjo, and Payaguaje, said in a statement Tuesday. “When a litigant tries to avoid a jury, you can be certain that litigant knows it has no case.”

He added, “This is an extraordinarily telling moment that suggests a collapse of confidence in the Chevron camp.”

U.S. District Judge Lewis Kaplan agreed to bifurcate the upcoming trial, set to begin Oct. 15, into a jury trial phase and a bench trial phase and refused to extend the trial date. Begrudgingly, he extended the time for the Donzinger defendants to submit materials pursuant to Fed.R.Civ.P. 44.1 until September 24, 2013.

John S. Austin, Austin Law Firm, Raleigh, NC


August 26, 2013

Eighty-seven Chief District Court Judges Declare Cuts to Judiciary “Untenable”

When one receives a letter from a chief United States district judge, he should take note; however, when one receives a letter from 87 chief U.S. district judges, the recipient should pay acute attention. Vice President Joseph Biden received such a letter last week.

The judges, including immediate past chair of the Trial Practice committee, the Hon. Ruben Castillo, expressed their “grave concern over the impact of flat funding of the last few years, followed by sequestration, is having on the Judiciary’s ability to court out its constitutional and statutory responsibilities.” In the letter dated August 13, 2013, the judges implore, “As the boots on the ground in our nation’s federal trial courts, we have experienced firsthand the effect of those constraints and funding reductions.”

“They have forced us to slash our operations to the bone, and we believe that our constitutional duties, public safety, and the quality of the justice system will be profoundly compromised by any further restraints,” the letter states.

Following a period of flat funding during ever-increasing caseloads, the federal judiciary had to cut nearly $350 million from its budget in fiscal year 2013. “Emergency measures were implemented throughout the federal court system to address the drastically reduced funding levels, but the federal courts do not have the flexibility to absorb such a large cut on top of previous flat funding,” the letter adds.

The judges contend “the most significant impact of budget cuts and sequestration thus far have been the reduction in funding for Defender Services.” They argue that further cuts will only force the judiciary to cut the federal defender organization (FDO) and its staff. Cutting the FDO and its staff will only shift the workload to court appointed attorneys, who charge hourly and thus increase costs. “This is an untenable approach, both because it increases costs overall and because adding to appropriations requirements in the coming fiscal year compounds the shortfall of funding in the overall account,” the letter states.

As an exemplar, the judges cite that the federal defender’s office in New York requested to postpone the trial of alleged terrorist Sulaiman Abu Ghaith, Osama bin Laden’s son-in-law, due to staff cutbacks. They cite that courts in New Mexico and Texas as well have reduced calendaring of criminal matters due to FDO staffing shortages.

The judges also say the funding cuts have severely impacted civil and bankruptcy cases. “These staffing losses are resulting in slower processing of civil and bankruptcy cases which impacts individuals and businesses seeking to resolve disputes in federal courts,” says the letter. For example, the bankruptcy court in the Southern District of New York, the venue for many prominent and complex cases, no longer continue hearings past 5:00 p.m., when in the past it had worked late into the night.

With such a backlog of criminal cases, civil litigators may have to reconsider filing in federal courts. Given a calendar preference for criminal cases, the federal courts may become of quagmire for civil cases, where decisions on dispositive motions and trial dates are continuously months away.

John S. Austin, Austin Law Firm, Raleigh, NC


August 15, 2013

Judge Finds Apple Participated in Price-Fixing Scheme

In April 2012, the U.S. Department of Justice sued Apple and five publishing giants (Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster) alleging violations of antitrust laws over a scheme to fix e-book prices. Prior to the bench trial, all five publishers settled, leaving Apple to defend against the allegations.

The lawsuit arose out of the release of the 2010 iPad, after Apple reached an agreement with the publishers to sell e-books from its newly launched iBookstore. Prior to the launch of iBookstore, Amazon's Kindle was the dominant e-reader on the market, making Amazon the leader in e-book sales. Amazon’s market share allowed the retailer to force publishers to sell most books below cost, at $9.99. The Department of Justice alleged this lowball pricing motivated the publishers to find a way to force Amazon to raise its prices—which is where Apple came into play.

With the introduction of iBookstore, Apple entered into an agreement with the publishers under the "agency pricing" model. "Agency Pricing" allowed the publishers to set the price of e-books, giving Apple a 30 percent cut. When the iBookstore opened in April 2010, there was a uniform price increase for all e-books, including those on Amazon—who was ultimately forced to accept the agency pricing model.

After the bench trial in the Southern District of New York, Judge Denise Cote found that

The Plaintiffs have shown not just by a preponderance of the evidence but through compelling direct and circumstantial evidence that Apple participated in and facilitated a horizontal price-fixing conspiracy.

The Plaintiffs have shown that the Publisher Defendants conspired with each other to eliminate retail price competition in order to raise e-book prices and that Apple played a central role in facilitating and executing that conspiracy. Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the Spring of 2010.

Key evidence considered by Judge Cotes included the words of Steve Jobs, the late Apple chairman, who spoke of the iBookstore launch to his biographer, Walter Isaacson. "Amazon screwed it up," Jobs said. "It paid wholesale price for some books, but started selling them below cost at $9.99. The publishers hated that—they thought it would trash their ability to sell hardcover books at $28…. So we told the publishers, 'We'll go to the agency model where you set the price, and we get out 30 percent, and yes, the customer pays a little more, but that's what you want anyway." Judge Cote found this evidence "compelling," stating "Apple has struggled mightily to reinterpret Jobs's statements in a way that will eliminate their bite.  Its efforts have proven fruitless."

Apple said it would challenge the ruling at the U.S. Court of Appeals for the Second Circuit.  The hearing on damages and injunctive relief is still pending.

Dedria Harper Kolb, Nexsen Pruet, Charlotte, NC


June 21, 2013

Judge's Facebook "Friend" Status Not Enough for Recusal

A New York judge's "friend" status calls into question social media relationships and takes into consideration recognizing one's own bias. The New York State Committee on Judicial Ethics believes the mere status of being a Facebook friend does not require a judge to exercise recusal. Judges "ultimately determine the nature of their own specific relationships with particular individuals and their own ethical obligations resulting from those relationships."

This opinion arose from a judge inquiring whether it is necessary to recuse himself from a criminal trial where he is a Facebook friend acquainted with the parents or guardians of minors who allegedly were affected by the defendant's conduct. The judge states that the Facebook nomenclature "friend" is too strong a descriptive, that these parents are mere acquaintances, and that he can be fair and impartial.

Most judges intend to be fair. However, judges are people too. Bias is encountered to different degrees everyday in courts whether with a judge or a jury. When a judge asks jurors if they can be fair, perceptions of authority frequently compels a yes reply, even though jurors are riddled with bias. Often a judge or juror recognizes bias but believes that it does not affect decision-making. Social desirability to be fair is a strong motivational factor.

Do we recognize our own biases? Sometimes—but mostly not. An acquaintance of a "friend" could mean one travels in the same circles, such as your kids play in the same soccer league or attend Boy Scouts camp together. There are common values that link individuals to a group affiliation. Despite the famous Groucho Marx quip about refusing to join any club that would have him as a member, most people affiliate with people like them. The affiliation and familiarity with the group tends toward liking individuals within the group. Taking an action such as connecting to a Facebook friend indicates a level of acceptance. Additionally and to the contrary, some people like to keep their enemies close and connect with people they do not like.

Other ethics opinions stem from prevalent social media use. The Association of the Bar of the City of New York Committee on Professional and Judicial Ethics released a formal opinion in 2010 that obtaining evidence from social networking websites is acceptable as long as one does not deceptively communicate (or deceptively "friend" a potential witness or juror in the process). In today's courtroom, trial lawyers must include social media searches to flush out bias while the case is in progress.

What can a trial lawyer do when a judge shows bias and chooses to remain rather than recuse from a case? At the trial level, the defendant will need to look for other appellate issues if the trial outcome is not to the client’s liking. Bias does not imply misconduct. Bias helps in decision-making by establishing a framework for comparing right or wrong on many different levels. In the Apple v. Samsung verdict, bias in jurors did not necessarily rise to the level of misconduct.

Cynthia R. Cohen, Verdict Success LLC, Manhattan Beach, CA


June 13, 2013

Second Circuit Says District Court Judge Misapplied English Law

In a recent decision, the U.S. Court of Appeals for the Second Circuit held that a district court judge misapplied English law and overturned a 2010 jury verdict in favor of Citigroup, Inc. The court found that the jury instructions incorrectly shifted the burden of proof on an element of the fraudulent misrepresentation claim brought by Terra Firma Investments. As a result, the Second Circuit remanded the case for a new trial.

Terra Firma alleged that in the auction of EMI Group, Inc., Citi (who served as both the buy-side and sell-side advisor in the sale) made numerous statements that caused Terra Firma to overbid to acquire EMI Group. Specifically, Terra Firma alleged that Citi banker David Wormsley falsely represented that a third-party private equity firm was competing in the auction, when in fact, the firm had withdrawn its bid.  Terra Firma brought claims of fraudulent misrepresentation, negligent misrepresentation, fraudulent concealment, and tortious interference with prospective economic advantage against Citi.

Judge Jed S. Rakoff of the Southern District of New York dismissed the negligent misrepresentation and tortious interference claims and granted Citi’s motion for directed verdict on the fraudulent concealment claim. The fraudulent misrepresentation claim proceeded to the jury who found in Citi’s favor.

On appeal, Terra Firma argued that Judge Rakoff’s jury instructions misapplied English law, which governed the case. The Second Circuit agreed.  To prove fraudulent misrepresentation under English law, a plaintiff must demonstrate a misrepresentation that is (a) false, (b) dishonest, (c) intended to be relied on, (d) is relied on, and (e) causes damage. On the reliance element, the burden shifts to the representor (Citi) to prove whether the representation induced the representee (Terra Firma) to act in a certain way.

In instructing the jury, the district court incorrectly stated that Terra Firma had to prove that it did in fact rely on one or more of Citi’s misrepresentations. The Second Circuit found that the jury instructions improperly shifted the burden of proof from Citi to Terra Firma on the reliance element, thereby prejudicing Terra Firma. The court vacated the judgment for Citi and remanded the case for a new trial.

In a concurring opinion, U.S. Circuit Judge Raymond Lohier claimed there is a need for a more definite procedure for federal courts to rule on questions of foreign law, much like the system in place for reviewing state law issues. Without said formal process, district court judges may continue to misemploy foreign law.

Dedria Harper Kolb, Nexsen Pruet, PLLC, Charlotte, NC


May 29, 2013

Former Recruiter Found Guilty under Computer Fraud and Abuse Act

The Computer Fraud and Abuse Act imposes potential civil and criminal liability against “[w]hoever…knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value. . .” 18 U.S.C. § 1030(a)(4). The meaning and scope of this liability provision has been the subject of significant litigation throughout the country. One case, U.S. v. Nosal, has substantially narrowed the scope of the CFAA—at least in the Ninth Circuit. Even so-narrowed, the CFAA imposes substantial penalties for those who violate its provisions.

On April 24, 2013, David Nosal, a former top executive at the search firm Korn/Ferry International, was criminally convicted in the United States District Court for the Northern District of California under the CFAA for gaining unauthorized access to Korn/Ferry’s computer systems. Nosal worked at Korn/Ferry for eight years and left in 2004 to start his own business. U.S. v. Nosal, 642 F.3d 781 (9th Cir. 2011) (stating facts of case), rev’d on reh’g, 676 F.3d 854 (9th Cir. 2012) (en banc rehearing decision). Upon leaving, Nosal entered into formal agreements with Korn/Ferry in which he agreed not to compete with Korn/Ferry for one year and to serve as an independent contractor for ongoing assignments. Yet after his departure, Korn/Ferry accused Nosal of soliciting Korn/Ferry employees to assist him in the misappropriation of trade secrets and other proprietary information that Nosal would allegedly use to start a competing business. Those employees were alleged to have used their accounts to access Korn/Ferry’s computer system and then give Nosal source lists, names, and contact information from the company’s “highly confidential” database.

Prior to Nosal’s conviction, the Ninth Circuit Court of Appeals heard and considered the CFAA’s scope in that case. The Ninth Circuit, in U.S. v. Nosal, 676 F.3d 854 (9th Cir. 2012), found, in contravention to other Circuit Courts of Appeal, that the CFAA’s reach was narrowly proscribed. See U.S. v. Nosal, 676 F.3d 854 (9th Cir. 2012). The court held that, as used in the CFAA, the phrase “exceeds authorized access” is limited solely to violations of a computer system’s access restrictions and does not extend to “use” restrictions. Per this interpretation, a “misuse” of information contained on a computer system is not covered by the CFAA, so long as the user had permission to access the computer database. The Ninth Circuit found that its narrow interpretation of the CFAA was consistent with the CFAA’s legislative history. That history shows that in enacting the CFAA, Congress intended to punish the “hacking” of computer systems, not misappropriation of trade secrets that might result from an authorized use. The Ninth Circuit was not persuaded by some of its sister circuits, which have interpreted the CFAA more broadly to cover not only unauthorized access but also violations of computer use restrictions and the duties of loyalty by authorized users.

The Ninth Circuit’s 2012 Nosal decision dismissed the CFAA charges as they related to information gained by Nosal from employees who were currently employed by Korn/Ferry at the time they took the information. The Ninth Circuit held that because those employees had permission to access the company database, the government failed to show that they did so “without authorization” as required by the CFAA. The case went to trial regarding other individuals—who were not employed by Korn/Ferry at the time—who “borrow[ed]” the passwords of current employees to gain information and then relate that information to Nosal. See U.S. v. Nosal, 2010 WL 934257 at *8 (U.S. Dist. Ct. N.D. Cal. 2010). The Ninth Circuit did not address the latter situation which eventually resulted in Nosal’s conviction.

Nosal contended at trial that as an independent contractor for Korn/Ferry, he was authorized to access the database, a claim the government rebuffed. That issue, and the one previously left unaddressed by the Ninth Circuit, are, inter alia, the basis for Nosal’s post-trial motion for acquittal. Nosal’s defense team plans to appeal if the motion is denied—maintaining that the CFAA is meant to punish “hacking” and not “misuse”. This appeal will allow the Ninth Circuit to further clarify the CFAA’s scope, as it and other Circuits continue to define its parameters. The Circuit split also represents a ripe issue for appeal to the U.S. Supreme Court, or possible amended legislation from Congress that clarifies how far the legislators intend the CFAA to extend.

Nosal’s sentencing is scheduled for September 4, 2013. The maximum statutory penalty for the conspiracy charge and the unauthorized access charges is five years imprisonment and a fine of $250,000. The maximum statutory penalty for the trade secret charges, upon which Nosal was also convicted, is 10 years imprisonment and a fine of $250,000 and restitution.

Keywords: litigation, trial practice, Computer Fraud and Abuse Act, Nosal

Christopher S. Anulewicz and Natalie Majeed, Balch & Bingham, LLP, Atlanta, GA


April 17, 2013

Judge Overturns Suspension of Prosecutors Involved in Senator Stevens Case

On October 27, 2008, Alaska Senator Ted Stevens was found guilty on seven counts of making false statements in a federal corruption scandal alleging he had failed to properly report certain gifts—including renovations to his home—that the Department of Justice claimed to be worth more than $250,000. Eight days later, Senator Stevens narrowly lost his reelection bid by less than 4,000 votes. The loss of Senator Stevens’ seat—previously considered a safe Republican seat—temporarily gave Democrats a filibuster-proof majority in the Senate, which helped pass the Affordable Care Act, instituting fundamental changes to the nation’s health-care system.

And then the case got really interesting.

Following a whistleblower affidavit by an FBI agent, it was discovered that federal prosecutors had failed to disclose exculpatory evidence that might have resulted in a "not guilty" verdict for Senator Stevens. The evidence—colloquially known as Brady material—involved inconsistent statements by key witnesses, including evidence that prosecutors may have allowed their star witness to knowingly perjure himself regarding the repairs to Senator Stevens’ home, the linchpin of the government’s case.

After this information came to light, the presiding trial judge held the prosecutors in contempt, and called it the worst case of prosecutorial misconduct he had ever seen. Attorney General Eric Holder subsequently moved the court to set aside the verdict and dismiss the indictment against Senator Stevens with prejudice.

Two members of the prosecution team—assistant U.S. attorneys Joseph Bottini and James Goeke—were subsequently found to have committed professional misconduct and were suspended without pay by the Department of Justice.

Last week, those suspensions were overturned by an administrative law judge on the grounds that the Department of Justice violated its own procedures in suspending the two prosecutors.

The department’s governing procedures require a rank-and-file attorney with the professional misconduct review unit to review the charges and propose appropriate discipline. After the initial attorney assigned to review the charges concluded that prosecutorial misconduct had not occurred, however, the unit’s chief intervened and proposed suspensions of 40 and 15 days for Bottini and Goeke, respectively.

The administrative law judge determined that the unit chief’s intervention violated the department’s procedures, and the suspended prosecutors received harsher discipline than they would have otherwise received. The judge reversed the suspensions on the grounds of harmful procedural error. The judge did not address whether the prosecutors had committed the underlying charges of prosecutorial misconduct at issue.

Keywords: litigation, trial practice, Senator Ted Stevens, prosecutorial misconduct

John Gekas, Gekas Law LLP, Chicago, IL


April 4, 2013

Litigating the Mass Disaster Case

The Deepwater Horizon oil spill is considered the largest accidental marine oil spill in the history of the domestic petroleum industry. Following the explosion and sinking of the Deepwater Horizon oil rig, a sea-floor oil gusher opened and flowed unabated for three months thereafter, with a total discharge estimated at 4.9 million barrels.

Following the explosion, a massive response ensued to protect beaches, wetlands, and estuaries from the spreading oil, using skimmer ships, floating booms, controlled burns, and 1.84 million gallons of oil dispersants. After several failed efforts to contain the flow, the well was capped and declared sealed in September 2010. However, the months of spill, along with response and cleanup activities, caused extensive damage to marine and wildlife habitats and the Gulf's fishing and tourism industries.

Numerous investigations have explored the causes of the rig explosion and oil spill. The disaster also spawned over 130 private lawsuits as well as civil and criminal federal prosecutions. In November 2012, BP settled the federal criminal case by pleading guilty to 11 counts of manslaughter related to the explosion and fire and agreeing to pay $4.525 billion in fines and other payments. BP also faces other potential civil liability to federal and state government entities and to thousands of fishermen, businesses, and others harmed by the spill.

At the time of this writing, the federal government’s civil suit against BP and others over this disaster is now in its sixth week. It is a fact of life that mass disasters like the Deepwater Horizon rig explosion trigger mass litigation. What are the lessons that the Deepwater Horizon litigation has for lawyers in this field?

First, actions taken during the first 48 hours of any mass disaster, whether a chemical plant explosion, a large-volume toxic release, a plane crash, or an oil spill, can have significant implications in subsequent litigation. Among the issues for an attorney to consider, in representing a client in relation to such an event and the initial response, are the following:

  • Attending to the duties regarding preservation of evidence

  • Responding to governmental investigations

  • Conducting an internal investigation, including interviewing witnesses and protecting privileges

  • Handling traditional and social media

After working through the initial crisis phase, the lawyer’s attention will likely turn to defending the litigation that inevitably follows. What are the unique attributes of litigating the single-event catastrophe case, involving hundreds or thousands of plaintiffs and multiple defendants?  Issues involved in handling this type of complex litigation could include the following:

  • Insurance coverage for potential liability

  • Managing discovery and handling discovery disputes

  • Developing case themes while building the case in discovery

  • Mastering the mechanics of trying the mass disaster case

Of course, most cases end in settlement rather than with a judgment following trial. Mass disaster cases are no different. However, there are complexities and ethical implications that arise in settling hundreds of cases that involve different types of injuries and with vastly differing levels of severity and financial exposure. Lawyers handling such cases will need to know the actual mechanics involved in negotiating and settling these cases, as well as the ethical limitations, hurdles, and pitfalls that can trip up even the seasoned litigator.

The Trial Practice Committee, together with the Mass Torts Committee, will co-sponsor the following track of programs at the Section Annual Conference in Chicago on April 24–26 that will examine all of these issues:

  • The First 48 Hours—Crisis Management and Litigation Planning During Mass Disasters (April 26 at 9:40 a.m.–10:50 a.m.)

  • Mass Disaster—Litigating the Mass Tort Disaster Case (April 26 at 11:00 a.m.–12:10 p.m.)

  • Disaster Averted, Mass Tort Resolved—Settling Mass Tort Disaster Cases (April 26 at 1:40 p.m.–2:50 p.m.)

To register for the conference, please click here.

Keywords: litigation, trial practice, trial skills, mass disaster litigation, mass torts, Deepwater Horizon



April 1, 2013

How Can Improvisation Improve Your Style at Trial?

Academics and professionals, including many lawyers, tend to “intellectualize every experience, typically missing the forest for the trees.” Yet good trial lawyers know that storytelling is an effective way to capture the jury’s attention. They know that a typical lecture format can quickly make a juror distracted or inattentive altogether. It is the trial lawyer who can present a case by telling a compelling story who will undoubtedly gain and hold the attention of jurors. One way to learn how to change your style at trial and become a more effective storyteller is following some of the techniques of improvisational theory.

On a theatre stage, actors use improvisation to draw the audience into sharing the constructed reality of the stage, such that they can actually “see” the objects and characters portrayed, without the use of props or costumes. The same technique is necessary for trial lawyers who must draw the jury into sharing the reconstructed reality of past events, such that they “see” what happened through witness testimony and other evidence, even though they were not present to observe the original actions.

To learn more about the art of improvisation can make you a more effective trial lawyer, come to the Section Annual Conference in Chicago (April 24–26) and attend the following CLE program:

How to Change Your Style at Trial
Thursday, April 25
3:20 p.m.–4:30 p.m.
Track: Trial Practice & Skills

Keywords: litigation, trial practice, trial skills



April 1, 2013

Twelve Sure Ways to Lose a Trial

Attorneys often want to know what the most effective ways to present a trial are. While knowing what to do in the courtroom is important, sometimes attorneys can learn a lot more from what not to do at trial. In this CLE program, “12 Sure Ways to Lose a Trial,” Federal District Court Judge Ruben Castillo will share his advice on what lawyers should absolutely avoid doing in the courtroom. Judge Castillo’s tips are based on 18 years of experience as a federal trial judge and over 30 years of experience as both a student and teacher of trial advocacy. In addition to sharing his experiences, Judge Castillo will moderate a panel of other seasoned federal judges who will discuss effective trial techniques.

To learn more about how to avoid “needlessly antagonizing a judge” and other courtroom faux pas, come to the Section Annual Conference in Chicago (April 24–26) and attend the following CLE program:

12 Sure Ways to Lose a Trial
Thursday, April 25th
2:00 p.m.–3:10 p.m.
Track: Trial Practice & Skills

Keywords: litigation, trial practice, trial skills



March 26, 2013

Cameras in the Courts

Cameras are increasingly present in trial court across the country. Federal courts are now in the second year of a pilot program that allows the recording of civil trials in 14 different district courts. Commercial television access and subscription services exist for many trials in state courts.

What can lawyers expect when cameras are used to broadcast their trials? Highly publicized trials can create issues for both trial lawyers and trial judges. If a trial will be broadcast, additional steps are required to protect privileged communications and the reasonable privacy interests of jurors and witnesses. Lawyers and judges may also need to take additional efforts to reduce the risk of mistrial and juror misconduct. On the other hand, broadcasting trials presents new opportunities for trial lawyers to try a better case. For example, a lawyer can use a simulcast trial to get needed feedback from a “virtual shadow jury”—that is, a shadow jury that observes the trial remotely, avoiding the big footprint of an in-court shadow jury. 

To learn more about the impact of broadcasting trials—and to get some ethics CLE credit—come to the Section Annual Conference in Chicago, April 24–26, and attend the following CLE program: “Cameras are in the Courts, Now What?”

To attend the conference, register here.

Keywords: litigation, trial practice, cameras in courts, shadow jury

Nash Long, Winston & Strawn LLP, Charlotte, NC



March 20, 2013

Sequestration Cuts Spell Trouble for Federal Courts

The well-known $85 billon sequestration cuts went into effect on March 1, 2013. Facing nearly $350 million in reductions to its operational budget for the upcoming year, the federal court system joined the ranks of those that claim the sequestration cuts will do irreparable harm.  According to U.S. Circuit Court Judge Julia Gibbons, chair of the federal Judicial Conference Budget Committee, “a cut of this magnitude particularly so late in the fiscal year, will affect every facet of court operations.”

The judiciary predicts the sequestration cuts will reduce funding for drug testing, mental health treatment, information technology programs, court-appointed attorneys, and court security and probation officers and will result in an overall slow-down of cases pending in the federal courts.  The Administrative Office of the U.S. Courts warned that the sequestration cuts could cause as many as 2,000 court officers to be terminated or furloughed during the coming year and that  federal civil trials could be suspended or delayed in an effort to contain costs. These measures will come on the heels of the approximately 1,800 court staff who were terminated or furloughed over the past 18 months.

It is important to recognize that each federal court controls its own budget and expenses. Therefore, we can expect that the federal courts will be soon facing difficult choices about how to implement the spending cuts. Until now, the federal courts have provided litigants with a more efficient and predictable avenue for litigation than state courts. Litigators will have to wait and see whether the sequestration cuts will change the face of federal litigation and require them to rethink litigation strategies.

Keywords: litigation, trial practice, sequestration, federal courts

Robert E. Sumner IV, Moore and Van Allen, PLLC, Charleston, SC


March 14, 2013

Supreme Court Rules Against Using GPS Device for Tracking

Washington, D.C., nightclub owner Antoine Jones will be tried a fourth time following a mistrial earlier this week in the high-profile drug prosecution. At the center of this case is the landmark Supreme Court ruling that determined that the warrantless tracking of Jones’s vehicle through a GPS device violated Jones’s Fourth Amendment rights.

Here, the government obtained a search warrant permitting it to install a GPS tracking device on Jones’s vehicle.  The search warrant authorized installation of the device in the District of Columbia within 10 days, but the device was installed in Jones’s vehicle on the eleventh day in Maryland. The government then tracked Jones’s vehicle for 28 days and eventually brought charges against him related to drug trafficking.

Following a mistrial in 2007, Jones was convicted in 2008 of conspiracy and sentenced to life in prison. The District Court held that the data obtained from the GPS tracking device that the government had installed in his vehicle was admissible because Jones had no expectation of privacy on public streets. The D.C. Circuit reversed, concluding that admission of the evidence obtained by warrantless use of the GPS device violated the Fourth Amendment.

In United States v. Jones, No. 10–1259, the Supreme Court ruled that the attachment of the GPS device to Jones’s vehicle and its subsequent use constituted a search under the Fourth Amendment. The installation of the device on Jones’s vehicle without his knowledge was considered a physical occupation of private property for the purpose of gaining information.

The Supreme Court found the physical nature of the installation of the GPS device on Jones’s vehicle dispositive and in violation of the Fourth Amendment, which is grounded in common-law trespass principles. The Court found that the “reasonable expectation of privacy” test was not applicable because a physical trespass had occurred.  However, the Court found that situations involving merely the transmission of electronic signals without trespass would remain subject to the “reasonable expectation of privacy” test. Thus the reasonable expectation of privacy test has been added to, not substituted for, the common-law trespassory test.

Following the Supreme Court’s ruling, Jones’s conviction was struck.  Jones was prosecuted a third time, which ended in a mistrial in early March 2013. The prosecution has stated that Jones will be tried a fourth time.

Regardless of Jones’s ultimate fate, it is clear that courts across the country will be determining the scope and implications of the Supreme Court’s decision for years to come. 

Keywords: litigation, trial practice, GPS devices, Fourth Amendment, privacy

Elizabeth Shively Boatwright, Brennan, Manna & Diamond, LLC, Akron, OH


March 13, 2013

A Unique Remedy for Juror’s Use of Social Media

A misbehaving juror in Florida has received an unusual sentence: Instead of facing jail time for contempt for his use of social media to research the defendant in violation of the court’s order, he will have to report for more jury duty.

Vishnu P. Singh was selected as a juror in a first-degree murder trial in front of Hillsborough Circuit Judge William Fuente in October 2012. Judge Fuente, who had recently declared a mistrial in a separate high-profile murder case after multiple members of the jury pool gossiped about the defendant during breaks in the selection process, was particularly careful to make sure that the jurors understood that they could not research or talk about the case. In fact, he gave each member of the jury pool an individual written order not to do any research or talk to anyone about the capital case. To further emphasize the prohibitions, Judge Fuente reminded the group before every break about these rules.

Despite those warnings, during a break, Singh searched for information about the defendant on Google, in violation of Judge Fuente’s order. Another member of the jury pool reported Singh to Judge Fuente. After telling him to be prepared for jail time when he was summoned back, Judge Fuente had Singh thrown out of the courthouse. Singh told the Orlando Sentinel that he remembered receiving a paper from the judge, but had not read the whole thing. 

On Friday, January 11, 2013, a contrite Singh begged for Judge Fuente’s forgiveness, explaining that curiosity had gotten the better of him. Instead of imposing jail time as he had threatened to do, Judge Fuente ruled that Singh must report for jury duty once a week for three months. If Singh fails to report for jury duty as ordered, he will go to jail for five days.

Although Judge Fuente said he believes that other jurors and prospective jurors disobey court orders and perform Internet searches for defendant names, he hopes that Singh’s sentence will serve as a cautionary tale. “It’s important that this be brought to the public’s attention,” he said during Singh’s hearing.

While Judge Fuente’s ruling certainly sends a message about the importance of abiding by the rules when serving as a juror, the imposition of continued jury service as a sentence may undercut the importance of such service. The right to a trial by a jury of peers is a cornerstone of the United States legal system. Courts throughout the country advise potential jurors that the duty to serve is both an honor and an important obligation of citizenship. To turn jury service into a penalty undermines this concept of civic duty and affirms many citizens’ belief that jury duty is its own special form of punishment.  Moreover, in addition to policy issues, the ruling raises a host of practical questions. For example, will Singh disclose in voir dire that he’s empanelled serially as punishment?  On this basis, would the judge allow a strike for cause to remove Singh or would counsel be forced to use a peremptory challenge?

This case illustrates the stresses—and the cost—that social media is putting on the criminal justice system. And others share Judge Fuente’s frustration. The Federal Model Jury instructions were recently amended to incorporate a plethora of warnings and admonitions designed to stop jurors from using social media. After several cases in California in which jurors’ use of the Internet to perform research and make comments about the trial put criminal convictions in jeopardy, the California Legislature amended the criminal contempt definition to cover juror misconduct. Under this amendment, California jurors who use electronic devices and wireless communications to conduct research or disseminate information about the trial face up to six months of jail time. In courts without specific rules, judges are holding jurors in contempt for using electronic devices to perform research on the case or to discuss the trial and sentencing them to fines or jail time.

It will be interesting to see if other judges follow Judge Fuente’s lead in imposing additional jury service for such violations. While such a sentence may seem fitting in the heat of the moment, widespread use of this important civic duty as a punishment ultimately could undermine the jury system.

Keywords: litigation, trial practice, jury service, social media, Internet, criminal justice

Noelle Valentine, Allston & Bird, LLP, Charlotte, North Carolina


February 25, 2013

Exclusion of Expert Could Derail Prosecution in Controversial Case

On December 23, 2010, Bei Bei Shuai, a woman who was eight months pregnant, attempted to commit suicide by consuming rat poison after her boyfriend broke up with her. She survived, but her baby was born prematurely and died four days later on January 3, 2011.

Three months later, the State of Indiana charged Shuai with murder and attempted feticide.  She was jailed without bail. After a decision by the Indiana Court of Appeals, Shuai was released from jail on a $50,000 bond. She is set to stand trial in April 2013.

Shuai’s case has set off substantial national debate. There is debate over whether Shuai had the requisite intent for her actions to be deemed criminal. There is uncertainty over the actual cause of the newborn’s death. This case has also sparked intense debate on issues such as women’s reproductive rights and prosecutorial discretion.

However, the trial court judge delivered what is likely a devastating blow to the prosecution’s case. Marion County Superior Court Judge Sheila Carlisle ruled in late January that the state’s main causation witness will not be allowed to testify regarding her opinion that the baby died as a result of the rat poison ingested by Shuai.

Judge Carlisle found multiple problems with the report of the pathologist who performed the baby’s autopsy. The judge found that the pathologist’s opinion on the cause of death was not reliable. The pathologist did not consider other potential causes for the brain bleeding that led to baby’s death and did not rule out indomethacin, a chemical used in Shuai’s treatment that is said to be associated with hemorrhages in babies. The report also failed to address the fact that babies born prematurely can have bleeding in their brains, often for unknown reasons. Ruling out the unknown cause is often a difficult hurdle for experts to overcome in many types of cases.

The judge ruled the report also did not provide proper support for the process by which the pathologist reached her causation opinion. She also found that the record failed to reflect any literature the pathologist relied on and that the “informal” Internet research conducted by the pathologist was not saved or maintained in her file.

As a result, the judge limited the pathologist to testimony regarding her observations and anatomical findings from her autopsy, and she would not be permitted to testify on cause of death.

This leaves the prosecution with few options. The prosecutor has admitted that with the existing combination of witnesses and without any proof of cause of death, the prosecution could not go forward on the murder charge. The prosecution still has options to seek interlocutory appeal, seek to add a new expert to testify on causation, or to drop the murder charge and proceed on the attempted feticide charge. The attempt charge does not require proof of causation, according to the prosecutor.

Certainly this case is an example of the challenges involved with complicated medical causation cases—not only in the criminal context, but in the civil arena as well.


Keywords: litigation, trial practice, evidence, experts, trial practice, Bei Bei Shuai 

J. Todd Spurgeon, Kightlinger & Gray, LLP, New Albany, Indiana.


January 14, 2013

D.C. Circuit to Decide on Osama Bin Laden Photos

On Thursday, January 10, 2013, the United States Court of Appeals for the District of Columbia heard oral arguments on whether the photographs taken after Osama bin Laden’s death are protected from disclosure under the Freedom of Information Action (FOIA) request filed by the conservative political watch group, Judicial Watch.  In April of 2012, District Judge James Boasburg ruled that the images were exempt from disclosure under FOIA, reasoning that the United States’ concern over national security is a sufficient basis for withholding and that verbal descriptions of the images constitute an acceptable response to the FOIA request.  In its reply brief, Judicial Watch argues that the photographs do not fall within the protections of an executive order issued pursuant to 5 U.S.C. §552(b)(1) because the Department of Defense (DOD) and Central Intelligence Agency (CIA) have failed to demonstrate that all 52 images were properly classified. Specifically, Judicial Watch argues that it is not accurate to state that all of the photos depict “foreign activities,” depict “intelligence activities,” or could be expected to cause “grave damage to national security.” Judicial Watch takes issue with the DOD’s and CIA’s representation of all the images as gruesome, graphic images that focus on bin Laden’s bullet wounds, pointing out that some of the photos were taken of the burial at sea. Additionally, Judicial Watch highlights the fact that the DOD and CIA failed to provide an appropriate index of the images withheld from production. Judges Merrick Garland, Judith Rogers, and Harry Edwards presided over the appeal.

Keywords: litigation, trial practice, Osama bin Laden death, Freedom of Information Act, photographs, national security, appeal

Robert E. Sumner, IV, Esq.; Moore & Van Allen, PLLC, Charleston, South Carolina


December 19, 2012

Judge Unseals Sanctions Order in DuPont Case

After jury awards $1 billion verdict against E.I. du Pont de Nemours and Company, court reveals findings that DuPont’s stacking position “was never rooted in fact, but was a fabrication based on a false misrepresentation to the court.”

In 2009, Monsanto sued E.I. du Pont de Nemours and Company (DuPont) in federal court in St. Louis for patent infringement and breach of its license to use Monsanto patents. DuPont counterclaimed for antitrust violations and reformation of its license arrangements. In August, 2012, a jury awarded Monsanto $1 billion in damages on its patent-infringement claims. The jury’s award, however, is but one notable aspect of this case.

During the proceedings, DuPont allegedly took the position that it believed its license agreement permitted it to combine, or “stack,” Monsanto’s patented approach to protect crops from herbicides with DuPont’s own technology to make a new product that would compete with Monsanto in the agri-chemical marketplace.

During discovery, Monsanto uncovered communications between DuPont executives and its outside counsel, which allegedly revealed that DuPont knew that the license at issue prohibited it from stacking Monsanto’s patented technology. Monsanto soon after moved to sanction DuPont for making false representations to the court.

Last December, the court issued a sealed order sanctioning DuPont for taking the stack position while knowing it was false. Prior to trial, Monsanto sought to unseal the court’s December 21, 2011 memorandum and order (sanctions order) purportedly because DuPont continued to make public statements that it was permitted to stack Monsanto’s patents.

Senior U.S District Judge E. Richard Webber of the Eastern District of Missouri appropriately denied Monsanto’s motion to unseal the sanctions order prior to trial, primarily to ensure that the case would be tried before an unbiased jury. That decision protected the integrity of the judicial system and the rights of the parties to a fair trial.

Post-trial, however, with the concerns about integrity of the judicial process moot, the court unsealed the sanctions order, revealing the court’s finding that DuPont’s stacking “position was never rooted in fact, but was a fabrication based on a false misrepresentation to the court.” The sanctions order lambasts DuPont, finding that:

    Defendants have made a mockery of this proceeding and delayed this litigation by their insistence that they believed they had the right to stack and commercialize RR and OGAT. Defendants have repeatedly made false representations to the court and these misrepresentations have compromised the integrity of the case and abused the judicial process.

As a sanction, Judge Webber struck many of DuPont’s counterclaims and awarded Monsanto its attorneys’ fees. This case is a solemn reminder, as the court so aptly stated, that “[c]orporate officers and the corporation’s counsel are expected to abide by the same rules of honesty and obedience to the rule of law that all individual litigants are required to follow … ”

Keywords: litigation, trial practice, misrepresentation; sanctions, Dupont, stacking approach

Peter S. French, Benesch Friedlander Coplan & Aronoff, Indianapolis, Indiana


December 10, 2012

The Art of a Compelling Closing Argument

Although consultants believe that the majority of jurors have made up their minds by the end of opening statement, closing argument is the last time to persuade jurors before the jury deliberates. Closing argument is the one opportunity to marshal all of the evidence and synthesize it for the jury. Closing argument is the final chance to argue your case, and remind the jury what evidence was credible and what evidence was not. 

While much of the themes and content should parallel your opening statement, this is the occasion where you can fold argument into the evidence from the trial. So the question is what are the key elements of closing argument? While everyone needs to have their own style and personality, there are certain things that every lawyer should do in order to make their closing argument as effective as possible.

Be Organized and Prepared 
One of the most important things to remember about closing argument is to be organized and prepared.  You should know the rules before you begin: where you can stand, where you can walk, when you can make objections, how much time you have. If allowed, do not hide behind the podium. Get in front of it.  Do not think that closing argument needs to be memorized. On the contrary, you want to have notes and you should use notes on the basis that “you want to get things right.” Have your exhibits ready. And, of course, if you are going to object, know the appropriate reasons to object—i.e., new facts not in evidence, misstatement of testimony, personal viewpoints, golden rule, etc.

The Introduction
Although the actual substance of the closing argument will obviously vary, there are certain parts of a closing argument that need to be present. The key sections to closing include an introduction, a discussion of jury instructions and the special verdict form, a summary of the evidence, a rebuttal of your opponent's case, a discussion of damages, and closing. The introduction allows the jury to understand the process and should outline what will happen. It lets them understand that they will hear jury instructions on the law. It lets them understand which party gets to go first and last. It should give them an outline to follow about what they will hear.

Jury Instructions and Verdict Form
Weaving jury instructions and the special verdict form into your argument is essential to an effective closing. Do not discuss all of the instructions unless you want to put the jury to sleep, but be sure to discuss key instructions. You should then use key words from the instructions repeatedly in your closing: “not defective,” “not unreasonably dangerous,” “not negligent.” And when it comes to the special verdict form, tell the jury what the questions are and how they should answer them. 

Tell Your Story with Passion
Be impassioned. This is your one chance where it is okay to show emotion. Use effective speech and persuasion. Make the jury feel enthusiastic about your cause. At the same time, while it is important to show the jury that you care about your case, it is equally important that you are honest, clear, and yourself. We have all seen great orators with totally different styles. Be a good orator, but be yourself.

It is equally important that you do not let the plaintiff control your closing argument. Closing argument should use all of the key evidence to tell why the jury should find in favor of your client. It should remind the jury of what the witnesses and experts said that make it obvious that your client is right. And it should most definitely point out to the jury why the plaintiff's case is not credible. Witnesses that impeached themselves or are unreliable should be exposed. Witnesses that dodged answers should be discussed.  Concessions made on cross must be noted. It is okay to tell a jury why not to believe these individuals.

Consider trying to use half of your closing argument time for ideas that are new to the jury. Perhaps using similar themes but with a new metaphor. If you can build policy into your argument, do it. Juries like to feel good about what they are doing. 

Rebutting the Other Side
You will need to rebut the other side's closing, but this should not be the focus, and do not worry about rebutting every piece. Much of what your opponent said has already been forgotten by the jury. But if there were a few key representations of the fact that are false, tell the jury that there were a few representations made that need to be clarified. And then list them very methodically. Or, if their argument is devoid of merit, say it and then tell them why. In fact, if the plaintiff gets a rebuttal, you should do your best to control what they say in their rebuttal. Comment on the issues that make the plaintiff's case hard and demand that they address them. You can even anticipate what they will be and note how they lack credibility.

Show and Tell with Exhibits
There can be a danger to using too many exhibits or a PowerPoint— or both—as it can interrupt flow or stop people from listening. But typically people remember things better when they see them. And an effective closing argument will bring out exhibits used in trial. Or even better, it can bring out new demonstrative exhibits. List all of the evidence that the plaintiff has failed to produce. List all of the witnesses that support your theory. List all of the documents that support your position. 

Juries need to hear your view on damages. Although a defense lawyer's primary focus should be on liability, you should not ignore the damages case. Your introduction to the same needs to make it apparent that damages should not come into play, but that somehow, given their exaggerated damages, it could not go unnoted. And then give the jury a fair, reasonable number that shows you are reasonable and trustworthy.

Finally, like any presentation, your closing argument should have a conclusion. Here, you want to summarize your key points. You want to remind the jury that the plaintiff likely gets the last word, but that you trust them to consider what the counter arguments are. You want to thank them for their service. Closing argument is the last opportunity you have to arm your supporters with facts and arguments. It is the last chance to tell everyone in the room why you should win. Do it with reason. Do it with clarity.  Do it with passion.

Keywords: litigation, trial practice, closing argument, jury

Alana K. Bassin, Bowman and Brooke LLP, Minneapolis, MN



December 5, 2012

Federal Courts Face Fiscal Cliff

With the "fiscal cliff" approaching, senator Charles Grassley (R-Iowa), the ranking member of the Senate Judiciary Committee, is pushing the federal court system to reevaluate cuts and create a comprehensive plan for operating with less.

In October, the Administrative Office of the United States Courts (AO) informed the Senate Judiciary Committee that a proposed cut of $555 million, or 8.2 percent, would be "devastating." While recognizing "the funding reductions would be difficult to absorb," Grassley recommends that federal courts do some trimming "to ensure as little disruption as possible in case sequestration occurs." For example, in his letter to judge Thomas F. Hogan, director of the AO, Grassley outlined his concerns about the "significant amount of court funding spent on non-case related travel." Over the last two years, Grassley placed a total value on this "significant amount" at nearly $19 million for trips to Hawaii and spa weekends.

The senator did not include other ideas for the proposed cuts. Instead, he criticized the AO for using scare tactics, including proclaiming that sequestration (better known as the fiscal cliff) would require the federal courts to downsize its staff by as much as a third, furloughs of up to five weeks for court employees, limitations on defender services, reducing court security, and ending pay for jurors. Thus, Grassley asked the AO for the following information by December 4, 2012:

    1) The detailed plan for how the AO intends to meet effectively the demands of any potential sequestration, and the demands of the federal court system.

    2) The cost savings for each measure outlined in the plan provided in question (1) would generate.

    3) Details regarding the decision-making process for determining where funding cuts would be made, how deep those cuts would be, and what, if any, programs would not receive a funding reduction.

    4) Details about how funding for non-case related travel throughout the federal judiciary will be reduced.

    5) The results of the Federal Judicial Center survey of judges to ascertain which resources they consider most (and least) essential to performing their official duties.

How the AO will respond to this request remains to be seen. However, as congress, the president, federal courts, and agencies consider the impact of budget cuts and shortfalls, they should be mindful that not all budgets affect our constitutional rights and not all budgets are created equal. 

Keywords: litigation, trial practice, fiscal cliff, sequestration, Senator Grassley, Senate Judiciary Committee, AO, federal court system

Christopher S. Anulewicz and M. Anne Kaufold-Wiggins of Balch & Bingham LLP



November 26, 2012

Legal Consequences of Lying About Jury Duty

Most trial lawyers know the story of Nicholas Easter in Runaway Jury, lying to get on the jury. Runaway Jury and other movies fictionally depict jury tampering. There are real incidents and repercussions for lying to get on the jury or lying to get off jury duty. Recent news reports in The New York Times and the Associated Press shed light on sentencing jurors.

In Salem, Massachusetts, a potential juror in a rape case admitted lying to the judge. Jonathan Ngarambe, 23, admitted lying to get onto a jury hearing a gang rape case. Ngarambe, a former classmate of three of the four defendants, as well as the victim, was asked repeatedly by Judge John Lu, whether he knew anyone involved in the case. Ngarambe insisted he did not. As Ngarambe was being arraigned on charges of perjury, he remained Facebook friends with one of the defendants. He also contacted the victim before the trial. The charges could have carried up to a 30-year sentence. Ngarambe was sentenced to two years in jail, followed by two years probation, 250 hours of community service, and to complete his GED.

"A trial before a fair and impartial jury is one of the fundamental principles of our democracy," District Attorney Jonathan Blodgett stated. "Had this young man succeeded in getting on this jury, it would have represented a serious miscarriage of justice for the victim of a horrific rape. This sentence sends a strong message that this kind of behavior won't be tolerated."

Ngarambe's defense lawyer told the story how Ngarambe's family came to the United States in 2000 after being in a Red Cross refugee camp in the Democratic Republic of the Congo. His father, a member of the Tutsi tribe, was held as a political prisoner by the government. In deciding on a two-year sentence, instead of a greater sentence, the judge noted that Ngarambe may not have realized the seriousness of his actions.

Friends often ask trial lawyers, "How do I get off jury duty?" Common lore is that someone who seems too radical, too opinionated, or victimized, are easily excused. Next time, think twice about those radicals, opinion mongers, or unfortunates. Susan Cole showed up with her hair in curlers, wearing mismatched socks and shoes, and pretended to be mentally ill to get out of jury duty. Months later, the judge heard her telling a radio show that she lied to get out of jury duty. Cole pleaded guilty last week in Denver to a felony charge of attempting to influence a public servant and a misdemeanor charge of second-degree perjury. Forty lashes? No, but 40 hours of community service, two years of probation, and a two-year deferred judgment on the felony.

Sentencing a juror for lying to get on a jury is worse than lying to get off. Stealth jurors with a motivation to change the outcome of the trial are more rare, but far worse than those jurors who simply lie to get off jury duty.

Keywords: litigation, trial practice, jury duty, lying, jury tampering, fair trial, felony, The New York Times, Associated Press

Cynthia Cohen, Ph.D., Verdict Success LLC


November 12, 2012

The Billion-Dollar Question

Following Apple’s groundbreaking $1 billion jury verdict against Samsung for patent infringement, Samsung moved the California court for a new trial on the basis of juror misconduct. Samsung claims that the jury foreman failed to disclose during voir dire that in 1993, he was sued by his former employer, Seagate Technology, PLC—a company in which Samsung later invested. Samsung maintains that the juror was biased against Samsung because of the Seagate matter and hid the suit to get on the jury.

Apple responded that Samsung waived the argument because it “should have” learned of the Seagate suit prior to the verdict. Samsung then moved to compel Apple to disclose how and when it learned of the Seagate suit. Samsung believes this information is critical to the waiver argument because, says Samsung, if Apple did not know of the suit until after verdict, it has no basis to contend that Samsung “should have” known that information before the verdict. And if Apple knew prior to the verdict, it violated its obligation to disclose the juror’s omission of the suit to the court.

On Friday, November 2, 2012, Apple filed an opposition brief to Samsung’s motion to compel, asserting that it should not have to produce the requested information. In the brief, Apple raised three grounds for denial of the motion. First, Apple’s knowledge has no relevance to what Samsung knew or could have discovered. Apple points out that Samsung knew of the juror’s bankruptcy and employment with Seagate during voir dire but elected not to investigate these facts.

Second, Apple had no duty to disclose this irrelevant information, and finally, Apple maintains that its juror research is attorney-work-product privilege. Apple’s brief highlights the lack of direct precedent supporting Samsung’s position and the self-serving nature of the argument.

There is no question that Apple is skeptical about Samsung’s recent efforts to get the court to declare a mistrial. Based on a reading of Apple’s brief, Samsung faces a difficult task in convincing the court that Samsung is entitled to discovery of any information from Apple.

Keywords: litigation, trial practice, Apple, Samsung, voir dire, attorney-work-product privilege

Robert E. Sumner IV, Moore & Van Allen, PLLC, Charleston, South Carolina


November 1, 2012

Louisiana Officials Still Challenged by Gulf Coast Oil Spill

Last week, Louisiana moved the court overseeing the Deepwater Horizon MDL for a jury trial on its $1 billion claim against British Petroleum for loss of revenue caused by the April 2010 Deepwater Horizon oil spill that devastated the Gulf Coast. In its motion, Louisiana expressed frustration with the pace of the MDL and stated, “Because proceedings on damages resulting from the Deepwater Horizon oil spill are stayed, Louisiana essentially has no recourse through the legal process.” Although the MDL judge scheduled a trial to begin early next year, the state believes it requires a separate trial on the limited issue of its 2010 economic losses to aid the parties in resolving the remainder of their differences.

Following the catastrophe, hundreds of private plaintiffs and many state and local governments filed civil lawsuits against BP. Those cases were consolidated in an MDL before Judge Carl J. Barbier of the Eastern District of Louisiana. Judge Barbier organized the claims into “pleading bundles” (personal injury and death, private individual and business loss, public damages, and injunctive relief) and divided the trial into three phases, the first of which is to begin in January 2013.

Judge Barbier has largely stayed all governmental actions, leaving Louisiana officials frustrated. The state therefore filed a motion on October 24, 2012, requesting targeted discovery and a separate trial on the quantum of damages for its loss of income tax, sales tax, mineral royalties, and oil and gas revenues in 2010.

Louisiana brings its claim for over $1 billion in lost revenue under the Oil Pollution Act of 1990 (OPA). In its motion, Louisiana describes BP’s two main defenses. First, BP maintains that Louisiana is only entitled to its net economic loss under OPA, which, according to BP, obligates the court to offset the state’s losses by any increase in tax revenue that can be tied to BP’s response and clean-up efforts after the oil spill (such as increased employment which yields increased income tax). In particular, BP will likely argue that it is entitled to an offset related to the $22 billion it spent to fund response operations, clean-up, and claims. Under this analysis, says BP, Louisiana is not entitled to any damages—instead, the state owes BP money. Second, BP will argue that the state’s economic losses were caused by the federal drilling suspension that was instituted shortly after the oil spill, and not by BP.

Given these hotly contested legal issues, Louisiana argues that a “narrowly limited test case” focused on its economic loss claims will help the state and BP move the case to resolution and also benefit other private and government litigants who are dealing with the same issues.

Keywords: litigation, trial practice, British Petroleum, BP, Deepwater Horizon, oil spill, Gulf of Mexico, Louisiana

Eric J. Goldberg, Pepper Hamilton LLP, Princeton, New Jersey


November 1, 2012

Wanted: California Judicial Officers

The Judicial Council of California recently released its November 2012 report titled, The Need for New Judgeships in the Superior Courts: 2012 Update of the Judicial Needs Assessment. The report, available at http://www.courts.ca.gov/7466.htm, assessed the need for additional judicial officers in the California state court system. The Judicial Council explained, “Securing adequate judicial resources for the courts is a top priority for the Judicial Council and is critical to ensuring public access to justice.”

Despite observing a modest decline in the assessed need for 2012, the Judicial Council estimates that the California Judiciary needs approximately 264 judicial officers. The absence of judicial officers in California will affect a litigant’s access to justice and the speed in which litigants may be heard. “The need for new judgeships in the superior courts is substantial and continues to need to be addressed to ensure the ability to provide justice,” according to the report.

The Judicial Council reported that the number of authorized judicial positions has been constant since 2008 and detected some growth in need for juvenile, family, and probate cases based on new requirements from the council and the state legislature. But that need was offset by a greater efficiency observed in felony cases and a sharp drop in misdemeanor filings. Thus, the assessed judicial need from has fallen slightly from 2008 to 2012.

Despite this downward trend, the takeaway from the Judicial Council’s report is that the need for judicial officers in the California legal system is substantial and critical. Without the addition of hundreds of judicial officers, judges will have a much harder time staying on top of the litigation workload in the state and litigants will experience longer delays.

Keywords: litigation, trial practice, Judicial Council of California

Phoebe N. Coddington, Winston & Strawn LLP, Charlotte, North Carolina


October 15, 2012

The Art of Closing Argument

Although consultants believe that the majority of jurors have made up their minds by the end of opening statement, closing argument is the last time to persuade jurors before deliberation; the one opportunity to marshal all of the evidence and synthesize it for the jury; and the final chance to argue your case and remind the jury what evidence was credible and what evidence was not.

While much of the themes and content should parallel your opening statement, this is the occasion where you can fold your argument into evidence from the trial. So the question is: What are the key elements of closing argument? While everyone needs to have their own style and personality, there are certain things that every lawyer should do in order to make their closing argument as effective as possible.

Be Organized and Be Prepared
One of the most important things to remember about closing argument is to be organized and prepared. You should know the rules before you begin: where you can stand, where you can walk, when you can make objections, and how much time you have. If allowed, do not hide behind the podium. Get in front of it. Do not think that closing argument needs to be memorized. On the contrary, you want to have notes to use on the basis that "you want to get things right." Have your exhibits ready. And, of course, if you are going to object, know the appropriate reasons to object—new facts not in evidence, misstatement of testimony, personal viewpoints, golden rule, etc.

The Introduction
Although the actual substance of the closing argument will obviously vary, there are certain parts of a closing argument that need to be present. The key sections to closing include: an introduction; a discussion of jury instructions and the special verdict form; a summary of the evidence; a rebuttal of your opponent's case; a discussion of damages; and closing.

The introduction allows the jury to understand the process and should outline what will happen. It lets them understand they will hear jury instructions on the law, which party gets to go first and last, and should give them an outline to follow about what they will hear.

Jury Instructions and Verdict Form
Weaving jury instructions and the special verdict form into your argument is essential to an effective closing. Do not discuss all of the instructions unless you want to put the jury to sleep, but be sure to discuss key instructions. You should then use key words from the instructions—"not defective," "not unreasonably dangerous," "not negligent”—repeatedly in your closing. When it comes to the special verdict form, tell the jury what the questions are and how they should answer them.

Tell Your Story with Passion
Be impassioned. This is your one chance where it is okay to show emotion. Use effective speech and persuasion. Make the jury feel enthusiastic about your cause. At the same time, while it is important to show the jury that you care about your case, it is equally important that you are honest, clear, and yourself. We have all seen great orators with totally different styles. Be a good orator, but be yourself.

It is equally important that you do not let the plaintiff control your closing argument. Closing argument should use all of the key evidence to tell why the jury should find in favor of your client. It should remind the jury of what the witnesses and experts said that make it obvious that your client is right. And it should most definitely point out to the jury why the plaintiff's case is not credible. Witnesses that impeached themselves or are unreliable should be exposed. Witnesses that dodged answers should be discussed. Concessions made on cross must be noted. It is okay to tell a jury why not to believe these individuals.

Consider trying to use half of your closing argument time for ideas that are new to the jury, perhaps by using similar themes but with a new metaphor. If you can build policy into your argument, do so. Juries like to feel good about what they are doing.

Rebutting the Other Side
You will need to rebut the other side's closing, but this should not be the focus, and do not worry about rebutting every piece. Much of what your opponent said has already been forgotten by the jury. But if there were a few key representations of the fact that are false, tell the jury that there were a few representations made that need to be clarified, and then list them very methodically. Or, if their argument is devoid of merit, say so and then tell them why.

In fact, if the plaintiff gets a rebuttal, you should do your best to control what they say in their rebuttal. Comment on the issues that make the plaintiff's case hard and demand that they address them. You can even anticipate what these issues will be and note how they lack credibility.

Show and Tell with Exhibits
There can be a danger to using too many exhibits or a PowerPoint (or both), as it can interrupt flow or stop people from listening. Typically, people remember things better when they see them, and an effective closing argument will bring out exhibits used in trial. A good closing also can bring out new demonstrative exhibits. List all of the evidence the plaintiff has failed to produce, all of the witnesses that support your theory, and all of the documents that support your position.

Juries need to hear your view on damages. Although a defense lawyer's primary focus should be liability, you should not ignore the damages case. Your introduction needs to make it apparent that damages should not come into play, but that somehow, given their exaggerated damages, they could not go unnoted. Then give the jury a fair number that shows you are reasonable and trustworthy.

Finally, like any presentation, your closing argument should have a conclusion. Here, you want to summarize your key points; remind the jury that the plaintiff likely gets the last word, but that you trust them to consider what the counterarguments are; and thank them for their service.

Closing argument is the last opportunity you have to arm your supporters with facts and arguments—and the last chance to tell everyone in the room why you should win. Do it with reason. Do it with clarity. Do it with passion.

Keywords: litigation, trial practice, closing argument

Alana K. Bassin, Bowman and Brooke LLP, Minneapolis, Minnesota


June 22, 2012

Primary Witness Lacks Credibility; Roger Clemens Acquitted

After enduring a “slow, agonizing” retrial and a few ballyhooed naps, a jury wasted little time in acquitting former Major League Baseball pitcher Roger Clemens of lying to Congress about alleged steroid use. The trial took nine weeks and featured 46 live witnesses, but jurors needed only 10 hours of deliberation to acquit Clemens on all counts.

The jury’s relatively short deliberations surprised some court watchers after the trial received as much attention for its length, repetition, and boredom as anything else. By the fifth week, two jurors had been dismissed for falling asleep. At one point, U.S. District Court Judge Reggie Walton even chided lawyers by paraphrasing Hamlet for contributing to the “slow, agonizing pace” with endless objections: “Thou doth protest too much.”

Yet through all of it, the jury was clearly listening. And they didn’t like what they heard. Their verdict presents a triumph of credibility over the excessive presentation of evidence.

The lack of credibility of former strength coach and primary witness Brian McNamee—who spent 26 hours on the stand—was key. Clemens’s defense team successfully turned the trial into a referendum on McNamee’s credibility, who admitted his story about Clemens had changed over time and was repeatedly contradicted by other witnesses. One juror told reporters after the trial that “[t]he defense showed that McNamee was a liar and once that was done, nothing that he said could hold up.”

As the only eyewitness to Clemens’s alleged steroid use, McNamee’s credibility was always important. But it became crucial after Clemens’s long-time friend, teammate, and training partner Andy Pettitte admitted under cross-examination that there was a 50-50 chance he had misinterpreted a 1999 conversation in which Pettitte has said Clemens admitted to using human growth hormone. Pettitte’s account of that story contradicted Clemens’s testimony before Congress in 2008, and was a precursor to Clemens’s perjury trial that followed.

The government’s physical evidence did not fare much better. Prosecutors presented DNA evidence from two cotton balls and a needle that McNamee says he saved after injecting Clemens with steroids in 2001. But McNamee also said he stored the cotton balls for six years in a beer can he found in a recycling bin. After a controversial defense expert was allowed to testify, the forensic toxicologist told the jury, “If you submit garbage to the laboratory, more than likely you’re going to get garbage on the end.”


Keywords: Clemens, steroids, perjury, trial

John Gekas, Gekas Law LLP, Chicago


June 18, 2012

Settlement Offer Defeats Class Action Lawsuit

Jerome Damasco filed a class-action lawsuit against Clearwire Corporation in an Illinois state court. Demasco alleged that Clearwire violated the Telephone Consumer Protection Act by sending unsolicited text messages to cellphone users.

Clearwire offered to settle the suit by giving Damasco and up to ten others $1,500 for each text message received from Clearwire, together with court costs. Clearwire also offered to stop sending unsolicited text messages to mobile subscribers.

Sometimes timing is everything. Clearwire next removed the case to federal court. Damasco then moved for class certification. As it turns out, he waited too long. Clearwire moved to dismiss the case, arguing that the settlement offer eliminated Damasco’s personal stake in the case and made his claim moot. The district court dismissed the case, and denied Damasco’s motion to reconsider.

Demasco filed an appeal which proved to be unsuccessful. Under Holstein v. City of Chicago, 29 F.3d 1145 (7th Cir. 1994), Clearwire’s offer mooted Damasco’s claim. The mootness doctrine requires that the parties have a personal stake in the outcome at all stages of the litigation. When the defendant offers to satisfy the plaintiff’s entire demand, there is no remaining dispute to litigate.

In the court of appeals, Damasco tried to create an exception to the mootness doctrine in potential class actions where defendants offer relief to named plaintiffs before they have a reasonable opportunity to seek class certification.

Damasco argued that Holstein should be overruled or distinguished. The appeals court recognized that four circuits have disagreed with its approach. Those circuits have ruled that unless there is undue delay, a plaintiff may seek to certify a class even after being offered complete relief.

The court of appeals, however, determined that the exception created by the other circuits was unnecessary. To allow a case to continue in federal court when the sole plaintiff no longer maintains a personal stake defies the limits on federal jurisdiction.

The appeals court stated that the mere fact that the complaint identifies the suit as a class action is not enough, by itself, to keep the case in federal court. There is an easy solution: class-action plaintiffs can move to certify the class at the same time that they file their complaint. This motion, while pending, would protect the class from attempts to settle with the named plaintiffs.

The appeals court also pointed out that counsel can ask the district court to delay its ruling, in order to provide time for additional discovery or investigation.

The court of appeals also reminded district courts that they must engage in a “rigorous analysis” before ruling on class certification.

Damasco also argued that the result would be different if Clearwire had made its offer under Rule 68. This was unavailing. Clearwire made its offer while the case was in state court, and Illinois has no rule similar to F.R.Civ.P. Rule 68.

The appeals court held that the district court did not abuse its discretion in denying Damasco’s request for reconsideration. Damasco v. Clearwire Corporation, 652 F.3d 891 (7th Cir. 2011)

Keywords: mootness doctrine, class action, Clearwire Corporation, Telephone Consumer Protection Act

Michael R. Lied , Howard and Howard Attorneys PLLC, Peoria, IL


June 4, 2012

California's Financial Crisis Hits L.A. Superior Courts

California’s budget crisis is rearing its ugly head, as the most significant reduction of the Los Angeles Superior Courts’ services will occur by June 30, 2012. The court is closing 56 courtrooms (24 civil, 24 criminal, 3 family, 1 probate, and 4 juvenile delinquency courts). With attrition over the past two years and staff reductions, nearly 350 workers will be out of jobs. The court also will eliminate its Informal Juvenile Traffic Court program, an innovative program for helping minors with low-level offenses.

According to Los Angeles Superior Courts Presiding Judge Lee Smalley Edmon, “Staffing reductions due to budget cuts over the past 10 years have forced our court to reduce staffing by 24%, while case filings continue to increase. This has created incredible pressures on our court to keep up with our work. We cannot endure these pressures for much longer.” The court’s press release further says that additional staffing reductions are required to deal with the fact that the state’s budget crisis has resulted in a funding reduction of $652 million to the California judicial branch. The court managed its share of these cuts by spending down year-end fund balances, freezing wages, furloughing court staff, and eliminating staff positions, achieving $70 million in ongoing savings as of last fiscal year.

­As of May 15, 2012, the court no longer provides court reporters for civil trials. Court reporters will be available for civil law and motion matters on a limited basis. Parties may arrange for privately retained reporters by stipulation. Beginning July 1, there will be a list of court-approved official court reporters without a stipulation posted on the court’s website www.lasuperiorcourt.org. (For further information, click on News and Media, then Notices to Attorneys.)

At the State Chief Justices Roundtable moderated by ABA President Bill Robinson, III, during the Section of Litigation Annual Meeting in DC, chief justices from the District of Columbia, Delaware, South Carolina, Tennessee and Texas discussed the courts funding crisis. California is not alone on this matter, but California’s financial crisis hits hard. Fewer courtrooms mean longer timelines and frustration for clients wanting expedient justice. California Chief Justice Tani Cantil-Sakauye stated to the Women Lawyers Association of Los Angeles last February that getting a restraining order and filing suit will become more difficult especially for the underserved population.

Lawyers with civil trials in Los Angeles now have longer wait times to get a courtroom. This could be a blessing to mediators, if it prompts an early settlement, or a curse because most parties drag their feet until a trial date is real. Civil trials, however, still frequently occur in Los Angeles—it is still one of the largest court districts in the country. With no rocket docket, trial lawyers have more time to prepare for trial. This could allow more time for discovery and jury research as clients decide whether to hold’em or fold’em.

Keywords: California courts, budget cuts, funding crisis, court reporters


Cynthia Cohen, Verdict Success LLC



March 6, 2012

Second Circuit Affirms Limits on Extraterritorial RICO Jurisdiction

On January 25, 2012, the U.S. Court of Appeals for the Second Circuit affirmed a district court decision dismissing a Venezuelan man’s RICO suit against several Venezuelan government officials. Cedeño v. Castillo, No. 10-3861-CV, 2012 U.S. App. LEXIS 1469 (2d Cir. Jan. 25, 2012). Cedeño, a Venezuelan exile, brought suit in the United States against several Venezuelan officials and their political allies, alleging that they had engaged in an extortion and money laundering scheme. Specifically, Cedeño alleged that the officials pegged Venezuela’s currency to the U.S. dollar and manipulated the exchange rate by trading government bonds and U.S. treasury bills as part of a racketeering scheme. Cedeño tried to use the officials’ reliance on New York banks as a predicate for finding RICO jurisdiction, but both the Southern District of New York and the Second Circuit disagreed.

The district court dismissed the case on the defendants’ motion to dismiss. Cedeño v. Castillo, 733 F. Supp.2d 471 (S.D.N.Y. 2010). Cedeño argued that the court had jurisdiction because: RICO provides for extraterritorial jurisdiction; or even if RICO does not provide for extraterritorial jurisdiction, the alleged acts fall under RICO’s domestic application. As to extraterritorial jurisdiction, the district court relied on the Supreme Court’s decision in Morrison v. National Australia Bank Ltd., to hold that as the RICO statute does not expressly provide for extraterritorial jurisdiction, such jurisdiction does not exist., 2884; 2010 U.S. LEXIS 5257 at *33 (June 24, 2010). The district court also rejected Cedeño’s domestic jurisdiction argument. It reasoned that the RICO statute is concerned primarily with domestic enterprises, and while the alleged course of conduct did touch the United States, “RICO does not apply where, as here, the alleged enterprise and the impact of the predicate activity upon it are entirely foreign.”

The Second Circuit wholly affirmed. It refused to credit Cedeño’s argument that RICO applies extraterritorially because the predicate offenses upon which he based his complaint apply extraterritorially. The court again relied on Morrison and Norex Petroleum Ltd. v. Access Indus., Inc. to hold that courts may not apply RICO extraterritorially even though some statutes outlawing its predicate offenses may apply abroad. Norex,631 F.3d 29, 33 (2d Cir. 2010). Additionally, Cedeño contended that the district court’s domestic application analysis was erroneous because it focused on domestic enterprises rather than on a “pattern of racketeering” in the United States. The Second Circuit decided that even if the district court should have focused on a pattern of racketeering, Cedeño still failed to allege that the defendants’ acts in the United States proximately caused his injuries. Thus, the Second Circuit, in an important statement, continued to erect barriers between foreign plaintiffs and the U.S judicial system.

Keywords: Extraterritorial RICO Jurisdiction, foreign plaintiffs, U.S. Court of Appeals for the Second Circuit, Venezuela, Cedeño v. Castillo, Morrison v. National Australia Bank Ltd.

—Robert Carlton, Haynes and Boone, LLP.



February 13, 2012

DOJ Urges Fourth Circuit to Reject Reporters' Privilege in All Criminal Investigations and Cases

In a case that the media law bar is monitoring closely, the Department of Justice recently filed its opening brief in its appeal of a district court’s order quashing the department’s subpoena to reporter James Risen. The government is urging the Fourth Circuit to draw a distinction between civil cases (where the Fourth Circuit has previously recognized the existence of a First Amendment reporters’ privilege) and criminal investigations and cases (where, according to the government, the privilege is inapplicable).

Judge Brinkema of the Eastern District of Virginia has quashed two subpoenas to author and New York Times reporter James Risen, both of which were issued in the course of the government’s investigation and prosecution of former CIA agent Jeffrey Sterling. At first, Judge Brinkema quashed a grand jury subpoena to Risen—but the grand jury indicted Sterling nevertheless. Then the government issued a trial subpoena to Risen—and again, the subpoena was quashed on the grounds that (i) a qualified First Amendment reporters’ privilege existed, even in the context of a criminal case, and (ii) the government had failed to overcome the privilege because it could not establish that the testimony was necessary or that there was a compelling interest in the testimony.

The government took an interlocutory appeal from Judge Brinkema’s decision granting the motion to quash the trial subpoena—but not right away. In fact, the government did not take its appeal until just days before trial was set to start, right after the court struck two of the government’s “key witnesses” as a (unrelated) discovery sanction. According to the government, this sanctions ruling was severe enough to “effectively terminate[] the prosecution.” The government is currently appealing the discovery sanction as well.

Whatever the government’s primary reasons for taking this appeal, the reporters’ privilege issue is now front-and-center. In its opening brief, the government claims that it is “not aware of any case in which a court has excluded the testimony of a reporter who personally witnessed a crime”—and Risen, by hearing Sterling disclose secret CIA information, was a witness to a crime, so the argument goes. Focusing on the Supreme Court’s decision in Branzburg v. Hayes, 408 U.S. 665 (1972), the government is urging the Fourth Circuit to adopt a position that hues close to the D.C. Circuit’s 2005 decision in In re Grand Jury Subpoena (Judith Miller), 438 F. 3d 1141, 1148 (D.C. Cir. 2006): Specifically, that Branzburg foreclosed any argument concerning a First Amendment reporters’ privilege in the criminal context. (The Judith Miller case arose in the context of a grand jury subpoena, not a trial subpoena.) Although the government acknowledges that the Fourth Circuit has recognized a qualified reporters’ privilege in the civil context, see Ashcraft v. Conoco, Inc., 218 F.3d 282, 287 (4th Cir. 2000), the government is arguing that the privilege must be limited in criminal matters (to the point of non-existence, it seems), because “our historical commitment to the rule of law is nowhere more profoundly manifest than in our view that the twofold aim of criminal justice is that guilt shall not escape or innocence suffer.”

At the district court, Risen also argued that he was protected by a reporters’ privilege that is, or should be, recognized as a matter of federal common law. On this appeal, the government claims that the district court “rejected” this argument (the district court stated that it will “limit its analysis to the reporter’s privilege under the First Amendment”), and implies that Risen cannot maintain this argument on appeal because he has not cross-appealed that earlier decision. The government argues in the alternative that, if a reporters’ privilege does exist, it has been overcome on these facts. Risen and Sterling’s briefs are due on February 14.

Keywords: Fourth Circuit, reporters privilege, Jeffrey Sterling, First Amendment.

—Nathaniel S. Boyer, Hogan Lovells US LLP, New York City.


November 28, 2011

ABA Files Amicus Brief in Lawyer Immunity Appeal

On Monday, November 21, 2011, the American Bar Association waded into the Supreme Court fight over whether a private lawyer retained to work with government employees is entitled to qualified immunity. In Filarski v. Delia (Case No. 10-1018), the appellant, a firefighter in Rialto, California, sued the city, its fire department, and fire officials under 42 U.S.C. § 1983 regarding an internal affairs investigation conducted when fire officials suspected that Delia was improperly using sick days to perform work on his home. Also named in the suit was Steve Filarksi, the private attorney hired by the city to assist with the investigation.

The California trial judge dismissed the case, finding that all of the defendants were entitled immunity. In September of 2010, however, the Ninth Circuit reversed and ruled that Filarksi was not entitled to qualified immunity because he was not an "employee" of the city. The Supreme Court granted certiorari to review the Ninth Circuit opinion on September 27, 2011, and is set to resolve the circuit split created by the opinion. Specifically, the Ninth Circuit refused to follow the Sixth Circuit ruling in Cullinan v. Abramson, 128 F.3d 301 (6th Cir. 1997) (citing Richardson v. McKnight, 521 U.S. 399 (1997)), which accorded immunity to private lawyers working for a municipality.

Siding with Filarksi, the ABA contends that "qualified immunity from Section 1983 suits is essential for private attorney's representing government clients." The ABA notes that the private bar provides government entities with an array of legal services that are essential to the performance of government functions. As such, the failure to extend immunity to private lawyers will substantially deter the involvement of outside counsel and negatively impact the government's ability to resolve conflicts. Citing to increased insurance costs and exposure to punitive damages, the ABA argues that "ensuring qualified immunity would promote the strong public interest in the continuing representation of public entities by private counsel." The Supreme Court's ruling on this issue will have far-reaching implications for all lawyers in this country who provide legal services for government entities. Oral argument is scheduled for January 17, 2012.

Keywords: Filarski v. Delia, amicus brief, lawyer immunity

Robert E. Sumner, IV, Esq., Moore & Van Allen, PLLC


November 28, 2011

Lawsuit Challenges Constitutionality of California Pro Hac Admission Rules

Across the United States, the trend is to reduce barriers to multi-jurisdictional client legal service in a global economy. In September of this year, the American Bar Association's Commission on Ethics 20/20 announced proposed changes to the Model Rules of Professional Conduct that would reduce barriers to the multi-jurisdictional practice of law. Comments to those proposed changes are due on November 30, 2011.

A recent lawsuit filed in the United States District Court, Northern District of California, San Francisco division, captioned National Association for the Advancement of Multijurisdictional Practice et al. v. United States et al., challenges the constitutionality of the local rules for admission pro hac vice in the California district courts and alleges that the restrictions on out-of-state admission are unconstitutional.

By way of example, the lawsuit claims that Northern District of California, Local Rule 11.3(b), which disqualifies from pro hac vice appearance lawyers who reside in California, regularly engage in the practice of law in California, or have registered to take the California Bar exam or are awaiting bar exam results. The suit complains that this rule and others like it violate federal equal rights, privileges, and immunities and "constitute a wall of financial protection and provide California licensed attorneys with a monopoly."

The proposed amendment to Rule 5.5 of the ABA Model Rules of Professional Conduct, however, would still prohibit a lawyer to be admitted to practice by motion where the lawyer has "systematic and continuous presence" in that jurisdiction.

As the cross-border practice of law continues to increase to serve the needs of clients in a global economy, there is bound to be more debate and litigation over the constitutionality of the rules that govern admission of out-of-state attorneys by motion.

Keywords: ABA Commission on Ethics, Rule 5.5, Rule 11.3(b), proposed amendment

Peter S. French, Benesch Friedlander Coplan & Aronoff, Indianapolis, IN


October 31, 2011

Can a Court Preside over Private Arbitration? One Group Says "No"

Contracting parties waive their right to a trial by jury and elect to arbitrate their disputes every day in the United States. Public policy strongly favors such alternative dispute resolution. In April 2009, the State of Delaware jumped on the alternative dispute resolution bandwagon when the state legislature adopted 10 Del. C. §349, which empowers the Delaware Court of Chancery to arbitrate business disputes upon the request of the parties where the amount in controversy exceeds $1 Million.

On October 25, 2011, Delaware Coalition for Open Government, Inc. (a not-for-profit corporation) filed suit against the Delaware Court of Chancery, five of its justices, and the State of Delaware, claiming that the Delaware Court violates the First Amendment to the United States Constitution by holding private arbitration proceedings. The main objection by the Delaware Coalition for Open Government is that such proceedings are confidential, and, this denies the public access to both the record of proceedings and hearings.

Like its counterpart in the United States Constitution, Section 9 of the Delaware Constitution provides that "[a]ll courts shall be open." The plaintiffs admit in their complaint that the right to public access is "presumptive," perhaps implicitly acknowledging that in some instances it is permissible for courts to hold closed proceedings. Courts have closed proceedings in cases involving state's secrets and in some intellectual property cases. Only time will tell whether public courts can preside over confidential arbitration proceedings.

Keywords: Delaware Chancery Court, First Amendment, arbitration

Peter S. French, Benesch Friedlander Coplan & Aronoff, Indianapolis, IN


October 13, 2011

Jury Selection Begins in Trial of New Jersey Criminal Defense Attorney

It is not unusual for New Jersey criminal defense attorney Paul Bergrin to defend a high-stakes criminal trial. After all, the prominent trial lawyer has handled numerous high-profile criminal cases for clients ranging from drug dealers to rap superstars like Queen Latifah and Lil' Kim. But what is most unusual about this particular case is Bergrin's client: himself.

On Tuesday, jury selection began in the Newark federal courthouse where Bergrin is representing himself as lead trial counsel against two charges accusing him of orchestrating the street murder of an FBI informant in 2004. Bergrin has been charged with a total of 33 counts in a 139-page indictment by the same U.S. Attorney's Office where Bergrin himself was a federal prosecutor in the 1980s. In addition to murder, Bergrin has been accused of various crimes, including fraud and cocaine trafficking. In 2009, Bergrin pled guilty to charges relating to his involvement in a high-end Manhattan prostitution service that Bergrin took over from one of his clients after the client was sentenced to 18 months in prison.

For now, however, Bergrin will only be tried on charges relating to his involvement in arranging the FBI informant's murder after U.S. District Court Judge William Martini severed the other charges in the indictment. Bergrin, who was reportedly fond of the expression "no witness, no case," allegedly passed the informant's name to a Newark drug dealer who Bergrin was representing. The informant was subsequently gunned down in broad daylight.

Due to safety concerns, Bergrin’s courtroom movements during the trial will be restricted. He will be required to stand behind a podium during witness examinations and must pass trial exhibits to witnesses through a proxy. It is not clear if Bergrin will be allowed to participate in sidebar conferences, which, if allowed, will happen only with a U.S. Marshal present. Bergrin has requested that prosecutors be similarly restricted, but it is not clear what restrictions on prosecutors will be imposed.

Opening statements are scheduled to begin next week. For more information on the case, see the New Jersey Star-Ledger's archives.

Keywords: Paul Bergrin, witness murder, FBI informant

John Gekas, Gekas Law LLP, Chicago, IL


October 3, 2011

Fifth Circuit Finds District Court Misapplied Cy Pres Doctrine in Class Action

The Fifth Circuit reversed a district court's order distributing unused medical monitoring funds from a class action settlement to third-party charities and ordered that the funds be distributed to a subclass that contained the most seriously injured class members. Klier v. Elf Atochem North America, Inc., ___ F.3d ___, 2011 WL 4436528 (5th Cir. 2001).  

In 1992, several plaintiffs filed a class action lawsuit against Arkema. Plaintiffs alleged that they were exposed to arsenic and other toxic chemicals from Arkema’s plant in Bryant, Texas. The parties eventually reached a $41.4 million settlement.

The settlement agreement created three subclasses. Subclass A was made up of class members who contracted cancer or birth defects. Subclass B was made up of class members who lived near the plant and met specified exposure standards, but its members were not required to demonstrate physical injury. Subclass C was established to compensate class members for property damages and diminution in property value.

Approximately $830,000 went unused during the administration of the medical monitoring program created for the benefit of Subclass B, because the initial participation rate was low and no significant health problems were found during the medical monitoring program.

The settlement administrator filed a status report, which explained that the medical monitoring program had ended and that approximately $830,000 was unused and needed to be distributed by the district court. The parties agreed that it was not economically feasible to distribute the unused funds to the members of Subclass B. The district court asked the parties for proposals for distribution of the unused funds.

Class counsel did not respond to the district court's request. Arkema proposed a cy pres distribution to seven charitable entities. Ralph Klier, a member of Subclass A, opposed Arkema's proposal and requested that the unused funds be distributed pro rata to the members of Subclass A. The district court ordered that the unused funds be distributed in equal shares to three of the charities proposed by Arkema and a charity selected by the court.

On appeal, the Firth Circuit explained that in the class action context, a cy pres distribution is a way for the court to put unclaimed settlement funds to their next best use for the benefit for the class. A cy pres distribution of unclaimed settle funds to a third-party is permissible only when it is not feasible to make further distributions to class members, except where an additional distribution would provide a windfall to class members whose claims were 100 percent satisfied by the initial distribution. "Cy pres comes on stage only to rescue the objectives of the settlement when the agreement fails to do so."

With these principles in mind, the Fifth Circuit reversed the district court, because the cy pres distribution was contrary to the terms of the two settlement documents, i.e., the Class Action Settlement Agreement and the Protocol for Distribution of Settlement Fund (the protocol).  

The Fifth Circuit concluded that no provisions in the settlement documents authorized a cy pres distribution. Moreover, the protocol required the district court to distribute the medical monitoring funds that were unused by members of Subclass B to other subclasses, as long as such distributions were feasible and equitable. The Fifth Circuit found that distribution of the unused medical monitoring funds to Subclass A was feasible and equitable because the members of Subclass B suffered no injuries, whereas the members of Subclass A suffered the most serious personal injuries.

Jim Shelson, Phelps Dunbar, LLP, Jackson, MI


September 27, 2011

Judicial Conference of the United States Met in September

The Judicial Conference of the United States met in New York City on September 13, 2011. The Judicial Conference is the governing body that sets policy for the federal judiciary. Headed by the chief justice of the United States Supreme Court, the Judicial Conference is comprised of the chief judges for the 13 federal appeals courts, a district judge for each of the 12 circuits, and the chief judge of the Court of International Trade. In September 2010, the Judicial Conference was responsible for introducing cameras into certain federal courtrooms as part of a three-year pilot program.


In light of budget pressures this year, the Judicial Conference increased various fees in federal courts beginning in November 2011. The increased fees are expected to generate $10.5 million in revenue for the federal judiciary. The Judicial Conference also increased public access fees for those using the Public Access to Court Electronic Records (PACER) from eight cents to ten cents per page. Local, state, and federal agencies will be exempt from the increase for three years. To minimize the impact of the fee increases, the billing process for PACER will be adjusted to require quarterly billing only to users who accrued more than $15 in fees.


The Judicial Conference also addressed the procedure for filing cases under seal. Specifically, the Judicial Conference states that cases should be filed under seal only when required by law or when "justified by a showing of extraordinary circumstances and the absence of narrower feasible and effective alternatives such as sealing discrete documents or redacting information." In 2006, 576 cases of the more than 245,000 total civil cases were filed under seal. Approximately one-third of those cases under seal were qui tam actions. The Judicial Conference also modified the judicial system's electronic case file system to include annual reminders to judges to review those cases filed under seal.

Robert E. Sumner IV, Moore & VanAllen, Charleston, SC


September 27, 2011

Second Circuit Vacates Preliminary Injunction Prohibiting Actions to Enforce Ecuadorian Judgment Against Chevron

On September 19, 2011, the Second Circuit Court of Appeals issued an order denying a Mandamus Petition seeking to compel district court Judge Lewis A. Kaplan to recuse himself from the Chevron lawsuit against several individuals accused of violating United States racketeering laws as a part of a scheme to obtain an $18 billion judgment against Chevron in Ecuador. The court also vacated a preliminary injunction issued by Judge Kaplan that prohibits efforts to enforce the $18 billion judgment pending appeal in Ecuador and stayed Chevron's claim for a judicial declaration that the Ecuadorian judgment is unenforceable in the United States. Notably, Chevron's racketeering claims are permitted to move forward on the merits.

According to a press release issued the same day by Chevron, the Second Circuit decision to vacate the injunction was handed down after representatives of the judgment holders promised to refrain from enforcement efforts pending the Ecuadorian appeal.

It is anyone's guess when the dispute between Chevron and Ecuador will be finally adjudicated or resolved. Chevron's appeal in Ecuador could be handed down any time between now and next year. No trial date has been set on Chevron's racketeering claim in the United States District Court.

Keywords: Chevron, Lago Agio, Ecuador

Peter S. French, Benesch Friedlander Coplan & Aronoff, Indianapolis, IN


September 14, 2011

ABA Proposes to Streamline Ethics Rules, Reduce Barriers to Cross-Border Practice of Law

In a development important to trial lawyers that practice in multiple jurisdictions, the American Bar Association’s Commission on Ethics 20/20 announced proposed changes to the Model Rules of Professional Conduct. These proposed changes represent the ABA's effort to implement meaningful ethical rules that recognize advances in technology and the desire for reduced barriers to multi-jurisdictional client service in a global economy. The draft rule changes published for comment by the Commission would make the following changes:

  • reduce the number of years a lawyer must be actively engaged in the practice of law before qualifying for admission in another jurisdiction by motion
  • permit lawyers to practice law in another jurisdiction for up to a year while a pursuing admission to practice in that jurisdiction
  • further define when virtual advertising may constitute systematic and continuous practice of law in a jurisdiction that requires a license to practice
  • loosen restrictions on disclosure of client information for the purpose of determining whether a conflict of interest exists if a lawyer joins a firm
  • establish circumstances where a lawyer and client may agree to select which jurisdiction’s conflict of interest rules apply in a multi-jurisdictional client representation

The proposed rules can be found on the ABA Journal’s website. The Ethics 20/20 Commission is seeking comments on its draft proposal no later than November 30, 2011.

Peter S. French, Benesch Friedlander Coplan & Aronoff, Indianapolis, IN


September 6, 2011

Federal Judge Upholds Reporter's Privilege in Criminal Trial

In November 2010, Judge Brinkema of the Eastern District of Virginia quashed a subpoena issued to journalist James Risen in the course of a federal grand jury investigation. The following month, the grand jury indicted former CIA case officer Jeffrey Sterling—without Risen's testimony. Then, in May of this year, the government issued another subpoena to Risen, this time seeking testimony about his confidential sources at Sterling's criminal trial. Risen agreed to authenticate the book and newspaper articles at issue, but moved to quash the remainder of the subpoena. On July 29, Judge Brinkema once again quashed the subpoena for Risen's testimony. See United States v. Sterling, No. 1:10cr485 (LMB) (E.D. Va. July 29, 2011).

The government's failure to overcome the reporter's privilege may come as a surprise to those following the case. In her opinion addressing Risen's grand jury subpoena, Judge Brinkema made clear that the government may overcome the reporter's privilege at trial, where it would face a much higher burden of proof—guilt beyond a reasonable doubt. Yet, in quashing the trial subpoena, Judge Brinkema found that the government completely failed to establish two elements necessary to overcome the reporter's privilege in the Fourth Circuit: a lack of alternative means for obtaining the evidence and a compelling interest in the testimony.

Explaining that "circumstantial evidence is no less probative than direct evidence," Judge Brinkema held that the government had several alternative means for establishing that Sterling was Risen's source, including telephone records, emails, computer files, and the testimony of another intelligence official. Sterling at 23, 28. Judge Brinkema also rejected the government’s argument that Risen's testimony would make the trial more efficient. To establish a compelling interest, she held that the government must show that Risen’s testimony was "necessary or critical to proving Sterling's guilt beyond a reasonable doubt." Id. at 30. Judge Brinkema found that the government failed to meet either of these standards and quashed the subpoena for Risen's testimony. Id. at 31.

See also Federal Judge Upholds Reporter's Privilege in Grand Jury Investigation (Aug. 3, 2011).

Sarah J. Gregory, Hogan Lovells, New York, NY


August 30, 2011

Can a Media Frenzy in the Court of Public Opinion Undermine Due Process?

The recent Casey Anthony case in Florida pitted fair trial advocates against proponents of free press and transparency in government. It is not surprising that Florida, which has the most liberal sunshine laws in the country, would (not for the first time) be at the center of this decades-old debate. In an impassioned editorial, Miami criminal attorney Terrence Lenamon, who participated in Anthony’s early defense negotiations, accuses the press of violating the constitutional right to due process and endangering us all. See the Orlando Sentinel. But a study by researchers William E. Loges, of Oregon State University, and Jon Bruschke, of California State University at Fullerton, published in their book, Free Press vs. Fair Trials: Examining Publicity's Role in Trial Outcomes, by Lawrence Erlbaum Associates in 2005, suggests that media coverage has no effect on trial outcomes.  See About.com.  Still others question the Antony’s “victory” in the judicial system. See CBSnews.com. Is that victory actually outweighed by Anthony’s apparent conviction in the so-called “social media courts"? Are there other basic freedoms and essential rights at risk here, even after the “fair trial” ends in acquittal?

Alicia Santana Torres, Rivero Mestre LLP, Miami, FL


August 23, 2011

Judge Denies Stay of Discovery in Chevron Challenge to Enforceability of Ecuadorian Judgment

On February 14, 2011, in a case commonly known as the "Lago Agrio Litigation," Maria Aguinda et al. v. Chevron-Texaco, an Ecuadorian Court entered a whopping $18 billion judgment against Chevron for alleged private injuries from environmental contamination that occurred in Ecuador's Oriente region. The alleged contamination occurred between the 1960s and 1990 during a joint venture oil operation between Texaco Petroleum Company and Ecuadorian owned Petro Ecuador. In 1992, total responsibility for operations was handed over to the Ecuadorian venture partner as Texaco wound down its operations. Chevron is the named defendant as it acquired Texaco stock at the end of 2001.

Chevron is appealing the judgment in the Ecuadorian court system and claims that it was entered only because of an illegal conspiracy between plaintiffs' lawyers and the Ecuadorian government to manufacture the evidence presented. Interestingly, Texaco's joint venture partner, Petro Ecuador, was shielded from liability as the result of an agreement with the plaintiffs' lawyers and others.

In addition to appealing the Ecuadorian judgment, Chevron is also taking the offensive, having initiated claims in the United States District Court for the Southern District of New York, in which it alleges that numerous lawyers (including the plaintiffs' lawyers), environmental consultants, and Ecuadorian officials participated in a racketeering scheme that led to the multi-billion dollar judgment (US RICO Lawsuit). Chevron has also filed a claim seeking a judicial declaration that the $18 billion Ecuadorian judgment is unenforceable in the United States or anywhere else.

The plaintiffs' lawyers have announced their intention to enforce the $18 billion judgment in multiple jurisdictions around the world and have sought multiple stays of the US RICO Lawsuit in order to proceed with attachment of Chevron assets.

On May 31, 2011, the New York Federal Court granted the request of Steve Donziger, one plaintiff lawyer named as a defendant in the US RICO Lawsuit, to sever the claim for declaratory relief from the rest of the RICO action. Thereafter, Donziger sought to intervene as a party with respect to the severed claim, which only seeks relief against his clients, the holders of the Ecuadorian judgment.

The court declined Donziger's invitation to intervene, in essence, because his interests were purely derivative of his clients. Donziger is appealing the denial of his motion to intervene and has sought to stay discovery in the severed declaratory judgment action while that appeal is pending.

On June 14, 2011, the Honorable Lewis Kaplan, United States District Judge, denied Donziger’s motion to stay finding that while "[b]oth Donziger and the LAP Representatives are trying to prevent any discovery in this action whatsoever," Donziger failed to show any threat of irreparable injury in the event that a stay is denied and that Chevron would be prejudiced by a stay of proceedings pending appeal.

The US RICO Lawsuit and the severed declaratory judgment claim are presently moving forward on discovery and no trials are scheduled yet.

Keywords: Chevron, Lago Agio, Ecuador

Peter S. French, Benesch Friedlander Coplan & Aronoff, Indianapolis, IN


August 15, 2011

Hero of Atlanta Olympics Unsuccessful With Libel Claims

On July 27th, 1996, at the Olympic Games in Atlanta, Georgia, a security guard named Richard Jewell spotted an unattended backpack tucked underneath a bench. Quickly realizing the pack could contain a bomb, Jewell notified the authorities and helped clear the area. Due to his "remarkable astuteness," only two people were killed when the explosion occurred, and Jewell was hailed as a national hero. Bryant v. Cox Enter., Inc., No. A11A0510, 2011 WL 2697045, at *1 (Ga. Ct. App. July 13, 2011).

But the situation quickly soured for Jewell. A 911 call warning about the bomb was made approximately 13 minutes after the backpack was found, and the payphone where the call originated was only a few blocks from the park. This led to the suspicion that Jewell could actually be involved in the bombing, perhaps "finding" the backpack and then leaving to make the call to divert attention from himself. Law enforcement officials conducted an extensive investigation, but eventually cleared Jewell of any wrongdoing.

In response to a number of articles published about the investigation, Jewell filed a libel action in 1997 against The Atlanta Journal Constitution (AJC) and other news defendants. Jewell alleged that three sets of statements were libelous: (1) statements that investigators believed Jewell was responsible for the bomb; (2) statements that investigators believed Jewell made the anonymous call to the police; and (3) statements comparing Jewell to a serial killer from the same area. In Georgia, to succeed with a libel claim, Jewell needed to show that AJC was responsible for publishing defamatory statements about him that were false and caused actual injury. Id. at *3. And because Jewell was a limited-purpose public figure, he was also required to show that the statements were made with "actual malice"—that the reporters at AJC had "actual knowledge" of, or acted with "reckless disregard" as to, the falsity of the statements. Id. at *4.

To overcome this burden, Jewell sought the identities of the sources for AJC's articles. But before compelling this information, the Georgia Court of Appeals instructed the trial court to assess the "potential viability of Jewell's libel claims." Id.at *3. On remand, the trial court found that "the challenged statements were either substantially true and/or the identities of the confidential sources were unnecessary to establish whether the statements were defamatory" and granted summary judgment to AJC. Id.

In July 2011, the Georgia Court of Appeals affirmed. The court simply could not conclude that, at the time the articles were published, and in light of the well-publicized search of Jewell's house, law enforcement officials did not actually believe Jewell may have planted the bomb. The court also noted that the articles included substantial mitigating evidence along with the allegedly libelous statements, such as the fact that Jewell had not been charged with a crime and that, at one point, investigators were "moving away" from Jewell as the lead suspect. Id.at *9. With respect to the 911 call, the very fact that the FBI collected voice samples from Jewell tended to prove that investigators suspected he had made the call. The article also mentioned that Jewell's voice objectively bore no resemblance to the anonymous one on the payphone. As such, a "reasonable reader would have understood the information to be preliminary in nature and published during the early stages of an ongoing investigation." Id. at *5. Since the overall characterization of the investigators' suspicions was not false, these libel claims failed.

Finally, as to the statements comparing Jewell to a serial killer, the court dismissed this claim as well on the grounds that a libel action must be based on a statement of "objective fact." Id. at *7. This means that "[n]on-literal commentary that cannot be reasonably interpreted as stating actual facts about an individual is not actionable." The article at issue did also note the dearth of evidence against Jewell and simply used "loose, figurative language that no reasonable person would believe presented facts." Id.

Perhaps the most notable aspect of this case is how extraordinarily contentious it was, lasting almost 15 years and consuming large amounts of time and money. Meanwhile, both Richard Jewell and one of the reporters involved passed away. AJC ultimately won the case, but the manner in which the litigation played out may have a significant impact on how cautious reporters are when characterizing investigations of private citizens.

Jason Porta, Hogan Lovells, New York, NY


August 12, 2011

Hearsay Evidence Excluded in Peterson Trial Based on Failure to Timely Challenge Ruling

An Illinois appeals court has upheld the exclusion of eight hearsay statements from the murder trial of former Bolingbrook, Illinois, police officer Drew Peterson on the grounds that there was no jurisdiction to consider the appeal because prosecutors missed the 30-day deadline for challenging the trial court's evidentiary ruling.

Peterson is charged with two counts of first degree murder in connection with the death of his third wife, Kathleen Savio, which was originally ruled an accidental drowning after her body was found in a dry bathtub in 2004. But the investigation was reopened after Peterson's fourth wife, Stacy Peterson, disappeared in 2007. The high-profile case has garnered national media attention, and actor Rob Lowe is reported to have been selected to play Peterson in a television movie project for the Lifetime Network.

In advance of trial, prosecutors sought permission to introduce 14 hearsay statements against Peterson, which prosecutors claim would allow Kathleen and Stacy to "speak from the grave." But following an evidentiary hearing before trial, the trial court ruled that eight of those statements were inadmissible hearsay.

Although the Illinois Supreme Court rules allow prosecutors to appeal certain types of interlocutory orders in criminal matters, a strict 30-day deadline applies. Because the 30-day time limit is jurisdictional—meaning the failure to challenge the ruling within 30 days deprives the appellate court of jurisdiction to hear the appeal—the prosecution's appeal was denied and the evidence will not be admitted at Peterson's trial.

The ruling represents a significant victory for the defense. It is not clear what, if any, physical evidence prosecutors have tying Peterson to the alleged murder of Savio, and prosecutors have previously described the now inadmissible evidence as crucial to their case against Peterson.

Keywords: Drew Peterson, hearsay, appeal

John Gekas, Gekas Law LLP, Chicago, IL


August 8, 2011

$115 Million Verdict Against Verizon in Patent Infringement Case

A federal jury recently handed down the single largest verdict ever in a patent infringement case in the Eastern District of Virginia of $115 million. On August 5, 2011, following a three-week trial, the jury found that Verizon Communications Inc. infringed on four ActiveVideo Networks Inc. patents that cover streaming video technology used in set-top boxes. ActiveVideo, a cloud-based TV infrastructure vendor, said it will move for an injunction as soon as possible to stop Verizon from using its video-on-demand technology but hopes a deal could be worked out before an injunction fight became necessary.

ActiveVideo filed suit against Verizon in May 2010, alleging that the Verizon FiOS television system infringed on four patents for technology created, owned, and used by ActiveVideo. At trial, District Judge Raymond A. Jackson declined to revisit earlier rulings and denied a motion to defer the judgment for 30 days. Judge Jackson also entered orders denying three of Verizon's motions for judgment as a matter of law on laches (concluding no undue delay by ActiveVideo or prejudice to Verizon), direct infringement (concluding that the battle of experts over an interface should go to the jury), and willfulness (again concluding that ActiveVideo had presented enough to get to the jury). The jury, however, did not find willfulness.


The jury also ruled on two counterclaims by Verizon that ActiveVideo indirectly infringed two Verizon patents, but only awarded Verizon $16,000. Verizon spokesperson Robert Varettoni said via email that “Verizon disagrees with the verdict and is confident that the court of appeals will agree. The company will not be paying damages while the appeal is underway.”


One has to wonder what helped this jury decide to award such a large verdict. Lawyers shouldn’t underestimate the importance of a clear, concise verdict form. Often, verdict forms are afterthoughts, one of myriad other trial documents drafted during the hectic period leading up to trial. While a convoluted verdict form or set of jury instructions can lead to jury confusion and even the death of a case, a straightforward form such as the one used in this case can pave the way for a jury to easily render its verdict and decide the proper award of damages. ActiveVideo Networks Inc. v. Verizon Communications Inc. et al., case number 2:10-cv-00248, in the U.S. District Court for the Eastern District of Virginia.

Robert E. Sumner, IV, Esq. and Amy Jowers, Esq., Moore & Van Allen, PLLC


August 3, 2011

Federal Judge Upholds Reporter's Privilege in Grand Jury Investigation

The circuit court split over whether a reporter has a privilege protecting against compelled disclosure of confidential sources was just widened. Last month, the U.S. District Court for the Eastern District of Virginia released an opinion that had been held under seal since November 2010. The opinion, penned by Judge Leonie Brinkema, addresses the constitutionality of a subpoena issued to New York Times journalist James Risen in the course of a federal grand jury investigation. See In re Grand Jury Subpoena to James Risen, No. 1:10-cr-00485-LMB (E.D. Va. June 28, 2011) (Risen). 

The government convened the grand jury to investigate former CIA case officer Jeffrey Sterling, who, according to the government, leaked highly classified information about a covert CIA operation to Risen. That information allegedly formed the basis of Chapter 9 of Risen’s book, State of War: The Secret History of the CIA and the Bush Administration, which describes a failed CIA attempt to provide Iran with flawed nuclear weapons plans. Risen refused to say whether Sterling disclosed the information in the book, maintaining that he promised confidentiality to his source.

Risen was not specifically asked to identify his source, but the subpoena issued by the grand jury in April 2010 did require Risen to testify and produce a range of documents, including Risen’s rolodex, contact information for Sterling, and all notes related to Chapter 9. In October, Judge Brinkema granted Risen’s motion to quash the subpoena for the documents. In the recently released opinion, the court once again granted Risen’s motion to quash, this time recognizing a privilege against testifying.

Arguing that the First Amendment simply does not protect journalists from the disclosure of confidential sources, the government relied primarily on Branzburg v. Hayes, 408 U.S. 665 (1972). There, the Supreme Court stated that the "only testimonial privilege for unofficial witnesses" derives from the Fifth Amendment—and explicitly declined to "create another by interpreting the First Amendment to grant newsmen a testimonial privilege that other citizens do not enjoy." Id. at 690.

Yet in granting Risen’s motion to quash, Judge Brinkema located a "clear legal rule": evidence of a confidentiality agreement between a reporter and a source triggers a qualified privilege against testifying in a criminal proceeding. Risen, at 19. To reach that conclusion, Judge Brinkema relied on Justice Powell’s concurrence in Branzburg, which she said "emphasize[d] the limited nature of the majority’s opinion" by creating room for a reporter's privilege where the freedom of the press outweighs the citizens’ obligation to testify. Id. at 15.  

Thus, Justice Powell's Branzburg concurrence, along with ambiguities in the Branzburg majority opinion, have led to a circuit split on the viability of a reporter's privilege. The Fourth Circuit adopted Justice Powell’s balancing test in cases involving confidential sources or government harassment—cases that Judge Brinkema relied on in quashing the Risen subpoena. In those cases, the privilege can only be overcome by a showing of relevance, a lack of alternative sources, and a compelling interest in the information. Id. at 17. But, as Judge Brinkema cautioned, the privilege may be overcome where the government needs the testimony to meet the heightened burden of proving criminal guilt. Id. at 34–35. 

In sharp contrast, the D.C. Court of Appeals rejected the reporter's privilege in the much-publicized Judith Miller subpoena case. 438 F.3d 1141 (D.C. Cir. 2006).  While other circuits have recognized the privilege, many disagree on its scope and the test for applying it. Compare Shoen v. Shoen, 48 F.3d 412 (9th Cir. 1995) with Gonzales v. Nat'l Broad. Co., Inc., 194 F.3d 29 (2d Cir. 1999). Until the Supreme Court resolves this issue or the Congress passes a federal reporter's shield law, the viability and scope of a reporter's privilege under the First Amendment has yet to be clearly defined.

Sarah Gregory, Hogan Lovells, New York, NY


July 27, 2011

Tenth Circuit Affirms Dismissal for Discovery Violations with a "Three Strikes Out" Approach

The Tenth Circuit recently affirmed a district court's dismissal of a case due to a party's blatant disregard for not one, but two, orders to produce documents in discovery, which were all along in the party's custody and control, and a false declaration stating all relevant materials had been produced. Lee v. Max International, LLC, 638 F.3d 1318 (10th Cir. 2011).

The facts of this case tell a strong cautionary tale for litigators and litigants alike that a party's unwillingness to comply with discovery and court orders may lead to serious legal consequences. The plaintiff, Markly Lee, and his company, PTK, (PTK) sued Max International (Max) alleging breach of contract. Discovery followed, as did a motion to compel, which was granted in Max's favor. In response, PTK failed to produce documents, leading to a motion for sanctions seeking dismissal. The magistrate judge gave PTK one last chance to comply while warning that further noncompliance would lead to the "harshest of sanctions." Instead of complying, PTK filed a declaration with the district court stating all documents had been produced to Max. When Max sought documents that were still missing, PTK ignored the request, forcing Max to renew its motion for sanctions. Subsequently, PTK produced additional responsive documents that should have been produced months prior. PTK's actions were not well received by the magistrate judge, and after a hearing on the renewed motion for sanctions, the magistrate judge issued a report and recommendation that the district court grant the motion for sanctions and dismiss the case due to PTK's misconduct. The district court did just that.

While recognizing that our legal system prefers to decide cases on the merits, the Tenth Circuit concluded that the district court was well within its broad discretion to determine that the circumstances here warranted the harsh sanction of dismissal pursuant to Rule 37(b). Using well-known rules of baseball, the court stated that "three strikes are more than enough to allow the district court to call a litigant out." Here, the three strikes were PTK's failure to respond to the initial discovery requests, PTK's violation of the order compelling production, and PTK's disregard for the second order requiring production and warning of harsh sanctions for non-compliance.

In discussing the issues, the Tenth Circuit stressed that the district court is in the best position to determine what sanction most appropriately fits a discovery violation, both from the standpoint of justice in a particular case, as well as to deter similar conduct. In this case, PTK's repeated failures to produce documents within its control showed that its actions evidenced willfulness and bad faith. The court suggested that the consequences of PTK's actions needlessly increased the cost of the litigation and delayed the progress of the case on the merits, both of which are contrary to the purpose of the Federal Rules of Civil Procedure in ensuring prompt resolution of pending actions. Further, the Court stated that "discovery karma" may catch up with a party, and Rule 37 is designed to ensure appropriate remedies are applied when discovery misconduct becomes sanction worthy, as here.

Finally, the Tenth Circuit dispelled PTK's arguments that the district court failed to adequately state its reasons for dismissing the case under the court's precedent in Ehrenhaus v. Reynolds, 965 F.2d 916 (10th Cir. 1992). The court clarified that the Ehrenhaus factors are helpful "criteria" or "guide posts" that a district court may wish to consider in exercising its discretion to dismiss a case, rather than amounting to a "rigid test." Because the record reflecting PTK's inappropriate actions strongly supported the district court's dismissal order, the Tenth Circuit held that the district court did not abuse its discretion by not including or discussing the Ehrenhaus factors in its dismissal order. In concurrence, Judge Murphy stated that the district court's explanation of the dismissal was inadequate, but noted that the "conduct was sufficiently egregious that I see no point in remanding to the district court to recite the obvious."

Sandra B. Wick Mulvany, McKenna Long & Aldridge LLP, Denver, CO


July 15, 2011

In Streamlined Retrial, Illinois Governor Rod Blagojevich Is Convicted of 17 of 20 Charges

Last summer, a Chicago jury was unable to reach a verdict on 22 of 23 corruption charges against former Illinois Governor Rod Blagojevich after a three-month trial and 14 days of deliberations, convicting him of only a single count of lying to the FBI. Following that first trial, the government was criticized for an overly dense presentation, which jurors complained was confusing.

The government apparently got the message. In a substantially shortened retrial featuring a streamlined government case, a jury convicted Blagojevich on 17 of 20 charges. The retrial lasted only three weeks, and the jury deliberated over parts of 10 days. In addition to guilty verdicts on 17 counts, the jury acquitted Blagojevich on one count of soliciting a bribe and did not reach a verdict on two counts of attempted extortion.

In the retrial, the government streamlined its presentation of evidence and focused on the marquee corruption charges against Blagojevich—primarily his much-publicized attempt to sell President Barack Obama's vacated U.S. Senate seat in 2008. The government dropped complicated racketeering charges against Blagojevich as well as the charges against his brother, Robert Blagojevich, who was a codefendant in the first trial. The government also omitted its prior presentation of evidence on ancillary topics, such as Blagojevich's penchant for expensive clothing, including made-to-measure suits from renowned Chicago haberdashery Oxxford Clothes.

The other standout difference in the retrial was a decision made by the defense: allowing Blagojevich to take the witness stand and testify in his own defense. In the first trial, the defense rested without presenting a single witness despite telling the jury in opening statements that Blagojevich would testify. But Blagojevich's lead trial counsel in the first trial switched tactics midway, choosing to focus their arguments on the government’s failure to prove its case.

Blagojevich's testimony in the retrial provided several interesting moments. The former governor repeatedly denied any wrongdoing from the witness stand and even apologized to the jury for his notoriously foul language, ironically calling himself an "effin' jerk."

But it was the cross-examination of Blagojevich that provided the key dramatic moment of the trial. In reference to the conviction for lying to the FBI after the first trial, the very first question of Blagojevich’s cross-examination was "You are a convicted liar, correct?" Despite multiple objections, Blagojevich answered yes. After the trial, one juror said that the exchange "scared us all to death. It did not get dramatic until he came out and did that and were all just like, 'Oh my god.'"

Other notable moments of Blagojevich's cross-examination included him blurting out his own objections in response to questions. Blagojevich, a former practicing attorney, responded "I object to that!" to one question, and sarcastically added “asked and answered” after another. Blagojevich also repeatedly talked over his own lawyers' objections, prompting Judge James Zagel to warn Blagojevich that "when witnesses argue with lawyers, they generally lose." But the problem continued, and Judge Zagel eventually felt compelled to threaten sanctions if Blagojevich failed to stop. Blagojevich ended his contentious cross-examination by attempting to shake hands with lead prosecutor Reid Schar upon stepping down from the witness stand, but Schar turned away. Judge James Zagel then explained to the jury that attorneys are forbidden from interacting with witnesses.

Although Blagojevich theoretically could be sentenced to as much as 30 years in prison, most predictions estimate he is facing approximately a 10-year sentence.

John Gekas, Gekas Law LLP, Chicago, Illinois

Keywords: Blagojevich, retrial, verdict


July 15, 2011

Post-Trial Challenges for Conflict of Interest: What is Fair Game?

What about a trial judge's personal background can constitute a conflict of interest? The question was raised recently in two unrelated cases. First, in the California litigation over same-sex marriage, the defenders of Proposition 8 (banning gay marriage) leveled the charge of conflict of interest because trial judge Vaughn Walker disclosed, after the trial and after he had retired from the bench, that he had been in a long-term relationship with another man. According to the proponents of Proposition 8, Judge Walker should have removed himself from the case, or at least disclosed his personal relationship, because he stood to benefit from the decision.

In a decision issued June 13, 2011, Chief U.S. District Court Judge James Ware for the Northern District of California rejected that charge out of hand and ruled that gay judges, like female or minority judges, can be impartial even in cases that might affect them. "We all have an equal stake in a case that challenges the constitutionality of a restriction on a fundamental right," Chief Judge Ware wrote. "The single characteristic that Judge Walker shares with the plaintiffs, albeit one that might not have been shared with the majority of Californians, gave him no greater interest in a proper decision on the merits than would exist for any other judge or citizen."

"The presumption that Judge Walker, by virtue of being in a same-sex relationship, had a desire to be married that rendered him incapable of making an impartial decision, is as warrantless as the presumption that a female judge is incapable of being impartial in a case in which women seek legal relief," he wrote. Finding that Walker could not be presumed to have a personal stake in the case just because he has a same-sex partner, Ware wrote that the judge had no obligation to divulge whether he wanted to marry before he struck down the ban represented by Proposition 8.

Now, in an unrelated case, a large asbestos verdict may be in jeopardy as a result of similar arguments raised by the losing party at trial. On July 13, 2011, the Mississippi Supreme Court issued a stay of trial court proceedings based on a defendant's allegations that the trial judge's "blatant conflict of interest" influenced the outcome of the trial, which resulted in a $322 million verdict against it.

Defendant Union Carbide claimed in a July 15, 2011, motion for an emergency hearing that the jury verdict against it should be set aside, saying the judge should have recused himself from the case because of a family connection with asbestos and asbestos litigation. The May 4, 2011, jury verdict called for Union Carbide and a codefendant to pay $300 million in punitive damages and $22 million in compensatory damages to 48-year-old plaintiff. Union Carbide then accused state court Judge Eddie H. Bowen of keeping under wraps his parents' own asbestos lawsuits against the company, including one that is still pending, despite the fact that he had disqualified potential jurors with similar ties to asbestos litigation, finding they could be biased.

The Mississippi Supreme Court, in an order that may be found here, asked for further filings from Union Carbide, the plaintiff and Judge Bowen before it makes a decision about whether the judge should have recused himself from the case. "After due consideration, the panel finds that the motion should be granted and that all trial court proceedings . . . should be stayed pending this court's resolution of the petition for disqualification of trial judge," Chief Justice William L. Waller Jr. wrote for the court.

The state Supreme Court gave Union Carbide until July 22 to submit any supplemental filing in the case, Brown until August 1 to file a reply and Judge Bowen until August 11. Id.

In both these cases, the losing party at trial has sought to undo the result not because the trial judge has a direct financial stake in the dispute, but because of an alleged sympathy for a party or its position. Such claims are based upon the proposition that a judge may have such a strong affinity for a party or position based on his or her personal background that he or she cannot abide by the oath to follow the law and rule dispassionately. Yet, on the other hand, a diversity of viewpoint and background has been touted as a benefit in recent federal judicial nominations. How far can a losing party go in questioning the independence and fairness of the trial court? To continue the conversation, join us on LinkedIn

Nash E. Long, Winston & Strawn LLP, Charlotte, NC


June 27, 2011

Supreme Court Denies Class Certification in Wal-Mart Employment Discrimination Case

In a 5–4 decision, the United States Supreme Court ruled that the certification of a nationwide class of female employees and former employees of Wal-Mart was inconsistent with the commonality requirement of Fed.R.Civ.P. 23(a)(2), because the plaintiff failed to show that the class members suffered the same harm. 

The named plaintiffs represented 1.5 million current and former female employees of Wal-Mart who alleged gender discrimination based on promotion and pay decisions in violation of Title VII of the Civil Rights Act of 1964. They alleged that the corporate culture of Wal-Mart pushed local managers, who possessed discretion to approve pay raises and promotions, to favor men. 

The named plaintiffs sought class certification under Federal Rule of Civil Procedure 23. Rule 23(a)(2) requires that there be questions of law and fact common to the class. To prove this commonality, the plaintiffs relied on statistical evidence purportedly demonstrating disparities between the number of men and women promoted into management positions and anecdotal reports of bias and discrimination.

The Court ruled, however, that such evidence did not meet Rule 23(a)(2)'s threshold requirement for class certification. The court emphasized that the Rule requires proof that all class members suffered the same injury, not that they all merely suffered a violation of the same provision of law.

Because Wal-Mart had no uniform policy for promotions of pay decisions but instead gave local managers discretion in making such decisions, the Court found that the claims of the class members and the reasons each class member was denied a promotion or pay increase were unique and not the proper subject of a class action.

The Court also held, unanimously, that the plaintiffs' claims for back pay as a remedy for discrimination were not permitted under Rule 23(b)(2).

Michael E. Lockamy, Bedell, Dittmar, DeVault, Pillans & Coxe, Jacksonville, FL


June 27, 2011

Products Liability Plaintiff Loses Bid for Remand to State Court

Bayer A.G. and related companies are getting sued in Southern Illinois over a contraceptive called Yazmin. In fact, Bayer is getting sued a lot.

Cathy Walton also became a plaintiff. In state court, Walton sued a number of Bayer affiliates, all citizens of states other than Illinois, plus Niemann Foods, Inc., an Illinois citizen. The suit claimed the defendants failed to warn of the side effects of Yazmin. Even though there was not complete diversity of citizenship, the Bayer defendants removed the case to federal district court, asserting that Niemann had been improperly joined to eliminate complete diversity.

Watson sought a remand to state court, but the district court refused. The court dismissed Niemann as a defendant, restoring complete diversity. On appeal, Walton sought reversal of the judge's order.

Watson made three arguments, asserting that there was no federal jurisdiction. The first was that she had not alleged that her damages exceeded $75,000.

According to the court of appeals, the "litany of injuries" Walton claimed made clear that she was seeking damages in excess of $75,000. A plaintiff can defeat removal of a diversity case by irrevocably committing (before the case is removed) to accepting no more than $75,000 in damages. Not surprisingly, Walton made no such commitment, because "that would make her suit not worth the expense of litigating it."

Walton's second argument was that the defendants failed to include in their removal papers the summons that Walton served on them in the state court.

Defendants, however, filed the summons a few days after the deadline. There was no suggestion that Walton was harmed by the delay, and the 30-day deadline is not jurisdictional. Finally, Walton argued for remand because of absence of complete diversity of citizenship, submitting that Neimann should not have been dismissed as a defendant.

The appeals court observed that a pharmacy may know—but the manufacturer will normally not know (and even a treating physician may not know)—that a particular customer has an unusual susceptibility to the side effects of a drug that it sells the customer.

If Niemann knew that Walton was abnormally susceptible to a particular side effect of Yazmin, it had a duty to warn her or her physician. But Walton did not claim Neimann knew anything about her alleged susceptibility, so Neimann had the full protection of the learned-intermediary doctrine. The district court correctly invoked the doctrine of fraudulent joinder as a ground for dismissing Niemann from the case leaving only diverse defendants.

Michael R. Lied, Howard & Howard Attorneys PLLC, Peoria, IL


June 20, 2011

Federal Courts Prohibited from Issuing Injunctions to Prevent Class Action Certification

In a unanimous decision on June 16, 2011, the U.S. Supreme Court ruled in Smith v. Bayer Corp., U.S., No. 09-1205, that the Anti-Injunction Act prohibits federal courts from issuing injunctions to prevent state courts from considering certification of class action litigation previously rejected by the federal courts. For a copy of the opinion, click here.

This case may provide plaintiffs' counsel with an additional incentive to pursue class actions simultaneously in different fora, to maximize their odds of prevailing on class certification. The decision may also increase the stakes for successfully removing class action litigation to federal courts and consolidating related actions in MDL proceedings. To continue the discussion on this topic, join the committee blog on LinkedIn

Nash E. Long, Winston & Strawn LLP, Charlotte, NC


April 5, 2011

Iqbal and Rule 11 Provide Caution to Plaintiffs and a New Tool for Defendants

The United States Supreme Court's recently heightened pleading standard cautions plaintiffs' attorneys against filing a civil action before fully investigating their case. Recent cases considering the interplay between this new pleading standard and Rule 11 provide another tool for defense counsel facing a frivolous complaint: sanctions.

Federal Rule of Civil Procedure 11 requires that attorneys conduct a reasonable inquiry into the factual and legal bases of all claims before filing any document with the court. Business Guides, Inc. v. Chromatic Commc’ns Enters., Inc.¸ 498 U.S. 533, 551 (1991). While this Rule is normally used to sanction frivolous motions and appeals, it has only recently become applicable to baseless complaints.

The U.S. Supreme Courtrecently ruled thatplaintiffs in federal court are required to make sufficient factual pleadings in their complaint such that each claim asserted is "plausible on its face." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). In other words, plaintiffs must now plead sufficient factual content to allow a court to draw the reasonable inference that the defendant is liable for the misconduct alleged. This newly heightened pleading standard means that "threadbare recitals of the elements of a cause of action supported by mere conclusory statements" do not suffice. Id

Taking Iqbal and Rule 11 together, a plaintiff is no longer permitted to "shoot first and ask questions later" by prematurely filing a complaint based in the hopes that later discovery will support its claims. Instead, plaintiffs must now conduct enough investigation before filing a complaint that they can make the factual allegations required by Iqbal, lest the complaint run afoul of Rule 11's reasonably inquiry requirement. Factually deficient complaints are now not only subject to dismissal, but may also subject a party to sanctions.

A recent Seventh Circuit decision speaks directly to this matter. In Kaye v. D’Amato, the court interpreted Iqbal and Rule 11 and found that where a plaintiff had failed to plead a sufficient factual basis for its claims of racketeering, and where the basis for such claims was so lacking as to be clear to any "reasonable attorney" after "minimal research," Rule 11 sanctions were appropriate. 357 Fed. Appx. 706, 717 (7th Cir. 2009). The court found that sanctions were particularly appropriate given the fact that the plaintiff had ignored multiple opportunities provided by the court to correct its pleading. Id.

The New Jersey Federal district court recently held similarly when awarding over $30,000 in attorney fees to defendants that were forced to address a frivolous due process action arising from a change in condominium management. In Bloomfield Condominium Associations. v. Drasco, the District Court of New Jersey found that where a complaint violates Iqbal by "provid[ing] no plausible basis, other than bald assertions" for the causes of action alleged, the very act of filing the complaint is a violation of Rule 11. 2010 WL 2652465, *4 (D.N.J. June 25, 2010). The court explained that "Rule 11 imposes on counsel a duty to look before leaping" and a "careless filing without reasonable factual or legal grounds warrants sanctions." Id. (internal quotations and references omitted). Other federal courts have imposed similar sanctions on parties who file complaints before investigating the factual circumstances of their case. See e.g.,Timmons v. Linvatec Corp., 263 F.R.D. 582, *10(C.D. Cal. 2010) ("[A]llowing plaintiffs to file first and investigate later would be contrary to Rule 11(b), which mandates an 'inquiry reasonable under the circumstances' into the evidentiary support for all factual contentions prior to filing a pleading.") (citing Fed. R. Civ. P. 11(b)(3)).

Although courts have only recently begun to consider the interplay between Iqbal and Rule 11, many have found that a violation of the United States Supreme Court's new pleading standard can simultaneously constitute a violation of Rule 11 and open a plaintiff to not only dismissal, but sanctions as well. As precedent on this topic develops, plaintiffs should be cautioned against filing complaints until sufficient investigation has taken place, lest they be subjected to sanctions, and defense counsel should be aware of this new tool for fighting baseless actions.

Brad Stoll, Schottenstein Zox & Dunn, Columbus, OH


February 1, 2011

Personal Jurisdiction in the Internet Age: uBID versus GoDaddy

Two recent decisions of the Seventh Circuit Court of Appeals clarify what acts may subject a defendant to personal jurisdiction. The first decision, uBID, Inc. v. GoDaddy, is discussed below. The second decision, Mobile Anesthesiologists Chicago, LLC v. Anesthesia Associates of Houston Metroplex, is covered in a separate overview.

In the first case, uBID, Inc. sued The GoDaddy Group, Inc., claiming GoDaddy violated the Anti-Cybersquatting Consumer Protection Act by registering domain names confusingly similar to uBID's trademarks and domain names. uBID asserted GoDaddy tried to profit from uBID's marks and took advantage of web surfers by selling advertising for confusingly similar websites.

uBID trademarks include UBID and UBID.COM. The complaint identified several domain names registered with GoDaddy that are similar, such as ubid4homes.com, ubidr.com, and ubidauctionsale.com.

The district court dismissed the complaint for lack of personal jurisdiction. uBID appealed, and the Seventh Circuit Court of Appeals analyzed whether the district court had personal jurisdiction over GoDaddy.

GoDaddy is incorporated and headquartered in Arizona. GoDaddy's computer servers and most of its offices and employees are located in Arizona. Nevertheless, GoDaddy has deliberately established a national presence. For example, GoDaddy has bought considerable television advertising time throughout the country, including the last six Super Bowl programs. Additionally, the company sponsors professional athletes. GoDaddy also has a presence in Illinois and has purchased advertising space in sports venues throughout Chicago.

GoDaddy's advertising has been successful. In 2008, GoDaddy had hundreds of thousands of customers in Illinois; those customers provided GoDaddy several millions of dollars of revenue.

According to the court of appeals, personal jurisdiction can be either general or specific, depending on the extent of the defendant's contacts with the forum state. If the defendant's contacts are so extensive that it is subject to general personal jurisdiction, then it can be sued in the forum state for any cause of action arising in any place. More limited contacts may subject the defendant only to specific personal jurisdiction, in which case the plaintiff must show that its claims against the defendant arise out of the defendant’s constitutionally sufficient contacts with the state.

The court of appeals agreed GoDaddy was not subject to general jurisdiction in Illinois. However, it found GoDaddy was still subject to being sued in Illinois. GoDaddy deliberately and successfully exploited the Illinois market. As mentioned above, instead of operating only in Arizona, GoDaddy conducted extensive national advertising and made significant national sales. GoDaddy aired many television advertisements on national networks. This marketing successfully reached Illinois consumers, who spent millions of dollars with GoDaddy each year. This was enough to establish GoDaddy's minimum contacts with Illinois for claims related to those contacts.

The court of appeals next considered if uBID's claim against GoDaddy arose out of or were related to those contacts. GoDaddy argued that its contacts with Illinois were irrelevant because they were unrelated to uBID's lawsuit. However, according to the court of appeals, GoDaddy's advertising discredited that argument.

In pertinent part, uBID's complaint alleged that GoDaddy "used and trafficked in" the parked pages with a bad-faith intent to profit from uBID's marks. The court of appeals found that GoDaddy could not reasonably have been surprised to find itself sued in Illinois.

The court realized that the concept of a geographical nexus is harder to apply where the alleged wrong can fairly be characterized as occurring anywhere the Internet is accessible. The court of appeals also recognized that the mere fact that the defendant caused harm by conducting business or advertising over the Internet is not sufficient by itself to establish jurisdiction in the court in which plaintiff chose to sue.

GoDaddy argued that the injury to uBID did not occur until GoDaddy connected the newly registered domain name to the parked page service—in its Arizona servers. When a plaintiff alleges that some of the defendant's contacts occurred through a website, the interactivity of that website is relevant to, but not dispositive of, the sufficiency of those contacts. The court of appeals noted that using a separate test for Internet-based contacts would be inappropriate when the traditional analysis of the nature, quality, and quantity of the contacts, as well as their relation to the forum state, remains up to this more modern task.

Where GoDaddy chose to locate the servers that completed the task in geographic terms was irrelevant. uBID's claim arose directly out of GoDaddy's registration of the infringing domain names purchased by customers it solicited in Illinois and many other states. The claim had a sufficient relationship to GoDaddy's business activities in Illinois so that GoDaddy could expect to defend itself in Illinois. uBID, Inc. v. The GoDaddy Group, Inc., et al., 623 F.3d 421 (7th Cir. 2010).

Michael R. Lied, Howard & Howard Attorneys, Peoria, IL


February 1, 2011

Personal Jurisdiction in the Internet Age: Mobile/Chicago versus Mobile/Houston

Two recent decisions of the Seventh Circuit Court of Appeals clarify what acts may subject a defendant to personal jurisdiction. In this second example, Mobile Anesthesiologists Chicago, LLC (Mobile/Chicago) brought suit against Anesthesia Associates of Houston Metroplex, P.A. (Mobile/Houston) in federal court in Illinois, claiming that Mobile/Houston violated the federal anti-cybersquatting statute.

Mobile/Chicago operates in the Chicago area and has affiliated offices in other cities. Mobile/Chicago registered the website www.mobileanesthesiologists.com, and also owns a federally registered trademark in the words MOBILE ANESTHESIOLOGISTS. In turn, Mobile/Houston was established by Dr. Eric Chan. Dr. Chan registered the website www.mobileanesthesia.com.

Dr. Chan's professional activities are limited to the state of Texas. Dr. Chan is licensed as an anesthesiologist only in Texas. He never advertised his services anywhere other than the website, which advertises anesthesia services "in the greater Houston area" and provides a Houston area phone number, and a printed advertisement published in Texas. Dr. Chan has visited Illinois just once, on vacation.

The district court dismissed Mobile/Chicago's suit for lack of personal jurisdiction. The court pointed out that Mobile/Houston lacked any meaningful contacts with Illinois and that its website, though bearing a name similar to Mobile/Chicago's, was not directed at Illinois in any way. Mobile/Chicago took an appeal.

As mentioned in uBid's case, personal jurisdiction can be general or specific. Mobile/Chicago did not claim—and the evidence did not support—that the district court had general jurisdiction over Mobile/Houston in Illinois.

Specific personal jurisdiction is appropriate when the defendant purposefully directs its activities, i.e., expressly "aims," at the forum state and the alleged injury arises out of those activities.

Mobile/Chicago argued the court should infer express aiming at Illinois from the fact that Mobile/Houston operated a website whose domain name is similar to Mobile/Chicago's trademark. The appeals court disagreed. A plaintiff cannot satisfy the specific personal jurisdiction standard simply by showing that the defendant maintained a website accessible to residents of the forum state and alleging that the defendant caused harm through that website.

Mobile/Houston's website did not create constitutionally sufficient contacts with Illinois in the absence of express aiming. The court of appeals emphasized that Dr. Chan is not licensed outside of Texas. The Mobile/Houston website contains a Houston-area phone number, an email address, and an invitation to doctors in the "greater Houston area" to contract for his services.

Mobile/Chicago argued that its trademark registration gave Mobile/Houston "constructive notice" that it was infringing Mobile/Chicago's trademark and therefore could expect to be sued in Illinois. One reason this argument failed is that the federal trademark statute does not authorize nationwide service of process.

Mobile/Chicago also asserted Mobile/Houston had actual notice of Mobile/Chicago's trademark from the moment it received Mobile/Chicago's cease-and-desist letter.  The court of appeals rejected this argument. To find express aiming based solely on the defendant's receipt of such a letter would make any defendant accused of an intentional tort subject to personal jurisdiction in the plaintiff's home state as soon as the defendant learned what that state was. Mobile Anesthesiologists Chicago, LLC v. Anesthesia Associates of Houston Metroplex, P.A., 623 F.3d 440 (7th Cir. 2010).

Michael R. Lied, Howard & Howard Attorneys, Peoria, IL


Plaintiffs Strike Out in Bids for Remand in Class Action Fairness Act Cases

Cunningham Charter Corporation sued Learjet, Inc., in an Illinois state court for breach of warranty and products liability on behalf of itself and other buyers of Learjets who had received the same warranty. Learjet removed the case to federal district court under the Class Action Fairness Act, 28 U.S.C. § 1332(d). Cunningham Charter moved to certify two classes, but the district court denied the motion and ruled that the denial of class certification eliminated subject-matter jurisdiction under the Act. The district court remanded the case to the state court. Learjet appealed the remand order.

The Act creates federal diversity jurisdiction over certain class actions in which at least one member of the class is a citizen of a different state from any defendant. 28 U.S.C. § 1332(d)(2). The Act applies to any class action within the Act’s scope before or after the entry of a class certification order.

According to the Seventh Circuit Court of Appeals, federal jurisdiction under the Act does not depend on actual certification of a class. The court noted the general principle that jurisdiction, once properly invoked, is not lost by later developments in the suit. This jurisdictional principle is backed by a goal to minimize expense and delay. A case should stay in the system that first acquired jurisdiction rather than be bounced between court systems.

The Seventh Circuit also believed that the policy behind the Act would be ignored if a suit within the scope of the Act ended up being litigated as a class action in state court after a remand. The judgment of the district court was reversed and the case remanded. Cunningham Charter Corporation v. Learjet, Inc., 592 F.3d 805 (7th Cir. 2010).

Certain Wisconsin residents claiming to be representatives of a class filed a complaint in Wisconsin state court against Burlington Northern Santa Fe Railway Company, Burlington Northern Santa Fe Corporation, and some of its employees. They alleged that BNSF’s failure to inspect and maintain a railroad trestle caused the town to flood, damaging their property.

BNSF removed the case to federal court, asserting that there was jurisdiction under the Act. The plaintiffs moved to remand the case to state court. The district court denied that motion. The plaintiffs then sought to amend their complaint to omit the class allegations. The district court allowed the amendment and treated the motion as an implied motion to remand the case. BNSF asked the district court to reconsider its remand order.

The district court recognized that there are exceptions to the general rule that removal jurisdiction is determined at the time of removal, but nevertheless concluded that it properly remanded the case. On appeal, the Seventh Circuit Court of Appeals repeated the general rule that jurisdiction is determined at the time of removal, and that nothing filed after removal affects jurisdiction.

The appellate court observed that in Cunningham Charter Corp. it had determined that federal jurisdiction survives even if the district court ultimately denies class certification.

This time, the question was whether jurisdiction under the Act continues when the post-removal change is the plaintiffs’ decision not to pursue class certification. The appellate court believed there were compelling reasons to conclude that such a post-removal amendment did not destroy jurisdiction. In particular, the court pointed to considerations of expense and delay and noted that allowing plaintiffs to amend away jurisdiction after removal would pose a risk of forum manipulation. In re Burlington Northern Santa Fe Railway Co., ___ F.3d ___, 2010 WL 1980172 (7th Cir. 2010).

Michael R. Lied, Howard & Howard Attorneys, Peoria, IL


Eleventh Circuit Orders Habeas Petition Be Granted under Confrontation Clause

When the Sixth Amendment Confrontation Clause is involved, all the state’s dirty laundry from its prior dealings with its “star witness” must be aired for the jury to see, says the U.S. Court of Appeals for the Eleventh Circuit in Childers v. Floyd, No. 08-15590, 2010 WL 2274481 (11th Cir. June 8, 2010). In one of the court’s few decisions this year to grant a defendant’s petition for writ of habeas corpus, the Eleventh Circuit held that the defendant’s Sixth Amendment Confrontation Clause right was violated when a Florida trial court curtailed his cross-examination of the State’s star witness by refusing to permit inquiry into the state attorney’s previous attempt to revoke the witness’s plea agreement.

The star witness, Willie Junior, struck a deal with prosecutors whereby the state would seek an 18-month sentence on charges of bribery, extortion, racketeering, and grand theft arising from Escambia County’s purchase of the Pensacola Soccer Complex. In exchange for the slap-on-the wrist sentence and a grant of full immunity, Junior agreed to fully cooperate with the state and testify at the separate trials of two codefendants in the alleged bribery and kickback scheme: Joe Elliott and Wyon Childers (petitioner). According to the prosecution’s theory, Childers (a county commissioner) made several payments to Junior (another county commissioner) to gain Junior’s vote in favor of the County’s purchase of the soccer complex from Elliott. To express his gratitude for their votes, Elliott sent monetary kickbacks to Childers and Junior.

Junior first testified at Elliott’s trial, where he was the prosecution’s star witness. During his testimony, Junior explained how Childers met with him several times to bribe him for his vote in favor of purchasing the soccer complex. Despite Junior’s testimony, Elliott was acquitted of all charges. About a month after Elliott’s acquittal—but before Childers’s trial—Junior’s memory was suddenly revived, and he met with state investigators to provide additional facts about Childers’s alleged bribery. These additional details elevated Childers’s role in the bribery/kickback scheme and—more importantly—were inconsistent with Junior’s earlier testimony at the Elliott trial.

Marlysha Myrthil, Holland & Knight LLP, Jacksonville, FL


Second Circuit Reaffirms "Serious Questions" Standard in Preliminary Injunction Analysis

On March 10, 2010, the Second Circuit reaffirmed the “serious questions” standard of its preliminary injunction test despite arguments that recent Supreme Court decisions abrogated that standard. See Citigroup Global Mkts., Inc. v. VCG Special Opportunities Master Fund Ltd., 2010 WL 786584 (2d Cir. Mar. 10, 2010). Under the Second Circuit’s long-standing preliminary injunction test, a party must demonstrate “irreparable harm absent injunctive relief and either a likelihood of success on the merits, or a serious question going to the merits to make them a fair ground for trial, with a balance of hardships tipping decidedly in the plaintiff’s favor.” In upholding the district court’s application of the test granting a preliminary injunction, the Second Circuit, despite the “either . . . or” language of its test, characterized its serious questions standard as essentially another way to analyze a likelihood of success on the merits. It therefore concluded that recent Supreme Court decisions had no effect on the test. At least two other circuits, however, have retreated from the more flexible approach in analyzing preliminary injunctions advocated by the Second Circuit following recent Supreme Court decisions, raising questions about whether the latest Supreme Court jurisprudence requires an across-the-board shift in the test for preliminary injunctions.

In this case, VCG Special Opportunities Master Fund Ltd. (VCG) initiated arbitration proceedings before the Financial Industry Regulatory Authority (FINRA) against Citigroup Global Markets, Inc. (CGMI), alleging that CGMI brokered transactions resulting in a credit default swap agreement between VCG and Citibank. In response, CGMI filed suit in federal district court seeking to enjoin the arbitration, alleging that it did not have to arbitrate the dispute because CGMI did not broker the Citibank credit default swap and, therefore, was under no obligation to arbitrate VCG’s claims under FINRA. The district court granted CGMI’s request for a preliminary injunction. In doing so, the district court held that CGMI demonstrated likely irreparable harm. It further found that, although CGMI did not demonstrate likely success on the merits, CGMI established that a serious question existed whether VCG was a “customer” of CGMI and that the balance of hardships tipped in CGMI’s favor.

Sandra B. Wick Mulvany and Charles Swanson, McKenna Long & Aldridge LLP, Denver, CO


First Conviction of Conspiring to Violate the Foreign Corrupt Practices Act

On July 10, 2009, handbag magnate Frederic Bourke became the first person to be convicted of conspiring to violate the Foreign Corrupt Practices Act. A jury in the U.S. District Court for the Southern District of New York found Mr. Bourke guilty of bribing officials in Azerbaijan in exchange for allowing Mr. Bourke and his associates to participate in the privatization of Azerbaijan’s state-run oil company.

The plot lines and characters involved in this closely watched and highly celebrated foreign corruption case read like a novel. Playing the lead role was Viktor Kozeny, the extradition-fighting fugitive currently living in the Bahamas who Forbes Magazine once dubbed one of the “Pirates of Prague.” There was also testimony recounting suitcases stuffed with millions of dollars and Chechen muscle men who intimidated government officials and protected Kozeny’s Azeri operations. Making a cameo appearance and testifying for more than four hours in defense of his friend Mr. Bourke was George Mitchell, the former Democratic Senate Majority Leader.

But none of these more sensational features of the case resonate as prominently as Judge Scheindlin’s decision to allow the government to introduce background evidence relating to reputations: Azerbaijan’s for corruption, Kozeny’s for bribery, and privatizations in the former Soviet states for being marred by corruption. Judge Scheindlin ruled that background evidence of corruption was relevant because “a person of Bourke’s means, who was considering making a large investment in a venture in Azerbaijan, would have at least been aware of the high probability that bribes were being paid.” The jury agreed, and in concluding that Mr. Bourke knew that Mr. Kozeny was paying bribes, the jury foreman echoed Judge Scheindlin’s logic: “It was Kozeny, it was Azerbaijan, it was a foreign country. We thought Bourke knew about the bribery and definitely could have known. He’s an investor. It’s his job to know.”

Mr. Bourke was thus convicted as much for what he should have known and failed to discover as for what he suspected was true and elected to ignore. In her jury charge, Judge Scheindlin explained that “knowledge [of a fact] may be established if a person is aware of a high probability of its existence and consciously and intentionally avoided confirming that fact. Knowledge may be proven in this manner if, but only if, the person suspects the fact, realized its high probability, but refrained from obtaining final confirmation because he wanted to be able to deny knowledge.”

Was Mr. Bourke convicted because he affirmatively “stuck his head in the sand” and ignored the likelihood that Mr. Kozeny was paying bribes or because, as an investor, it was “his job to know” precisely the details and information Judge Scheindlin allowed into evidence? Was Mr. Bourke guilty of inadequate due diligence? The jury foreman’s post-trial comments reveal such shortcomings may have been partly responsible for Mr. Bourke’s conviction. Whatever the case, well-heeled and high-profile investors are well advised to conduct an amount of due diligence commensurate with the red flags attendant to their deals lest they suffer a similar fate.

Mr. Bourke’s sentencing is scheduled for November 10, 2009.

Daniel Dominguez, Latham & Watkins LLP, Washington, D.C.


Supreme Court Considers Federal Preemption in Pharmaceutical Cases

On March 4, 2009, the Supreme Court issued its decision in Wyeth v. Levine, the first Supreme Court case to consider whether preemption applies in pharmaceutical cases.

In a 6 to 3 decision, the Supreme Court upheld the lower courts’ decisions, concluding that Wyeth could have complied with differing state and federal law obligations. In rejecting the preemption argument, the majority opinion relied upon the Changes Being Effected (CBE) provision, which permits brand name drug manufacturers to unilaterally add or strengthen warnings and contraindications on a drug label without prior FDA approval. The Court reasoned that the CBE provision allowed manufacturers to comply with heightened state standards imposed by juries in product liability lawsuits.

The majority opinion put the onus for changing the label firmly on drug manufacturers, holding that the existence of the CBE provision “[made] it clear that manufacturers remain responsible for updating their labels.” Similarly, in language sure to be repeated in front of juries for years, the Court stated that “it has remained a central premise of federal drug regulation that the manufacturer bears responsibility for the content of its label at all times.”

Wyeth involved the brand name drug Phenergan, a drug designed to treat severe nausea associated with migraine headaches. Phenergan can be taken orally, or intravenously when faster relief is necessary. Intravenous delivery is available either through IV-push or IV-drip. Phenergan is corrosive and can cause irreversible gangrene if it enters a patient’s artery. The labeling for Phenergan included multiple warnings of this risk.

Despite these warnings, a physician’s assistant delivered a double-dose of the drug via IV-push to Diana Levine and ignored her complaints of pain while the drug was injected. During the entire three or four minutes of this process, the Phenergan was being injected into an artery in Levein’s arm. As a result, her forearm had to be amputated, ending her career as a professional musician.

After settling with her healthcare providers, Levine sued Wyeth, the manufacturer of Phernergan. The trial court rejected Wyeth’s preemption arguments, and a Vermont state court jury found in Levine’s favor. The Vermont Supreme Court upheld the trial court’s decision rejecting Wyeth’s preemption argument, and the Supreme Court granted certiorari to consider the case.

In its amicus brief and at oral argument, the FDA explained that the CBE provision should only be used to change a label to “reflect newly acquired information.” A final rule recently issued by the FDA further clarified and emphasized this position. Nonetheless, Wyeth destroys any utility in this limitation, finding that newly acquired information is “not limited to new data, but also encompasses analyses of previously submitted data.” In other words, a drug manufacturer’s label will always be vulnerable to hindsight.

In addition to finding that FDA approval does not, by itself, preempt state law claims, the majority opinion also considered whether Wyeth had specifically addressed the risks of the IV-push method with the FDA in drafting the labeling for Phenergan. The majority found that the facts did not support Wyeth’s argument that it had adequately addressed the risks specific to IV-push in its labeling, but rather concluded that Wyeth had not adequately explored these risks with the FDA. This was apparently made clear by the fact that Wyeth’s labeling did not distinguish between the IV-drip and IV-push methods, although the IV-drip method had virtually no risk of arterial exposure. “The CBE regulation permitted Wyeth to unilaterally strengthen its warning, and the mere fact that the FDA approved Phenergan’s label does not establish that it would have prohibited such a change.”

The Wyeth decision left the door open on preemption in pharmaceutical cases involving warning issues, but only slightly open. The majority opinion recognized that the FDA has final authority over all labeling decisions, but stated that “absent clear evidence that the FDA would not have approved a change to Phenergan’s label, we will not conclude that it was impossible for Wyeth to comply with both federal and state requirements.” In other words, if the FDA has rejected the same kind of additional warning or contraindication that a plaintiff’s product liability claim would impose, preemption could apply. The Court emphasized, however, that “[i]mpossibility preemption is a demanding defense.”

While Wyeth leaves open the possibility for preemption where the FDA has flatly rejected a stronger warning or contraindication, it also may apply only to branded drugs and not generics. Generic drugs are required to have labeling and active ingredients that are identical to what the FDA has approved for its branded counterpart. As a result, Wyeth does not appear to overrule the growing body of case law holding that it is impossible for generic drug manufacturers to comply with state requirements that are inconsistent in any way with federal laws and regulations.

Wyeth only gave hints at the extent to which preemption could apply in pharmaceutical cases. In the coming months, it will fall upon trial courts to determine whether and when preemption applies.

Richard G. Morgan and Shane V. Bohnen, Bowman and Brooke LLP, Minneapolis, MN


Court Adopts Test Interpreting False Claim Act’s First-to-File Rule

The Fifth Circuit overturned a decision by Judge Peter Beer dismissing several insurance companies and adjusting firms from an action accusing them of overbilling the federal government for flood-damage claims resulting from Hurricane Katrina. The qui tamaction, entitled U.S. ex rel. Branch Consultants v. Allstate Insurance Company, accused eight insurers and six adjusting firms of inflating flood-damage estimates so that the federal government would cover a greater share of the payout on claims based on damage to Gulf Coast homes.

In reinstating the action against several of the insurance defendants, the Court of Appeals joined other circuits in interpreting the federal False Claims Act’s “first-to-file” rule to require dismissal where a later-filed action alleges the same material or essential elements of fraud as a previously filed action. The court also held, as a matter of first impression for any circuit court, that allegations in a first-filed action cannot bar related actions against wholly unrelated defendants brought in a subsequent action.

The allegations of fraud underlying the Eastern District of Louisiana action, which had been filed in August 2006, paralleled similar claims that were simultaneously pending in a separate action in the Southern District of Mississippi, United States ex rel. Rigsby v. State Farm Ins. Co., No 1:06-CV-433 (S.D. Miss. filed Apr. 26, 2006). The Mississippi action, which involved some, but not all of the same insurer defendants, was filed in April 2006 by sisters Cori and Kerri Rigsby, former State Farm adjusters who claimed that State Farm pressured engineers to change damage reports.

Judge Beer dismissed the claims in the Louisiana action against all of the insurers and adjusting firms named as defendants after concluding that the False Claim Act’s “first-to-file” provision deprived him of jurisdiction over the Louisiana matter because it was based on the same “general conduct and theory of fraud” as the Mississippi case, despite the fact that the Mississippi action focused on different details, geographic locations, and other insurer defendants. Under the Civil Actions for False Claims Statute’s first-to-file bar, U.S.C. § 3730(b)(5), when a person brings an action under the FCA, no person other than the government may bring a second action based on the same facts as the first action.

On appeal, a three-judge panel for the Fifth Circuit found that Judge Beer’s decision was correct as to two of the insurance companies—Allstate Insurance Co. and State Farm Fire and Casualty Co.—because they were already named as defendants in the Mississippi action. For the rest of the insurance and adjusting firms, however, including Liberty Mutual Insurance Co., Fidelity National Insurance Co., American National Property & Casualty Co., American Reliable Insurance Co., and Standard Fire Insurance Co., the Appeals Court reversed because those companies had not yet been named as defendants in the first-filed action.

In so doing, the Fifth Circuit for the first time adopted a test for determining whether the False Claim Act’s first-to-file provision applies, choosing to follow the lead established by the Sixth, Tenth, and D.C. Circuits in adopting the Third Circuit’s LaCorte rule, which rejects the argument that the first-to-file provision blocks only those subsequent claims that arise from facts identical to those in the first-filed action. The court found that the rule effectively balanced the dual legislative purposes of the False Claims Act, which are both to encourage whistleblowers “with genuinely valuable information” to bring suits “for the common good,” and “to discourage opportunistic plaintiffs from filing parasitic lawsuits that merely feed off previous disclosures of fraud.”    

In applying the rule, the court agreed that merely adding factual details or different geographic locations to a fraud claim was not enough to avoid the first-to-file rule, and so upheld the district court’s dismissal of claims against insurance companies also named in the Mississippi action. The court, however, disagreed with the district court regarding the other insurance defendants and found that the generic naming of two other insurers was insufficient to trigger the first-to-file bar as to insurance defendants that the Mississippi action did not name. Writing for the court, Judge Haynes concluded that on the basis of the FCA, “we cannot hold that ‘suit as to one is suit as to all,’” finding that “nothing in the [Mississippi] complaint provided the government with facts from which it could discern a widespread fraud involving all [insurers] or the identities of other specific fraudfeasors.”

Theresa M. House, Hogan & Harston LLP, New York, NY


Court of Appeals Rules That an Attorney's Attempt to Deceive a Court Will Result in Treble Damages

In Amalfitano v. Rosenberg, No. 01069, slip op. (N.Y. Feb. 12, 2009), the New York Court of Appeals held that an attorney who attempts to deceive the court is subject to treble damages, despite the fact that the deceit is unsuccessful. The decision was made in response to two certified questions presented to the court by the U.S. Court of Appeals for the Second Circuit. The certification sought the correct interpretation of Section 487 of the Judiciary Law of New York (Section 487). Section 487 states that an attorney who deceives the court is guilty of a misdemeanor and subject to treble damages:

An attorney or counselor who . . . is guilty of any deceit or collusion, or consents to any deceit or collusion, with the intent to deceive the court or any party . . . [i]s guilty of a misdemeanor, and in addition to the punishment prescribed therefore by the penal law, he forfeits to the party injured treble damages, to be recovered in a civil action. (N.Y. JUD § 487 (2009)).

The Second Circuit posed two questions: (1) whether Section 487 applies when an attorney tries to deceive a court but fails; and (2) whether “the costs of defending litigation instituted by a complaint containing a material misrepresentation of fact [should] be treated as the proximate result of the misrepresentation” even if the court was not deceived. Amalfitano v. Rosenberg, 533 F.3d 117, 126 (2nd Cir. 2008).

The defendant, Armand Rosenberg, brought an action on behalf of Peter Costalas against his niece, Vivia Amalfitano, and her husband, Gerard Amalfitano, in the Supreme Court, New York County. Amalfitano v. Rosenberg, 428 F.Supp.2d 196, 201 (S.D.N.Y. 2006); see Costalas v. Amalfitano, 305 A.D.2d 202 (1st Dep’t 2003).The lawsuit alleged that the Amalfitanos fraudulently purchased the Costalas’s family business, 27 Whitehall Street Group. Id. Rosenberg represented to the trial court that Costalas was a partner in the family business, which was not true. Id. The Amalfitanos made the court aware of this misrepresentation in a motion to dismiss. Thus, the trial court did not, in fact, rely on the misrepresentation and was not deceived by it. The trial court judge subsequently entered a default judgment against Costalas for Rosenberg’s failure to appear. Id.at 202. On appeal, the Supreme Court Appellate Division reversed the trial court’s decision and remanded the case for trial. Id. At trial, the Supreme Court, New York County again dismissed Costalas’s lawsuit for failure of proof, and the Appellate Division affirmed. Id. at 206.

The Amalfitanos subsequently initiated a diversity action against Rosenberg in the U.S. District Court for the Southern District of New York, alleging that he engaged in conduct throughout the Costalas litigation in violation of Section 487. Id. The district court agreed with the Amalfitanos and granted treble damages in the amount of $268,245.54, which included the plaintiffs’ legal expenses from inception of the Costalas litigation to the judgment. Id. at 212. Rosenberg appealed the decision to the U.S. Court of Appeals for the Second Circuit. The panel of judges hearing the appeal requested guidance from the New York Court of Appeals to interpret Section 487 correctly. Amalfitano v. Rosenberg, 533 F.3d at 126.

The court first addressed whether Section 487 applies when an attorney attempts to deceive a court but fails. Regarding this question, the defendant argued that Section 487 is equivalent to the common law tort claim for fraud. Id. at 3. The court noted that under New York common law, to succeed on the tort claim for fraud, the plaintiff must actually be deceived and damaged by the fraud. Id. (citing Channel Master Corp. v. Aluminum Ltd. Sales, 4 N.Y.2d 403, 406–407 (1958)). Applying the logic in Channel Master Corp., the defendant suggested that Section 487 only applies when the court is successfully deceived. Id. Because the court was not fooled by the misrepresentation regarding Costalas’s relationship with the family business, the defendant argued that he could not be held liable under Section 487. Id.

The court rejected the defendant’s argument that Section 487 is comparable to the common law tort claim for fraud. Id. Instead, the court traced the history of the law to the first Statute of Westminster, which was adopted by the English Parliament in 1275. Id. The Statute of Westminster stated that if a Pleader were to deceive the King’s Court, he would be imprisoned for a year and a day and barred from pleading in that court again. Id. Similar laws were adopted by the New York legislature beginning in 1787 and culminating in Section 70 of the Code of Civil Procedure, which awarded treble damages to a party injured by an attorney’s deceit of the court. Id. at 4–5. Under Section 70, “deceit” was defined by Looff v. Lawton, 14 Hun. 588 (2d Dept 1878) mod. 97 NY 478 (1884). Id.at 5. Looff held that the legislature intended an expansive reading of “deceit” rather than “confining the term to common law or statutory cheats.” Looff, 14. Hun. at 589. Looff concluded that because there was already a common law tort for fraud, no additional action for “deceit” was needed unless the legislature wished to limit the action to a specific class of individuals, such as lawyers, due to the trust placed in them by their relationship with the court. Amalfitano, No. 01069, slip op. at 6. Eventually, the law was transferred to the Judiciary Law as Section 487. Id.  The court cited this extensive history to find that Section 487 is not based on the common law tort claim for fraud, but instead has a lengthy heritage of holding attorneys responsible for deceiving the court and awarding treble damages for the deceit. Id.

The court held that Section 487 focuses on the attorney’s intent to deceive, using language such as “guilty of any deceit,” and does not focus on whether or not the court is fooled by the attorney’s deceit. Id. The court also noted that Section 487 is similar to criminal law— having been included in the state’s Penal Code for many years—where attempts are prosecuted as significantly as successful crimes. Id. The court concluded that “to limit forfeiture under section 487 to successful deceits would run counter to the statute’s evident intent to enforce an attorney’s special obligation to protect the integrity of the courts and foster their truth seeking function.” Id. at 6–7.

The court briefly addressed the second question posed by the Second Circuit: whether the costs of defending the lawsuit are the proximate results of the material misrepresentation of fact, even though the misrepresentation failed to deceive the court. The court declared that the answer to this question is irrelevant to recovering treble damages, but because “the lawsuit could not have gone forward in the absence of the material misrepresentation, that party’s legal expenses in defending the lawsuit may be treated as the proximate result of the misrepresentation.” Id. The district court and the Second Circuit appeared to consider all legal expenses associated with defending the litigation, although the court does not clarify this point. The court answered the certified questions in accordance with their opinion and returned the case to the Second Circuit to be decided.

The court’s decision regarding the two questions posed by the Second Circuit raises additional questions that were not addressed. The court makes an analogy to criminal law in its decision, recognizing that for many years, Section 487 was part of New York’s Penal Code. Id. at 6. If Section 487 is comparable to criminal law, then what standard of proof must a court use to determine if there was a violation of the law? The district court did not mention the standard of proof that it was applying. Instead, it appears that the district court’s decision turned on whether or not the defendant had the intent to deceive the court. Amalfitano, 428 F.Supp.2d at 209–210.

In criminal law, intent can be inferred from circumstantial evidence. The district court found that the defendant made a false representation in his complaint and repeated it on appeal. Id. Because the representation made by Rosenberg directly contradicted tax returns he had previously produced, the district court held that “the conclusion is inescapable that Rosenberg’s actions demonstrated a knowing intent on his part to deceive both the Supreme Court and the Appellate Division.” Id. This conclusion more closely resembles a beyond a reasonable doubt standard of proof or a clear and convincing standard than a preponderance of the evidence standard. Neither the district court nor the New York Court of Appeals elaborated on the type of evidence necessary to find intent.

An important question raised by this decision concerns vicarious liability. While the court in Amalfitano focused solely on the defendant, the court did not limit its finding of liability just to the attorney who makes the misrepresentation. If an attorney works for a law firm and attempts to deceive the court, could the attorney’s colleagues face vicarious liability for his actions? Section 487 applies only to attorneys, but it does not limit liability to the actual attorney that makes the misrepresentation. Without limiting its holding to the specific attorney that makes a false misrepresentation, the court leaves the door open for more expansive lawsuits that endorse a greater span of liability.

— Melissa A. Patterson, Hunton & Williams, Charlotte, NC


Trademark Protection for Color Schemes

In Bd. of Supervisors for La. State Univ. v. Smack Apparel Co., 550 F.3d 465 (5th Cir. 2008), the Fifth Circuit upheld a district court’s finding that a t-shirt maker that used school color schemes in combination with specific facts and indicia about the school infringed on the schools’ trademark rights in those color schemes, even if neither the school logo or other mark appeared on the t-shirt. The case is a huge victory for universities and their respective trademarks. More importantly, however, the case marks the first time a court has analyzed the trademark rights of a color scheme separate and apart from an accompanying word mark or logo.

Louisiana State University, the University of Oklahoma, Ohio State University, the University of Southern California, and the schools’ licensing agent brought this trademark infringement action against Smack Apparel Company, alleging that Smack’s t-shirts create a likelihood of confusion among consumers. Smack produces t-shirts bearing the distinctive color schemes of various universities and professional sports teams, along with sarcasm or puns relating to some fact or indicia about the school or team, such as events, game scores, and taunts at major rivals. The university-based items tend to relate to the school’s sports teams.

Smack’s products are unlicensed. In news interviews, the company claims to be “licensed only by the First Amendment.” Smack also paid no royalties to the schools.

The plaintiff universities alleged that Smack’s products were identical to and competed directly with the universities’ own officially licensed products. The Eastern District of Louisiana agreed with the universities, finding that Smack’s use of the color schemes and other indicia constituted trademark infringement, granting summary judgment to plaintiffs and holding a jury trial as to damages. Smack appealed.

The court noted that in order for an unregistered mark to obtain protectibility, “[t]he key is whether the mark is ‘capable of distinguishing the applicant’s goods from those of others.’” Bd. of Supervisors for La. State Univ. v. Smack Apparel Co., 550 F.3d 465, 475 (5th Cir. 2008) (citing Two Pesos Inc. v. Taco Cabana Inc., 505 U.S. 763, 768 (1992). The Fifth Circuit agreed with the parties that a color scheme can be protected as an unregistered trademark when, as here, it has acquired secondary meaning and is non-functional. Id. at 475–476. Notably, the schools claimed a mark not in the color scheme alone, but in the combination of color scheme and school indicia on Smack’s products.

The court applied the multi-factor test for determining secondary meaning set forth in Pebble Beach Co. v. Tour 18 I Ltd., 115 F.3d 525, 541 (5th Cir. 1998), which included: (1) length and manner of use of the mark or trade dress; (2) volume of sales; (3) amount and manner of advertising; (4) nature of use of the mark or trade dress in newspapers and magazines; (5) consumer-survey evidence; (6) direct consumer testimony; and (7) the defendant’s intent in copying the trade dress. Board of Supervisors for La. State Univ., at 476.

The plaintiff schools had been using their respective color schemes for more than 100 years; the colors were immediately identifiable with the school by those familiar with the school. The schools sell over $10 million in color scheme-marked merchandise every year, and the color schemes are included in all promotional material. The color schemes had been referenced multiple times in the media, and the schools often refer to themselves using their colors. Indeed, Smack intentionally incorporated the colors in their products in the belief that the colors had developed a secondary meaning. Because so many of the factors were met in this case, the court determined that the color schemes had developed a secondary meaning. Id. at 476–477.

Once a plaintiff shows ownership in a protectable mark, he must show that defendant’s use of the mark “creates a likelihood of confusion in the minds of potential customers as to the ‘source, affiliation, or sponsorship’ of the product at issue.” Id. at 478. In order the determine likelihood of confusion, the court assesses eight factors: (1) the type of mark allegedly infringed; (2) the similarity between the two marks; (3) the similarity of the products or services; (4) the identity of the retail outlets and purchasers; (5) the identity of the advertising media used; (6) the defendant’s intent; (7) any evidence of actual confusion; and (8) the degree of care exercised by potential purchasers. Id.

Analyzing the facts under these factors, the court found that plaintiffs adequately demonstrated a likelihood of confusion. The court found that the marks were strong despite some evidence of third-party use of the colors. Id. at 479. Even though Smack asserted that its designs were not identical to any university-licensed shirts, the court found, after comparing the shirts, a “striking similarity.” Id. Both parties used similar media, advertising, and retail outlets to sell products. Id. at 481. As to intent, Smack’s owner testified that it was “no coincidence” that his shirts incorporate the university color schemes and the he designed the shirts to make people think of the particular targeted school. Id. at 481–482.

In all, the court found a likelihood of confusion, stating “Smack’s use of the universities’ colors and indicia is designed to create the illusion of affiliation with the universities and essentially obtain a ‘free ride’ by profiting from confusion among the fans of the universities’ football teams who desire to show support for and affiliation with those teams. Boston Athletic Ass’n v. Sullivan, 867 F.2d 22, 33 (1st Cir. 1989). This creation of a link in the consumer’s mind between the t-shirts and the universities and the intent to directly profit therefrom results in “an unmistakable aura of deception” and likelihood of confusion. Id. at 35.” Board of Supervisors for La. State Univ., at 483–484.

The Fifth Circuit’s decision serves as a partial guide for companies seeking to use unregistered color schemes in connection with unlicensed products or services. Clearly, the use of those color schemes in combination with indicia of the trademark owner’s entity constitutes infringement. However, the court does not go so far as to state whether the color schemes alone, without the other collegiate indicia, would similarly have constituted protectable trademarks. This issue remains to be decided. Schools and companies can protect themselves against infringement by registering their color marks, which would create a presumption that the color scheme is a valid trademark.

— Jeffrey J. Zuber and D. Dennis La, Zuber & Taillieu LLP, Los Angeles, CA


Court Rules on Waiver of Remand in MDL Proceedings

Under 28 U.S.C. § 1407, the Judicial Panel on Multidistrict Litigation (the Panel) may transfer lawsuits involving common parties from their various original jurisdictions to one district for consolidated pretrial proceedings. At the conclusion of the pretrial proceedings, the cases must be remanded back to their original jurisdictions for trial. Armstrong v. LaSalle Bank National Association, No. 07-2280, 2009 WL 66584 (7th Cir. Jan. 13, 2009) addresses the appropriate standard for waiver of the right to remand individual cases consolidated under 28 U.S.C. § 1407 at the conclusion of pretrial proceedings.

In Armstrong, the Panel determined that multiple lawsuits against common defendants—Amsted Industries, Inc., its Employee Stock Ownership Plan (ESOP), and Amsted officers—by participants in Amsted’s ESOP, should be transferred to the Northern District of Illinois for consolidated pretrial proceedings. Id. at *1. The lawsuits charged the defendants with violations of ERISA along with breaches of fiduciary duty, breach of contract and conversion. Id. The cases were originally initiated in Alabama, Illinois, and Florida. Id. The district court ordered the parties to consolidate the cases into two categories of plaintiffs: (1) retired Amsted employees, and (2) non-retired Amsted employees. Id. The non-retirees’ consolidated complaint joined a new defendant, LaSalle Bank, to the lawsuit. After several proceedings, the only claims remaining were those against LaSalle. Id.

At the close of pretrial proceedings, the plaintiffs moved to remand their claims pursuant to § 1407. Id. LaSalle argued that the plaintiffs, through their conduct, had implicitly waived the right to remand and had consented to venue in the Northern District of Illinois. Id. LaSalle’s argument rested on the plaintiffs’ statement in the consolidated complaint that “venue is proper in this court,” and the fact that, throughout the pretrial proceedings, the plaintiffs consented to the district court’s development of a schedule for discovery and trial. Id. The district court granted the remand request despite LaSalle’s objections. Id.

On appeal, the Seventh Circuit Court of Appeals discussed what standard must be used to determine when a § 1407 right to remand is waived. The plain language of § 1407 instructs that “[e]ach action so transferred shall be remanded . . . at or before the conclusion of such pretrial proceedings. . . .” Id. at *2. Based on this language, the court started with the presumption that all cases will be remanded at the close of pretrial proceedings. Id. The Seventh Circuit recognized, however, that plaintiffs may waive that right. Id. The issue of waiver of the § 1407 right to remand was apparently an issue of first impression in the Seventh Circuit, leaving the court to examine a comparable issue: waiver of the right to arbitration. Id. In determining whether a party has waived such a right, the court must “determine whether based on all circumstances, the party against whom the waiver is to be enforced has acted inconsistently with the right to arbitrate.” Id. at *3 (internal quotations omitted). Simply demonstrating inconsistent conduct is not enough. Moreover, because section 1407 is a statutory right, an even stronger showing of waiver is required than for waiver of the right to arbitration. Id. The court did not address this more restrictive standard, holding that LaSalle failed to demonstrate waiver even under the less restrictive arbitration standard. Id.

To determine whether the plaintiffs “evidenced an intent contrary to that statutory mandate” of section 1407, the court looked to the plaintiffs’ actions. Id. The plaintiffs filed a consolidated complaint in the district court at that court’s request. Id. at *4. While the plaintiffs admitted that venue was proper in the district court, such an admission is not equivalent to admitting that venue was only proper in that court. The Seventh Circuit recognized that “venue may be proper in more than one court.” Id. The plaintiffs also submitted a proposed order for case management, which stated that the parties may request remand of any case. Id. The district court granted that motion but without the plaintiffs’ proposed language. Id. Still, the plaintiffs’ intent was evident from that language. The Seventh Circuit distinguished this case from others where the plaintiffs waited until the day of trial to move for remand or cases where the parties consented to trial in the transferee court. Id. at *5. In Armstrong, there was “no ongoing effort to pursue a trial in the transferee court beyond the pretrial proceedings.” Id.

The Seventh Circuit affirmed the district court’s decision to grant the plaintiffs’ request for remand. In doing so, the Seventh Circuit established that for waiver of the right to remand to occur, there must be clear, unequivocal evidence that the parties intentionally waived that right. The court did not, however, outline a more restrictive waiver requirement for section 1407 compared to the less stringent waiver requirements for arbitration. While a party may only waive the right to remand by intentional conduct, it is unclear what conduct qualifies to meet the high threshold for waiver. Parties wishing to preserve the right to remand their case at the conclusion of pretrial proceedings lack a clear set of guidelines for preservation, though parties clearly cannot wait until the day of trial or explicitly consent to venue in the transferee court. Moreover, any conduct inconsistent with the right to remand must cease at the conclusion of pretrial proceedings. The Seventh Circuit did not delineate other conduct that may result in waiver of the right to remand. It appears that such a determination must be made on a case-by-case basis. At the very least, parties should follow the standards already set by courts to preserve the right to arbitration.

— Melissa A. Patterson, Hunton & Williams, Charlotte, NC