Foreign firms lose billions

Every year, non-U.S. firms overpay billions and billions of dollars for goods and services as a result of price-fixing, collusive market-splitting, and other restraints of trade. But many of the firms can get no relief in a U.S. court.

The reason? A U.S. statute — the Foreign Trade Antitrust Improvements Act (FTAIA) – generally exempts from U.S. antitrust law any "conduct involving trade or commerce (other than import trade or import commerce) with foreign nations". 15 U.S.C. 6a.

The FTAIA has an exception. It bars antitrust claims only "unless" the conduct (1) "has a direct, substantial, and reasonably foreseeable effect" on U.S. commerce and (2) "such effect gives rise to a claim under" U.S. antitrust law. Id.

Second Circuit case

The first court of appeals to address the scope of section 6a's exception read it narrowly. The Ninth Circuit construed "direct, substantial, and reasonably foreseeable effect" as requiring that the domestic effect occur as an "immediate consequence" of the defendant's conduct. United States v. LSL Biotechnologies, 379 F.3d 672, 680 (9th Cir. 2004).

Eight years later, the Seventh Circuit adopted an easier test. It heldthat section 6a(1) calls for only a "reasonably proximate causal nexus" between the foreign conduct and the domestic effect. Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845, 857 (7th Cir. 2012) (en banc) (quoting Makan Delrahim, Drawing the Boundaries of the Sherman Act: Recent Developments in the Application of the Antitrust Laws to Foreign Conduct, 61 N.Y.U. Ann. Surv. Am. L. 41, 430 (2005)).

A case involving third-generation USB connectors prompted the Second Circuit to weigh in on the circuit split. Lotes Company, a Taiwanese firm, alleged that competitors in Taiwan and China colluded to keep Lotes out of the USB 3.0 market. The anticompetitive pact, Lotes claimed, threatened to bankrupt Lotes and eliminate it as a competitor. 

The district court relied on the Ninth Circuit's approach to the "direct, substantial, and reasonably foreseeable effect" language in dismissing the case. Lotes appealed.

Good for overseas plaintiffs . . . and bad

The Second Circuit rejected the Ninth Circuit test and adopted the Seventh Circuit's more lenient one.

But the panel affirmed the dismissal of Lotes's case anyway. The court ruled that, although Lotes had alleged enough to show a "reasonably proximate causal nexus" for purposes of section 6a(1), it had not stated facts that demonstrated a nexus between the anticompetitive conduct and the effect of the conduct on Lotes in the U.S.:

We . . . must determine whether any domestic effect resulting from the anticompetitive conduct proximately caused Lotes's injury. We conclude that it did not. Lotes alleges that defendants' foreign conduct had the effect of driving up the prices of consumer electronics devices incorporating USB 3.0 connectors in the United States. But those higher prices did not cause Lotes's injury of being excluded from the market for USB 3.0 connectors — that injury flowed directly from the defendant's [sic] exclusionary foreign conduct. Lotes's complaint thus seeks redress for precisely the type of 'independently caused foreign injury" that . . .falls outside of Congress's intent.

Lotes Co., Ltd. v. Hon Hai Precision Industry Co., No. 13-2280, slip op. at 47 (2d Cir. June 4, 2014) (quoting F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 173 (2004)).

Upshot

The Second Circuit's ruling in Lotes eases the first part of the FTAIA test (section 6a>1)) but strictly applies the second component (section 6a(2)). Anticompetitive conduct that takes place entirely overseas may (and in a global business almost always will) proximately cause an effect in the U.S., but the domestic effect still must "give[] rise" to the claim in the sense that it causes the injury for which the plaintiff seeks recovery.

A claim like Lotes's — that the defendants did things in Taiwan and China to destroy Lotes as a competitive manufacturer of USB 3.0 connectors in Taiwan — may pass the "direct" prong of the FTAIA test by alleging higher prices in the U.S.* but fails the "gives rise to" prong unless the plaintiff felt the effects of the anticompetitive behavior in the U.S.

The case may have come out differently if Lotes could have alleged that the anticompetitive conduct in Asia had foreseeably kept it out of the U.S. market.

__________________

*The panel declined to reach the question of whether Lotes's complaint satisfied section 6a(1).

ImageInvestors who wished for a helping hand in pursuing claims against banks that sold them exotic debt instruments instead got a kick in the pants from the Second Circuit today.

No no-admit deals

In 2011, U.S. District Judge Jed Rakoff famously refused to approve a consent decree between the Securities and Exchange Commission and Citigroup. The pact concerned the financial behemoth's possibly fraudulent role in marketing and selling interests in a risky "fund". The "Fund’s assets . . . were primarily collateralized by subprime securities tied to the already faltering U.S. housing market." Securities and Exchange Comm'n v. Citigroup Global Markets, Inc., No. 11-5227, slip op. at 4 (2d Cir. June 4, 2014).

Judge Rakoff rejected the deal largely on the ground that Citigroup did not admit to facts that would support the injunctive relief to which it had agreed. He wrote:

An application of judicial power that does not rest on facts is worse than mindless, it is inherently dangerous. The injunctive power of the judiciary is not a free‐roving remedy to be invoked at the whim of a regulatory agency, even with the consent of the regulated. If its deployment does not rest on facts—cold, hard, solid facts, established either by admissions or by trials—it serves no lawful or moral purpose and is simply an engine of oppression

Id. at 9 (quoting Securities and Exchange Comm'n v. Citigroup Global Markets, Inc., 827 F. Supp. 2d 328, 335 (S.D.N.Y. 2011)).

Appeals court vacates and remands

The Second Circuit vacated the ruling. It held that the district court abused its discretion by requiring that the record establish the "truth' about the allegations underlying the SEC's charges against Citigroup.

Investors and their lawyers should note the panel's view about a major reason that Citigroup did not want to concede it did something wrong — the issue-preclusive (or, if you prefer old school, collateral estoppel) effect of the consent decree. " "Nor can the district court reject a consent decree on the ground that it fails to provide collateral estoppel assistance to private litigants—that simply is not the job of the courts." Id. at 27.

Winners and losers

With an admission of guilt by a Citigroup (or a Bank of America or a Credit Suisse or another financial institution), unhappy investors would not have to prove wrong-doing. They would mainly need to show that they bought a bad investment during the relevant time period and lost money on it.

The Second Circuit's decision paves the way for more no-admit settlements with the SEC. That is good news for banks, bad news for investors.

Seventh Circuit Judge Richard Posner savaged a district court for approving a class action settlement that paid lead class counsel an $11 million fee while providing class members with benefits worth, in Judge Posner's reckoning, no more than $8.5 million. Eubank v. Pella Corp., No. 13-2091 (7th Cir. June 2, 2014).

The fact that the lead counsel stands in jeopardy, for reasons collateral to the class action case, of losing his law license seems not to have helped his cause.

The opinion has lots of pointers on what not to do in a class action.

Shutterstock_98079497Patents require definiteness

The U.S. Supreme Court has tightened the test for whether a patent "particularly point[s] out and distinctly claim[s] the subject matter which the applicant regards as [the] invention." 35 U.S.C. § 112, ¶ 2.

The Federal Circuit (which handles all appeals from district courts on patent matters) had interpreted the statute to require only that "the claim is 'amenable to construction,' and the claim, as construed, is not 'insolubly ambiguous.'" Nautilus, Inc. v. Biosig Instruments, Inc., No. 13-369, slip op. at 1 (U.S. June 2, 2014) (quoting Biosig Instruments, Inc. v. Nautilus, Inc., 715 F.3d 891, 898-99 (Fed. Cir. 2013)).

New test

Reversing a Federal Circuit ruling that upheld a patent on heart-rate monitoring technology on exercise machines, the unanimous Supreme Court held that, from now on, "a patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention." Id.

Instead of applying the new formulation of what section 112, paragraph 2, requires, the Court remanded the case to the Federal Circuit for that purpose.

What next

The Nautilus ruling tolerates less vagueness in patents. It will therefore likely result in the invalidation of some patents that would have survived under the "insolubly ambiguous" standard. It may also produce more rejections of patent applications and greater precision in drafting of patent applications.

Shutterstock_163349231The U.S. Supreme Court took a step today towards limiting patent infringement cases, at least ones involving "method" patents (i.e., ones that describe a process rather than a device, design, or other patentable subject matter).

Kinds of infringement

Patent infringement may take different forms:

  • "Direct" infringement under 35 U.S.C. 271(a).
  • "Inducement" of infringement under 35 U.S.C. 271(b).
  • "Contributory" infringement" under 35 U.S.C. 271(c).

Patent lawyers often divide the three types into "direct" and "indirect", the latter of which includes both inducement and contributory infringement theories. A direct infringement claim does not require that the infringer realize she infringes, but an indirect claim does.

A question about inducement

The case that the U.S. Supreme Court decided today involved a claim that Limelight Networks "carries out several of the steps claimed in" an Akamai Technologies patent. (The technology related to a method for easing access to data during "peak usage" by making segments of content available on multiple servers in more than one location.) But Limelight did not perform all of the steps that the patent called for. Akamai claimed Limelight induced infringement by helping customers complete the other steps.

Trial in the district court produced a $40+ million verdict for Akamai, but the trial judge threw out the award. He ruled that you can't induce infringement (of a method patent at least) unless someone directly infringes the patent. Because neither Limelight nor its customers directly infringed the Akamai patent, the court held, the verdict could not stand.

On to the Federal Circuit

A panel of the Federal Circuit upheld the district court's judgment. Akamai petitioned for rehearing by the full court. The en banc court reversed. It concluded that liability for inducement may exist without liability for direct infringement. So long as one or more persons perform all the steps that would constitute direct infringement, the court decided, inducement infringement may occur.

Unanimous reversal

The Supreme Court held that infringement by inducement does not exist unless direct infringement does also. Justice Alito wrote:

The Federal Circuit's analysis fundamentally misunderstands what it means to infringe a method patent. A method patent claims a number of steps; under this Court's case law, the patent is not infringed unless all the steps are carried out. . . . This principle follows ineluctably from what a patent is: the conferral of rights in a particulat claimed set of elements. "Each element contained in a patent claim is deemed material to defining the scope of the patented invention," Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17, 29 (1997), and a patentee's rights extend only to the claimed combination of elements, and no further.

Limelight Networks, Inc. v. Akamai Technologies, Inc., No. 12-786, slip op. at 5 (U.S. June 2, 2014).

Limits on ruling

The outcome leaves open the question of what conduct counts as direct infringement. The Court assumed "without deciding", id. at 6, that the Federal Circuit's earlier decision in Miniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008), had rightly permitted liability for direct infringement so long as "a single defendant 'exercises "control or direction" over the entire process such that every step is attributable to the controlling party'", id. at 3. But "since the question on which we granted certiorari did not involve 271(a), petitioner did not address that important issue in its opening brief", but "the Federal Circuit will have the opportunity to revisit the 271(a) question if it so chooses." Id. at 10.

Sumner RedstoneA rule against making too much money?

Plenty of public companies pay their executives very large salaries, bonuses, and other goodies, including stock grants, stock option awards, and rides in fancy jet planes.

The WSJ recently reported that the median pay for CEOs of "big companies" totaled $11.4 million in 2013. The biggest earner, Oracle's Larry Ellison, took home $76.9 million last year.

Blawgletter has wondered about what, other than a board's imagination, constrains its members in what it has the authority to grant executives.

A new case out of the Third Circuit — which includes the corporate law capital of the U.S., Delaware — reminds us of the difficulties of challenging seemingly outlandish pay packages.

A taxing question

The familiar business judgment rule generally protects board decisions about pay for officers of the company they serve. That rule gives directors a great deal of leeway, at least so long as they do not have a personal interest, financial or otherwise, in voting for the compensation package or plan.

But the Internal Revenue Code also has a rule that could cabin executive pay. It provides that a company may not deduct pay above $1 million unless it jumps through several hoops, including making a study about the justifications for paying the big bucks. Failure to do the work could result in disallowance of the deduction, resulting in loss to the company.

Enter Redstone

A shareholder of Viacom complained about the $100 million or so that the company's board awarded to board chairman Sumner Redstone and two other high execs. He contended that the Viacom board's Compensation Committee failed the test for disinterestedness and behaved so arbitrarily as to run afoul of the business judgment rule.

The Third Circuit upheld dismissal of the shareholder's derivative charges. Robert Freedman, the shareholder, did not allege facts that called into question the independence of at least six of the 11 Compensation Committee members. Nor did he overcome the presumption of proper decision-making under the business judgment rule. Freedman v. Redstone, No. 13-3372 (3d Cir. May 30, 2014).

The court also affirmed dismissal of Freedman's direct claim, in which he alleged that the board had violated the Internal Revenue Code provision requiring shareholder approval of pay in excess of $1 million before the company may claim a deduction for the over $1 million compensation. The panel ruled that 26 U.S.C. 162(m) doesn't create voting rights and therefore could not have required Viacom to count non-voting shares in determining whether enough shareholders approved the pay package.

Lessons

As executive pay continues to mount, the inclination to challenge it as excessive will grow as well. But you have to have sharp weapons to succeed in this sort of fight. If you cannot show that the board or board committee lacked a majority of independent members, you will almost certainly fail.

Look for that. Think about doing something else if you can't find it.

Shutterstock_195534275

Arbitration good?

The Supreme Court of Texas has made enforcing arbitration clauses super-easy. But what happens if the arbitration produces an outcome that may give the conservative Court pause — a $125 million award in favor of the claimant, for instance?

A case that the Court decided last week poses that lurking question. And regrettably their honors answered the question in the way you've probably come to expect. See here.

Question about an impression

Does the fact that an arbitrator has begged the lawyers who represent a party in arbitration for business but has gotten none make the arbitrator "evidently partial" to that party? The one whose lawyers have so far stiffed him on his requests for work? Such that a court must vacate the arbitration panel's award in favor of that party?

The Supreme Court of Texas said yes last week. In Tenaska Energy, Inc. v. Ponderosa Pine Energy, LLC, No. 12-0789 (Tex. May 23, 2014), the 9-0 Court applied an easy-peasy test for unhappy losers to satisfy. They need show only that a non-disclosure "might have conveyed an impression [of the arbitrator's] partiality toward [the lawyers for the winning party] to a reasonable person." Id. at 13.

Did you get that? Might have conveyed an impression of partiality to a reasonable person. Not "would have conveyed" it. Only might have. Possibly could have. Perhaps maybe did. We have our suspicions. I don't like the look of that. We're going to need you to go ahead and come in on Saturday, um-kay.

What about waiver?

The airy-fairiness of that "might have conveyed" rule may or may not bother you. But what do you think about how the Court dealt with a waiver question?

The court of appeals had held that the losing party — Tenaska Energy — had waived any complaint because the business-hungry arbitrator had disclosed the fact that the lawyers for the winning party — Ponderosa Energy — had tapped him three times before to serve as an arbitrator and that he'd solicited business from their law firm. The court cited the fact that Tenaska also agreed, in writing, that it "knowingly waived any and all conflicts of interest and/or potential conflicts of interest relating to the designation of the members of the Panel in this Arbitration." Id. at 17.

The Court batted the waiver point away by noting that the same writing also represented that the arbitrators had "fully disclosed all conflicts of interest and potential conflicts of interest with respect to the designation of the members of the Panel in this Arbitration". Id. "Because the waiver clause was conditioned on a full disclosure that did not occur, Tenaska has not waived its partiality challenge." Id. at 18.

The Court didn't explain in what way the waiver "was conditioned on a full disclosure". The document didn't use any language that implied that the waiver depended on the accuracy of the "fully disclosed" statement. So it's okay for Tenaska to have fibbed that it "knowingly waived any and all conflicts of interest"?

The Court also put a lot of stress on the fact that the non-disclosing arbitrator solicited work from Ponderosa's lawyers not for himself but on behalf of an Indian firm that he partly owned and helped set up in the U.S. He disclosed that he'd hustled business for the Indian outfit from the law firm but hadn't gotten any.

But, in view of the fact that Ponderosa's lawyer chose him as an arbitrator — in the same way that Tenaska's lawyers chose another of the three arbitrators, and those two selected a chair person  – should Tenaska have some kind of obligation to ask questions to find out why Ponderosa thought so highly of him?

Why did they do it?

A Court that routinely rules unanimously in favor of defendants probably doesn't realize just what an echo chamber it has become. The members may beguile themselves with the thought that they would have ruled exactly the same way if the defendant had won the arbitration – thus saving claimant Ponderosa from having to take a $1.25 million award and getting a fresh shot at the $150+ million that it sought.

Blawgletter does wonder what to make of the fact the Court mentioned that the Ponderosa lawyers converted their fee arrangement from hourly to contingent. Id. at 4-5. What does that signify, if not discomfort with a claimant and its lawyers receiving a big award?

Bottom line

What results from all this? Texas courts go out of their way to compel arbitration, including by non-signatories of agreements that include arbitration clauses, but also go out of their way to vacate awards on grounds that other courts would reject.

We also wonder why the Court didn't mention the Fifth Circuit's en banc opinion on the very same issue. Positive Software Solutions, Inc. v. New Century Mortg. Corp., 476 F.3d 278 (5th Cir.2007) (en banc) (rejecting "mere appearance" of bias test). The Court would have had a very hard time explaining why the arbitrator who disclosed the fact that he'd tried to get business but had so far failed needed also to disclose more particulars about his unsuccessful efforts under the Fifth Circuit test. Maybe that's why.

Photo credit: Sarin Kunthong/Shutterstock.com

Shutterstock_127174835Copyrights endure

If you own a copyright — in a cat video, say — and someone rips it off — perhaps by posting it on his Kraaasy Kaaats website and claiming it as his own — how long can you and your heirs wait to sue for damages?

Under a new Supreme Court ruling, you can take your sweet time. Petrella v. Metro-Goldwyn-Mayer, Inc., No. 12-1315 (U.S. May 19, 2014).

You — your heirs, actually — can even hold off, in theory, until just before the copyright expires, 70 years after your death. 

But no matter when you bring an action, you can collect for only the preceding three years under the statute of limitations in the Copyright Act, 17 U.S.C. 507(b).

Raging Bull

The case involved copyright in a 1963 screenplay that told the story of boxer Jake LaMotta's life. In 1976, the co-authors of the screenplay, LaMotta and his friend Frank Petrella, assigned their copyright in the screenplay, which later ended up with Metro-Goldwyn-Mayer, Inc. In 1980, MGM released "Raging Bull", which starred Robert DeNiro (at right), who won a Best Actor Academy Award for the role. MGM has since continued to market the movie.

But Congress conferred "renewal rights", which reverted to the authors or their heirs despite the fact that the original copyright belonged to someone else, usually by virtue of an assignment.

Paula Petrella obtained the copyright in the 1963 screenplay. In 1998, her lawyer told MGM that its sales of "Raging Bull" videos infringed her copyright. But she waited until 2009 to sue.

The district court dismissed the case under the equitable docrine of laches. The Ninth Circuit affirmed.

Ruling

A 6-3 Supreme Court reversed. Laches cannot override Congress's judgment to allow suits to collect damages for a three year "look-back" period, the majority held. 

The Court went on to rule that laches may limit a copyright owner's right to equitable relief other than an injunction and may bar a claim for a permanent injunction.

Justice Ginsburg wrote for the Court. Justice Breyer filed a dissent. Chief Justice Roberts and Justice Kennedy joined him

Implications

Will the ruling in Petrella carry over to other kinds of intellectual property cases — ones involving patent or trademark infringement, say? That will likely depend on the wording of the limitations provisions in the patent and trademark statutes.

The Copyright Act's statute of limitations for civil actions, in 17 U.S.C. 507(b), provides that "[n]o civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued."

The trademark statute, the Lanham Act, has now limitations provision, but it "expressly provides for defensive use of 'equitable principles, including laches.'" Petrella, slip op. at 13 n.15 (citing 15 U.S.C. 115(b)(d)).

The patent-law limitations period, in 35 U.S.C. 286, says that, "[e]xcept as provided for by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action." The Petrella majority noted that "the Federal Circuit has held that laches can bar damages incurred prior to the commencement of suit, but not injunctive relief." Id. The Court went on to note that it has "not had occasion to review the Federal Circuit's position.

Blawgletter will bet that Petrella does control the laches-within-the-limitations-period for patent infringement cases. We even predict that the Federal Circuit will so hold, before the Court does have occasion to review that court's position post-Petrella.

Bonus

We watched "Raging Bull" for the first time tonight. In view of all the blood that the boxers spilled, especially LaMotta, we felt grateful that the director Martin Scorsese chose to go with black-and-white. We also admired De Niro's ability to go from a shrink-wrapt, abs-o'-steel menace in the ring to a tubby, sotty, and pitiful Miami night club owner who specializes in insults and dumb jokes for his patrons.

But did it have some intensity. That movie still has legs.

Photo credit: RoidRanger/Shutterstock

A Chance to Shine

Ninth Circuit San FranciscoHow often do fourth-year associates get an opportunity to argue before a U.S. court of appeals?

That sort of thing occurs a lot at the place where Blawgletter has worked since 1985.

It happened most recently to Amanda Bonn, an associate in Susman Godfrey's Los Angeles office. Let us tell you the story.

A Case About Fixing Prices

The lawsuit involved federal and state law claims that 3D-3C, Panasonic, Toshiba, and SanDisk fixed prices on SD digital memory cards (the SD stands for "secure digital"). The class plaintiffs also alleged anticompetitive practices in how the card-makers licensed other manufacturers to use the defendants' SD technology patents.

3D-3C, Toshiba, and the others moved to dismiss the case on the ground that the plaintiff class had filed suit too late, beyond the four-year statute of limitations for damages claims under the federal Sherman Act. The district court granted the motion.

Writing the Brief . . . then Arguing

Ms. Bonn worked on the team that lost in the Oakland district court. Three partners from SG's Houston office joined her on the SG ninja squad.

Unsurprisingly, the associate took the lead in writing the brief to the Ninth Circuit. But now an unusual SG rule — or guideline* — came into play. That rule provides, roughly, that if you wrote the argument, you make it.**

So it happened here.

On the morning of December 5, 2013, Ms. Bonn stood before a three-judge panel of the Ninth Circuit at the James R. Browning courthouse in San Francisco. Her argument orally ripped the dismissal order to pieces. Her opponent — a senior partner at Davis Polk & Wardwell — could not repair the damage. In her rebuttal, Ms. Bonn stomped on the shreds that remained.

The Result

Today the panel's ruling came out. The panel reversed the dismissal on both of the grounds that Ms. Bonn had articulated, first in the brief and then in the oral argument.

The court noted that, because the plaintiffs sought only injunctive relief, the four-year statute of limitations did not apply. The "equitable defense of laches" determines the timeliness of lawsuits under federal antitrust law for an injunction, the panel pointed out. Oliver v. 3D-3C LLC, No. 12-16421, slip op. at 7-8 (9th Cir. May 14, 2014).

Their honors next held that the "continuing violation" and "speculative damages" exceptions to limitations and laches defenses applied to the plaintiffs' claims. "[E]ach time a defendant sells its price-fixed product, the sale constitutes a new overt act causing injury to the purchaser[,] and the statute of limitations runs from the date of the act." Oliver, slip op. at 9. And "[i]t would have been pure speculation whether Plaintiffs would have been harmed by Defendants' alleged unlawful acts" before they bought SD memory cards in 2007. Id. at 11.

The court therefore reversed the dismissal and remanded the case to the district court.

About the Arguer

Ms. Bonn joined SG after a clerkship with U.S. District Judge Dean Pregerson in Los Angeles. She earned a B.A. summa cum laude from UCLA in 2006 and a J.D. from Stanford Law School in 2009.

Way to go, Amanda.

 ______________________

*Cf. Pirate's Code.

** The rule also applies to deposition and trial witnesses. It provides in those instances that if you write it, you take the witness.

Shutterstock_136443644When can "newly discovered evidence" save you from a bad outcome, even after the time for appeal has expired?

Rarely, the D.C. Circuit ruled on May 13.

Too rarely, Blawgletter thinks.

Wanna Be Startin' Sometin'

The D.C. Circuit's decision came in a case by one of Michael Jackson's last managers, Raymone K. Bain. Bain brought the case on May 5, 2009 — just weeks before Jackson's death (by propofol and lorazepam) on June 25, 2009.

Bain claimed that Jackson owed her $44 million as a 10 percent fee for bringing him projects under a May 2006 Personal Services Agreement.

Beat It

MJJ Productions, Inc., and the Estate of Michael Joseph Jackson moved for summary judgment against Bain's case,* citing a Payment and Release Agreement that Bain signed in December 2007.

Under the PRA, Jackson paid Bain about $500,000 in “full and final satisfaction of any [and] all monies, known or unknown, to be owed to you by the Jackson Parties with respect to any and all agreements whether verbal or written that you may have entered into with the Jackson Parties from the beginning of time until December 27, 2007.”

Don't Stop 'til You Get Enough

Bain opposed the motion to dismiss Because: Reasons. The Reasons included fraud, mistake, and forgery (of Jackson's signature). Bain also said the release language didn't really cover "any [and] all monies . . . with respect to any and all agreements . . . entered into with the Jackson Parties" as of December 27, 2007 but instead excluded "claims concerning future work or deals yet to be finalized." Bain v. MJJ Productions, Inc., No. 12-7061, slip op. at 3 (D.C. Cir. May 13, 2014).

Bad

The court ruled against Bain on May 7, 2010. But Bain didn't appeal.

She instead waited until October 4, 2010, to file a motion to set aside the summary judgment against her under Rule 60(b)(2). She cited "newly discovered evidence" — an April 24, 2008 letter, in which the King of Pop himself wrote:

I have never terminated your services nor did I null and void any of your Agreements. I know nothing about a release form. I neither authorized or signed the same. Therefore, I am authorizing you to continue to communicate with Mr. Yakoob regarding the Sultan’s property in Las Vegas, and to continue your role as my General Manager and President/COO of The Michael Jackson Company.

Bain, slip op. at 4-5. Bain alleged that he got a copy of the letter in late June or early July 2010 from a "consultant" to Jackson. Why the consultant chose to bring a box full of Jackson stuff to Bain more than a year after Jackson died does not appear.

Leave Me Alone

The district court held that the letter couldn't count as "newly discovered" under Rule 60(b)(2). The court pointed out that, at the time he responded to the motion for summary judgment, Bain had known about the letter, at least in the sense that he recalled that it once existed. The fact that he didn't get a copy until after the court granted summary judgment did not matter to the court.

The district court also ruled that Bain hadn't used enough "due diligence" to track down a copy of the letter for purposes of Rule 60(b)(2). Bain should have at least mentioned the letter in his opposition papers, the court noted, but did not.

Free

The court of appeals affirmed. It disagreed that the letter couldn't qualify as "newly discovered". In the panel's view, "evidence that was lost, hidden, or unavailable during trial could qualify as 'newly discovered evidence' when later found, even if the evidence was known to the movant at the time of trial." Bain, slip op. at 8.

But the court agreed that Bain had failed to meet the due diligence test. Why didn't Bain ask the district court for help in finding a copy of the letter, the court wanted to know. It wrote:

Bain . . . ultimately offers no justification for her failure to mention the 2008 letter to the district court, to seek the court’s assistance in locating a copy, or to ask the defendants for any copy in their possession. Nor does she suggest that any such efforts to locate the letter could not have borne fruit. See In re Hope 7 Monroe St. Ltd. P’ship, 743 F.3d 867, 873-74 (D.C. Cir. 2014). In those circumstances, the district court did not abuse its discretion in finding that Bain failed to exercise reasonable diligence.

Bain, slip op. at 11.

Never Can Say Goodbye

Blawgletter thinks that the courts expect too much. They say that, even if you have no reason to believe that a copy of a document still exists, you must cite it and ask the court to help you find a copy it. The panel cites only to the original — which seems never to have turned up — but doesn't explain the relevance of its merely possible existence. The copy that Bain eventually found came from a file relating to the Sultan of Brunei. How could Bain have asked for help finding that copy?

The courts also seem to have assumed that Bain had a photographic memory of what the April 2008 letter said. That feels like a big leap to us. The only evidence relating to Bain's knowledge said nothing specific about the letter and instead noted that "I knew I had correspondence from Mr. Jackson" — hardly proof that Bain knew of the April 2008 missive or recalled its contents. Bain, slip op. at 6.

__________________

*The court actually converted a motion to dismiss into a summary judgment motion, but it amounts to the same thing.

Photo credit:    Joe Seer / Shutterstock.com