Everything's Fine When You're Pro Se

One of my personal truisms is: you’re always better off having a really good lawyer on the other side.  Good lawyers tend to do things that make sense, cut to the heart of issues and move things toward an efficient conclusion.  People who represent themselves tend to do the opposite (you’re the exception, Mr. A.). 

Sometimes, it’s not their fault, they’re struggling through a world that can be technical, difficult and overwhelming.  My own pro se experience in adoption court was way more stressful than I expected, and I had samples of everything I needed to file, a great judge and staff and 15 years of litigating under my belt.  Courts bend over backwards to protect people who represent themselves and sometimes, people take advantage of that.

A frustrated Illinois Appellate Court has taken on what it calls “paper terrorism,” in an opinion it begins as follows:

[t]his appeal of a mortgage foreclosure case involving an empty lot is so groundless that we would normally dispose of it with a brief summary order.

Instead, the court took the 

opportunity to review a number of tactics a small number of debtors use both to delay the ultimate resolution of cases against them and to use the legal system for improper purposes.

This was quite a review.  The entire opinion spans 53 pages, about 15 of which are devoted to a detailed recitation of the facts, mostly a case history.  Why give so much ink to a case that is “so groundless?”  The court answered this question by quoting a former, presiding Chancery Judge:

“the proper response to malicious prosecution or careless lawyering is not to respond in-kind with slovenly preparation or half-hearted advocacy; *** but rather to validate our profession’s righteous outrage and indignation over such conduct with meticulous research, careful analysis, expansive writing and aggressive advocacy.”

Capsulizing its meticulous discussion into just two sentences, the court said:

[v]irtually every one of their arguments is abjectly frivolous and/or presented in such a confusing manner, perhaps deliberately so, to make it as laborious as possible to resolve them.

***

These tactics often appear in courts hearing debt cases, generated by defendants engaging in an organized program of filing frivolous pleadings, lawsuits, and claims in an effort to harass judges, creditors, and even court staff.

Perhaps recognizing the value an attorney might bring to their case, the appellants asked the court to appoint a lawyer for them.  Too little, too late:

after defendants had already filed their own brief and [the Plaintiff Bank] had also filed its brief in this court, defendants filed a motion asking us to appoint an attorney for them, a request which was truly bizarre since the appointed pro bono attorney would have had the sorry task of taking on a case that defendants had already done their level best to sabotage.

Ultimately, the court affirmed the order of foreclosure, affirmed the award of attorney’s fees and directed the other side to submit bills supporting an award of attorney’s fees for defending the appeal.  Then it did something I’ve never seen before: it issued a rule to show cause why the litigants should not be fined $10,000 for their conduct on appeal.  In taking these steps, the court stated:

while [The Plaintiff Bank] was, and will be, awarded its attorney fees, the award may be merely a Pyrrhic victory for it since defendants apparently have insufficient funds to pay them and might discharge them through bankruptcy

***

The fine, which will not be dischargeable in bankruptcy (see 11 U.S.C. §523(a)(7) (2006)), is high enough that it will discourage future tactics in debt collection cases, and punish defendants for their conduct in litigating this case in the manner they have.

You can read the entire opinion here.  As of today, it is just two days old, so it is non-final and subject to revision.  The time for filing motions for rehearing or a further appeal has not expired.  The court has not yet resolved its rule to show cause or the attorney’s fees on appeal.

Because I Said So

Let’s get this out of the way: the defendants in this case are not sympathetic.  The complaint paints them as sneaky, conniving and ham-handed about it.  Since this is a motion to dismiss, we have to assume that’s true.  For non-lawyers, a motion to dismiss is the legal equivalent of “so what.”  It means, even if everything you say is true, the law says you still have no case.  

According to the complaint, employees from one software company visited a competitor’s website and requested a 30 day free trial of the competitor’s software.   The employees used a fake name, pretended to be from a fake real estate company and provided fake addresses.  The competitor’s salesman agreed to set up a 30 day trial environment, upon acceptance of a End User License Agreement (“EULA”).  The employees agreed.

The EULA said that “the Software is provided to User for evaluation purposes," and that it is a "license to use the software solely for the purposes of testing and evaluating the software." The EULA also said that the user "shall not engage in competitive analysis." 

Over the next 30 days, the employees accessed the trial environment 43 times and asked the salesman a number of questions.  But that just wasn’t enough, so they requested another two weeks of access.  That prompted the competitor’s salesman to arrange a conference call.  When the employees called in, the salesman noticed that incoming number didn’t identify a bogus real estate firm, it identified a competing software company.  The lawsuit followed in short order.

In their trade secret claim, the plaintiff alleged that the competing employees:

learned-technical details about the… Software and its functionality, and acquired information about [Plaintiff’s] confidential and proprietary marketing strategies and pricing information, which information constitutes [Plaintiff’s] confidential, proprietary, and trade secret information.

That may be, but none of things things qualify as “trade secrets,” said the defendant in its motion to dismiss.   According to the defendant, software functionality, marketing strategies disclosed through the sales process and pricing aren’t really secrets.  Those are things that are widely known to customers and prospective customers.  The only “functionality” that might qualify as a trade secret is source code, and nobody alleged that they had access to that.

The court agreed that the defendant’s arguments made sense, if not for the EULA.  According to the court, the EULA said that all of these things were secrets and if every other customer had made the same agreements, then the plaintiffs may have a case.  Motion to dismiss denied.

It’s tempting to think of motions to dismiss as the land of law exams, near fantasy worlds where courts indulge in esoteric discussions about what might be possible.  Their effects are starkly practical.  For many defendants, the cost of fighting a case past such a motion just isn’t worth it.  For them, every esoteric possibility is a cold, economic reality. 

Like I said before, the defendants in this case aren’t all that sympathetic.  But, I’ll bet you’ve clicked through hundreds of EULA’s that you’ve never even read.  Any one of those could be transforming widely held information into potential trade secrets—and many probably are.  Just because they said so.

You can read the full opinion here.

Just a Second

I’ve been involved in a few forum fights following a proverbial “race to the courthouse,” but this one is a true photo finish.   The parties laid the groundwork for this contest by agreeing that a litigation standstill would expire on November 12, 2012, at exactly 8:00 pm.

With one eye fixed on the United States Naval Observatory Master Clock and a finger on the “submit” button, one party filed in Washington DC.  Meanwhile, in Georgia, the other side was standing in the clerk’s office watching the second hand tic on an iPhone and waiting for the instant to hand over its complaint.

The electronic time stamp in the Washington DC filing said 8:00:01. p.m.  In Georgia, the deputy clerk wrote a note on the complaint, saying it had been accepted at “8:00 p.m.”  Both parties argued they were “first to file” and sought dismissal of the other case.

After everyone had caught their breath months later, a Washington DC judge wisely declined to award a gold medal:

This is because the Court finds, in an exercise of its discretion, that even if Plaintiffs were the first to file suit, equitable considerations weigh overwhelmingly in support of resolution of the parties' dispute by the Southern District of Georgia.

In this case involving a Georgia construction project, the Georgia Prompt Payment Act and a contract applying Georgia law, the court ruled that there was no reason to run to Washington DC.

You can read the entire opinion here.

Attorney Told He’s Not a Victim of Insurance Scam

We’ve got a pretty good spam blocker, so I haven’t seen a “check scam” pitch in quite a while.  Here’s one I pulled out of quarantine; some of the names have been changed to protect the guilty:

RE: Mutual Partnership with You/Firm

 Dear Prospective Agent,

My Name is Leo Herman, Human Resource Manager of Universal Medicare. Universal Medicare is a surgical and medical equipment manufacturing company based in India, United Kingdom and the Peoples Republic of China(P.R.C) with company registration number 03307219. Our company export Medical and Surgical equipments into Canada, USA, Europe and Central America.

Due to increase in demand of our products in North and South American continent,we decided to move our products fully into the continent of

America.

We are searching for reliable person/company will act as PAYMENT RECEIVABLE AGENT in collecting funds owed to us by our deliquent

customers within your region.

We wish to partner with you/your company. Partnership scope includes placing orders for products from customers and receiving payments for

products supplied.

You can work part time and you need no prior experience. Should you be interested in this cooperation or have questions/inquiries in this regard, please feel free to email us; neveryoumind@not.telling

Thank you and I await your prompt response .

Leo Herman

Universal Medicare

200 City Road,

London EC1V 2PH

Tel: 44 (0) 000 000 0000

Email:

Leo’s got pretty poor grammar and lousy spelling for a professional Brit., but when it comes to clients, who can be choosy, right?  A New Hampshire attorney wishes he had been a little more selective after falling for a somewhat more sophisticated variation on this theme.  

One night, the attorney received an email purporting to come from Richard Downey, an lawyer with the Law Offices of Richard L. Downey & Associates in Fairfax, Virginia.  Downey is a real attorney and his website pops right up on Google.   The email, however, did not come from the real Downey.  The bogus email said that Downey would be “sending a client over for a business litigation matter,” and asked the New Hampshire lawyer to “[a]dvise of [his] availability.”  If available, “Downey” would “have [his] client contact [the New Hampshire lawyer] directly with pertinent information.” 

The New Hampshire lawyer didn’t respond right away, so he got an identical email from the “Downey” poser late the following night— this time from a different email address.  The next morning the lawyer responded to the first email, telling “Downey” he was “completely available.”  The day after that the New Hampshire lawyer gave a similar response to “Downey’s” second email.

A few days later, “Downey” wrote back, saying he had “forwarded your contact to my client to establish direct contact and provide pertinent information for your review.”  A short while later, the New Hampshire lawyer got an email from a person claiming to be “Martin Joachim,” of Bendtsteel A/S in Frederiksvaerk, Denmark.  “Joachim” said he had been referred by Richard Downey and promised to forward more information later about “our legal matter.”

After several more days, “Joachim” sent an email with some details on the “legal matter.”  It said that Mill Steel Supply of Manchester, New Hampshire had made a partial payment for unspecified "goods" supplied by Bendtsteel, leaving over $500,000 outstanding.  Bendtsteel wished to maintain its good relationship with Mill Steel Supply, but thought that retaining the New Hampshire lawyer "and the introduction of legal pressure may initiate immediate payment." "Joachim" went on to say:

Our expectation of your services for now will be within the scenario of a phone call or demand letter to our customer. This approach will trigger the much needed response from our customer towards payment.

When all available options have been exhausted, litigation may be introduced as a last resort. We will forward the pertinent document for your review.

You may send your retainer document for the board to review as we intend to commence immediately.

The New Hampshire lawyer cleared conflicts and sent “Joachim” an engagement letter, by email.  “Joachim” emailed back a signed engagement letter and a piece of good news: Mill Steel had agreed to pay, after learning of Bendtsteel’s intention “to retain legal services as regards our claim.”  After a few more emails, “Joachim” advised the New Hampshire attorney that Mill Steel Supply had "made a part payment to you/your firm to avoid litigation," and that the payment would be sent directly to Whittington's office.

It wasn't long before the New Hampshire attorney received a UPS package containing a check in the amount of $195,790, purportedly issued by Citibank N.A. on behalf of Mill Steel and payable to the attorney’s firm.  The New Hampshire attorney promptly advised “Joachim,” asking whether he wanted the funds wired and suggesting the lawyer keep a $2,000 retainer for his firm.   “Joachim” agreed to the retainer, and directed the New Hampshire attorney “to transfer by swift to our creditor MS CAR FACTORY COMPANY LTD in CHIBA-KEN, JAPAN the sum of $188,978.000 (USD).”  As instructed, the attorney deposited the check and requested the wire transfer.

Hours after the funds were transferred, the attorney’s bank learned that Citibank had dishonored the check and tried (unsuccessfully) to withdraw the wire.  “Joachim” absconded with the money.  The bank seized the attorney’s remaining trust funds to offset its loss and sued the New Hampshire attorney for the balance.  The attorney, in turn, made a claim with his professional liability carrier.  The insurer denied the claim and sued the attorney for a declaration that there was no coverage.

The insurance company argued that there were two reasons why there was no coverage.   First, the carrier noted that the policy only applies to “professional services,” which are defined as “services or activities performed for others as an attorney in an attorney-client relationship.”  According to the insurer, “Joachim,” wasn’t a real guy, or at least he wasn’t a real client.  As such, there was no attorney-client relationship, thus no “professional services” and therefore, no coverage.  Nonsense, argued the lawyer.  All that’s required is an attorney's “good faith belief . . . that he had entered into a legitimate attorney-client relationship.”  

Each side had a bunch of cases to support their position, but the court said it didn’t have to resolve this “interesting” question.  Instead, it could decide the case on the basis of this exclusion:

THIS POLICY DOES NOT APPLY TO ANY CLAIM ARISING FROM OR IN CONNECTION WITH . . . [a]ny conversion, misappropriation or improper commingling by any person of client or trust account funds or property, or funds or property of any other person held or controlled by an Insured in any capacity or under any authority, including any loss or reduction in value of such funds or property.

Rejecting several different arguments offered by the attorney, the court ruled that this exclusion was “clear and unambiguous as applied to the facts of this case.”

First, the New Hampshire attorney argued that the “funds” represented by Joachim’s bogus check were never in the attorney’s trust account and so the exclusion did not apply.    The court disagreed, saying those weren’t the pertinent “funds.”  Rather, the funds at issue were the very real dollars that had disappeared from the attorney’s trust account.  These were indisputably “controlled” by the attorney, at least insofar as he had issued the order to send them to Japan.

The attorney also argued that the exclusion was ambiguous because it could have been drafted differently, excluding claims “arising out of, in connection with, or in consequence of . . . the dishonoring of any financial instrument.”  To this, the court said:

Determining whether a policy exclusion is ambiguous, though, does not turn on whether the insurer might have included another, more precise exclusion. As already discussed, ambiguity turns instead on whether “the parties may reasonably differ about the interpretation of the language” of the exclusion that was actually included in the policy.

The court had already decided that the attorney’s interpretation was not “reasonable.” 

The attorney made one last stab at a “reasonable expectation” argument, claiming “no law firm purchasing professional liability insurance would expect that permitting its client trust account to be pilfered would not be covered.”  Alas, the court did not agree that the New Hampshire attorney had been scammed by his insurance company.  “It suffices to say in response that if the plain and unambiguous language of the insurance policy excludes coverage for those acts, the insured law firm should expect just that.”

You can read the full opinion here.  It has been appealed.

Federal SCA Respects Your Facebook Privacy - But Pick Your Friends Wisely

If you’re on Facebook, you’ve probably seen a few posts warning about its default privacy settings, and how to keep everyone but friends off of your Facebook lawn.   Your privacy settings may do more than keep your status updates and family pictures private.  They may have important legal effects.

Any time there’s a major news story, chances are you’ll see strong reactions on your Facebook timeline.  On June 8, 2008, a New Jersey nurse working as a paramedic posted the following:

An 88 yr old sociopath white supremacist opened fire in the Wash D.C. Holocaust Museum this morning and killed an innocent guard (leaving children). Other guards opened fire. The 88 yr old was shot. He survived. I blame the DC paramedics. I want to say 2 things to the DC medics. 1. WHAT WERE YOU THINKING? and 2. This was your opportunity to really make a difference! WTF!!!! And to the other guards....go to target practice.

She had set her privacy settings to “friends only,” but one of those friends was disturbed by the post and sent it on to her supervisor.  She was suspended for two days with pay, and received a memo stating management was concerned her comments showed “a deliberate disregard for patient safety.”  Upset for being called out over a private Facebook post, she made a federal case out of it and sued her employer. 

Actually, she had a lot of complaints, which a Federal Judge dismantled in an entertaining opinion you can read here.  I’m only going to focus on her claims under the federal Stored Communications Act, 18 USC. §§ 2701-11 (“SCA”).  Enacted in 1986, a technological lifetime ago, the SCA was intended to protect the privacy of electronic communications.  As the New Jersey court put it:

the SCA covers: (1) electronic communications, (2) that were transmitted via an electronic communication service, (3) that are in electronic storage, and (4) that are not public. Facebook wall posts that are configured to be private meet all four criteria.

Accordingly, the court found that the SCA applied to the private posts and suggested that the employer could be sued for using them.  The SCA has also been used to stop a subpoena of private Facebook posts.  However, there are exceptions.  First, the SCA does not apply when the disclosure is “authorized… by a user of that service with respect to a communication of or intended for that user.” 

Here, our New Jersey paramedic had shared her rant with a friend who shared it with her employer.  Everyone in the chain had "authorized" disclosure to the next person.  Crying foul, the paramedic argued that the disclosure was not “authorized,” because her friend must have been “coerced” into giving up the post.  Apparently, he worked for the same company, and she argued that he had been threatened by the company into spying on her.  Courts have said that “coerced” disclosure is not authorized and violates the SCA.  In fact one court said that a boss who merely asked for a Facebook password might be guilty of coercion—up to the jury.  

In this case, however, there was no evidence that anything like that had happened.  At least her “friend” could not verify that theory, he was “traveling in an RV” and unavailable to give a deposition. The employer said they never asked for the post and was as surprised as anyone to get it.  According to the court, the disclosure was authorized by a user, the exception applied and our paramedic had no case.

This case offers a few take aways.  First, if you’re a Facebook user, set your privacy settings to “friends only.”  The same for other social media, or anything you say can and will be used against you.  If you’re an employer, beware of using social media posts as a reason for disciplining an employee.  Be sure you know exactly how the company got the information and who provided it.  Also, don’t ask employees for social media passwords.  It’s not just bad form, it might get you into trouble.  Last of all, remember the word “friend” doesn’t necessarily mean the same thing on Facebook as it does in real life.