Category: General Law


Ken Lay: R.I.P.

Ken Lay, R.I.P. at 64. A few thoughts.

1. I’m not running for office, and I don’t think this blog counts as journalism, so I must be a fool. I think that Lay deserved prison time. (Whether or not Lay would have been sentenced to a life term, as Larry Ribstein claims here, or its functional equivalent is unclear). Now, did he deserve as much time as a murderer? (Assuming that murder was a federal crime). It is a tough question, as I admitted in January. Ribstein describes Lay’s crimes as follows:

He was convicted for lying about [Enron being a Ponzi scheme] at the tail end. Some people bought in at that point because they didn’t know the truth, and maybe that was partly Lay’s fault. But others (not Lay) got out – the gains and losses of these traders net out.

Alot of the people who feel hurt here simply hung onto their stock too long. But did they get hurt by Lay? If he had told the truth at his first opportunity, or even just remained conspicuously quiet, they just would have gotten hurt sooner.

Let’s put aside the factual disputes [But note: weren't the locked-in employees owed some sort of duty by their boss?], and also put aside the point on timing [But note 2: if the truth had been revealed earlier, perhaps JKS wouldn't have quit, or the firm would have been saved, etc. Lies fester.] Larry’s argument would seem to prove too much – there will often be non-wrongdoer “winners” from fraud, as there are winners from murder, theft, etc. Does this mean that fraud ought not be criminal in the ordinary case?

The punishment point is more troubling to me. Is fraud as bad as murder? On considered reflection, of course not. But that doesn’t mean that fraudsters ought not be punished like murderers. Ordinary deterrence intuitions suggest that punishment needs to be ratcheted up as enforcement goes down. Thus, murder is almost always prosecuted. Stock market manipulation and lying to banks to secure loans almost never are. Larry would have punishment in corporate law instantiate lex talonis. But punishment in this arena dances to Becker’s drum, not Markel’s. To make the laws against securities fraud work, we need tough penalties, or many more prosecutions. I’d rather the former than the latter.

2. Peter Henning says that the criminal conviction has now been expunged,and that “the plaintiffs cannot rely on it as proof in their case, if my dim memory of collateral estoppel serves me right.” My memory of CE is also obscure, and I wonder if any of our regular and/or expert commentators care to weigh in on this civil procedure problem. Separately, can the civil plaintiffs use Skilling’s conviction against either Skilling or the Lay estate before it becomes final? It is hard to believe that the civil trial has to be stayed for the pendency of the coming appeals, but such would seem to be the consequence of the rule that Henning has unearthed.


“Juicy” Weather?

The torrential rains rode into Virginia on tropical winds that were “very juicy” with moisture and were blocked from blowing out over the Atlantic Ocean, said meteorologist Dave Lawrence of the weather service’s Blacksburg [Virginia] office.

– Kiran Krishnamurthy, City Braces for Storms, Rich. Times Disp., June 27, 2006

It is raining up and down the east coast, and, not only have I never seen rain like this, I have never heard of weather being described as “juicy.”

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Mastering The Art Of Redaction. Or Not.

Adam Liptak at the New York Times reports that:

About eight pages of a 51-page government brief filed in federal court in San Francisco on Wednesday were electronically blacked out to protect what prosecutors said was sensitive material concerning a grand jury’s investigation into steroid use in baseball. But the secret passages can be viewed by simply pasting the document into a word processing program.

Forget the substance of this case. And I assume that the material was supposed to be blacked out. (The general counsel for Hearst newspapers, an opposing party, elegantly suggested this might have been an intentional leak, saying “it is our hope that the government did not leak the document”. Nice!) I can’t help but wonder who screwed up (lawyer, paralegal, or secretary) and whether any heads will roll.

Speaking as a former legal assistant at Heller, Ehrman in San Francisco, and junior associate at Debevoise & Plimpton in New York (roughly equivalent positions, given that SF paralegals routinely conducted cite-checks, a task left to junior associates in NY), I can only imagine the horror transpiring at DOJ. The low level employees responsible for these redactions no doubt live in daily dread of a – shall we say it? – fuck up of this magnitude. The good news is that this incident will be a helpful training vehicle for law firms across the country. The bad news is that the median blood pressure of paralegals and junior associates just went up a notch.

Meanwhile, at this very moment, somebody is holding his or her head very low. He or she may already be toting a pink slip. Given our small world, I’ll bet that there’s no more than one degree of separation between Co-Op readers and this sorry soul. If you know him or her, tell him my heart goes out. Thank the lord it wasn’t me.


James Joyce & Fair Use

Represented by Larry Lessig, Carol Loeb Shloss, an English professor at Stanford University, has filed a law suit in the U.S. District Court for the Northern District of California, against the Irish estate of James Joyce.

The lawsuit alleges that the estate has improperly interfered with the professor’s efforts to reproduce, consistent with the provision of “fair use” under copyright law, portions of Joyce’s writings. The estate reportedly has a long history of telling scholars and others that they cannot reproduce anything Joyce wrote without the estate’s permission. The professor seeks a declaratory judgment that her reproductions constitute fair use and, further, that the estate has engaged in copyright misuse and therefore cannot enforce its copyrights against her. The complaint is available here. The New Yorker also recently published an account of the case.

My article, Copyfraud, published this month in the NYU Law Review, deals with the problem of publishers, archives, and estates leveraging copyright law to prevent legitimate forms of copying and makes some proposals for how Congress and the courts should respond to this problem, including by expanding the rarely used “copyright misuse” doctrine.

Though I’m all in favor of developing the law in this area, I’m not sure that this is the right case to do it.

Some judges are going to bristle at this lawsuit. The materials at issue are excerpts from Joyce’s writings that the professor’s own publisher told her to remove from her book. At Lessig’s suggestion, she decided to post those removed excerpts on a website and provocatively told the Joyce estate of this plan. Copyright misuse, like patent misuse, is normally a defense once you’ve been hauled into court and found guilty of infringement. Here, the professor has not even been sued by the Joyce estate for infringement. Granted, she fears a lawsuit (as did her publisher), but there is a good chance that the court will deny the motion for declaratory relief–not wanting to intervene until the professor is actually sued.

This is a case to watch.


Name That Hero!

Many thanks to the fine folks at Concurring Opinions for the chance to blog a bit over here! I’ll do my best not to dirty up the place too much.

I’m not authorized to do this, but I’ll offer a full refund of the Concurring Opinions subscription price to the first commenter who can name the hero I’m pictured with below. (To avoid confusion, that’s me on the right.)


The Special Value of Public Defenders

As I’ve suggested, one of the big poblems with Alabama’s death penalty is its system of indigent defense. The committee recommended a more systematic approach to assigned counsel in capital cases, but I want to focus on one particular approach to indigent defense that I personally believe is clearly superior to others: the use of public defender offices.

In most of America’s big cities, indigent criminal defense work is primarily provided by public defenders. In Alabama, however, the only urban area served by a public defender is Tuscaloosa (population 78,000). The state’s major cities – Birmingham, Montgomery, Mobile and Huntsville – do not have public defenders. In a state of 4.6 million people, less than 10% of the state lives in areas covered by public defenders. Everywhre else, indigent defense is provided by appointed counsel.

Why do I think services provided by public defenders are better, on balance, than those provided by individual appointed defense lawyers? Four reasons. First, there is the matter of expertise. Public defenders typically handle only criminal work. They know statutes and caselaw better simply because that’s all they do. And because they handle a large volume of cases, they tend to make fewer silly mistakes – forgetting to file motions, for example. My wife – a doc – always tells me that when you need surgery, you want a doctor who does the procedure frequently. If you plan to get Lasik surgery on your eye, go to the (high quality) factory – the place where they do 20 a day, and have every protocol down pat. An experienced technician will make fewer errors and will also have more experience dealing with those problems most likely to surface. So it is with lawyers Obviously, there are brilliant lawyers (and doctors) who handle a small number of cases very effectively; but most people are not brilliant and the typical lawyer will be most effective once she’s got the drill down pat.

Because of their size, public defender offices also do a better job supporting good lawyering. It’s hard for individual lawyers to keep up with changes in the law. It takes a fair amount of time. In a public defender’s office, one attorney can be assigned the job of reading all the new cases and statutes. He can then circulate the news to the office on a regular basis. When I practiced in Philadelphia, public defenders were often the first people to learn and argue new developments in the law. In this respect, public defenders improve the quality of lawyering for everybody, because private practitioners (and DA’s and judges) hear about new cases simply by listening to PD’s cite and discuss them.

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Disney Prescience or Stomach Virus?

I have been flat on my back and sicker than a dog for 36 hours. I thought it was a stomach virus. It seems that it might have instead been a sense of impending doom. The Disney opinion came out tonight. The link is:

I do not have the energy in me to do a fancy blue shortened hyperlink. I have to save my meager energy to rage about blasphemous statements such as “a plaintiff who fails to rebut the business judgment rule presumptions is not entitled to any remedy unless the transaction constitutes waste.”

And the specific discussion on good faith doesn’t get any better. After making that odd statement about the BJR, the court criticizes the appellants’ assertion that “directors violate their duty of good faith if they are making material decisions without adequate information and without adequate deliberation.” Hello pot? This is the kettle, you are black. If we want to compare “unjustifiable statements that might make sense,” I have to believe that the appellants win in this situation. Is the Delaware Supreme Court really trying to say that “making material decisions without adequate information and without adequate deliberation” *ARE* acts of good faith?

Read that again:

Based on the Delaware Supreme Court’s critique on page 63 of the Slip Op. of the appellants’ assertion that “directors violate their duty of good faith if they are making material decisions without adequate information and without adequate deliberation,” am I to believe that the good court is saying that such decisions *are* acts in good faith? Colleagues, we know that good faith means, roughly, acting in the best interests of the corporation. How can acts “without adequate information and without adequate deliberation” be acts “in the best interests of the corporation?”

I am so disappointed, but I am not shocked. As could be expected, the Delaware Supreme Court implicitly concedes to bastardizing the phrase “not in good faith” to mean “bad faith.” For those who missed it the first few times I made the argument, I maintain that “not in good faith” (as it appears in the BJR or in DGCL 102(b)(7)) covers ABDICATION of duty. Apparently this version of the Delaware Supreme Court has abandoned their previously held opinion that good faith is an affirmative obligation, requiring action in the best interest of the shareholders. Instead, it seems that the 2006 Delaware Supreme Court is of the view that “bad faith” is a good shorthand for the absence of affirmative action in the shareholders’ best interest. Kind of like a McDonald’s hamburger is a good shorthand for “a steak from Peter Luger’s.”

I need to go rest – I cannot tell if I am still feeling my stomach virus or I am just physically put off by 89 pages of words that bode ill for the American investor. I have much respect for Justice Jacobs, the author of the opinion, Chief Judge Steele, and Justices Berger, Holland, and Ridgely, but I have to sadly admit that I am of the view that they failed to produce the best, most-justified, most solidly-reasoned and strongly principled opinion possible. I will post my specific objections later.


Blogging Policies at Work

Speaking of the employment at will rule, (see post directly below), here’s an excerpt from the New York Times about blogging policies at work.

The vast majority of organizations don’t have policies in place,” said Jennifer Schramm, a workplace trends and forecasting manager at the Society for Human Resource Management in Washington.

The group found last year that only 8 percent of the 404 human resource professionals it polled had blogging policies, while 85 percent did not. (The other 7 percent did not know.)

Ms. Schramm said that is just as bad for the employee as for the employer. “Right now it is tough for individuals to know what is happening because so few organizations have a clear policy about employee blogging,” she said.

Of course, as long as there have been managers and underlings, there have been disgruntled workers gabbing around the water cooler or over drinks at happy hour. E-mail and instant messages are merely a quicker way to say, “You wouldn’t believe what a jerk my boss is.”

Blogging takes the grumbling to another level, but one that makes sense when considering how much of it is going on out there. According to the Pew Internet and American Life Project, about 11 million people have created blogs at one time or another.

A blog and a job don’t necessarily have to clash, some bloggers say.

The article goes on to describe how some have bloggers have decided to tone down their blogs, write about subjects other than work, or blogged anonymously. The article also describes how some employees simply don’t care about blogging policies – even if fired, they’ve gone on to make much more money because of the notoriety derived from blogging.

[Hat-Tip: Josh Rosenberg]


New Study Shows No Marijuana-Lung Cancer Link

According to a story in today’s Washington Post, a new NIH-funded study has shown that smoking marijuana does not increase the risk of lung cancer – and may actually reduce it. Since this conflicts with the administration’s party line, I wonder whether we’ll see various divisions of the government working to supress or otherwise undermine these results. I’ve previously blogged about the way the FDA has deceptively reported marijuana research.

There is little question that using marijuana, or other recreational drugs, is rarely a healthy life choice. This new research would not change my own view that smoking anything is dangerous. But since the administration has repeatedly worked to suppress or undermine data that it dislikes, I feel a sense of dread about how it will handle this surprising outcome. Will the researchers lose their grants or get blacklisted? Will the DOJ seek to fund a study specifically designed to undermine this data (incorporating any necessary methodological flaws)? Will the FDA follow its prior form, and issue a press release denying the study ever happened? Or will this information simply be deleted from every federal publication that otherwise documents new health research?

And was I always this cynical?


Milberg Weiss Firm Indicted

At this point, given the amount of press that the investigation received, it does not come as a surprise that plaintiffs’ firm Milberg Weiss Bershad & Schulman has been indicted for providing “kickback” payments plaintiffs in securities class action cases. The firm has launched this new website to deny the charges (and presumably do some damage control).

Having previously worked for a plaintiff’s securities law firm, and knowing how passionately the partners there cared about cleaning up some of the worst abuses in the corporate world, I’m saddened by this. Over many years, Milberg Weiss has taken on many big, high-dollar, controversial cases that have shaken things up. On the other hand, will it really have that big an impact on class actions? If Milberg’s reputation and market share decreases, that leaves a power vacuum for its other competitors to fill. More details here from the government’s press release, all over the WSJ blog, and commentary from Conglomerate here.