Best Lawyer TrophyThe 2015 edition of Best Lawyers has emerged from embargo.

It lists 17 partners in Blawgletter's firm. And, yes, it includes Blawgletter. For the 11th time. Go figure.

Dallas

  • Blawgletter: Bet-the-Company Litigation, Commercial Litigation, Litigation – Antitrust, Litigation – Intellectual Property, and Litigation – Patent
  • Ophelia F. Camiña: Commercial Litigation, Litigation – Antitrust, Litigation – Intellectual Property, and Litigation – Patent
  • Terrell W. Oxford: Bet-the-Company Litigation and Commercial Litigation

Houston

  • Neal S. Manne: Bet-the-Company Litigation, Commercial Litigation, Litigation – Antitrust, Litigation – Intellectual Property, Litigation – Patent, and Personal Injury Litigation – Plaintiffs
  • Kenneth S. Marks: Commercial Litigation, Litigation – Antitrust, and Litigation – Securities
  • Eric J. Mayer: Commercial Litigation
  • Kenneth E. McNeil: Commercial Litigation
  • William R. H. Merrill: Commercial Litigation
  • J. Hoke Peacock III: Commercial Litigation
  • Shawn L. Raymond: “Lawyer of the year” in Houston for Litigation – Antitrust
  • Harry P. Susman: Commercial Litigation, Personal Injury Litigation – Defendants, and Personal Injury Litigation – Plaintiffs
  • Stephen D. Susman: Bet-the-Company Litigation, Commercial Litigation, Litigation – Antitrust, Litigation – Environmental, Litigation – Intellectual Property, Litigation – Patent
  • Max L. Tribble, Jr.: Litigation – Intellectual Property and Litigation – Patent
  • Mark L. D. Wawro: Commercial Litigation

New York

  • William C. Carmody: Bet-the-Company Litigation, Commercial Litigation, Litigation – Antitrust, Litigation – Patent, and Litigation – Securities

Seattle

  • Parker C. Folse III: Bet-the-Company Litigation, Commercial Litigation, Litigation – Antitrust, Litigation – Patent, and “Lawyer of the year” in Seattle for Litigation – Intellectual Property
  • Brooke A.M. Taylor: Litigation – Intellectual Property

Bonus:    There are two kinds of people. Those who think there are two kinds of people, and those who don't.

Second bonus:    There are three kinds of people. Those who can count, and those who can't.

Third bonus:    Blawgletter will get a new design in the next week or two. The redo will look fabulous! Details will follow.

Shutterstock_119691289A way out of arbitration?

A new Ninth Circuit decision points to a possible way to avoid arbitration clauses in the take-it-or-leave-it "adhesion" contracts that electronic retailers post on their websites.

Online vendors want you to accept their terms of service. That way, you will bind yourself to a form contract that mainly favors the website owner. A key clause in the pact will provide that you waive your right to resolve any complaint you may have against the vendors in court or on a class basis.

Arbitration, baby!

"Clickwrap" v. "browsewrap"

You can't avoid doing things the e-tailers' way. But to get you in their clutches they must take steps that enable them to prove that you in fact accepted the online agreement. As the Ninth Circuit explained in a class action relating to a messy fire sale of HP TouchPads by Barnes and Noble:

Contracts formed on the Internet come primarily in two flavors: “clickwrap” (or “click-through”) agreements, in which website users are required to click on an “I agree” box after being presented with a list of terms and conditions of use; and “browsewrap” agreements, where a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen.

Nguyen v. Barnes & Noble, Inc., No. 12-56628, slip op. at (9th Cir. Aug. 18, 2014).

The winner

Guess which approach works better? The one that doesn't require you to do something that shows you agree to the terms of service? Or the one that does?

Bingo:

[W]here, as here, there is no evidence that the website user had actual knowledge of the agreement, the validity of the browsewrap agreement turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract.

Id. at 11-12 (applying New York law).

[W]here a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on—without more—is insufficient to give rise to constructive notice.

Id. at 15.

Lesson

Online retailers that rely on the less-intrusive "browsewrap" approach may want to rethink their methodology. "Clickwrap" pacts may annoy customers, but they stand a better chance of passing muster as a binding contract.

Benefits may include avoiding a class action.

Lawyers who represent consumers will also want to take notice of Nguyen v. Barnes & Noble, Inc. That consumer fraud or antitrust case that you turned down because of the online arbitration clause barring class actions? Take a new look at it. If the bad actor use browsewrap instead of clickwrap, your client-in-waiting may have a viable case.

NEWS FLASH

Blawgletter will soon launch a redesign. You'll find it easier to read and navigate. Details to follow.

Buy ButtonYou have a special treat today.

Hollis Salzman and Meegan F. Hollywood at Robins, Kaplan, Miller & Ciresi L.L.P. in New York have written a timely Guest Post on an important and exotic antitrust topic — monopsony.

Ms. Salzman serves as Co-Chair of Robins Kaplan's Antitrust and Trade Regulation Group and as co-lead counsel in blockbuster antitrust class actions, including In re Automotive Parts and In re Air Cargo Shipping Services. Recognition of her knowledge and skill have come from Chambers USA, Lawdragon, and Benchmark Litigation, to name a few. Check out a recent interview by Law360.

Ms. Hollywood prosecutes class actions that involve price-fixing, unlawful monopolization, and other anticompetitive practices. She heads up the associates who handle In re Air Cargo Shipping Services.

You can contact them at hsalzman@rkmc.com and mfhollywood@rkmc.com, respectively.

*  *  *  *

"The Everything Store" — Can You Buy a Monsopsony on Amazon?

There has been a lot of buzz in recent months over the highly publicized Amazon-Hachette dispute, which was first reported by The New York Times when negotiations over renewed contract terms between the online retailer and publisher broke down earlier this year.  While details regarding the exact nature of the dispute have not been divulged, the general consensus is that Hachette prefers to return to an agency pricing model, which allows publishers to set the prices of their own books.  Amazon is adamantly opposed to this switch because the agency model would prevent the kind of drastic discounting that Amazon is known for.  It’s no secret that publishers deem Amazon’s discounting practices a violation of antitrust laws.  Recent debate, however, has focused on whether US regulators tend to agree.

Of course, all of this follows from that other much-publicized dispute in which the Department of Justice successfully claimed that the six largest publishers in the US, including Hachette, unlawfully colluded with Apple to raise e-book prices when they introduced the agency pricing model in response to Amazon’s deep discounting back in 2010.  The publishers settled the case and agreed to certain restrictions, which largely enabled Amazon to continue discounting e-books.  Moreover, US District Judge Denise Cote’s final order, issued in 2013, laid out a staggered schedule for the various publishers to renegotiate their contracts with retailers.  As it turns out, Hachette was up first.

Reportedly, Amazon demanded better terms from Hachette, and negotiations rapidly deteriorated.  Amazon retaliated by declaring literary war on Hachette in an effort to force the publisher’s hand.  Specifically, Amazon delayed delivery of books published by Hachette for up to three weeks, removed the pre-order option for Hachette titles, charged more for Hachette books, and even suggested that readers might enjoy a book from another author instead.  To add to the hype, Hachette authors simultaneously took to social media to denounce the mammoth online retailer for offenses ranging from bullying to extortion to a violation of antitrust laws.

Meanwhile, across the pond, recent reports indicate that the European Commission has begun a preliminary investigation into complaints that Amazon violated European competition law by engaging in similar tactics with Bonnier AB, a German publishing trade group.  Specifically, Bonnier claims that Amazon delayed delivery of its books in order to force the publisher to accept lower prices for its e-books.  European antitrust law expressly forbids companies with a dominant market position from engaging in such abusive conduct. 

All of this has led many to ponder whether Amazon’s recent exploits might (finally) raise the eyebrows of US antitrust watchdogs.

Monopoly, Monopsony – What’s The Difference? 

While commentators often attach the word “monopoly” to Amazon, the real inquiry is whether Amazon is, instead, a “monopsony.”  An unlawful monopsony, the lesser known violation in the antitrust family, occurs when a buyer of goods has the power to unlawfully lower the prices of the products that it buys.  By contrast, an unlawful monopoly occurs when a seller of goods has the power to unlawfully raise the prices of what it sells.  Both result in a misallocation of resources, which harms consumers and distorts markets, and therefore each violates antitrust law. 

The theory of monopsony assumes that the monopsonist has the power to dictate terms to its suppliers.  However, to show monopsony, one must show that suppliers are forced to sell their products at prices so low that the loss results in a reduction of supply.  Harm to the market results when suppliers are, in turn, driven out of business, or have less money to invest in new innovation, technology, equipment, and/or expansion.  In that sense, a monopsony often does not directly affect consumers in the traditional way that unlawful monopolies do. 

As an added wrinkle, buyer power without true monopsony power can actually benefit consumers.  Indeed, when buyer power pushes prices down without resulting supply reduction, consumers enjoy lower downstream prices.  Consumers are harmed, however, when output reduction is coupled with a misallocation of resources.  While consumers may not immediately feel the effects of the monopsony, harm resonates nonetheless as wealth is transferred to the monopsonist, and consumers are faced with higher prices and fewer options.

For its part, Amazon has a strong reputation for consumer-friendly discounting.  Thus, as consumers enjoy discounted e-book prices, it is difficult to imagine how they are being harmed by Amazon’s practices.  The relevant question is whether Amazon’s bullying tactics with publishers could effectively result in a reduction of books being published.       

Could Amazon Be The First Illegal Monopsony?

Significantly, no US court has yet to find a single company guilty of an unlawful monopsony.  The case that came the closest was Weyerhaeuser Co. v. Ross-Simmons Hardware Lumber Co., 549 U.S. 312 (2007).  In Weyerhaeuser, a dominant purchaser of logs was accused of overbidding, and driving its smaller rival out of business.  While the trial court and Ninth Circuit found for the plaintiffs, agreeing that the defendant paid “more than it needed to pay” for logs, the Supreme Court reversed 9-0.  

The Weyerhaeuser Court concluded that predatory buying must be evaluated under a much stricter analysis than that contemplated by the Ninth Circuit.  Specifically, the Court held that a buyer is liable only if (1) buy-side bidding caused costs to rise higher than revenues, and (2) the defendant has a “dangerous probability of recouping the losses” through an “exercise of monopsony power.”  It is important to note that under the Weyerhaeuser standard, recoupment via higher prices in the downstream market does not satisfy the test.  Rather, the Supreme Court required recoupment “through the exercise of monopsony power,” that is – by forcing lower prices on the buy-side.  

Since Amazon first introduced its Kindle product, it has priced e-books below what it was buying them for.  For example, if Amazon bought an e-book from Hachette for $15, it resold it to a consumer for $9.99, losing $5.01 per e-book.  Not surprisingly, e-book consumers flocked to Amazon helping the online retailer to grow exponentially over the years, and causing publishers and authors to rely on Amazon’s sales.  In fact, some have even suggested that consumers use Amazon as a modern-day card catalog.  According to that theory, if a book or author is not sold on Amazon, that book or author must not exist. 

With its low prices and established reputation as a consumer-friendly reading room of sorts, there is little debate that Amazon is a dominating force in the e-book market, both on the buy-side and sell-side.  Varied reports have placed Amazon’s share of the e-books market from anywhere between 60 to 90 percent.  Moreover, Amazon accounts for nearly 65 percent of Hachette’s e-book sales.  Thus, Amazon certainly has market power in the antitrust sense, and its buyer power alone cannot be said to be merely circumstantial. 

Now it seems that Amazon is attempting to enhance its bottom line by wielding its power in the market to achieve more favorable pricing from publishers, rather than by increasing its own prices downstream, i.e. recoupment through the exercise of monopsony power.  It remains to be seen, however, whether Amazon’s tactics will result in a reduction of output.  Publishers will certainly be put out by larger discounts to Amazon and expensive services.  Authors will likewise suffer if publishers are, in turn, unable to pay large advances, or are paid less per book due to higher discounts paid to Amazon.  Stifling authors could certainly lead to fewer publications for consumers to choose from, and a reallocation of wealth flowing directly to Amazon. 

Interestingly, in an effort to break its standoff with Hachette, Amazon executive David Naggar, wrote an open letter to Hachette authors proposing to take them out of the middle of the dispute by promising them a “big windfall.”  Specifically, Amazon dangled 100% of the sales price of every Hachette e-book sold on Amazon to Hachette authors.  However, Hachette quickly rejected the proposal, calling it “suicidal.”  Whether Amazon is trying to avoid being labeled an unlawful monopsonist by this recent proposal, or whether it is just trying to win back the hearts of frustrated authors and consumers alike remains to be seen.

Conclusion

The general consensus among antitrust analysts is that US regulators are not likely to intervene in what has been labeled by some as a simple business dispute.  Indeed, many view this dispute as normal business dealings between a retailer and supplier, and maintain that the enormous attention merely stems from the visibility and notoriety of the parties involved.  However, as Amazon continues its fight with Hachette, and its contracts with the remaining publishers start to expire, perhaps US regulators will be inclined to take a closer look.

Big victory for big oil . . . and big gas

Shutterstock_157298618The Fifth Circuit handed a large win today to oil and gas lessees in the Lone Star State.

The dispute that the court addressed concerned computation of royalties, which an oil and gas producer pays to landowners and others in return for the right to explore for minerals that underlie the property. 

The key part of the lease in question provided (with our emphasis) as follows:

Notwithstanding anything to the contrary herein contained, all royalty paid to Lessor shall be free of all costs and expenses related to the exploration, production and marketing of oil and gas production from the lease including, but not limited to, costs of compression, dehydration, treatment and transportation.

The lessee — Chesapeake Exploration, L.L.C. — produced natural gas from the lessors' land in Johnson County, Texas, south of Fort Worth. Chesapeake affiliates then compressed, dehydrated, and treated the gas before transporting it far away and selling it to independent buyers.

Computing royalties

But the company computed the royalties it had agreed to pay the lessors — one-fourth of the gas's "market value" at the "point of sale" — in a peculiar way. Although it purported to sell the gas at the "wellhead", Chesapeake based the royalty calculation on the sales prices at locations far from the wellhead, minus the compression, dehydration, treatment, and transportation costs that Chesapeake's affiliates incurred after the gas left the wellhead. The result, Chesapeake contended, constituted the price at the "point of sale" (the wellhead) to a non-Chesapeake affiliate.

That upset the lessors. They thought that "free of all costs and expenses" meant that Chesapeake couldn't deduct expenses it incurred in getting the gas to the actual places at which it bona fide sold the gas, far downstream. As the lessors pointed out, the lease required that "[p]ayments of royalties shall be based on sales of leased substances to unrelated third parties at prices arrived at through arms length negotiations." Because the sales to "unrelated third parties" took place at distant locations, they urged, Chesapeake had to pay royalties on the prices that the third parties paid, "free of all costs and expenses" of getting the gas to market.

The lessors sued. But they lost in the district court in Dallas.

Fifth Circuit rules

They lost again today in the Fifth Circuit. The panel explained its affirmance thus:

The above-quoted language directs that “royalty” is to be “free of all costs and expenses related to the exploration, production and marketing of” gas “including, but not limited to, costs of compression, dehydration, treatment and transportation.” As discussed above, when gas is sold at the wellhead, there are typically no costs of compression, dehydration, treatment or transportation. When there are no such costs at the wellhead, the market value at the wellhead is “free of all costs and expenses,” as contemplated by the above-quoted paragraph, and there is nothing in the royalty clause “contrary” to the “[n]otwithstanding” sentence. If the gas is sold by the lessee downstream of the wellhead, then both the sentence providing for a 1/4 royalty and the “[n]otwithstanding” sentence contemplate that costs incurred by the lessee between the point of production and the point of sale are to be borne by the lessee. Since it is undisputed that gas sales by Chesapeake have occurred at the wellhead, and since the lessors do not contend that the sales to unaffiliated purchasers were at less than market value, Chesapeake could arrive at the market value at the wellhead by deducting reasonable post-production costs to deliver the gas from the wellhead to the point at which the gas was sold to unaffiliated purchasers.

Potts v. Chesapeake Exploration, L.L.C., No. 13-10601, slip op. at 6 (5th Cir. July 29, 2014) (emphasis ours) (applying Texas law).

"Free of costs" that don't exist

The court said that "when gas is sold at the wellhead, there are typically no costs of compression, dehydration, treatment or transportation." Id.

Typically? How about never?

The "[n]otwithstanding" sentence has no meaning in the context of a sale and delivery that in fact take place at the wellhead. It applies only if the sale occurs somewhere downstream; otherwise no relevant "costs" exist. But the lessee may avoid the "[n]otwithstanding" language by purporting to sell the gas at the "wellhead" — something that Chesapeake accomplished by selling at the wellhead to an affiliate. Magic.

Shazam.

A happy outcome for counsel

All you in-house lawyers out there might want to raise a hearty cheer for the D.C. Circuit. Outside counsel may want to clap also. For a panel of the appeals court held in In re Kellogg Brown & Root, Inc., No. 14-5055 (D.C. Cir. June 27, 2014), that you can convert mandatory internal investigations into hush-hush probes whose results you may keep secret. Presto change-o!

The ruling arose out of a False Claims Act (or qui tam) case that a whistle-blowing ex-KBR worker brought against the defense contractor, his former employer.

Harry Barko alleged that KBR had defrauded the U.S. military in Iraq by inflating costs and paying kickbacks. He asked KBR to produce documents that related to its probe of the fraud. As the cort of appeals noted, "KBR had conducted that investigation pursuant to its Code of Business Conduct, which is overseen by the company's Law Department." In re KBR, slip op. at 2.

Trial court orders production

The district court read the documents in camera before rejecting KBR's claim of privilege. KBR failed to show, the court held, that "the communication[s in the documents] would not have been made 'but for' the fact that legal advice was sought." United States ex rel. Barko v. Halliburton Co., No. 05-cv-1276, 2014 WL 1016784, at *2 (D.D.C. Mar. 6, 2014) (quoting United States v. ISS Marine Services, Inc., 905 F. Supp. 2d 121, 128 (D.D.C. 2012)).

KBR conducted the probe, the court concluded, not "for the purpose of obtaining legal advice" but "pursuant to regulatory law and corporate policy". Id. at *3. Indeed, the court found, "[n]othing suggests the reports were prepared to obtain legal advice. Instead, they were prepared to try to comply with KBR's obligation to report improper conduct to the Department of Defense." Id. at 2.

D.C. Circuit intervenes

KBR sought emergency relief from the D.C. Circuit, which granted it. The district court erred, the panel opined, because "it employed the wrong legal test." In re KBR, slip op. at 8. "Under the District Court's approach," the panel stated, "the attorney-client privilege apparently would not apply unless the sole purpose of the communication was to obtain or provide legal advice." Id. at 9. "That is not the law." Id.

But the district court ruled no such thing. Instead of holding that privilege "would not apply unless the sole purpose of the communication was to obtain or provide legal advice", the court had found that KBR did not prepare the reports "to obtain legal advice" but to discharge its pre-existing legal duty "to report improper conduct to the Department of Defense."

The circuit court's gloss on what the district court had done dictated a failing grade. It also led to the following declamation:

We are aware of no Supreme Court of court of appeals decision that has adopted a test of this kind in this context. The District Court's novel approach to the attorney-client privilege would eliminate the attorney-client privilege for numerous communications that are made for both legal and business purposes and that thereftofore have been coverd by the attorney-client privilege. And the Disrict Court's novel approach would eradicate the attorney-client privilege for internal investigations conducted by businesses that are required by law tomaintain compliance programs, which is now the case in a significant swath of American industry.

Id. at 9.

The court's new "one of the significant purposes" standard

The panel went on to say the True Test calls on courts to figure out whether "a primary purpose" of the communication "[w]as obtaining or providing legal advice". Id. at 10 (emphasis in original). It defined "a primary purpose" as "meaning one of the significant purposes". Id.

The standard makes little sense in the context of the case before the court, Blawgletter submits. A company in KBR's position can always choose to conduct a mandatory internal investigation with lawyers rather than with non-attorney professionals. The company can then always plausibly claim that "one of the significant purposes" of gathering the information consisted of "obtaining or providing legal advice".

Implications

The result? Companies may cloak the purely factual products of a mandatory investigation simply by having lawyers particpate in it. Plaintiffs like Mr. Barko will lose access to potentially crucial documents — an especially bad result for Mr. Barko, whose case relates to conduct that took place a decade or so ago.

Sis-boom-bah.

Chief Justice RobertsCLE Panels of Judges

Have you noticed how many continuing legal education programs feature "judges panels" and urge you to attend so their honors can instruct you in how to win your next case?

A blurb about an upcoming "Legal Writing to Win" seminar in Texas highlights its "Judges Panel: The Worst Things We See in Briefs". The ABA's 2014 Class Actions National Institute promises to inform you "how judges view class actions". Lots of bars offer "view from the bench" sessions.

All of these resources share the premise that what you learn from judges will help you win. But will it?

Advice from the Chief Justice

Chief Justice John G. Roberts didn't think so before he took the bench. At least he took judicial instruction with a grain of salt.

He explained, in his immensely helpful "Thoughts on Presenting an Effective Oral Argument" in 1997, in this way:

Be particularly skeptical of advice on how to argue an appeal from appellate judges. The great Supreme Court lawyer John W. Davis, in his classic piece on appellate advocacy, asserted that "a discourse on the argument of an appeal would come with superior force from a judge who is in his judicial person the target and the trier of the argument," but Davis' comment must be qualified in an important respect: most judges give good advice on how to win a winning case. They all say to focus on the language of the statute in a statutory interpretation case, to discuss the facts fairly and objectively, to describe the holdings of any controlling cases. Good advice if the statutory language is helpful, the facts support your position, and the precedent leans your way; perhaps not so good advice if the opposite is true. Judge have no interest in the court reaching a "wrong" result, but fifty percent of clients do.

What We Can Learn

Lawyer Roberts didn't want to imply of course that listening to judges talk about what they like and find effective will waste your time. He meant instead that you still have to think hard about "the strengths and weaknesses of your case."

"General rules are of no help here."

Roberts-the-advocate reminds us that pointers on "how to win a winning case", even from your very own judge, may not help either.

The difficult thing is to take a case that could go either way — the great bulk of them — and make it into a winner. The ability to do that is what separates the pikers from the John Robertses.

 

Texas GavelOur last four posts on the highest civil court in the Lone Star State went from Bloody Day at Texas Supreme Court (Mar. 28, 2014) to Do Plaintiffs Stand a Chance in the Supreme Court of Texas? (Apr. 25) to Do Plaintiffs Stand a Chance in the Supreme Court of Texas — Part 2 (May 30) to Do Plaintiffs Stand a Chance in the Texas Supreme Court — Part 3 (June 23).

The streak continues. In the three Fridays that followed our June 23 post — the Court usually issues opinions at the end of each business week — the Court has kept up its, er, consistency.

Behold, the Court:

  • Reinstated a grant of no-evidence summary judgment in favor of a defendant land owner whose employee chased a trespassing vehicle across the land at high speed, leading to a rollover and three fatalities. The Court reasoned that chasing the vehicle across unlit roads "d[id] not create [a] likelihood of serious injury to the defendants" absent evidence of "aggressive moves" on the part of the employee or the speed at which he was travelling. Boerjan v. Rodriguez, No. 12-0838 (Tex. June 27, 2014).

  • Ruled that a royalty owner was not entitled to a $10 million jury award for underpayment of royalties, finding that the costs of separating CO2 from casinghead gas may be assessed against the royalty interest as a postproduction expense, despite the parties previously classifying all oil separation activity as a production expense.  French v. Occidental Permian Ltd., No. 12-1002 (Tex. June 27, 2014).

  • Reversed a trial court order requiring a majority shareholder found to have engaged in oppressive conduct to buy-out the minority shareholder's interest for fair value. The Court ruled that a buy-out order is not an authorized remedy for oppressive conduct under the TBOC. Cardiac Perfusion Services, Inc. v. Hughes, No. 13-0014 (Tex. June 27, 2014).
  • Ruled that the imposition of a spoliation instruction against a defendant store owner who allowed video surveillance footage to be automatically erased was an abuse of discretion because the degree of resulting prejudice was not in accordance with the spoliating party's culpability. The Court reversed judgment for plaintiff and remanded for new trial. Brookshire Brothers, LTD v. Alridge, No. 10-0846 (Tex. July 3, 2014).
  • Denied a plaintiff's takings claim after the state claimed and fought for ownership of part of Plaintiff's land for two decades, reducing the value of the land and preventing her from finding a willing buyer. Although the court found that "the State's conduct is troubling," it held that no taking occurs until the assertion of ownership is coupled with taking physical possession. Porretto v. Texas General Land Office, No. 12-0483 (Tex. July 3, 2014).
  • Dismissed the claims of an asbestos plaintiff's estate because the claims failed to comply with the requirements of new legislation enacted post-injury that changed the procedural requirements for statutory wrongful death causes of action. To do so, the Court overruled a court of appeals ruling that the new requirements were unconstitutionally retroactive as applied to Plaintiff's claims.Union Carbide Corp. v. Synatzske, No. 12-0617 (July 3, 2014).
  • Overturned the denial of immunity to a government-entity defendant, dismissing a commercial tenant's breach of contract claim. Although entering into a contract for goods or services waives governmental immunity from claims by the contracting party, the Court reasoned that the lease was not such a contract despite a use restriction requiring plaintiff to operate a marina. Lubbock County Water Control v. Church & Akin, LLC, No. 12-1039 (Tex. July 3, 2014).
  • Affirmed dismissal of an asbestos plaintiff's claim against a manufacturer, finding that evidence of considerable exposure to defendant's products was, given evidence of additional exposure to other sources of asbestos, insufficient to establish causation in the absence of evidence quantifying the aggregate dose of asbestos attributable to defendant. Bostic v. Georgia-Pacific Corp., No. 10-0775 (Tex. July 11, 2014).
  • Vacated a $1.2 million jury verdict against a fuel system manufacturer for installing a faulty flex connector, resulting in massive fuel loss. The court ruled that a spoliation instruction issued against the defendant after it lost the flex connector in question was, absent evidence of intentional concealment, an abuse of discretion. Petroleum Solutions, Inc. v. Head, No. 11-0425 (Tex. July 11, 2014).

The slaughter has become extreme.

If you have a choice about where to file a case, you might give serious thought to going somewhere other than the state courts of Texas.

Shutterstock_183258623A Question of Efficiency

Will quick review of a final judgment in just one of many cases that make up a large multi-district litigation bog the MDL process down  — or make it work better?

Defense lawyers insist that consolidation of cases before a single district judge (by the U.S. Judicial Panel on Multidistrict Litigation) changes the general rule that a final judgment against a party gives it (the party) the right to take an immediate appeal. The Supreme Court will decide the issue in the coming Term. See Supreme Court Takes LIBOR Case.

While the outcome in the Supreme Court may not turn formally on the efficiency question, the issue has practical importance for clients and lawyers who participate in the MDL process.

Who Gains from Interlocutory Review

Defendants will normally not want appeals from final judgments in individual cases for the simple reason that, by definition, they will have won in the district court handling the MDL. An appeal puts that victory at risk.

If the defendants can hang on to the win, they can use it to drive down the settlement value of the entire MDL. They potentially could save tens of millions if not billions of dollars.

Plaintiffs, on the other hand, want the opposite. Prompt review by a court of appeals will give them a chance to overturn an adverse ruling. It will also reduce pressure to accept a low-ball settlement.

What the System Wants

Allowing interlocutory appeals from final judgments makes more sense from the perspective of the federal judicial system. The system wants just and right outcomes. Its ability to get them depends on correct determinations of legal issues. Review of a ruling by a single district judge on a key matter of law by a panel of appellate judges enhances the likelihood that the MDL process will yield a fair result.

Blawgletter said as much recently to a reporter from Policy and Regulatory Report, Ryan Lynch. Defendants "are having trouble", we said, with the prospect of an immediate appeal "because they  now have risk that they would prefer not to have. It's not that there is any inefficinecy  happening. It is that there is the potential that they are going to suffer a loss on something that they have [so far] won." 

Chief Justice Roberts

If you’ve thought about filing a business lawsuit in federal court or you have one underway already, you’ll probably want to read about two still-in-process studies by Columbia University and Harvard University law school professors on how the U.S. Supreme Court under Chief Justice John Roberts (2005-present) has treated business lawsuits, and how that treatment has resulted in a more arduous, expensive process for businesses.

On April 4, draft papers on the topic by Columbia’s Scott Hemphill and Harvard’s John Coates were subjected to scrutiny at the Institute for Law and Economic Policy’s 20th annual conference. On the panel, Duke’s Jim Cox stood in for Coates, who had a conflict. Also on the panel were Robert Jackson Jr. of Columbia, law professor Barak Orbach of University of Arizona and Lawrence Norden of NYU’s Brennan Center. Blawgletter rounded out the group.

The Roberts Court on Antitrust

Hemphill’s work focused on antitrust cases, and his outline highlighted the largely pro-defendant record of the Roberts Court in this arena. It recounted the four wins versus 10 losses by plaintiffs, but noted that the victories all came after 2009. Hemphill said that the rulings reflect skepticism about class actions (Twombly and Comcast) as well as the ongoing influence of economic theory on the substantive scope of liability (Weyerhaeuser, Leegin and Actavis). He pointed to the latest ruling, in Actavis, as cabining “patent triumphalism” in antitrust.

Orbach said decisions from the Roberts Court have lacked any meaningful analysis. Of the 14 antitrust cases it’s ruled on, eight were on substantive matters and six on procedural issues. “The most obvious pattern in these decisions is hostility to private enforcement,” he said.

Orbach pointed out that in his confirmation hearing in September 2005, Chief Justice Roberts emphasized the value of private antitrust enforcement. Specifically, he stated, “I do think that the system established under the Sherman Act of private antitrust enforcement—and of course the opportunity to recover additional damages and attorneys’ fees and other aspects—has been an effective tool in enforcing the law.” Thus far, Orbach noted, the Roberts Court has been very consistent in dismantling this antitrust tool.

The scholars on the panel repeatedly circled back to one overriding concern: the Roberts Court lacks any business litigators, and thus is making uninformed decisions in these cases.

“I am equally troubled by the credit the Court receives for its use of economic lingo, suggesting it endorses economic principles,” Orbach continued. “I simply don’t see any meaningful analysis in antitrust decisions. The lingo is used to justify very simple decisions, but the decisions are not necessarily coherent.”

The Roberts Court on Securities Fraud

Criticism of the Roberts Court’s handling of business cases continued as the panel moved to cases involving securities fraud, which was the focus of Coates’s work. His paper aimed at grading the Roberts Court by tallying securities fraud cases that it deemed “expansive” versus those it assessed as “restrictive.” It concluded that the Court has not gone very far either way. It also attributed what it perceived as the Court’s gradualism to Roberts’s background as an appellate lawyer, rather than a transactional one who would tend to prefer bright-line rules.

The NYU Brennan Center’s Norden spoke about Citizens United, which struck down limits on corporate funding of PACs, and the brand-new McCutcheon ruling, which lifted the cap on total contributions to all federal candidates. Like Orbach, Norden believes the Roberts Court has been labeled “pro-business” inaccurately: “. . . [W]hat Professor Coates’ work and methodology require us to do is look past the Court’s rhetoric and image to what is actually happening in the cases—and what is interesting to see is that even in the high-profile lottery cases, the Court demonstrates a similar lack of understanding about how business and corporations work.”

While the members of the Court may have pro-business instincts, Norden said, “they don’t have a deep substantive understanding of how businesses work.”

Columbia’s Jackson agreed, stressing that the Roberts Court lacks any business lawyers, and therefore they don’t really understand what businesses want from the Court and often make mistakes that actually make the law tougher on those they’d like to help. So, while the Court may want to be pro-business, it is decidedly not.

The Cost of Business Litigation

As a member of the panel, Blawgletter focused my assessment on the Court’s strong tendency to make business litigation more costly. We cited Chief Justice John Marshall’s dictum that “the power to tax includes the power to destroy.” The tendency continues a trend that started in the 1980s with Celotex (on summary judgment) and continued in the 1990s with Daubert (expert opinion evidence), the 2000s with Twombly and Iqbal (pleading a claim), and the 2010s with Dukes, Comcast, and the 2014 Halliburton decision (class certification).

Each layer of procedure tightens the filter, presumably in the hope that it will catch and eliminate any “false-positive” results (cases that plaintiffs win but, in a metaphysically objective way, should lose). But it has the effect of multiplying the number of false-negative results (cases that plaintiffs should win but don’t, either because the filter is substantively too demanding or makes pursuing the claim too costly).

The obsession with false positives and use of procedure to banish them has perverse results. The Court’s majority often cites the great expense of business litigation, but in truth the growth in cost has largely resulted from the vast increase over the last three decades in the number and complexity of procedural devices that defendants may deploy to postpone or avoid a judgment on the merits.

Class certification, for instance, no longer occurs (if at all) early in a case. Instead it takes place (again, if at all) almost simultaneously with summary judgment motion practice shortly before trial. Tightening the filter increases the cost, higher costs justify another tightening of the filter, that raises costs further . . . and the cycle continues. We have a system that ferrets out almost every false positive, promotes false negatives, and is so expensive that only the wealthy can afford it. No wonder people try cases so seldom these days.

We ended by pointing to a June 2013 story by New York Times Supreme Court reporter Adam Liptak. He noted that “[t]he price of victory today for liberals . . . can be pain tomorrow.”

He had in mind a 2007 precursor to 2010’s Citizens United, a modest ruling in which Roberts laid the rhetorical groundwork for the vastly more far-reaching decision in the sequel. But he could as well have meant what happened to Twombly, the 2007 case that Justice David Souter authored. Two years later, in 2009, Justice Souter found himself dissenting, in Iqbal, which took Twombly to a new level. He said in dissent that “there is no principled basis” for the majority’s application of Twombly. Thus seeds grow into poisonous bushes.

What We’ve Learned

In 1955, a British journalist wrote an essay on bureaucracy for The Economist magazine. The correspondent, Cyril Parkinson, put in the first sentence what we now know as Parkinson’s Law. It posits, roughly, that work expands to fill the time available to do it.

What held for bureaucrats in 1955 holds for lawsuits today.

In 2014, you rarely see a commercial case that gets to trial until the number of docket entries climbs above 400. You find motions to dismiss under Twombly and Iqbal, to compel arbitration under Stolt-Nielsen and Italian Colors, to enforce a forum-selection clause under Atlantic Marine Construction, for summary judgment under Celotex, to strike expert reports under Daubert, to decertify a class under Dukes and to review class certification under Rule 23(f).

The same impulse that prompts lawyers to use every available procedural device also persuades them to include a multitude of grounds. Thus a motion to dismiss asserts not only that the statute of limitations has run but also that laches, equitable estoppel and waiver bar the claim. A Daubert motion attacks not just the expert’s credentials, her methodology, the reliability of the data she used, the timeliness of her report and the possibility of gaps in her reasoning; it also recounts every time a judge has said something uncomplimentary about her work.

These efforts cost a bundle—for the clients. Not all of them have the same likelihood of success, but who will demand restraint? Using all of them wastes the time—and tests the patience—of judges, whose goodwill and trust you will need sooner than you think, but how often do lawyers cite that as a consideration when advising clients about strategy?

By increasing the size of the copious supply of defensive procedural weapons, the Roberts Court has created many new ways to expend resources—money, credibility, reputation. But lawyers should select the one, two or at most three devices whose skillful deployment will give their clients the best chance of winning. That requires restraint. We need a lot more of it.

This article first appeared in the July 8, 2014 issue of Corporate Counsel.
Read more: http://www.corpcounsel.com/id=1202662054054/What-Businesses-Need-to-Know-About-the-Roberts-Court#ixzz36t70yRVp

LIBORGet ready for the Supreme Court to resolve a question that has divided courts of appeals for years:

Whether and in what circumstances is the dismissal of an action that has been consolidated with other suits immediately appealable?

If that doesn't sound sexy enough for you, consider that the issue arises in massive litigation over manipulation of LIBOR — the London Inter-bank Offer Rate, a key interest rate benchmark for lenders and borrowers worldwide. In one of the cases that constitute In re LIBOR-Based Financial Instruments Antitrust Litigation, No. 1:11-md-02262-NRB (S.D.N.Y.), the plaintiffs alleged only a federal antirust claim, and as a result of the district court's dismissal of all antitrust claims the case effectively ended for those plaintiffs. Must they nonetheless wait until everyone else finishes with their surviving claims before these antitrust-only plaintiffs can prosecute an appeal?

Alison Frankel of Reuters offers a splendid exposition of the background, the stakes, and the potential impact of the Court's granting of review. Frankel's piece highlights the effect of review on Blawgletter's clients in the case — and quotes us to boot:

[I]t’s certainly good news for Libor claimants that the U.S. Supreme Court granted a petition for certiorari by bond investors whose case [District Judge] Buchwald dismissed in its entirety when she bounced the Libor antitrust claims. “We are both optimistic and pleased,” said Barry Barnett of Susman Godfrey, who represents a class of investors in over-the-counter securities in the Libor litigation and filed an amicus brief urging the justices to grant the bond investors’ appeal. The cert grant, Barnett said, means that as the Libor class moves ahead with discovery on the claims that have survived Buchwald’s dismissal rulings, they have some hope that the federal antitrust claims will be revived.

The Court will likely hear oral argument in the appeal later this year.