It's an argument that's so beloved by professors, but there was not a single justice who was even interested in the tax-power argument in six hours of oral presentation. If any justice liked the tax-power theory, you would have expected to hear from her or him during the discussion of the Anti-Injunction Act.

The justices were debating among themselves why it didn't apply. There was nobody saying it did apply.

If it were actually accepted by the Court, they would basically be saying that Congress has unlimited power to do whatever they want as long as they limit these sanctions to a monestary fine collected by the IRS. That would be a startling claim of power.

Randy Barnett, Harvard Law Today, July 2012, at 6 (talking about Supreme Court review of suits to block Affordable Care Act).

By a 5-4 vote, the U.S. Supreme Court today upheld the penalty in the Affordable Care Act for not buying health insurance as within Congress's constitutional power to tax. Nat'l Federation of Independent Business v. Sebelius, No. 11-393 (U.S. June 28, 2012).

The majority consisted of Chief Justice Roberts, who wrote the main opinion, and Associate Justices Breyer, Ginsburg, Kagan, and Sotomayor.

The ruling avoided a showdown over how far the federal government's power to regulate interstate commerce reaches.


Walter Brennan (1894-1974) played Will Sonnett.

In 1967, at the tender age of eight, Blawgletter started watching a new TV western, The Guns of Will Sonnett. It lasted two seasons. We loved it.

The namesake of Will Sonnett handled a pistol as well as any man alive. He revealed his skill by citing his son ("the third-best shot in the West"), his grandson (no. 2), and then himself ("I'm better'n both of 'em"). He added: "No brag, just fact."

Which leads us to this fact:

Vault just named our firm, Susman Godfrey, the no. 1 litigation boutique in these United States.

Not by a small margin. The Vault survey gives SG a 45.6 score. Which eclipses the second-place firm by 19.5 points.

No brag.

Sixth Circuit Dings RMBS Suit by Blue Grass Bank's Blue Sky Law Claims
Sue-wee!

Your bank in Louisville spent $50 million on fancy paper that a nice salesman at Bear Stearns told you would earn the bank a decent return without much risk. But things didn't turn out as the kindly broker said. The fancy paper — residential mortgage-backed securities (or RMBS)s — proved pretty much worthless once the Great Recession cranked up in 2007-08.

So the bank sues Bear Stearns, the sales guy, and the outfit that bought Bear Stearns as it teetered on the cusp of oblivion (JPMorgan Chase).

Does the bank win? No.

Why not? Do you really have to ask?

Yes. Okay then.

Your bank lost because the brochure you received from the fellow who got you into this mess would have told you — if you had taken the time to leaf through it — that the RMBSs involved a good bit more risk than the seller-dude led you to believe. Also because your complaint didn't say enough about why things he told you or forgot to mention amounted to fraud that caused the bank's losses. Stuff like that. Republic Bank & Trust Co. v. Bear Stearns & Co., No. 10-5510 (6th Cir. June 20, 2012).

Bonus (quotes from the opinion):

"He succeeded."

"Republic appeals."

"Institutional investors, while sophisticated, are not omniscient."

"The difference is one of degree."

"The defect is fatal."

"This argument fails for two reasons."

"This argument is unavailing for three reasons."

"Failure to do so vitiates its claims."

"This claim is untenable."

"Mere omissions will not do."

Extra bonus:

The court relies on dicta . . . that cites no authority . . . and appears in a footnote . . . of an unpublished Kentucky court of appeals opinion . . . to conclude that the Kentucky version of negligent misrepresentation, unlike the versions in the 49 other states, "plainly understood, requires an allegation of duplicity" and therefore sounds in "fraud" and calls for details about time, place, content, and so forth. Id. at 8 (quoting Thomas v. Schneider, No. 2009-CA-002132-MR, 2010 WL 3447662, at *1 n.2 (Ky. App. Sept. 3, 2010)). Although the footnote ends by saying "we have not been asked to address" any of the misrepresentations to which it refers, the Republic opinion praises the state court's "reasoning" as "correct".

Negligent misrepresentation does not sound in fraud. Unless you allege fraud. And then it does. So there.

The Fifth Circuit ruled last week that the terms of an oil and gas lease could give a real estate firm the right to damages for drilling operations that hurt the firm's efforts to build and sell homes in a Shreveport subdivision. Greenwood 950, L.L.C. v. Chesapeake Louisiana, L.P., No. 11-30436 (5th Cir. June 12, 2012).

The lease covered 238 acres in Caddo Parish. It called for the lessee, Chesapeake, to confine its drilling work to a small part of the tract, a precise 16.5 acres. And Chesapeake kept that promise. But, because it blocked the main road into the tract, the lessor, Greenwood 950, alleged, Chesapeake injured Greenwood's prospects for turning the rest of the land into a bodacious Shreveport subdivision.

But, you ask, what does the lease say? It provides, as we learn on page 5 of the Fifth Circuit's opinion, that Chesapeake agreed to "repair all surface damages done by its operations or shall pay Lessor for all damages caused by any operations hereunder to any property, both real and personal, of Lessor and Lessor's tenant, if any".

Note the "or shall pay Lessor for all damages". Especially the "or".

The district court ruled, on motion for summary judgment, that the or clause meant "surface damages" and not injury to Greenwood's hopes for turning the tract into a cash cow. The Fifth Circuit begged to differ. It found the lease unclear and sent the case back to the district court. The promise to pay for "all" damages, the panel ruled, could cover harm to Greenwood's developmental hopes and dreams, which it assumed counted as "damages . . . to . . . property".

Blawgletter mainly wonders if hurting a real estate developer's plans for a subdivision amounts to harm to "property". Does a cause of action for consequential damages equal an interest in "property"? But perhaps a physical interference such as Chesapeake's with the doing of things necessary to make a real estate development viable does count as damages to property.

File:Royal Arms of the Kingdom of Scotland.svg

Royal Arms of the Kingdom of Scotland. Note the lion rampant.

The Chief Judge of the Seventh Circuit enjoys hurling verbal bolts of lightning. At least you would think so if you read what His Honor, Frank Easterbrook, wrote this week in Robert F. Booth Trust v. Crowley, No. 10-3285 (7th Cir. June 13, 2012).

An appeal by a class action gadfly, Theodore H. Frank, so riled Judge Easterbrook that he and the other panel members not only granted Mr. Frank the main relief he asked for (the formal right to appear in the case as an "intervenor") but also gave him something he didn't request (throwing out the case on the merits).

The suit charged two Sears board members with violating the bar in antitrust law against serving "as a director or officer in any two corporations . . . that are . . . competitors". 15 U.S.C. 19(a)(1). One of the two sat on the boards of AutoNation and AutoZone, and the other held a spot on the Jones Apparel Group board. But the complaint didn't say the "interlocking directorates" hurt Sears, except to assert that the interlock raised a risk that the feds might perhaps someday think about maybe bringing an action to de-interlock the directorates.

Sears chose to settle with the plaintiffs, who sued "derivatively" (i.e., on behalf of Sears) to purge the company from the sin of tempting antitrust enforcers to file a case. Mr. Frank moved the district court to let him into the action so he could protest the deal, which would have paid the plaintiffs' lawyers $925,000 but Sears investors nothing. When the district court told him to go away, he filed an appeal to the Seventh Circuit.

Then the Easterbrookian thunderbolts started to fly. They included these:

  • "It seems odd to allow investors, who stand to gain if producers with market power cooperate, to invoke an antitrust doctrine that is designed for strangers' benefit."
  • "Antitrust suits are notoriously costly."
  • "That the plaintiffs say the have other investors' interests at heart does not make it so."
  • "[T]his litigation is so feeble that it is best to end it immediately, as both Sears and Frank unsuccessfully asked the district judge to do."
  • "The only goal of this suit appears to be fees for the plaintiffs' lawyers."
  • "It is an abuse of the legal system to cram unnecessary litigation down the throats of firms whose directors sever on multiple boards, and then use the high costs of antitrust suits to extort settlements (including undeserved attorneys' fees) from the targets."
  • "The suit serves no goal other than to move money from the corporate treasury to the attorneys' coffers, while depriving Sears of directors whom its investors freely elected."

The panel thus reversed denial of Mr. Frank's motion to intervene and ordered the district court "to enter judgment for defendants."

Why the court thought it had the merits before it escapes Blawgletter.

But once you start throwing those lightning bolts we suspect you might have a hard time stopping.

Too much fun. WAY too much, perhaps.

The Supreme Court of the Lone Star State doesn't often make rulings that favor class action treatment of claims. But last week it did.

The case arose in Williamson County — home of a District Attorney who fought DNA testing for an innocent man who spent 25 years in prison for killing his wife. The petition charged the County with violating the constitutional rights of poor people who face charges of minor crimes (1) to legal counsel at the County's expense, (2) to represent themselves, and (3) to "open courts". It also sought class treatment of the claims.

The district court denied the County's plea to the jurisdiction (a Texas-style motion to dismiss), but the court of appeals reversed. The latter held that, because none of the plaintiffs alleged all three claims, none of them had standing to bring the case on a class-action basis.

The Supreme Court upheld the district court's ruling and sent the case back. In doing so, the 9-0 Court cut through a slew of complaints about why the case didn't belong in a civil court. These included the gripe that each plaintiff in a class action must have standing to bring all claims in the petition — a problem that the Court resolved by saying the trial court could create a subclass for each claim or group of claims. Blawgletter will allow you, Gentle Reader, to sort out the other details. Heckman v. Williamson County, No. 10-0671 (Tex. June 8, 2012).

We mention the case mainly because it might, just might, mark a small start of a modest turn a little bit towards a rediscovery of the important role class actions can play in civil disputes.

The District Attorney, by the way, lost his bid for re-election in the May primary, which the County's County Attorney won.

Way back in March 2012, the Supreme Court dealt with a New Deal-era law (section 16(b) of the Securities Exchange Act) that bars "short-swing profits" on a purchase and sale (or sale and purchase) (a) of a public company's equity security, (b) within a six-month period, (c) by an "insider" of the company. The Court held, 8-0, that the two-year limit on how long you can wait to sue on behalf of the company to recover the short-swing profits runs out in . . . two years. Post here.

Last week, the Second Circuit did something almost as easy. It ruled that a purchase-and-sale that took place within five days ran afoul of section 16(b) and thus required Tonga Partners (the insider that bought and sold equity in Analytical Surveys, Inc., during that five-day period) to fork over to ASI the $5 million difference between the purchase price and the sale price. Analytical Surveys, Inc. v. Tonga Partners, L.P., No. 09-2622-cv (2d Cir. June 4, 2012).

Tonga Partners urged that the way it went about buying the shares in ASI — by using ASI's default on a convertible promissory note to force ASI to convert $1.7 million owing on the note into $6.7 million worth of ASI stock, which Tonga sold on the open market – fell within a section 16(b) safe harbor for "debt previously contracted". The district court said no, and so did the Second Circuit. The safe harbor applies only when the insider gets stock automatically as a result of a then-due debt — not, as in the case of Tonga, when the insider declares a default and opts to get shares in lieu of the now-mature debt, the panel said.

The odd thing? The court took a long time — almost 29 months from oral argument to issuance of its opinion. A rare delay by a diligent court.

An adverb usually relates to a verb. It in that case does something to the verb. But it can also concern an adjective. Or indeed any part of speech, except a noun. And it often ends with "ly", as in "simply" or "oftenly". Or "stupidly".

So do you think it should adjoin the verb (or adjective or other part of speech) to which it relates?

Think about one of the Supreme Court cases that came out today. The start said:

This case requires us to decide whether two federal law enforcement agents are immune from suit for allegedly arresting a suspect in retaliation for his political speech, when the agents had probable cause to arrest the suspect for committing a federal crime.

Reichle v. Howards, No. 11-262, slip op. 1 (U.S. June 4, 2012).

Did the author put the adverb — "allegedly" — in the right spot? Or should it have gone just before "in retaliation" — as in "are immune from a suit for arresting a suspect allegedly in retaliation for his political speech"?

The Court held, by the way, that Secret Service agents deserved immunity from a claim that accused them of wrongfully clapping irons on someone due to the fact that he objected on political grounds to the views of a high-ranking politician. Arresting someone for political reasons, the Court held, didn't violate a clear constitutional right at the time since the Court hadn't yet disapproved having "probable cause" to arrest someone for a different reason (i.e., lying about whether the protestor touched the politician) as a basis for putting someone in custody.

Blawgletter doesn't think the Secret Service arrested Mr. Howards "allegedly". The Secret Service, we believe, admits that it arrested him. Mr. Howards alleges that he had a bad reason for the arrest.  RIght?

For people who lose a claim of confidential lawyer-client communication or work product privilege, the normal rule gives them a scary option if they want to contest the loss in a higher court. They must defy the order, which directs them to produce the documents or furnish the information, and thus stand in contempt of it.

But what if you send all copies of the docs to the law firm that kinda sorta represents you. Can you thus avoid the Normal Rule?

No. In re Grand Jury, No. 12-1697 (3d Cir. May 24, 2012).