The Supreme Court has posted a transcript of the oral argument in Stonebridge Inv. LLC v. Scientific-Atlanta, Inc., No. 06-43, on Tuesday.

Blawgletter’s read:  The Stonebridge "scheme" liability will go the way of Central Bank "aiding and abetting" liability — dead, dead, dead.

Barry Barnett

Our feed pulses.

Do you seek a savage beating?  Help you I can, yes.

The Jedi master said to his apprentice Luke:

Try not.  Do — or do not.  There is no try.

Barry Barnett

Our feed feels the Force.

Inequitable conduct in dealings with the U.S. Patent and Trademark Office may expose patents to an unenforceability defense.  Today, the Federal Circuit considered a "collection" of missteps by an inventor who chose to represent himself before the PTO.  The mistakes included paying small entity (rather than large entity) maintenance fees, failing to disclose an affiant’s financial interest in the patents, misclaiming priority dates, and not disclosing patent litigation and prior art.  The court expressed sympathy for the inventor but declined to excuse his too-many flubs.  Nilssen v. Osram Sylvania, Inc., No. 06-1550 (Fed. Cir. Oct. 10, 2007).

Get a lawyer, knucklehead!

Barry Barnett

Our feed hires only the best.

The Eighth Circuit held today that incorporating a construction contract by reference into a performance bond didn’t bind the bond-issuer to an arbitration clause in the contract.  The court thus affirmed an order denying a motion to compel Liberty Mutual to arbitrate Mandaree’s claims on a bond that Liberty issued to Tooz Construction for remodeling and expansion of a public school. Liberty Mut. Ins. Co. v. Mandaree Public School Dist. No. 36, No. 06-3957 (8th Cir. Oct. 10, 2007) (applying North Dakota law).

Barry Barnett

Bond — performance bond.

Samuel Clemens — Mark Twain — exposed bigotry.

Blawgletter shies from political-type fights.  Yet we feel an urge to point out that bidness doesn’t always beat govment.

We say govment in honor (and ridicule) of Huckleberry Finn’s father — Pap Finn.  Pap says lots of prime things.  They include: 

Oh, yes, this is a wonderful govment, wonderful.  Why, looky here.  There was a free nigger there, from Ohio; a mulatter, most as white as a white man.  He had the whitest shirt on you ever see, too, and the shiniest hat; and there ain’t a man in that town that’s got as fine clothes as what he had; and he had a gold watch and chain, and a silver-headed cane — the awfulest old grey-headed nabob in the State.  And what do you think?  They said he was a p’fessor in a college, and could talk all kinds of languages, and knowed everything.  And that ain’t the wust.  They said he could vote, when he was as home.  Well, that let me out.  Thinks I, what is the country a-coming to? It was ‘lection day, and I was just about to go and vote, myself, if I warn’t too drunk to get there; but when they told me there was a State in this country where they’d let that nigger vote, I drawed out.  I says I’ll never vote agin.  Them’s the very words I said; they all heard me; and the country may rot for all me-I’ll never vote agin as long as I live. And to see the cool way of that nigger — why, he wouldn’t a give me the road if I hadn’t shoved him out o’ the way. I says to the people, why ain’t this nigger put up at auction and sold? — that’s what I want to know. And what do you reckon they said?  They said he couldn’t be sold till he’d been in the State six months, and he hadn’t been there that long yet.  There, now-that’s a specimen.  They call that a govment that can’t sell a free nigger till he’s been in the State six months.  Here’s a govment that calls itself a govment, and lets on to be a govment, and thinks it is a govment, and yet’s got to set stock-still for six whole months before it can take ahold of a prowling, thieving, infernal, white-shirted free nigger, and —

We concede at once that Mark Twain intended Pap’s speech to shock the conscience of even 19th-century folk.  The rant disturbs us now far more.  As Twain, we imagine, hoped it would.

But let’s please not lose track of our point.  As America’s founding fathers knew, government exists not just to protect property rights.  We formed a more perfect union also to establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity.  Our founders believed that government does all of those things.

And let us not fail to point out that, unlike private enterprises, the government earns no profit.  It bills for goods and services at cost.  We can and should complain about instances in which government charges more for something than a private contractor would.  But profit-motivation means that NGOs value our founding values at the expense of their own bottom lines.  Pap Finn wouldn’t mind.  Should we?  Shouldn’t we?

Barry Barnett

Blawgletter adores Samuel Clemens.

The Supreme Court heard oral arguments this morning in Stoneridge Inv. LLC v. Scientific-Atlanta, Inc., No. 06-43.  The case has people all atwitter. 

From reading the WSJ, for example, you might think that Stoneridge threatens a securities law Armageddon.  Only coch-roaches (and possibly class action lawyers) will survive.

Blawgletter doesn’t see the case that way.  To us, Stoneridge presents the question of whether someone who knowingly participates in what the Securities Exchange Act defines as "deceptive conduct" may escape liability because the market doesn’t detect his role in the securities fraud.  We don’t feel a lot of sympathy for those who fit that description.  Nor do we believe that any floodgates of litigation would open from requiring the deceptive ones to answer for their intentional deception.

But only eight votes count — those of the Supreme Court justices who haven’t recused themselves.  (Chief Justice Roberts and Justice Breyer did remove themselves, but the Chief unrecused himself.)  How do the votes stack up?

Six of the eight sat on the Court that, in 1994, rejected "aiding and abetting" liability under federal securities law.  Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 411 U.S. 164 (1994).  Three voted in the majority (Kennedy, Scalia, and Thomas) and three in the dissent (Stevens, Souter, and Ginsburg).  Their ballots then may foreshadow how they’ll come out in Stoneridge.

Questions and comments by Justice Scalia and the newest Court members — Chief Justice Roberts and Justice Sam Alito — suggest that they will almost certainly favor the defense.  We have no reason to believe that the other justices will change their 1994 positions, but we do note that both Kennedy and Thomas would have to shift in order for the plaintiffs to win.  A 4-4 tie would go to the winner in the court of appeals — the defendants.

But at least plaintiffs wouldn’t have another ugly precedent on the books.

Barry Barnett

Our feed hopes for the best.

With the ferment in private equity deals going flat lately, Blawgletter notes with approval the pending marriage between SABMiller and MolsonCoors.  The two brewing behemoths will combine U.S. operations to compete better with beer brute Anheuser-Busch.  The deal hops their joint production to 69 million barrels of the frothy, yeasty, and barley-malty beverage per year.

Barry Barnett

David Hume could outconsume Schopenhauer and Hegel.

Private equiteers took a blow yesterday, when student lender SLM Corporation sued to force them to close a $25 billion buy-out deal.  WSJ report here; NYT version here.

The lawsuit, in Delaware Chancery Court, turns on whether a "Material Adverse Effect" occurred after the parties signed their agreement.  Blawgletter quoted the definition of MAE in the SLM papers on September 27 and before that parsed the MAE provisions from a faltering merger agreement involving Harman International.

We don’t count on a decision.  The private equity outfits offered another (cheaper) deal to SLM and may go higher.  If they lose, they may have to shell out a $900 million breakup fee.  Settlement city, baby!

Barry Barnett

What happens if a material positive effect comes along?