Blawgletter®

Quote of the Day: Eleanor Roosevelt

Eleanor Roosevelt (1884-1962).

Great minds discuss ideas.  Average minds discuss events.  Small minds discuss people.

She always took the high road.

An Extraordinary Writ Turns Normal

Voltaire said "perfection is the enemy of the good".  The Texas Supreme Court disagrees.

Blawgletter recalls our horror, on a fall day in 1981, when the civil procedure professor revealed that appellate courts could -- in fact usually must -- delay correcting egregious trial court errors until after final judgment.  But why, we wanted to know.  Don't the higher courts owe their very existence to the importance of fixing trial judges' mistakes?

Well, yeah.

The professorial explanation didn't give us much comfort.  Most flubs don't affect the merits, he said.  Most in fact correct themselves.  Plus the appeals courts would have no time to deal with actual final judgments if they routinely monkeyed with interlocutory complaints.  Not to mention the disruption, expense, and delays to progress in the case from a mid-stream interruption.

Too bad, so sad, we thought.  We want to get each and every ruling right, don't we?  Shouldn't our system of justice at least act as if it aspired to perfection?

Our heart leapt at the discovery of ways to get around the "final judgment" rule.  Things like the collateral order doctrine, grants by rule or statute of a right to an interlocutory appeal, and the mysterious writs of prohibition and mandamus.  But then we learned the impossible rarity of success along those "extraordinary" avenues of pre-judgment review.  Big frown.

And yet today our 1L dream came true.  The Supreme Court of Texas announced that it will grant the extraordinary writ of mandamus whenever a majority durn well pleases. 

The 6-3 court exercised its will in ordering dismissal of a medical malpractice case because the plaintiffs' medical doctor expert didn't prove, to the majority's satisfaction, her expertise in judging a hospital's decision to credential an allegedly incompetent physician.  In re McAllen Medical Center, Inc., No. 05-0892 (Tex. May 16, 2008).  Talk about judicial activism!

The dissent said:

A whole new world in mandamus practice, hinted by opinions in the last few years, is here. The Court’s heavy reliance on costs and delay to support its conclusion that the hospital has no adequate remedy by appeal marks a clear departure from the historical bounds of our mandamus jurisprudence.  Because the Court’s opinion in this case does not follow the standards we established in the once-seminal case of Walker v. Packer, 827 S.W.2d 833 (Tex. 1992), for exercising our mandamus jurisdiction, notwithstanding the merits of the case, I respectfully dissent.

Our 22 year old self would have rolled our eyes.  But, from the perspective of double 22 plus five, we lament the court's decision to give itself power to rap trial judges' knuckles any time the defendants lose a motion to kill a case before trial.

We might feel better had the court paddled a trial judge for erroneously rejecting an expert's report and thus denying a jury the chance to settle the dispute.  At least then we could see some balance.  Because a rule that authorizes mandamus to avoid a trial always favors the status quo -- which generally means the defendant, who thus dodges a status quo-changing trial and judgment.

[Our confidence didn't get a boost from another of the court's "weekly orders" today.  This one, a per curiam opinion without oral argument, overturned a trial court's and appellate court's conclusion that the defendants waived their right to arbitrate the dispute by, among other ways, asking for consolidation of the case with similar ones so the parties could litigate them more efficiently.  In re Citigroup Global Markets, Inc., No. 06-0886 (Tex. May 16, 2008) (per curiam).  The decision follows hard on the heels of an opposite outcome for the husband and wife plaintiffs in Perry Homes v. Cull, No. 05-0882 (Tex. May 2, 2008).  We described the result in Perry Homes as "harsh and extreme" and wondered why the court has never held that a defendant waived its right to arbitrate.]

We still feel our 1L adoration for rigorous enforcement of principles.  But neutrality, balance, and restraint matter more than rigor.  Kudos to Justice Wainright, Chief Justice Jefferson, and Justice O'Neill for seeing that in their McAllen Medical Center dissent.

Hooray!  Our daughter's back from college!

Scrapping Over Class-Wide Damages

Tubular, man!

The Sixth Circuit yesterday upheld an $11.5 million jury award to a class of Northeastern Ohio scrap metal "generators".  The generators alleged that scrap "processors" conspired not to compete with each other on bids for the ferrous and non-ferrous stuff the generators generated.  The result?  Lower prices for their scrap.  About, oh, $11.5 million worth in lower prices.

After automatic trebling under the Sherman Act, the verdict became $34.5 million.  The district court reduced that figure by the amount of pre-trial settlements, entering judgment for $23,036,000.  In re Scrap Metal Antitrust Litig., No. 06-4511 (6th Cir. May 15, 2008).

The processors' appeal encapsulates several risks that antitrust class actions pose -- even when, as in Scrap, the defendants didn't seriously contest liability. 

The "most critical question", according to the court, concerned the admissibility of expert testimony on damages under Daubert.  The court made long work of the challenge but got the outcome right:  the expert adequately explained his methodology, assumptions, and adjustments to allow the jury to accept or reject his conclusions.  The hard-working jury -- don't juries do a splendid job? -- in fact bought some of the testimony and disregarded the rest; the finding of $11.5 million in underpayments to the class fell below what the expert opined to.

But Blawgletter's favorite parts of the opinion related to the fundaments of class actions alleging a price-fixing conspiracy.  To wit:

• Fact of class-wide damage.  Under Federal Rule of Civil Procedure 23(b)(3), common questions of law or fact must predominate over issues individual to class members.  Conspiracy cases always involve a common question about whether the defendants conspired, but what about damages?  A long line of decisions holds that predominance exists if, but only if, the plaintiffs seeking class certification also demonstrate how they will prove that the conspiracy hurt all class members and, in the aggregate, by how much.  They typically make that showing through an economics expert's opinion that (a) the conspiracy caused all class members to overpay or undercharge for the relevant good or service and (b) reliable methods exist for computing the minimum percentage overcharge or underpayment to each class member.  The Sixth Circuit upheld the sufficiency of the expert's testimony about the "fact of damage" to the entire class.  Correctamundo.
• Aggregate award.  The verdict in a price-fixing class action awards a total amount to the class.  Defendants hate that.  In this case, the defendants deemed the verdict and judgment an endorsement of "fluid recovery" -- a cy pres concept that allows distribution of class action recoveries to people other than class members.  The Sixth Circuit pointed out that an aggregate award doesn't mean the money will go to non-class members.  We would further note that fluid recovery happens, if at all, only after eligible class members get their full share of an award.  In a sense, once the jury awards damages to the class, the defendants have nothing to say about who should receive the benefit of it.

The Scrap decision ringingly confirms both the viability and importance of class litigation challenging conspiracies to thwart competition.  Booyah!

Stay classy, y'all.

How Federal Courts Got Their Inefficiency -- Part 1

In 1905 -- his "miracle year" -- physicist Albert Einstein wrote four path-breaking papers.  One of them revealed his special theory of relativity.  In it, he disclosed that electromagnetic waves, including light, always travel at a constant speed -- about 186,000 miles per hour -- but that our observation of them depends on our movement relative to their source.

Got that?

Blawgletter confesses a sensation of doubt.  Big time. 

But we feel more confident that our current subject -- the efficiency vel non of federal courts -- depends ever so much on the judiciary's perception of case velocity relative to some reference point.  Huh?

Consider that federal judges hold Vast Power.  They display a great deal of Independence.  And, with few exceptions, they enjoy Near Invisibility outside the courtroom.

All of which leaves Their Honors with tremendous discretionary influence over their dockets.  They can move the cases or not move them, push them fast or slow them down, work them hard or hardly at all.

We hypothesize that how quickly judges choose to dispatch their dockets depends on whether they look at cases as moving towards trial too fast, too slow, or at just the right speed. 

Next time, we'll attempt an approximation of which view predominates in 2008 -- and, more important perhaps, why.

Our feed doesn't know how this will end either.

Puttin' Out the Writs -- Never Mind

You know the Clear Channel case in San Antonio against a bunch of banks for refusing to fund a loan that would enable private equity firms to buy a chunk of the company?  The one that a Bexar County district judge refused to dismiss in favor of a New York forum?  And the one in which the Fourth Court of Appeals denied mandamus relief?

Yesterday, the Supreme Court of Texas set the banks' mandamus petition for oral argument -- this Friday, May 16, at 2:00 p.m. 

The banks frame the legal issue thus:

Can parties seeking funding under a loan commitment with a forum selection clause circumvent the clause by pleading a tort claim in a nonforum state that, in fact, seeks enforcement of the loan commitment?  Or, are those parties bound by the forum selection clause in the loan commitment under direct benefits estoppel?

What does the clause say?  This:

You, the Sponsors and we hereby irrevocably and unconditionally submit to the exclusive jurisdiction of any state or Federal Court sitting in the City of New York over any suit, action or proceeding arising out of or relating to the Transactions or the other transactions contemplated hereby, this Commitment Letter or the Fee Letter or the performance of services hereunder or thereunder . . . .

The "exclusive" in the clause makes it a mandatory one.  So, as the banks argue, the question boils down to whether suing for tortious interference with the Commitment Letter estops Clear Channel, a non-party to the agreement, from having to abide by the forum selection clause.

Blawgletter will now consult the oracles to guess how the mandamus will turn out.  The first auspice -- the Court's setting the petition for hearing on a few days' notice -- bodes well for the banks.  Another omen -- the Court's enthusiasm for using mandamus to enforce arbitration and forum selection clauses -- also predicts a good outcome for Wall Street.  A final sign -- the Court's pro-defendant tilt -- pretty much seals the deal.

Except that, on the same day the Court set reached out for the case, the parties settled.  The deal carries a lower price tag -- a mere $17.9 billion now -- but everybody seems happy (or miserable) enough.  So scratch that hearing, Your Honors.

Our feed predicts, the Court decides.

Ban on "Transfer" of Case Bars Removal to Federal Court

Forum and venue selection clauses pick a jurisdiction/place (or jurisdictions/places) where contracting parties must (or may) litigate disputes.  "Mandatory" clauses dictate the parties' exclusive options -- and usually they specify just one.  "Permissive" ones grant the parties the right to file in a particular forum/spot but don't prohibit them from suing elsewhere.  A "hybrid" clause permits action at a particular somewhere but prohibits a second suit in another somewhere.

Yesterday, the Eleventh Circuit dealt with one of the hybrids. 

A contract for the purchase of Florida real estate provided that the parties "waive any objection to the venue of any action filed in any court situated in the jurisdiction in which the property is located and waive any right to tranfer any such action filed in any court to any other court."  One of the parties sued in Florida state court, but -- notwithstanding the waiver of "any right to transfer [from] any court to any other court" -- the defendant removed the case to U.S. District Court for the Middle District of Florida.  The district court remanded it to state court.  The Eleventh Circuit affirmed:

The forum selection clause at issue here is likewise one such hybrid clause.  The first portion of it is permissive.  A party need not sue in Orange County, Florida, but if a suit is initiated there, the defendant’s consent to venue in Orange County is contractually provided.  The second portion, however, waives the parties’ rights to “transfer” the suit, when filed, to “any other court.”  To “transfer” means to “convey or remove from one place or one person to another.” Black’s Law Dictionary 1536 (8th ed. 2004).  The clause is not susceptible to more than one interpretation; therefore, its plain meaning governs. Based upon the plain meaning of the word “transfer,” we find that the forum selection clause waived Harvard’s right to remove in addition to its right to transfer for the convenience of the parties and witnesses.

Ocwen Orlando Holdings Corp. v. Harvard Property Trust, LLC, No. 07-13920 (11th Cir. May 12, 2008).

Blawgletter would have thought that "transfer" doesn't include "remove".  That Black's Law Dictionary defines "transfer" as "convey or remove" strikes us as happenchance.  Yet the clause does say "to any other court", which of course includes the federal court sitting in the same geographic area as the state court.  So we have a hard time disagreeing with the result.

The race sometimes does go to the swift.

How the Federal Courts Got Their Inefficiency

[Today we begin a series -- likely an occasional one -- on an Extremely Serious Subject:  The efficiency of the federal courts in handling civil litigation.  This installment begins the journey.]

Rudyard Kipling's Just So Stories include the marvelous one about "The Elephant's Child".  It tells how the elephant got its trunk. 

In what manner did he obtain it?  Kipling tells us that, because of Elephant Child's "'satiable curiosity", he wanted to know what Crocodile eats for dinner.  Questing for and then finding the object of his interest, he believes Crocodile's promise to whisper the answer and leans close to hear. 

But Crocodile means to devour him and so clamps toothy jaws on Elephant Child's diminutive proboscis.  Elephant Child tries to pull away, and soon his friend the Bi-Coloured-Python-Rock-Snake coils around his back legs and commences a-pulling too.  The double-teaming works, separating Elephant Child from hungry Crocodile, but not before stretching the pachydermous pug to five feet and more.

If we stop here, we would think that Kipling intended a cautionary tale about nosiness.  But the author of The Jungle Book, If--, and Kim meant no such thing.  His tale instead goes on to demonstrate how useful the accidental product of 'satiable curiosity became to Elephant Child and his posterity.

"That may all seem well and good to you, Blawgletter," we hear you say, "but what does that have to do with the judiciary and its acquisition of inefficiency?  Please, good sir, do get to the point.  And do it efficiently, mind!"

We shall endeavor to start doing so.  Next time.

I am Iron Man -- dah-da-dah-da-dah-da-dah-da-dah-dah-dah!