The Eighth Circuit gave the Hell’s Angels Motorcycle Club, Minnesota chapter, a reprieve today.  The federal government brought the case under the Civil Asset Forfeiture Reform Act of 2000 with the goal of seizing the Angels’ clubhouse.  The government alleged that the Angels used the clubhouse to sell methamphetamine.   According to the allegations, Club members used meth as a medium exchange, even paying remodelers for their work on the clubhouse with the drug.  The district court granted summary judgment to the government, but the Eighth Circuit reversed.  The court held that the Angels’ opposing affidavits sufficiently undermined the credibility of the government’s affiants, requiring a trial to determine where the truth lies.  United States v. Real Property Located at 3234 Washington Avenue North, Minneapolis, Minnesota, No. 06-1983 (8th Cir. Mar. 22, 2007).

All of which reminds Blawgletter of something a Hell’s Angels leader once said to a reporter, who asked how the group recruited members.  He said " we don’t recruit ’em.  We recognize ’em."

Barry Barnett

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These guys have nothing to do with the case.

Blawgletter doesn’t often cover decisions from Florida’s intermediate appellate courts, but a decision out of West Palm Beach today justifies a deviation from the norm. 

The ruling arises from the purchase of Sunbeam stock by a company that financier Ronald Perelman controls.  The buyer sued Morgan Stanley for fraud that induced the transaction and won a jury award of $1.57 billion in actual and punitive damages.  Reversing, the Sunshine State’s Fourth District Court of Appeal held that Coleman produced no evidence supporting the award, concluding that Coleman improperly attributed losses in the value of Sunbeam stock over a period of years to the fraudulent inducement.  The court also refused to order a new trial.  One of the three judges dissented.  Morgan Stanley & Co. Incorporated v. Coleman (Parent) Holdings Inc., No. 4D05-606 (Fla. Dist. Ct. App. Mar. 21, 2007).

You may recall the case from reports about sanctions against Morgan Stanley for, er, difficulties in finding, preserving, and producing electronic documents.  No doubt MS’s lawyers at Kirkland & Ellis breathed a deep sigh of relief when the Court of Appeal rendered its decision.

Barry Barnett

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The Supreme Court of the United States Blog today presents an enlightening analysis of Monday’s decision in Regents of the University of California v. Credit Suisse First Boston (USA), Inc., No. 06-20856 (5th Cir. Mar. 19, 2007).  (See Blawgletter posts here and here.) 

SCOTUSblog notes, among other things, that Regents may enhance the likelihood that the U.S. Supreme Court will grant review of two other cases involving similar issues under the Securities Exchange Act.  The Court now has before it certiorari petitions in the Eighth Circuit case that the Fifth Circuit majority embraced in holding that the Regents plaintiffs failed to state a securities fraud claim under Rule 10b-5 as well as in the Ninth Circuit case that the majority rejected.  SCOTUSblog also points out that the Justices will consider the petitions in their upcoming conference on Friday.

Barry Barnett

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The Eighth Circuit held today that the Federal Communications Commission acted within its authority in preempting state regulation of Internet telephone service — which goes by the popular name Voice over Internet Protocol or VoIP.  The court rejected challenges to the FCC’s determination that federal rules must prevail due to the impracticability of figuring out which VoIP calls involved only intrastate communications (which states may regulate) and which ones traveled interstate (the FCC’s domain).  The Minnesota Public Utilities Commission v. FCC, No. 05-1069 (8th Cir. Mar. 21, 2007).

VoIP, as a cheaper and more flexible alternative to regular telephone service, fascinates Blawgletter.  The court’s opinion made the technology even more interesting.  Blawgletter learned, for example, the difference between "nomadic" VoIP service, which a customer may use anywhere he can connect via broadband to the Internet, and "fixed" VoIP service, which the customer accesses from one place, often where he receives cable modem service.  What will they think of next?

Barry Barnett

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Okay, so Barnett’s Notes on Commercial Litigation won a Grand Prize award last year for best law firm newsletter.  Big deal.  That doesn’t mean you should bother to read it.

And yet. 

You may just find that you like it.  Stories and features have talked about everything from Ockham’s Razor, Catch 22, and rapper Sir Mix-a-Lot to the Battle of Agincourt, The Da Vinci Code, and Curb Your Enthusiasm — all on the way to making a point about business trial law.  Indeed, gentle reader, Barnett’s Notes spares no effort to connect, for your enjoyment, the unlinkable.

Take a minute to check it out.  Don’t cost nothin.  And, if you don’t like Barnett’s Notes, you can always go back to Googling your name every 15 minutes.  Cheers!

Barry Barnett

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The Fifth Circuit knows that Blawgletter loves them.

Yesterday’s Fifth Circuit decision (with one judge concurring in the result) does some things that class action and securities lawyers ought to know about.  Regents of the University of California v. Credit Suisse First Boston (USA), Inc., No. 06-20856 (5th Cir. Mar. 19, 2007).  Blawgletter offers this early assessment:

1. We’ve created a monster.  Rule 23(f) of the Federal Rules of Civil Procedure has, since December 1, 1998, given courts of appeals discretion to review orders granting or denying class certification.  What considerations limit that discretion?  In Regents, the majority cited pressure on the defendants to fork over money and "unsettled" questions of law.  One may question whether the defendants felt much money-forking pressure, having resisted it since December 2001.  As for the second factor, Blawgletter respectfully suggests that a court of appeals will always deem a legal question "unsettled" if it disagrees with how the district court resolved it.  No, Blawgletter takes the Rule 23(f) advisory committee at its word when it said the rule provides "unfettered discretion" to grab a class certification ruling for interlocutory ravishment.
2. The monster has an appetite.  As the concurrence in Regents emphasizes, the court needn’t have reached the question of whether Rule 10b-5 imposes liability for the kind of fraudulent conduct that the plaintiffs alleged.  Can you imagine an issue more central to the "merits", from resolving which courts have shied for decades in dealing with class certification motions.  And consider that the liability question didn’t directly bear on class certification.  The majority had to conclude, first, that no liability exists under Rule 10b-5; second, that the absence of liability precluded the district court from presuming that all class members relied on the defendants’ fraudulent conduct; and that, without the presumption, the class didn’t satisfy the requirements for class certification.
3. The monster will eat you.  The Regents majority took a strikingly narrow view of Rule 10b-5 liability.  Defendants who knowingly scheme with others to defraud investors stand beyond the law’s reach, the court held, unless the defendants themselves made misrepresentations or violated a duty to disclose or engaged in manipulative trading in the underlying security.  Everything else amounts to "aiding and abetting" — liability for which the Supreme Court foreclosed in Central Bank, N.A. v. First Interstate Bank, N.A., 511 U.S. 164 (1994). 

Barry Barnett

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The Federal Circuit today issued two opinions relating to patent law — one affirming a district court’s conclusion, following a bench trial, that the claimant’s inequitable conduct during patent prosecution rendered the patent unenforceable and the other reversing a summary judgment of infringement as to one patent claim and ordering reconsideration of the infringement issue as to a second patent claim.  Espeed, Inc. v. BrokerTec, Inc., No. 2006-1385 (Fed. Cir. Mar. 20, 2007) (concerning "methods and systems for trading financial instruments"); Cross Medical Products, Inc. v. Medtronic Sofamor Danek, Inc., No. 05-1415 (Fed. Cir. Mar. 20, 2007) (involving "polyaxial screws").

Barry Barnett

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Sachet bundles.  Will you help Blawgletter write
an amicus brief?

Today, the Ninth Circuit issued an order inviting amicus briefs on important antitrust issues:

Whether a plaintiff who seeks to establish the predatory or anticompetitive conduct element of an attempted monopolization claim under section 2 of the Sherman Act by showing that the defendant offered bundled discounts to the defendant’s customers must prove that the defendant’s prices were below an appropriate measure of the defendant’s costs.  If so, what is the appropriate measure of costs and how should the trial court instruct the jury on the matter of costs?  If not, what standard should the trial court instruct the jury to use to determine whether the bundled discounts are predatory or anticompetitive?

Cascade Health Solutions v. PeaceHealth, Nos. 05-35627, 05-35640, 05-36153 & 05-36202 (9th Cir. Mar. 20, 2007).  The court directed the filing of amicus briefs within 30 days — which Blawgletter puts at no later than April 19, 2007 — and grants leave to file to all comers.

In the underlying case, McKenzie-Williamette Hospital obtained jury findings that PeaceHealth attempted to monopolize the provision of hospital care, unlawfully discriminated in the pricing of services, and wrongfully interfered with the hospital’s prospective business relations.  The jury awarded the hospital $5.4 million, which the district court trebled to $16.2 million.

Blawgletter views the court’s call for amicus briefs as a laudable effort to clarify a vexing set of questions in the area of bundling services — a practice common in health care and lots of other businesses.  Anyone care to join us in writing a brief to assist the court?

Barry Barnett

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