People who handle cases in all kinds of civil courts, whether state, federal, or both, get an odd feeling when they wander into a special kind of civil court — the U.S. bankruptcy court. The oddness comes partly from the strange ways bankruptcy law handles disputes. Often, the merits of a claim seem to take a back seat to how many stake-holders you can get to back your plan for how to treat — "adjust" – your claim and claims like it in a reorganization or liquidation of the debtor. And perhaps as a result the free-wheeling hearings that bankruptcy lawyers and judges call trials feel more like semi-impromptu gabfests, where rules of evidence and other bulwarks of trial practice bend, sway, and splinter.

Two rulings out of courts of appeals brought the weirdness of bankruptcy to mind this week. One dealt with whether a U.S. bankruptcy court did wrong by deeming the outcome of a foreign bankruptcy too outlandish for U.S. bankruptcy law to stand. The other concerned limits on the powers of bankruptcy courts to make binding rulings on certain kinds of claims.

In the first case, a Mexican company had gone into a "concurso mercantil" proceeding after the 2008 downturn swamped its business (glass-making). But — before filing the concurso — the firm, Vitro, had somehow turned its subsidiaries from debtors (to the tune of $1.2 billion) into creditors (in the amount of about $1.5 billion). These same subs had signed guaranties for around $1.216 billion in Vitro notes. The subs then voted their more than 50 percent (in face amount) of Vitro's general debt obligations in favor of a concurso plan that denied any payment to a note holder that did not consent to the plan unless they later agreed to the plan. The plan also released the subs' guaranties of the Vitro notes.

The Fifth Circuit said ix-nay on the exican-May an-play under chapter 15 of U.S. bankruptcy law. Vitro had brought the chapter 15 case in an effort to stop U.S. holders of Vitro notes from taking steps to enforce the subs' guaranties in U.S. courts. (Note holders had won a ruling from a state court in the Empire State that, as a matter of New York law, the guaranties prohibited their release in insolvency proceedings such as the concurso.) The bankruptcy court ruled against Vitro on the ground that the concurso plan strayed too far from U.S. bankruptcy norms — the ones that bar "insiders" of a debtor (e.g., Vitro's subs) from casting key votes on a plan and that prohibit reorganization plans that wipe out obligations of non-debtors (such as the Vitro subs). The Fifth Circuit panel agreed. Ad Hoc Group of Vitro Noteholders v. Vitro SAB de CV (In re Vitro SAB de CV), No. 11-10542 (5th Cir. Nov. 28, 2012).

The other case, in the Ninth Circuit, held that a Supreme Court ruling from last term, in Stern v. Marshall, 131 S. Ct. 2594 (2011) (posts here and here), prevents bankruptcy courts from issuing final judgments on any sort of claim in respect of which a party may demand a jury trial and that requires an Article III judge — including claims to recover fraudulent transfers under section 548 of U.S. bankruptcy law. The ruling thus clarified that Stern v. Marhsall applies not only to state law claims but also to claims that exist solely because of bankruptcy law. Executive Benefits Ins. Agency v. Arkison (In re Bellingham Ins. Agency, Inc.), No. 11-35612 (9th Cir. Dec. 4, 2012).

Being tall, approaching someone, and asking them questions (even in an accusatory tone) does not arguably satisfy the elements of any crime.

Ackerson v. City of White Plains, No. 11-4649-cv, slip op. at 14 (2d Cir. Dec. 4, 2012) (reversing summary judgment against plaintiff Ackerson, who charged that police officers falsely arrested him for "third degree menacing").

Blawgletter believes trial judges should set a limit on how long each side can take to try a case. Any time a lawyer for Side A has the floor as the jury sits in the box counts against Side A. The same applies to Side B. Our firm in fact includes a pact on trial time in the standard set of agreements we ask our adverse friends to agree to.

But 7.5 hours per side strikes us as harsh and more than a little odd. The limit seemed that way to the Third Circuit also, but the court ruled that the district judge in Pittsburgh had not gone beyond the bounds of his discretion. The panel said:

In denying mandamus relief, we emphasize that we are not ruling on the propriety of the time-limit order. We appreciate that this is a complex case, that the Committee has sued sixteen individual defendants, and that many of the defendants may need to testify to present their own defenses, even if some of their testimony is duplicative. Because 7.5 hours may ultimately be too little time for the Lemington Defendants to adequately present their case, we do not conclude that the time-limit order is permissible or valid. We hold only that a post-judgment appeal is adequate to assure meaningful review of the propriety of the time-limit order.

In re Baldwin, No. 11-447, slip op. 14 (3d Cir. Nov. 26, 2012). Then, in a footnote, the panel said how it really felt:

It is difficult to conceive how either side in this complex case could possibly present the necessary evidence to a jury in 7.5 hours of trial time. Although the Committee has not sought immediate review of the time-limit order, it did make clear at oral argument that it was not willing to concede that the order was a proper exercise of discretion. Instead, the Committee asserted that it was not waiving its right to challenge the time-limit order if it does not prevail at trial. It is also difficult to understand the District Court’s rationale in allocating to the entire defense side of the case 7.5 hours of evidence presentation time given the fact that there may be different liability rules and defenses applicable to defendants who were members of the board of directors versus defendants who were officers of the non-profit entity. 15 Pa. Cons. Stat. Ann. § 5712(a)-(b) (standard of care for directors of a nonprofit corporation) with 15 Pa. Cons. Stat. Ann. § 5712(c) (standard of care for officers of a nonprofit corporation). We therefore urge the District Court to re-examine the time-limit order to avoid the necessity of a re-trial. We trust that if, at any time, the District Court is persuaded that any time limits it has set are not sufficient to allow for a fair presentation of the case, the Court will take appropriate steps to see that due process is satisfied.

Id. at 14 n.5.

We suspect the Third Circuit judges held out hope that their seemingly petulant colleague on the district court bench would see the error of his time-limiting ways. And we've hard of instances in which circuit judges would get on the phone with such a colleague in an effort to give him or her a chance to hear how nutty he must sound to everybody else.

Bonus:    You can see our post on an earlier Third Circuit ruling that sent the case back for trial here.

Second bonus:    The ruling we just mentioned named the trial judge. The one about the trial limits thing does not.

 

 

Congress handed the Federal Circuit the job of grading district courts' papers any time a case raises a meaty question of patent law. The court has taken its role to heart. Although issues of how to handle a case — procedural matters — turn on the law of the circuit from which the case comes, Federal Circuit law trumps all else (save the Supreme Court) on patent law's substance.

Except sometimes even things having to do with procedure fall within the Federal Circuit's purview, as it held today. A district court in Vermont had applied Second Circuit rules in judging whether to grant a preliminary injunction against (what the plaintiff deemed) on-going patent infringement of a patent on "ballistic protective eyewear". The Second Circuit uses a two-tier test — a milder one for a preliminary injunction that maintains the status quo and a tougher standard for a p.i. that changes it. But the panel believed that, because "[s]ubstantive matters of patent infringement are unique to patent law, . . . the estimated likelihood of success in establishing infringement is governed by Federal Circuit law." Revision Military, Inc. v. Balboa Mfg. Co., No. 11-1628, slip op. 4 (Fed. Circ. Nov. 27, 2012). The court vacated the district court's denial of Revision's motion for preliminary injunction and sent it back "for redetermination in accordance with Federal Circuit criteria." Id. at 7.

[Today we reprise our Thanksgiving Day post from four years ago, not long after the bottom fell out of financial markets.]

Even calamity ought not divert us from counting and giving thanks for our blessings, President Lincoln reminded Americans on October 3, 1863, in the midst of the War Between the States:

The year that is drawing toward its close has been filled with the blessings of fruitful years and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the Source from which they come, others have been added which are of so extraordinary a nature that they can not fail to penetrate and soften even the heart which is habitually insensible to the ever-watchful providence of Almighty God.

In the midst of a civil war of unequaled magnitude and severity, which has sometimes seemed to foreign states to invite and to provoke their aggression, peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed, and harmony has prevailed everywhere, except in the theater of military conflict, while that theater has been greatly contracted by the advancing armies and navies of the Union.

Needful diversions of wealth and of strength from the field of peaceful industry to the national defense have not arrested the plow, the shuttle, or the ship; the ax has enlarged the borders of our settlements, and the mines, as well of iron and coal as of the precious metals, have yielded even more abundantly than theretofore. Population has steadily increased notwithstanding the waste that has been made in the camp, the siege, and the battlefield, and the country, rejoicing in the consciousness of augmented strength and vigor, is permitted to expect continuance of years with large increase of freedom.

No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy.

It has seemed to me fit and proper that they should be solemnly, reverently, and gratefully acknowledged, as with one heart and one voice, by the whole American people. I do therefore invite my fellow-citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next as a day of thanksgiving and praise to our beneficent Father who dwelleth in the heavens. And I recommend to them that while offering up the ascriptions justly due to Him for such singular deliverances and blessings they do also, with humble penitence for our national perverseness and disobedience, commend to His tender care all those who have become widows, orphans, mourners, or sufferers in the lamentable civil strife in which we are unavoidably engaged, and fervently implore the interposition of the Almighty Hand to heal the wounds of the nation and to restore it, as soon as may be consistent with the Divine purposes, to the full enjoyment of peace, harmony, tranquility, and union.

In testimony wherof I have hereunto set my hand and caused the seal of the United States to be affixed.

The 1863 Thanksgiving fell on November 26 — exactly a week after President Lincoln delivered the Gettysburg Address.

Fix in your mind an image — of an offshore drilling rig. One that looks like a big boat. You see the derrick. It sits atop and in the middle of the boat. And then you notice something odd. The derrick has two tops, from each of which a string of metal depends. What gives?

Steady there. You've just spotted the tell-tale signs of an invention that one of the world's largest offshore drillers, Transocean (yes, that Transocean), got patents on three times over. The "dual drawworks" design allows drillers to do two things at once — such as drill two wells or lower a blow-out preventer while lifting drill pipe out of the borehole. Which sure sounds like a good idea, especially for rigs that prospect in very deep water.

But another drilling firm, Maersk, deemed the invention "obvious", which the Court in KSR Int'l Co. v. Teleflex, Inc., 550 U.S. 398 (2007), confirmed will make a patent invalid. And Maersk seemed to have a point. If all the world uses a single drawworks, what could appear more blazingly obvious — patent, even! — than simply adding a second?

Except that sort of thinking gets you only so far. As the Federal Circuit pointed out, as it reviewed a judgment against Transocean on the obviousness issue, the fact that you could combine distinct ideas that others had imagined before you doesn't make the combination obvious. Looking at "objective factors" that tend to suggest or negate obviousness can make the difference. And it did in this case.

The Transocean design produced "commercial success" (oil and gas people wanted its dual-drawworks rigs), won "industry praise" (the same people said nice things about those rigs), generated "unexpected results" (the rigs worked better than people thought they would), prompted "copying" (by envious competitors), parodoxically earned "industry skepticism" (that the rigs would not work well), resulted in "licensing" (by more candid competitors), and met a "long-felt but unsolved need" (for the doing two jobs at once thing). Transocean Offshore Deepwater Drilling, Inc. v. Maersk Drilling USA, Inc., No. 11-1555 (Fed. Cir. Nov. 15, 2012).

 Bonus:  Check out the cool video.

 

Blawgletter had the pleasure of trying a case in Louisiana state court last year. The subject matter — a fight over oil and gas rights and 3D seismic data — fit well within our legal wheelhouse. But something made us feel like a fish out of water.

The law in the Pelican State, you see, gets its roots from the civilian tradition of France, not the common law approach of merry old England. Civilian law puts heavy stress on statutes and gives less weight to court rulings. And the freedom that that seems to give lawyers and judges can unnerve people who know only the strictures of the common law. We tend to like turning sharp corners. But our Louisiana brethren and sisteren take pride (justly, we think) in going their own less rigid ways.

So what happens when the legal habits of mind from L'Hexagone cross paths with one of the greatest common law courts of modern times — the Second Circuit?

Judging from the majority and dissenting opinions in Louisiana Stadium & Exposition District v. Financial Guaranty Co., No. 10-2030 (2d Cir. Nov. 6, 2012), confusion may reign. The panel dealt with the question of whether the owner of the Louisiana Super Dome could rescind a policy that insured municipal bonds it issued in 2006. The owner claimed that the "cause" for getting the policy consisted of saving more on interest payments than the $13 million premium it paid for the coverage. But the insurer went belly up, and its collapse dashed any hope for such a boon. And the owner sued for rescission and its money back.

The district court granted the insurer's motion to dismiss. The Second Circuit affirmed, by a 2-1 vote. The dissent pointed out that Louisiana law presents mysteries that common law judges cannot easily fathom and that the wiser course lay in asking the Supreme Court of Louisiana to opine on whether the Super Dome folks stated a basis for a refund.

Blawgletter had the pleasure today of standing before the Chief Justice and eight Associate Justices of the Supreme Court of the United States. We urged their honors to send a case we've worked on for more than nine years back to the trial court . . . for trial.

We had not done that before (the standing before the Court thing). We'd argued a Fair Number of times in courts of appeals, both state and federal. But never in a supreme court, much less the one.

You may guess that worry about messing up gave us pangs of doubt. Many pangs. Which hurt.

You know what? Those pangs did a great job of forcing us to get ready. Making us try to master details. Think of the hardest questions. Ponder the best answers. Do moot courts. And in general conduct the hard work that might get our cause over the top.

Our case dealt with damages in an antitrust class action. Comcast Corp. v. Behrend, No. 11-864 (U.S.). We felt sure that the damages expert had done a superb job but even more confident that the trial judge had gone above and beyond in testing the expert's model, which he found sound. We hope that confidence came through to the justices.

You can read the transcript here, listen to audio here.

A favorite exchange:

JUSTICE SCALIA:    I never know how to say it. Is it Daubert or Daubert?

MR. BARNETT:        It depends on the time of day, Your Honor.

JUSTICE SCALIA:    Yes, I think you're right.

It was great fun.

If you could see Blawgletter right now, you might notice some blushing. For that of which we write betrays a streak we prefer not to show.

The story begins Monday morning, when we heard a U.S. Supreme Court justice mention "Coke on Littleton, 1628" — and instantly knew what he meant. Why the blaze of recognition? It came because we'd lately re-read a 2007 Supreme Court ruling that spoke of "a treatise published in 1628". Which fact may strike you as at least a one on the nerd-o-meter.

The case before the Court on Monday involved the reach of the "first-sale" doctrine under U.S. copyright law. Does it let Amazon, say, buy in Singapore excess stocks of Harry Potter books that J. K. Rowling's publisher printed in, for instance, Shanghai and import them into the U.S. without fear of a copyright infringement claim by Ms. Rowling? Or does first-sale apply only to goods that the copyright owner made in the U.S.?

Justice Breyer cited Lord Coke's treatise for the notion, as he said, "if a man be possessed of a chattel and give or sell his whole interest upon a condition, that condition is no good." Supap Kirstaeng v. John Wiley & Sons, Inc., No. 11-687, Tr. at 49:10-12  (U.S. Oct. 29, 2012).  By which His Honor seemed to imply that he thinks the first-sale doctrine in the Copyright Act of 1976 allows you to purchase overseas and import into the U.S. any goods no matter where the copyright owner made or caused the making of the goods.

The 2007 case prompting the recollection involved an antitrust claim that for almost a century the Supreme Court treated as a per se violation of section 1 of the Sherman Act. In that case, Leegin
Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007), the Court overruled its decision in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911). The opinion cited the ancient treatise by way of explaining that Dr. Miles stood more on "'formalistic' legal doctrine" than on sound economic theory. Leegin, 551 U.S. at 888.

Lord Coke won in Dr. Miles and lost in Leegin. Will he stage a come-back by forming the crux of the decision in the first-sale doctrine case?

We will know by June — and likely a lot sooner.