The Federal Circuit today tossed the work of a jury on grounds that the losing parties never raised before their appeal.  "Plain error", the panel held.

Uh.

The plaintiff, WordTech Systems, alleged that Integrated Network Systems, and two men who worked at INS, infringed patents relating to robo-copying compact disks.  At trial, the district court asked the jurors to find whether the men directly infringed the patents, induced infringement, and contributed to infringement.  All the jurors answered the questions "yes" as to each.  The district court accepted the verdict and entered judgment on it.

A panel of the Federal Circuit reversed, holding that the district court made plain errors in how it instructed the jury and in the way it posed the infringement questions.  Because of the plainness of the mistakes, the court ruled, the fact that the defendants didn't point them out — and likely didn't see them, despite their manifestness — didn't matter.

Let's take a quick look at the first two of the glaring gaffes.

Direct infringement.  The INS workers urged that INS's "corporate veil" barred liability on their part.  WordTech answered that INS had forfeited its corporate status and that, regardless, the men's acts made them direct infringers, corporate veil or no.  The men replied that INS filed papers that "revived" its corporate status.

The panel decided that the failure to instruct the jury on INS's "corporate status" made the "yes" answers on direct infringement beside the point. That seems plausible if some evidence showed that INS had a corporate veil that needed piercing.  The court notes only that INS "fil[ed] appropriate paperwork" to "revive[]" its veil under Nevada law.  WordTech Systems, Inc. v. Integrated Network Solutions, Inc., No. 09-1454, slip op. at 8 (Fed. Cir. June 16, 2010).  But, as Blawgletter reads the Silver State's statute, INS's act of filing papers revived nothing unless the Secretary of State granted the corporate zombie new life.  We can glean no sign of such official revivification.

Inducement of infringement.  The court noted that "inducement was not raised in the Final Pretrial Order, in the jury instructions, or in the closing arguments."  Id. at 13.  But Jury Instruction No. 15 — which we got from the district court's docket on PACER — says that WordTech claimed the men "actively induced" infringement "by others."  Doesn't that count?

The panel also pointed out that the jury question asked if INS's devices — and not the men — infringed the patents.  Noting that "a device cannot induce infringement", the court deemed the question "nonsensical".  But didn't the jurors know, when they checked "yes" by each man's name, that they were finding the men, and not the devices, guilty of inducing infringement?

Likely we've misunderstood some fine points of law.  Please feel free to set us straight.

Two of Blawgletter's partners, Terry Oxford and Ophelia Camina, today brought in a verdict for $250 million on behalf of Dillard's.

At the end of a trial that started on May 17, a Dallas County jury found i2 Technologies, a software company, liable for fraud and awarded Dillard's about $100 million in actual damages plus $150 million in punitives.  The jurors also rejected i2's limitations and other defenses.

The verdict caps a three-week run in which lawyers from the Dallas office of Susman Godfrey won for our clients rulings that saved or awarded them more than $800 million.  

Boo-yah.

The second phase of Blawgletter's trial ended last Wednesday.  How'd it go?  Like this:

DALLAS, June 15 /PRNewswire/ — Susman Godfrey lawyers again teamed with colleagues from Kelly, Hart & Hallman and Energy Future Holdings Corp. ("EFH"), this time in defeating a $50 million breach of contract claim by Alcoa against Luminant in the 20th District Court of Milam County, Texas.

In the same case, a Milam County jury on June 2, 2010 rejected Alcoa's claims for more than $500 million against Luminant.  The jury also awarded Luminant $10 million in damages.

At the conclusion of the evidence in a bench trial on June 9, District Judge Ed Magre ruled against Alcoa on its claim that Luminant "wasted" lignite coal at the Three Oaks Mine, which straddles Bastrop and Lee Counties in central Texas.  The Court also ordered Alcoa to pay Luminant about $2 million for mining services and directed Alcoa to consent to the transfer of the mine permit for Three Oaks Mine to Luminant.

Alcoa sold Three Oaks Mine to Luminant in 2007 but kept ownership of some lignite.  Alcoa claimed that Luminant did not operate Three Oaks Mine prudently and should have stockpiled lower-quality lignite for possible use in Luminant's nearby power plants, Sandow Units 4 and 5.

Marshall Searcy, partner in Kelly Hart's Fort Worth office, took the lead in the trial to the Court for EFH subsidiary Luminant Mining.  The trial team consisted of Mr. Searcy; Stacey Dore, Associate General Counsel of EFH; Chad Arnette, also a Kelly Hart partner; and Barry Barnett and Joseph Portera of Susman Godfrey in Dallas.

"We are pleased to have helped show that Luminant Mining fully complied with its obligations and is entitled to transfer of the mine permit," Mr. Barnett said.  "Marshall Searcy, Stacey Dore, Chad Arnette, and Joseph Portera are terrific lawyers, and it's been a pleasure and privilege to work with them on this important case."

Here you go:

May 2010 Hearing Session

Motions to Centralize — New MDLs (.pdfs)

 MDL No. 2171 — IN RE: Capital One Bank Credit Card Interest Rate Litigation

 MDL No. 2169 — IN RE: General Mills, Inc., YoPlus Yogurt Products Marketing and Sales Practices Litigation

 MDL No. 2168 — IN RE: NebuAd Device Privacy Litigation

 MDL No. 2167 — IN RE: JPMorgan Chase Bank Home Equity Line of Credit Litigation

 MDL No. 2166 — IN RE: Fifth Third Bank Checking Account Overdraft Litigation

 MDL No. 2165 — IN RE: Endangered Species Act Section 4 Deadline Litigation

 MDL No. 2164 — IN RE: Nissan North America, Inc., Infiniti FX Dashboard Products Liability Litigation

 MDL No. 2163 — IN RE: CableNet Services Unlimited, Inc., Fair Labor Standards Act (FLSA) Litigation

 MDL No. 2162 — IN RE: Provident Securities Litigation

 MDL No. 2161 — IN RE: EasySaver Rewards Marketing and Sales Practices Litigation

 MDL No. 2160 — IN RE: American-Manufactured Drywall Products Liability Litigation

 MDL No. 2158 — IN RE: Zimmer Durom Hip Cup Products Liability Litigation

 MDL No. 2157 — IN RE: JPMorgan Auction Rate Securities (ARS) Marketing Litigation

 MDL No. 2156 — IN RE: Air Crash at Las Vegas, Nevada, on August 28, 2008

 MDL No. 2155 — IN RE: The Bank of New York Mellon Securities Lending Litigation

 MDL No. 2153 — IN RE: United Parcel Service “Air-in-Ground” Marketing and Sales Practices Litigation

 MDL No. 2152 — IN RE: Air Crash Over the Hudson River near New York, New York, on August 8, 2009

Motions in Previously-Centralized MDLs (.pdfs)

 MDL No. 2122 — IN RE: National Arbitration Forum Trade Practices Litigation

 MDL No. 2100 — IN RE: Yasmin and Yaz (Drospirenone) Marketing, Sales Practices and Products Liability Litigation

 MDL No. 2098 — IN RE: Kitec Plumbing System Products Liability Litigation

 MDL No. 2096 — IN RE: Zicam Cold Remedy Marketing, Sales Practices and Products Liability Litigation

 MDL No. 2047 — IN RE: Chinese-Manufactured Drywall Products Liability Litigation

 MDL No. 2036 — IN RE: Checking Account Overdraft Litigation

 MDL No. 2036 — IN RE: Checking Account Overdraft Litigation

 MDL No. 2014 – IN RE: Bank of America Corp. Auction Rate Securities (ARS) Marketing Litigation

 MDL No. 2009 — IN RE: Regions Morgan Keegan Securities, Derivative and Employee Retirement Income Security Act (ERISA) Litigation

 MDL No. 1953 — IN RE: Heparin Products Liability Litigation

 MDL No. 1932 — IN RE: Family Dollar Stores, Inc., Wage and Hour Employment Practices Litigation

 MDL No. 1905 — IN RE: Medtronic, Inc., Sprint Fidelis Leads Products Liability Litigation

 MDL No. 1899 — IN RE: Southeastern Milk Antitrust Litigation

 MDL No. 1845 — IN RE: ConAgra Peanut Butter Products Liability Litigation

 MDL No. 1828 — IN RE: Imagitas, Inc., Drivers' Privacy Protection Act Litigation

 MDL No. 1596 — IN RE: Zyprexa Products Liability Litigation

 MDL No. 1552 — IN RE: UnumProvident Corp. Securities, Derivative & "ERISA" Litigation

 MDL No. 1507 — IN RE: Prempro Products Liability Litigation

 MDL No. 1203 — IN RE: Diet Drugs (Phentermine/Fenfluramine/Dexfenfluramine) Products Liability Litigation

 MDL No. 875   – IN RE: Asbestos Products Liability Litigation (No. VI)

Other Orders (.pdfs)

 MDL No. 2147 — IN RE: AT&T Mobility Wireless Data Services Sales Tax Litigation

You know — of course you do — that almost any complex case calls for the help of an Expert Witness.  Possibly several.

She or he may opine about a Great Many Things, from where the product market starts and ends, to the amount of damages, and (even) to the air-speed velocity of an unladen swallow.

Lots of cases can't get through the Early Innings without an expert report.  Medical malpractice comes to mind.

Blawgletter's earliest experience with an expert reminds us of the Danger that attends the Choice of Expert.  We picked one who looked good in the Yellow Pages.  And yet he Begged to Differ with our dear client on the stand, in front of a Jury.

That seldom happens in a Big Case.  The experts must often pass the filter of Jury Trial Experience.  And need to have won more than their share of victories.

But we see Danger in the statistics.  An expert who has enjoyed some success in court tends to believe in her or his Prowess.  The expert comes to doubt critics.  Doesn't like to admit errors that could hurt her or his Cachet as a Testifying Expert.  And somehow feels, or simply wants to feel, invulnerable.

Yet.

Somewhere along the way every Expert has taken a nick here or there.  A judge doubted her or his methodology.  Questioned the reliability of the underlying assumptions and data.  Or simply felt the other side had the better of an argument.

A Bad Expert recalls the times that she or he managed to testify despite the objections.  She or he forgets the blows that landed.  And so testifies in deposition that Nothing Bad Ever Happened in previous cases.

Beware, we tell you, of that Bad Expert.  The Bad Expert's reflexive denial opens the door to ugly questions about her or his Very Real Mistakes — and casts doubt on All the Right Things She Did in your case.

Our advice:  Question your experts closely, before you hire them, about the outcomes of Daubert challenges and their involvement in personal litigation.  Read court opinions that mention them.  Talk with lawyers who used or opposed them.  Assess whether their Warts undermine their credibility enough to choose someone else.  But, above all, make those you choose to hire admit the Bad Things they've suffered through.

Jurors may forgive an expert's loss under Daubert.  They may not care.  But they likely won't forget, or forgive, a false claim of Daubertian perfection.

Blawgletter admires the careful work that goes into rulings by our U.S. courts of appeals.  But we especially like the effort that some, but not all, of the courts put into making the decision-making process, up high and down below, transparent.

Seven of the courts stand out.  This bare majority of the 13 circuits show in their opinions both the date of oral argument and the name of the district judge:  Second Circuit, Third Circuit, Fourth Circuit, Sixth Circuit, Seventh Circuit, Ninth Circuit, and D.C. Circuit.  You thus can tell how quickly the courts of appeals did their job and identify the district judge who erred or got it right.

Two of the circuits sit in a middle tier.  The First Circuit and Federal Circuit name the district judge but don't give the oral argument date.

The rest do neither of the things that would help lawyers, clients, the public, and other judges see how good a job the judges have done in making timely and correct rulings:  Fifth Circuit, Eighth Circuit, Tenth Circuit, and Eleventh Circuit.

Why do some courts excel at transparency while others fall short?  We can't speculate and wouldn't want to even if we could. 

But we do know that, to us at least, more and better information enhances our confidence in judicial performance of the duty "to secure the just, speedy, and inexpensive determination of every action and proceeding."  Fed. R. Civ. P. 1.  We urge all courts to adopt the best practices of the first tier courts — the Second, Third, Fourth, Sixth, Seventh, Ninth, and D.C. Circuits.

We also note that, among the stand-outs, the Second does the very best.  That court not only provides the date of argument and the name of the district judge but also includes a synopsis of the issues and the outcome at the start of each opinion.  Kudos.

Stop Blawgletter if you've heard this one before.

A lady trips on a cable during an oceanic cruise.  Injuries ensue.  She sues Cruise Company A.  Cruise Company A points the Finger of Blame at Cruise Company B, saying that Cruise Company A merely served as sales agent for Cruise Company B, the actual owner and sailer of the vessel.

The lady drops Cruise Company A and moves to amend her complaint to add Cruise Company B as defendant.  The district court grants her motion.  But Cruise Company B's lawyers — the same ones who got Cruise Company A off the hook — move to dismiss on the ground that the lady waited too long to bring Cruise Company B into the suit.  The district court grants the motion, and the court of appeals affirms.

Yesterday, the U.S. Supreme Court reversed.  The 9-0 Court held that, contrary to the view of the Courts Below, Rule 15(c) allows a party to correct a "mistake" as to the True Defendant's identity even if she knew of the True Defendant's existence.  What matters, the Court concluded, is whether the True Defendant knew or should have known of the gaffe.  "For purposes of that inquiry," the Court noted, "it would be error to conflate knowledge of a party's existence with the absence of mistake."  Krupski v. Costa Cociere, S.P.A., No. 09-337, slip op. at 9 (U.S. June 7, 2010).

You have to like that sentence — calling "absence of mistake" an "error".

You may have noticed that Blawgletter hasn't posted much since early May.  The following tells you why:

DALLAS, June 4 /PRNewswire/ — Susman Godfrey lawyers led a trial team that cleared Luminant of charges that the company breached a major power supply contract with Alcoa and acted in bad faith.

Alcoa claimed that Luminant violated the contract by mismanaging a pollution control project at Luminant's Sandow Unit Four power plant in Milam County, Texas.  The power contract between Luminant and Alcoa entitled Alcoa to 398 megawatts of firm power and obligated Alcoa to pay 83 percent of the cost of state-of-the-art selective catalytic reduction (SCR) equipment, which substantially reduces emissions of nitrogen oxides.  The SCR cost $277 million.

Alcoa also alleged that Luminant caused outages of Sandow Unit Four during the spring and summer of 2008 in bad faith.  Alcoa asserted that Luminant's conduct required Alcoa to pay a higher contract price for power and caused the closure of Alcoa's aluminum smelter near Rockdale, Texas, in September 2008.

Alcoa sought more than $500 million in damages.

On June 2, a Milam County jury cleared Luminant of Alcoa's charges.  The jury rejected Alcoa's SCR and outage claims and found that Alcoa breached its obligation to pay its share of the cost of installing the SCR.  The jury confirmed Alcoa's duty to pay its share of the SCR by awarding Luminant $10 million that Alcoa currently owes.

Barry Barnett, a partner in Susman Godfrey's Dallas office, served as lead trial counsel for Luminant.  Dallas partner Jonathan Bridges and associate Joseph Portera also played key roles in the jury trial, as did Stacey Dore, Associate General Counsel of Luminant parent Energy Future Holdings (fka as TXU Corp.), and Marshall Searcy, partner in the Fort Worth office of Kelly, Hart & Hallman.

"We are grateful to the hard-working people of Luminant for their confidence and to the jurors for their dedication," Mr. Barnett said.  "The verdict is a testament to the integrity of our civil justice system and to the importance of keeping promises.  It has been an honor to represent Luminant."

"Barry Barnett was magnificent in trying this case," said Rob Walters, EVP and General Counsel of Energy Future Holdings.  "We couldn't ask for more able trial counsel than we received from Susman Godfrey and Kelly Hart & Hallman."

Added Luminant CEO David Campbell, "we are a company that cares deeply about our reputation and are dedicated to honoring our responsibilities and commitments.  I am delighted the jury agreed with us, and we sincerely thank the team from Luminant and EFH and our trial lawyers at Susman Godfrey and Kelly Hart & Hallman."

A second phase of the trial starts on Monday.  We hope to get back to posting more often after we finish late next week.

The Cameron (Texas) Herald reports today:

After just a little more than two hours of deliberation, the jury returned a verdict in favor of Luminant in its breach of contract case against Alcoa.

After resting their case in chief, the attorneys for Luminant requested a directed verdict for a second time, but the request was denied.

On Wednesday the jury heard closing arguments and received their charge.

Alcoa was seeking $500 million in damages contending Luminant manipulated electricity prices for power used to operate Alcoa’s Rockdale Operations. Luminant officials have denied Alcoa’s claims.

The case was heard in Judge Ed Magre’s 20th District Court.

Blawgletter had the honor of representing Luminant.  

We note that the jury also awarded Luminant $10 million and that a bench trial to determine Luminant's reasonable attorneys' fees will begin on Monday.

May auditors who help a company's officers disguise their cooking of its books avoid liability to the company (now insolvent) by imputing the officers' knowledge of the fraud to the company?

By saying the officers' fraud conferred at least a "peppercorn" of benefit to the company?

The Third Circuit this week held that its previous yes responses must give way to a new decision by the Supreme Court of Pennsylvania — a decision that the federal court requested by certifying questions.  Keystone State law, the Court concluded, bars imputation and the in pari delicto (equally at fault) defense if the auditors failed to act materially in good faith towards the company.  Official Committee of Unsecured Creditors of Allegheny Health, Education and Research Foundation v. PricewaterhouseCoopers LLP, 989 A.2d 313 (Pa. 2010).   

Accepting the Court's answers, the Third Circuit reversed summary judgment in favor of the auditing firm.  Official Committee of Unsecured Creditors of Allegheny Health, Education and Research Foundation v. PricewaterhouseCoopers, LLP, No. 07-1397 (3d Cir. May 28, 2010) (overruling Lafferty Official Committee of Unsecured Creditors v. R. F. Lafferty & Co., 267 F.3d 340 (3d Cir. 2001) (applying Pennsylvania law)).

Blawgletter wonders if Allegheny will breathe new life into the "deepening insolvency" theory of liability, which theory posits that prolonging the life of a firm wastes what little assets it has available to pay its obligations and therefore increases the losses of creditors.