Blawgletter®

Arbitrators, Not Court, Must Decide Who Pays AAA Fees, Fifth Circuit Holds; Blood from a Turnip?

2009-11-22T12:03:09-06:00

The Arbitration Act of 1925 set up a regime aiming to settle disputes quickly and cheaply. The system depends on courts to make it work. Courts don't do quick and cheap. Sorry.

The Fifth Circuit proved the point this week. The appeal turned on whether a district court erred by ordering a respondent in an arbitration (Old Colony) to pay $29,600 as a deposit to cover American Arbitration Association fees. The arbitrators had directed the claimant (Dealer Computer Services) to front the money for Old Colony. The court held the question procedural and thus one for the arbitrators. Dealer Computer Services Inc. v. Old Colony Motors Inc., No. 09-20049 (5th Cir. Nov. 19, 2009).

The appeal took 10 months and cost Old Colony -- the pauper -- the writing of 50-page and 19-page briefs plus a trip to New Orleans for its lawyer. Quick and cheap?

Blawgletter gets the bee gotta buzz, bird gotta sing aspect of the federal court system. It can't help its nature -- deliberative and collegial. (The bee says buzz buzz buzz; the bird sings tweedily tweedily twee; and judges think long and hard, but with little thought to cost).

Some courts have dealt with the slow and costly problem by granting sanctions for stringing out the process and threatening worse. (Recent case here.) Others have taken to advising corporations not to include an arbitration clause in their contracts and to use a jury waiver instead.

Neither the blunderbuss nor the dodge seems helpful to us. Ruling timely does.

By the way, why did DCS insist on forcing Old Colony to arbitrate and to pay its part of the deposit? You can't get blood from a turnip, they say. And you won't get any hint at the answer from the court's opinion. But the briefing reveals that Old Colony wanted to address DCS's claim through a pending class arbitration and that DCS preferred not to. The quicker and cheaper way, you know.

Our feed buzzes and tweets.

Qui Tam Target May Sue Third Party for Causing Target to Make False Claim to Feds, Ninth Circuit Rules

2009-11-19T18:24:20-06:00

One hundred and eighty years ago, on August 15,1829, as the New England summer faded and a school year dawned, U.S. Supreme Court Justice Joseph Story spoke to a muster of colleagues and students in Cambridge, Massachusetts. They came to honor the Justice's inauguration as Dane Professor of Law at Harvard University. He told them about the "Value and Importance of Legal Studies". He said:

I will not say with Lord Hale, that "The Law will admit of no rival" . . . but I will say that it is a jealous mistress, and requires a long and constant courtship. It is not to be won by trifling favors, but by lavish homage.

Justice Story's words came back to Blawgletter today as we scanned a Ninth Circuit ruling from the day before. The opinion did one of the things we enjoy most about the law. It taught us something we didn't know.

We've paid a bunch of homage to her majesty, The Law, for that feeling. God help us.

The court held that a qui tam defendant may go after a third party for causing it (the defendant) to do stuff (filing bogus claims) that made it liable under the False Claims Act to the federal government. The case involved an upstart drug maker, Cell Therapeutics. CT had come up with a way to treat leukemia. It hired a firm, a predecessor to Lash Group, to advise it about Medicare reimbursement. The firm said, untruly, that CT could rightly get Medicare money for "off label" uses of the drug. An ensuing qui tam case against CT forced it (CT) to pay more than $10 million to the feds.

CT sued Lash for giving bum advice. The district court kicked the suit on the ground that the FCA doesn't allow claims for contribution and indemnity between qui tam guilty parties. The Ninth Circuit agreed with the rule but said it didn't apply. The FCA, it held, permits claims "independent" from recovery of CT's qui tam liability. CT alleged that Lash damaged it by preventing adoption of proper Medicare reimbursement requests, increasing CT's cost of capital, and hurting CT's reputation. That just might make the claims independent, the court concluded. It remanded the case so the trial court could rule on whether or not CT's claims somehow depended on its qui tam liability. Cell Therapeutics Inc. v. Lash Group Inc., No. 08-35619 (9th Cir. Nov. 18, 2009).

Boeing Goes Three for Three on Tanker Contract; Federal Circuit Restores Air Force Award

2009-11-18T10:08:07-06:00

Boeing put the the first KC-135 Stratotanker into service 52 years ago. The U.S. Air Force bought the last one in 1965.

The four-engine KC-135 Stratotanker jets across the firmament, refueling other aircraft in flight. It also, per Boeing -- which first delivered the hulking milk cow in June 1957 -- can with upgrades "serve as flying command posts, pure transport, electronic reconnaissance, and photo mapping craft."

In 2005, the Air Force asked for proposals on a contract to provide upkeep of the aging fleet of more than 415 Stratotankers. Boeing's response to the Request for Proposal won. A losing bidder, Alabama Aircraft Industries, protested the award to the Government Accountability Office. The GAO found Boeing's "price-realism analysis" wanting and told the Air Force to take another look. Boeing got the contract the second time, too. The GAO denied AAI's protest of the new award.

AAI sued in the U.S. Court of Federal Claims and prevailed. The court set aside the award on the ground that Boeing and the Air Force hadn't done enough to explain pricing in light of the KC-135 fleet's advancing ancientness.

The Federal Circuit reversed, holding that the GAO's ruling didn't transgress the "arbitrary and capricious" standard for overturning agency decisions under the Administrative Procedure Act. While the Air Force failed to address the impact of age on price in a direct and explicit way, the court noted, it did make bidders structure their proposals to include a basic maintenance component, a "discrete" additional tasks component, and an "unexpected work" component. The Air Force thus "decided the best approach was to provide all offerors with the three-tier work package on which to base their proposals. This was a determination well within the agency's discretion." Ala. Indus., Inc. - Birmingham v. United States, No. 09-5021, slip op. at 7 (Fed. Cir. Nov. 7, 2009).

"Super Lawyers" Ranks Law Schools!

2009-11-18T00:05:00-06:00

They did it! The folks who create Super Lawyers have parsed their data to see which law schools produce the most promotion-worthy lawyers. The top 10 list follows:

Rank	Law School
1	Harvard Law School
2	University of Michigan Law School
3	The University of Texas School of Law
4	University of Virginia School of Law
5	Georgetown University Law Center
6	New York University School of Law
7	Columbia Law School
8	University of Florida Levin College of Law
9	University of California Berkeley School of Law - Boalt Hall
10	Yale Law School

Blawgletter fancies some will fuss that the ranking system overstates the throw weight of big law schools on a lawyer-for-lawyer basis. We can already hear the Yale law alums griping that Harvard graduates THREE TIMES as many as the New Haven school generates each year (circa 600 v. circa 200).

Do the numbers add up? Super Lawyers lists 3,568 HLS grads and 1,091 from YLS. Go figure.

Imagine our feed's surprise.

Alaska Supremes Uphold Shift from Flat to Contingent Fee

2009-11-17T14:22:36-06:00

The Alaska Supreme Court looked last week at the trade off between lawyer and client in contingent fee arrangements. It held that an agreement to revert from a flat fee to the original contingent one didn't unduly burden the clients' right to accept or reject settlement offers.

The case involved a personal injury claim arising from the collapse of stairs at Katmai Lodge. The husband and wife hired a law firm on a contingent fee basis. After filing a complaint against the lodge and its owner, the firm advised the couple to settle for the coverage limits under an insurance policy (around $1.1 million).

The clients said fine so long as the firm agreed to cut its fee to costs plus $250,000. The lawyers went along, and the resulting amendment said that it would apply if the defendants settled for policy limits "without requiring further substantial litigation" but otherwise "will revert to our previous written fee agreement and the percentages written there." The defendants rejected the settlement proposal.

The case moved forward for several months without much happening at the courthouse. Most of the work involved discovery and getting ready for trial.

At length, the defendants and their insurer settled with the husband and wife for policy limits (now up to $1.2 million for some reason).

The clients insisted that the lawyers couldn't receive more than $250,000 as a fee. The law firm begged to differ. A lawsuit ensued. The couple argued that enforcing their agreement to switch back to a contingent fee would authorize lawyers to force clients to accept settlement offers they'd otherwise reject. But the trial court granted summary judgment for the lawyer. The Supreme Court of Alaska affirmed. It held that the reversion of the flat fee to a contingent one after "substantial litigation" didn't put too heavy a burden on the clients' right to approve or reject a settlement. Weiner v. Burr, Pease & Kurtz, P.C., No. S-13214 (Ala. Nov. 13, 2009).

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