The Third Circuit held today that an outfit whose raison d'etre consists of fleecing investors can't sue you for giving it funds that enabled it to cut off more and more wool from the innocent sheep. 

The court said the act that caused the loss consisted not of furnishing the money.  No.  That simply made the outfit's short-term liquidity better.  The bad result-causing thing instead involved management's decision to misuse the cash, for evil purposes.  That broke the causal connection.  "The losses BFS suffered as a result were proximately caused by Bentley's subsequent actions, not by the cash infusion itself."  Marion v. TDI Inc., No. 06-5173, slip op. at 35 (3d Cir. Jan. 4, 2010) (footnote omitted but worth reading).

Even though none of it would've happened but for what you did.  You naughty person.

Blawgletter learned in college, to our surprise, that we liked the dismal science.  We could do without the math, mind you — regressions, Lagrange multipliers, and whatnot.  But we did enjoy the parts that seemed to make practical sense of the world.

On vacation this last week, between the day after Christmas and the one following New Year's, we recalled the stuff that beguiled us back in the late 1970s.

A talk about gasoline prompted the memory.  Why do the cars here use the kind with lead in it when vehicles in the U.S. don't?

Well, we said, lead in gasoline prevents engine knocking and allows for more powerful engines.  The greater power means lower cost per mile and therefore better economy for the driver/owner.

Also, lead makes catalytic converters, which cut pollution, ineffective.  To use catalytic converters in automobiles, a nation must not only forego higher octane gasoline (with lead) but must also force people to pay the extra cost of factory installation of the device in the automobiles they drive.

Regulation of lead additives in gasoline thus translates into (a) giving up the anti-knock qualities and higher octane of putting lead into gasoline and (b) increasing car prices to consumers.  (The state must also monitor compliance with anti-lead and catalytic converter rules, costing taxpayers for the oversight.)

Do the benefits of regulation outweigh its costs?  The lovely and poor island-nation we visited felt they did not.  Noxious fumes hung always around the streets and highways, but the people seem to have judged that they'll benefit more from allowing air pollution than from barring lead in gasoline.

Clean air, we infer, amounts to a luxury for many.  (Take China.  Please.)  Americans don't mind paying for it so much.  The challenge consists in how to convince other countries to feel as most of us do.

Blawgletter wishes you a happy new year.  Now back to work!

The Eighth Circuit ended its 2009 with a ruling in an antitrust case.  The decision turned on market definition — a key battle in cases that don't involve per se unlawful things like cartels that fix prices, restrict output, or allocate customers or territories.  (Market definition lets us figure out if "market power" or "monopoly power" exists and who has it.  A narrow one may inflate the share of the biggest firm.)  We regret to say the court did a less than stellar job.

Cardiologists who had built their own surgical hospital in Little Rock, Arkansas, brought the action under sections 1 and 2 of the Sherman Act.  They sued the largest health management organization, Blue Cross & Blue Shield, and the biggest hospital company, Baptist Health, for locking them out of the market for Little Rock-area patients whose private insurance foots their medical bills.  Blue Cross and Baptist Health achieved the lock out by refusing to pay for services that patients got from "competing" hospitals such as the plaintiff-cardiologists'. 

The cardiologists' complaint excluded from the "product market" patients who paid with Medicare or Medicaid benefits.  It noted that private insurance, on the one hand, and Medicare/Medicaid, on the other, each covered about half of paying patients.

The Eighth Circuit panel upheld dismissal of the complaint.  It ruled that the cardiologists couldn't just leave out half of the potential patients simply because the government — instead of private insurers — paid their medical bills.  It said:

LRCC's claims boil down to the allegation that, due to Baptist Health's allegedly unlawful actions, LRCC has access to fewer patients.  The relevant question, then, is to whom might the cardiologists at LRCC potentially provide medical service?  LRCC's complaint provides the answer:  LRCC can provide service to "patients . . . from either a government program such as Medicare or Medicaid, or from a private insurer."  (emphasis added).  Patients able to pay their medical bill, regardless of the method of payment, are reasonably interchangeable from the cardiologist's perspective — the correct perspective from which to analyze the issue in this case.

Little Rock Cardiology Clinic PC v. Baptist Health, N0. 08-3158, slip op. at 8 (8th Cir. Dec. 29, 2009).

Why does the ruling leave us cold?  Because the panel leaps from the fact that many patients pay with government money to the notion that they "are reasonably interchangeable" with private insurance patients.  How does the court support its reasonable interchangeability conclusion?  It doesn't, except by ipse dixit ("he himself said it").

But let us pause on the question.  Do docs in fact view the folks that Medicare or Medicaid covers as pretty much the same as patients with private insurance?  Doesn't Medicare/Medicaid reimburse at low, low rates?  And, even if docs do regard (stingier) government payments as similar enough to (higher) private insurance remittances, why on earth did Blue Cross and Baptist Health bother to shut the LRCC cardiologists out of the private insurance piece of the patient pie?

The opinion disappoints also in that it doesn't mention the complaint does allege that the lock-up of private insurance patients hurt LRCC by forcing its cardiologists to do more government business.  The scheme, it alleged, changed "the plaintiffs' payor mix to a higher percentage of Medicare and Medicaid patients than would have obtained in a competitive market, which resulted in substantial lost revenues to plaintiffs."  Third Am. Complaint ¶ 193.

But perhaps the plaintiffs didn't say anything about reasonable interchangeability, leaving the court to draw its own inferences?  No.  Sorry.  The panel inferred reasonable interchangeability despite the plaintiffs' express allegations that it didn't exist.  Their Honors did so because, they said, plaintiffs looked at the product market from the perspective of patients (what payment options they had) rather than from that of the cardiologists (what patients they could treat). 

Cardiologists could also choose, you know, to limit their practices to people who couldn't pay at all.  How would their non-paying patients fit in the product market definition?  Wouldn't including them in the definition ignore the fact that doing surgery for free isn't the same as doing it profitably?

Maybe Medicare and Medicaid do pay enough to make their beneficiaries reasonably interchangeable with private insurance patients.  The court simply assumed they do.  We doubt that would do in the pre-Twombly and –Iqbal world, which didn't allow judges to make subjective "plausibility" assessments of allegations.  We respectfully would like a bit more than a pro-dismissal assumption.

If you've worked in the building trades, you've seen people trudging around with their feet up to a yard or more off the ground.  Blawgletter does not refer to self-levitation.  We mean instead the workers – often those putting up drywall — who walk on stilts so they can reach high spots at will.

Yesterday, the Federal Circuit used a case involving a patent on such height enhancers to teach about false patent "marking".  Often you'll see the words "patent pending" or "protected by U.S. patents X,XXX,XXX and Y,YYY,YYY" on a tool or other device.  To what purpose, you say?  It has to do with giving "public notice of patent rights", the court explained.

"Congress intended the public to rely on marking as a ‘ready means of discerning the status of intellectual property embodied in an article of manufacture or design.’" . . . Acts of false marking deter innovation and stifle competition in the marketplace. . . . If an article that is within the public domain is falsely marked, potential competitors may be dissuaded from entering the same market. False marks may also deter scientific research when an inventor sees a mark and decides to forego continued research to avoid possible infringement. . . . False marking can also cause unnecessary investment in design around or costs incurred to analyze the validity or enforceability of a patent whose number has been marked upon a product with which a competitor would like to compete. . . .

The Forest Group, Inc. v. Bon Tool Co., No. 09-1044, slip op. at 11 (Fed. Cir. Dec. 28, 2009) (citations omitted).

The case involved Forest Group's claim that Bon Tool infringed a stilt patent.  Bon Tool counterclaimed that Forest Group falsely marked its stilts to claim protection under the patent.  The district court held that neither company's stilts met the "resiliently lined yoke" limitation in the patent and therefore that Bon Tool didn't infringe and that Forest Group violated the false-marking statute when it marked its stilts with the patent number.

The big issue came down to the remedy for Forest Group's false marking.  The district court imposed a single $500 fine under 35 U.S.C. 292, a branch of the Lanham Act.  The Federal Circuit begged to differ, concluding that the key part – which allows up to $500 in fines for "every such offense" — calls for a fine on each article that bears the false mark.  Forest Group, slip op. at 8-14.

The panel turned aside predictions that a swarm of "marking trolls" will make "a new cottage industry" of false-marking claims.  Id. at 12.  District courts may order fines far less than $500 under section 292, the panel noted, even "a fraction of a penny per article".  Id. at 13.  So much for huge windfalls.

Say you settle a class action.  The pact calls for future royalty payments.  A dispute ensues over accounting for the royalties.  The settling plaintiffs invoke the peace treaty's arbitration clause.  The arbitration panel rules against them. 

The settling plaintiffs later raise another accounting complaint.  They again file an arbitration proceeding.  But the settling defendants sue in federal court for a ruling that the outcome in the first arbitration control under the res judicata doctrine and therefore bars the second one.  The district court agrees with the settling plaintiffs but orders that the old panel decide the res judicata issue.  The settling plaintiffs appeal.

The Tenth Circuit reverses.  It cites the arbitration clause, which says:

The meaning and effect of this Agreement and any and all disputes . . . arising from or relating in any way to . . . this Agreement shall be submitted to and decided by binding arbitration . . . . Within ten (10) days after notice by one party to the other of its demand for arbitration, which demand shall also set forth the matter or matters to be submitted and the name of its arbitrator, the other party shall name its arbitrator, identify any other matter(s) to be submitted, and so notify the demanding party.  Within ten (10) days thereafter the two arbitrators shall select a third arbitrator.

Shell Oil Co. v. The CO2 Committee, No. 08-2281, at *8 (10th Cir. Dec. 21, 2009).  The panel holds that the broad reach of the arbitration clause — "any and all disputes . . . arising from or relating in any way to . . . this Agreement" — covers the settling defendants' res judicata defense and that the part about selecting arbitrators requires choosing a new panel for each time a party demanded arbitration.

Blawgletter wishes to point out that a more sticky issue would have presented itself had a party demanded Arbitration B before Arbitration A ended in a final judgment.  We'd guess that the outcome would depend in part on how far Arbitration A had gotten and on how much the issues in Arbitration B overlapped with those in Arbitration A.  Do you roll Arbitration B into Arbitration A?  Does the panel decide?  Which one?  What if they disagree?  And so on?

Blawgletter grew up in Nacogdoches and went to college and law school in New England.  Bear with us.

One time, to get home for Christmas, we caught a bus in New Haven, boarded another one in a scary part of New York, rode across the nation's midsection before cutting south, and ended up in Henderson, Texas.  Our dad picked us up there and carried us home. 

The snow that made big drifts along the interstates that winter reminds us of the enormous blanket that coats large parts of the country — even Dallas! — now.

The journey recalls how we passed the time on the Greyhound.  We read a long paperback.  The writer, a Spaniard, Miguel de Cervantes, told the tale of a knight errant, Don Quixote, and his faithful companion, Sancho Panza, in the early 1600s.

One of the most memorable (and funniest!) parts of the book sprang to mind:

OF THE GOOD FORTUNE WHICH THE VALIANT DON QUIXOTE HAD IN THE
TERRIBLE AND UNDREAMT-OF ADVENTURE OF THE WINDMILLS, WITH OTHER
OCCURRENCES WORTHY TO BE FITLY RECORDED

At this point they came in sight of thirty forty windmills that
there are on plain, and as soon as Don Quixote saw them he said to his
squire, "Fortune is arranging matters for us better than we could have
shaped our desires ourselves, for look there, friend Sancho Panza,
where thirty or more . . . giants present themselves . . . ."

"What giants?" said Sancho Panza.

"Those thou seest there," answered his master, "with the long
arms, and some have them nearly two leagues long."

"Look, your worship," said Sancho; "what we see there are not giants
but windmills, and what seem to be their arms are the sails that
turned by the wind make the millstone go."

*  *  *  *

Like Cervantes, my dad, Don Barnett, made me smile.  This holiday season, I hope you, too, fondly remember the people who won your love and yet have passed away.

They may be giants.

The Federal Circuit yesterday upheld almost all of a $240 judgment against Microsoft Corporation for willful patent infringement. 

U.S. District Judge Leonard A. Davis presided over a jury trial on i4i's claims.  He accepted findings of infringement and willfulness and the jury's verdict of $200 million in damages.  He also enhanced the award by $40 million, in part due to Microsoft's misbehavior during the lawsuit. 

The Federal Circuit agreed with all that and adjusted only the start date of the permanent injunction against future use of the XML editor feature in Microsoft's popular Word application program.  The only evidence of when Microsoft could achieve the switch said it could happen at the earliest after five months.  The panel gave Microsoft exactly that much time.  i4i Ltd. Partnership v. Microsoft Corp., No. 09-1504 (Fed. Cir. Dec. 22, 2009).

The decision drew Blawgletter's curiosity in part because it likewise attracted an amicus curiae brief from the Washington Legal Foundation, which styles itself "a public interest law and policy center that devotes substantial resources to defending and promoting free enterprise, individual rights, and a limited and accountable government."  Anxious to see what Issue of Great Moment and Wide Public Interest grabbed WLF's attention, we scanned its brief.  But imagine our disappointment at what we saw:  "WLF believes that the excessive damages award and ill-conceived injunction in this case reflect disturbing trends in patent infringement cases more generally."

The Disturbing Trends problem!  Woo-hoo!

The Strait of Gibraltar pinches the Atlantic Ocean and Mediterranean Sea into a 7.7-mile slit of water that joins the two great saltwater masses.  Ancient writers called mounts on each side of the channel — including the Rock of Gibraltar — the Pillars of Hercules.  The Pillars marked the far point of Hercules's wide travels and thus the limits of terra cognita and mare cognitum.

Today the Sixth Circuit upheld an order remitting two online gamblers to the tender mercies of the court system in the self-governing British overseas possession of Gibraltar.  The Internet bettors accused PartyGaming, a Gibraltar company, of violating Ohio law by falsely implying that no collusion took place in PartyGaming's digital poker parlor.  The district court raised forum non conveniens on its own and dismissed the case in favor of refiling, if at all, in Gibraltar.

The Sixth Circuit put weight on the fact that PartyGaming's "Terms and Conditions of Use" included a choice of law clause — selecting Gibraltar law — and a forum selection clause — which the court paraphrases as providing that "any disputes shall be subject to the exclusive jurisdiction of the courts of Gibraltar."  Wong v. PartyGaming LTD., No. 08-4295, slip op. at 2 (6th Cir. Dec. 21, 2009).  The panel also rejected the plaintiffs' chief gripe about Gibraltar — that its courts don't seem to allow for class actions.  PartyGaming said that they do, too, permit class cases, but the court said it doesn't matter.