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By Richard A. Epstein

The 2010 enactment of the Durbin Amendment as part of the Dodd-Frank Act set into motion an extensive round of administrative rulemaking and litigation that may well have run its course with the recent unanimous opinion of the Circuit Court for the District of Columbia, written by Judge David Tatel for himself and Senior Judges Harry Edwards and Steven Williams in NACS (formerly National Association of Convenience Stores) v. Board of Governors of the Federal Reserve. The outcome of the case was to sustain the decision of the Federal Reserve to allow the banks that issue debit cards to recover $0.21 cent on average in debit card transitions. In so doing, the Court reversed the decision below by Judge Richard Leon, which was openly contemptuous of the arguments of the Fed that carried undue weight in the Court of Appeal. It is a long saga in which no one is covered with glory. To set this in context, it is therefore regrettably necessary to review some of Durbin's tangled history.

The Durbin Amendment The debit card was one of the great commercial innovations in American banking. Starting from a standing start in 1995, it managed by 2009 to become the dominant form of payment in the United States, eclipsing the venerable credit card both in number of transactions and in dollars transferred. One might have thought that this enviable record of success would have won plaudits across the board, for no program can enjoy such success if it does not create net gains to all the parties who contribute to the system.

In this case, those parties numbered five. In the middle of the picture lay the credit card companies, chiefly Visa and MasterCard, which orchestrate transactions between two sides of the market. On the one side lie the credit card holders who received their cards from issuing banks. The key feature of the pre-Durbin arrangement was that the debit card holder paid no monthly or swipe fee for the use of the card. Instead the cost of servicing and recruiting the debit card holders was funded by an interchange fee that was paid to the issuing banks from the retail merchants who accepted the cards. These merchants also paid a fee to the acquiring banks that serviced their accounts, and a smaller fee to the credit card companies that orchestrated the transaction from the middle.

In NACS, Judge Tatel accepted the Durbin fairy tale that this entire arrangement reeked of market failure because of the high level of interchange fee charged for the occasion. But at no point does he explain what the correct fee ought to be, for his only account of market failure is that merchants discovered that they could not do without the card, from which, however, it does not follow that they will pay anything to get it. Rather, what happened was that the credit card companies in discharge of their contractual obligations set the interchange fees at a level that allowed all parties to prosper. The use of that payment in these two-sided markets in effect put the cost of running the system on the parties for whom demand was inelastic (i.e., relatively unresponsive to price changes). The lower prices offered to cardholders thus increased the number of card users, which in turn allowed the fixed costs of running the system to be amortized over a larger customer base. And those interchange dollars funded the special benefit packages that kept debit cardholders coming into the system. In a word, the system was not broken, and the Durbin Amendment did not fix it.

More specifically, the Amendment introduced its own novel inefficiencies by its government command. The relevant text has to be set out in full in order to understand the bizarre nature of the Circuit Court's decision. It reads as follows:

Section 920 (2) Reasonable interchange transaction fees The amount of any interchange transaction fee that an issuer may receive or charge with respect to an electronic debit transaction shall be reasonable and proportional to the cost incurred by the issuer with respect to the transaction.

In prescribing regulations under paragraph (3)(A), the Board shall--

(4) (B) distinguish between--

(i) the incremental cost incurred by an issuer for the role of the issuer in the authorization, clearance, or settlement of a particular electronic debit transaction, which cost shall be considered under paragraph (2); and

(ii) other costs incurred by an issuer which are not specific to a particular electronic debit transaction, which costs shall not be considered under paragraph (2).

The correct reaction to this sorry provision is that it is both clear and misguided. The initial material in subsection (2) is deeply uninformative because setting fees that are "reasonable and proportional to the cost incurred by the issuer with respect to the transaction" gives no hint of the horror to come. That capacious phrase clearly covers all costs, both variable and fixed, associated with the transaction. On this view, the provision does not put any constraint on the fees that could be charged above and beyond those found in a competitive market, which would lead to that result.

The entire sense of the provision takes on a darker meaning in the light of Section (4)(B), which gives a definition that is far more restrictive than the general statement above. It divides the world into two kinds of costs and makes it clear that only the "authorization, clearance, or settlement" costs for a particular electronic transaction should be considered under paragraph (2) while all other costs are removed.

Judicial Obscurantism in the Court of Appeals It does not take a genius to conclude that the listing of these three transaction-specific costs excludes all the overall costs needed to design, operate and maintain the system. By design, those were to be cast back on the issuing banks to recover from their own debit card customers. Try as one might, it is not possible to see any gaps in the statutory structure. The only way in which this could have been made clearer is to have inserted the word "all" before "other costs" in paragraph (ii). But it is hard to resist the conclusion that Senator Durbin, perverse though he be, knew exactly what he was doing with his own Amendment. The Senator was devoted beyond all measure to Walgreen's and other retailers and equally intransigent with respect to the banks, so it is a virtual certainty that he meant what he said--and said what he meant. The retailers had excellent lawyers to help Senator Durbin along his appointed path. Judge Tatel called the Durbin Amendment a badly drafted statute, but that charge is surely wrong. Incompetently conceived, surely, but accurately drafted, regrettably, is a much better account of Durbin's regulatory calamity.

At this point, the contrast between the learned obscurity of Judge Tatel and the blunt clarity of Judge Leon's opinion below is a sight to behold. The key argument of Judge Tatel is that this text could "easily" be regarded as ambiguous so that it is correct for the Board to allow "issuers to recover, equipment, hardware, software and labor costs since [e]ach transaction uses the equipment, hardware, software and associated labor, and no particular transaction can occur without incurring these costs." Judge Leon rightly dismissed that claim in one word: "Please."

Leon's terse view of statutory interpretation makes infinitely more sense than the tendentious reading Judge Tatel, who relied on this identical passage to incorporate the semiotics of Jacques Derrida or the post-structuralism of Michel Foucault into modern administrative law. Finding, or inventing, ambiguity where none existed, he gave the views of the Federal Reserve undeserved prominence under the regrettable Chevron doctrine that has courts defer to agencies when statutes are found ambiguous.

To conjure up that needed ambiguity, Judge Tatel launches into an extended, prolix, and tedious discussion of restrictive and nonrestrictive clauses, which, he claims, allows the Fed to infer this third class of expenses lurking in the shadows that the Fed by rule recover through debit interchange.

We are in an ethereal world. These unspecified objects might be called "fixed, variable costs". But suppose that these costs, like the Loch Ness monster, do exist. It nonetheless remains true that the impatient Judge Leon offers the only tenable reading of the Durbin Amendment: these fixed costs of running the computer network were excluded along with every other business cost needed to keep the program going, without which any particular transactions would not happen.

Economic Redemption, of Sorts As a matter of statutory interpretation, Judge Tatel's opinion is an intellectual train wreck. But functionally, it supplies a most welcome result, because of the hopelessly confiscatory nature of the Durbin Amendment, which on its face would have make made it impossible for the banks to recover their extensive invested costs in their operational system through interchange, without supplying them any alternative. To be sure, there was extensive talk of how banks should charge their own customers monthly or swipe fees. But those were never collected, after they were buried in an avalanche of abuse, starring the ubiquitous Senator Durbin who wrote the heads of Bank of America and Well-Fargo gratuitously nasty letters asking that they rescind the fees that only months before were supposed to be their salvation.

The net result was that the banks could not recover their invested capital sunk in these debit card systems. This whole statutory system borders on the farcical because it overlooks its long-term stability and success. In many places I have urged that the entire statute should be struck down as a confiscatory taking. That decision was resisted in the earlier and misguided 2011 decision of the Eighth Circuit in TCF National Bank v. Bernanke (on which I worked as a consultant to TCF through the trial stage) that suggested that the issuing banks could make up their lost revenue somehow by charging their own customers, which never happened.

As an economic matter, it is clear that the higher the allowable debit interchange fees, the less disruptive the Durbin Amendment is to the operation of the debit card interchange market, and in that sense at least the decision in NACS performs a useful public service that was no part of its intention. Indeed, I suspect--or just hope--that Judge Tatel's misguided bit of statutory interpretation will not be challenged down the road.

Remember that the panel decision was unanimous, and it may prove unlikely that either the entire District of Columbia Court of Appeal or the Supreme Court will have any appetite to untangle the tortured arguments that persuaded so distinguished a panel of the Court of Appeals. And if they did look at this statute, they should start by revisiting the constitutional issues from TCF, which were decided on an assumption that has proved false, namely, that the debit card companies can recover their lost fees from their own customers.

That seems highly unlikely at present, so at present the best achievable resolution for this issue is a large dose intellectual bed rest after all the legal twists and turns of the past four years. But who am I to say? I thought that the chances that Judge Leon's decision would be overturned were close to zero. And never in my most fevered moment could I have imagined the grotesque and improbable way in which the Court of Appeals saved the bacon of the Federal Reserve, and yes, of the issuing banks. Wonders never cease.

Our latest column from Professor Richard Epstein:

The Improbable Fate of the Durbin Amendment in the Circuit Court of Appeals for the District of Columbia
A Learned Court Makes Intellectual Hash of an Ill-Conceived Statute

The 2010 enactment of the Durbin Amendment as part of the Dodd-Frank Act set into motion an extensive round of administrative rulemaking and litigation that may well have run its course with the recent unanimous opinion of the Circuit Court for the District of Columbia, written by Judge David Tatel for himself and Senior Judges Harry Edwards and Steven Williams in NACS (formerly National Association of Convenience Stores) v. Board of Governors of the Federal Reserve. The outcome of the case was to sustain the decision of the Federal Reserve to allow the banks that issue debit cards to recover $0.21 cent on average in debit card transitions. In so doing, the Court reversed the decision below by Judge Richard Leon, which was openly contemptuous of the arguments of the Fed that carried undue weight in the Court of Appeal. It is a long saga in which no one is covered with glory. To set this in context, it is therefore regrettably necessary to review some of Durbin's tangled history.

The Durbin Amendment The debit card was one of the great commercial innovations in American banking. Starting from a standing start in 1995, it managed by 2009 to become the dominant form of payment in the United States, eclipsing the venerable credit card both in number of transactions and in dollars transferred. One might have thought that this enviable record of success would have won plaudits across the board, for no program can enjoy such success if it does not create net gains to all the parties who contribute to the system.

In this case, those parties numbered five. In the middle of the picture lay the credit card companies, chiefly Visa and MasterCard, which orchestrate transactions between two sides of the market. On the one side lie the credit card holders who received their cards from issuing banks. The key feature of the pre-Durbin arrangement was that the debit card holder paid no monthly or swipe fee for the use of the card. Instead the cost of servicing and recruiting the debit card holders was funded by an interchange fee that was paid to the issuing banks from the retail merchants who accepted the cards. These merchants also paid a fee to the acquiring banks that serviced their accounts, and a smaller fee to the credit card companies that orchestrated the transaction from the middle.

In NACS, Judge Tatel accepted the Durbin fairy tale that this entire arrangement reeked of market failure because of the high level of interchange fee charged for the occasion. But at no point does he explain what the correct fee ought to be, for his only account of market failure is that merchants discovered that they could not do without the card, from which, however, it does not follow that they will pay anything to get it. Rather, what happened was that the credit card companies in discharge of their contractual obligations set the interchange fees at a level that allowed all parties to prosper. The use of that payment in these two-sided markets in effect put the cost of running the system on the parties for whom demand was inelastic (i.e., relatively unresponsive to price changes). The lower prices offered to cardholders thus increased the number of card users, which in turn allowed the fixed costs of running the system to be amortized over a larger customer base. And those interchange dollars funded the special benefit packages that kept debit cardholders coming into the system. In a word, the system was not broken, and the Durbin Amendment did not fix it.

More specifically, the Amendment introduced its own novel inefficiencies by its government command. The relevant text has to be set out in full in order to understand the bizarre nature of the Circuit Court's decision. It reads as follows:

Section 920 (2) Reasonable interchange transaction fees The amount of any interchange transaction fee that an issuer may receive or charge with respect to an electronic debit transaction shall be reasonable and proportional to the cost incurred by the issuer with respect to the transaction.

In prescribing regulations under paragraph (3)(A), the Board shall--

(4) (B) distinguish between--

(i) the incremental cost incurred by an issuer for the role of the issuer in the authorization, clearance, or settlement of a particular electronic debit transaction, which cost shall be considered under paragraph (2); and

(ii) other costs incurred by an issuer which are not specific to a particular electronic debit transaction, which costs shall not be considered under paragraph (2).

The correct reaction to this sorry provision is that it is both clear and misguided. The initial material in subsection (2) is deeply uninformative because setting fees that are "reasonable and proportional to the cost incurred by the issuer with respect to the transaction" gives no hint of the horror to come. That capacious phrase clearly covers all costs, both variable and fixed, associated with the transaction. On this view, the provision does not put any constraint on the fees that could be charged above and beyond those found in a competitive market, which would lead to that result.

The entire sense of the provision takes on a darker meaning in the light of Section (4)(B), which gives a definition that is far more restrictive than the general statement above. It divides the world into two kinds of costs and makes it clear that only the "authorization, clearance, or settlement" costs for a particular electronic transaction should be considered under paragraph (2) while all other costs are removed.

Judicial Obscurantism in the Court of Appeals It does not take a genius to conclude that the listing of these three transaction-specific costs excludes all the overall costs needed to design, operate and maintain the system. By design, those were to be cast back on the issuing banks to recover from their own debit card customers. Try as one might, it is not possible to see any gaps in the statutory structure. The only way in which this could have been made clearer is to have inserted the word "all" before "other costs" in paragraph (ii). But it is hard to resist the conclusion that Senator Durbin, perverse though he be, knew exactly what he was doing with his own Amendment. The Senator was devoted beyond all measure to Walgreen's and other retailers and equally intransigent with respect to the banks, so it is a virtual certainty that he meant what he said--and said what he meant. The retailers had excellent lawyers to help Senator Durbin along his appointed path. Judge Tatel called the Durbin Amendment a badly drafted statute, but that charge is surely wrong. Incompetently conceived, surely, but accurately drafted, regrettably, is a much better account of Durbin's regulatory calamity.

At this point, the contrast between the learned obscurity of Judge Tatel and the blunt clarity of Judge Leon's opinion below is a sight to behold. The key argument of Judge Tatel is that this text could "easily" be regarded as ambiguous so that it is correct for the Board to allow "issuers to recover, equipment, hardware, software and labor costs since [e]ach transaction uses the equipment, hardware, software and associated labor, and no particular transaction can occur without incurring these costs." Judge Leon rightly dismissed that claim in one word: "Please."

Leon's terse view of statutory interpretation makes infinitely more sense than the tendentious reading Judge Tatel, who relied on this identical passage to incorporate the semiotics of Jacques Derrida or the post-structuralism of Michel Foucault into modern administrative law. Finding, or inventing, ambiguity where none existed, he gave the views of the Federal Reserve undeserved prominence under the regrettable Chevron doctrine that has courts defer to agencies when statutes are found ambiguous.

To conjure up that needed ambiguity, Judge Tatel launches into an extended, prolix, and tedious discussion of restrictive and nonrestrictive clauses, which, he claims, allows the Fed to infer this third class of expenses lurking in the shadows that the Fed by rule recover through debit interchange.

We are in an ethereal world. These unspecified objects might be called "fixed, variable costs". But suppose that these costs, like the Loch Ness monster, do exist. It nonetheless remains true that the impatient Judge Leon offers the only tenable reading of the Durbin Amendment: these fixed costs of running the computer network were excluded along with every other business cost needed to keep the program going, without which any particular transactions would not happen.

Economic Redemption, of Sorts As a matter of statutory interpretation, Judge Tatel's opinion is an intellectual train wreck. But functionally, it supplies a most welcome result, because of the hopelessly confiscatory nature of the Durbin Amendment, which on its face would have make made it impossible for the banks to recover their extensive invested costs in their operational system through interchange, without supplying them any alternative. To be sure, there was extensive talk of how banks should charge their own customers monthly or swipe fees. But those were never collected, after they were buried in an avalanche of abuse, starring the ubiquitous Senator Durbin who wrote the heads of Bank of America and Well-Fargo gratuitously nasty letters asking that they rescind the fees that only months before were supposed to be their salvation.

The net result was that the banks could not recover their invested capital sunk in these debit card systems. This whole statutory system borders on the farcical because it overlooks its long-term stability and success. In many places I have urged that the entire statute should be struck down as a confiscatory taking. That decision was resisted in the earlier and misguided 2011 decision of the Eighth Circuit in TCF National Bank v. Bernanke (on which I worked as a consultant to TCF through the trial stage) that suggested that the issuing banks could make up their lost revenue somehow by charging their own customers, which never happened.

As an economic matter, it is clear that the higher the allowable debit interchange fees, the less disruptive the Durbin Amendment is to the operation of the debit card interchange market, and in that sense at least the decision in NACS performs a useful public service that was no part of its intention. Indeed, I suspect--or just hope--that Judge Tatel's misguided bit of statutory interpretation will not be challenged down the road.

Remember that the panel decision was unanimous, and it may prove unlikely that either the entire District of Columbia Court of Appeal or the Supreme Court will have any appetite to untangle the tortured arguments that persuaded so distinguished a panel of the Court of Appeals. And if they did look at this statute, they should start by revisiting the constitutional issues from TCF, which were decided on an assumption that has proved false, namely, that the debit card companies can recover their lost fees from their own customers.

That seems highly unlikely at present, so at present the best achievable resolution for this issue is a large dose intellectual bed rest after all the legal twists and turns of the past four years. But who am I to say? I thought that the chances that Judge Leon's decision would be overturned were close to zero. And never in my most fevered moment could I have imagined the grotesque and improbable way in which the Court of Appeals saved the bacon of the Federal Reserve, and yes, of the issuing banks. Wonders never cease.

Chevron-Ecuador and Steven Donziger update - PointOfLaw Forum

Updating our Chevron/Ecuador/Lago Agrio coverage:

Roger Parloff tweets:

Q: what do you get when you lie to the press nonstop for 7 years straight? A: a puff piece in the nyt. Bloomberg BusinessWeek isn't impressed, either.

Meanwhile, an Ecuadorian judge admitted to fraud in the proceedings, and Patton Boggs may be beginning to regret its involvement. A WSJ op-ed notes the success of Chevron refusing to be a corporate defendant that cowers in settlement when faced with fraud.

Chevron is meanwhile opening another front against Ecuador, through enforcement of treaty obligations in international arbitration.

Stratus Consulting retracted its expert report. I had some concern that Chevron was winning solely through bullying: I've seen firsthand litigators use scorched-earth tactics to try to force me to apologize for and retract statements that were true. But then I saw Keker & Van Nest claim that Donziger had stopped paying them and they had to withdraw from their defense of him. This is the surest sign yet that Donziger is in the wrong. As Judge Kaplan's order noted, "this is a case in which those who control whatever money is available to finance litigation efforts have decided not to pay these lawyers." If Donziger had even a smattering of truth on his side, the small chance of a jackpot against Chevron would be more than enough to obtain litigation financing. Yet apparently he is unwilling or unable to provide sufficient reassurance in litigation financier due diligence.

Reuters has had a lot of good coverage, but it's unfortunately all behind a paywall now.

Stratus Consulting and Chevron-Ecuador - PointOfLaw Forum

A Law Week Colorado story (via Amazon Post), looks at the role of Stratus Consulting in the gigantic Lago Agrio verdict, and Chevron's suit against the firm. Greenwire reports that Stratus is currently receiving federal taxpayer money for consulting work.

EEOC "guidance" on use of conviction records - PointOfLaw Forum

Yesterday, the EEOC issued "guidance" (h/t P.T.) on the ability of employers to use conviction and arrest records in hiring. (We'd previously noted EEOC enforcement actions in that regard.) In another example of the Obama Administration's upside-down approach to preemption, the EEOC purports to preempt local laws and regulations forbidding the hiring of criminals if the EEOC believes they contradict Title VII's disparate impact rules; employers are thus in a damned-if-they-do, damned-if-they-don't situation if they follow or don't follow those state laws since they can get sued either way, including massive tort liability for the criminal acts of their employees. And that surely won't have any effect on employers willingness to create jobs, will it?

As Michael Greve notes (h/t OL), administrative agencies have taken advantage of the Chevron and Chevron II framework to evade judicial review of administrative law. This "guidance" outside of formal administrative rule-making is a prime example of that tactic, and validates Greve's argument that "increased judicial conflict over the administrative state" with more rights for the regulated against the regulator needs to be in the offing.

Chevron videos on Lago Agrio - PointOfLaw Forum

Chevron tells its side of the story in a seven-part video series on the Lago Agrio litigation in Ecuador.

Around the web, March 13 - PointOfLaw Forum

  • Who says Wal-Mart v. Dukes ends class actions—or even employment class actions? Certainly not Richard Posner. [McReynolds v. Merrill Lynch; Trask; Karlsgodt; Seyfarth Shaw; Baker Hostetler; WSJ Law Blog; earlier at POL]

  • Richard Epstein on safety nets: "These can cushion individuals from shock in the short run, but the balance is not sustainable in the long run. Too many people climb into the nets, leaving too few productive individuals to support them." [Hoover]
  • Charity auction for Friars Club doesn't deliver on the promised goods of Oscar tickets, so not only refunds purchasers their $27,000 purchase price, but offered them first-class roundtrip airfare and a luxury hotel stay. Not good enough, say plaintiffs, who hire BigLaw firm to sue for $250,000 in damages including "intentional infliction of emotional distress." [Am Law Daily]
  • Mazie Slater attempt to free ride on class action ex-partners litigated doesn't fly with New Jersey federal judge. [Lawyers USA]
  • EDNY magistrate shoots down defendant's request for plaintiff's log-in information for Facebook and other social network sites. Such an overbroad request and intrusion on privacy can deter plaintiffs from bringing legitimate actions, so this is a good ruling. But let's see judges recognize the problems caused by overbreadth in the other direction. [Turkewitz]
  • Coverage of Chevron/Ecuador $18 billion Lago Agrio judgment. Theodore Boutros notes that the ability of Ecaudorian President Rafael Correa to silence a critical newspaper with a criminal libel prosecution demonstrates the corrupt judiciary of Ecuador. [Boutros @ Forbes; Mastro video interview @ WSJ; California Lawyer]
  • For all the complaints about working conditions at Foxconn (which do seem very unpleasant), Chinese workers prefer it to other alternatives. [Atlantic]
  • The Landlord's Tale. [CJ]

Setback for Chevron in fraudulent Ecuador litigation - PointOfLaw Forum

The Second Circuit has ruled that Chevron must challenge the Ecuadorian judgment against it jurisdiction by jurisdiction rather than asking a US court to enjoin enforcement globally. The ruling is likely to have an adverse effect on Chevron's collateral RICO litigation against the plaintiffs. Meanwhile, you wouldn't know anything was fishy going on if you relied on Time Magazine's one-sided coverage instead of Alison Frankel's. [Frankel; Frankel; Frankel; Time; NYLJ; New Yorker via OL]

On November 15th, the U.S. House of Representatives Judiciary Subcommittee on Courts, Commercial and Administrative Law held a hearing on "Recognition and Enforcement of Foreign Judgments." John B. Bellinger, III testified on behalf of the U.S. Chamber of Commerce and the U.S. Chamber Institute for Legal Reform.

As the Chamber's ILR report Confronting the New Breed Of Transnational Litigation: Abusive Foreign Judgments points out "in the last few decades, there has been a significant increase in the number of actions seeking recognition and enforcement of foreign judgments in the United States." Therefore, this hearing was an important forum to set out the concerns and fears of many in the business community who are at risk and could be subject to unfair legal practices abroad. These concerns are especially well founded in light of cases such as Chevron v. Mendoza where the Second Circuit recently vacated the preliminary injunction granted by the district court which blocked enforcement of the $18 billion judgment against Chevron.

John Bellinger explained that "the business community supports recognition and enforcement of appropriate foreign judgments in U.S. courts but wants to avoid abuse of the liberal U.S. legal framework for recognition and enforcement."

He identified what he believes are the "three main goals of the U.S. business community" which are summarized as follows:

First, U.S. businesses want to know that if they obtain a money judgment, whether inside or outside the United States, they will be able to enforce that judgment in jurisdictions where the judgment debtor has assets.

Second, and related to the first goal, U.S. businesses need to understand what exceptions to recognition and enforcement might be invoked by judgment debtors that could undermine the success of the U.S. businesses' pursuit of judgments in their favor, and they need to be able to invoke appropriate exceptions themselves as judgment debtors to ensure that unjust or inappropriate judgments by foreign tribunals are not enforced against them.

And third, U.S. businesses want a predictable international legal regime where courts are obligated to recognize judgments that have been reached in other courts selected by the parties themselves.


Lago Agrio lawyers lobbying state AGs? - PointOfLaw Forum

Of course, it's a standard tactic for plaintiffs' lawyers to lobby media, hedge funds, and government to mau-mau corporations into settling, so this isn't exactly a man-bites-dog scandal, but the New York Times takes a look at this often underreported aspect of big-bucks litigation. Chevron has filed a freedom-of-information request with New York state government. Chevron's Amazon Post website is an admirable attempt to get its side of the story out there (one we'd wish other corporations would emulate when being unfairly attacked by the trial bar).

Relatedly, Miami Herald film critic Glenn Garvin has some trenchant observations about the number of trial-lawyer-funded films masquerading as documentaries.

In other Lago Agrio news, the Second Circuit vacated Judge Kaplan's preliminary injunction against the plaintiffs regarding enforcement of the Ecuador judgment. A request to remove Kaplan from the case was denied.

Patton Boggs v. Chevron dismissed again - PointOfLaw Forum

Judge Kennedy once again dismisses the complaint in Patton Boggs v. Chevron, which was an odd second front against Chevron in the corrupt Ecuadorian Lago Agrio case. Earlier.

Daniel Fisher has details at Forbes. The Chamber of Commerce takes a hard line with these arrangements, but I don't see anything particularly problematic as a public-policy matter with this particular contract, which is really structured as a very high-interest contingent loan with a de facto lien on the settlement proceeds. The funder doesn't control the litigation (unless there's a secret side agreement), and there isn't a conflict of interest.

What does strike me as interesting is the existence of a "non-profit," "Friends of the Defense of the Amazon" in the Chevron litigation, which is a decidedly for-profit endeavour. I find my non-profit project decidedly restrictive in terms of what litigation I can and cannot engage in while complying with tax law, but perhaps the Lago Agrio plaintiffs have been more creative in structuring their entities.

Parloff on Lago Agrio - PointOfLaw Forum

The new Fortune magazine has coverage of the Lago Agrio scandal, and supplements it on the web with Roger Parloff's tale of the latest evidence of Ecuadorian corruption: a judicial opinion that quotes heavily not from any of the court filings, but from an internal plaintiffs' firm memo.

Judge Lewis Kaplan issued a 131-page opinion detailing the corruption of the Ecuadorian judiciary—as well as the plaintiffs' lawyers plans for evading the parts of Ecuadorian law that prohibit excessive attorneys' fees. Click the tags below for recent posts on the subject. [Fisher @ Forbes]

Update: And Chevron moves to disqualify Steven Donziger's attorney. [LNL]

Around the web, February 17 - PointOfLaw Forum

  • Texas asbestos and silicosis reform a success. [LNL; TCJL]
  • Elsewhere in Texas, Governor Perry proposes loser pays and making access to justice easier for smaller cases. [TCJL]
  • Extensive tort reform in Wisconsin undoes some bad Wisconsin Supreme Court decisions, caps punitive damages. [Sachse]
  • Multi-billion dollar judgment in Ecuador in Chevron lawsuit. Chevron has a webpage detailing its response to and summarizing the various collateral litigations, including a Hague international arbitration temporarily prohibiting international enforcement of the judgement.

  • "Climate Policy by Judicial Fiat: How Global Warming Lawsuits Subvert the Democratic Process" [Heritage]
  • Insider trading and the Sentencing Guidelines. [Ribstein]
  • Why is Obama meeting with a group that launders Chinese money? [Carney @ Examiner]
  • DOJ/DHS operation shuts down over 83,000 web sites for no reason. [Blackman]

Around the web, February 10 - PointOfLaw Forum

  • TRO against collection in Chevron Ecuador case. [AP/NYT]
  • Responses to Laurence Tribe (NYT) on the Obamacare lawsuits. [Yoo @ Ricochet; Epstein @ Ricochet; Adler @ Volokh; Tabarrok; Instapundit roundup]
  • Zach Scruggs has already served his time for his role in the Scruggs bribery scandal, but is arguing to undo his guilty plea. [LNL]
  • Putative consumer fraud class action against sugary Nutella spread over the standard "part of a healthy breakfast" language. [WLF; OL link roundup]
  • New York Times and Washington Post continue to lie about Citizens United; the Times editorial page is particularly bad about legal issues, refusing even to issue corrections. [Atlantic; Volokh]
  • More media bias on judicial confirmations. [Whelan]
  • Sara Wexler on the pending Brueswitz v. Wyeth Supreme Court case. [DJCLPP Sidebar]
  • My oral argument in the Ninth Circuit in the Bluetooth class action settlement case. [CCAF]
  • Japanese anime satirizes American legal system. [Siouxsie via OL]

"An Ecuadorian racket" - PointOfLaw Forum

The Washington Times wonders when the Department of Justice will start investigating the fraudulent lawsuit against Chevron. Relatedly, Patton Boggs shames itself by bringing a frivolous suit for "tortious interference" against Chevron.

Around the Web, Feb. 8 - PointOfLaw Forum


And news releases on American Electric Power v. Connecticut: 



Around the web, February 5 - PointOfLaw Forum

  • Tenth Circuit affirms exclusion of junk-science expert in unreported opinion. [Graves v. Mazda Motor Corp. via ABA Litigation News]
  • Taco Bell aggressively defends against consumer-fraud suit; Chevron files RICO suit over trial lawyer fraud. On the other hand, Illinois Central RR's battle against asbestos fraud perhaps more expensive than simply accepting victimization—but only if one doesn't consider the deterrent effect. [Bulletproof Blog; AP/law.com; WSJ Law Blog; LNL]
  • MGA Entertainment sues Mattel, alleging a strategy to "litigate MGA to death." One sympathizes, but the Supreme Court has pretty much all but ruled out antitrust liability for overaggressive litigation. [CNBC via ABAJ]
  • Dan Snyder sues Washington City Paper and its owner over negative story. But why is the Simon Wiesenthal Center getting involved? [WaPo; WaPo]
  • Chamber of Commerce recognizes that Obama executive order on outdated/burdensome regulation doesn't apply to much of the regulatory state. [WSJ ($)]
  • Racist and violent rhetoric at a political rally, but it was Common Cause, rather than the Tea Party, so don't expect mainstream media coverage. [WSJ; Jennifer Rubin]
  • Bill Childs is looking for examples of usage of historians as experts. [Torts Prof]

More fraud in Lago Agrio? - PointOfLaw Forum

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