Steps Of Litigation

Friday, July 15, 2016

Practical Tips: Keeping Trade Secrets Safe During Litigation – Texas Supreme Court Edition

Posted on June 3, 2016
by Mark Mermelstein and T. Wayne Harman

Last week, the Texas Supreme Court provided its first opinion interpreting the Texas Uniform Trade Secrets Act in a case involving an issue that often causes discomfort to lawyers on both sides of the “v” in trade secret misappropriation cases: how much of their trade secrets do plaintiffs have to disclose to enable the defendant to adequately defend itself? The opinion inIn re M-I L.L.C. d/b/a M-I Swaco, 2016 WL 2981342 (Tex., May 20, 2016) demonstrates this tension. In that case, the Texas Supreme Court, on a petition for a writ of mandamus, held that the trial court abused its discretion by (i) refusing to exclude the defendant’s designated representative from the courtroom during a hearing where the plaintiff’s trade secrets would be disclosed; and (ii) ordering the production of an affidavit containing the plaintiff’s trade secrets without first conducting an in camera review.

The plaintiff in the case, M-I Swaco (“Swaco”), and the defendant, National Oilwell Varco (“NOV”), are competitors who provide equipment and services to the oil and gas industry. In the action, Swaco alleges that one of its former employees accepted a position at NOV in breach of a non-compete agreement, and that he knew, and would inevitably disclose, Swaco’s trade secrets. At a hearing on Swaco’s application for a temporary injunction, the trial court rejected, on due process grounds, Swaco’s request for the exclusion from the courtroom of NOV’s designated representative during Swaco’s testimony concerning its trade secrets.

While the trial court granted the request for a recess to permit Swaco to file a writ of mandamus challenging this decision, the trial court also ordered Swaco to submit an affidavit setting forth the alleged trade secrets as part of its offer of proof. Swaco complied, and while the appellate court rejected NOV’s attempts to access the affidavit, the trial court was not so protective. Instead, the trial court granted NOV’s motion to compel, ordering the affidavit disclosed without first reviewing it. Swaco petitioned for a writ of mandamus, challenging both the refusal to exclude NOV’s designated representative and the disclosure of the affidavit. The Texas Supreme Court found that both were an abuse of the trial court’s discretion, for which there was no adequate remedy at law court litigation.

The Texas Supreme Court first found that the trial court failed to conduct the balancing test required by the Due Process Clause, which pits the presumption in favor of allowing the defendant to participate in the proceedings against the degree of relative harm the plaintiff would face if its trade secrets were disclosed. The trial court incorrectly assumed that the due process right to be present at a civil trial was absolute, concluding that “[Swaco] sued them. They stay, period.” Instead, the Texas Supreme Court reiterated that the right to be present is qualified.

The Texas Supreme Court also rejected the trial court’s absolutist position in its analysis of NOV’s remaining arguments. It found that (i) any right of public access under the Texas Constitution’s “open courts” provision would be similarly qualified; and (ii) other Texas Rules of Civil Procedure must be interpreted in a way consistent with the Trade Secrets Act.

Finally, the Texas Supreme Court found that the trial court had an obligation to review the affidavit allegedly containing Swaco’s trade secrets before ordering it disclosed, to determine what protective procedures, if any, were necessary to protect Swaco’s interests.

For litigants, the opinion provides a useful framework for determining whether, and to what extent, trade secrets must be disclosed during court proceedings in cases where those trade secrets are central to the claims presented. As explained in Swaco, trial courts should consider the following:

While the rejection of a per se rule may add a layer of complexity and expense to an already-costly trade secrets dispute, requiring the courts to conduct a balancing test could provide the parties with an early assessment of the strengths and weaknesses of their case, which ultimately may save them time and expense in the long run.

In 2012 the California Legislature amended the judicial remedies aspect of the Brown Act “Opening Meetings” Law. That amendment added section 54960.2 to the Government Code to require that a party seeking a judicial remedy for a past action of a legislative body alleged to be in violation of the Brown Act must first submit to that body a cease and desist letter. If the legislative body responds with an unconditional commitment to cease and desist from, and not repeat, the alleged violation, then a judicial remedy is foreclosed. In other words, the cease and desist letter is a pre-requisite to initiating a judicial action to stop or prevent past violations of the Act.

The City Council of San Diego regularly meets on Mondays and Tuesdays in a two-day regular meeting, which the City considered to be a single meeting. Pursuant to a city ordinance, only one non-agenda public comment period, required by the Brown Act, was afforded — on Tuesday mornings. Without providing a cease and desist letter, the Center for Local Government Accountability brought suit against the City asserting its single, non-agenda public comment practice violated the Brown Act. After the action was filed, the City changed course and adopted an ordinance providing for non-agenda public comment periods on both Mondays and Tuesdays.

The City demurred to the complaint, first asserting that the Center had failed to satisfy the cease and desist letter requirement of section 54960.2, and second that the complaint was moot, as the City had changed its ordinance to provide for two public comment periods — one each day. The trial court sustained the demurrer, dismissed the action and the Center appealed.

The Court of Appeal, in a decision issued in Center for Local Government Accountability v. City of San Diego on May 31, reversed the trial court order. First, the appellate court found that the cease and desist letter requirement applied only to actions seeking a remedy solely for a past action of a legislative body. (The trial court had concluded that it applied to both past actions and future threatened actions.) The appellate court found that the Center’s complaint was focused on the one non-agenda comment period ordinance and practice, which extended to all council meetings, including those in the future. Therefore, the complaint sought a remedy for future threatened actions and the cease and desist letter requirement did not apply.

Finally, the court rejected the City’s contention that the enactment of the new ordinance providing for a non-agenda public comment period on both days of the Council’s meetings rendered the lawsuit moot. The court noted that the City continued to insist that its two-day meeting regime was in fact one continuous meeting, rather than two separate meetings, and refused to concede that its prior practice of a single non-agenda public comment period violated the Brown Act. (One of the conditions of the “unconditional commitment” to cease and desist is a confession that the Act had been violated.) Reasoning that the City could easily resurrect its prior ordinance, the court allowed the Center to return to the trial court, amend its complaint, and seek a judicial determination that the one non-agenda comment period practice violated the Brown Act.

This case illustrates the risks of Brown Act litigation for legislative bodies. Indeed, the City here appears to have lost the battle and lost the war, and will most likely be tagged with the Center’s attorney’s fees, as well as costs, which the appellate court ordered it to pay.

Thursday, July 7, 2016

Bankruptcy Petition Costs Litigant Right to Appeal State Court

6/7/2016

Nicholas Agnello

| Burr & Forman

Learning the interplay between state rules of judicial procedure and federal bankruptcy law can be a daunting undertaking, but the pitfalls of failing to do so can be severe. A recent example of the importance of being mindful of these issues is Hewett v. Wells Fargo Bank, N.A. as Trustee, No. 2D15–1074, 2016 WL 3065014 (Fla. 2d DCA June 1, 2016) where the filing of a bankruptcy petition ultimately cost a foreclosure defendant his right to appeal a final judgment of foreclosure.

The Second DCA summarized the procedural posture of the case as follows:

“The circuit court’s final judgment of foreclosure of Mr. Hewett’s home was rendered on February 27, 2015, when the order denying Mr. Hewett’s motion for rehearing and new trial was filed with the clerk of the circuit court. See Fla. R. App. P.9.020(i)(1). On March 2, 2015, Mr. Hewett filed a petition for bankruptcy in the United States Bankruptcy Court for the Middle District of Florida. Then on March 9 Mr. Hewett filed with the clerk of the Lee County circuit court a notice of appeal challenging the foreclosure judgment. Without argument, were it not for the filing of his bankruptcy petition, Mr. Hewett’s notice would have been timely filed to invoke our jurisdiction. SeeFla. R. App. P. 9.110(b).”

The Second DCA examined a similar, but distinguishable fact pattern in AmMed Surgical Equipment, LLC v. Professional Medical Billing Specialists, LLC, 162 So. 3d 209, 211 (Fla. 2d DCA 2015) where the Second DCA concluded that “the filing of a notice of appeal instate court should be considered the ‘continuation . . . of a judicial . . . proceeding against’ the appellant” that would be prohibited by the automatic stay.” However, in AmMed the Court accepted the filing of the appeal as timely because a second notice of appeal was filed within the Bankruptcy Code’s extended deadlines for “commencing or continuing a civil action” which expire during the application of the automatic stay.See 11 U.S.C. § 108(c)(2) (extending deadlines to commence or continue a civil acton which expire during the period of the automatic stay by thirty days from the expiration of the automatic stay court litigation.

In Hewett, however, no notice of appeal was filed within the period described in Section 108(c)(2) of the Bankruptcy Code.

Citing to AmMed, Wells Fargo moved to dismiss the appeal on the basis that the notice of appeal was filed in violation of the automatic stay, rendering the notice of appeal void, and that in the absence of some other valid method of invoking the appellate court’s jurisdiction, the appeal ought to be dismissed for lack of jurisdiction. In ruling in favor of Wells Fargo and dismissing the appeal, the Second DCA held:

“These two principles we announced in AmMed—that a notice of appeal is a continuation of a judicial proceeding, and that the Bankruptcy Code prohibits the filing of such a notice during an automatic stay—comport with the broader (and broadly held) view that the filing of a notice of appeal during the pendency of a bankruptcy stay should be deemed void as a violation of the automatic stay. Consistent with AmMed, we agree with these holdings. Therefore, since the only notice of appeal Mr. Hewett ever filed was a nullity, we are without jurisdiction to consider his appeal.” (citations omitted).

Perhaps more interesting than the holding of Hewett is the dicta concerning constitutional concerns regarding the validity of Section 108(c) of the Bankruptcy Code:

“To be sure, the Bankruptcy Code provides extended, substitute deadlines for ‘continuing a civil action’ after an automatic stay has expired or been terminated. See 11 U.S.C. § 108(c). Were we in a position to simply engraft that section of the federal Bankruptcy Code into our State’s rules of appellate procedure, then the dismissal of Mr. Hewett’s appeal, and what appellants in Mr. Hewett’s circumstance ought to do to invoke our court’s jurisdiction after their bankruptcy cases have concluded, could be easily resolved. But we do not have that power. And it is not entirely clear whether Congress has that power either.

Although Congress may exercise plenary power under the Constitution to ‘establish . . . uniform Laws on the subject of Bankruptcies throughout the United States,’ art. I, § 8, cl. 4, U.S. Const., the reach of that power might not extend so far as to alter state judicial procedures within state court proceedings:

‘Without any doubt it rests with each state to prescribe the jurisdiction of its appellate courts, the mode and time of invoking that jurisdiction, and the rules of practice to be applied in its exercise; and the state law and practice in this regard are no less applicable when Federal rights are in controversy than when the case turns entirely upon questions of local or general law.’ John v. Paullin, 231 U.S. 583, 585 (1913).

Thus, the kind of pragmatic question our dismissal of this appeal could raise—whether or to what extent 11 U.S.C. § 108(c) may, of its own force, affect the procedural filing deadline of rule 9.110(b) following the expiration or termination of an automatic stay— appears to be one that has never been squarely decided by any federal court.

So we are left with an appellate rule that does not speak about bankruptcy and a bankruptcy statute that may not be able to speak to our appellate rules. While we recognize this potential conundrum, we cannot attempt to resolve it. In light of these concerns, though, we would commend this issue for the Appellate Court Rules Committee’s consideration of whether a new or amended rule of appellate procedure would be appropriate to incorporate the tolling provisions of 11 U.S.C. § 108(c) or another period that explicitly addresses the effect of an automatic stay in bankruptcy on the filing of a notice of appeal.” (citations omitted).

Hewett’s failure to raise any constitutional concerns in his response to the motion to dismiss ensured that this question will not be resolved any time soon. However, given the frequency with which such fact patterns arise, it would not be surprising if this issue does reach the Second DCA at some point (even in an en banc setting given the appearance of a conflict with between the dicta inHewett and outcome of AmMed) or the Florida Supreme Court at some stage. It also certainly appears to merit revision to the Florida Rules of Appellate Procedure unless the Florida Supreme Court disagrees with the Second DCA’s dicta regarding the possible constitutional issues with Section 108(c). Certainly those who seek to employ Section 108(c) tolling in Florida’s appellate courts in the future are likely to be met with motions to dismiss predicated on the dicta in Hewett the future.

That being said, diligent practitioners can avoid this conundrum altogether quite easily. If Hewett had filed his appeal first and then stayed his own appeal by petitioning for bankruptcy, his right to appeal would have been preserved as opposed to destroyed by the application of the automatic stay. This sequencing is certainly recommended for anyone facing this issue in the near future. Additionally, if Hewett secured stay relief, even nunc pro tunc, within the thirty period within which to appeal under Fla. R. App. P. 9.110(b), the issue likely would have been resolved differently. Nonetheless, by the time the issue reached the Second DCA, Hewett had irrevocably lost his right to appeal by filing his appeal in violation of the automatic stay and failing to remediate the issue before the applicable deadlines (be it Fla. R. App. P. 9.110(b) or Section 108(c) of the Bankruptcy Code) had expired.

This case should certainly serve as a cautionary tale to others about the need to examine the interplay between bankruptcy and state court proceedings before initiating action in either setting.

Wednesday, June 29, 2016

Peter Thiel Should Learn A Broader Litigation Lesson From His Gawker Lawsuit

Posted at 10:14 am on June 7, 2016 by Seton Motley

Silicon Valley entrepreneur Peter Thiel is a pretty smart guy. As partial evidence, I give you his self-made net worth of $2.7 billion. He co-founded online payment mega-company PayPal - which was in 2002 sold to eBay for $1.5 billion. Anyone who saw the very good flick “The Social Network” knows Thiel was one of the first outside investors in Facebook. He still owns a chunk, and is on their Board. He invested in LinkedIn. He’s…done well.

Thiel obviously has a knack for knowing what is worth his money, time and effort. So it was noteworthy when he officially acknowledged that he helped fund professional wrestler Hulk Hogan’s lawsuit against the online publication Gawker (Gawkerhad amongst other things posted a Hogan sex tape.) Hogan was awarded $140 million for Gawker’s invasion of his privacy litigation lawsuit.

Why did Thiel fund Hogan? Because nine years ago, Gawkerinvaded Thiel’s privacy - with a story headlined “Peter Thiel is Totally Gay, People.” Thiel said Gawker followed up with similarly invasionary stories on several of his friends (and others) - which Thiel said “ruined people’s lives for no reason.”

So Thiel “funded a team of lawyers to find and help ‘victims’ of the company’s coverage mount cases against Gawker.” Which begat Hogan. Thiel assessed why he stepped up: “I can defend myself. Most of the people they attack are not people in my category. They usually attack less prominent, far less wealthy people that simply can’t defend themselves…It’s less about revenge and more about specific deterrence.”

Thiel should apply these very words and this perspective to patents - which he bizarrely loathes and denounces. Thiel doesn’t at all like patent-protection lawsuits - especially when they are filed against him and his business interests.

But this opposition directly contradicts his very reasoned, reasonable explanation of why he launched Team Lawsuit against Gawker. In the tech world, huge companies (See: Google- Net Worth: $350 billion) routinely steal patented things - usually from “less prominent, far less wealthy” inventors “that simply can’t defend themselves.” It’s the classic bully move -Gawker would be proud. Thiel should be appalled.

In fact, this bully abuse of patent holders has contributed to an increase in the number of “patent trolls” people like Thiel loath. “Patent trolls” are actually nothing more than people who own patents - but don’t actively manufacture anything with them. Often they purchase the patents as an investment - to make up the purchase price (and then some) by charging people to license them. A perfectly valid business practice.

Why do the inventors themselves sell their patents? Really, it’s none of your business - it’s their property, and they can do with them whatever legal thing they wish. That being said - there are a couple of routine reasons.

One: Have you ever met an inventor? They can be…quirky. They usually aren’t the CEO type. The last thing most want to do after inventing something - is go into the business of selling, manufacturing and distributing it. They would much prefer to make some coin on their last invention - and plow it into their next. So they sell their patents.

Two: Again, inventors oft don’t have a lot of coin. Certainly not Peter Thiel-coin. So if a giant company (See: Google) steals their patent - they are not in a fiscal position to sue and do anything about it. So to ensure they get something for their patent, they sell it - to people with more coin to fend off the thieves (See: Google).

So opposition to “patent trolls” by the likes of Peter Thiel - actually creates more “patent trolls.” In a sense, inventors are outsourcing the protection of their patents - just as Thiel outsourced his legal campaign against Gawker.

Meanwhile, our United States Congress has crafted legislation (the Innovation and PATENT Acts) - that makes it even harder for inventors to protect their patents. These bills make it more difficult and much more expensive for patent holders to sue in defense of their property.

Which will lead even more cash-strapped inventors - to sell their patents to more-fortified “patent trolls.” Even more of the exact opposite result the likes of Thiel say they want.

Thiel doesn’t like bullies like Gawker - and he’s exactly right. Bullies stink on ice. But Thiel is worth $2.7 billion - which means he too can be a fairly huge bully if wants. Sadly, he appears to want to be - and to embolden and empower other bullies - when it comes to patents.

That ain’t good - and it ain’t in keeping with Thiel's GawkerTeam Lawsuit mission statement.

Wednesday, June 15, 2016

Site of warehouse blaze has history of code violations

By Rikki King and Eric Stevick
Herald Writers

Published: Monday, June 6, 2016, 6:06 p.m.

EVERETT — Just last week, the Everett Fire Department alerted all of its crews to potential trouble at a warehouse near the mouth of the Snohomish River.

Woody materials stored inside the concrete building caught fire twice last week before Saturday's three-alarm blaze. The tenant was supposed to have an around-the-clock fire watch over the weekend. That didn't happen.

The 7-acre parcel at 101 E. Marine View Drive has a long history of regulatory problems.

Various tenants have run operations there over the years, leasing the land from a holding company set up by a longtime Everett family. Garbage, piles of debris and questionable environmental practices have drawn rebukes from city code enforcement officers and the Snohomish Health District, public records show what does civil litigation mean.

At least two former tenants were named in an ongoing multimillion-dollar lawsuit by the property owner over the cost of cleanup, rent and repairs — from before the fire. The health district also successfully sued one of the tenants in 2014 to shut them down over waste violations.

The fire that started Saturday evening continued to burn Monday. In its first two hours, it generated 94 calls to 911.

Firefighters hope to extinguish the last of the flames sometime Tuesday, Everett Fire Marshal Eric Hicks said.

They were using heavy equipment to spread the smoldering piles and tear down the remnants of walls.

“We're making good progress on it,” he said. “It's just a massive overhaul process.”

There was no word Monday on a damage estimate but it likely will reach seven figures. The cause remains under investigation, and it's not yet clear if the fire and last week's flames were related, Hicks said.

“We want to make sure we interview everybody,” he said. “We want to rule out everything.”

The warehouse building was destroyed. Next-door neighbor Everett Engineering suffered fire damage on one wall but was back open for business Monday, Hicks said.

Before the big blaze, firefighters had planned to meet with the current tenants to find out what was causing the earlier fires and “why they had that much material of that type inside the building,” Hicks said.

He described the debris as dirty wood with a fire hazard akin to bark and compost. Last week, the business was told the materials were not safe to keep inside. The issue “was on our radar,” Hicks said Monday.

Late last week, the second fire damaged the building's fire sprinklers and the city ordered the fire watch.

“Unfortunately, the person on fire-watch duty temporarily left the building on Saturday night, and it appears that that's when the fire broke out,” Hicks said.

Despite its ferocity and impressive plume, the fire is not considered a public health risk. The Snohomish Health District, state Department of Ecology and federal Environmental Protection Agency have been monitoring air quality.

State records show at least three tenants since 2013: Busy Beaver recycling, Hungry Buzzard recycling and a company called Eco Fuel, which is owned by the Rubatino family. The company did not return a phone call Monday.

Busy Beaver was shut down after a 2014 Snohomish Health District lawsuit. Busy Beaver and Hungry Buzzard shared at least one owner, a man with a Mill Creek address, state records show.

The recycling companies rented space from the property owners, a holding company called Blunt Family LLC. The holding company filed a lawsuit in 2015 to force tenants to help with the clean-up, as well as to collect money for damages to the site and unpaid fees.

In March, a judge ruled against one of the Busy Beaver business partners and told the property owners to report back with what amounted to a bill. The plaintiff said in court papers filed May 26 that “an appropriate judgment,” including triple damages, would exceed $12 million.

Cory Burke manages the holding company.

“We are devastated about the loss of our building,” he said in an email Monday. “We are extremely grateful that nobody was injured.”

Citing the ongoing investigation, Burke said, “we have no further comments at this time.”

In the lawsuit, the family alleged that the earlier tenants left behind “mountains of unseparated construction debris, unsorted recyclables, unground materials and other garbage.”

“...The refuse and debris was piled nearly to the roof in various places and covered at least 70 percent of the more than 90,000 square feet” available, court papers said.

Also left behind were thousands of tons of ground asphalt shingles. The cost to properly dispose of the asphalt shingles alone was estimated at $1.2 million.

How much of the debris remained on site when the fire occurred was not immediately known, said Heather Thomas, a spokeswoman for the Snohomish Health District.

In February, a health district inspector visited the site. The new company on the site is operating what is called a “material recovery facility” and was meeting regulatory requirements, Thomas said.

Among other things, Busy Beaver ran into trouble during health district inspections for having refuse on the ground near the shoreline. Regulators were concerned that garbage-fouled runoff could get into the river.

Much of the debris was moved indoors.

Separately, Busy Beaver and Hungry Buzzard have been the focus of inquiries by the city of Everett's code enforcement department.

The department opened three cases at that location between 2012 and 2013, supervisor Kevin Fagerstrom said. All three cases involved debris storage. All were resolved without enforcement action, he said.

The problems involved how the place looked, not health or safety, he said.

“These are materials that are either supposed to be inside a structure or screened from public view,” he said. “They were piling up their construction debris in a fashion that exceeded the conditions of their permit.”

A May 2013 inspection found that materials were being stored too close to the shoreline, among other problems. By December 2013, the tenant had moved out of sight 75 percent of the materials that were causing problems outdoors, according to city enforcement documents obtained by The Herald under state public records laws.

Wednesday, June 8, 2016

Alaska Electrical Pension Fund v. Bank of America: A Key Decision for Plaintiffs in the ISDAFix Antitrust Litigation

A significant decision was recently issued in the ISDAfix antitrust class action, titled Alaska Electrical Pension Fund v. Bank of America, N.A., 2016 WL 1241533 (S.D.N.Y. Mar. 28, 2016), in which Quinn Emanuel is co-lead counsel for the class. ISDAfix is an interest rate benchmark used to determine the settlement value of cash-settled swaptions (options on interest rate swaps) and other financial derivatives. Plaintiffs’ basic allegation was that the fourteen major Wall Street banks who set the ISDAfix rate each day conspired to rig ISDAfix in order to extract higher profits on financial instruments that are linked to ISDAfix.

On March 28, 2016, Judge Jesse Furman issued an in-depth, 36-page opinion largely upholding the complaint. Judge Furman sustained the antitrust, breach of contract, and unjust enrichment claims, while dismissing the tortious interference and breach of implied duty of good faith and fair dealing claims. The court’s decision has important implications for financial benchmark litigation in particular, and antitrust litigation in general plaintiff litigation.

The case is one of a number of large financial-misconduct cases being put together through quantitative analysis of public and quasi-public data. The use of “screens” to detect subtle but consistent pricing and other anomalies was also used, for example, in LIBOR. In Alaska Electrical, the “screens” revealed that: (1) the banks repeatedly claimed to have had identical offer/bid rates; (2) the level of uniformity of the banks’ submissions was undermined by concurrent market rates; (3) the level of uniformity in the banks’ submissions abated once regulatory scrutiny increased; and (4) the change in the banks’ behavior cannot be explained by an increase in volatility, or other market forces. The analyses also show that (5) the banks “banged the close” in the market for ISDAfix-related instruments to manipulate the reference rate; (6) the banks conspired with the ISDAfix rate administrator, ICAP, to delay the publication of transactional information; and (7) these behaviors also began to dissipate when the banks came under increased scrutiny from regulators in late 2013.

The Alaska Electrical court’s upholding of the complaint is another judicial stamp of approval on this approach to “plausibly” pleading a claim based primarily on analyses of pricing data. This approach allows plaintiffs to take the initiative to immediately pursue their claims, rather than wait for news stories or government investigations to fully develop. The court rejected many common defense arguments, such as that their non-nefarious alternative explanations for the data should hold sway at the pleading stage, and that the court had to blind itself to the banks’ wrongdoing in other areas. 2016 WL 1241533, at *4-5. To the contrary, Judge Furman recognized that the fact the banks had held together a conspiracy in other financial areas, provided additional support for the allegation they conspired here as well. This is because it took the air out of the defense argument that the alleged conspiracy was simply too complex, across a too-diverse set of banks, to make economic sense.

The case is also important because it highlighted a split amongst the district courts with regard to the issue of “antitrust standing.” The court rejected the banks’ argument that plaintiffs cannot establish antitrust injury because the setting of ISDAfix was “based on a cooperative process.” Id. at *6. The banks relied on In re LIBOR-Based Financial Instruments Antitrust Litigation, 935 F. Supp. 2d 666 (S.D.N.Y. 2013) (“LIBOR I”), where Judge Naomi Buchwald held that “the process of setting LIBOR . . . was a cooperative endeavor wherein otherwise-competing banks agreed to submit estimates of their borrowing costs . . . to facilitate calculation of an interest rate index.” Id. at 688. Judge Buchwald concluded that if the banks “subverted this process by conspiring to submit artificial estimates . . . it would not follow that plaintiffs have suffered antitrust injury. Plaintiffs’ injury would have resulted from defendants’ misrepresentation, not from harm to competition.” Id.

Judge Furman disagreed for two reasons. First, he found that a benchmarking conspiracy that was carried out not only through the reference-rate process, but also through “banging the close” market activities, distinguished the ISDAfix case from the LIBOR cases. 2016 WL 1241533, at *6. More “broadly,” Judge Furman “disagree[d] with the LIBOR I Court’s legal conclusion” that engaging in a purportedly “cooperative” process to manipulate prices insulates the participants from antitrust liability. Id. at *6-7. He began his analysis with Supreme Court precedent, which says that the specific “machinery employed by a combination for price-fixing is immaterial” to the antitrust laws. He also disagreed with Judge Buchwald’s conclusion that the LIBOR claims are essentially fraud allegations, writing that “[i]t would be perverse to grant such wrongdoers immunity from liability under the antitrust laws.”

Notably, Judge Lorna Schofield of the S.D.N.Y., who is overseeing litigation involving alleged manipulation of foreign currency exchange, similarly concluded that collusion in the setting of a benchmark rate results in antitrust injury and disagreed with Judge Buchwald. Judge Furman’s decision is timely because LIBOR I is now before the Second Circuit, which heard oral arguments last November. The decisions by Judges Furman and Schofield may increase the chances that the Second Circuit will see Judge Buchwald’s decision as an outlier and reverse.

Another common area of dispute in these large financial cases, which the Alaska Electrical court had chance to weigh in on, is whether the parties bringing the claims are the “right” plaintiffs. Defendants have argued that particular plaintiffs cannot show “standing” without pleading “injury-in-fact” with great specificity—i.e., tying their investment to a specific day, time of day, and type of demonstrated misconduct. The Alaska Electrical court held that the basic “standing” requirement is a “low threshold” for plaintiffs. 2016 WL 1241533, at *4. The court found that the ISDAfix plaintiffs easily met the standard by alleging that they “transacted in interest rate derivatives. . . directly impacted” by the manipulation of ISDAfix, recognizing that a “paid too much” or “received too little” harm is a “classic” economic injury-in-fact. The court thus rejected the argument that the plaintiffs had to detail their investments, and the wrongdoing, down to the exact minute.

The banks also regularly argue that their misconduct may have benefitted the plaintiffs. A movement in one way that harmed those who bought, simultaneously helped those who sold. The court held that these “netting” issues are simply not a pleading question. Id. The plaintiffs’ only burden is to plausibly plead some harm, which the Alaska Electrical plaintiffs did. As the court observed, the fact “that an injury may be outweighed by other benefits, while often sufficient to defeat a claim for damages, does not negate standing.” Finally, on the statute of limitations, Judge Furman found allegations that the conspiracy to manipulate ISDAfix was secretive by nature, and thus fraudulently concealed, well-pled. Id. at *12-13. The court rejected the banks’ argument that plaintiffs should have known of their allegations earlier because the underlying economic data was publicly available.

The court noted that “the trends identified in the Amended Complaint are subtle and required the aggregation of massive quantities of data.” This aspect of the decision is thus another significant victory for the data-driven approach to pleading benchmarking conspiracies, as pleading a case based on publicly available data is always potentially a dual-edged sword with respect to the statute of limitations.

On Family Law: Does Meister Mean More Grandparent Visitation Litigation?

May 18, 2016 – On April 7, 2016, the Supreme Court of Wisconsin issued its opinion in In re Marriage of Meister, 2016 WI 22, 876, N.W.2d 746, reversing an unpublished court of appeals’ decision affirming a circuit court order denying a grandmother's motion for visitation rights. The case required the Wisconsin Supreme Court to interpret Wis. Stat. section 767.43(1), which allows certain categories of individuals to petition for the right to visit children, usually following the dissolution of a marriage.

Under the statute, a grandparent, great-grandparent, stepparent, or person who has maintained a relationship similar to a parent-child relationship with the child may file a motion for visitation rights. The Wisconsin Supreme Court had to determine whether the parent-child relationship requirement applied only to the person category listed in the statute or whether it applied to a grandparent, great-grandparent, and stepparent as well steps of litigation.

About Meister

The case arose after Carol Meister filed a motion for the right to visit her four grandchildren in the wake of her son Jay Meister's divorce from Nancy Meister. The family court commissioner for the Jefferson County Circuit Court initially granted the motion, but the circuit court denied the motion on de novo review. Reading section 767.43(1) as requiring every petitioner under this subsection to demonstrate a parent-child relationship with the child, the circuit court concluded that Carol's supportive relationship with the children did not elevate her to a parent-like role in their lives.

The Meister children appealed, and the court of appeals affirmed, citing its decision in Rogers v. Rogers, 2007 WI App 50, 300 Wis. 2d 532, 731 N.W.2d 347, as controlling. In Rogers, the court of appeals held that grandparents filing a motion under section 767.43(1) must prove a parent-like relationship with the child in order to secure visitation rights. The Meister children, through their guardian ad litem, filed a petition for review, which the Wisconsin Supreme Court granted.

The Meister children argued that the court of appeals misinterpreted section 767.43(1) in Rogers. They asserted that the phrase “who has maintained a relationship similar to a parent-child relationship with the child" applies only to a person other than a grandparent, great-grandparent, or stepparent filing a motion for visitation under the subsection. Nancy countered that reading the subsection to allow courts to grant visitation rights to grandparents, great-grandparents, and stepparents based solely on a best interest of the child determination would intrude on parents' fundamental due process rights to direct the care, custody, and control of their children.

In examining “the syntax” of section 767.43(1), the Wisconsin Supreme Court found it was clear that the legislature had gradually expanded the number of persons who may petition for visitation rights. The current statute allows grandparents, great-grandparents, and stepparents to petition for visitation rights, and it allows other persons to seek visitation as well, so long as they have "maintained a relationship similar to a parent-child relationship with the child." Given the legislature's history of expanding visitation rights and the fact that any court considering a child's best interests under section 767.43(1) must give special weight to fit parents' best interest determinations, the Wisconsin Supreme Court concluded that a grandparent, great-grandparent, or stepparent need not prove a parent-child relationship in order to secure visitation rights under that subsection.

Importantly, the Wisconsin court further held that this interpretation of the statute would not violate the constitutional rights of fit parents to raise their children under Troxel v. Granville, 530 U.S. 57 (2000). The court apparently believed that since visitation could only be granted when a court found it to be in the best interests of the child, the statute, as interpreted, was constitutional.

The Effect of Meister

This decision may very well greatly expand grandparent visitation litigation in Wisconsin. As a result, the court may have missed the forest due to trees. The “trees” is the statutory provisions that it painstakingly analyzed correctly. The “forest,” to which they give short shrift (and not for the first time), is the need to protect children from litigation.

The court spends 23 pages of its decision dissecting the statute. It spent just a bit more than three pages discussing the application of Troxel. While the court concluded that the court of appeals “appropriately addressed” the constitutionally protected liberty interests of parents in Roger D.H. v. Virginia O., 2002 WI App 35, 250 Wis. 2d 747, 641 N.W.2d 440, it does not even discuss the concept that litigation is inherently bad for children. Therefore, any law that encourages litigation over children is detrimental to them.

The constitutional rights of fit parents to be free of court supervision finds support long before Troxel(and in Troxel). Consider, for example, a situation where there are two sets of grandparents, both sets of which are divorced and remarried and all four sets want court-ordered time with the grandchildren. Beside the litigation and the cost (which should be enough to discourage such an event in and of itself), imagine if they were successful. There may never be a weekend left for an intact family.

A likely event? Perhaps not. But the Wisconsin Supreme Court seems to think that children will be protected by trial courts basing their rulings on children’s best interests. The problem is that by the time the court gets to that decision, the harm will have been done by the litigation itself.

This is not a unique position by this court. On issues such as prohibiting contingent placement orders and refusing to honor stipulations freezing child support, the court fails to see the harm to children created by litigation itself. That is unfortunate, as frequently the best interests of children are best served not by money, but by peace.

Grandparent visitation issues frequently comprise the rare legal case where both sides are right and neither are wrong. One’s heart goes out to grandparents who are being deprived of the right to see their grandchildren, especially in a case like Troxel where the parent of the child has died. Yet, the decision should be based on the best interests of the child with all other interests and rights being subordinate. And that interest is usually better served by lack of litigation than by resolving convoluted statutory language.