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 Web.com.com (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.
Friday, September 30, 2005
No Private Right of Action Under SOX
7:00 am edt
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.
Langone v. Spitzer
6:51 am edt
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.
Thursday, September 29, 2005
Analysis of Georgia Offer of Judgment Case
10:25 am edt
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
Tuesday, September 27, 2005
Georgia Judge Strikes Down Offer of Judgment Law
5:35 pm edt
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
Ferguson Fries Lockyer
12:23 pm edt
High Gas Prices, Low Gas Prices, Just Blame Bush
7:32 am edt 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.
More on Frivolous Inmate Lawsuits
7:24 am edt
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.
Monday, September 26, 2005
Colorado Trial Lawyers Recycle Hoax Stories
11:16 am edt
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.
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.
Michigan Newspaper Sides with Trial Lawyers
10:53 am edt
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.
Category 5 Lawsuits
9:40 am edt
takes aim at the Mississippi AG's lawsuit to invalidate flood exclusion clauses after Hurrican Katrina. (Past coverage:
Sunday, September 25, 2005
3:25 pm edt
Melanie Kirkpatrick takes a look
at the female judges who might be named to replace Justice O'Connor
The Education of Maria Cantwell
8:16 am edt 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
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
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
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.
Saturday, September 24, 2005
Legal Disaster Follows Natural Disaster
7:48 am edt 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
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.
Friday, September 23, 2005
A Conservative Vision of Social Justice
1:15 pm edt
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.
Convicted Rapist Sues Victim
8:13 am edt
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
Thursday, September 22, 2005
Not Horsing Around
11:12 am edt
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)
Wednesday, September 21, 2005
More Katrina Litigation
7:30 am edt
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."
ALEC Opposes Absestos Reform Act
7:13 am edt
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)
Tuesday, September 20, 2005
A New Energy Policy
12:47 pm edt
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.
12:37 pm edt
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
Sunday, September 18, 2005
Senate Committee to Investigate Environmental Litigation
7:49 am edt
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
Saturday, September 17, 2005
In Another Age Roberts' Confirmation Would be Unanimous
12:26 pm edt
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.
Friday, September 16, 2005
Manuel Miranda Takes the Gloves Off
3:04 pm edt
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
The Fruits of Reform in Mississippi
6:56 am edt 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.
Survey Finds Support for Litigation Reform in Illinois
6:51 am edt
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".
Roberts Confirmation Seems Assured
6:48 am edt
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.
Wednesday, September 14, 2005
Roberts Confirmation Blogging
2:20 pm edt
Monday, September 12, 2005
9:40 am edt
More Flood Perspectives
8:26 am edt
Mixing it Up at the U.N.
8:25 am edt
Merck's GC Vows to Fight
8:23 am edt Merck's GC
says it will be in the Vioxx fight "for the long haul".
"Frivolous" Case Against Sony Nets $500K for Lawyers; Only $5K for Plaintiffs
8:22 am edt
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.
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.
Saturday, September 10, 2005
Chili Finger Hoaxer Pleads Guilty
7:50 am edt
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.
Jose Padilla: Detained
7:41 am edt
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.
Friday, September 9, 2005
New Orleans Catastrophe: Are Environmentalists to Blame?
8:06 am edt
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"
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?
Eliot Spitzer Sues Federal Government to Restrict Consumer Choices
7:41 am edt
. . . . 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.
Thursday, September 8, 2005
1:41 pm edt
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.
Preparing for World War III
1:00 pm edt
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.
In Praise of Price Gouging
7:20 am edt
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.
Wednesday, September 7, 2005
Gasoline Price-Gouging or Political Grandstanding?
7:19 am edt
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.
Cross-Border SOX Problems
6:44 am edt
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
Tuesday, September 6, 2005
Siebel Systems' Regulation FD Case Dismissed
1:15 pm edt
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,
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
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)
Monday, September 5, 2005
Why Janice Rogers Brown Will Not Be Nominated
3:20 pm edt 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.
Roberts Nominated for Chief Justice
11:50 am edt
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.
Sunday, September 4, 2005
Chief Justice William Rehnquist Dies
7:27 am edt
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.
Saturday, September 3, 2005
Randall Robinson Spreads Rumors of Cannibalism in New Orleans
2:09 pm edt
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)
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.
California Small Businesses Fight Back
7:21 am edt
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
"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.
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.
Friday, September 2, 2005
Explaining New Orleans
1:51 pm edt
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.
, 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
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.
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.
Phone: 404-353-4833 | email@example.com
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