March 13, 2010
Bubbles and Earthquakes
Posted by Jeff Lipshaw
My article on financial bubbles and earthquakes, The Epistemology of the Financial Crisis, is due out any moment in the Southern California Interdisciplinary Law Journal. In it, I suggest there are parallels between the science of earthquakes and the science of financial booms and busts and the epistemological crises that I claim ensued when the workings of the world managed to burst the bubble of faith in predictive sciences with respect to each of them. What interested me as a lawyer in particular, as discussed in the piece, is the lawyerly equation of causation with blame. I had a friendly debate a few weeks ago with one of my faculty colleagues who said she did assess this last bubble correctly before it burst. I have no doubt she's right, but proving it's anything more than luck is far more difficult because of the counter-factuality problem - otherwise known as 20-20 hindsight - in historical causation.
It turns out I'm not the only person who has a dual interest in bubbles and earthquakes. The Wall Street Journal has an article this morning about Professor Didier Sornette, the director of the Financial Crisis Observatory at the Swiss Federal Institute of Technology in Zurich. As a geophysics professor at UCLA, he has studied earthquakes, which he concludes are more difficult to predict than anything else. As a professor of finance, he tries to predict market bubbles, having now made several predictions and locked them away in encrypted files.
Once again, the counter-factuality problem raises its ugly head. Even if it turns out he's right, it won't prove much. Sporadic evidence confirming a theory doesn't carry much weight, even if we accord a lot of weight to theories (like quantum mechanics) that haven't been falsified, but have been confirmed in thousands of experiments and applications. Nor will being wrong, I suspect, damage his career, the case in point being Ed Yardeni, who made his name for several years predicting the collapse of the world because of the Y2K problem.
March 12, 2010
Wounded And Suspended
A superior court judge who had been involved in a domestic dispute was shot in the scalp in a self-inflicted wound. As a result, she suffered a concussion and went to a hospital for treatment. There she made a statement to the effect that she had accidentally shot herself. She asked the responding officer to retrieve and "get rid of" a handwritten note by her left at the scene the incident. She was acquitted of ensuing criminal charges of attempted obstruction of justice.
The judicial disciplinary matter was resolved today by the Indiana Supreme Court, which accepted an agreed statement of facts and proposed sanction and ordered that the judge be suspended for 60 days and recused from future matters involving named individuals for one year. The court noted that the underlying personal issues involved had been addressed and that the judge had fully cooperated with the judicial discipline process. (Mike Frisch)
Dismissal Of Malpractice Case Against Former Corporate Counsel Affirmed
The Nebraska Supreme Court affirmed the dismissal of legal malpractice and related claims brought against the former attorney of a company that performed radiology services. The attorney was corporate counsel to Radiology Services from 1995 to 2003. Her father was a senior official of the company and there was concern that he had a drinking problem. After he left the company, the father sent letters to entities that did business with the company and it was alleged in this lawsuit that three clients stopped doing business with the company after the letters were received.
The complaint alleged that the attorney had improperly assisted her father in retirement negotiations with the company (he was the president at the time) and had misused the company's confidential trade secrets.
The court found that the trial court had properly concluded that, viewed in the light most favorable to the company, there was insufficient evidence to establish legal malpractice or misuse of trade secrets by the company's former counsel. (Mike Frisch)
March 11, 2010
Don't Assume That Your $436k in Jewelry Is Up in That Overhead Bin
Posted by Alan Childress
Not a legal profession case, but eye-opening to those of us who travel a lot and hate to check luggage: you may THINK it is overhead when it is not...
The Court also released this notable unpublished decision: Malik v. Continental Airlines, Inc., No. 09-50444 (5th Cir. March 10, 2010) (Garza, Clement and Owen) (per curiam; unpublished): According to Malik's lost-luggage claim, she had $436K worth of jewelry and other valuables in a bag checked on a flight from Austin. According to a statement of facts in the district court record, the bag was originally one of Malik's carry-on items. She was unable to find bin space over her seat, so a flight attendant assisted her in putting the bag into a bin 13 rows in front of her seat. After she returned to her seat, a flight attendant decided that it needed to be stowed in the cargo hold. Because the bag had no external identification, someone in the stowage process opened it to ascertain its owner. The bag never arrived at Malik's final destination. The district court allowed her to recover only $800. Holding: Affirmed. "[C]arriers are allowed to limit their liability by contract if they give reasonable notice to passengers.... Here, Continental limited its liability for lost luggage to $2,800 [less exclusions for "heirlooms, irreplaceable items, and jewelry"]." The limit, minus the exclusions, yielded only $800 for Malik. The fact that the bag "was checked by airline personnel without her permission" was irrelevant, since "Continental ... reserved the right to check any passenger's bag." (Appeal from W.D. Texas Case No. 1:060cv-695; http://www.ca5.uscourts.gov/opinions/unpub/09/09-50444.0.wpd.pdf.)
This blurb is courtesy of the Fifth Circuit Civil News, published by Bob McKnight.
After The Millenium
The New York Appellate Division for the First Judicial Department accepted the resignation of an attorney and struck him from the rolls. The facts:
Respondent acknowledges that a disciplinary investigation was commenced against him in June 2009, while he was an associate at a law firm. Respondent admits that while handling cooperative and condominium closings for the firm, he and certain non-lawyers diverted a fictitious brokerage commission to which they were not entitled, from the firm's escrow account, to a company that he formed called Millenium 1851, and for whose account he was a signatory. Their intention was to share the money they had wrongfully obtained from the firm's client amongst themselves. When respondent's misconduct was discovered a few days after the closing, he made prompt restitution to the firm and resigned. Respondent further admits that, during the course of his employment with the firm, he wrongfully diverted additional funds totaling approximately $22,220 for which he has similarly made restitution. Finally, respondent acknowledges that if charges were predicated upon the misconduct under investigation, he could not successfully defend himself on the merits against such charges.
No AppealA notice of appeal of the dismissal of a bar complaint by the complainant was rejected by the Delaware Supreme Court. The court held that there is no procedure for such an appeal of a complaint dismissed by disciplinary counsel. The court only reviews disciplinary and disability matters on review of decisions of its Board on Professional Responsibility. (Mike Frisch)
The Long Reach Of Hurricane Katrina
The District of Columbia Board on Professional Responsibility recently recommended a one-year suspension of a former senior domestic policy adviser to former President George W. Bush for criminal conduct unrelated to the practice of law. The attorney had been convicted of misdemeanor theft offenses from Target. He bought two items from a store and used the receipt to attempt to get a refund after taking the identical items off the shelf.
The board concluded that the crimes did not involve moral turpitude, which would have required disbarment. The board also noted that two jurisdictions had imposed 90 day suspension for the misconduct. Notably, the attorney had claimed (and the board agreed) that the stress related to his involvement in the response to Hurricane Katrina had played a role in the violations.
The case is In re Claude Allen and can be accessed through this link. (Mike Frisch)
March 10, 2010
Summer Abroad June-July 2010: Studying Comparative Legal Professions in the Greek Isles
Posted by Alan Childress
This is the time of year when I remind readers (and, I hope, Googlers of the phrase law school summer abroad programs in Greece or law study summer school,near Athens) that -- somewhat related to the subject of this blog -- Tulane Law School offers a course June 20-July 9, 2010 in "Comparative Legal Professions and Ethics" on the beautiful care-free and car-free island of Spetses. In Greece, on the Saronic Gulf of the Mediterranean Sea. We offer five other courses as well, including contract theory, comparative torts, intro to Greek, and control of product safety in the EU. We have two other summer schools on the large island of Rhodes (before and after, for instance if you want to combine two as many students do). Classes are in English and admit students from law schools all over. Just contact assistant director J. Sayas for more info, at ac 504 and number 865 - 5981 or email jsayas AT tulane.edu. She knows about Spetses and Rhodos. Here is a link to the resort hotel we stay at (pretty cheap, includes meals) on Spetses: enjoy the view. And links to my course info from past years. Your room looks out on the view left. There is no immediate deadline, but it is best to sign up in March to ensure the program continues.
March 9, 2010
Claims Against Referring Firm Reinstated
A law firm that had represented a client sued the client for unpaid fees. The plaintiff firm also sued the law firm that had referred the client, claiming that the defendant law firm had represented that their clients (the Nassers) guaranteed payment of their fees. Plaintiff appealed the dismissal of claims against the referring law firm.
The New York Appellate Division for the First Judicial Department held that the claims were viable:
The complaint alleges that defendants-respondents represented to plaintiff law firm that they had authority from the Nassers to promise payment of $75,000 of the legal fees incurred by plaintiff's client when, in fact, they lacked the authority to bind the Nassers. Thus, the complaint alleges a viable claim for breach of the implied warranty of authority. The complaint also alleges that defendants-respondents falsely represented to plaintiff law firm that they specifically discussed the subject matter of their authority and representations with the Nassers. Thus, the complaint alleges a viable clam for tortious misrepresentation of authority and assurances of payment.
To the extent the motion court relied on the principle of apparent authority, lack of consideration and the statute of frauds to dismiss these causes of action, such was error. The doctrine of apparent authority is irrelevant because the fourth and fifth causes of action are not seeking to hold the principals (the Nassers) liable on the ground that defendants-respondents had apparent authority from the Nassers to make promises of payment. Rather, these causes of action are seeking to hold the agents, defendants-respondents, liable for contracts or representations they purported to make on behalf of the principal (the Nassers) while acting without authority from the principal. Therefore, the fact that the Nassers never manifested to plaintiff law firm that defendants-respondents were authorized to act on the Nassers' behalf has no bearing on the viability of the fourth and fifth causes of action. Moreover, regardless of whether or not there was consideration running to the Nassers, defendants-respondents can still be held liable for their own tortious conduct in making deliberate misrepresentations of fact that they had authority to make the promises that the Nassers would pay $75,000 of the legal fees incurred by plaintiff's client (see Restatement (Third) of Agency §§ 6.10, 7.01 ). In addition, the statute of frauds does not come into play since the fourth and fifth causes of action are not seeking to enforce the unwritten agreement by the Nassers to pay plaintiff's client's legal fees against the Nassers. These causes of action state a claim against the defendants-respondents regardless of whether there is an enforceable contract with the Nassers.
The sixth cause of action against defendants-respondents for tortious interference with defendant Jacques Nasser's contract with plaintiff law firm to pay $37,500 of the legal fees incurred by plaintiff's client was also improperly dismissed by the motion court. In order for there to be a viable claim there must be a valid contract between Jacques Nasser and plaintiff law firm. Pursuant to General Obligations Law § 5-701(a)(2), every agreement, promise or undertaking which is a special promise to answer for the debt of another is void unless it is in writing. Under a long-standing exception to the statute of frauds, however, the promise need not be in writing if it is supported by new consideration moving to the promisor and beneficial to him, and the promisor has become in the intention of the parties a principal debtor primarily [*3]liable (see Martin Roofing v Goldstein, 60 NY2d 262, 264 , cert denied 466 US 905 ; Carey & Assoc. v Ernst, 27 AD3d 261 ). At the very least, the allegations in the complaint raise an issue of fact concerning whether Jacques Nasser agreed to act as a guarantor in the event plaintiff's client did not pay her legal fees, in which case there was no enforceable contract, or whether in seeking to secure the benefit of the cooperation of plaintiff's client in connection with the lawsuit against him by her employer, Jacques Nasser offered to lift the burden of the obligation to pay legal fees from plaintiff's client and pay the law firm directly, in which case the contract would not be barred by the statute of frauds (see Rowan v Brady, 98 AD2d 638, 639 ). Therefore, the sixth cause of action for tortious interference with contract is reinstated.
Finally, the motion court erroneously dismissed the seventh cause of action against defendants-respondents which alleges tortious interference by defendants-respondents with the attorney-client relationship between plaintiff law firm and its client, defendant Srour. Insofar as the complaint alleges that defendants-respondents, knowing that Srour was represented by plaintiff law firm, met with Srour alone, without informing plaintiff law firm of the meeting, and approximately three days later, Srour discharged plaintiff law firm, it is sufficient at this stage of the proceedings, to state a viable claim, and therefore the seventh cause of action is reinstated.
Not An Ordinary Expense
The New Jersey Supreme Court affirmed the judgment of the Appellate Division in a matter involving the conviction of a State Senator. The senator was convicted of corruption and fraud crimes. His designated campaign committee then sought an advisory opinion as to allowing it to pay the costs of defending the criminal case.
The criminal case involved allegations that the School of Osteopathic Medicine of the University of Medicine and Dentistry of New Jersey put him on payroll with a "do-little job" and allowed him to fraudulently increase his state pension benefits in exchange for using influence to get funding for the school. He also was charged with similar arrangements with a county board of social services and Rutgers-Camden Law School.
The court held that the legal costs of defending against charges of official corruption are not an "ordinary and necessary" expense of holding public office. Thus, the decision of the Election Law Enforcement Commission to prohibit campaign funds to be used for such a purpose was not plainly unreasonable. (Mike Frisch)
March 8, 2010
The Michigan Attorney Discipline Board affirmed a hearing panel's findings of misconduct and reprimand for a violation of Michigan Rule of Professional Conduct 6.5(a), which requires a lawyer to:
...treat with courtesy and respect all persons involved in the legal process. A lawyer shall take particular care to avoid treating such a person discourteously or disrespectfully because of the person's race, gender, or other protected personal characteristic. To the extent possible, a lawyer shall require subordinate lawyers and nonlawyer assistants to provide courteous and respectful treatment.
The attorney sought review of the hearing panel's decision, arguing that "his conduct was protected by state and federal guarantees of free speech, that [the rule] was not violated, and that the rule did not provide fair notice that his conduct would subject him to discipline."
The board rejected these contentions:
There is no dispute about the nature of respondent's statements. They were made in the course of his duties at the courthouse. They go beyond discourteous and disrespectful and were in fact offensive and degrading. We conclude that they are also plainly covered by the rule, and we find no constitutional impediment to their enforcement under these circumstances.
The statements are not recounted in the board's order.
Update: I now have the panel decision and understand why the board did not quote the respondent.
The link did not work--will fix next week. (Mike Frisch)
The always-informative web page of the North Dakota Supreme Court has a link to an article in last Friday's TwinCities.com Pioneer Press about unhappiness in the state public defender's office over the selection of a new appellate chief. The report:
The state's new chief appellate public defender has never filed a legal appeal in Minnesota.
The appointment of attorney David Merchant has raised eyebrows and, in some cases, hackles of attorneys who represent Minnesota's poorest defendants in sensitive and high-profile cases.
Among the complaints is that Merchant has made clear to them that, unlike his predecessors, he will not be handling cases himself. They say this will leave the office, already overwhelmed with appeals, further short-staffed.
Four attorneys from the state public defender's office have sent letters to the Board of Public Defense that appointed Merchant questioning why, at a time of budget cuts, a current employee of the office wasn't elevated to the top appeals spot, eliminating the need to budget for a new hire.
The controversy began Feb. 11 when four attorneys interviewed for the top appellate spot in the public defender's office, a position that oversees the 28 lawyers who argue most of the legal appeals for criminal defendants in the state.
Cathy Middlebrook, a managing supervisor in the office and the sole female applicant, had specialized in handling appeals for 23 years. Another candidate, Ben Butler, had just won a case before the U.S. Supreme Court. A third candidate, Paul Maravigli, came from the Hennepin County public defender's office and had once specialized in appeals.
After four hours of interviews, the Board of Public Defense announced its decision. Merchant takes over the position March 15.
"Shocking," "insulting" and "demoralizing" are just some of the words public defenders and criminal defense attorneys have used to describe the hiring of their new boss, who declined to be quoted for this article.
Interim Chief Appellate Public Defender Marie Wolf resigned from the position the day after Merchant was hired.
In a letter to the Board of Public Defense and the governor's office, Assistant State Public Defender G. Tony Atwal said his colleagues within the appellate office were "demoralized and devastated" by the decision to hire a top supervisor new to criminal defense work in Minnesota.
Atwal, an adjunct professor of appellate law at William Mitchell College of Law, called the meeting "an example of how fundamentally flawed the leadership at the board and within the public defender system is and how disconnected it is with the needs of the system."
"The citizens of Minnesota deserve better from its public agencies," he wrote. "... In my view, the leadership at the board and within the public defender system is broken."
Another attorney wrote in a letter that one board member preferred Middlebrook because she had spent nine years as a supervising manager in the office. The others overruled that board member after only brief discussion, with one board member mentioning having a "gut feeling" that Merchant was the better candidate.
"I sat in disbelief over what had transpired before my eyes. I felt ill," wrote Ngoc Nguyen, an assistant state public defender, in a letter to the board dated Feb. 19. "The board's inability to articulate why Mr. Merchant was more qualified was insulting and demoralizing."
Another lawyer, Bridget Sabo, wrote: "He has no criminal law experience in Minnesota. ... Mr. Merchant seems to lack almost all of the qualifications set forth in the job description for our Chief. ... To hear ... that he will not be able to offer us case support in any meaningful way and has never managed a group of attorneys before is, frankly, nothing short of shocking."
Attorneys Governed By Bankruptcy Act
The United States Supreme Court held today that the class of bankruptcy professionals designated as "debt relief agenc[ies]" by the Bankruptcy Abuse Prevention and Consumer Protection Act includes attorneys who provide bankruptcy assistance. The provision of the Act that prohibits advising a debtor to incur more debt because the debtor is filing for bankruptcy rather than for a legitimate purpose is valid as applied to the attorneys who brought the challenge. The court further held that its decision in the Zauderer case governs the disclosure requirements of the Act and that such disclosure obligations are "reasonably related" to the Government's interest.
Justice Sotomayor wrote for the Court. All justices joined the full opinion except Justice Scalia, who did not join one footnote and Justice Thomas, who joined except for one part. Justice Thomas filed an opinion that discusses the Zauderer precedent. (Mike Frisch)
Plane Hits House, Attorney Misses Statute Of Limitations
A high school English teacher was sitting in her living room when a small plane hit the roof of the second story of her home. She suffered no direct physical injury but went into a state of shock, which led to health problems.
She retained an attorney to file suit against the pilot. The attorney missed the one-year statute of limitations despite reminders and also failed to comply with discovery obligations and court orders. The suit was dismissed. The teacher then sued her attorney for malpractice. A jury returned a verdict in her favor of over $5 million. The lawyer appealed.
The Kentucky Court of Appeals affirmed the jury verdict of malpractice and punitive damages against the attorney. The court vacated some aspects of the damage award. In particular, the teacher's "case-within-a-case" proving negligence on the part of the pilot could not sustain a claim for punitive damages because of Kentucky's "impact" rule. (Mike Frisch)
The Arizona Disciplinary Commission has adopted a hearing officer recommendation of a four year suspension with two years probation upon reinstatement for an attorney who had practiced while suspended for non-payment of annual dues and failed to participate in the disciplinary process. Commissioner Todd dissented and concluded that the sanction should be disbarment:
Nothing in the record suggests that [the attorney] was unable to pay her bar dues following her June 2008 suspension for non-payment or that she was unaware of the obligation. Rather, the record reflects that she was paid $55,000 in public monies to practice law while suspended. Then during the disciplinary proceedings she failed to cooperate, to appear, or to explain. Granted as a practical matter under the circumstances, a 4 year suspension is essentially the same as disbarment without the label of disbarment. Here, I believe the label matters and it would be appropriate.