Biggest Attorneys' Fee Award Ever?

Mattel asserted a copyright claim that was stunning in scope and unreasonable in the relief it requested. . . . MGA’s successful defense ensured that well-resourced plaintiffs cannot bend the law to suit their pecuniary interests. For these reasons, and pursuant to 17 U.S.C. § 505, the Court awards MGA $105,688,073.00 in attorneys’ fees and $31,677,104.00 in costs.

From here.

The issue at trial regarding the question of whether an MGA line of fashion dolls similar to those of Mattel were copyright infringing, when the line of dolls was invented by a Mattel employee, arguably on his own time, who took the idea to MGA that invested in it and made it a great success through their marketing efforts.

I simply cannot fathom how either side could run up that amount of attorneys' fees in a single copyright infringement case. Actually, I can. I'm sure that a huge amount of money was spent on discovery and expert witness fees. But, there is no way it would have had to cost that much if the case management had been better.

This is a case where the big picture conceptual issues on how the idea was developed and how similar it was to the Mattel idea dwarf the fact intensive details when it comes to liability and where both parties would have had sophisticated managerial accounting systems that would have made damages relatively workable to discern in great detail.

This is a case that could have been litigated quite adequately between two less flush parties for hundreds of thousands of dollars each, instead of hundreds of millions.

Mattel asked for $1 billion in damages but was awarded about $10 million by a jury. The judgment was reversed on an interlocatory appeal and they ended up losing the case.

I don't have great sympathy for either party in this case, and the 10th Circuit's contract interpretation that was central to a defeat for Mattel was somewhat strained. But, it is a symptom of a grossly flawed court process that it is possible to reasonably spend that kind of money on this kind of case.

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Iqbal Almost Doubled Likelihood Of Motion To Dismiss Grant

The most controversial decision in civil procedure in recent history was the Twombly/Iqbal decisions of the U.S. Supreme Court that made it easier to dismiss a case on the face of the Complaint filed in federal court for failure to state a claim in certain kinds of cases (the applicable rule is 12(b)(6) in the federal rules of civil procedure). Under the previous rule, these kinds of motions to dismiss, which are sometimes described as "so what" motions because they argue that even if everything alleged is true that no legal remedy is available, were extremly hard to establish.

The latest statistics confirm that these decisions did indeed matter:

The results indicate that even taking out the pro se cases, the odds of a court granting a 12(b)(6) motion, at least in part, as compared to denying the motion, were expected to be 1.79 times greater under Iqbal than under Conley (p = 0.002), all other variables held constant.

Second, I used only the cases in my database from 2006 (Jan to Dec) and from 2010 (Jan to May 18), and otherwise limited as described above (no pro se, no magistrate judges). Here, the results indicate that even leaving out the pro se cases, the odds of a court granting a 12(b)(6) motion, at least in part, as compared to denying the motion, were expected to be 1.92 times greater in 2010 than in 2006 (p = 0.013), all other variables held constant.

Run of the mill cases are largely unaffected. The main category of cases where Iqbal and Twombly make a difference are cases where the harmed party must show some kind of behind the scenes activity by defendant insiders which is merely circumstantially established at the outset and then, in past practice, revealed if present during the discovery process. The doors to the federal courthouse are now largely closed to such cases without a whistleblower or some form of domestic espionage. The ruling does not directly apply to state courts.

These motions remain rare, affecting something on the order of 1% of cases on the federal docket, and are granted about three-quarters of the time (up from about two-thirds of the time under prior law).

READ MORE - Iqbal Almost Doubled Likelihood Of Motion To Dismiss Grant

Class Action Suit v. Westwood College By Students Derailed

The United States District Court for the District of Colorado has denied class action status to a class of students suing Colorado's for profit Westwood College, who allege misrepresentations in its marketing materials. The court ruled on the basis of an arbitration clause with a class action waiver in its enrollment documents, which recent U.S. Supreme Court rulings have established is enforceable, despite the fact that absent the ruling that the judge would have found the provision to be unconscionable. The named parties were ordered to arbitrate pursuant to the agreement. The ruling was made on June 6, but apparently didn't receive much press at the time. The ruling was Bernal v. Burnett (D. Colo., June 06, 2011) 2011 WL 2182903. This class action suit was filed in August, 2010.

Another class action lawsuit brought by students in Texas against Westwood was dismissed in January, 2011 on the ground that the class representative was inadequate.

This doesn't mean that Westwood College has escaped any legal repercussions for its conduct. It settled a federal government lawsuit in May of 2009 for $7 million, in which " the government charged Westwood was not the college it said it was, and that it did not provide careers for its students. The lawsuit covers a period from 2002 to 2005[.]"

The college was placed on probation by its accrediting agency and the State of Colorado in late 2010:

The Accrediting Commission of Career Schools and Colleges put Westwood College on probation in September and issued an order of continued probation Dec. 9, state officials said. "Under the spirit of consumer protection, the Colorado Commission on Higher Education decided to put Westwood College under probation," commission spokesman Chad Marturano told 7NEWS.

Westwood's Colorado accreditation was restored in March of 2011 and it was licensed in Wisconsin in February of 2011.

It also faced regulatory action from the State of Texas for failing to make refunds to students there in September 2010 that could cost the college its accreditation there. Around the same time, Wisconsin ordered it to stop enrolling students because it was not accredited under that state's laws.

Texas officials fined its local affiliates of Westword College $41,000 and put its license on probation in January of 2011.

As Wikipedia notes (and confirmed here):

"In March of 2011, the Veterans Administration disqualified three Westwood College Campuses from the GI Bill Program. The VA took this step after finding, "erroneous, deceptive, and misleading advertising and enrollment practices at these institutions."

Westwood College laid off 100 online admissions office employees based in Colorado Springs, Colorado in January of this year, effective March 23, 2011.

Earlier this month, (more here) Westwood College announced that it would provide what amounts to an unemployment payment for graduates who had decent grades and are looking for work, but have not found it, up to $500 a month for six months (less for some students).

The Internet is also awash with personal rants and testimonials from former students denouncing the Westwood College. Probably no other for profit college system has a more tarnished brand.

Thus, while Westwood College has won some battles, with the end of the class action lawsuit against it in Colorado being the most recent, it remains to be seen if the institution can survive.

READ MORE - Class Action Suit v. Westwood College By Students Derailed

The Power of Clarity

The web comic Misfile illustrates a point that is a powerful one in litigation and conflict resolution generally: clarity of proof can be extremely powerful.

The scene as set as two of our main characters, both high school girls (actually, it is a bit more complicated than that, but those issues aren't relevant to this post) and neither of whom has any prowess at fighting, head to the parking lot after a late night burger and fry session where they encounter two imposing men with bad intentions who make increasingly less veiled threats until their not very imposing high school friend appears and confronts the men (1, 2, 3, 4, and 5).

Our hero is clever, however, and does have a cell phone, which saves the day as illustrated below in the scene's climax:

Mangaka Chris Hazelton isn't breaking new ground in this twist. I've seen it in popular fiction half a dozen times, but it really does work in real life, and I've seen this general insight used with success in media reports of real life lawsuits, cases that I've actually worked on, and in day to day disputes that threatened to escalate over the years quite a few more times than I have in action movies and police procedurals.

While there are fine points of the law that are resolved in appellate courts, often to address instances when the facts or law are ambiguous, the law can be an extremely powerful and predictable tool when the facts are crystal clear and that law that applies to those particular facts is not ambiguous.

Video recordings and DNA evidence, for example, have led to an surge in cases where police misconduct is identified and punished, where innocent defendants who are convicted are exonerated, and where guilty individuals are identified and convicted of serious crimes. Likewise, as a general rule, the value of private investigators who can develop a clear set of facts in a case, is greatly underestimated.

Clear facts mean that presumptions that protect powerful interests don't work. Clear facts mean that the party with the facts in their favor doesn't have to compromise in settlement negotiations. Clear facts permit litigators to present a smaller number of simpler legal theories rather than hedging their bets due to factual ambiguities with multiple theories.

A great deal of the way that economic transactions are structured can be explained by a desire to create a compact set of completely unambiguous, easily proven facts should there be a need to bring suit as a result of the transaction. For example, when a purchase is financed with credit, the underlying purchase of goods or services for money is typically separated from the promise to pay a third party lender with whom the only material issues are the terms of a promissory note or credit agreement, the amount lent in documented non-cash transaction, and the payments made in documented non-cash transactions. By segregating disputes about the underlying purchase from disputes about the debt, the resulting lawsuits become simpler. Lenders also tend to lend predominantly in low dollar amount transactions that can be litigated with the expedited procedures of limited jurisdiction courts, or in transactions with collateral where the collateral can be seized in at least partial satisfaction of the debt without judicial process or with an expedited and standardized foreclosure process. Moreover, because the judicial process poses such a low barrier to enforcement of an obligation in a situation where the facts are clear, it is often not necessary to resort to that process at all to secure compliance.

Messy aspects of economic transactions can be and are litigated. Business people sometimes extend credit to their customers, linking the credit arrangment and the underlying transaction, and dissatisfied customers sometimes bring suit when the goods and services they receive are unsatisfactory. Some deals are inescapably complex, multi-party arrangements. Accidents happen in ways that are not foreseen and not well documented but serious nonetheless. But, these make up a decided minority of cases that are litigated in the civil courts.

READ MORE - The Power of Clarity

Quote of the Day

One of my favorite legal quotes is from Elihu Root, a famous Wall Street lawyer a hundred years ago or so. He said "About half of a decent lawyer's practice is telling prospective clients that they are damn fools and should stop."

Via Trade Secrets Today.

Bonus quote from the same source for litigation lawyers:

Under Rule 11, eventually, after expensive litigation, a party might convince a judge to sanction a bully's lawyer for filing a frivolous lawsuit. Rule 11 awards are extremely rare, kind of like sightings of Bigfoot.

READ MORE - Quote of the Day

SCOTUS Puts Slight Boundaries On Product Liability Jurisdiction

In a product liability suit arising from an allegedly defective European tire design that caused in injury to a North Carolina resident in Paris, (Goodyear v. Brown) and a product liability suit involving an English machine marketed in some U.S. states but not New Jersey where no more than four of the machines, and perhap just one, ended up being sold, and one of those machines allegedly caused the injury, (but in which the manufacturer did hold a U.S. patent) (J. McIntyre v. Nicastro) the U.S. Surpeme Court held that long arm jurisdiction over the manufacturers was not present on a "stream of commerce" theory.

These would be landmark decisions in personal jurisdiction if they spoke with one voice, but they don't. As the lead opinion in the second case explains:

The rules and standards for determining when a State does or does not have jurisdiction over an absent party have been unclear because of decades-old questions left open in Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty., 480 U. S. 102 (1987).

The first case, unanimously decided, was as much error correcting and precedent changing. Incidental sales of a few products not marketed there in the forum state, when those product that actually caused an injury to the Plaintiff were never present in the forum state, would not generally give rise to personal jurisdiction under a fair reading of existing law. The injuries involve didn't result from a products being carried in the stream of commerce to the place where the harm was caused in the case.

The second case, decided on a 6-3 basis, with two of the majority judges (Breyer and Alito) concurring in judgment, but not reasoning of Justice Kennedy's ruling on behalf of four judges, is a case that was a close one, quite plausibly providing a basis for personal jurisdiction in a U.S. state under a stream of commerce theory (although Breyer and Alito find that it does not under existing precedents because it involves a single isolated sale with no contacts in New Jersey in particular, rather than a regular stream of products), and it may constrain that theory of personal jurisdiction in personal injury cases going forward. The concurrence also argues that what makes since for a large scale manufacturer may not make sense in the case of a small craft manufacturer operating through big business distributors.

Justice Kennedy's opinion, whose rational fails to secure a majority, rejects a theory based on "fairness and foreseeability" under Ashai, and instead reverts to an earlier precedent out of which the stream of commerce standard arose that is still a touchstone for personal jurisdiction cases outside the product liability area, which holds that a court can have long arm jurisdiction over a party when it "“purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Hanson v. Denckla, 357 U. S. 235, 253 (1958)."

The dissent would have transferred a clear intent to market in the United States to the particular state, New Jersey, where the product happens to wind up.

The practical impact of these particular cases is material for the defendants involved. French and English forums, in addition to being inconvenient for U.S. defendants, do not award signficant damages for non-economic harms like pain and suffering, do not afford a right to trial by jury for Plaintiffs in products liability lawsuits, and arguably have less generous standards for finding liability at all on failure to warn theories.

But, since the first case was well within past precedents, and the major change in the standard for applying its personal jurisdiction precedents in the second one did not secure majority support (while the broadened standard advanced by the dissenters also failed to secure majority suport), the net effect of all of these suits is to leave the legal standard for asserting personal jurisdiction in product liability suits essentially unchanged while reaffirming that not every single product liability suit brought by a U.S. defendant against a foreign manufacturer is within the long arm jurisdiction of state courts.

READ MORE - SCOTUS Puts Slight Boundaries On Product Liability Jurisdiction

SCOTUS Dislikes Class Actions

Today, a conservative majority of the U.S. Supreme Court in a 5-4 decision, held that a sex discrimination case against Wal-Mart on behalf of its 1.5 million female employees could not be certified as a class action lawsuit. (There was wide agreement that the backpay due in the case could not be handled on a class basis, but there was deep dispute over whether the existence of gender discrimination at the company could be litigated in that manner.)

This is the latest of a string of cases that have disfavored class actions, such another this term that held that the right to conduct a class action arbitration could not be implied from a simple arbitration clause and that the fact that an arbitration clause expressly prohibits class actions could never be sufficient to render it unconscionable under a provision of the federal arbitration act that allows arbitration clauses to be invalidated if they would be unconscionable under state law.   The rulings have largely been statutory or based on court rules, thus they are more easily overriden than rulings based on constitutional grounds, but the rulings are colored by a deep distrust of the class action generally.

Concerns about class actions have also been a central to the tort reform movement, and have been an area where the movement has achieved more than one significant victory, by imposing major procedural limitations on securities law class actions, and by giving the federal courts jurisdiction over many class actions arising under state law that would not qualify for diversity jurisdiction.  Today's ruling, interpreting the class action rule in the federal rules of civil procedure, thus, has wider implications for class actions generally, than it would have a couple of decades ago, because more kinds of class action lawsuits are confined to the federal courts.

To some extent, the distate of big businesses for class actions, and plaintiff friendly group's support for them is simply a matter of mathematics.  In a situation where there are many people with small claims against a single business or small group of businesses, large numbers of people with claims will never choose to bring valid lawsuits because the litigation cost economics don't make sense, and except in the very clearest cases, the verdicts will be a mixed bag.  In contrast, a win in a class action will afford a remedy to everyone with a claim (or a proxy for them) and a win on behalf of all claimants is possible even when a win on the liability issue isn't a sure thing in any given isolated case.

There is also considerable controversy over the fact that "coupon settlements" and contributions to non-profit caues often replace money awards as typical class action remedies, that class actions are expensive to litigate and rarely result in a resolution on the merits by a judge, that there are often multiple competing class actions that must be consolidated arising from single incidents, that forum shopping can be especially problematic in these cases, and that the cases can seem to be attorney driven rather than focused on providing a remedy for a client.  The high cost and long litigation times involve in class action litigation don't speak well for a process which was invented to reduce litigation costs and handle numerous related small claims more efficiently than traditional litigation efforts.

On the other hand, class actions can put pressure on big businesses to comply with the law even when the state regulators of an industry are asleep at the switch, underfunded, run by a political appointee hostile to the agency's purpose, or are the victim of capture by the regulated industry.  Class actions can close the gap between the laws on the books regulating an industry or practice,  and the law as actually enforced.  It can function as a remedy to corrupt administration of regulatory laws.  Class actions are also an arguable preferrable way to regulate industries through decisions by private individuals rather than actions by state officials whom many people who are inclined towards libertarian political ideologies may distrust.

In employment cases, the key attraction of a class action is the question of proof.  It may be much easier to establish discrimination on a statistical basis than it is to prove that it was present in an individual case, and it may be easier to fashion an affirmative action remedy in response to statistically proven discrimination than it is to wade through the details of a money damage remedy on a case by case basis.

But, class action cases can appear to grant legislative or regulatory type authority to courts whose procedures are primarily geared towards resolving disputes that involve only narrow disputes between small numbers of people.  This tendency is particularly apparent in false advertising claims where very large numbers of people are exposed to advertising claims and considerably numbers of people may buy products that are falsely advertised, but the individualized consumer harm may be modest.  Negotiations between alleged wrongdoers and alleged victim's representatives may also lead to court sanctioned remedies, such as certain forms of affirmative action, that could never be approved as legislation in the absence of a violation of the law that is never provided on the merits in court.

The trend seems contrary to the trends in our economy, in which big corporations whose mistakes routinely impact large numbers of people in incidents with a common source, rather than isolated incidents of wrongdoing, are increasingly the norm.  If a big money center bank calculated interest rates on loans, or forecloses on houses improperly, it will usually be because some system has gone wrong or some computer program had an incorrect rule, with the error affecting hundreds of thousands of people nationwide, rather than because there was some isolated defect in one customer's particular case.  Serious misrepresentations to consumers in commerce not infrequently involve massive advertising campaigns rather than an isolated vendor and purchasers in an open air marketplace.  Serious discrimination in employment practices frequently flows from bad leadership at the top of an organization that guides subordinate managers, rather than individualized misconduct by low level managers.  In our modern era of quality control systems in manufacturing, systemic defeats in mass manufactured products are more likely to cause harm than isolated duds that aren't successfully removed from the assembly line: most defective products are the result of a design defect, either in the product itself or the manufacturing process.  An inability to remedy systemic wrongdoing by a big business in a collective way is out of step with an economic reality in which a large share of all wrongdoing has a systemic source.  In the long run, it may be more important to the functioning of our economic to solve systemic problems than to remedy the one off screw ups that can never be completely eliminated.

For what it is worth, big government agencies, like the I.R.S., have many of the same weaknesses in offering remedies to systemic errors that put individuals in low stakes cases in bind, that big businesses do.

Some problems in the way that big businesses and big government operate, may be flaws in how they do justice between third parties who deal with them, rather than actually benefitting these entities themselves.  For example, most securities fraud involves cases where a misrepresentation by a business causes a stock price to fail to reflect the truth for some period of time, which benefits some secondary market stockholders to the deteriment of other secondary market stockholders, while having little or no direct economic impact on the company itself and where only a tiny part of the benefit or harm accrues to company insiders.  Often the beneficiaries and victims of the misrepresentation have no knowledge that they are acting in the basis of a misrepresentation until after the harm has been done. 

Yet, if misrepresentations with immense economic consequences for stock traders routinely lead to no repurcussions for the parties who make them, the soundness of our financial system is seriously undermined.  Some of the parties most responsible in fact for the financial crisis, the major credit rating companies, had very little other than their pitiful compared to the amount at stake in the economy fees, in their decisions, and will bear no consequences for their mistakes, and there is a movement in the securities law world to treat accountants the same way.  Yet, if the people whose observations drive the market have little stake in being accurate, the financial markets are certain to repeat its world economy shaking mistakes.  Millions of people are out of work and have been for many, many months, in substantial part because the tiny number of people on Wall Street who determined how creditworthy bond issuers were had an insufficiently compelling incentive to get their decisions right.

Part of the barrier to the problem is that power dynamics and self-interest driven policy stances are often so transparent in the tort reform area and in the area of class action litigation in particular, that it is hard to separate and address sincere and legitimate concerns from merely self-serving ones in the policy arena.  Also complicating the effort to find a fair way to deal with the cases that drive class action litigation is that extremely loose class action standards and substantive law claims that can be brought as class actions in a handful of states like California create extremes of the process that suggest solutions that aren't necessarily appropriate for the more strictly regulated federal courts or courts in states like Colorado where class action litigation isn't nearly so common.

READ MORE - SCOTUS Dislikes Class Actions

Counsel Sometimes Required In Civil Contempt Cases

The U.S. Supreme Court held today that there is sometimes a right to counsel in civil contempt case, typically brought to secure compliance with child support orders by imprisoning self-employed people or people who have access to assets beyond the reach of the court's jurisdiction (such as funds in an asset protection trust) by incarcerating them until they comply.  Civil contempt remedies are available in a wide variety of civil cases, but is rarely permitted in ordinary debt collection cases and in other cases (typically involving alleged violations of court injunctions), the parties typically are not indigent and have or have access to legal counsel.


Typically, in these cases, the critical issue is whether there is an ability to comply with the court order.  Incarceration for non-payment when there is a mere inability to pay (a remedy once called "body execution") is an unconstitutional debtor's prison remedy. 

The existence of the child support judgment and the fact that it has not been paid is typically self-evident from the record.  But, the existence of income not succeptible to garnishment, or of assets that cannot simply be levied upon with a writ of execution is often hotly contested.  The fact that a mistake on this point renders the incarceration not just inaccurate but unconstitutional makes the stakes particularly important.

I've handled both sides of such disputes for clients myself, and while the black letter law of contempt proceedings is fairly clear, judges and the sheriffs who manage the incarcerations are often confused by them because they are outside the ordinary criminal procedure mold that governs the vast majority of incarceration cases.  The contempt of court remedy is often a critical safeguard in securing compliance from the most evasive and dishonest child support debtors, but is sometimes applied inappropriately to punish people who truly are simply unable to pay, rather than merely unwilling to pay.  For whatever reason, child support debtors are among the most common to refuse to personally acknowledge and concede that they owe a debt even after court rulings to the contrary, so these cases are among the most contentious forms of debt collection actions.

The high court found that while incarceration of people for civil contempt can be allowed in some court systems where there is pro se party friendly environment that calls attention to the critical issues at the hearing and provides a simple form driven way for the unrepresented person to participate in the process, that such incarceration is unconstitutional without a right to counsel provided at state expense when the court system is no friendly to pro se parties or is too complex for an unrepresented person to handle.

Thus, while the South Carolina civil contempt process at issue in  the case before the U.S. Supreme Court failed the test, it is entirely possible that the due process protections for the same kind of proceeding in Colorado might meet the high court's due process standards.

The 5-4 ruling is a departure from most past rulings of the U.S. Supreme Court on procedural due process requirements, which have typically imposed a clear bright line rule in a class of cases, rather than setting forth a more generalized standard to apply on a court system by court system, or even case by case basis.  The conservative dissenters would have found that there was no right to counsel in these cases.

Since state governments, almost to a one, are currently in a very tight fiscal situation and would be hard pressed to pay for court appointed counsel in these cases, the likely response to the ruling will be for state court systems to develop pro se party friendly court procedures for run of the mill child support contempt of court cases.

READ MORE - Counsel Sometimes Required In Civil Contempt Cases

State Securities Law Class Actions In Colorado

Colorado had somewhere from 12 to 16 state court securities law class action lawsuits in the fifteen period from 1996 to 2010, six in the first five years, zero to four in the next five years, and six in the last five years. State securities law class action suits most often arise in states with many publicly held corporations headquartered there (Delaware, California, New York, and Texas) and most frequently involve merger and acquisition deal disputes. The highest number of suits was in 2009, with four, but other years had just zero or one or two filings.

READ MORE - State Securities Law Class Actions In Colorado

Bank of America Still Stupid

It takes a really poorly run bank to first foreclose on a property that has on that has no mortgage, and then to ignore a judgment entered against it from the same lawsuit until the sheriff's deputies are on its door. Alas, this is one of the half dozen largest banks in the United States, and probably the world.

Bank of America mistakenly filed a foreclosure claim against [Warren and Maureen Nyerges] even though they had no mortgage at all. The couple fought the case in court and won, but then asked Bank of America to pay for $2,534 in attorney fees. A Collier County judge ruled the bank should pay, but the bank never did.

On Friday, the couple's lawyer went to a Bank of America branch with two sheriff's deputies. He was prepared to take possession of furniture inside the bank to pay the debt.

One hour later, the bank wrote a check for $5,772.88 to satisfy the original debt plus other fees.

From here.

In truth, the consequences for the Bank of America in this Florida case were probably entirely too lenient.

READ MORE - Bank of America Still Stupid

Quote of the Day

While an appellate court may have the opportunity to reverse any individual trial judge every few years, I know that trial judges, in their numerous workday rulings, reverse appellate courts every day.

- Gregory Kellam Scott, “Judge-Made Law: Constitutional Duties and Obligations Under the Separations of Powers Doctrine,” 49 DEPAUL L. REV.517 (1999) (a former Colorado Supreme Court justice) via 39 Marc Galanter, “The Vanishing Trial: An Examination of Trials and Related Matters in Federal and State Courts,” 1 J. EMP. LEGAL STUDIES (2004) 459, 519.

READ MORE - Quote of the Day

Colorado Securities Act Trumps Forum Selection Clause in Contract

As a general rule, parties to a contract can decide where disputes arising under the contract or between the parties in relation to the transaction are litigated and according to which state's law. When this is part of an arbitration clause, state law determinations that a choice of forum are frequently pre-empted by the Federal Arbitration Act. But, what if the contract provides that suits may be brought in ordinary courts, but only in a particular state?

If that contract is a contract related to a sale of securities that are regulated by the Colorado Securities Act because sales are made by a business with Colorado offices from which it conducts business, the Colorado Court of Appeals has held that the contract's forum selection clause is void as violation of a public policy articulated in that statute in an anti-waiver provision.

The Colorado Court of Appeals followed precedents interpreting similar issues under Colorado's Wage Claims Act and invalidating an arbitration requirement in a case covered by Colorado's Wrongful Withholding of Security Deposits Act. California and Illinois have similarly used anti-waiver provisions to invalidate forum selection clauses.

The Colorado Court of Appeals rejected analogies to federal securities contracts in international situations where state securities law claims are also present, a situation where many federal courts have upheld choice of forum clauses. It also rejected analogies to arbitration cases, where a federal statute applies, and to change of venue motions in the federal courts which do not have an analogous provision for transferring a case to a different state in Colorado's state courts.

In the case decided, in which the clause also selected Texas law as applicable, the distinction was crucial, because the general partnership interests that were marketed are securities under Colorado law, but not under the state securities laws of Texas, and because the Texas securities law, on its face, does not apply to transactions conducted outside the state of Texas.

Notably, this case was not brought as a class action.

READ MORE - Colorado Securities Act Trumps Forum Selection Clause in Contract

Probate Law and 9-11

Osama bin Laden is dead. Why care? Because it opens the door to probate claim litigation in his estate for 9-11 victims.

Osama bin Laden evaded civil liability for 9-11 and other terrorist attacks prior to his death because no process server could find him.

Bin Laden’s death could open the door to civil litigation targeted directly at him if new assets are uncovered, said Bill Wheeler of Mississippi’s Wheeler and Franks. The firm is pursuing a civil suit pending in Washington federal court stemming from the 1998 embassy bombings in Africa.

If an estate is discovered abroad, said Wheeler's co-counsel, James Franks, “that would be much easier than trying to get service on bin Laden [when he was alive].” But the ability to access those assets would depend on the probate laws in that country, he added.

Of course, the probate issues in these kinds of cases are non-trivial. Bin Laden was a Saudi Arabian national and at the time of his death was domiciled in Pakistan, both jurisdictions that use Islamic law as determined in Shari'ah courts to determine the inheritance rights in the estates of Muslim decedents like Bin Laden. In rem jurisdiction would also be present, under general Anglo-American and civil law principles, in jurisdictions where Osama bin Laden owned property. My understanding is that he was disinherited by his family, so none of the substantial inheritance to which he would otherwise have been entitled would be available to him or to his creditors.

Testamentary freedom is limited in the Islamic law regime, with only one-third of an individuals estate distributable to a non-designated heir, and I am not familiar with how it handles claims arising from the acts of decedents. Western legal systems typically provide some priority in an estate for spouses and children of a decedent over the claims of tort creditors. Also, it is likely that Bin Laden dedicated a significant share of his wealth to religious organizations which he controlled, rather than personally owning that wealth.

Shari'ah law does provide for the payment of "blood money" (diyah) when one causes the wrongful death of another, a remedy that parallels that of a civil suit, but there is not consensus among scholars of Islamic law over whether the 9-11 terrorist event was wrongful. Some Islamic law scholars have issued proclamations stating that the attack was wrongful under Islamic law, but Bin Laden likely had conferred with an Islamic law scholar, or had the authority as an Islamic law scholar himself, to determine that the attacks were conducted pursuant to a valid Jihad.

Not surprisingly, the Quran, which is the primary source of authority in Islamic law, is particularly sparse in resolving issues of jurisdiction, venue and collateral estoppel in a system of Shari'ah law courts that has no one central organization and was mostly not in place at the time that the Quaran was written.

Indeed, from a formal structural perspective, a large share of all the schisms and conflicting interpretations of Shari'ah within Islam that divide it into religious sects and national polities have this lack of clear canon law jurisdictional rules at their root. The problem is somewhat less acute in Shi'ite Islam, where there is or was for a long period depending on the sect, a living person to adjudicate these disputes, than for Sunni Islam, but in Shi'ite Islam, disputes over the legitimate order of succession among Imams (itself a quasi-probate issue) produced similar schisms.

READ MORE - Probate Law and 9-11

New Rules

The U.S. Supreme Court has approved new court rules to take effect on December 1, 2011 unless Congress acts to disapprove them.

The most notable changes are revisions to the rules concerning what a creditor in bankruptcy must include in a claim filed with a bankruptcy court, and the plain English restyling of the Federal Rules of Evidence. The other bankruptcy and appellate rule changes are relatively obscure.

There were also changes to the Federal Rules of Criminal Procedure that reflect new telecommunications and other electronic technologies used in the courts (e.g. allowing testimony by Skype rather than merely by telephone and allowing for the e-filing of many court documents).

READ MORE - New Rules

Federal Arbitration Act Strengthened

The U.S. Supreme Court,  in a 5-4 ruling along its "usual" liberal-conservative lines in the case of AT&T Mobility v. Concepcion, has held that the Federal Arbitration Act pre-empts state law in California that holds that waiving the right of access to a class action remedy in an arbitration clause in unconscionable and void when it included in certain kinds of consumer contracts.

Since the U.S. Supreme Court ruling interprets only a federal statute, Congress could pass a law changing the result as it did, for example, in a recent case where Congress disagreed with a U.S. Supreme Court ruling interpreting the statute of limitations under a federal employment law.

The dissent in the case emphasized that the ruling effectively makes it economically impracticable to make all consumers who are harmed by low dollar misconduct in a consumer case to receive a remedy, and instead, effectively insures that the big business with the arbitration clause will profit from its misconduct in these consumer transaction because not all consumers will litigate.  Indeed, since the doctrine of collateral estoppel does not necessarily apply in arbitration cases, in principle, each consumer must separately litigate the merits of the underlying misconduct in full in every case, despite the fact that the harm to each consumer is only about $30.

On the other hand, while this ruling creates a situation where consumers cannot file a class action in this kind of case (either in court, from which they are barred, or in arbitration), the arbitration clause does not necessarily prevent a governmental regulatory body or attorney general from bringing suit against a business for a violation of a state or federal statute in connection with its conduct.  Indeed, this kind of litigation is fairly routine.  The total volume of regulatory actions in consumer cases rivals or exceeds the aggregate volume of consumer class action litigation, while avoiding sticky problems associated with selecting and compensating class counsel in a private class action case.  Generally, since the regulator or governmental agency is not a party to any contract with the business, it cannot be bound by an arbitration clause or other limitation on remedies reached with consumers in that contract.

READ MORE - Federal Arbitration Act Strengthened

Feds Take Aim At Investment Banks

The National Credit Union Administration is a federal regulatory institution for credit unions roughly analogous to the FDIC for commercial banks. The credit union industry is structured in two main tiers. As the Wall Street Journal explains today:

The wholesale credit unions, also known as corporate credit unions, are at the heart of the nation's credit-union system. They not only invest customer deposits but also provide services such as check clearing for nearly 8,000 "retail" credit unions—member-owned cooperatives that act somewhat like banks for firefighters, teachers and other workers who have something in common. Such customers have a total of about $680 billion in deposits at credit unions.

In reality, the strength of the tie between what customers of credit union members have in common has declined for years. For example, I am a member of the Security Services Federal Credit Union, despite the fact that the only paying jobs that I have ever held in my life have been as a newspaper delivery boy, as a freight unloader in a university kitchen, as a tutor, as a math homework grader, as a continuing education instructor, as a professor, as a reporter and as a lawyer, none of which rightly qualify as security services unless you include the occassions when I've acted as bouncer at law firms where I have been employed. But, they remain member owned and tend to be more conservative in their lending and investments than commercial banks.

The NCUA put five wholesale credit unions into receivership as a result of the financial crisis. The Wall Street Journal, summed up the impact of those receiverships, three of which took place in September of 2010, and the other two of which were earlier.

Bad bets on mortgage-backed securities have now killed five of the nation's 27 wholesale credit unions since March 2009. The federal government, which now controls about 70% of the total assets at such credit unions, said the surviving institutions will be reined in so that they take fewer risks with their investments. . . . Members United Corporate Federal Credit Union in Warrenville, Ill., Southwest Corporate Federal Credit Union of Plano, Texas, and Constitution Corporate Federal Credit Union, Wallingford, Conn., which had a total of $19.67 billion in assets as of July, were taken into conservatorship by federal regulators. . . . Since the start of 2008, 66 retail unions have failed, compared with more than 290 banks or savings institutions. . . . Last year, regulators seized the two largest wholesale credit unions, U.S. Central Federal Credit Union, based in Lenexa, Kansas, and Western Corporate Federal Credit Union, San Dimas, Calif., after finding their losses were much larger than previously reported.

Losses on the mortgage-backed securities held by the five seized credit unions are expected by regulators to total about $15 billion. Wiping out the capital of the failed institutions will cover a chunk of those losses. But the remaining $7 billion to $9.2 billion eventually will be passed along to the nation's 7,445 federally insured credit unions in the form of future assessments.

The total number of failed banks and S&Ls has now risen to more than 350.

The $50 billion of mortgage backed securities bought by the wholesale credit unions which placed into receivership are now worth about $25 billion. WesCorp, which had 74% of its investments in mortgage backed securities has suffered a 31% on its mortgage backed security portfolio, the other four wholesale credit unions suffered losses of 10% to 16% on their mortgage backed securities portfolio which made up 31% to 57% of their respective portfolios of investments.

Of hundreds of bonds inherited by the NCUA in its rescues of wholesale credit unions, many were packed with subprime mortgages, interest-only loans or mortgages with other risky characteristics such as not requiring income verification. The mortgage-backed securities often carried Triple-A credit ratings at first. Many now have junk ratings.

Now, the NCUA and other federal agencies stuck with the bad loans are threatening suits to strike back at the investment banks that overhyped these mortgage backed securities:

The NCUA is accusing Goldman Sachs Group Inc., Bank of America Corp.'s Merrill Lynch unit, Citigroup Inc. and J.P. Morgan Chase & Co. of misrepresenting the risks of the bonds to wholesale credit unions. . . . agency officials recently issued an ultimatum to several firms that churned out the bonds: Either refund every dollar spent to buy the bonds when they were issued or face lawsuits seeking to recover the money. In a securities filing this month, Goldman said the NCUA "has stated that it intends to pursue. . . on behalf of certain credit unions for which it acts as conservator" claims that offering documents for certain securities Goldman sold "contained untrue statements of material facts and material omissions."

The NCUA claim is the classic securities fraud 10b-5 suit. The NCUA is claiming that the investment banks had to lie in very specific disclosure document in order to sell their bonds.

But, the economics involved in a securities fraud suit against an investment bank based on bond issuances are very different than the economics involved in the more typical securities fraud suit against a corporation brought by shareholders of that corporation based on stock issued long ago and were trading in the secondary market when the person who is suing bought them.

In a suit by a bondholder, the situation is very similar to an ordinary fraud suit where someone selling something lies about it to make a sale in exchange for immediate payment in which the seller has a direct and immediate financial interest. And, the pot of money from which recovery is sought is different from the one owned by the people bringing the suit.

The FDIC, the Treasury and the Federal Reserve, each of which holds similar securities acquired in the course of the bailout for which similar representations were made could bring similar suits.

[T]he Federal Deposit Insurance Corp.'s board has authorized the filing of lawsuits seeking to recover more than $3.5 billion from officers and directors at failed U.S. banks.

Last week, the FDIC accused the wives of Washington Mutual Inc.'s two top executives at the time of the big thrift's 2008 collapse of illegally moving cash and houses into trusts to shield the assets.

The executives called the suit seeking over $900 million baseless. . . .

Last year, the FDIC took over as plaintiff in a suit filed by Riverside National Bank of Florida, a bank in Fort Pierce that, before failing in April, had stuffed its portfolio with 27 collateralized debt obligations, or slices of bond pools. Riverside accused more than a dozen firms of misrepresenting the CDOs' value. At the time the FDIC stepped in, it owned parts of over 250 CDOs bought by small banks that subsequently failed.

Of course, investment bankers were the only one's at fault:

In November, an audit by the NCUA's inspector general concluded that the management and board of one wholesale credit union, called Western Corporate Federal Credit Union, or WesCorp, didn't properly manage the risk of its portfolio and bought too many mortgage securities. . . . The inspector general's review didn't analyze the possible role of underwriters, issuers or credit-ratings firms.

It isn't entirely clear from the newspaper report whether the investment banks were acting and underwriters or issuers in these sales. Credit ratings themselves are considered "opinions" which do not give rise to fraud liability, even though most bond traders rely on those ratings almost completely to the exclusion of prospectuses, and even though a triple-A rating was in fact completely inappropriate for securities that were as risky as the entire class of mortgage backed securities that were issued actually were in hindsight.

Establishing that facts in the prospectus were false or that facts existed that were omitted from the prospectus, and that those facts had a material impact on the value of the securities, is generally straightforward legally now that investigations have revealed what when wrong with these securities.

The unknowns in suits against investment banks are establishing that the investments banks a the proper parties to sue, rather than special purpose companies set up to issue the securities, because securities laws do not generally recognize "aider and abettor" liability for securities fraud. And, the party bringing the suit also has to establishing "scienter" at the time that the prospectus containing material fact or omitting material facts was prepared. In other words, it isn't enough to show that a statement included a false statement or omitted a material statement, the suit has to show that the company making the statement knew at the time that it was stating something that was untrue and material, or omitting a fact known to be material.

In defending the suits, the investment banks can either claim that it didn't know about the ugly details, or that they believed that the facts were not material because features of the bonds like guarantees from loan originators and credit default swap derivatives made problem with the underlying bonds irrelevant, and nobody realized that "counterparty risk" in these guarantees was as serious as it actually turned out to be in hindsight.

If a court finds that they lied, the investment banks are on the hook and their newfound post-financial crisis profits could evaporate. But, if a court finds that they weren't aware of the problems with their prospectuses, then they are off the hook. Post-financial crisis investigations which seem to show that there were insider communications showing that insiders at major investment banks knew that mortgage backed securities were really junk weaken the case of the investment banks on the merits, if they are not mere "aiders and abetters." Revisions to the bankruptcy code made in 2005 also makes it much harder for investment bankers found to have lied to protect their assets from those who prevail in securities fraud lawsuits.

Moreover, if one federal agency prevails in a securities fraud suit from a particular bond issuance, and appellate courts set precedents that clear legal obstacles to that theory of recovery by affirming those wins, other federal agencies and private bondholders who took losses in the same or similar deals can walk into court using the doctrine of collateral estoppel to apply the first winner's success to their own cases, leaving little more to be proved. As a result, there are huge incentive beyond those in these particular NCUA lawsuit for the investment banks to settle the cases to avoid setting a precedent to could be applied in many other cases.

Thus, it is very likely that the investment banks will have to pay record settlements that reduce taxpayer and innocent investor losses at the expense of the investment banks before the aftermath of the financial crisis is complete.

READ MORE - Feds Take Aim At Investment Banks

Obama Concedes DOMA is Unconstitutional

Learning a lesson from the decision of California's leaders in the Prop 8 litigation, where the state refused to appeal a trial court finding that Prop 8 was unconstitutional (the standing of the ballot measure proponents to appeal in that case has been certified to the California Supreme Court), President Obama has directed the Department of Justice to stop defending the constitutionality of Section 3 of the Defense of Marriage Act. The Justice Department has said:

The Attorney General made the following statement today about the Department’s course of action in two lawsuits, Pedersen v. OPM and Windsor v. United States, challenging Section 3 of the Defense of Marriage Act (DOMA), which defines marriage for federal purposes as only between a man and a woman: . . . The President has also concluded that Section 3 of DOMA, as applied to legally married same-sex couples, fails to meet that standard and is therefore unconstitutional. . . . [T]he Department will not defend the constitutionality of Section 3 of DOMA as applied to same-sex married couples in the two cases filed in the Second Circuit. We will, however, remain parties to the cases and continue to represent the interests of the United States throughout the litigation. I have informed Members of Congress of this decision, so Members who wish to defend the statute may pursue that option. The Department will also work closely with the courts to ensure that Congress has a full and fair opportunity to participate in pending litigation.

Furthermore, pursuant to the President ’ s instructions, and upon further notification to Congress, I will instruct Department attorneys to advise courts in other pending DOMA litigation of the President's and my conclusions that a heightened standard should apply, that Section 3 is unconstitutional under that standard and that the Department will cease defense of Section 3. . . .

Section 3 of DOMA will continue to remain in effect unless Congress repeals it or there is a final judicial finding that strikes it down, and the President has informed me that the Executive Branch will continue to enforce the law. But while both the wisdom and the legality of Section 3 of DOMA will continue to be the subject of both extensive litigation and public debate, this Administration will no longer assert its constitutionality in court.

Colorado's Attorney General, John Suthers, has filed an amicus brief arguing that the Courts should uphold the constitutionality of Section 3 of the Defense of Marriage Act, despite the fact that it does not directly impact state law, over the outraged protests of supporters of gay rights in Colorado.

Section 3 of the Defense of Marriage Act states that the federal government, when applying federal law, shall disregard legal state law marriages that are not between one man and one woman.

The key parts of the Defense of Marriage Act state that:

Section 2. Powers reserved to the states:

No State, territory, or possession of the United States, or Indian tribe, shall be required to give effect to any public act, record, or judicial proceeding of any other State, territory, possession, or tribe respecting a relationship between persons of the same sex that is treated as a marriage under the laws of such other State, territory, possession, or tribe, or a right or claim arising from such relationship.

Section 3. Definition of "marriage" and "spouse":

In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word "marriage" means only a legal union between one man and one woman as husband and wife, and the word "spouse" refers only to a person of the opposite sex who is a husband or a wife.

The decision does not by itself affect Section 2 of the Defense of Marriage Act which provides that the full faith and credit clause of the United States Constitution does not extend to same sex marriages. Thus, state, local, territorial and Indian tribe governments are not federally required to honor same sex marriages that are valid in other states.

Will President Obama's Position Be Sustained In the Courts?

President Obama's decision is likely to stick. Generally, the only parties with standing to participate in a case where a same sex couple alleges that their rights have been violated by Section 3 of DOMA are the federal government and the couple(s) bringing the lawsuit. The U.S. Supreme Court, particularly in recent years, has construed taxpayer standing (alleging the federal funds are used for an unconstitutional purpose) and citizen standing (alleging that the federal government is acting unconstitutionally) very narrowly.

I'll have to look later at the standing of members of Congress to speak for the federal government in litigation or intervene in lawsuits attacking the constitutionality of a statute. The general rule is that the Justice Department is the sole representative of the U.S. position. But, federal courts have the authority, although not necessarily the obligation, to appoint a lawyer to argue for a position like that constitutionality of a law or the rights of pro se parties, that is not represented by a party in court.

To speak for Congress, per se, or even one house of Congress, would ordinarily require the passage of a resolution by Congress or at least a house of Congress. But, members of Congress who sponsored or voted for legislation might be viewed by a court as suitable intervenors to argue to a court for a position that no party to the suit is willing to advance.

An IRS ruling last year holding that domestic partners in California were entiteld to split income for federal income tax purposes due to community property principles foreshadowed the changing position of the Obama administration on this issue.

Consequences

From a practical perspective, some of the main consequences of the decision are that gay married couples can file tax returns with married filing jointly status (and receive all of the benefits of married couples for estate taxation purposes), that same sex married couples qualify for federal immigration law treatment of spouses, and that same sex married couples can receive Social Security survivors benefits and spousal Veteran's benefits. The Veteran's benefits issue looms large now that Congress has repealed the "Don't Ask, Don't Tell" law.

Also, while not quite spelled out by this ruling, the implication seems to be that a same sex couple that is legally married in any state will thereafter be treated as married by the federal government, even if the state in which they live does not recognize same sex marriage. Since some states do recognize same sex marriage (and allow non-residents to be married in their state), that means that same sex couples that go to those states to be married and then return to their home states can receive all of the federal government benefits of marriage.

In addition to undermining the efforts of state governments to deny federal benefits of marriage to same sex couples in their own states, the determination also increases the stakes in the civil union v. gay marriage debate in the states. Until now, this has been a strictly symbolic debate. A civil union bill (SB 11-172) that creates as the legal rights and responsibilities of marriage under state law, but doesn't call it marriage (such as one pending in the Colorado General Assembly right now) would not constitute marriage under federal law, while one that calls the relationship marriage would have that effect.

Thus, states are left with multiple options including: (1) disallow both civil unions and same sex marriages, but acknowledge that couples with legal sex sex marriages from other states may receive federal treatment as married, (2) allow civil unions but not same sex marriage, which gives copules state law marriage rights but denies couples federal treatment as married until they get legally married in another state, or (3) allow same sex marriage.

Also, while Section 2 of DOMA does not require states to recognize same sex marriages from other states, it also does not prohibit them from doing so out of comity. In many states, the issue of when comity should recognize other state's legal acts when the full faith and credit clause of the United States Constitution does not require it has been left to the courts rather than being made a subject of legislation. Thus, judges could choose, influenced but not bound by the Section 3 of DOMA interpretation, to honor out of state same sex marriage even though the constitution and federal law do not require them to do so.

Civil unions have been a sensible legislative objective for same sex couples in many states, like Colorado, where the state constitution has been amended to prohibit same sex marriage, but not more broadly to prohibit civil unions or domestic partnerships of same sex couples as well. But, there will be increasing pressure to actually call this marriage legislatively, and as courts evaluate the issue.

READ MORE - Obama Concedes DOMA is Unconstitutional

Greeley-Evans School Board Member A Menace

We knew Brett Reese was a bad example when the Greeley-Evans School District 6 Board of Education member (elected in November 2009 with a fourth place finish out of five candidates with 9,648 votes to a four year term) used his low power radio station to run an anti-Martin Luther King, Jr. letter with heavy conspiracy theory overtones.

His decision to bring a concealed weapon to school board meetings heightened our concern and was circumvented by the rest of the board by scheduling school board meetings in school and having a policeman on hand to address his fears for his personal safety.

But, he crossed a line when he told a fellow radio station owner that he would get in a "shoot out" with him in a voice mail (a recording of which is available at the link) which was interpreted as a threat, and a Judge agreed with a the fellow radio station owner that this interpretation of Reese's statement was reasonable under the totality of the circumstances (including Reese's recent oddball behavior and the assassination attempt on a Democratic Congresswoman in Tuscon), despite Reese's claim that the statement wasn't intended as a threat.

As a result the temporary restraining order obtained against Reese was made permanent by the judge in his case. He has been ordered to forever "stay at least 100 yards away from his business competitor KFKA 1310 AM radio general manager Justin Sasso's home, business and body, and permanently revokes a concealed weapon permit that Reese has had for more than two years.

Restraining orders are civil, rather than criminal (although a failure to comply with one is both a civil and criminal wrong), so the burden of proof to have one imposed is lower than in a criminal case and there is no right to a jury trial on one (as injunctions fall within the "equitable" part of a court's jurisdiction). While it is called a "permanent restraining order," it can be modified or lifted with court permission in a motion brought as often as once every four years. "Threatened bodily harm" is a ground for issuance of a civil protection order (the proper legal name for one in Colorado). A temporary order must allege an "imminent danger" arising from the threat, but a permanent one issued after an evidentiary adversary hearing on the matter need not show that the danger is imminent. Instead, it is merely necessary to show that "the defendant has committed acts constituting grounds for issuance of a civil protection order and that unless restrained will continue to commit such acts."

The judge found that Reese did make a threat and that he would continue to make threats if not restrained.

One could legitimately argue as a lawyer to interpret Reese's statements as a threat, or a mere metaphor, but I can't say that the judge was clearly wrong in finding that this was a threat. Reese's multiple recent controversies show him to be a volatile individual with bad judgment, and nobody forced him to call up his competition and say what he did at a time when his willingness to use a gun was all over the papers.

If there is an appeal of the ruling, the question before the appellate court will not be whether or not they agree with the decision made by a trial court judge considering the question "de novo," but whether his interpretation of the facts and law was so off base that it must be reversed on appeal (there are several standards of review that apply in this kind of situation with similar meanings, such a determination that there was an "abuse of discretion," a determination that "no reasonable finder of fact," could reach the same conclusion, or a holding that a finding of fact was "clearly erroneous", and I am not going to exhaustively research which one is correct for this post). Since the decision was made by a county court judge, the first appeal from the decision would be to a single district court judge in Weld County, and the next appeal would be to the Colorado Supreme Court.

None of this, of course, forces Brett Reece to resign from his office as a school board member, although the example he is setting for the students in the district is growing increasingly bad. He can be removed upon resignation, loss of residency, conviction of a felony, a court finding that he is "insane or otherwise mentally incompetent" to "such a degree that the person is incapable of serving as a school director," death, or unexcused failure to attend three or more consecutive school board meetings. But, all of this makes ample fodder for a recall effort, should strongly encourage Reece to resign his post, and certainly hurts his shot at getting re-elected. A recall petition requires signatures of 40% of the voters who voted in the last school board election, which is a little hard to determine directly from the outcome of the election, since voters were allowed to vote for up to four candidates, but some, no doubt, did not vote for a full slate of four candidates, but would require approximately 4,900 signatures in the sixty days after the approval of the petition form.

He claims to have received death threats and to have lost advertisers at his radio station as a result of the controversy.

If there is a recall, at least the clerk and recorder will know what to do, having just conducted a school board recall election this past December.

Fortunately, since school boards have multiple members, all of whom seem to be united against him on the issues he has identified as key to him, in part because he is apparently a difficult when it comes to carrying out his board duties in addition to being known for close to the line rhetoric (“That's how you make a successful business. You don't reinvent the wheel. You go steal it.”), and in part because he is world's apart in policy attitudes from the other board members (he strongly opposed the most recently property tax increase for the district and home schools his own three children); so he probably isn't capable of doing much harm even if he serves out his full term of office.

He far right conservatism, by the way, isn't limited to guns and Martin Luther King, Jr. Consider this question he poses at a GLBT forum:

How is it that sexual deviance, such as homosexuality and bisexuality, are different and OK when incest among consenting adults, polygamy and group marriage is considered in our society not OK and a means of sexual deviancy?

Suffice it to say that his comments on this issue, and on MLK, Jr. would not be helpful to the district if it faced an employment discrimination lawsuit.

READ MORE - Greeley-Evans School Board Member A Menace

Ivory Coast Type Election Issues In Cincinnati

Hamilton County, Ohio, whose principal city is Cincinnati, is faced with an election law issue pertaining to an open, elected partisan juvenile court judgeship election dispute upon which the Ohio Supreme Court and Ohio Secretary of State have ruled one way (don't count the ballots), but a federal district court judge, Chief Judge Susan J. Dlott of the U.S. District Court for the Southern District of Ohio has reached a contrary result.

What is the Board of Elections member (the Board itself is split two to two and does not agree) to do? The officials in question now face a contempt of court hearing today, which puts the officials at risk of personally going to jail or being fined, for failing to honor a federal court order that is contrary to a state court order.

Generally, elections are matters of state law. But, if a federal constitutional right or federal statute is implicated, federal law supersedes state law. And, while the 11th Amendment prevents state governments from having to deal with cases in federal trial courts, state and local government officials in suits not seeking money damages and arising under federal law, and suits against governmental entities distinct from state governments are not subject to that limitations. Doctrines that one learns when studying the federal courts generally provide that a final ruling of either a federal court or state court is binding on the parties who may not then forum shop for another judge with a more favorable outlook on the case. In particular, a federal trial court may not generally sit as an appellate body with regard to a state court ruling in a civil matter. But, since the law in this federal v. state jurisdiction area is so complex, even in cases arising out of purely state office elections (which are far simpler than cases arising out of federal elections, like Bush v. Gore, where a host of special constitutional rules apply), judicial rulings are sometimes hard to predict in this cases and judges come to different conclusions in the face of hot partisan conflict that often sees judges and elections officials lining up along the lines that their political histories would suggest, despite their duties to enforce the laws impartially.

Republican John Williams leads Democrat Tracie Hunter by 23 votes in the official count, but the parties disagree on how to handle 849 provisional ballots that were not counted.

The ballots were set aside on Election Day because poll workers believed they were cast at the wrong precinct.

Dlott, however, has said 149 of those ballots were cast at the wrong precinct because of poll worker error and should be counted. Many may have been cast at the wrong table even though voters cast their ballot in the right building.

The [federal] judge said failing to count ballots that were disregarded through no fault of the voter would violate the 14th Amendment’s requirement that all citizens receive equal protection under the law.

Partisan, Personal and Federalism Issues Involved

There is a partisan dimension to this struggle as there is in most election law cases.

The Board of Elections is split two posts for Republicans, two for Democrats, split evenly by design.

The Ohio Secretary of State is an elected Republican and favors the Ohio Supreme Court position that lets the Republican judge win. Six of the seven officially non-partisan elected justices on the Ohio Supreme Court were nominated by the Republican party and known to have Republican affinities.

The Democrats on the Board, however, would like a recount, as the federal judge, who was appointed by President Clinton, a Democrat, in 1995 when Democrat John Glenn and Republican Mike DeWine were U.S. Senators from Ohio, has ordered. Dayton native Dlott is married to Stanley M. Chesley (a trial lawyer more familiar to me than almost any lawyer in Denver by name, despite the fact that I haven't lived in the area for a copule of decades), lives in the most expensive single-family home ever listed in Greater Cincinnati, shows dogs, and has won praise for her racial sensitivity and even handed management and resolution of complex cases.

The Secretary of State is (by design) normally a partisan tie breaker for county boards of election, in this case on the issue of whether the federal court ruling should be appealed to the 6th Circuit Court of Appeals. If the 6th Circuit overules the trial judge, the conflict between the courts no longer exists, but, should the United States Court of Appeal for the 6th Circuit (which is neither particular conservative nor particularly liberal as federal appellate courts go in the United States at the moment) affirm the trial court's ruling (in which she is entitled to considerable deferrence in a number of respects), its authority vis-a-vis the Ohio Supreme Court's ruling is just as ambiguous as the trial court's ruling. Only the U.S. Supreme Court has clear jurisdiction over both the state and the federal judges in this case.

The case also pits concerns about federal involvement in state and local government operations against concerns about fairness in elections in a system controlled by political allies of the aggrieved candidate. Stereotypically (for modern times), it is the Republicans who are pressing a state's rights argument in this case, and the Democrats who are pressing for federal involvement in the interest of civil rights.

There is also a perceived racial element to the contest. Hamilton County is 70% white and 25% African-American, with the African-American population predominantly in Cincinnati, the central city, ahd the white population disproportionately in suburban Hamilton County. Democrat Tracie Hunter, a former public defender and guardian ad litem, who is also a pastor and radio personality is an African-American woman, while Republican John Williams, a former prosecutor campaigning with a tough on crime agenda in a court where most of the defendants are African-American juveniles and African-American parents, is a white man whose website prominently displays white Hamilton county suburbanites in the background, in a county just on the border between Northern leaning Ohio and Southern leaning border state Kentucky.

To be perfectly honest, if I had been forced to vote in that election, I wouldn't have been terribly happy with either of my choices. Both candidates are partisans seeking a post that demands neutrality and evenhandedness.

Voters were very evenly split in the race, and usually, in this kind of situation, where a significant number of provisional ballots are at issue, a recount will favor a Democrat. It wouldn't be surprising for an apparently heavy handed or partial ruling to lead to a riot in Cincinnati.

The Stakes

This all sounds like a very technical issue of civil procedure and election law, with valid legal considerations on both sides of the case.

The outcome of this case won't directly affect anyone who doesn't do have a connection to Hamilton County Juvenile Court, a county where 99.7% of the population of the United States doesn't live, and with which 95%+ of the population of Hamilton County will never have any business. It has one other judge in addition to the position at stake in this election, and the Juvenile Court's rulings are very important to those who are before the court, and who in making child custody decisions and juvenile delinquency sentencing decisions has immense discretion.

Life will go on with either resolution of the matter, so long as it is resolved, and there is really no room for compromise. Neither candidate has shown any basis for a do over of the election, only one can be elected for a long term to the only judgeship on the court, and the judicial ideologies and the personal experiences that the candidates bring to the court are very different. Either way, unhappen litigants can try to appeal rulings without a proper legal basis.

Cote D'Ivoire Compared

But, while this particular case in Ohio won't change the world, an extremely similar legal issue in Cote D'Ivoire's 2010 Presidential election, in West Africa, in a country only a little larger in size and area than Ohio (it has 20.6 million people up by a third in the last decade alone, while Ohio has about 11.5 million although probably a similar number of adults of voting age; it has 124,502 square miles, while Ohio has 44,825 square miles; both have strong regional and ethnic partisan divides), in which a Board of Elections and independent election observers came to one conclusion on the outcome of a contested election dispute arising out of vote counting concerns (in favor of the contesting candidate Alassane Ouattara), while the Constitutional Court of the country came to a contrary determination (in favor of the incumbent President Laurent Gbagbo).

The election dispute in Cote D'Ivoire has brought that country to the brink of civil war, despite the absence of a complicated mix of federal courts. Scores or hundreds of people have died already in the several week old dispute. The international community has sided with the challenger (in part on the merits, and in part because the incumbent has manipulated the electoral process in undemocratic ways that were to be put behind the country in free and fair elections in 2010), while the incumbent appears to have practical control of most instruments of state power in the country.

UPDATE: The 6th Circuit has entered a stay in the case. All the original source documents you could ever want can be found here.

READ MORE - Ivory Coast Type Election Issues In Cincinnati

Class Actions

Securities fraud class action lawsuist receive a lot of attention. But, there actually aren't very many of them. One blog devoted to the subject identified 189 of new securities fraud class action lawsuits in 2009, predominantly, although not exclusively, in federal court.

There were an average of about 618 class action lawsuits filed each year from 2000-2005 in California's state courts, the nation's largest state and one that has traditionally been friendly to class action lawsuits. The Class Action Fairness Act of 2005 probably curtailed this number significantly.

Employment cases represented a yearly average of 29.3% of all class action cases. Business Tort cases represented a yearly average of 27.4% of filings during the same period. . . . The percentage of contract class action cases declined during the study period. . . . with a six-year average representation of 10.3% of all cases filed. . . . Likewise, antitrust cases . . . with a six-year average of 5.9%.

Other case types include construction defects (5.4%), insurance coverage, mass torts, civil RICO, fraud (3.4%), product liability (3.5%) and civil rights cases.

The employment cases involved overtime and meal/break disputes. The anti-trust cases arose largely out of two events, profiteering in the utility industry during the 2000 energy crisis in California and a pricing dispute related to GM automobiles in 2003. The business tort cases are basically false advertising cases.

About half of the cases were resolved during the study period. Of those, just under a third (32%) settled, just over a third (34%) were dismissed in motion practice, and just under a third (33%) were transferred to another state or federal court or merged with another case. Nine out of 1294 cases (less than 0.1%) went to trial on the merits (compared to 8.6% of all general jurisdiction civil cases in the study period). A small number were stayed, on appeal of the class action determination, or in some other procedural situation.

About a sixth of the cases, or more, would be barred from state court under the Class Action Fairness Act of 2005.

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