The Bright Line Business Law Blog

These are two beautiful watercolors by my favorite artist, Maribeth. Be sure to check out her website on the left rail.

Sandra Day O'Conner resigns

Supreme Court Justice Sandra Day O'Conner submits her resignation. It was not much of a surprise that she is resigning as she has reportedly sufferd from back pain for a numebr of years. It is a little surprising that she beat Rhenquist out the door. I wish her the best in retirement.

Legal pundits in the know will have more colorful, and possibly more accurate, speculation on a potential successor that I will.  I do predict a nomination that will bring howls from the liberal side of politics and the focus will be Roe v. Wade.  There won't be much focus on how a new justice will deal with important business related legal issues.

I think that's unfortunate.  The Supreme Court should be a model of  the "bright line"  philosophy.  Not very many cases can make it to the Supreme Court, and the the most valuable role the Court can play is establishing bright lines in the law to increase predictability for all citizens.

The recent pair of Ten Commandments cases are a good example of a failure to enunciate a claer principle.  What's the bright line? How can any public entity know what to do after reading two 5-4 decisions that got to different results?

My ideal Supreme Court justice would probably be conservative, humble, adhere to stare decisis as a positive legal value and favor finality and clarity in the decision making process. Don't look for too many of these qualities to be discussed in the pre-nominaiton politicking and the confirmaiton process, though.

Trolling for clients on the internet

A recent 9^th circuit case, Barton v District Court, 2005 DJDAR 6720, held that attorneys trolling for clients on the internet by having individuals fill out questionnaires can protect the questionnaires from discovery by relying on the attorney client privilege. I think the Ninth circuit is wrong. There are special problems with mass tort, multiple plaintiff cases and form inquiries. These should be discoverable.

The Barton case arises from Paxil litigation in which large numbers of plaintiffs are suing SmithCline, Paxil’s manufacturer, claiming Paxil caused injuries. According to the Ninth circuit, instead of the “traditional” way of contacting lawyers by walking into their offices, these plaintiffs filled out Internet questionnaires.

This characterization of how clients are obtained is not “traditional,” it’s naïve to suggest that was ever the method in mass tort cases. Attorney websites for ever imaginable mass tort situation abound. Here are two typical examples.  The Internet is full of them.

The Ninth Circuit correctly referred to the practice of “trolling for clients on the internet.” Some clients do meet their lawyers on the Internet and some come in to the office. In both cases, there is a period of time where, even if the attorney does not accept the case, confidential information is disclosed. Information conveyed during that period of time should be protected. However, that time should begin some time after intentionally ambiguous questionnaires are filled out.

A following post will develop the problems inherent in mass tort questionnaires and why they should not be privileged.

"Aye" says the parrot, "Always tell the truth, argh!"

In admiralty law there is an ancient doctrine called “uberimae fidae.” Under this doctrine, the applicant for marine hull insurance has the obligation of “uttermost good faith” to disclose to the insurer any matter that may possibly affect the risk of loss. This obligation extends to all material information, whether asked for or not. The requirement arose from the recognition that ships were usually well over the horizon when applications for insurance would be made and information about the ship’s current condition was usually sparse and unevenly distributed. Often, neither the shipowner nor the potential insurer could know whether the ship was above or below the water at the time the application was made. It was not unheard of, in the days of sailing ships, for unscrupulous owners, upon learning by messenger pigeon of their vessel’s sinking, to obtain marine insurance “after the fact” before the loss was officially reported. Lesser misdeeds included obtaining insurance just before the arrival of typhoons or even pirates at a far off location where the ship happened to be. The doctrine of uberrimae fidae arose to prevent these greater and lesser attempts to obtain marine insurance by taking advantage of an owner’s greater knowledge of potential risks. In California, the uberriame fidae doctrine is codified at California Insurance Code §1900:

1900. In marine insurance each party is bound to communicate, in addition to what is required in the case of other insurance:

(a) All the information which he possesses and which is material to the risk, except such as is exempt from such communication in the case of other insurance.

(b) The exact and whole truth in relation to all matters that he represents or, upon inquiry assumes to disclose.

In light of the things that can actually go wrong with a ship at sea, the nature of relevant information that must be disclosed to the insurer could be very broad. The traditional marine insurance perils clause is a delight to read:

"Touching the adventures and perils we the assurers are contended to bear and to take upon us in this voyage: they are of the seas, men-of-war, fire, enemies, pirates, rovers, thieves, jettisons, letters of marque and countermarque, reprisals, takings at sea, arrests, restraints, and detainments of all kings, princes and people, of what nation, condition or quality soever, barratry of the master and mariners, and of all other perils, losses, and misfortunes, that have or shall come to the hurt, detriment or damage of the said goods and merchandises, and ship, &c., or any part thereof. "

Just compare that to the language in your standard CGL policy!

A recent California case makes the point that, even for landlubbers, the obligation to disclose all relevant information is very high indeed, if not to the level of “uberrimae fidae.” In Mitchell v United National Insurance Co., (2005) 127 Cal.App4th 457, 25 Cal.Rptr.3d 627, the court held that material misrepresentations of fact on the application for insurance permit the insurance company to cancel the policy even after a loss and even if the misrepresentations were not intentional. The insurer has no obligation to independently verify the accuracy of the representations.

On April 11, 2000, Mitchell applied for fire insurance on a recently purchased building. On the application he told the insurer that the building was a 3420 square feet commercial building used as a video production studio and he had a $20,000 payroll with $300,000 in receipts. He also represented that the building met city code requirements and there was no other insurance. In fact, the building was only 2000 square feet, was used only to film a single music video for two days and was then leased to a tenant who operated a garment manufacturing business and the building was subject tot a city abatement order and could not be occupied until certain repairs were undertaken. In November of 2000 a prospective buyer set fire to the building and died in the blaze. When Mitchell made a claim under the policy, the carrier, then examined the inaccurate application, noticed the discrepancies and rescinded the policy.

Predictably, Mitchell sued the carrier, but the court held that the insurer was entitled to rescind the policy. The application contained several inaccuracies. The insurer pointed out that owner-occupied business of a certain size and location were important factors in setting premiums. Mitchell claimed that at the time he submitted the application, he intended to use the building for music video productions but this never came to pass, essentially arguing that the inaccuracies either were minor or unintentional.

The court of appeals properly relied on Insurance code sections 331 and 359 in holding that the insurer can rescind for any material misrepresentation. A material representation in one that would cause to the insurer to either decline the application, amend the terms or change the premiums. If the insurer asks for information on the policy it’s pretty safe to conclude that the information is “material” to the insurer. The insurer's questions regarding the building's size use and codition were all "material" and inaccurate answers were given in reponse. Therefore, the insurer did not have to pay for the fire loss.

It is essential to be fully truthful in filling out applications for insurance. There are specific statutes governing most types of insurance in California that may limit the insurer’s right to rescind, but generally the insurer can rescind the policy even after a loss if an unintentional material misrepresentation was made in the application for the policy. Even if you don’t intend to run afoul of pirates, practice uberrimae fidae in all insurance applications, to be safe.

Bendectin may be back

The March of Dimes announced recently that Bendectin was making a comeback.

You may remember Bendectin, a morning sickness drug widely administered to pregnant women from 1956 to 1983.

Bendectin treats the most common unpleasant pregnancy complication, nausea, affecting up to 80% of pregnant women. By 1980, between 10 and 25% of pregnant women were taking Bendectin.  In 1983, Merrill Dow Pharmaceuticals withdrew the drug from the market due to an overwhelming number of lawsuits claiming Bendectin caused birth defects. The most famous of these is unquestionably Daubert v. Merrell Dow Pharmaceuticals, Inc. (1993) 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469.  In Daubert, plaintiffs alleged Bendectin caused birth defects. Merrell Dow moved for summary judgment, submitting an affidavit from an expert epidemiologist, Dr. Lamm, who stated that none of the 30 pertinent published studies had ever found Bendectin capable of causing malformations in fetuses. Rather than directly contest Dr. Lamm's factual statements, plaintiffs responded with their own experts' declarations to the effect that their unpublished studies, and reanalyses of published studies, indicated a link between Bendectin and fetal malformation.

Plaintiffs, in short, practiced Junk Science.

The motion was granted, and on appeal, the Ninth Circuit Court of Appeals ruled that expert opinion based on methodology diverging "significantly from the procedures accepted by recognized authorities in the field ... cannot be shown to be 'generally accepted as a reliable technique,' ..." (Id. at p. 1130.) The Court of Appeals rejected plaintiffs' reanalyses as "unpublished, not subjected to the normal peer review process and generated solely for use in litigation." (Id. at p. 1131, fn. omitted.) Emphasis added. I cannot imagine how an attorney could ethically prepare a “study” solely for use in litigation. Ultimately, the Supreme Court issued its landmark ruling, cited above, making federal judges "the gatekeepers" with aresponibility of keeping "junk sciecne' out of the courtroom.

Now, a Canadian Company plans to market a drug with the same ingredients as Bendectin, to be called Diclectin. By now, there is a large body of research showing that there is no connection between Bendectin and birth defects. Unfortunately, doctors are reluctant to invite lawsuits by prescribing a drug that even ahs the underserved reputation of causing birth defects. I don’t blame them, but, in the meantime we lose an important tool in improving our quality of life. Certainly, in this case, more harm than good was done.  I object to junk science because its use has harmful consequences that should have been avoided.

Small Business Scam

A small business client of our firm received an “official notification” that his corporate formalities are not being observed. If he immediately sends in $175 before it’s too late, he can avoid sanctions “including audits, lawsuits and summons.” If that wasn’t enogh to generate a little anxiety, there is a “Personal Liability” section, in bold type, stressing that failure to follow corporate formalities will expose shareholders to personal liability.

The form then emphasizes that  action must be completed within 20 days to ensure “timely processing” of the corporate miunutes.  Upon receipt, miuntes and resolutions will be prepared just in the nick of time, before anything bad happens. There is no justification for the urgency set out in the form, or why “timely processing” is so important. Our firm’s turnaround time on the same documents is less than one day.

I think this mailing is deceptive advertising. Don’t fall for it. It implies there is an impending emergency and the corporation is actually out of compliance.  Why else would a company get a mailing from “Board of Minutes and Resolutions/ Compliance division in Sacramento?

Oh, and the “real address of the sender is a UPS STORE

915 L ST # C

SACRAMENTO, CA 95814-3707

You can verify that by calling 916-444-3214.

It appears to be deceptive advertising under the California False Advertising Act, California Business and Professions Code § 17500 et seq., and the Unfair Business Practices Act Business and Professions Code § 17200 for at least following reasons:

1. The form is intended to be confused with official state government correspondence.
2. The language pressures the recipient into acting quickly because of an assumed violation of law.

3. The corporate ID number gives the impression the form is government generated
4. The apparent Sacramento location indicates a government office when a post office drop is actually used.

5. The use of the terms “compliance division,”  “notice date,” and “enforcing” infer that the recipient is under official investigation.

If you are a small business corporation, made a point to have your attorney review corporate minutes and resolutions and ensure formalities are observed. Often there are significant matters that should be in the minutes, yet this solicitaiton makes no effort to ensure the preparation of accurate and legally effective minutes. Many law firms provide this minutes and resolutions  as a maintenance service at minimal charge, and others include this service in a package annual legal checkup provided to small businesses.  Most attorneys wouldn’t charge $175 for a simple review of and preparation of routine small business annual minutes.

Thanks to our client for the heads up.  And see them for all your yachting needs.

 

Legal Writing: Step 2 Now, Make Your Point

(Second in an intermitent series, see  Step 1, "Have a Point" here.)

Use a Structure to Organize

           The best way to make the point is to have an explicit framework outlining the document.  Whether it is a skyscraper or a human being, there is a skeleton that serves as the framework supporting the structure. One good way to make the point is to make that framework visible.  Since good legal writers work off of outlines, simply make this outline the visible framework to the reader, and you will quickly reinforce the point of your writing.  In all three forms of legal writing, the structural support can be shown by the use of headings and labels identifying the sections, the various contentions of the parties and specific legal points or authority.  A table of contents does the same thing for longer documents and is required by court rule in law and motion papers over 10 pages.

          Give away the mystery in the introduction. It doesn't need to be boring. Here’s a colorful example of explaining structure by Jared Diamond, in his book, Collapse.  In the book, he discusses the reasons for the failures of various civilizations.  Here is how he shows the structure:  “So that readers will have some advance idea where they are heading, here is how this book is organized. Its plan resembles a large boa constrictor that has swallowed two very large sheep.”  He then says that two major portions of the book discuss modern Montana and Norse Greenland as major case studies--the two large sheep. Smaller sections of the book cover Easter Island, the Maya and Anasazi and modern Rwanda.  His colorful outline accurately describes the book’s organization.

            Furthermore, in persuasive legal writing, there should be an introduction that summarizes the arguments you are about to make.  An example might read as follows:

“This motion for summary judgment argues:

1.            Plaintiff is not a corporation authorized to do business by the Secretary of State;

2.            Individuals do not have standing to prosecute this action on behalf of the corporation; and

            3.         The statute of limitations has expired.”

The judge, and the judge’s research attorney, both know after the first paragraph what the three main arguments will be.  Unfortunately, most legal briefs begin with a dreary and lengthy compound sentence simply describing the parties with accompanying “hereinafters” with substantial written equivalent of throat clearing and “ahems.”  Often a brief will have an introduction similar to:

“Comes now defendant X Box Corporation for itself and no other defendant

(hereinafter referred to as “X Box Corp.”) and brings the motion against

plaintiff’s first amended complaint of Alphabet Soup Corporation (hereinafter

“Alphabet Soup”) including a motion for summary judgment, or in the alternative

summary adjudication, of the issues on the first, second and third causes of

action as more fully and completely set forth in the accompanying memorandum

of points and authorities, papers, affidavits, exhibits and arguments that may be

permitted both oral and written.”

Boredom sets in before the point is ever made.

Helpful headings

            The headings can also be argumentative themselves.  When headings are used, they are often innocuously labeled “facts,” “statute of limitations,” or “plaintiff’s corporate status.”  The headings should make their own point.  Instead of “Statute of Limitations,” try “The Three Year Statute of Limitations Expired No Later than 2002, Two Years Prior to this Lawsuit.”  Subheadings could then be stated as follows:  “The Oral Statute of Limitations Expired in 2001.”  The next subheading could be, “The Statute of Limitations for Fraud Expired in 2002.”  And, the final subheading could be, “The Written Contract Statute of Limitations Expired in 2003.”  The use of argumentative headings will reinforce the overall point and help to focus the written argument. The best part is that these are simply part of the original outline and it requires little extra work to be more persuasive and easier to comprehend.

            With respect to informational writing, the same holds true.  For example, a discussion of  various legal courses of action and analyzing available options can be labeled,  “1.  Do Nothing,” “2. Arbitrate,” “3.  Mediate,” “4.  Litigate.”  Under the pros and cons of each recommended course of action, all factual and legal issues such as choice of law, evidence and juror pools can be discussed with parallel subheadings as needed.  The intended reader can get a grasp of the entire range of options, pros and cons, simply by looking at the headings. The structure of the headings serves to reinforce the advice being given.

            In operative documents, either Roman numeral subheadings or some other numerical system with descriptive headings will assist the document’s users to quickly locate key provisions by reading descriptive headings labeled, for example, “attorney’s fees” or “arbitration in case of dispute.”

Conclusion

          Showing the structure improves reading comprehension. Readers who comprehend will get the point. They are also more likely to retain information on the first reading and can easily navigate the documents on subsequent readings to find wha they need.

CDC backs off Mold Claim

The Canadian Occupational Safety magazine has an interesting article on mold exposure.  The typical mold related lawsuit will be careful to allege exposure to Stachybotrys, an allegedly harmful mold implicated in an outbreak of respiratory disorders among young children in Cleveland.  Now it seems the science behind that finding is questionable and the CDC has retracted its earlier report.  From the online article:

I realize that many who read this Newsletter make a good living in the search and destruction of mold in various indoor environments. As a toxicologist, however, I have real reservations about the science (or lack thereof) currently used to support the notion that molds may readily cause adverse health effects in humans.

Much of the concern about Stachybotrys relates to reports, dating back to 1994, of a cluster of infants in Cleveland, Ohio who were diagnosed with pulmonary hemorrhage or pulmonary hemosiderosis. Since these infants were found in homes with water damage and/or contamination with Stachybotrys strains capable of producing trichothecene mycotoxins, a causal association between these serious hemorrhagic lung disorders and this mold was made

What has happened is that moot clinical studies in humans combined with misinterpreted toxicological findings in animals have led to the creation of a "junk science" abetted by both the scientifically naive and unscrupulous opportunists. [emphais added]

The Centers for Disease Control (CDC) has recently announced a retraction of its earlier tentative support for a link between Stachybotrys and pulmonary hemorrhagic disorder.

That'd be me

Blog 702 notes that two attorneys will be indexing and reporting on Daubert issues for the blog.  One of those mystery attorneys is me. We tentatively plan on getting all current California appellate expert witness cases (Daubert or not) to the 702 Blog. As cases get depublished, we'll track that, too. Any help or suggestions to make the worthy project more helpful to academics and practictioners would be gratefully appreciated.

In case you haven't checked it out, you are missing a unique web resource. Blog 702 is one of the great benefits of the internet with a very comprehensive data bank of expert witness cases indexed by area of expertise, state and by federal circuit. The case reporting and tracking is neutral and comprehensive.  They have done great work in the finest tradition of the legal profession. I'm honored to be able to make a contribution to part of the project.

Common Good: Common Good's Second Annual Gatekeeper Awards

Common Good: Common Good's Second Annual Gatekeeper Awards.

Common Good has announced the winners of its second annual Gatekeeper Awards. The Awards highlight the appropriate role of judges in determining who can sue for what. They honor judges whose decisions eliminate frivolous lawsuits.

The First Annual awards are here.

Via Overlawyered

Congratulations and a sincere thanks to all the winners.