The same set of ugly facts can give rise to a welter of claims.  And not just a welter — also a variety.

Take a securities fraud case.  It alleges that somebody misled investors, who as a result overpaid for a stock, bond, or other security.  But the bad facts that motivated the lying often also suggest that the officers and directors didn't do their jobs — as fiduciaries to the company itself.  Those claims fall under the "derivative" rubric.

An Eighth Circuit decision today drew the distinction.  It thumped a district court for letting a single lead plaintiff, Horizon Asset Management, dump derivative claims in favor of bringing securities fraud claims only.  The panel said (having affirmed dismissal of the securities claims):

It may be debatable whether a conflict of interest necessarily prevents a single plaintiff, such as Horizon, from bringing both direct claims against a corporation and derivative claims on the corporation's behalf. . . . Once it was clear that Horizon would not pursue the derivative claims, it was error for the district court to abide by its decision to appoint Horizon as the sole lead plaintif to prosecute a single consolidated complaint.

Horizon Asset Mgmt. Inc. v. H & R Block, Inc., No. 08-1593, slip op. at 19-20 (8th Cir. Sept. 9, 2009).

The Third Circuit today upheld class treatment of an antitrust case that alleged bid-rigging by insurance brokers and carriers.  The panel also okayed two settlements — one for $121,800,000 and the other for $28,000,000 — and a fee-and-expense award of $29,500,000 to class counsel.  In re Ins. Brokerage Antitrust Litig., No. 07-1759 (3d Cir. Sept. 8, 2009).

The $25 million fee compares to a lodestar of almost three times that — more than $74 million.

Feed-icon-14x14 All that hydraulic pressure to settle, we suppose.

Frank Easterbrook 
Frank Hoover Easterbrook's opinions suggest a healthy self-regard.

Blawgletter has asked if the Chief Judge of the Seventh Circuit cares what you think.  The way we posed the question implied how we would come out on it.

Today His Honor performed a Britney Spears.  Oops, he did it again.

The case raised a nifty issue:  can parties to a dispute stop others from learning their secrets by vowing to each other to keep the stuff away from others' prying eyes?  Chief Judge Frank Easterbrook today said no:

[S]uch a provision would be ineffectual.  Contracts bind only the parties.  No one can “agree” with someone else that a stranger’s resort to discovery under the Federal Rules of Civil Procedure will be cut off.  We applied this principle in Jepson, Inc. v. Makita Electric Works, Ltd., 30 F.3d 854 (7th Cir. 1994), to confidentiality agreements reached during litigation.  That conclusion is equally applicable to confidentiality agreements that accompany arbitration.  Indeed, we have stated more broadly that a person’s desire for confidentiality is not honored in litigation. Trade secrets, privileges, and statutes or rules requiring confidentiality must be respected, see Fed. R. Civ. P. 45(c)(3)(A)(iii), but litigants’ preference for secrecy does not create a legal bar to disclosure. See Baxter International, Inc. v. Abbott Laboratories, 297 F.3d 544 (7th Cir. 2002); United States v. Foster, 564 F.3d 852 (7th Cir. 2009) (Easterbrook, C.J., in chambers).

Gotham Holdings, LP v. Health Grades, Inc., No. 09-2377, slip op. at 2 (7th Cir. Sept. 3, 2009).

Except that the case didn't really present that issue.  The court could have ruled on the basis that the agreement not to disclose by its terms said the promise didn't apply if a party got a subpoena.  See id. (noting that "¶6 of the agreement between Health Grades and Hewitt Associates provides that materials from the arbitration may be disclosed in response to a subpoena").

What moved Judge Easterbrook to go on to give us obiter dicta?  Perhaps so he could share with us this thought (plus a few others):

According to Health Grades, access to the information would undermine the national policy favoring arbitration.  There is no such policy.

Id. at 3.

We don't deny His Honor's wisdom and cleverness on this head.  But we do marvel that he seems to think we need them so much.

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Most everyone knows by now that the Private Securities Litigation Reform Act of 1995 made winning a federal securities lawsuit a lot harder — including by setting a tougher test for pleading scienter, which in context means the defendant intended to defraud someone. 

Fewer people have heard that the PSLRA also raised the stakes for a plaintiff that loses such a case.

The Second Circuit brought the latter point home today.  It held that the statute (1) requires district courts to find whether or not the losing party did things that warrant Rule 11 sanctions, (2) allows sanctions even if the losing party could've stopped sanctions by invoking the Rule 11 safe harbor in non-PSLRA cases, and (3) doesn't demand proof that the losing party acted in "bad faith".  ATSI Communications, Inc. v. The Shaar Fund, Ltd., No. 08-1815 (2d Cir. Sept. 2, 2009).

The court went on to reverse the sanctions amount.  It asked the district court on remand to look into whether the defendants could have avoided incurring fees if they'd moved for Rule 11 sanctions sooner.

Peter Lorre 
Peter Lorre (1904-1964).

Blawgletter never tires of watching Casablanca (1942).  It has all you could want — gorgeous movie stars (Ingrid Bergman and Peter Lorre), lovely music ("As Time Goes By" and "La Marseillaise"), a noirish look (in black and white), a passionate romance (between Bergman's Ilsa and Bogart's Rick), and a surprise ending – in which love gives way to a higher cause (beating the Nazis). 

We also like the lines, which include:

  • Of all the gin joints in all the towns in all the world, she walks into mine.
  • Round up the usual suspects.
  • I am shocked, shocked to find out that gambling is going on in here.
  • Play it, Sam.
  • Here's looking at you, kid.

  • We'll always have Paris.

This last came to mind on Monday, when we ran across a Ninth Circuit case that concerned another Paris — the one with Hilton as her last name.  Ms. Hilton sued Hallmark for using her image and exploiting her fame on a greeting card.  Circuit Judge Diarmuid F. O'Scannlain set the scene:

The front cover of the card contains a picture above a caption that reads, "Paris's First Day as a Waitress."  The picture depicts a cartoon waitress, complete with apron, serving a plate of food to a restaurant patron.  An oversized photograph of Hilton's head is super-imposed on the cartoon waitress's body.  Hilton says to the customer, "Don't touch that, it's hot."  The customer asks, "what's hot?"  Hilton replies, "That's hot."  The inside of the card reads, "Have a smokin' hot birthday."

Hilton v. Hallmark Cards, No. 08-55443, slip op. at 12116 (9th Cir. Aug. 31, 2009).  His Honor further explains:

Hilton's basic contention is that Hallmark lifted the entire scene on the card from the "Simple Life" episode, "Sonic Burger Shenanigans."  The conceit behind the program was to place Hilton and her friend Nicole Ritchie into the life of an average person, including working for a living.  In the episode, the women work at a drive-through fast-food restaurant.  They cruise up to customers' cars on roller skates and serve them their orders.  True to form, Hilton occasionally remarks that a person, thing, or event is "hot."

Id. at 12136.

The law part strikes us as dull but quite good.  Judge O'Scannlain — Diarmuid! — gamely takes us through questions about court of appeals jurisdiction; California's anti-SLAPP law, which aims to combat lawsuits that attack free speech and such; and (at last) whether Ms. Hilton has a more-than-futile claim.  The answers:  the court has jurisdiction over some of the appeal; the anti-SLAPP law applies; and Ms. Hilton does have a non-bogus claim and thus gets by the anti-SLAPP hurdle.

We sort of knew the last part after we read what Ms. Hilton claimed.  Kudos to the author for holding our interest to the end.

Feed-icon-14x14 Our feed likes Paris Texan.

By 1997, Bose Corporation quit making tape recorders and players.  Four years later, its general counsel said under oath that Bose still used its "WAVE" trademark "in connection with" such devices. 

The Trademark Trial and Appeal Board — a unit of the U.S. Patent and Trademark Office — deemed the statement a falsehood and declared Bose's renewal registration of the WAVE mark forfeit.

The Federal Circuit reversed.  The court made Abundantly Clear that the Board put too light a burden on the claim that Bose (through its general counsel) did a fraud on the PTO.  The Board employed a "should have known" test for fraudulent intent — as in the GC should have known that ongoing repair work on old WAVE recorders and players didn't count as use of the mark "in commerce".  The court, by contrast, required a subjective purpose to deceive — a test that in this case would've demanded proof that they GC didn't really think repair work amounted to "commerce".  It said:

Mr. Sullivan explained that in his belief, Bose’s repairing of the damaged, previously-sold WAVE audio tape recorders and players and returning the repaired goods to the customers met the "use in commerce" requirement for the renewal of the trademark. . . . There is no fraud if a false misrepresentation is occasioned by an honest misunderstanding or inadvertence without a willful intent to deceive. . . . Sullivan testified under oath that he believed the statement was true at the time he signed the renewal application. Unless the challenger can point to evidence to support an inference of deceptive intent, it has failed to satisfy the clear and convincing evidence standard required to establish a fraud claim.

In re Bose Corp., No. 08-2448, slip op. at 10 (Fed. Cir. Aug. 31, 2009).

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When Blawgletter first heard about "discovery", we thought it barb'rous.  You have to give your files to your enemy — the one who loves to call you names, who wants to bankrupt you, who prays for your painful death, but who secretly envies you?  WHAT?!!

Since then, we've come to like it . . . some.  The fun part, we feel, involves figuring out which rocks to turn over.  You don't need to look under all of them, you know.  Just the right ones.  Doing that takes brains.

The dawn of e-discovery changed only the number of useless rocks to upend.  It didn't alter the need to use your smarts.  You simply have to apply them to the realm of electronics — servers, hard (and floppy!)disks, flash (and thumb!) drives, personal digital assistants, compact (and digital video!) disks, smart phones, voice mail systems, email (business and personal), text messaging, Twitter, Facebook, LinkedIn, Blawgletter®, portable media players, the Internets (both good and bad ones), and on and on.

In 1999, Texas led the way in writing rules to help judges, lawyers, and clients find the right electronic rocks.  And the big brain of our senior partner, Steve Susman, deserves a lot of the credit.  He chaired the Discovery Subcommittee that drafted the almost complete rewrite of the Texas discovery rules.  The Federal Rules of Civil Procedure didn't adopt e-discovery strictures until 2006.

The Supreme Court of Texas applied the 1999 rules for the first time last Friday.  It held that a party must ask for "deleted emails" if it wants emails that have gone dark but may remain in an electronic nook or cranny (such as on a server or backup tape).  The 9-0 justices also struck down an order that forced defendant Weekley Homes to let experts for plaintiff HFG "image" several computers and look through their e-contents for "deleted emails" from 2.5 years earlier.  "The missing step", the Court concluded, "is a demonstration that the particularities of Weekley’s electronic information storage methodology will allow retrieval of emails that have been deleted or overwritten, and what that retrieval will entail."  In re Weekley Homes, L.P., No. 08-0836, slip op. at 17 (Tex. Aug. 28, 2009).

The Court added this bit about "the proper procedure under Rule 196.4:"

— the party seeking to discover electronic information must make a specific request for that information and specify the form of production. TEX. R. CIV. P. 196.4.

— The responding party must then produce any electronic information that is “responsive to the request and . . . reasonably available to the responding party in its ordinary course of business.” Id.

— If “the responding party cannot — through reasonable efforts — retrieve the data or information requested or produce it in the form requested,” the responding party must object on those grounds.

— The parties should make reasonable efforts to resolve the dispute without court intervention. TEX. R. CIV. P. 191.2.

— If the parties are unable to resolve the dispute, either party may request a hearing on the objection, TEX. R. CIV. P. 193.4(a), at which the responding party must demonstrate that the requested information is not reasonably available because of undue burden or cost, TEX. R. CIV. P. 192.4(b).

— If the trial court determines the requested information is not reasonably available, the court may nevertheless order production upon a showing by the requesting party that the benefits of production outweigh the burdens imposed, again subject to Rule 192.4’s discovery limitations.

— If the benefits are shown to outweigh the burdens of production and the trial court orders production of information that is not reasonably available, sensitive information should be protected and the least intrusive means should be employed. TEX. R. CIV. P. 192.6(b). The requesting party must also pay the reasonable expenses of any extraordinary steps required to retrieve and produce the information. TEX. R. CIV. P. 196.4.

— Finally, when determining the means by which the sources should be searched and information produced, direct access to another party’s electronic storage devices is discouraged, and courts should be extremely cautious to guard against undue intrusion.

In re Weekley Homes, slip op. at 21-22.

The U.S. Courts website features lots of helpful info on what it calls, grandly, The Federal Judiciary.

Here you can get, for instance, Statistical Reports on all manner of data.  One such report, Judicial Business of the United States Courts, tries to order all the facts so as to give you an idea — a notion really – of what the Least Dangerous Branch has done for you and other Americans lately.

Other parts of U.S. Courts clue you into the process for making court rules, tell you how the Judicial Conference sets policy, and offer links to court websites and PACER sites.

An extra sparkly part of the site — to Blawgletter's magpie eye at least — tracks Judicial Vacancies.  Let's take a look at the state of play with JVs:

  • They come in seven flavors:  Deceased, Elevated, New Position, Removed, Resigned, Retired, and Senior.  (Senior means a judge stays on the bench but cedes "active" status and often takes a smaller caseload.) 
  • Among current JVs, Senior segment accounts for 74 of the 91 now-empty seats; seven arose from Resigned; five went the Elevated route; Deceased explains four; and New Position garners one.
  • Twenty-four JVs will open up in the next year or so:  15 by way of Senior status; six Elevateds; two Retireds; and one Resigned.
  • The President has nominated 16 men and women to fill that many bench spots.

Looking at things from a circuit/district view, we see the current and future landscape of open seats thus:

First Circuit:  One/three

Second Circuit:  Five/six

Third Circuit:  Two/seven

Fourth Circuit:  Five/11

Fifth Circuit:  One/10

Sixth Circuit:  One/five

Seventh Circuit:  Two/eight

Eighth Circuit:  None/nine

Ninth Circuit:  Three/15

Tenth Circuit:  One/four

Eleventh Circuit:  One/nine

D.C. Circuit:  Two/three

Federal Circuit:  One/not applicable

Finally, let's cast our gaze on how the Senate would change the mix, in each circuit, between appointees of Republican presidents and Democratic ones if it confirmed all of he pending nominations.  (Numbers include active circuit judges only; shows shifts from majority Republican status in yellow):

First Circuit:  From 3-2 to 3-3

Second Circuit:  From 6-3 to 5-8

Third Circuit:  From 6-6 to 6-8

Fourth Circuit:  From 5-5 to 5-10

Fifth Circuit:  From 12-4 to 12-5

Sixth Circuit:  From 10-5 to 10-6

Seventh Circuit:  From 7-3 to 7-5

Eighth Circuit:  No change from 9-2

Ninth Circuit:  From 11-16 to 11-18

Tenth Circuit:  8-4 to 8-5

Eleventh Circuit:  From 7-4 to 7-5

D.C. Circuit:  From 6-3 to 6-5

Federal Circuit:  From 8-4 to 7-5

The U.S. Senate has voted on (and confirmed) just one nominee — Associate Justice Sonia Sotomayor.  The Judiciary Committee held hearings for five others but hasn't set dates for any of the rest.

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Kevin Trudeau 
Kevin "They" Trudeau.

Kevin Trudeau must like getting strangers to buy stuff . . . with claims that defy belief.  He seems to have done well at drawing money from people who want to believe more than they do believe.  So well that, since 1998, the Federal Trade Commission has tried to shut him up.

Today the Seventh Circuit cut back on an FTC win against Mr. Trudeau.  The district court found that he had lied on TV about his diet book — The Weight Loss Cure "They" Don't Want You to Know About — and that the fibs ran afoul of a consent decree in which he vowed to tell only the truth.  The court went on to fine him $37.6 million — to repay losses to book-buyers — and to ban him from doing any more "infomercials".  But the Seventh Circuit panel, which upheld the finding that calling the diet "easy" and "simple" amounted to lying, tossed the fine and the ban, holding that the lower court didn't say enough about why it imposed them.  Federal Trade Comm'n v. Trudeau , No. 08-4249 (7th Cir. Aug. 27, 2009).

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