Note the "and" in "to protect the Lender's interest in the Property and rights under this Security Instrument".

The lender got a judgment against the home owners in their bankruptcy case and asked for an award of attorneys' fees for its trouble. The bankruptcy and district courts said no, that "and" means "and", that it doesn't mean "and/or". But the Fifth Circuit reversed:

[W]e find that consideration of Section 9 [in the deed of trust] as a whole requires construing "and" to mean "either or both: to effectuate the clear intent of the parties.   Section 9 specifically lists contemplated actions that can be undertaken by the lender.  It states that "Lender's actions can include, but are not limited to . . . paying reasonable attorneys' fees to protect its interest in the Property and/or rights under this Security Instrument, including its secured position in a bankruptcy proceeding." (emphasis added).  In light of this language, it is clear that the Deed of Trust contemplates entitlement to attorney's fees incurred to protect Countrywide's interest in the property or rights under the Deed of Trust.  Consequently, "and" does not strictly mean "both" in the phrase "Lender may do and pay for whatever is reasonable or appropriate to protect Lender’s interest in the Property and rights under this Security Instrument."  (emphasis added).  To interpret Section 9 otherwise would impermissibly render portions of the agreement meaningless and frustrate the intentions of the parties as made clear by Section 9 as a whole.

Valasquez v. Countrywide Home Loans Servicing, Inc., No. 10-20609, slip op. at 9 (5th Cir. Oct. 17, 2011) (per curiam).

Just why the panel thought that "and" meant "and/or" in a contract that used "and/or" when it meant and/or baffles Blawgletter. Didn't the lender write the deed of trust? Don't ties go to the debtor?

But what do we know. As Lewis Carrol wrote:

"When I use a word," Humpty Dumpty said, in rather a scornful tone, "it means just what I choose it to mean — neither more nor less."

"The question is," said Alice, "whether you can make words mean so many different things."

"The question is," said Humpty Dumpty, "which is to be master — that's all."

And some wonder why OWS swells.

Bonus: Two months ago, a different Fifth Circuit panel ruled against the lender on the same issue. See Wells Fargo Bank v. Collins, 2011 WL 3568910 (5th Cir. Aug. 15, 2011) (per curiam). The new panel "respectfully disagree[d]" with the old one but didn't say why. Valesquez, slip op. at 9 n.5.

______________________

Our thanks to WaveCult for the lovely flickr image.

Your mom asked you, when you told her you'd lost something, "where'd you see it last?" Right? And it worked? Maybe not right away but soon. Yes?

The folks at Absolute Software and Stealth Signal tried to save you from your mom's loving disdain by coming up with ways to track laptops that someone had either misplaced (you) or stolen (the person who "found" the laptop you'd "misplaced" in the airport Admirals Club while you went to refill your ramekin of wasabi beans).

After Absolute sued Stealth for patent infringement and Stealth returned the favor, an Epic Battle ensued in Houston's U.S. District Court. The judge (Ewing Werlein) cast a pox on both parties' houses by way of a summary judgment order, in which he ruled neither house infringed the other's patents.

The Federal Circuit for the most part affirmed the order. But the panel begged to differ on whether Absolute raised a fact question on infringement. It held that the record could support a jury finding that Stealth's XTool Tracker (a software "agent" program) gave both the Internet protocol (IP) address of the "host" tracking system and the IP address of the laptop that emits (thanks to the Stealth "agent") an SOS signal. Absolute Software, Inc. v. Stealth Signal, Inc., No. 2010-1503 (Fed. Cir. Oct. 11, 2011).

Blawgletter guesses that you'd need the IP address of each to locate the laptop you should have tucked under your arm before going for the snack you really didn't need before boarding your flight to a place at which you'll spend most of your time asking questions of a person you have never met and won't likely see ever again and whose smug answers anger only you and the court reporter who wants you to hire the firm for which the CR works to record more depositions.

We guess we'll see on remand. Won't we.

Setting: Sunday morning at the Original House of Pancakes, Northwest Highway unit. Newsprint litters a table. Bitey gulps coffee and tries for eye contact with Snappy, who has just done the crossword.

Bitey: Hey, Snaps — did you read the "The Glass Ceiling" thing in The New York Times? On the page where they Share Their Views on the World with Us? Huh?

Snappy: Nay.

Bitey:  But you'd like it! It says things like women make up almost half of law firm associates but just 15 percent of "equity partners", six percent in big firms.

Snappy: Tedious.

Bitey: Don't say that, Snappy! Just because you've done so great!

Snappy: Does it say why?

Bitey: Yes. It talks about a "presumption that women are less devoted to their jobs", "the buddy system" that results in better work going to men, the "stigma" of working on a flex schedule, and the need to "have transparent systems for evaluating, assigning and paying lawyers."

Snappy: Snork.

Bitey: [Heavy sigh.] Maybe you'd like this one better — "For Women, Parity is Still a Subtly Steep Climb".

Snappy: You astonish me. What does it say?

Bitey: Some of the same stuff. About "a corporate environment" instead of the law biz. Also mentions that people need "sponsors" to climb up to the top tier in a company.

Snappy: [Raising eyebrows.] Hand it here, you.

Bitey: [Beaming.]

Snappy: Hmm. This bit looks pretty good:

”Women tend to be overmentored and undersponsored,” says Ms. Hewlett, who has done research to find out why. One reason is that women are more uncomfortable using their work friendships to land a deal or to join a team, she says. For men, those kinds of interactions tend to be second nature.

Another tripwire is more insidious because it is awkward to discuss. Most of the people in senior management are men, but many are very reluctant to take on women as protégées because of the sexual dynamics, Ms. Hewlett says. They fear that gossip will spread if they are seen regularly with a junior female colleague.

Companies must face this uncomfortable reality head-on, she says. They need to make sponsorship a transparent and integral part of the culture, so that when a male senior executive is seen with a lower-level manager, it will be assumed that he’s a sponsor.

“When women have a sponsor they really do move up,” Ms. Hewlett says, “but you can’t just be a wallflower and wait for someone to pick you.” Actively working to find a sponsor is good practice for a higher leadership position, she adds, because it is all about “leveraging the power relationships in your life.”

Bitey: Can you use that big of an quote without infringing copyright?

Snappy:  Don't know. We'll just have to see.

Can you think of anybody who has made more of a direct impact on your life than Steve Jobs?

He of the iPod, the iPhone, and the iPad?

Anybody? No? Dang.

How could you not admire his work?

When Blawgletter read of the death of Mr. Jobs this week, we felt sad. That surprised us. It really did. We never met him, but just the same we wished he hadn't had to go.

We thought about the help he'd given us (and a great many others). Wow. And we also thought how much we will miss him.

Rest in peace, Steve Jobs. Rest in peace.

People who run a company that enters the "zone of insolvency" acquire a new set of duties. Surprise!

Instead of working only for the firm and its owners, they must now answer also to its creditors. And, if they let the outfit keep going when it should shut down to cut losses, they may expose themselves to claims by those creditors under the "deepening insolvency" theory of liability.

Blawgletter has written a couple of items about the theory (here and here). In the process, we've pointed out that two defenses most often vex a deepening insolvency claim — the business judgment rule (which applies to claims that someone breached the duty of care) and the doctrine of in pari delicto ("equally at fault"). A new ruling out of the Third Circuit shows how to get around both.

The case of In re Lemington Home for the Aged (Official Committee of Unsecured Creditors v. Baldwin), No. 10-4456 (3d Cir. Sept. 21, 2011), involved an odd set of facts. The officers and directors of the Lemington Home, a non-profit that started in 1883, let the record-keeping and financial condition of the Home fall into such bad shape that they at length chose to shut it down.

But they did many things wrong, according to the court. They didn't tell people who continued to provide goods and services of the impending closure. They also did next to nothing to collect — or even track — the large payments owing to the Home from Medicare. Nor had the Home's Administrator shown up to work more often than once in awhile (due to illness), and the Chief Financial Officer seems not to have known how to keep a general ledger or maintain billing records. Plus the directors opted to transfer assets from the Home to another non-profit in which many of them also served as directors.

Lots of other bad stuff happened, too.

The impending disaster came to a head after two of the Home's residents died. The Home soon after filed for bankruptcy. But even then it failed to file financial reports that would have disclosed to creditors the size of its ongoing losses.

The district court granted the directors and officers summary judgment. It relied on the business judgment rule and the in pari delicto doctrine.

The Third Circuit reversed. It rejected the business judgment defense because the evidence implied that the officers and directors knowingly did a deplorable job (by, for example, letting the Home go on with a largely absent Administrator and an, ahem, uncareful CFO). The panel also ruled that in pari delicto did not apply where the conduct of the officers and directors did not benefit the corporation.

What does the case mean? We think not that much. If you believe the Third Circuit's review of the facts, the people who controlled the destiny of the Home acted and failed to act in ways that we struggle to explain. The Home no doubt did a lot of good for many years. Maybe that blinded the defendants to how their conduct might look in the cool light of day. And yet they acted with astonishing dumbness.

A Seventh Circuit panel today upheld an award in arbitration.

The panel ruled that the arbtitrators didn't manifestly violate law or exceed their powers by finding that the parties jointly owned one patent "family" and that one of the parties solely owned another family of patents. Affymax, Inc. v. Ortho-McNeil-Janssen Pharmaceuticals, Inc., No. 11-2070 (7th Cir. Oct. 3, 2011).

Chief Judge Easterbrook wrote the opinion. His ruling overturned the district court's, which tossed the arbitration award.

Imagine Blawgletter's surprise.

Blawgletter's friend Sam Simon asked us to visit this morning with the Class Action Committee of the New York State Bar's Antitrust Section, and the chair — whom we also count as a friend — Hollis Salzman gave her okay.

You can see below the remarks we wrote out (plus a Q&A at the end to reflect some of the things that happened during the back-and-forth with CAC members):.

Good morning. You are very kind to let me talk with you about the Behrend v. Comcast case. And I thank my friends Sam Simon and your chair Hollis Salzman for granting me this privilege.

Sam asked me to cover a couple of things with you and at the same time urged me to urge all of you to make comments and ask questions any time you want. We'll get the most out of our time if we make it a back and forth, not just with me but also with your colleagues on the Class Action Committee.

I'll start with a sketch of the dynamics of the Comcast case, which we call Cable Antitrust, and of the proceedings before Judge Padova in Philadelphia and then give an overview of the Third Circuit's ruling. Again, please chime in if you have a point you'd like to make or a question you want to ask.

The dynamics of a case that is now almost eight years old have of course changed since the day in December 2003 when we filed it.

The case has always alleged that Comcast violated sections 1 and 2 of the Sherman Act by pursuing a strategy of "clustering" its cable assets in certain metropolitan areas. It executed the strategy largely by gobbling up other cable providers and systems that furnished cable service in the metropolitan areas that Comcast wanted to dominate.

The result of the decade-long process was that Comcast dominated some areas while its erstwhile competitors dominated others and that the fortresses they thus created enabled them to fend off head-to-head competition from overbuilders.

An overbuilder, as you may know, builds a cable system on top of or beside an existing system, enabling the overbuilder to compete for the incumbent's existing cable subscribers.

The Behrend lawsuit challenged Comcast's conduct in three areas — Boston, Chicago, and Philadelphia.I'll talk only about Philadelphia today. The Boston and Chicago parts of the case have been stayed pending the result of the Philadelphia piece.

The first several years involved dealing with preliminary matters, starting with a motion to compel arbitration, which led to two trips to two different courts of appeals; we ultimately won [see Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006)], and Comcast agreed to withdraw its demand for individual, case-by-case arbitration.

We also responded to a pre-Twombly motion to dismiss and then a post-Twombly motion for judgment on the pleadings. Judge Padova wrote strong opinions rejecting the motions.

We moved for class certification, and Judge Padova granted the motion in 2007. After Hydrogen Peroxide came out at the end of 2008, he partly decertified the class because he concluded he had not made express findings on two issues, both relating to predominance under Rule 23(b)(3) — antitrust impact and methodology of damages — specifically, whether the class could prove those elements using evidence common to the class.

We felt the court didn't need to conduct an evidentiary hearing, but Comcast said the opposite. As a result, Judge Padova heard live testimony over four days in the fall of 2009, culminating in a half-day of final argument.

If that isn't a mini-trial, I don't know what is. But I believe Judge Padova wanted to make sure he fully and scrupulously satisfied the Hydrogen Peroxide standard. He issued his opinion in January 2010.

Comcast asked the Third Circuit to take an appeal under Rule 23(f), and the court granted the petition in June 2010. The parties briefed the appeal and argued it in January of this year.

We had a total of five judges who for awhile at least were on our panel. Judge Rendell, who signed the order granting the 23(f) appeal, recused herself a week or two before the hearing. Judge Jordan replaced her. Judge Ambro presided at the oral argument. He recused himself a week after the argument; Senior Judge Aldisert took his spot.

The reconstituted panel did not request further oral argument. Their opinion came out on August 23, 2011, with Judge Aldisert writing the majority opinion for himself and Judge Fisher and Judge Jordan concurring in part and dissenting in part. [Behrend v. Comcast Corp., — F.3d —, 2011 WL 3678803 (3d Cir. Aug. 23, 2011)]. The court declined rehearing en banc on September 14.

In brief, the majority held that Judge Padova did not abuse his discretion or clearly err in finding and concluding that we met our burden of showing a plausible theory of antitrust injury and a plausible damages methodology and citing evidence common to the class in support of the plausible theory and plausible methodology.

On antitrust impact, the majority ruled that expert reports, government and academic studies, and Comcast's own documents and testimony supported a finding that the clustering strategy in Philadelphia enabled Comcast to stop an overbuilder, RCN, from building a system in the Philadelphia area and that the deterrence of overbuilding competition allowed Comcast to charge supra-competitive prices for cable service throughout the area, not just in the five counties where RCN announced plans to overbuild.

A lot of the discussion dealt with whether we'd shown a plausible basis for defining the relevant geographic market as the Philadelphia Designated Market Area, which roughly corresponds to the Philadelphia metropolitan area. The panel said we had made the necessary showing because the evidence indicated that cable subscribers in the DMA faced similar competitive choices — meaning that they overpaid for cable because Comcast quashed overbuilding and jacked up prices throughout the DMA.

Judge Jordan concurred with the conclusion that Judge Padova didn't err in dealing with the question of class-wide antitrust impact, but he got there by a different route. He wrote that the geographic market doesn't really matter so long as there's evidence that the members of the class all sustained antitrust impact. And he agreed with the majority that we'd presented evidence of common impact of the anticompetitive conduct across the class.

On the damages methodology, the majority rejected Comcast's criticisms of our expert's analysis. Dr. McClave used screens to create an econometric analysis of the difference between the prices that Comcast actually charged and the prices it would have charged in the absence of its anticompetitive behavior. Comcast's critique was wide-ranging but to some extent focused on the fact that Judge Padova rejected three of four theories we presented of anticompetitive conduct.

The surviving theory alleged that clustering deterred overbuilding and that the deterrence of overbuilding allowed Comcast to charge supra-competitive prices. Comcast argued that it just couldn't be so that Dr. McClave's analysis could withstand the loss of the other three grounds of liability. Judge Jordan agreed in dissent. But the majority did not. They instead ruled that Judge Padova acted within his discretion and did not clearly err in accepting Dr. McClave's explanation that his methodology isolated truly anti-competitive conduct and therefore provided an accurate estimate of what prices would have been in the more competitive but-for world.

The main significance of Behrend v. Comcast is in saying that class certification in a large antitrust case can be done, that perfection isn't the standard, that plausibility is the key. That "plausibility" thing seems to echo Twombly's plausibility test for pleading but doesn't expressly adopt it.

The panel shunned the idea of having mini-trials on class certification, and that may be true in some cases. But it's hard to imagine that in a complex antitrust case you will not have live testimony at least of experts. In the Chocolate case just yesterday, in fact, Judge Connor set a three-day evidentiary hearing in November. That, I suspect, will be the norm in antitrust cases, at least until we see the courts of appeals allow less elaborate proceedings before certification.

That is what I had prepared to say. Please let me know if you have any questions.

Qs and As:

  • Do you now have to have evidentiary hearings before class certification? It depends. In some cases, maybe not. In complex cases, including most antitrust actions that involve heavy expert work, you may not be able to avoid presenting live testimony.
  • What happens next in Behrend v. Comcast? Today the Third Circuit issued its mandate, which will have the effect of sending the case back to Judge Padova. Comcast may ask for Supreme Court review, but that won't stay the case in the trial court. We expect supplemental briefing on narrower summary judgment issues and a trial setting, we hope in the next six to 12 months.
  • Didn't all those proceedings cost class counsel a lot? Yes. On the other hand, the process, and especially the result of the appeal, reduced the uncertainty that plaintiffs have and has gotten us ready to try the case without a great deal of additional expenditure of time and money.
  • How can you manage the amount of effort you have to put into class certification? Behrend v. Comcast will likely represent the gold standard of class certification proceedings. Judge Padova prudently and scrupulously followed, met, and exceeded the requirements the Third Circuit set in Hydrogen Peroxide. The question now is, how much less can a district court do while still meeting the Hydrogen Peroxide standard? We'll need to litigate some more to get more guidance on what steps short of what we did in Behrend v. Comcast will suffice.
  • Where did you get your phrase "I'm not telling the cow how to eat the cabbage" from the oral argument? The court tells you in advance who will sit on the panel, and I saw that two of the three members of the Hydrogen Peroxide panel were going to serve also on the Behrend v. Comcast panel. So I tried to think of a way to say what I thought Hydrogen Peroxide required without sounding presumptuous. And that's what occurred to me. [You can get an idea of why the phrase would bloom in the mind of a lawyer who grew up in the piney woods of East Texas here.]

Did you really not know that selling out your clients could get you in trouble?

A law firm that agreed to take many millions — up to $7.5 millions — from a defendant in return for getting plaintiff-clients to settle cheap seems not to have thought that far ahead.

The firm hired on to represent 587 people who claimed that Nextel discriminated against them in the terms or conditions of employment. But it also agreed with Nextel to get its clients to accept a Dispute Resolution and Settlement Agreement (DRSA), which forced them to mediate and then arbitrate but also promised the firm a big pay day.

Some of the clients sued the firm. The district court granted a motion to dismiss for failure to state a claim. But the Second Circuit reversed. It said:

On the face of the DRSA, its inevitable purpose was to create an irresistible incentive — millions of dollars in payments having no relation to services performed for, or recovery by, the claimants — for LMB to engage in an en masse solicitation of agreement to, and performance of, the DRSA's terms from approximately 587 claimant clients. The effectiveness of the DRSA, and therefore the payments to LMB, depended on Nextel's conclusion that a sufficient number or clients had agreed to it. . . . By entering the DRSA, agreeing to be bound by its terms and accepting the financial incentives available therein, LMB violated its duty to advise and represent each client individually, giving due consideration to differing claims, differing strengths of those claims, and differing interests in one or more proper tribunals in which to assert those claims.

Johnson v. Nextel Communications, Inc., No. 09-1892-CV (2d Cir. Sept. 26, 2011) (footnotes omitted). The panel thus upheld the complaint and sent the case back to the district court to deal further with the claims that the law firm breached fiduciary duties to its clients.

Blawgletter offers no view on whether the law firm in fact did wrong. Ahem.

The joint defense agreement between Nintendo and Advanced Micro Devices made their talks about litigation private but also said the JDA and actions under its veil would not provide either Nintendo or AMD grounds to disqualify counsel for the other company.

An in-house lawyer for AMD left the company for a job as partner at a law firm, which in due course sued Nintendo for patent infringement. Nintendo moved to DQ the law firm. The district court granted the motion.

Who wins the firm's petition for writ of mandamus?

The law firm, of course — on the strength of the waiver of the right to DQ in the JDA. In re Shared Memory Graphics LLC, Misc. No. 978 (Fed. Cir. Sept. 22, 2011).

Another quirk of his at the time was that in general he refused to look at any memo submitted to him in writing if it exceeded one page. He required memos from his employees and advisors to be reduced to one page and he preferred that each memo deal only with one subject matter.

Oberly v. Howard Hughes Medical Institute, 472 A.2d 366, 374 (Del. Ch. 1984) (Brown, C.) (describing one habit of late billionaire, magnate, and crazy person Howard Hughes).