Recent Articles in Corporate & Commercial Litigation from LexMonitor

GUEST BLOGGER: Sergei Lemberg from lemonjustice.com on the "Loser Pays" system and why it hurts consumers

thecomplexlitigator@leviant.net (H. Scott Leviant) — Fri, 21 Nov 2008 20:32:23 GMT

THE COMPLEX LITIGATOR: As a new feature of this blog, I am hoping to provide regular visitors with some added variety through guest authors that cover topics related to, but outside the scope of, this blog. Sergei Lemberg, an attorney...

Sergei Lemberg, an attorney who practices lemon law and blogs at www.lemonjustice.com is sitting in the guest blogger’s chair today.

“Loser Pays” and Its Impact on Consumers

Every state has a Lemon Law, which requires a manufacturer to give you a refund or a replacement vehicle if they can’t fix a new car’s defect within a certain number of attempts. As we all know, car manufacturers will try to do whatever they can to get out of compensating a consumer who has a lemon. So, when a manufacturer refuses, it’s up to the consumer to file a Lemon Law claim.

A number of states require that the consumer enter an arbitration program run by either the manufacturer or the state. The rationale is that, if the two parties’ differences can be smoothed out, it won’t burden the court system. In practice, however, car manufacturers have legal teams that fight Lemon Law claims – whether in arbitration or in the court system. It’s much more likely that consumers will have positive outcomes and get the compensation they deserve when they hire a Lemon Law attorney. This is because most state laws say that, if the consumer wins the case, the manufacturer has to pay the consumer’s attorney’s fees. Therefore, manufacturers need to weigh the cost of fighting the claim (that is, the cost of their legal team plus the consumer’s lawyer) against agreeing to a buyback or replacement vehicle. If the consumer has a lawyer and a good case, chances are that the manufacturer will back down and pay up.

England and many other European countries have what’s termed a “loser pays” policy, whereby whomever is on the losing side of a legal action has to pay the legal fees of the prevailing party. While this might seem fair on the face of it, loser pays undermines the foundation of Lemon Laws and other laws that include what’s termed “fee-shifting.” Think about it. The average consumer simply doesn’t have the resources to risk filing a Lemon Law claim and having to pay GM’s or Chrysler’s legal bills. No one in their right mind would take a car manufacturer to court – even if they had a solid case.

Lemon Laws certainly don’t provide consumers with an unfair advantage; if anything, they make it difficult to get relief by imposing stringent requirements on consumers. Awarding attorneys’ fees in a successful Lemon Law claim puts the onus where it belongs: squarely on the shoulders of the car manufacturer who made and sold a defective product.

It goes without saying, however, that there are two sides to every story. There are some who think that attorney’s fees are causing the legal system to run amok, and who propose reforms that would make it harder for wronged consumers to fight back.

The problem with this position is twofold. First, consumers are regularly abused by big car companies, who have bottomless pockets with which to fight claims against them. Second, because Lemon Law claims result in relatively low dollar amount settlements (thousands of dollars instead of hundreds of thousands or millions of dollars) it’s impossible for attorneys to bring cases without also being awarded fees.

"Public Interest Lawyers Secure Right to Fees"

uclpractitioner@gmail.com (Kimberly A. Kralowec) — Fri, 21 Nov 2008 17:41:53 GMT

This morning's Daily Journal has an article on the Supreme Court's decision yesterday in the Vasquez case. An excerpt: Attorney Michael Rubin of Altshuler Berzon in San Francisco ... said the opinion eliminates any potential confusion about when attorneys can...

This morning's Daily Journal has an article on the Supreme Court's decision yesterday in the Vasquez case. An excerpt:

Attorney Michael Rubin of Altshuler Berzon in San Francisco ... said the opinion eliminates any potential confusion about when attorneys can collect fees.

"This ruling is consistent with the California Supreme Court's pragmatic, centrist approach to judicial decision-making," Rubin said. "It ended up with a result that is fair to all parties in this and future cases."

....

The attorney general's office had also weighed in on the state's side. The office was in the unique position of wanting to see public-interest lawyers get compensated for their work but also having to defend the state against such litigation.

Although the court did not adopt the rule the state sought, Supervising Attorney General Ed Weil said the new guidelines are an improvement.

"As a practical matter, if you're an attorney out there deciding what to do, the only prudent course is an effort to resolve the matter before filing," he said. "If you don't, the ruling may come back to haunt you."

Forge Consulting Is Kicking Your Ass! Are You Happy?

structures@aol.com (John D. Darer) — Fri, 21 Nov 2008 17:31:20 GMT

The company whose 3 principals' moral compass guided them to each sign a declaration under penalty of perjury attesting to substantial defense work to the United States Department of Justice at the same exact time that they marketed to tort victims and their attorneys that they were plaintiff exclusive, is starting to kick the ass of many of the big names in the structured settlement business in Internet traffic. I ask you how do you feel about that?

The "QSF jockeys" who are among the most universally disliked in the structured settlement and settlement planning industry (although not hated enough by the NSSTA Board for appointing Spooner Phillips to be the "shining deacon of membership") appears to have made an investment to increase its web traffic. Kudos to them. What are the rest of you doing?

Attorney Lays Out "Cash Now Pushers' Case to Jack Up Costs To Tort Victims

structures@aol.com (John D. Darer) — Fri, 21 Nov 2008 17:00:48 GMT

Mike Green, Pennsylvania attorney who represents factoring companies has done a nice job of explaining some of the key concepts of factoring which appear in a post on the Settlement Capital blog (www.setcap.com) There are some important points in Mike...

There are some important points in Mike Green's final thoughts. He states "I sometimes see judges become concerned at an interest rate which may seem high. Sometimes proposed transactions will contain an interest rate which exceeds 20%. While, in some circumstances, that interest rate is indeed unreasonably high, other times that rate may be reasonable. The judge and the transferor need to understand that, in general, the effective interest rate is based on the size of the payments to be transferred,the dates that those payments will be transferred and the perceived viability of the annuity company, considering also the factoring company’s overhead and profit. The factoring company also bears the risk of inflation. If inflation increases, it acts as a discount rate, “diminishing” the future value of the periodic payments. When an individual makes a structured settlement transfer, the inflationary risk (as well as the insurance company viability risk) passes to the factoring company.

“Smaller” transactions, i.e. proposed sales which involve one relatively small payment or periodic payments which are due many years in the future, will often have higher effective interest rates because of the factors described herein."

Seems like there sure are alot of ways for the "financial crack dealer" and "cash now pusher" crowd to attempt to justify their costs so the poor structured settlement annuitant gets what appears to be diddly.

Guiding Your Client Through Bankruptcy Exemption Planning

tiffany@infra-strategy.com (Kevin Chern) — Fri, 21 Nov 2008 16:18:01 GMT

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Startup ABC’s - Pre-Startup IP Issues

rob.hyndman@gmail.com (Rob Hyndman) — Fri, 21 Nov 2008 15:49:57 GMT

(This post is a condensation of a conversation Rick Segal and I recently had in a session at StartupEmpire’s StartupSchool) I think many people would be surprised to hear that there are important steps you need to take for your new business before - even well before - you start it. But it’s true. The [...]

(This post is a condensation of a conversation Rick Segal and I recently had in a session at StartupEmpire’s StartupSchool)

I think many people would be surprised to hear that there are important steps you need to take for your new business before - even well before - you start it. But it’s true. The single most common request I’ve had over the past year from startups is to help them deal with intellectual property ownership problems created because of pre-startup work relationships. Indeed, in the last year I’ve seen one startup abandoned because of this issue and one exit scrapped. And many other problems have been worked through, with varying degrees of success and difficulty. All of this is a shame because these are generally easy - at least relatively - problems to address if you get at them early.

What’s the issue?

Generally, your employer expects that work you create on the job belongs to them. After all, you’re getting paid for it - this is only fair. Where your work product is protectable by copyright, the Canadian Copyright Act echoes this principle in Section 13(5), which says:

Where the author of a work was in the employment of some other person under a contract of service or apprenticeship and the work was made in the course of his employment by that person, the person by whom the author was employed shall, in the absence of any agreement to the contrary, be the first owner of the copyright, but where the work is an article or other contribution to a newspaper, magazine or similar periodical, there shall, in the absence of any agreement to the contrary, be deemed to be reserved to the author a right to restrain the publication of the work, otherwise than as part of a newspaper, magazine or similar periodical.

I’ll make two points about this. First, putting aside cases where the work is an article or other contribution to a newspaper, magazine or similar periodical, the copyright in work “made in the course of employment” belongs to the boss. Second, because this is triggered by employment, it applies only to employees - this means that in Canada the copyright in work created by a person who is not an employee - we generally call these people ‘independent contractors’ - is owned, in the absence of any agreement, by the independent contractor.

What the Copyright Act says is only the beginning, though. Many employers - probably almost all in the tech sector - are not content to leave this issue to the Copyright Act. They prefer written agreements with their team members, generally because (i) there are intellectual property rights created by their employees (such as inventions, trade secrets and others) that are not addressed by the Copyright Act, (ii) they also work with people who aren’t employees, and are therefore not covered by the Copyright Act, and (iii) there are other aspects to the business relationship, like confidentiality, payment, non-solicitation, and many others, that should also be addressed in a written agreement.

As a result, one of the first things one gets from a potential new boss is their form of employment agreement or consulting agreement, and sometimes also a separate IP ownership, confidentiality and non-solicitation agreement. Sometimes the provisions of these agreements that deal with IP ownership are very similar to the words used in Section 13(5) of the Copyright Act - they state that the company owns work created “in the course of employment”. But usually they go further than this, and claim for the company not only work that is created in the course of employment, but other work as well.

Here’s an example. One pro-company formulation of this concept that I see quite often says that anything created by the worker during the calendar period they were working for the company (whether during business hours or not - whether in the office or not - whether using company equipment or information or not - even whether working on a project requested by the company or not) is owned by the company. While this is an extreme example, I see troublesome language in these contracts all the time. And I’ve seen many problems in these contracts caused by drafting errors - even very serious ones (these problems are not, I’m sad to say, rare, and can often make it very difficult to sensibly interpret a contract). I’m not saying, of course, that there aren’t cases where an approach that might at first blush seem extreme isn’t appropriate - but those cases are pretty rare, at least on the ‘net.

Why is this an issue for tech startups? Well, code, visual design and written work is often the subject of copyright. And all of these forms of work - as well as others that are potentially copyrightable - are often developed by and for tech startups, especially those active on the Web. But if the individual creating that work was working for someone else when the work was created, the chances are pretty good that the Copyright Act or a written agreement between that individual and that someone else raises questions about who actually owns that copyright. And if you don’t settle those questions early - preferably before the work is created - you could have problems - potentially very serious problems - later on.

How? Here’s an example that mashes together a few cases I’ve worked on recently: A client approached me wanting to sell his business. The main asset was an app. The key team members had written the code in the evenings and on weekends while they were employees of another company. The work was outside of their employment with that company, but to be sure about their position, they approached their supervisor to tell him what they were doing on their own time, and the supervisor verbally acknowledged that that side project was not the property of the company. Fast forward, and the team has left their former employer and is now in their own company, working on the app full-time, and is approached by a potential buyer. The buyer does some basic due diligence and learns that the core of the app was built while the key team members were working for the former employer. The team produces their old employment agreements, and discover that they contain copyright ownership language that seems to be very much in favour of the employer. I say “seems to be” because what’s more, the agreements are not well-drafted - people reviewing the documents can’t say for certain who owns the copyright created during the team’s employment, or since. Worse yet, the buyer is a competitor of the former employer and suspects that when the employer learns about the deal it might want to interfere just to slow down the competition. Cue litigators. Cue sick feeling in your stomach.

How Do You Deal With This?

There is only one sure way. Before you sign an agreement giving someone else rights to what you create, review it carefully. If you’re not sure about your position, have it reviewed by a lawyer. If you still have concerns about your ownership of Project X, clear them up with your boss in writing. And if Project X isn’t yet on the horizon, raise it as soon as it is - ideally, before you start working on it, but certainly before you start creating meaningful work product.

For a variety of reasons, people are often reluctant to raise these issues with their boss. First, they don’t want the boss to know they’re living another life or planning a departure - it’s important, for promotions, bonuses and the like, to be seen as loyal and committed. Second, they don’t want to be seen as a complainer - someone who “can’t see the big picture” and gets bogged down in “unimportant detail”. And of course, sometimes Project X will compete with the employer - the worker has figured out an approach that they think is better - and breaking that news to the boss is trouble for a variety of reasons.

I think some of these concerns are often misplaced. Many people understand now that no one is just one thing in the world of work. And the best employees often have a lot more than just one thing going on at any one time. Smart employers seek out creative people, and are not surprised when their creativity takes them in new directions. And smart employers know that someone who is particular about detail and principled about setting correct expectations before they start work will behave that way on the job too.

But only you can decide what the right approach is in your situation. Just be aware that keeping your head down now could create serious problems later on. And keep in mind also that written agreements with your boss sometimes also contain language requiring you to keep your boss informed of even your outside projects.

Last, you should keep in mind that every member of the team you might be putting together is in the same position - you need to vet all of them to make sure no one is coming aboard with a problem.

WV Supreme Court Reverses Dismissal of Lloyd's of London Breach of Contract Action

jeff@mehaliclaw.com (Jeffrey V. Mehalic) — Fri, 21 Nov 2008 14:37:34 GMT

Earlier this month, the Supreme Court of Appeals of West Virginia issued its opinion in Certain Underwriters at Lloyd’s, London, Subscribing To Policy No. B0711 v. PinnOak Resources, LLC, 2008 WL 4867663 (W. Va., November 6, 2008). The Court described the facts of the dispute before it as “straightforward,” but its per curiam opinion is hardly a model of clarity. I think the facts, at least as recited in the opinion, are confusing and not clearly explained. So with that caveat, here is what was at issue.

Lloyd’s was one of several insurers that provided PinnOak Resources, LLC with a total of $75 million in property insurance coverage. In 2003, PinnOak’s Pinnacle Mine experienced methane ignitions. In 2004, PinnOak sued its insurers, including Lloyd’s, to recover for its property loss. PinnOak alleged that Lloyd’s breached its insurance agreements and engaged in bad faith in handling PinnOak’s claim.

PinnOak settled with its insurers in 2004 and 2005, and finally settled with Lloyd’s in 2006, at which time PinnOak and Lloyd’s entered into a “global settlement agreement and release” and Lloyd’s paid its share of the $56 million settlement.

Here’s where it gets complicated. While PinnOak and Lloyd’s were litigating, Lloyd’s agreed to further insure PinnOak. The policy originally ran from June 30, 2004 to June 30, 2005 for an up-front premium of $5 million, but PinnOak’s cash flow prevented it from accepting those terms.

The parties then agreed that the policy would run from June 30, 2004 until June 30, 2009 and would have an annual premium of $375,000, in addition to five annual payments of $1,250,000, which would be deferred until the parties resolved the August 2003 loss. If the policy was not renewed, the entire amount would be due in full. Lloyd’s claimed that PinnOak recommended this provision when it realized that it would not have positive cash flow until the 2003 loss claim settled.

PinnOak decided not to renew its policy after the first full year, after which PinnOak and Lloyd’s entered into a settlement agreement in May 2006 regarding the property loss claim.

When PinnOak did not pay any of the premiums due for Policy No. B0711, Lloyd's filed suit on the grounds that PinnOak owed the full premium, as PinnOak had chosen not to renew the policy and PinnOak and Lloyd's had settled the coverage lawsuit.

The Circuit Court of Wyoming County granted PinnOak's motion to dismiss, which was converted into a motion for summary judgment by the court's consideration of materials outside of the pleadings. The court reasoned that the parties' settlement agreement represented their intent to diverge from any prior agreements, which meant that the parties' obligations under Policy No. B0711 were terminated and PinnOak did not owe the agreed-upon premium. The court also interpreted the term "payback" in the policy to refer to a recoupment of settlement monies, which the settlement agreement barred.

The issue before the Supreme Court was the relationship, if any, between the settlement agreement and Policy No. B0711. Not surprisingly, Lloyd's argued that the circuit court erred in interpreting "payback" to mean a payback from the settlement agreement and in finding that the settlement agreement relieved PinnOak of its obligation to pay the premium due.

The Court found that the circuit court was wrong to hold that there was any connection between the two documents and that its interpretation of "payback" was unsupported. The settlement agreement could not extinguish PinnOak's obligation under the policy because the agreement applied only to the 2003 "loss," which was PinnOak's claim for "business interruption and other losses under the aforementioned policies of insurance, as well as PinnOak's claims of bad faith by Insurers and VeriClaim relating to and/or arising out of one or more methane ignitions/explosions at the Pinnacle Mine beginning on August 31, 2003 and the subsequent claims handling and investigation."

The relevant policy to our determination, Policy B0711, is not included in the Settlement Agreement. Any mention of Policy B0711 is absent, even though it was entered into prior to the Settlement Agreement. The Settlement Agreement, pursuant to its own definition of the "loss" that is the subject matter of the agreement, settled the coverage action relating to the August 2003 methane ignitions. However, it did not release the parties from their agreement regarding Policy B0711.

The "payback" in the policy referred to the policy premium that was due but was held in abeyance, and would be paid back once PinnOak had positive cashflow.

Further, the Court pointed out that the parties' contractual obligations under Policy B0711 were not mentioned in the settlement agreement, and held that PinnOak's insurance premiums were due.

Finally, PinnOak argued that the settlement agreement should be enforced as written, which the Court addressed:

This opinion does nothing to alter or change our longstanding law regarding settlement agreements. Courts should favor and encourage settlement agreements. This opinion does nothing to void or lessen the validity of the Settlement Agreement entered into in May 2006. However, this opinion confines the Settlement Agreement to its actual terms and refuses to expand the Settlement Agreement beyond its plain terms to extinguish the contractual obligations in Policy B0711. PinnOak breached its duty to pay the premium it owed under Policy B0711. Pinn Oak entered into a contract for insurance coverage and has breached its duty to pay the premiums as agreed to in the policy. Thus, PinnOak is required to pay the premiums.

(Emphasis added.)

TSX announced amendments to Listing Fee Schedule effective January 1, 2009

info@stikeman.com (Stikeman Elliott LLP) — Fri, 21 Nov 2008 14:27:03 GMT

Following its annual review of its Listing Fee Schedule, the TSX has made certain adjustments to its listing fees effective January 1, 2009. The fee review included a consideration of the difficult market environment currently facing many TSX-listed issuers and the need to be competitive with other major exchanges.

The amendments to the Listing Fee Schedule include changes to:

the base and maximum sustaining fees for corporate issuers (variable fee rates remain unchanged);
the fees payable for corporate reorganisations, which includes income trust conversions; and
the maximum fees payable for security-based compensation arrangements (minimum fees and the variable fee rates remain unchanged).

Original listing and additional listing fees (other than for security-based compensation arrangements) remain unchanged.

As the revised Listing Fee Schedule will be effective as of January 1, 2009, the new listing fees will apply to applications, transactions and notices filed on or after January 1, 2009.

Let’s Blame the Sick People!

Fri, 21 Nov 2008 13:59:54 GMT

During the sub-prime crisis, many people started out by blaming the poor people. You know, the dead beats that could not pay their mortgages. They were the people that tricked the billion dollar banks into giving them mortgages they could never afford, especially those on floating interest rates. The front page of The Oklahoman [...]

The front page of The Oklahoman reported today that Oklahoma Insurance Commissioner Kim Holland at the Oklahoma Health Summit has diversified the game into blaming the sick people for their lack of health insurance. Her suggestion is that there have to be government imposed penalties on people that do not have health insurance.

Holland believes the sick people really can afford health insurance but prefer to stand in line at emergency rooms to drain state resources and participate in a culture of non-payment of medical bills.

Holland has suggested that season football tickets should be forfeited by those that do not have health insurance (as well as driver’s licenses, hunting and fishing licenses, and, of course, state tax refunds). Her underlying premise is that the sick people really have money and are spending it on everything but health insurance. Holland correctly, however, diagnosed that one third of Oklahomans do not have health insurance, but she thinks it is their fault rather than the Insurance Commissioners’ fault.

Holland has apparently never spoken to anyone in those emergency rooms. She has never spoken to any family that has to pay its own insurance premiums. Holland probably enjoys her health coverage provided by state taxpayers and believes she could trade places with those that do not have state benefits.

Obviously, Holland does not understand the insurance system she is supposed to be regulating. Health insurance in Oklahoma is not affordable, just like everywhere else in the United States, because the insurers cannot solve the cost of health care in this country any better than anyone else. If Holland wants universal health insurance coverage in Oklahoma, she should have the legislature pass a cap law that limits the exposure of health insurers to $500,000 and has the state pick up everything above that on a covered claim. With that limitation on exposure, the price of premiums for health insurance would begin to decline. If they did not decline enough, then the cap could be lowered to $400,000, and so on.

Who would pay for the state’s “above the cap” share of medical expenses? Wrong question. What are we as state taxpayers already paying and would this be better? State tax payers are paying for the medical care of one third of the state’s population from zero. By making health insurance more affordable, and thereby reducing the third to a smaller percentage, by having more people buy insurance, the cost would likely be less.

To work the problem from the other end, the state should make health insurance premium payments for children deductible from state income taxes. That would also increase the number of middle income tax payers that could afford health insurance.

If the Insurance Commissioner needs a funding source, maybe she could propose a special tax on season tickets to OU and OSU football seasons. Maybe she is so smart she could retool the lottery into not only the funding rescue for Oklahoma education, but the funding source for health insurance (or season football tickets for everyone). But, blaming the sick people, or the poor people, for their lack of money, or their lack of fiscal responsibility, is based on the bogus notion that people want to stand in line at the emergency room, want to lose their homes in foreclosure, and are just wastrels and ne’er do wells.

Stark & Stark Attorney Featured on Legally Speaking

rdeluca@stark-stark.com (Stark & Stark) — Fri, 21 Nov 2008 13:34:00 GMT

Michael J. Fekete, member of Stark & Stark's Business & Corporate group, was a featured guest on the Camden County Bar Foundation's weekly television talk show Legally Speaking on Sunday November 9, 2009. Mr. Fekete discussed the New Jersey Home Improvement Law, the Consumer Fraud Act and the Contractor's Registration Act. You can watch the full episode online here.

Law Blogs Report on New FMLA Regulations

angelo@brogers.cc (Angelo Tartaro) — Fri, 21 Nov 2008 12:51:12 GMT

New regulations have been issued for the Family Medical Leave Act (FMLA). Law.com reports on them and predicts more confusion and litigation in a post by Tresa Baldas of the National Law Journal entitled (“New FMLA Rules Will Create More Confusion and Litigation, Attorneys Warn”).

Daniel Schwartz in the Connecticut Employment Law Blog takes a somewhat more positive approach and in two recent posts has reported on “What Employers Need to Know About the New FMLA Regulations - Part I” and “ What Employers Need to Know About the New FMLA Regulations - Part II”).

We have to admit to not having had the opportunity to study the new regulations and refer you to the above posts until we can catch up a little.

November-December Issue: Deal Lawyers Print Newsletter

Fri, 21 Nov 2008 12:07:36 GMT

November-December Issue: Deal Lawyers Print Newsletter This November-December issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on: - Responding to Liquidity/Capital Constraints: The Joint Venture Decision Tree - Breaking Up is Hard...

November-December Issue: Deal Lawyers Print Newsletter

This November-December issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:

- Responding to Liquidity/Capital Constraints: The Joint Venture Decision Tree
- Breaking Up is Hard to Do - and Must Be Done Carefully
- Lessons from the Meltdown: Reverse Termination Fees
- Getting Engaged: When Hiring an M&A Financial Advisor, It?s All About the Contract
- Leveraging a Dealroom: A ?How To? Guide
- Expanded Liability for Representations and Warranties: Limiting Survival Provisions
- Liquidity Facilities: The SEC Moves Towards Less Tender Offer Regulation

As all subscriptions are on a calendar-year basis, please renew now to receive the next issue. If you're not yet a subscriber, try a 2009 no-risk trial to get a non-blurred version of this issue (and the rest of '08) for free.

No Longer Good Law

the10bdaily@hotmail.com (Lyle Roberts) — Fri, 21 Nov 2008 03:28:54 GMT

As discussed in The 10b-5 Daily before, whether the Tellabs decision on pleading scienter (i.e., fraudulent intent) can best be described as a victory for plaintiffs or defendants has to be evaluated on a circuit-by-circuit basis. In the U.S. Court...

U.S. Treasury Troubled Asset Relief Program: Recent Developments

joewallin@dwt.com (Joseph M. Wallin) — Fri, 21 Nov 2008 00:15:27 GMT

By Laura A. Baumann

On Oct. 14, 2008, the United States Department of Treasury announced the Troubled Asset Relief Program, or TARP Program, which is one of several recent government initiatives to improve the strength of financial institutions and enhance market liquidity. We summarized the highlights of the program in an advisory bulletin in October. On Nov. 17, 2008, the Treasury released the term sheet and frequently asked questions for certain privately held financial institutions applying for the TARP Program. This bulletin will briefly summarize the recent developments with respect to the TARP Program. Continue reading...

Section 1021.5 does not require a prelitigation demand in non-catalyst cases: Vasquez v. State of California

uclpractitioner@gmail.com (Kimberly A. Kralowec) — Thu, 20 Nov 2008 21:49:25 GMT

The Supreme Court's decision in Vasquez v. State of California, ___ Cal.4th ___ (Nov. 20, 2008) is now up. The Court held that in non-catalyst cases, section 1021.5 contains no "categorial" rule requiring a prelitigation demand as a prerequisite to...

The Supreme Court's decision in Vasquez v. State of California, ___ Cal.4th ___ (Nov. 20, 2008) is now up. The Court held that in non-catalyst cases, section 1021.5 contains no "categorial" rule requiring a prelitigation demand as a prerequisite to an attorneys' fees award. In other words, the Court limited its holding in Graham v. DaimlerChrysler Corp., 34 Cal.4th 553 (2004) to catalyst cases. The Court also held that evidence of prelitigation efforts to resolve a dispute may be considered, in the trial court's discretion, when determining whether "the necessity ... of private enforcement ... [was] such as to make the award appropriate."

An excerpt from the opinion:

The State argues a court may never award attorney fees under section 1021.5 unless the plaintiff attempted to settle before resorting to litigation. Neither the language of the statute nor the cases interpreting it impose[s] such a categorical requirement. In determining, however, whether “the necessity and financial burden of private enforcement ... are such as to make the award appropriate” (§ 1021.5), a court properly takes into consideration whether the party seeking fees attempted to resolve the matter without litigation.

....

We have not interpreted section 1021.5 as imposing a prelitigation settlement demand requirement in noncatalyst cases. In Graham, supra, 34 Cal.4th 553, we did require prelitigation demands, but only in catalyst cases.

Slip op. at 7, 9 (emphasis in original).

Chancery Denied Reargument on Attorneys' Fees

fpileggi@foxrothschild.com (Francis G.X. Pileggi) — Thu, 20 Nov 2008 20:57:27 GMT

In Postorivo v. AG Paintball Holdings, Inc., 2008 Del. Ch. LEXIS 165 (Nov. 13, 2008), the Delaware Chancery Court denied reargument of a prior award of attorneys' fees that limited the total amount payable. For more factual background, I refer you to my summaries of the three (3) prior decisions in this case that are available here.

In Vasquez v. State of California Supreme Court declines to impose a pre-filing resolution requirement to all 1021.5 fee requests, but...

thecomplexlitigator@leviant.net (H. Scott Leviant) — Thu, 20 Nov 2008 20:16:37 GMT

This morning the California Supreme Court issued an opinion that examined the limits on its attorney fee opinion in Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553, 560 (Graham). " In Vasquez v. State of California (November 20, 2008), the...

This morning the California Supreme Court issued an opinion that examined the limits on its attorney fee opinion in Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553, 560 (Graham). " In Vasquez v. State of California (November 20, 2008), the Supreme Court was asked to extend Graham, a catalyst theory case, to all Code of Civil Procedure section 1021.5 requests for fees resulting from a public benefit. The sumary of the holding neatly summarizes the Supreme Court's "no, and yes" answer to that invitation:

“Today we revisit one of the “limitations on the catalyst theory” adopted in Graham, supra, 34 Cal.4th 553, 575 — specifically, the rule that the plaintiff in a “catalyst case,” to recover attorney fees under section 1021.5, “must have engaged in a reasonable attempt to settle its dispute with the defendant prior to litigation” (Graham, at p. 561). While this is not a catalyst case (see post, at p. 19), defendant argues the rule just mentioned should apply whenever fees are sought under section 1021.5. We hold that no such categorical rule applies in noncatalyst cases. In all cases, however, section 1021.5 requires the court to determine that “the necessity and financial burden of private enforcement . . . are such as to make the award appropriate . . . .” (Ibid., italics added.) In making this determination, one that implicates the court’s equitable discretion concerning attorney fees, the court properly considers all circumstances bearing on the question whether private enforcement was necessary, including whether the party seeking fees attempted to resolve the matter before resorting to litigation.

(Slip op., at pp. 2-3.) So you don't have to attempt to resolve a matter before litigation to claim sectin 1021.5 fees, but the Court can consider whether you did as a factor when deciding if it will award fees under section 1021.5. I suppose this means that the reasonability of the defendant and its counsel and the inclinations of the particular judge hearing the case will now have a lot more to do with whether a plaintiff is successful in recovering fees under 1021.5. An intractable defendant with obstructive counsel will have a hard time convincing a court that it would have cooperated without the need for litigation had the plaintiff but asked. On the other hand, a very cooperative defendant could save itself fees under this section by demonstrating its willingness to change practices and correct problems.

I wonder if this mixed set of incentives will change any behaviors on either side of the bar.

Contractor Lien Law (F.S. 713.21) Does Not Allow M-Compel Arbitration As Response to Discharge of Lien

Thu, 20 Nov 2008 20:12:28 GMT

In a statutory-driven area of construction law, the Fourth District (Klein, Farmer, and Taylor) once again bristle at a party's attempt to seek arbitration. Ironically, in their haste to torpedo the enforcement of arbitration in 2 pages or less, it appears they missed citing to pretty decent precedent from the Third DCA. In Connie and Charles J. Brookshire v. GP Construction of Palm Beach, Inc., the court held that strict construction of a lien law took precedent over Florida court's (draconian) precedent on avoiding waiver of the right to arbitrate. Contractor put a lien on a house. Owners filed suit seeking to discharge the lien, which was served on the contractor along with a clerk-issued rule to show cause order per Florida Statute 713.21(4). That statute calls upon the recipient to show cause why the lien should not be enforced or why the lienor did not commence such action. Here, the contractor filed, within the 20 day period, a motion to compel arbitration per the contract. Owner argued, at both trial and appellate levels, that the failure to show cause for failing to comply leaves the court with no discretion. The 4th DCA reasoned that the "lien and the dispute are not one and the same" and that the disposition of the lien would not resolve the contractor's claim for payment. Strictly speaking, that's true. But liens are the teeth behind contractor claims. Liens exist as a part of the claim. One goes with the other. We won't argue the in's and out's of contract law because... well, because the Fourth District didn't bother to either. Incidentally, the court did not provide the arbitration language, so we do not know what was within the scope of arbitration. The contractor "could have complied with the 20-day statutory period by filing a counterclaim within the owner's action... any concern about whether the contractor was waiving arbitration could have been satisfied by filing a motion to arbitrate those issues which were subject to arbitration." Notably, none of the three cases cited were within the last several years thus we don't know if they are still viable after the Florida Supreme Court's decision in Raymond James Financial v. Saldukas, a 2005 case which defines waiver of arbitration under Florida state law. Take a moment to read this 7-paragraph Brookshire opinion and then look at the three cited cases in the second-to-last paragraph (from 1978, 1986 and 2001). Acceptable precedent for part of their point but how do we know this is solid arbitration-waiver law post-Saldukas? What about a citation to Waterhouse Construction Group v. 5891 SW 64th Street LLC?

In Connie and Charles J. Brookshire v. GP Construction of Palm Beach, Inc., the court held that strict construction of a lien law took precedent over Florida court's (draconian) precedent on avoiding waiver of the right to arbitrate.

Contractor put a lien on a house. Owners filed suit seeking to discharge the lien, which was served on the contractor along with a clerk-issued rule to show cause order per Florida Statute 713.21(4). That statute calls upon the recipient to show cause why the lien should not be enforced or why the lienor did not commence such action.

Here, the contractor filed, within the 20 day period, a motion to compel arbitration per the contract. Owner argued, at both trial and appellate levels, that the failure to show cause for failing to comply leaves the court with no discretion.

The 4th DCA reasoned that the "lien and the dispute are not one and the same" and that the disposition of the lien would not resolve the contractor's claim for payment. Strictly speaking, that's true. But liens are the teeth behind contractor claims. Liens exist as a part of the claim. One goes with the other. We won't argue the in's and out's of contract law because... well, because the Fourth District didn't bother to either.

Incidentally, the court did not provide the arbitration language, so we do not know what was within the scope of arbitration.

The contractor "could have complied with the 20-day statutory period by filing a counterclaim within the owner's action... any concern about whether the contractor was waiving arbitration could have been satisfied by filing a motion to arbitrate those issues which were subject to arbitration." Notably, none of the three cases cited were within the last several years thus we don't know if they are still viable after the Florida Supreme Court's decision in Raymond James Financial v. Saldukas, a 2005 case which defines waiver of arbitration under Florida state law.

Take a moment to read this 7-paragraph Brookshire opinion and then look at the three cited cases in the second-to-last paragraph (from 1978, 1986 and 2001). Acceptable precedent for part of their point but how do we know this is solid arbitration-waiver law post-Saldukas? What about a citation to Waterhouse Construction Group v. 5891 SW 64th Street LLC?

The Complex Litigator will consider all offers of gainful employment or similar associations

thecomplexlitigator@leviant.net (H. Scott Leviant) — Thu, 20 Nov 2008 19:57:16 GMT

Having accomplished what I set out to do in my last endeavor somewhat faster than anticipated,I now find myself looking for my next challenge. Anyone interested in working with a somewhat opinionated attorney (who is willing to dial down those...

thecomplexlitigator [at] leviant.net.

It only hurts a little to ask, right?

More breaking news (off-topic): Supreme Court issues order to show cause in Prop. 8 cases

uclpractitioner@gmail.com (Kimberly A. Kralowec) — Thu, 20 Nov 2008 19:14:29 GMT

This is off the topic, but this afternoon the Supreme Court issued an order to show cause in the cases challenging the validity of Proposition 8, which purports to strip away the Constitutional right of equal protection from a minority group of California citizens. Regardless of how one feels about the merits of same-sex marriage, the case is fascinating to me from the standpoint of appellate procedure. This is the relevant text from the court's order, copied from the docket in Strauss v. Horton, no. 168047:

The State of California, the Attorney General, the State Registrar of Vital Statistics, and the Deputy Director of Health Information and Strategic Planning of the California Department of Public Health are ORDERED TO SHOW CAUSE before this court, when the above entitled matters are called on calendar, why the relief sought by petitioners should not be granted.

The issues to be briefed and argued in these matters are as follows: (1) Is Proposition 8 invalid because it constitutes a revision of, rather than an amendment to, the California Constitution? (See Cal. Const., art. XVIII, sections 1-4.) (2) Does Proposition 8 violate the separation of powers doctrine under the California Constitution? (3) If Proposition 8 is not unconstitutional, what is its effect, if any, on the marriages of same-sex couples performed before the adoption of Proposition 8?

The return is to be filed by respondents, and a brief may be filed by intervenors, in the San Francisco Office of the Supreme Court on or before Friday, December 19, 2008. A reply may be filed by petitioners in the San Francisco Office of the Supreme Court on or before Monday, January 5, 2009. Any application to file an amicus curiae brief, accompanied by the proposed brief, may be filed in the San Francisco Office of the Supreme Court on or before Thursday, January 15, 2009. Any reply to an amicus curiae brief may be filed in the San Francisco Office of the Supreme Court on or before Wednesday, January 21, 2009.

Moreno, J. joins this order except that he would grant the requests to stay the operation of Proposition 8 pending this court's resolution of these matters. Kennard, J. would deny these petitions without prejudice to the filing in this court of an appropriate action to determine Proposition 8's effect, if any, on the marriages of same-sex couples performed before Proposition 8's adoption. Votes: George, C.J., Baxter, Werdegar, Chin, Moreno, and Corrigan, JJ.

The Supreme Court has a special web page with copies of pertinent filings from the case, including the order to show cause. On a personal note, my own marriage to an Asian-American man would have been "illegal and void" in California 60 years ago (and in two thirds of the rest of the country 40 years ago), so I feel particularly interested in how this turns out.