2017 CLAY Awards
Attorneys receiving this year’s CLAY honor dazzled in the courtroom and in the boardroom, setting a standard for excellence to which all litigators and corporate lawyers should aspire. Their work garnered headlines for the innovativeness and impact. A team, for example, from Gibson, Dunn & Crutcher LLP helped push the Golden State Warriors arena forward to revitalize part of San Francisco while a team from Wilson Goodrich & Rosati PC represented career site LinkedIn in its $26 billion sale to Microsoft Corp. Other cases featured prominent attorneys from different firms collaborating for the best result. Arguedas, Cassman & Headley LLP and Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates shot down in less than a week federal claims that client Fedex Corp. knowingly shipped illegal drugs and Gradstein & Marzano PC and Susman Godfrey LLP helped a beloved music group get royalties from work released before 1972. These cases and all of the others featured in this issue had far-reaching impacts in law, business and society. We highlight and salute the winners’ work.
Ensuring historic art is in the right hands
The case had all the makings of a historical art heist film, complete with a Bolshevik looting and the forced Nazi sale of a German Renaissance painting. More than 60 years later, Munger Tolles & Olson LLP partner Luis Li found himself untangling the intricacies of postwar Dutch restitution law as the family of dealer Jacques Goudstikker tried to reclaim the stolen art from Pasadena’s Norton Simon Museum of Art.
After nearly a 10-year legal battle that dug deep into the troubled history of World War II, the museum was granted summary judgment last summer by U.S. District Judge John F. Walter, who ruled the Netherlands rightfully acquired the paintings, thus making the museum the sole owner of the title.
The two pieces, titled “Adam” and “Eve,” were painted by Lucas Cranach in the 16th century and are believed today to be worth tens of millions of dollars. They were eventually acquired by Goudstikker, a Dutch Jewish art dealer, but sold to the Nazis in a coerced sale. Goudstikker’s daughter-in-law, Marei von Saher, argued the paintings should be returned to her family. Many of those who laid claim to stolen art after the war got it back through the Dutch government’s restitution process, but the judge’s ruling rested on the idea that von Saher’s family passed on the opportunity to get the art back for financial reasons, in turn missing his chance to reclaim it. ”
The bottom line is because of its unique history, because of the fact that it involves both a Bolshevik looting and a forced sale by the Nazis, and because the prior owners availed themselves of a bonafide restitution system and it specifically declined to claim these paintings, we felt the moral and legal situation compelled us to defend the claim,” said Li, whose case had stops at the 9th U.S. Circuit Court of Appeals and the U.S. Supreme Court.
Prior to Goudstikker acquiring the paintings, they were claimed to be property of the noble Stroganoff family or of a Ukrainian church. What is known is they were stolen during the 1917 Bolshevik Revolution and eventually bought at a Berlin auction by Goudstikker in 1931. Years later, during World War II, Nazi Commander Hermann Goering forced a sale of the paintings, along with several hundred others.
They were eventually returned to the Netherlands after the war, but Goudstikker never reclaimed them through the post war restitution process. All of this was revealed via discovery proceedings through old primary source documents, which were rarely in English. “It was fascinating. We got documents from U.S. National Archives, Amsterdam, National Archives of the Netherlands, the German Federal Archives, and using all those sources we were able to put together from original sources the way the restitution system in the Netherlands worked after the war.”
Although it is disputed whether the Stroganoff family actually possessed the paintings, it acquired them years later through a settlement with the Dutch government, then sold them to prominent Los Angeles art collector Norton Simon in 1971. They continue to sit, at least for now, in the Pasadena museum named after him. The family of Goudstikker has appealed the U.S. District Court decision. — Justin Kloczko
Helping a community exercise its voice
Fallout from the Vietnam War in the form of a nomenclature dispute roiled expatriate Vietnamese residents of San Jose in 2007 as the large enclave grew divided politically over the designation of a business district to honor the lost name of their homeland’s capital, Saigon, now Ho Chi Minh City. Groups favoring “Little Saigon,” “New Saigon” or “Vietnamese Business District” for the area around two largely Vietnamese shopping malls on San Jose’s Story Road lost a city council vote 8-3 to a compromise name, “Saigon Business District,” proposed by Councilmember Madison Nguyen, herself a Vietnamese refugee.
The name “Little Saigon” was seen as a tribute to other Vietnamese community hubs in the U.S., in Orange County, San Diego, Houston and elsewhere. Nguyen was accused of ignoring the will of her constituents and bowing to economic interests that wanted a “business” component to the name.
Few were pleased. Some launched an unsuccessful Nguyen recall movement. At a 2008 council meeting at which more than 1,000 “Little Saigon” supporters participated, the lawmakers rescinded “Saigon Business District” but did not rename the area.
Into the fray stepped veteran trial lawyer James McManis of McManis Faulkner, retained by “Little Saigon” supporters to accuse the city council of violating the Ralph M. Brown Act, a state sunshine statute that prohibits secret meetings by elected legislators in favor of a public deliberative process.
The claim McManis filed in court papers arose when, in an interview, Councilmember Forrest Williams disclosed that he had spoken privately with Nguyen about the issue before the vote. McManis developed evidence that Brown Act violations have occurred in other cases before the council due to its policy of allowing members to issue pre-vote memoranda supporting predetermined outcomes.
After nearly a decade of pretrial litigation, during which the city adamantly denied the claim and defended its legislative practices, McManis’ clients prevailed at a month-long 2016 trial before Santa Clara County Superior Court Judge Vincent J. Chiarello. The judge ruled that Nguyen secretly solicited signatures from four other council members for “Saigon Business District” and discussed the matter with another member. That totaled a six-member majority, violating the open meeting law. Vietnamese American Community of Northern California v. City of San Jose, 1-08-cv-107082 Santa Clara Super. Ct., filed Feb. 29, 2008).
“My clients didn’t want a politician telling them what they wanted,” said McManis. “But from day one the city pooh-poohed our position and called it a frivolous lawsuit.” He said he struggled to get the court to frame a remedy, because the council still issues memos with five signatures and any discussion on an issue with one additional councilmember would mean a Brown Act violation. San Jose’s mayor, former vice mayor and other councilmembers have admitted to at least three similar Brown Act violations in 2016. The judge ordered councilmembers to issue written statements accompanying future memos certifying they have not discussed an issue with a sixth member. “A big step in the right direction,” McManis said.
McManis’ record of civil rights litigation includes a case now before the state Supreme Court challenging San Jose officials’ practice of withholding conversations relating to public business that were sent or received on private devices like cellphones on the grounds they are not public records. A decision on that case is expected shortly. City of San Jose v. Superior Court (Smith), S218066 (Cal. Sup. Ct., filed May 7, 2014). The ruling is expected to have implications for municipalities statewide. “It would be a huge loophole in the California Public Records Act if the city’s position prevailed,” McManis said.
He added that the problem stems from the way elected politicians are shielded from scrutiny. “Public officials never get cross-examined when they are non-responsive at press conferences or in interviews,” he said. “But at a trial they have to sit there as the truth emerges. It makes them uncomfortable, but the rule of law saves us from politicians.”
In the Vietnamese case, a permanent marker was unveiled near Story Road early this year. It reads, “Welcome To Little Saigon San Jose.” — John Roemer
Standing up for citizens mislabeled as gang members
When Olu K. Orange sued the city of Los Angeles in 2011 for classifying residents of certain neighborhoods as gang members and subjecting them to curfews and other restrictions long since struck down by appellate courts as unconstitutional, he knew it would take a committed squad of civil rights attorneys to prevail.
He asked several well-known civil rights firms to join. He also asked pro bono departments of national law firms, and the American Civil Liberties Union of Southern California.
“They all told me I’d have to be crazy to bring a case on behalf of supposed gang members, that there was no way to win the case, no jury would find for me, the courts would be against us,” Orange said. “Some even went so far as to say that if I had any political ambitions I was ruining them, or ‘Why don’t you leave this work to the people who know what they’re doing?’ and I would say, ‘Because nobody’s doing it!'”
After a month of knocking on doors he found willing partners: Dan L. Stormer, Anne K. Richardson and Cindy Panuco of Hadsell Stormer & Renick LLP.
“It is a very unpopular class, but a class that desperately needs representation because they suffer the most indignities at the hands of the powers that be,” said Stormer.
Stormer said depositions of city staff revealed they had known for two years that provisions contained in 26 gang injunctions, such as a 10 p.m.-to-sunrise curfew, had been ruled unconstitutional when challenged in other counties.
The city nonetheless fought back with a fusillade of defense motions, until U.S. District Judge Dolly M. Gee ruled that the city was liable for civil rights violations for enforcing the injunctions, and that some 5,700 plaintiff class members could take their claims to trial.
Through conference calls with the class, the attorneys said they heard one message loud and clear: A payout of several thousand dollars would be used up quickly. What they really needed was schooling and apprenticeships leading to well-paying jobs.
This fall, law school students will begin representing class members in first-of-their-kind injunction removal hearings before Chief U.S. Magistrate Patrick J. Walsh, for residents who claim they were wrongly labeled gang members.
“If you take a net over an entire area you might catch one or two gang members, but you also catch a lot of innocent young men and women,” said Richardson, who moved to Public Counsel and brought Alisa L. Hartz onto the case as well. “But punishing little transgressions like biking down the wrong side of the street is not a good use of LAPD resources, and this case is really an example of attempts to get at the very common problem of criminalizing poverty.” — America Hernandez
Putting a corrupt politician behind bars
Persuading a corrupt public official to accept a guilty plea to avoid trial is often a daunting task, Assistant U.S. Attorney Mack E. Jenkins said, after he and colleague Douglas M. Miller achieved that goal in the case of former state Sen. Ronald S. Calderon and his brother.
In October, U.S. District Judge Christina Snyder sentenced Calderon, the Montebello Democrat, to 31/2 years in prison after accepting his guilty plea to mail fraud through the deprivation of honest services. Calderon admitted accepting more than $150,000 in bribe payments from two sources: a Long Beach hospital owner who wanted a law to remain in effect so he could continue to reap tens of millions of dollars from a health care fraud scheme and from undercover FBI agents posing as independent filmmakers who wanted changes to California’s film tax credit program.
Getting such officials to admit to wrongdoing, Jenkins said, “is an uphill and often impossible battle.” Public officials are much more likely to insist on going to trial, he added, “because they are much more concerned about losing their reputations than their freedom.”
Indeed,image was very much on Calderon’s mind at his sentencing hearing. “My reputation is destroyed,” he had said. “I had so much potential for life after politics.” U.S. v. Calderon , 14-CR-00103 (C.D. Cal., filed Feb. 20, 2014).
Jenkins is in the Public Corruption & Civil Rights Section under U.S. Attorney Eileen M. Decker of Los Angeles. He and colleagues also prosecuted Calderon’s brother Thomas M. Calderon, also of Montebello, a former assemblyman who became a political consultant and who pleaded guilty to one federal count of money laundering as part of the same scheme. Tom Calderon was sentenced to a year in federal prison. Both brothers remain behind bars.
Jenkins credited former Assistant U.S. Attorney Douglas M. Miller, his co-counsel on the cases for much of the successful prosecution. Miller, who filed the original indictments in 2014, has since left the office to become a senior trial counsel at the Securities & Exchange Commission regional office in Los Angeles. Jenkins and Miller said partnerships with FBI investigators and an undercover agent and Internal Revenue Service criminal investigators were key.
“That agent sacrificed many years of his life doing thankless undercover work” posing as someone Ron Calderon thought was associated with an independent film studio, Jenkins said. “These were professional and personal sacrifices.” Jenkins noted that the agent’s work showed the FBI at its best. “The FBI may have taken some reputational hits lately, but here you have an example of real dedication in the public interest.”
Added Miller, “My hope is that the depth of this undercover investigation will send a clear message to any public official considering taking bribes that… they will get caught if they cross the line and start abusing their office.”
A sentencing memorandum noted that Ron Calderon “sold his vote not just to help pay for the expenses of living beyond his means, but for the more banal and predictable aims of corruption—fancy luxuries, fancy parties and fancy people.”
Ron Calderon also had admitted in interviews with the FBI and prosecutors to a lot of his conduct, then changed his mind and refused to follow through. “He basically disappeared,” Jenkins said. “Then we got a call from [Calderon’s lawyer] Mark Geragos saying he would no longer cooperate. But the earlier interviews made it difficult for them to put on a defense.” Jenkins and colleagues also obtained favorable testimony from the hospital owner about his part in bribing Calderon.
“Mr. Geragos litigated every avenue until he and his client could see the writing on the wall just before trial,” Jenkins said. “We hope this case serves as a wake-up call for public officials in power. It demonstrates federal dedication to maintaining integrity in government.” — John Roemer
Giving artists royalties for pre-1972 recordings
The Turtles sang in their 1968 hit “Elenore,” “Gee I think you’re swell/And you do me really well…” But that was hardly the legendary rock band’s attitude toward those who played their music but refused to pay royalties.
Taking on as clients pre-1972 song owners including The Turtles’ founders Flo & Eddie – in real life Howard Kaylan and Mark Volman – against a powerful music industry defendant, Henry D. Gradstein of Gradstein & Marzano LLP, prevailed in a landmark class action. Gradstein, with law partner Maryann R. Marzano and Susman Godfrey LLP class action specialists Kalpana Srinivasan and Steven G. Sklaver, won a $25 million Central District settlement that could balloon depending on cases pending in other states. Flo & Eddie Inc. v. Sirius XM Radio Inc., 13-cv-5693 (C.D. Cal., filed Aug. 3, 2013).
“It wasn’t fair that Sirius XM was playing pre-1972 recordings without paying for them,” Gradstein said. “The defense theory was that the Copyright Act doesn’t cover pre-1972 works, and that is a fact. But I began researching the states’ common law copyright statutes. In California there is a statute arguably right on point in the civil code. It says the author of a recording has the exclusive right to exploit it. And other states have good case law as well.” A 1937 East Coast case dealing with band and choral group Fred Waring and the Pennsylvanians was also useful. Gradstein also found a relevant 1973 U.S. Supreme Court case. Goldstein v. California, 412 U.S. 546, held that California laws criminalizing record piracy did not violate the U.S. Constitution’s Copyright Clause.
“The law was pretty clear,” Gradstein said. “The hard part was convincing judges that state law did indeed provide these protections.”
The case took what Gradstein called “a circuitous and labyrinthine route” after September 2014 when U.S. District Judge Philip S. Gutierrez of Los Angeles extended California copyright protection of performances of so-called “oldies” sound recordings. “This settled the ambiguity in the law by explicitly holding that the older songs are protected by state law,” Gradstein said.
Five major record labels, Capitol Records LLC, Sony Music Entertainment, UMG Recording Inc., Warner Music Group Corp. and ABKCO Music & Records Inc., that control about 85 percent of the oldies, then entered into a $210 million settlement agreement with Sirius in mid-2015. “The labels relied on our work,” Gradstein said. “We got nothing.”
But Gutierrez had established liability and certified a class. Gradstein enlisted Susman Godfrey and proceeded with damages claims on behalf of the individual clients, including Flo & Eddie. Sirius lost its bid to decertify the class and was barred from arguing any defenses to liability, the judge ruled.
In November, on the eve of trial, as Sirius faced the prospect of a jury’s damages finding, the defendant settled. The deal included a future running royalty of 5.5 percent of pro-rata Sirius gross revenues from 2018 through 2028 from playing class members’ sound recordings in exchange for a license to play them. Gradstein has a similar case pending against Pandora at the 9th U.S. Circuit Court of Appeals on whether the performance of the pre-1972 performance involves First Amendment issues.
Marzano called the result “the culmination of a battle Henry and I started almost four years ago and continued to wage with Susman Godfrey at our side. Over the course of what was to become an epic David versus Goliath fight, we remained true to our mission to uphold the law protecting artists’ performance and other rights and to ensure that artists were fairly compensated for the fruits of their labor. In our current climate, where it is a struggle for musicians to earn a living, it was of great societal importance to pursue this case.”
Said Srinivasan, “I was all set to give the open at trial. I was excited to tell their story, but [the settlement] was an emotional victory and I was so glad for the class.” Added Sklaver, “It took the threat to the defendants to achieve the settlement. It was the genius of Henry and our collaborative work for the class to arrive at a settlement meaningful for our clients and for us as lawyers.” — John Roemer
Defending public-private enterprise to attain fresh water from the Mojave desert
Lawsuits by the Center for Biological Diversity, the San Bernardino Valley Audubon Society and the Sierra Club’s San Gorgonio Chapter, among others, contended that the project was improperly approved under the California Environmental Quality Act. They also claimed the Santa Margarita Water District, Ouellette’s client, was wrongly designated as the project’s lead agency. San Bernardino County’s approval of the project also was unsuccessfully contested. Center for Biological Diversity v. County of San Bernardino, G051058 (Cal. App. 4th Dist., filed Aug. 31, 2012). Best Best & Krieger functions as the water district’s general counsel; Ouellette is its CEQA counsel.
Colleagues Sarah E. Owsowitz and Jennifer J. Lynch were key members of Ouellette’s winning team, Ouellette said.
“CEQA is complicated and so are water district partnerships,” Ouellette said. “This project provides a stable water source.” As the appellate panel noted, the proposed project to pump fresh groundwater from an underground aquifer located below property owned by renewable resources company Cadiz Inc. spawned six related lawsuits. Ouellette defended the project for years, prevailing at both trial and appellate levels.
Originally nine cases were filed to derail the project. “We had months and months of motions and status hearings,” Ouellette said.
The panel held that Ouellette’s client was properly designated as the lead agency and that the environmental impact report describing the project was accurate and not misleading. “We conclude that the Project is consistent with the EIR’s purpose and objectives because it will conserve water otherwise lost to brine and evaporation, and will improve water supplies throughout many areas of the State of California,” wrote Associate Justice Richard D. Fybel for a unanimous panel. The water will flow as far west as Orange County.
The project will reclaim fresh water that would otherwise be contaminated when it flows from the aquifer to dry lakes, where it mixes with highly salinated groundwater, becoming unusable as fresh water, before evaporating. The result of the favorable outcome will allow users in some parts of Southern California to receive an annual average of 50,000 acre-feet of water over 50 years.
The wins were a long time coming. Ouellette said she was on vacation in Russia in 2015 when she got a call from her assistant to let her know she had prevailed at the trial court level. The case had been transferred to Orange County Superior Judge Gail A. Andler, who has since retired. “I’ll never forget toasting the victory with a lot of vodka, then running around the block in St. Petersburg screaming, which really isn’t done in Russia. Then I called and pranked my client. I said, ‘Sit down.’ He said, ‘Oh, God, how bad is it?’ Then I gave him the good news. It seems like this case has been running my entire life.”
Under CEQA, public agencies like her client have to look at the environmental impacts of their projects before they approve them, but there isn’t much case law on how that requirement functions in the lead agency context where a public-private partnership is involved, such as Santa Margarita Water District’s deal with Cadiz, known as the Cadiz Valley Water Conservation, Recovery and Storage Project.
Yet such compacts are becoming more common, Ouellette said. “Increasingly financially strapped public agencies need to work with private entities to get things done,” she said. Absent the favorable ruling, San Bernardino County would have been forced to assume the lead agency role. “That would have slowed things down and made everything much more complicated,” she said. “We felt very confident about our legal arguments, but with CEQA, one never knows.”
Writing about the win for a bar association journal, Ouellette quoted hydrologists Ramon Llamas and Emilio Custodio on the significance of water in the West: “No resource is as vital to California’s urban centers, agriculture, industry, recreation, scenic beauty and environmental preservation as its liquid gold.” — John Roemer
Reexamining the federal employee retirement law
When Peter K. Stris, the founding and managing partner of Stris & Maher LLP, learns the U.S. Supreme Court has granted a cert petition in a case he’ll be arguing, he makes a quick call to Georgetown University Law Center. Like most Supreme Court advocates, he asks for a moot court practice session at the school’s prestigious Supreme Court Institute, but there’s a catch. Because of confidentiality concerns, the institute reserves its replica courtroom and panel of stand-in “justices” for one side of each case only. Reservations are honored on a first-come basis for the first counsel for a party to contact the institute after the court grants review. When both sides get in touch within the first 24 hours, as usually happens, administrators flip a coin. Petitioner is heads, respondent is tails. In last year’s Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, 577 US _ (2016), Stris lost the flip but went on to win the case.
In the 2015 term, his firm represented clients in three of the Supreme Court’s most significant business cases. Stris argued and won two of them, including Montanile.
The case involved Robert Montanile’s $121,000 in medical expenses following a car accident. His employer’s Employee Retirement Income Security Act health plan – the National Elevator Industry Health Benefit Plan – paid the expenses. The trustees of the plan then sought reimbursement from a $500,000 settlement Montanile’s attorneys had obtained for him. Montanile argued that because he had already spent the $240,000 that remained after the lawyers took their cut, the trustees were out of luck when they sued to enforce a lien against him. Lower courts sided with the trustees in Montanile’s case, though federal appellate circuits have split on the question. Stris and counsel of record Radha Pathak, an associate dean at Whittier Law School and of counsel to Stris & Maher, argued that a plan can recover settlement funds only if they are in the beneficiary’s possession.
The high court agreed, 8-1, holding that the law did not permit a judgment against Montanile’s general assets, but only against funds related to the settlement.
“The decision in Montanile was an important victory for individuals who have obtained tort settlements and used those much-needed funds to pay for basic living expenses like food, rent and child care,” Pathak said. “Before, insurance companies were obtaining judgments against those individuals, many of whom were like our client – of modest means to begin with and then the victim of a serious accident.”
She said the outcome was significant for the public, especially seniors. “It reaches beyond its particular factual context: The Supreme Court’s decision will also protect at least some retirees from having to use their fixed income to correct payment mistakes made through no fault of their own.”
Stris, who has his seventh high court argument coming up March 21 on behalf of a potential class of consumers suing Microsoft Corp. for alleged defects in its Xbox 360 game console, said he no longer gets as nervous as he did a decade or so ago when he first appeared before the justices. Earlier this year, he sat as second chair when law partner Daniel L. Geyser argued for the respondent in Midland Funding LLC v. Johnson, No. 16-348, a Fair Debt Collection Practices Act case.
“The whole experience is extremely rewarding,” Stris said. “It is advocacy at the highest level. The justices know these cases really well and are fully engaged. Of course, it is much more rewarding to win.” — John Roemer
Helping emergency doctors receive fair compensation
It was Andrew H. Selesnick’s first argument at the state Supreme Court. Despite his rookie status at the court, he successfully persuaded the justices that health care plans are not free to stiff emergency doctors when their independent practice association shuts down.
The high court, adopting Selesnick’s position, developed a novel theory of tort liability in California that lets plaintiff physicians sue health care plans directly and prevents such plans from absolving themselves of their obligations to the physicians by laying off payment responsibility on third parties. The 7-0 opinion by Chief Justice Tani G. Cantil-Sakauye agreed that a trial court was wrong to conclude otherwise. A cause of action exists, she wrote, “in favor of noncontracting emergency service providers that allege… that a health care service plan negligently delegated its duty to pay emergency service claims to an IPA that it knew or should have known was financially unsound.” Centinela Freeman Emergency Medical Associates v. Health Net of California Inc., 2016 DJDAR 11237.
Selesnick litigated the case while at Michelman & Robinson LLP with colleague Damaris L. Medina. The pair has since left the firm. Michelman appellate counsel Robin James participated in the case’s Supreme Court finale.
Of appearing before the high court, Selesnick said, “It was a very cool experience, a lot of fun. The justices were very engaged. Even my contemporaries on the other side had not appeared before the Supreme Court before. It is a case I have lived with for years.”
The health plan defendants included Aetna Health of California Inc., Blue Shield of California and Cigna Healthcare of California Inc. They contended that a seminal state statute, the Knox-Keene Health Care Service Plan Act of 1975, allowed them to manage risk by contracting with an IPA and delegating responsibilities.
Selesnick asked the justices to affirm a court of appeal ruling that the defendants should have known that an IPA known as La Vida was failing and would soon go bankrupt, leaving medical providers unpaid for services they had already provided. Delegation of risk to La Vida was negligence, the lower appellate panel held. The high court agreed.
“These are trauma surgeons and orthopedists who come in on emergencies at 2 a.m. to take care of you,” Selesnick said of his clients. “The defendants took the position that even though they took your premiums, once they delegated the risk to an IPA, they could wash their hands and walk away from their obligation.”
Added Medina, “We argued that this was unfair, as it essentially allowed the plans to take advantage of the regulatory system to put emergency physicians in the untenable position of providing services to the health plans’ members for free, despite the plans having received premium payments from their patients.” The high court’s opinion, she added, “will force the plans to make good decisions when they delegate payment responsibility, and ensure that these arrangements continue to be financially sound during the term of the contracts. In the end, I think that this decision will bring more balance and stability to California’s health care system.”
Selesnick recalled one justice asking whether the situation as it existed was a way of rationing medical care. “My response was that if emergency physicians aren’t paid, necessarily you’ll have fewer positions on hospital staffs and people will die. And that’s not a public policy we want to encourage.”
Associate Justice Goodwin H. Liu asked whether health care plans won’t be torn between trying to save financially at-risk IPAs and cutting their losses. Selesnick replied that imposing tort liability will strengthen the system because it incentivizes health plans to better monitor their contracted associations.
The justices’ resulting opinion agreed, finding that “forcing others to provide professional services for the benefit of one’s own customers, without any reasonable prospect of payment, is morally blameworthy.”
Summed up Selesnick, “I have litigated against these health plans for years. It was very gratifying to see the payers’ position rejected.” — John Roemer
Seeking justice for deported veterans
A team led by Latham & Watkins LLP partner Colleen C. Smith represented the first U.S. veteran to have his citizenship application approved for his military service while being unable to reside in the U.S. legally.
Latham also became the first and only firm to collaborate with the ACLU of Southern California on its deported veterans project. The project’s purpose is to bring awareness to the deportation of noncitizen military veterans who might qualify for naturalization because of their service.
“We view this as a very meaningful project,” Smith said. “The ACLU’s goal and our goal … is to bring more attention to the issues which will help these veterans in the process. We think this is very important work.”
Through their work with the project, Latham attorneys discovered Daniel Torres, a U.S. Marine living in Tijuana, Mexico after having left the United States. With no legal status in the U.S. and unable to enter his adopted country, he had no access to veterans’ benefits to which he was entitled.
James A. Erselius, an associate at Latham and co-lead for Torres’ case, said Torres could not return to the U.S. after he lost his wallet in 2011 containing his identification. Authorities issuing the new identification discovered he was living in the U.S. without permission. He had been honorably discharged, Erselius said.
“He didn’t know he was eligible to naturalize until our involvement,” Erselius said. “A lot of veterans don’t have the knowledge when this happens.”
Taiga Takahashi, another associate at Latham and co-lead on Torres’ case, said military recruiters or commanders sometimes do not inform service members of the potential to naturalize. The military isn’t being malicious, he said, immigration law is complicated.
“So it’s easy for those like Daniel to slip through the cracks,” Takahashi said. “They never took the extra steps that would get them their citizenship.”
The main hurdle in helping Torres to achieve citizenship was navigating a legal process still not widely practiced. “There were legal issues that came up in the interview about how he enlisted in the Marines and how he was discharged,” Erselius said.
Physical limitations were also challenging, Erselius said. It was “getting him into the country in the first place to get his application to … the government agency responsible for naturalization applications, and to get him into the States for his interview,” Erselius said.
Their biggest hurdle was getting the U.S. Citizenship and Immigration Services to issue a visa for Torres, Erselius said. Their request was initially denied but they persisted. Torres was naturalized the same day as his interview, Erselius said.
Smith said it was most helpful that Torres was prepared for his interview.
“Having an attorney helped prepare him for the interview,” she said. “It was very, very helpful to him and will be helpful to others with more complicated issues. Each case is different considering the different immigration laws.”
Attorneys from Latham are representing other veterans with situations similar to Torres’, including veterans in Ecuador, India and Mexico.
Smith said they will help as many as they can. “To bring awareness to the project and the work we have done will prompt others to get involved,” she said. “Veterans like Mr. Torres are entitled to citizenship. They just need a little help in the process.” — Renee Flannery
Defending intellectual property use in the age of technology
Robert A. Van Nest seized the mantle of Silicon Valley’s premier copyright trial lawyer when he led Keker, Van Nest and Peters LLP to two resounding jury verdicts that absolved his major technology clients Alphabet Inc. subsidiary Google and Arista Networks Inc. of any infringement liability.
Each case asked jurors to consider whether the defendant was legally allowed to use plaintiffs’ copyright-protected computer code and commands without a license. Van Nest convinced jurors to find that Google and Arista acted lawfully.
In a May retrial, a San Francisco federal jury held that Google’s inclusion of Oracle Corp.’s Java programming code in its Android mobile operating system was fair use under copyright law. Oracle America Inc. v. Google Inc., 10-CV3561, (N.D. Cal., filed Aug. 12, 2010).
In December, a federal jury in San Jose held that Arista Networks successfully presented a legal defense known as “scènes à faire” to justify its implementation of Cisco Systems Inc.’s command-line interfaces.
“We were on the side of defending and promoting innovation against legacy,” Van Nest said. “It’s gratifying to try several cases a year, especially when you’re enthusiastic about the principles you’re defending.”
The seven-year legal slugfest between Oracle and Google attracted attention from the entire computer technology industry. A copyright win for Oracle could have brought in billions of dollars and spurred lawsuits against other companies that use elements of Java.
Oracle obtained the rights to Java when it purchased Sun Microsystems Inc. in 2010. Google’s reliance on declaring code from 37 application programming interfaces, or APIs, of Java was illegal, Oracle claimed in court.
The U.S. Court of Appeals for the Federal Circuit held in 2014 that the declaring code and the “structure, sequence and organization” of Oracle’s Java APIs were copyrightable, dealing a major setback to Google’s defense.
On remand, a legal team led by Van Nest and second-chaired by firm partner Christa Anderson set about persuading jurors that Google’s use of Java in a smartphone language was transformative, one of the key tests in determining fair use.
“The most important thing is to try and communicate in plain English the technological ideas,” Anderson said. “Whoever is in the jury has a few weeks to be exposed to the technology and then make really important decisions.”
The trial featured testimony from Google co-founder Larry Page, ex-Google CEO Eric Schmidt, Oracle co-CEO Safra Catz and former Sun CEO Jonathan Schwartz.
“I think the trial demonstrates that at least in California juries are receptive to the concept of fair use as a tool to promote innovation,” Van Nest said. “The whole idea of fair use is to allow copying in certain circumstances to promote innovation.”
Oracle appealed May’s fair use verdict to the Federal Circuit last month.
With blockbuster patent damages awards on the wane, Anderson said plaintiffs are looking to get an advantage on competitors with other types of intellectual property claims.
“There are more copyright cases and more trade secrets cases and less of a heavy focus on patent cases,” Anderson said.
In the Arista case, Cisco sought $335 million for Arista’s illegal use of Cisco’s command-line interfaces, which are typed-in manual text commands used for controlling network switches. Cisco Systems Inc. v. Arista Networks Inc., 14-CV5344 (N.D. Cal., filed Dec. 5, 2014).
The San Jose federal jury found that Arista presented a valid legal defense, defeating Cisco’s copyright claims. Jurors also found that Arista did not infringe a patent Cisco asserted at trial.
Van Nest has been with his current firm since the late 1970s, when he joined as its first associate.
He never could have envisioned at that time that most of his legal work would be involved with technology companies.
“None of us would have predicted the importance of or the rise of technology that has happened,” Van Nest said. “None of us was aware that technology would become so important to the Bay Area or the world or that we would be able to participate it in the way that we have.” — Kevin Lee
Labor & Employment
Deflating workplace retaliation claims
Lynne C. Hermle’s string of successes for tech clients fighting off gender harassment and discrimination claims got longer in October when she scored a total defense win for client Space Exploration Technologies Corp. in an $8 million jury trial. The panel rejected accusations that plaintiff Zhoie M. Teasley, a welder in the Elon Musk-founded aerospace manufacturer and transport services company known as SpaceX, suffered verbal and physical sex abuse, disability discrimination, failure to accommodate, failure to properly respond to her allegations and retaliation on the job.
Teasley contended SpaceX ignored the abuse and let other co-workers taunt her when she returned from a leave of absence.
Hermle, of Orrick, Herrington & Sutcliffe LLP, used the audacious and risky strategy of depicting Teasley’s claims as the product of mental illness. Hermle contended the accusations were not only false but the accuser was emotionally unstable, suffering from borderline personality disorder and unable to accurately recall events. Teasley v. Space Explorations Technologies Corp., BC568896 (L.A. Super. Ct., filed Jan. 8, 2015).
The jury verdict was another triumph for Hermle, who set the bar high in 2015 when she persuaded jurors to absolve venture capital firm Kleiner Perkins Caufield & Byers LLC of gender discrimination against worker Ellen Pao in a landmark San Francisco trial. Before the Pao case, such claims were frequently settled out of court. Since then, Hermle has represented other firms in high-profile employment litigation such as Twitter Inc., Apple Inc. and Microsoft Corp. A Morgan Stanley & Co. matter was set for trial in March, but plaintiff’s counsel recently withdrew, citing conflicts. Hermle declined to comment on her recent cases, citing client wishes.
She spoke more generally last year, noting that the pace and diversity of such suits is growing. “Employment litigation is more active than it’s been in the last few years and virtually all of it is interesting,” she said in a 2016 interview. “Gender and diversity issues are front and center, especially in tech, and there’s a steady wave of gender and equal pay claims. And plaintiffs are filing sexual harassment claims, many arising from consensual sexual relationships, at steady levels.”
Some problems arise from corporate workplace diversification efforts, she said. “It’s great that employers are looking to increase diversity, especially at the senior levels, but some of the initiatives which provide preferential treatment for diverse candidates are likely not to pass scrutiny with the Equal Employment Opportunity Commission or the courts,” she said. “We are likely to see reverse discrimination claims arising out of the diversity effort; there’s some indication those are already here.”
In the Teasley case, SpaceX substituted Hermle in shortly before trial, replacing Fox Rothschild LLP partner Alexander J. Hernaez. Hermle presented jurors with testimony on borderline personality disorder from a psychiatric expert, then demonstrated how those characteristics fit the plaintiff through other witnesses including Teasley’s own mental health expert, the accused harassers and Teasley herself.
Teasley’s lawyer, Michael W. Parks of Schimmel & Parks APLC, countered that his client’s problems were due to a hostile all-male work environment. Though Parks wept during his closing argument, Hermle remained dispassionate as she summed up, highlighting Teasley’s symptoms, how she turned on those close to her at SpaceX, the likely motivations for her accusations and why jurors should believe the witnesses who contradicted her.
Hermle termed Teasley a “rigid, compulsive perfectionist” who was the victim of an abusive childhood and now sees the world in black and white and conflates and confuses life events. Hermle also disparaged Parks’ courtroom style, assailing his “raised voice, accusatory tone and flipping of exhibits” which, she argued, were designed to distract jurors from the reality of the evidence.
To contradict Teasley’s claim that the harassment left her unable to return to work, Hermle showed a video of Teasley flexing buffed muscles and dancing at a beach. “She has the ability to succeed,” Hermle said.
After the verdict, Parks asserted that he lost due to the video. “It was a really inflammatory piece of evidence,” he said. “The view of [Teasley] was almost cartoonish.” His move for a new trial was rejected. — John Roemer
Waging a modern war for the right to privacy
A secretly recorded sex tape, a betrayal by a best friend, and a clash between an individual’s right to privacy and the media’s right to publish information. It was fitting that one of the most dramatic lawsuits of 2016, right down to its nail-biting conclusion, was brought by one of professional wrestling’s biggest stars.
Terry Bollea, more commonly known under his wrestling moniker Hulk Hogan, sued gossip website Gawker for invasion of privacy and emotional distress in 2013. The lawsuit was in response to Gawker’s posting of a 2-minute video of Bollea having sex with Heather Clem, then the wife of Bollea’s best friend, Bubba Clem.
The “highlight reel,” which was part of a longer video reportedly recorded without Bollea’s knowledge by the Clems, rapidly generated millions of page views. After Gawker refused to acquiesce to requests to take the video down, Bollea sued. Bollea v. Gawker Media LLC, 12-12447-CI (6th Jud. Circ. Fl., March 18, 2016).
In court and in public statements, Gawker defended the video as a matter of free speech. Given Hogan’s celebrity, Gawker CEO Nick Denton reasoned the posting was of interest to the public and newsworthy, and thus enjoyed First Amendment protection.
Charles Harder, a Harder, Mirell & Abrams LLP partner who served as lead counsel for Bollea, said the company sought to hide behind a journalistic code of ethics it had strayed from long ago. He said his favorite document in the entire case was one presented by a journalism professor outlining the Society of Professional Journalist’s code of ethics, as each line served to illustrate how far Gawker had fallen from journalistic standards.
“There were a lot of points – don’t pander to lurid curiosity, don’t unnecessarily harm the people who are the subject of your reporting, carefully weigh and balance the interests of your readers and what they’re entitled to receive against the harm that could be done to a person by your reporting,” Harder said. “It was a reality check, so to speak, for Gawker.”
The trial began in March 2016 after more than three years of delays, starts-and-stops, and trips to Florida’s District Court of Appeal. Harder’s co-counsel Douglas Mirell, also a partner at Harder, Mirell & Abrams, said Gawker’s defense was undermined throughout trial by testimony from its own employees.
Mirell asked Gawker editor A.J. Daulerio whether there was a celebrity sex tape he wouldn’t consider newsworthy. Daulerio drew a line at children – though, under further questioning – clarified that such a limit would only apply to children under the age of 4.
“They tried subsequently to argue that he was being sarcastic, flippant, and didn’t really mean it,” Mirell said, noting that Daulerio had declined the opportunity to review his deposition to make note of any intention of sarcasm.
Bollea’s team requested $50 million in economic damages and left it to the jury to determine the value of Bollea’s emotional distress. When the jury awarded Bollea $140 million, Harder said he was overwhelmed, and the wrestling star was brought to tears.
“He was just completely bawling,” Harder said. “By the time that verdict was being read, he’d been dealing with this for over four years.”
Though Gawker initially intended to appeal the decision, the two sides agreed to a $31 million settlement in November 2016. Gawker filed for bankruptcy in January, and the company’s flagship website ceased operations soon after.
Harder said he hopes the verdict made clear that anyone – whether a celebrity or not – should expect a reasonable amount of privacy.
“If they could say it’s news to play sex tapes of people, then we’d live in a world without privacy,” Harder said. “You’ve got to draw the line somewhere.” — Steven Crighton
Mergers & Acquisitions
Advising the sale of a social media network to a technology pioneer
Wilson Sonsini Goodrich & Rosati PC advised LinkedIn Corp. in its $26.2 billion sale to Microsoft Corp. but there was a time when the parties involved were unsure who would buy the company.
At least four other entities discussed buying LinkedIn, according to a Securities and Exchange Commission filing. Multiple potential buyers was an issue attorneys had to consider in advising LinkedIn.
“The question was how do you make sure to be fair to the various interested parties and find the best price for stockholders?” said Martin W. Korman, one of the lead Wilson Sonsini attorneys advising LinkedIn. “The law makes clear there’s no single blueprint.
“We had to design a process that would yield the best price.”
Three potential buyers decided not to pursue the acquisition, so Microsoft and another entity called “Party A” in SEC filings engaged in a competitive bidding process. Party A entered the first bid, expressing an interest in buying LinkedIn for between $160 and $165 per share.
“Part of the job was keeping the two bidders interested and engaged,” Korman said. “We wanted to run a fair process so that those who were interested had an equal opportunity to succeed.”
After more than two months of bidding, Microsoft came out on top with a bid of $196 per share.
Wilson Sonsini attorneys had to face another issue: LinkedIn created a dual class common stock structure in connection with its 2011 IPO. There were two types of voting shares, high vote and low vote shares. All pre-IPO holders received shares that gave them high votes over matters requiring stockholder approval.
“This was unique in that there was a controlling shareholder,” said Katharine “Katie” Martin, also a lead Wilson Sonsini attorney advising LinkedIn.
Attorneys worked through all the issues and the deal closed at the end of 2016.
Wilson Sonini first worked with LinkedIn at the end of 2010, advising the company in its IPO and several subsequent matters. LinkedIn now operates as an independent subsidiary of Microsoft, keeping its name, management team and brand.
“It was the collective effort of the senior management team, the board of directors and the bankers that all had to come together to really execute and bring together a deal that provided this much value,” Martin said. “It’s a credit to LinkedIn and the value of the company.
“I think it’s an example of a really great success story relative to a business startup in Silicon Valley.” — Melanie Brisbon
Creating an innovative solution for hollowed out communities
Born and raised and a current resident of the western Contra Costa County city of Richmond, John H. Knox of Orrick, Herrington & Sutcliffe LLP has been the city’s bond counsel for more than 25 years. “I know the city really well,” he said.
Knox watched as Richmond officials tried to abate nearly 1,000 dilapidated houses that had become a crime and blight magnet and were costing the city about $1.7 million in upkeep annually. “They experimented with using eminent domain to acquire underwater mortgages from banks, but that got them into litigation with Wells Fargo and other lenders.”
When Knox’s underwriter went out to sell standard municipal bonds, they got no bids. “The securities industry was up in arms over the eminent domain effort, fearing that the city could force banks to sell performing mortgages at a discount. The capital markets decided the city was not trustworthy,” he said. “Reading between the lines, you could say Richmond was blacklisted. And every time you heard about this in the news, they showed a boarded-up abandoned home, a so-called zombie property.”
The program failed. “It became politically controversial, and even if it did work, it wouldn’t have really solved the problem,” Knox said.
Knox had a better idea. He would use an innovative plan to marry the issuance of social impact bonds with a rehabilitation effort that would restore the properties for sale to first time homebuyers who graduated from a financial literacy program run by the nonprofit SparkPoint program and others in the market for houses.
In what was the first such bond to be issued in the U.S. for this purpose, Knox and Orrick colleagues advised the city and the Richmond Community Foundation in closing a $3 million social impact bond. The city council amended its municipal code to allow the bonds. Banks that get involved get credit under the federal Community Reinvestment Act, which encourages financial institutions to aid local projects’ credit needs.
Richmond acted as a conduit issuer for the bond, while the foundation put together a team involving local contractors, real estate agents, Home Depot Inc. and SparkPoint. San Pablo-based Mechanics Bank, which has longstanding ties to Richmond, agreed to purchase the bonds. The money is to acquire and repair the abandoned homes. The debt is backed by the revenue the foundation expects to reap from the home sales.
“I saw the disconnect between the hot Bay Area housing market and these rundown properties,” Knox said. “There are plenty of people out there wanting to buy fixer-uppers and flip them.”
The industry took note. The Bond Buyer published a positive article quoting nearby Oakland’s chief resilience officer, Kiran Jain, who called the project intriguing. “Tackling blighted housing through social impact bonds, which restores non-performing assets to the city of Richmond’s tax rolls for revenue and bonding purposes, is precisely the type of opportunity [community investment platform] Neighborly is interested in supporting and scaling or communities,” she said. “We need to think creatively and holistically, as the city and Richmond Community Foundation have done, to solve vexing community issues with innovative financing solutions.”
So far the project is working, Knox said. “A lot of the titles are messed up, and the city has to go through probate court to get title, but after that, it’s not rocket science. We have succeeded in keeping it simple. We avoided regulatory friction, unlike some programs that try to hire the homeless to fix homes up or limit buyers to low-income people. If you keep adding ornaments to the Christmas tree, it’ll topple over.”
Other cities have shown interest. “We have talked to Rust Belt cities that need this kind of thing,” Knox said. Online mortgage lender Quicken Loans Inc., based in Detroit, sent a delegation to take a look, he said. “The foundation runs this. My work was to get the bond deal done. But we’re all in this for the long haul.” — John Roemer
Helping U.S. veterans find affordable housing
Roman E. Darmer is a former federal prosecutor now working as a securities and complex commercial litigator at Jones Day. He’s also the Irvine office’s pro bono partner, so when affordable housing advocates asked to put some big law muscle behind their assault on Huntington Beach’s new limits on lower income housing units, he gladly accepted the challenge.
“We were looking for impact and strategic litigation, and this was exactly the kind of case we wanted to take on,” he said of the resulting partnership with Public Interest Law Project and Public Law Center. Their efforts resulted in a trial court ruling that the limits were void for violating state law and the city was enjoined from enforcing them. The Kennedy Commission v. City of Huntington Beach, 30-2015-00801675 (L.A. Super. Ct., filed July 31, 2015).
Darmer and Jones Day colleague Walter “Chris” Waidelich joined with Sarah J. Gregory and Kenneth W. Babcock of Santa Ana’s Public Law Center and Craig D. Castellanet and Michael F. Rawson of Oakland-based Public Interest Law Project. They sued on behalf of two military veterans unable to afford to live in Huntington Beach and the Kennedy Commission, an Irvine-based nonprofit that advocates for affordable homes in Orange County.
The group petitioned for a writ of mandate, alleging Huntington Beach’s city council responded to residents’ complaints about high density development by revising a zoning plan that froze out the poor.
Los Angeles County Superior Court Judge James C. Chalfant issued the writ, agreeing that the plan left the city more than 400 units short of low-income housing sites under Regional Housing Need Allocation rules, a state mandate. Later, Los Angeles County Superior Court Judge Michael L. Stern ordered that Darmer and colleagues be awarded attorney fees of $648,000. Stern wrote, “The matters presented by the petition concern a controversial matter of significant public concern. The legal issues entailed are novel, technical and difficult.”
Said Gregory, a Public Law Center staff attorney, “Although this Superior Court decision … is a win for affordable housing in Huntington Beach, our work to ensure veterans and other vulnerable individuals can continue to call Orange County home will continue in earnest.” She added that the ruling will force the city to work with the state and community on housing issues. “The overarching message is you can’t just do it haphazardly or disregard the law because it’s politically convenient.”
Cesar Covarrubias, executive director of the Kennedy Commission said, “Affordable housing is once again possible in Huntington Beach.”
The story isn’t over. The city is appealing both the writ and the fee award and has reportedly refused to comply with the orders. “But the interest clock is ticking,” Darmer noted. “From the public record I can surmise there was unease in Huntington Beach at the prospect of poor folk and development in this part of the city,” including Beach Boulevard and Edinger Avenue.
Darmer said the city’s litigation tactics included trying to confuse the issue by mixing up multiple issues. “Their pleading landed on the judge’s desk with a big thud. I don’t have enormous experience in housing law, but the judge did. His ruling was detailed and focused. He saw through their effort to muddy the water. He gets knotty cases in that writ court all the time.”
Darmer agreed the case was a new experience. “I practice securities law, and this wasn’t exactly in my wheelhouse. But I have done plenty of complex litigation cases in state court. It’s rare for me to be a plaintiffs’ counsel. I got to wear the white hat here.” — John Roemer
Keeping bar applicant data private
The state Supreme Court ruled unanimously in 2013 that the State Bar should disclose demographic and academic information about bar applicants requested by a law professor if the data could be provided in a way that protected individual applicants’ privacy.
Attorneys from Kerr & Wagstaffe LLP in San Francisco were able to secure a subsequent trial court victory for the bar last year in the long-running case brought by UCLA School of Law Professor Richard Sander.
San Francisco County Superior Court Judge Mary E. Wiss sided with the bar for five independent reasons, including that the disclosure of the requested data would constitute an unwarranted invasion of privacy. Sander v. State Bar of California, CPF08508880 (S.F. Super. Ct., Nov. 7, 2016).
James M. Wagstaffe, Michael von Loewenfeldt and Melissa Perry – the Kerr & Wagstaffe attorneys who represented the bar – said retaining a top-notch expert witness was one key to their victory at trial.
The bar’s expert was Dr. Latanya Sweeney, the director of the Data Privacy Lab at Harvard University. Sweeney invented a privacy protection model that the petitioners in the case used in some of their attempts to prove the data they sought could be successfully de-identified and maintained that way.
But Sweeney was able to demonstrate at trial that she could re-identify individuals based on some of the data the petitioners were seeking.
“It was critical to be able to make clear the real risk involved and that it was not speculation,” von Loewenfeldt said.
Wagstaffe said it was also important for the defense to show the case was about real people “who did not want information about their ethnicity and race released and potentially misused.”The trial included testimony from intervenors who shared their concerns of being identified by data they provided to the bar under the understanding it would be kept confidential.
“People of different colors and backgrounds expressed why their privacy rights should be honored,” Wagstaffe said.
Perry said Kerr & Wagstaffe also succeeded in showing that responding to the petitioners’ records request would have forced the bar to create new records, which the public records law prohibits, and imposed a heavy burden on the agency.
“This would have been an unprecedented release of data,” she said.
Both Wagstaffe and von Loewenfeldt had worked on the case since it was filed in 2008, which they said made the victory more meaningful. The petitioners have appealed Wiss’ November decision.
“I’m hopeful that many, many years of litigation is enough,” Wagstaffe said. — Lyle Moran
Proving new sports arena won’t harm local environment
As the Golden State Warriors readied a Jan. 17 ground-breaking ceremony for their new San Francisco Mission Bay arena, Mary G. Murphy, the Gibson, Dunn & Crutcher LLP partner who has shepherded the project since 2012 through land use permitting and litigation, checked her messages. Foes of the project had petitioned the state Supreme Court to review a November 2016 green light from the 1st District Court of Appeal.
Like a well-timed pass from Stephen Curry to Kevin Durant for a dunk at the buzzer, the high court came across. “An hour and a half before the ceremony, the Supreme Court denied review,” Murphy said. “So it was a fun event for us. Kevin Durant was there. Steve Kerr was there. The mayor was there, the owners, one of the bankers. There were acrobats. The Mission Bay Alliance wanted a stay, but we could go in feeling lighthearted. I did not wear a hard hat, but Kevin Durant did, and he looked even taller than usual.” Mission Bay Alliance v. Office of Community Investment and Infrastructure (GSW Arena), S239371 (Cal. Sup. Ct., 17, 2017).
As it happens, Murphy is a former college basketball player who was on the junior varsity team at Yale before going to law school at Harvard. “I happen to be a huge basketball fan,” she said as she began hashing out the Warriors deal in 2013. “So I’m in heaven. It couldn’t be more fun.”
The fun turned out to be mixed with some stress. She has represented the Warriors in the California Environmental Quality Act analysis and project entitlements phases of the 488,000-square foot arena project. Their new court is planned to exist within an event center alongside mixed-use office and retail space on the waterfront of a city famous for litigious groups eager to challenge new development. Working with a team boasting the league’s best record keeps her focused, she said. “I have to admit I feel some of that pressure. [The Warriors] are such winners, and you want to match that.”
She credited the Warriors’ general counsel, David J. Kelly, with coordinating a large squad of lawyers. “It’s been a team effort, like basketball,” Murphy said. “David kept everyone moving in the right direction.”
Opponents geared up to stop the Warriors project, arguing the environmental impact report was inadequate, related permits were invalid and the arena complex would dangerously clog traffic near a hospital. Among the plaintiffs lined up against the plan was woman who alleged that if the project were approved she would be adversely affected by impeded access to UC San Francisco medical facilities at Mission Bay for her minor son with a congenital heart condition.
In 2015, Murphy, law partner Daniel M. Kolkey and colleagues at Gibson Dunn used a new Assembly Bill 900 Environmental Leadership Project tactic to fast track the arena, designed by the Legislature and Gov. Jerry Brown to streamline CEQA challenges in developments costing more than $100 million that can be certified to result in no net additional greenhouse gas emissions. The law expedites judicial review in exchange for the creation of good, skilled jobs and guarantees of mitigation measure monitoring. Cases filed by opponents go directly to the court of appeal.
To monkey-wrench the project, Murphy said, foes represented by four law firms filed three separate actions in Sacramento, Alameda and San Francisco counties. Kolkey and lawyers from other firms persuaded courts to transfer and consolidate two of them to San Francisco and to stay the Alameda County case. Wrote Associate Justice Stuart R. Pollak of the 1st District for the panel, “We conclude there is no merit to plaintiffs’ objections to the sufficiency of the city’s environmental analysis and its approval of the proposed project.”
Kolkey, a Gibson Dunn’s California Appellate Law Practice Group and is himself a former associate justice on the 3rd District Court of Appeal, noted the opponents’ efforts met swift, effective pushback from the Warriors’ legal team. “Not only was this case an important milestone for the Warriors and the team’s fans,” he said, “but it showed that the law sets limits upon those who would merely use CEQA as a weapon to obstruct progress. It also demonstrated that careful planning that anticipates your adversary’s next move, before it even knew it had a next move, is a recipe for success.” — John Roemer
Waging a speedy and high-stakes war over trade secrets
It was a big dollar case that Rick L. Richmond was forced to try before a federal judge in a hurry. Despite the urge for speed from the bench and the amount of money at stake, Richmond, the founding and managing partner of Jenner & Block LLP’s Los Angeles office, attained $940 million for health care software client Epic Systems Corp. It was the biggest trade secrets verdict in Wisconsin history and the second largest in the U.S.
Epic’s claim was that documents it outsourced for testing to an Indian multinational information technology service were stolen to benefit a medical software rival. Epic Systems Corp. v. Tata Consultancy Services Ltd., 14-cv-00748 (W.D. Wis., filed Oct. 31, 2014).
“It was not my preference, but the Western District of Wisconsin has a practice of keeping the docket moving expeditiously,” Richmond said. “The judge set an early trial date for a case of this magnitude and stuck to it. We were in court from 8 a.m. to 5 or 6 each night. As if the pressure of the litigation weren’t enough, there was constant pressure from the bench. We had to take depositions during the trial. We trimmed the video and kept the witnesses short. I’ve taken depos during trial one other time in 30 years of practice.”
U.S. District Judge William M. Conley of Madison, Wisconsin, also instructed the sides to stipulate to some witness statements and read summaries to the jury. “It’s provided for in the federal rules, but I’ve never done that before,” Richmond said. “The judge told me to read them with feeling but without theater. He made it happen.”
Richmond managed to shoehorn the testimony of 50 witnesses into 10 trial days and still manage to give the jury a clear understanding of what happened to his client’s confidential information. The 10 days included jury selection and two opening and closing statements from each side, because the trial had been bifurcated into liability and damages segments.
At one point mid-trial, the judge observed that Richmond’s evidence of how the defendant used the stolen evidence was incomplete. “We came back and pointed out that it was not our fault if they destroyed it,” Richmond said.
Richmond’s software expert supported that argument when he testified that information needed to determine some potential wrongdoing was missing, leading to plaintiff arguments that the defendant deleted essential computer evidence. The judge issued an unusual adverse inference instruction, telling jurors that if they determined that Tata destroyed evidence in bad faith, they could assume it would have harmed the defense case. That was one turning point, Richmond said. “A policy, quote, to ‘suppress the truth’ came from the mouth of one of their employees on cross examination, and it clearly had an impact.”
The jury was out for one day on liability and on punitive damages just three or four hours. The verdict broke down as $240 million in compensatory damages and $700 million in punitives.
The judge also issued a permanent worldwide injunction forbidding Tata from using or retaining any of Epic’s information and providing for the appointment of a monitor to oversee that directive. The judge also indicated he was going to award substantial sanctions for Tata’s discovery abuses. That part of the case remains pending.
Richmond noted that the case has been watched closely by chief information and technology officers. The verdict, one industry media report said, “threatens to derail not just [Tata] itself, but Indian IT as well.” The outcome also highlighted the risks of doing business in countries with different laws and legal culture, Richmond said. “You just lose some control.”
Despite the trial’s challenges, Richmond remains enthusiastic about his job. “I love trial work. I love the strategic part of litigation. More than anything, I love to be in trial, examining the witnesses, helping the jury understand the issues and the facts and persuading them of my clients’ point of view,” he said. — John Roemer
White Collar Criminal Defense
Delivering a stunning defeat of government overreach
In retrospect, Cristina C. Arguedas of Arguedas, Cassman & Headley LLP has lingering questions about the mammoth win she and colleagues attained in the federal government’s prosecution of Memphis-based client FedEx Corp. Before she even presented her defense – but after her detailed opening statement, a four-hour marathon – Arguedas had won over Senior U.S. District Judge Charles R. Breyer of San Francisco and brought enough pressure on the government’s evidence that prosecutors waved the white flag after only three days of a bench trial.
The charges that the big package shipper intentionally transported illegal online prescription pharmaceuticals and laundered drug money grabbed headlines and carried the potential of $1.6 billion in fines. U.S. v. Fedex Corp., C14-00380 (N.D. Cal., June 17, 2016). Rival UPS Inc. paid $40 million to settle similar claims. Arguedas argued that FedEx actually aided law enforcement in tracking drug shipments and that the government sought to conceal that exculpatory truth.
Allen J. Ruby of Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates conducted a key cross-examination of a lead Drug Enforcement Administration agent for the defense. “It brought into focus the extent to which the government chose not to take action against these pharmacies,” he said. “Yet they were claiming FedEx should have acted.” As Ruby threw queries, Breyer joined in the interrogation from the bench, alerting prosecutors that their case was slipping away. “The judge pretty much took over and asked some pointed questions,” Ruby said. Jack P. DiCanio, Patrick Hammon and Claire A. McCormack also helmed the Skadden team.
Arguedas pointed to DEA witnesses that prosecutors failed to call. That led Breyer to request their testimony. On the day the judge expected to hear the agents disclose details of their investigation and take a hard look at Arguedas’ motion to dismiss the charges, Assistant U.S. Attorney John Hemann made the same motion, asking the judge to end his own case.
Breyer agreed, sounding baffled by the prosecution’s approach. “The defense was factually innocent and did not have intent,” he said from the bench. “The act of dismissal is entirely consistent with government’s overarching obligations to seek justice, even at the cost of some embarrassment.”
Now Arguedas wonders what has happened since that dramatic day in June 2016.
“The government said it would investigate what happened in the trial,” she said. “It was Brian Stretch [the U.S. attorney for the Northern District, whose deputies prosecuted FedEx] doing the investigation. He interviewed me post-trial. I’m not saying they have a duty to tell us what they concluded, but we’d sure like to know.”
The government claimed FedEx was part of a decade long conspiracy with online pharmacies to ship product to drug dealers. “But the prosecution’s position was that they had to give us discovery only from Northern California,” Arguedas said. She said a key defense decision was to seek federal subpoenas to depose agents in Florida, Kentucky, Georgia and elsewhere. Law partners Ted W. Cassman of and Raphael M. Goldman of Arguedas Cassman led the subpoena effort in the face of strong prosecution pushback, Arguedas said. “They fought us, and we prevailed. We got a lot of information on the ways FedEx had been helpful to government agents investigating online drug sales.”
During the trial, pressure from the defense led prosecutors to finally agree to call two retired DEA officials who once led the agency’s pharmaceutical investigation division. “If the government doesn’t call them, we will,” Arguedas threatened. One, Arguedas had learned from subpoenaed deposition testimony, had met at FedEx headquarters with company security team members about efforts to combat illegal online drug running. An agent and a FedEx employee took notes, Arguedas said, noting that the government had not shown the notes during its opening presentation.
“In these two-day meetings, the DEA never suggested that FedEx was doing something wrong by shipping packages for pharmacies from the online pharmacy industry,” Arguedas said.
Assistant U.S. Attorney Kirstin M. Ault objected to use of the notes in court, describing them as hearsay and arguing, “In an ordinary case … if we had a jury, the parties would have to agree that the evidence was admissible before it was shown.”
The judge wasn’t impressed. “Believe me, this is not the ordinary case,” Breyer said. — John Roemer
Worker Health & Safety
Standing up for workers’ right to sit down
A unanimous state Supreme Court ruling in April interpreted an almost never utilized wage order, last amended in 1980, to find that employees must have the option of sitting if they can do their job while seated. Kilby v. CVS Pharmacy Inc., 63 Cal. 4th 1 (2016).
Justice Carol A. Corrigan’s opinion was nuanced. Afterward plaintiffs’ lawyer Michael Rubin, partner at Altshuler Berzon LLP, and CVS Pharmacy Inc., represented by Timothy J. Long, partner at Orrick, Herrington & Sutcliffe LLP, each declared victory.
But Kilby’s early fallout is pro-plaintiff. In June, the 9th U.S. Circuit Court of Appeals certified seating class actions against CVS, JPMorganChase Co, and Wal-Mart Stores Inc. Three months later, Bank of America settled with a class of 23,000 tellers for $15 million and an agreement that tellers could sit on the job. Garrett v. Bank of America, RG-13699027 (Alameda Super. Ct.,Oct. 28, 2016).
Crucially, $7.3 million of the Bank of America deal went to state coffers, under PAGA in which citizens sue over labor code and wage order violations on behalf of the state, with the Department of Labor Standards & Enforcement getting a chunk of the money.
The Bank of America settlement was 10 times the money California got from any prior PAGA payout.
“These cases validate the legislative purpose underlying PAGA,” said Rubin, worker’s lead appellate attorney for the suitable seating cases. “The whole point of PAGA is that state agencies are underfunded and lack sufficient staff, so the Legislature enlisted the support of workers and private counsel for labor law enforcement.”
Until PAGA was introduced in 2004, lawyers could not sue over sitting, because it was merely a wage order, not in the labor code.”Employers in California have ignored the regulation in California for the sole reason that they thought it would not be enforced,” said Matthew Righetti, plaintiffs’ lawyer at Righetti Glugoski PC. “Spotty enforcement of such regulations was the reason why PAGA was enacted, which enabled employees to enforce this kind of regulation.”
Righetti, along with Kevin J. McInerney of McInerney Law, and James B. Clapp of the Law Offices of James B. Clapp, got the suitable seat litigation going, including filing the Kilby and Garrett matters. Whether the Garrett settlement portends a sea change in suitable seating litigation and PAGA payoffs will be determined soon. Several seating cases, including the matters against CVS, JPMorgan Chase, and Wal-Mart, are pending before trial courts. — Matthew Blake