How effective is litigation as a vehicle for negotiating a business deal?

Posted on May 29, 2009 by Daniel Reisman

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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Big Law Firms Cutting Summer Programs May Ultimately Broaden Job Prospects

Posted on May 13, 2009 by Daniel Reisman

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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First Person Shooters Find Protection Under The First Amendment: A Win for the Video Game Industry

Posted on February 25, 2009 by Daniel Reisman

Last week, on February 20, 2009, the Ninth Circuit refused to extend the definition of obscenity to encompass portrayals of violence under the First Amendment, and thereby held a California law prohibiting the sale or rental of violent video games to minors an unconstitutional content-based restriction on freedom of expression. See Video Software Dealers Association v. Schwarzenegger, No. 07-16620, 2009 WL 415582 (9th Cir. Feb. 20, 2009).

In 2005, California passed a law prohibiting sales and rentals of violent video games to minors. If the law had gone into effect, the penalty for a violation would have been a $1000 fine. And, all video games, determined to be violent by the State, would have to have been labeled ‘18’ on the front of the packaging.

Thankfully, two industry trade groups, the Video Dealers Association (‘VDSA’), and the Entertainment Software Association (‘ESA’), quickly filed suit.

The district court granted a preliminary injunction prohibiting enforcement of the law before it went into effect, and later granted the plaintiffs' motion for summary motion judgment permanently enjoining the enforcement of the law on constitutional grounds.

The Ninth Circuit affirmed the district court's rulings in Video Software Dealers Association v. Schwarzenegger. The opinion, drafted by Judge Callahan, holds that obscenity laws cannot be applied to violent content under the First Amendment.

I imagine the ruling comes as more of a relief than a surprise to the ESA, who defeated a similar law in Illinois. Nevertheless, it is a major victory for the video game industry, retailers, and for a variety related businesses in California.

Video games are a multi-billion dollar industry, and, according to the ESA, “California is the largest employer of computer and video game personnel in the nation, accounting for 40 percent of the total industry employment nationwide.” Although the video game industry is probably not as “recession proof” as it appeared to be a month or two ago, it is still not being hit as hard as other other sectors of the economy. See e.g., The Los Angeles Times (detailing Electronic Arts’ projections for 2009).

Admittedly, this is just speculation on my part, but laws prohibiting the sales and/or rentals of violent video games, and levying fines on those that violate them, would hurt not only the video game industry, but a number of related industries as well, and could drive an already-shrinking economy further into recession. I know first hand that students in film school, music school, and recording school are increasingly looking toward the video game industry for employment as the music industry is in shambles and post-production jobs in the film industry are difficult to get.

I am not suggesting that, as matter of policy, business interests and the economy should be put ahead of protecting children from real risks of harm. And, I think it is fairly clear that not all video games are suitable for young children. However, a quantifiable risk of actual harm to a child's psychological and neurological well-being from playing ‘violent’ video games is anything but proven.

Moreover, I concede that beating up hookers in Grand Theft Auto completely lacks educational value, but other games, despite being gory and violent, may not. As the Ninth Circuit puts it,

Many of these games have extensive plot lines that involve or parallel historical events, mirror common fictional plots, or place the player in a position to evaluate and make moral choices. Id.

Detailed Summary and Analysis of the Case

  • First, the Ninth Circuit held that strict scrutiny is the applicable standard in this case, which is important because it puts a very high burden on the State to justify the need for the law.

Generally, as the Ninth Circuit notes, content-based restrictions on expression are subject to a standard of strict scrutiny. See Video Software Dealers Association, No. 07-16620, 2009 WL 415582, at *1. That means that the law at issue must be “narrowly tailored to promote a compelling government interest, and if less restrictive means to achieve same purpose are available they must be used.” Here, despite the State’s argument to the contrary, the Ninth Circuit held the law to be a content-based restriction and decided strict scrutiny applies.

The State urged otherwise and contended that the court should base its analysis on “what has been called ‘variable obscenity’ or ‘obscenity as to minors’” Ginsburg v. New York, 390 U.S. 629 (1968).

The Ginsburg Court applied a rational basis test to the statue at issue because it placed the magazines at issue within a subcategory—obscenity as to minors—that had been determined to be not protected by the First Amendment, and it did not create an entirely new category of expression excepted from First Amendment protection. The State, in essence, asks us to create a new category of non-protected material based on its depiction of violence. Video Software Dealers Association No. 07-16620, 2009 WL 415582, at *8. (Emphasis added).

The gist of it is that First Amendment guarantees freedom of expression. Obscenity, is not protected under the First Amendment because it is not considered expression. However, as the Ninth Circuit notes here, Ginsburg created a ‘sub-category’ of obscenity for minors. Thus, a depiction of sexually explicit acts may be considered obscene when in the hands of minors and is not protected. That same sexually explicit material, in the hands of an adult, may not be obscene when only viewed by adults, so it receives its full First Amendment protection. The State’s contention is that the court should extend the holding in Ginsburg to cover violent works as well as sexually explicit ones. If Ninth Circuit had accepted the State’s contention, strict scrutiny may have been inapplicable. Instead, the rational basis standard would apply, which only requires that the state show a rational basis for the law in order for it to pass constitutional muster. The Ninth Circuit rejected the State’s argument because (a) the Court did not want to extend the definition of obscenity to violence, and because (b) Miller v. California, 413 U.S. 15 (1973), implies that only works depicting sexual content may fall within the scope of obscenity laws. Video Software Dealers Association, No. 07-16620, 2009 WL 415582, at *8.

  • Second, the Ninth Circuit held that the State could not meet its burden under a strict scrutiny review because there is no clear evidence linking violent video games to psychological and neurological harm in children.

Strict scrutiny requires an affirmative showing of a ‘compelling Government interest.’ The compelling interest asserted by the State is ”preventing psychological or neurological harm to minors.„ As the Ninth Circuit notes, the Supreme Court held that such protection is a compelling interest.Id. (citing Erznoznik v. City of Jacksonville, 422 U.S. 205, 212-213 (1975)). However, the harm must be real and the disputed law has to alleviate them in a “direct and material way” Id. at *9. Thus, the court went on to evaluate the evidence the State relied on to prove that there is a compelling state interest restrict expression in video games.

The State relied heavily on a few studies wherein the authors admitted that the results were fairly speculative and only suggested correlations between violent video games and actual harm to children—not causation. Id.at *9–*10. As such, the Ninth Circuit held,

Although we do not require the State to demonstrate ‘scientific certainty’ the State must come forward with more than it has. As a result, the State has not met its burden to demonstrate a compelling interest. Id.

  • Third, the Ninth Circuit held that even if the State had shown sufficient evidence of harm to minors, the law also fails a strict scrutiny review because the State failed to consider a less restrictive alternative.

The Court explains that even if the State could show a compelling interest in preventing psychological harm and neurological harm, the law would still fail under a strict scrutiny analysis because the State did not take into account less-restrictive alternatives that could prevent the harm. Specifically, the Court discusses the ESRB rating system, a voluntary system for rating video games, and implies that the ESRB ratings could prevent harm by helping parents protect their children. Id.

  • Summary

    1. Strict scrutiny is the applicable standard.

    2. The State’s evidence does not support the existence of a compelling interest to protect children from psychological and neurological harm caused by violent video games because there is no clear evidence that violent video games cause such harm.

    3. Even if the State could satisfy the compelling interest requirement of strict scrutiny, it would still fail to satisfy the less restrictive alternative requirement

Therefore, the law fails under a strict scrutiny review and is an unconstitutional content-based restriction on expression.

  • One more thing...

The last part of Video Software Dealers Associationn v. Schwarzenegger deals with commercial speech, but since I intend to address false advertising and commercial speech very soon, I’m saving it for another post.
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