The Legal Intelligencer Blog

3rd Circuit Refuses to Overturn Delaware Dredging Ruling

By Zack Needles
Of the Legal Staff

The U.S. 3rd Circuit Court of Appeals has declined to overturn Judge Sue L. Robinson's late January ruling that opened the doors for the first phase of a project that would deepen the Delaware River shipping channel.

In a Feb. 8 order, a three-judge panel led by Chief Judge Anthony J. Scirica denied an expedited motion for injunction and stay pending appeal filed by intervenors the Delaware Riverkeeper Network, the Delaware Riverkeeper, the Delaware Nature Society, the National Wildlife Federation, the New Jersey Environmental Federation and Clean Water Action.

Scirica, who was joined by Judges Julio M. Fuentes and Thomas M. Hardiman, said the appellants failed to meet the standards for either an injunction or a stay. On Jan. 29, Robinson ruled that dredging could begin on "Reach C" of the river, which runs south from Wilmington, Del., to just south of the Chesapeake and Delaware Canal.

Robinson said in the opinion that Delaware's Department of Natural Resources and Environmental Control and the other plaintiffs, which also included the state of New Jersey as an intervenor, had failed to adequately demonstrate their potential to succeed on the merits, as well as to show that the deepening project would cause irreparable harm.

Robinson did preliminarily enjoin the defendant, the U.S. Army Corps of Engineers, which controls the deepening project, from dredging other sections of the river "until further order of the court," noting that subsequent phases of the project are not set to begin until December of this year, by which time the DNREC said it can likely complete a review.

At oral arguments in December, Delaware Deputy Attorney General Jennifer Oliva said the corps has been uncooperative in obtaining the state permits it needs to begin work on the dredging project, which seeks to deepen and widen a 102.5-mile stretch of river that runs through Delaware, New Jersey and Pennsylvania.In 2003, a state-hired hearing officer recommended the corps' permit application be denied, according to Oliva, but the state never officially acted on this recommendation.

Oliva said the corps never made any subsequent effort to satisfy the permit requirements and then took the state by surprise last October when it announced it would move forward with the project by early January 2010 without permits.

The corps' attorney, Kent Hanson of the U.S. Justice Department, said during the arguments that there was "no explanation for the state's five-and-a-half years of inactivity."

Oliva also said the project would churn up long-dormant toxins that could potentially harm aquatic life and, once the debris is stored, seep into groundwater if left unchecked.

But Hanson said Delaware lacked sufficient evidence to back up this claim, which he denounced as "a kind of fear-mongering."

Delaware Riverkeeper Network staff attorney Elizabeth Brown said Wednesday that her clients were "disappointed" in the appeals court's ruling on the motion to stay, but "we certainly recognize the extraordinary relief we were seeking."

"We will press forward with the underlying litigation in Delaware and New Jersey," Brown said.

The U.S. Justice Department could not immediately be reached for comment.

Continued Planning in the Era of Estate Tax Repeal

By Robert H. Louis
 
At mid-February, 2010, we still have no indication of the future of estate tax legislation. There was a suggestion that it might be included in the jobs bill that could be considered by Congress soon. All that we know is that every prediction, guess and inside tip from every commentator and tax lawyer has so far proved wrong.
 
But there is still planning that can and should be done now. The values of business and investment assets are generally lower than they were a few years ago and that, we hope, they will be in a few more years. The interest rates used to value such interests and the rates used by the IRS to determine the gift element of transfers are both at historic lows. Those two circumstances make it important to consider planning techniques such as grantor retained annuity trusts (GRATs), which are forms of deferred gifts. In addition, because housing values are still low, it's worthwhile to consider qualified personal residence trusts (QPRTs). Conventional wisdom suggests that QPRTs work best in a high interest environment and, all other things being equal, that's true. But all other things aren't equal: the continued "dip" (recession, collapse, depression?) in housing values make QPRTs a good technique even while interest rates are low.
 
To these techniques should be added the value of outright gifts and other forms of gifts in trust, since the federal gift tax rate has fallen to 35 percent this year. And, thought should also be given to Roth IRA conversions, another subject of continued discussion now that the rules permitting such conversions have been relaxed.
 
We expect that the federal estate tax will return, either this year or next, and it may be that Congress will act to restrict one or more of the techniques described above. Until then, estate planners should consult with clients to review the advantages of planning right now.

Robert H. Louis is a partner and co-chairman of the personal wealth, estates and trusts department at Saul Ewing. His practice includes estate, tax and retirement planning for individuals and closely held businesses. He is a fellow of the American College of Tax Counsel and a graduate of the Wharton School and the Harvard Law School. Louis can be reached at rlouis@saul.com and 215-972-7155.

A Potential Conflict of Interest Costs a Firm Millions

by Joshua D. Wolson

A federal judge in California recently issued a startling ruling that class counsel in an antitrust class action was not entitled to any fees, even though it pursued the case for years and successfully negotiated a $49 million settlement. In effect, the judge converted the case from a contingent-fee case to a pro bono case, all because of a potential ethical conflict arising from a retainer letter that obligated counsel to seek incentive awards for the named plaintiffs in the event of any recovery in the case. 

The issue arose because convincing a person or business to serve as a representative plaintiff in a class action often presents a free rider problem. To wit, if the case is ultimately resolved favorably, either through settlement or trial, every member of the class will benefit.  Yet the named plaintiff will have suffered through discovery, including document requests and depositions, while no absent class member will have suffered the same burdens.  These can be painful, distracting experiences for an individual, and potentially disruptive to a small business.  So a potential class representative could be forgiven for asking, “What’s in it for me?” 

The decision, by Judge Manuel Real of the Central District of California, makes clear that law firms might not be forgiven if they answer that question with promises to seek incentive payments for the class representatives.  The issue arose when Real granted final approval to a $49 million settlement in an antitrust class action against West Publishing Corp. (owners of BAR/BRI) and Kaplan Inc., alleging that the two companies illegally agreed that Kaplan would stay out of the market for bar study courses.  At the same time, Real was also asked to consider whether to award incentive awards to the named class representatives. Under the terms of the named plaintiffs’ retainer agreement, class counsel was obligated to seek incentive awards on a sliding scale – the greater the recovery for the class, the larger the incentive awards, up to a recovery of $10 million for the class.  For any recovery above $10 million, the incentive awards remained the same. Real rejected the requested incentive awards. 

On appeal, the 9th Circuit noted that the retainer agreement created significant ethical problems for McGuire Woods, which was serving as class counsel. The court of appeals explained that the agreement created a potential conflict between the named plaintiffs – who had a reduced incentive to seek a recovery above $10 million in the case – and the absent class members and that California law prohibits an attorney from recovering fees for a conflicting representation.  However, the 9th Circuit did not decide what effect that conflict should have on any fee application.

On remand, Real took the 9th Circuit’s caution very seriously.  In fact, he held that McGuire Woods’ failure to secure a waiver of the conflict – and, of course, given that the conflict was with tens of thousands of absent class members, doing so would have been impossible – meant that the firm was not entitled to collect any fees.  This is a startling result, particularly under the circumstances:  McGuire Woods was not the firm that entered into the retainer agreement; McGuire Woods secured a settlement far greater than the $10 million threshold of the purported conflict; and all requests for incentive fees were submitted to the court and subject to court scrutiny (although the original retainer agreement was not subject to such scrutiny). 

Nonetheless, assuming the decision holds up on appeal – and the 9th Circuit’s decision gives no reason to think that it will not – it is a costly result for McGuire Woods, and an vital cautionary tale for anyone else seeking to sign up potential representative plaintiffs. 

Joshua D. Wolson is a member of the litigation department at Dilworth Paxson.  He can be reached at 215-575-7295 or jwolson@dilworthlaw.com. This posting is for informational purposes only and should not be construed or interpreted as legal advice on any matter.

Baer Asks Senate Panel for More in State Tax Revenues

By Amaris Elliott-Engel
Of the Legal Staff

With Pennsylvania facing another tight fiscal year, the Pennsylvania state court system received both sympathy and prodding for improvement in its financial situation from state senators during a state Senate Appropriations Committee hearing Thursday.

State Supreme Court Justice Max Baer told the committee that the state judiciary has received less funding than it needs to pay for judges, judicial staff and courthouses for the last five years. He said the judiciary's budget request of $341 million for the fiscal year starting July 1 includes $20 million to cover a shortfall for this fiscal year's expenses.

"We, like you, are a co-equal branch of government and respectfully, we need to be funded so we can carry out the mandatory constitutional duties of the judiciary and we do not have extra funds in our budget," Baer said.

State Sen. Tommy Tomlinson, R-Bucks, majority vice chair of the committee, and state Sen. Patrick M. Browne, R-Lehigh, both said that the state judiciary should not be tapping into a computer augmentation account to pay for shortfalls in funding the judiciary as the judiciary has been doing in recent years.

"We're making your argument for you," Tomlinson said at the very end of the hearing.
Last year, both the state Senate and Gov. Edward G. Rendell's spending proposals for the state judiciary provided funding that was tens of millions of dollars below the court's self-identified budget needs.

Rendell's proposal this year would keep intact the funding cuts from last year and fund the court system at $335.9 million, including $276.9 million from the general fund.

Baer said the court system is facing the $20 million shortfall, in part, because a law increasing court user fees became active later than first expected because of last year's Harrisburg budget showdown.

State Sen. Stewart Greenleaf, R-Montgomery, floated the idea of increasing court user fees again this year to address any shortfall in funding the judiciary. Last year, the state court system requested a larger increase in user fees than the state Senate showed a willingness to pass into law.

Baer said the state court system is requesting $340 million in general fund dollars, including coverage of the $20 million shortfall in this year's fiscal budget. But if the new court user fees, which are expected to generate $29 million annually, are added to the governor's suggested appropriation, the shortfall between the judiciary's request for fiscal year 2010-2011 and the governor's proposal would be closer to $13 million, Baer said.

Baer said there are reasons to question "the merits of the policy of funding the third branch of government -- with fees rather than tax dollars -- but it's better than not being funded. At least we can operate."

State Sen. Mary Jo White, R-Venango, and state Sen. Lisa M. Boscola, D-Northampton, asked why the court system does not require its judges and other employees to pay part of their health care premiums, just as the state Senate does.

Baer said there is a disturbing trend of older judges deciding to not serve until the mandatory retirement age of 70 in order to take more lucrative work for a law firm. He said one of the benefits the judiciary can offer is very competitive benefits.

Justice Thomas G. Saylor, Commonwealth Court President Judge Bonnie Brigance Leadbetter, state Court Administrator Zygmont Pines and others also made presentations on behalf of the state court system.

The state Senate, which is controlled by Republicans, has not yet introduced its own budget proposal.

The state House of Representatives, which is controlled by Democrats, held a budget hearing on the state court system earlier this week.

To Address or Not to Address Damages: The Dilemma for Defense Attorneys

There is a recent article in “The Jury Expert” by Jeri Kagel called “Damages: A Defense Attorney’s Dilemma”. It got my mind brewing about this question that has historically plagued defense attorneys in injury cases.

Kagel discusses some concerns defense attorneys face that I have seen over and over again in my practice. Specifically, some defense attorneys are concerned that speaking about damages means conceding liability. Others feel that arguing against injury-related damages means that the defense is callous and dismissive of the plaintiff’s injuries.  While this can be the case if not done strategically, it does not have to be true.

Does Discussing Damages Mean I Concede Liability?

There are ways to discuss a plaintiff’s damages without agreeing that the damages will need to be paid. 

In an auto accident case, a man’s hand was severely injured when the side door of his van closed unexpectedly on his hand, shattering several bones. The plaintiff was suing for a large amount in damages, claiming that the door was pushed closed by the defendant’s passing truck, and that he was permanently injured. The plaintiff claimed that the injury left him disfigured and so depressed that he could no longer be intimate with his wife or play soccer with his son. 

The defense conducted a mock trial for this case and vehemently argued against liability. In the closing of its presentation, it also closed the circle of the case by discussing damages. First, the injury was conceded and the pain of having such an event happen was undeniable. That said, the defense argued, “the plaintiff’s damage claims are just one more example of how plaintiff is over-reaching in this case. Was his hand broken? Yes. Was it very painful and very unfortunate? Yes. Is the plaintiff still able to have a fulfilling life despite having his hand broken? Yes.” The jurors in the exercise saw the plaintiff’s damage claims as a pattern of trying to claim more than he deserved. Therefore, the damage argument strategy did not only work for damages, but also supported the liability case.

Does Discussing Damages Mean the Defense Will be Perceived as Callous or Uncaring?

Obviously, many injury cases will involve more than a broken hand. There are times when the injury is permanent and is undeniable. Typically, the issue in these cases is not the level of care needed, but the cost of that care. As a damage argument, it is typically (although not always) inadvisable to say that a severely and permanently injured plaintiff does not need “the best care” or can go for something more “cost effective.”  That does typically turn jurors off.  You can provide care alternatives for jurors, but a focus on arguing the costs of the care the plaintiff is requesting is typically more palatable to jurors when possible.

In another accident case, a woman had a head-on collision with a truck and was rendered quadriplegic. In the mock trial exercise, while not conceding liability (in fact, the defense claimed that the accident was the plaintiff’s fault), the defense spoke of the plaintiff’s damages, agreeing with the plaintiff’s injuries and with his life care plan. This defense spent its damage arguments on the economist’s instruction of “present value” in order to show jurors that the plaintiff’s top quality care does not cost what the plaintiffs were claiming it did. The present value testimony did appeal to jurors, who were impressed when they felt the defendant did not dismiss the plaintiff’s injuries. In this case, jurors also agreed that the plaintiff caused the accident.

Why Is Discussing Damages So Important?

There are no guarantees that a juror will find for you on liability. It is important not only to argue liability, but to mitigate damages as a defendant. With only one set of numbers for damages, that will be the only anchor jurors will have as reference for making their damage awards. When more than one set of damages are provided, jurors often use both sets of numbers to determine what is fair. The research has shown that providing those alternative anchors brings damages down … especially when done with compassion and without conceding liability. 

Melissa M. Gomez, Ph.D. is a jury consultant and owner of MMG Jury Consulting LLC. She holds a Ph.D. in psychology from the University of Pennsylvania. Her experience includes work on more than 100 jury trials in Philadelphia and across the country, with a focus on the psychology of juror learning, behavior and decision-making. She has more than a decade of expertise in research design and methodology, as well as in behavioral and communication skills training.

This posting is for general informational purposes only and should not be construed or interpreted as advice specific to any matter. Each case is different and no strategy applies uniformly to all.

If you have any questions regarding jury psychology that you would like to see addressed in this blog, please contact Dr. Gomez at melissa@mmgjury.com or call 215-292-7956.

Melissa M. Gomez, Ph.D.
MMG Jury Consulting, LLC
www.mmgjury.com

Meet the Editors on Feb. 11 - Submitting to Editorial Pages

As an update to my last blog, I want to remind everyone that the Philadelphia Bar Association Bar-News Media Committee will host “How and When to Share Your Opinion with the Press - Submitting to Editorial Pages” at noon Feb. 11. The discussion will feature:

• Bernard Dagenais, editor, Philadelphia Business Journal.

• Hank Grezlak, associate publisher and editor-in-chief, The Legal Intelligencer.

• Lisa Hostein, executive editor, Jewish Exponent.

• Irv Randolph, managing editor, The Philadelphia Tribune.

The program will be held at the Philadelphia Bar Association, 1101 Market St., 11th Floor Conference Center, Philadelphia. Click here to register.

And if you plan to attend, be sure to review my last blog on this topic: Understanding How and When to Share Your Opinion With the Press – Submitting to Editorial Pages

Gina F. Rubel, Esq., is the owner of Furia Rubel Communications, Inc.,a public relations and marketing agency with a niche in legal communications. A former Philadelphia trial attorney and public relations expert, Gina is the author of Everyday Public Relations for Lawyers. Gina and her PR firm have won numerous awards for legal communications, public relations, media relations, strategic planning, corporate philanthropy and leadership. She maintains a blog at www.ThePRLawyer.com, is a regular contributor to The Legal Intelligencer Blog and blogs for The Huffington Post. You can find her on LinkedIn at www.linkedin.com/in/ginafuriarubel or follow her on Twitter at http://twitter.com/ginarubel.  For more information, go to www.FuriaRubel.com.

So, What do Jurors Really Think?

For the past few months, I have been perusing comments folks make about jury duty as @mmgjury on Twitter (www.twitter.com).  What I have learned has been quite insightful, and has elicited more than one belly laugh. So, if you want to know what the folks in your venire are really thinking, here are some of their comments.

   About Each Other

• "78-85 year old dude here at jury duty wearing a shirt that says ‘I love hot moms.’"
• "Please, Baby Jesus, let there be no farters or actors at jury duty."
• "There are more depressed looking people here at the courthouse waiting for jury duty than at the DMV or an airport."
• "Lady next to me in the jury duty room is snoring like a chainsaw. Do I give her the old foot kick?"
• "Jury duty is like central booking. Everyone has a reason they shouldn't be here. Chairs are more comfy though."
  
  About How to Get Disqualified

• "I have jury duty. Tried so hard to get out of it but. … Serves me right for being a voting noncriminal."
• “How my (female) friend got out of jury duty -- Q: Do you believe in death penalty? A: Depends on what time of the month.”
• "The next time they call me for jury duty I’m going to tell them I have crabs."
• "Got up to try and convince people I was too unstable for jury duty."
• "Jury duty. When they interview me, I'll ask if it is fair that I can read minds."
• "Guy suggested I use prenatal symptoms as excuse to get out of jury duty. Uhm, dude, not pregnant. Hitting gym tonight."
• "You are perfect for jury duty: smart and well-spoken. You’ll just have to act illiterate and narrow-minded."
• "I'm almost ready to leave for jury duty; I just have to rub garbage all over my clothes and make my tinfoil hat."
  
  About the Litigants

• “How the hell are corporations considered people? They don't vote, procreate, have jury duty, etc. Their sole interest is profits."
• "Whoever got me up at 6AM is guilty!"
  
  About the Process

• "Anyone that has served jury duty, have you ever been told to ‘disregard’ something ... did you do it? How did you do it?"
• "Today I do my civic duty and serve jury duty. I am going to sentence them to death if I get hot or bored."
• "Wondering why civic duty has to feel like a lottery you don't want to win."
• "Jury duty = snitchin."
• "H1N1 might be less impactful on productivity than Grand Jury Duty."
• "Jury duty should be the punishment for criminals, not prison. Four hours of cheap coffee and boredom=no repeat offenders."
• "Today’s feature film will be 'jury duty 2.0: trial by boredom.'"
  
  About You

• "Getting ready for week 3 of grand jury duty. Hopefully will get some juicy cases and well-prepared prosecutors."
• "Jury duty, how I detest everything about you except for the parade of lowlifes. I'm talking about the lawyers."
• "Last time I had jury duty I was relieved not to be picked because one attorney drove me nuts in voir dire!"
  
  Prefer Enthusiasm?

Some potential jurors lead you to wonder whether you would prefer folks who want to be there, or those who do not.

• "On the way to Jury Duty. Pick me pick me!"
• "What’s so bad about jury duty? Deciding whether or not someone gets to rot in prison seems pretty freakin sweet"
• "Jury Duty sucks!!! Unless it’s about murder."
   

Melissa M. Gomez, Ph.D. is a jury consultant and owner of MMG Jury Consulting, LLC. She holds a Ph.D. in psychology from the University of Pennsylvania. Her experience includes work on more than 100 jury trials in Philadelphia and across the country, with a focus on the psychology of juror learning, behavior and decision-making. She has more than a decade of expertise in research design and methodology, as well as in behavioral and communication skills training.

This posting is for general informational purposes only and should not be construed or interpreted as advice specific to any matter. Each case is different and no strategy applies uniformly to all.

If you have any questions regarding jury psychology that you would like to see addressed in this blog, please contact Gomez at melissa@mmgjury.com or call 215-292-7956.

Is Twitter Serious Enough to Get You Sued?

Are Twitter tweets, all 140 characters or less, intended to be taken seriously?  Or is the microblogging site just one big forum of hot air, where nothing can be taken seriously and nothing is capable of defamatory meaning?  That seems to be one of the issues percolating as courts face the challenge of applying defamation law that was developed for old media to a host of new fora.  Last year, I blogged about a Chicago woman, Amanda Bonnen, who was sued by her landlord after she tweeted, “Who said sleeping in a moldy apartment was bad for you?  Horizon realty thinks it’s okay.”  Last month, a state court judge in Illinois dismissed the case.

Although the court did not issue an opinion, Bonnen’s argument raises important questions about how the law will apply to Twitter, and maybe to other social media.  In particular, she argued that tweets are, by their nature, opinion and that, absent some verifiable factual information included in a tweet, a tweet can offer no basis for a defamation claim.  She went on to claim that most tweets are just “pointless babble.”  (For now, I’m assuming that she and her lawyers did not have in mind my blog posts, which I typically circulate on Twitter, when she used that description.)  This is an argument that anyone suing over a tweet is likely to hear again, in some form. 

It is not clear whether Twitter’s very nature makes tweets less capable of defamatory meaning.  Certainly, the substance of the medium makes defamatory statements hard – it is hard to say anything in 140 characters, let alone something that includes verifiable assertions of fact.  And Twitter followers may have learned to take many tweets with a healthy grain of salt.  Indeed, most of the tweets I receive tend to be commentary of one type or another, along with a healthy dose of the pointless babble to which Bonnen referred in court.  On the other hand, Twitter allows its users to attach links to Web sites and other types of factual information that, at least in some circumstances, might allow a reader to think a tweet is an assertion of fact.  In addition, while most tweets are shorter than other forms of speech, they can very quickly reach a broad audience, and the speaker often has no idea who his or her followers are on Twitter.  What is clear is that any tweet is intended by the speaker to be broadcast to a wide audience, and possibly even retransmitted (“retweeted,” in the Twitter vernacular). 

Ultimately, it seems likely that a post on Twitter might be capable of defamatory content.  However, like any other speech, its context will be important.  Anyone concerned with maintaining a particular image, either for branding reasons or otherwise, would be well-advised to keep an eye on relevant tweets and consider whether they, like any other public statement, are really defamatory and worth a lawsuit.  And remember that, in making that determination, context counts.

Joshua D. Wolson is a member of the litigation department at Dilworth Paxson.  He can be reached at 215-575-7295 or jwolson@dilworthlaw.com.  This posting is for informational purposes only and should not be construed or interpreted as legal advice on any matter.