Council Holds Fall Retreat
By Bennette D. Kramer
The Federal Bar Council Second Circuit Courts and First Decade Committees hosted the Fall Bench and Bar Retreat on October 24 through 27, 2014 at the Inn at Pocono Manor in Pocono Manor, Pennsylvania. Over 150 people attended the weekend retreat, which brought together federal judges, Council members and their families, and panel members who were experts in their fields for six CLE Programs. On Friday evening, attendees enjoyed a reception and buffet dinner. On Saturday evening, after a reception, a plated dinner was served, followed by a DJ and dancing.
Federal Rules Challenge
The Federal Rules Challenge held on Friday afternoon launched the weekend. The program was a Jeopardy-style quiz game covering the rules and procedures applicable to the Second Circuit, including the Federal Rules of Civil Procedure. The teams of six tested their knowledge of civil and criminal procedure in a wide range of categories, including “Second Circuit Local Rules,” “That Ship Has Sailed” (maritime procedure) and “Dude, Where’s My Case?” (venue rules). The participants on all teams felt that the program was quite difficult, including the final answer: “The Second Circuit was created in this year.” Only two of the six teams provided the correct question: “What is 1891?” The Red Team, composed of Marjorie Barnett, Ira Matetsky, Noah Peters, and Robin Zablow, ultimately prevailed. Everyone had a good time.
The Roosevelt Court
In a reprise of a program first performed at the 2013 Winter Meeting, Mark Zauderer of Flemming Zulack Williamson Zauderer LLP moderated a panel on the Supreme Court under President Franklin D. Roosevelt. The program focused on the Commerce Clause through A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935). A video providing background on the New Deal and the Schechter Case, produced by Vilia Hayes, was followed by excerpts of the Supreme Court argument of the Schechter case. Second Circuit Judge Gerard E. Lynch played Justice McReynolds, Judge Stefan Underhill of the District of Connecticut played Justice Butler, and Professor John Q. Barrett of St. John’s University Law School played Justice Stone. Other justices were played by Oriana Carravetta, Robert Kaplan, Randi Kornreich, and Mary Kay Vyskocil. Peter Eikenberry, Law Office of Peter Eikenberry, and Thomas Bezanson, Cohen & Gresser, argued for the government, as Solicitor General Stanley Reed and Donald Richberg, Special Assistant to the Attorney General, respectively. Ronald Fischetti, Fischetti & Malgieri, and Vilia Hayes, Hughes Hubbard & Reed LLP, argued for defendants as Joseph Heller and Frederick Wood. The majority opinion held that there was no interstate commerce in the slaughter and distribution of chickens in Brooklyn and therefore no constitutional jurisdiction. During the following panel discussion, Zauderer moderated with Judges Lynch and Underhill and Professor Barrett as panel members. Zauderer explained that by 1942, after Schechter, the Court had changed and expanded the Commerce Clause to the point where it was just prior to the Affordable Care Act case.
Professor Barrett opined that there will be challenges to the scope of the president’s authority to rule by executive order, but no more decisions on the activity/inactivity issue, which ended with the Affordable Care Act decision.
Anti-Corruption Investigations and the Foreign Corrupt Practices Act
Southern District Judge Lorna G. Schofield chaired a panel that explored the right and wrong ways to conduct an investigation of potential Foreign Corrupt Practices Act violations in connection with the acquisition of a foreign company by a British company. Panel members included Linda Goldstein and Jonathan Streeter, Dechert LLP, and Charles Duross, Morrison Foerster LLP. The program began with the first part of an excellent film created by Dechert dramatizing an investigation that took many wrong turns. Film segments were interspersed with a panel discussion. Duross pointed out that the cozy relationship between the acquired company and the local government in a country with a reputation for corruption should have raised red flags and triggered a thorough pre-acquisition investigation, which was not done because of time and expense.
Following the second segment, Streeter highlighted specific failings of the board and management following whistleblower allegations of corruption. In an effort to save money and keep disruption to a minimum, the CEO used an internal audit team instead of outside counsel to investigate and decided not to include review of e-mails as part of the investigation. The CEO overruled the general counsel several times when she suggested conducting a more intensive investigation.
Goldstein discussed who was at fault, concluding that the head of electronics was most culpable because he pushed sales at the acquired company, which he knew or should have known were achieved by bribing a foreign official and violation of trade sanctions – e-mails and side letters demonstrated his involvement. The CEO set the wrong tone by dismissing pre-acquisition and subsequent red flags. He was responsible for assessing the risk. The general counsel should have been more insistent on performing a proper investigation and spelled out the consequences of a failure to investigate. Duross pointed out that the outside directors who had reservations about the acquisition and saw the red flags did not speak up. The outside directors have no criminal liability, but will be subject to civil suits and shareholder derivative actions. As fiduciaries they were reckless.
Goldstein noted that whether D&O insurance would cover the costs of the government investigation depended on whether the company disclosed the initial whistleblower claims. Non-disclosure could vitiate insurance in connection with a subsequent investigation.
Legal Challenges to the NCAA’s Amateurism Rules
Judge Nicholas G. Garaufis of the Eastern District of New York chaired a panel composed of Benjamin Block, Covington & Burling LLP, Peter A. Carfagna, Magis, LLC, Martin D. Edel, Miller & Wrubel P.C., and Jeffrey L. Kessler, Winston & Strawn LLP, that explored the dichotomy between the big business of college sports and the required amateurism of the players. Edel explained that college sports – primarily football and basketball – are a $12 billion per year industry in which the players do not share. The policy concerns underlying this contrast are:
(1) players receive scholarships that enable them to receive an education, but not money;
(2) the NCAA emphasizes amateurism; and
(3) how to create a level playing field.
The position of the NCAA is that it protects the players from exploitation. However, the fact is that most athletes, particularly basketball players, do not graduate, so do not benefit from the academic scholarships.
In the Jenkins litigation, an antitrust case, plaintiffs claimed that college sports are a big business and have formed an illegal cartel by getting together and agreeing not to pay the players. Kessler, who brought the case, seeks a ruling that each school must decide for itself how to compensate players, and not the conference.
Black represents the NFL and other sports entities. He explained that Kessler had brought free agency to professionals and the Jenkins litigation will bring free agency to the college level. He noted that college athletics differed from professional sports because the primary mission of college was educational and colleges were not-for-profit institutions. Black viewed the lawsuits as using the antitrust laws to create rights where there was no economic interest.
Hessler responded that the real question was whether athletes should play in exchange for a college education, when they were required to devote 60 to 70 hours a week during the season to athletic programs. This requirement has a serious impact on academics and makes the players into well-paid slaves. All the money coming in through the athletic programs goes into the athletic departments, not the college as a whole. Some funds may benefit women sports or minor sports, but not the English department.
Judge Alison J. Nathan of the Southern District of New York chaired a panel including Mark A. Berman, Ganfer & Shore, LLP, Celeste Koeleveld, Executive Assistant Corporation Counsel for Public Safety, New York City Law Department, Dr. J. Lee Meihls, President and Senior Consultant Trial Partners, Inc., and Michael S. Ross, Law Offices of Michael S. Ross, that addressed various issues relating to jurors’ use of social media. Judge Nathan, stating that she was not aware of any misconduct in her trials, set forth the issues:
(1) jurors use of social media and technology – e-mail, texting, Twitter – during trial;
(2) lawyers use of social media and technology to research jurors and, when learning about juror misconduct, their obligation to report;
(3) the right procedures for the court to impose, including preventative measures, and handling of violations; and
(4) determining how lawyers should deal with clients who use social media.
Berman described software that enables lawyers to look at the number of Tweets in a given area. The software determined that there were 28,000 public tweets during the month of September 2014 in the Pearl Street/Foley Square area. Restricting the word search to “jury,” “duty,” “trial,” “court,” “judge,” and “panel,” narrowed down the number of public tweets to 1,900. The software creates an approximate digital footprint and is neither expensive nor hard to use.
Meihls, as a trial consultant, focuses on social media postings by jurors. Social media searches are a good tool for lawyers because postings reveal what jurors are talking about when they think no one is looking. Lawyers should be concerned about postings by jurors after they have been warned not to post and who continue to post on social media through the trial. Once Meihls has determined that jurors are posting, she advises attorneys to request an admonition from the judge and to continue to monitor the jurors. A lot of jurors have trouble disconnecting from electronics – 25 percent of prospective jurors admit that they will have trouble disconnecting. It is never acceptable for a juror to friend or research a party or attorney. To address the risk, the court should give a strong admonition, explaining why disconnecting from social media matters and the consequences of not doing so. If jurors understand why it matters they are much more likely to comply; 92 percent of jurors follow admonitions. If they do not stop posting, the judge should remove the jurors from the panel and admonish them, find them in contempt, and fine them.
Koeleveld discussed what lawyers should do when they discover a juror has lied to get on the jury. In United States v. Parse, the government received information after trial about a juror who had lied at voir dire, but one defendant’s counsel had learned some inconclusive information during trial without disclosing that information to the court or the government. On the one hand, Federal Rule of Evidence 606(b)(1) prohibits questioning jurors about the validity of the verdict. In contrast, New York Rule of Professional Conduct 3.5 obligates a lawyer to bring juror misconduct to the attention of the court. The real question is when the obligation to disclose arises. A lawyer who has “actual knowledge” of juror misconduct must disclose. Ross stated that lawyers have an ethical responsibility to get as much information as they can. The bottom line is that all defendants, except the one represented by the lawyer who had some knowledge of the juror misconduct, got a new trial.
Other issues discussed were how to deal with a client who wanted to use social media in a way a lawyer could not (no obligation to report unless it tainted the proceedings) and whether it was appropriate to remove a client’s social media material (very hard to do and watch out for spoliation of evidence). The program concluded with agreement by all that many issues related to social media remain unanswered and more guidance was needed from the courts.
Music Industry Copyright Infringement
The last program of the Fall Retreat explored copyright infringement in the music industry through Bright Tunes v. Harrisongs, in which Judge Richard Owen found that George Harrison’s song “My Sweet Lord” written for the Beatles infringed on “He’s So Fine,” composed by Ronald Mack and recorded by the Chiffons. The program was a reprise of a New York Inn of Court program and all participants are members of the New York Inn of Court. The audience heard both songs, followed by a reenactment of segments of the trial before Judge Owen in the Southern District of New York. Judge Owen, the composer of a number of operas and other compositions, took over some of the questioning. The trial segments included the testimony of several expert witnesses and George Harrison himself. Judge Owen decided that, while George Harrison was not aware he was copying the theme, portions of the songs were identical. Judge Owen found in favor of the plaintiff on the issue of copyright infringement and that Harrison was liable for subconscious copying. Participants in the trial and program included Mary Kay Vyskocil, Simpson, Thacher & Bartlett LLP, as the narrator, the Honorable Betty Weinberg Ellerin, the Honorable Helen Freedman, and the Honorable Karla Moskowitz as the Chiffons, and Andrew Mancilla, Sarah Cave, and Mark Pincus as board members of Bright Tunes, the holder of the “He’s So Fine” copyright. Others involved were Peter Hoenig (plaintiff’s counsel), Ira Brad Matetsky (Judge Owen), Henry Freedman (defense counsel), Chris Fraser (plaintiff’s expert), Justice Ellerin (plaintiff’s expert), Chris Tumulty (George Harrison), Justice Freedman (Alan Paniser), Brooke Bowen (Harold Barlow), Mark Pincus (defense expert), and Noah Peters (Allen Klein, former manager for several of the Beatles and substitute plaintiff).
In the subsequent damages trial, because a company formed by Harrison’s former manager had purchased the copyright, Judge Owen decided that the damages should be based on the amount of that purchase and Harrison would become copyright owner. Judge Owen was displeased by the breach of fiduciary duty.
A panel discussion followed with Vyskocil moderating a panel including the Honorable Helen E. Freedman of the Appellate Division, New York State Supreme Court, the Honorable Betty Weinberg Ellerin, senior counsel, Alston & Bird, LLP (a former Appellate Division justice), Vyskocil, Ira Matesky, Ganfer & Shore, LLP, and Andrew Mancilla. They discussed why the Chiffons’ song was so popular and whether Judge Owen needed the experts. There was a lively debate whether Judge Owen should have disclosed his expertise before trial and why no one had requested a jury.
1 With thanks to Lauren Handelsman for covering the Federal Rules Challenge