Opinion

Alison Frankel

Election savant Nate Silver: Why punditocracy gets politics wrong

Alison Frankel
Jun 27, 2013 18:19 UTC

If Nate Silver, the data-driven New York Times FiveThirtyEight blogger who nailed state-by-state results in the 2012 presidential election, had been a better baseball player or a more satisfied KPMG numbers cruncher, our current political discourse would be a lot less analytically savvy than it is today.

I had a chance to hear Silver answer questions from Katie Couric Wednesday night at the Aspen Ideas Festival, where political, business and art bigwigs (including lawyers such as Robert Bennett of Williams & Connolly and Robert Gruendel of DLA Piper) gather in this mountain-ringed and flower-bedecked city to talk about the big ideas of the day. I’ll be blogging and tweeting from the festival through Saturday.

The Silver session followed the opening reception and was mobbed. He and Couric justified the crowd. Silver said that he was drawn to statistics through his love of the Detroit Tigers (and his sad realization that he was not cut out for the pros), then realized he only cared about certain kinds of data analysis when he suffered through what he calls the worst job of his life at KPMG, resorting to baseball data analysis to keep himself amused. The result was his blog about baseball analytics, which eventually led to his brilliant political data analysis at FiveThirtyEight.

The big news from Silver’s conversation is that he gives the Republican Party a 35 percent to 40 percent chance of winning control of the U.S. Senate in the midterm election, which he called “a decent shot.” But right now, he considers Democrat Hillary Clinton the frontrunner in the 2016 presidential campaign, though he says she could be hurt if President Obama’s approval ratings sink beneath 40 percent or if the economy tanks. Silver also said Chris Christie, whom he considers the best politician among possible Republican presidential contenders, is unlikely to prevail in state primaries. He called Marco Rubio “the closest thing to a Republican frontrunner,” but suggested that Wisconsin Governor Scott Walker, who hasn’t gotten much presidential chatter, could be a viable contender.

Silver seemed perfectly happy to prognosticate, which was a pleasant surprise considering his general disdain for the punditocracy. (Couric asked him about a quote in which he called former Reagan speech writer Peggy Noonan “very, very skilled at making bullshit look like some elegant soufflé.” Silver said he stands by the quote.) The problem with Washington spinmeisters, he said, is that they consider events from an advocacy position rather than dispassionately. “You have to stand back,” Silver said. “Are you an analyst or an activist?”

Wake up, shareholders! Your right to sue corporations may be in danger

Alison Frankel
Jun 25, 2013 23:10 UTC

Do you believe that securities class actions and shareholder derivative suits have any salutary effect on corporate governance – that directors and officers are less likely to misbehave when they’re liable to shareholders (their nominal bosses) in court? If so, you ought to be very worried about a pair of developments in the last week that offer a theoretical framework to end shareholder class actions. If, on the other hand, you’re of the view that shareholder litigation is merely a transfer of wealth from corporations to plaintiffs’ lawyers, with little actual return to investors, you might want to start thinking about how to use the new rulings to stop that from happening.

Let’s look first at the U.S. Supreme Court’s 5-3 decision last week in American Express v. Italian Colors. That case, as you know, was brought by small businesses that believed American Express was abusing its monopoly in the charge card market by requiring them also to accept Amex credit cards carrying higher fees than competing credit cards. The Supreme Court said that even though the merchants had statutory antitrust rights under the Sherman Act, they had given up their right to sue Amex as a class when they signed arbitration agreements barring such suits. It was of no matter, the majority said, that the cost of arbitrating an individual antitrust claim would dwarf the recovery of any single small business: The merchants signed contracts that included arbitration clauses and those contracts bound them. (Or, as Justice Elena Kagan put it in a memorable dissent: “Here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad.”)

The Amex ruling immediately drew the ire of consumer and employment rights advocates, who argued that it gives corporations the power effectively to insulate themselves against all sorts of legitimate claims by cutting off escape routes from class action waivers in mandatory arbitration clauses. But what about shareholders? In a very smart column on Monday, Kevin LaCroix of D&O Diary raised the question of Amex‘s potential impact on securities fraud and shareholder derivative class actions. Does the court’s ruling, he asked, mean that “the broad enforceability of arbitration agreements reaches far enough to include the enforceability of arbitration agreements and class action waivers in corporate articles of incorporation or by-laws?”

Journalists and the Espionage Act: Prosecution risk is remote but real

Alison Frankel
Jun 24, 2013 20:51 UTC

Meet the Press host David Gregory brought down the wrath of fellow journalists on Sunday when he asked a provocative question of Glenn Greenwald, the Guardian reporter who broke revelations from Booz Allen contractor Edward Snowden about the U.S. government’s monitoring of citizens’ phone and Internet data. After Gregory and Greenwald discussed the Justice Department’s new Espionage Act charges against Snowden, Gregory asked, “To the extent that you have aided and abetted Snowden, even in his current movements, why shouldn’t you, Mr. Greenwald, be charged with a crime?”

Gregory’s prosecutorial tone didn’t go over well with journalists trained to believe that the U.S. Supreme Court’s landmark 1971 ruling in The New York Times v. United States (better known as the Pentagon Papers case) gives them carte blanche to publish materials they’ve received lawfully from their sources, even if their sources broke the law to obtain the information. The court’s subsequent 2001 ruling in Bartnicki v. Vopper confirmed that the media cannot be punished for publishing information that sources obtained illegally, so long as the information is of public importance. But there’s actually a distinction in the law between the media’s right to publish sensitive national security information and the government’s right, at least in theory, to bring charges against reporters and publishers for possessing and disclosing classified information.

Gregory’s question, in other words, may have been inaptly posed but it addressed a legitimate, albeit remote, risk for reporters with hot national security stories. No journalist has so far been prosecuted under the Espionage Act for a story that reveals sensitive information (nor, for that matter, under other federal laws addressing classified information), and Attorney General Eric Holder has said publicly that he doesn’t intend to start charging reporters for doing their job. Nevertheless, there’s enough uncertainty about criminal liability that the government has used the threat of prosecution to try to squelch reporting, according to a fascinating 2008 paper, “National Security and the Press: The Government’s Ability to Prosecute Journalists for the Possession or Publication of National Security Information,” from the Communication Law & Policy journal.

The inherent conflict for lawyers who oppose Supreme Court review

Alison Frankel
Jun 21, 2013 19:52 UTC

As usual, the U.S. Supreme Court has saved the big stuff for the last week of its term. Among the 11 cases the justices have yet to decide are the four that garnered the most public attention this year: Fisher v. University of Texas, which addresses affirmative action; the voting rights case Shelby County v. Holder; and the two gay marriage cases, Hollingsworth v. Perry, which stems from California’s ballot-proposition ban on gay marriage, and U.S. v. Windsor, which challenges the federal Defense of Marriage Act. You can reliably expect frenzied coverage at the court until rulings come down in all four of these hot-button cases.

With all eyes on the Supreme Court, I wanted to revisit an issue I mentioned glancingly in a post earlier this week: Do lawyers who write briefs opposing Supreme Court view have an ethical conflict if they’re secretly hoping for a chance to argue before the justices? I posed the question as an afterthought in a story about experienced Supreme Court litigators taking over certiorari briefing in a $350,000 dispute between a union pension fund and a landscaping company when it became clear that the otherwise undistinguished case had a shot at Supreme Court review. (And, indeed, the court granted certiorari on Monday.) A Twitter reader very thoughtfully directed me to a 2012 article in the Harvard Journal of Law & Public Policy that attempts to answer the question with some hard data.

In “The Ethics of Opposing Certiorari Before the SupremeCourt,” then Stanford Law student Aaron Tang posited the theory that as the Supreme Court’s docket shrinks and oral arguments become increasingly restricted to an elite appellate bar, “the value associated with each rare opportunity to argue before the court continues to rise.” One way to get before the justices is to prevail with a cert petition for clients seeking review of adverse rulings, Tang said, but the other, of course, is to write an unsuccessful cert opposition brief. “Attorneys who lose at the opposition stage might nevertheless enjoy a personal ‘win’ in the form of an opportunity to argue at the Supreme Court,” he wrote. “As a result, there is an ex ante ethical dilemma for attorneys tasked with opposing certiorari. This dilemma, in turn, might well have important downstream effects on clients who prevailed below and who, unlike their attorneys, would therefore prefer not to be in the Supreme Court at all.”

What hope remains for consumers, employees after SCOTUS Amex ruling?

Alison Frankel
Jun 20, 2013 21:53 UTC

The U.S. Supreme Court’s ruling Thursday in American Express v. Italian Colors has narrowed to an irrelevant pinhole the so-called “effective vindication exception” to mandatory arbitration. Despite dicta in previous Supreme Court cases that suggested arbitration clauses are not enforceable when it is prohibitively expensive for claimants to enforce their rights through the arbitration process, the five justices in the Amex majority held that plaintiffs who sign arbitration agreements don’t have the right to pursue their claims on anything but an individual basis, even if the cost of that pursuit dwarfs their potential recovery.

The effective vindication exception “would certainly cover a provision in an arbitration agreement forbidding the assertion of certain statutory rights. And it would perhaps cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable,” Justice Antonin Scalia wrote for the majority. “But the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.” (As many early commentators have noted, Justice Elena Kagan wrote a memorable rejoinder for the three Amex dissenters: “Here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad.”)

The decision overturns a ruling by the 2nd Circuit Court of Appeals that permitted small businesses to proceed with an antitrust class action against Amex, despite arbitration agreements between the credit card company and the merchants suing over allegedly unfair fees. The majority’s reasoning will extend beyond arbitration over antitrust rights, however, and almost certainly beyond federal causes of action. There’s little doubt that one of the only other decisions to buck the Supreme Court’s 2011 pro-arbitration holding in AT&T Mobility v. Concepcion - a ruling last week by the Massachusetts Supreme Judicial Court, in a consumer case against Dell that raised similar issues of the affordability of pursuing individual claims through arbitration – will not survive Thursday’s Amex opinion. (Dell counsel John Shope of Foley Hoag told me that “it’s very clear” that under Amex, the Massachusetts ruling “is no longer good law, if it ever was.” The plaintiffs’ lawyer in the case,Edward Rapacki of Ellis & Rapacki, said his clients’ claims may yet survive under a slightly different theory.)

What hope remains for consumers, employees after SCOTUS Amex ruling?

Alison Frankel
Jun 20, 2013 21:51 UTC

The U.S. Supreme Court’s ruling Thursday in American Express v. Italian Colors has narrowed to an irrelevant pinhole the so-called “effective vindication exception” to mandatory arbitration. Despite dicta in previous Supreme Court cases that suggested arbitration clauses are not enforceable when it is prohibitively expensive for claimants to enforce their rights through the arbitration process, the five justices in the Amex majority held that plaintiffs who sign arbitration agreements don’t have the right to pursue their claims on anything but an individual basis, even if the cost of that pursuit dwarfs their potential recovery.

The effective vindication exception “would certainly cover a provision in an arbitration agreement forbidding the assertion of certain statutory rights. And it would perhaps cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable,” Justice Antonin Scalia wrote for the majority. “But the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.” (As many early commentators have noted, Justice Elena Kagan wrote a memorable rejoinder for the three Amex dissenters: “Here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad.”)

The decision overturns a ruling by the 2nd Circuit Court of Appeals that permitted small businesses to proceed with an antitrust class action against Amex, despite arbitration agreements between the credit card company and the merchants suing over allegedly unfair fees. The majority’s reasoning will extend beyond arbitration over antitrust rights, however, and almost certainly beyond federal causes of action. There’s little doubt that one of the only other decisions to buck the Supreme Court’s 2011 pro-arbitration holding in AT&T Mobility v. Concepcion - a ruling last week by the Massachusetts Supreme Judicial Court, in a consumer case against Dell that raised similar issues of the affordability of pursuing individual claims through arbitration – will not survive Thursday’s Amex opinion. (Dell counsel John Shope of Foley Hoag told me that “it’s very clear” that under Amex, the Massachusetts ruling “is no longer good law, if it ever was.” The plaintiffs’ lawyer in the case,Edward Rapacki of Ellis & Rapacki, said his clients’ claims may yet survive under a slightly different theory.)

Should defendants fear new SEC policy on admissions in settlements?

Alison Frankel
Jun 19, 2013 22:23 UTC

Mary Jo White proved herself to be quite a shrewd strategist on Tuesday, when she made a surprise announcement at The Wall Street Journal’s annual CFO Network Event. The chair of the Securities and Exchange Commission said that the agency would no longer maintain a blanket policy permitting defendants to settle SEC cases without admitting to wrongdoing. “We are going to in certain cases be seeking admissions going forward,” White said, according to my Reuters colleague Sarah Lynch. “Public accountability in particular kinds of cases can be quite important and if we don’t get (admissions), then we litigate them.” White said that in cases involving “widespread harm to investors,” “egregious intentional misconduct” or obstruction of the SEC’s investigation, the agency may insist that defendants accept liability as a condition of settlement.

In an internal email Monday to the staff of the Enforcement Division, co-directors Andrew Ceresney and George Canellos provided a bit more detail than White did in her public remarks. “While the no admit/deny language is a powerful tool, there may be situations where we determine that a different approach is appropriate,” Ceresney and Canellos said in the email, which was provided to me by an SEC representative. “In particular, there may be certain cases where heightened accountability or acceptance of responsibility through the defendant’s admission of misconduct may be appropriate, even if it does not allow us to achieve a prompt resolution. We have been in discussions with Chair White and each of the other commissioners about the types of cases where requiring admissions could be in the public interest. These may include misconduct that harmed large numbers of investors or placed investors or the market at risk of potentially serious harm; where admissions might safeguard against risks posed by the defendant to the investing public, particularly when the defendant engaged in egregious intentional misconduct; or when the defendant engaged in unlawful obstruction of the commission’s investigative processes. In such cases, should we determine that admissions or other acknowledgement of misconduct are critical, we would require such admissions or acknowledgement, or, if the defendants refuse, litigate the case.”

That sounds like a major policy shift from an agency that has for decades permitted defendants to settle civil cases without admitting or denying the SEC’s allegations. Until last year, after all, even defendants who had already been convicted of financial crimes didn’t have to admit liability in settlements with the SEC. The neither-admit-nor-deny policy, as you know, has lately been criticized by a series of federal judges following the lead of U.S. Senior District Judge Jed Rakoff of Manhattan; and has been aggressively questioned by Senator Elizabeth Warren (D-Mass.). Given the public grumbling about the SEC’s perceived failure to obtain accountability from the financial institutions responsible for the economic crisis, it’s probably not an accident that White announced the agency’s new policy at an event well covered by reporters.

Supreme Court to resolve circuit split on timing of appeals

Alison Frankel
Jun 18, 2013 22:24 UTC

Once upon a time, ordinary lawyers appeared at the U.S. Supreme Court. If, by some chance, their client’s case defied long odds and made it onto the justices’ docket, lawyers who’d been on the litigation from its start would make a once-in-a-lifetime argument to the highest court in the land. Those days are mostly gone. As my brilliant Reuters colleague Joan Biskupic discussed Tuesday in a story about the competition to represent a pro se plaintiff whose petition for certiorari was granted last year, arguments at the Supreme Court have come to be the near-exclusive province of lawyers who specialize in this high-prestige, high-profile practice.

A case that the justices agreed Monday to hear in their upcoming term shows that the elite Supreme Court bar actually seems to be on the lookout for issues that will attract the justices’ attention even before cert petitions are filed. The case, Ray Haluch Gravel v. Central Pension Fund, raises the question of whether a federal district court’s ruling on the merits that leaves unresolved a request for contractual attorneys’ fees is a final decision – and thus appealable – or whether the decision is not appealable until the court has ruled on contractual attorneys’ fees. That’s a matter of consequence for parties deciding when to file their appeals, but certainly not a huge constitutional battle. Nor are the sums of money at issue – at most, about $350,000 in supposedly unpaid union contributions and attorneys’ fees – particularly notable, except for the Massachusetts landscaping company and union fund involved in the case. Both the landscaper and the union were represented in federal district court in Boston and at the 1st Circuit Court of Appeals by regional firms with fewer than 50 lawyers.

Yet both had top-notch Supreme Court counsel for their cert filings: Mayer Brown for Ray Haluch and the University of Pennsylvania Supreme Court Clinic for the union. Dan Himmelfarb of Mayer Brown and Stephanos Bibas of Penn declined to comment, but it’s a good bet that when the 1st Circuit issued its decision last September, noting a deep split in the federal circuits on whether contractual attorneys’ fees are collateral to the merits of a case, the Supreme Court bar suddenly became interested in an otherwise modest dispute between a small business and the union representing a few of its employees.

SCOTUS pay-for-delay ruling: New scrutiny for nonpharma patent deals?

Alison Frankel
Jun 17, 2013 21:08 UTC

In the U.S. Supreme Court’s ruling Monday on pay-for-delay settlements in the pharmaceutical industry – in which a brand-name drugmaker pays generic rivals to drop challenges to its patent, thus assuring its monopoly – five justices agreed with the Federal Trade Commission that the key question isn’t whether pay-for-delay deals exceed the scope of the brand-maker’s patent. Courts cannot simply rubber-stamp such settlements as presumptively legal, the majority said in FTC v. Actavis. But nor can they assume that pay-for-delay settlements are illegal by their very nature. Instead, according to the majority, trial courts must conduct a “rule of reason” analysis to determine whether reverse-payment settlements violate antitrust law.

Those inquiries, the majority concedes, are probably going to be “time consuming, complex and expensive” – a much less convenient alternative to the simple scope-of-the-patent test endorsed by the 11th Circuit Court of Appeals in the underlying case and by several other federal circuits in previous pay-for-delay suits by the FTC and private plaintiffs. But the scope-of-the-patent approach “throws the baby out with the bath water,” the majority said. A patent holder has monopoly rights only when its patent is valid, the very inquiry that is aborted through pay-for-delay settlements.

The justices concluded that trial judges need not conduct a full-blown inquiry into a patent’s validity to evaluate the anticompetitive impact of a pay-for-delay deal, but can consider (among other factors) the size of the reverse payment as a proxy for the patent’s weakness. “An unexplained large reverse payment itself would normally suggest that the patentee has serious doubts about the patent’s survival,” the majority said, in an opinion written by Justice Stephen Breyer. “And that fact, in turn, suggests that the payment’s objective is to maintain supracompetitive prices to be shared among the patentee and the challenger rather than face what might have been a competitive market – the very anticompetitive consequence that underlies the claim of antitrust unlawfulness.”

SCOTUS in Myriad: Federal Circuit doesn’t know what’s patent-eligible

Alison Frankel
Jun 13, 2013 22:34 UTC

Justice Clarence Thomas of the U.S. Supreme Court doesn’t come out and say so in his straightforward, rhetoric-free, 19-page opinion for a unanimous court in Association for Molecular Pathology v. Myriad Genetics, but the takeaway from the ruling is not only that human genes are not patentable in and of themselves but that the Federal Circuit Court of Appeals isn’t very good at interpreting patent-eligibility under Section 101 of the Patent Act. As the Supreme Court decision notes, the Federal Circuit panel that ruled Myriad has the right to composition patents on genes associated with breast cancer disagreed on the rationale. One judge said that isolated genes are chemically distinct from the molecules found in nature. Another cited longstanding Patent and Trademark Office policy on gene patentability. The third disagreed with both explanations. So too did the entire Supreme Court, which said the dispositive question is whether the purported invention is created or found in nature. Genes are found in nature, the court said, and thus not patent-eligible.

Myriad’s share price actually bumped up after the court’s ruling because the justices also held that synthetic composite DNA is eligible for patenting, and that biotech companies may still seek patents on applications for human genes. In that regard, the Supreme Court decision is good news for both researchers, who argued that patents should not be used to restrict their use of identified genes, and the biotech industry, which quite understandably wants to profit from its investment in gene isolation.

But if you’re an IP lawyer trying to advise clients on the patent-eligibility of their research and development projects, the Myriad ruling is yet another exasperating sign that you can’t rely on the Federal Circuit to decide issues that are supposed to be at the heart of its mission. The United States has a centralized court for patent appeals because Congress wanted a single set of experienced judges to offer definitive interpretations of IP law, which often involves highly technical but economically critical decisions. As former Federal Circuit JudgeArthur Gajarsa, now senior counsel at Wilmer Cutler Pickering Hale and Dorr, said in a speech in March, the court’s statutory mandate is “to normalize patent law … by establishing rules which district courts can follow.”

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