I. Lewis "Scooter" Libby after guilty verdict.

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Barry Barnett

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Fendi will need to sell lots of these to pay Mr.
Incalza’s judgment against it.

A federal statute forbids employment of an alien who lacks authority to stay in the U.S., but California law prohibits firing such an employee without good cause.  The Ninth Circuit held today that the federal and state requirements don’t necessarily conflict because, in the case before it, the alien employee (Giancarlo Incalza) could have remedied his visa problems with the help of his employer (Fendi, in its Beverly Hills store).  The court thus affirmed a post-trial judgment awarding Mr. Incalza more than $1 million.  Incalza v. Fendi N. Am., Inc., No. 04-57119 (9th Cir. Mar. 6, 2007).

Barry Barnett

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The Eighth Circuit brought relief today to directors and officers who face civil or criminal peril for the way they performed (or didn’t perform) their business responsibilities.  Applying Arkansas law, the court overturned a summary judgment against a former bank director who sought recovery from the bank’s D&O insurance carrier.  The court rejected the carrier’s narrow construction of "solely" in the policy, holding that coverage extended not only to claims arising from a former director’s "status" as a director but also to claims concerning the director’s conduct as a director.  McAninch v. Wintermute, No. 05/2798/05-2938 (8th Cir. Mar. 6, 2007).

The difference between a "status" claim and a "conduct" claim seems a tad metaphysical to Blawgletter, but such distinctions make the D&O coverage world go around for our friends who specialize in that field.  Bless them.

Barry Barnett

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If you like bankruptcy — and the way it gets the calf and the lion and the yearling to lie down together — the Second Circuit today issued an opinion that’ll hold your interest well into the night.  What joy it will bring!  Motorola, Inc. v. Official Committee of Unsecured Creditors (In re Iridium Operating LLC), No. 05-2236-bk (2d Cir. Mar. 5, 2007).

Blawgletter hasn’t the time just now to decipher and parse the subtleties of the Bankruptcy Code’s priority scheme or the nuances of Bankruptcy Rule 9019 — even if we could.  But, in a big picture, 30,000-feet, thumbnail sketch sort of a way, the following appears to have happened:

The debtor, Iridium, made those crazy-big satellite phones with the dorky antennas that you had to point at a satellite to get a signal (see picture).  Motorola spun off Iridium in 1993 but continued to maintain and operate the Iridium system.  The technology never got far off the ground, and in 1999 Iridium crashed and burned into bankruptcy. 

After whaling on each other in the insolvency proceedings, Iridium’s bank lenders patched up their differences with the committee representing low-priority creditors to go after Motorola.  They got bankruptcy court approval of their settlement, including the part that created and funded Iridium Litigation LLC ("ILLLC"), a vehicle for pursuing claims against Motorola.  A litigation trust owned 99.9 percent of ILLLC and would distribute proceeds of Motorola lawsuits among creditors in certain ways.  Motorola objected as an "administrative creditor" of the Iridium bankruptcy estate, but it lost in the bankruptcy and district courts.  All this happened before confirmation of a reorganization plan.

Blawgletter will not deny you the pleasure of discovering the Second Circuit’s legal analysis.  So here we end, pointing out only that the lenders and low-priority creditors seem to have largely won — and will lose on remand only if ILLLC fails in its efforts to make Motorola pay.

Barry Barnett

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Sinochem involves a dispute over shipping steel coils
from Philadelphia to Guangzhou, China.

Today marked the U.S. Supreme Court’s majestic — and unanimous — return to the vexing subject of forum non conveniens — the common law doctrine that lets judges send cases overseas (or at least across an international frontier), often hoping that the move will their quietus make.  The Court held that federal district courts not only have discretion to dismiss cases under the doctrine but also may choose to dismiss them before determining whether or not they would have jurisdiction to decide the case on the merits.  And along the way the Justices drew fresh meaning from some "less than ‘felicitously’ crafted" statements that has muddied the forum non waters since Gulf Oil Co. v. Gilbert, 330 U.S. 501 (1947).  Sinochem Int’l Co. v. Malaysia Int’l Shipping Corp., No. 06-102 (U.S. Mar. 5, 2007).

As Blawgletter reads the opinion, the Court granted federal trial judges discretion to, um, exercise discretion. 

But the Court did not resolve an issue that recurs in the context of forum non — whether a court that may lack jurisdiction over the dispute or the parties nonetheless possesses authority to impose conditions on a forum non dismissal — such as requiring that the defendant waive jurisdictional or statute of limitations defenses or provide discovery or that the case actually make progress in the alternative forum.  Oh, well.  Any court in a storm.

Barry Barnett

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What do the six "weekly orders" that the Texas Supreme Court published on March 2 share in common?  The defendants won every case.  Imagine our surprise.

Barry Barnett

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Chief Justice John Marshall (1755-1835).
Would he take a Texas class action?

As Blawgletter surveyed the Texas Supreme Court’s "weekly orders" from last Friday, the words of Chief Justice John Marshall came to mind.  He wrote:  "That the power to tax involves the power to destroy [and] that the power to destroy may defeat and render useless the power to create . . . are propositions not to be denied."  McCulloch v. Maryland, 17 U.S. 316, 431 (1819) (holding taxation of Bank of the United States by State of Maryland unconstitutional).

The case that summoned the memory concerned whether a state trial court erred in certifying a worldwide class to pursue a state securities law claim against Texas defendants.  The plaintiffs filed the action in 1999.  After hearing four days of testimony and argument, the trial court issued a 20-page order certifying the worldwide class and including a 10-page "trial plan".  The court of appeals affirmed the certification order in 2003.  Citizens Ins. Co. of Am. v. Daccach, 105 S.W.3d 712 (Tex. App. — Austin 2003). 

The Supreme Court heard oral argument in 2004 and rendered its decision two years and four months later.  Citizens Ins. Co. of Am. v. Daccach, No. 03-0505 (Tex. Mar. 2, 2007).  The Court decertified the class, holding that "the trial court did not consider the effect of res judicata on the adequacy of the class representative, the superiority of litigating this case as a class action, the typicality of claims within the class, and the predominance of common issues over individual issues".

Sounds pretty dull, eh?  Blawgletter agrees.  But you’ll notice the emphasis that we’ve put on how long the court system has taken — nearly eight years — to put the class plaintiffs back to square one.  Now the lawsuit will return to the trial court, and any certification it orders will again start the ponderous climb through the wonderland of another interlocutory appeal.

And yet one may descry in Daccach a glimmer of hope for Texas class actions.  Since Sw. Ref. Co. v. Bernal, 22 S.W.3d 425 (Tex. 2000), Blawgletter cannot recall a single instance in which the Court upheld — much less required — class certification.  The Court on the contrary has seemed almost monomaniacal in creating ever more stringent requirements for class treatment.  But, despite its decertification in Daccach, the Court essentially held that the trial court can fix the res judicata problem by notifying class members that they’ll probably lose the right to pursue individual claims if the class loses on the merits.  That sounds pretty easy.

Blawgletter doesn’t see a new day dawning for class actions in the Lone Star State.  So long as the Supreme Court continues to tax class cases with the delays and uncertainties of interlocutory review, Rule 42 will lay in the ruins it has become.  The power to tax involves the power to destroy.  Indeed.

Barry Barnett

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Barnett’s Notes on Commercial Litigation won the Advocatus Diaboli’s Grand Prize for best law firm newsletter in 2006.

If you like Blawgletter, you’ll love Barnett’s Notes on Commercial Litigation, the monthly newsletter of Susman Godfrey L.L.P.  The April 2007 issue includes:

1.  Sisyphus, Catch-22, and The Walk of Life.  Disparate comparisons illustrate the persuasive value of analogies.

2.  Did You Know?  We got awards. 

3.  Misunderestimating Opponents.  Doncha do it.

4.  Cappin’ Crunch.  Cap-and-trade as remedy for pollution.

5.  Roundup.  Links to favorite Blawgletter posts.

6.  Hot Lunch.  We help stop pollution.  For free.  In Texas!

7.  Biosphere 3.  Cartoon.

If you’d like to receive Barnett’s Notes via email, send an email with "subscribe" in the subject line or the text to notes@susmangodfrey.com 

Barry Barnett

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