One pill makes you larger.

Today the Second Circuit solved a possible conflict between different kinds of employee welfare benefit plans by carving out a sub-class. 

Merck-Medco contracted to manage pharmaceutical benefits for the plans and their members.  The plans alleged that Merck-Medco breached fiduciary duties under the Employee Retirement Income Security Act of 1974 by favoring itself (and its drug-making parent) at the expense of the plan beneficiaries.

The district court approved a $42.5 million settlement and plan of allocation, certified a class under Rule 23(b)(3), and awarded attorneys’ fees.  But several plans opted out of the class, and others filed objections.  The objectors argued that some plans suffered bigger losses because they bore the risk of drug price increases whereas other plans passed that risk on to others.  They also asserted that the plan of allocation didn’t adequately address the disparity. 

The district court rejected their points, but the Second Circuit didn’t.  Although upholding the settlement and the fee award, the court concluded that the potential conflict warranted creation of a sub-class consisting of plans that directly paid for increases in drug prices.  It also directed the district court to reconsider the allocation plan.  Central States Southeast and Southwest Areas Health & Welfare Fund v. Merck-Medco Managed Care, L.L.C., No. 04-3300 (2d Cir. Oct. 4, 2007).

Barry Barnett

Our feed thinks you look fabulous today.

The Fifth Circuit yesterday sent a securities case back to the district court for trial.  The decision reversed a summary judgment for Terrebonne Parish on its statute of limitations defense.  The court held that disappointing financial results didn’t give the securities purchasers "inquiry notice" of possible fraud.  They didn’t get notice, the court concluded, until they heard a tape recording in which the Parish admitted misleading them because it desperately needed a tenant for the Parish’s civic center.  Sudo Properties, Inc. v. Terrebonne Parish Consol. Gov’t, No. 06-30632 (5th Cir. Oct. 3, 2007).

The civic center’s website reveals that the Lewis & Clark Circus will play the hall on October 24 and 25.  But Blawgletter didn’t see any football games on calendar.

Barry Barnett

Our feed inquires and gives notice daily.

The Doobie Brothers sang "Blackwater".

In 1651, the bookish Englishman Thomas Hobbes published Leviathan.  In it, he ruminated on humans’ cession of their natural rights to a sovereign state in return for protection.  The social contract ended the war of all against all and saved us from a life that he described, in a state of nature, as "nasty, brutish, and short".

The late news of a private security company’s shoot-first policy in Iraq reminded Blawgletter of the old philosopher.  Why?  Because Blackwater operated in a "very murky" legal context.  Iraqi law didn’t apply; the Coalition Provisional Authority exempted Blackwater before handing the scepter to the Iraqi Interim Government on June 28, 2004.  Nor did military rules restrain the contractor’s behavior; it worked mainly for the Department of State.

Hobbes’s state of nature strikes us as aptly describing the present situation in Iraq — at least as it relates to Iraqis and outfits like Blackwater.  The defenders of the enterprise cite its challenging mission as justification for 195 Iraq shooting incidents, in 80 percent of which its people fired first.  But we think that Hobbes would have well understood the Blackwaterian impulse.  In the state of nature, before a social contract, self-defense trumped all other considerations.  Only when a sovereign capable of protecting the people arrived would individuals rationally give up their right to kill anyone who seemed to threaten them.

Blackwater’s guilt or innocence, in our view, doesn’t matter.  "The fault, dear Brutus, is not in our stars but in ourselves."

Barry Barnett

Our feed built us a raft ready for floatin’.

The First Circuit held yesterday that a "reconstruction" of a copyrightable work doesn’t satisfy the "copy" requirement for copyright registration.  The author in the case wrote down lyrics and music for an original song on a piece of paper in 1993.  He forgot about it until eight years later, when he learned that somebody else had recorded it.  He then applied to register his copyright in the song with the U.S. Copyright Office.  But, after the songwriter won a verdict of infringement, the district court dismissed the case for want of subject matter jurisdiction.  The First Circuit affirmed, concluding that a reconstruction from memory violates the jurisdictional prerequisite of depositing a "copy" of the work with the registration application.  Torres-Negron v. J & N Records, LLC, Nos. 06-2058 & 06-2059 (1st Cir. Oct. 2, 2007).

Barry Barnett

COPYright Barry Barnett 2007.

By day, J. Gregory Sidak teaches at the Georgetown University Law Center and consults for Criterion Economics, which he founded.

Recently, Dr. Sidak submitted to the Federal Communications Commission the last of several declarations opposing approval of the plan by radio satellite provider Sirius to buy its sole competitor, XM.  He summarizes his conclusions in an online National Review article. 

Blawgletter couldn’t help noticing that, in the third supplemental declaration, Dr. Sidak presses a startling charge:

[A] serious antitrust problem facing XM and Sirius . . . has escaped notice in analysis of the proposed merger by journalists and equity analysts, and in public comments filed at the FCC. Professor Sidak explains that XM’s and Sirius’s public statements that they will not provide channels on á la carte basis unless the government approves their merger is a breathtaking admission of critical antitrust significance.  "It is an agreement not to compete over the pricing and unbundling of currently bundled content," he explains.  "Rarely do price-fixing cases contain such conclusive evidence of a meeting of the minds between two competitors to refrain from competing with one another."

But we wonder:  Competitors in a duopoly agreeing not to compete?  Plausible.  Quite.  Conspiring publicly — indeed, using the government itself as the vehicle for committing felony?  Emm, ur, let us think about that one.

[Several hours pass.]

Okay.  We believe it.  Why?  Because we think that deregulation in telecommunications has forced what once went on in private out into public view.  The FCC retains an oversight role, but the good old "filed rate doctrine" no longer provides complete cover for anticompetitive conduct on which regulatees develop a Vulcan mind meld through the alchemy of announcing, filing, amending, and supplementing tariffs.

Like Poe’s The Purloined Letter (1844), they hide in the open.

Barry Barnett

But can they get away with it?

Their Honors will hear argument on October 9 in Stoneridge Investment v. Scientific-Atlanta, Inc., No. 06-43 (U.S.).  The case concerns whether securities fraud liability reaches silent collaborators. "Questions Presented" here.

Blawgletter talked in August about the Solicitor General’s split-the-baby approach to the Stoneridge questions and the possible effect of Stoneridge on a Fifth Circuit decision favoring Enron’s investment bankers.

A few days ago, the Chief Justice un-recused himself from the case.

NOTE:  A big thanky to The Office Goat for pointing out that we got the argument date a tad early the first time.  And sorry for the heart attack, Mr. TOG.

Barry Barnett

Our feed predicts another Wall Street win.

In Catch-22 (1955), Joseph Heller put this bit of dialogue in the mouths of B-25 bombardier Yossarian and squadron physician Doc Daneeka:

"Sure there’s a catch," Doc Daneeka replied.  "Catch-22.  Anyone who wants to get out of combat duty isn’t really crazy."

*  *  *  *

"That’s some catch, that Catch-22," he [Yossarian] observed.

"It’s the best there is," Doc Daneeka agreed.

Barry Barnett

Our feed tastes like chicken.

Time to wake up, little one.

The D.C. Circuit today issued its first opinion in more than a month.  The judicial hiatus started on August 24, 2007.  Blawgletter still has no idea what caused it.

Strangely, the parties argued the appeal during the decision drought.  Did the court really have no backlog?

The case involved the timeliness of a payment request.  The bill related to construction of electric interconnection facilities in the Golden State.  The court ordered the Federal Energy Regulatory Commission to apply California law to the question.  Southern California Edison Co. v. Federal Energy Regulatory Comm’n, No. 06-1202 (D.C. Cir. Oct. 2, 2007).

Barry Barnett

Our feed seldom yawns, never nods off.