PintoYou know what the phrase "legal costs" refers to, right? It means the amount that a plaintiff spends to achieve a recovery by way of pressing a lawsuit? US Airways, Inc. v. McCutchen, 133 S. Ct. 1537, 1550-51 (2013) (treating "legal costs" as a party's "costs of recovery").

You would never equate "legal costs" with damages – payment for actual harm — would you? No, of course you wouldn't.  

 But you should know that The Wall Street Journal begs to differ with you. Blawgletter knows because of recent WSJ headlines, which include these:

"Legal Costs to Put RBS in the Red"

"Investors Punish Citi's Legal Costs, Look Past Morgan Stanley's"

"Backdating Scandal Carried Steep Legal Costs"

What does the WSJ mean by "legal costs"? Just this (with our emphasis in the RBS article):

[T]he new provisions include setting aside an extra £1.9 billion to cover litigation and other claims around mortgage-backed securities sold before the financial crisis. It added £465 million to its funds to repay customers who bought payment protection insurance on credit cards and loans, bringing its total PPI provisions to £3.1 billion, and said it would take a further £500 million in provisions to make payments to small businesses that bought interest-rate hedging products on loans. The bank also warned of around £200 million of extra provisions for various conduct related and legal expenses at its "bad bank" unit.

Add in the fact that the item on that "Backdating Scandal" includes a claim that "settlements cost companies and their executives, auditors and advisers a combined $7.3 billion." "Legal costs" in the WSJ sense therefore include all the damages money that the "settlements cost" for the companies that engaged in the unlawful backdating.

Which leaves the question of whether the WSJ's depiction of harm to customers as a kind of "legal cost" matters.

Blawgletter believes that it does.

The characterization implies a belief that damages are no more regrettable than other sorts of business expenses.

The Ford Pinto case – which exposed Ford executives for calculating that hurting and killing people with defective cars would cost less than fixing the defect – springs to mind.

Legal costs properly consist of legal fees and expenses of litigation. They do not include damages, actual or punitive.

The WSJ should know better.

The Swiss company Swatch makes stylish watches but takes itself Way Too Seriously.

A couple of weeks ago, Swatch lost an appeal over whether the maker of low-end, cutie-pie Swap watches infringed the high-end, hoity-toity Swatch trademark. "Swiss Swatch Swings at Swap, Whiffs".

This week, Swatch lost an appeal having to do with an equally goofy copyright infringement claim.

Swatch sued Bloomberg for posting on its Bloomberg Professional site a bootleg copy of a Swatch earnings call. The district court held that the use of the audio recording fit within the "fair use" doctrine, which provides a defense to claims of copyright infringement. The Second Circuit went through the fair use factors and agreed with the district court, affirming summary judgment for Bloomberg. Swatch Group Mgmt. Services Ltd. v. Bloomberg L.P., No. 12-2412-cv (2d Cir. Jan. 27, 2014). 

A hedge fund that bought pieces of loans to a Texas corporation sued the borrower's directors. The hedge fund alleged breach of fiduciary duty. But it didn't claim that the firm had ceased operations.

The hedge fund argued in response to the directors' motion to dismiss that the absence of such a charge didn't matter.

Today, the U.S. District Court for the Northern District of Texas  ruled that it does matter. The Court pointed to the fact that Texas has no statute that allows creditors to sue derivatively and that Texas cases applying Texas common law have never permitted such a derivative claim except under the "trust fund" doctrine. That doctrine requires that the corporation have ceased operations.

The defect in the complaint proved fatal to it, although the Court did allow the hedge fund 21 days to try to replead if it can.

[Barry Barnett, who wrote this post, represents the directors in the case, Aurelius Capital Master, Ltd. v. Acosta, No. 3:13-cv-173-P (N.D. Tex.).]

A long-time Air Wisconsin pilot got mad when he seemed on the verge of botching a fourth — and final — chance to pass a test of his skill at flying an aircraft that he’d never piloted before. The pilot accused the person who gave him the test of “railroading the situation”. Another Air Wisconsin employee told the Transportation Security Administration that the pilot could have a pistol and had shown “mental instability” before boarding a flight back home. The TSA ordered the jet to return to the gate and arrested the pilot. He sued for defamation — and won.

The Supreme Court today reversed. It held that the Aviation and Transportation Security Act gave the Air Wisconsin people immunity from any claim that arose from telling the TSA about a security concern — unless they had given the TSA “materially false” information. The Court went on to hold, by 6-3 margin, that the airline folks hadn’t said anything “materially false” about the pilot. Air Wisconsin Airlines Corp. v. Hoeper, No. 12-315 (U.S. Jan 27, 2014) (http://www.supremecourt.gov/opinions/13pdf/12-315_j5fl.pdf).

The three dissenters agreed that the “materially false” element applied but disagreed that the evidence showed an absence of materially false information as a matter of law. The jury should decide that question, they concluded.

Airline Agent Who Defamed Pilot Has Immunity, Supreme Court Holds

A panel of the Seventh Circuit split 2-1 on whether to halt a district judge's order that called for a big drug-maker in Germany to ship a baker's dozen of its workers to New York for depositions. In re Petition of Boehringer Ingelheim Pharmaceuticals, Inc., No. 13-3898 (7th Cir. Jan. 24, 2014). The court opted to rescind the come-to-New-York order but upheld, for now at least, other sanctions against Boehringer.

Judge Posner explains the panel's thinking on the Main Issue:

The  problem  is  the  form  the  sanction  ordered by  the  judge  took—ordering  Boehringer  to  be  the  court’s  agent  in  violating  federal  legal  limitations  on  compelled  discovery  in  foreign  countries,  merely  so  that  depositions  could  be  shifted  [from Europe] to  a  place  inconvenient  for  the  [German] witnesses  who  are  to  be  deposed.  They  are  to  be  punished  for  the  sins  of  their employer.  And  they  are  not  even  corporate  bigwigs,  who  might  feel  humiliated  by  a  travel  order;  so  far  as  appears,  they  are  merely  research  scientists.  They  are  not  responsible  for  Boehringer’s  contumacy,  yet  they  are  the  targets  of  the  sanction.

Id. at 4-5.

The dissent, by Judge Hamilton, opposed relief by the "extraordinary" writ of mandamus instead of through the normal course, which involves defying an order and then pressing an appeal after the district court holds you in contempt. His Honor deemed Boehringer a wuss:

The extraordinary thing in this case is that the petitioners themselves recognize these alternatives, but they just seem too weak-kneed to use them. They explain in note 6 of their petition that they do not want to refuse to comply with the order because they respect the court and because they do not want “to further jeopardize their interactions with the [district] court by willfully disregarding its order.” 

We should not enable this approach to litigation. With all due respect, this is a major league discovery dispute in high-stakes international litigation. Refusing to comply with a discovery order you believe is unlawful is the respectful course and the orderly procedure. E.g., Allendale Mut. Ins. Co. v. Bull Data Systems, Inc., 32 F.3d 1175, 1179 (7th Cir. 1994) (dismissing appeal of discovery order where party failed to take that step). Refusal is a serious step that makes a party think hard about how important the issue is and how confident it is in its position. See, e.g., Ott v. City of Milwaukee, 682 F.3d 552, 555 (7th Cir. 2012) (“The adversely affected party is expected to put its money where its mouth is, so to speak, before an appeal will be heard.”); Reise[ v. Board of Regents], 957 F.2d [293,] 295–96[ (7th Cir. 1992)]. 

Judges understand that the option of refusal and contempt is available for a party that is truly serious about wanting prompt appellate review of a discovery order. Taking this option does not indicate the kind of lack of respect that these defendants had been showing prior to the second sanctions order. The petition should be rejected on procedural grounds alone. We need not and should not enable the use of mandamus as an alternative, thereby inviting far too many interlocutory appellate reviews of discovery orders.

Id. at 9. Judge Hamilton also believed the district court acted within its power to impose sanctions for Boehringer's abuse of its discovery duties:

There is no reason for this court to have qualms about whether the defendants can or will order their employees to comply with the district court’s sanctions order. Courts routinely issue orders to corporate parties that require them to order their employees to do things they might prefer not to do, such as appear for a deposition, answer interrogatories, or search for documents for discovery. Nor is there anything unusual about having these defendants order an employee to travel across an international border, whether for meetings or for depositions. These defendants are part of a global pharmaceutical enterprise. Their employees travel across international borders all the time.

Id. at 12.

For another mandamus fight over making people travel, see "Court Hearing Tax Case Went Too Far by Telling Feds to Send Someone with Power to Settle, Ninth Circuit Rules".

ICDDoes a patent licensee's filing of a declaratory judgment action against a patent holder shift the burden of persuasion from the holder to the licensee — or must the holder still persuade the trier of fact that the licensee infringes the patent?

The Supreme Court held today that the burden stays with the patent holder, despite the fact that it must carry the burden in the less-desirable posture of a defendant. Medtronic, Inc. v. Mirowski Family Ventures, LLC, No. 12-1128 (U.S. Jan. 22, 2014).

The Court also ruled that enough of a patent law dispute existed between Medtronic, the licensee, and Mirowski Family Ventures, the patent holder, that the district court had subject matter jurisdiction and therefore the power to decide the patent issues.

The patent at issue related to implantable cardioverter defibrillator devices, which detect an abnormal heartbeat and stimulate the heart to beat in a normal way.

The unanimous outcome favors infringement defendants. Does it portend more defense-side wins in an IP-heavy Supreme Court docket this Term?

In Batson v. Kentucky, 476 U.S. 79 (1986), the Supreme Court ruled that a party may not use a "peremptory strike" to prevent a member of a jury venire from serving on a criminal jury due to his or her race. The constitutional right to "equal protection" of the laws forbids such discrimination, the Court concluded. The Court extended the Batson rule to civil juries in Edmonson v. Leesville Concrete Co., 500 U.S. 614 (1991), and to the exclusion of women from juries in J.E.B.v. Alabama ex rel. T.B., 511 U.S. 127 (1994). But does Batson also bar keeping people off of juries because of their sexual orientation?

Yes, it does, the Ninth Circuit held in SmithKline Beecham Corp. v. Abbott Labs., No. 11-17357 (9th Cir. Jan. 21, 2014).

SmithKline alleged in the case that Abbott illegally inflated the price of an HIV drug it sold to SmithKline in order to drive customers to another Abbott product. In jury selection at trial, Abbott used a peremptory strike — which doesn't require a showing of "cause" for excluding a potential juror — to eliminate Juror B, a male whose answers to voir dire questions revealed that he lived with a male whom he described as his "partner". SmithKline challenged the strike under Batson, but the disrict court allowed the strike to stand. After a disappointingly small verdict in its favor, SmithKline cited the strike as a basis for the Ninth Circuit to overturn the result. The Ninth Circuit agreed:

We hold that heightened scrutiny applies to classifications based on sexual orientation and that Batson applies to strikes on that basis. Because a Batson violation occured here, this case must be remanded for a new trial.

SmithKline, slip op. at 39.

For more on Batson in the Ninth Circuit, see "Striking Alaska Native from Civil Jury Violated Batson".

MLK  Martin Luther King, Jr. (1929-68).

I know you are asking today, "How long will it take?" Somebody’s asking, "How long will prejudice blind the visions of men, darken their understanding, and drive bright-eyed wisdom from her sacred throne?" Somebody’s asking, "When will wounded justice, lying prostrate on the streets of Selma and Birmingham and communities all over the South, be lifted from this dust of shame to reign supreme among the children of men?" Somebody’s asking, "When will the radiant star of hope be plunged against the nocturnal bosom of this lonely night, plucked from weary souls with chains of fear and the manacles of death? How long will justice be crucified, and truth bear it?"

I come to say to you this afternoon, however difficult the moment, however frustrating the hour, it will not be long, because "truth crushed to earth will rise again."

How long? Not long, because "no lie can live forever."

How long? Not long, because "you shall reap what you sow."

How long? Not long:

Truth forever on the scaffold,

Wrong forever on the throne,

Yet that scaffold sways the future,

And, behind the dim unknown,

Standeth God within the shadow,

Keeping watch above his own.

How long? Not long, because the arc of the moral universe is long, but it bends toward justice.

How long? Not long, because:

Mine eyes have seen the glory of the coming of the Lord;

He is trampling out the vintage where the grapes of wrath are stored;

He has loosed the fateful lightning of his terrible swift sword;

His truth is marching on.

He has sounded forth the trumpet that shall never call retreat;

He is sifting out the hearts of men before His judgment seat.

O, be swift, my soul, to answer Him! Be jubilant my feet!

Our God is marching on.

Glory, hallelujah! Glory, hallelujah!

Glory, hallelujah! Glory, hallelujah!

His truth is marching on.

Martin Luther King, Jr., March 25, 1965, Montgomery, Alabama.  Watch it here.

A decision last week by the Ninth Circuit proves that you don't have to deserve first amendment rights to have them. You don't even need to be a journalist. Or especially sane.

Our story begins when Crystal Cox wrote a blog post that accused a bankruptcy trustee and his firm of "fraud, corruption, money-laundering, and other illegal activities". Obsidian Finance Group, LLC v. Cox, No. 12-35238, slip op. at 4 (9th Cir. Jan. 17, 2014).

"Cox apparently has a history of making similar allegations and seeking payoffs in exchange for retraction." Id. She styles herself a "Real Estate Consumer Advocate, Anti-Corruption Blogger, [and] Free Speech Advocate" who "Mak[es] a STAND for ALL Citizen Journalists and Victims of Corruption . . . in Love and Light". And someone dislikes her enough to devote an entire blog — Crystal Cox is NOT a Journalist — to making fun of her.

The trustee, Kevin Padrick, and his firm, Obsidian Finance Group, did not like the post. They sued Cox for libel. They won. The Portland jury awarded Padrick "presumed damages" of $1.5 million and Obsidian $1 million.

Cox appealed to the Ninth Circuit. She urged that the first amendment applied to her blog posts. She claimed that Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974), therefore obliged Padrick and Obsidian to prove that she acted negligently and with actual malice before they could recover presumed damages.

Bloggers flocked to Cox's defense. Eugene Volokh — he of The Volokh Conspiracy — briefed and argued for Cox to the Ninth Circuit. Tom Goldstein — who founded SCOTUSblog.com — filed an amicus brief in support of Cox's appeal, as did The Reporters Committee for Freedom of the Press.

The Ninth Circuit ruled in favor of Cox. It held that the Gertz rule doesn't protect only "the institutional press":

The protections of the First Amendment do not turn on whether the defendant was a trained journalist, formally affiliated with traditional news entities, engaged in conflict-of-interest disclosure, went beyond just assembling others' writings, or tried to get both sides of a story. As the Supreme Court has accurately warned, a First Amendment distinction between the institutional press and other speakers is unworkable: "With the advent of the Internet and the decline of print and broadcast media . . . the line between the media and others who wish to comment on political and social issues becomes far more blurred." Citizens United[ v. Federal Election Commission], 558 U.S. [310, ]352[ (2010)]. In defamation cases, the public-figure status of a plaintiff and the public importance of the statement at issue — not the identity of the speaker — provide the First Amendment touchstones.

Obsidian Finance, slip op. at12.

The panel also:

  • Ruled that Cox's crime-charging post dealt with "a matter of public concern". Id. at 13 (noting that Gertz negligence requirement may apply even if speech does not relate to matter of public concern).
  • Declined to deem Padrick and Obsidian "public figures", a status that would have required them, under The New York Times Co. v. Sullivan, 376 U.S. 254 (1964), to show that Cox wrote her post with "actual malice". Obsidian Finance, slip op. at 14-16.
  • Upheld the district court's conclusion that Cox's other posts didn't assert "an objective fact" and therefore couldn't support a libel claim. Id. at 16-18.

Mercedes-Benz Argentina (“MBA”) aided and abetted the killings and mayhem that defined Argentina’s Dirty War (1976-83), the plaintiffs alleged. But they sued MBA’s German parent Daimler — not MBA. And they brought the action in California — not where Daimler’s main United States sub (Mercedes-Benz USA or MBUSA) had incorporated (Delaware) or the state in which MBUSA kept its main place of business.

The Ninth Circuit held that in law and fact the district court had had something it thought it lacked — personal jurisdiction over Daimler by virtue of the many things MBUSA had done in the Golden State as Daimler’s “agent”.

Reversing, the Court (in the person of Justice Ginsburg) ruled that Daimler’s contacts with California through its American offspring MBUSA did not warrant hailing the German giant into court there. Because the case related solely to events in Argentina and had nothing to do with California, the Court noted, only “all-purpose” jurisdiction mattered. Pooh-poohing the notion that all-purpose jurisdiction can exist any time a foreign entity has “important” links to the forum state, the Court stated that “the inquiry . . . is not whether a foreign corporation’s in-forum contacts can be said to be in some sense ‘continuous and systematic,’ it is whether that corporation’s ‘affiliations with the State are so ‘continuous and systematic’ as to render [it] essentially at home in the forum State.’” Daimler AG v. Bauman, No. 11-965, slip op. at 20 (U.S. Jan. 14, 2014) (quoting Goodyear Dunlop Tires Operations, S. A. v. Brown, 564 U. S. ___, ___ (2011)) (http://www.supremecourt.gov/opinions/13pdf/11-965_1qm2.pdf). Daimler did a lot of stuff through MBUSA in California, the Court conceded, but not enough to make it “at home” in the land of Hollywood, Death Valley, and Muir Woods, the Court held.

The outcome extends the Court’s march away from all-purpose or “general” jurisdiction and towards the “specific” kind, which turns on the linkage among the defendant, the forum, and the lawsuit. Having first spoken of the two jurisdiction types in International Shoe Co. v. Washington, 326 U. S. 310 (1945), the Court has thus trimmed the growth of the former in heavy favor of the latter.