Asbestosis inflames and scars lungs.  It causes shortness of breath.  And it increases the risk, and fear, of lung cancer.

Yesterday, the U.S. Supreme Court, in a summary decision, reversed a $5 million verdict and judgment for an asbestosis victim, Thurston Hensley.  Mr. Hensley contracted the disease from breathing asbestos fibers during 33 years of work as an electrician for a railroad, CSX Transportation.

The error?  CSX asked for an instruction on fear-of-cancer damages.  It would have told the jury not to award such damages unless it found that Mr. Hensley worried about getting cancer "genuine[ly] and serious[ly]".  The 7-2 Court deemed the trial court's refusal to give the instruction "clear error".  The Court cited "the volume of pending asbestosis claims" and "the danger that a jury, without proper instructions, could award emotional distress damages based on slight evidence of a plaintiff's fear of conracting cancer."  CSX Transp., Inc. v. Hensley , No. 08-1034 (U.S. June 1, 2009).

Justice Per Curiam wrote the Court's opinion.  Justices Stevens and Ginsburg added separate dissents.

The Washington Post reports today that, under Chairman Christopher Cox, an ex-Congressman, the Securities and Exchange Commission collected a whopping $256 million in fines during 2008. 

The bad news?  The 2008 take represented 16 percent of the $1.59 billion the SEC brought in during 2005, at the start of Mr. Cox's reign.

The report summarizes the problems thus:

During Cox's tenure, investigators who wanted to subpoena documents or compel interviews faced an increasingly cumbersome process to win the commission's approval for each case, according to current and former agency officials.

Cox also required enforcement officials to see the commissioners before approaching a company about a civil settlement. In several high-profile cases, when SEC lawyers were ready to ask the commission to authorize lawsuits or approve settlements, Cox postponed the decisions at the last minute, leaving cases unresolved for months, the sources said. At times, as in the Biovail case [in which the commission knocked down a penalty to a small fraction of what SEC staff had sought], the commission eventually weakened the sanctions sought by the enforcement division.

Blawgletter today proudly welcomes as guest blawger a fellow Texan — Gerald E. Hawxhurst. 

Jerry practiced law in New York and Los Angeles at Simpson Thacher and Quinn Emanuel before co-founding  Baker Marquart Crone & Hawxhurst LLP in LA.

A Texan by birth/stays a Texan/anywhere on earth.

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California Court of Appeal Holds that Home State “Permission To Sue” Procedures Are Substantive Rules After All

In a case of first impression, the California Court of Appeal in Vaughn v. LJ Int’l, Inc., No. B208192 (Cal. Ct. App. May 26, 2009), held that a shareholder seeking to bring a derivative suit in California must first comply with the “permission to sue” procedures under the laws of company's state of incorporation—in that case, the British Virgin Islands—in order to bring a derivative action in California.

The court reasoned that because permission to sue rules determine whether a party has standing, they are “most appropriately” characterized as a substantive right, and therefore must be applied under California’s “internal affairs” statute, Corporations Code section 2116 (the “internal affairs” doctrine provides that the internal affairs of a company will be governed by the laws of the state in which the company is incorporated).   The Court of Appeal noted that companies and their shareholders should be entitled to rely on the laws of the company’s state of incorporation and that consistent application of those laws gives them greater predictability in how disputes concerning internal affairs will be resolved.   

I predict more difficulty in bringing derivative suits in California.

Gerald E. Hawxhurst

   Thanks, Jerry!

A long-running antitrust class action produced a peace pact in 1999 for $164 million.  A claims administrator mailed checks to many class members but couldn't find others.  The district court ordered a cy pres remedy — payment of the remaining funds to an air quality monitoring project.

The sum of $4,638,283 remained on account for class members whose "last known" addresses put them within the borders of the Lone Star State.  The Attorney General of Texas said the money belonged to Austin for the benefit of the true owners.  He also claimed the right of Texas to keep all interest on the $4.6 million.  He tried to intervene.  The district court rebuffed him.

The Fifth Circuit reversed.  In re Lease Oil Antitrust Litig., No. 08-40230 (5th Cir. May 28, 2009).  The court went through the factors that govern "intervention as of right" under Rule 24(a) of the Federal Rules of Civil Procedure and held that the AG satisfied enough of them.  The central factor — whether the state could assert "a direct, substantial, legally protectable interest in the action" — turned on Texas's right to the funds or the interest that accrued on them.  Id., slip op. at 8.  The court said the state didn't own the money but could claim the interest.

Feed-icon-14x14 An interest in interest.

The May issue of Barnett's Notes on Commercial Litigation will come out tomorrow.  We'll post a link in the morning.

In This Issue

1.  Antitrust Resurgent:  What to Expect.  Eight things.

2.  Did you know?  New federal laws expand civil remedies.

3.  Arbitration Gets Another Supreme Court Boost.  Now you can always appeal denial of a stay pending arbitration.

4.  Laying Blame.  Angry?  Join the club.  But the gods still first make mad those they would destroy.

5.  Twombly Applies in All Civil Cases.  9/11 aftermath case supplies decision.

6.  Hot Lunch.  SEC finds fraud in credit default swaps trade.  Imagine that.

7. Links & Info.

Blawgletter ran into free speech expert Paul Watler today.  He's a partner at Jackson Walker LLP in Dallas.  We asked after the health of the first amendment.  He said the struggle never ends.

A little later Paul sent me a link to an article he wrote about a new Texas law that protects professional journalists from having to reveal their work product.  "We finally have a shield law on the books after many years of trying", he said in the email.

You can check out the text of H.B. No. 670 here.

Jeffrey Toobin writes a lot about the law, lawyers, even judges.  His oeuvre includes, for example, The Nine:  Inside the Secret World of the Supreme Court (2007).  (NYT review here.)  Plus he comments on CNN, which may say something about his leanings. 

Anyway, he recently published a longish profile of Chief Justice John Roberts (in The New Yorker, another possible tip-off). 

The title and subtitle offer a preview of what Mr. Toobin thinks of His Honor's work on the Court – "No More Mr. Nice Guy:  The Supreme Court's stealth hard-liner".

The core of Mr. Toobin's argument — let's call it that — arrives about paragraph 12.  He says:

After four years on the Court . . . Roberts’s record is not that of a humble moderate but, rather, that of a doctrinaire conservative. The kind of humility that Roberts favors reflects a view that the Court should almost always defer to the existing power relationships in society. In every major case since he became the nation’s seventeenth Chief Justice, Roberts has sided with the prosecution over the defendant, the state over the condemned, the executive branch over the legislative, and the corporate defendant over the individual plaintiff. Even more than Scalia, who has embodied judicial conservatism during a generation of service on the Supreme Court, Roberts has served the interests, and reflected the values, of the contemporary Republican Party.

Whoa!

The article came out around a week before President Barack Obama announced that he'd nominate Second Circuit Judge Sonia Sotomayor to replace retiring Associate Justice David Souter.  But it doesn't mention the retirement.  Call that serendipity. 

Whatever you may think about the nomination — or Mr. Toobin's argument – a look back at the Chief Justice's confirmation hearing, and at his rulings since, adds interest to the debate about what sort of Associate Justice Judge Sotomayor might become. 

Does it tell us anything?  Anything useful, Blawgletter means?

LarryCableGuy 
Larry the Cable Guy.

In 2007, the Federal Communications Commission found that exclusive contracts between cable companies and owners of multiple-dwelling units (e.g., apartment complexes) cause significant harm to competition and consumers.  The FCC therefore banned exclusivity.

The D.C. Circuit today upheld the order.  Nat'l Cable & Telecomm. Ass'n v. Federal Comm. Comm'n, No. 08-1016, slip op. at 3 (D.C. Cir. May 26, 2009).  The cable industry arguments it rejected included a narrow reading of a broad statute — section 628(b) of the Communications Act.  As the court explained:

The provision at issue here . . . makes it unlawful "for a cable operator . . . to engage in unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers."

Id., slip op. at 3 (quoting 47 U.S.C. 548(b)).  The cable group urged that "providing" programming (TV shows) really means "obtaining" it.  The court said no.

The court also found the FCC adequately explained its reasons for changing its mind about exclusive contracts.  The agency's earlier refusal to bar exclusive dealings, the court noted, turned on the sparser record it had at the time (in 2003).  Things change.

See the opinion for other interesting tidbits peculiar to the cable business, the FCC, and rulemaking.

The decision comes at a bad time for the cable behemoths.  In 2007 and 2008, the FCC seemed, at last, to start finding the means, and the will, to begin reining in anticompetitive cable practices.  That trend will likely gain strength in the new administration.

And the industry's insistence that section 628(b) covers denying access to programming?  The FCC has taken steps to issue rules to end cable companies' withholding of "must-have" content like regional sports programming.  Cable will now have an even harder time showing that such rules as those fall outside of section 628(b) bounds.

FeedIcon Hoist on one's own petard.