August 31, 2007

Lawsuit 101: Understanding the Process of Business Litigation

We regularly receive requests to explain the process of litigation, which we always communicate (using dialog NOT monologue) to prospective clients during our initial consultation. We hope you will find our lawsuit synopsis helpful. Feel free to forward it to others and remember to contact us with any questions about any business or employment lawsuit.

The litigation process generally involves four (4) phases. The length of each phase varies with the legal and factual complexities of each case.

The initial phase takes place before anything is filed in court. The attorney meets with the client to determine the facts of the claim being advanced by the client or the client's defense to a claim brought by another. In either case, it is essential that the client meet with the attorney at the earliest opportunity as valuable rights may be lost by delay. Once the attorney meets with the client, the attorney will review any documents relevant to the matter, research the applicable law and possibly speak to witnesses in order to chart a course which is in the best interest of the client.

1504001%20Gavel%20%26%20Money%202.jpgThe next phase involves the filing of an initial pleading in court. Typically, this is the filing of a Complaint or an Answer to a Complaint. The discovery process begins, which may include serving the other side with written questions, called Interrogatories, obtaining evidence which may be in the possession of the adversary or some other party and taking depositions, the oral questioning of parties and witnesses.

Once this phase has been completed, the case is ready to be tried. A trial may be in front of a Jury or a Judge and can vary in length depending upon the number of witnesses and quantity of exhibits offered. Under our system of jurisprudence, the plaintiff has the burden of proof. The plaintiff's case goes first. The defendant then has an opportunity to respond to the plaintiff's case with witnesses and evidence to support the defense. If the defendant has brought a Cross-Complaint, it is tried in the same manner. Otherwise, the plaintiff has an opportunity to put on a rebuttal case to counter the evidence offered by the defendant and, on occasion, a defendant may offer a sur-rebuttal to reply to the evidence offered by plaintiff in the rebuttal case.

The final phase of litigation involves the post-trial matters including motions to vacate or correct the judgment, appeals and efforts to collect on the judgment.

August 23, 2007

Court of Appeal to Santa Monica: Your Litigation Waived Your Right to Arbitration in Lawsuit

The case of City of Santa Monica v. Baron & Budd, B187425, simply stated, is a case about legal fees and retainer agreements. The City of Santa Monica hired attorneys, discharged attorneys and hired more attorneys. The retainer agreement in dispute included contingent fee provisions. It also had a clause stating that the attorneys were entitled to a reasonable fee if the contingent fee provisions could not be enforced. Further it stated that the amount of the fee was subject to arbitration before JAMS (Judicial Arbitration and Mediation Services).

The next 5 to 10 paragraphs could be spent describing the legal wrangling of a city government and 3 law firms. Instead I will just give the highlights.

425184_grant%20%2450.jpg Around the time the City of Santa Monica was resolving/settling the legal matter which caused it to hire outside counsel, the attorneys and the city realized there were disagreements about calculations and fees to be paid to outside counsel.

With no resolution at hand the city sued for declaratory relief in May 2004. It later amended the complaint to allege breach of fiduciary duties. Coming as no surprise, the lawyers cross-complained for their fees.

In May 2005, Los Angeles Superior Court Judge David Minning denied the city’s motion for summary adjudication. Five months later, the city moved to compel arbitration. Judge Minning denied the motion.

Court of Appeal Justice Robert Mallano said the trial judge was correct.

He cited the 17-month delay between the filing of the suit and the demand for arbitration, that the parties had extensively litigated the issues that would be the subject of the arbitration, and the prejudice the law firms would have suffered as a result of having to provide the city with more discovery than would have been required had the case been assigned to arbitration at the outset.

Los Angeles Superior Court Judge Frank Jackson, sitting on assignment, concurred in the opinion, while Justice Frances Rothschild concurred separately.

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August 9, 2007

Corinthian Schools Denies Wrongdoing and Settles Lawsuit with Attorney General Jerry Brown for $6.5 Million

Corinthian Schools Inc. and Titan Schools Inc., subsidiaries of Santa Ana-based Corinthian Colleges Inc have reached a settlement with California Attorney General Jerry Brown to refund $4.3 million to former students, and pay $1.5 million for student debt cancellation. Additionally, Corinthian will pay $700,000 in civil penalties.

821422%20california_flag.jpg According to Hoovers.com (a D&B company), Corinthian had sales of $966.7 Million with net income of $41.5 Million in 2006. Their website states that they have 94 schools in 24 states with 65,000 students.

Corinthian is also required to cease offering 11 courses for 18 months, including the Pharmacy Technician program in Anaheim.


Here is Corinthian’s statement: "We disagree with the Attorney General's conclusions, but we are pleased to have this matter behind us. The agreement is not evidence of wrongdoing, and the company specifically denied any wrongdoing as part of the settlement. We are fully committed to providing quality education and job placement services for students and to being in compliance with state law and regulation."

Sometimes, it can be better to create a settlement which will allow your company to just get back to business. Would prolonged litigation have brought about a better result for Corinthian? We’ll never know. And considering that $6.5 Million is equal to about 2 months of Corinthian’s 2006 profit, this settlement was likely to be the best scenario in that it allows the school to focus on its business which can easily accommodate this “bump in the road.”

Trying to operate a business embroiled in litigation is like trying to play tennis in handcuffs. You may win a few points but you’re likely to lose the match.

Read more about the Value of Time and the true cost of business litigation.

August 2, 2007

VidiLife.com (LiveUniverse) Loses Antitrust Case Against MySpace.com

Can a social networking site like MySpace.com prevent its users from posting links to other competing social networking websites? According to U.S. District Court Judge A. Howard Matz, it can. In his ruling Judge Matz threw out the antitrust claim against MySpace.com declaring that the social networking site isn't required to display competitors' Web page links.

According to court documents, LiveUniverse alleges that MySpace prevents users from watching vidiLife videos that they or other users previously loaded onto their MySpace webpage, deletes references to vidiLife.com on MySpace and prevents MySpace users from mentioning “vidiLife.com.”

609312_dotcom%20FF.jpgThis may be the first antitrust case to address whether a social networking site can prevent its users from posting certain links. Representing MySpace, attorney Richard Stone stated ”MySpace doesn't prevent anyone from going to their competitors' sites, but, we have no responsibility to build a moving walkway to a competitor's store." Stone continued “And by including those links, MySpace would be risking exposure if sites such as vidiLife had any inappropriate content. “

LiveUniverse, owner of vidiLife.com was founded by Brad Greenspan. Mr. Greenspan was the founder eUniverse the company that created MySpace.com which was sold to Rupert Murdoch’s News Corp for $580 Million. According to Business Week, in that transaction Greenspan pocketed more than $47 Million.

Another VERY important aspect of this lawsuit is the lawsuit timeline.

The suit was filed on November 2, 2006. On November 22 MySpace filed a motion to dismiss LiveUniverse’s complaint. The court held a hearing on December 18 in which it granted that motion, but gave LiveUniverse an opportunity to clarify one premise of the complaint.

On January 16, 2007 LiveUniverse filed a First Amended Complaint (FAC). On February 5, MySpace filed the motion to dismiss the FAC.

The court held a hearing on March 5 and presented its decision on June 4, 2007.
In only seven months, this lawsuit went from initial complaint to resolution. Lawsuits do not have to drag on for years while depleting the assets of both parties. As was done here, good lawyers look for, create and act on opportunities to move toward resolution.

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