The Alaska Supreme Court looked last week at the trade off between lawyer and client in contingent fee arrangements.  It held that an agreement to revert from a flat fee to the original contingent one didn't unduly burden the clients' right to accept or reject settlement offers. 

The case involved a personal injury claim arising from the collapse of stairs at Katmai Lodge.  The husband and wife hired a law firm on a contingent fee basis.  After filing a complaint against the lodge and its owner, the firm advised the couple to settle for the coverage limits under an insurance policy (around $1.1 million).

The clients said fine so long as the firm agreed to cut its fee to costs plus $250,000.  The lawyers went along, and the resulting amendment said that it would apply if the defendants settled for policy limits "without requiring further substantial litigation" but otherwise "will revert to our previous written fee agreement and the percentages written there."  The defendants rejected the settlement proposal. 

The case moved forward for several months without much happening at the courthouse.  Most of the work involved discovery and getting ready for trial.

At length, the defendants and their insurer settled with the husband and wife for policy limits (now up to $1.2 million for some reason). 

The clients insisted that the lawyers couldn't receive more than $250,000 as a fee.  The law firm begged to differ.  A lawsuit ensued.  The couple argued that enforcing their agreement to switch back to a contingent fee would authorize lawyers to force clients to accept settlement offers they'd otherwise reject.  But the trial court granted summary judgment for the lawyer.  The Supreme Court of Alaska affirmed.  It held that the reversion of the flat fee to a contingent one after "substantial litigation" didn't put too heavy a burden on the clients' right to approve or reject a settlement.  Weiner v. Burr, Pease & Kurtz, P.C., No. S-13214 (Ala. Nov. 13, 2009).

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Austin Hall 
Austin Hall, home of the Ames Courtroom.

The Judicial Panel on Multidistrict Litigation sets up shop at Harvard Law School on November 19. 

Their Honors will hear argument on motions to centralize, in ONE district, cases pending in MULTIPLE districts. 

The matters up on Thursday:

SECTION A

MATTERS DESIGNATED FOR ORAL ARGUMENT

MDL No. 2103 — IN RE: KENTUCKY GRILLED CHICKEN COUPON MARKETING AND SALES PRACTICES LITIGATION

Motion of defendants KFC Corp. and Yum! Brands, Inc., for centralization of the following actions in the United States District Court for the Northern District of Illinois or, in the alternative, the United States District Court for the Western District of Kentucky:

Central District of California

James Asanuma, et al. v. KFC Corp., et al., C.A. No. 2:09-5246

Northern District of California

Daleen Brown v. KFC Corp., C.A. No. 3:09-3269

Northern District of Illinois

Christine Doering v. KFC Corp., C.A. No. 1:09-4166

Eastern District of Michigan

Kay Ready v. KFC Corp., C.A. No. 2:09-12827

MDL No. 2104 — IN RE: IKO ROOFING SHINGLE PRODUCTS LIABILITY LITIGATION

Motion of defendants IKO Manufacturing, Inc.; IKO Chicago, Inc.; and IKO Pacific, Inc., for centralization of the following actions in the United States District Court for the Northern District of Illinois:

Northern District of Illinois

Pamela D. McNeil, et al. v. IKO Manufacturing, Inc., et al., C.A. No. 1:09-4443

District of New Jersey

Debra Zanetti v. IKO Manufacturing, Inc., C.A. No. 2:09-2017

Western District of New York

Gerald P. Czuba, et al. v. IKO Manufacturing, Inc., et al., C.A. No. 1:09-409

Western District of Washington

Michael Hight, et al. v. IKO Manufacturing, Inc., et al., C.A. No. 2:09-887

MDL No. 2105 — IN RE: RITE AID CORP. WAGE AND HOUR EMPLOYMENT PRACTICES LITIGATION

Motion of plaintiffs James Fisher; Justin Torres; Robert T. Vasvari; Shirley Craig; Rachel Harriman; Deanna Johnson; Lisa Laun; Deshawn Powell; Eric Rosen; John MacDonald; Michael Veri; and John Kuhl, Sr., for centralization of the following actions in the United States District Court for the Middle District of Pennsylvania:

District of Maryland

James Fisher v. Rite Aid Corp., et al., C.A. No. 1:09-1909

District of New Jersey

Justin Torres v. Rite Aid Corp., C.A. No. 3:09-2922

Southern District of New York

Yatram Indergit v. Rite Aid Corp., et al., C.A. No. 1:08-9361

Angel Naula, et al. v. Rite Aid of New York, Inc., C.A. No. 1:08-11364

Northern District of Ohio

Robert T. Vasvari v. Rite Aid Corp., et al., C.A. No. 4:09-1699

Middle District of Pennsylvania

Morgan Jackson, et al. v. Rite Aid Corp., et al., C.A. No. 1:09-1063

Shirley Craig v. Rite Aid Corp., et al., C.A. No. 4:08-2317

MDL No. 2106 — IN RE: FONTAINEBLEAU LAS VEGAS CONTRACT LITIGATION

Motion of plaintiffs Avenue CLO Fund, Ltd., et al., for centralization of certain of the following actions in the United States District Court for the Southern District of New York and motion of Turnberry Residential Limited Partner, L.P., and Jeffrey Soffer for centralization of the following actions in the United States District Court for the Southern District of Florida:

Southern District of Florida

Fontainebleau Las Vegas LLC v. Bank of America, N.A., et al., C.A. No. 1:09-21879

District of Nevada

Avenue CLO Fund, Ltd., et al. v. Bank of America, N.A., et al., C.A. No. 2:09-1047

Southern District of New York

Deutsche Bank Trust Co. Americas v. Jeffrey Soffer, et al., C.A. No. 1:09-7089

MDL No. 2107 — IN RE: BUDEPRION XL MARKETING AND SALES PRACTICES LITIGATION

Motion of defendants Teva Pharmaceuticals USA, Inc.; Teva Parenteral Medicines, Inc.; Anchen Pharmaceuticals, Inc.; and Impax Laboratories, Inc., for centralization of the following actions in the United States District Court for the Northern District of Texas or, in the alternative, the United States District Court for the Eastern District of Louisiana:

Central District of California

Laura Kelly v. Teva Pharmaceutical Industries Ltd., et al., C.A. No. 2:09-5348

Middle District of Florida

Sherri Henchenski, et al. v. Teva Pharmaceutical Industries Ltd., et al., C.A. No. 2:09-470

Eastern District of Louisiana

Andrew Morgan v. Teva Pharmaceutical Industries Ltd., et al., C.A. No. 2:09-4409

Eastern District of North Carolina

Camilla Snipes Weber v. Teva Pharmaceutical Industries Ltd., et al., C.A. No. 7:09-113

Eastern District of Pennsylvania

Steven Rosenfeld v. Teva Pharmaceuticals USA, Inc., et al., C.A. No. 2:09-2811

Northern District of Texas

Theresa L. Anderson v. Teva Pharmaceutical Industries Ltd., et al., C.A. No. 3:09-1200

MDL No 2108 — IN RE: APPLEBEE’S WEIGHT WATCHERS MENU MARKETING AND SALES PRACTICES LITIGATION

Motion of defendants Applebee’s International, Inc.; DineEquity, Inc.; and Weight Watchers International, Inc., for centralization of the following actions in the United States District Court for the District of Kansas:

Northern District of Illinois

Jaime Jaramillo, et al. v. DineEquity, Inc., et al., C.A. No. 1:09-1983

District of Kansas

Sheree Shepard, et al. v. DineEquity, Inc., et al., C.A. No. 2:08-2416

Eastern District of Kentucky

Anita Kramer, et al. v. Applebee’s International, Inc., et al., C.A. No. 2:09-131

Southern District of Ohio

Pamela Curry v. Appelbee’s International, Inc., et al., C.A. No. 1:09-505

MDL No. 2109 — IN RE: PLASMA-DERIVATIVE PROTEIN THERAPIES ANTITRUST LITIGATION

Motion of plaintiff Hospital Damas, Inc., for centralization of the following actions in the United States District Court for the Northern District of Illinois:

Northern District of Illinois

Hospital Damas, Inc. v. CSL Ltd., et al., C.A. No. 1:09-5130

Eastern District of Pennsylvania

Pemiscot Memorial Hospital v. CSL Ltd., et al., C.A. No. 2:09-3143

Solaris Health Systems v. Baxter International, Inc., et al., C.A. No. 2:09-3342

MDL No. 2110 — IN RE: LUKE FOUT AND TODD WUERDEMAN LITIGATION

Motion of defendant CSX Transportation, Inc., for centralization of the following actions in the United States District Court for the Southern District of Ohio:

Northern District of Illinois

Todd Wuerdeman v. Illinois Central Railroad Co., C.A. No. 1:08-6043

Southern District of Ohio

Luke Fout v. CSX Transportation, Inc., et al., C.A. No. 1:08-721

Todd Wuerdeman v. CSX Transportation, Inc., et al., C.A. No. 1:08-746

MDL No. 2111 — IN RE: AMERICAN EXPRESS CO. ANTI-STEERING RULES ANTITRUST LITIGATION

Motion of plaintiffs Lopez-Dejonge, Inc.; Parlor Corp.; JASA, Inc.; Italian Colors Restaurant; Cohen Rese Gallery, Inc.; Bar Hama, LLC; and Animal Land, Inc., for centralization of the following actions in the United States District Court for the Eastern District of New York or, in the alternative, the United States District Court for the Southern District of New York:

Eastern District of New York

Rite Aid Corp., et al. v. American Express Travel Related Services Co., Inc., et al., C.A. No. 1:08-2315

CVS Pharmacy, Inc. v. American Express Travel Related Services Co., Inc., et al., C.A. No. 1:08-2316

Walgreen Co. v. American Express Travel Related Services Co., Inc., et al., C.A. No. 1:08-2317

Bi-Lo, LLC v. American Express Travel Related Services Co., Inc., et al., C.A. No. 1:08-2380

H.E. Butt Grocery Co. v. American Express Travel Related Services Co., Inc., et al., C.A. No. 1:08-2406

Southern District of New York

Performance Labs, Inc., et al. v. American Express Co., et al., C.A. No. 1:06-2974

MDL No. 2112 — IN RE: FLORIDA DEPARTMENT OF CORRECTIONS SEXUAL HARASSMENT BY INMATES LITIGATION

Motion of plaintiffs Donna Austin, et al., for centralization of the following actions in the United States District Court for the Northern District of Florida:

Middle District of Florida

Marsha Bennett, et al. v. Department of Corrections, State of Florida, C.A. No. 2:09-549

Tara Archer, et al. v. Department of Corrections, State of Florida, C.A. No. 3:09-864

Beebe L. Clark, et al. v. Department of Corrections, State of Florida, C.A. No. 5:09-358

Northern District of Florida

Donna Austin, et al. v. Department of Corrections, State of Florida, C.A. No. 4:09-97

Southern District of Florida

Eugenia V. Davis, et al. v. Department of Corrections, State of Florida, C.A. No. 1:09-22446

Cindy Baker, et al. v. Department of Corrections, State of Florida, C.A. No. 2:09-14281

MDL No. 2113 — IN RE: AFTERMARKET AUTOMOTIVE SHEET METAL PARTS ANTITRUST LITIGATION

Motion of plaintiff Vehimax International, LLC, for centralization of the following actions in the United States District Court for the Central District of California or, in the alternative, the United States District Court for the Eastern District of Wisconsin:

Central District of California

Vehimax International, LLC v. Jui Li Enterprise Co., Ltd., et al., C.A. No. 2:09-6437

Eastern District of Wisconsin

Fond du Lac Bumper Exchange Inc. v. Jui Li Enterprise Co., Ltd., et al., C.A. No. 2:09-852

MDL No. 2115 — IN RE: PFIZER INC. MARKETING AND SALES PRACTICES LITIGATION

Motion of plaintiff Kathleen Zafarana for centralization of the following actions in the United States District Court for the Eastern District of Pennsylvania:

District of Massachusetts

Michael Alan Caltieri, etc. v. Pfizer Inc., et al., C.A. No. 1:09-11480

Eastern District of Pennsylvania

Stefan Kruszewski, etc. v. Pfizer Inc., C.A. No. 2:07-4106

Kathleen Zafarana v. Pfizer Inc., et al., C.A. No. 2:09-4026

MDL No. 2116 — IN RE: APPLE IPHONE 3G AND 3G-S “MMS” MARKETING AND SALES PRACTICES LITIGATION

Motion of defendant AT&T Mobility, LLC, for centralization of certain of the following actions in the United States District Court for the Eastern District of Louisiana or, in the alternative, the United States District Court for the Northern District of Ohio and motion of plaintiffs Philip Sterker and Arturo Molina for centralization of the following actions in the United States District Court for the Northern District of California or, in the alternative, the United States District Court for the Eastern District of Louisiana:

Central District of California

Aida Kamarian v. Apple, Inc., et al., C.A. No. 2:09-6590

Tim Williams, et al. v. Apple, Inc., et al., C.A. No. 2:09-6914

Northern District of California

Philip Sterker v. Apple, Inc., et al., C.A. No. 4:09-4242

Kevin Khoi Duy Tran v. Apple, Inc., et al., C.A. No. 5:09-4048

Southern District of California

Arturo Molina v. Apple, Inc., et al., C.A. No. 3:09-2032

Southern District of Illinois

Tim Meeker v. Apple, Inc., et al., C.A. No. 3:09-607

Eastern District of Louisiana

Christopher Carbine, et al. v. Apple, Inc., et al., C.A. No. 2:09-5470

District of Minnesota

Kyle Irving v. Apple, Inc., et al., C.A. No. 0:09-2613

Eastern District of Missouri

Meredith Goette, et al. v. Apple, Inc., et al., C.A. No. 4:09-1480

Northern District of Ohio

Michael Pietrangelo v. Apple, Inc., et al., C.A. No. 1:09-1992

Matthew Sullivan v. Apple, Inc., et al., C.A. No. 1:09-1993

Deborah Carr v. Apple, Inc., et al., C.A. No. 1:09-1996

MDL No. 2118 — IN RE: CYCLOBENZAPRINE HYDROCHLORIDE EXTENDED-RELEASE CAPSULE PATENT LITIGATION

Motion of plaintiffs Eurand, Inc., et al., for centralization of the following actions in the United States District Court for the District of Delaware:

Central District of California

Eurand, Inc., et al. v. Anchen Pharmaceuticals, Inc., et al., C.A. No. 2:09-4931

Eurand, Inc., et al. v. Anchen Pharmaceuticals, Inc., et al., C.A. No. 8:09-1098

District of Delaware

Eurand, Inc., et al. v. Mylan Pharmaceuticals, Inc., et al., C.A. No. 1:08-889

Eurand, Inc., et al. v. Impax Laboratories, Inc., C.A. No. 1:09-18

Eurand, Inc., et al. v. Anchen Pharmaceuticals, Inc., et al., C.A. No. 1:09-492

Eurand, Inc., et al. v. Anchen Pharmaceuticals, Inc., et al., C.A. No. 1:09-715

MDL No. 2119 — IN RE: MORTGAGE ELECTRONIC REGISTRATION SYSTEMS (MERS) LITIGATION

Motion of defendants CitiMortgage, Inc.; Mortgage Electronic Registration Systems, Inc.; MERSCORP, Inc.; National City Bank; National City Mortgage; National City Corp.; PNC Financial Services Group, Inc.; and AIG United Guaranty Corp. for centralization of the following actions in the United States District Court for the District of Arizona:

District of Arizona

Olga Cervantes, et al. v. Countrywide Home Loans, et al., C.A. No. 2:09-517

Jonathan E. Robinson, et al. v. GE Money Bank, et al., C.A. No. 4:09-227

Central District of California

Alfonso Vargas, et al. v. Countywide Home Loans, Inc., et al., C.A. No. 2:09-2309

District of Nevada

Josefa S. Lopez, et al. v. Executive Trustee Service, LLC, et al., C.A. No. 3:09-180

Aleta Rose Goodwin, et al. v. Executive Trustee Services, LLC, et al., C.A. No. 3:09-306

Joseph Green, et al. v. Countrywide Home Loans, Inc., et al., C.A. No. 3:09-374

Lacy J. Dalton, et al. v. CitiMortgage, Inc., et al., C.A. No. 3:09-534

MDL No. 2120 — IN RE: PAMIDRONATE PRODUCTS LIABILITY LITIGATION

Order to show cause for centralization of certain claims in the following actions in a single United States district court:

District of District of Columbia

Laura Brooks v. Novartis Pharmaceuticals Corp., et al., C.A. No. 1:08-484

Dara Pace v. Novartis Pharmaceuticals Corp., et al., C.A. No. 1:08-634

Suzanne Eckblom, et al. v. Novartis Pharmaceuticals Corp., et al., C.A. No. 1:09-440

M. Margaret Patterson, et al. v. Novartis Pharmaceuticals Corp., et al., C.A. No. 1:09-441

Middle District of Florida

James E. Lockard, et al. v. Novartis Pharmaceuticals Corp., et al., C.A. No. 8:08-818

Susan Kahn v. Novartis Pharmaceuticals Corp., et al., C.A. No. 8:09-1529

Northern District of Florida

Ben J. Smith, et al. v. Novartis Pharmaceuticals Corp., et al., C.A. No. 1:09-13

Southern District of New York

Gary Dale Fry v. Novartis Pharmaceuticals Corp., et al., C.A. No. 1:09-7264

Evan Chandler v. Novartis Pharmaceuticals Corp., et al., C.A. No. 1:09-7265

MDL No. 2121 — IN RE: FRETTED MUSICAL INSTRUMENTS ANTITRUST LITIGATION

Motion of plaintiff David Giambusso for centralization of the following actions in the United States District Court for the Southern District of California:

Central District of California

Allen Hale v. Guitar Center, Inc., et al., C.A. No. 2:09-6897

Mark O'Leary v. Guitar Center, Inc., et al., C.A. No. 2:09-7015

Southern District of California

David Giambusso v. National Association of Music Merchants, Inc., et al., C.A. No. 3:09-2002

Colby Giles v. Guitar Center, Inc., et al., C.A. No. 3:09-2146

Rory W. Collins v. Guitar Center, Inc., et al., C.A. No. 3:09-2151

David Keel v. Guitar Center, Inc., et al., C.A. No. 3:09-2156

Northern District of Illinois

Alex Teller v. Guitar Center, Inc., C.A. No. 1:09-6104

Feed-icon-14x14 Our feed will attend The Game this weekend.

MonopolyGame 
Not so fast, Uncle Pennybags.  We'll need you to take a SSNIP test.

On May 11, the new antitrust sheriff at the U.S. Department of Justice, Christine Varney, revoked the dominant firm-friendly report that the guy she replaced, Thomas O. Barnett, put out the autumn before.

Will dust-canning the section 2 report satisfy her?  We must say NO.  For the Antitrust Division and the Federal Trade Commission will go at least one better.  They'll hold "workshops" to look at ways to tweak the Horizontal Merger Guidelines, which since 1968 have informed the antitrust agencies' reviews of potential business deals that may lead to monopoly.

Last week, Carl Shapiro, Deputy Assistant Attorney General in the Antitrust Division, told a gathering of antitrust lawyers about plans for the workshops.  He titled his speech "Updating the Merger Guidelines:  Issues for Upcoming Workshops".  The schedule:

December 3 FTC Washington, DC

December 8 New York University New York

December 10   Northwestern University Chicago

January 14   Stanford  University   Palo Alto, CA

Expect a lot of pro-antitrust economists and lawyers to show up.

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Blawgletter just got back from a short trip.  You may only guess at our surprise when we learned that high profile lawyers, including Rudolph Guiliani, oppose trying 9/11 planners for mass murder in any civilian court, let alone the one nearest Ground Zero. 

The foolish venuing, they argue, will give the likes of mastermind Khalid Shaikh Mohammed a better chance at acquittal — presumably from the current odds of snowball's chance in hell to when monkeys fly out of Mr. Guiliani's flaring nostrils.  (Note:  Mr. Mohammed confessed to 9/11 — and a whole bunch of other terrorist plots and attacks.  In court.  Without waterboarding.)

The critics also worry about grandstanding by terrorists.  By which we infer they mean more than usual grandstanding.  Because they do that a lot already.  In case you hadn't noticed.

The nay-sayers also decry the high cost of security in Foley Square and around Manhattan.  And yet the guy who runs the main local supplier of security, New York City, said fine.  Plus, the U.S. did try (and convict) an earlier group of terrorists in the same spot without incident.

But we really just want to point out that saying something bad could happen may cost little and may produce a big pay off in the event the prophecy comes true.  (Althought it also may cost a lot if it fits a pattern.  See Chicken Little; The Boy Who Cried Wolf.)  Pushing fear triggers loss aversion, which posits that humans strongly prefer avoiding losses to achieving gains.  (You'll feel much worse about losing $100 than you'll enjoy gaining $100.)

Finally, we wonder why Mr. Guiliani, et al., have said nothing about the civil cases, pending in the same courthouse, against Mr. Mohammed and other perpetrators of 9/11 attacks, for upwards of eight years.  See In re Terrorist Attacks on Sept. 11, 2001, No. 03-MDL-1570 (S.D.N.Y.).  Don't they count?

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AMD v Intel 
You could put an eye out with that gavel.

Intel Corporation has made peace with Advanced Micro Devices, Inc., the companies announced in IDENTICAL press releases today (here and here).  The money part said:

[Blah blah blah,] and Intel will pay AMD $1.25 billion. Intel has also agreed to abide by a set of business practice provisions. As a result, AMD will drop all pending litigation including the case in U.S. District Court in Delaware and two cases pending in Japan. AMD will also withdraw all of its regulatory complaints worldwide. The agreement will be made public in filings with the Securities and Exchange Commission.

The pact won't end Intel's worries.  As the NYT reported:

[T]he Intel-A.M.D. settlement does not end separate antitrust actions against Intel by government bodies in Europe, Asia and the United States.

In May, the European Union hit Intel with a record $1.45 billion fine, which the company is appealing. Last week, New York’s attorney general, Andrew M. Cuomo, filed a wide-ranging antitrust suit against Intel. The Federal Trade Commission, which oversees some antitrust issues in the United States, has also been mulling whether to open formal proceedings against the company.

The $1,250,000,000.00 payment looks to Blawgletter like serious money.  Like Intel felt less sure of its position:  We.  Did.  Nothing.  Wrong.  Oh yeah?

Does forking over $1.25 big ones matter in a practical way? 

Yes.  It surely won't dim the ardor of AG Cuomo, et al., for their government cases, but it does suggest that Intel will work hard to settle them, too.  (Remember the tobacco companies, which caved everywhere after caving in Mississippi?)  It also implies weakness and a board-level decision to make love, not war.

While we suspect that Intel has taken steps before now to placate its big chip buyers — Hewlett-Packard/Compaq, Dell, Gateway, IBM, Sony, Apple, eMachines, Acer, and Velocity, among others — woe for Intel if it hasn't done so convincingly. 

Because the way to the courtroom looks clear. 

Ching — da-dum, da-dum.

A bankruptcy judge tells you, from the bench, "don't do X".  You can't do X, right?  Even if the judge hasn't signed an order, true?

Except that you didn't go to the hearing because you thought the court just might – let's face it, probably would — instruct you not to do X.  Because you really really wanted to do X.  And you thought that, if you actually heard the judge's voice, you'd have to obey.  Otherwise not.  Then you did X, as you planned all along.  Could the judge hold you in contempt?

Yes.  Ingalls v. Thompson (In re Bradley), No. 08-50587 (5th Cir. Nov. 11, 2009).

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The standard for recusal of a federal judge on grounds of bias requires proof that "his impartiality might reasonably be questioned."  28 U.S.C. 455(a). 

The district judge in White v. Nat'l Football League, No. 08-2001, slip op. at 12 (8th Cir. Nov. 10, 2009), said in a press interview that the NFL "would have loved for me to be out of the way".  He did so by way of explaining why the league wrote him a letter asking "that I remove myself from matters involving the NFL and the players' union."  Id.

Add that lawyers for the union often met with His Honor ex parte for "an exchange of pleasantries in chambers when counsel arrived from out of town."  Id. at 16.  The NFL attorneys may have simply chosen not to attend.

The court of appeals held that U.S. District Judge David Doty did not abuse his discretion by refusing to recuse himself. 

The thing that most upset Their Appellate Honors?  That Judge Doty talked with the press and therefore seemed to "covet publicity."  Id. at 14.

Blawgletter marvels at how far judges will go to beguile themselves with the fantasy that bias in their colleagues doesn't exist . . . or that its appearance doesn't really hurt anything.  But when it does exist, or seems to, as in this case, it does hurt.  More than they know.

We don't say Judge Doty crossed the line, but we do believe the Eighth Circuit told the facts in a way that made his indiscretions seem more gauche than troubling.  Bad.

The case, by the way, involved whether Michael Vick — the former Atlanta Falcon quarterback — has to forfeit $16.22 million in "roster bonus" due to his guilty plea on federal dog-fighting charges.  He doesn't.

Have you ever heard of the McCarran-Ferguson Act?  Not long ago, half a century after its passage, the statute became a low-key but key part of the healthcare reform debate.  

The WWII-vintage statute, you see, generally exempts insurers from federal antitrust law.  That means health (and other) insurers can collude to fix premiums, rig bids, allocate customers and terroritories, and commit other gravely anticompetitive acts without running afoul of the Sherman Act.  Although state law likely will bar such bad behavior, any remedy for it usually must happen on a state by state basis. 

Senator Patrick Leahy (D-VT) in September filed a bill to repeal the exemption for health and medmal insurance carriers.  A version of it made its way into the comprehensive bill that the House passed a few days ago.

Blawgletter would now like you to turn to another part of the Act, one that drew the en banc Fifth Circuit's attention yesterday.  This portion also does an odd thing.  It makes state law supreme over any "Act of Congress" that affects the business of insurance "unless such Act specifically relates to the business of insurance".  Reverse preemption — state law trumping federal law instead of the other way around.

The issue arose because a district court held that a Louisiana statute barred enforcement of a contract clause calling for arbitration overseas (in London, we think).  A Fifth Circuit panel reversed.  The en banc court reconsidered and came out the same way. 

Fourteen of the 18 judges agreed that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards didn't count as an "Act of Congress" under McCarran-Ferguson.  The logic went like this:  Treaty does not equal Act.   Safety Nat'l Casualty Corp. v. Certain Underwriters at Lloyd's, London, No. 06-30262 (5th Cir. Nov. 9, 2009) (en banc).  Louisiana law therefore did not bar, and could not bar, enforcement of the international arbitration clause, McCarran-Ferguson or no.

A concurring judge would've reversed purely on Supremacy Clause grounds.  A three-judge dissent pointed out that Congress passed an Act that breathed life into the Convention, therefore meeting the "Act of Congress" requirement.

Blawgletter thinks insurers no longer deserve special legal treatment, if they ever did.  Repeal away!

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Rube Goldberg Flyswatter
Flyswatter by Rube Goldberg.

You've heard about the genius whose incandescent idea for a new contraption wakes him in the hours before sunup.  You'll also recall Edison's cutesy statement that "[g]enius is one percent inspiration, ninety-nine percent perspiration."

Both the burning thought that disturbs the inventor's slumber and the drudgery that produces the pre-dawn bolt have entered the folklore about what our U.S. Constitution calls "Discoveries" that "promote the Progress of Science and useful Arts".  We like those people and don't mind if they prosper, even if their royalties cost us more for the stuff we buy. 

Which brings us to Bilski v. Kappos, No. 08-964 (U.S.), a case that explores the edges of what sorts of things the geniuses and drudges can get a patent for.  The Court heard argument in Bilski today.

Bilski turns on how far Congress went in allowing business "method" or "process" patents.  The inventors, who lost below, say patent law permits patenting so long as the inventions don't simply capture "laws of nature, physical phenomena, and abstract ideas" under Diamond v. Diehr, 450 U.S. 175, 185 (1981), but go on to make some "practical application" of such laws, phenomena, and ideas.  And they say their method for hedging against the risk of swings in the price of gas and other commodities.

The Federal Circuit in Bilski set a "machine-or-transformation" test for patentability, holding that the Bilski inventors didn't satisfy it.  As the WSJ explains, the test requires that a business method/process "must be 'tied to a particular machine or apparatus' or transform 'a particular article into a different state or thing.'"

The fight comes down to a flexible v. rigid standard.  The "practical application" test sounds good to Blawgletter's ear.  The Federal Circuit's "machine-or-transformation" formulation, on the other hand, makes us think of Rube Goldberg.  (Skip to UPDATE and UPDATE 2 to see why neither will likely win the day.)

But the Supremes seem at times to hear music when our ears perceive racket.  A 6-3 majority, for example, liked the fuzzy "plausibility" test of Twombly, while we groaned at Twombly's tightening of the federal case filter.

We'll post the hearing transcript when the Court makes it available.  We'll take special interest in questions implying worry that the number of business process patent applications jumped from fewer than 1,000 a decade ago to almost 14,000 in 2008.  Justices who focus on that may take the leap from the surge in applications to the conclusion that patent trolls will soon bring commerce to a halt by enforcing patents that cover things like typing a blog post.  Yikes.

UPDATE:  SCOTUSblog.com offers this:

The largest question left unanswered when the one-hour argument was over was whether the Court would go forward and issue a major new ruling interpreting patent law, when the practical result here seemed so evident.  Lawyers and judges have invested major resources in the Bilski case, and it does raise a fundamental question that may well need answering. But, when there may well be no formulation of patent law that would salvage the Bilski-Warsaw creation, why bother?

UPDATE 2:  The Court has put the transcript up. 

Bilski jumped the shark no later than this exchange:

JUSTICE BREYER: . . . . You know, I have a great, wonderful, really original method of teaching antitrust law, and it kept 80 percent of the students awake. They learned things –

(Laughter.)

JUSTICE BREYER: It was fabulous. And I could probably have reduced it to a set of steps and other teachers could have followed it. That you are going to say is patentable, too?

MR. JAKES: Potentially.

FeedIcon Ignoring the fact that that would increase productivity.