Los Angeles Business Litigation Blog : Los Angeles Business Litigation Lawyer & Attorney : Daniel Reisman Law Firm : California Civil Litigation & Contracts

• Mozilla officially released Firefox 3.5 today. One of its touted new features is Private Browsing mode (also known as "porn mode").

While private browsing may be useful for protecting sensitive information from some prying eyes, it's important to note that private browsing only means that Firefox won't save browsing history and cookies on one's local machine. In other words, you can now search for that perfect anniversary gift for your spouse online without the fear that he or she will be able to figure out what you were doing just by launching Firefox. However, your activity is still just as easy to track from another computer. (So, if any member of your household knows how to use a packet-sniffer, she'll still be able to see just how much porn you're watching how many gifts you're thinking about purchasing.)

• Turning piracy into profit for content owners:

Piracy watchdog Nexicon has found the ultimate way to turn piracy into profit for the fresh copyright holders added to their clientele. They offer alleged file-sharers the chance to settle for $10 per downloaded song or an equal amount for a pirated movie. If you decide not to settle, they promise to bankrupt you in court.

(via TorrentFreak).

There's nothing wrong with content owners tracking the digital distribution of their work. And, there isn't necessarily anything morally, ethically, or legally wrong with pursuing infringers. However, Nexicon and its affiliates such as the Video Protection Alliance ("VPA") (which happens to deal exclusively with adult content) have crossed the line.

The article at TorrentFreak points the reader's attention to the FAQ on the VPA's website. While all of the questions and answers are obviously aimed to scare the recipient of a settlement letter into using the credit card processing system conveniently provided by the VPA to quickly settle the matter, there are two that are particular causes for concern. They are as follows:

• How do I obtain a Liability Release & Settlement Receipt? Your Liability Release & Settlement Receipt will be automatically provided on screen and via email at the end of the settlement payment process.

• Do I need a lawyer? As with any legal proceeding, the guidance and representation of a lawyer can be very important. It is likely that the cost incurred to retain a lawyer will exceed the settlement amount offered. The decision to hire a lawyer is entirely up to you.

Regarding the first question, the problem is that it doesn't provide any detail as to what a "Liability Release & Settlement Receipt" actually is. As far I as I know, there is no standard legal definition of a "Liability Release & Settlement Receipt." Nor would it be in the VPA's interest if there were a standard definition. While a "Liability Release & Settlement Receipt" could theoretically contain an actual settlement agreement and release from liability, there is nothing in the language used on the website to indicate that it actually does. Even if the receipt does contain language releasing the settlor from liability, it may be very narrowly drafted. And, of course, one doesn't actually get to see the "Liability Release & Settlement Receipt" until after payment is tendered.

Regarding the second question, it essentially advises the reader not to seek the independent advice of a lawyer, and simultaneously attempts to avoid advising the reader not to seek the independent advice of a lawyer. In my opinion, it is plainly unethical. In general, if a lawyer is going to advise an individual to take any sort of action that is in the lawyer's interest, but adverse to the individual's interest, the lawyer should encourage the individual to seek independent counsel. Although the VPA is neither a lawyer nor a law firm, to the extent that it offers legal advice, I see no reason as to why it shouldn't be bound by similar ethical standards. After all, the VPA's website isn't solely providing educational information, and it isn't just advertising--it's negotiating settlements.

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It's no secret that more and more employers are doing a quick Google search for a job applicant’s name as part of their background checks, but the City of Bozeman is taking it one step further.

In an article published yesterday afternoon, Montana's News Station reports that applying for a city job now requires turning over some fairly sensitive information. Specifically, the background check form for city jobs requires applicants to

list any and all, current personal or business websites, web pages or memberships on any Internet-based chat rooms, social clubs or forums, to include, but not limited to: Facebook, Google, Yahoo, YouTube.com, MySpace, etc.,...There are then three lines where applicants can list the Web sites, their user names and log-in information and their passwords.

When the station asked Bozeman City Attorney Greg Sullivan about the new policy he stated,

So, we have positions ranging from fire and police, which require people of high integrity for those positions, all the way down to the lifeguards and the folks that work in city hall here. So we do those types of investigations to make sure the people that we hire have the highest moral character and are a good fit for the City...

In other words, in order to apply to become a lifeguard employed by the City of Bozeman, I can never have any expectation of privacy online. At any given time, some random city employee can use my login credentials to chat on AOL using my name. Perhaps the form should include authorization for the City to enable one-click purchasing on Amazon.com using my account in order to expedite the hiring process.

Although thorough background checks are mandated for certain types of jobs in both the public and private sectors, requiring all job-seekers, no matter the position, to disclose sensitive login information on an application that may be seen by dozens of people raises major concerns regarding discrimination, privacy, and the safety of data stored on remote servers.

[Update (6/19/09): According to this article in the Bozeman Daily Chronicle, the City's policy caused enough of a stir on the internet to prompt the ACLU to look into the matter. Consequently, "City Attorney Greg Sullivan said in light of concerns being expressed by the public, officials are looking at ways to alter the policy so that they might view an applicant’s online information without asking for log-in codes."]

[Update (6/21/09): According to cnet, Bozeman stopped asking for passwords as of midday on Friday.]

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An elderly woman is suing Sacha Baron Cohen and NBC in Los Angeles County Superior Court for injuries she suffered, which left her permanently disabled, due to an incident at a bingo tournament where Cohen was filming for his upcoming movie “Bruno.” The lawsuit seeks unspecified damages of more than $25,000.

Gossip blog Gawker’s take on the matter:

We would hope that if this lady genuinely suffered brain bleeding that left her in a wheelchair that she's asking for much more than $25,000 in damages, but why she waited two years to file the suit is anyone's guess—-Some would say probably because it's all a bunch of BS.

Fellow legal blogger Maxwell Kennerly's explanation:

[A] suit that "seeks unspecified damages of more than $25,000" could be worth millions or billions of dollars. That allegation is nothing more than a legal term inserted in the complaint by the plaintiff's lawyer to let the clerk know that the case should be assigned to the full-fledged civil trial court and not the small claims court.

(via Litigation and Trial).

Generally, Kennerly is right. Specifically, in most types of Unlimited Jurisdiction cases, the amount in controversy must exceed $25,000 (see the mandatory Civil Case Cover Sheet). And, while a plaintiff is usually required to state the amount of damages he or she is seeking in a civil case in the complaint under section 425.10(a)(2) of the California Code of Civil Procedure (“CCP”), in personal injury cases, CCP § 425.10(b) specifically prohibits the plaintiff from stating the amount of the damages in the complaint.

Instead, the plaintiff must serve the defendant with a “separate statement of damages” that is not filed with the court. See CCP § 425.11. The reasoning behind the rule is that it protects defendants from adverse publicity resulting from exaggerated monetary demands since the separate statement of damages is not public record.

Of course, given that Sacha Baron Cohen essentially built his career by making an ass of himself in public and on film (frequently with hilarious results), I doubt he’s worried about the adverse publicity. Nevertheless, and despite the irony, even plaintiffs suing those who thrive on bad publicity are bound by the rule.

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In Kearns v. Ford Motor Co., No. 07-55835, 2009 WL 1578535 (9th Cir. June 8, 2009), the Ninth Circuit held that Federal Rule of Civil Procedure ("FRCP") 9(b) applies to causes of action under California's unfair competition laws brought in federal court. FRCP 9(b) requires that

when fraud is alleged, "a party must state with particularity the circumstances constituting fraud . . . ." [FRCP] 9(b). Where fraud is not an essential element of a claim, only those allegations of a complaint which aver fraud are subject to Rule 9(b)'s heightened pleading standard. Id. at *2.

Kearns brought a class action against Ford alleging that Ford Motor Company and its licensed dealerships conspired to mislead customers into paying more for "Certified Pre-owned Vehicles," which weren't actually any better than equivalent non-certified used cars.

According to Kearns, Ford misled its customers by making false statements regarding the overall safety and road-worthiness of Ford-certified pre-owned vehicles when compared to regular used cars. As a result of Ford's false statements, consumers were led to believe that the certified pre-owned vehicles were guaranteed safer than non-certified used cars when, in fact, they were not.

Kearns argued that Ford never maintained much oversight over the certification process. Thus, the certified pre-owned cars were really no safer than average used cars, and the average price difference between a certified pre-owned car and a regular used car was somewhere around $1,080.

Kearns further argued that Ford's behavior with regard to the certified pre-owned vehicles constituted violations of California's Consumer Legal Remedies Act, and California's Unfair Competiton Law. However, the district court dismissed the case because Kearns' complaint failed to state his claims with the requisite heightened particularity.

The Ninth Circuit affirmed the district court's decision, holding that since essentially all of Kearn's claims were grounded in fraud, his pleadings had to meet the "heightened particularity" requirement as articulated in FRCP 9(b). Kearns' claims that he relied on false or misleading television advertisements, and other misleading sales materials were too unspecific to satisfy FRCP 9(b). As the Ninth Circuit states,

[n]owhere...does Kearns specify what the television advertisements or other sales material specifically stated. Nor did Kearns specify when he was exposed to them or which ones he found material. Kearns also failed to specify which sales material he relied upon in making his decision to buy a [certified pre-owned] vehicle. Id. at *4.

• What's the Point of the "Heightened Particularity" Standard for Fraud Claims?

Fraud claims are unique as they are basically excepted from the relatively loose federal notice pleading standard because of how potentially damaging they may be to the defendant's reputation. As the Ninth Circuit explains,

[FRCP] 9(b) serves three purposes: (1) to provide defendants with adequate notice to allow them to defend the charge and deter plaintiffs from the filing of complaints "as a pretext for the discovery of unknown wrongs"; (2) to protect those whose reputation would be harmed as a result of being subject to fraud charges; and (3) to "prohibit [ ] plaintiff[s] from unilaterally imposing upon the court, the parties and society enormous social and economic costs absent some factual basis." In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1405 (9th Cir. 1996) (quoting Semegen v. Weidner, 780 F.3d 727, 731 (9th Cir. 1985)). Id. at *3.

In short, the heightened standard is supposed to deter serious accusations of fraud and conspiracy that lack a real basis in fact; however, I've never been quite convinced that it actually serves that purpose. Rather, it seems that it serves to deter accusations of fraud and conspiracy that lack a basis in specific facts known to the plaintiff when filing a claim. But, isn't formal discovery at least in part designed to give the parties access to evidence that independent investigation and other methods of informal discovery might otherwise fail to uncover?

I also find it odd that of the three purposes behind FRCP 9(b), as stated by the courts, not one of them specifically mentions that a successful fraud claim can lead to large punitive damages awards. What other "enormous social and economic costs" could the Ninth Circuit be referring to?

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Via The Complete Lawyer, Savvy Lawyers Value Their Human Capital:

Use litigation as an opportunity to negotiate a business deal. In hard economic times, GC’s are not in the “millions for defense but not a penny in tribute” mood. Google’s GC Eric Schmidt famously said that litigation is “just a business negotiation being conducted in the courts.” The more working parts any potential business deal has, the easier it is to find solutions that benefit both parties in different ways. Before we can explore the most effective and efficient business solution to a commercial problem, we must shed our merits-based resolution blinders and explore the parties’ commercial interests. One of the swiftest means of doing so is bringing the decision-makers on both sides to the planning, problem-solving and bargaining table. If the parties agree that these brain-storming sessions can be considered “mediations” you can avail yourself of state or federal confidentiality protections. Then let the business people do what they do best: plan for a productive future rather than fighting about an unproductive past.

Settling earlier often means spending less and potentially earning more. But, shedding “our merits-based resolution blinders” may not be so easy. Clearly delineating and distinguishing among commercial interests and personal interests can be difficult for both lawyer and client, especially when smaller businesses and/or individuals are involved. Many business relationships are also personal relationships. Thus, the negative impact of a dispute that reaches litigation on, for example, longstanding friendships, may prove difficult to ignore. While a collaborative approach to dispute resolution may lead to a productive future, sometimes moving forward may require a judgment about an unproductive past.

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Back in February I wrote about the Ninth Circuit decision holding a 2005 California law banning the sale of violent video games to minors unconstitutional.

Apparently, California isn’t satisfied with that ruling. According to the Associated Press, Attorney General Jerry Brown has petitioned the Supreme Court for a Writ of Certiorari to review the Ninth Circuit’s holding in Video Software Dealers Association v. Schwarzenegger, 556 F.3d 950 (9th Cir. 2009).

So, instead of focusing on the budget crisis, prison overcrowding, and/or subpar public schools, California is going to spend as much money as possible trying to keep our impressionable youth from playing GTA IV. Then again, maybe the excessive penalties that video game retailers will face for selling a game to a minor that someone in Sacramento decided was too violent for innocent children will solve all the budget woes?

Hopefully, the Supreme Court will just deny cert, saving both the video game industry and the taxpayers money. I doubt that even the conservative justices on the Supreme Court really want to tackle the issue of whether the definition of obscenity should be extended to include violence.

On the other hand, if the Court does hear the case and rules in favor of the State, it may become easier for kids to figure out which video games are the best. All they’ll have to do is look for the big “18” sticker on the front of the boxes.

You can find a copy of California’s petition here (warning: pdf).

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Most attorneys that I know are vigilant about their billing practices, and upfront with their clients about them. But, as with any other contractual relationship, disputes inevitably arise. And, in an effort to cut costs due to the economic climate, both individuals and businesses are paying much closer attention to their bills lately. So, it shouldn’t come as much of a surprise that law firms are looking for a way to cash-in on clients’ new spendthrift habits.

Although attorneys who specialize in managing costs and fees of litigation as well auditing other attorneys’ billing practices have been around for ages, I wouldn’t be surprised if other mid-sized firms started looking for partners with specific experience in related areas.

At Legal Blog Watch, Carolyn Elefant writes:

Manchester, England-based law firm Boote Edgar Esterkin has figured out a novel way to generate more revenue. Instead of charging clients more for the firm's services, Boote Edgar has created a new practice specialty going after other law firms for overcharging, reports Crain's Manchester Business. The service, which is called ab8, will help clients either by opening formal negotiations on behalf of customers who believe they’ve been overcharged by their law firms or, in some cases, issuing proceedings against firms.

According to Mark Yaffe, the associate who will run the new service,

[t]here are strict rules governing how solicitors provide information to their clients, especially in relation to costs. Solicitors have a duty to provide their clients with the ‘best information possible’ at the outset of any matter, and this ought to include a clear and concise explanation of the total costs involved.

• Lawyers in California Are Not Usually Bound by Their Initial Estimates.

Lawyers in California do not have the same duty as their British counterparts regarding initial fee quotes. Although it’s a good practice to provide clients with the best information possible at the outset of a matter, most lawyers who do are also careful to explain that litigation can be very unpredictable (which is certainly true), and the costs and fees they quote at the outset of a matter are just an estimate.

• The Mandatory Fee Arbitration Act

The problem, especially for individuals and small businesses with limited resources, with hiring another lawyer to “go after” a previous lawyer for overcharging is the expense of hiring another lawyer. Consequently, the California Legislature enacted the Mandatory Fee Arbitration Act (“MFAA”). Cal. Bus. and Prof. Code. §§ 6200-6206.

The policy behind the mandatory fee arbitration statutes...is to alleviate the disparity in bargaining power in attorney fee matters which favors the attorney by providing an effective, inexpensive remedy to a client which does not necessitate the hiring of a second attorney. Manatt, Phelps, Rothenberg & Tunney v. Lawrence, 151 Cal. App. 3d 1165, 1174-1175 (1984).

The MFAA provides that if a dispute over costs and fees for legal services arises between a lawyer and a client, the client may choose to have the case heard before an arbitration panel under procedures established by the State Bar. The arbitration is optional for the client and mandatory for the lawyer, regardless of which party initiates a fee suit. The arbitration is only binding, however, if the attorney and client so agree in writing after the dispute has arisen. Otherwise, either party may request a trial de novo (something similar to an appeal) within 30 days after the arbitration has concluded.

Also, a lawyer who intends to a initiate a fee dispute against a client is required to notify the client of his or her right to arbitration under the MFAA. Otherwise, there may be grounds for dismissal.

• A few important things to keep in mind regarding mandatory fee arbitration:

1. The courts are not fond of dismissing suits because the lawyer neglected to serve the MFAA notice, especially if the client doesn’t actually want to arbitrate.
2. If the client is already aware of his or her right to arbitration under the MFAA, the lawyer’s failure to give MFAA notice may not result in a dismissal.
3. A dismissal with prejudice based on the lawyer’s failure to give MFAA notice is an abuse of discretion.
4. If the client brings any action for affirmative relief against the lawyer that isn’t specifically limited to the dispute over costs and fees, the right to MFAA arbitration is waived.
5. If the attorney files a complaint against the client, and the client answers the complaint, the right to MFAA arbitration is waived.
6. Most importantly, the judgment of the arbitration panel is not binding for either party, unless the (a) parties otherwise agreed to in writing, or (b) neither party requests a trial de novo within 30 days after the arbitration.

Also of note, a binding arbitration agreement in an agreement for legal services is still binding even if the client requests MFAA arbitration. In other words, if there is a relevant binding arbitration clause in the in the contract between the lawyer and the client, the lawyer may compel the contractually based arbitration proceedings after the MFAA arbitration. See Schatz v. Allen Matkins Leck Gamble & Mallory LLP.

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What if lawyers could get jobs at big firms after they've been lawyers for a few years? If big law firms cut their summer programs, and in turn, dismantle the formal hiring process that basically starts and ends during the first semester of a student's second year in law school, it might just happen.

According to The National Law Journal's L.A. Legal Pad,

With no sign of a lasting rebound in the wider economy, some law firm leaders are playing it safe by reducing their 2010 summer programs or skipping them altogether.

Personally, I think that big firms should cut their formal summer programs entirely.

The idea of securing a job through on-campus interviews during the fall of one's second year in law school with a start-date just over two years away is ridiculous. It creates a false sense of security, and it puts too much emphasis on a student's grades from his or her first year in law school.

I don't think that firms should necessarily stop hiring law students for summer positions; however, I think that the focus of summer employment should shift from lining up next year's crop of associates to actually providing the students with some practical experience.

Clients are increasingly requesting that law firms refrain from staffing cases with first-year associates in order to cut down on their legal fees. Clients tend to think of a lawyer's first year as nothing more than on-the-job training, and they don't want to pay for it. Also, partners at large firms often prefer to hire laterals, who already have experience in specific areas. However, the big firms' formal hiring processes--which start with summer programs--make it nearly impossible for a student who chooses not to go through on-campus interviewing during his or her second year of law school to get a job at a big firm at all.

The result? Law students are advised to get a job at a big firm for a couple years before doing anything else--even if said students have no desire to work at a big firm--because they may never get another chance. Instead of working up the pay ladder, many lawyers are paid more for their first two years of practice than for their next ten.

If big law firms break with tradition by ending their summer programs and their formal yearly hiring processes, hiring partners will be able to hire associates based on academic credentials and experience. Clients will be happier because they'll at least think that they're getting a better deal. Most importantly, law students, and new lawyers will be able explore different career choices without the fear that there's no chance they'll ever get hired at a big prestigious firm.

Overall, lawyers may actually be able to work their way up into big firms based on broad qualifications rather than just their grades from their first years of law school.

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Last week, the Minnesota Supreme Court ruled that one DWI defendant is entitled to examine the source code of the breathalyzer used to determine his blood alcohol content, and that another DWI defendant is not entitled to examine the source code of the same make and model of breathalyzer.

The court reasons as follows:

Under Minn. R.Crim. P. 9.01, subd. 2(3), it was an abuse of discretion for a district court to order discovery of the source code of the Intoxilyzer 5000EN when a defendant did not submit any evidence on how the source code may relate to his guilt or innocence; however, it was not an abuse of discretion for a court to order discovery of the source code to a defendant who submitted evidence that an analysis of the source code may reveal deficiencies that could challenge the reliability of the Intoxilyzer and would relate to his guilt or innocence. State v. Underdahl, Nos. A07-2293, A07-2428, 2009 WL 1150093 (Minn. Apr. 30, 2009).

The evidence presented by the defendant who won access to the code consisted of a definition of source code, and a declaration by a computer science professor discussing voting machines and the law regarding breathalyzer source code in New Jersey. The unsuccessful defendant's lawyer argued that he should have the right to attack the reliability of the test itself, and that the source code was necessary in order to do so, but he only did it during oral argument. Apparently, this is not a distinction without a difference although I fail to understand why. 

From a cynical point of view, I guess there is a positive aspect of the decision--since the court reached two completely opposite conclusions in two very similar cases, it left the breadth of trial courts' discretion in discovery matters intact. From a reasonable point of view, the decision leaves the question of whether defendants in DUI or DWI cases should have access to breathalyzers' proprietary source code unanswered.

In sum, both DWI defendants want to challenge the reliability of the breathalyzer through analysis of the source code. One of the defendants won the right to do so because he presented evidence that the source code "may reveal deficiencies about the test's reliability." That evidence was based on access to proprietary source code obtained in a case in New Jersey. So, in order to provide evidence sufficient for discovery purposes that the State should grant a defendant access to otherwise inaccessible proprietary source code, one must provide a copy of buggy proprietary source code. I believe computer programmers would call this an infinite loop.

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