Tuesday, July 07, 2015

Rule 1

The reformers who drafted the Federal Rules of Civil Procedure in the 1930's thought that if we could only get rid of the complexities of ancient pleading practices, and liberalize discovery, cases could be fairly adjudicated on their merits instead of being won or lost on technicalities. Their intent can be gleaned from Rule 1, which provides that the rules "should be construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding."

To a large extent, the simplified rules we have been living with for so many years must be judged a success, simply because they have stood the test of time. On the other hand, hardly anyone would say that Rule 1 accurately describes the way civil cases are currently processed. We have encrusted the original simple pamphlet enacted in 1938 with so much commentary and interpretation that the rules are on their way to becoming as arcane as the system they were designed to replace. We no longer administer the rules to remove roadblocks to just, speedy and inexpensive determinations of every action and proceeding. Instead we have created so many new roadblocks--mainly the burden of expensive discovery, but also new opportunities for motions--that the whole premise of the federal rules project must be called in question.

The rules ought to be re-written and streamlined again from top to bottom, which would be an endeavor comparable in scope to the original project. Such a revamping should recognize that the vast majority of cases are never going to be adjudicated on the merits anyway, and should better incorporate alternative forms of dispute resolution into the rules of civil procedure. A simplified set of rules could eliminate steps that are unnecessary for the vast majority of cases that not going to trial anyway, and could also encourage parties to move toward resolution rather than engaging in wasteful adversarial behavior. At the same time, simplifying the rules could make it possible for more cases to go to trial, because the cost of litigation would present less of an obstacle. (My own radical proposal for an overhaul of the federal rules can be found here.)

One commendable effort to reform the rules has been undertaken by the American College of Trial Lawyers and the Institute for the Advancement of the American Legal System. The task force has compiled a set of principles that still exalt the ideals of Rule 1, and that seek to create more flexibility and proportionality in the civil justice system to allow cases to be resolved in more appropriate ways. Some of these ideas are being incrementally adopted in amendments to the Federal Rules.

I'm not sure I will live long enough, however, to see the kind of wholesale reform that I think is needed. There is too much resistance to change in the fearful legal profession. And there is too much partisanship and paralysis in the political system to allow that kind of change. That means that the only practical way now to create the kind of streamlined dispute resolution process that would live up to the ideals of Rule 1 is to do it at least partially outside the purview of the court system. More on how to do that in subsequent posts.

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Tuesday, May 12, 2015

The Art of Negotiation

A long time ago, when I was fairly new at law practice, I represented a plaintiff in a contentious sexual harassment case against a large company. After a series of pre-trial battles, the defendant's counsel opened the door to the possibility of settlement, throwing out an insultingly low-ball number. I wasn't sure how to respond.

At that point in my career, I thought I knew how to litigate, but nobody had ever taught me how to negotiate. I had never received any training in negotiation strategy in law school, and very little at my law firm. The subject simply wasn't taught at the time. So I honestly didn't know the best number to come back with in order to lead the process to a good result for my client. For some reason I confessed my weakness to the other side, saying something that indicated I wasn't sure what to do next. My adversary's response was to ask me whether there was anyone else at my firm who was more skilled at negotiation who could get back to him with a response to his offer.

Suddenly I understood two things. First, there was nobody else at my firm who could do this better than I could. This was my case, and I knew it better than anyone. Second, I realized from defense counsel's somewhat desperate request for somebody to negotiate with, that the other side was extremely anxious to make a deal. Their aggressive litigation strategy had failed to make us go away, and now they were looking at the high costs and high risks of proceeding to trial. I knew they would pay more than they were offering, even though I wasn't sure how much I could talk them up.

Once I figured out how to process what the other side was telling me, I had the confidence to handle the negotiations, And I was able to engage in the kind of give-and-take necessary to get the deal done. After that, I never again thought of myself as someone who didn't know how to negotiate.

This story came back to me as I was reading a book called The Art of Negotiation, by Michael Wheeler, a professor at Harvard Business School, who is also part of Harvard's well-known Program on Negotiation. I picked up the book after I had a chance to hear Wheeler talk at UCLA about his theories of negotiation. The book is filled with entertaining stories about buying houses and cars, and closing business deals. Wheeler teaches classes on negotiation, so he obviously believes students can learn about negotiation in a classroom. But he also understands that negotiation is more of an art than a science. His theme is about the importance of improvisation in negotiation: responding to the cues and information given by the other side It's about the attention, presence of mind, and creativity needed to succeed in negotiation.

In other words, the secrets of negotiation lie not so much in knowing how to parry and thrust against the other side's maneuvers to score the most points. In fact, Wheeler repeatedly emphasizes that pushing for the best possible deal is not necessarily to a negotiator's advantage. Sometimes an overly aggressive approach will cause the other side to walk away, and sometimes getting more than your fair share will end up costing you in the end.

Instead, being a good negotiator is more about being in tune with the needs and desires of the other side, the way that good jazz musicians or theatrical improvisers respond to what they hear from their counterparts. It's about having a plan and then throwing that plan out the window as soon as you encounter the unpredictable response of the other side. And it's about learning how to treat our adversary as a partner in a project that requires more collaboration than competition.

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Thursday, March 26, 2015

Patent litigation

Recently I attended a program on patent reform featuring representatives from both sides in the "patent troll" debate. Though there was disagreement on the nature and extent of the problem, most of the panelists seemed receptive to proposed solutions such as making it harder to get patents issued, imposing stricter pleading requirements, regulating demand letter practices, or allowing fee-shifting to discourage meritless litigation.

I wondered, however, whether increasing the size of the hurdles on the litigation track might in some cases only give parties new issues to litigate over. If the cost of litigation is what gives patent "trolls" leverage to demand settlements, then the solution might instead lie in reducing the cost of litigation. Maybe by streamlining procedures, restricting discovery, reducing motion practice, and limiting opportunities for other litigation activities that drive up costs, we could reduce the leverage of those who demand payment to avoid the high cost of litigation.

One of the panelists worked for a substantial tech company that has spent a lot defending itself against so-called "trolls." Even though he complained about the high cost of litigation, he seemed to take pride in his company's willingness to take a stand in these cases. I asked why, if we were interested in reducing the cost of litigation, would we want to create new issues to argue about in lawsuits. Instead perhaps we should consider taking some steps that would actually make litigation less expensive. Several members of the panel dismissed the idea. arguing that discovery, motions, and other litigation tools are necessary to smoke out and fight meritless lawsuits.

To my mind that suggests that those who are complaining about the size of the hole we have dug ourselves into are also involved in digging that hole deeper.

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Monday, January 05, 2015

Law and Movies

2014 wasn't much of a year for courtroom dramas, unless you want to count The Judge, which I really don't. That movie's only redeeming feature was the chance to watch two great actors, Robert Duvall and Robert Downey, Jr., ply their trade. Otherwise, the story was weak and the moral would make no sense to any criminal defense attorneys I know. There was, however, a cute recurring bit showing the lawyers throwing up on the way into court in the morning. A nice commentary on how even the best trial lawyers still suffer nervousness and stage fright.

Then the year was saved when I saw two terrific films this week with legal themes. First was A Most Violent Year, starring Oscar Isaac and Jessica Chastain, which is set in the rough and tumble heating oil business in New York City in the 1980's. They should show this movie in business school as well as in law school, because it provides a great illustration of the economics of unrestrained competition, as well as the limited power of the legal system to keep that competition from turning violent and destructive. The story concerns one man's drive to try to resist the forces that pull him toward becoming a gangster. He doesn't mind being a little crooked, but he strongly wants to avoid becoming a gangster. We also see how the legal system can sometimes be used to try to maintain a more civilized form of competition, but also as just another tool in the warfare between competing businesses. And how the legal system can become susceptible to corruption and power also.

Then there was Selma, about the marches that led to passage of the Voting Rights Act in 1965. There has been some controversy about the historical accuracy of parts of this movie, but I have to say that I don't have much patience with those kinds of criticisms. Selma is not a documentary, even though it does use some documentary footage in one part, and the filmmakers are entitled to whatever artistic license they feel they need for the sake of heightening the drama. The point of the movie, which it succeeds at brilliantly, is demonstrating the power of a social movement to create change. In the processs, the movie also puts Martin Luther King, Jr. front and center so that we can understand and feel the leader's personal struggle to balance the desire for change, the safety of his followers, his family's needs, and his sense of the most successful strategy for achieving the movement's goals.

What interests me as a lawyer, of course, is the role of the courts and the political system in the drama. The movie understandably puts the court proceedings somewhat in the background, except that the court case pops out somewhat unexpectedly at one point in the middle of a series of meetings and preparations. The movie offers a somewhat confusing portrayal of the aborted second march (based on the historical record, that day probably was very confusing), seeming to suggest that King obtained spiritual guidance that persuaded him to turn back. That may be true, but it is also true that he was thinking about the temporary restraining order he would have been violating by proceeding. Then we see the courageous Federal District Court Judge Frank Johnson (played by Martin Sheen) hearing a parade of witnesses before issuing an order that permitted the third march.

But it was the first march, the one that barely made it across the Edmund Pettus bridge before being met with horrific police violence, that shocked the nation, and probably did the most to impel Congress to pass the Voting Rights Act. I'm not sure I want to compare the situations in these two movies, but in both Selma and A Most Violent Year, it is violence that prods the legal system into putting the laws in place that ultimately bring a measure of justice needed to reduce that violence. And it is in both films the tension between the deliberate use or provocation of violence to achieve a party's goals, and the desire to use the law to create a more just and peaceful solution, that creates much of the thought-provoking drama. (interesting trivia: David Oyelowo appears in both films.)

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Sunday, November 23, 2014

Trials

The vast majority--more that 90%--of civil cases never go to trial. They are resolved by default, or by motion, or by negotiated settlement. And if by settlement, that happens between the parties themselves or with the court's assistance or by mediation. It's true that a lot of cases can be settled by raising the specter of trial as an unappealing alternative, but that specter is not going to materialize in most cases anyway, because eventually most parties in most cases are going to find a way to avoid trial. They have to, because the courts don't have time to try more than a tiny percentage of the cases that are filed, and because it almost always becomes apparent in most cases that it just doesn't make sense to try them.

The problem with our civil justice system is not that we have too many trials. The problem is that we have too few trials, and we have too much of all the other stuff that happens in litigation. If we had more trials, then more young lawyers would have the experience of knowing what is important when the case finally gets to trial, and they probably would waste less time filing every possible motion, or deposing every last witness, or fighting over every last document or interrogatory answer. Because what you learn when your case finally does get to trial is that most of that activity is of little use at that point. Those discovery motions you filed? You're probably not going to look at those. All those documents you obtained from the other side? You're only going to mark a few of them as exhibits. That monstrous motion for summary judgment? It's going to remain in its box for the duration of trial.

Years ago I pretty much gave up on filing discovery motions, and decided to do whatever I could to prevent the other side from filing them. I found that I can almost always obtain better results by negotiating the resolution of discovery disputes rather than taking them to the judge. Then recently I successfully took a case to jury verdict where of necessity and by design our side didn't file any motions of any kind, or take any depositions, or designate an expert, or even depose the other side's expert. After that experience, I'm thinking I should renounce most of those activities also. It turns out to be a lot easier to surprise a witness on cross-examination if you have never taken his deposition. And a lot more fun also. And it saves the client a lot of money. I'm not saying you can avoid discovery or contested motion practice in every case. You can't. Some of it is quite necessary and important. But most of it is not.

Maybe this should be the test for deciding whether to take a particular step in a lawsuit: is it likely to help resolve the conflict? In other words, is it something you really need if the case goes to trial, or is it something that will bring the parties closer to settlement? If you don't need it for trial (and you're probably not going to trial anyway), and if it's not going to help bring the parties closer to settlement, then why are you doing it? You might just be exacerbating the conflict rather than helping to resolve it.

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Thursday, June 12, 2014

Tesla patents

While not very impressive grammatically, the statement published today on Tesla's website that "all our patent are belong to you" might have some earthshaking consequences in the intellectual property world. Tesla has decided that in the interest of developing an electric car market and battery infrastructure, they will no longer bring patent infringement lawsuits against anyone using their electric car technology in good faith. Perhaps there is an element of "save the world" altruism in this gesture, as Tesla claims to be motivated by a desire to get all gasoline-powered vehicles off the road. And Tesla acknowledges that they themselves can't possibly build enough electric cars to accomplish that goal. But Tesla's new policy also seems like a remarkable recognition that the usual strategy of protecting intellectual property rights for the purpose of preventing competition or obtaining license revenue, might actually be counter-productive to Tesla's interest in building the electric car market, and creating the necessary support network of charging stations that will sustain it. Non-enforcement might be better for business.

Will Tesla's new stance cause other companies to re-think the value of enforcing their patent rights? Quite possibly if the patent-holder is, like Tesla, trying to expand the market for its products, and encourage the development of related technology. But even apart from that situation, some patent holders might well question whether the pursuit of patent infringement claims is worth the enormous cost and risk, and whether a more open approach to technology might better serve companies' business interests. Elon Musk's explanation of his company's new policy notes that receiving a patent often only buys you a ticket to a costly lawsuit, something that many other patent-holders have learned the hard way.

I'm not necessarily endorsing Tesla's new strategy for everyone, as it probably doesn't make sense for a lot of businesses, and I'm not sure whether it's good for my business either. But the question whether to pursue litigation to enforce or defend against intellectual property claims, as opposed to some other strategy, is always worth careful consideration for every business on either side of the issue.


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Thursday, June 05, 2014

Employment Claims and the DFEH

I heard a talk recently by Phyllis Cheng, the director of the California Department of Fair Employment and Housing ("DFEH"). Ms. Cheng walked through the process of resolving employment claims in the department. For cases not processed by issuing an immediate right to sue notice, the department offers numerous opportunities to steer those cases to a negotiated resolution, as opposed to a judicially or administratively determined outcome, and maintains a staff of 11 mediators for the purpose. In all, the number of cases resolved consensually far exceeds the number that the Department prosecutes.

Given the huge numbers of settlements, in contrast to adjudications, we should perhaps think of the DFEH not so much as a law enforcement agency, charged with putting teeth into statutory prohibitions against discrimination, but rather as a conflict resolution service offered by the government to assist parties in dealing with all manner of employment disputes.

That role also appears to flow naturally from the gradual expansion of the department's mandate. Over time, statutes prohibiting discrimination based on race, sex or religion have expanded their reach to embrace all manner of categories, including age, sexual preference, harassment, etc. Currently, the fastest growing category of cases, according to Director Cheng, is discrimination or failure to make accommodations for disabilities.

I have observed in my own practice of representing clients in employment disputes, that at bottom, many of these claims arise out of actual or perceived unfair treatment of an employee that doesn't necessarily fit comfortably within the law's pigeonholes. For example, an employee may have a personality clash with a supervisor, or feel victimized by some new management practice, but cannot simply file a complaint alleging that he or she was treated unfairly at work. The law only allows employees to seek redress for discrimination based on a recognized category. But the perception has gradually taken hold that there should be a remedy for any sort of harassment or unfair treatment at work, whether or not based on such a category.

Given the gradual expansion of categories of discrimination, a complainant can usually find some available legal "hook" on which to hang her complaint. Eventually the real cause of the dispute comes into play, because resolution of the discrimination claim requires the court or the agency or the parties themselves to talk about the claimed underlying unfairness or policy change or personality clash that actually caused the dispute. The difference is that in a lawsuit or administrative adjudication, the determination of whether an adverse employment action was taken for impermissible reasons is supposed to be dispositive, but in a consensual resolution, an employee's ability to prove that the employer acted for the wrong legal reason may be less important, thus giving the parties the ability to concentrate on their real grievances, whether or not they overlap with legal requirements. (Note that I am not arguing that discrimination has been eliminated, or that claims of discrimination are always pretextual. Discrimination remains a serious problem. What I'm saying is that claims of unfair treatment at work don't always include legally cognizable discrimination. Yet employees understandably feel aggrieved by any sort of unfair treatment.)

It seems that we are almost to the point--given the agency's predominant focus on alternative dispute resolution as opposed to adjudication--where the DFEH can deal with any type of workplace unfairness as long as the original complaint is appropriately labeled with a charge of discrimination to get it past the agency's door. The agency doesn't yet have an explicit mandate to deal with all types of workplace conflict, even though a lot of workplace conflicts that don't necessarily arise from legally cognizable discrimination are already sneaking through that door. But private resolution, either within companies' workplace grievance procedures, or outside them, does have that capacity.

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Tuesday, March 25, 2014

Penalties

Another Court of Appeal opinion in California reaffirmed the rule that penalty provisions in settlement agreements are not enforceable. In a settlement agreement entered in Purcell v. Schweitzer, the plaintiff agreed to accept payments totaling $38,000, but provided that in the event of a default, judgment in the full amount of $85,000 could be entered. Evidently hoping to make such a judgment enforceable, the settlement agreement also recited that the $85,000 "is an agreed upon amount of monies actually owed . . . and is neither a penalty nor is it a forfeiture." Further, the agreement set forth a host of reasons why an $85,000 judgment was reasonable, and barred the defendant from appealing or otherwise contesting this amount.

No dice, said the Court of Appeal. The additional amounts over and above the damages and interest resulting from breach of the settlement agreement, could not be justified, and the contractual language attempting to characterize these amounts as something other than a penalty was swept aside as contrary to public policy.

It is understandable that parties that agree to accept payment plans are interested in whatever measures they can impose to incentivize the paying party to make all of the payments on time. I expect they will continue asking for such provisions. Paying parties can feel fairly safe making those agreements first in the hope that they will actually be able to make all the payments on time, but second in the comfort of knowing that such penalties will probably be held unenforceable.

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