Thursday, November 30, 2006
That's the perfectly reasonable position taken by this op-ed piece from the National Law Journal (and Law.com), echoing as well Jeff's earlier call to take MR 5.5(d) seriously on its common-sense flexibility regarding corporate counsel in good standing with some state's bar but not licensed in the corporation's home state. The writers note that 5.5(d) "would largely cure these problems but it has not yet been uniformly implemented." [Alan Childress]
A follow-up to the earlier post on the Thompson Memo (DOJ policy forcing corporate waiver of privilege): see today's articles by the Washington Post and AP on further movements to push back against the memo and other prosecutorial policy. The Post says that the Senate Judiciary Committee may come forth as early as Monday with a bill reversing the memo's policy on inducing waiver to be "cooperative."
Larry Thompson himself now thinks it's gone too far: speaking at the Heritage Foundation today, he said, "We may be entering an era where the department should consider perhaps making appropriate revisions to the memo," as reported by AP's Lara Jakes Jordan. Thompson suggested that prosecutors have "overreached" what he presents as his memo's more "limited" call for pressuring cooperation.
Update: Here is the WSJ Law Blog story Dec. 1 on Thompson's speech, as well as a great post by Ellen Podgor at White Collar Crime Prof on the need to legislate instead of humoring the internal DOJ solutions some of the Heritage speakers were touting. [Alan Childress]
Posted by Alan Childress
Over at Legal Ethics Forum, Davids McGowan and Hricik are asking (here and here) about the ethics, or at least unusualness, of Federal Circuit opinions on "obviousness" that read more like detailed amicus supplication to the Supreme Court while it is considering the unpublished Federal Circuit ruling in KSR Int'l v. Teleflex. Now the case has been argued, and it appears from yesterday's Legal Times story (per Law.com here) that perhaps the Justices are not taking the hint from the erstwhile amicus opinions. Several Justices expressed hostility to and confusion about its obviousness test (showing no appeasement from later clarifications in the lower court). So much so that the story reports a phone interview with the court's Chief Judge later--also an unusual public defense if you will, though he emphasized he was not responding to any particular Justice's comments.
Reminds me of a story about the late, very great Fifth Circuit Judge Reynaldo Garza, who appeared openly frustrated at an en banc argument in which counsel was butchering the job of defending a panel opinion Judge Garza had written. Judge Garza kept interrupting so much from the bench to toss softballs, and fix the argument, that other judges seemed annoyed. Litigants in that beautiful courtroom in the John Minor Wisdom Courthouse to this day swear they heard Judge Garza's distinctive voice directed in exasperation to another judge: "But, but...he's losing my case for us."
Perhaps it is time for the Federal Circuit to let the litigants (well represented here by, for example, Thomas Goldstein), industry groups and the patent bar (several filed as amicus), and able law professors (noted in Hricik's post and link, including my former colleague Chris Cotropia) all address these kinds of issues to the Supreme Court and defend circuit law. And especially be the ones to speak to the press after the cases are heard. Not that there is necessarily a "violation" of anything, even an elusive "appearance of impropriety," in what transpired here. I am only saying it ultimately just isn't their place. It's not their case.
Nonetheless, there is no truth to the rumor that Justice Scalia appeared ready to rule that a patent is valid only if it is obvious, given that "patent" and "obvious" are literally and unambiguously synonyms. Nor was Justice Kennedy prepared to say that an obvious patent cannot be executed, based on international norms of customary law.
The most obvious test for obviousness that the Court should tell the Patent Office to use? "I know it when I see it."
by Mike Frisch
A case decided by the Idaho Supreme Court involving a lawyer who neglected a personal injury case and failed to advise the client that the case had been dismissed is interesting because the court accepted the stipulation of misconduct entered into between the Idaho State Bar and the attorney but rejected the proposed agreement as to sanction. The court found that the proposed sanction failed to give full weight to the "dramatic consequences" of the misconduct and the pattern of repeated violations. The court imposed a thirty six month month suspension with thirty months withheld. The lawyer may apply for reinstatement after six months. The opinion is linked here.
The case demonstrates a common sense approach to discipline by agreement in that the court retains the ultimate authority to revise the sanction but is not obligated to move the case back to square one for further proceedings. This strikes me as an approach that permits cases to move promptly and minimizes the danger that the result will not protect the public from unfit lawyers.
Steven L. Schwarcz (Duke, below) is the star of this week's top ten, with two papers currently highlighted. Here are the papers with the most downloads in the Legal Ethics & Professional Responsibility Journal, as reported by SSRN for the last sixty days.
1 Law and the Humanities: An Uneasy Relationship, Jack M. Balkin, Sanford Levinson, Yale University - Law School, University of Texas Law School
2 The Paradox of Extra-Legal Activism: Critical Legal Consciousness and Transformative Politics, Orly Lobel, University of San Diego School of Law.
3 Options Backdating, Tax Shelters, and Corporate Culture Victor Fleischer, University of Colorado at Boulder - School of Law
4 Harry Potter, Ruby Slippers and Merlin: Telling the Client's Story Using the Paradigm of the Archetypal Hero's Journey, Ruth Anne Robbins, Rutgers School of Law - Camden.
5 To Make or to Buy: In-House Lawyering and Value Creation, Steven L. Schwarcz, Duke University School of Law
6 Southwest Airlines: Hedging and Shareholder Value Michael R. Ingrassia, Georgetown Law Center, Victor Fleischer, University of Colorado School of Law
7 The Public Responsibility of Structured Finance Lawyers Steven L. Schwarcz, Duke University School of Law
8 Scholarship Advice for New Law Professors in the Electronic Age, Nancy Levit, UMKC School of Law
9 Plato, Hegel, and Democracy, Thom Brooks, University of Newcastle upon Tyne (UK)
10 The Legal Penalties for Financial Misrepresentation Jonathan M. Karpoff, D. Scott Lee, Gerald S. Martin, University of Washington - Business School, Texas A&M University - Department of Finance, Texas A&M University - Department of Finance.
November 30, 2006 in Weekly Top Ten: SSRN Legal Ethics & Professional Responsibility | Permalink | Comments (0) | TrackBack (0)
Wednesday, November 29, 2006
Posted by Alan Childress
I'm not on-topic at all, but Frank Pasquale just nails it here on Concurring Opinions, on the mixed message of New Orleans: parts are inexplicably and unforgivably the same as Sept. 05, others are thriving, beautiful, and well worth visiting or living in. I fear that the latter message is like the Who people before the little kid on Horton piped up. I had the same phone conversation today with a well-read and educated law professor at another school that I have had so many times with so many people--the same question reported to me by Tulane colleagues in November interviewing [great] candidates for the AALS FRC in D.C., when they themselves ran into well-meaning and smart professors too from law schools all over...
That Groundhog Day question we all get? "Is Tulane having classes yet? " The answer is Yes -- since Jan. 06 in fact -- and all caught up, thanks to the commitment of amazing students and devoted teachers and staff all willing to do class on Saturdays and school through June. And a new 1L class every bit as amazing (and incidentally as highly test-scored) as the ones before. They want to be part of something bigger than themselves and saw Tulane as an opportunity of a lifetime, which it is (as is Loyola, by the way, also relatively blessed by location on uptown's higher ground, and having devoted profs and committed students). With all the work left to be done in the region, some of it generously by the law schools' community itself, the reality is that Tulane's glass is not just half-full, it has been brimming for nearly a year now in a way that cannot be explained. That is my impression of Loyola and many other city mainstays as well. (So the question is not, in fact, Ned Ryerson asking if I have enough insurance. Watch out for that step, it's a doozy.)
Thanks, Frank, for seeing both sides on your trip.
Posted by Alan Childress
A recent First Circuit ruling allows a corporation to recoup the massive legal fees it had paid (over an indemnity agreement under Delaware law) to finance an executive to defend himself against insider trading, fraud, or similar charges--if ultimately he is found to have acted in bad faith. See the Law.com story here. Ultimately the exec (a director) owes his old company a million dollars for an offense in which he was civilly fined $70k.
At first blush, no one defends an exec 'rewarded' for acting in bad faith by paying his or her fat cat lawyers. It does not seems fair that he or she gets the company defense. But run-of-the-mill insurance contracts with a duty to defend built-in are really just indemnification agreements too. Is anyone suggesting that each of us pay Allstate back after we lose the auto accident case for which it paid our defense? Well, you say, this one acted in bad faith, but we don't when we run into a light pole. Yes, but all sorts of insurance policies which cover bad faith--where allowed to--provide for defense costs. I have not heard of paying back the insurer after losing such cases, if the policy is valid and covers the loss and defense. It does not appear that the First Circuit is ruling that it is invalid as a public policy matter to contract for such defense. The case then ultimately turns on this particular indemnity clause and the "out" it gave the corporation when the exec lost his civil case. (in that sense it may just be fairly narrow and consistent with rulings in Delaware courts over Disney on which Jeff has posted.) But I fear it will not be read in that limited way.
This kind of ruling, while focusing on an unsympathetic party, ultimately creates rules for the rest of us. It is one more notch in the expanding belt of disincentives to get smart people (who can do basic risk analysis) to be directors. It also skews the risk analysis an innocent accused must do when presented with charges, a settlement offer, and the prospect of a bonus fine of one million dollars (past the smaller substantive exposure) if one rolls the dice and loses. Wouldn't the smart innocent person just settle every time and swallow the pretense of guilt but no finding of bad faith rather than risk ruination with a formal guilty finding? Or if the settlement or plea is proof of bad faith, so that settling equals a massive debt to the employer, wouldn't everyone innocent or not have to roll the dice, precluding rational settlement? The implications are not just about sympathy for the bad corporate apple.
Gotcha. Per today's Wall Street Journal, the CEO of Hormel Foods Corp. is Jeffrey M. Ettinger, 48, who "began his Hormel career as a corporate lawyer, but then jumped to the food side of the business where he managed the chili division before moving up to head Jennie-O, a successful subsidiary specializing in turkey. He was named CEO of Hormel last year, having been handpicked by his predecessor, Joel Johnson, without an external search, and last week, he took on the additional post of chairman of the board."
Anything I were to say from here on would be a cheap laugh, and I only go for cheap laughs in class.
by Mike Frisch
The Supreme Court of Washington has adopted a "bright-line rule that no duties exist between co-counsel that would allow recovery for lost or reduced prospective fees." The court expressed concern that such a cause of action would impair the duty of loyalty that co-counsel jointly owe to the client. The opinion is reported here.
The underlying case involved a worker who had been electrocuted when a drilling company drilled into a buried electric line. Client hired Lawyer Mazon, who brought in Lawyer Krafchick, who had "special expertise" in such cases. Mazon drafted the complaint; Krafchick filed it. Krafchick's paralegal was directed to effect service but failed to do so, despite assuring Krafchick that service was obtained. As a result, the complaint was dismissed and the statute of limitation had run.
Client sued both lawyers and the case was settled for an amount in excess of a million dollars. Mazon then sued Krafchick, seeking recovery of the expected fee, advanced costs, his insurance deductible and the payment made on his behalf in the settlement. The Supreme Court found no basis for claims of co-counsel that are jointly liable to a client against each other.
The lesson: choose co-counsel as carefully as you would a partner. You may be stuck with co-counsel's errors without legal recourse.
Posted by Jeff Lipshaw
I'm sitting in the Tulane Law School multi-purpose room, in the process of paying off my debt to Professor Eric Dannenmaier arising out of the recent World Series. The deal was that if the Tigers won, Eric would serve breakfast to my morning class, and if the Cardinals won, I would do the same for his. As you may recall, the good guys lost.
So when I saw Larry Solum's post this morning about a new article on experimental philosophy, and I recalled Frank Pasquale's interest in the subject, it occurred to me that I had recently faced an experiment in deontology versus consequentialism. Eric and I decided that rather than simply serve breakfast to one or the other of the classes we would make the bagels and coffee available to all of our classes.
Now here's the duty versus consequence question: you are going to announce this windfall to the class that wasn't going to get served. It also happens to be the morning that you are passing out the teaching evaluation forms. Do you announce the bagels and coffee before you pass out the evaluations, or after they are filled out and collected? WWKD?
Today's ABA Journal, on-line here (for its November issue), features a story on the ethics of a title entitled "Lawyers Are Doctors, Too: But there is no clear ethics rule on whether they may say so." How about clear norms of civility against pretension? Many states, in any event, find the practice inherently misleading--or misleading in certain contexts like ads for med mal cases. [Posted by Dr. Dr. Alan Childress, Ph.D., J.D., M.A., B.A.]
Julie Goldberg, right, a recruiter from Korn/Ferry, has a post over at Law.com on what it takes for an in-house law department to recruit lawyers away from law firms, particularly given the escalation in salaries at big firms in large financial centers.
I agree with most of it - though there is a certain irony to reading about the attractiveness to lawyers of precisely the stock-based compensation that academic corporate lawyers are wont to debate - but one paragraph caught my eye as being wrong:
Although in-house lawyers put in long hours, their schedules have one big advantage over those of lawyers working in firms -- predictability. Do not underestimate the appeal of knowing that weekend and vacation plans will not be ruined. Work/life balance is now openly acknowledged as a factor in employment decisions, and top-notch lawyers demand time for life outside the office.
I don't know which corporation Ms. Goldberg is thinking about. I'm pretty sure that if you counted up all the hours I would have billed, had I been billing them, in the first year after I left the law firm to go in-house, it would have been somewhere in the 2,700 hour range (compared to my high water mark, as I recall, in the law firm, of about 1,950). That year also included something like eleven trips to Germany in ten months negotiating a joint venture, one of which was on about four hours' notice in the middle of a vacation - on a Tuesday morning, I was sitting by a beach in northern Michigan, and at 1:00 p.m. on Wednesday, I was in a conference room in Munich.
The great difference, to me at least, was the primacy of the result versus the primacy of the clock. I know there are lawyers who can generate passion around what they do for others in the big firm context, but I couldn't. The billable hour clock was always ticking in the background. The 2,700 hours were fulfilling in a way the law firm hours never managed to achieve, and became something like the sense of time when you are fully engrossed in something other than watching the clock.
Posted by Jeff Lipshaw
More to come somewhere somehow someday from me on this, but the subtitle of the piece "do courts matter?" evokes a fascinating (to me, at least) dialogue I had with a law and economics scholar in the last few days about the purpose of a written agreement. When sophisticated business people think about agreements, and send their lawyers off to scriven, are they writing the agreements for courts or for each other? Whether or not contracts are interpreted textually or contextually, it's probably fair to say that the lawyers, if you asked them, were doing their best to make the entire agreement textual, and not contextual. And the reason for textuality is that the writing will be read and interpreted by others. Or will it? Have you ever set aside a draft and re-read it a year later? Or re-read an old article that you wrote five or six years ago? Who wrote it?
So I think there is something far more nuanced going on than the rational model that we write contracts because we are addressing the hypothetical judge who will resolve our disputes, and in doing so, apply ex ante the rules that have been laid down legally or linguistically, as a way now of controlling the future. Hence, I've asked the question whether there is any real linkage between what the court ends up saying in a close case of interpretation and what the parties may have intended.
I am very interested in, yet remain to be convinced of, the Smith-Ueda working thesis that courts as common law developers of a more flexible, adaptable law, as compared with the civil law, have a material effect on the facilitation or hindrance of entrepreneurial activity. Here I return to my nascent meanderings about lawyerly styles of cognition from a few days ago as well as the post from November 20 on Schumpeter and entrepreneurship. I would suggest that the way common law judges process data and apply rules in adjudication bears little resemblance to the way a Schumpeterian entrepreneur would process data and apply rules, including the rules, where he or she aware of them, laid down by the common law judges. And if the response is, yes, but they have lawyers to make them aware of the rules, I ask, "Really? How do you know? And if they do have lawyers, do they listen to them?" (Without giving it nearly the due it deserves, let's just play with the title of Frederick Schauer's Playing by the Rules. What does playing by the rules mean to a court? What does playing by the rules mean to an entrepreneur? And what does playing by the rules mean to the entrepreneur's lawyer? This is a little bit of a tease, but one of the management books boxed up in my self-storage unit is entitled First, Break All the Rules. Here's more of a tease. One of the few books authored by a law professor about entrepreneurial problem-solving itself has a rule-contrarian title: Why Not? How to Use Everyday Ingenuity to Solve Problems Big and Small by Barry Nalebuff and Ian Ayres (Yale, left).)
My intuition is that the rule of law, or more precisely, a society that values the rule of law, is an element of a social environment that fosters entrepreneurship. No, it's more precise than that: a society that builds the rule of law from Lockeian assumptions about the primacy of property, and the freedom to own it and trade it, fosters entrepreneurship. There is a strong libertarian theme here - entrepreneurial communities are the wild west, wherein the notions of personal autonomy and freedom run deep, not just politically, but epistemologically and morally as well. Is there a relationship between that underlying libertarianism and the presence of a common, rather than civil, law? I'm not enough of a political theorist to know. Judges could put a crimp in the economic incentives to creative destruction, but so could legislatures and executives. But to me, that's like holding the tiller of a small boat on the crest of a tsunami, and thinking that because you can impede or enhance the progress of the boat, you control the tsunami. Do tiller-people matter? Yes, but not nearly as much as the tiller-people think. In this analogy, the entrepreneurs are the seismic causes of the tsunami.
So I await this work eagerly!
Tuesday, November 28, 2006
Over at the blog for Appellate Law & Practice, a recent post comments on and links a U.S. First Circuit decision affirming summary judgment in favor of a lawyer who properly withdrew and caused the client to get a new lawyer. This is not malpratice (under contract law), said the court, applying Connecticut law and its Model Rules-based standard on withdrawing, Rule 1.16 -- and if it was (possibly under tort law), then the statute of limitations ran out, as timed from the withdrawal. [Alan Childress]
by Mike Frisch
The Lawyers Manual on Professional Conduct (Nov. 15, 2006) has a description of ABA Ethics Opinion No. 06-442, holding that the Model Rules do not prohibit lawyers from reviewing and using metadata embedded in email and other electronic documents received from opposing counsel or adverse parties. Attorneys who trasmit such documents are cautioned to take appropriate steps (described in the opinion) to reduce the risk of "mining" the documents for information.
The ABA's summary is reproduced below:
Formal Opinion 06-442
August 5, 2006
Review and Use of Metadata order here
The Model Rules of Professional Conduct do not contain any specific prohibition against a lawyer’s reviewing and using embedded information in electronic documents, whether received from opposing counsel, an adverse party, or an agent of an adverse party. A lawyer who is concerned about the possibility of sending, producing, or providing to opposing counsel a document that contains or might contain metadata, or who wishes to take some action to reduce or remove the potentially harmful consequences of its dissemination, may be able to limit the likelihood of its transmission by “scrubbing” metadata from documents or by sending a different version of the document without the embedded information.
David Hricik (Mercer, right, and I swear that's the picture on his bio page!) over at Legal Ethics Forum had a brief note on a recent New Jersey ethics opinion. The opinion (if not Professor Hricik's picture - one assumes it was taken in connection with "International Talk Like a Pirate Day") is worth at least a little bemused puzzlement.
The question is whether it is ethical for an employer to require an in-house lawyer to sign what looks to me like the fairly standard employment non-disclosure agreement, which in this case, also includes the fairly standard non-compete clause. (Let's assume the non-compete is otherwise enforceable in terms of geography and time.)
1. The question itself, it seems to me, is problematic: "whether an employer's request that its in-house counsel execute restrictive covenants. . .violates the Rules of Professional Conduct." I can see that if I were the general counsel and a member of the New Jersey bar, my request to another lawyer would fall within the ambit of the RPC. But if I am the general counsel, and the agreement is presented to me by the Senior Vice President of Human Resources (after approval by the CEO and the Board of Directors), how are the lawyers' professional rules in any way incumbent on these non-lawyers?
2. The opinion says "it is conceivable that an in-house lawyer could obtain confidential information and/or trade secrets which would not be protected by RPC 1.6 or the attorney-client privilege. Therefore, it may be reasonable for a corporation to request its lawyers to sign a non-disclosure or confidentiality agreement, provided that it does not restrict in any way the lawyer's ability to practice law or seek to expand the confidential nature of information obtained by the in-house lawyer in the course of performing legal functions beyond the scope of the RPCs." I do not understand this at all. I knew lots of stuff at Great Lakes that undoubtedly came to me other than in my capacity as a lawyer. It has to be reasonable to expand the definition of confidential information beyond that which I learn in the course of giving legal advice. If the impact is that I may not be able to be the general counsel for my direct competitor, why should I get a pass, as a lawyer, that other senior executives don't get?
3. The opinion says that the "assignment of inventions" clause does not impact any ethical considerations. That may be, but what if you design, on the company's time, a neat system for monitoring outside counsel? Or develop your own store of Sarbanes-Oxley flow charts that you use in explaining the requirements of the law to the board of directors? Are those "designs, processes or know-how" (patentable or not), and thus the sole property of the Employer?
Posted by Alan Childress
An "ABAnet" email proclaims somewhat dramatically that Congress failed to overturn the U.S. Sentencing Commission's vote earlier this year to rescind its 2004 rule that had allowed waiver of privilege to be treated as cooperation under sentencing guidelines. That made the new policy effective November 1.
The ABA article from April 2006 that the email cites, linked here, is fine as far as it goes. The Sentencing Commission's movement in this direction is of course welcome, as far as it goes. But this does not put much of a dent in the "culture of waiver" and prosecutorial discretion that abounds today under the Thompson Memo (as we posted on here). That is because sentencing under the guidelines is only the tail end of many steps of discretion and negotiation that a client must go through. Long before that, in just the early steps, are prosecutorial decisions to be interested, to investigate, to expand the investigation, to indict, and the terms and limits of the charges (and many steps in between these). Long before sentencing is imposed, discretion begins. Until they are legally told otherwise, prosecutors are going to do what prosecutors will do (absent perhaps state bar ethics changes in this area, pushing back). They will encourage waiver. Even if they are told otherwise, by withdrawal of the DOJ policy or some state ethics rule, won't corporate counsel be eager to initiate the look of cooperation by offering to waive?
To the extent the 2004 commission policy had encouraged prosecutors to demand waiver, it makes a little sense that its demise led the ABA president to proclaim in April--sort of in Patrick Henry or Chevy Truck style--that the decision "is not only correct, it is good for America and its citizens, and our democracy." But the commission's reform is not a rescission of the Thompson Memo, which is DOJ policy not about sentencing as such--and should not be mistaken for one. I fear that the lingering and harmful effects of that policy (to privilege, and indeed to America and our democracy) will not only survive the end of the commission's policy but even the potential withdrawing of the memo and its overall prosecutorial policy as well. Further notes on the Holder Memo after the jump.
Blogging entrepreneur, Grand Poobah Plenipotentiary of the Law Professor Blogs Network, and all-around good guy Paul Caron (Cincinnati, right) provides an empirical justification for the time spent blogging over at our sibling Tax Prof Blog.
Fortunately for me, the question posed by the piece is whether scholars are better bloggers, not whether bloggers are better scholars. Whether or not it has any societal value, I find blogging to be a better use of my time in airport departure lounges than, say, playing the Solitaire game I recently found Motorola was kind enough to install on my Q phone.
The Association of Professional Responsibility Lawyers will meet in Miami Beach from February 8-10, 2007. Among the program highlights will be a panel discussion in conjunction with the National Organization of Bar Counsel on the impact of disciplinary processes on solo and small firm practicioners and another panel on the ethics of judicial elections. Panel discussions also will consider bar admission issues as well as ethics issues in the representation of Guantanamo detainees. (The APRL meeting and its overlap with NOBC were posted on here.)
The full APRL agenda is linked here. [Mike Frisch]
We previously posted here on the growing phenomenon of law firm outsourcing of discrete legal tasks. Robert Ambrogi's LawSites blog reports here that, starting today, a new website bidding and exchange process is up-and-running to allow licensed lawyers to outsource such work as "legal research and writing, due diligence and document reviews, Web site design, marketing or any other type of project." The new site, LawSourcing, promises that "[p]osting a project is quick, simple, and free, and exposes your project to hundreds of skilled professionals around the world eager to help," leaving the bidder "to focus on the 'big' cases." [Alan Childress]