JoeyDauben 
Joey Dauben really likes domain names.

A company that has registered almost 635,000 Internet domain names, Dauben Inc., adores typing mistakes.  Microsoft, for example, complained about Dauben's use of 86 domain Microsofty names, including "mocrosoftoffice.com", "micriosoftsupport.com", and "otlookexpress.com".

Today the Fifth Circuit considered a preliminary injunction that barred Dauben from exploiting domain names "confusingly similar" to "southerncompany.com".  The Southern Company, a big electricity generator from Georgia, alleged that Dauben's "sotherncompany.com" and "southerncopany.com" violated the Anticybersquatting Consumer Protection Act.  

Dauben's strategy, Southern claimed, allowed the "typosquatter" Dauben to convert Internet users' keyboard yips into cash by sending them to Internet pages featuring nothing but ads.  If an errant user clicks the link on one of the adverts, Dauben gets money (from the ad's sponsor).

The district court granted Southern's motion for preliminary injunction.  The Fifth Circuit reversed (in a non-precedential opinion).  The lower court, it held, failed to analyze Dauben's argument that its conduct fell within a "fair use" exception and neglected to explain just how diverting people from Southern's Internet site to the Dauben ad pages would cause irreparable harm.  The Southern Co. v. Dauben Inc., No. 08-10248 (5th Cir. Apr. 15, 2009) (per curiam).

Great.  Just great.  Now Blawgletter will have to look at paying Go Daddy $9.99 a year for the privilege of registering "blawglettr.com".  That scuks.

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The Fifth Circuit held last week that a potential contractor’s revelation of a choice between options doesn’t necessarily a trade secrets misappropriation claim make.

The case involved a dispute between CQ, Inc., and TXU Mining Co., L.P., over TXU’s solicitation of help for cleaning lignite coal.  CQ applied for a TXU lignite-cleaning contract.  CQ won first place standing.  But TXU never inked a deal. 

CQ sued for, among other things, theft of trade secrets.  It alleged that its suggestion of cleaning run-of-mine (ROM) lignite instead of “waste” lignite revealed in confidence to TXU a protectible trade secret.

The Fifth Circuit, applying Texas law, upheld dismissal of the misappropriation claim.  It said:

The ROM strategy does not qualify as a trade secret under Texas law. As defined by CQ, the “ROM strategy” was CQ’s recommendation that TXU focus on cleaning ROM lignite instead of waste lignite at the Twin Oak Mine. CQ does not allege that the ROM strategy itself involved a previously unknown process or method for cleaning lignite. In fact, the record indicates that TXU contemplated cleaning ROM lignite when it sent its initial request for bids. The ROM strategy was essentially a strategic recommendation between two generally known alternatives. While this recommendation may have been based on CQ’s valuable experience and effort, it was not a “process or device for continuous use” that offered TXU an advantage over its competitors. See [RESTATEMENT OF

TORTS § 757, cmt. b. (1939)].  Moreover, the record indicates that the recommendation was tailored to TXU’s initial cleaning project, not to the mining industry generally. See id . (explaining that a trade secret “is not simply information as to single or ephemeral events”). Accordingly, the ROM strategy was not a trade secret under Texas law, and the district court did not err in granting summary judgment against CQ’s misappropriation claim.

CQ Inc. v. TXU Mining Co. L.P., No. 07-11134, slip op. at 8 (5th Cir. Apr. 9, 2009) (applying Texas law).

Blawgletter says, ah — a strategic recommendation that tells you something you could already know doesn’t count as a trade secret.  But the pre-existing awareness by TXU of the ROM option made all the difference.  Ah. 

The Judicial Panel on Multidistrict Litigation has begun ruling on transfer motions it heard on March 26 in San Diego.  The Panel granted transfer and centralization in five MDL matters, denied one, deemed one moot, and declined to reconsider another. 

The results:

Transfers (transferee court in parentheses)

MDL No. 2020 — In re Aetna, Inc., Out-of-Network "UCR" Rates Litig. (D.N.J.)
MDL No. 2021 — In re Le-Nature's, Inc. Commercial Litig. (W.D. Pa.)
MDL No. 2022 – In re Payless ShoeSource, Inc., Calif. Song-Beverly Credit Card Act Litig. (E.D. Cal.)
MDL No. 2027 — In re Satyam Computer Services, Ltd. Securities Litig. (S.D.N.Y.)
MDL No. 2029 — In re Online DVD Rental Antitrust Litig. (N.D. Cal.)

No Transfer

MDL No. 2026 — In re AriZona Beverage Co. Product Mktg. and Sales Practices Litig. (Denied)
MDL No. 2038 — In re Honda Mfg. of Alabama, LLC, and Honda of Am. Mfg., Inc., Employee Retirement and Income Security Act (ERISA) Litig. (Moot)

No Reconsideration

MCP-103 — In re Environmental Protection Agency, Final General Permit:  Final National Pollutant Discharge
Elimination System (NPDES) General Permit for Discharges Incidental to the Normal Operation of a Vessel, 73 Fed. Reg. 79,743, Published on Dec. 29, 2008, Issued on Jan. 12, 2009 (Denied)

Blawgletter has worked at one place, a law firm, since getting a bar card in 1985.  At some point, the firm tried to distill its approach to trial work into one document.  The current version appears below:

How We Handle Cases

In handling complex litigation, our firm is guided by two principles, both of which reduce expense without sacrificing chances for success. First, less is best. Excess discovery is not just nonproductive, it often is counterproductive. Excess discovery removes the element of surprise at trial, forces the opposition lawyers and witnesses to get prepared earlier than they otherwise would, and often takes the eyes of the lawyers who engage in it off the ball. The best lawyers are best able to handle (and create) surprise at trial. We believe in retaining our natural advantage.

Minimal discovery, however, doesn't mean being ill-prepared. It means we prepare by means other than formal discovery, such as thoroughly interviewing our client's employees and the other side's ex-employees, organizing all documents and information chronologically to understand the complete picture, and conducting jury simulations.

Second, we take whatever discovery we need before the other side does. We like to take the first depositions and we like to depose the top executives first – before they can get their stories straight. We don't believe extensive document discovery is necessary to do this.

THE BOTTOM LINE

  • We are stand-up jury trial lawyers, not discovery litigators. Everything we do is designed to prepare us to persuade a jury.

  • Fifty percent of our time as a firm is spent in handling contingent fee matters for plaintiffs. Since preparation in these cases is on our own nickel, we know how to economize and insist that everything we do potentially be outcome-determinative. We acquire good habits from this contingent fee work.

  • We encourage clients to compensate us on a result-achieved basis. We want the same incentive to win our clients have. But even when we are paid by the hour, we pride ourselves in a "mean and lean" approach to litigation.

  • In our experience, the bottom line amount of our monthly statements will be lower than those of large firms that compensate partners on a pyramid basis and that leverage off the billings of large numbers of associates. We do not have enough lawyers or enough excess capacity to over-work a case, and even if we did and a client was willing to pay us to do so, it would go against our grain. We often staff cases with just a fraction of the number of lawyers our adversaries use to overwork the case.

  • Because we only do litigation, we have few regular clients. The only way we get business is by the result we achieved in the last case. Our most prized asset is our list of clients who have seen us in court. We cannot afford to lose. And we cannot afford to win inefficiently.

TEAMWORK ON THE BIG CASE
(WE HANDLE SMALL ONES, TOO)

At the beginning of a complex case, we assemble our trial team, rarely consisting of more than one or two partners, an associate and a legal assistant.

  • We candidly discuss staffing with the client up front and try to assign to the case lawyers with whom the client feels comfortable.

  • We believe in one-lawyer-one-task. We rarely assign two lawyers to cover a litigation event.

The partner in charge manages case preparation by using a Task Assignment memo, revised weekly, and a regular weekly team meeting or conference call.

  • Task Assignment Memo. Each task is assigned to a named team member with the due date. These memos are numbered sequentially and revised after each weekly meeting.

  • The Weekly Meeting. Interoffice conferences among trial team members are necessary for effective communication and to avoid duplication of effort. But they are wasteful if the same message must be repeated. By focusing our interoffice communications into a regularly scheduled meeting or conference call, we avoid unnecessary jawboning among team members at other times. This also allows the client's in-house counsel, co-counsel, etc., to attend and keep up to date.

  • Call Reports. If a member of the team has a substantive discussion with the client, co-counsel or opposing counsel, he routes a call report by e-mail to other team members.

DISCOVERY AND DISCOVERY DISPUTES

Dealing with Opposing Counsel

  • We try to conduct all discovery by agreement. It is expensive to do otherwise.

  • We rarely take discovery disputes to court. Judges hate them and usually give both sides less than they could get by agreement. Our rule is to take a discovery dispute to court only when the issue is outcome-determinative (few are), and only when we have confidence that we can win.

  • At the start of a case, we send a memo to opposing counsel seeking agreement to a number of protocols that we have found to facilitate cooperation and reduce costs.

Document Production

  • Upon receipt of the other side's document request, an experienced attorney, in consultation with the client, determines what should be objected to. We have found that it is better to produce too much than too little. It is very expensive to review masses of documents to remove what is nonresponsive or irrelevant. Sooner or later, we'll probably have to produce them anyway. We even encourage our clients to allow open files searches if we can get a stipulation preserving privileges or find a way to identify files that are likely to contain privileged documents.

  • We do not simply like to rely on our client to locate and furnish to us responsive documents. Our legal assistants are experts at this, and there is too much danger of an inadvertent omission unless we are involved from the beginning. For example, we believe in numbering the originals of all documents produced for inspection before they are inspected, in logging all files searched, and in interviewing file custodians while the searches are being made.

  • Before numbered originals are produced for inspection, a lawyer reviews them to remove those that are privileged. All documents withheld on the ground of privilege are logged at the time they are withheld.

Document Organization

  • We are not great believers in computerizing all documents. This is expensive and, in most cases, unnecessary. Even the most complex case boils down to less than several hundred hot documents. As we initially review documents – ours and theirs -lawyers select those that are to be included in our hot document chronology. These are the documents that tell the story, which we use to prepare witnesses, and to depose witnesses. They are the ones that likely will become trial exhibits.

  • From the document chronology, we prepare a written chronology of events. It is not a document digest, but rather an annotated narrative of what happened.

Depositions

  • We don't take many, and those that we take are short. We don't need to look under every stone. We just need to know where the boulders are. Excessive questioning of witnesses, particularly experts, serves only to educate them.

  • We normally videotape depositions of fact witnesses. This minimizes excessive talking by opposing counsel and allows us to show the other side's key witnesses during jury simulations.

  • We believe there is no such thing as a bad witness -only one who has been ill-prepared. We give witnesses who are our clients "Your Deposition," a memo that incorporates our cumulative experience in trying lawsuits. Then we prepare our witnesses for the twenty tough questions – we don't sit them in a room alone with the thousands of documents they may have been copied over the years and ask them to review them. The documents they may have problems with are usually those they have authored.

Witness Preparation

  • Witnesses learn through doing. Therefore, we cross-examine our own witnesses on video as part of their preparation. We play back and critique their performance.

  • Defending lawyers are not supposed to talk during depositions. Courts are sanctioning those that do. If the witness is well prepared, there is nothing for the defending lawyers to do but listen proudly. By involving the most experienced lawyers in witness preparation, we often are able to trust deposition defense to lawyers with lower billing rates.

  • Some lawyers believe that what a witness doesn't know can't hurt him. They encourage their witnesses not to remember, not to know. This is dangerous. A witness who doesn't know or recall at his deposition is often useless at trial. We encourage our fact witnesses to learn, remember, and be responsive, even at their depositions -to be able to handle even the most off-the-wall hypothetical questions. We encourage our experts to type out their opinions to hand to the other side.

  • Most lawyers do not question their own witnesses at their depositions. They are afraid to commit to what they want to prove at trial, often because they themselves haven't taken the time to think their case through. We believe in asking many of our own witnesses questions at their depositions. This gives us some favorable testimony to show or play to the jury during the other side's case. It also removes the need to bring all of our witnesses to trial. Usually opposing counsel is ill-prepared to engage in a trial-type cross examination after we question our own witnesses on direct at the end of the deposition – frequently, they are in a hurry to catch planes home.

BUDGETING AND CALLING THE ODDS

  • Upon request, we will prepare litigation budgets for our clients, but we prefer to work on a fixed-fee basis that places the risk of inefficiency on us and allows our clients to accurately budget for a case.

  • Clients are entitled to know what we see as the issues and how we call the odds on each. Though we are unable to opine much for auditors, we are not reluctant to share our thoughts in writing with our clients

JURY SIMULATIONS

  • We are great believers in jury simulations or mock trials, and we conduct them early and frequently in most cases. They help us predict the outcome, hone our arguments, and conduct discovery with an eye to telling a simple story to a jury. They let our clients see how their lawyers will look and sound during the real thing. When the result is favorable, we frequently disclose it to the other side to encourage settlement.

  • A mock trial with 36 jurors costs around $35,000 and can be much more expensive depending on the circumstances. The cost is well worth the information and strategic guidance we gain.

Two insurance companies, National Travelers and ReliaStar, disagreed about whether Coinsurance Agreements between them had terminated.  The arbitration that the Coinsurance Agreements mandated  generated a finding of non-termination and a $21 million damages award to ReliaStar.  The three arbitrators also ordered National Travelers to pay ReliaStar $3.8 million in attorneys' fees and expenses for conducting the arbitation in "bad faith".

National Travelers moved in district court (S.D.N.Y.) to vacate the "bad faith" part of the award on the ground that the arbitration panel lacked authority to make it.  NT pointed to section 10.3 of the Coinsurance Agreements, noting that it obligated each party to "bear the expense of its own arbitrator  . . and related outside attorneys' fees."  The district court granted NT's motion.

The Second Circuit split 2-1 in favor of upholding the "bad faith" award.  The majority "clarif[ied] that a broad arbitration clause, such as the one in this case, see Coinsurance Agreements § 10.1, confers inherent authority on arbitrators to sanction a party that participates in the arbitration in bad faith and that such a sanction may include an award of attorney’s or arbitrator’s fees."  ReliaStar Life Ins. Co. of New York v. EMC Nat'l Life Co., No. 07-0828-cv, slip op. at 8 (2d Cir. Apr. 9, 2009).  The majority also concluded that section 10.3 did not override the arbitrators' power to impose compensatory sanctions.  "[S]ection 10.3 is fairly understood to reflect the parties’ agreement as to how fees are to be borne, regardless of the arbitration’s outcome, in the expected context of good faith dealings."  Id. at 11 (emphasis in original).

The dissenting judge believed that section 10.3 "divested the arbitral panel of authority to make an award of attorney's fees."  Id. at 16 (emphasis in original).

Feed-icon-14x14 Our feed asks why the sea is boiling hot and whether pigs have wings.

Asiana 
Asiana admitted fixing cargo and passenger prices on routes between Korea and the U.S.

The Antitrust Division of the U.S. Department of Justice announced today three new guilty pleas and $214 million in fines "for conspiring to fix prices in the air cargo industry." 

The culpability-confessing carriers — Cargolux Airlines International S.A., Nippon Cargo Airlines Co. Ltd. (NCA), and Asiana Airlines Inc. — agreed to pay $119 million, $45 million, and $50 million, respectively.

The Antitrust Division's press release explains:

These cases arise from an ongoing investigation into the air transportation industry. Including Cargolux, NCA, and Asiana’s pleas, 15 companies have pleaded or agreed to plead guilty in the Justice Department’s investigation into price fixing in the air transportation industry. British Airways Plc, Korean Airlines Ltd, Qantas Airways Limited, Japan Airlines International Co. Ltd., Martinair Holland N.V., Cathay Pacific Airways Limited, SAS Cargo Group A/S, Société Air France and Koninklijke Luchtvaart Maatschappij N.V. (KLM Royal Dutch Airlines), LAN Cargo S.A., Aerolinhas Brasileiras S.A., and EL AL Israel Airlines Ltd. have also pleaded guilty. Additionally, three individuals have previously pleaded guilty for their involvement in the illegal activity. Collectively, the companies have paid or agreed to pay fines totaling more than $1.6 billion and all three executives have been sentenced to serve jail time.

Feed-icon-14x14 Our feed.  Soars.

Ameriprise

Companies that set up mutual funds — outfits like Fidelity, Vanguard, and Oppenheimer — also "advise" the funds on their investments.  People who buy shares in a mutual fund pay a fee for the advisory services.  And these folks depend on the fund's board of directors to hold the fee at a reasonable level.

Almost 60 years ago,lack of robust competition in the mutual fund industry led Congress to enact the Investment Company Act of 1940 and, in 1970, to amend the statute in a way that protects mutual fund shareholders from excessive or otherwise improper adviser fees.  New section 36(b) deems investment fund fund advisers "to have a fiduciary duty with respect to the receipt of compensation for services, or of payments of a material nature, paid by [a] registered investment company or by the security holders thereof, to such investment adviser or any affiliated person of such investment adviser."  15 U.S.C. 80a-35(b).  It also provides that "[a]n action may be brought under this subsection by the Commission, or by a security holder of such registered investment company on behalf of such company, against such investment adviser."  Id.

In Gallus v. Ameriprise Fin., Inc., No. 07-2945 (8th Cir. Apr. 8, 2009), shareholders of 11 Ameriprise mutual funds sued for breach of the section 36(b) fiduciary duty.  They alleged that Ameriprise misled the funds' boards about comparable fees, particularly the fees it charged to other non-mutual fund clients, including pension funds, which paid about half as much as the mutual funds did.  The district court granted Ameriprise's motion for summary judgment on the ground that the end result of the negotiations — the total fee itself — didn't pass into the realm of exorbitance.

The Eighth Circuit reversed.  It held that the district court should have considered not only the fee's magnitude but also any sharp behavior of Ameriprise during the negotiation process.  In looking at the fee itself, moreover, the district court should also have compared the amount to much-lower fees Ameriprise charged pension funds for similar services.  The evidence raised material fact issues, the court concluded, as to whether Ameriprise's overall conduct passed fiduciary muster, requiring a trial.

Feed-icon-14x14 Trials 'r' Us.

The equitable remedy of accounting exists for rare cases in which "accounts between the paries are of such a complicated nature that only a court of equity can satisfactorily unravel them."  Dairy Queen, Inc. v. Wood, 369 U.S. 469, 478 (1962) (internal quotation marks omitted).  The court may appoint a special master to review the relevant transactions and render a report.  The judge then takes the guise of a chancellor in equity, balancing the equities between the parties and rendering an award according to his or her sense of fairness.

But the remedy applies only if the claimant lacks an adequate legal remedy — which typically takes the form of money damages.

A district court thought it found a new way to get around the inadequate remedy at law requirement.  It said that "[r]equir[ing] the jury to go through the detail of what each of [the parties' transactions] meant in terms of damages would prolong the trial unduly, and that makes it an inadequate legal remedy."

The Tenth Circuit reversed.  Haynes Trane Service Agency, Inc. v. Am. Standard, Inc., No. 07-1440 10th Cir. Apr. 7, 2009).  The party seeking the remedy, Trane, alleged a legal claim, fraud, against HaynesTSA, a Trane franchisee that sold Trane heating, ventilation, and air conditioning products.  HaynesTSA cheated, Trane alleged, by submitting false "claim-back" forms.  The claim-backs enabled HaynesTSA to collect from Trane payments compensating for price reductions HaynesTSA represented it made to meet competitors' lower prices to HVAC customers.

The Tenth Circuit would have none of it:

In this case the district court did not make (and based on the record on appeal, could not have made) findings establishing that "only a court of equity [could] satisfactorily unravel" the parties' accounts.  Dairy Queen, 369 U.S. at 478.  All the district court found was that having a jury tediously slow through individual claimbacks would "prolong the trial."  Aplts. App. Vol. IV at 1712.  We can locate no support, however, for the view that a prolonged trial in itself provides an inadequate remedy at law.

Haynes Trane, slip op. at 37.  Because the question of damages intertwined with the question of whether HaynesTSA defrauded Trane, the court remanded the case for a new trial.

Today the Eleventh Circuit vacated a class certification order after finding "numerous flaws, both procedural and substantive" in the district court's analysis.  Vega v. T-Mobile USA Inc., No. 07-13864 (11th Cir. Apr. 7, 2009).

Blawgletter sees nothing remarkable in the basic decision.  The plaintiff, Henry Vega, made quite the hash of his basic claim, which seems to relate somehow to T-Mobile's shortchanging of sales employees on commissions for peddling wireless telephone service plans.  Vega at first didn't allege breach of contract, didn't identify any contract that T-Mobile might have breached, cited an inapplicable state statute, changed his mind about the breach of contract thing, asked for leave to amend his complaint (without success) to assert a breach of contract, argued he really had a breach of contract claim after all, and at last specified a document that by its terms plainly negated the existence of any contract.  That left him with unjust enrichment, an equitable-type claim that (per the Eleventh Circuit) almost never deserves class treatment (because it requires individual balancing of equities for each class member).

No, the interesting part concerned something else — the Eleventh Circuit's vexation at the confusion of merits issues with class certification questions.  "By putting off these [certification] issues until trial, or blinking them entirely, both Vega and the district court ran an unnecessarily high risk of introducing needless and avoidable complexity into an already complex case."  Id., slip op. at 45.  Further:

By delaying the class certification decision until shortly before trial, and also by combining the class certification order with its disposition of T-Mobile’s motion for summary judgment, the district court also made it more likely that the discrete issues involved in class certification would become needlessly intertwined with the merits of the case dispositive motion.  The record suggests that this is indeed what happened in this case, as the parties’ arguments surrounding the class certification issues tend to bleed into a deeper discussion of the merits than is necessary to resolve the Rule 23 question. The district court could have prevented, or at least reduced, this confusion by keeping the class certification determination both conceptually and temporally distinct from its merits ruling on summary judgment.

Id. at 46 n.21.

The court's distress runs counter to the now-common view among class action defendants that Rule 23 now allows — even requires — examination of just about any "merits" issue.  Vega offers a welcome reminder that certification isn't the time to resolve questions going to the merits.  The principal issue remains whether the plaintiffs have shown they can prove their claims with class-wide proof.  Resolving whether the claims survive summary judgment or prevail at trial is for another day.

GoogleSearch 
A new decision may change Google's ad sales model.

The Second Circuit dealt a blow last week to Google's approach to selling advertisements that appear with search results. 

Rescuecom Corp., the plaintiff, accused Google of infringing the Rescuecom trademark.  Google did so, the complaint said, by offering the trademark to Rescuecom's competitors as a "keyword".  Once a potential customer entered "Rescuecom" in a search request, Google's search algorithm displayed not only the search results but also ads by the competitors.  The searcher/potential customer, thinking that the link led to the Rescuecom website, might then click on a link to a competitor's online encampment.  The resulting consumer confusion, according to the complaint, would permit the Rescuecom competitor to capitalize deceptively on the Rescuecom trademark.

The district court granted Google's motion to dismiss on the ground that Google didn't "use" Rescuecom's trademark "in commerce".  It relied heavily on the Second Circuit's decision in 1-800 Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2d Cir. 2005).  The court in 1-800 held that no "use in commerce" occurred when a computer program triggered pop-up ads in response to search terms (including trademarks) that the advertiser had no role in selecting.  Google, by contrast, actually promoted, suggested, and sold to advertisers keywords that consist of (or include) trademarks belonging to the advertisers' competitors.  That, the court held, constitutes "use in commerce" under the Lanham Act.  Rescuecom Corp. v. Google, Inc., No. 06-4881-cv (2d Cir. Apr. 3, 2009).

Blawgletter suspects that the decision will prompt other trademark owners to consider whether Google's practices — including its AdWords and Keyword Selection Tool features — likewise infringe their marks.  An important part of the analysis will examine whether or not Google's exploitation of their trademarks to sell advertisements satisfies the "likelihood of confusion" element of an infringement claim — an issue the Second Circuit left open as subject to proof.

We also imagine that Google will look at revamping its ad sales model.  With the Second Circuit's decision, selling trademarks as keywords has become a lot riskier.

Feed-icon-14x14 AdWords to the wise?