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Subpoena Motion Practice in Multidistrict Litigation: The Conflict on Authority Over Subpoena-Related Disputes

A key purpose of multidistrict litigation (MDL) is centralized management of pretrial proceedings to avoid duplicative discovery and resolve common issues in an efficient manner. An MDL court becomes sufficiently familiar with the facts, scientific issues, and procedural history of the litigation to often allow a just and efficient resolution of complex discovery disputes.

One type of dispute common in MDL proceedings concerns third-party discovery. Often, third parties are essential sources of critical information about a claim—such as physicians who treated a plaintiff in product liability litigation. Just as frequently, these third parties are located outside the district of the MDL judge, forcing parties to serve extra-district subpoenas to obtain such discovery.

When disagreements arise over the scope or content of a subpoena, Rule 45 of the Federal Rules of Civil Procedure requires such disputes to be brought in the “district court where compliance is required,” which is rarely the MDL court. Those situations raise the question whether the MDL court can exercise jurisdiction over subpoena-related disputes despite the mandate of Rule 45. This article analyzes the apparent conflict between Section 1407’s authorization of MDL courts to resolve pretrial disputes and Rule 45’s subpoena requirements, and how courts have resolved this conflict for MDL litigants.

The Conflict Between the MDL Court’s Authority to Manage Pretrial Proceedings and Rule 45’s “Where Compliance Is Required” Requirement.

At the heart of the dispute over where parties should bring subpoena-related motions in MDL proceedings is the conflict between Rule 45 and Section 1407. In ordinary cases, Rule 45(d) provides that a party must move to enforce or quash a subpoena in “the district where compliance is required”—typically, the district where the individual or entity resides. But in enacting Section 1407, Congress centralized management of pretrial proceedings in a single federal court to ensure the “just and efficient” conduct of the litigation.[1] Indeed, a key role of multidistrict consolidation is to “avoid duplicative discovery, prevent inconsistent pretrial rulings and conserve judicial resources.”[2]

To further these goals, Section 1407 also provides MDL courts with the authority to “exercise the powers of a district judge in any district for the purpose of conducting pretrial depositions.”[3] Thus, whether this statutory language authorizes MDL courts to manage subpoena disputes involving extra-district nonparties requires courts to confront the “apparent conflict” between Rule 45 and Section 1407.[4]

Who Has Jurisdiction Over Extra-District Nonparty Subpoenas?

Leading Decisions Hold that MDL Courts Have Broad Authority to Enforce Extra-District Subpoenas Under Section 1407

The two leading decisions analyzing the conflict between Section 1407 and Rule 45 arose out of a multidistrict qui tam action consolidated in the District Court for the District of Columbia in U.S. ex rel. Pogue v. Diabetes Treatment Centers of America, Inc. In Pogue, the relator served subpoenas duces tecum on nonparty businesses headquartered in Tennessee.[5] After the parties failed to resolve disagreements over the scope of the subpoenas, the relator sought to enforce them in the MDL district court. The nonparties opposed enforcement there, contending that under Rule 45, the subpoenas could only be enforced “where compliance is required”—in that case, the Middle District of Tennessee.[6]

The MDL court noted that “[w]ere this an ordinary case, [the nonparties] would be correct and this case would be easily disposed of” given Rule 45.[7] But it observed that this was “not an ordinary case” because the Judicial Panel on Multidistrict Litigation had “transferred to this Court related qui tam actions pending across the country under the authority of 28 U.S.C. § 1407.”[8] The court explained that the purpose of MDL actions is to ensure the “just and efficient” conduct of pretrial proceedings involving common issues and “to eliminate duplicative discovery, pretrial rulings, and conserve the resources of the parties, their counsel and the judiciary.”[9] It then held that “to that end, § 1407 bestows upon the transferee court the power to exercise the powers of a district judge in any district for the purpose of conducting pretrial depositions in MDL cases.”[10]

Although the MDL court found that while it was not “a settled question” whether it had jurisdiction over extra-district subpoenas, “the weight of authority and effectuation of the purposes of multidistrict litigation support a finding of jurisdiction,” and that “§ 1407 confers on MDL judges the power to supervise depositions taking place in other jurisdictions.”[11] The court also found that the use of the term “shall” in Section 1407(b) “mandates that such motions be heard by the MDL court.”[12] Thus, the court determined that it had jurisdiction over the relators’ motions to compel the extra-district nonparties to comply with the subpoenas.[13]

In a later appeal, the Sixth Circuit[14] agreed with the MDL court, observing that “the Federal Rules are designed to ensure that district courts remain firmly in control of those depositions and document productions involving nonparties located in their districts.”[15] Because the Federal Rules “could hamstring an MDL court’s ability to conduct coordinated pretrial proceedings over cases that have been consolidated from far-flung foreign districts, the MDL statute empowers an MDL judge to act as a judge of the deposition or discovery district.”[16] The court, therefore, held that “[a] judge presiding over an MDL case” could rule on subpoena-related motions “notwithstanding the nonparty’s physical situs in a foreign district where discovery is being conducted.”[17]

Courts Have Expressed Conflicting Views on Whether an MDL Court Can Enforce an Extra-District Subpoena Duces Tecum

As one court has observed, “[t]he overwhelming majority of courts that have considered the issue of whether Section 1407(b) authorizes a transferee judge the power to act as any judge of any district for pretrial depositions as well as subpoenas duces tecum, have found that it does.”[18] For example, the District Court for the District of Puerto Rico in In re San Juan Plaza Hotel Fire Litig. found that to effectuate the purpose of multidistrict litigation, it is “necessary to append to the transferee judge enforcement powers in relation to subpoenas issued in the deposition district, including depositions and subpoenas addressed to nonparties.”[19] Likewise, the District Court for the District of Kansas in In re EpiPen Mktg., Sales Practices and Antitrust Litig. observed that the “statute’s remedial purpose of eliminating the potential for conflicting contemporaneous pretrial rulings would be frustrated if the MDL court could not entertain motions to compel [compliance with subpoenas in other districts].”[20] Other courts have reached similar conclusions when presented with the conflict between Rule 45 extra-district subpoenas and Section 1407.[21]

A small minority of courts, however, has narrowly construed Section 1407(b) as authorizing an MDL court to enforce deposition subpoenas—but not document subpoenas. For example, in In re Packaged Seafood Prod. Antitrust Litig., the MDL court declined to exercise jurisdiction over enforcement of a subpoena duces tecum. The court acknowledged that Section 1407(b) authorized it to exercise the powers of a district judge in any district “for the purpose of conducting pretrial depositions,” and that “may necessarily include the power to enforce deposition subpoenas.”[22] But it drew a distinction between a deposition subpoena and a subpoena duces tecum—a distinction which it found “makes a difference.”[23] In refusing to enforce the subpoena duces tecum, the court reasoned that “[t]he extension of jurisdiction in MDL cases to the conduct of pretrial depositions” is not “tantamount to extending jurisdiction to enforce document subpoenas on third parties.”[24]

Other courts have also interpreted Section 1407 narrowly. In VISX, Inc. v. Nidek Co., et al., the District Court for the Northern District of California found that “§ 1407(b) expands a transferee court’s discovery powers only to pretrial depositions,” and that “[h]ad Congress wanted to expand these powers to document subpoenas, it would have said so.”[25] In In re Monat Hair Care Prod. Mktg., Sales Practices & Prod. Liab. Litig., the District Court for the Southern District of Florida found “the reasoning of In re Packaged Seafood and VISX persuasive” that “Section 1407(b) does not expressly exempt MDL courts from Rule 45’s dictates; rather, it expressly gives MDL courts the discretion to exercise the powers of a district judge in any district only for the purpose of conducting pretrial depositions.”[26] Thus, given that “Section 1407(b) makes no reference to subpoenas for the production of documents,” the court held that Rule 45 mandated that only the Middle District of Florida had jurisdiction to enforce the nonparty, nonresident subpoena.[27]

That said, courts holding that MDL courts lack jurisdiction over extra-district document subpoenas are in the minority. Indeed, the 6th Circuit in Pogue noted that while “[a]n argument can be made that the Section 1407(b)’s grant of authority to the MDL judge to oversee nonparty discovery occurring outside of the MDL district does not extend to enforcement of documents-only subpoenas,” the “rationale underlying the MDL statute of ‘just and efficient’ resolution of pretrial proceedings requires the conclusion that Section 1407(b)’s grant of authority applies to both deposition and document-only subpoenas.”[28] Most other courts that have considered the issue have similarly agreed that “[i]n keeping with the efficiency goals of the MDL statute,” an MDL court’s authority “extends to overseeing subpoenas for documents.”[29]

A Motion to Transfer to the MDL Is a Viable Alternative

If an opposing party has already moved under Rule 45(d) to quash or modify a subpoena in the “district where compliance is required,” or an MDL court declines to exercise jurisdiction over the initial subpoena-related motion, a Rule 45(f) transfer for “exceptional circumstances” to the MDL court can be appropriate. Although the term “exceptional circumstances” is not defined in Rule 45, the Advisory Committee Notes provide that while the “prime concern” when considering transfer “should be avoiding burdens on local nonparties subject to subpoenas,” in “some circumstances . . . transfer may be warranted in order to avoid disrupting the issuing court’s management of the underlying litigation[.]”[30] And courts have found “exceptional circumstances warranting transferring subpoena-related motions . . . when transferring the matter is in the interests of judicial economy and avoiding inconsistent results.”[31]

In re Disposable Contact Lens Antitrust Litig. provides an especially applicable analysis of Rule 45(f) and MDL subpoenas. Here, plaintiffs issued a subpoena duces tecum to a nonresident third party, which ultimately refused to comply with the subpoena.[32] Plaintiffs moved to enforce the subpoena in the MDL court, which found that it lacked authority to rule on the motion because, under Rule 45, “a party seeking to compel compliance with a subpoena must file its motion in ‘the district where compliance is required.’”[33] Following the MDL court’s ruling, plaintiffs filed an action in the District Court for the District of Columbia—where compliance was sought—to transfer the subpoena-enforcement motion to the MDL court under Rule 45(f) or, in the alternative, enforce the subpoena.[34] After engaging in an exacting analysis, the district court found that transfer of the motion to enforce the subpoena to the MDL proceeding was appropriate.

First, the court observed that the “MDL status of the underlying litigation is surely an ‘exceptional circumstance’ that weighs strongly in favor of transfer to the Issuing Court under Rule 45(f), because the same concerns about orderliness and disruption that led to the consolidation of actions as an MDL in the first place arise with respect to pretrial disputes regarding subpoenas issued in the context of that complex litigation.”[35] Second, the court noted that it was “highly unlikely” that the respondent would need to travel to the MDL court in Florida, as a telephonic hearing on the motion was likely, and thus there was no undue burden to the nonresident respondent.[36] And lastly, given the that the MDL was a “rather a highly complex case and potentially a class action asserting nationwide antitrust claims against five large corporate defendants,” the district court found that the MDL court was best situated to decide whether the subpoena should be enforced.[37] Thus, given that the “factors that weigh in favor of transferring this subpoena dispute” were abundant, the district court granted plaintiffs’ motion and transferred the motion to the MDL court.[38]

Conclusion

While the language of Rule 45 suggests that subpoena-related disputes can only be resolved in the “district where compliance is required,” MDL litigants should be aware of the authority granted to MDL courts under Section 1407. The MDL court is often better suited to resolve such disputes given its extensive knowledge of the facts and science surrounding the litigation and the history of the litigation. In the event that an MDL court declines to exercise direct jurisdiction over a dispute concerning a subpoena duces tecum, a Rule 45(f) transfer of a motion from the local district to the MDL court is a feasible alternative. With either approach, MDL litigants can better ensure that complex subpoena-related disputes are resolved by the MDL court in an efficient manner that reduces the potential for inconsistent rulings or duplicative discovery.

[1] In re New York City Mun. Sec. Litig., 572 F.2d 49, 51 (2d Cir. 1978) (quoting H.R. Rep. No. 1130, 90th Cong., 2d Sess.).

[2] In re Air Disaster, 486 F. Supp. 241, 243 (J.P.M.L. 1980).

[3] 28 U.S.C. § 1407(b).

[4] E.g., In re Mentor Corp. Obtape Transobturator Sling Prod. Liab. Litig., No. CIV.A. 09-3073JAP, 2009 WL 3681986, at *2 (D.N.J. Nov. 4, 2009); In re Subpoenas Served on Wilmer, Cutler & Pickering & Goodwin Proctor LLP, 255 F. Supp. 2d 1, 1 (D.D.C. 2003).

[5] 238 F. Supp. 2d. 270, 273 (D.D.C. 2002).

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id. (citing 28 U.S.C. § 1407(b); Man. for Complex Litig. (Third) § 21.424 (2002)) (internal quotations omitted).

[11] Id. at 273-74 (citing In re Corrugated Container Antitrust Litig., 662 F.2d 875, 879 (D.C. Cir. 1981)).

[12] Id. at 275.

[13] Id. at 279.

[14] As noted in the 6th Circuit’s opinion, appeal from exercise of an MDL judge’s authority to act as a judge of the deposition or discovery district “lies in the circuit court embracing that deposition or discovery district.”

[15] U.S. ex rel. Pogue v. Diabetes Treatment Ctrs. of Am., Inc., 444 F.3d 462, 468 (6th Cir. 2006).

[16] Id. at 468.

[17] Id. at 468-69.

[18] In re: Intel Corp. Microprocessor Antitrust Litig., No. 05-1717-JJF, 2007 WL 9612142, at *3 (D. Del. May 18, 2007), report and recommendation adopted, No. 05-1717-JJF, 2007 WL 9612141 (D. Del. June 14, 2007); see also In re Mentor Corp. Obtape Transobturator Sling Prod. Liab. Litig., No. CIV.A. 09-3073JAP, 2009 WL 3681986, at *2 (D.N.J. Nov. 4, 2009) (finding that “most courts which have addressed this issue have concluded that section 1407(b) empowers an MDL transferee court to exercise the powers of any other district court, including the enforcement of subpoenas.”).

[19] 117 F.R.D. 30, 32 (D.P.R. 1987).

[20] 2018 WL 2926581, *3 (D. Kan. June 11, 2018).

[21] See, e.g., In re Am. Med. Sys., Inc. Pelvic Repair Sys. Prod. Liab. Litig., No. 2325, 2017 WL 1090029 (S.D.W. Va. Mar. 21, 2017); In re Neurontin Mktg., Sales Practices & Prod. Liab. Litig., 245 F.R.D. 55 (D. Mass. 2007); In re Accutane Prod. Liab. Litig., No. 804MD2523T30TBM, 2006 WL 1000311 (M.D. Fla. Apr. 14, 2006).

[22] No. 15-MD-2670-JLS-MDD, 2018 WL 454440, at *2 (S.D. Cal. Jan. 17, 2018) (citing 28 U.S.C. § 1407(b)).

[23] Id.

[24] Id.

[25] 208 F.R.D. 615, 616 (N.D. Cal. 2002).

[26] No. 18-MD-02841, 2020 WL 1950463, at *2 (S.D. Fla. Apr. 23, 2020).

[27] Id.

[28] U.S. ex rel. Pogue, 444 F.3d. at 468 n.2.

[29] In re Photochromic Lens Antitrust Litig., No. 8:10–md–2173–T–27, 2012 WL 12904391, at *2 (M.D. Fla. Dec. 20, 2012) (collecting cases); see also In re Bank of New York Mellon Corp. Forex Transactions Litig., No. 11 CIV. 9175 LAK JLC, 2014 WL 2884726, at *1 (S.D.N.Y. June 26, 2014) (“Despite [Section 1407(b)’s] limiting language as to depositions, however, it is widely accepted that this authority extends to all pretrial proceedings, including governance of non-party, extra-district subpoenas.”).

[30] Rule 45(f), 2013 Advisory Committee Note.

[31] Wultz v. Bank of China, Ltd., 304 F.R.D. 38, 46 (D.D.C. 2014); see also In re Braden, 344 F. Supp. 3d 83, 91 (D.D.C. 2018) (finding that transfer of subpoena-related motion to Southern District of Ohio “is appropriate to avoid disrupting the underlying litigation.”).

[32] 306 F. Supp. 3d 372, 374 (D.D.C. 2017).

[33] Id.

[34] Id.

[35] Id. at 378.

[36] Id. at 379-81.

[37] Id. at 381 (internal quotations omitted).

[38] Id. at 383.

ARTICLE BY The National Law Review’s Guest Contributors Matthew A. Campbell and Rand K. Brothers of Winston & Strawn LLP.

For more on subpoenas, see the National Law Review Civil Procedure Law section.

The Intersection of Libel Law and Politics

Libel Commentary

Since its beginning, the American Republic has debated sedition, free speech, and protection of reputation. After we cut our British roots we ensured our right to criticize our leaders, the politicians who control our government. The British crown demanded loyalty of its printers, but American courts would not tolerate such prosecutions as the notion of a truly free press emerged.

Today, we are witnessing an intense intersection of politics and libel law unlike anything we’ve seen since the 1960s. Politicians are suing for libel damages and being sued. The current overlap of politics and libel includes a push by the president of the United States to change libel law. Those who seek change, including President Trump, say they want to make it easier for plaintiffs to prevail and collect damages. Careful what you wish for, though, because such change would ease the path for plaintiffs seeking to collect damages from public officials such as Donald Trump.

Heading into the 2020 election, the Trump campaign filed three lawsuits in a 10-day period against mainstream media.

Legal scholars and pundits have opined that Trump’s pending libel complaints against The New York Times, The Washington Post, and CNN are weak or even dead on arrival. These analysts point out that Trump’s campaign is seeking damages due to political opinions, which are protected speech under the First Amendment.

As a life-long public figure and now public official, Trump (his re-election campaign is the plaintiff) must prove that the media defendants acted with actual malice, that is, reckless disregard for the truth or that they published information knowing it was false. The actual malice standard is well established through the First Amendment by a unanimous U.S. Supreme Court in New York Times v. Sullivan in 1964.

Win or lose in court, the president’s libel lawsuits also are political messaging, dramatic actions that complement his anti-press rhetoric. The stories about the libel suits are arguably more effective than the libel suits themselves in the president’s battles to discredit the mainstream press. In addition to political messaging, libel claims – even when they fail in court — can be a form of punishment.

Historical Context

Presidential involvement in libel litigation is rare, but not unprecedented. President Theodore Roosevelt was irritated by published allegations of corruption in the sale of the Panama Canal. He pushed the Justice Department to prosecute publisher Joseph Pulitzer and other newspapermen for criminal libel. Courts later quashed indictments.

After his presidency, Roosevelt was sued for libel by a New York political figure (William Barnes) who objected to being called corrupt by Roosevelt. The jury trial, in Syracuse in 1915, was grist for Dan Abrams’ book “Theodore Roosevelt for the Defense.” The jury ruled in Roosevelt’s favor; he seemed to thrive in legal combat, the book says.

Fifteen years ago, there was speculation about the prospect of President George W. Bush suing the National Enquirer. The Enquirer published a report based on unnamed sources who claimed that pressures of the job led Bush to drink, even though he said he gave up alcohol on his 40^th birthday.

“The president would be exceptionally ill-advised to file suit over this story, even if he knows . . . it’s false,” wrote First Amendment lawyer Julie Hilden in 2005.

She suggested such a suit would likely fail because its “actual malice” claim appeared to be weak. Plus, she warned, the suit would expose the president to civil discovery. Bush did not sue.

After the 1964 election, Republican presidential candidate Barry Goldwater successfully sued Fact Magazine and its publisher for an article questioning Goldwater’s mental fitness to hold office (Goldwater v. Ginzburg). Federal courts found that Goldwater’s complaint met the actual malice standard, awarding $75,000. The U.S. Supreme Court, in 1970, declined to hear the case.

Trump’s Track Record

In seven earlier speech-related cases filed by Donald Trump or his companies before he became president, four were dismissed on the merits, two were voluntarily withdrawn, and one was an arbitration won by Trump by default. These findings were compiled by Susan E. Seager, a First Amendment attorney who teaches media law at University of Southern California. Indeed, this appears to be a way of life for the highly litigious Trump, who has been involved in approximately 4,000 legal battles over the past 30 years, both as a plaintiff and defendant. An exhaustive analysis by USA Today detailed those seven libel cases where he initiated the lawsuits and seven more where he was named defendant. These don’t even include the threats of suits, the so-called “I’ll sue you” effect that can too often chill speech.

A common thread of these cases is the pursuit of jumbo damages. Trump alleged $5 billion in damages (in New Jersey state court) because author Timothy O’Brien and his book publishers cast doubt on the size of the real estate mogul’s wealth. Trump lost after five years of litigation but assessed the outcome this way to The Washington Post: “I spent a couple of bucks on legal fees but they spent a whole lot more. I did it to make [O’Brien’s] life miserable, which I’m happy about.”

Judicial Nominations

Judicial appointments are a priority for the Trump Administration. Interestingly, a judge nominated by the president in 2018 dismissed (with prejudice) a case filed by a Republican congressman.

On August 5, 2020, U.S. District Court Judge C.J. Williams of the Northern District of Iowa dismissed Congressman Devin Nunes’ defamation complaint against Esquire writer Ryan Lizza and its publisher. The judge said published criticism of Nunes (R-CA) was not actionable (Devin G. Nunes v. Ryan Lizza and Hearst Magazine Media, Inc).

Interestingly, part of this recent case deals directly with President Trump and his tweets. I’ll quote Judge Willliams’ opinion regarding Trump’s tweet that “Obama had my ‘wires tapped’ in Trump Tower:”

First, to the extent defendants assert President Trump “made up” the tweet,

the statement is not of an concerning plaintiff (Nunes). Second, plaintiff has

not alleged that the statement is false. Third, even if the statement is factually inaccurate, the statement that plaintiff’s theory about surveillance of the Trump campaign “began” with President Trump’s tweet is not defamatory.

Other Political Cases

Sarah Palin, John McCain’s vice-presidential running mate in 2008, sued The New York Times for defamation, claiming that a 2017 editorial maliciously associated her with a mass shooting that injured Congresswoman Gabrielle Giffords (D-AZ). A federal judge dismissed her case, but a 3-0 panel of the U.S. Second Circuit Court of Appeals reversed, thus reviving the case (Sarah Palin v. The New York Times).

Besides the characters involved – and the reversal in federal court – this case is interesting because The New York Times published a correction: “An earlier version of this editorial incorrectly stated that a link existed between political incitement and the 2011 shooting of Representative Gabby Giffords. In fact, no such link was established.”

To prevail, Palin – a public figure — must show that the newspaper acted with actual malice.

Meanwhile, a former contestant on “The Apprentice,” Summer Zervos sued President Trump in 2017 claiming she was defamed because candidate Trump said her allegations of his sexual misconduct in 2007 were lies. In 2019, a 3-2 majority of a New York State appeals court rejected the argument from Trump’s counsel that a sitting president cannot be sued in state court (Zervos v. Trump).

In addition to its spotlight on the Supremacy Clause, the Zervos lawsuit also examines the boundaries of opinion-as-defense in defamation disputes. Trump’s lawyers argue that his campaign rhetoric and opinions are protected by the First Amendment.

Nicholas Sandmann, a student at Covington Catholic High School in northern Kentucky, alleged that he was defamed by news coverage and social media sharing of accounts of his encounter near the Lincoln Memorial with a Native American activist in early 2019. Sandmann sued The Washington Post for $250 million; NBC and CNN for $275 million each. CNN and The Washington Post settled for undisclosed terms.

Are media rattled by all this litigation? Yes, I think that’s pretty apparent. How could they not be in this anti-press environment? Libel claims are part of a general, overarching criticism of press, reporting the news, and media prerogatives.

From a bottom-line standpoint, media must pay for legal defense. Newspaper publisher McClatchy — a defendant in one of Congressman Devin Nunes’ myriad libel suits — filed for bankruptcy in February. The Poynter Institute for journalism published commentary in 2019 that McClatchy could hire 10 reporters for the money it would spend on the Nunes lawsuit.

A small newspaper in Iowa (Carroll Times Herald) won a libel case but created a GoFundMe appeal in 2019 because the legal defense drained its resources. Response to the solicitation — mainly small donations, from across the country — was impressive.

Most certainly the Sandmann cases have drained considerable resources from some of the most noted media companies in the country as those out-of-court settlements show.

Non-political Cases

We also see a flurry of high-dollar claims not directly related to political speech.

On August 14, the unanimous North Carolina Supreme Court upheld a jury’s libel decision against the Raleigh newspaper (Beth Desmond v. The News & Observer Publishing Company). The Ohio private liberal arts Oberlin College is appealing the whopping $44 million in damages awarded to a local bakery stemming from an alleged shoplifting attempt by three African American students (Gibson’s Bakery v. Oberlin College). Rolling Stone paid dearly for its flawed article about a campus rape at the University of Virginia.

Is libel law likely to change?

Fundamental change is not likely in the near future. Justice Clarence Thomas suggested it’s time for the Supreme Court to examine/roll back the New York Times v. Sullivan standard created in 1964. The premise is that current strict standards intended to protect free speech and free press make it nearly impossible for public figures and public officials to prevail in libel cases.

Justice Thomas’ colleagues on the Court have not publicly joined him in urging review of Sullivan.

Libel cases are percolating in federal and state courts that eventually could ripen for Supreme Court review. The Roberts Court has been protective of speech, including commercial and political speech, such as:

Citizens United v. FEC, 2010 (political contributions)
Snyder v. Phelps, 2010 (picketing at funerals)
Sorrell v. IMS Health, 2011 (data mining, drug marketing)
Reed v. Town of Gilbert, 2015 (sign regulations cannot be based on content)
Matal v. Tam, 2017 (trademarks)

We all can be grateful that American libel law does not mirror British libel law, where the burden of proof is on the defendant rather than the plaintiff. Surely by now we have all seen the clickbait coverage of actor Johnny Depp’s libel case against The Sun (Johnny Depp v. News Group Newspapers) for its 2018 reportage of his contentious divorce, which included a headline calling him a “wife beater.”

American libel law is not British libel law. And we need to keep it that way.

© Aimee Edmondson, PhD

Article by Aimee Edmondson, PhD E.W. Scripps School of Journalism at Ohio University and National Law Review Guest Contributor.

For more on free speech, see the National Law Review Constitutional Law section.

Amrock Lawsuit Spotlights Consequences of Litigious Gamesmanship

Trade Secret Litigation Commentary

On June 3, the Texas Fourth Court of Appeals reversed and remanded the dumbfounding $740 million award in Title Source v. HouseCanary – a welcome development for American innovation and business collaboration. On the back of years-long litigation, a fresh trial of the case can offer important signals for corporations on the risks and rewards of collaboration, as well as deliver much-needed guidance on best practices to navigate already murky trade secret protections.

For the uninitiated, litigation between HouseCanary and Title Source (now Amrock) was borne out of a contract the two companies entered in 2015. The arrangement obligated the delivery of an automated valuation model (AVM) and an app to Title Source at a rate of $5 million per year for HouseCanary’s efforts. Title Source intended to use the software and app as a platform to provide customers the ability to assess property values digitally alongside other services the company offers, like title insurance and closing services. After HouseCanary failed to meet its contractual obligation to deliver a working AVM app, Title Source sued for breach of contract.

HouseCanary then filed a counter claim including allegations that Title Source had misappropriated proprietary information, in this case trade secrets, in an attempt to make an app of its [Title Source’s] own. After a six-week trial that concluded in March 2018, a Texas jury decided in favor of HouseCanary and awarded nearly three-quarters of a billion dollars – one of the largest tort settlements of the year.

Should anyone be keeping score at home, that means the case’s settlement was valued at nearly 150 times the annual payout HouseCanary was to receive from its work with Title Source and dwarfed the firm’s multiple rounds of venture funding by over $600 million. For HouseCanary, litigation proved more profitable than any of its own business ventures, and the settlement certainly outstripped the going market rates on AVMs.

By the conclusion of the original trial, it seemed clear that Title Source had not misappropriated HouseCanary’s trade secrets or proprietary information in building its own app. Further, HouseCanary’s own expert witness testified that there weren’t “any fingerprints, any clues, any reference to any HouseCanary technology” in the app Title Source developed on its own.

Regrettably, the jury’s finding against Title Source was based on inaccurate and incomplete information, unsubstantiated inadmissible character attacks, and back-of-the-napkin math from a questionable damages ‘expert.’ It seemed to be more focused on sticking it to corporate America rather than the actual facts and merits of the case. Not only was the jury gravely mislead, but they also never heard critical information which came to light days after the trial concluded.

Post-trial statements by a former HouseCanary executive turned whistleblower clarified that there was never a “working version” of the app to be delivered to Title Source, and per three more former HouseCanary executives, that the company didn’t have “any IP to steal.” The cogency of HouseCanary’s allegations were further thrown into question when the company, six weeks after the trial’s closure, moved to seal a number of exhibited documents from court record.

As I wrote previously, once the sealing motion was overturned, the documents should “provide another look at the technology in question, which will provide clarity whether there were trade secrets to be stolen.” This is especially important when considered in tandem with the whistleblower testimony.

These and other erroneous inclusions and fatal procedural errors led to a Texas appellate court overturn ing the verdict and ordering a new trial. The ramifications of the decision in the new trial promise to be immense, especially if HouseCanary invokes Texas’ Uniform Trade Secrets Act for a second time. The Act has been adopted by 47 states total, and significantly broadens the implications of this trial for business operations in all kinds of industries by setting precedent for other lawsuits.

Trade secret litigation has increased tremendously in the past decade, with over 2,700 cases since 2009; add on the massive original settlement and the ruling may very well set the tone for the future of trade secret litigation and the standard of intellectual property protections.

Given the new evidence that has emerged since the jury delivered its decision in 2018, the cards certainly appear stacked against HouseCanary successfully duping the retrial jury. There is little doubt that businesses and innovators everywhere will be awaiting the verdict of the Texas court for clarity on trade secret protections and our court system’s tolerance for overwhelmingly apparent legal gamesmanship.

Authored by George Nethercutt of The George Nethercutt Foundation, a guest contributor to the National Law Review.

For more on trade secrets, see the National Law Review Intellectual Property law section.

Federal Court Strikes Down Portions of Department of Labor’s Final Rule on COVID-19 Leave, Expands Coverage

On August 3, 2020, the United States District Court for the Southern District of New York struck down portions of the DOL’s Final Rule regarding who qualifies for COVID-19 emergency paid sick leave under the Emergency Paid Sick Leave Act (“EPSLA”) and the Emergency Family and Medical Leave Expansion Act (“EFMLEA”), collectively referred to as the Families First Coronavirus Response Act (“FFCRA”).

Of particular importance to retail employers, the Court invalidated two provisions of the DOL’s Final Rule pertaining to: (1) conditioning leave on the availability of work and (2) the need to obtain employer consent prior to taking leave on an intermittent basis.

Neither the EPSLA nor the EFMLEA contains an express “work availability” requirement. The EPSLA grants paid leave to employees who are “unable to work (or telework) due to a need for leave because” of any of six COVID-19-related criteria. FFCRA § 5102(a). The EFMLEA similarly applies to employees “unable to work (or telework) due to a need for leave to care for . . . [a child] due to a public health emergency.” FFCRA § 101(a)(2)(A). In its Final Rule, the DOL concluded that these provisions do not reach employees whose employers “do not have work” for them, reasoning a work-availability requirement is justified “because the employee would be unable to work even if he or she” did not have a qualifying condition set forth in the statute.

In rejecting the DOL’s interpretation, the Court stated that “the agency’s barebones explanation for the work-availability requirement is patently deficient,” given that the DOL’s interpretation “considerably narrow[s] the statute’s potential scope.” Under the Court’s interpretation, employees are entitled to protected leave under either the EPSLA or EFMLEA if they satisfy the express statutory conditions, regardless of whether they are scheduled to work during the requested leave period.

The Court also rejected part of the DOL’s interpretation that employees are not permitted to take the protected leave on an intermittent basis unless they obtain their employer’s consent. As an initial matter, the Court upheld the DOL’s interpretation that employees cannot take intermittent leave in certain situations in which there is a higher risk that the employee will spread COVID-19 to other employees (i.e., when the employees: are subject to government quarantine or isolation order related to COVID-19; have been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19; are experiencing symptoms of COVID-19 and are taking leave to obtain a medical diagnosis; are taking care of an individual who either is subject to a quarantine or isolation order related to COVID-19 or has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19).

In those circumstances, the Court agreed that a restriction on intermittent leave “advances Congress’s public-health objectives by preventing employees who may be infected or contagious from returning intermittently to a worksite where they could transmit the virus.” Therefore, in those situations, employees are only permitted to take the protected leave in a block of time (i.e., a certain number of days/weeks), not on an intermittent basis. As a result, the Court upheld the DOL’s restriction on intermittent leave “insofar as it bans intermittent leave based on qualifying conditions that implicate an employee’s risk of viral transmission.”

The Court, however, rejected the requirement that employees obtain their employer’s consent before taking intermittent leave in other circumstances (i.e., when an employee takes leave solely to care for the employee’s son or daughter whose school or place of care is closed). In doing so, the Court ruled that the DOL failed to provide a coherent justification for requiring the employer’s consent, particularly in situations in which the risk of viral transmission is low. The Court’s opinion brings the EPSLA and EFMLEA in line with the existing FMLA, which does not require employer consent.

It is unclear if the DOL will challenge the Court’s decision or revise its Final Rule to bring it in compliance with the Court’s opinion. Regardless, the Court’s decision takes effect immediately and retail employers should be mindful of this ruling and revisit their COVID-19 leave policies.

ARTICLE BY Robert T. Quackenboss, Tyler S. Laughinghouse and Katherine P. Sandberg.

For more on the FFCRA, see the National Law Review Labor & Employment law section.

Reactions to the U.S. Supreme Court’s Rulings in Trump v. Vance & Trump v. Mazars

In Trump v. Vance and Trump v. Mazars the Supreme Court issued opinions in two cases concerning the release of President Trump’s financial records. Reactions to the July 9^th rulings have varied, with opinions differing on whether or not Trump’s reputation and presidency will be significantly impacted by what his financial records may reveal.

Below, we outline the details of each case and the reactions to the Supreme Court’s decisions.

Background Trump v. Vance

In Trump v. Vance, the court stated that Trump had no absolute right to block the Manhattan District attorney’s access to Trump’s financial records for the purposes of a grand jury investigation. The court held in a 7-2 decision that “Article II and the Supremacy Clause do not categorically preclude, or require a heightened standard for, the issuance of a state criminal subpoena to a sitting President.” The court’s opinion was written by Chief Justice John Roberts for the majority including Justices Ginsburg, Breyer, Sotomayor and Kagan with Justice Kavanaugh filing a concurring opinion joined by Justice Gorsuch, and Justice Thomas and Justice Alito writing separate dissenting opinions.

Trump v. Vance involves a state criminal grand jury subpoena not served on President Trump, but on two banks and an accounting firm that were custodians of the records. The subpoenaed records are for eight years of Trump’s personal and business tax returns and other banking documents in the years leading up to the 2016 election served on behalf of New York District Attorney Cyrus Vance., Jr. Vance’s investigation centered around payments made to two women — Karen McDougal and Stormy Daniels — who alleged they had affairs with Trump before he entered office.

The Supreme Court considered state criminal subpoenas could threaten “the independence and effectiveness” of the president as well as undermining the president’s leadership and reputation, weighing Trump’s circumstances against those in Clinton v. Jones, the 1997 case where President Bill Clinton sought to have a civil suit filed against him by Paula Corbin Jones dismissed on the grounds of presidential immunity, and that the case would be a distraction to his presidency.

Trump argued that the burden state criminal subpoenas would put on his presidency would be even greater than in Clinton because “criminal litigation poses unique burdens on the President’s time and will generate a considerable if not overwhelming degree of mental preoccupation” and would make him a target for harassment.

The Court addressed Trump’s argument, stating that they “rejected a nearly identical argument in Clinton, concluding that the risk posed by harassing civil litigation was not ‘serious’ because federal courts have the tools to deter and dismiss vexatious lawsuits. Harassing state criminal subpoenas could, under certain circumstances, threaten the independence or effectiveness of the Executive. But here again the law already seeks to protect against such abuse … Grand juries are prohibited from engaging in ‘arbitrary fishing expeditions’ or initiating investigations ‘out of malice or an intent to harass.’”

The Court also considered that Vance is a case addressing state law issues where Clinton was a case addressing federal law issues. Trump argued that the Supremacy Clause gives a sitting president absolute immunity from state criminal proceedings because compliance with subpoenas would impair his performance of his Article II functions. Arguing on behalf of the United States, the Solicitor General claimed state grand jury subpoenas should fulfill a higher need standard. In response, the Court ruled, “A state grand jury subpoena seeking a President’s private papers need not satisfy a heightened need standard … there has been no showing here that heightened protection against state subpoenas is necessary for the Executive to fulfill his Article II functions.”

Notably, the Supreme Court decision does not allow for public access to Trump’s tax returns; they will be part of a Grand Jury investigation, which is confidential. However, many took away the message that the majority’s decision–bolstered by Gorsuch and Kavanaugh, Trump appointees, who concurred–that the law applies to everyone.

Reactions to SCOTUS Decision from Jay Sekulow and Cyrus Vance, Jr.

Both Vance and Trump’s attorney Jay Sekulow expressed they were content with the Court’s ruling, albeit for different reasons.

“We are pleased that in the decisions issued today, the Supreme Court has temporarily blocked both Congress and New York prosecutors from obtaining the President’s financial records. We will now proceed to raise additional Constitutional and legal issues in the lower courts,” Sekulow tweeted.

We are pleased that in the decisions issued today, the Supreme Court has temporarily blocked both Congress and New York prosecutors from obtaining the President’s financial records. We will now proceed to raise additional Constitutional and legal issues in the lower courts.

— Jay Sekulow (@JaySekulow) July 9, 2020

“This is a tremendous victory for our nation’s system of justice and its founding principle that no one – not even a president – is above the law. Our investigation, which was delayed for almost a year by this lawsuit, will resume, guided as always by the grand jury’s solemn obligation to follow the law and the facts, wherever they may lead,” Vance said in a statement.

**Other Reactions to the Supreme Court’s Trump v. Vance Ruling**

Following the Supreme Court’s arguments in Vance, lawyers and legal scholars commented about what the decision could mean for the presidency.

In a C-SPAN interview with National Constitution Center President and CEO Jeffrey Rosen, Columbia Law School Professor Gillian Metzger spoke about the issue of burden on the president in Vance, “A lot of what is being shown in these cases is who bears the burden when. Clinton v. Jones said that first, you have to show the burden on the presidency…already the Solicitor General is trying to move us beyond where we had been in Clinton vs. Jones. Among the justices on the court, my sense is that they are really trying to figure out what the standards should be…I didn’t get the sense of a stark ideological divide on this.”

In agreement with seeing the ruling as a victory for the rule of law, David Cole, the ACLU National Legal Director said: “The Supreme Court today confirmed that the president is not above the law. The court ruled that President Trump must follow the law, like the rest of us. And that includes responding to subpoenas for his tax records.”

Harvard Law professor Laurence Tribe, a frequent Trump critic, highlighted the victory on Twitter, saying: “No absolute immunity from state and local grand jury subpoenas for Trump’s financial records to investigate his crimes as a private citizen. Being president doesn’t confer the kind of categorical shield Trump claimed.”

Of a practical matter, though, Mark Zaid, the Washington attorney who represented the whistleblower who set the stage for Trump’s impeachment proceedings, tweeted:

Even if Trump’s tax returns reveal fraud, I find it doubtful that this fact would finally be straw that broke his supporters’ back on election day.

But importance of ruling is that criminal investigation continues & will exist past expiration of Trump’s presidential immunity. https://t.co/dn3GIJ9CRj

— Mark S. Zaid (@MarkSZaidEsq) July 9, 2020

“Even if Trump’s tax returns reveal fraud, I find it doubtful that this fact would finally be straw that broke his supporters’ back on election day. But importance of ruling is that criminal investigation continues & will exist past expiration of Trump’s presidential immunity.” (Should we embed the tweet?)

Background for the Supreme Court’s Ruling in Trump v. Mazars

The Supreme Court remanded back to the lower courts the second case, Trump v. Mazars in a 7-2 decision. The Mazars case involved three committees of the U. S. House of Representatives attempting to secure Trump’s financial documents, and the financial documents of his children and affiliated businesses for investigative purposes. Each of the committees sought overlapping sets of financial documents, supplying different justifications for the requests, explaining that the information would help guide legislative reform in areas ranging from money laundering and terrorism to foreign involvement in U. S. elections.

Additionally, the President in his personal capacity, along with his children and affiliated businesses—contested subpoenas issued by the House Financial Services and Intelligence Committees in the Southern District of New York. Trump and the other petitioners argued in the United States Court of Appeals for the Second Circuit that the subpoenas violated separation of powers. The President did not, however, argue that any of the requested records were protected by executive privilege. Justice Roberts wrote the majority opinion, with Thomas and Alito filing dissenting opinions.

In Mazars, the District Court for the District of Columbia upheld the Congressional subpoenas, indicating the investigations served a “legislative purpose” as they could provide insight on reforming presidential candidate’s financial disclosure requirements. However, Roberts writes: “the courts below did not take adequate account of the significant separation of powers concerns implicated by congressional subpoenas for the President’s information.”

In the opinion, Roberts sets out a list of items the lower courts need to consider involving Congress’s powers of investigation and subpoena, noting that previously these disagreements had been settled via arbitration, and not litigation. Additionally, Roberts summarizes the argument before the court, drawing on the Watergate era Senate Select Committee D. C. Circuit made by the President and the Solicitor General, saying the House must demonstrate the information sought is “demonstrably critical” to its legislative purpose did not apply here. Roberts, stated that this standard applies to Executive privilege, which, while crucial, does not extend to “nonprivileged, private information.” He writes: “We decline to transplant that protection root and branch to cases involving nonprivileged, private information, which by definition does not implicate sensitive Executive Branch deliberations.”

However, Roberts detailed that earlier legal analysis ignored the “significant separation of powers issues raised by congressional subpoenas” and that congressional subpoenas “for the President’s information unavoidably pit the political branches against one another.” With these constraints in mind, Roberts charged the lower court to consider the following in regards to congressional investigations and subpoenas:

Does the legislative purpose warrant the involvement of the President and his papers?
Is the subpoena appropriately narrow to accomplish the congressional objective?
Does the evidence requested by Congress in the subpoena further a valid legislative aim?
Is the burden on the president justified?

Reactions to Trump v. Mazars

Nikolas Bowie, an assistant Harvard Law Professor, turning to Robert’s analysis in the opinion on Congressional investigations opinion discussing Congressional investigations indicated the decision “introduces new limits on Congress’s power to obtain the information that it needs to legislate effectively on behalf of the American people . . . the Supreme Court authorized federal courts to block future subpoenas using a balancing test that weighs ‘the asserted legislative purpose’ of the subpoenas against amorphous burdens they might impose on the President.”

Additionally, Bowie points out, “it seems unlikely that the American people will see the information Congress requested until after the November election.”

Writing for the nonprofit public policy organization, The Brookings Institution, Richard Lempert, Eric Stein Distinguished University Professor of Law and Sociology Emeritus at the University of Michigan, concurs with Bowie’s point, writing that the Mazars decision may set a new standard for Congressional subpoenas moving forward:

“The genius of Robert’s opinion in Mazars is that while endorsing the longstanding precedent that congressional subpoenas must have a legislative purpose and without repudiating the notion that courts should not render judgments based on motives they impute to Congress, the opinion lays down principles which form a more or less objective test for determining whether material Congress seeks from a president is essential to a legislative task Congress is engaged in … Congress should be able to spell out in a subpoena why it needs the documents it seeks.”

Looking Ahead to What’s Next

There is a lot of information in these decisions to unpack, especially in relation to Congressional investigations and subpoenas. Additionally, questions remain on how the lower courts may interpret Roberts’ directive to examine “congressional legislative purpose and whether it rises to the step of involving the President’s documents” and how Congress will “assess the burdens imposed on the President by a subpoena.”

ARTICLE BY Rachel Popa, Eilene Spear and Jennifer Schaller at The National Law Review / The National Law Forum LLC.

For more on this case, see the National Law Review Litigation and Trial Practice type-of-law section.

Supreme Court Decides to Rule on FTC’s Disgorgement Authority

As previously blogged about here, the Supreme Court recently upheld the SEC’s disgorgement authority but imposed certain limits, including consideration of net profits. FTC defense practitioners immediately began to consider how the ruling might potentially impact FTC investigations and enforcement actions, including how it might bear upon other judicial challenges to whether Section 13(b) of the FTC Act authorizes the FTC to obtain equitable monetary relief.

On July 9, 2020, the Supreme Court granted certiorari in the AMG Capital Management and Credit Bureau Center matters that should now decide the issues of whether Section 13(b) permits courts to award disgorgement.

In AMG v. FTC, the Ninth Circuit held that courts’ equitable powers include awarding equitable monetary relief, including disgorgement. In contrast, the Seventh Circuit in FTC v. Credit Bureau Center recently disregard years of precedent when it held that the express terms of Section 13(b) illustrate that Congress only authorized injunctive relief, not equitable monetary relief or disgorgement.

The two matters have been consolidated and with a total of one hour allotted for oral argument. The importance of these matters cannot be overstated as they conclusively resolve splits of authority relating to whether or in what circumstances FTC lawyers are entitled to seek equitable monetary relief in the form of disgorgement.

ARTICLE BY Richard B. Newman at Hinch Newman LLP.

See the National Law Review Financial Institutions and Banking law section for more information.

IMS Insights Podcast: Episode 18-Tips From the “Hot Seat” for Remote Hearings and Court Events Amid the Pandemic

In this episode of the IMS Insights Podcast, we speak with trial presentation advisor Jeff Dahm about his perspective as a hot seat operator and his role during the COVID-19 pandemic.

Teresa Barber: So, Jeff, tell me, we’re in a really interesting time and you mentioned this just a couple of moments ago that so many people are in very new environments. We’re having very high stakes meetings and events but in a totally virtual environment and you were talking about other folks in the industry who have those hot seat trial presentation skills for attorneys, for clients, what should they be … I mean are there things that a traditional trial presentation consultant could do right now that can help attorneys feel a little more confident, a little more prepared when they’re going into those virtual meetings, virtual events?

Jeff Dahm: Sure, sure. Trial presentation consultants are quite familiar with the way the video conferencing software works. Call them up, have them assist you in the video conferencing platform. Have them help you make sure that everything works. Schedule a Zoom meeting with your trial presentation consultant to run through a program, make sure it looks good on the other end. Hire them, send them the PowerPoint, run the PowerPoint and you watch it click through, so you can see what the client … What the judge is going to see, what the other opposing counsel is going to see. Just like in a war room, you do run throughs, run throughs and run throughs but good attorneys that know what it’s about, practice because they look effortless in court because they practice and you should do the same thing with your consultant if you have an online hearing. Practice.

Dahm: I mean you would need to practice in person, you’re going to want to practice with an online hearing. It’s very important. So, they can help you with that. Make sure that if you want to show something in OnCue or Trial Director, make sure that the documents come up right. Make sure the video looks good. If you have to show video clips in your hearing, the trial presentation consultant can help you edit those clips, get them together, organize them. I mean there’s a lot of stuff that happens in trial that’s technical that doesn’t actually happen in the trial. It happens before the trial and you still have those things that are going to have to happen and the trial presentation consultant can help you with those.

Barber: Nice. Yeah, interesting. Yeah, and I would imagine, let’s say we’re in a virtual environment or a virtual hearing that stuff is very visible, right? If there’s a glitch in something.

Dahm: Yeah, you’ve got to be smooth. There’s little things like when you press … When you start the PowerPoint, that you don’t have the speaker view on the screen, you have to switch. I mean there’s a seamless operation that a good trial tech does in court and the same seamless operation can happen in the online hearing and it’s the same sort of method to keep things running smooth just like you do in a courtroom.

Barber: Yup, very interesting. So, without disclosing anything confidential, you’ve had a very lengthy career, Jeff, a lot of interesting trials, a lot of interesting moments. Without disclosing anything confidential, could you share maybe a moment where you would be especially proud of what you were able to contribute and the outcomes that you were able to bring?

Dahm: Sure, sure. So, I would say, I think about all of these years I’ve been doing this and the moments that stand out and for me, in a court … I mean I have some pretty dramatic, crazy things that have happened but the most effective and the most jaw dropping moments are when you impeach a witness on the stand and when you play a video clip that shows that they contradicted themself on the video, that is truly one of the most effective moments in a trial to win. You have an expert witness up there who’s very cocky, who thinks they know everything and thinks they read their deposition and has everything right and they put their story wrong together and as a trial presentation consultant, I have these video clips, impeachment clips lined up, ready to go and for me, it’s the most important part of my job and I instill this in all of my trial techs is that you need to make sure you bring up that impeachment clip fast in order for the effectiveness of it and it’s crucial.

Dahm: If a witness is on the stand and they say X and I have a video clip that says Y and my client asks for it, boom, it’s got to come up in seconds to get the effective … And if you do that, you really do have the best chance of discrediting a witness you really want to. I mean it’s not pleasant always, it’s a little uncomfortable at times but it’s the most effective moment in a trial, I believe.

Dahm: I also have a couple of random little stories of things that have happened to me.

Barber: Yeah, I was going to ask you, 23 years sitting in court, in trials, you’ve spent more time in courtrooms than most attorneys would have, and you’ve got to have some stories. Are there any moments that standout to you?

Dahm: There are a couple of them here. So, I was involved in this case in like 2001, 2002, early on in my career. It was a dog mauling in San Francisco, and there was a woman who was mauled. It was a terrible, terrible story and we worked with the district attorney’s office to help prosecute these people that have these dogs and so I was in the courtroom. The trial was on Court TV. It was like a big case and then the defense counsel gets up and she stands up and she gets on the floor and starts barking like a dog, in the middle of the courtroom, and the whole place is like going crazy barking like a dog. Okay, so I do my presentation and my mother was watching at home and I talked to her afterwards and she said, “Now, I finally understand what you do for a living.” She couldn’t get it before.

Dahm: I’m like, “Yeah, I go into court, help display evidence.” But she saw me on TV. She saw the attorney barking like a dog and she’s like, “Now, I kind of get what you do.”

Barber: Oh, my goodness.

Dahm: Another big moment for me was I did a trial for a Pueblo in New Mexico to try and get land back from the government under aboriginal Indian title. It was a truly amazing case and it was incredible and one of the witnesses was one of the medicine men from the Pueblo and he got up on the stand and he led the whole entire congregation in the courtroom in a prayer and they were all in a chanting prayer and it was so overwhelmingly amazing and beautiful and I couldn’t believe that I got to be a part of this, sitting in a federal courtroom. It was pretty amazing. And at the end of that trial, they gave me a piece of pottery that they make, the Pueblo makes this pottery, and it’s truly one of my most prized possessions. It was just a fantastic trial. I really enjoyed it.

Barber: Sounds like some moments definitely stay with you.Dahm: Yeah, yeah, but you get the big moments like you get to go to some event. I sat … You get court side at a game as like a thank you, like flying on a plane. You end up in these crazy moments in this job that you don’t even expect and you’re like oh my gosh, this is really happening. I’m just the trial tech but trial tech is a very important part of the whole process, so it’s just been a great 25 years for me. It’s been really good.

Barber: Yeah. It sounds really interesting and I have to say too, you’re working with really impressive attorneys too quite a bit and how clients certainly have to have shaped your mindset, your approach to everything. What role have clients played in how your career’s developed?

Dahm: Yeah, so I started early on in my career working with a firm, Keker, Van Nest & Peters, and they were … I got in on some cases early on and I started working with the whole firm and just there … Seeing their work ethic and their passion for their job and they were all just dynamic people who were so effective in a courtroom and fun people, fun people to be around and so great at their jobs and I saw this early on in my career and I was like I want to be like this.

Dahm: So, I sort of modeled my work ethic and my career path based on the way that this firm has done their work and it’s been a really, really great experience for me working with them and also just learning so much about just the law and being in court and working on a team and working effectively on a team. I mean these are some values that I learned from them that I really, really take that from every part of my life. It’s been really, really great for me. So, I thank them immensely for what they’ve done for me.

Barber: That kind of mindset too makes it a little more … I mean it makes it fun, right? You kind of get that back when you put it into your work.

Dahm: Yeah. It’s been fantastic, yeah.

Barber: We were talking a moment ago about nearly 25 years in the industry working in trials, working as a trial presentation consultant, you’ve seen a lot of trials and certainly, that truth makes it over to clients, to attorneys. Do you ever have clients who stop you during trial or kind of pull you to the side and want your opinion? How does that work?

Dahm: I find that the clients that ask my opinion and the clients that want to know what the trial tech thinks are the clients that tend to win. I mean you have this invaluable resource sitting right there in the courtroom that has sat through a lot of trials. I mean let’s say … I mean I’ve sat through hundreds of them because I’ve been doing this for 25 years but even somebody who’s only done it 10 years, five years, they still have more experience than most attorneys in a courtroom. I wrote an article a few years ago about view from the hot seat, showing what the hot seat operator, the five most important things that a hot seat operator can tell a client to win and I tell you, I stand by those.

Dahm: It’s just you get so much just from sitting in a courtroom and I pay attention. I mean I follow the cases. I mean you have to if you’re going to be helping bringing up evidence because when they turn around and say can you bring up the statute, they don’t always say exhibit 55, you have to know what the statute is. So and they do ask my opinion and I give my opinion quite candidly whenever I am asked because it doesn’t help anybody to not tell the truth in these situations so I just tell it like it is, say you’re not going to win that argument, you need to try this different and they really do appreciate it and then a few clients, it turns into like a half an hour session at the end of every single day of court, “Okay, Jeff, what about this client? What about this witness? What happened here? What do you think with this judge? What about this ruling?” And I give my opinion and trust me, I have them.

Barber: Like a debrief?

Dahm: Yeah, that’s exactly. You sit in court 25 years, you have an opinion on everything that happens in that courtroom and it tends to run … Cases tend to run similar, even though the details are different but the cases generally run at the same flow so I could help with that. I help with the flow. I help with the cadence. I help with the message and making sure they’re getting a clean, simple, effective message to the jury and that’s how you win.

Barber: Right, which yeah, great way to boil it down to the fundamentals too. That’s an interesting segue here because there are attorneys who feel that they’ve kind of got the bases covered. That they have a paralegal who’s really talented who may be able to be the hot seat operator at their trial. Is that an effective strategy most of the time from what you’ve seen?

Dahm: So, no. Well, I shouldn’t say no overall because if you have a case that has 50 exhibits, small case, not much going on in the case, two or three day case and you don’t have any depo, I don’t see any reason why a good paralegal that you trust could run the show. Those are not the cases for trial presentation consultants as much. You have a big case, you have a heavy load, you have a lot of video depositions, you have multiple things to handle, then you’re going to want to have a trial presentation consultant in there because your paralegal’s going to have a lot to do too in a heavy evidence case. They’re going to have a lot of copying, a lot of binders, a lot of things to submit to the court, I mean filings. I mean there’s just so much for the paralegal to do and you can also …

Dahm: The trial presentation consultant becomes a part of your team, so there’s another person that goes in the whole collective group and if the case can afford it, you should always do it because you will find at the end of it that you were like wow, that was amazing because you have this sort of … This like nirvana that happens in court when you call out exhibits and they come on the screen. I’ve heard clients talk about this nirvana and they say it’s like you’re reading my mind but that’s just a good trial tech doing the good job in the courtroom and the paralegal is focused on being a paralegal. All we’re focused on is bringing the stuff up in court and bringing it up fast and effectively and that is hard to do. It may seem easy but it’s not.

Barber: Yeah, and I was going to say it sounds like there’s a level of kind of perspective and expertise that comes to that. You cannot put that kind of responsibility on a paralegal to bring all of that depth of experience of being in … Like you said, you’ve had hundreds of trials, that perspective adds a level of what should really build confidence in the client to be able to trust, to be able to say, “Okay, I’m going to focus on the strategy. I’m going to focus on telling that story and then lean on the expertise and the perspective of Jeff or my trial presentation consultant who’s here with me.”

Dahm: Yeah, it is a luxury. I mean it can be a luxury if you don’t have the means but if you do have the means, it’s a necessity because it makes your case run smoother and you … Everything that gets on that screen, I mean just think about this, every single thing you put on the screen is so important. It is so important to the end result of the case, what goes on that screen and someone who has the experience to put it on the screen in an effective manner is going to make you win your case. I mean it’s just that simple. I mean not always but it definitely helps. If jurors can see the way it looks and it looks pretty and it looks good and it’s easy to adopt, they’re going to adopt it.

Barber: Mm-hmm (affirmative).

Dahm: So, it’s interesting.

Barber: What I want to ask you too, we’re starting to see some courts reopening but even … And businesses reopening and some restrictions kind of easing related to the pandemic but even with a lot of restrictions lifting and some courts starting to move forward with physical schedules, we’re going to have people who aren’t able to travel. So, when we think about witnesses, we’re going to see witnesses unable to travel. How do you think courts are going to handle that and what advice would you have for attorneys right now?

Dahm: Sure. So, I’ve dealt with this issue for years. I’ve dealt with it at least a few times a year for years and so what happens is you have a witness that can’t travel and they want to remotely testify and so they call me and they say how can we have a witness testify remote? So, I go through the whole thing, explaining how we can put … Have a camera where they’re at, you have a camera in the courtroom … You put the signal into a projector in the courtroom. You can display the person live and you can put documents next to it. So, I have figured out logistics to get this done and then almost every single time, when they propose it to the judge, the judge says no, they have to testify, they have to come or you play a deposition. That’s going to change.

Dahm: So, now, all this preparation that I have done over the years to figure out how to get a live feed in the courtroom and how to show exhibits while it’s going on the screen, all that work is done. I have it ready to go. So, if a client calls me and they need to have a witness testify remote, we are ready to go.

Barber: Yeah, definitely interesting. It certainly makes you wonder how much of the historical cultural hesitance we’ve had about virtual versus in-person that I think COVID, if nothing else, may be wearing some of that down.

Dahm: And with all the testing I’ve done, with all the software, I’ve tested OnCue, I’ve tested Trial Director, I’ve tested PowerPoint. I’ve tested anything you would want to just use to display in a courtroom and it all works online. It all works in the virtual hearing and you should be using it because the case is just as important even though you’re not there. We could have a witness testifying remote. I mean there’s really no limits, I don’t think, at this point. With all of our years of using video conferencing software in my industry and then now we have to apply it to trial tech and trial presentation, bring it on because we are ready to go.

Barber: Yeah, very interesting, Jeff.

Dahm: It’s exciting too. It’s really exciting for me too because it’s like I have such a passion for trial presentation and then to be able to do it in a new method, in a new platform, in a new way is just so exciting because it’s like I feel very comfortable online and I know my techs do too, feel very comfortable in the Zoom meeting or a Skype call. I can share screens, switch back and forth, I mean it’s not hard for me because that’s what I’ve done in the courtroom for 25 years. So, I’m really excited to be able to do all of this stuff and I’m sitting at home now. It’s just, it’s great for me. So just got to have people realize that it is as important as it was.

Barber: Yeah, and reach out for help, right? Because I think not everyone shares your sense of comfort with it and I think that it’s just kind of interesting to make those connections that I think there are attorneys who could use some help right now just to get that confidence in this weird new normal of the remote world.

Barber: So, Jeff, it’s been really interesting having you on today. Wonderful to hear your really interesting perspective about the current situation and also just learn as little bit more about what you’re bringing to the table and your background.

Dahm: Great, yeah. Thanks for having me, Teresa. Yeah, this has been really fascinating. I just love explaining how trial presentation works and what we can do and it’s just … As I said, it’s my passion and I just enjoy talking about it, so I could talk about it with you for another couple of hours. It’s just …

Barber: Well, we may take you up on that, Jeff. So, we’ll have you back sometime soon. So thank you. I really appreciate it. Thanks, Jeff.

Dahm: Thanks, Teresa.

ARTICLE BY IMS ExpertServices.

For more on trials amid the pandemic, see the National Law Review Litigation / Trial Practice section.

Legal Industry Updates from the National Law Review: Law Firm Moves, Hires and Response to Racial Injustice

The legal industry continues to respond to larger forces in society, and along with our usual focus on law firm moves, hires, and accolades, we take a look at the specific ways law firms are pledging to combat racism and fight for social justice in their communities and across the country.

Law Firm Moves, Hires and Recognitions

Down in Texas, Erin England joined Katten’s Dallas office as a partner in the firm’s commercial finance practice. England represents alternative lending institutions and banks in negotiating and structuring domestic and international commercial transactions. She also has experience in the real estate finance industry, representing lenders and borrowers in real estate and construction loans involving retail space and industrial properties.

“In the last two years, we’ve added leading attorneys like Erin in key growth areas such as commercial finance,” said Mark S. Solomon, managing partner of Katten’s Dallas office. “As an active member of several organizations committed to the hiring, retention, and promotion of diverse lawyers, Erin also shares in Katten’s deep commitment to diversity and inclusion, which is a fundamental part of the culture in our Dallas office.”

Also joining the Katten Dallas is Michael Gaston-Bell, who is the first labor and employment attorney in the firm’s Dallas office. His previous experience includes representing clients on Title VII, Americans with Disabilities Act (ADA), Age Discrimination in Employment Act (ADEA) and the Family and Medical Leave Act (FMLA) and the Fair Labor Standards Act (FLSA) workplace matters in state and federal court, and working with corporate leadership on complex and often crisis level employment issues, including internal investigations, unfair competition and major transactions in health care, entertainment, banking, military contracting and retail industries.

“Michael is a talented attorney who will offer our clients in Dallas and across the country exceptional employment litigation counsel,” said David Crichlow, national chair of Katten’s Commercial Litigation group. “He has the skills to succeed and a track record for being a true advocate of his clients who often face tough, complicated issues.”

Katten opened the firm’s Dallas office with seven partners in 2018 and has grown to over 40 attorneys in the past two years.

George Howard joined the Restructuring & Reorganization practice of Vinson & Elkins (V&E) in their New York City office as a partner. Howard represents distressed debt investors, asset purchasers, companies, banks and secured lenders in out of court restructurings, chapter 11 reorganizations, distressed M&A, cross-border insolvency proceedings, and secured financing transactions.

“We are focused on growing the firm’s restructuring team particularly to meet increasing client demand for company and debtor side representations,” said V&E managing partner Scott Wulfe. “George is a great addition to the team not only because of his significant debtor experience, which perfectly complements our existing strengths but also because he is a natural team player and a great cultural fit for V&E.”

Matthew Jones Ropes & Gray Attorney — Matt Jones Ropes & Gray

Ropes & Gray’s Chicago office added Matthew (Matt) R. Jones to the firm’s employment, executive compensation, and benefits practice group. Jones advises private equity firms and their portfolio companies on executive compensation in relation to complex commercial transactions. Jones also advises clients on Securities and Exchange Commission executive compensation arrangement reporting obligations.

“We are very excited that Matt has joined the firm,” said global private equity practice co-chair Neill Jakobe. “Chicago is a priority market for our clients and our firm, and it is critical that we continue to attract the top talent in this market. Matt is an exceptional fit from a strategic and cultural perspective and he will further enhance the value we deliver to our clients locally, and globally.”

Christopher Passodelis Jr., James M. Sander, Brandon T. Uram and Megan L. Tymoczko-Korch joined Steptoe & Johnson PLLC, working remotely from the firm’s Southpointe office in Canonsburg, Pa., with plans to move to the downtown Pittsburgh office this fall. All four attorneys practice in the firm’s Business Department, handling business transactions and corporate services and tax. Uram focuses his practice on transactions and business litigation.

“Chris, Jim, and Megan bring an entrepreneurial spirit and many decades of diverse experience representing businesses large and small to our firm. Brandon is a creative and fierce advocate for clients who are faced with litigation,” said CEO Susan S. Brewer. “As Steptoe & Johnson grows its presence in western Pennsylvania, they will play a key role in helping us meet our clients’ needs.”

Immigration attorney Sarah Hawk joined Barnes & Thornburg (B&T) as a partner, along with Of Counsel Terra Martin and Paralegal Elizabeth Wei. She has 20 years of corporate immigration experience representing universities, corporations, and individuals, and leads the firm’s Southeastern immigration practice.

“In this critical time, we couldn’t ask for a better resource for our clients than Sarah,” said B&T’s labor and employment department leader Kenneth Yerkes. “COVID-19 has complicated many employees’ immigration statuses, whether it stems from remote work, reductions in force, border closings or shortened internship programs.”

David F. Johnson of Winstead was named to the Board of Directors for the Texas Board of Legal Specialization (TBLS). Established in 1974, the TBLS is a certifies lawyers and paralegals in their specific area of law, bestowing certification upon demonstration of expertise, after passing a rigorous exam and demonstration of completion of CLE continuing education credits. Out of 110,000 attorneys licensed to practice in Texas, only 7400 are board-certified. Johnson, who writes extensively on Fiduciary law in Texas, is also Board Certified in Civil Appellate Law, Civil Trial Law, and Personal Injury Trial Law. He will serve a three-year term on the TLBS beginning July of 2020.

Law Firm Contributions to Social Justice

Law firms have responded in a variety of ways to the recent protests, civil upheaval, and calls for change surrounding the murder of unarmed minorities at the hands of police. Many law firms announced Juneteenth observances, and encouraged their employees to use the day as a chance to reflect on how to best encourage tolerance and justice in their lives and through their legal work.

Below is a sampling of some initiatives, pro-bono efforts, and other steps towards positive change announced by law firms.

One thousand attorney law firm BakerHostetler announced the firm’s intention to develop firm-wide plans to become a more “inclusive, diverse and successful place to work and thrive.” The firm announced plans to partner with civil and human rights organizations to develop an environment welcoming of honest conversations about race and discrimination, as well as resources to educate firm-wide to effect change. As an initial step, the BakerHostetler Foundation is donating $100,000 to the Equal Justice Initiative, a non-profit dedicated to justice, ending mass incarceration and police reform. Along with the donation, BakerHostetler acknowledges “like many other law firms, we have work to do to increase diversity among our attorneys and leadership, and we will not stop working to address these issues.”

A global law firm focused on technology and innovation, Orrick has also announced plans to advocate for racial equality and diversity in the legal industry. Along with increased resources devoted to the firm-wide pro-bono program, Orrick Cares, Orrick has also announced the Orrick Racial Justice Fellowship Program. This program will allow at least five attorneys within the firm to devote a year each to focus on social justice and civil rights issues.

Additionally, two associates with Orrick, Tatyanna Senel and Yasmina Souri rallied almost 1,000 attorneys to provide pro-bono representation to protesters in Los Angeles. Senel and Souri helped formalize a working relationship between Orrick and the National Lawyers Guild, an established bar association with a mission of using the power of the law for the people, by bringing together lawyers, law students, legal workers and jailhouse lawyers to work together on a wide spectrum of issues, and create change on the local, regional, national and international levels. The National Lawyers Guild (NLG) is one of the most progressive bar associations in the country, as well as one of the oldest, and the first to be racially integrated. Additionally, Senel and Souri activated their own networks to rally friends and colleagues to the cause. Senel says, “We’re [Senel and Souri] both passionate about the message, and we felt like there was something we could do with our law degrees.”

According to the LA Times, almost 3,000 protesters were arrested in Southern California during the upheaval surrounding George Floyd’s death. Through this partnership, NLG is able to deploy almost 1,000 attorneys with varying levels of expertise to provide legal defense to protesters arrested. Criminal Defense attorneys will handle the more complex matters, while attorneys with limited or no experience in criminal law will handle lower-level issues, like curfew violations. Additionally, the volunteers will provide training on how to act as a legal observer.

Wiggin and Dana LLP, in response to racial inequalities brought to the forefront by recent events, has announced the Wiggin Opportunity Initiative, a pledge to provide $10 million in pro-bono legal services to minority-owned businesses over the next decade. Managing Partner, Paul Hughes, said, “While born of current events and frustrations, the firm wants to do something that will outlast the spotlight of this particular moment and support long-term improvement in opportunity and equality in our communities. By leveraging the particular skillset of our sophisticated lawyers in a sizeable, sustained and focused effort over time, we hope to make real change in a way that we could not achieve by more modest, incremental efforts.”

The next step in the initiative is to identify, through collaboration with community partners businesses that could benefit from the initiative. The legal services will be available across a variety of practice groups in order to meet a variety of needs in the business community. With a ten-year commitment, the firm is hoping to develop long-term relationships with the minority businesses to form partnerships to amplify the success of the businesses, to best impart lasting change on the landscape.

WilmerHale is a full-service, international law firm with 1,000 attorneys is focusing their racial equality efforts on police reform. WilmerHale announced their intention to donate at least a quarter of a million dollars to organizations working on police reform efforts, and select two fellows to work with civil rights groups addressing issues related to systemic racism, criminal justice and holding police accountable.

Focusing on WilmerHale’s proven track record in Police Department Counseling, the firm has established a pro bono client initiative focusing on police reform and social inequities affecting minorities, focusing on police accountability—using WilmerHale’s long-standing expertise in advising police departments in Baltimore and Chicago under Department of Justice (DOJ) investigation to assess practices and bolster public safety by helping departments adopt best practices. WilmerHale indicates these steps are just the beginning, saying: “These are our initial steps in our efforts to ensure meaningful change. We plan to build on and expand this work.”

Many law firms have announced their intention to contribute financially as well as look internally and find ways to make their own workplaces more inclusive, by formalizing initiatives to increase diverse attorney representation across the industry. In fact, to further this goal, over 125 law firms have joined the Law Firm Antitracism Alliance, with the purpose of:

. . . leveraging the resources of the private bar in partnership with legal services organizations to amplify the voices of communities and individuals oppressed by racism, to better use the law as a vehicle for change that benefits communities of color and to promote racial equity in the law.

Through coordination of Pro-bono efforts, law firms will partner with legal services organizations to “identify and dismantle structural or systemic racism in the law.”

On June 18, 2020, the U.S. Supreme Court ruled that the Trump Administration could not continue with its plan to dismantle the Deferred Action for Childhood Arrivals (DACA) program, and the 700,000 DACA recipients are protected from deportation and their work authorization remains valid. The decision, the Department of Homeland Security et al. v. Regents of the University of California et al. was celebrated as a major victory by immigration activists working on behalf of DACA recipients.

Akin Gump, wrote an amicus curiae brief on behalf of the respondents, in conjunction with the American Historical Association, the Organization for American Historians and the Fred T. Korematsu Center for law and Equality, along with over 40 individual historians, supporting the legal challenge to the Trump Administration’s decision to rescind the DACA program. The brief looks at the historical context of decisions such as these, with a focus on the coded language and implicit bias used by the government to support policies. The brief indicates, in part:

. . . [A]mici seek to ensure that this Court understands the ways in which racially coded language has been used by government actors, both past and present, to mask illicit discriminatory motives—particularly in the immigration context, including the rescission of DACA.

Pratik Shah, co-head of Akin Gump’s Supreme Court and appellate practice, pointed out that many DACA recipients have only ever known the United States as their home, and all who earn DACA protection had done so by furthering their education or serving in the military. He says, “The Court’s decision that the administration cannot arbitrarily upend the lives of hundreds of thousands who arrived in our country as children . . . is a victory for both the rule of law and common decency.”

Julius Chen, corporate partner Alice Hsu and litigation senior counsel Jessica Weisel worked with Mr. Shah on the brief.

It’s impossible to say what will come next in 2020, but we’ll have more legal industry news in a few weeks. Stay safe and sane until then!

ARTICLE BY Eilene Spear and Rachel Popa at The National Law Review / The National Law Forum LLC.

For more legal marketing news, see the National Law Review Law Office Management section.

Seila Law LLC v. Consumer Financial Protection Bureau: Has the Supreme Court Tamed or Empowered the CFPB?

On June 26, the Supreme Court issued its long-awaited opinion in Seila Law LLC v. Consumer Financial Protection Bureau,¹ finally resolving the question that has dogged the new agency since its inception: Is the leadership structure of the Consumer Financial Protection Bureau (CFPB) constitutional? Writing for a 5-4 majority, Chief Justice John Roberts ruled that the CFPB structure—“an independent agency that wields significant executive power and is run by a single individual who cannot be removed by the President unless certain statutory criteria are met”—violates the Constitution’s separation of powers.²

For financial services companies regulated by the CFPB, the most important aspect of Seila Law is not the headline constitutional defect, but the remedy. Choosing “a scalpel rather than a bulldozer,”³ the Court did not invalidate the CFPB. The Court held 7-2 that the Director’s constitutionally offensive removal protection could be severed from the CFPB’s other authorities, thus bringing the Director (and with her, the CFPB) under Presidential control, while leaving the CFPB’s other powers in place.⁴

While Seila Law is an important case in the evolving doctrine of separation of powers as applied to independent agencies, the case has three immediate consequences for financial services companies. First, the CFPB is here to stay, and its broad authorities and other controversial aspects (such as its insulation from Congressional appropriations) remain intact. Second, the CFPB’s Director is now directly accountable to the President, significantly raising the stakes in the 2020 election for the agency’s regulatory and enforcement agenda. Third, the Court left one important question unanswered: it declined to address the effect of its ruling on prior CFPB rules and enforcement actions. While we believe the agency will attempt to cure the constitutional defect, we expect continued litigation—and uncertainty—on this issue.

Background

In response to the 2008 financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), creating the CFPB as an independent financial regulator within the Federal Reserve System.⁵ The CFPB has expansive authority to “implement and, where applicable, enforce Federal consumer financial law,” which includes 19 enumerated federal consumer-protection statutes and the Dodd-Frank Act’s broad prohibition on unfair, deceptive, and abusive acts and practices.⁶ The CFPB’s authority over consumer financial products and services includes rulemaking authority with respect to the enumerated statutes, the ability to issue orders, including orders prohibiting products and services which it concludes are “abusive” or substantively unfair, as well as the power to impose significant financial penalties on financial services companies. The CFPB is funded through the Federal Reserve System, and thus is not subject to Congressional constraint through the appropriations process. Although technically housed within the Federal Reserve System, the CFPB also is not subject to oversight or control by the Board of Governors of the Federal Reserve System. As a result, the CFPB was created to be an independent agency, largely unconstrained by Congress or the Federal Reserve System. The CFPB is headed by a single Director appointed by the President, by and with the advice and consent of the Senate, for a five-year term.⁷ The Director may be removed by the President only for “inefficiency, neglect of duty, or malfeasance in office.”⁸

In 2017, the CFPB issued a civil investigative demand to Seila Law LLC, a California-based law firm that provides debt-related legal services to consumers. Seila Law refused to comply, objecting that concentrating the CFPB’s authority in a single Director with for-cause removal protection violated the separation of powers doctrine. The CFPB filed a petition to enforce its demand in federal district court. The district court rejected Seila Law’s constitutional objection and ordered the law firm to comply with the demand. The Court of Appeals for the Ninth Circuit affirmed.⁹

Case Analysis: Seila Law

The Supreme Court granted certiorari to address the constitutionality of the CFPB’s single-Director structure. That decision was telling in and of itself, given that the Ninth Circuit’s ruling was in accord with PHH Corporation v. CFPB, the D.C. Circuit’s en banc opinion upholding the Director’s removal protection.¹⁰ As many had expected, the Supreme Court reversed the Ninth Circuit and held that Congress’s restriction on the President’s power to remove the CFPB’s Director violated the separation of powers doctrine.

The Court began its analysis from the premise that Article II of the Constitution gives the entire executive power to the President alone, “who must ‘take care that the Laws be faithfully executed.’”¹¹ Lesser officers who aid the President in his or her duties “must remain accountable to the President, whose authority they wield.”¹² The President’s power to remove these lesser officers at will is foundational to the President’s executive function and “has long been confirmed by history and precedent.”¹³ The Court held that “[w]hile we have previously upheld limits on the President’s removal authority in certain contexts, we decline to do so when it comes to principal officers who, acting alone, wield significant executive power.”¹⁴ The Court found that the CFPB’s Director fit that bill. In creating the CFPB, Congress “vest[ed] significant governmental power in the hands of a single individual accountable to no one.”¹⁵ Such an agency “has no basis in history and no place in our constitutional structure.”¹⁶

Next, the Court turned to the remedy. Seila Law argued that the Director’s unconstitutional removal protection rendered the “entire agency … unconstitutional and powerless to act.”¹⁷ The Court disagreed. Relying on the Dodd-Frank Act’s severability clause, the Court’s severability precedent, and the proposition that “Congress would have preferred a dependent CFPB to no agency at all,” the Court ruled that the Director’s removal protection is severable from the CFPB’s other statutory authorities.¹⁸ “The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will.”¹⁹

Finally, the Court expressly declined to address how its holding affects prior CFPB regulatory and enforcement actions. The government had argued that the Court need not reach the constitutional question because the CFPB’s demand to Seila Law had since been ratified by an Acting Director accountable to the President.²⁰ The Court remanded the question of ratification to the lower courts, noting that it “turns on case-specific factual and legal questions not addressed below and not briefed here.”²¹

Implications

Seila Law is an important case for the canons of administrative law and the separation of powers doctrine. But for financial services companies regulated by the CFPB, it has meaningful (and immediate) practical consequences.

First, the CFPB has escaped Supreme Court review with its authorities basically untouched. Absent Congressional action, the CFPB will (i) continue to be run by a single Director, (ii) continue to wield expansive rulemaking, supervisory, and enforcement authority over the multi-trillion dollar market for consumer financial products and services, and (iii) continue to be insulated from Congressional control via the appropriations process.

Second, the CFPB’s Director is now directly accountable to the President—whoever that person may be. Typically, financial regulators have a measure of insulation from the political process to provide consistency and certainty to financial markets. With this decision, the election of the next President—and the prospect of a Democratic administration—could result in significant and immediate changes to the CFPB’s regulatory and enforcement agenda.

Third, while Seila Law secured the CFPB’s future, the Court left in place significant uncertainty as to its past. This past includes major enforcement actions and rulemakings that have reshaped the market for consumer financial products and services over the last nine years. Of course, it remains to be seen what appetite financial services companies have to challenge the CFPB’s prior rules and enforcement orders. And, we expect the CFPB will attempt to remedy the constitutional defect by ratifying the agency’s past actions or perhaps invoking the de facto officer doctrine.²² Yet, the availability of either remedy is an open question. Ratification in particular is a live dispute in both Seila Law and a pending en banc appeal before the Fifth Circuit, Consumer Financial Protection Bureau v. All American Check Cashing.²³ Ratification of prior agency actions was also left unresolved in another thread of the Supreme Court’s recent separation of powers jurisprudence. In Lucia v. SEC, the Court found that the SEC hired administrative law judges (ALJs) in violation of the Appointments Clause, but offered limited remedial guidance aside from instructions that Lucia was entitled to a “new hearing before a properly appointed” ALJ.²⁴ While litigating Lucia’s challenge, the SEC issued an order purporting to ratify its past ALJ appointments by approval of the Commission itself. The Court acknowledged that order, but declined to address its validity.²⁵

1 Seila Law v. Consumer Financial Protection Bureau, 591 U.S. ____ (2020) (June 26, 2020).

2 Id., Slip Op. at 2–3.

3 Id., at 35.

4 Id., at 3.

5 Title X of the Dodd-Frank Act, 12 U.S.C. § 5301 et seq., created the CFPB and defines its authorities.

6 12 U.S.C. § 5511 (defining CFPB’s purpose); 12 U.S.C. § 5481(14) (defining “Federal consumer financial law”).

7 Id. § 5491(b)(2), (c).

8 Id. § 5491(c)(3). For a detailed discussion of the CFPB and its powers, see our Clients & Friends Memo, The Consumer Financial Protection Bureau: The New, Powerful Regulator of Financial Products and Services (March 06, 2012).

9 Seila Law, Slip Op. at 6–8 (discussing procedural history).

10 PHH Corp. v. CFPB, 881 F. 3d 75 (D.C. Cir. 2019) (en banc). Tellingly, then-Judge Kavanaugh wrote the D.C. Circuit panel decision holding that the CFPB’s structure violated the separation of powers doctrine. 839 F.3d 1 (D.C. Cir. 2016). The en banc court vacated that decision, but now-Justice Kavanaugh joined the majority in Seila, reiterating his separation of powers analysis from the D.C. Circuit. For further analysis of the PHH decision, see our Client & Friends Memo Federal Appeals Court Rules That CFPB Structure is Constitutional (Jan. 31, 2018) (discussing the en banc decision); D.C. Circuit Brings CFPB under Presidential Control (Oct. 13, 2016) (discussing the initial panel decision of the D.C. Circuit).

11 Seila Law, Slip Op. at 11 (quoting U.S. Const., Art. II, § 1).

12 Id. at 12.

13 Id.

14 Id. at 36. Specifically, the Court wrote that it has recognized two limited exceptions to the President’s unrestricted removal power. Seila Law, Slip Op. at 15–16. First, in Humphrey’s Executor, 295 U.S. 602 (1935), the Court upheld removal restrictions for Commissioners of the Federal Trade Commission, which Roberts characterized as “a multimember body of experts, balanced along partisan lines, that performed legislative and judicial functions and was said not to exercise any executive power.” Seila Law, Slip Op. at 15. Second, in United States v. Perkins, 116 U.S. 483 (1886), and Morrison v. Olson, 487 U.S. 654 (1988), the Court permitted removal protections for certain inferior officers with narrow duties, such as an independent counsel appointed to investigate and prosecute specific crimes.

15 Seila Law, Slip Op. at 23.

16 Id. at 18.

17 Id. at 31.

18 Id. at 32–36 (emphasis in original).

19 Id. at 3.

20 Id. at 30.

21 Id. at 31. Justice Thomas viewed this theory as irrelevant, since the Acting Director could not have ratified the continuance of the action by Director Kraninger. Justice Kagan did not address this theory specifically.

22 See Ryder v. United States, 515 U.S. 177 (1995) (the de facto officer doctrine “confers validity upon acts performed by a person acting under the color of official title even though it is later discovered that the legality of that person’s appointment or election to office is deficient.”).

23 No. 18-60302 (5th Cir.).

24 Lucia v. S.E.C., 138 S. Ct. 2044, 2055 (2018).

25 Id. at 2055 n.6.

ARTICLE BY Rachel Rodman and Scott A. Cammarn and Nihal S. Patel at Cadwalader, Wickersham & Taft LLP.

For more on the CPFB, see the National Law Review Consumer Protection law section.

A Warning to One, A Warning to All?

As part of their ongoing effort to combat misinformation about COVID-19, federal agencies have issued warning letters to more than 150 companies. While companies know that a warning letter is serious and requires immediate attention, perhaps the greater challenge is what often follows: the so-called “piggyback” class action lawsuit.[1] And recently, plaintiffs’ attorneys have gone one step further: they have been filing “piggyback” class actions not against the company that received the warning letter but against competitors that make similar products.

Because warning letters are publicly available and posted prominently on various agency websites, consumers can view the warning letter and then file a “piggyback” class action against the recipient of the warning letter. Indeed, oftentimes these “piggyback” class actions merely recast the government agency’s allegations as claims for violations of various state consumer protection statutes. For example, in November 2013, the U.S. Food and Drug Administration (FDA) sent a genetic testing company a warning letter ordering it to stop selling and marketing one of its genome tests because the company had failed to show that the test actually worked. Five days later, the company was hit with a proposed class action for allegedly violating several California consumer protection laws.[2] Dozens of other companies – from hotel chains to cereal manufacturers – have also been hit with piggyback class actions based on warning letters.

But things have changed recently. Consumers have targeted companies that never received a warning letter. These proposed class actions are based largely – sometimes entirely – on the allegations in a warning letter directed to another company. In these cases, the plaintiffs’ theory is that, because the products are similar, the substance of the warning letter “applies equally” to the similar products.

This trend has continued in the COVID-19 era. On January 17, 2020, a week before the first reported case of COVID-19 in the United States, the FDA sent a leading hand sanitizer manufacturer a warning letter telling the company to stop advertising its product as one that can prevent an array of diseases, including Ebola, MRSA, and the flu. The FDA explicitly challenged the product’s claim that it “kills 99.99% of most common germs” because the claim allegedly lacked adequate scientific support. On the heels of FDA’s warning letter, at least six class actions were filed against the manufacturer.[3] Although the claims differ slightly, all of the lawsuits are premised on the same basic theory articulated in the FDA warning letter—which all of the complaints cite.

Then came the copycat piggyback lawsuits. The manufacturer of a competing hand sanitizer was sued in February and March 2020.[4] In one of the complaints, the plaintiff alleged that because both products have the same active ingredient, the FDA’s allegations about labeling apply to both products. Separately, a plaintiff sued a large retailer in a class action making similar claims about its generic hand sanitizer.[5] In that case, the plaintiff argued that the retailer’s labeling was also misleading because it had the same active ingredient as the brand name and implied that its product was as effective as the brand name.

So what should companies do? Here are proactive steps to protect against these lawsuits.

Review labels and advertisements. To protect against “piggyback” class actions, companies should ensure that they have reliable scientific evidence to support their products’ stated claims and alleged benefits, particularly if a competing product that makes similar claims has received a warning letter. Additionally, if a company compares its product to competing products, companies should check to see whether those competing products have ever been the subject of a warning letter.

Monitor guidance from relevant governmental agencies. Companies should also actively monitor guidance from relevant federal or state agencies. During the COVID-19 pandemic, agencies have issued and amended guidance more often than they typically do. For example, in March 2020 the FDA issued guidance temporarily relaxing regulatory requirements for production of certain hand sanitizer products. The FDA then revised that guidance on March 28, and again on April 15, 2020. Companies should stay abreast of the most recent guidance to ensure that they are complying with laws and regulations.

Monitor warning letters and enforcement actions against competitors. Of course, a company that receives a warning letter should seek legal advice to determine how to respond. But even if a company does not itself receive a warning letter, companies might learn about federal agencies’ warning letters and enforcement actions against other companies, particularly competitors or companies that make similar products. Where the products are similar, enterprising plaintiffs’ attorneys could repurpose a warning or enforcement action against one company’s product into the basis for a class action against its competitors. If a competitor has received a warning letter or been the target of an agency enforcement action, legal counsel may help assess their situation compared to the company’s.

Conclusion

It is a challenging time for companies in so many ways. These lawsuits might be the beginning of a trend of class actions filed both against companies whose products appear on the radar of governmental agencies during the COVID-19 pandemic and against companies that make similar products. The plaintiffs’ bar is closely monitoring agency warning letters. Companies should take that into consideration.

[1] John E. Villafranco and Daniel S. Blynn, The Case of the Piggyback Class Action, Nutritional Outlook (Sept. 2012) (defining a piggyback lawsuit as “a class action lawsuit filed by a private litigant against an advertiser or manufacturer after a federal agency…has already taken regulatory action against the same company on behalf of the public.”)

[2] Aeron v. 23andMe, Inc., No. 13-cv-02847 (S.D. Cal. filed Nov. 27, 2013); see also Dan Munro, Class Action Filed Against 23andMe, Forbes (Dec. 2, 2013, 11:04 PM), https://www.forbes.com/sites/danmunro/2013/12/02/class-action-law-suit-f….

[3] DiBartolo v. GOJO Industries, Inc., No. 20-cv-01530 (E.D.N.Y. filed Mar. 24, 2020); Miller v. GOJO Industries, Inc., No. 20-cv-00562 (N.D. Ohio filed Mar. 13, 2020); Jurkiewicz v. Gojo Industries, Inc., No. 20-cv-00279 (N.D. Ohio filed Feb. 9, 2020); Gonzalez v.Gojo Industries, Inc., No. 20-cv-00888 (S.D.N.Y. filed Feb. 1, 2020); Aleisa v. Gojo Industries, Inc., No. 20-cv-01045 (C.D. Cal. filed Jan. 31, 2020); Marinovich v. Gojo Industries, Inc., No. 20-cv-00747 (N.D. Cal. filed Jan. 31, 2020).

[4] David v. Vi-Jon, Inc., No. 20-cv-00424 (S.D. Cal. filed Mar. 5, 2020); Sibley v. Vi-Jon, Inc., No. 20-cv-00951 (N.D. Cal. filed Feb. 7, 2020).

[5] Taslakian v. Target Corp., No. 2:20-cv-02667 (C.D. Cal. filed Mar. 20, 2020)

ARTICLE BY J. Maxwell Heckendorn and Jeffrey Skinner at Schiff Hardin LLP.

For more on product’s COVID-19 claims, see the National Law Review Coronavirus News section.

The Conflict Between the MDL Court’s Authority to Manage Pretrial Proceedings and Rule 45’s “Where Compliance Is Required” Requirement.

Who Has Jurisdiction Over Extra-District Nonparty Subpoenas?

Leading Decisions Hold that MDL Courts Have Broad Authority to Enforce Extra-District Subpoenas Under Section 1407

Courts Have Expressed Conflicting Views on Whether an MDL Court Can Enforce an Extra-District Subpoena Duces Tecum

A Motion to Transfer to the MDL Is a Viable Alternative

Conclusion

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Historical Context

Trump’s Track Record

Judicial Nominations

Other Political Cases

Non-political Cases

Is libel law likely to change?

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Background Trump v. Vance

Reactions to SCOTUS Decision from Jay Sekulow and Cyrus Vance, Jr.

Other Reactions to the Supreme Court’s Trump v. Vance Ruling

Background for the Supreme Court’s Ruling in Trump v. Mazars

Reactions to Trump v. Mazars

Looking Ahead to What’s Next

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Law Firm Moves, Hires and Recognitions

Law Firm Contributions to Social Justice

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Background

Case Analysis: Seila Law

Implications

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Conclusion

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**Other Reactions to the Supreme Court’s Trump v. Vance Ruling**