Sunday, July 15, 2007

Legal Blog Watch

Legal Blog Watch

Issue Spotting the Whole Foods CEO's Pseudonymous Online Life

With the bar exam just around the corner, it's probably too late to add this doozy of a fact pattern about John Mackey, the co-founder of Whole Foods who had an online pseudonym -- Rahodeb -- under which he posted 1,100 entries on Yahoo Finance's bulletin board touting his company's stock and also criticizing Wild Oats Markets, a rival that his company went on to buy. Mackey's postings were made over a seven-year period - - and apparently, intervening events like the prosecution of Enron honchos for making false statements never made any impression. 

So, what's wrong with this picture? Steve Bainbridge takes a stab at some of the issues in need of analysis in this post:

1. Did any of the posts contain material misrepresentations or omissions that might constitute securities (or wire) fraud?
   2. Did any of the posts contain libelous statements?
   3. If the answer to either of the above is yes, can legal responsibility for such statements be attributed to the company?
   4. What impact will this have on the merger? Note the stakeholders potentially affected: The FTC, the DOJ, Wild Oat's board and top management, Wild Oat's shareholders, Whole Foods' shareholders.
   5. Your very high profile CEO is now a laughingstock. E.g., one Yahoo board poster wrote: "What a hoot! It's so Nixonian! Maybe he needs some animal fat in his diet. I've known vegans who suffered from teeth and gum disease; now we know a vegan who's suffering from 'foot-in-mouth' disease.

In this post at Law Biz Blog, Ed Poll mentions some of the same issues as Professor Bainbridge, as well as one "of even greater significance":

Whole Foods has portrayed itself as, ethical, honest and concerned primarily about the well-being of its customers. As one analyst opined, the company probably has enough "points in the emotional bank" to weather this storm but this maelstrom certainly chips away at their reputation and our confidence in them.

And finally, we have this take  from the Insurance Coverage Blog:

This bizarre story [about Mackey] is a reminder for insurers to redouble their sensitivity to Internet-related risks.  Additionally, it is also a reminder to carefully police their own employees' Internet activity.  Even the bright, sophisticated, and successful fail sometimes to exercise good judgment online.

Posted by Carolyn Elefant on July 13, 2007 at 04:11 PM | Permalink | Comments (0)

Spam Filter Causes Lawyer to Miss Court Date

After having relied on the often unreliable postal service in Washington D.C. and slow mail filtering in my office building (often delaying delivery by up to a week), the availability of e-filing in the firm where I practice was huge cause for celebration. But perhaps I rejoiced too soon. Because after reading this horror story, Spam filter costs lawyers their day in court (Washington Post, 7/13/07), I've realized that not even my beloved e-filing systems are impervious to error.

As the article reports, a Colorado law firm that was being bombarded with pornographic and offensive spam directed its IT administrator to fix the problem. He changed the firm's firewall settings to block spam from reaching desktop computers. But because the administrator failed to "whitelist" certain permissible mail, the system also began blocking e-mail from the U.S. District Court for the District of Colorado. And wouldn't you know it -- the day that the spam settings were changed, the court sent the firm notice of a hearing in a civil lawsuit. The system blocked the message, the firm missed the hearing and the judge ordered the firm to pay attorney fees and expenses of the lawyers who showed up. 

This post at Spam Notes.com criticized the court's sanction as excessive. From the post:

The firewall software was installed on May 21, 2007 the same day the court issued the initial Minute Order.  The court seems to go through an awful lot of trouble to prove its point (e.g., calling the IT administrator as a witness, examining the firewall log).  The court even seemed peeved that some other courts were whitelisted but it was not [writing that] as of the date of this hearing on June 20, 2007, Mr. Rea still had not whitelisted this court's domain name even though he previously whitelisted the court domain names of the Colorado State Courts prior to May 21, 2007. . . . See Barracuda Spam Firewall log sheets attached to Mr. Rea's affidavit which shows e-mails from Colorado State Courts were not blocked because they were whitelisted (docket no. 137-2)

Meanwhile, Jim Calloway offers solutions on  how firms can avoid this problem in the future. Calloway advises:

OK, here's a law practice tip you can take to the bank, folks. if you practice in any CM/ECF court, your spam filter needs to have a whitelist feature and you need to use it for every court that may send you an e-mail notice. Like it or not, once you have "agreed" to receive notices via e-mail, you just can't plead "my spam filter ate my homework." If your spam filter cannot do that, then you need a new one. Sometimes it might be as simple as adding a sender's address to your contacts to get it whitelisted.  I'm not saying it will be that easy for everyone. I about blew a gasket the other day when my spam filter told me there was a limit of 250 and I had to delete someone to be able to add someone. But you don't have a choice. The argument that it is too big a burden to manually maintain a whitelist was not persuasive to this judge nor will it be to others.

Posted by Carolyn Elefant on July 13, 2007 at 04:07 PM | Permalink | Comments (0)

Outsourcing Expert Witnesses?

Medical expert testimony for litigation doesn't come cheap in the United States, with expert fees costing as much as $1,000 an hour. But now, lawyers have found that they can solve the problem of high expert costs in the same way that they deal with other high costs: through outsourcing and offshoring. As this article states, US Lawyer Finds Medical Experts in India (7/12/07), U.S. lawyer Dorothy Clay Sims has started using medical experts in India for help in legal cases:

Sims has reduced [medical expert costs] by hiring medical experts in India for a fraction of the price, and she makes the service available to other American lawyers through an Internet-based business called MD in a Box. The U.S. lawyers pay $90 an hour for the medical consulting.  The process works through a real-time link to an Indian doctor by computer. Sims describes a typical case in which a U.S. orthopedic surgeon disputes her client's claims in an American courtroom.

"I have my computer with me, and my doctor in India is listening to the orthopedic surgeon the whole time, through a microphone plugged into my laptop," said Dorothy Clay Sims. "He is then sending me instant messages saying, "that is not true. It is actually such and such or so and so." And I look down at my screen and I will just say exactly what the doctor said from India."

Offshoring medical consulting sounds like a great idea. At a minimum, the availability of lower-cost service could perhaps introduce some competition to the expert industry and put a little downward pressure on rates. And low-cost medical testimony up front could give lawyers more information early on about the viability of case, perhaps leading to early settlements. Of course, there are also  practical hurdles. For example,  would you videotape a deposition with the doctor -- or could you outsource the entire deposition process to lawyers in India? And I guess you'd have to submit the video deposition in court. 

For a round-up of recent IT outsourcing developments by firm, see this post by Ron Friedmann.

Posted by Carolyn Elefant on July 13, 2007 at 04:05 PM | Permalink | Comments (0)

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