Practical Matters: Brackets? We don’t see no stinkin’ brackets

By David M. Heilmann
Clausen Miller

Brackets are coming out in a few days.

That’s what an Iowa attorney friend said to me the other day.

I, of course, had no idea what he was talking about.

“March Madness, Dave,” he said. “The Sweet 16, Final Four, the brackets, the pools. We have a terrific one at the office.”

Ohhhh. You mean those sheets that people copy from the newspaper or get online that they madly fill out and keep running to Thursdays through Sundays for a few weeks? The ones where you throw in a few bucks with some friends and hopefully are smart enough not to pick a bunch of 13 seeds advancing to the final game?

“Yes, those sheets.”

We don’t do that in Illinois. Especially lawyers.

In an unofficial survey of 100 law firms, I discovered that not one practicing lawyer in Cook County has ever seen anything like this.

Besides, gambling is illegal in Illinois. And we don’t break the rules around here, buster. Everyone stays right at the speed limit, makes complete stops at signs, and stays away from those wretched, workplace-ruining pools. We are officers of the court, by God.

In Illinois, a person “commits gambling” when he plays a game of chance or skill for money or other thing of value. A person does not commit gambling when making wagers at the racetracks, boats, bingo halls, or going broke purchasing lottery tickets every day.

Apparently there is some distinction, presumably from Rome, and so those are exceptions.

I didn’t get a chance to read the legislative comments on why pools are illegal, but I can assume there was a fear of thousands lying in the gutters, begging for food and money, wailing, “Why did I pick all Big Ten teams?”

In some states pools are legal, others aren’t. But has a trend started toward official sanction of such pools?

In Connecticut there was a smidgen of interest in pools right around the Super Bowl for some reason. But gambling is illegal in Connecticut. The state has no exception for office pools, but one section exempts from punishment wagers incidental to a bona fide social relationship. As opposed to all those artificial social relationships we all have.

But just to make sure there was no confusion, the week before the Super Bowl, Connecticut AG Richard Blumenthal said, “Office pools are generally legal unless they’re done for a profit by the person organizing it.”

How about neighboring New York? The New York Constitution states that pool-selling, book-making, or any other kind of gambling shall not be allowed.

But that same week before the Super Bowl, Dutchess County DA William Grady said the state penal laws draw a distinction between those pools where the winners split the whole purse from those where someone is taking a cut of the action.

“Informal office pools, while technically a form of gambling, are not criminal so long as no one is making a profit from the venture,” Grady said.

On Jan. 30, 2008, California Assemblyman Kevin Jeffries introduced legislation that would decriminalize participation in Super Bowl pools, March Madness brackets, and other office pools.

“At a time when we can’t keep car thieves, multiple DUI offenders, and armed robbers in prison, it is silly to continue to threaten people with jail time for buying a $5 square at a Super Bowl party,” Jeffries said.

Back in the Midwest a few years ago, Iowa Department of Inspections and Appeals Director Steve Young made clear that office pools are legal, subject to a few stipulations, such as the pools being on a social basis and no more than $50 is lost in a 24-hour period. This begs the obvious question of what happens in the West Coast bracket triple-OT games extending past midnight CST.

Last March, Michigan State Rep. Kim Meltzer introduced a bill to allow the office pools saying: “What makes March Madness unique is that all kinds of people and sports fans of all levels fill out their brackets and enjoy the tournament. It’s a crime we consider that a crime, and I want to change it.”

The Michigan legislature then passed a bill making legal any office pool where bets remained under $10 and the total pot was less than $1,000.

An August 2007 survey done by the Society for Human Resource Management revealed that nearly one-third of human resource professionals knew betting pools for the NCAA basketball tournament exist at their company.

The other two-thirds didn’t answer because they were filling out their brackets.

Few if any of you reading this have ever seen one of these pools in an Illinois law firm. So you’re probably totally unaware of the subject, as was I. That’s why it was necessary to provide this critical insight so that now, before it’s too late, we can warn our clients
of the laws of the State of Illinois and the dangers of this practice.

Unless the AG says it’s okay. Then fade the Big Ten.

Climbing the Ladder: Reputation is hard to build and easy to lose

By William B. Oberts
Tribler Orpett & Meyer

When you hear the names Philip H. Corboy and Robert A. Clifford, you think of the top tier of attorneys. Those names are as synonymous to the practice of law as Mercedes and Lexus are to luxury automobiles. But their reputations did not come overnight.

Building those reputations took years of hard work at becoming skilled practitioners, while also realizing the importance of bar association activities and giving back to the community.

As a young lawyer, it is important to think about building your reputation throughout your career.

As Benjamin Franklin said, “[I]t takes many good deeds to build a reputation and only one bad one to lose it.” Which is why reputation is hard to build and easy to lose.

I confess that I watch “Celebrity Apprentice.”

On a recent episode, Piers Morgan was the project manager for the men’s team and asked Vinny Pastore to act as a “rat” and spy on the women’s team. Piers eventually ratted out Vinny, causing the women’s team to turn against him, which led to Vinny’s demise on the show. Vinny later realized that Piers’s overall objective was to eliminate him from the show.

Why am I providing an overview of “Celebrity Apprentice” in Chicago Lawyer? Good question. I believe that we can all learn several lessons about reputation from that episode.

Piers and Vinny were both strong players throughout the show and over time they earned the respect of their teammates. However, it took only one act to lose the respect they earned and the reputation they built. In the end, the men’s team lost trust in Piers and the women’s team trusted neither Piers nor Vinny.

Although there are thousands of attorneys in Chicago, it’s still a small legal community, and reputation is everything.

Reputation is not just about being a skilled practitioner. Reputation is built upon civility and trust.

As a young lawyer, it is important to think about earning the respect of your peers and the judiciary.

Civility is an important aspect of building a reputation.

You will encounter many different types of lawyers throughout your practice - some civil, some not so civil. An opposing counsel’s lack of civility may tempt you to become equally uncivil. I urge you to refrain and take the higher road.

Young lawyers are sometimes uncivil because they believe that being uncivil makes them appear tougher.

In reality, it emphasizes their status as a “young” lawyer who has yet to learn what it means to truly practice law. On the other hand, some older lawyers may act uncivilly toward younger lawyers in an effort to intimidate the younger lawyer. But this just shows the immaturity of the older lawyer.

Regardless of your years in practice, always remember that this may not be the only time that you will have a case against this practitioner, his or her law firm, or before that judge.

That’s why it is so important to practice civility - regardless of the lack of civility of the other counsel.

Trust is another vital aspect of building a reputation. Your opposing counsel must be able to trust you. Trust also must be earned before the judiciary.

Therefore, be prepared when you step before the bench and do not assert facts that you cannot support. Once you lose the trust of your opposing counsel or the judge, it’s very hard to earn it back.

Vinny learned the hard way that losing a person’s trust can lead to ultimate demise. As for Piers, he may have accomplished his objective to eliminate Vinny, but his reputation among the remaining participants is severely damaged.

Similarly, an attorney’s lack of civility or trustworthiness may serve to accomplish a specific, short-term goal, but it would be at the expense of his or her long-term reputation.

The legal community in Chicago is closely knit - people talk.

Don’t fool yourself into thinking that your lack of civility or deception toward a particular attorney or judge will be an isolated incident. Your colleagues will likely hear of your conduct and it will surely affect your reputation.

You may be questioning my authority to be preaching about reputation, and you are right to do so. I may be no Mercedes at this stage of my career; however, I work on building my reputation with each case and each court appearance, and I try to be civil in the hopes of earning the respect of my opposing counsel and the judiciary.

In the end, a person’s reputation boils down to what people think of him or her. People’s opinions are based on, and affected by, a person’s conduct, trustworthiness, and even the company one keeps.

Keep this in mind every time you converse with another attorney or step into a courtroom. One misstep could lead to your professional demise.

All in the Family: Put your kids to work

By Joseph N. DuCanto
Schiller, DuCanto and Fleck

To paraphrase “W,” no kid should be left unemployed.

School may or may not be more difficult these days, but there’s no doubt that the “kiddie tax” has become even more taxing. No longer does it stop at taxing the passive income of children less than 14 years old at their parents’ highest marginal rate.

The depressing truth is that in 2006, the kiddie tax increased its amplitude to include all children up to age 18.

In 2007 the tax hammer fell once again, raising the applicable age to 19 - or more. The kiddie tax now also is a “smartie tax,” if the “kiddie” is a full-time student up to age 24, fails to earn enough to provide more than half of his or her own support, and is the parents’ not-so-bouncing baby exemption.

Perhaps this is the opposite of “no child left behind”.

This time it means “no child gets ahead.” These mean-spirited directives prevent wealth-building by the young.

This legislation springs from a basic assumption that inter-generational wealth transfer from parents to their young children is a pernicious device used by senior family members solely to escape taxation on their lofty income.

Baloney.

Most of us are not Rockefellers or rock stars. But we also get hit, and our children suffer for it both now and in the long run, because the kiddie tax is extremely short-sighted.

Teaching youngsters the value of saving and the judicious use of their money is a worthwhile endeavor and ultimately produces financially intelligent citizens.

Reality intrudes, however, and one asks, “What’s a parent to do?”

Be smart.

If you are a business owner or a professional, hire your kid! It’s not only desirable, it’s legal.

In some instances, the age limitation for child labor is lower for family members working in a family enterprise than is generally applicable to unrelated employees. It is thus possible for a business owner to shift some of her highly taxed income to her 16-year-old daughter who works full-time during the summer and part-time while in school, assisting with routine office work, reception, and related jobs.

Such additional temporary help is often completely justified by using the child to
fill in for vacationing full-time, unrelated employees.

Assume an Illinois mother has a 38 percent tax burden, including state taxes. Assume further that she employs her child for $9 an hour for 12 weeks, resulting in a gross income of $4,320 for the child.

Now add a 10-hour-per-week part-time job for 30 weeks during the school year, adding another $2,700 to the child’s income, and totaling $7,020 for the year.

Such earned income is not subject to the kiddie tax since that tax relates only to investment income. Additionally, while the child is still claimed as a dependent by her mother, the child may nonetheless use her 2008 standard deduction of $5,450 to shield her income from taxation.

Before April 15, 2009, this fond and doting mother gifts the child with a contribution of $5,000 to the daughter’s newly established Individual Retirement Account.

Despite receiving the IRA funds as a gift, the child may nonetheless still claim the IRA deduction as an income offset for taxable year 2008, completely shielding all of her income from any tax, including FICA, which does not tax income of a child under 18 while the child is employed by a parent.

Consider here that the mother has indelibly impressed upon the child the necessity of maintaining the IRA over future years.

This is a great lesson in thrift and the miracles of tax-free compounding.

Mother is able to demonstrate that daughter’s continuation of the $5,000 per year contribution for 50 years, at an average growth of 7 percent compounded annually, produces an astonishing end fund of $2,032,645! How can one resist the logic of use of this major wealth-building strategy?

In summary, Mother has successfully shifted an avoidable tax burden of $2,668 (38 percent of $7,020) to the daughter and is financially “out” only $2,332 after gifting the IRA contribution to the daughter, who now has a head start on a lifetime of wealth-building and financial planning.

And, when the daughter receives a tax refund in 2009, reflecting a return of taxes withheld from her weekly wages, she will
get a big lesson on the impact of taxation in American life.

The scenario is not a sleazy game but a perfectly legitimate use of good financial-tax sense.

The job is real, is actually performed by the child onsite, and is justified by the needs of the business.

Perhaps, you say, Mother would not have hired someone from outside the family to provide these services; but then, as all parents will attest, “charity” begins at home.

Take THAT, Uncle Sam.

Deals // Verdicts // Settlements

Big Deals

Schiff Hardin’s client, Dorel Industries Inc. completed the acquisition of Cannondale Bicycle Corporation.

This is the second bicycle company deal Schiff Hardin has handled for Dorel Industries Inc. In 2004, Schiff Hardin represented Dorel in its acquisition of Pacific Cycle, Inc.

The Schiff Hardin team was led by Bruce P. Weisenthal and Roger R. Wilen, with key assistance from attorneys Alexander B. Young, Ismail Alsheik, Melody R. Barron, John Schietinger, Larry Jacobson, Lauralyn G. Bengel, Chris L. Bollinger, Marina Rabinovich, Ann K. Pikus, Stephen J. Bonebrake, and Laura B. Friedel, as well as paralegal Paul Bernacki.

Sonnenschein Nath & Rosenthal served as counsel to Votorantim Cement North America in its recent acquisition of Bridgeview-based Prairie Material Sales, a leading supplier of ready-mix concrete, with 81 plants in Illinois, Michigan, Indiana, and Wisconsin.

Votorantim Cement North America (VCNA), through its U.S. affiliate, Votorantim Cimentos North America, Inc., acquired Prairie Material Sales, Inc. and some of its ready-
mix concrete, aggregates and related cartage businesses.

VCNA is the North-American subsidiary of Votorantim Cimentos, an international cement manufacturer and part of the Votorantim Group of companies, one of Brazil’s largest industrial conglomerates.

Based solely on projections for the acquired assets, Prairie’s 2007 sales were about $450 million. Prairie employs over 1,800 people within the businesses related to the acquired assets.

Andrew Weil, a corporate partner in the firm’s Chicago office, was the lead attorney on the deal.

The other attorneys representing Votorantim included corporate partners Linda Harris and Kathy Ingraham, and corporate associates Nadim Kazi, Jacqueline Farinella, Matthew McKim, and Katherine Moore. Other partners who worked on the deal: Barry Nekritz, real estate; Jeff Fort, environmental; Kelli Toronyi, employee benefits; Roger Brice, labor and employment; and Gary Senner, antitrust.

Verdicts

In one of the more significant business decisions in several years, the U.S. Supreme Court ruled, 5-3, in Stoneridge Investment Partners v. Scientific-Atlanta Inc. that investors could not hold secondary actors liable for securities fraud by a public company if the investors did not rely on the conduct or statements of the secondary actors. Charter Communications, a cable company, created a series of fraudulent transactions with some of its vendors that would allow Charter to overstate its revenue. The 8th Circuit dismissed the suit and the Court affirmed, with Justice Anthony Kennedy writing the majority opinion. The impact of the decision was apparent almost immediately, as the Court denied certiorari to Enron shareholders in Regents of the University of California v. Merrill Lynch Pierce Fenner & Smith Inc., a case in which the petitioners argued for a “financial services” exception to the principle that third parties who do not communicate with investors are not subject to private securities fraud suits.

Stephen Shapiro of Mayer Brown argued the case for the respondents in Stoneridge, his 27th oral argument before the Court. Here, Shapiro discusses the impact of Stoneridge.

Chicago Lawyer: How significant is the Stoneridge ruling?

Shapiro: The Wall Street Journal characterized the Stoneridge case as the most important securities case in a generation. One leading law professor in the field was quoted repeatedly in the press describing the case as the “Roe v. Wade of business cases.”

General public interest and importance were reflected in an unprecedented number of amicus briefs in a business case. There were 15 amicus briefs on each side. About 20 former SEC commissioners and enforcement officials took different positions on the case, and the current SEC was divided three-to-two on the proper resolution of the matter. Banking agencies and the Department of Treasury participated in the administration’s review of the case, and made recommendations to the solicitor general, who ultimately agreed with us about the merits.

At issue in the case was the question of whether investors in public companies can sue not only their companies and management in cases of bankruptcy or business decline, but also a wide range of other persons who did business with those public companies. Under the theory of “scheme liability” advanced by the plaintiffs in Stoneridge, all these business partners — including lenders, product vendors, investment banks, insurers, accountants, and lawyers — could be roped into multibillion-dollar class-action lawsuits and accused of complicity in the public company’s misleading financial statements.

Third parties are in no position to serve as watchdogs of an independent company’s financial reporting, and an extension of liability would have chilled ordinary commercial relations, particularly international trade. And it would have interfered with the regulation of federally supervised and insured lending institutions, as the solicitor general pointed out.

It is a good thing for the U.S. economy and investor welfare overall that the Supreme Court rejected “scheme liability” in Stoneridge.

Chicago Lawyer: Given the Credit-Suisse decision, Stoneridge, and the denial of cert in Regents, what is the landscape now for business-fraud lawsuits?

Shapiro: What the Supreme Court is saying in all these cases is that private class-action litigation is not a suitable means for resolving these issues.

In Billing [Credit-Suisse], the private suit trespassed on the SEC’s expert regulatory regime. There was a real risk of conflicting judgments that would interfere with capital formation in this country. In Stoneridge, the Court again opted for expert and disinterested SEC supervision of the subject. The Court concluded that this was Congress’ preferred policy, and that the judge-made implied right of action under Section 10(b) should not be extended to permit open-ended private suits.

A week after the Supreme Court decided Stoneridge, it denied certiorari in the Regents case, making clear that Stoneridge is not limited to manufacturers. It applies to any category of defendant (including investment banks) when the defendant does not itself make false statements to the investing public and investors rely on the public company that issued the securities. At the same time that the Court denied certiorari in Regents it also summarily vacated a 9th Circuit decision that had accepted “scheme liability” and applied it to a variety of business partners. The Court is sending a strong message with these three rulings.

Chicago Lawyer: Can you discern a jurisprudence with this Court as it relates to business regulation in general?

Shapiro: The Court’s decisions over the last several years, whether written by justices appointed by Republican or Democratic administrations, show a cautious approach generally in reviewing massive damage claims in business cases. The Court looks closely for signs of congressional intent and does not make up new liabilities demanded by trial lawyers without some congressional warrant. It is concerned about the perverse economic effects of these huge lawsuits.

The Court in Stoneridge noted that unconstrained civil liability appears to be driving U.S. securities offerings and registrations overseas. The Court, I believe, is also looking more deeply at questions of investor welfare. Not every lawsuit filed by an investor advances the welfare of investors generally. In Stoneridge, for example, the plaintiff was trying to take money from one group of innocent investors and pay it to another group of investors, with a big rake-off for the lawyers. This undermines investor welfare, and does little for investor protection. Investors pay the tab for these wealth transfers, including fees for plaintiffs’ lawyers and defense costs, not to mention disruption of business operations.

Chicago Lawyer: Heading into oral arguments in Stoneridge, what did you think was the petitioner’s strongest argument?

Shapiro: I thought the petitioner’s best argument was that everyone that has some role in facilitating a misstatement should be brought to justice. Our response to that was that Congress dealt with the issue and relegated these questions to the SEC, an expert and impartial administrative agency.

“Scheme liability” claims are elusive and their merits never get adjudicated in private cases. The threatened liabilities are so exorbitant in class-action proceedings that all defendants are forced to pay large settlements, regardless of the merits. Legal rights and obligations don’t get clarified in that kind of system. These cases were bad for the development of the law and for the economy, benefiting lawyers and no one else.

Chicago Lawyer: Can you tell from Justice Kennedy’s opinion which of your arguments struck home?

Shapiro: Justice Kennedy was apparently impressed with the direct relevance of the prior Central Bank decision of the Court, which had foreclosed private “aiding and abetting” claims under the securities laws. He didn’t want to see it eroded by re-labelling “aiding and abetting” as “scheme liability,” which the trial lawyers attempted to do. He also gave weight to Congress’ judgment that these cases should be handled by the SEC. As in Central Bank, the Court, speaking through Justice Kennedy, warned of the dangers of expansion of implied causes of action — including driving securities offerings overseas, chilling international trade, and generating unnecessary business costs to the detriment of investors and consumers. Central Bank previously explained that expansion of civil liability reduces the availability and drives up the costs of professional services too. These are still important concerns.

A Jenner & Block team led by Susan C. Levy secured a significant victory for client General Dynamics Land Systems (GDLS), a designer and manufacturer of land and amphibious combat systems for the U.S. Army and Marine Corps, in a multimillion-dollar contract dispute with an Israeli armor manufacturer involving the “best efforts” provision of their contract.

The U.S. District Court for the Southern District of New York denied the plaintiff’s petition to vacate a 2007 arbitration award in favor of GDLS and granted GDLS’s motion to confirm the award.

The companies had entered into an agreement that granted GDLS the exclusive right to market and sell the armor company’s unique technology, Light Improved Ballistic Armor (LIBA), in the U.S. in exchange for a royalty on the amount of LIBA used or sold. The contract terms provided that “GDLS will use its best effort to expand and maximize the U.S. market for the LIBA product.”

In 2005, the armor company filed an arbitration demand against GDLS claiming more than $250 million in damages due to GDLS’ alleged failure to maximize the sales of LIBA in the United States.

During the 12-day arbitration hearing, the Jenner team established that GDLS sold more LIBA in the U.S. than the claimants sold in any other country and that there were valid technical reasons why LIBA was not competitive on other products. The arbitrator ruled in favor of GDLS on all claims in the case, finding that GDLS did not breach the best efforts clause.

In denying the plaintiff’s motion to vacate and granting GDLS’ motion to confirm the award, the U.S. district court held that “the arbitrator’s determination was predicated on facts that are not reviewable by this Court under the language of the contract.”

In addition to Levy, the Jenner & Block team included partners Richard T. Franch, Susan Kohlmann, Debbie L. Berman, Matthew J. Thomas, and R. Clay Stiffler; associate Joelle K. Blomquist; and senior paralegal Jessica Merkouris.

Settlements

A federal judge has approved a $3.45 million settlement for family members who were injured when a truck rear-ended their car.

In 2003, the Charvat family — which included the father, Richard, the mother, Kelly, three daughters, ages 19, 17, and 15, and their 11-year-old cousin - was on I-55, driving to Pekin. An earlier crash stalled traffic in Livingston County, and the Charvat’s car was struck from behind by a tractor-trailer driven at 57 m.p.h.

All the occupants in the car were injured. There were two brain injuries, a ruptured thoracic aorta, a collapsed lung, and fractures of the ribs, pelvis, clavicle, femur, ankle, jaw, and teeth. All of the family members suffered some scarring.

The family members were represented by Robert J. Bingle of Corboy & Demetrio and James Behrens and Michael Schroeder of Behrens, Gioffre & Schroeder, of Cleveland. The defendants were represented by Stephen M. Passen.

— Robert Yates

Doctors and Lawyers: Witness intimidation?

By Pat Milhizer

When mail came from the Florida Medical Association, Dr. John H. Fullerton just thought the group was looking for a new member.

The letter might as well have been burning in his hands.

“I think I even dropped it,” Fullerton said. “It felt like a hot potato. And I remember just being stunned and shocked and then just ­furious.”

The letter was a blistering complaint from three Florida doctors who were defendants in a 2004 medical malpractice case in which Fullerton testified as an expert for the patient. The letter said that Fullerton aided a frivolous lawsuit by promoting unsound theories just to make a buck.

Fullerton responded with a defamation law­suit against the association and the doctors, and the case is pending.

These days, Fullerton believes, doctors face heightened pressure from private medical groups to avoid moonlighting as expert witnesses for plaintiffs in malpractice cases.

“There were times in the ‘50, ’60s, and beyond where that white coat of silence was talked about, where it was hard to get doctors to testify against other doctors,” said Fullerton, who practices medicine in San Francisco and is also licensed in Florida. “With stuff like this going on, it’s a resurgence of that kind of activity.”

And it’s not limited to water-cooler talk anymore.

Some medical associations have issued policies on the standards for courtroom experts and the potential for the peer review of one’s testimony. Plaintiff’s attorneys call it a form of witness intimidation.

“They act like they’re looking at testimony, but all they’re doing is trying to have the doctor never testify again,” said Joseph W. Balesteri of Power, Rogers & Smith. “It’s become a great way to keep very well-qualified experts from wanting to testify.

“It’s a real thing that a lot of people don’t know about,” he said. “And it’s becoming much more prevalent.”

Here in Illinois, the tension is only escalating between doctors and plaintiff’s lawyers, who are still smarting from the General Assembly’s decision in 2005 to cap non-economic damages in medical malpractice cases.

The debate

On a recent day at the office, Stephen D. Phillips fired off an e-mail to his colleagues at the Illinois Trial Lawyers Association.

Phillips, who co-chairs the group’s Medical Negligence Committee, wanted to hear their stories about problems they’ve had when trying to secure doctors to testify.

Phillips already has a few stories of his own.

In one case, he found a doctor willing to testify on behalf of a plaintiff who ended up with a severe nerve injury after a standard knee procedure. The doctor was the “all-star of knee surgeries” and had invented a form of the procedure, Phillips said.

“And he calls me a month before the deposition saying he can’t do it. I had the guy. And then I had to scramble to get another expert,” Phillips said.

In another instance that happened after a trial, a hospital president called a physician into his office and brandished copies of his trial testimony and deposition testimony while telling the doctor, “We don’t testify against other doctors around here,” Phillips said.

“It’s a prime example of the length that certain members of the medical profession will go to continue cloaking the truth and impeding the courthouse doors for victims of medical malpractice,” he said.

For their part, two prominent medical asso­ciations provided their policies on expert testimony.

Diversity in Practice: Defining and talking about race

By Arin N. Reeves, J.D., Ph.D.
The Athens Group

My mother — a first generation immigrant woman of color physician who raised her children in several countries before making America her home — finds it utterly amusing that her daughter chooses to grapple with diversity for a career.

When a Chinese Cuban associate joined her medical practice a few years ago, she challenged me with this “diversity” question: If a man, born in Cuba to a Chinese father and a Cuban-Chinese mother, grows up in Spain, immigrates to America and speaks English, Spanish, and Chinese (with a Spanish accent), is he considered a European, Hispanic, or Asian?

After a lengthy dialogue on race, ethnicity, nationality, and accent, she concluded by asking - Do racial categories enable diversity or do they limit diversity’s full expression?

Although my mother likes to engage me in such conversations to probe what I actually do for a living, the issue of defining, naming, and populating racial/ethnic categories is a very real and complex challenge facing legal workplaces striving for diversity and inclusion.

The Oxford English Dictionary defines race (partially) as: (1) each of the major divisions of humankind, having distinct physical characteristics; (2) racial origin or distinction; and (3) a group of people sharing the same culture, language, etc. such as an ethnic group.

The reference gurus, however, caution the reader that, in modern usage, “some people now feel that the word race should be avoided, because of its associations with the now discredited theories of 19th-century anthropologists and physiologists about supposed racial superiority. Terms such as people, community, or ethnic group are less emotionally charged.”

What the reference gurus fail to mention is that the constantly changing categories of race (and its various substitutes) create a semantic chaos in workplaces around which diversity and inclusion efforts are tenuously built. Whether diversity is about creating parity with national demographics or ensuring equal opportunity for all, legal workplaces struggle with the semantics in order to measure progress, and they look to three distinct definitions of diversity that sometimes overlap and often disagree with each other.

First, the U.S. Census Bureau categorizes race as American Indians/ Alaska Natives, Asians/Pacific Islanders, Black or African American, Native Hawaiian or Other Pacific Islander, White, and/or Some Other Race. Hispanics - now measured as an ethnicity instead of a race - have to select one of the racial categories above and then complete the Hispanic Origin section.

Next, the U.S. Equal Employment Opportunity Commission interprets race as “Whites, Blacks, Asians, Latinos, Arabs, Native Americans, Native Hawaiians and Pacific Islanders, multi-racial individuals, or persons of any other race, color, or ethnicity.”

Finally, the National Association of Law Placement — the main source of employment statistics in the legal profession - asks employers to report on the race of “minority” lawyers who are Black, Hispanic, American Indian/Alaskan, Asian/Pacific Islander, and Multi-Racial.

In spite of the multiple definitions, legal scholars like John Tehranian and Richard Thompson Ford argue that the existing categories do not yet fully cover or clarify racial minority groups. Tehranian argues for the creation of a “Middle Easterner” category that includes Arabs, Turks, Persians, and other ethnicities so that people from the Middle East are not forced to accept “compulsory whiteness.” Ford explores the debate on whether “African American” refers to just individuals who are descendants of slaves or all people with roots in Africa.

The research and dialogue adds to employers’ agony over how to collect racial/ethnic data on employees and who to include in the NALP forms. Minority associations are in equal agony over how to represent the diversity of identities captured under such vast umbrellas as Asian (continental category spanning many ethnicities) and Hispanic (ethnic category spanning many continents.)

Perhaps the Oxford linguists’ understanding of race as an “emotionally charged” concept sheds some light on why race endures as a critical yet indefinable signifier of difference.

Are racial differences (skin color, facial features, etc.) seen simply as “different than,” or are racial differences surrogates in helping us evaluate “better than” and “less than?” Do we focus on NALP forms because counting racial minorities is easier than talking about racial stereotypes, racial bias, racial prejudice, and racial privilege?

Maybe the reason we, as a nation and as a profession, have such difficulty defining race is because we have such difficulty talking about what race means and why that matters.

Definitions and categories may allow us to track our efforts in increasing the numbers of “racial/ethnic minorities,” but I question the merits of what we are measuring. The legal profession is rife with examples of how increasing numbers of minorities do not lead to more inclusive workplaces. If we stop trying to define race and actually talk about why race still matters, could we move toward a diversity where race no longer needs a definition?

Firm Life

Jennifer T. Nijman and Susan M. Franzetti formed Nijman Franzetti, which will handle environmental law and litigation. Nijman was chair of Winston & Strawn’s environmental law practice group, and Franzetti, formerly a partner at Sonnenschein Nath & Rosenthal, had been with the Franzetti Law Firm.

Susan Franzetti (left) and Jennifer Nijman. Photo by David Durochik

DLA Piper named William A. Rudnick managing partner of the firm’s Chicago office, succeeding Louis S. Cohen. Rudnick is the grandson of Harry L. Rudnick, who co-founded Rudnick & Wolfe in 1936. DLA Piper is the successor firm of Rudnick & Wolfe.

Nixon Peabody has named Richard F. Langan, Jr. as chief executive officer and managing partner. Langan will succeed Harry P. Trueheart III, in May.

Dykema has appointed Thomas R. Hill, former group leader of the litigation practice group, to office managing member of the firm’s Chicago and suburban Chicago (Joliet and Lisle) offices. The firm also appointed Richard E. Gottlieb as leader of its financial institutions team.

Grantland G. Drutchas has become managing partner at McDonnell Boehnen Hulbert & Berghoff, succeeding Matthew J. Sampson.

Lawrence J. Casazza has been elected to the executive committee of Vedder Price.

Chapman and Cutler has named Timothy V. McGree and M. John Trofa as co-chairs of the firm’s public finance department, replacing Daniel L. Johnson, who was named the firm’s chief operating partner.

Gil M. Soffer, a partner at Katten Muchin Rosenman, has been appointed counsel to the deputy attorney general of the United States. Soffer resigned from the partnership in January, under the requirements of the appointment.

Manish K. Mehta, an associate at Brinks Hofer Gilson & Lione, has been appointed
a vice president of the Indian-American Bar Association of Chicago.

Richard Lipton, a partner at Baker & McKenzie, was elected chair of the American College of Tax Counsel. And John A. Biek, a partner at Neal, Gerber & Eisenberg, has been elected a Fellow to the ACTC.

Olson & Hierl has changed its name to Olson & Cepuritis.

Susan E. Kamman opened Susan E. Kamman & Associates, in Barrington. The new firm focuses on matrimonial and parentage matters.

Longwell Associates has changed its name to Longwell & Blair Associates, reflecting Deanna R. Blair’s elevation to partnership.

Jonathan Strauss opened The Law Offices of Jonathan Strauss, a downtown law office dedicated to business law and finance. The office is at 55 E. Monroe St., Suite 3910.

Gordon & Rees opened an office in Chicago at 1 N. Franklin St. The new office focuses on commercial liability, insurance, and professional liability. Michael P. Tone, a former partner at Ross, Dixon & Bell, serves as managing partner.

Katten Muchin Rosenman has been selected by the Chicago Committee on Minorities in Large Law Firms as the committee’s new home until 2010. The committee had been housed at Reed Smith since 2006.

Kirkland & Ellis has named 16 law students as recipients of its 2008 Diversity Fellowship Program. The two local students are Jacqueline M. James and Sanjay M. Nangia, both from Northwestern University School of Law.

The family of Allen J. Hoover, the patent lawyer killed in a shooting rampage in December 2006, has established the Allen J. Hoover Memorial Award. The $5,000 award, which is funded by Hoover’s family and his law firm, Wood Phillips, will be given to a third-year DePaul University law student who is expected to make the greatest contribution to intellectual property law.

The Center for Disability & Elder Law announced its new slate of officers: Immediate Past President, Peter J. Mone; President, Addison Braendel, Baker & McKenzie; Vice President, Erin M. Maus, Baker & McKenzie; Treasurer, Nicole Wells, FTI Consulting; and Secretary, Robert Johnson, McDonald’s Corporation.

> Partners

Baker & McKenzie has elected four new partners in its Chicago office: Elizabeth P. Fahey, corporate and securities; Lisa Parker Gates, intellectual property; Stephen M. Griesemer, corporate and securities; and Edward J. West, corporate and securities.

Wildman Harrold has named five new attorneys to the partnership: Alison C. Conlon, complex litigation and arbitrations; Matthew M. Garrett, product liability and mass tort defense; Jamie Rubin, intellectual property, advertising, marketing and promotions; Gregory M. Smith, intellectual property; and David P. Vallas, restructuring and insolvency.

Howrey has promoted 15 attorneys to partnership, including two in its Chicago office: Thomas Jenkins, intellectual property; and Steven Yovits, intellectual property.

Duane Morris has named 10 associates to partnership, including one in its Chicago office: Jeffrey Hamera, construction.

Ross, Dixon & Bell has elected David F. Cutter, insurance coverage and commercial litigation, as a partner in the firm.

Schopf & Weiss has named William B. Berndt, complex contractual disputes and business torts, a partner in the firm.

DLA Piper promoted 69 attorneys to partnership, including five in Chicago: David B. Allswang, real estate; Joseph E. Collins, complex commercial litigation; Gina L. Durham, domestic and international intellectual proprety; Robyn Goldman Koyner, corporate and securities; and Micah R. Onixt, business, corporate collaborations, life sciences, biotechnology, and information technology.

Hoeppner Wagner & Evans has named Sean E. Kenyon, civil litigation, insurance coverage, and employment; and Michael E. Tolbert, insurance defense, civil litigation, and employment law, partners in the firm.

Banner & Witcoff has elected 11 new principal shareholders and shareholders, including three in its Chicago office: principal shareholders Paul J. Nykaza and Richard S. Stockton; and shareholder Michael J. Harris.

McDermott Will & Emery has promoted 16 lawyers to partner in its Chicago office: Catherine A. Battin, state and local tax; Philip J. Castrogiovanni, health law; Sandra M. Di Varco, hospitals and health systems; Timothy J. Eloe, mergers and acquisitions; Ashley Mc Kinney Fischer, health care; Aron J. Frakes, complex commercial litigation; Jocelyn D. Francoeur, civil litigation; John P. Hammond, corporate; Ryan M. Harding, sophisticated wealth transfer and estate planning; Ryan D. Harris, mergers and acquisitions, securities; Nicole K. Mann, private client; J. Christian Nemeth, trial; John P. Schetz, mergers and acquisitions; Edward B. Tuerk, corporate finance; Jamie A. Weyeneth, employee benefits; Stephen Y. Wu, antitrust.

Stahl Cowen Crowley has elevated Lauane C. Addis to name partner. The firm is now known as Stahl Cowen Crowley Addis.

Querrey & Harrow has named Cynthia E. Garcia, corporate, a shareholder.

Nixon Peabody has elected William D. Pegg, technology and intellectual property, to partnership.

> Moves

To Foley & Lardner: partners Harold L. Kaplan and Mark F. Hebbeln, both business reorganization, from Drinker, Biddle & Reath.

To Holland & Knight: partner Robert H. Lang, litigation, from Quarles & Brady.

To Reed Smith: counsel Michael M. Geoffrey, intellectual property, from USG Corp.; and partners James M. Davis, insurance recovery, and Paul R. Walker-Bright, insurance recovery; and associate Evan T. Knott, insurance recovery, from Anderson Kill & Olick.

To Loeb & Loeb: partner Elizabeth L. Majers, corporate, from McDermott Will & Emery.

To McDermott Will & Emery: partner Eric D. Hargan, health law, from the U.S. Department of Health and Human Services, where he was acting deputy secretary.

To Schiller DuCanto and Fleck: partner Elizabeth Wells, retirement benefits, from her solo practice.

To Mayer Brown: partner Ray A. Dybala, tax controversy and transfer pricing, from Motorola, Inc., where he served as senior vice president and director for worldwide tax.

To Pasulka & White: new associates Lindsay M. Keenan and Erin R. Doyle, both in family law.

To Goodsmith Gregg & Unruh: senior counsel Steven N. Wayland, general commercial, from Debevoise & Plimpton.

To Katten Muchin Rosenman: partner Neal Wolf, bankruptcy and creditors’ rights, from Dewey & LeBoeuf.

To Scandaglia & Ryan: associate Seth Remy Yohalem, commercial litigation, from Kirkland & Ellis.

To Sonnenschein Nath & Rosenthal: national client services manager John T. Podbielski Jr., from Schelbe & Podbielski.

To Lewis Brisbois Bisgaard & Smith: partners Timothy J. Young and P. Chauncey Cassidy; and associates Joseph W. Substalae, Garry B. Zak, Ronald W. Payne and Dallas J. O’Day, all in general liability practice, from Chilton Yambert Porter & Young.

To Latherow Law Office: associate Bridget Duignan, personal injury, from the Illinois House of Representatives, where she was assistant counsel to House Speaker Michael J. Madigan.

To Perkins Coie: partner David M. Neff, bankruptcy and workouts, from DLA Piper.

To SmithAmundsen: partner Michael G. Cortina, financial services, in the firm’s Woodstock office, from The Law Office of Michael G. Cortina.

To Kenneth M. Sullivan & Associates: trial attorney Dennis F. Esford, commercial litigation, from Lawyer-Link, where he was director of business development.

To Banner & Witcoff: associate Louis Di Santo, from Wildman Harrold; and new associates Katie L. Becker, Katherine L. Fink, Dima N. Moussa, Timothy J. Rechtien, and Bradley J. Van Pelt.

To Shefsky & Froelich: associates Michelle L. Clauss, real estate, from Sugar, Friedberg & Felsenthal; and Roger J. Kiley, litigation, from the Illinois Attorney General’s Office.

To Kinnally Flaherty Krentz & Loran: associates Rorry Kinnally Bonifas and Nicholas A. Bonifas.

To Pircher, Nichols & Meeks: counsel Brett D. Smith, real estate, from Katten Muchin Rosenman.

To Wildman Harrold: partner W. Allen Woolley, commercial and environmental litigation, from Kirkland & Ellis.

To Thompson Coburn Fagel Haber: partner Mark Lenz, public finance and real estate, from Dykema.

To Belongia & Shapiro: partner Kelly A. Saindon, commercial and civil litigation, from Zagotta Saindon Law Offices.

> Changes

John H. Stroger, the first black president of the Cook County Board, died at age 78 on Jan. 18. Stroger was head of the board from 1994 to 2006.

Harry G. Comerford, who served as chief judge of the Cook County Circuit Court during the Greylord corruption investigation, died at age 86 on Jan. 29, of pulmonary fibrosis. Comerford was a judge for 34 years, and was chief judge from 1978 to 1994.

Operation Greylord, which started in 1980, culminated in the bribery and tax fraud convictions of 15 judges and more than 40 lawyers.

David I. Herbst, a partner at Butler Rubin Saltarelli & Boyd died Feb. 3, at age 67, following a nine-month fight against leukemia.

Q&A: Jill B. Berkeley

> Jill B. Berkeley

Family: Married with two sons.

Education: A 1972 University of Michigan graduate, and a 1975 Northwestern University School of Law graduate.

Professional: A partner and co-chair of Howrey’s Insurance Recovery practice. Her clients include Ameren Corp., Chicago Bears Football Club Inc., Humana, and Laidlaw.

1. Why did you become a lawyer?
I was in college in Ann Arbor and I was a journalism major and writing for The Michigan Daily. I was covering the Commission on Women and, of course, it was also the late ’60s, early ’70s. I was very much swept away by the idea that women need to challenge themselves by doing more than just taking the easy path. …

I just felt I should be something I never would have assumed a woman could be. Although both of my parents went to college, there were no lawyers in the family.

I was not the least bit science-oriented, so I certainly wasn’t going to medical school. I wasn’t really interested in research — laboratory or academic research — and I also felt there were a lot of women already in those fields. So I said, “Well I will try this lawyer thing.” I took the LSAT and applied to law school and that’s what got me started.

2. What is the last big deal or case you worked on that you can talk about, and what did it entail?
The Illinois Appellate Court granted a petition for rehearing in a case we had won over a year ago, which was titled American Economy Insurance Company v. Holabird & Root. We had to prepare the response to the petition for rehearing and prepare for the oral argument and we are now awaiting the decision from the appellate court.

The issue in the case was an interesting question under duty to defend principles where we were attempting to have American Economy acknowledge its obligations to defend the architect as an additional insured under a subcontractor’s general liability policy.

3. What is the weirdest thing that ever happened to you as a lawyer?
I think probably the strangest thing I’ve ever done as a lawyer was to buy an insurance publication and become the publisher, the editor, the accountant, the marketer, and the researcher all at the same time.

When I went to law school it was really because I didn’t want to go into business. I just felt I didn’t have a real head for making a profit and, of course, the law has certainly become more of a business today. Taking that leap and owning a business and running a business at the same time that I was a lawyer was a real departure from what I would have thought was my career path.

4. If you could have lunch with anyone, living or dead, who would it be and why?
Frank Lloyd Wright.

I have been fascinated with him for his work as an architect, and his work as a visionary, and his success in building not just buildings, but also the creation of ideas. I’m fascinated with people who work with tangible things as opposed to just ideas. He, to me, combined the concepts of all these fantastic ideas and art and structure and engineering, and really changed the landscape of cities.

5. What is your favorite book, movie or television show about lawyers, and why?
For me, in some ways, my favorite movie would be “My Cousin Vinny.” I don’t mean that in any kind of deprecating kind of way.

Of all the things you could say — the TV shows, the movies and the books - there is just something about “My Cousin Vinny” that strikes me, that says something about the goodness of people who want to help someone. And a lawyer can certainly be a flawed person, but can actually still help somebody in need.

6. What advice do you have for new lawyers or those wanting to become lawyers?
I have found that new lawyers or maybe younger lawyers have developed an attitude of trying to do the work with as little effort as possible - in other words, trying to understand how to get the best result they can with the least amount of work …

I think that is such a dangerous attitude to have for a young lawyer. What I really want to nurture in my young lawyers is the sentiment that they should do whatever it takes to get the absolute best product, whether it’s a brief, whether it’s a memo, whether it’s taking a deposition.

As a young lawyer, if you don’t put in the effort to really push yourself as hard as you can to be as excellent as you can, you’ll never have as good of an opportunity in your life to really learn what it means to really work hard to get a great result.

7. What do you like the most and the least about being a lawyer?
I really like the ability to solve intricate and complex problems. I love sort of starting with a clean slate and having a client come to you with a problem that has layers and layers of complexity to it; and having to figure out and problem-solve and strategize how to get to the best result for the client. It really makes a new client a lot of fun to work with because you have new problems that come up.

What I like least is dealing with people who like litigation just for the battle. And there are many that really are thrilled by just engaging in conflict for the sake of conflict. And I recognize in my own practice that litigation is a necessary tool to resolve disputes. But I really don’t enjoy the battle just for the sake of battle. And I should say I don’t mean that in kind of a girly-girl way. I love to battle for the right result and I’m not at all adverse to conflict and aggression. But it offends me when people just do it for the joy of the battle.

— Interviewed by Olivia Clarke

Clifford’s Notes: Zoo liability

By Robert A. Clifford
Clifford Law Offices

Americans were horrified when they heard of the three teens who were attacked on Christmas Day, one of them fatally, by a 300-pound Siberian tiger at the San Francisco Zoo.

The death marked the first time a visitor had been killed at an accredited zoo in America. The family of the young injured men hired famed West Coast attorney Mark Geragos, who charged that zoo administrators knew that the 12-foot-5-inch wall containing the tiger habitat is nearly 4 feet below industry recommendations and “couldn’t hold a house cat.”

The zoo already is facing a lawsuit by a zookeeper who was attacked last year by that same tiger, Tatiana, while the employee fed her.

That zookeeper accused the City of San Francisco, which owns the zoo property, of housing the tigers with “reckless disregard for the safety of animal handlers and members of the general public.”

Nine days after the Christmas Day attack, the zoo reopened and visitors found workers with jackhammers installing glass panels that raised the height of the tiger walls to 19 feet. The big cats were kept indoors until the outdoor enclosure improvement was completed.

I have heard callers on radio talk shows in Chicago argue that all visitors to zoos must feel safe, and predatory wild animals certainly should never be allowed to escape.

Although these listeners will not be part of Geragos’ jury pool, I think back to the famous 1996 incident where a 3-year-old boy tumbled into the gorilla habitat at Brookfield Zoo.

Captured on home video, Americans watched the female gorilla cradle the unconscious boy, protecting him from other gorillas as she brought him to her trainers. Brookfield Zoo touts on its website that the gorilla, Binti, was raised, coincidentally, at the San Francisco Zoo but, because she was never fully accepted by the other gorillas in California, a decision was made to move her to Brookfield Zoo for socialization and breeding purposes.

San Francisco’s zoo, like many others, is owned by a municipality; Lincoln Park Zoo is operated by the park district. Most cases against zoos are premises liability claims, not animal attacks, although Lincoln Park Zoo was in the news in 2006 for paying a fine to the U.S. Department of Agriculture, in part, for a gorilla attack on a zookeeper.

Courts have recognized that, because cities do not have a duty to establish a park or zoo, when it does undertake to house ferocious animals, it must be held to a strict duty of keeping them safely. Byrnes v. City of Jackson, 140 Miss. 656, 105 So. 861 (1925).

A 9-year-old boy in Mississippi was mauled by a tiger after the animal reached under a cyclone fence and pulled the boy’s leg into the cage.

The court found that the keepers of wild animals were absolutely liable for damages caused by that animal because of obvious public safety issues. Burns v. Gleason, 819 F.2d 555 (5th Cir.1987).

In Illinois, notwithstanding potential claims of tort immunity, courts have found that, where the public entity is engaged in a non-governmental function, such as operating a public arena, it is held to the same standard imposed on private parties in exercising a high degree of care toward its invitees to protect them against the likelihood of danger from reasonably foreseeable attacks. Comastro v. Village of Rosemont, 122 Ill.App.3d 405, 461 N.E.2d 616 (1st Dist.1984). See also, Roth v. Costa, 272 Ill.App.3d 594, 650 N.E.2d 545 (1st Dist.1995).

Arguably, the Illinois Animal Control Act, 510 ILCS 5/16 (2008), should apply. It provides: “[i]f a dog or other animal, without provocation, attacks, attempts to attack, or injures any person who is peaceably conducting himself or herself in any place where he or she may lawfully be, the owner of such dog or other animal is liable in civil damages” for injuries. Cf., Smith v. Lane, 358 Ill.App.3d 1126, 832 N.E.2d 947 (5th Dist. 2005).

Since the tiger escape on Christmas, a snow leopard at that same zoo ripped a small opening in its wire cage, but an employee prevented its escape, and on another day workers had to shoot darts at a polar bear there in order to goad it back into its night enclosure.

The Association of Zoos and Aquariums, which accredits zoos throughout the country, sent an inspection team to look into the specifics of these incidents, and San Francisco’s mayor is conducting a series of public hearings about the deadly tiger attack to examine the operations and safety of the zoo, as well as the protocol of the city’s emergency services department.

The city’s Recreation and Parks Commission has been ordered to conduct an outside audit of the zoo’s safety procedures and policies, and the city has asked zoo officials to prepare a plan to improve security and emergency response, and have the city controller audit the zoo’s finances and performance.

All of this review is good, but it is tragic that it took the death of that teenager to get officials to examine any deficiencies. Perhaps it will serve as a wake-up call for other zoos to do the same before another tragedy strikes.

Info Tech Law: DMCA provides pitfalls and remedies

By Alan S. Wernick
Wernick & Associates

The Digital Millennium Copyright Act (DMCA) contains many remedies, as well as some pitfalls, for copyright owners. However, it also provides protections for alleged infringers.

Among other things, if an Internet service provider (ISP) - which has been broadly construed by the courts to include most website owners/operators - has designated with the U.S. Copyright Office an agent to receive notifications of claimed infringement, then the DMCA provides a safe harbor provision shielding the ISP from liability for copyright infringement under certain circumstances.

If your company has not recorded a DMCA designated agent filing with the U.S. Copyright Office, and receives a valid DMCA notice, without any misrepresentations, it may be liable for the copyright damages available to the copyright owner. But, if your company complies with the DMCA, has done the requisite filing, and acts promptly and appropriately upon receipt of the notice, then it may avoid liability for damages for copyright infringement on your company’s website.

In addition, the DMCA provides a sword to the ISP in the form of a damages remedy available to the ISP, and the alleged infringer, for misrepresentations by a copyright owner in a takedown notice under the DMCA.

The DMCA defines a “service provider” broadly to mean “an entity offering the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of material of the user’s choosing, without modification to the content of the material as sent or received.” 17 U.S.C. Sec. 512(k).

An ISP is generally a “service provider” under the DMCA, but many other website owners/operators have found refuge in the broad variety of Internet activities included under Sec. 512(k)(1)(B).

Recently, the U.S. District Court for the Southern District of New York considered the DMCA notices sent by a copyright owner to two ISPs and issued a preliminary injunction against the copyright owner, stopping the copyright owner from sending further takedown letters without court approval.

In Biosafe-One Inc., et al. v Hawks, et al., the plaintiffs alleged that the defendants copied the plaintiffs’ website, among other things. The plaintiffs, prior to the preliminary injunction hearing, submitted two DMCA notices to the defendants’ web hosting companies, resulting in the shutdown of the defendants’ website, and ultimately forcing them to host it overseas at a higher cost.

The defendants argued that filing these notices violated the DMCA’s prohibition against misrepresentation. Both parties moved for preliminary injunctions, including a request by the defendants for damages based on alleged misrepresentations in the plaintiffs’ DMCA notices.

The court held that the plaintiffs failed to demonstrate that they are likely to prevail on their infringement claim, and denied their motion for a preliminary injunction. The court then granted the defendants’ motion for a preliminary injunction and ordered the ISP to reinstate the defendants’ website.

The court then turned its attention to the defendants’ request for damages under DMCA 17 U.S.C. Sec. 512(f), which provides:

“Any person who knowingly materially misrepresents … that material or activity is infringing … shall be liable for any damages, including costs and attorneys’ fees, incurred by the alleged infringer, by any copyright owner or copyright owner’s authorized licensee, or by a service provider, who is injured by such misrepresentation, as the result of the service provider relying upon such misrepresentation in removing or disabling access to the material or activity claimed to be infringing, or in replacing the removed material or ceasing to disable access to it.”

The court, after reviewing the test of 17 U.S.C. Sec. 512(f), held that the defendants failed in their motion for a preliminary injunction to present sufficient evidence to prove a violation of Sec. 512(f): “While defendants have not demonstrated their likely success on the merits, they have demonstrated sufficiently serious questions going to the merits to make them fair grounds for litigation and a balance of hardships tipping in their favor. To succeed on their claim, defendants need only prove plaintiffs knew defendants were not infringing when they submitted the DMCA notices. Defendants have not yet had the opportunity to fully develop this theory.”

The court went on to say that portions of a plaintiff’s testimony lacked credibility, and a fair issue exists as to whether his statements that the defendants’ website infringed when the plaintiff sent the DMCA notices were intentionally and knowingly false.

This opens the door to the defendants’ potentially receiving a Sec. 512 damages award upon a full hearing on the merits. As in some other cases, the copyright owner in this case may find itself liable for damages for misrepresentations made in the copyright owner’s DMCA takedown notice.

The bottom line is that while the DMCA provides some powerful remedies to copyright owners, it also presents some potential pitfalls, and potential liabilities.

© 2008 Alan S. Wernick

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