Vangogh
Self-Portrait (1888).  Mr. van Gogh cut his ear off
before painting Ms. Taylor’s picture.

Today, the Ninth Circuit held that actress Elizabeth Taylor needn’t part with a Vincent Van Gogh painting that she acquired at a Sotheby’s auction in 1963.  The court held that ancestors of Margarete Mauthner, a Jewish collector who fled Nazi Germany in 1939, could not prevail on their claims against Ms. Taylor because the Holocaust Victims Redress Act didn’t create a private cause of action and because limitations expired no later than 1993 on their state law claims.  Orkin v. Taylor, No. 05-55364 (9th Cir. May 18, 2007).

Barry Barnett

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The First Circuit gave Colt a jolt today when it affirmed a summary judgment on the gun-maker’s claim against a competitor for infringing its trademark rights in "M4".  Colt alleged that M4 identified it as the source of a certain kind of carbine rifle.  The court held that the evidence established the "genericness" of M4 and therefore defeated Colt’s trademark claim.  Colt Defense LLC v. Bushmaster Firearms, Inc., No. 06-1696 (1st Cir. May 18, 2007).

Colt designed its M4 carbine, at the request of the military, as a compact version of the M16 rifle.  Both Colt and the defendant, Bushmaster, made M4s for the military under separate contracts.  But Colt registered M4 with the U.S. Patent and Trademark office and sued Bushmaster for using the mark to describe Bushmaster’s lightweight carbine rifle.  The district court granted Bushmaster’s motion for summary judgment.

The First Circuit affirmed.  It pointed to evidence that trade publications, customers, and even Colt used M4 as a kind of carbine instead of as Colt’s carbine.  The trademark registration didn’t overcome the evidence of generic use and understanding of the mark, the court held.

This sort of stuff fascinates Blawgletter.  Who knew that the M4 came about because the military wanted a more compact M16?  That it has a 14.5 inch barrel and a collapsible stock?  Or that M4 doesn’t really refer to a globular cluster of stars in the constellation Scorpius?  Wow!

Barry Barnett

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The administration yesterday prohibited federal agencies from hiring lawyers on a contingent fee basis.  See Executive Order.  Why?  "To help ensure the integrity and effective supervision" of legal services to the government, of course.

How will paying hourly rates improve "integrity and effective supervision"?  Blawgletter can only speculate. 

But "integrity and effective supervision" just might really mean "loyal and subservient".  Those traits make a nice contrast with vigorous representation by independent professionals.

Barry Barnett

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A 2-1 panel of the Fifth Circuit today bludgeoned a securities fraud class action — probably to death.  The court held that plaintiffs seeking class certification in a securities fraud case may not invoke the Basic, Inc. v. Levinson, 485 U.S. 224 (1988), presumption of reliance without first proving "loss causation".  (Loss causation usually means that the defendants’ lies inflated a stock’s price and brought it back down when the truth came out, producing losses for people who bought the stock in the meantime.)   The court also concluded that the district court abused its discretion in finding that the plaintiff did establish loss causation by a preponderance of the evidence.  Oscar Private Equity Investments v. Allegiance Telecom, Inc., No. 05-10791 (5th Cir. May 16, 2007).

Judge Dennis, in eloquent dissent, lamented the majority’s "breathtaking revision of securities class action procedure that eviscerates Basic‘s fraud-on-the-market presumption" of reliance.  He pointed out that the Basic presumption related to "transaction causation" — reliance — rather than the separate issue of whether the defendants’ fraud caused the plaintiffs’ loss — loss causation.  He also noted that the majority’s analysis shifted the burden of proof under Basic from defendants to plaintiffs.  And he allowed that the majority reviewed the evidence of loss causation de novo, with no deference to the district court, instead of for abuse of discretion.

The majority rhetorically endowed class certification with "lethal force" and "in terrorem power".  Blawgletter wonders why.  The opinion cites no evidence.  In our experience, certification merely turns a bad case into a bigger bad case and a good case into a larger good one.  It doesn’t scare anyone into settling.  Only a trial — after denial of summary judgment — may do that.  But doesn’t the scariness in any event depend wholly on the merits at that point?  And shouldn’t it?

Gosh.

Barry Barnett

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The Fourth Circuit today affirmed a verdict and judgment against Custer Battles for failing to compensate the company it hired to establish and provide security for a permanent camp at the Baghdad International Airport.  Custer Battles hired DRC to do the work without a contract in writing.  DRC built the camp and recruited British Army Gurkhas for security.  A jury awarded DRC more than $1.3 million in quantum meruit and tortious interference damages.  The Fourth Circuit affirmed but ordered remittitur of the $130,000 in damages that DRC conceded duplicated another element of recovery.  DRC, Inc. v. Custer Battles, LLC, No. 06-1591 (4th Cir. May 17, 2007).

Blawgletter mentions the case because we remember Custer Battles as the controversial recipient of a no-bid $16 million contract to secure the Baghdad airport in 2003.  The company came to life just before it won the deal; it had no experience in providing security.  And several parties sued the company for fraudulent billing to the U.S. government.  The Department of Defense has banned it from further contract work.

Barry Barnett

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The Federal Circuit today held that a defendant abandons its counterclaim if it moves to dismiss under Rule 12(b)(6) without reasserting the counterclaim.  The court didn’t explain why a dismissal motion tolls the time for answering and counterclaiming in the context of a motion to dismiss an original complaint but not a later one.  General Mills, Inc. v. Kraft Foods Global, Inc., No. 06-1569 (Fed. Cir. May 16, 2007).

Did the drafters of the Federal Rules of Civil Procedure really intend that a defendant moving to dismiss a second or third complaint loses its right to answer and counterclaim after decision of the motion?  Count Blawgletter dubious.

Update:  Blawgletter has slogged back through the rules and believes we’ve found the source of the problem.  The defendant, Kraft, denominated its motion as one to dismiss under Rule 12(b)(6) instead of one for judgment on the pleadings under Rule 12(c).  Rule 12(c) gives a party the option, "[a]fter the pleadings are closed", to move for judgment.  Kraft moved to dismiss before the pleadings closed.  If it had waited a few days and invoked Rule 12(c) instead of 12(b)(6), Rule 12(a)(4)(A) would have allowed it to answer and counterclaim within 10 days after notice of the court’s denial of its motion.

The court’s construction of the rules strikes Blawgletter as hypertechnical and possibly unjust.  Most judges would let the defendant off the hook in these circumstances for missing the deadline.  But this one didn’t.  So watch out.

Barry Barnett

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If you love or hate nekkid pictures on a computer screen, you may want to read the Ninth Circuit’s opinion today in Perfect 10, Inc. v. Amazon.com, Inc., No. 06-55405 (9th Cir. May 16, 2007).  For the indifferent among you, Blawgletter will supply a synopsis.

Perfect 10 makes pictures of "nude models" available on its websites.  Users of Google and Amazon.com can get HTML links to copies of the photos on non-Perfect 10 websites.  Google also displays thumbnail copies of the pix.  The district court preliminarily enjoined Google from exhibiting the thumbnails but declined to stop either company from furnishing links to infringing copies of the images.

The Ninth Circuit affirmed in part and reversed in part.  The court agreed that giving users an HTML link to infringing websites didn’t directly infringe Perfect 10’s copyrights and that Google’s use of thumbnail versions probably did.  But the court disagreed with the district court’s conclusions (1) that Google probably wouldn’t win its "fair use" defense to the thumbnail claim and (2) that Perfect 10 wouldn’t likely prove "contributory infringement" by the provision of links to infringing copies of the photos.  The court also directed the district court to consider Perfect 10’s Digital Millennium Copyright Act claim, which the district court didn’t reach.

So:

  • Links to infringing copies of copyright material DON’T directly infringe.
  • Thumbnails DO but may evade liability with fair use defense.
  • Links may contributorily infringe depending on circumstances (such as whether link-provider has notice of and ability to control access to infringing material).
  • DMCA may apply.

Barry Barnett

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Don’t think that Blawgletter doesn’t remember that weeks ago we pronounced the current occupant of the U.S. Attorney General’s office legally dead — after he rejected our advice for testifying before the Senate.  So how can Fredo get into more trouble?

Blawgletter rejoices that you asked the question.  It means that you’ve honored us with that most valuable commodity — your kind attention.

The latest news merely supplies the context for our figurative answer.  It tells of Fredo’s late night visit, on March 10, 2004, to the hospital sickbed of his predecessor, John Ashcroft, who hovered near literal death.  Fredo’s mission?  To induce a possibly dying man to abjure his top aide’s refusal to pronounce legal a domestic spying plan that he considered illegal.  The aide intervened, and Mr. Ashcroft demurred.

All of which summons a dim memory from an epic poem that Blawgletter could never quite finish — Dante’s Purgatorio, the second part of Divine Comedy.  In that poem, people who died without expiating their sins (but who didn’t quite qualify for the Inferno) landed there.  Penitence could yet occur.  But, boy, it hurt!

Blawgletter chooses, metaphorically, to place Fredo, post-death, in that place, where hope still abides.  But let us hope he at last sees that his mortal legal coil has already shuffled off.  And that he must now repent, in a dramatic and painful way, to salvage what he can of his post-AG afterlife.

Barry Barnett

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The Seventh Circuit today accused the Securities and Exchange Commission of "grinding down a corporation" because "the agency (or its senior staff) is in a snit" over the "firm’s refusal to kowtow" to it.  The language resulted from the SEC’s decision to classify the outfit (correctly) as an "investment company" but its refusal (which the court deemed incorrect) to recognize that the enterprise qualified for a statutory "exception" to the definition of "investment company".  But the court also noted that the SEC offered two routes of escape — either by cutting its holdings of "investment securities" or by applying for (and receiving) an exemption.  SEC v. Nat’l Presto Industries, Inc., No. 05-4612 (7th May 15, 2007).

Blawgletter wonders what provoked castigation of an agency whose error consisted in offering an "exemption" while rejecting an "exception" but will leave you to draw your own conclusions.

Barry Barnett

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The Sixth Circuit today ordered a district court to cut a jury’s punitive damages award to achieve a one-to-one ratio to the compensatory damages.  The jury awarded an elderly widow $400,000 in actuals plus $2,628,600 in punitives against a bank for violating the Fair Credit Reporting Act.  The district court, after an initial appeal and remand, ordered reduction of the $2,628,600 to $2,228,600.  The Sixth Circuit held the subtraction of $400,000 not enough to fix the unconstitutional overkill of the punitive element.  And it directed the district court to slash the award to no more than $400,000 — the same as actual damages.  Bach v. First Union Nat’l Bank, No. 06-3660 (6th Cir. May 15, 2007).

Barry Barnett

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