Amid discussions on how the Sequester will impact the country and reports of law firm downsizing, two recent surveys indicate that economic conditions in the legal industry are on an upswing.

First, on March 18, 2013, Citi Private Bank’s Law Firm Group released results from its Law Watch Managing Partner Index survey. The survey covers the fourth quarter of 2012 and is based on responses from 77 law firm leaders to questions about his or her overall confidence in business conditions in the legal industry. The leaders’ responses were plotted on a 200-point index, with 99 points or less representing a lack of confidence, 100 points representing a neutral response and 101-200 points representing complete confidence. Overall confidence in the industry rose 13 points from the third quarter of 2012, with 34% of respondents indicating his or her overall confidence is now “somewhat better.” Other topics in which leaders are increasingly confident are the economy at large, business conditions of the legal profession, profits and revenues, and demand. As one may expect, leaders also reported a continued increase in demand for discounts, cumulating in 73 points, which places this category in the “lack of confidence” portion of the scale; this index value represents a 4-point drop from Q3 2012 to Q4 2012, indicating that leaders still experience push-back from clients on fees.

Supporting the idea that economic conditions are improving, Robert Half Legal released its 2013 Salary Guide, stating that “an upturn in business activity has sparked renewed hiring at both law firms and corporate legal departments.” Law firms are focusing on hiring experienced lawyers; “hybrid paralegal/legal secretary positions” are also in demand as firms continue to streamline operations. Also, based on a survey of 200 lawyers in the largest firms and corporations in the United States, three key areas of law should experience the most growth in the next two years: healthcare, general business/commercial law, and litigation. Salaries for all legal positions in both law firms (all sizes) and corporations are expected to increase. The Salary Guide further indicates that the employment outlook for Canada also remains positive, with general business/corporate law expected to experience the most growth over the next two years. The Guide concludes with eight signs it’s time to start hiring additional staff (beyond the obvious “new work is coming in”), whether or not counteroffers should be made to departing employees, and eight low-cost employee perks that are inexpensive for employers to offer yet are highly appealing to employees.

Perhaps 2013 will be a banner year after all . . .

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Class Action Deemed to Be Improperly Certified by Lower Courts


CHICAGO – (March 27, 2013) The Supreme Court this morning reversed the judgment of the Third Circuit Court of Appeals in the case of Comcast v. Behrend, an opinion in alignment with the position of DRI – Voice of the Defense Bar in its amicus brief filed in August of last year. The majority held that the class action in Comcast v. Behrend was improperly certified under Rule 23(b)(3). 

In this case, subscribers sued Comcast Corp. and various Comcast subsidiaries, alleging that Comcast monopolized Philadelphia’s cable market and excluded competition in violation of federal antitrust laws. To constitute a class, plaintiffs proffered an expert damages model that purported to prove each class member’s damages by evidence common to all. Comcast responded that the plaintiffs’ model was incapable of calculating damages for the class because it was based on several erroneous assumptions about the asserted claims, and indeed that common proof of damages is impossible given significant differences among the class members. The district court nonetheless certified the class.

Comcast sought review in the Third Circuit Court of Appeals, which affirmed the certification order after expressly declining to consider Comcast’s contentions. While the Third Circuit acknowledged that, “[t]o satisfy . . . the predominance requirement, Plaintiffs must establish that the alleged damages are capable of measurement on a class-wide basis using common proof,” it nonetheless insisted that “[w]e have not reached the stage of determining on the merits whether the methodology [offered by Plaintiffs] is a just and reasonable inference or speculative.” The court concluded that Comcast’s “attacks on the merits of the methodology” have “no place in the class certification inquiry.” 

In his dissent, Judge Jordan stated in part, “not only have Plaintiffs failed to show that damages can be proven using evidence common to the class, they have failed to show . . . that damages can be proven using any evidence whatsoever—common or otherwise.” 

The Supreme Court held that the Third Circuit erred in refusing to decide whether the plaintiff class’s proposed damages model could show damages on a class-wide basis. Under proper standards, the model was inadequate and the class should not have been certified. The vote was 5–4 with Justices Breyer, Ginsburg, Sotomayor and Kagan dissenting.

Citing the Federal Judicial Center’s Reference Manual on Scientific Evidence, the majority held that “’The first step in a damages study is the translation of the legal theory of the harmful event into an analysis of the economic impact of that event.’ The District Court and the Court of Appeals ignored that first step entirely.”

The Third Circuit’s approach to class certification would have allowed plaintiffs to obtain certification without showing a reasonable likelihood that they will be able to prove their class-wide claims (predominately) by common evidence. This would have significantly lowered class plaintiffs’ burden under Rule 23 and resulted in the certification of many more non-meritorious class actions.
Brief author Jonathan F. Cohn of Sidley Austin LLP, Washington DC, is available for interview or for expert comment through DRI’s Communications Office.
For the full text of the brief, click here.

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An important federal appeals court has determined that a Connecticut court has jurisdiction over a Canadian citizen whose only act in Connecticut was accessing information on a computer server located in Connecticut.  In MacDermid, Inc. v. Deiter, 702 F.3d 72 (Dec. 26. 2012), a Connecticut-based company, MacDermid, Inc., sued its former employee, Deiter, a Canadian citizen who worked from Canada, in federal court in Connecticut for misappropriation of MacDermid’s trade secrets.  MacDermid alleged that Deiter sent confidential company information from her company email account to her personal email account.  The lower court dismissed the case, saying that Connecticut courts did not have jurisdiction over Deiter because she never set foot in Connecticut and only used a computer terminal in Canada.  MacDermid appealed.  The U.S. Court of Appeals for the Second Circuit, in New York, reversed, holding that it was proper for a Connecticut court to exercise personal jurisdiction over a Canadian employee of a Connecticut company because, even though she was located in Canada and physically interacted only with a computer in Canada, she “used” a server in Connecticut.


Background

MacDermid is a chemical company located in Connecticut.  Dieter, a resident of Ontario, Canada, worked for MacDermid’s Canadian subsidiary.  The email system for both MacDermid and its Canadian subsidiary is located on a server in Waterbury, Connecticut.  Just before Dieter was about to be fired, she forwarded what MacDermid claims is confidential information from her MacDermid email account to her personal email account.  In doing so, Dieter accessed MacDermid’s email server in Connecticut, even though she did so while located in Canada and physically interacting only with her computer terminal in Canada (albeit a company computer).  MacDermid sued Dieter in Connecticut for trade secrets misappropriation, and Dieter moved to dismiss, arguing that Connecticut courts did not have jurisdiction over her, as she had never left Canada.  The issue was whether the Connecticut “long arm” statute gave Connecticut courts jurisdiction over someone outside of Connecticut, and whether such jurisdiction would be constitutional.  One section of the “long arm” statute gives Connecticut courts jurisdiction over someone who “uses a computer” or “a computer network” located in Connecticut.  Therefore, the issue became whether accessing email via a server located in Connecticut constituted “using” a Connecticut computer or network.

Analysis

The lower court dismissed the case because it found that Dieter had not “used” a Connecticut computer or Connecticut computer network, but had only sent email from one computer in Canada to another computer in Canada.  The Second Circuit court disagreed.  It concluded that “using” a computer or network may involve more than just the act of physically interacting with a computer.  While Dieter had physically interacted only with her terminal in Canada, she had “used” MacDermid’s network in Connecticut by accessing it electronically when she sent an email from her company account to her personal account.  The Second Circuit pointed out that the “long arm” statute does not require that user be located in Connecticut, but only that the computer or network – i.e., the thing that is “used” – be located there.  In other words, the “long arm” statute extends to people who access Connecticut computers or networks remotely.

But, having determined that Connecticut’s “long arm” statute extended to Dieter, the Second Circuit still had to determine whether exercising jurisdiction over Dieter would be  constitutional.  It found that it was.  The court found that Dieter knew that, in using MacDermid’s email system, she was accessing a server in Connecticut.  Even though Dieter would have to travel from Ontario to Connecticut to defend herself in the lawsuit, that would not be an unreasonable burden on her.  Furthermore, according to the court, Connecticut has a significant interest in interpreting its misappropriation laws.  The Second Circuit concluded that it was proper for Dieter to be sued in Connecticut for the wrong she was alleged to have committed.

Implications

While this decision was based on Connecticut law, the Second Circuit federal appeals court covers New York, Connecticut, and Vermont.  Moreover, it is considered an important authority on commercial law.  So its analysis on personal jurisdiction could be persuasive in other courts.

Lesson

The lesson here is that if you think you are safe from suit in a particular state in the U.S. just because you access a computer from the comfort of a faraway state – or even, as in this case, another country – you might be gravely mistaken.

Walter Judge is a litigation partner at Downs Rachlin Martin PLLC who blogs on intellectual property litigation topics
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It is a deposition question that too often surprises lawyers and corporate-witness deponents.  Upon return from a water or lunch recess, the deposing lawyer asks the witness: “So, tell me what you and your company’s lawyer discussed during the break?”  Can the deposing lawyer ask that?  Does the defending lawyer have an attorney-client privilege objection?

In-House and outside counsel focus their deposition preparation on reviewing the notice-of-deposition topics, selecting the most appropriate corporate employee for the deposition task, and preparing that witness with the boilerplate deposition ”dos and don’ts.”  And while many lawyers defending depositions see every break as an opportunity to consult with the witness, they neglect to consider whether these in-deposition consultations are privileged and, importantly, to prepare the witness how to answer an out-of-the break question about those consultations.

Unfortunately, there is no uniform rule on whether lawyers may have privileged conversations with witnesses during deposition breaks.  Some jurisdictions prohibit all during-the-break consultations except when necessary to assert an evidentiary privilege.  Other jurisdictions reject this draconian rule for the more practical approach of permitting break-time discussions except when a question is pending.  In my recent article, Protecting Attorney-Corporate Witness Consultations During Deposition Breaks, published by Inside Counsel, I explore the various rules on this issue and provide practical tips for preparing lawyers and witnesses for this inevitable happening.

You may access the article at this link.  How does your jurisdiction–state or federal–handle this situation?  Place your comments in this post–perhaps we can gather the local rules, judicial rulings, and local practices so that others may find answers in a single forum.

As originally published at presnellonprivileges.com 
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Last June, Drake and Chris Brown found themselves on opposite sides of a New York City nightclub scuffle.  Now, according to reports by TMZ, they are suing each other over the fight in the hopes of receiving a judicial determination of who was responsible for the brawl.  The fight began after an argument broke out over the pop singer Rihanna.  Eventually, punches and bottles were thrown, leaving the club in shambles and Brown with a gash on his chin.  After a model named Romain Julien was also injured in the fight, he sued Brown, Drake, and the club for damages stemming from his cuts, “cosmetic defects,” and emotional distress.  Most likely, Brown and Drake are seeking this determination in order to avoid paying damages should Julien win his lawsuit.

Other notable lawsuits stemming from that particular fight include Entertainment Enterprises Ltd.’s $4 million lost licensing deal claim, along with a $20 million eye injury claim brought by NBA star Tony Parker.  Surprisingly, the incident resulted in no criminal charges against either party due to a lack of conclusory evidence.

As originally published at Sports Law Insider

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Rule 403 of the Federal Rules of Evidence governs the admissibility of demonstrative evidence at trial, assuming that evidence is determined to be relevant under Rule 401. Pursuant to Rule 403, a demonstrative exhibit may be excluded from the courtroom if its probative value is substantially outweighed by its unfair prejudice, its cumulative nature or if it is confusing or misleading.

Does the exhibit (1) relate to a piece of admissible substantive proof; (2) fairly and accurately reflect that substantive proof; and (3) is it sufficiently explanatory or illustrative to assist the jury? These are the questions used to establish a proper foundation for use at trial.

In addition, the exhibit should convey what it is designed to convey. For example, a computer enhanced photograph should not make an accident scene look better or worse than it actually was. Similarly, the demonstrative evidence should convey representational accuracy. The scale, dimensions and contours of the underlying evidence should all be accurately depicted. Today more than ever, the creative use of software permits trial counsel to manipulate demonstrative exhibits in ways often difficult to spot.

In an excellent article titled, “5 Demonstrative Evidence Tricks and Cheats to Watch Out For,” Ken Lopez, fouinder of A2L Consulting, provides a useful guide for spotting misleading charts and explains why they are misleading. Lopez discusses five such tricks (which are somewhat difficult to convey without having all of the graphics Lopez uses in his article to illustrate his points):

1. The Slippery Scale. This trick involves setting the the vertical y-axis on a graph in a narrow range that does not include “0.” By not including “0,” it is easy to make a relatively small change look enormous.

2. Compared to what? If the trial lawyer seeks to demonstrate a small change on a percentage basis, all he needs to do is carry the horizontal x-axis so that time is literally “on his side”

3. The Percentage Increase Trick. How many times have you heard someone talk about a 200% or 300% increase and really wonder what they mean? 

4. Tricking the Eye with 3D Charts. Flat charts with no depth or 3D aspect are harder to trick the viewer with, so always scrutinize your opponent’s charts when a third dimension is introduced. On a pie chart, when a slice of the pie (e.g., the percentage of customers injured by a purportedly defective product) is closer to the viewer, it looks much bigger.

5. Misleading Emotional Imagery. Putting an image of a homeless person in the background of a chart about increasing homelessness is designed to evoke emotion. Similarly, showing an oil-covered bird in the background in an explanation of how much oil was spilled in an accident does not add to one’s understanding of the amount of oil spilled, but seeks to trigger an emotional response in the viewer.

Perhaps the single most important Rule 403 objection you can make in a jury trial is the exhibit’s capacity to generate an emotional response such as pity, revulsion or contempt. Under these circumstances, the capacity to evoke emotion far outweighs the value of the evidence on the issues before the court and exclusion is appropriate.

As originally posted on January 9, 2013 in Toxic Torts Litigation Blog
 
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A Pennsylvania district court in CAMICO Mutual Insurance Co. v. Heffler, Radetich & Saitta, LLP (E.D. Pa. Jan. 28, 2013), refused to allow an insurer access to its insured’s defense file, holding that that the insurer was not a client of the insured’s defense counsel.  There, CAMICO Mutual Insurance Co. insured Heffler, Radetich & Saitta, L.L.P. (“Heffler”) which was sued for misappropriating class action settlement proceeds.  In response to the suit, Heffler selected its defense counsel, and CAMICO agreed to pay defense counsel’s fees.  

CAMICO filed this declaratory judgment action seeking a finding apparently regarding the available policy limits.  In connection therewith, CAMICO sought production of certain documents related to the underlying lawsuit.  Heffler refused, and CAMICO moved to compel.  CAMICO argued the application of exceptions to the attorney-client privilege, which the parties agreed would have otherwise protected the documents from production.

CAMICO relied on the co-client exception, which concerns where two or more clients share the same attorney.  CAMICO argued that the exception applied because defense counsel represented the joint interests of Heffler and CAMICO with respect to the underlying lawsuit.  The district court disagreed, relying on several authorities for the proposition that the insurer is not automatically a client of defense counsel, even when it funds its insured’s defense.  Further, the district court found that based on the factual record, CAMICO was not a client of defense counsel.  Therefore, the district court denied CAMICO’s motion.

Notably, the district court glossed over three important issues, which merit a brief discussion here:  (1) Heffler’s choice of its own defense counsel, (2) the common interest exception as an exception to the attorney-client privilege, and (3) CAMICO’s providing a defense to Heffler in the underlying lawsuit while seeking to litigate the extent of coverage.  

First, that Heffler chose its own defense counsel made the arguments in favor of the co-client exception peculiar.  If CAMICO had appointed defense counsel for Heffler, there probably would have been a better argument for a co-client exception.  

Second, several courts recognize the common interest doctrine as an exception to the attorney-client privilege.  E.g., Waste Management, Inc. v. Int’l Surplus Lines Ins. Co., 144 Ill. 2d 178, 579 N.E.2d 322 (1991).   Although the district court asserted, without more, that CAMICO’s counsel did not share information with Heffler’s defense counsel, that is the point—CAMICO desired that defense counsel provide its counsel with otherwise privileged information.  This may have been a legitimate exception to the attorney-client privilege.   And, the Third Circuit and the Supreme Court of Pennsylvania have not taken a position on whether they will follow the Illinois Supreme Court’s interpretation of the common interest exception as set forth in Waste Management. 

Third and finally, that CAMICO was not seeking a declaration that it had no duty to defend or indemnify suggests that CAMICO and Heffler could have a common interest with respect to the underlying lawsuit.  Most courts that have criticized the Waste Management reject, in pertinent part, the concept that the insurer can seek to vindicate its disclaimer of coverage in a declaratory judgment action, yet have a common interest with its abandoned insured in the underlying tort action.  While subject to debate, that CAMICO was merely seeking to litigate the available limits suggests that the common interest exception may be available here.

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In a thoughtful decision handed down in Reeps v. BMW of North America, LLC, 2012 N.Y. Slip Op. 33030(u), on December 16, 2012 in New York County Supreme Court, the Hon. Louis B. York excluded the expert testimony of plaintiff’s two key causation experts in a toxic tort case where plaintiff alleged that a child’s birth defects were attributable to the mother’s in utero exposure to gasoline vapors.

In an earlier article on this blog about the same case, we examined the decision by the First Department, on an interlocutory appeal, which determined that: (1) defendants had failed to demonstrate that the infant’s parents disposed of their BMW with knowledge of its potential evidentiary value; and (2) that plaintiff’s claims against the BMW dealer, sounding in product liability and breach of implied and express warranty, should be dismissed because the dealer was a service provider, not a product seller.

In that article, we also discussed plaintiff’s burden in having to prove general causation at trial, that is, whether exposure to chemical components in gasoline fumes have been associated in the scientificliterature with cerebral palsy and the other abnormalities alleged. We discussed that if plaintiff is able to prove general causation, she will then have to prove specific causation, that is, whether the dose and duration of exposure to the purported teratogen was sufficient to cause the specific birth defect.

In a Frye decision (tantamount to a dismissal), Judge York analyzed plaintiff’s expert disclosures made pursuant to CPLR 3101(d) for Shira Kramer, Ph.D., and Linda Frazier, M.D., M.P.H. Both experts submitted detailed reports. In support of its Frye motion, BMW submitted affidavits by its own experts, Anthony Scialli, M.D. and Peter Lees, Ph.D. Dr. Scialli is an OB-GYN and reproductive toxicologist. Dr. Lees is a specialist in industrial hygiene and environmental health science. The experts on both sides of the dispute were highly credentialed with impressive CV's.
The timeline of events leading up to the filing of the case is as follows:

1991-In March and again in November, the Reeps bring their 1989 BMW 525i to Hassel Motors, a licensed BMW dealer, to fix an exhaust odor inside the car. Dealer fails to identiify an exhaust odor in March, but later identifies problem as a split fuel hose and repairs it under warranty.

1992-In May, Sean Reeps is born with birth defects, including cerebral palsy, which plaintiffs attribute to Debra Reep's inhalation of gas fumes early in her pregnancy.

1994-BMW recalls BMW525i vehicles due to a safety defect that caused odor due to feed fuel hose.

Plaintiff’s experts attributed the child’s birth defects to gasoline vapors his mother inhaled during the first trimester of her pregnancy while driving her BMW. Dr. Kramer offered the opinion that gasoline vapors and specific chemical constituents of gasoline, such as toluene and other solvents, are casually related to an elevated risk of birth defects among children exposed to these chemicals in utero. Dr. Kramer applied a “weight-of-evidence” assessment of the association between exposure to gasoline vapors, and the chemical constituents of gasoline vapors, and an increased risk of birth defects and other adverse birth outcomes. She based her assessment on the epidemiological, medical and toxicological literature.

For her part, Dr. Linda Frazier opined that the mother was exposed to developmental hazards due to substances and compounds found in gasoline vapors, which included toxic substances capable of severely damaging a developing fetus during the first trimester. She was able to determine that the exposure levels by the mother to gasoline were high, based upon her reported symptoms of headache, nausea and irritation of the throat. Studies have found that these symptoms occur at gasoline vapor concentrations of at least 1,000 ppm.

 As noted by the Court, Dr. Scialli concluded that no scientific publication has ever established a causal relationship between the inhalation of gasoline during pregnancy and the birth defects diagnosed in Sean Reeps. Further, he criticized Dr. Kramer’s reliance on two human case report articles suggesting an association between leaded gasoline and birth defects for lack of “specificity.” The adverse outcomes in those studies were different from those in Sean Reeps’ case. Other studies cited by plaintiff’s experts discuss the effects of gasoline’s ingredients (such as toluene, ethylbenzene, zylene and benzene) on reproductive and developmental outcomes. However, taken together, these components account for no more than 2% gasoline vapors. To have inhaled a significant amount of these gasoline components would have had fatal consequences for the mother.

Finally, Dr. Scialli asserted that plaintiff’s experts failed to consider causes other than gasoline vapor inhalation for the developmental delays diagnosed in Sean Reeps. For example, intrauterine infection is among the most common causes of cerebral palsy. Mrs. Reeps had a history of herpes simplex infection and a rash during her pregnancy.

In ruling on the motion, the Court made several significant holdings, which defense lawyers should find useful. My observations about  some of the notable points in Judge York’s decision are as follows:

1. Plaintiff contended that a motion for a Frye hearing should be precluded by the procedural posture of the case. Plaintiff pointed out that defendant had already made and lost a summary judgment motion. In response, the Court determined that a Frye hearing is evidentiary, separate from dispositive motions, and can be held prior or during the trial. Thus, the Court found it appropriate, at this juncture in the case, to consider a Frye challenge. Although trial courts may apply different procedural rules, it may be not always be necessary for the defendant to mount  Frye challenge as part of a dispositive motion;

2. Under Frye, it is not sufficient to merely utilize accepted methodology in reaching an opinion. Rather, it is necessary that the accepted technologies be properly performed and generate results accepted as reliable within the scientific community.  Plaintiff’s experts, Judge York determined, were merely playing lip service to accepted methodology “while pursuing a completely different enterprise”. Thus, the court should explore not just whether plaintiff's expert cites to an accepted methodology, but whether than methodology was properly applied by the expert in reaching a causation opinion;

3. Plaintiff’s failure to submit affidavits from their experts in opposing defendant’s motion proved fatal in hindsight. In bringing a Daubert or a Frye motion, or in responding to a Daubert or a Frye motion, it is generally sound practice to submit an expert affidavit on behalf of the challenged expert to either explain, or to bolster, the expert’s opinion. Here, defendant’s motion provided plaintiff a roadmap report to the purported weaknesses in the experts’ arguments. Affidavits responding to the criticism of their reports could only have helped their cause.

4. Judge York drew an analogy to a deficiency in Dr. Kramer’s expert report to the expert report in the landmark Court of Appeals case, Parker v. Mobil Oil Corp. In Parker, plaintiff’s expert concentrated on the relationship between benzene and the risk of developing AML – an association that was not in dispute. Key to the Parker litigation, however, was the relationship, if any, between gasoline containing exposure as a component and AML.

In the instant case, the Court found that Dr. Kramer was essentially mixing apples and oranges in attempting to extrapolate from the studies concerning gasoline components to gasoline itself.  Parker remains the touchstone in New York toxic tort jurisprudence.

5. According to the decision, Dr. Kramer’s conclusion on general causation was inadequate because Dr. Kramer failed to state unambiguously that exposure to gasoline vapors during early gestation is causally related to the specific conditions diagnosed in the infant plaintiff specifically.

6. Dr. Kramer failed to meet the Parker v. Mobil Oil Corp. requirement that the expert assess the threshold level at which maternal exposure to gasoline vapors is capable of producing adverse effects generally, or in the case at bar, specifically. Citing Parker, Judge York held that “the threshold level of exposure is an element of general causation.”

 7. The expert's statement that there is an “association” between a specific chemical and an adverse birth outcome is not sufficient to establish “causation.” Citing the Appellate Division's decision in Fraser v. 301-52 Townhouse Corp,  the Court held that “association” is not equivalent to “causation.”  Words matter--how the expert characterizes her opinion is important.

Reflecting the importance that New York state courts need to give to proof of both "general" and "specific" causation, the Court summarized its view as follows:

“Dr. Kramer’s and Dr. Frazier’s opinions do not comport with methodologies prevailing in the epidemiological and toxicological scientific communities and on occasion depart from generally accepted rules of drawing conclusions from premises. They provide insufficient support for the conclusion that exposure to gasoline in some unidentified concentration in the first trimester of pregnancy can cause cerebral palsy, microcephaly or any other condition found in Sean Reeps (general causation), or that such exposure actually led to his illness (specific causation).

In words that any defendant’s trial counsel would want to hear, the Court held, “The Frye’s ‘general acceptance’ test is intended to protect juries from being misled by expert opinions that may be couched in formidable scientific terminology but that are based on fanciful theories.”

The Court found that conducting a separate Frye hearing would be “redundant” considering that plaintiff’s extensive reports fully presented their arguments.

It is likely that this decision will be appealed given what is at stake. Stay tuned.

As originally published in the Toxic Torts Litigation Blog on January 17, 2013
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Law.com’s Legal Blog Watch recently noted a viral Facebook photo involving a “footlong” sandwich that appeared to be less than 12 inches long:  http://legalblogwatch.typepad.com/legal_blog_watch/2013/01/how-many-inches-is-your-subway-footlong-sub.html.  Citing a post from Today where restaurant customers were posting pictures of footlong sandwiches, http://lifeinc.today.com/_news/2013/01/17/16565128-wheres-the-inch-subways-footlong-falls-short?lite, Legal Blog Watch asked whether a class action or two or three would soon follow.  One might reasonably question whether customers suffered any damages by the claimed shortfall.  One might further question how plaintiffs’ counsel could possibly prove any sort of claim on a class-wide basis.  Nonetheless, the fact that such questions come to mind shows the pervasiveness of class action litigation in today’s society.  The issues inherent in the current use of the class action device are of such importance that the U.S. Supreme Court’s current docket features five merits cases involving class action claims.  Those Supreme Court cases, along with a number of other cutting-edge class action topics, will be the subject of DRI’s 2013 Class Action Seminar, which will take place at the Washington Court Hotel in Washington, DC on July 25 and 26.  DRI members interested in this area of law will want to attend this Program.

 

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From time to time I encounter cases where a party is subject to both criminal and civil proceedings arising from the same circumstances.  Examples include drunk drivers involved in car accidents, security guards involved in physical altercations and professionals who mishandle client funds.  This causes concern as to whether the person’s Fifth Amendment rights against self-incrimination will be invoked and what impact that invocation would have on the civil proceeding.  Most often, the criminally charged party wishes to stay the civil matter pending the outcome of the criminal matter.  The other parties to the civil suit typically resist and, until last week, there was little guidance from the Supreme Court of Nevada as to how to balance these interests.

Aspen Fin. Servs. v. Dist. Ct., 128 Nev. Adv. Op. 57 (Dec. 6, 2012) provided this guidance.  The case arose from certain real estate investments which failed.  During the civil lawsuit

[t]he Aspen defendants filed a motion with the district court to stay any depositions and written discovery that would require their employees and officers or Guinn to make testimonial statements. The Aspen defendants asserted that the Federal Bureau of Investigation (F.B.I.) had initiated a criminal investigation into their activities at the behest of the Gragson plaintiffs. They further asserted that they had been served with a federal grand jury subpoena seeking information about various subjects, including the loans for the Milano property. In addition, the Aspen defendants argued that the Gragson plaintiffs had been, and would continue, funneling discovery obtained in the civil proceeding to the F.B.I. After an extensive hearing, the district court issued a written order summarily denying the motion without prejudice.

Id.  The court noted the difficult choice confronting a party to both civil and criminal proceedings.

Here, if discovery is not stayed, Guinn, in particular, will face a difficult choice when the Gragson plaintiffs depose him. He can either waive his Fifth Amendment privilege and risk revealing incriminating information to criminal investigators, or he can assert his privilege and forego the opportunity to deny the allegations against him under oath, thereby effectively forfeiting the civil suit.

Id. (citations and quotations omitted).

After surveying the methodologies used in various jurisdictions to determine how respond to a request for a stay of a civil lawsuit in these circumstances, the Supreme Court adopted a framework used by the Ninth Circuit.

[C]ourts should analyze ‘the extent to which the defendant’s fifth amendment rights are implicated as well as the following nonexhaustive factors:(1) the interest of the plaintiffs in proceeding expeditiously with [the] litigation or any particular aspect of it, and the potential prejudice to plaintiffs of a delay; (2) the burden which any particular aspect of the proceedings may impose on defendants; (3) the convenience of the court in the management of its cases, and the efficient use of judicial resources; (4) the interests of persons not parties to the civil litigation; and (5) the interest of the public in the pending civil and criminal litigation.

Id. (quoting Keating v. Office of Thrift Supervision, 45 F.3d 322 (9th Cir. 1995)).  Applying these criteria to the operative facts, the court ultimately concluded a stay was not appropriate.

Aspen Fin. Servs. expands upon the Supreme Court of Nevada’s Francis v. Wynn Las Vegas, LLC, 27 Nev. Adv. Op. 60, 262 P.3d 705 (2011) decision considering Girls Gone Wild founder Joe Francis’ invocation of his Fifth Amendment rights during deposition.  Francis recognized that Fifth Amendment rights may be invoked in civil litigation, however “a claim of privilege will not prevent an adverse finding or even summary judgment if the litigant does not present sufficient evidence to satisfy the usual evidentiary burdens in the litigation.”  Id. at 711 (citation and quotation omitted).

Together, Francis and Aspen Fin. Servs. do significantly clarify Nevada’s law concerning the application of Fifth Amendment privilege to civil matters.  These clarifications do, however, raise significant concerns as how discovery will be conducted where parallel civil and criminal proceedings occur and the need for motion practice to invoke a stay.

As originally posted on http://www.compellingdiscovery.com/?p=873 on 12/12/12

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