Silicon Valley gender discrimination lawsuit: the ending

About 6 months ago, Silicon Valley VC firm Kleiner Perkins won a jury verdict in former employee Ellen Pao’s high-profile gender discrimination jury trial. (See the Law Talk discussion of the verdict here.)

A few weeks later, an interesting (and expected) follow-up issue emerged: litigation costs. Pursuant to the “American Rule” that sometimes shifts a lawsuit winner’s costs to the loser, Kleiner asked Ms. Pao to reimburse its litigation costs in the amount of $973,000. But in an unusual twist, Kleiner offered to waive its right to recover litigation costs if Ms. Pao agreed not to appeal the trial court decision. Christina Lee, a spokeswoman for Kleiner, had the following explanation in a statement quoted in several newspapers and magazines at that time: “We believe that women in technology would be best served by having all parties focus on making progress on the issues of gender diversity outside of continued litigation.” Law Talk discussed these litigation cost issues here, and concluded with the anticipatory “to be continued.”

In June, Ms. Pao proceeded with an appeal.

And just last week, Ms. Pao announced that she was dropping her appeal, and without any settlement agreeement.  According to a statement that she released to the Wall Street Journal, Kleiner offered her a settlement agreement with financial benefits (presumably forgiveness of the debt concerning court costs), but only if she refrained from “disparaging” Kleiner.  She said in her statement: “Settlement might have provided me with financial benefits, but only at the great cost of silence. I feel gratified that my actions have encouraged others to speak up about discrimination in venture capital and technology more broadly. I am encouraged that companies are taking more action to quantify and address the disparity of opportunities for women and minorities.”

Despite her refusal to “sell” her ability to speak out, she nonetheless explained her decision to drop the appeal as being financial, saying that she could no longer afford to continue.  (An article in the Huffington Post provides more details.)

It’s still not clear how much of Kleiner’s costs Ms. Pao needs to pay.  She’s reportedly paying $276,000 (down from the $973,000 requested in April), but a Fortune article analyzes several aspects of uncertainty about the final amount that she’s paying, and concludes that “this is all over. Sort of. »

So we have an incomplete dénoument or coda, depending on your preferred art form metaphor.

To be continued? Maybe, and maybe not . . .

Uber lawsuit certified a class action

Yesterday, United Stated federal district court judge Edward Chen certified, as a class action, the widely watched case of Uber Drivers v. Uber (really known as Douglas O’Connor v. Uber Technologies).  As Law Talk explained in February, a class action lawsuit involves one or several persons suing on behalf of a larger class of persons.  The rules of civil procedure allow this only when the issues in dispute are common to all members of the class, and the members of the class are so numerous as to make it impracticable to bring them all into court.  The decision in a class action lawsuit can bind all members of the class.


In the Uber case, the plaintiff drivers claim that they’ve been misclassified by defendant Uber as independent contractors, when they should be properly considered employees entitled by law to reimbursement of expenses like gas and vehicle maintenance.   Two California administrative agencies have already ruled that Uber drivers are employees and not independent contractors (the California Labor Commission and the California Unemployment Insurance Appeals Board), but Uber continues to maintain that several factors point to the drivers being independent contractors and not employees.

You can read yesterday’s class certification decision here Judge Chen had previously denied Uber’s motion for summary judgment, which you can read here. (Summary judgment is appropriate when a decision is possible without a trial, because no relevant facts are in dispute and the decision turns on pure legal analysis.)

Of course, Uber is considered the strongest of the “unicorns,” privately held firms with a market capitalization of over a billion dollars.  Reports such as this one in the Wall Street Journal cite a market cap for Uber of 50 billion dollars–yes, FIFTY billion–just 2 months ago.  Needless to say, Uber can afford an outstanding legal team!

To be continued . . .

Pissarro painting decision: a “choice of law” question with a weighty background

A federal judge in California ruled a few weeks ago that Spanish law applied to a dispute before his court. He then applied Spanish law to resolve the dispute.

This wasn’t just any dispute, however. At the center of the dispute was a painting, Rue St. Honoré, après midi, effet de pluie, by French impressionist Camille Pissarro (the “Painting”).

Pissaro painting

The Painting is currently in the Thyssen-Bornemisza Museum in Madrid. It arrived there indirectly as a result of the Nazi regime’s expropriation of art from its owner Lilly Cassirer Neubauer.  The plaintiffs seeking to recover the painting are members of her family.

The court’s approach is in a sense a relatively straightforward one.  First, the court had to resolve the “choice of law” question and decide whose law should apply to resolve the dispute before the court. Judge John Walter ruled that Spanish law should apply: “although plaintiffs’ relationship to California is significant, the painting’s relationship to California is not.” Having chosen Spanish law, the court then had to apply it. Judge Walter concluded that Spanish law wouldn’t require the painting’s return to the plaintiffs, because the museum “was not an accessory to the crime committed by the Nazis.”

Judge Walter also recognized that law and justice don’t always coincide.  He ended his decision with an extraordinary recommendation in anticipation of an appeal:

Although the Foundation has now prevailed in this prolonged and bitterly contested litigation, the Court recommends that, before the next phase of litigation commences in the Ninth Circuit, the Foundation pause, reflect, and consider whether it would be appropriate to work towards a mutually-agreeable resolution of this action, in light of Spain’s acceptance of the Washington Conference Principles and the Terezin Declaration, and, specifically, its commitment to achieve “just and fair solutions” for victims of Nazi persecution.

The plaintiffs last Friday did in fact appeal the ruling, as Judge Walter anticipated.  In the US federal courts, an appeal from a district court to the relevant circuit court of appeals is a matter of right—the court of appeals must  review the appeal.  (In contrast, an appeal from a federal court of appeals to the US Supreme Court is rarely reviewed—the Supreme Court selects only a tiny percentage of submitted appeals for review.)

An appeal typically addresses only issues of law, and not findings of fact.  This appeal will lead to an exchange of briefs and then an oral argument hearing before a panel of three judges of the US Court of Appeals for the Ninth Circuit. The panel will then issue its decision.

Law Talk will come back to this issue when the Ninth Circuit acts on the appeal. In the meantime, here are a few resources for readers interested in learning more.

First, the decision by Judge Walter.

Second, a short Wikipedia article on Judge Walter.

Third, a series of articles involving this dispute and/or foreign restitution disputes in general, from the newsletter Art Law Report (published by the law firm Sullivan & Worcester) :

Fourth, Sullivan & Worcester lawyer Nicholas O’Donnell’s analysis of this decision, Cassirer and the State of Restitution—Takeaways and Next Steps.

Finally, Judge Walter’s presentation of the dispute (with most of the footnotes removed), to allow readers to fully understand the complex factual background, as well as the case’s procedural posture:

[Lilly Cassirer Neubauer (“Lilly”)] inherited the Painting in 1926. As a Jew, she was subjected to increasing persecution in Germany after the Nazis seized power in 1933. In 1939, in order for Lilly and her husband Otto Neubauer to obtain exit visas to flee Germany, Lilly was forced to transfer the Painting to Jakob Scheidwimmer, a Nazi art appraiser. In “exchange,” Scheidwimmer transferred 900 Reichsmarks (around $360 at 1939 exchange rates), well below the actual value of the painting, into a blocked account that Lilly could never access. After the war, Lilly filed a timely restitution claim. Because the location of the Painting was unknown, Lilly ultimately settled her claim for monetary compensation with the German government, but did not waive her right to seek restitution or return of the Painting.

Without Lilly’s knowledge, the Painting surfaced in the United States in 1951. In July 1951, the Painting was sold to collector Sydney Brody in Los Angeles, California through art dealers M. Knoedler & Co. in New York and Frank Perls Gallery in Beverly Hills, California. The Frank Perls Gallery earned a commission of $3,105 for arranging the sale of the Painting to Sydney Brody. Less than a year later, in May 1952, Sydney Schoenberg, an art collector in St. Louis, Missouri, purchased the Painting from M. Knoedler & Co., on consignment from the Frank Perls Gallery, for $16,500.

 More than twenty years later, on November 18, 1976, Baron Hans-Heinrich Thyssen-Bornemisza of Lugano, Switzerland (the “Baron”) purchased the Painting through New York art dealer Stephen Hahn for $275,000. The Painting was maintained as part of the Thyssen-Bornemisza Collection in Switzerland until 1992, except when on public display in exhibitions outside Switzerland.

In 1988, the Baron and Spain agreed that the Baron (through one of his entities, FavoritaTrustees Limited) would loan his art collection (the “Collection”), including the Painting, to the Kingdom of Spain. Pursuant to the 1988 Loan Agreement, Spain established the Foundation, a non-profit, private cultural foundation to maintain, conserve, publicly exhibit, and promote artwork from the Collection. The Spanish government agreed to display the Collection at the Villahermosa Palace in Madrid, Spain, which would be restored and redesigned for its new purpose as theThyssen-Bornemisza Museum (the “Museum”). On June 22, 1992, the Museum received the Painting, and, on October 10, 1992, opened to the public with the Painting on display.

Spain later sought to purchase the Collection. On June 18, 1993, the Spanish cabinet passed Real Decreto-Ley 11/1993, authorizing the government to sign a contract allowing the Foundation to purchase the 775 artworks that comprised the Collection. In accordance with Real Decreto-Ley 11/1993, on June 21, 1993, the Kingdom of Spain, the Foundation, and Favorita Trustees Limited entered into an Acquisition Agreement, by which Favorita Trustees Limited sold the Collection to the Foundation.[FOOTNOTE 5]

[START OF FOOTNOTE 5] In 1989 and 1993, in connection with the loan and ultimate purchase of the Collection, Spain and the Foundation commissioned an investigation of title to verify that the Baron and his relevant entities had clear and marketable title to the Collection. Plaintiffs claim that the investigation was incomplete and that Spain and the Foundation ignored red flags concerning thePainting’s provenance, including, for example, that: (1) the Stephen Hahn Gallery had been affiliated with Nazi looting; (2) paintings by Pissarro were known to be the frequent subjects of Nazi looting; and (3) the back of the Painting has a “Berlin” label traceable to the Cassirer Gallery and the provenance documentation provided no explanation for that label. However, this disputed issue as to the Foundation’s alleged “bad faith” is not material or relevant to the Court’s decision on these motions. [END OF FOOTNOTE]

The Foundation’s purchase of the Collection for $338 million was entirely funded by Spain. The Painting has been on public display at the Foundation’s Museum in Madrid, Spain since the Museum’s opening on October 10, 1992, except when on public display in a 1996 exhibition outside of Spain and while on loan at the Caixa Forum in Barcelona, Spain from October 2013 to January 2014. Since the Foundation purchased the Painting in 1993, the Painting’s location and the Foundation’s “ownership” have been identified in several publications including: (1) Wivel, Mikael: Ordrupgaard. Selected Works. Copenhague, Ordrupgaard, 1993, p. 44; (2) Rosenblum, Robert: “Impressionism. The City and Modern Life”. En Impressionists in Town. [Cat. Exp.].Copenhague, Ordrupgaard, 1996, n. 17, pp. 16-17, il. 61.; (3) Llorens, Tomas; Borobia, Mar y Alarcó, Paloma: Obras Maestras. Museo Thyssen-Bornemisza. Madrid, Fundación CollectiónThyssen-Bornemisza, 2000, p. 156, il. p. 157; and (4) Perez-Jofre, T.: Grandes obras de arte. Museo Thyssen-Bornemisza. Colonia, Tascnen, 2001, p. 540, il. p. 541. Declaration of Evelio Acevedo Carrero [Docket No. 249-2] at ¶ 18.

Neither Lilly nor any of her heirs attempted to locate the Painting between 1958 and late 1999, and Claude Cassirer, Lilly’s heir, did not discover that the Painting was on display at the Museum until sometime in 2000. On May 3, 2001, he filed a Petition with the Kingdom of Spain and the Foundation, seeking return of the Painting. On May 10, 2005, after his Petition to return the Painting was rejected, Claude Cassirer filed this action against the Kingdom of Spain and the Foundation, seeking the return of the Painting, or an award of damages in the event the Court isunable to order the return of the Painting. From 1980 to the time of his death on September 25, 2010, Claude Cassirer lived in California. 

After extensive motion practice, including two appeals to the Ninth Circuit, the Foundation now moves for summary judgment on the grounds that: (1) under Swiss or Spanish law, the Foundation is the owner of the Painting; (2) California Code of Civil Procedure § 338(c), as amended in 2010, violates the Foundation’s due process rights by retroactively depriving the Foundation of its vested property rights; and (3) Plaintiffs’ claims are barred by laches. Plaintiffs move for summary adjudication, seeking an order declaring that the substantive law of the State of California governs, and that the law of Spain does not govern, the merits of this dispute.


More on mass surveillance programs in the US and France

Law Talk recently commented on a lawsuit that had just been filed by Human Rights Watch to challenge the constitutionality of an American mass surveillance program put into place after the terrorist attacks of September 11, 2001.

Since then, several interesting developments have occurred, and more are expected to occur as early as tomorrow.

First, the French legislative assemblée voted to authorize a similar mass surveillance program, and tomorrow the French senate will begin its review of the bill. Here’s the French senate website page on different aspects of the pending bill.

Second, a portion of the American mass surveillance program, including the National Security Agency’s bulk telephone metadata collection program that was challenged in the Human Rights Watch lawsuit, expired yesterday due to a scheduled lapse of legislative authority.  The House of Representatives had already acted to renew the authority, but the Senate failed to reach a vote on the issue.  Debate in Washington over whether and how to renew the program’s authority has been vigorous, and a new Senate vote could occur as early as tomorrow.   This Huffington Post article summarizes the situation.

Third, in early May there was an appellate decision in an earlier lawsuit, brought by the American Civil Liberties Union and 3 fellow civil liberties organizations, to challenge the National Security Agency’s bulk telephone metadata collection program as both exceeding the agency’s statutory authority and violating the US constitution.  In that earlier lawsuit, the US district court had dismissed the complaint on the reasoning that the statute precludes judicial review. (The district court also found that the claim that the program exceeds statutory authority would in any event fail on the merits, and that the program doesn’t violate the US Constitution.)  On May 7, the US Court of Appeals for the Second Circuit reversed the district court’s decision.  Without reaching the constitutional issues, the appeals court confirmed that judicial review was permissible, and then found that the bulk telephone metadata collection program exceeds the National Security Agency’s statutory authority.

If Congress votes to reauthorize the mass surveillance program, then it can of course clarify the statutory limits of the National Security Agency’s authority to operate the bulk telephone metadata collection program.  In other words, the appellate court’s finding of an absence of statutory authority would be rendered moot.  However, in that case the courts would surely be called upon again to address the constitutional issues, and this time they would be required to reach them.

You can read the appellate court decision here.

Meanwhile, we’ll leave with an excerpt from Alexander Hamilton’s Federalist  paper #8 (published in late 1787 to promote ratification of the US Constitution, and quoted by Judge Sack in his concurring opinion in last month’s appellate court decision invalidating the NSA’s bulk telephone metadata collection program):

Safety from external danger is the most powerful director of national conduct.  Even the ardent love of liberty will, after a time, give way to its dictates.  The violent destruction of life and property incident to war, the continual effort and alarm attendant on a state of continual danger, will compel nations the most attached to liberty to resort for repose and security to institutions which have a tendency to destroy their civil and political rights.  To be more safe, they at length become willing to run the risk of being less free.

To be continued . . .



The ruling in the FHFA case against Nomura Securities and RBS: the essentials

In the summer of 2008, primarily to address the subprime mortgage crisis, the US Congress passed, and President Bush signed, the Housing and Economic Recovery Act of 2008.  One division of that act, called the Federal Housing Finance Regulatory Reform Act of 2008, merged some existing government agencies to create the Federal Housing Finance Agency (the “FHFA”).

FHFA logo

Since then, the FHFA oversees Fannie Mae and Freddie Mac, two pre-existing government-sponsored private entities whose mortgage-backed bond activity has long provided liquidity to banks for originating home loans. In the midst of the financial crisis, Fannie Mae and Freddie Mac were extremely frgaile, and a month after its creation, the FHFA put Fannie Mae and Freddie Mac into conservatorship.  (You can read more about these background events in this Wikipedia article.)

Among the FHFA’s actions as conservator for Fannie Mae and Freddie Mac was the filing of 16 lawsuits against financial firms, alleging misrepresentation in bond-related documents.  If true, the alleged misrepresentations would be violations of both federal and state securities laws.

Most of the firms settled (for $17.9 billion collectively).  However, two firms, Nomura Securities and Royal Bank of Scotland, chose to go to trial. (See this January article from Bloomberg on Nomura’s refusal to settle.)

Nomura logo

RBS logo

The trial started in March, and closing arguments were in April.  Because the prayer for relief that remained at trial didn’t include damages, but was rather a request for equitable relief (to have the defendants repurchase the securities), the defendants had no right to a jury.  As a result, the judge not only presided over the trial but was also the finder of facts. And just a few days ago, Judge Denise Cote of the US District Court for the Southern District of New York issued her 361-page ruling, finding for the FHFA.  Her decision opens with the following introduction:

“This case is complex from almost any angle, but at its core there is a single, simple question.  Did defendants accurately describe the home mortgages in the offering documents for the securities they sold that were backed by those mortgages?  Following trial, the answer to that question is clear.  The offering documents did not correctly describe the mortgage loans.  The magnitude of falsity, conservatively measured, is enormous.”

The decision contains no final judgment amount, instead directing the FHFA to submit a proposed amount in conformity with a formula in the opinion.  (The FHFA had initially sought over $1 billion.)

You can read the decision here.  It’s long, but it’s indispensable reading if you want to understand the complex reality underpinning the lawsuit.

Law Talk also recommends the Michael Lewis book The Big Short.  Not only does it help make the complex reality of toxic collateralized mortage obligations somewhat understandable, it’s also a pleasure to read (as are all Michael Lewis books).


Who pays the winning defendant’s costs in the Silicon Valley discrimination lawsuit?

A few weeks ago, Silicon Valley VC firm Kleiner Perkins won a jury verdict in former employee Ellen Pao’s high-profile gender discrimination jury trial. (See the Law Talk discussion of the verdict here.)   An interesting (and expected) follow-up issue has now emerged: litigation costs.

In the United States, the winning party’s attorneys’ fees and litigation costs are generally not paid by the losing party. This rule, often called the “American Rule,” is subject to fee- and cost-shifting provisions found in contracts or statutes. (The contrasting “English Rule” would generally impose on the losing party the obligation to pay the winning party’s attorneys’ fees and litigation costs.)  Ms. Pao’s lawsuit was brought under a California Government Code statute prohibiting gender-based discrimination, and that statute provides for a losing defendant to pay a winning plaintiff’s attorneys’ fees and litigation costs.  It also provides for a losing plaintiff to pay a winning defendant’s litigation costs, but not attorneys’ fees.

Pursuant to this cost-shifting provision, Kleiner is now asking Ms. Pao to reimburse its litigation costs in the amount of $972,814: $864,680 in expert witness fees, $59,000 in deposition costs, and $40,000 in other costs. You can see here the memorandum of costs that Kleiner’s lawyers filed with the court.

Even more interesting, Kleiner is reportedly offering to waive its right to recover litigation costs if Ms. Pao agrees not to appeal the trial court decision. Christina Lee, a spokeswoman for Kleiner, had the following explanation in a statement quoted in several newspapers and magazines (including Forbes): “We believe that women in technology would be best served by having all parties focus on making progress on the issues of gender diversity outside of continued litigation.”

To be continued . . . .

Mass surveillance programs: challenged in the US and the UK, being considered in France

Human Rights Watch (“HRW”) filed a lawsuit against the US government last week in US federal court, challenging the constitutionality of the government’s mass surveillance program.  The complaint, which you can read here, alleges that the mass surveillance program is a violation of both the First Amendment and the Fourth Amendment of the US Constitution.
HRW complaint

The First Amendment argument is that the mass surveillance program unduly burdens the free speech and free association rights of HRW and its staff, including the right to communicate anonymously, the right to associate privately, and the right to engage in protected advocacy free from government interference.

The Fourth Amendment argument is that the mass surveillance program violates HRW’s reasonable expectation of privacy and consistutes an unreasonable searche and/or seizure.  (For a partial analysis of the Fourth Amendment issue, see this January commentary by Marjorie Cohn, a professor at Thomas Jefferson School of Law.)

Whether or not they’re interested in US constitutional law, French lawyers may find the policy issues behind this American lawsuit quite interesting, because the French legislature is right now  considering authorizing just the kind of mass surveillance program challenged in the HRW lawsuit.  HRW is especially concerned about what could happen to its valued contacts in foreign countries if the US government were to share with foreign governments some or all of the information gathered through its mass surveillance program. As explained by Dinah PoKempner, general counsel of HRS, “At Human Rights Watch we work with people who are sometimes in life or death situations, where speaking out can make them a target. Whom we communicate with and when is often extraordinarily sensitive – and it’s information that we wouldn’t turn over to the government lightly.”  It’s just one example of how a mass surveillance program can have spillover effects far beyond the intended goals (combatting drug dealing, combatting terrorism, etc.).

The French bill, the “projet de loi relatif au renseignement,” is scheduled to be considered as early as today, April 13, 2015, under an accelerated legislative procedure that precludes a second reading. You can see the bill here.  You can read an American commentary on the French bill here.  And you can read a recent French article on it, from Le Monde, here.

Meanwhile, several human rights organizations, including Amnesty International, submitted an application last week to the European Court of Human Rights challenging British surveillance practices.  You can read the application here.  And you can read an American commentary on it here.

To be continued . . . .

Silicon Valley gender discrimination lawsuit: the essentials

French lawyers who work with American clients know that the American legal and business communities held their breath this past week waiting for the jury in a San Francisco courtroom to deliver its verdict in an employment-related lawsuit involving a legendary Silicon Valley venture capital firm.  Today’s Law Talk helps French lawyers (and any other readers) understand what happened.

The defendant: Kleiner Perkins Caufiel & Byers, the VC firm that provided early funding for many prominent companies, including Facebook, Google, Genentech, and Amazon.

The plaintiff: Ellen Pao, a former lawyer who joined Kleiner Perkins in 2005 and was made a “junior investing partner” in 2007, and who was asked to leave the firm in 2012 (a few months after filing the complaint in this case).

The complaint: In 2012, having been passed over for promotion to full partner, Ms. Pao filed a complaint in California Superior Court.  The complaint asserted three causes of action: gender discrimination, retaliation, and failure to take reasonable steps to prevent discrimination, all in violation of California Government Code Section 12940.

Pao vs Kleiner complaint

The amount at stake: Ms. Pao had asked the jury to award $16 million in compensatory damages (based on the foregone higher compensation that she would have received had she become a full partner).  For any finding of liability, the jury was also allowed to award punitive damages, which in theory would both reform this defendant and deter others from enaging in similar conduct.  A typical cap on punitive damages in California is 9 times the amount of compensatory damages.  Between the compensatory damages and the punitive damages, the amount at stake was nearly $160 million.

The jury vedict: Friday, nearly 3 years after the filing of the complaint, the jury delivered its verdict, specifically answering 4 questions. For each answer, the jury majority needed to be 9 out of 12, and the standard of proof was a preponderance of the evidence (ie, “more likely than not”).  Here are the questions and in each case the jury’s answer:

1.  Did Kleiner Perkins discriminate against Ms. Pao because of her gender by failing to promote her and by terminating her employment?  The jury answered no.

2. Did Kleiner Perkins retaliate against her by failing to promote her because she had conversations with partners about the discrimination in December 2011 and/or because she gave a memorandum about the discrimination to the firm on Jan. 4, 2012?  The jury answered no.

3.  Did Kleiner Perkins retaliate against her by terminating her employment because of either/or her memo and her suit?  The jury answered no.

4.  Did Kleiner Perkins fail to take all reasonable steps to prevent gender discrimination against her?  The jury answered no.

Some of the primary legal documents:  There’s no shortage of commentary about this case (some of the better articles are listed further down in this Law Talk), but sometimes a lawyer just wants a direct unmediated look at the primary legal documents.  We’ve gathered some of them for you:

2012 complaint.

Plaintiff’s trial brief.

Defendant’s trial brief.

Jury instructions.

Verdict form to be filled out by the jury (a distillation of the jury instructions, essentially an algorithm to guide the deliberations).

About the lawyers and the judge:  They’ve been all over the American press lately, and you might be curious to know more about them.  The lead counsel for Kleiner Perkins was Lynn Hermle of Orrick Herrington and Sutcliffe.  Here’s her bio page on the Orrick site.  (You might know some Orrick lawyers:  since Orrick’s 2006 merger with Rambaud Martel, they have a Paris office.)  The lead counsel for Ms. Pao was Allan Exelrod of Rudy, Exelrod, Zieff & Lowe.  Here’s his bio page on the Rezlaw site.  Co-lead counsel was Therese Lawless of Lawless & Lawless.  Here’s her bio page on the Lawless website.  The judge was Harold Kahn, named to the bench in 2002 by then-Governor Gray Davis.  Here’s his not-very-informative Wikipedia page, and here’s a 2002 newspaper profile of him, shortly after he took the bench.

Interesting commentary:  Now that the jury has issued its verdict, much of the recent press coverage has lost its interest, but here are two pre-verdict articles with enduring value.  First, the New York Times magazine published an article on the industry background and what was really at stake.  Second, the New Yorker magazine published an article on what we mean by “discrimination.”

What’s ahead:  A complaint was just filed against Twitter, asserting gender discrimination.  While the Pao v. Kleiner Perkins case was interesting, it was limited to one specific plaintiff.  In contrast, the Twitter complaint seeks certification of a whole plaintiff class.  (Go back and read again the Law Talk from early February on class-action lawsuits.)  We’re going to hear a lot more about the Twitter case . . . .

Bankruptcy and commercial law and the myth of the economically rational actor

“Bankruptcy and commercial law provide the essential rules necessary for any country’s daily life; these laws affect every type of exchange, from buying a Twinkie to building a hydroelectric dam.  No company or entrepreneur can do anything without considering their effect on each transaction undertaken.”

Do you agree?

The quote above comes from Bruce Markell, currently a professor of law at Florida State University, formerly a highly regarded United States Bankruptcy Judge, and a very long time ago the partner for a bankruptcy research project assigned to me when I was a summer associate in a large law firm.  I have an enormous amount of respect for Judge Markell, and I genuinely like him, and for many years I would have been inclined to say that his statement above is correct.  However, I can’t agree with his statement as drafted.  To help the analysis, let’s separate the statement into two separate components, each to be evaluated independently:

Bankruptcy and commercial law provide the essential rules necessary for any country’s daily life; these laws affect every type of exchange, from buying a Twinkie to building a hydroelectric dam.

I agree with this as an absolute truth, and you probably do, too.  OK, there’s a reasonable challenge to this assertion as applied to countries whose exchanges are driven by cultural norms as much as (or even more than) laws.  But in modern industrial democracies, it’s hard to argue with the accuracy of the first part of Judge Markell’s statement. Now on to part 2:

No company or entrepreneur can do anything without considering [the] effect [of bankruptcy and commercial law] on each transaction undertaken.

I agree that no company or entrepreneur can rationally do anything without considering the effect of bankruptcy and commercial law on each transaction undertaken.  However, business decisions, like personal ones, sometimes get made with irrational disregard for factors that would be dispositive to a rational actor.  I know this from my own experience, and you probably do, too–maybe it’s because of trust in a valued relationship.  Or maybe it’s fear of derailing a deal’s momentum, or some other psychological factor.  Ultimately, companies act and decide through people, and people are, well, human, with human psychological foibles.

Most economists now recognize that the long-cherished hypothetical rational actor is just that, hypothetical.  If you’re a traditionalist and continue to believe in the economic rationality of people, then I encourage you to read Predictably Irrational by Duke professor Dan Ariely.  (If you’re more comfortable reading in French, its translated version is called C’est (vraiment) moi qui décide?)  In that book, Professor Ariely summarizes many of the insights of the field now known as behavioral economics, and makes them accessible, relevant, and entertaining. (He himself is responsible for some of those insights, even if the Nobel prize glory for behavioral economics went to his psychologist colleague and occasional collaborator Daniel Kahneman.)

We’ll come back to American bankruptcy and commercial law in future Law Talks.  If you do business in the United States, or if you advise companies that do business in the United States, then it truly is irrational for you to ignore their effect.  To paraphrase Judge Markell, “no company or entrepreneur doing business in the US can rationally do anything without considering the effect of American bankrupcty and commercial law on each transaction undertaken.”

For now, simply enjoy Dan Ariely’s entertaining and informative 2008 TED Talk “Are we in control of our own decisions?”:

And if you have an experience with irrational decision-making in business, whether or not it involves bankrupcty and commercial law, please feel free to share it in the comments!

US copyright law and the “Blurred Lines” jury verdict

The intersection of music and US copyright law is in the news, thanks to the recent jury verdict regarding the song “Blurred Lines” by Robin Thicke, T.I., and Pharrell Williams. “Blurred Lines” created a sensation in 2013, not only for catchy music that led to the sale of nearly 15 million singles, but also for lyrics and a video that Robin Thicke himself admitted in an interview in the magazine GQ are degrading to women. (He later said that the admission was an ironic joke, and that in fact the lyrics and the video are pro-feminist and liberating for women, but not many people seem to agree.)

The writers of the song openly acknowledged heavy sampling of Marvin Gaye’s song “Got To Give It Up.”  The owners of the rights to that song—Marvin Gaye’s surviving family members— thought that the sampling crossed the line separating permissible and impermissible borrowing, and made an accusation of copyright infringement in out-of-court communications. In response, and in anticipation of a lawsuit, the three writers of “Blurred Lines” went to federal court seeking declaratory relief: they wanted a court judgment confirming that “Blurred Lines” was not a copyright infringement (with respect not only to Marvin Gaye’s “Got To Give It Up,” but also the Funkadelic song “Sexy Ways” owned today by Bridgeport Music). See the complaint here.

The Gaye family and Bridgeport Music counterclaimed, seeking damages.  After discovery, the “Blurred Lines” artists moved for summary judgment, asserting that there were no relevant facts in dispute and asking the judge to rule as a matter of law that there was no copyright infringement. The judge disagreed with them, and allowed the dispute to proceed to a trial.  See the judge’s summary judgment decision here.

Foreign lawyers, take note: an appeal in the US is generally based on an alleged mistake of law, so one likely basis of any appeal is this summary judgment decision.

Details of many of the pre-trial procedural maneuvers can be found here.  Bridgeport Music reached a settlement, but the Gaye family claim proceeded to trial.  And just last week, the jury in the case issued a verdict in favor of the Gaye family members.

There’s no shortage of critical commentary by IP law scholars, IP law practitioners, musicians, and other informed observers.  As  Columbia professor Tim Wu put it in The New Yorker magazine:

A serious error has been made: the judge overseeing the case should never have let the case go before a jury. The ruling against Thicke was a mistake, and it should, and likely will, be reversed on appeal . . . The question is not whether Pharrell borrowed from Gaye but whether Gaye owned the thing that was borrowed. And this is where the case falls apart. For it was not any actual sequence of notes that Pharrell borrowed, but rather the general style of Gaye’s songs. That is why “Blurred Lines” sounds very much like a Marvin Gaye song. But to say that something “sounds like” something else does not amount to copyright infringement.

The New York Times music critic had this to say:

Owing to the specifics of copyright law, the jury was instructed to base its decision on the sheet music, a fact that reflects how inadequate copyright law is when it comes to contemporary songwriting and production practices. In 2015, the arrangement of notes on a sheet of paper is among the least integral parts of pop music creation. We’re decades beyond the time when a songwriter penned a tune on paper, then gave it to musicians to perform. . . Besides, in an age in which popular music is incredibly diverse, with more sonic references, instruments and digital trickery available than ever, using sheet music as a measure of a song’s originality is a weak tactic, and possibly an irresponsible one. The “Blurred Lines” verdict is a victory for an outmoded law, but also an outmoded way of thinking about music.

Speaking of jury instructions, they’re the other likely basis for an appeal.  Here you can see the actual jury instructions provided in the “Blurred Lines” trial.  You IP litigators out there might enjoy comparing them with the model copyright infringement jury instructions in the 9th federal court circuit, where the “Blurred Lines” case was adjudicated.

Here’s a contrary law professor view, finding the jury verdict “hand-wringing” but predicting that the legal issues–the summary judgment decision and the jury instructions–will be upheld on any appeal.

And here’s a practitioner comment on the evidence made available to the jury.

On the human interest side, here’s a New York Times profile of the lawyer who represented the Gaye family.

Finally, you can listen for yourself to the similarities between the two songs.  Here’s “Blurred Lines” (not the version with topless women):

And here’s a video of Marvin Gaye’s “Got To Give It Up”:

Same vibe and style, yes.  Same melody?  Not at all!

The same melody in 2 different songs really was at issue when George Harrison lost a copyright infringement lawsuit in 1976 involving his 1970 hit “My Sweet Lord” and its uncanny musical similarity to  the 1963 hit “He’s So Fine,” written by Ronnie Mack, recorded by The Chiffons, and owned at the time of the lawsuit by Bright Tunes Music.  George Harrison denied any intentional copying, and Judge Richard Owen discussed “subconscious” plagiarism in his decision:

Did Harrison deliberately use the music of “He’s So Fine”? I do not believe he did so deliberately. Nevertheless, it is clear that “My Sweet Lord” is the very same song as He’s So Fine with different words, and Harrison had access to “He’s So Fine.” This is, under the law, infringement of copyright, and is no less so even though subconsciously accomplished.

You can find the complete decision at the Music Copyright Infringement Service, a joint project of the Columbia and USC law schools.  A nifty feature lets you hear, for both the complaining work and the defending work, the complete sound recording and a rendition of just the isolated melody.  Even more nifty : a superimposition of the isolated melodies.  When you listen to the superimposition of melodies, it’s hard to disagree with Judge Owen : “My Sweet Lord” is indeed the very same song as “He’s So Fine” but with different words.

For background of and details on the “My Sweet Lord” case, see this article originally published in 910 magazine, as well as this article from the Performing Songwriter site (with several embedded videos, including the following alternate superimposition of the recorded versions of the two songs).

There was a very different outcome for John Fogerty, the songwriter and singer behind the group Creedence Clearwater Revival, when he was accused of copying . . . himself!  Among his many songs: “Run Through The Jungle,” written in 1970 and recorded by Creedence Clearwater Revival; and “The Old Man Down The Road,” published in 1985 by John Fogerty as a solo artist.  “Run Through The Jungle” was owned in 1985 by Fantasty Records, and Fantasy sued Fogerty for copyright infringement–he was sued for writing a new song that was too much like his own earlier song!  A jury found in favor of defendant Fogerty.  Unfortunately for him, the court denied his request for attorney’s fees, because Fantasy hadn’t brought its suit in bad faith.  The legal fees issue went all the way up to the US Supreme Court, which clarified the standards to govern a trial court in awarding (or not) attorney’s fees in copyright disputes.  (The federal circuits had been divided on this question of statutory interpretation.)

This Law Talk will close with a preview of a class being offered at NYU :

Recycling Pop Music: Innovation, Imitation and Originality

Course description here .  Oh, to be a student with the time to study such things!