In 1905 — his "miracle year" — physicist Albert Einstein wrote four path-breaking papers.  One of them revealed his special theory of relativity.  In it, he disclosed that electromagnetic waves, including light, always travel at a constant speed — about 186,000 miles per hour — but that our observation of them depends on our movement relative to their source.

Got that?

Blawgletter confesses a sensation of doubt.  Big time. 

But we feel more confident that our current subject — the efficiency vel non of federal courts — depends ever so much on the judiciary’s perception of case velocity relative to some reference point.  Huh?

Consider that federal judges hold Vast Power.  They display a great deal of Independence.  And, with few exceptions, they enjoy Near Invisibility outside the courtroom.

All of which leaves Their Honors with tremendous discretionary influence over their dockets.  They can move the cases or not move them, push them fast or slow them down, work them hard or hardly at all.

We hypothesize that how quickly judges choose to dispatch their dockets depends on whether they look at cases as moving towards trial too fast, too slow, or at just the right speed. 

Next time, we’ll attempt an approximation of which view predominates in 2008 — and, more important perhaps, why.

Our feed doesn’t know how this will end either.

You know the Clear Channel case in San Antonio against a bunch of banks for refusing to fund a loan that would enable private equity firms to buy a chunk of the company?  The one that a Bexar County district judge refused to dismiss in favor of a New York forum?  And the one in which the Fourth Court of Appeals denied mandamus relief?

Yesterday, the Supreme Court of Texas set the banks’ mandamus petition for oral argument — this Friday, May 16, at 2:00 p.m. 

The banks frame the legal issue thus:

Can parties seeking funding under a loan commitment with a forum selection clause circumvent the clause by pleading a tort claim in a nonforum state that, in fact, seeks enforcement of the loan commitment?  Or, are those parties bound by the forum selection clause in the loan commitment under direct benefits estoppel?

What does the clause say?  This:

You, the Sponsors and we hereby irrevocably and unconditionally submit to the exclusive jurisdiction of any state or Federal Court sitting in the City of New York over any suit, action or proceeding arising out of or relating to the Transactions or the other transactions contemplated hereby, this Commitment Letter or the Fee Letter or the performance of services hereunder or thereunder . . . .

The "exclusive" in the clause makes it a mandatory one.  So, as the banks argue, the question boils down to whether suing for tortious interference with the Commitment Letter estops Clear Channel, a non-party to the agreement, from having to abide by the forum selection clause.

Blawgletter will now consult the oracles to guess how the mandamus will turn out.  The first auspice — the Court’s setting the petition for hearing on a few days’ notice — bodes well for the banks.  Another omen — the Court’s enthusiasm for using mandamus to enforce arbitration and forum selection clauses — also predicts a good outcome for Wall Street.  A final sign — the Court’s pro-defendant tilt — pretty much seals the deal.

Except that, on the same day the Court set reached out for the case, the parties settled.  The deal carries a lower price tag — a mere $17.9 billion now — but everybody seems happy (or miserable) enough.  So scratch that hearing, Your Honors.

Our feed predicts, the Court decides.

Forum and venue selection clauses pick a jurisdiction/place (or jurisdictions/places) where contracting parties must (or may) litigate disputes.  "Mandatory" clauses dictate the parties’ exclusive options — and usually they specify just one.  "Permissive" ones grant the parties the right to file in a particular forum/spot but don’t prohibit them from suing elsewhere.  A "hybrid" clause permits action at a particular somewhere but prohibits a second suit in another somewhere.

Yesterday, the Eleventh Circuit dealt with one of the hybrids. 

A contract for the purchase of Florida real estate provided that the parties "waive any objection to the venue of any action filed in any court situated in the jurisdiction in which the property is located and waive any right to tranfer any such action filed in any court to any other court."  One of the parties sued in Florida state court, but — notwithstanding the waiver of "any right to transfer [from] any court to any other court" — the defendant removed the case to U.S. District Court for the Middle District of Florida.  The district court remanded it to state court.  The Eleventh Circuit affirmed:

The forum selection clause at issue here is likewise one such hybrid clause.  The first portion of it is permissive.  A party need not sue in Orange County, Florida, but if a suit is initiated there, the defendant’s consent to venue in Orange County is contractually provided.  The second portion, however, waives the parties’ rights to “transfer” the suit, when filed, to “any other court.”  To “transfer” means to “convey or remove from one place or one person to another.” Black’s Law Dictionary 1536 (8th ed. 2004).  The clause is not susceptible to more than one interpretation; therefore, its plain meaning governs. Based upon the plain meaning of the word “transfer,” we find that the forum selection clause waived Harvard’s right to remove in addition to its right to transfer for the convenience of the parties and witnesses.

Ocwen Orlando Holdings Corp. v. Harvard Property Trust, LLC, No. 07-13920 (11th Cir. May 12, 2008).

Blawgletter would have thought that "transfer" doesn’t include "remove".  That Black’s Law Dictionary defines "transfer" as "convey or remove" strikes us as happenchance.  Yet the clause does say "to any other court", which of course includes the federal court sitting in the same geographic area as the state court.  So we have a hard time disagreeing with the result.

The race sometimes does go to the swift.

[Today we begin a series — likely an occasional one — on an Extremely Serious Subject:  The efficiency of the federal courts in handling civil litigation.  This installment begins the journey.]

Rudyard Kipling‘s Just So Stories include the marvelous one about "The Elephant’s Child".  It tells how the elephant got its trunk. 

In what manner did he obtain it?  Kipling tells us that, because of Elephant Child’s "’satiable curiosity", he wanted to know what Crocodile eats for dinner.  Questing for and then finding the object of his interest, he believes Crocodile’s promise to whisper the answer and leans close to hear. 

But Crocodile means to devour him and so clamps toothy jaws on Elephant Child’s diminutive proboscis.  Elephant Child tries to pull away, and soon his friend the Bi-Coloured-Python-Rock-Snake coils around his back legs and commences a-pulling too.  The double-teaming works, separating Elephant Child from hungry Crocodile, but not before stretching the pachydermous pug to five feet and more.

If we stop here, we would think that Kipling intended a cautionary tale about nosiness.  But the author of The Jungle Book, If–, and Kim meant no such thing.  His tale instead goes on to demonstrate how useful the accidental product of ‘satiable curiosity became to Elephant Child and his posterity.

"That may all seem well and good to you, Blawgletter," we hear you say, "but what does that have to do with the judiciary and its acquisition of inefficiency?  Please, good sir, do get to the point.  And do it efficiently, mind!"

We shall endeavor to start doing so.  Next time.

I am Iron Man — dah-da-dah-da-dah-da-dah-da-dah-dah-dah!

Have a look at the latest issue of Barnett’s Notes on Commercial Litigation.  You’ll find there:

1. Uniform (Contingent Fee) Rates — Bah!  Refuting humbug.

2. Did You Know?   An associate knocks another one out of the park.

3. The Value of Class Actions.  The Second Circuit reverses to affirm class litigation as a social good.

4.  Should Public Entities Hire Contingent Fee Lawyers?  The debate rages.

5.  Whither Cy Pres?  Nudging an explicitly imperfect remedy closer to the ideal.

6.  Hot Lunch.  When the Texas Supreme Court lost balance, it squandered influence too.

7.  Taking Unfair Advantage.  Cartoon.

8.  Links & Info.

Have a terrific weekend — and remember your Mom on Sunday.

A presidential candidate spoke yesterday about the federal judiciary: 

In America, the constitutional restraint on power is as fundamental as the exercise of power, and often more so. Yet the framers knew that these restraints would not always be observed. They were idealists, but they were worldly men as well, and they knew that abuses of power would arise and need to be firmly checked. Their design for democracy was drawn from their experience with tyranny. A suspicion of power is ingrained in both the letter and spirit of the American Constitution.

In the end, of course, their grand solution was to allocate federal power three ways, reserving all other powers and rights to the states and to the people themselves. The executive, legislative, and judicial branches are often wary of one another’s excesses, and they should be. They seek to keep each other within bounds, and they are supposed to. And though you wouldn’t always know it from watching the day-to-day affairs of modern Washington, the framers knew exactly what they were doing, and the system of checks and balances rarely disappoints.

So far so good.  But then:

There is one great exception in our day, however, and that is the common and systematic abuse of our federal courts by the people we entrust with judicial power. For decades now, some federal judges have taken it upon themselves to pronounce and rule on matters that were never intended to be heard in courts or decided by judges. With a presumption that would have amazed the framers of our Constitution, and legal reasoning that would have mystified them, federal judges today issue rulings and opinions on policy questions that should be decided democratically. Assured of lifetime tenures, these judges show little regard for the authority of the president, the Congress, and the states. They display even less interest in the will of the people. And the only remedy available to any of us is to find, nominate, and confirm better judges.

Did we read that right?  Did the candidate actually say "common and systematic abuse of our federal courts by the people we entrust with judicial power"?

The candidate continued.  The first criticism related to a Supreme Court justice’s concurring opinion, in which he (a Republican appointee) mentioned that "my own experience" supported the view (of a Democratic appointee decades ago) "that the imposition of the death penalty represents ‘the pointless and needless extinction of life with only marginal contributions to any discernible social or public purposes.  A penalty with such negligible returns to the State [is] patently excessive and cruel and unusual punishment violative of the Eighth Amendment.’" Baze v. Rees, No. 07-5439 (U.S. Apr. 16, 2008) (Stevens, J., concurring in judgment).

The candidate said that the justice’s "conclusion found no support in the Constitution, or in applicable statutes, or in the record of the case in front of him."

The example suggests, to Blawgletter, the legitimate point that judicial officers ought to interpret the Bill of Rights as a static document, which means the same thing now as it did at ratification in 1789.  But to attribute "common and systematic abuse" to the current federal judiciary — in the guise of a concurrence upholding the death penalty — strikes us as more than a stretch.

The second complaint concerns Roper v. Simmons, 543 U.S. 551 (2005), in which the Court held that the eighth amendment prohibition against cruel and unusual punishment bars execution of a 17 year-old murderer.  The problem with the majority opinion?  It "left posterity with a lengthy discourse on international law, the constitutions of other nations, the meaning of life, and ‘evolving standards of decency.’"  And thus "reduce[d] the penalty, disregard[ed] our Constitution, and brush[ed] off the standards of the people themselves and their elected representatives."

The third instance of "common and systematic abuse" arises from Connecticut’s payment to private landowners for taking their property under its condemnation authority.  The Supreme Court upheld the state’s right to condemn and take the land upon payment of just compensation in Kelo v. New London, 545 U.S. 469 (2005).  The candidate said the Court "gave that property away to a private developer" but didn’t mention that the petitioners got just compensation.  The persuasive complaint — that Connecticut’s desire to redevelop New London didn’t amount to a "public use" — gets lost in the candidate’s simplification.

And the final gripe relates to the Ninth Circuit’s 2-1 ruling, in Newdow v. United States Congress, 292 F.3d 597 (9th Cir. 2002), that requiring public school students to recite "under God" in the Pledge of Allegiance every morning violates students’ first amendment rights.  The candidate doesn’t add that the Supreme Court overturned the decision on the ground that Mr. Newdow lacked standing.  Thus ended the case.

So we have two death penalty cases, one in which the condemnee lost and the other in which the teenager won life in prison; a "takings" case where the landowners received just compensation; and a Pledge of Allegiance ruling that the Supreme Court tossed on procedural grounds.

"Common and systematic abuse" of "judicial power"?  Puh-leeze.

We know — politics.  But still.

Today we welcome a guest blawger — the Senior Vice President & General Counsel of Zix Corporation (NASDAQ:ZIXI), Ronald A. Woessner. 

Ron knows a thing or two about data encryption.  As Zix’s homepage says:

Zix Corporation is the leading provider of services that Connect entities to Protect and Deliver sensitive information. ZixCorp’s hosted Email Encryption Service provides an easy and cost-effective way to ensure customer privacy and regulatory compliance for corporate email. Its PocketScript^® e-prescribing service reduces costs and improves patient care by automating the prescription process between payors, doctors, and pharmacies.

So let’s hear from Ron.  Here goes:

 
Zeroes and ones — joy!

In 1999, the American Bar Association’s Standing Committee on Ethics and Professional Responsibility ruled that an attorney may transmit confidential client information via unencrypted email over the Internet without violating the Model Rules of Professional Conduct.  The basis for the ABA’s decision was that unencrypted email has a reasonable expectation of privacy from a technological and legal standpoint — similar to the expectation of privacy for mail, phone and facsimile communications.

The basis for the ABA’s decision is no longer valid, given what we know today about the inherent privacy and security vulnerabilities of unencrypted email.  The ABA should revise its decision.

It is now widely known to information technology professionals that unencrypted email messages are as vulnerable as a postcard to a third party’s prying eyes.  In recognition of this, the regulations under the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and the Gramm-Leach-Blilely Financial Modernization Act of 1999 ("GLBA") require that email messages containing personal health information and personal financial information be encrypted.  Encryption is required because, according to the regulations, unencrypted "email is not a secure method for sending sensitive data."

The HIPAA and GLBA regulations do not require encryption for regular mail, phone and fax communications.  Since encryption is required for email messages but not for these other forms of communication, the federal regulators clearly believe that unencrypted email is less secure than regular mail, phone and fax communications.

Recent court decisions illustrate the legal risk to attorneys that use unencrypted email.  In Scott v. Beth Israel Medical Center, Inc., the court held that unencrypted email messages sent by a client to his attorney using his employer’s computer and via the employer’s email system pertaining to the client’s legal claim against the employer were not protected from discovery because the client had no reasonable expectation of privacy.

Admittedly, this particular case involved a situation where the attorney-client communications related to a legal claim against the employer whose email system was being used to transmit the email messages.  Nevertheless, the rationale of the decision — that there is no reasonable expectation of privacy in unencrypted email messages transmitted by an employer’s computer network — could be readily extended to any email communication about a personal legal matter that is transmitted or accessed by the client from his or her place of employment during business hours.

Given the foregoing, the ABA should begin requiring the use of encryption for attorney-client communications.  Attorneys that do not use encryption for sensitive email communications risk legal malpractice claims.  Attorneys that do not use encryption for email communications containing personal information protected by HIPAA or GLBA risk fines and jail time.

Ronald A. Woessner

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