A Study of Hill & Barlow's Implosion . . .

An interesting bit in the ABA Journal this month by Steven Keeva, "Lessons from Loss," on page 84. Keeva describes a work by Harvard Researcher Paula Marshall analyzing the demise of former prominent Boston law firm, Hill & Barlow. You can buy Marshall's study here for $5.00. At some level, another lament of the loss of the soul of the law in pursuit of money, but Keeva's article is a pretty good read and Marshall's sounds like it will be too.

Credit Where Due . . .

Here's a good page offer by Findlaw, which has articles by various firms/attorneys on issues relating to corporate and securities litigation.

Happy Thanksgiving.

DL

One for the Home Town . . . Purported Amendment to the Big East Conference Constitution was Invalid

A recent decision out of the Massachusetts Superior Court Business Session that I like:

Trustees of Boston College v. Big East Conference, 2004 Mass. Super. LEXIS 298 (August 18, 2004, 03-4818 BLS) (Van Gestel, J.).

On October 12, 2003, Boston College announced that it was withdrawing its football team from the Big East Conference to join the Atlantic Coast Conference. Just six days earlier, the members of the Big East had purported to amend the Big East Conference Constitution to increase the penalty for withdrawal from $1 million to $5 million, and increase the required advance notice from 12 months to 27 months. Boston College had previously indicated that it supported this amendment to the Constitution, but when the Conference Chair called for a vote by facsimile, Boston College (and Notre Dame) abstained.

Boston College sought a declaratory judgment that the purported amendment was invalid for failure to follow the procedure required by the Constitution. The Court interpreted the Constitution following fundamental principles of contract interpretation and agreed with Boston College. Because Article VIII of the Constitution expressly provided that the Constitution could be amended at a meeting, the vote-by-facsimile procedure employed was invalid, even though a separate provision of the Constitution permitted the members to conduct business by a mail, fax or telephone vote at the request of the Chair. “If two provisions of a contract are in conflict, the specific provision controls over the more general provision.” Id. at *22.

Can a Company have a Document "Retention" Policy if it is Constantly Being Sued?

Here's one worth watching: Burst.com has challenged Microsoft's company policy of deleting e-mail after 30 days. See Wall Street Journal, November 17, 2004 at A3, "Microsoft Conduct is Challenged Again." Burst.com has a patent suit pending against Microsoft in the U.S. District Court for the District of Maryland (before Judge Frederick Motz). It claims that Microsoft has been improperly destroying its e-mails. Microsoft has a company policy of deleting its e-mail after 30 days. There is nothing per se unlawful about having a document "retention" (read, destruction) policy. But there is also a clear duty to preserve documents when you are the subject of a lawsuit or a government investigation.

So what do you do when you are the 800-pound gorilla, and you get sued all the time just as part of the cost of doing business? Can you have an effective document retention policy at all, or must you constantly preserve everything to avoid being accused of destroying evidence? This is a tough question. Surely it can't be right that a company must constantly preserve all of its documents. Eventually, no matter how large the company and how clever it is about storing its records, it's going to get swamped. And the costs of preserving all that detritus, and worse still are the costs of producing it to someone in a lawsuit, just so they can sift through warehouses full of garbage looking for a nugget of information. I am involved in a case right now where one of the parties has 60 (yes sixty) associates reviewing documents to produce to the other side. Imagine the costs involved. How much of that vast quantity of documents will prove relevant to any issue in the case? Not darn many I'm betting. Will the other side be able to make a meaningful review of all of the stuff it has demanded be produced? I doubt it.

The electronic age has ramped up the costs of discovery in a lawsuit to insane proportions. There is a developing body of case law dealing the problem, but we're clearly in a bad place right now.

What do you do for a living . . .

Two particularly good articles in the WSJ today about the current witch-hunt climate pervading government investigations of corporations in this country.

Right on the front page, Deborah Solomon discusses the dissention within the SEC regarding whether to pound corporations with huge fines -- "As Corporate Fines Grow, SEC Debates How Much Good They Do." Two Republican Commissioners, Paul Atkins and Cynthia Glassman, deserved to be lauded for their rational approach to the topic. Who takes it in the teeth when a corporation gets hit with a big penalty? Why the shareholders of course. And what, exactly did they do wrong? Hmmm. Plus, by the time the penalty hits, the stock has likely already been pounded by the underlying scandal and a raft of shareholder suits. Solomon has the perfect quote from Ms. Glassman: "When boards and management are agreeing to these penalties, they're agreeing to pay with other peoples' money." Exactly. So why do it?

The other article that really caught my eye is on page C3 --"Hartford Fires Two Underwriters Amid State Probe," by Theo Francis. Among Eliot Spitzer's jihads is a lawsuit against Marsh & McLennan for bid rigging. The lawsuit alleges, among other things, that Hartford participated in a scheme to submit phony quotes for insurance coverage. Here's the best part of Francis's article:

"Hartford declined to say whether the dismissed employees participated in arrangements such as the one described in the lawsuit. In a statement, the company said it is cooperating with the attorney general's inquiry, and also is conducting an internal review."

Two more employees thrown the wolves in an effort to show "cooperation" in hopes that the government won't whack the corporation with huge penalties (see above). I hope they did something wrong.

See my June 4, 2004 Post, Getting Thrown Under the Bus, for prior comments about this problem.

First Circuit Opinion Emphasizes Rule 56(c)

This decision may be a little arcane, and perhaps caught my eye only because I was recently asked to review a case in which a party suffered a sua sponte summary judgment against it while arguing its motion for summary judgment (ouch, that's about as hard as you can lose).

Today, the First Circuit vacated a summary judgment entered at least in part on the ground that the district court did not afford the losing party the requisite 10 days to respond under Rule 56(c). See John G. Alden, Inc. of Massachusetts v. John G. Alden Insurance Agency of Florida, Inc.

The procedural stuff makes all the difference.

“Unseemly Fight Between a Father and Son Over the Spoils of a Family Business”

A preview today of one of the case blurbs I wrote for the upcoming issue of Session Watch, which is a quarterly newsletter my firm provides summarizing decisions from the Massachusetts Superior Court Business Litigation Session. (You can get on the mailing list here). I just finished drafting the new issue, which will go out later this month. Here's one of the decisions from last quarter (July through September 2004):

Avon Tape, Inc. v. Shuman, 2004 Mass. Super. LEXIS 356 (September 27, 2004 BLS) (Van Gestel, J.).

In Avon Tape, the Court granted in part and denied in part a motion for summary judgment on “counterclaims” against the plaintiffs and a third-party defendant. The Court described the underlying litigation as “an unfortunate suit by two closely-held corporations, founded and controlled by [the father] against his son, over matters relating to the businesses, in which [the son] was once employed and/or had interests.” Id. at *2. The court granted judgment on a counterclaim asserted under Chapter 93A on the grounds that the dispute was not based upon “trade or commerce” within the meaning of the statute. Rather, it was properly viewed as either an employee/employer dispute, a close corporation shareholder dispute, or a dispute between members of the same entity.

The counterclaim plaintiff also asserted various claims for breach of fiduciary duty, accounting, declaratory judgment, and breach of the covenant of good faith and fair dealing. The Court characterized these claims as derivative and dismissed them to the extent they were asserted on behalf of a corporation in which the counterclaim plaintiff was not a shareholder. The others survived for the time being, although the court clearly intimated that a motion to dismiss for failure to comply with the pre-suit demand provisions of Mass. R. Civ. P. 23.1 would be viewed favorably.

Particularly when read in conjunction with the August 2, 2004 Demoulas decision (discussed in the next Session Watch), Avon Tape suggests that the Court grows weary of inter-family, close corporation squabbling. Plaintiffs considering bringing such claims should analyze their merit carefully before filing and be careful to comply with pre-suit demand requirements for any derivative claims.

An Apology

Anyone who is still checking my site knows I have not posted anything in several weeks. I have a panoply of excuses -- my firm is moving one of its offices into bigger space (good news, we're growing) -- and that is eating up an incredible amount of time. And, happily, we have some terrrific cases going that are also demanding lots of attention.

Bottom line -- I apologize for the long drought and am committing myself to improved performance. I will post new material twice a week at minimum, and strive to do better, but you can count on me to post at least on Tuesdays and Fridays henceforth.

More good stuff to come!