Texas Lawyer Blog

Houston's Kathy Patrick leads Gibbs & Bruns team working on $8.5 billion deal

Texas Lawyer affiliate The AmLaw Litigation Daily is reporting on a creative, ground-breaking $8.5 billion deal between Bank of America and the trustee for bond investors in Countrywide mortgage-backed securities. The institutional investors -- led by BlackRock, PIMCO, certain ING companies, MetLife, and the Federal Home Loan Mortgage -- are represented by Houston-based Gibbs & Bruns. Kathy Patrick (pictured) led a Gibbs & Bruns team that included partners Robert Madden and Scott Humphries, and associate Kate Shih. (See Texas Lawyer’s 2008 profile of Patrick here.) Bank of America turned to Wachtell, Lipton & Katz's Meyer Koplow and Theodore Mirvis. Bank of New York, the trustee for the residential mortgage-securitization trusts at issue, was represented by a team from Mayer Brown: Jason Kravitt, Hector Gonzalez, and Matthew Ingber. The deal must be approved by New York state court Judge Barbara Kapnick in a so-called Article 77 proceeding under New York law. To read the full AmLaw Litigation Daily report, click here.

Morning docket

“Dallas’ 5th Court of Appeals has vacated and remanded a $22 million arbitration award after finding the arbitrator failed to disclose that a lawyer representing a party in the dispute had given him a ticket to an NBA basketball game, a wine basket and paid for expensive meals, among other things,” reports Tex Parte blog.

A jury in the Eastern District of Texas ruled in "ColorQuick LLC v. Vistaprint Ltd.that Vistaprint did not infringe a ColorQuick patent," reports The National Law Journal. Beforehand, the judge ruled there was no literal infringement, but he allowed ColorQuick's case to continue under the doctrine of equivalents. "The rarely allowed doctrine allows a patent owner to claim patent infringement when the infringing item doesn't literally fall within the scope of the patent claim but is equivalent to the invention," the story says. Most patent cases focus on literal infringement. Vista print lawyer Thomas Friel of Cooley Godward told the newspaper, "The one lesson I learned is to pay a lot more attention to doctrine of equivalents in expert reports." ColorQuick representatives declined comment.

“Wall Street financial institutions are pretty stingy about offers (less than half — 49 percent — plan to extend offers to 10 percent or less of their summer hires). But what everyone — including lawyers — should pay attention to is where they expect to hire: operations, debt/fixed income, corporate finance, research, and compliance,” reports The Careerist, a Texas Lawyer affiliate. “The message to lawyers is that there's ‘a tremendous shortage of compliance people,’ ” the story quotes Constance Melrose, the managing director of eFinancialCareers North America, as saying.

Law360 reports, “Democratic senators on Wednesday criticized a trio of recent U.S. Supreme Court rulings, saying they privileged corporations and would bar individuals from accessing the justice system. ‘You get the unfortunate feeling that many of the justices view plaintiffs as a mere nuisance to corporations,’ Sen. Patrick Leahy, D.-Vt., said at a U.S. Senate Judiciary Committee hearing.” But the story says the winning attorney in one of those cases, Mayer Brown partner Andrew J. Pincus “defended the high court's decisions. Pincus, who pulled in the win for AT&T, said the Supreme Court was simply applying long-held legal principles to curb unusual applications of the law, and it would be impossible to predict the reach of the decisions.”

In New York, “Nearly 1,000 elected state judges will no longer receive assignments to cases where lawyers, their firms or their clients have contributed $2,500 or more to the judge's campaigns in the previous two years, or have collectively contributed $3,500 or more, under a new rule adopted by the court system,” reports The National Law Journal, a Texas Lawyer affiliate.

-- Angela Morris

5th Court vacates $22 million arbitration award due to arbitrator’s failure to disclose contacts with Fish & Richardson lawyer

Dallas’ 5th Court of Appeals has vacated and remanded a $22 million arbitration award after finding the arbitrator failed to disclose that a lawyer representing a party in the dispute had given him a ticket to an NBA basketball game, a wine basket and paid for expensive meals, among other things. 

The June 28 opinion in Robert C. Karlseng, et al. v. H. Jonathan Cooke focuses on a number of social contacts between JAMS arbitrator Robert Faulkner, a former U.S. magistrate judge, and Brett Johnson, a partner in the Dallas office of Fish & Richardson – contacts Faulkner did not disclose after Johnson appeared in front of him in an arbitration case on behalf of a client. 

“The record in this case reflects substantial evidence of a personal, social, and professional relationship between arbitrator Faulkner and Johnson. This relationship grew over a long period of time, commencing in 1994,” the 5th Court wrote.

According to the decision, the underlying arbitration involves a partnership dispute. Cooke, who is represented by Fish & Richardson, and Karlseng both selected Faulkner to hear the arbitration in 2007. Faulkner disclosed to the parties that he had within the five previous years presided over an arbitration involving Fish & Richardson. Four days after Faulkner made the disclosure, Johnson made his first appearance in the arbitration.

Following a five-day arbitration hearing in 2008, Faulkner ruled in favor of Cooke, awarding him $22 million and more than $6 million in attorneys’ fees. After Karlseng’s attorneys argued there was evidence of “evident partiality” on behalf of Faulkner, the trial judge confirmed the award. Karlseng appealed to the 5th Court.

According to the 5th Court’s opinion, in December 2006, Johnson and Faulkner attended a Dallas Mavericks game with tickets paid for by Johnson that had a face value of $1,200. They also ate dinner at the Capital Grille, a meal paid for by Johnson that cost $428, the 5th Court wrote. Also in December 2006, Johnson and his wife sent Faulkner a basket of wine valued at $75, according to the decision.

Faulkner testified before the trial judge that he did not recall receiving a Christmas gift from Johnson; rather his wife opens and enjoys the Christmas gifts, the 5th Court wrote.

After consulting with his wife, Faulkner recalled attending the Mavericks game and having dinner with Johnson. Faulkner testified that he has attended two other Mavericks games with another attorney, but did not remember the Mavericks game with Johnson until his wife refreshed his memory, according to the decision.

Yet there was “undisputed evidence Arbitrator Faulkner and Johnson acted as ‘strangers’ when they introduced themselves to each other at the Cooke arbitration on or about December 10, 2007,” according to the 5th Court’s decision.

“It is beyond any question that an arbitrator has a duty of disclosure. Such a duty is predicated upon the enormous power, responsibility, and discretion vested in the arbitrator and the very limited judicial review of the arbitrator’s decisions,” wrote Justice Kerry FitzGerald in an opinion joined by Justices Elizabeth Lang-Miers and Robert Fillmore.

“Faulkner failed to make any effort to reflect on the interests, contacts, and relationship he enjoyed for many years with Johnson, in order to assure the appellants of his impartiality and to safeguard the integrity of the arbitration process . . .,” FitzGerald wrote.

“In a case of this magnitude, in which Cooke requested over $6 million in attorney’s fees and in which arbitrator Faulkner and Johnson did not disclose the nature of their relationship, the evidence of the relationship between arbitrator Faulkner and Johnson is particularly alarming,” FitzGerald wrote.

Faulkner, through a JAMS spokesperson, declines comment.

Johnson says he disagrees with many of the 5th Court’s conclusions.

“I appreciate the opinion’s maintaining a high standard for arbitrator disclosures,” but Johnson says he respectfully disagrees with the standards the 5th Court applied in the case.

“Over the course of 15 years, I went to three dinners and a Mavericks game. My wife sent a wine basket and a Christmas card that he never knew about. So I think to term that an intimate relationship given the span of time is just not appropriate,” Johnson says. “You know, I think the opinion talked about the arbitrator’s duty to disclose, and I don’t read it as a lawyer’s duty to disclose. If I had a legal duty, I would have disclosed it.” 

Johnson says, “Look, I absolutely wish there were disclosures made, because my client is an elderly man, and time is not on his side.” Johnson also disagrees with the 5th Court’s conclusion that he and Faulkner acted like “strangers” when they introduced themselves during the arbitration.

“This idea that Faulkner and I introduced ourselves as strangers just did not happen,” Johnson says. “Think about that. A 30-year judge and a 15-year lawyer don’t know each other?”

Tom Melsheimer, the managing partner of the Dallas office of Fish & Richardson who argued the case for Cooke before the 5th Court of Appeals, believes the trial court was correct in confirming the arbitration award.

“We argued that the appellate court should have given credibility and deference to the findings of the district judge. The court saw Judge Faulkner testify. The court saw Brett Johnson testify, and the court saw the defendants testify. And, in fact, some of the conclusions that the appellate court reached are inconsistent with what the district court found based on his personal observation and all of the evidence,” Melsheimer says. “We absolutely applaud and endorse a rule that says arbitrators should fully disclose significant or important material relationships — no question about that. We didn’t argue against a rule of disclosure. We simply argued in the facts of this case that the district court got it right.”

Melsheimer says his client has not decided whether to ask the 5th Court for a rehearing of its decision.

Susan Hays, a shareholder in Dallas’ Godwin Ronquillo who represented Karlseng and related parties on appeal, says the opinion “shores up the integrity of arbitration.”

Hays says, “Arbitrators better disclose everything, and lawyers better disclose everything — just in case — or they risk losing a lot of money in legal fees and a lot of money in the effort of going through arbitration.”

-- John Council

Legislature passes judicial system overhaul bill

The very last bill to pass out of the 82nd Texas Legislature will change the operation and administration of the state’s judicial branch in ways that officials say will make the courts more efficient. “It’s a miracle — a miracle the bill passed,” says Rep. Tryon Lewis (pictured), R-Odessa, who authored House Bill 79 in the special session. “It’s been a long time; it’s been a three-session bill,” he says. Sen. Robert Duncan, R-Lubbock, says, “Over the years we’ve had a court system that’s been put together one piece at a time. We’re trying to deal with it in a more uniform way.” Duncan was involved in attempts to pass the judicial-system reforms in 2007, 2009 and the 2011 regular session. When the bill died this year, Lewis rewrote it, emphasizing its fiscal impact, and re-introduced it in the special session, which the governor had called to deal with fiscal matters, among other topics. Lewis says it was stressful seeing H.B. 79 yet again bump up against the final deadline of the special session on June 29. “I’m very relieved it got done and is now heading to the governor,” Lewis says. The bill becomes law unless the governor vetoes by July 19. One significant provision in H.B. 79 would make it easier for district courts to transfer cases and for district judges to preside in another district court if a judge were away for any reason. Another major provision creates uniform jurisdictional limits, functions, rules and definitions for county courts-at-law. The only provision that caused some controversy in the regular session affects justices of the peace, who preside over justice and small claims courts. The bill merges those two functions into one, so JPs would hear all small claims within justice court, and the justice courts would adopt the procedures currently used in small claims courts, which are fairly informal. The final version of the bill contains specific instructions for the Supreme Court to create new JP procedures that are informal enough for ordinary people to understand without the need to hire lawyers. “There were some concerns by justices of the peace and by members that the alterations being made would somehow make it more difficult for individuals to represent themselves and go in court without a lawyer,” explains Lewis. The Office of Court Administration is poised to take action to implement some provisions in H.B. 79. When asked his thoughts upon the bill’s passage, OCA Director Carl Reynolds says, “My thought was: We have our work cut out for us.” Several years ago, Reynolds served on a committee that helped identify needed reforms to the judicial system.

-- Angela Morris

Texas Office of the Attorney General plans to appeal decision to permit Rule 202 deposition of Texas Comptroller Susan Combs

The Texas Office of the Attorney General plans to appeal a June 27 ruling by a district judge in Austin, who granted a Rule 202 petition that seeks the deposition of Texas Comptroller of Public Accounts Susan Combs about her office’s accidental release this spring of the private information of 3.5 million Texans. The June 27 letter ruling from 98th District Court Judge Rhonda Hurley says Combs must submit to a three-hour deposition and says another unnamed comptroller of public accounts representative must sit for a six-hour deposition. The letter notes, “[T]he court enters a temporary protective order preventing the disclosure” of the deposition testimony. The letter was provided by Chuck Herring of Herring & Irwin in Austin, who represents former teacher Sarah Canright, one of the parties seeking the Rule 202 deposition, because her private information was included in the data breach. The letter says Hurley denies a plea to the jurisdiction. Combs’ lawyers filed the plea on May 16, arguing the court didn’t have authority to order Combs’ deposition because, as a state official, she has sovereign immunity. “I think we’re pretty satisfied with the ruling,” says Jim Harrington, director of and attorney for the Texas Civil Rights Project, the other petitioner seeking the deposition. Herring and Harrington want to draft an order and circulate it to opposing counsel for approval this week, possibly clearing the way for the judge to sign the order, says Herring. “When the judge enters the order, we intend to appeal the decision to deny our jurisdictional plea and to grant the Rule 202 petition. Both issues will be addressed in our appeal,” writes OAG spokesperson Tom Kelley in an e-mail. He declines further comment. “Our reply brief pretty much addresses this anyway,” Kelley writes. OAG lawyers on May 24 filed an Answer to the Plaintiffs’ Rule 202 Petition, arguing Rule 202 depositions are not for routine use, but “only in unusual, if not extraordinary, circumstances,” the answer says. The petitioners already have sufficient information about the data breach, the answer says, because the comptroller’s office has released many details about the incident. “Thus, contrary to Rule 202.1(b)’s intended purpose of determining whether facts exist to support the filing of a lawsuit, Plaintiffs now attempt to invoke the rule as a routine discovery tool to prove up the elements of potential legal claims,” the answer says. The Rule 202 petition claims the data breach by Combs’ office violated privacy protections in Texas Government Code §821.010, the Texas Public Information Act, common law and the Texas Constitution. In the requested depositions, the petitioners would seek information about how and why the data breach occurred, the people responsible, the specific procedures the comptroller’s office allegedly violated, why it took so long to discover the error, who will pay for possible damages and more. “What we want to do is get answers to some very basic questions that 3.5 million Texans are entitled to have. That’s the goal at present: to discover the facts and decide whether further legal action is appropriate,” Herring says. Allen Spelce, spokesperson for the comptroller’s office, e-mailed a statement in response to a telephone message for R.J. DeSilva, another spokesperson in the office. “The Comptroller is deeply sorry for the data exposure that happened, and the agency has been taking actions to help those who were affected and implementing new policies and procedures to help ensure this never happens again,” Spelce wrote in the e-mail.
-- Angela Morris

Morning docket

The Texas Legislature yesterday passed a bill to reform the Texas Windstorm Insurance Association, which insures otherwise uninsurable coastal residents’ properties, reports The Texas Tribune. Fixing the insurer “has stumped legislators all year, as it became a proxy fight between trial lawyers and tort reformers,” the story says.

Two people filed suit Monday after glass panels at the W Austin Hotel shattered and falling glass injured them on June 10, reports the Austin American-Statesman. The hotel announced yesterday it would close temporarily because more glass panels fell this week. “Susan Davis and friend Prashanth Magadi, who were both hurt in the June 10 incident, filed suit against the hotel and operator Starwood Hotels and Resorts Worldwide Inc. late Monday, alleging that the W had been warned about potential problems and failed to take appropriate action,” the story says.

A survey by LexisNexis Martindale-Hubbell shows 70 percent of firms think client feedback affects how they conduct business, but only 48 percent of the 415 survey respondents actually solicit client critiques, reports The AmLaw Daily, a Texas Lawyer affiliate.

The BLT reports, “Wilmer Cutler Pickering Hale and Dorr is facing the prospect of making $214 million in payments to one of its clients, in what would be an unusually large settlement of a malpractice claim.” But the firm’s co-managing partner who signed the settlement “said on Tuesday he’s confident it will prove unnecessary,” according to the affiliate of Texas Lawyer.

“Houston-based energy law firm Burleson LLP said Tuesday it added 25 attorneys, including three partners, in Texas and Pennsylvania to expand the firm's regional reach and work with clients involved in shale-based oil and gas production,” reports Law360.

-- Angela Morris

UT law prof pens article criticizing Obama’s judicial nominations

In the June 30 issue of The New Republic, Justin Driver (pictured), an assistant professor at the University of Texas School of Law, criticizes what he calls the Obama administration’s “lethargic rate” of judicial nominations and paucity of judicial nominees “who seem inclined to engage in the hard work of combating the conservative constitutional agenda.” In a telephone interview, Driver says he wrote “Obama’s Law” this month because enough time has passed to evaluate Obama’s judicial appointment record and it's not impressive by a liberal audience's standards. “I didn’t think it would be fair to write the article without having a decent number of data points,” says Driver. In the piece, Driver notes that, during the administration's first two years, the president nominated 103 federal district and circuit court of appeals judges, 26 fewer than former President George W. Bush and 37 fewer than former President Bill Clinton. Driver is not optimistic about what Obama may accomplish with judicial appointments for the rest of his term. “The time to do it is within the first two years of an administration,” he says. Has Driver heard back from the White House? "Not directly," he says.
-- Miriam Rozen

TRAP amendments on intermediate appellate court e-filing rules to go into effect

According to amendments to the Texas Rules of Appellate Procedure (TRAP), intermediate courts of appeals can officially start adopting e-filing rules as of June 30, but as Texas Supreme Court Clerk Blake Hawthorne explains, some appellate courts already have adopted such rules — with the high court’s approval. The TRAP amendments also provide e-filing rule templates for the appellate courts to consider, he says. Currently, the 1st, 3rd, 5th, 11th and 14th Courts of Appeals have adopted e-filing rules, Hawthorne says. He hopes others, particularly courts in large cities, will follow suit in the coming months. “We’ll see if Fort Worth and El Paso come along. But it’s up to each individual court. Others are taking a wait-and-see approach,” he says. One thing that may force the issue is when a case filed electronically in an appellate court that has e-filing rules subsequently gets transferred to an appeals court that does not have e-filing rules, Hawthorne says. “That is pushing some of these transferee courts to put in their own rules, so they don’t have to force the other courts to give them paper,” he says.
 -- John Council

Texas Tech civ pro law prof uses Dallas Mavericks owner Mark Cuban's summary judgment motion as teaching tool

When Texas Tech University School of Law assistant professor Dustin Benham (pictured) read the Mark Cuban summary judgment motion attached to an e-mail he received last week, he immediately knew he had an interesting teaching tool. “It was a short and a great way to incorporate demonstrative evidence into a motion,” he says. “The picture spoke for itself, didn’t it?” The picture is the Dallas Mavericks celebrating their NBA championship. It is incorporated into a summary judgment motion filed June 22 in the 192nd District Court in Dallas. Benham shared the motion with the law students in his civil procedure class. “The students loved it, because it incorporated something they are very interested in, like sports, into the legal context, which I’m interested in teaching them about,” Benham says. “It’s hard to get students excited about motions for summary judgment, believe it or not. When you have something that is exciting and also a motion for summary judgment, it’s a great tool.” Benham says he is not familiar with the underlying suit, but he says the motion has features he encourages his students to incorporate in their legal writing: brevity and creativity. When asked about the team, Benham says, “Oh yeah, I’m a huge Mavericks fan.”
-- Jeanne Graham

Morning docket

“Rep. Ruben Hinojosa, D-Texas, introduced a bill Friday in the U.S. House of Representatives that would add 38 new permanent judgeships and seven temporary judgeships to overburdened federal district courts in four U.S. states along the Mexican border,” reports Law360. Under the proposal, Texas would get 10 new permanent judges.
 
“More freshly minted lawyers are opting for public interest careers -- the percentage of new law graduates taking those jobs grew from 2.1 percent in 1990 to 6.7 percent in 2010, according to the most recent data from the National Association for Law Placement, or NALP,” reports The National Law Journal, a Texas Lawyer affiliate.
 
The Texas Tribune writes in an update about the Legislature’s special session that two big bills remain unfinished, and the session closes tomorrow. The article includes a rundown on all the bills lawmakers worked on during the special session.
 
“The Supreme Court on Monday struck down on First Amendment grounds a California law that banned the sale of violent video games to children. The 7-to-2 decision was the latest in a series of rulings protecting free speech, joining ones on funeral protests, videos showing cruelty to animals and political speech by corporations,” reports The New York Times.
 
The AmLaw Daily, a Texas Lawyeraffiliate, interviews Susan Saladoff, an attorney who created “Hot Coffee,” a documentary that “sets off to explore the forces that Saladoff believes are undermining the country's civil justice system: caps on damages, judicial campaign contributions, and mandatory arbitration clauses. All this, Saladoff argues, has severely restricted the ability of ordinary people to bring civil actions,” the story says.

-- Angela Morris