Blawgletter felt in our gut that the AT&T deal with Deutsche Telekom to buy the T-Mobile wireless system would never go through.

Christine Varney, the head of the Antitrust Division in the U.S. Department of Justice, wouldn't stand for it. She threw out a Division report that she saw as too deal-friendly and teamed up with the Federal Trade Commission to make their joint guidelines for judging mergers less deal-friendly.

Neither would Julius Genachowski, chair of the Federal Communications Commission. He's declared himself a friend of consumers and an enemy of too much market power.

Plus just the idea that the biggest wireless firm could gobble up the third-largest in one $39 billion gulp feels so wrong.

News weighs in.

But AT&T''s (and our) home town newspaper, The Dallas Morning News, begs to differ. It came out today in favor of letting AT&T swallow T-Mobile. Its reasons? All revolve around scare-mongering. Behold:

Developing faster and more affordable high-speed networks is to the digital age what railroads, highways, the telephone and electricity were for past generations. Moreover, the ability to move data quickly and affordably is a competitive edge that ultimately translates into thousands of new jobs and more efficient commerce. Today, there are many elements that determine whether mergers are in the public interest. That’s a new-age way of looking at competition — and one that regulators would be wise to factor into their reviews.

So there you go. We need to leave behind "old school" notions of competition and adopt "a new-age way of looking at" it — the way that focuses on building "high-speed networks" and creating "thousands of new jobs and more efficient commerce" as a result of the merger. Failure to okay the deal would DEPRIVE US OF THE NETWORKS and KILL THOSE JOBS!

Really? How, exactly? A lot of the cost savings come from firing people and closing offices. Thousands of people, dozens of offices. $40 billion worth!

And a stronger AT&T, its number three competitor safely in its belly, will feel less pressure to offer good rates, expand product offerings, and provide good service, which lots of people regard as awful already. Taking the pressure off AT&T to furnish those things will cost jobs . . . and will put more money in AT&T's pockets, mainly at the expense of employees, customers, and suppliers.

What'll happen?

Will the deal pass muster? Put us down as doubtful. We'll likely see a clutch of private antitrust suit against AT&T — perhaps even one by Sprint — and very close review by the Antitrust Division and FCC. The pressure may cause a gasket to blow.

But the thing that may undo the pact lies within it.  The Stock Purchase Agreement promises, in the event a Governmental Entity doesn't approve the transaction, that T-Mobile gets a "Termination Transfer" of $3 billion plus "the assets set forth on Annex E". (You'll look in vain in AT&T's Report on Form 8-K for Annex E on the company's website.) The assets consist of "a roaming agreement with Deutsche Telekom on terms favorable to both parties and [a] transfer to Deutsche Telekom [of] certain wireless AWS spectrum that the Company does not need for its initial LTE roll-out." Which T-Mobile may conclude, as it reviews its options, beats going the way of Pacific Bell, Ameritech, and Bell South.

Would the death of the deal make T-Mobile stronger? We suspect so. (And a combination with Sprint would do less harm.)  And we hope the Termination Transfer proves the poison pill it seems. We don't fear it a bit. Doing it old school!

Bitey:    Snappy, those nice people at The Wall Street Journal put a big whamba-lamba ding-dong on some real bad lawyers this weekend. Won't those shysters not never learn? Right?

Snappy:    As if.

Bitey:    Didn't you read it, Snaps? It said an awesome judge in Chicago kicked a case against Boeing because the lawyers had told her about what a "confidential source" knew — wrongly! Something to do with the 787 Dreamliner. Like the execs somehow knew it had problems!

Snappy:    Duh.

Bitey:    Wake up! You totally hate on lawyers who lie.

Snappy:    Mmmph.

Bitey:    Although I read Judge Conlon's nine-page opinion and saw that she didn't say they lied and mainly complained they hadn't checked the guy's story enough:

More significantly, this unseemly conflict between plaintiffs' confidential source and plaintiffs' investigators could have been avoided by reasonable inquiry on the part of plaintiffs' counsel before filing the second amended complaint and, later, by making flawed representations directly to the court about the confidential source's position and firsthand knowledge of Boeing's internal testing documents. It is uncontested that plaintiffs' counsel did not meet Singh until his deposition approximately six months after filing the second amended complaint, nor does it appear that counsel conducted a reasonable investigation concerning the credibility and reliability of a purported key witness attributed with making the serious allegations in paragraphs 139-142.  Rather, plaintiffs' counsel relied on investigators' unverified interview reports, even though one report noted Singh's information regarding Boeing's Structural Design reporting hierarchy was unreliable. Dkt. No. 193 (January 18, 2011) Ex. 9 at 20.  This should have been a red flag. Instead, the information described by the investigator as unreliable was included in paragraphs 139 and 140 of the second complaint.

Snappy:    Go away.

Bitey:    I myself blame the Private Securities Litigation Reform Act. Because — as the smart, honest, and exceptionally good-looking WSJ folks pointed out — the lawyers had a town's pension fund as a client; and under the PSLRA you pretty much have to get an institutional investor as a client if you want to represent a class in a securities fraud case. The really, really, really super-duper lawyers don't go there. So you get firms that institutionally represent institutional investors. Urp.

Snappy:    Do you know all you've said so far sounded to me like buzzzzz?

Bitey:    Huh?

Snappy:    Buzzzzzzzzzzzzz.

Bitey:    What. Ever.

Now I'll quote something else from WSJ:

As all trial lawyers know, the main hurdle for this kind of case is surviving the motion to dismiss. To move forward, plaintiffs must present some bare-bones evidence of fraud to the court. If their complaints can squeak by, the case moves into the discovery phase, allowing attorneys to rummage through millions of documents, imposing huge costs and inconvenience on companies that increase the incentive to settle.

In fact, Snapster, you don't have to "present some bare-bones evidence of fraud to the court".  You've got to plead fraud "with particularity". And you've got to make the judge draw a "strong inference" of intent to defraud. Bare bones, hah!

Snappy:    Imagine my surprise.

Bitey:    One last thing. The lawyers offered 21 exhibits to show Boeing did lie about the 787, but the judge refused to give them weight. Because the issue, to her, boiled down to whether she would've granted a motion to dismiss many months before if she'd known the truth about the source.

Snappy:    Pipe down. I can't hear Top Chef.

Fade to black.

1.    Atheists disqualified from holding office or testifying as witness.

No person who denies the being of a God shall hold any office in the civil departments of this State, nor be competent to testify as a witness in any Court.

Arkansas Constitution of 1874, art. 19, § 1.

[Hat tip to Blawgletter's ever-alert partner in Seattle, Drew Hansen.]

When something hits him on the head, Chicken Little gets an epiphany, and he runs to warn the king that the sky has commenced to falling. Converts rally to his cause. A great cry goes up in the land. And fear stalks the streets.

The sky hasn't fallen at all, of course. Just an acorn.

Kind of the same thing happened not long ago after the Federal Circuit ruled that damages in false patent marking cases could, in theory, total billions of dollars — up to $500 per item that displayed a false patent marking.  See "False Patent Marking Gets Fine 'Per Article', Federal Circuit Rules", Dec. 29, 2009.

You can see a good example of the response in "Trolls Target Patent Markings with a Trillion Dollar Lawsuit", Mar. 1, 2011.

Yesterday, the Federal Circuit did something to quell the hyperventilating. It issued a writ of mandamus telling a district court to require a false patent marking plaintiff to plead the "fraudulent intent" element of his claim "with particularity" under Rule 9(b).  In re BP Lubricants USA Inc., Misc. No. 960 (Fed. Cir. Mar. 16, 2011). The ruling will make pleading a case under 35 U.S.C. § 292 harder and winning a motion to dismiss more likely.  See, e.g., this.

Where in the false marking statute do you find this scienter element, you say?  You don't, Blawgletter regrets to reply.  It springs instead from judicial gloss — and pretty recent gloss at that.  See Clontech Labs., Inc. v. Invitrogen, Inc., 406 F.3d 1347,1352 (Fed. Cir. 2005) (deeming the question of whether statute requires intent to deceive public "virtually an issue of first impression").

No doubt in the rush to get out a ruling that calms some of the false marking hysteria, the panel omits that bit of history. Which tells you something about how much the IP game involves inside baseball.  But you knew that already.

[Bonus:  Who remembers what happened to Chicken Little, Ducky Lucky, Turky Lurky, et al.?  Lookie here.]

Patent reform seems to have gotten a boost in the 112th Congress.  The Senate voted 95-5 on March 8 to pass The America Invents Act, which also goes by S.23 among the cognoscenti, which doesn't include Blawgletter.

Some key changes would have affected lawsuits in direct ways.  But, just before the Senate tally, S.23 shed almost all of those parts.  The bill thus doesn't cabin damages, keeps the status quo on venue transfer, and waters down limits on business method patents.

Manus Cooney and Marla Grossman at IP Watchdog give a great overview.

The House may act on the bill this month.

Blawgletter just wrote a paper for an American Bar Association newsletter.  It starts thus:

You know that the Supreme Court took no antitrust cases in its (current) October 2010 Term, right?  You feel either sad (defense lawyer) or happy (plaintiff side), yes?  We’ll have no Twombly,[1] no Leegin,[2] no Weyerhaeuser,[3] no Empagran,[4] not even a Credit Suisse[5] or an American Needle[6] in 2011, you think?  No big changes in the antitrust firmament, correct?

Hah.

[1] Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (creating plausibility test for pleading causes of action and affirming dismissal of antitrust claim alleging that local telephone companies conspired not to compete outside their respective historical territories).  Blawgletter posts here, here, here, and here.

[2] Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007) (overruling per se treatment of antitrust claims alleging vertical price restraints under Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911)).  Blawgletter post here.

[3] Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549 U.S. 312 (2007) (holding that predatory bidding on product inputs claim required proof that bidder lost money on sales of output goods but would likely recoup the loss later).  Blawgletter post here.

[4] F. Hoffman-La Roche Ltd. v. Empagran S.A., 542 U.S. 155 (2004) (ruling that Foreign Trade Antitrust Improvements Act barred price-fixing claims by foreign buyers of goods).

[5] Credit Suisse Securities (USA) LLC v. Billing, 551 U.S. 264 (2007) (concluding that federal securities law precluded antitrust claims that challenged conspiracy among securities underwriters to force buyers to overpay for access to hot initial public offerings).  Blawgletter post here.

[6] Am. Needle, Inc. v. Nat’l Football League, 130 S. Ct. 2201 (2010) (refusing to treat firm that sports teams formed to exploit their intellectual property as beyond the reach of Sherman Act section 1).  Blawgletter post here.

You can read the rest in Business Torts and RICO News.

The pro baseball player from Japan fell through a deck while taking a tour around the Marianas Resort and Spa on the Pacific island of Saipan.  The pitcher, Kouichi Taniguchi, at first said he felt fine, but two weeks later claimed the collapse hurt him.  Bad.

He sued.  He sought damages for, among other things, losses on contracts that, he alleged, would have paid him princely sums to promote stuff.  But, as the resort's brief on appeal pointed out, the contracts "were all backdated to dates prior to the accident."  The brief added, a bit unkindly:

[U]nder these back-dated contracts, a winless, retired journeyman pitcher was purportedly to receive about US $1,200,00 per year for promotional types of activities.  Taniguchi testified under oath at his deposition that he never expected to receive the $1.2 million — or indeed anything at all — from these three contracts.

Need Blawgletter say that Mr. Taniguchi never made more than $100,000 a year for pitching?  Or that he lost on summary judgment?

The appeal posed the question of whether the cost of translating the contracts from Japanese into English — the official language on Saipan — counted as recoverable expenses under 28 U.S.C. § 1920.  The district court held that "costs of special interpretation services" in section 1920(6) covers document translation.  

The Ninth Circuit affirmed.  The panel disagreed with the Seventh Circuit's view that "interpretation" doesn't mean "translation" and instead embraced the Sixth Circuit's earlier, and opposite, conclusion.  Taniguchi v. Kan Pacific Saipan, Ltd., No. 09-15212 (9th Cir. Mar. 8, 2011).

We trust that AT&T won't take it personally.

Federal Communications Comm'n v. AT&T Inc., No. 09-1279, slip op. 12 (U.S. Mar. 1, 2011) (Roberts, C.J.) (holding, 8-0, that "personal privacy" in exemption from Freedom of Information Act means privacy of an individual and not privacy of a Fortune 100 company); see posts on the court of appeals decision and on oral argument to the Court.

Blawgletter notes that corporations also lack a soul.

Blawgletter wrote a couple of years ago that the tougher test for pleading securities fraud under the Private Securities Litigation Reform Act and Tellabs, Inc. v. Makor & Rights, Ltd., 551 U.S. 308 (2007), "would logically mean that the reasonable person wouldn't conclude he, she, or it had a claim until he-she-it learned facts suggesting a strong inference of fraud, right?  Which would have the effect of making a statute of limitations defense harder to prove and easier to whip, correct?"  The Relevance of Scienter to Securities Fraud Limitations Analysis, Jan. 9, 2009 (discussing Alaska Elec. Pension Fund v. Pharmacia Corp., 554 F.3d 342 (3d Cir. 2009)).

As we predicted, see Merck Lawyer Takes Nicks on Question of Timely Securities Complaint in Supreme Court, the Supreme Court in 2010 agreed with us in Merck & Co. v. Reynolds, 130 S. Ct. 1784 (2010).

Today, the Second Circuit chimed in.  It held that the district court erred in tossing a complaint on the ground that news stories put buyers of MBIA stock on "inquiry notice" of the bond insurer's possible fraud more than two years before plaintiffs sued.  Citing Merck, which post-dated the district court's dismissal order, the panel ruled that a securities fraud plaintiff doesn't "discover" that he-she-it has a claim for purposes of the two-year limitations statute until he-she-it "can adequately plead" scienter as well as the other elements of the claim.  City of Pontiac Gen'l Employees' Retirement Sys. v. MBIA, Inc., No. 09-4609-cv (2d CIr. Feb. 28, 2011).

The Second Circuit didn't mention Pharmacia (or Blawgletter).  Neither did it note the absurd delay in getting to the merits.  What we said about Merck goes double for MBIA:

What does an obvious bludgeoning in Supreme Court oral argument do to the value of a case like the one against Merck? 

If you said "increases it", you get a silver star. 

You'd receive a gold one if you added "but not that much". 

Why?  BECAUSE THE DISTRICT COURT STILL HASN'T RULED ON WHETHER THE CLASS ACTION COMPLAINT STATES A CLAIM — MORE THAN SIX YEARS AFTER PLAINTIFFS BROUGHT THE CASE!!!

The district court in MBIA likewise has not yet ruled on a motion to dismiss — and the Second Circuit didn't resolve the limitations issue or a statute of repose one.  In a case that started in 2005, the plaintiffs have taken barely a step forward. 

And to think that courts simply assume class actions involve no risk and put huge pressure on defendants to settle for outlandish sums.  Bah.