Apparently No One Likes AT&T's Arbitration Requirement, Including AT&T

Let me see if I understand this. In AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), decided by the United States Supreme Court in April, the Court held in a 5-4 decision that the Federal Arbitration Act preempted California's judicial rule prohibiting class-wide arbitration waivers, such as AT&T's, on the grounds they were unconscionable. So AT&T's position, endorsed by the Court, was that a consumer must (1) arbitrate, not litigate, his or her claim against AT&T; and (2) may not arbitrate as part of a class, but must do so as an individual.

The decision attracted a tremendous amount of commentary and analysis about its effect on the viability of class actions. For a sampling, here is a post by the firm of Morelli Ratner that collected ten of the best posts on the decision; a detailed discussion from the employer's perspective by Seyfarth Shaw's Workplace Class Action Blog; and this analysis by Daniel Schwartz at the Connecticut Employment Law Blog. So you get the idea.

Fast forward a few months, when a few hundred of AT&T's customers are attempting to arbitrate their disputes on an individual basis, just as the Supreme Court required. But now, AT&T claims – you guessed it – that those individuals should not be allowed to arbitrate their claims. 

According to this article by Reuters in yesterday's New York Times, AT&T has filed eight lawsuits directed at two law firms that AT&T claims are trying to derail its takeover of T-Mobile by organizing customers to file hundreds of demands for arbitration and notices of dispute (as required by AT&T's contract). AT&T claims that the law firms are hoping that an arbitrator in one of the arbitrations will rule that the takeover cannot take place, although there is some question as to whether an arbitrator in an individual arbitration would have that authority.

I don't know all the districts where AT&T filed its lawsuits, but here is one that was filed in the Southern District of New York.  AT&T Mobility LLC v. Gonnello, et al., Civil Action No. 1:11-CV-05636 (S.D.N.Y. August 12, 2011). The complaint seeks injunctive and declaratory relief against five individual defendants.

AT&T is extremely frustrated that its own arbitration-only requirement is being used against it:

Although the claim [for arbitration] is meritless, the Bursor and Faruqi [law] firms are hoping that thousands of "bites at the same apple" will turn up just one arbitrator willing to entertain it—and that [AT&T Mobility] will hedge against that risk by entering into an extortionate settlement.

I think it's unlikely that an arbitrator will rule that AT&T cannot pursue its takeover of T-Mobile; that's the sort of decision that would need to be made in another forum, whether it's the Federal Communications Commission, the Department of Justice's Antitrust Division, or various state regulators. But it's ironic – and more than a little satisfying – that AT&T is so vigorously fighting the effect of the very agreement that AT&T went all the way to the Supreme Court to enforce against its customers.

WV Supreme Court Clarifies "Alternate Forum" Requirement in Doctrine of Forum Non Conveniens

Late in its January Term, the Supreme Court of Appeals of West Virginia issued a decision dealing with the well-known, but somewhat misunderstood, or at least misapplied, doctrine of forum non conveniens. In essence, the doctrine allows a court to decline to assert jurisdiction over an action before it if another, more appropriate forum exists for its resolution.

In Mace v. Mylan Pharmaceuticals, Inc., 2011 WL 2446644 (W.Va., June 16, 2011), Kathy Mace, a North Carolina resident, died on October 25, 2005, allegedly due to an overdose of fentanyl, a narcotic pain medication. Her personal representative filed suit in Monongalia County, West Virginia on October 1, 2008 against Mylan Pharmaceuticals, Inc.,  Mylan Technologies, Inc., and Mylan, Inc. The first two are West Virginia corporations, while the third is a Pennsylvania corporation. 

Ms. Mace's estate alleged that the Mylan defendants were responsible for designing, manufacturing, marketing, and distributing the fentanyl pain patch, and alleged claims for strict products liability, negligence, breach of implied and express warranties, and punitive damages.

Apparently, Ms. Mace's estate sued a California generic drug manufacturer for her death, and learned through that litigation learned that the Mylan defendants actually manufactured and distributed the fentanyl patch. But by the time the estate filed suit in West Virginia, the two-year statute of limitations for wrongful-death claims had expired. (North Carolina also has a two-year statute of limitations for wrongful-death  claims, which will feature prominently in the court's decision.)

The Mylan defendants moved to dismiss on the grounds on the grounds of forum non conveniens, and argued that North Carolina was the appropriate forum for the lawsuit because Ms. Mace lived there, wore the patch there, and died there, and that the patch was shipped to North Carolina from Mylan's plant in Vermont.

Ms. Mace's estate argued that because West Virginia permits tolling the statute of limitations based on the discovery rule, while North Carolina does not, the estate could not pursue the lawsuit in North Carolina unless the Mylan defendants waived their statute of limitations defense. Absent that waiver, North Carolina was not available as an alternative forum for the lawsuit.

The Circuit Court of Monongalia County dismissed the lawsuit on December 16, 2008 based on forum non conveniens, and found that North Carolina was an alternate forum in which the Mace estate could bring the action. The court also found that the Mylan defendants had agreed to consent to and not contest personal jurisdiction in North Carolina and would waive their statute of limitations defense.

But apparently the Mylan defendants did not remember it that way. A couple of months later, they moved to amend or clarify the order on the grounds that they had agreed to waive any new statute of limitations defense, but maintained that they should be able to assert the defense as to the estate's West Virginia action. In response, the estate moved to reinstate the case in circuit court on the grounds that if the Mylan defendants obtained their relief, the case could not go forward in North Carolina, as that statute of limitations had expired before the lawsuit had been filed in West Virginia. 

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The Honorable M. Blane Michael 1943-2011

The Honorable M. Blane Michael, a judge on the United States Court of Appeals for the Fourth Circuit and one of the most illustrious members of  West Virginia's legal community, died yesterday. Here is the story in the Saturday Gazette-Mail and his biography on the Fourth Circuit's website. The Washington Post has this story from the Associated Press.

Judge Michael received his undergraduate degree from West Virginia University, where he was student body president, and got his law degree from New York University. To say he then enjoyed a varied and interesting career is an understatement.

Following his graduation from law school in 1968, he was in private practice in New York City, then served as an AUSA for the Southern District of New York.  He came back to West Virginia in 1972, where he was an special AUSA for the Northern District of West Virginia. He was in private practice in Petersburg, West Virginia from 1973-75, then clerked for Judge Robert Maxwell of the Northern District of West Virginia from 1975-76. Judge Michael became counsel for Governor Jay Rockefeller in 1977 and served in that position until 1980. He returned to  private practice in Charleston with Jackson Kelly PLLC  from 1981 until 1993, when President Clinton nominated him to the Fourth Circuit. Judge Michael received his commission on October 1, 1993.

During one my summers while in law school (in the early 1980s), I interned in a congressional office. Judge Michael was suggested to me as someone who could provide some advice or direction on how to combine a legal career with an interest in politics. Even though I didn't know him, I called him. While I remember that his advice was that working in a governor's office offered the best opportunity to combine the two, what I remember much more was his willingness to talk to and assist someone whom he didn't know. Even though I didn't follow that career path, I have never forgotten his kindness in talking to me.

I invite anyone who wants to share a memory or reminiscence of Judge Michael to leave a comment. 

Corrected Links for February 26, 2011 Post

The link to the National Law Journal article referenced in yesterday's post may require you to register for the site, which is free, rather than take you to the article. This link should work.

Also, the alleged link to the Kentucky Court of Appeals' docket sheet takes you to the court's site, where you can search for information.If you want to review the docket sheet, you can enter any of these case numbers and be taken there: 2007, CA-001971; 2007-CA-01981; 2007-CA-002173; and 2007-CA-2174.

Sorry for the confusion.

Kentucky Appellate Court Reverses Summary Judgment Against Fen-Phen Lawyers Based on (Disavowed) Affidavit from Kenneth Feinberg

In the course of writing about Stan Chesley's travails, I was curious to find out what happened in the case described in the final paragraph of the National Law Journal's story about Chesley:

Earlier this month, the Kentucky Court of Appeals vacated a $42 million summary judgment in favor of the 431 fen-phen plaintiffs against Chesley, Cunningham, Gallion and another attorney in the case. The court said that the lawyers had presented an issue of triable fact regarding their handling of legal fees. The decision came after Kenneth Feinberg retracted an affidavit supporting the attorneys' position. Feinberg is the attorney presiding over the BP oil spill settlements.

Here is the Kentucky Court of Appeals' decision in Cunningham v. Abbott, 2011 WL 336459 (February 4, 2011, Ky. App.), which, as the article described, relied on Feinberg's affidavit in reversing the Fen-Phen plaintiffs' summary judgment against their counsel, Chesley, Shirley A. Cunningham, Jr., William J. Gallion, and Melbourne Mills, Jr., and vacated the damages award.

Feinberg, in addition to administering claims resulting from the BP oil spill, is an expert in mass torts and served as special master of the September 11th Victim Compensation Fund.

The opinion explains that Feinberg provided a seventeen-page affidavit on behalf of the lawyers in opposing summary judgment, in which he stated:

In my opinion, the case was handled properly and ethically. I have seen nothing that credibly suggests any misconduct by the attorneys or any inappropriate action by the judge who presided over the case. It appears that the instant action against the plaintiffs' attorneys in Guard is based on nothing more than misinformation or lack of understanding of the procedures involved in class action or common fund or aggregate mass tort settlement.

The Kentucky court ruled that Feinberg's affidavit "was sufficient to create genuine issues of material fact" and reversed the summary judgment in the Fen-Phen plaintiffs' favor.

There's just one problem: according to this story by Louisville Courier-Journal reporter Andrew Wolfson, Feinberg testified last September in a separate disciplinary action against Chesley that almost everything he knew about the case came from Gallion (one of the plaintiffs' attorneys) and that if he had known about the extent of the lawyers' misconduct, he "would have thrown [his] affidavit in the waste basket."

The article says that Angela Ford, who represents the plaintiffs, will appeal the decision to the Kentucky Supreme Court, relying on Feinberg's disavowal of his affidavit. I thought the comment from James Shuffett, Melbourne Mills, Jr.'s lawyer was interesting. He said that Feinberg's renunciation was irrelevant because it occurred three years after the trial court had ruled against the lawyers.

Shuffett may be correct on the chronology -- the trial court granted summary judgment on March 8, 2006 and it appears that Feinberg first renounced his affidavit in September 2010 -- but it ignores -- perhaps understandably -- the effect of the affidavit on the appeal. According to this docket sheet from the Court of Appeals for one of the cases referenced in the opinion, the appeal was argued on June 18, 2009, so the renunciation, which occurred while the court was considering the appeal, could have been very relevant to the Court of Appeals.

I leave it to people smarter than me to figure out how (the why is fairly obvious) Cunningham et al. ever thought they could ethically and practically justify taking so much in fees from their clients or why someone of Feinberg's reputation would even get involved in the mess. (Apparently, Gallion promised him a $50,000 fee for his work, but never paid up, and Chesley ended up paying Feinberg $10,000.)

"Master of Disaster" Faces Possible Disbarment for Role in Kentucky Fen-Phen Settlement

Over the next few posts, I want to follow up on some earlier posts and also talk about Supreme Court of Appeals decisions that, for one reason or another, I have overlooked.

You may remember that a couple of years ago, as a result of criminal charges that a trio of plaintiffs' lawyers took an extra $65 million from the settlements of 440 plaintiffs they represented in Fen-Phen litigation, two of the lawyers, Shirley A. Cunningham, Jr. and William J. Gallion, were found guilty and were sentenced to 25 years and 20 years, respectively, in federal prison. The third lawyer, Melbourne Mills, Jr., was acquitted. (To make matters worse -- if that's possible -- Joseph A. Bamberger, the Kentucky state court judge who approved the settlement, including the outrageous attorney's fees -- and also benefited financially from the settlement in a secret deal -- resigned in 2006 rather than be removed from the bench.)

Now it looks like the Fen-Phen attorney's fee scandal may claim one more, and perhaps its highest-profile, victim: Stanley M. Chesley, the so-called "Master of Disaster" and name partner of Cincinnati law firm Waite, Schneider, Bayless & Chesley.

Chesley, as co-counsel with Cunningham, Gallion, and Mills, received a $20 million fee for his help in settling the case, including an additional $4 million for convincing Judge Bamberger to increase the attorneys' take of the settlement to 49%.

Until now, Chesley's role had not received the scrutiny that the others' had. But today's reports that a Kentucky trial commissioner recommended on Tuesday that Chesley be permanently disbarred because his actions were basically "a cover-up of thievery," and that he be required to disgorge $7.5 million of his fee.

According to this article in today's online National Law Journal, Chesley has retained experienced appellate and criminal defense practitioners to represent him in his appeal of the trial commissioner's recommendation.

Chesley is admitted to practice in Kentucky and Ohio, so any disbarment in Kentucky would likely trigger the same discipline in Ohio, and render him unable to practice in any jurisdiction.

By the way, Chesley is married to Susan J. Dlott, who is a judge for the United States District Court for the Southern District of Ohio, so his possible disbarment must make for interesting dinner conversation.

Huffington Post Lawsuit Shows Why You Have to Assert Claims on a Timely Basis

Chances are you've visited or at least heard of The Huffington Post, the eponymous blog and news-aggregation site started by Arianna Huffington and others, which has expanded to include in-depth coverage on an ever-growing number of subjects.

In the February issue of Vanity Fair, William D. Cohan writes about a dispute over who is responsible for the success of HuffPost, which Cohan says is worth an unconfirmed $350 million, based on projected 2011 revenues of $60 million.

The background is that Democratic political operatives Peter Daou and James Boyce maintain that they were involved in the creation and development of HuffPost, along with Huffington and Ken Lerer, who provided financing for the site, but never received any credit or equity or compensation for their efforts, particularly after HuffPost became so successful. Both continued to write for the site, however, which started in 2005.

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WV Supreme Court Provides Additional Information Online, Will Address Scope of Nursing Homes' Arbitration Provisions

In my post from a couple of weeks ago about the implementation of the Revised Rules of Appellate Procedure at the Supreme Court of Appeals, I neglected to mention a couple of other changes.

First, you'll see on the calendar that in addition to the links for argument dockets, there are now links to Order Lists, which are released at various times during the month. Here is the Order List from January 14, which indicates the Court's rulings on petitions for rehearing, motions for argument in Rule 19 and 20 appeals, and other orders of note. The order may indicate the vote, if one was taken, and a summary of the Court's action, if appropriate.

Also, on the main Opinions page of the Court's website, in addition to the link to Current Term Opinions, there are now separate links to Orders (the Order Lists described above) and Memorandum Decisions.

Also, in what could be a significant decision regarding the interpretation and enforcement of arbitration provisions -- especially for health care providers -- I note that on the argument docket from January 19, the Court consolidated for argument under Rule 20 three proceedings (two separate appeals and a certified question) involving circuit court rulings that enforced arbitration provisions and dismissed the plaintiffs' complaints against nursing homes and/or nursing home operators.


Virginia Federal Court Declines to Apply Ashcroft v. Iqbal to Defendant's Pleading

H. Scott Johnson, Jr., one of the authors of the Virginia Business Law Update, wrote last week about a recent Virginia federal court decision which held that Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009), does not apply to a defendant’s affirmative defenses. Iqbal, you will recall, is the United States Supreme Court's decision that "requires that allegations in a claim for relief include enough factual matter, taken as true, to plausibly suggest an entitlement to relief." For some background, I refer you to this post on Iqbal's holding and this one on the Fourth Circuit's application of Iqbal.

In denying the plaintiff's motion to strike the defendant's affirmative defenses in Lopez v. Asmar's Mediterranean Food, Inc., 2011 WL 98573 (E.D.Va. 2011), Senior Judge James C. Cacheris of the Eastern District of Virginia found that because Rule 8 of the Federal Rules of Civil Procedure requires only that a defendant "state in short and plain terms its defenses to each claim asserted against it[,]" such a requirement does not invoke the Iqbal standard applicable to complaints.

Judge Cacheris acknowledged that every other district court in the Fourth Circuit that has ruled thus far has held that Iqbal's requirements apply equally to a plaintiff's complaint and a defendant's defenses, although he also pointed out that no appeals court has yet ruled on the question.

Footnote 3 of Judge Cacheris' opinion, which identifies the Fourth Circuit district courts that have held that Iqbal applies to defendants as well as plaintiffs, does not include any West Virginia courts.

Revised Rules of Appellate Procedure in Effect at WV Supreme Court

Yesterday was the first day for arguments before the Supreme Court of Appeals of West Virginia under the Revised Rules of Appellate Procedure that went into effect on December 1, 2010. The revised rules govern appeals from final judgments entered by a circuit court on or after December 1, 2010 and petitions for extraordinary relief filed with the Supreme Court on or after December 1, 2010.

If you look at the Court’s docket, you will see some of the changes effected by the revised rules. First, the Court now indicates whether an appeal is argued under Rule 19 (appeals that involve, for example, an allegation that the trial court abused its discretion or erred in applying settled law) or Rule 20 (appeals that involve, for example, cases of first impression or cases involving questions of public policy).

Next, appeals are allotted amounts of time, typically 10 minutes per side for Rule 19 appeals and 20 minutes per side for Rule 20 appeals. Under the prior rules, arguments in specific appeals had no set duration. Arguments began at a specified time – usually 10 a.m. – and continued until the Court finished its docket that day.

Finally, there are no more motion dockets, i.e., the Court no longer hears oral presentations of petitions for appeal. Under the revised rules, the Court reviews the parties’ briefs, then determines which appeals to hear and schedules them for argument.

In addition to its other materials, the Clerk’s office has also posted this guide to preparing an appeal from a circuit court order using the revised rules, which will be the most common type of appellate proceeding for most practitioners. A sample petitioner's brief is also provided.