Yes, yes, the helicopter crash that killed people and hurt others happened in Hawaii. Lots of other stuff that may have led to the accident also took place in the Aloha State. Some relevant contacts had a nexus with France or Nevada. The defendant, though, had its main place of business in Grand Prairie, Texas (a suburb of Dallas). And the contract between the defendant — American Eurocopter — and the firm that flew the helicopter — Heli-USA — called for Texas law to govern their relationship as it concerned AE's providing of parts and technical info to Heli-USA.

National Union paid the crash victims' claims against Heli-USA as its insurer and then went after AE for its share of fault in the crash under a theory of contribution. But AE urged that Texas, not Hawaii, law governed and that it barred contribution claims against "other entities that were potentially liable as joint tortfeasors." Nat'l Union Fire Ins. Co. v. Am. Eurocopter Corp., No. 11-10798, slip op. at 3 (5th Cir. Aug. 27, 2012) (citing Beech Aircraft Corp. v. Jinkins, 739 S.W.2d 19, 21-22 (Tex. 1987)).

The Fifth Circuit upheld the district court's order dismissing National Union's claim against AE under the Texas anti-contribution rule. The whole thing turned on which state's laws applied. And that question, in turn, pivoted on the last factor in the test under section 6 of the Restatement (Second) Conflict of Laws — "the relevant policies of the forum, the policies of other states and their relative interests in the determination of the particular issue, and the protection of justified expectations." Id. at 6. On that point, the panel said:

We are skeptical that Texas courts would reach choice-of-law decisions that would frustrate that [anti-contribution] policy to the detriment of a Texas defendant, unless other considerations overwhelmingly favored a different forum.

Id. at 6-7 (emphasis in original).

Blawgletter will not weep too much for National Union. The insurer seems to have thought it bought the crash victims' claims against AE by settling their claims against Heli-USA. But any insurer with a lick of sense — and surely Big Bad National Union Fire Insurance Company of Pittsburgh, Pennsylvania — should have known that the Lone Star State has for a great while barred the very sort of claim National Union tried to push through in the Northern District of Texas.

Not a single tear will we shed.

Who likes contention interrogatories? Anyone? Anyone at all?

Blawgletter agrees. But Once in a Blue Moon they may matter. Ask DeAngelo Marine Exhaust, which lost its Best Defense as a result of paying them not enough mind.

Marine Exhaust Systems sued DeAngelo for infringing two patents. The patents dealt with systems for cooling exhaust that spews from the engine of a marine vessel. DeAngelo alleged the defense of invalidity because, it claimed, someone else disclosed key bits of the inventions before the filing of the patent applications. But, for reasons we may never know, DeAngelo didn't find — and didn't produce to MES — Key Drawings that (DeAngelo asserted) proved its invalidity defense until the day before the deadline for finishing discovery.

So what, right? Right. Except that MES had asked DeAngelo to answer a pesky set of annoying contention interrogatories. And one of the pesky set annoyingly inquired about details around — you guessed it! — DeAngelo's invalidity defense.

DeAngelo urged that an email it sent along with the drawings to MES's lawyers went far enough to meet its duty to supplement its response to the contention interrogatory. Not so, the district court ruled. And the Federal Circuit agreed, writing:

The interrogatory in question did more than require the identification of documents (a requirement that DeAngelo satisfied by the production). It requested that DeAngelo "[s]tate with specificity all prior art that anticipates such claims of one or more of the patents at issue or renders them obvious. In doing so, specify the particular claim being referred to and identify why such prior art anticipates such claims or renders them obvious." Mot. to Strike Drawings at 1-2 (emphasis added). While DeAngelo’s e-mail of February 8, 2010 (in which it disclosed the drawings) stated that the drawings "may anticipate the Woods inventions, or may be relied upon as showing the state of the art in the early 1990’s," DeAngelo did not comply with the empha-sized requirements before the discovery deadline. Such compliance was important. As discussed above, contention interrogatories serve an important purpose in ena-bling a party to discover facts related to its opponent’s contentions. In order for MES to have an opportunity to meaningfully challenge DeAngelo’s reliance on the draw-ings as prior art (including whether the drawings were published or whether devices made from the drawings contained the claimed features and were in fact on sale in the early 1990s), it would have needed to know what features of the drawings DeAngelo contended rendered MES’s patents obvious on a claim-by-claim basis.

Woods v. DeAngelo Marine Exhaust, Inc., No. 10-1478, slip op. at 15-16 (Fed. Cir. Aug. 28, 2012) (footnote omitted).

Have you heard of fibro? As in fibromyalgia?

The folks at the Mayo Clinic describe it thus:

Fibromyalgia is a disorder characterized by widespread musculoskeletal pain accompanied by fatigue, sleep, memory and mood issues. Researchers believe that fibromyalgia amplifies painful sensations by affecting the way your brain processes pain signals.

But some people think that fibro doesn't exist. Or that, if it does, it springs not from real causes but from imaginary ones. Or, worse, from a desire to goldbrick.

The Seventh Circuit begged to differ this week. It sided with a man whose employer fired him because he could not work at all hours of the day. The district court ruled that David Feldman had no case under the Americans with Disabilities Act despite the diagnoses of his regular doctor and a specialist that fibromyalgia made working odd shifts exhausting and excruciatingly painful for him. Feldman's employer, Olin Corporation, had refused to accommodate him with straight-shift work. But later, when a straight-shift job as a tractor operator opened up, Feldman got it. He has worked for Olin since.

Feldman started at Olin in 1974.

The Seventh Circuit held that the district court erred in treating the physicians' opinions as no evidence of disability. The panel reversed the summary judgment in favor of Olin and sent the case back to the district court for trial. Feldman v. Olin Corp., No. 10-3955 (7th Cir. Aug. 27, 2012).

The old firm used phone lines to help state fish and wildlife agencies issue fishing and hunting licenses. A new outfit said it did the same thing, only better, by employing the Internet.

Hoping to seize the future, the old firm buys the new one for about $1 million. Then it finds out the Internet-using outfit kinda sorta didn't tell the whole truth about how well its software worked. It kinda sorta didn't work. And so buyer sues the seller for fraudulent inducement.

The parties try the case to the bench. The seller's defenses? That its false representations about the software amounted to meaningless jibber-jabber and that the buyer could have and should have found out the Truth in its due diligence.

The district court would have none of it, and the Eighth Circuit today agreed. Outdoor Central, Inc. v. GreatLodge.com, Inc., No. 11-3264 (8th Cir. Aug. 23, 2012). 

It takes no expansion of the mind to understand how Texas's message disfavoring abortion would be garbled if health care providers participating in the [Women's Health Program] could identify and poster their clinics with abortion-related identifying marks.

Planned Parenthood Ass'n of Hidalgo County, Texas, Inc. v. Suehs, No. 12-50377, slip op. at 10 (5th Cir. Aug. 21, 2012) (per E. Grady Jolly, J.) (holding district court erred in barring Texas from stopping payments to organization that offers non-abortion services because affiliate sharing organization's name/logo does perform abortions).

AIG Logo
Um.

Settling a class action case means you don't have to try it. But does making peace also mean you don't have to turn all the square corners of the class action rule, the one we call 23?

It does. Kind of. At least to the extent it avoids trial problems. The kind that could make it go on and on. And on.

The Supreme Court ruled thus in Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997). The Court held that, because settling means not having a trial on the merits at all, you don't have to worry about managing it. Rule 23(b)(3)(D) has a manageability requirement.

But how far does that get you? Does it let you forego, for instance, showing one of the toughest things that plaintiffs need to prove in a stock fraud case — that the jury can presume all buyers of the stock relied on the market price as a True Reflection of the stock's Actual Value?

The Second Circuit ruled last week that it does. In Ohio Public Retirement Sys. v. Gen'l Reins. Corp. (In re Am. Int'l Group, Inc. Sec. Litig.)., No. 10-4401-cv (2d Cir. Aug. 13, 2012), the panel reversed the trial court's denial of a motion to certify a securities fraud case against American International Group and its sub General Reinsurance as a class action under Rule 23 of the Federal Rules of Civil Procedure.

The ruling strikes Blawgletter as a rare, but welcome, nod towards the fact that courts ought not insist on near-perfection, whether in class actions or in non-class cases.

Say your firm does an awesome job in a bankruptcy case. It helps the debtor come up with a plan to pay its debts, put its balance sheet in order, and emerge from Chapter 11 in near-record time.

Your firm's lodestar — hours times hourly rate — comes to $5.98 million. You ask for a $1 bonus. Only the U.S. trustee objects to the request, and even he complains only about the $1 million boost. Does the bankruptcy judge have the power to "enhance" your lodestar by the $1 million?

Yes he does, the Fifth Circuit ruled last week.

Bankruptcy lawyers and other professionals across the tri-state area of Louisiana, Mississippi, and Texas rejoiced.

The problem lay in a U.S. Supreme Court case, Perdue v. Kenny A., 130 S. Ct. 1662 (2010) (post here), which held that lawyers in most federal civil rights cases can't get more than their lodestar no matter how well they do for their clients. Did that rule also apply to bankruptcy cases?

The Fifth Circuit, in a thorough opinion by Circuit Judge Jennifer Walker Elrod, said no. CRG Partners Group, L.L.C. v. Neary (In re Pilgrim's Pride Corp.), No. 11-10774 (5th Cir. Aug. 10, 2012). The court therefore affirmed the bankruptcy court's award of the $1 million "enhancement fee".

 

Non-Fat Dry Milk
Got non-fat dry milk?

You'll just have to trust Blawgletter that the U.S. Department of Agriculture sets minimum prices for milk producers.

Unless you want to read the 10-page SUMMARY of the process in Carlin v. DairyAmerica, Inc., No. 10-16448, slip op. at 8731-41 (9th Cir. Aug. 7, 2012).

Go ahead. We'll wait.

Ready?

Okay.

The milk-pricing system depends on private reporting of actual wholesale prices. DairyAmerica, a group of dairy co-ops, controlled around three-quarters of wholesale milk purchases in the U.S. (other than in the Golden State). DairyAmerica understated actual prices for non-fat dry milk from January 2002 until April 2007. And the low-balling of the NFDM prices had the effect of depressing what the dairies had to pay, and did pay, dairy farmers for their cows' milk.

When the farmers sued, DairyAmerica argued to the district court that the "filed-rate doctrine" barred the price-fixing claims. The doctrine, DA said, precluded it from buying milk products at prices that varied from the minimums the Ag Department published. The court agreed and dismissed the case.

The Ninth Circuit reversed. It held that the price-fixing claims did fall within the compass of the filed-rate doctrine but that the FRD didn't bar the milk producers' claims. The Department of Agriculture, the panel stressed, had disavowed the prices it had announced during the relevant time period:

We agree that the filed rate doctrine does not preempt or otherwise pose a preclusive bar to plaintiffs' lawsuit, because: (1) the federal agency itself detrmined that the FMMO prices were incorrect and (2) the policy considerations behind the doctrine to not justify applying the doctrine as a bar in this case.

Id. at 8760.

Will we see something along the same lines by the banks that set LIBOR? You betcha! Will they win? Carlin doesn't bode well.

The Second Circuit today came out with rulings in two big commercial cases.

The first involved a "collateralized debt obligation", the second a cartel that the plaintiffs alleged fixed prices for "publication paper". Plaintiffs won both times.

The CDO case stemmed from a $60 million purchase in December 2006 by a German bank, Bayerische Landesbank, of shares, which took the form of "Notes", in a $100 million "synthetic" CDO. A shell entity that Aladdin Capital Management and Goldman Sachs set up served as the Issuer of the Notes.

Aladdin acted as the Portfolio Manager. The Portfolio consisted of debt securities.

The Issuer sold a credit default swap — a sort-of insurance policy – to Goldman Sachs. That meant the Issuer would have to pay GS lots and lots of money if debt securities in the Portfolio suffered adverse Credit Events, such as downgrades or payment defaults.

You know the rest. The debt markets went haywire in 2008 and 2009. The Portfolio had Way Too Many Credit Events (a total of 11). And that sent the value of the Notes to zero.

Bayerische Landesbank sued Aladdin for reckless handling of the risk in the Portfolio. The district court dismissed the case. The Second Circuit — per U.S. District Judge Jed Rakoff — reversed the ruling and sent the case back.

The panel held that Aladdin owed a duty of care to the bank both as a third-party beneficiary of Aladdin's Portfolio Management Agreement with the Issuer of the Notes and as grossly negligent tort-feasor by virtue of Aladdin's close relationship with the bank. The court also ruled that the complaint alleged a plausible case of gross negligence against Aladdin — mainly because it seems to have let Goldman Sachs run circles around it in its (unsuccessful) efforts to avoid Credit Events. Bayerische Landesbank, New York Branch v. Aladdin Capital Mgmt. LLC, No. 11-4306 (2d Cir. Aug. 6, 2012).

[Judge Rakoff, btw, does a stupendous job of laying out how the whole synthetic CDO concept worked — or, in this case, didn't (except for GS). Blawgletter says check it out.]

In the price-fixing case, a class action, a district court in Connecticut granted summary judgment on a claim that competing makers of publication paper conspired to fix prices. In re Publication Paper Antitrust Litig., No. 11-101-cv (2d Cir. Aug. 6, 2012). The outcome resulted largely from the fact that two long-time Finnish friends, Markku Tynkkynen and Kai Korhonen, met secretly to talk about pricing shortly before their respective companies announced price increases. Cuts in production capacity also helped raise an inference of non-independent conduct.

The U.S. Department of Justice lost a criminal trial against the paper-makers in July 2007. Tynkkynen and Korhonen testified at the trial, and that explains why the plaintiffs in Publication Paper knew so many details about their doings.