Remain calm
Remain calm

Changing the status quo

Plaintiffs’ lawyers tend not to count patience as a virtue.

Thirty years ago, I showed a busy plaintiffs’ lawyer a new Fifth Circuit decision that took three paragraphs to explain why the district court should have let the plaintiffs amend their complaint.

Those judges need to make better use of their time, he said — and stop wasting mine!

As an aspiring disturber of the status quo — as someone whose job required him to disturb it — he wanted to get on with the disturbing, and to do so with the least amount of nonsense and a minimum waste of time and effort.

That kind of attitude can backfire. In the contest of a motion to dismiss, it might lead an impetuous plaintiffs’ lawyer to propose an amendment of the complaint even before the district court rules on the merits of the motion. But, as the old Fifth Circuit case illustrated three decades ago and a new one from the Second Circuit stresses anew, the let’s-get-on-with-it view of the world can rob you of an important advantage — clarity on what to fix.

The right to amend

The case that provoked the mini-tirade, Auster Oil & Gas, Inc. v. Stream, 764 F.2d 381 (5th Cir. 1985), alleged a Keystone Cops-like scheme to detect theft of oil from a field in Calcasieu Parish, Louisiana. The oddity of the facts prompted the author of the opinion, my judge, to use names of novels by William Faulkner as headings. I’ve always liked it.

The court in Auster Oil & Gas upheld a complaint that accused the Louisiana officials of conspiring with the owners of an oil field to conduct an unlawful search of gathering lines in order to determine whether the operator had diverted some of the oil via a secret outlet. In doing so, the panel stressed that Rule 15 mandates leave to amend a complaint any time “justice so requires”. An effort “to correct any flaws in its original statement of its claims”, the court noted, “cuts in favor of . . . allowing the amendment.”

Collateralized debt obligations

In Loreley Financing (Jersey) No. 3 Ltd. v. Wells Fargo Securities, LLC, No. 13-1476-cv (2d Cir. July 24, 2015), the court vacated the district court’s dismissal of a complaint alleging fraud against Wells Fargo, Wachovia, and others for their roles in the sale of complex financial instruments (collateralized debt obligations) for many millions of dollars.

The 3-0 opinion — a sparkler by the former dean of the Yale Law School, Guido Calabresi — elucidates nuances of New York law on scienter, loss causation, and other matters on the way to reversing dismissal of the CDO purchasers’ complaint.

But the last section, which ran four and a half pages, focused on the district court’s abuse of discretion in refusing to permit the plaintiffs to amend the complaint. Judge Calabresi wrote as follows:

[The district court erred when] it presented Plaintiffs with a Hobson’s choice: agree to cure [pleading] deficiencies not yet fully briefed and decided or forfeit the opportunity to replead. Without the benefit of a ruling, many a plaintiff will not see the necessity of amendment or be in a position to weigh the practicality and possible means of curing specific deficiencies.

Loreley Financing, slip op. at 53-54. Judge Calabresi continued:

The present case combines a complex commercial reality with a long, multiprong complaint. In such situations, pleading defects may not only be latent, and easily missed or misperceived without full briefing and judicial resolution; they may also be borderline, and hence subject to reasonable dispute. As discussed in Part I, supra, dismissal was partly based on the district court’s determination that Plaintiffs’ fraud allegations raised neither plausible inferences of material misrepresentations nor strong inferences of scienter. Id. at *10-15. These determinations entail judgment calls on which reasonable minds can differ in a not insignificant number of cases. Cf. [Ashcroft v.] Iqbal, 556 U.S. [662,] 679 [(2009)] (“Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.”). The district court’s rejection of Plaintiffs’ position that the strength-of-inference requirements had been met by the facts set forth in the original complaint was, without more, insufficient reason to bar Plaintiffs from repleading. Indeed, that our opinion today partially vindicates Plaintiffs’ position is, we think, some measure of the potential for reasonable disagreement here.

Id. at 55-56.

The bright side

In 1985, a judicial trend — towards making cases procedurally more difficult for plaintiffs — had already begun. The lawyer who railed against a three-paragraph explanation of why plaintiffs should get a second chance to pleading a viable case sensed the shift and did not like it.

The tide has gone out much further since then. Twombly and Iqbal have toughened the test for pleading in all kinds of cases. Little wonder then that courts have shown little hesitation when dismissing complaints also to deny leave to amend them.

Loreley Financing provides a welcome reminder that Rule 15 mandates an opportunity to repair a complaint in light of the district court’s actual ruling on the sufficiency of the original allegations. Plaintiffs counsel should therefore resist asking for leave to amend until after the court issues its ruling. You will then have the benefit of the court’s reasoning.

Acting sooner may make you feel smart and on top of things. But Auster and Loreley Financing counsel that you can, and should, wait.

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Photo of Barry Barnett Barry Barnett

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck…

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck Redden).

Barnett is a Fellow in the American College of Trial Lawyers, and Lawdragon has named him one of the top 500 lawyers in the United States three years in a row. Best Lawyers in America has honored him as “Lawyer of the Year” for Bet-the-Company Litigation (2019 and 2017) and Patent Litigation (2020) in Houston. Based in Texas and New York, Barnett has tried complex business disputes across the United States.

Barnett’s background, training, and experience make him indispensable to his clients. The small-town son of a Texas roughneck and grandson of a Texas sharecropper, Barnett “developed an unusual common sense about people, their motivations, and their dilemmas,” according to former client Michael Lewis.

Barnett has been historically recognized for his effectiveness and judgment. His peers chose him, for example, to the American College of Trial Lawyers and American Law Institute. His decades of trial and appellate work representing both plaintiffs and defendants have made him a master strategist and nimble tactician in complex disputes.

Barnett focuses on enforcement of antitrust laws, the “Magna Carta of free enterprise,” in Supreme Court Justice Thurgood Marshall’s memorable phrase. “Barry is one of the nation’s outstanding antitrust lawyers,” according to Joseph Goldberg, a member of the Private Antitrust Enforcement Hall of Fame. Named among Texas’s top ten antitrust lawyers of 2023, Business Today calls Barnett a “trailblazer” among the “distinguished legal minds” who “dedicate their skill and expertise to the maintenance of healthy competition in various sectors” of the Lone Star State’s booming economy. Barnett is also adept in energy and intellectual property matters and has battled for clients against a Who’s Who list of corporate behemoths, including Abbott Labs, Alcoa, Apple, AT&T, BlackBerry, Broadcom, Comcast, Dow, JPMorgan Chase, Samsung, and Visa.

Barnett commands a courtroom with calm and credibility and “is the perfect lawyer for bet the company litigation,” said Scott Regan, General Counsel of former client Whiting Petroleum. His performance before the Supreme Court in Comcast Corp. v. Behrend prompted the Court to withdraw the question on which it had granted review. The judge in a trial involving mobile phone technology called Barnett “one of the best” and that his opening statement the finest he had ever seen. Another trial judge told Barnett minutes after a jury returned a favorable verdict against the county’s biggest employer that he was one of the two best trial lawyers he’d ever come across—adding that the other one was dead.

A versatile trial lawyer, Barnett knows how to handle a case all the way from strategic pre-suit planning to affirmance on appeal. He’s tried cases to verdict and then briefed and argued them when they went before appellate courts, including the Second, Third, Fifth, and Tenth Circuits, the Supreme Court of Louisiana, and (in the case of Comcast Corp. v. Behrend) the Supreme Court of the United States.

Barnett is a sought-after public speaker, often serving on panels and talking about topics like the trials of antitrust class actions and techniques for streamlining complex litigation. He also comments on trends in commercial litigation and the implications of major rulings for outlets such as NPR, Reuters, Law360, Corporate Counsel, and The Dallas Morning News. He’s even appeared in a Frontline program about underfunding of state pensions, authored chapters on “Fee Arrangements” and “Techniques for Expediting and Streamlining Litigation” (the latter with Steve Susman) in the ABA’s definitive treatise on Business and Commercial Litigation in Federal Courts, 5th, and commented on How Antitrust Enforcers Might Think Like Plaintiffs’ Lawyers.

Clients and other hard graders have praised Barnett for his courtroom skills and legal acumen.

A client in a $100 million oil and gas case, which Barnett’s team won at trial and held on appeal, said Barnett and his team “presented a rare combination of strong legal intellect, common sense about right and wrong, and credibility in the courtroom.” David McCombs at Haynes and Boone said Barnett “has a natural presence that goes over well with juries and judges.”

Even former adversaries give Barnett high marks. Lead opposing counsel in a decade-long antitrust slugfest said “Barry is a highly skilled advocate. He understands what really matters in telling a narrative and does so in a very compelling manner.”

Barnett relishes opportunities to collaborate with all kinds of people. At the Center for American and International Law (CAIL), founded by a former prosecutor at Nuremberg in 1947 and headquartered in the Dallas area, he has served on the Executive Committee, co-chaired the committee that produced CAIL’s first-ever strategic plan, supported CAIL’s Institute for Law Enforcement Administration and other development efforts, and proposed formation of a new Institute for Social Justice Law. CAIL’s former President David Beck said “Barry is extremely bright” and is “very well prepared in every lawsuit or professional task he undertakes.”

Barnett is also a Trustee of the New-York Historical Society, a Sterling Fellow at Yale, a member of the Yale University Art Gallery’s Governing Board, a winner of the Class Award for his work on behalf of his college class, and a proud contributor to the Yellow Ribbon Program at Harvard Law. Barnett’s pro bono work includes leading the trial team representing people who are at greatest risk of severe illness and death as a result of being exposed to the novel coronavirus SARS-CoV-2 while being detained in the Dallas County jail—work for which he received the NGAN Legal Advocacy Fund RBG Award.

At Susman Godfrey, Barnett has served on the firm’s Executive Committee, Employment Committee, and ad hoc committees on partner compensation, succession of leadership, and revision of the firm’s partnership agreement. He also twice chaired the Practice Development Committee.

Barnett understands that clients face many pressures. Managing the stress is important, especially in matters that take years to resolve. He encourages clients to call him whenever they have a question or concern and to keep the inevitable ups and downs in perspective. He wants them to know that he will do his level best to help them achieve their goals. He also strives to foster trust and to make working with him a pleasure.

Cyrus “Skip” Marter, the General Counsel of Bonanza Creek in Denver and a former Susman Godfrey partner and client, said Barnett is “excellent about communicating with clients in a full and honest manner” and can “negotiate for his clients from a position of strength, because he is not afraid to take a case through a full trial on the merits.” Stacey Doré, the President of Hunt Utility Services and a former client, said that Barnett is “an excellent trial lawyer and the person you want to hire for your bet-the-company cases. He is client focused, responsive, and uniquely savvy about trial and settlement strategy.” A New York colleague said, “Barry is a joy to work with as co-counsel. He tackles complex procedural and factual hurdles capably, efficiently, and without drama.”

Barnett’s wide-ranging experience and calm, down-to-earth approach enable him to connect with clients, judges, jurors, witnesses, and even opposing counsel. He grew up in Nacogdoches, Texas. He co-captained his high school varsity football team as an All-East Texas middle linebacker while also serving as the Editor of Key Club’s Texas-Oklahoma District, won the Best Typist award, took the History Team to glory, and sang in the East Texas All Region Choir. As Dan Kelly of client Vistra Corp. put it, Barnett is “a great person to be around.”

Barnett is steady and loyal. He has practiced at Susman Godfrey his entire career. He and his wife Nancy live in Dallas and enjoy spending time in Houston and New York. Their daughter works for H-E-B in Houston, and their son is a Haynes and Boone transactions lawyer in Dallas.

As a member of Ivy League championship football teams in his junior and senior years at Yale and a parent of two Yalies, Barnett has no trouble choosing sides for “The Game” in November. And he knows how important fighting all the way to the end is. On his last play from scrimmage, in the waning minutes of The Game on Nov. 22, 1980, he recovered a Crimson fumble.

Yale won, 14-0.