Today, Blawgletter has the pleasure of giving honor to an item by one of our firm's newest lawyers, David Shank, late from a clerkship with the estimable and Honorable Barbara M. Lynn.

Mr. Shank spotted a big issue in a new Texas law that aims to cut back on what our lawmakers and governor deemed "frivolous" lawsuits. Does the law really import from federal law a subjective standard of plausibility, he asks.

Let us see what Mr. Shank has to say.

Last May, Texas Governor Rick Perry signed into law a bill that adopts a form of  “loser pays” for “causes of action that have no basis in law or fact”. Last month, a branch of the Texas Supreme Court Advisory Committee drafted a new rule to implement that part of House Bill 274. But guess what? The draft would import a kind of Twombly test into Texas practice – a cure worse than the disease. 

HB 274 requires the Supreme Court in Austin to “create rules to provide for the dismissal” of baseless claims “on motion and without evidence.”  It also provides that, upon deciding such a motion, “the court shall award costs and reasonable and necessary attorney’s fees to the prevailing party.” So far so good.

To many Texas lawyers, the phrase “no basis in law or fact” will look familiar.  Texas Rule of Civil Procedure 13, which provides for sanctions against attorneys who submit groundless pleadings and motions, defines the term “groundless” as having “no basis in law or fact and not warranted by good faith argument for the extension, modification, or reversal of existing law.”

By using the same phrase to define baseless claims in  HB 274 as the Supreme Court used in Rule 13, the legislature seems to have done most of the Supreme Court’s work for it. A voluntary working group of lawyers, on both sides of the docket, thought so. Members from the Texas Association of Defense Counsel, the Texas Trial Lawyers Association, and the Texas chapters of the American Board of Trial Advocates, with help from the Texas Bar’s Section of Litigation, unanimously approved a draft rule that used the “without basis in law or fact” language with no change.

But, as Texas Lawyer’s Tex Parte blog reports, a subcommittee of the Texas Supreme Court Advisory Committee sees things differently.  The relevant parts of the committee’s draft rule, which it recently finalized and submitted to the Supreme Court, provide as follows (with our emphasis):

A. Grounds and content of motion.

(1) On motion a court must dismiss a claim that has no basis in fact or that is not supported by existing law or by a reasonable argument for extending, modifying, or reversing existing law.

(2) In deciding the motion to dismiss the court must not consider evidence, except as to attorneys’ fees, and must accept as true all allegations in the challenged pleading unless a reasonable person could not believe them.

. . . .

G. Attorneys’ fees. Upon granting or denying the motion in whole or in part, the court must award costs and reasonable and necessary attorneys’ fees to the prevailing party for preparing and presenting, or responding to, the motion.

The subcommittee’s decision to alter the statutory language “no basis in law or fact” looks curious, since that language incorporates a standard already in the rules.  Tex Parte reports that the committee engaged in “hours of discussion” about how the rules should “define a claim with ‘no basis in law or fact.” But the post sheds no light on why the group dropped “no basis in law or fact” in favor of a wordier test.

Nor does it explain why the subcommittee chose to instruct courts to disregard factual allegations that “a reasonable person could not believe.”  That sounds an awful lot like the plausibility standard that the United States Supreme Court created for federal Rule 12(b)(6) motions to dismiss in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)—a standard the Texas solons avoided by specifically removing the original bill’s reference to federal Rule 12 and replacing it with Texas Rule 13’s standard for groundless claims.

Did the subcommittee have a choice?  The final bill expressly provides that a court must decide the motion to dismiss “without evidence.” If a judge cannot review evidence, the subcommittee seems to have thought, how can she determine a claim lacks a basis in fact?   But granting trial judges license to disregard factual allegations they deem unreasonable would defy the long-standing Texas rule that requires courts to accept all factual allegations as true.

The working group had the better idea. Put the exact words the legislature used in the rule and no more. We don’t need no stinkin’ Twombly badges in Texas.

 

Nightmare on the stand

The trial judge asks your client what happened to the originals of two key documents. Your client admits she has them at home. The UPS lawyer loudly insists that he'd asked for the "originals" over and over again in discovery. 

What does the trial judge do? Order a recess until your client retrieves the originals? Instruct the jury to infer something bad about the documents, as the UPS lawyer asked him to do? No. The judge sends the jury home. He declares a mistrial. And he invites UPS to move for sanctions. Then he grants UPS's motion and tosses your client's case with prejudice under his "inherent authority".

The Third Circuit today reversed, largely because of "misrepresentations of the record promulgated by UPS." Bull v. United Parcel Service, Inc., No. 10-4339, slip op. at 13 (3d Cir. Jan. 4, 2012). It shows how nutty spoliation claims can become — and what happens when a judge's pique colors judgment. Cf. Achilles, Wrath of.

Holdings

The panel first ruled that spoliation includes not only destroying evidence but also hiding it. Their honors also agreed with the district court that Ms. Bull could have foreseen "the future need to provide access to the original notes", which might have shown signs of alteration undetectable on copies.

The court then held that the trial judge clearly erred in finding that Ms. Bull "withheld" the originals — not least because UPS never asked for them in discovery. That fatal flaw also doomed the conclusion that Ms. Bull acted in bad faith. How could she withhold something in bad faith if she didn't even know the other side wanted it?

The panel reversed the judgment and remanded the case for a retrial.

"Originals" of e-docs?

The court also spoke in a footnote to the strangeness of applying spoliation concepts to electronic information:

As electronic document technology progresses, the concept of an "original" document is becoming more abstract. Moving from the more easily distinguishable photocopy or facsimile to documents created, transmitted and stored in an electronic form means that it will be increasingly difficult to ascertain where the boundary of an objectively reasonable duty to preserve such documents lies. There are—and increasingly will be—circumstances in which the foreseeability of a duty to preserve the information contained in a particular document is distinguishable—under an objective analysis—from the need to preserve that information in its "original" form or format. Indeed, arriving at a common understanding of what an "original" is in this context is challenging enough. Although it does, and always will rest with the courts to preserve the distinction between an objectively foreseeable duty and actual knowledge of such a duty, there is a concomitant obligation that counsel must assume to clearly and precisely articulate the need for parties to search for, maintain, and—where necessary—produce "original" or source documents. This case gives us one more opportunity to highlight our position that clarity in communications from counsel that establish a record of a party’s actual knowledge of this duty will ensure that this technology-driven issue does not consume an unduly large portion of the court’s attention in future litigation.

Id. at 23 n.12.

 

If you wonder what "prosecution history estoppel" in a patent infringement case means, you might check out MarcTec, LLC v. Johnson & Johnson, No. 10-2085 (Fed. Cir. Jan. 3, 2012), in which the court affirmed an award of $4,683,653.03 in fees and expenses to the defendants.

MarcTec alleged infringement by the "Cypher stent" — "a balloon expandable drug-eluting stent" that aims to help people with coronary artery disease. But, during the prosecution of the patents, MarcTec overcame objections to the applications by saying two key things — that coating of the device with medicine had to occur as a result of applying heat and that the patent didn't cover — you guessed it — stents. The record revealed that the drug on the Cypher stent didn't bond to it as a result of heat. Yet MarcTec insisted that the Cypher stent infringed.

The district court ruled that patent history estoppel barred MarcTec from claiming that the patents covered the Cypher stent. It also deemed the case "exceptional" due to MarcTec's "bad faith" in pressing the claims and awarded Johnson & Johnson and Cordis more than $4.6 million in fees, expert expenses, and other outlays. The court of appeals affirmed.

On the "heat" bonding issue, the panel wrote:

As Cordis correctly argues, MarcTec cannot claim to be ignorant of the references to heat in the claims, the language in the specification discussing the importance of heat to the bonding process, or Dr. Bonutti’s statements to the PTO. Indeed, as we noted in the prior appeal, the doctrine of prosecution history estoppel prevented MarcTec from asserting its construc-tion of the term "bonded." After careful consideration and review of the record, we agree with the district court that MarcTec’s proposed claim construction, which ignored the entirety of the specification and the prosecution history, and thus was unsupported by the intrinsic record, was frivolous and supports a finding of bad faith.

MarcTec, slip op. at 18. On the question of stent v. no stent, the court said:

While it is clear that "[d]efeat of a litigation position, even on summary judgment, does not warrant an auto-matic finding that the suit was objectively baseless," here the record supports the district court’s finding that Marc-Tec pursued objectively baseless infringement claims. . . . The district court found that the "written description and prosecution histories of the patents-in-suit, and other documentary evidence, demonstrate that MarcTec’s patent infringement case was baseless." . . . . The court further found that, because MarcTec disclaimed stents to overcome the prior art, it could not turn around and assert infringement against the Cypher stent. Because the specification and prosecution history clearly refute MarcTec’s proposed claim construction, the district court did not err in finding that MarcTec’s infringement claims were objectively baseless.

Id. at 19 (omitting citations).

Big Oil v. Royalty Owners

Who said Big Oil can't beat Texas royalty owners?

Not Blawgletter. And definitely not the Supreme Court of the Lone Star State.

Royalty owners typically become that by granting your ExxonMobils, your Conocos, your BPs, and the like the right to drill for oil and gas. The lease contract calls for the lessor (mineral owner) to get royalties on any production from good wells (plus per-acre "bonus" payments on the front-end no matter what). And the royalties usually equal a fraction (e.g., one-eighth) of what the lessees sell any oil and gas for.

Victory for Exploration and Production Companies

A couple weeks ago, the Court handed Shell Oil Company, and its Big Oil brethren, a huge win against Texas royalty owners. Although Shell admitted that it underpaid mineral owners in the Permian Basin, the Rosses, around $73,000 from 1988 through early 1994, the Court ruled for Shell — unanimously.

Shell asserted as its main defense that the Rosses had waited too long to sue. A Houston jury disagreed, finding that Shell defrauded the family by sending them royalty checks that understated the prices at which Shell sold the Rosses' gas. The trial court entered judgment on the verdict.

The court of appeals affirmed. But the Supreme Court held that the evidence proved, as a matter of law, that the Rosses hadn't used "due diligence" to figure out that Shell had short-paid them on the royalties.

Texas Two-Step

The Court used a two-step analysis. It first ruled that the Rosses should have noticed that royalty check stubs that Shell sent them showed different prices for gas from the same reservoir. One set of check stubs — for the Rosses' "Lease Wells" — reflected prices far less than those on other check stubs — for the "Unit Wells", which Shell had drilled on land near the Rosses'. "The large difference in the prices paid to the Rosses on the Unit Wells and on the Lease Wells", the Court said, "triggered the Rosses' duty to investigate the royalty payments." Shell Oil Co. v. Ross, No. 10-0429, slip op. at 7 (Tex. Dec. 16, 2011).

Step two dealt with what the Ross family should have done once the "duty to investigate" arose. The Court noted that the Rosses could've looked at "readily accessibly and publicly available information" to see that prices on the Shell check stub prices fell below market prices. The info consisted of records at the Texas General Land Office — a state agency that received (higher) royalty payments for its share of the gas under a "pooling and unitization agreement" with the Rosses — and an index of gas sales prices in the Permian Basin. The combination of a duty to investigate and the fact that an investigation "could have led to discovery of Shell's underpayments" established Shell's limitations defense as a matter of law, the Court held. Id. at 9 (emphasis ours).

Check Those Check Stubs

What does the outcome mean for royalty owners? Mainly it suggests that they can't rely on oil companies to report accurately and must instead look for signs of perfidy. Also that, once red flags "trigger[] the . . . duty to investigate the royalty payments", royalty owners must consult public data to see if it supports the view that the lessee has short-paid royalties. Even if you have to go to Austin to examine the General Land Office's records.

Note that the Court requires royalty owners to assume the worst. The fact that the prices for the Unit Wells far exceeded the prices for the Lease Wells didn't trigger a duty to look only into the Lease Wells prices but also into the (much higher) prices for the Unit Wells. (Really? Why?) And the Court didn't require that a review of public records "would" lead to discovery of underpayments. It instead called for a "could" test. (Huh? Surely the public info needs to show a clear case of underpayment for a court to take the issue from a jury. "Could" strikes us as far too lenient for the short-payers.)

Landowners of Texas, get out your royalty check stubs and start looking for discrepancies. And do it now. The clock may have started ticking.

You run a website that lets people upload videos. Some of the site's users upload clips that include songs. And some of the songs belong to copyright owners who don't like the idea of having people hear their tunes for free.

Blawgletter knows just how you feel. We also know the question you itch to ask us. Do you owe money to the copyright owners?

Under the "safe harbor" part of the Digital Millennium Copyright Act of 2000, you may not. See UMG Recordings, Inc. v. Shelter Capital Partners LLC, No. 09-55902 (9th Cir. Dec. 22, 2011).

Gretchen Sween, member of the legal writing faculty at The University of Texas School of Law and Special Counsel at Dechert LLP, has guest-posted and scored a review on Blawgletter before. Today, she takes keyboard in hand to tap out a thought piece on the things you see marching across your screen — words. We hope you enjoy it as much as we did.

*   *   *   *

When Politicians Lambaste Judges

During the last Republican presidential debate before the upcoming Iowa caucuses, a moderator asked front-runner Newt Gingrich about comments he’d made about firing federal judges and even abolishing entire courts that reached results with which he disagreed.   Gingrich did not back away from his remarks.  Instead, he boldly reaffirmed this crazy concept, stating, “The courts have become grotesquely dictatorial, far too powerful.  I’ve been working on this project since 2002 when the Ninth Circuit court said that ‘one nation under God’ is unconstitutional in the Pledge of Allegiance.  And I decided that if you had judges that were so radically anti-American that they thought ‘one nation under God’ was wrong, they shouldn’t be on the court.  Like Jefferson, Jackson, Lincoln and FDR, I would be prepared to take on the judiciary if, in fact, it did not restrict what it was doing.”

Never mind that the Ninth Circuit itself has since disavowed the opinion that Gingrich invoked as support for his position.  During the recent debate, only Ron Paul had the gumption to express any real concern about firing federal judges, correctly noting that the idea offended the Founders’ commitment to separation of powers.  Bachman, Perry, and Santorum jumped enthusiastically on the judge-bashing bandwagon. 

I get it that federal judges are not actually a huge constituency.  Politicians can refuse (and have refused) to pay them a fair wage; and a single U.S. senator can (and has) put “secret holds” on nominations to the federal bench to ensure that current judges do not get much needed help with their workloads.  And these silly political machinations increase the likelihood that highly qualified individuals will decline the possibility of service on the federal bench rather than subject themselves to such indignities.  Members of Congress do not see the benefit of defending the integrity of other branches of government.  And many see that they can actually make inroads with some voting blocs by railing against “activist judges”—by which they seem to mean any judges who reach results that the person hurling the ad hominem does not like.  So these folks mouth off, suggesting that we would somehow be better off if elected officials had the power to threaten the only branch of government not directly dependent upon a fickle electorate or well-endowed interest groups:  “Give us the results we, who know only the most superficial details about a case and the governing law, think are best or else!”

Lawyers Should Know Better

While some find these kinds of assertions stirring, just as many once responded to calls to engage in lynching, such words are decidedly dangerous.  Advocating that the rule of law in this country be replaced with a system reminiscent of Stalinist regimes and military juntas should horrify self-respecting lawyers of every stripe—Republican, Democrat, Green, Libertarian, or agnostic.

That is, lawyers in particular cannot idly dismiss the Gingrich rhetoric as “just words.” 

“Just words” is a deceptive phrase if ever there was one.  Words can hurt a great deal more than sticks or stones.  And they can do as much to transform how people see the world as non-verbal deeds can.  (Think of MLK’s “I Have a Dream” speech.)

Every lawyer knows that words matter tremendously.  As Judge Learned Hand noted: “Words are not only the keys of persuasion, but the triggers of action.”  In fact, words can themselves be actions—at least when they travel from one person to another.  And I am not referring only to the kind of words that philosophers call “speech acts”—such as words consecrating a marriage (“I now pronounce you husband and wife.”).  Words in motion can be criticism, praise, inspiration, provocation, education, deception, seduction, persuasion, instruction, analysis, commentary—You get the idea.

Lawyers’ power is a function of words.  More specifically, lawyers wield power by using reason to develop sound arguments that are supported by recognized authorities and acceptable evidence.  That is, the members of everyone’s favorite profession to hate have social power and responsibility because they sell reasonableness for a living—just using words. 

The Law is replete with prohibitions based on our societal understanding that words matter.  A bedrock principle of democracy is that words should flow rather freely.  Yet many causes of action reflect our understanding that words can be so damaging that certain types should be discouraged: libel, slander, tortious interference with business relationships, deceptive trade practices, fraud, insurance bad faith.   Other causes of action are premised on the fact that words themselves can give rise to legal rights in the form of contracts, copyright, covenants not to compete, implied and express warranties, and so forth.  In short, a great deal of The Law focuses on how word usage defines the boundaries of human freedom and responsibility.

So all lawyers should understand that nothing they write or say in a professional capacity is ever “just words.”  Indeed, “thinking like a lawyer” requires a heightened sensitivity toward the construction of words and the implication of analogies, a deep respect for linguistic clarity and precision, and the ability to root out irrational, or at least unsubstantiated, leaps of logic.  Good lawyers despise vague formulations and declaw paper tigers by using words like razors, not cudgels.

If you took a public opinion poll, a lot of non-lawyers would probably agree that lawyers use words for a living—but would argue that lawyers do so mainly to manipulate, hide, intimidate, bludgeon.  These same hypothetical respondents might even suggest that, because lawyers’ medium is “just words,” lawyers should be viewed with suspicion or even disdain.  This latter sentiment is symptomatic of “logophobia.”

Lawyers Should Resist Logophobia

“Logophobia” is the irrational fear of logic.  “Logos” means “words,” but in the Classical sense it also means cosmic reason, the source of order and true knowledge.  A “phobia,” also from Classical Greek, refers to an illogical fear.  Those who exploit logophobia use words to incite while abandoning any concern that their words are properly tethered by context, connotations, and correspondence to hard reality.  They actively choose words that will interfere with their listeners’ ability to think straight, as they hope to compel action based on unbridled emotion.  But as Aristotle instructed, truly persuasive discourse must strike a balance between pathos, ethos, and logos.  Appeals that rely chiefly on pathos—such as calls for reactionary vengeance—may prompt action, but they do not serve the greater good.

But because logophobia exists and may seem to further their clients’ interests, plenty of lawyers, not just politicians, try to exploit it.  These lawyers misuse words and invite their audience not to think.  But I believe appeals to logophobia are a really bad idea.  And not just because they are unethical.  While politicians rely on logophobia to gain short-term advantages, lawyers engaged in actual lawyering who resort to logophobia often see their efforts backfire. 

Let me tell you about a federal criminal case that I once saw tried to a verdict.  The case involved white collar crimes, including massive securities fraud.  The defendant was a mid-level manager whose bosses had already negotiated plea agreements with the government.  He was a handsome family man and a hard-working, ambitious professional—trained as both a lawyer and an accountant.  He was also the author and recipient of many e-mails describing various complex accounting transactions and observations on what should and shouldn’t be disclosed to “anyone.”  At trial, the lawyer for the accused pursued a theme that went something like this: “My client don’t know nuthin’ ’bout no mark-to-market accounting.  His company hired lots of fancy lawyers and accounting firms.  He and the company relied on them to tell him what was right.  The Government is gist tryin’ to make his young fella a scapegoat and get another notch in its gun.”  To go with this theme, the lawyer, a city boy, adopted an exaggerated country accent, cowboy boots, and bad grammar.

This strategy struck me as distracting at best.  Neither the lawyer nor his client was an ill-informed bumpkin.  And the mismatch between the lawyer’s style and the case’s exceedingly complex substance created dissonance.

I cannot say that the jury found this bright young family man guilty on multiple criminal counts because they too felt this dissonance and thus distrusted the lawyer and, by extension, his client.  Certainly, the decision to pursue this particular trial strategy was not professional malpractice.  Yet the strategy did not result in the client’s prevailing in the face of the government lawyers’ plodding, methodical presentation.

Perhaps the strategy failed because the jurors took their jobs seriously.  That is, citizens who are asked to do their civic duty and serve on juries are explicitly instructed not to let emotion cloud their judgment.  They are supposed to assess credibility, weigh evidence, and see how the facts fit with the law as it has been described to them.  And jurors mostly seem to take those instructions to heart.  Therefore, when lawyers take the stage, they need to appeal to jurors’ reason.  Lawyers do this by emphasizing substance in a way that makes their client’s view of reality seem more legitimate than the other side’s view.  The lawyer cannot be boring or indifferent in presenting this substance.  But a theatrical form alone cannot convince an impartial viewer to see it your way unless that viewer already suffers from logophobia. 

Appeals to logophobia diminish the legal profession and the judicial system itself.  When lawyers resort to logophobic tactics, they give fodder to those inclined to dismiss all trial lawyers as snake-oil salesmen who use theatrics to seduce juries. 

Because Words Really Matter

Today, all lawyers, not just plaintiff-side personal injury lawyers, have to do business in a culture affected by prejudices engendered by champions of “tort reform” who portray our justice system as overwhelmed by “frivolous lawsuits” filed by “unscrupulous trial lawyers” seeking “jackpot justice” at the expense of poor, innocent corporate “job-creators.”   But people continue to hire lawyers despite the ad hominems flying around out there because they need smart people to help them find reasonable ways to negotiate complicated, unpleasant situations.  These clients’ interests are best served by lawyers who are authentic—and who understand that “authenticity” is not synonymous with a certain accent, costume, or membership in a particular club.  Authenticity requires using yourself as a vessel to convey someone else’s story without recourse to logophobia and appeals to unfair or unreasonable prejudices.

Because logophobia is anathema to lawyering itself, lawyers should be willing to stand up and cry foul when someone in power starts shouting to the rabble: “First thing we do, let’s kill all the judges with whom we disagree!”  Perhaps you lawyers recognize this line as an allusion to “Dick the Butcher’s” infamous suggestion that Jack Cade, leader of a bloody, bumbling uprising in Shakespeare’s Henry VI, commence his regime by eradicating all lawyers.  In context, that laugh line symbolizes the highly uncivilized impulse of the logophobic—who would abolish the rule of law and bring on anarchy as a self-serving, short-term response to both real and perceived injustices.  Cade says, “Is not this a lamentable thing, that of the skin of an innocent lamb should be made parchment?  That parchment, being scribbled o’er, should undo a man?”  And with this colorful, rhetorical question, Shakespeare succinctly captures a rather scary disdain for literacy, written agreements, and the very concept that people should be bound by the contracts they sign.    

Shakespeare, mystery man though he may have been, knew that words matter.  Lawyers know this, too.  And because words matter—a lot—we have to acknowledge their power to do serious harm when they invite action divorced from reason.

 

Remember the antitrust settlement class that a Third Circuit panel struck down last year? The one that went en banc a few weeks later? The one whose oral argument Blawgletter saw and wrote a post about?

Today, the en banc Third Circuit ruled 7-2 in favor of class certification. Judge Rendell, who wrote the dissent from the panel ruling, authored the full court's majority opinion. As she summarized:

At issue on appeal in this class action litigation is the propriety of the District Court's certification of two nationwide settlement classes comprising purchasers of diamonds from De Beers S.A. and related entities ("De Beers").  The settlement provided for a fund of $295 million to be distributed to both the direct and indirect purchasers:  the direct purchasers were to receive $22.5 million of the fund, while the indirect purchasers would receive $272.5 million.  A panel of our Court held that the District Court‘s ruling was inconsistent with the predominance inquiry mandated by Federal Rule of Civil Procedure 23(b)(3), and remanded the matter for further proceedings.  See Sullivan v. DB Investments, Inc., 613 F.3d 134 (3d Cir. 2010), reh’g en banc granted and vacated by Sullivan v. DB Investments, Inc., 619 F.3d 287 (3d Cir. 2010).  We then granted the plaintiffs‘ petition for rehearing en banc and vacated the prior order. Accordingly, we address anew the propriety of the District Court‘s certification of the direct and indirect purchaser classes pursuant to Federal Rule of Civil Procedure 23(b)(2) and 23(b)(3), and also consider for the first time the objections raised to the fairness of the class settlement.2 

We believe that the predominance inquiry should be easily resolved here based on De Beers‘s conduct and the injury it caused to each and every class member, and that the straightforward application of Rule 23 and our precedent should result in affirming the District Court‘s order certifying the class.  But the objectors to the class certification and our dissenting colleagues insist that, when deciding whether to certify a class, a district court must ensure that each class member possesses a viable claim or "some colorable legal claim," (Dissenting Op. at 10).  We disagree, and accordingly, we will reason through our analysis in a more deliberate manner in order to explain why the addition of this new requirement into the Rule 23 certification process is unwarranted.

Sullivan v. DB Invesments, Inc., No. 08-2784, slip op. at 10-11 (3d Cir. Dec. 20, 2011) (en banc) (foonotes omitted).

The court went on to okay the district court's plan for doling out the money to members of the two subclasses of direct and indirect buyers and its award of about $73 million in fees and expenses to class counsel. The panel hadn't reached either issue because it ruled that the case didn't qualify for class treatment.

[Hat tip to the ever-alert William Hoese, whose membership in Phi Beta Kappa will come as no surprise to those who know him.]

AT&T just told the world that it and Deutsche Telekom would halt the purchase and sale of T-Mobile USA. The press release stated: 

AT&T Inc. (NYSE: T) said today that after a thorough review of options it has agreed with Deutsche Telekom AG to end its bid to acquire T-Mobile USA, which began in March of this year.

The actions by the Federal Communications Commission and the Department of Justice to block this transaction do not change the realities of the U.S. wireless industry. It is one of the most fiercely competitive industries in the world, with a mounting need for more spectrum that has not diminished and must be addressed immediately. The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage.  In the absence of such steps, customers will be harmed and needed investment will be stifled.

“AT&T will continue to be aggressive in leading the mobile Internet revolution,” said Randall Stephenson, AT&T chairman and CEO.  “Over the past four years we have invested more in our networks than any other U.S. company. As a result, today we deliver best-in-class mobile broadband speeds – connecting smartphones, tablets and emerging devices at a record pace – and we are well under way with our nationwide 4G LTE deployment.

“To meet the needs of our customers, we will continue to invest,” Stephenson said. “However, adding capacity to meet these needs will require policymakers to do two things. First, in the near term, they should allow the free markets to work so that additional spectrum is available to meet the immediate needs of the U.S. wireless industry, including expeditiously approving our acquisition of unused Qualcomm spectrum currently pending before the FCC.  Second, policymakers should enact legislation to meet our nation’s longer-term spectrum needs.

“The mobile Internet is a dynamic industry that can be a critical driver in restoring American economic growth and job creation, but only if companies are allowed to react quickly to customer needs and market forces,” Stephenson said.

To reflect the break-up considerations due Deutsche Telekom, AT&T will recognize a pretax accounting charge of $4 billion in the 4th quarter of 2011.  Additionally, AT&T will enter a mutually beneficial roaming agreement with Deutsche Telekom.

 WSJ article here. Post with links to older posts here.

Church & Dwight bills itself as "one of the fastest growing Consumer Packaged Goods companies" and as "a leader in the Household Consumer Products and Personal Care industry, with such brands as ARM & HAMMER, Trojan, First Response, Nair, Spinbrush, Oxi Clean, Orajel and more."

Note the "Trojan" bit.

In June 2009, the Federal Trade Commission resolved to check Church & Dwight out on whether it "has attempted to acquire, acquired, or maintained a monopoly in the distribution or sale of condoms in the United States, or in any part of that commerce, through potentially exclusionary practices including, but not limited to, conditioning discounts or rebates to retailers on the percentage of shelf or display space dedicated to Trojan brand condoms and other products distributed or sold by Church & Dwight, in violation of Section 5 of the Federal Trade Commission Act." Federal Trade Comm'n v. Church & Dwight, Inc., No. 10-5383, slip op. at 3 (D.C. Cir. Dec.13, 2011).

Church & Dwight, the FTC pointed out, held more than 70 percent of the U.S. market for latex condoms.

True to its Resolution, FTC staff subpoenaed the firm to turn over documents relating to "Trojan brand condoms and other products distributed or sold by Church & Dwight". The company objected that "and other products" must mean other condom products and that therefore it could redact from documents that did concern condom products any statements about non-condom products. The FTC and district court deemed to gripe overly rigid and said no to quashing the subpoena. This week, the D.C. Circuit affirmed.

Church & Dwight seems to have thought it could win by asking the D.C. Circuit to reject what it (C&D) deemed an extreme reading of Sherman Act section 2 — the Third Circuit's en banc decision in LePage's Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003) (en banc). The LePage's court ruled that the jury could have properly found, as it did, that 3M violated section 2 by bundling of products even if the bundling didn't involve predatory (below-cost) pricing.

People had "roundly criticized" the ruling in LePage's, the panel noted, but then it held: 

Because LePage’s is the law in the Third Circuit, and because Church & Dwight sells both condoms and other consumer products within the Third Circuit, the Commission may lawfully investigate whether the Company’s practices would constitute a violation of the law in that circuit.  Although this court might someday reach a different resolution of the issue presented in LePage’s, “a subpoena enforcement action is [generally] not the proper forum in which to litigate disagreements over an agency’s authority to pursue an investigation.  Unless it is patently clear that an agency lacks the jurisdiction that it seeks to assert, an investigative subpoena will be enforced.”  [FTC v. ]Ken Roberts[ Co.], 276 F.3d [583,] 584[ D.C. Cir. 2001)].  We hold, therefore, the Resolution lawfully encompasses an investigation into whether Church & Dwight has bundled discounts for condoms and other products in order to acquire or maintain a monopoly in the market for condoms in the United States.

Church & Dwight, slip op. at 8 & 9-10.