Jonathan B. Wilson

Legal Resources
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Jonathan Wilson is an Atlanta attorney with more than 19 years of experience guiding growing private and public companies.  He currently serves as the outside general counsel of several companies and is the former general counsel of (NASDAQ: WWWW) and EasyLink Services (NASDAQ: ESIC).  He is also the founding chair of the Renewable Energy Committee of the American Bar Association's Public Utility Section.

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Friday, September 30, 2005

No Private Right of Action Under SOX
A federal judge has dismissed the claims of a putative class against a corporation and its officers and directors under Section 304 of the Sarbanes-Oxley Act, ruling that the statute does not include a private right of action.
The principle will be an important one to corporations.  SOX imposes a host of previously-unheard-of obligations on corporations, directors and officers.  If each of those new statutory obligations provided the basis for a private right of action, publicly traded companies could be awash in litigation.
7:00 am edt 

Langone v. Spitzer
Ken Langone, the former chair of the compensation committee of the NYSE's board of directors, is a defendant in a civil suit brought by New York Attorney General Eliot Spitzer, claiming that Langone mislead committee members into approving the generous pay package granted to the NYSE's CEO, Dick Grasso.
Langone skewers Spitzer's case in today's WSJ, citing the deposition testimony of the members of the compensation committee that they were not mislead and received abundant information about Grasso's pay package, market compensation comparisons and other data. 
A public response like this, trying to embarass the AG into dropping the case or settling is not unusual.  What is unusual is the AG's suit itself
Spitzer is not accusing Langone of committing any crime and if Spitzer succeeds Langone will not go to jail or pay any fine to the State of New York.   Rather, any recovery against Langone would be paid to the NYSE, a not-for-profit corporation certainly, but one that also has the wherewithall to litigate its own claims.
What duty does the New York Attorney General have to pursue to private rights of action of the NYSE?  While Spitzer may have the legal standing to pursue these claims, as a matter of prudence and judicial economy it would seem more efficient to let private litigants try their own cases.  The NYSE is not an impoverished class member, unable to fend for itself and requiring the state to act on its own behalf.
The only explanation is that executive compensation, and the admittedly generous $187 million package earned by Grasso, makes for salacious journalism and is the stuff by which populists score points.  A smart man with obvious political ambition, Spitzer saw the Langone suit as an opportunity to grandstand to voters.
Langone's PR efforts will try to educate voters that their tax dollars are paying for Spitzer's shot at celebrity. 
6:51 am edt 

Thursday, September 29, 2005

Analysis of Georgia Offer of Judgment Case

Gwinnett County Superior Court Judge Michael C. Clark struck down the offer of judgment provisions added to Rule 68 by the 2005 Georgia tort reform bill. 


The decision, clearly written for further review, is the first case to assess the constitutionality of Georgia's Rule 68.


Judge Clark's decision advances three primary arguments:


1)         The offer of judgment provisions in Rule 68 are unconstitutional under Georgia’s Constitution because they “effectively chill “the right to prosecute or defend” a cause of action in the courts of this state – a right that is secured and protected from legislative interference by Art. I, Sec. 1, para 12 of the Constitution of the State of Georgia.”


2)         Rule 68 applies to tort plaintiffs only, and not to plaintiffs with contractual rights of action, thereby violating Georgia Constitutional rights of equal protection.  Ga. Const. Art. I. Sec. 1, para 2. 


3)         The 2005 tort reform bill has a retroactive effect, applying to cases filed before the adoption of the law, and therefore violates Georgia Constitutional prohibitions against “retroactive laws”.  Ga. Const. Art. I. Sec. 1, para 10.


While space will not permit a full analysis here, a few points bear mentioning.


The decision's analysis of the "access to the courts" clause of the Georgia Constitution is weak, relying primarily on dicta in an 1879 Georgia Supreme Court case to conclude that any rules that place a burden on litigants unconstitutionally limits their access to the courts.


The dicta in the 1879 case of Tift v. Towns (63 Ga. 237) makes for interesting reading:

 “No counsel fees ought to have been allowed by way of damages.  The case is one fairly open to controversy in all its branches.  The plaintiff commenced by insisting upon too high a standard both of liability and compensation.  The defendant has had to resort to this court for protection in a previous instance and again on the present occasion.  No man is bound to forego litigation at the expense of yielding rights apparently well founded, much less those which prove to be so founded in the end.  Where there is a bona fide controversy for the tribunals to settle, and the parties cannot adjust it amicably, there should be no burdening of one with the counsel fees of the other, unless there has been wanton or excessive indulgence in litigation.”

 What makes the court's citation of Tift v. Towns interesting is that the case reversed a trial court's judgment that included an award of attorneys' fees in favor of a plaintiff.  The dicta cited above supported the defendant's recourse to litigation, ruling that the plaintiff's demands were unreasonable and that the defendant should not be taxed with attorneys' fees simply because he resisted the plaintiff's unreasonable demands.


The facts in Muenster v. Suh, of course, are precisely opposite.  The plaintiff in Meunster refused an offer of judgment from the defendant that ultimately proved to be more generous than what the jury awarded.


The 2005 amendment to Rule 68 allowed the defendant to recover its attorneys fees, expressing the legislature's view that a party who is willing to settle a case should not be burdened by litigation when that party offers a judgment that is 25% more generous that what the plaintiff was ultimately capable of recovering at trial.


This story is just beginning as other courts will offer their views on Rule 68 and the Georgia legislature is likely to re-write the law again in the coming 2005-2006 session.
10:25 am edt 

Tuesday, September 27, 2005

Georgia Judge Strikes Down Offer of Judgment Law
After barely seven months on the books, Gwinnett County Superior Court Judge Michael C. Clark has struck down Georgia's offer of judgment reform statute (O.C.G.A. 9-11-68), reasoning that it is unconstitutional under the Georgia State Constitution for restricting the access of individual litigants to the courts.  (Fulton County Daily Report, Sept 27, 2005 (sub); Decision). 
5:35 pm edt 

Ferguson Fries Lockyer
Columnist Andrew Ferguson burns California AG Bill Lockyer to a crisp in a criticism of Lockyer's french-fry labeling suit. 
(Past coverage: Ted Frank, Aug. 29.  These pages: Aug. 29, Aug. 30). 
12:23 pm edt 

High Gas Prices, Low Gas Prices, Just Blame Bush
Maria Cantwell blames Bush and the Republican Party for failing to stop price-gouging and high gas prices.   She has authored a bill that would make it a crime for gas prices to rise unexpectedly. 
The AJC's Cynthia Tucker blames Bush and the Republican Party for trying to lower gas prices.  She says it's a "spectacular failure of leadership" that Bush and Republican allies have failed to allow gas prices to rise unexpectedly.
Oh whatever!.  It's all Bush's fault. 
7:32 am edt 

More on Frivolous Inmate Lawsuits
Ted Frank picks up the story on frivolous inmate litigation over at PointOfLaw as he recounts tales of imprisoned members of the Aryan Brotherhood using litigation and civil subpoena powers to exert control over gang members, hold leadership meetings and intimidate rivals. 
7:24 am edt 

Monday, September 26, 2005

Colorado Trial Lawyers Recycle Hoax Stories
The newest president of the Colorado Trial Lawyers Association, Murray Ogborn, is recycling long-discredited hoaxes about the prevalance of frivolous litigation. 
Ogborn is claiming that "propaganda" circulated by "big business and insurance companies" is frightening juries and legislators into thinking there is a problem with excessive lawsuits. 
As "examples" of the propaganda he cites the hoax stories of the man who trims his hedge with a lawn mower and the man who put his recreational vehicle on cruise control.
Past coverage has described that neither of these incidents ever happened and is ever cited by responsible writers as evidence supporting the need for tort reform. 
Update: Links to "urban legend" coverage on OverLawyered.



11:16 am edt 

Michigan Newspaper Sides with Trial Lawyers
A Michigan paper has editorialized in favor of changing Michigan's drug manufacturer shield law which effectively immunizes drug manufacturers from suits based on "inherently dangerous" properties of drugs where the FDA has approved the drug for sale.
At issue is the ability of trial lawyers to sue Merck over Vioxx claims in Michigan.
10:53 am edt 

Category 5 Lawsuits
Today's WSJ takes aim at the Mississippi AG's lawsuit to invalidate flood exclusion clauses after Hurrican Katrina.  (Past coverage: Sept. 24)
9:40 am edt 

Sunday, September 25, 2005

Chick List
Melanie Kirkpatrick takes a look at the female judges who might be named to replace Justice O'Connor
3:25 pm edt 

The Education of Maria Cantwell
Maria Cantwell, a Democratic Senator from Washington, has joined the chorus of opportunistic politicians clamoring for legislation to curb what they call "price gouging" in gasoline in the wake of hurricane-induced shortages. 
"We need to make price gouging illegal," Cantwell said Wednesday. "We need to make sure that there is a federal price-gouging law on the books, so that in times of national emergencies, oil companies aren't tempted to rake in outrageous profits."   
Cantell has authored a bill (S. 1735, Energy Emergency Consumer Protection Act of 2005) that would make gasoline price-gouging a crime.  The bill allows the FTC and state attorneys' general to prosecute situations where (a) the price of gasoline after an emergency is substantially higher than it was before the emergency or (b) the price of gasoline at one retailer is substantially higher than it is at another retailer.
Cantwell's bill is only one of many as price-gouging legislation allows politicians to pretend like they're doing something about high gas prices without making any of the difficult decisions a real solution would require.
Cantwell and others on the anti-gouging bandwagon also display an appalling ignorance of basic economics in their screeds against high gas prices.  (Walter Olson, Sept. 22
Gasoline prices jumped after hurricane Katrina (and again in anticipation of hurrican Rita) because the U.S. gasoline refining capacity is strained and there are bottlenecks in the U.S. supply system.   
This should be no surprise to anyone who has paid attention to the industry in the past few years.  Numerous studies have documented our lack of refining capacity and have warned of coming price surges. 
Over the past five years there have been several occasions where regional events (a burst pipeline; a refinery fire) have induced temporary price spikes because our system for refining and distributing gasoline is very fragile.  As a result, the U.S. is currently importing not just oil, but refined gasoline from Canada and Europe.  The price of gasoline, while high, is not as high as it was during a price spike in 1981 (after adjusting for inflation).  While prices have risen steadily since 1998, average vehicle fuel efficiencies have remained constant.
The system is so fragile, and operates near capacity even in normal times, that when any part of the system breaksdown, shortages spread rapidly throughout the U.S.  Anyone who stayed awake during the first week of Economics 101 will recall that, when demand is constant and supply decreases, price rises.  This is the phenomenon that Canwell calls "price-gouging". 
"Oil barons are making $200 million a day in profits," she said. "There is absolutely no reason for gas to go up in Washington as the result of a hurricane."  Perhaps Cantwell needs to enroll in a nearby community college for a refresher. 
What makes her ignorance, and the ignorance of those other politicians who have taken up this cause, so shocking is the potential damage she can cause through her legislation.
Retailers who fear possible prosecution from price-gouging legislation have only a few choices available.  They can exit the industry, they can increase prices to generate the funds they will need to defend themselves, or they can adopt accounting procedures that will allow them to put on the affirmative defense they will need if they are prosecuted.  Each of these choices, of course, adds cost to the system and puts pressure on retailers to increase the price of gasoline.
Cantwell's righteous indignation is a dangerous thing.  While grandstanding to the uninformed and railing against "oil barons" she is actually making the problem worse. 
8:16 am edt 

Saturday, September 24, 2005

Legal Disaster Follows Natural Disaster
Walter Olson confronts Mississippi Attorney General Jim Hood's suit to invalidate the standard clause in homeowner insurance policies that bars claims for flood damages in today's Wall Street Journal. 
The flood insurance exclusion, upheld in numerous decisions and in force in each of the 50 states, means that insurers in Mississippi will pay out only $40-60 billion in claims.  If Hood's suit prevails, and insurers are forced to pay claims they never bargained for, their exposure will skyrocket, possibly bankrupting the industry in that state. 
Olson, a well-known critic of plaintiffs' lawyers and the political connections that help them generate extortionate settlements like the $246 billion tobacco settlement, notes the political relationship between the Mississippi AG and well-known plaintiffs' lawyer and Mississippi native Dickie Scruggs. 
Olson quotes Scruggs from another article to say of the suit, "I'd rather see an insurance company go broke than the tens of thousands of my friends and neighbors in Mississippi, Alabama, and Louisiana go bankrupt."
Insurance companies are sometimes their own worst enemies, failing to pay legitimate claims and generating resentment from policyholders who suffer losses.  Those tactics may leave insurers with little goodwill to fall back upon when they are attacked on illegitimate grounds like those in the Hood suit.
But what really chaps Olson's briefcase is the symbiotic relationship between certain politicians and the trial lawyers, with the lawyers providing campaign financing and the politicians providing opportunities for the lawyers that the law shouldn't provide.
If plaintiffs' lawyers like Scruggs were left to their own devices they would have to try numerous cases against insurers.  Each one would be decided on its own facts and the law.  To some of us, at least, that sounds like justice.
If Hood's suit prevails, the State of Mississippi will, by judicial fiat, alter the basis of the bargain struck by insurers with thousands, perhaps millions, of individual homeowners.  The insurers will be left, like fish in a barrel, for Scruggs and other plaintiffs' lawyers to land.
7:48 am edt 

Friday, September 23, 2005

A Conservative Vision of Social Justice
British MP Iain Duncan Smith and Pennsylvania Senator Rick Santorum describe a new vision of conservative social justice in today's Wall Street Journal:
Conservatives on both sides of the Atlantic and beyond are charting a new vision of social justice. It recognizes that the problems caused or aggravated by the growth in government cannot be corrected by a crude reduction in its size. Policy must also deliberately foster the growth of what Edmund Burke called "the little platoons" of civil society: families, neighborhood associations, private enterprises, charities and churches. These are the real source of economic growth and social vitality.
* * *
Addressing these social problems that have worsened over many decades will take years. "The most important of all revolutions," Burke wrote, is "a revolution in sentiments, manners and moral opinions." Yet we believe that social-justice conservatism can produce societies that are more humane than anything liberalism could accomplish. As we build a conservative alternative--a vision informed both by idealism and realism--we have evidence, experience and common sense on our side.
1:15 pm edt 

Convicted Rapist Sues Victim
Connecticut Attorney General Richard Blumenthal is seeking an injunction to prevent convicted rapist, Allen Adgers, from using legal process to harass his victim.
According to the AG, Adgers, 41, who is serving a 13-year prison sentence for kidnapping, raping and assaulting his victim, has initiated at approximately two dozen lawsuits in the last four years against judges, prosecutors and even the victim in his case.
As part of the litigation, Adgers has used civil subpoena powers to force his victim to answer questions, using the opportunity to ask her about her past sexual experiences, bra size and other personal details. 
Sadly, this is not an isolated story as our legal system contains few constraints to prevent abusive litigation of this sort.  (Past coverage)
8:13 am edt 

Thursday, September 22, 2005

Not Horsing Around
A federal jury returned a verdict for the defense in a personal injury case filed by an off-duty Boston police officer against a mounted Massachusets state trooper.
The plaintiff claimed he was injured when the trooper caused his horse to head-butt him outside a New England Patriots game in 2001, resulting in five months of missed work, headaches and dizziness.  The defendant trooper claimed he did not intentionally cause the head-butt and that the plaintiff was drunk and had jay-walked, leading to the horseplay at issue. 
(Cross-posted at PointOfLaw)
11:12 am edt 

Wednesday, September 21, 2005

More Katrina Litigation
A group of fishermen has filed suit against a handful of oil companies, alleging they are responsible for oil spills occuring during the hurricane and that the oil spills have harmed their ability to commercially fish in the Gulf of Mexico.
According to local news reports, there are now five class actions involving oil companies for Katrina-related claims. 
Jim Porter, President of Louisiana Mid-Continent Oil and Gas Association, said of the suits:
"People have died. Lives have been changed. Property has been destroyed. Yet, a group of trial lawyers are using this disaster, not as a reason to help the people of this state, but instead to further their own personal agenda." 
7:30 am edt 

ALEC Opposes Absestos Reform Act
The American Legislative Exchange Council, which describes itself as an "association for conservative state lawmakers who share a common belief in limited government, free markets, federalism, and individual liberty" has issued a report claiming that the Fairness in Asbestos Injury Reform Act of 2005 is "fundamentally flawed."
According to the press release, the reform bill fails to set aside enough money in trust to cover anticipated claims, leading to its own insolvency in three years or less. 
(Cross-posted from PointOfLaw)
7:13 am edt 

Tuesday, September 20, 2005

A New Energy Policy
Pete DuPont writes persuasively in the Wall Street Journal on our need to develop a new energy policy that allows for the development of new refineries, the recovery of oil and natural gas from untapped resources, and the creation of additional nuclear power plants. 
12:47 pm edt 

Confirming Roberts
IT WILL BE A DAMNING INDICTMENT of petty partisanship in Washington if an overwhelming majority of the Senate does not vote to confirm John G. Roberts Jr. to be the next chief justice of the United States.  - Los Angeles Times
12:37 pm edt 

Sunday, September 18, 2005

Senate Committee to Investigate Environmental Litigation
The Senate Environment and Public Works Committee  is beginning an investigation into the impact of environmental groups' lawsuits against the U.S. Army Corp of Engineers.  Recent coverage in the wake of Hurricane Katrina had speculated that such litigation might have hampered efforts by the Corp to maintain and extend levees that might have prevented the flooding.
Environmental groups were quick to voice their outrage over the investigation, accusing Republicans of using the disaster as an excuse to attack them. 
The investigation is entirely appropriate and long overdue.  Litigation, even when unsuccessful, has an impact on the activity being challenged.  While it remains to be proven, it is within the realm of possibility to imagine that sustained litigation against levee projects had an impact on the Corp's workplan in the Mississippi delta.  (Overlawyered,  Clarion Ledger, Sept. 17.,  Washington Post., Sept. 17 )
7:49 am edt 

Saturday, September 17, 2005

In Another Age Roberts' Confirmation Would be Unanimous
Watching Senators interrogate John Roberts this week, we kept wondering: Could all eight Democrats on the Senate Judiciary Committee really vote against someone with so much experience and legal acumen? Apparently they might, and if that happens it'll say far more about the state of our judicial politics than about Judge Roberts. Nowadays, Oliver Wendell Holmes would struggle to get Democratic votes.
It was indeed mind-boggling to see how little the opposition had left when Roberts was done with their questions.  Roberts displayed a mastery of Supreme Court precedents and a preternatural ability to stay calm in the face of obnoxious personal attacks.  If he ever finds himself in private practice again, Roberts will not want for lack of clients.
But what end-game does the opposition seek?  They can't stop his nomination now.  Those few Democrats who vote against his nomination only guarantee themselves a loss.
Senate Democrats came at him fast and angry the first day, with the usual litany of charges that he was opposed to the rights of women, minorities, the poor, the environment, seniors, the disabled, et cetera. But Mr. Roberts so clearly rebutted the charges that by day two the Senators were barely hanging around to listen to anyone's questions but their own. On IQ points alone, it wasn't a fair fight.
It's rare that these confirmation fights are so unbalanced, but this is a rare nomination. 
On the coming vote, Democrats are conflicted. They know they can't beat Judge Roberts, but their interest groups are shouting at them to vote "no" anyway. They want a strong opposition vote to intimidate President Bush into believing that his next nominee will be defeated if he or she is a genuine conservative. On the other hand, some Democrats feel they'll be in a stronger position to oppose the next nominee if they can show they voted for this one.
As the WSJ concludes, the object lesson for the President is that there is no substitute for hard-earned and widely-acknowledged competence.  Even those who disagreed with Roberts on the issues were forced to concede that he was scholarly, sincere in his beliefs, well-meaning in his intentions and modest in his demeanor. 
When these traits, which are hard to find in isolation and even harder to find aggregated, come together in an exceptional individual like Judge Roberts, the result is an unbeatable nominee.
John Roberts will be the next Chief Justice.  President Bush's best hope of seating an Associate Justice is to nominate one who comes as close as possible to the model of Judge Roberts. 
12:26 pm edt 

Friday, September 16, 2005

Manuel Miranda Takes the Gloves Off
In today's W$J:
Yesterday, on the last day of the John Roberts hearings, Americans--or those few who tuned in--had the opportunity to see the corruption of the Senate confirmation process put on its very best face. We saw well-spoken, even well-meaning, advocates of this or that in their best clothes. Their aim was no different from that of all those petitioners who historically have chased high officeholders down streets or crowded the doorways of monumental buildings to press complaints and prayers for relief into the hands or pockets of the powerful. In our Congress they used to call it "to press claims" or "to importune the Members." In a word, lobbying.
Reporters covering the Roberts hearing tell me that loitering liberal leaders appeared crazed in spinning their stories. And more and more Americans know that what they have wrought has corrupted the Senate and made Democratic senators into mere shills
3:04 pm edt 

The Fruits of Reform in Mississippi
Charlie Ross, who chaired one of the Mississippi Senate Committees through its 2004 tort reform legislation, describes the fruits of reform in a recent W$J op/ed.  Among the benefits of reform: the chief issuer of medical malpractice insurance in the state has announced that it will cut its rates in 2006. 
6:56 am edt 

Survey Finds Support for Litigation Reform in Illinois
A new poll by the U.S. Chamber of Commerce finds that 53% of Illinois residents think the state is on the "wrong track" and 84% say that frivolous lawsuits "are a serious problem". 
6:51 am edt 

Roberts Confirmation Seems Assured
The nominee's questions ended yesterday without any of his adversaries laying a glove on him.  Charles Schumer, an opponent of the nominee if ever there were one, called his performance a "tour de force". 
Later, witnesses both supporting and opposing Roberts made the kind of statements that they were expected to say.  But there were no surprises and no drama. 
Barring a last minute surprise, which is virtually impossible to imagine, John Roberts should be the next Chief Justice.
6:48 am edt 

Wednesday, September 14, 2005

Roberts Confirmation Blogging
Live blogging on the Roberts confirmation hearings. 
2:20 pm edt 

Monday, September 12, 2005

High Noon
Roberts confirmation hearings begin at noon
9:40 am edt 

More Flood Perspectives
How the Dutch recovered from the flood of 1953 and their lessons for New Orleans.   

More coverage on the responsibility of environmental activists for the New Orleans flood.  
8:26 am edt 

Mixing it Up at the U.N.
John Bolton serves up some straight talk.   

Captain Ed outlines some alternatives to the U.N
8:25 am edt 

Merck's GC Vows to Fight
Merck's GC says it will be in the Vioxx fight "for the long haul". 
8:23 am edt 

"Frivolous" Case Against Sony Nets $500K for Lawyers; Only $5K for Plaintiffs
A Washington Post story recounts the 2001 scandal in which Sony was forced to admit that it used fake "blurbs to tout it movies.  The blurbs purported to be quotations by real newspaper movie critics but were in fact written by Sony employees. 
Litigation brought by attorneys purporting to represent a class of disgruntled movie-goers had coaxed Sony into a $1.5 million settlement (in which Sony admitted no wrongdoing).  The article, however, uncovered that only $5,000 was ever claimed by real plaintiffs.  Nearly $500,000 was paid to the plaintiffs' lawyers and Sony paid $250,000 in administrative fees (including the cost of advertising the available settlement funds for potential class members). 
Before the settlement was finalized, Sony was permitted to appeal to the California Court of Appeals.    Although a majority disagreed with Sony, Judge Reuben A. Ortega dissented from that opinion, saying of  the case against Sony "This is the most frivolous case with which I have ever had to deal."
Per the settlement agreement, the nearly $500,000 remaining settlement funds that were unclaimed by class members was delivered to the Elizabeth Glaser Pediatric AIDS Foundation and the Women's Care Cottage in Los Angeles.
(Tip: Overlawyered)
8:22 am edt 

Saturday, September 10, 2005

Chili Finger Hoaxer Pleads Guilty
Anna Ayala and Jaime Placencia, the couple accused of planting a human finger in a bowl of Wendy's chilli, plead guilty to charges of felony conspiracy and attempted grand theft. 
7:50 am edt 

Jose Padilla: Detained
The Fourth Circuit Court of Appeals reversed the trial court in the case of Padilla v. Hanft, concluding that the executive branch is within its rights to hold Jose Padilla indefinitely without trial.
Writing the opinion for the Fourth Circuit was Judge Michael Luttig, a resident on the Supreme Court Short List. 
7:41 am edt 

Friday, September 9, 2005

New Orleans Catastrophe: Are Environmentalists to Blame?
Two recent articles (John Berlau, National Review Online and Michael Tremoglie, FrontPageMag) make the case that agressive litigation by environmental groups delayed -- or increased the costs -- of levee improvement and flood prevention programs over the past decades.
Environmentalists often opposed levee maintenance, extensions and construction with the argument that natural floods were essential to "river health" and "maintaining wetlands".  Building levees, they argued, restricted the "natural flow" of rivers.
New Orleans is currently under several feet of natural flow.  I wonder if the environmental groups, and the foundations that finance them, will take any responsibility for the natural outcome of the litigation they pursued?
8:06 am edt 

Eliot Spitzer Sues Federal Government to Restrict Consumer Choices
 . . . . and also to garner more publicity for his gubernatorial campaign.
So say Walter Olson and Ted Frank in a pair of posts on Spitzer's latest suit that accuses the federal Department of Energy of failing to require appliance manufacturers to make consumer appliance more energy-efficient.  
7:41 am edt 

Thursday, September 8, 2005

Dropping Names
Manuel Miranda drops a few new names onto the Supreme Court Short List, including:
Maura Corrigan - Michigan Supreme Court Justice
Danny Boggs - Judge, Sixth Circuit Court of Appeals
Raoul Cantero - Florida Supreme Court Justice
Jeff Sessions - U.S. Senator, Alabama
John Cornyn - U.S. Senator, Texas
Mel Martinez - U.S. Senator, Florida
This is an interesting, new angle.  I would tend to discount, however, the three Senators on the list.  The 2006 elections are looming large on the horizon and it wouldn't make sense for Republicans to put that house one seat closer to parity by nominating a Senator to the Court. 
1:41 pm edt 

Preparing for World War III
John Hinderaker opines that Rehnquist's death, Roberts' likely confirmation and the inevitable nomination to take Justice O'Connor's seat sets the stage for "World War III" in the ideological struggle for control of the Court.
1:00 pm edt 

In Praise of Price Gouging
John Stossel opines that price gouging might be justified after all, with price increases representing a premium that accounts for risk and having the secondary effect of inhibiting hording and avoiding shortages.
7:20 am edt 

Wednesday, September 7, 2005

Gasoline Price-Gouging or Political Grandstanding?
No one likes high gasoline prices, or long lines, or when gas stations simply run out of gas.  We've seen all three of these in the past two weeks in Atlanta, as prices jumped Wednesday, sparking panic buying and then widespread gasoline unavailability Thursday and Friday.
Governor Pudue issued a press release and an executive order condemning price gouging by gas stations and threatening violators with prosecution.  Then everyone got into the act.  Members of Congress called on the Federal Trade Commission to investigate and even New York Attorney General Eliot Spitzer found it necessary to weigh-in. 
According to Spitzer's press release, illegal price gouging occurs when "the amount charged represents a gross disparity between the price of the goods or services...and their value measured by the price at which such consumer goods or services were sold or offered by sale..."
It may not be Eliot Spitzer's fault, but this has got to be one of the vaguest laws ever devised.  If you parse the language it says that a crime occurs when there is a "disparity between the price . . . and . . the price".  So, any significant increase in price is illegal?
But while the law in New York in vague, at least the law in Georgia is temporary.
Governor Purdue's executive order purports to take action under the Georgia Emergency Management Act (O.C.G.A. 38-3-51), authorizing the Governor to adopt reasonable orders, rules and regulations as necessary to protect public health, safety and welfare in times of emergency and under O.C.G.A. 10-1-393.4 which provides in pertinent part:
It shall be an unlawful, unfair, and deceptive trade practice for any person, firm, or corporation doing business in any area in which a state of emergency, as such term is defined in Code Section 38-3-3, has been declared, for as long as such state of emergency exists, to sell or offer for sale at retail any goods or services necessary to preserve, protect, or sustain the life, health, or safety of persons or their property at a price higher than the price at which such goods were sold or offered for sale immediately prior to the declaration of a state of emergency; provided, however, that such price may be increased only in an amount which accurately reflects an increase in cost of the goods or services to the person selling the goods or services or an increase in the cost of transporting the goods or services into the area.
The Georgia anti-gouging statute is limited in time ("for as long as the state of emergency exists") and expressly permits an increase in retail price that "accurately reflects an increase in cost" on the part of the retailer.
Unlike the New York and FTC invocations against gouging, the Georgia approach is more limited and, on balance, probably acts primarily as moral suasion.  By the beginning of these week, after the long Labor Day weekend, most gas stations were refuled and prices were beginning to ease. 
7:19 am edt 

Cross-Border SOX Problems
Larry Ribstein has an insightful piece on the difficulties of complying with Sarbanes-Oxley for firms with operations outside the U.S.  It seems that the "ethics hotlines" required by SOX may run afoul of privacy laws outside the U.S., especially in the E.U. 
Of course, if only the federal government were required to document and audit its own internal controls (as public companies are only Section 404 of SOX) perhaps there would be fewer screw-ups in the federal government
6:44 am edt 

Tuesday, September 6, 2005

Siebel Systems' Regulation FD Case Dismissed
A Federal court in New York rebuked the SEC on September 1st when it dismissed the SEC's lawsuit alleging that Siebel Systems, Inc. violated Regulation FD, a rule providing for "fair disclosure" to investors (SEC v Siebel Systems, Inc., S.D.N.Y., No. 04CV5130 (GBD), September 1, 2005).
Regulation FD requires public companies to disclose information to the public in ways that avoid "selective disclosure", prohibiting public companies from saying one thing in a press release, for example, only to give out different information to analysts or investors. 
While the rule has an admirable intent, it can be very difficult for corporate officers to apply.  Corporate officers routinely have conversations with analysts and key investors and cannot simply repeat the text of press releases in those conversations.  The practical implications of the rule have proven difficult to implement and represent an ongoing concern for corporate law practitioners.
Siebel was the first company charged by the SEC under Regulation FD in 2003. It settled those charges, but when the SEC brought a second action in June 2004 it decided to fight back.
The SEC's complaint alleged that Siebel had disclosed material non-public information during private dinners with institutional investors. The SEC alleged that by disclosing that Siebel's business activity levels were "good" and "better" and that its sales were "growing" and "building", the CFO implied that the company's business was improving.  The SEC claimed that this information was significantly different from public statements made by the company's CEO in shareholder conference calls, where he had allegedly emphasized negative aspects of the business.
According to the SEC, institutional investors who attended the the private dinners interpreted the statements as a signal of improving fortunes and communicated this to clients, leading to a jump in Siebel's stock price. The SEC argued that this market reaction proved the materiality of the information.
What made the SEC's charges especially problematic for corporate counsel was the vagueness of the language at issue in the Siebel case.  If corporate insiders cannot have conversations with outsiders in which they say that business is "good" or "better" and "growing" or "building", how can they say anything at all?  Corporate spokespersons would be required to record all of their conversations and then post transcriptions on the company's website to avoid the potential for inconsistent disclosure.  Such an outcomes would have been unreasonable, of course, but would have seemed inevitable if the SEC had its way. 
In its opinion, granting Siebel's motion to dismiss, the Court held that the SEC's approach put an unreasonable burden on companies, requiring a level of linguistic sensitvity that is inappropriate.  The judge wrote "Regulation FD was never intended to be utilized in the manner attempted by the SEC under these circumstances." The Court stated that "excessively scrutinizing vague general comments has a potential chilling effect which can discourage, rather than encourage, public disclosure of material information."

(Tip: Kilpatrick Stockton, LLP)

1:15 pm edt 

Monday, September 5, 2005

Why Janice Rogers Brown Will Not Be Nominated
Orin Kerr, writing at Volokh, offers an insightful view into this question, concluding that Judge Brown's nomination is unlikely. 
In essence, Kerr thinks that Brown's libertarian views on criminal issues (opposing, for example, stop-and-search procedures that she believes impinge on the Fourth Amendment) would make Brown hostile to the federal government's war on terror and, therefore, less likely to attract the President's interest.
3:20 pm edt 

Roberts Nominated for Chief Justice
President Bush has nominated Judge Roberts to take the role of Chief Justice. 
As Orin Kerr notes, opposition to Roberts had mostly fizzled and the one remaining argument was that Roberts would be more conservative than O'Connor.  With Roberts now replacing Rehnquist, that argument "doesn't really go anywhere."
Roberts' confirmation now looks like a lock.
The more interesting question is who from the Supreme Court Short List will be nominted to fill Justice O'Connor's associate spot.
11:50 am edt 

Sunday, September 4, 2005

Chief Justice William Rehnquist Dies
Chief Justice William Rehnquist died last night after battling thyroid cancer.  He was 80 years old.
The second vacancy on the Supreme Court throws previous political calculations into disarray and could increase the intensity of the confirmation hearings of Judge John Roberts scheduled for next week. 
7:27 am edt 

Saturday, September 3, 2005

Randall Robinson Spreads Rumors of Cannibalism in New Orleans
Randall Robinson, an activist and Harvard-educated lawyer whose past activities include founding the TransAfrica organization, encouraging black Americans to sue for reparations, and then loudly emigrating in protest from the U.S. to the Caribean island of St. Kitts, now claims that black Hurricane victims are "eating corpses to survive."
A quick scan of major news networks and a Google search on the phrase "hurricane victims eating corpses to survive" uncovers absolutely no support for this outrageous claim.  While that's hardly the final word when it comes to proof, it's more evidence than Robinson offers for his bizarre claim.
Ordinarily, I don't spend much time trying to debunk the fevered paranoia of the moonbat left, but Randall Robinson is a well-spoken radical who is drawn to microphones like a moth to a evening porchlight and his ghoulish rumor-mongering is just too likely to capture the attention of the credulous.
Flashback:  When asked why he was leaving America for St. Kitts (other than to promote his book on the subject) Robinson said:
America is a huge fraud, clad in a narcissistic conceit and satisfied with itself, feeling unneedful of any self-examination nor responsibility to right past wrongs, of which it notices none. It's the kind of fraud that simply wears you out.
Kinda makes you glad he left.
2:09 pm edt 

California Small Businesses Fight Back
A group of small business defendants in California has banded together to fight back against a series of UCL 17200 suits filed by serial plaintiff Satinder Brar and her attorney/husband Harpeet Brar.  (Past coverage: May 5, 2005
According to Dilip Vithlania, the sole practitioner who is representing the defendants pro bono:
"Mr. Brar has a well-documented history of filing such lawsuits in the State of California and is again abusing the judicial system under the guise of doing 'public good' while collecting settlements from these hard-working business owners. The suits target minority owners, typically of Hispanic and Asian descent. In many instances, store owners have opted to 'settle' with Mr. Brar."
 "It's basically a shakedown of small business owners who in most cases are unwilling to engage in an expensive legal fight and thus typically capitulate to Mr. Brar by settling with him in exchange for a dismissal."
Mr. Brar has sued hundreds of small businesses in Los Angeles County for allegedly collecting ATM transaction fees or "point-of-sale" device fees from his wife, plaintiff Satinder Brar, without proper disclosure signs.

Harpreet Brar is one of several attorneys who had previously filed numerous suits of a similar nature under California's Unfair Competitional Law 17200.  In 2003, the State Attorney General sued Harpreet Brar (among other attorneys) in an effort to put a stop to such tactics, and in October of 2004 an Orange County Superior Court permanently enjoined Mr. Brar and other attorneys from filing such suits unless he could show that all defendants acted in concert.  That court also ordered Brar to pay $1.78 million to the State Attorney General in civil penalties and restitution for monies he had collected from defendants who had settled the suits he filed.  

Mr. Brar appealed the Orange Coun order and oral arguments on his appeal were heard on August 19, 2005. A decision from the Court of Appeal is pending. Mr. Brar filed the latest round of suits notwithstanding the permanent injunction and while his appeal was pending. 
The pending suits accuse liquor store owners of failing to disclose ATM charges to consumers. Immediately after each of the store owners were served with the complaint, they each received a settlement demand varying from $500 to $1,000 in exchange for a dismissal.
7:21 am edt 

Friday, September 2, 2005

Explaining New Orleans
An emerging theme from the chorus of pundits is that the breakdown of the "thin veneer of civilization"  we're seeing in New Orleans is largely the fault of government and our government's bureaucracy.
Daniel Henninger, writing in the Wall Street Journal, argues that bureaucracy is inherently unable to think creatively and, therefore, will never be capable of managing the task of responding to disasters (whether natural or manmade):
We fail to use well what we know because we rely too much on large public bureaucracies. This was the primary lesson of the 9/11 Commission Report. Large public bureaucracies, whether the FBI and the CIA or FEMA and the Corps of Engineers, don't talk to each other much. They are poorly incentivized, if at all. Budgets, the oxygen of the acronymic planets, make bureaucracy's managers first responders to constant political whim. Real-world problems, as the 9/11 report noted, inevitably seem distant and minor: "Once the danger has fully materialized, evident to all, mobilizing action is easier--but it then may be too late."
Homeland Security, a new big bureaucracy, has struggled since 2001 to assemble a feasible plan to respond to another major terror event inside the U.S. The possibility, or likelihood, of a bird-borne flu pandemic is beginning to reach public awareness, but the government is at pains to create a sufficient supply of vaccine or a distribution system for anti-viral medicines. Any bets on which will come first--the flu or the distribution system?
Big public bureaucracies are going to get us killed. They already have. One may argue that this is an inevitable result of living in an advanced and complex democracy. Yes, up to a point. An open political system indeed breeds inefficiencies (though possibly the Jeb Bush administration that dealt with the 2004 hurricanes is more competent than Gov. Blanco's team in Louisiana). And perhaps low-lying, self-indulgent New Orleans understood its losing bargain with a devil's fate.
But we ought to at least recognize that our increasingly tough First World problems--terrorism, viruses, the rising incidence of powerful natural disasters--are being addressed by a public sector that too often is coming to resemble a Third World that can't execute.
While outsourcing the management of disaster recovery may be a  creative approach, it is only part of the solution. 
Why is our civilization's veneer so thin? 
Why is it, as the Washington Post's Eugene Robinson writes, that "people could live in a city all their lives and have so little sense of civic responsibility, how "we're all in the same boat" can be so completely obliterated by "I'm getting mine."" 
Some, like the Gerard Baker, writing from outside the U.S. have suggested that the lawlessness and anarchy in New Orleans are an outbreak of pent-up rage by oppressed minorities:
The tragedy has been visited disproportionately, indeed almost exclusively, on the city’s African-Americans. The images from the city have been compared with natural disasters in sub-Saharan Africa; it is the faces of the victims as much as the scale of the destruction that underscores the comparison.
This massive disparity of suffering is bound to provoke a fresh controversy about race and class inequality, the great open sore of American society that bleeds profusely from time to time. The spectacle of tens of thousands of indigent blacks, apparently alone in being unable to save themselves from this horror, will surely make it weep anew.
But this too is an insufficient answer. 
New Orleans has been a racially mixed city for decades and its current Mayor and much of its city council are African-American. 
Racism does not explain why authorities in the City of New Orleans and the State of Louisiana failed to upgrade their levee system, when every tourist who takes the Grey Line bus tour is told by the tour guide that the levees were fragile and probably wouldn't withstand a direct hit from a hurricane.  (I can remember the tour guide's remarks very well from my last visit to the Big Easy in 2001). 
Bureacratic incompetence comes in all shapes, sizes, colors and creeds. 
Thomas Lifson seems to come closest to a satisfying answer:
Nobody wants to kick New Orleans and Louisiana when they are so devastated. But we will be deluding ourselves and laying the foundations for future suffering, if we don’t examine the human failures which have turned a natural disaster into a tragedy.
* * *
[T]he many virtues of New Orleans are offset in part by serious flaws. The flowering of the human spirit in the realm of cultural creativity is counterbalanced by a tradition of corruption, public incompetence, and moral decay. It is no secret that New Orleans and the Great State of Louisiana have a sorry track record when it comes to political corruption. And corruption tolerated in one sphere tends to metastasize and infect other aspects of life. They don’t call it “The Big Easy” because it is simple to start a business, and easy to run one there.
Many years ago, an oilman in Houston pointed out to me that there was no inherent reason Houston should have emerged as the world capital of the petroleum business. New Orleans was already a major city with centuries of history, proximity to oil deposits, and huge transportation advantages when the Houston Ship Channel was dredged, making the then-small city of Houston into a major port. The discovery of the Humble oil field certainly helped Houston rise as an oil center, but the industry could just as easily have centered itself in New Orleans.
When I pressed my oilman informant for the reason Houston prevailed, he gave me a look of pity for my naiveté, and said, “Corruption.” Anyone making a fortune in New Orleans based on access to any kind of public resources would find himself coping with all sorts of hands extended for palm-greasing. Permits, taxes, fees, and outright bribes would be a never-ending nightmare. Houston, in contrast, was interested in growth, jobs, prosperity, and extending a welcoming hand to newcomers. New Orleans might be a great place to spend a pleasant weekend, but Houston is the place to build a business.
Today, metropolitan Houston houses roughly 4 times the population of pre-Katrina metropolitan New Orleans, despite the considerable advantage New Orleans has of capturing the shipping traffic of the Mississippi basin.
It is far from a coincidence that Houston is now absorbing refugees from New Orleans, and preparing to enroll the children of New Orleans in its own school system. Houston is a city built on the can-do spirit (space exploration, oil, medicine are shining examples of the human will to knowledge and improvement, and all have been immeasurably advanced by Houstonians). Houston officials have capably planned for their own possible severe hurricanes, and that disaster planning is now selflessly put at the disposal of their neighbors to the east.
Let us all do everything we can to ameliorate the horrendous suffering of people all over the Gulf Coast, not just in New Orleans. But we must not fail to learn necessary lessons. Hurricanes are predictable and inevitable. Their consequences can be minimized by honest and capable political leadership. It appears that New Orleans could have done much better. We would honor the suffering and deaths by insisting that any rebuilding be premised on a solid moral and political foundation.
1:51 pm edt 

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Jonathan B. Wilson is an Atlanta attorney at the law firm of Taylor English Duma LLP.  Jonathan B. Wilson provides legal advice to investors, companies and business executives involving corporate law, securities law, SEC matters, intellectual property, website and Internet legal issues, start-ups, limited liability companies, partnerships, 1934 Act matters, outsourcing, strategic alliance agreements, contracts, and other matters of importance to growing private and publicly-traded companies.