From the July-August 2007 issue of Barnett’s Notes on Commercial Litigation:

Just after the dawn of the 20th century, a dissenting Justice Oliver Wendell Holmes, Jr., famously said that "great cases, like hard cases, make bad law".  He explained that a case’s greatness will "exert a kind of hydraulic pressure which makes what previously was clear seem doubtful, and before which even well settled principles of law will bend."  Northern Securities Co. v. United States, 193 U.S. 197, 364 (1904).

What Did Holmes Intend?

He meant, I suspect, that judges — even his colleagues on the U.S. Supreme Court — cannot isolate themselves from forces at work in the communities where they live.  But, implying his own insensibility to public irrationality, Justice Holmes opined that the Sherman Act did not prohibit an agreement among several railroads not to compete with each other.  The hue and cry, the great Holmes suggested, impelled one set of lesser mortals (government lawyers) to seek an injunction against the monopoly and another group (the 5-4 majority) to uphold a judgment granting it.

History disagreed with Holmes on the merits.  But do let us ponder his analogy.  The power of hydraulic pressure allows a small force at point A to exert a larger force at point B within a mechanical system.  It thus pushes a big piston to raise the car rack so that a mechanic can fix the oil pan you busted when you drove too fast over a road hump.  But in Northern Securities Holmes used "a kind of hydraulic pressure" as a figure for distortion of judgment.

Inordinate Pressure to Settle

Which brings us to the recent rash of lower court decisions that decry "hydraulic pressure" to settle class actions.  The first reference, in 1995, may have warranted the name.  In In re General Motors Corp. Pick-Up Truck Fuel Tank Product Liability Litig., 55 F.3d 768, 790 (3d Cir. 1995), Circuit Judge Becker noted the deleterious effect of a certifying a sprawling class action for settlement:

Cases could be filed without any expectation or intention of litigation, with the foreknowledge that the natural hydraulic pressure for settlement may in fact lead to a class settlement, especially given the incentive a defendant has to bind as many potential claimants as possible with an approved class settlement.

The plaintiffs’ and defendants’ lawyers would get fat fees, and the defendants would buy peace cheap.  The pressure to certify — on the parties and the trial court — may have distorted judgment about the propriety of certification, with the potential that absent plaintiffs would get short shrift.

Later use of "hydraulic pressure" stands Judge Becker’s concerns on their head.  These instances don’t focus on judgment-distorting pressure to certify but on pressure to settle.  They thus infer that certification impels defendants to pay big money to resolve unmeritorious claims.  E.g., Hevesi v. Citigroup, Inc., 366 F.3d 70, 81 (2d Cir. 2004) (granting Rule 23(f) petition in part because, due to settlement pressure, "it is hard to conceive of many cases that are less likely than the instant case to yield an appealable final judgment"); De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 311 (3d Cir. 2003) ("The aggregation of claims, particularly as class actions, profoundly affects the substantive rights of the parties to the litigation.") (emphasis added); In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 148 (2d Cir. 2001) ("Even a defendant who is innocent and holy may rationally choose to pay a few hundred million dollars in settlement of a class action rather than ‘run the risk of ruinous liability.’") (quoting Fed. R. Civ. P. 23 advisory committee’s note); Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 164 (3d Cir. 2001) (citing "inordinate or hydraulic pressure on defendants to settle, avoiding the risk, however small, of potentially ruinous liability" as factor favoring interlocutory review).

The slope has proved slippery.  In Regents of the Univ. of Calif. v. Credit Suisse First Boston (USA) Inc., 482 F.3d 372, 379 (5th Cir. 2007), the majority cited "particularly acute" pressure to settle as justification for Rule 23(f) review.  But the court went on to reverse certification because it rejected the merits of the class claims.  The majority even cited its concern about "opening the floodgates for nearly unlimited and frequently unpredictable liability" as support for its ruling that the claims couldn’t survive legal scrutiny.  Id . at 393.  "Pressure to settle" thus merged with an explicit weighing of the merits.

Observations

I have two observations on this perhaps inevitable consequence of allowing practically limitless interlocutory review of class certification decisions.  The first concerns the absence of proof that settlement pressure encourages wrong certifications, either generally or in particular cases.  One would expect, in fact, that the very size of a case would promote greater care in district courts’ rulings under Rule 23.  See Regents,  482 F.3d at 380 (noting the district court’s "best of intentions" and "hurculean effort").

The second thought also comes from lack of evidence.  Courts appear to indulge an irrebuttable presumption  that pressure to settle produces unjust outcomes.  On what basis do they do that?  As far as I can tell, they take it as an article of faith.  They don’t cite studies.  They don’t even offer examples.  Do defendants actually misjudge the risk of class actions?  Do they truly overpay?  Count me skeptical.

The strongest cases get the most urgent cries of hydraulic pressure.  One can hardly blame the defendants, but judges needn’t accept their complaints at face value.  The focus should stay on evaluating the likelihood of error by the district court.  A settlement class may increase the danger of a mistake.  But mere bigness normally doesn’t — and it usually has the opposite effect.

Justice Holmes, in his very first dissent, sassed his Northern Securities colleagues by implying that they let public opinion bend their judgment.  He was wrong; they were right.  And, in the spirit of humility, which becomes us all, let us settle or try cases on their merits.  Let us allow doubt about settlement pressure in weak cases.  Cost of defense, perhaps.  Maybe a tiny bit more for the low but conceivable possibility of losing not only at trial but also on post-trial motions and appeal.  But please don’t pay more than that, friends, for bad cases.  You’ll have only believing in a myth to blame.

Barry Barnett

Don’t you dare myth our feed.

Barbara Jordan (1936-96).

Deep in the hot summer of 1974, on July 25, a junior member of the House Judiciary Committee spoke for articles of impeachment against President Richard Nixon.  Barbara Jordan said (with our emphasis):

Earlier today, we heard the beginning of the Preamble to the Constitution of the United States:  "We, the people."  It’s a very eloquent beginning.  But when that document was completed on the seventeenth of September in 1787, I was not included in that "We, the people."  I felt somehow for many years that George Washington and Alexander Hamilton just left me out by mistake.  But through the process of amendment, interpretation, and court decision, I have finally been included in "We, the people."

Today I am an inquisitor.  An hyperbole would not be fictional and would not overstate the solemness that I feel right now.  My faith in the Constitution is whole; it is complete; it is total.  And I am not going to sit here and be an idle spectator to the diminution, the subversion, the destruction, of the Constitution.

Barry Barnett

Blawgletter defends the Constitution against all enemies, foreign and domestic.

The Justice Department announced yesterday a federal indictment in Detroit of two Michigan lawyers for conspiring to contribute more than $125,000 to the 2004 presidential campaign of John Edwards through dozens of "straw donors".  The 10-count indictment alleges that Geoffrey Fieger and Ven Johnson reimbursed people for contributions through their law firm.  Also that they made false statements and obstructed a grand jury investigation. 

"The indictment states that Senator Edwards’ campaign was unaware of Fieger and Johnson’s actions", according to the DOJ press release.

Mr. Fieger’s online biography highlights his representation of Jack Kervorkian in connection with criminal charges for helping people commit suicide.  It also notes that, in 1998, he ran for Governor of Michigan as the Democratic Party nominee.  He lost in the general election. 

Mr. Fieger contends that politics motivated the charges, which he denies.  In a statement (see story), he said:

The timing of these unprecedented charges, that have no support in fact or law, during the height of the presidential fundraising campaign, is solely intended to intimidate Democratic supporters around the country.

Mr. Fieger hired Gerry Spence to defend him.

Barry Barnett

Our feed whistles while it works.

From the May 2006 issue of Barnett’s Notes on Commercial Litigation:

A dear client in a hard case once took to assuring our trial team of victory by telling us that "we will kill them."  An Italian by birth, upbringing, and temperament, the client rendered "kill" as "keel", which made his assurance more, well, assuring.  It worked for us.

In the years since, I’ve comforted other clients by telling them the same thing — even saying it the same way that my friend Alberto Lombardi did.  They love to hear me say we will keel them!

I’ve said we will keel them so many times now that people in my office use it to make fun of my obsessive distaste for passive voice.   My colleagues taunt me with they will be killed by us.  Ouch. 

I don’t like passive voice.  I don’t like it one bit.  Not even a tiny bit is it liked by me.

In my view, passive voice reveals either of three unflattering things about the writer — cowardice, fuzziness of thinking, or slothful ways.  Cowardice in this context means that the writer doesn’t have the guts to identify the actor or wants to hide his identity ("mistakes were made" instead of "I made mistakes").  By fuzzy thinking I mean that the author doesn’t have the wattage to fix the imprecision of his writing ("mistakes were made" seems perfectly fine to this dullard).   Slothfulness  suggests that the author could take the time to connect the actor to the action but chooses not to do the work or to do it in a loopy way ("mistakes were made by me").

A judge who reads passive voice in a brief should extend the magisterial antennae of skepticism.  Alarms should go off.  Red flags ought to billow.  The writer either wants to hide something, doesn’t know what to say, or rates his time as more valuable than yours.

All this adds up to one thing:  passive voice in legal writing shows disrespect to the reader.  It lengthens, complicates, and obstructs writing; it forces the reader to remember too much, to fill too many gaps, to work too durn hard.  The audience deserves better.

Active voice propels the reader forward.  It holds interest.  It makes reading easier, more fun, and maybe irresistible.  It can even save writers from writing nonsense because it forces them to think through exactly what they mean.

Please use active voice always.  Or consequences will be suffered.  By you.

Barry Barnett

Our feed always uses active voice.

An optoelectronic package allows transmission of light carrying data at high speeds over fiber optic networks.  In the 1990s, engineers Frank T. Shum and Jean-Marc Verdiell worked together on optoelectronic packaging.  After they split up, each separately applied for and received U.S. patents in the optoelectronic packaging field.  Mr. Verdiell later sold his company to Intel, which thus became the owner of the patent that Mr. Verdiell obtained.

Mr. Shum learned of the Verdiell-Intel patent in 2001and filed suit in federal court to declare himself, as a matter of patent law, at least a co-inventor.  He also alleged that Mr. Verdiell procured the Verdiell-Intel patent by failing to disclose to the U.S. Patent and Trademark Office Mr. Shum’s status as a co-inventor.  The district court chose to hold a bench trial on the inventorship question before reaching the state law fraud and unjust enrichment claims.  Mr. Shum lost the trial.  Relying on its findings and conclusions in the bench trial, the district court later granted summary judgment on the state law claims.  Shum v. Intel Corp., No. 06-1249 (Fed. Cir. Aug. 24, 2007).

The Federal Circuit, by 2-1, reversed.  The majority held that the seventh amendment guaranteed Mr. Shum a trial by jury on his state law claims and that the bench trial of the patent-law inventorship question deprived him of that right.  It concluded that the fraud claim required a finding that Mr. Shum conceived the invention before Mr. Verdiell did and that the claim therefore inextricably intertwined with the inventorship issue.  Under Beacon Theatres, Inc. v. Westover, 359 U.S. 500 (1959), and Dairy Queen, Inc. v. Wood, 369 U.S. 469 (1962), the court determined, a jury trial of the state law claims had to go first.  The court also reversed summary judgment on the unjust enrichment claim, holding (contrary to the district court) that it did not "merely duplicate" the fraud claim under California law.

The outcome reaffirms that courts may not fence jury trial rights by postponing jury trial until after a bench trial and using the findings in the bench trial to resolve the issues to which the jury trial right attaches.

Barry Barnett

Blawgletter loves the seventh amendment.

A 2-1 panel of the Federal Circuit yesterday upheld summary judgment of non-infringement as to several patents relating to orthodontic appliances.  But the court reversed as to several claims in another patent, holding that they didn’t encompass the same limitations in the patents.  Ormco Corp v. Align Technology, Inc., Nos. 06-1240 & 06-1274 (Fed. Cir. Aug. 24, 2007).

The majority also concluded that the district court properly granted summary judgment on an infringement counterclaim under the "obviousness" doctrine.  But it did so — for at least the fourth time — without acknowleding that the Supreme Court’s recent decision in KSR Int’l Co. v. Teleflex Inc., 127 S. Ct. 1727 (2007), may have changed the Federal Circuit’s test for obviousness.  The panel instead upheld summary judgment under the law of the case doctrine, ruling that its decision in a previous appeal sealed the patent’s fate as invalid.

The third panel member voted to reverse and remand because she believed that the district court lacked a sufficient record to construe the patent claims.

Barry Barnett

Sink your choppers into our feed.

After a summer hiatus, the Texas Supreme Court returned to the work of deciding cases today.  It issued seven opinions. 

The defendants won every one.  And, in four of the seven, the court acted without hearing oral argument.

Big deal, right?  Maybe the defendants deserved to win.

Barry Barnett

Happy Friday.

At Blawgletter’s house, we call the Whole Foods Market up the street "Wholey Foods" — which sounds like "holy foods".  Sometimes we get their mash of avocados and other makings into guacamole.  Delicious!

Yesterday, the D.C. Circuit cleared the way for Whole Foods to smuch rival Wild Oats into its organic foods empire.  The court’s order says:

Upon consideration of the emergency motion of the Federal Trade Commission for an injunction pending appeal, the opposition thereto, the reply, the supplemental opposition, and the supplemental reply; and the motion for leave to file amicus brief, and the lodged amicus brief, it is

ORDERED that the motion for leave to file amicus brief be granted. The Clerk is directed to file the lodged document. It is

FURTHER ORDERED that the administrative injunction issued August 20, 2007 be dissolved and the motion for an injunction pending appeal be denied. Although the FTC has raised some questions about the district court’s decision, it has failed to make a “strong showing that it is likely to prevail on the merits of its appeal.” Washington Metro. Area Transit Comm’n v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C. Cir. 1977); see also FTC v. Weyerhaeuser Co., 648 F.2d 739, 741 (D.C. Cir. 1981). The FTC must show that the district court, in denying the preliminary injunction, abused its discretion by making clearly erroneous factual findings or errors of law. FTC v. Beatrice Foods Co., 587 F.2d 1225, 1230 (D.C. Cir. 1978); Weyerhaeuser, 648 F.2d at 741. At this stage, the FTC has failed to meet that burden.

Federal Trade Comm’n v. Whole Foods Market, Inc., No. 07-5276 (D.C. Cir. Aug. 23, 2007) (per curiam).  Yum!

John Mackey, Chairman, CEO, and co-founder of Whole Foods — and former anonymous blogger extraordinaire — said that "[w]e are looking forward to closing this merger . . . ."  Well, yeah.

Barry Barnett

Our feed loves Fridays.