3d DCA Watch -- The Continuing Story of BDO Seidman

Well it feels good to be back in the saddle again.

Three things I learned from my recent "unplugging":

1. Working a matter up for trial is hard.

2. There are too many distractions in the day, and it felt clarifying to be able to focus for extended periods of time on a single topic or issue, without answering phone calls, continually looking at emails, or incessantly surfing the tubes for Drew Barrymore updates.

3. Oy with this Sultan of Brunei.

Speaking of Resplendently Robed Ones™, let's dig right in and see what written utterances have emerged from our very own sometimes blinkered, always bunkered band of A-Team judicial misfits:

BDO Seidman v. Banco Espirito:

It's nice to see the 3d DCA pick up some steady work.

Here, that work consists of regularly passing on various appellate issues that arise from the accounting malpractice trial that has been playing to sold-out audiences before Judge Rodriguez for several years, with no apparent end in sight:

The accounting firm of BDO Seidman, LLP appeals a jury verdict and final judgment awarding the appellees over $159 million in compensatory damages and over $351 million in punitive damages. The appellees—Banco Espirito Santo and two of its affiliates (collectively, “Banco”)—cross-appeal the denial of prejudgment interest on the compensatory award from the date the losses allegedly occurred through the date of the jury verdict. We reverse the final judgment and remand the case for a new trial, finding that the “trifurcation” of the trial into three distinct phases impermissibly allowed the jury to render a verdict on BDO’s liability for gross negligence (a determination pertinent in this case as a predicate for the later consideration of punitive damages)1 two months before the jury’s consideration of, and verdict deciding, the intertwined issues of causation, reliance, and comparative fault.

Because of the prejudice inherent in the premature, first-phase gross negligence finding, we do not address in detail other aspects of the trial. Our conclusion regarding the “trifurcation” issue renders moot or pretermits our consideration of most of the other parts of the jury’s verdicts and the remaining points on appeal and cross-appeal.

I once had trifurcated premature, first-phase gross pretermittal -- once.

(It may have been the six Gin Gibsons, I'm not sure.)

Actually, reading Judge Salter's clear, concise, calm opinion, it's amazing anyone could have thought otherwise. Here's the nub of it:

The trial court ultimately determined that comparative fault and causation issues would be tried and determined in the second, compensatory damages phase rather than in the first phase. The question of whether BDO was “personally guilty of gross negligence” would be determined in the first phase. The jury would then be asked at the close of phase II whether Banco was entitled to punitive damages against BDO (and if so, the amount of those punitive damages would be determined in phase III). This meant that the phase I jury deliberation regarding negligence and gross negligence did not include specific evaluations of the alleged negligence and fault, including failures to report or act, on the part of the Banco parties and ten third-party or Fabre actors. Those determinations occurred instead at the close of phase II, when all of the evidence in that phase was viewed against the backdrop that BDO had already been found not merely negligent, but so negligent (or “guilty”) as to arise to the level of intentional disregard for the rights of others.

This makes eminent sense, though that means they have to do it all over again (presumably without Big Lew Freeman).

Judge Salter at the end is sympathetic to a case that has dragged on for years, consumed seven months of trial time and has resulted in one mistrial already, but he ultimately concludes that the "cart cannot lead the horse," which either was the title of an old episode of Little House on the Prairie or else is judicial-speak for "enjoy the retrial."

I guess for the 37 firms involved, that's a good thing?

Teabaggers Strike Back!

Let's talk about a topic I love -- teabagging.

Excuse me, "Tea Partiers."

We've previously written about the intra-teabag legal fight brewing before Judge Marra.

Now comes word that Judge Marra has set a trial date and other deadlines and defendant/lawyer Fred O'Neal has filed a summary judgment motion against the plaintiff, South Florida Tea Party, that includes some strong allegations.

Basically, Fred says he never threatened anybody with any litigation, the emails are truncated and omit important information, and besides O'Neal was just old and upset over the Gators losing to Alabama.

Hail, I was mad about that too.

So mad that -- like all good Tea Partiers -- I decided to secede from the Union and start my own heavily armed country.

So far I have asked two highly qualified candidates to serve in my administration -- in a Steven Seagal sort of way -- and once we clear up a few minor legal details (ok, restraining orders?), I've no doubt Drew and Zooey will finally join me in forming that cherished, more perfect union.
Tea Party Summary Judgment

Digital Dump

A random sampling of items k-nocking around in my keppe this morning:

1. I bumped into Bob Zarco last week and he was wearing blue suede shoes -- I call them F U shoes.

2. When does the filing of a lawsuit constitute "civil extortion" or worse yet, "criminal extortion"?

Ask Irvin's lawyer Larry Friedman, who has a history of vigorously and publicly denouncing suits filed against his client.

Maybe someone should ask David Lister, who filed the danged thing.

3. Where are all the women? Even among clerks at the Supreme Court?

4. I'll trade you two Twomblies and an Iqbal for a well-worn Conley:

What is the new test that replaced notice pleading as set forth in Rule 8? In short, there is now a standard of "plausibility" which requires the pleading of "enough fact[s] to raise a reasonable expectation that discovery will reveal evidence" of what is alleged in the complaint.⁹ In deciding what is "plausible" the trial court should not accord the presumption of truthfulness to so-called conclusory allegations, and perhaps more importantly, the Twombly Court held that factual allegations that are merely consistent with the elements of the claims did not cross "the line between possibility [or conceivability] and plausibility."¹⁰ The Twombly Court explicitly permits a court to consider inferences that favor the plaintiff as well as those that favor the defendant. This likely means that courts are now required to weigh competing inferences and find, at the motion to dismiss stage, that the inferences that can be drawn in plaintiff's favor are at least as strong, if not stronger, than the inferences that can be drawn in defendant's favor.¹¹

In Iqbal, the Court got very explicit and said a claim is plausible when "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged" and to do that a court must "draw on its judicial experience and common sense."¹² Now that is and should be a frightening thought. When courts are told to draw on experience and common sense that means that predictability will vanish because every judge has had different experiences and has a different definition of common sense. What we will see is that depending on a judge's views, one judge will dismiss a claim where another would have let it survive.

Indeed, there are some early post-Twombly statistics. One scholar found that the grant rate of motions to dismiss Title VII cases went from 42 percent under the Conley regime to 54 percent under Twombly.¹³ A different academic found that in the year before Twombly, 54.2 percent of disability cases were dismissed on motion, but in the year after Twombly, 64.6 percent were dismissed.¹⁴ The same holds true for civil rights cases: 41.7 percent were dismissed under Conley, 52.9 percent under Twombly.¹⁵ The motion to dismiss may be seen as the new summary judgment motion, and we will see a continuing trend toward judges determining outcomes rather than juries.

5. I hate stats. And Justin Long.

I probably hate Justin Long a bit more.

Good Lord Am I Sick of Scott Rothstein!

How many news cycles can this story dominate?

Scott, this scandal has officially joined the list of Things That I Hate -- in no particular order:

1. Flatbread;
2. The Case That Dare Not Speak Its Name;
3. Any current or former lovers of Drew Barrymore;
4. Metadata;
5. Flavored vodka;
6. Jeremy Piven and/or Brett Ratner;
7. Pesto wraps;
8. Certain Herald TV critics (Glenn was right about V however -- it rocked).

Oh the melodrama:

Rothstein mused that he had three options -- kill himself, live life "on the lam as a fugitive'' or go to prison and risk being killed there because he had made enemies, said the law firm's co-founder, Stuart Rosenfeldt, according to the website. Rosenfeldt talked to Rothstein, urging him to "choose life.''

I bet that's the first time a George Michael T shirt saved a high-powered lawyer from suicide.

Scott seems to possess a perfect storm of characteristics -- talented yet narcissistic, delusions of grandeur, persecution complex, excessive displays of wealth even by South Florida standards, megalomania and a sense that the entire world revolves around him -- in other words, your typical successful South Florida trial lawyer.

Consider the stories coming out -- private elevators, a car fetish, carrying a gun in an ankle holster, blowing $10 million a month.

Indeed, look at the comments section of Bob Norman's "Jewish Avenger" story -- there is definitely something not right about the way Scott engages Norman.

Are there some chemical or other disorders at work here?

Now that he's down, it seems everyone has a negative Rothstein story -- yet some of these folks sat on their feelings or refused to act on them, no?

Roger Stone now says Scott "never added up"; Bill Scherer says "[w]e all wondered where the money came from"; Michael Goldberg says Scott's spending "made no sense." Sunshine Charlie says "I think everybody heard rumors."

My friend Brian Tannebaum wonders how in this recession a firm can go from seven lawyers to seventy and no one questions why or how?

He relates a story of how he drove 40 minutes to meet with Scott for lunch, only to be totally stiffed:

I never met Scott Rothstein. He ducked out a few minutes before our lunch a few years ago. His secretary telling me and his colleague, who set up the lunch: "he went to lunch." There was no further inquiry as we were not entitled to even be standing by his office, an "off-limits" area of the firm. Instead I went to lunch with some other lawyers in the firm who felt they needed to take pity on me for my wasted 40 minute drive, all of them telling me in response to the unprofessional behavior of their king: "I'm not surprised." "That's Scott."

These out-of-control legal types, of which I know many, all have enablers -- those who justify, excuse, or clean up the mess left by the large lives of the bosses they serve, and who not coincidentally benefit from being near to the flame.

Now we know that a seventy lawyer firm, with only two equity partners, really only had one -- as Stuart Rosenfeldt apparently had no signatory authority on certain firm accounts and there is suddenly only $500k left in the firm's operating account.

Judge Streitfeld called Rosenfeldt "clueless" about the firm's finances at a hearing yesterday. Stuart has since invested a large chunk of his own money to keep salaries paid and the firm afloat.

There are lots of victims here, including many many fine lawyers at RRA, but a few of us in the South Florida legal and business communities should probably step up and acknowledge we could have been a bit more proactive on what some apparently suspected all along.

Congress Held An Iqbal Party!

I had some time on my hands yesterday, so I went ahead and did a Jay Z-White Album-style mashup of the Congressional testimony on Iqbal yesterday and John Lennon's seminal Plastic Ono Band album from 1970 -- it starts with a gong and a raspy-voiced John primal screaming "Mama don't GOOOOOOOOOO!!, Iqbal stay home" and ends with Lennon cooing to Arlen Specter "Rule 8 and me, that's reality."

I think it came out pretty.....what, was I the only one to think of that?

But can you believe a group of Congresspeople actually got together yesterday on the Hill and discussed Iqbal, which has already been cited 2700 times in federal court:

"The Iqbal decision will effectively slam shut the courthouse door on legitimate plaintiffs based on the judge's take on the plausibility of a claim, rather than on the actual evidence," Nadler said. The bill will be similar to one introduced earlier this year in the Senate by Sen. Arlen Specter (D., Penn.) but will spell out the new standards more specifically.

The proposed legislation would return pleading standards to where they were after the Supreme Court's 1957 Conley v. Gibson decision, which stated that defendants should have "fair notice" of any claim, but said only cases lacking strong evidence should be dismissed.

Hmm, I've heard of that before -- it's called Rule 8(a).

I knew Specter was old, but he's going all the way back to 1957 and Conley v. Gibson -- hail, that's pre-Mad Men old.

Not so fast, says the dude who actually argued Iqbal, who predicts Gloom and Doom, cats and dogs etc. if we go back to the way things used to be just five months ago:

If passed, the bill could raise legal fees for companies. Electronic discovery proceedings can cost millions of dollars and even tens of millions in anti-trust and other complicated cases, said Gregory Katsas, former U.S. assistant attorney general who helped represent the U.S. government in Ashcroft v. Iqbal.

Come on -- you'd have to be a pretty bad lawyer if you couldn't get a motion to dismiss granted pre-Iqbal if your grounds were that strong.

The problem is the nearly formless "implausibility" standard, which introduces a huge amount of judicial discretion at too early a stage:

"The bottom line is that the Supreme Court knows what the impact of this decision is," Johnson said. "Even defense lawyers have called the Iqbal decision an unexpected gift for the business community."

You know, I find plenty of things "implausible" -- Drew Barrymore dating that idiot from the Mac commercial, for example, but should I get to decide everything?

Ok, don't answer that.

You Don't Want My Metadata.

A few years ago everyone wanted to talk about "metadata."

There were CLE seminars on it, papers, you name it.

Of course the Florida Bar got involved and the Florida Bar Board of Governors held a conference and naturally everyone got very worried about it -- so worried that several of the board members hadn't heard the word "metadata" until the meeting in which they immediately voted to denounce it.

I don't want to say it reached what I would describe as the highest level of inordinate outsized media attention --"flatbread mania" if you will, but it got up there.

Add to that the annoying obligation recently imposed by the CM/ECF system to check off your awareness of your redaction responsibilities every time you log on -- thank you, stupid bankruptcy lawyers! -- and you have a perfect storm of y2k-style paranoia brewing.

Just a few moments ago I received this email from a federal district court advising that even your well-intentioned yet totally lame redaction methods may be inadequate:

Some redaction techniques used when e-filing are ineffective, in that the text intended to be hidden or deleted can be read via a variety of techniques. And, because information about the document, called "metadata", is also stored inside the document, it is often viewable as well. Examples of metadata and hidden data include the name and type of file, the name of the author, the location of the file on your file server, the full-sized version of a cropped picture, and prior revisions of the text.

E-filers must use extra care to make sure that the PDF documents to be submitted to ECF are fully and completely free of any hidden data which may contain redacted information. The protection of sensitive data can be compromised if improper redaction techniques are used. Here are a couple of examples of sensitive-data visibility issues:

* Highlighting text in black or using a black box over the data in MS Word or Adobe Acrobat will not protect the data from being able to be seen. Changing the text color to white so it disappears against the white screen/paper is similarly ineffective.

* Previous revisions and deleted text may be able to be seen by manipulating an Adobe Acrobat file.

Listen, I'M JUST TRYING TO FILE A NOTICE OF APPEARANCE HERE!

If somebody wants to take the time to unpack my one page notice and learn that I spent half the day rewriting the first page of the brilliant graphic novelization of Kafka's Metamorphosis to include wild half-man, half-bug sex between Gregor Samsa and Drew Barrymore, so be it:

One morning, as Gregor Samsa was waking up from anxious dreams, he discovered that in his bed he had been changed into a monstrous verminous bug. He lay on his armour-hard back and saw, as he lifted his head up a little, his brown, arched abdomen divided up into rigid bow-like sections. From this height the blanket, just about ready to slide off completely, could hardly stay in place. His numerous legs, pitifully thin in comparison to the rest of his circumference, flickered helplessly before his eyes.

“What’s happened to me,” he thought. It was no dream. His room, a proper room for a human being, only somewhat too small, lay quietly between the four well-known walls. Above the table, on which an unpacked collection of sample cloth goods was spread out—Samsa was a travelling salesman—hung the picture which he had cut out of an illustrated magazine a little while ago and set in a pretty gilt frame. It was a picture of Drew Barrymore from her January 1995 Playboy pictorial, with several well-placed tattoos and a smile that could make a man go buggy with primal animal desire. She sat erect there, lifting up in the direction of the viewer a solid fur muff into which her entire forearm had disappeared.

It goes on from there, but you get the picture.

There, I hope it was worth it, all you efiling metadata thieves -- happy now?