Barnett's Notes on Commercial Litigation

February 2008

Volume IV, Issue 2

In This Issue

1. Affidavits Cast Light on Dark Chocolate Plot. Did confectionary giants fix prices on the food of the gods?

2. Did You Know? A new law encourages an unlikely source of help for the tax man -- private citizens.

3. Depression Confession. Help for lawyers who suffer.

4. Un-Subpriming the Investment Pump. Wall Street and friends have made a fine mess of credit markets. Guess who gets to clean it up?

5. Hot Lunch. A tort reform group positions itself to sue anybody who dares use its "judicial hellhole" trademark.

6. The Cycle. Cartoon.

7. Blawgletter® Roundup. Links to favorite recent posts.

8. Links & Info. Er, links and info -- what else?

The Tax Collectors (1550).

Did You Know?

Tom Herman, in his WSJ Tax Report column, noted recently that the Internal Revenue Service has "issued guidance" on whistleblower claims under a 2006 law. The statute doubles the rewards available to individuals who squeal on tax cheats.

You can see the IRS's announcement here. It includes links to Notice 2008-04, which describes relevant procedures, and Form 211, the "Application for Award for Original Information".

The new program allows bounties of between 15 and 30 percent of the extra that the IRS collects. The old regime limited payments to 15 percent or less.

Qui tam cases under the False Claims Act require a claimant to file a lawsuit under seal. The IRS program, by contrast, involves filing papers with the Whistleblower Office -- a process that, at first blush, looks simpler and easier for the whistleblower but that now promises the same potential award levels.

The release helpfully ends with the note that "[a]wards will be subject to normal tax reporting and withholding requirements."

Un-Subpriming the Investment Pump.

The NYT reports that the first-ever quarterly loss at Bear Stearns foretokens more agony on Wall Street. The article doesn't explain why.

Your Editor has heard that the subprime fallout won't end until investors learn where the risk of subprime borrower defaults ended up. Apparently the subprime industry did such a terrific job of shifting risk that we can't tell who now bears it.

Does the uncertainty matter? And, if it does, why?

I imagine that where the risk went matters a lot to owners of entities (or funds or securities) that concentrated on financial instruments whose collateral consists largely if not entirely of unwise mortgages. Also to potential investors in outfits ranging from commercial and investment banks to hedge funds and "collateralized debt obligations".

The Bear Stearns announcement suggests that even the bullet-proof aren't. And that, until we get a true accounting of the dumb decisions Wall Street made, for itself and its gullible investors, we should expect more shocks, less investment, and additional lawsuits.

Litigation, indeed, will have to sort out the winners and losers of the commercial carnage. It always does.

Hot Lunch.

The American Tort Reform Association published its Judicial Hellholes 2007, er, report. Imagine Your Editor's excitement.

Adam Liptak, in his Sidebar column at the NYT, points out a few shortcomings in the, ah, report -- including that "[i]t has no apparent methodology."

Note that you'd better not compose your own list of judicial hellholes. That little "®" in Judicial Hellholes® means ATRA registered it with the Patent and Trademark Office -- presumably so they can sue your pants off for tradmark infringement if you use "hellhole" to describe a court where, say, defendants win all the time. Even if you have a methodology.

Blawgletter® Roundup .

Links to favorite recent posts from Blawgletter®:

New Federal Rules of Civil Procedure

Public Nuisance Cases as "Income-Redistribution Racket"

Canadian Court Certifies Price-Fixing Class Action

Third Circuit Declines Review of Cable Class

Go Google Yourself

Carve-Outs Defeat Fraud and "Material Adverse Effect" Defenses to Merger Deal

Affidavits Cast Light on Dark Chocolate Plot

Does price-fixing make chocolate sweeter?

The Globe and Mail (Toronto) describes affidavits that Canadian antitrust enforcers used to get chocolaty search warrants in November 2007. The Competition Bureau filed the 24-page and 57-page affidavits with the Ottawa Superior Court of Justice. The WSJ has a similar article.

The affidavits tell of a price-fixing conspiracy lasting from 2002 until late 2007. The scheme involved the big chocolatiers -- Hershey, Cadbury Schweppes, Mars, and Nestle -- as well as ITWAL, which describes itself as a "national distribution network of wholesale distributor members." The conspirators agreed to coordinate price increases and may even have forced retailers not to discount.

The reports don't name the affiants other than to say that they want immunity. Here's a clue: The Competition Bureau didn't ask for a Cadbury Schweppes search warrant. Hmmm.

Your Editor read about the Canadian probe in November 2007 and learned in December that the U.S. Antitrust Division now has its own inquiry going.

To get a flavor for how the chocolate bidness operates in the U.S., I took a look at a few reports. I found an April 4, 2007, press release in which Hershey announced "[a]n increase of approximately 4-5 percent on the Company's standard bar, king-size bar, 6-pack and vending lines . . . effective immediately." I also saw this April 5, 2007, report: "Prudential analyst John M. McMillin . . . noted that . . . British competitor Cadbury recently raised prices and [that] privately held competitor Masterfoods, which makes M&Ms and Mars candy bars like Snickers and 3 Musketeers, 'is also taking pricing up, so Hershey is not out there alone, we think, in this chocolate price increase.'" And, on April 23, 2007, Nestle mentioned the positive impact in the Americas of customer "buying ahead of [recent] price increases, notably in dairy-related categories."

Simultaneity by itself doesn't prove coordination. But what do they say about smoke and fire?

Barry Barnett
Dallas, Texas

I like emails. Clickhere to send me one.

Depression Confession

Abraham Lincoln called his depression "the hypo".

Your Editor enjoys Sue Shellenbarger's Work & Family column in the WSJ. Recently, she wrote about an area in which our profession totally rocks -- clinical depression. She calls it "Even Lawyers Get the Blues: Opening Up About Depression". Kudos to her!

Also to the Oklahoma City lawyer, Dan Lukasik, who tossed caution to the wind and fessed up to the reality that lawyers suffer depression at almost three times the rate of the general population. He even has a website on the subject --Lawyers with Depression. It includes lots of helpful information and an abundance of links to resources.

As Mr. Lukasik explains:

Yes, it is true that (a) there are many sites about depression and (b) many sites about attorneys and the problems encountered in the practice of law. . . . Yet, they don't particularly grasp a lawyer's predicament. . . . When you check out . . . more traditional lawyer programs and/or websites, there is usually little information or support for lawyers struggling with depression.

This website seeks to fill that gap. It is a web site specifically devoted to lawyers with depression. I hope that such a site will be more relevant and helpful to lawyers looking for support. I also hope that it will make a difference for lawyers looking for support. I also hope that it will make a difference for readers to know that I am a practicing litigation and suffer from depression. I am not a psychiatrist or psychologist, but I am a person who knows intimately what it is to suffer from depression and simultaneously be a practicing lawyer.

Heavens to Betsy, you might ask -- what could possibly depress people who have so much going for them money-wise, prestige-wise, and other-wise?

The question recalls to me a report of an interview with James Joyce, author of the (to us) impenetrable yet awesomely great Ulysses (1922), in which the questioner wants to know what the author meant by such-and-such. Joyce answers along the lines of: Once God and I knew what I meant. Now God only knows.

I suspect that people with great creative gifts -- a group that includes the best lawyers -- feel the pain of birthing innovative ideas. Imagine, therefore, the agony of rejection -- an occupational certainty for lawyers. Which experience may lead to the dullness of depression.

Thank you, Sue and Dan, for shining light on the subject. I suspect that many will benefit.

The Cycle.

Links & Info

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