As I am a great fan of Walter’s book on legal education (subscription required, alas), I am very excited to be co-guest blogging with James Maxienier.

 

Unlike Walter or James, I am not an academic.  My background is as a lawyer in financial services, first as a regulator and in-house, and now in private practice. In my spare time I’m editor of an online book review, the University Bookman, which covers law and other subjects.

 

The financial system is an exceedingly complex set of relationships and legal obligations. It is also very highly regulated – some op-eds to the contrary – but sometimes so highly regulated that unintended consequences sometimes trumps the regulatory scheme. A recent example:  Knight, a brokerage firm recently caught, through apparent computer programing errors, with a loss of over $400 million earlier this month.  But the error may have been exacerbated by rules enacted in the wake of the last computer programming error, the so-called “flash crash” in 2010.  As reported in the Wall Street Journal

“Desperate to keep the company afloat, Knight Capital CEO Thomas Joyce spoke with SEC Chairman Mary Schapiro Wednesday about having its erroneous trades cancelled. Citing SEC rules, Schapiro effectively turned him down, according to a person familiar with the agency.”

This week I hope to explore some of examples of regulation – in the financial services area primarily, but not exclusively – where the rules don’t seem to work as intended, as well as anything else I think you may find of interest.

 

By now everyone has heard that Apple took a $1.05 billion bite out of Samsung Friday.  The jury did not just say, we find for Apple for $1.05, but it did not tell us which facts it found or how these facts fit under the law. It filled out a 33 question twenty page form. It answered probing questions such as

7. For each of the following products, has Apple proven by a preponderance of the evidence that Samsung Electronics Co. (SEC) and/or Samsung Telecommunications America (STA) has infringed the D’305 Patent?

(Please answer in each cell with a “Y” for “yes” (for Apple), or with an “N” for “no” (for Samsung). Do not provide an answer for any cell that is blacked out.)

10. If you answered “Yes” to any of Questions 1 through 9, and thus found that any Samsung entity has infringed any Apple patent(s), has Apple proven by clear and convincing evidence that the Samsung entity’s infringement was willful?

(Please answer in each cell with a “Y” for “yes” (for Apple), or with an “N” for “no” (for Samsung).)

11. Has Samsung proven by clear and convincing evidence that Apple’s asserted utility and/or design patent claims are invalid?

You can find the jury form used at http://ia600609.us.archive.org/14/items/gov.uscourts.cand.239768/gov.uscourts.cand.239768.1890.0.pdf .

For $31.8 million per question, you might think that Samsung is entitled to more than a simple yes/no. If the judge triples the verdict because the infringement was willful (question 10), its $95.4 million per question. And just how will the Court of Appeals review this verdict?

Hi. I’m James Maxeiner. Along with Gerald Russello, I’m guest blogging this week. Although I teach law now, formerly I was a litigation lawyer and in house counsel, so I look at things from a practical perspective. Thanks to additional foreign education and international practice, I look abroad for ideas that might help our system work better.  You can find out more about me at http://law.ubalt.edu/faculty/profiles/maxeiner.cfm

My litigation practice background—which was mostly for foreign clients—is the theme of my first post.

What’s the difference between a domestic and a foreign client? When you touch on a hot button issue, e.g., crazy lawsuits, discovery, unjustifiable and unreviewable jury verdicts, or incredible costs, the American client will squawk, but will accept the U.S. lawyer’s consolation that, “sometimes it’s crazy, but that’s the price we pay for our legal system.” The foreign client—at least one from a well-functioning system—will not.

The foreign client will tell the U.S. lawyer, what do you mean? Your system is primitive and unjust. It’s crazy that someone can bring a lawsuit with no plausible legal ground. The foreign client will say, its expensive and idiotic that the adversary’s lawyer can make me produce thousands of documents with no apparent connection to the lawsuit. It’s unjust that the jury gives a verdict that makes no sense and no court can review the “facts” the jury found and its application of law. The foreign client will scream to high heaven when he or she wins: “what do you mean I won? After paying you, court costs and experts’ fees, I have only $30,000 of the $100,000 the defendant owes me. That’s not justice!

There’s another difference: the sophisticated foreign client will not only give the U.S. lawyer a piece of his or her mind, he or she will tell the lawyer how things can be done better. He or she will say, we don’t have many frivolous lawsuits, because the loser pay rules discourages most of them and active judges weed out the remaining ones. He or she will say, we don’t let parties demand any materials they like: judges have to approve materiality of evidence taken. We won’t let irrational decisions stand: decision-makers in first instance have to explain their decisions and those decisions are fully reviewable on appeal. In our system, a win is a win: losers pay the cost of winners. My right is to one hundred cents on the Euro and not discounted to third.

Practice for foreign clients challenges us to reform our courts, not with small steps to deal with the extreme, but with fundamental changes for the everyday. As Philip K. Howard’s Common Good organization argues, America is fixable, but it needs to Start Over. Foreign clients force American lawyers to reconsider what they are doing.

Read more: James R. Maxeiner, Failures of American Civil Justice in International Perspective (Cambridge University Press, 2011) http://www.amazon.com/Failures-American-International-Perspective-ebook/dp/B005IVX1I4 ;  http://www.theatlantic.com/special-report/america-fixable; http://www.commongood.org/