Of all the problems facing the United States right now, none are more important than health care.

President Obama says rising costs are driving huge federal budget deficits that imperil our future, and that there is enough waste and fraud in the system to pay for health care reform if it was eliminated. Jan Schlichtmann

At the center of both issues is Medicare, the government insurance program that provides health care to 46 million elderly and disabled Americans. But it also provides a rich and steady income stream for criminals who are constantly finding new ways to steal a sizable chunk of the half trillion dollars that are paid out each year in Medicare benefits.

In fact, Medicare fraud - estimated now to total about $60 billion a year - has become one of, if not the most profitable, crimes in America.

This story may raise your blood pressure, along with some troubling questions about our government’s ability to manage a medical bureaucracy.

(Source: CBS News)

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Of all the problems facing the United States right now, none are more important than health care.

President Obama says rising costs are driving huge federal budget deficits that imperil our future, and that there is enough waste and fraud in the system to pay for health care reform if it was eliminated. Jan Schlichtmann

At the center of both issues is Medicare, the government insurance program that provides health care to 46 million elderly and disabled Americans. But it also provides a rich and steady income stream for criminals who are constantly finding new ways to steal a sizable chunk of the half trillion dollars that are paid out each year in Medicare benefits.

In fact, Medicare fraud - estimated now to total about $60 billion a year - has become one of, if not the most profitable, crimes in America.

This story may raise your blood pressure, along with some troubling questions about our government’s ability to manage a medical bureaucracy.

(Source: CBS News)

Get the latest Legal Headline News with our free email newsletter!

Scott Drake interviews Columbia Law Professor Conrad Johnson (Video)

(NYT) While law schools added about 3,000 seats for first-year students from 1993 to 2008, both the percentage and the number of black and Mexican-American law students declined in that period, according to a study by a Columbia Law School professor.

What makes the declines particularly troubling, said the professor, Conrad Johnson, is that in that same period, both groups improved their college grade-point averages and their scores on the Law School Admission Test, or L.S.A.T.

“Even though their scores and grades are improving, and are very close to those of white applicants, African-Americans and Mexican-Americans are increasingly being shut out of law schools,” said Mr. Johnson, who oversees the Lawyering in the Digital Age Clinic at Columbia, which collaborated with the Society of American Law Teachers to examine minority enrollment rates at American law schools.

However, Hispanics other than Mexicans and Puerto Ricans made slight gains in law school enrollment.

The number of black and Mexican-American students applying to law school has been relatively constant, or growing slightly, for two decades. But from 2003 to 2008, 61 percent of black applicants and 46 percent of Mexican-American applicants were denied acceptance at all of the law schools to which they applied, compared with 34 percent of white applicants.

“What’s happening, as the American population becomes more diverse, is that the lawyer corps and judges are remaining predominantly white,” said John Nussbaumer, associate dean of Thomas M. Cooley Law School’s campus in Auburn Hills, Mich., which enrolls an unusually high percentage of African-American students.

Mr. Nussbaumer, who has been looking at the same minority-representation numbers, independently of the Columbia clinic, has become increasingly concerned about the large percentage of minority applicants shut out of law schools.

“A big part of it is that many schools base their admissions criteria not on whether students have a reasonable chance of success, but how those L.S.A.T. numbers are going to affect their rankings in the U.S. News & World Report,” Mr. Nussbaumer said. “Deans get fired if the rankings drop, so they set their L.S.A.T. requirements very high.

“We’re living proof that it doesn’t have to be that way, that those students with the slightly lower L.S.A.T. scores can graduate, pass the bar and be terrific lawyers.”

Margaret Martin Barry, co-president of the Society of American Law Teachers, said that while she understood the importance of rankings, law schools must address the issue of diversity. “If you’re so concerned with rankings, you’re going to lose a whole generation,” she said.

The Columbia study found that among the 46,500 law school matriculants in the fall of 2008, there were 3,392 African-Americans, or 7.3 percent, and 673 Mexican-Americans, or 1.4 percent. Among the 43,520 matriculants in 1993, there were 3,432 African-Americans, or 7.9 percent, and 710 Mexican-Americans, or 1.6 percent. The study, whose findings are detailed at the Web site A Disturbing Trend in Law School Diversity, relied on the admission council’s minority categories, which track Mexican-Americans separately from Puerto Ricans and Hispanic/Latino students.

“We focused on the two groups, African-Americans and Mexican-Americans, who did not make progress in law school representation during the period,” Mr. Johnson said. “The Hispanic/Latino group did increase, from 3.1 percent of the matriculants in 1993, to 5.1 percent in 2008.”

Mr. Johnson said he did not have a good explanation for the disparity, particularly since the 2008 LSAT scores among Mexican-Americans were, on average, one point higher than those of the Hispanics, and one point lower in 1993.

Over all, Mr. Johnson said, it is puzzling that minority enrollment in law schools has fallen, even since the United States Supreme Court ruled in 2003, in Grutter v. Bollinger, that race can be taken into account in law school admissions because the diversity of the student body is a compelling state interest.

“Someone told me that things had actually gotten worse since the Grutter decision, and that’s what got us started looking at this,” Mr. Johnson said. “Many people are not aware of the numbers, even among those interested in diversity issues. For many African-American and Mexican-American students, law school is an elusive goal.”

Under Sarbanes Oxley regulations, CEOs and CFOs of publicly traded companies in the United States can now be held criminally liable for the accuracy of financial information, yet these officers usually have little control or knowledge of how this information is gathered and analyzed. This indicates a system that increases transparency, accuracy and helps streamline financial; reporting could be quite popular.

 Scott Drake interviews Patrick Quinlan the president of Rivet Software. Rivet has created such a product. Rivet Software clients include securities companies, mutual funds, publicly traded companies of all sizes and agencies of the federal government.

Connie Barton and Donna Kendall both have something in common:  they stood up to one of the largest and most powerful drug companies in court – and won.  Today, in Philadelphia, PA, these two verdicts against Wyeth (a division of Pfizer) over its hormone therapy drugs (Premarin and Prempro) were released.  In each case, the jury awarded these women significant compensatory and punitive damages ranging from more than $34 million to $78 million.  And this is just the tip of the iceberg as Wyeth faces lawsuits from more than 10,000 additional women who also claim that Wyeth’s drugs gave them breast cancer.  A third punitive verdict that was awarded in 2007 in the Daniel v. Wyeth case was scheduled to be released today as well.  However, Wyeth was granted emergency relief this morning to keep the third verdict sealed. 

(Philadelphia Inquirer) The lawyers who won $103 million in two jury verdicts announced Monday against Pfizer Inc. relied as much on their storytelling ability as their knowledge of the law.

Most plaintiffs’ lawyers are men, but two prominent lawyers in these cases are women: Zoe Littlepage of Houston and Esther Berezofsky, whose firm is in Philadelphia.

On Monday, a jury in Philadelphia Common Pleas Court awarded $28 million in punitive damages to Donna Kendall of Decatur, Ill., after finding that Pfizer’s Prempro hormone-replacement therapy caused her breast cancer.

In a separate decision the same day, a judge in that same court unsealed a verdict reached earlier this year that awarded $75 million in punitive damages to another Illinois resident, Connie Barton, over her Prempro-linked breast cancer.

Pfizer said the verdicts were not supported by the evidence and vowed to continue fighting.

Tobis MilroodFor Tobias Millrood, Kendall’s lawyer, the high-stakes litigation began seven years ago with the release of a study suggesting that a popular hormone-replacement therapy might raise the risk of breast cancer.

Millrood, then only 32, filed his first lawsuit the next day alleging that the drug had caused breast cancer.

Since then, he has come to represent 1,000 plaintiffs in the litigation, which includes about 10,000 total cases against Wyeth and Upjohn, alleging that their drugs had put his clients’ lives at risk. Both companies were acquired by Pfizer.

The lawyers in these cases belong to a small legal fraternity who earn their livings suing pharmaceutical companies. Because they typically charge their clients nothing, they take on huge financial risk. They finance the costs of depositions, expert testimony, and investigations that can run into millions of dollars.

But the payoff can be huge. Lawyers’ fees in such litigation range between 30 percent and 40 percent of the total award.

“These are very, very high-risk cases and there are not a lot of firms that have the resources or the will” to take them on, said Millrood, a partner in the firm of Pogust Braslow & Millrood L.L.C. of Conshohocken.

Since graduating from the University of Tulsa College of Law, he has tried some 20 cases to verdict and settled several others shortly before or during trial.

For most jurors, pharmaceutical litigation is a complex terra incognita, where scientific certainty is often unattainable and drawing an irrefutable causal link between the taking of a medication and the onset of disease nearly impossible.

In the Prempro case, Millrood maintained to the jury that the hormones in the drug stimulated tissue growth that eventually morphed into cancer, and he pointed to statistical studies showing an elevated occurrence of cancer among women who took the drugs.

He and the other trial team members also sought to undermine the credibility of Pfizer witnesses.

Ron Rosenkranz, of Finkelstein & Partners, of Newburgh, N.Y., who served as cocounsel along with Millrood for Donna Kendall, said jurors expressed great skepticism about the Wyeth and Upjohn witnesses in a meeting after the punitive-damages verdict.

Rosenkranz, 63, described the trial as physically punishing - he had a kidney replaced four years ago and earlier had triple-bypass surgery - yet he said the results were gratifying.

For Littlepage, the courtroom is a theater, the jury is her audience, and props are part of the act.Zoe Littlepeage

In some of the hormone-replacement cases, for example, she filled a fishbowl with pieces of paper that included details about Wyeth studies on the drugs. She then asked a Wyeth witness to pick a piece of paper randomly from the fishbowl and read what was on it.

Littlepage asked questions about each study picked, driving home the point that no matter what the witness selected, no study adequately investigated links between the drugs and breast cancer.

“She’s a master of translating very complex concepts into visuals that are readily comprehensible and that juries react to,” said Berezofsky, who also was a lawyer for Barton and is the liaison for lawyers in Prempro cases being tried in New Jersey.

(Pfizer continues to say it did the necessary research and disclosed risks to patients.)

Littlepage’s tactics occasionally have annoyed defense lawyers, prompting one to say during a trial: “I can’t compete with Zoe and her toys.”

Courtroom litigation can be rough, but Littlepage enjoys it.

“My style is theatrical and dramatic but not emotional,” she said. “I just have a lot of fun trying lawsuits.”

Esther BerezofskyBerezofsky, who lives in Cherry Hill, says perseverance is in her genes. Her mother was a resistance fighter during the Holocaust. One of Esther Berezofsky’s first jobs was promoting community mental-health projects in Detroit.

“I come from a family who resisted against and fought oppression, so in my life now, I work or represent people who need some kind of advocacy,” she said.

Her firm, Williams Cuker Berezofsky, is based in Center City and employs 14 lawyers.

A graduate of Wayne State University and Rutgers Law School, she also has successfully represented families in Toms River, N.J., who claimed that Ciba Specialty Chemicals Corp., Union Carbide Corp., and United Water Resources Inc. caused their children’s cancer. The companies did not admit fault in those cases.

Scott Drake talks with Barton’s attorney Zoe Littlepage

Jan Schlichmann discusses the claims and the similarities to his Procrit case.

The Indiana Attorney General’s Office joined in a lawsuit along with 13 other states against Amgen Inc., alleging the pharmaceutical manufacturer illegally promoted its anemia-treatment drug Aranesp by offering physicians kickbacks and other illegal inducements to prescribe it.

The multi-state investigation and lawsuit was initiated by a company whistleblower, a former sales and marketing professional in California, who came forward about alleged illegal marketing practices.

Under the federal False Claims Act, a whistleblower who exposes Medicaid fraud is able to share in any resulting monetary damages, through what is known as “qui tam” (pronounced “key tam”) litigation. In this qui tam case, a private individual filed suit in 2006 on behalf of the government to recover public funds wrongly paid due to health care fraud. The case remained under seal while the states and the federal government investigated.

“Today, we are intervening and joining the case as plaintiffs,” Indiana Attorney General Greg Zoeller said. “Our office wants to encourage whistleblowers to come forward so that pharmaceutical-marketing fraud is exposed and public dollars wrongly paid out are recouped.”

Named as defendants in the multi-state action are: Amgen Inc., based in Thousand Oaks, Calif., that manufactures Aranesp; International Nephrology Network or INN, a group-purchasing organization based in Frisco, Tex.; ASD Healthcare, a medical wholesaler also based in Frisco, Tex.; and its parent companies, AmerisourceBergen Specialty Group and Amerisource Bergen Corp., based in Chesterbrook, Pa.

The Indiana Medicaid Fraud Control Unit or the MFCU – part of Attorney General Zoeller’s office – is handling the case in Indiana. Other states intervening as plaintiffs in the suit are California, Delaware, Florida, Hawaii, Illinois, Louisiana, Massachusetts, Michigan, Nevada, New Hampshire, New York, Tennessee, Virginia and the District of Columbia. The states today officially joined the lawsuit, filed in U.S. District Court for the District of Massachusetts, following a federal-state investigation.

Specifically, the MFCU alleges:

-The defendants allegedly marketed an unapproved monthly dosing regimen of Aranesp for use in treating patients with chronic kidney disease who are not receiving dialysis.

-Since 2002, Amgen allegedly offered providers free “overfill” vials of Aranesp. The complaint alleges that providers were encouraged by the defendants to bill Medicaid for the free Aranesp product by submitting ineligible drug-reimbursement claims. This allegedly was intended to increase market share over a competing anemia drug, Procrit. The fraudulent reporting also meant the state Medicaid programs received rebate amounts lower than those to which they were entitled.

-Amgen, International Nephrology Network and ASD Healthcare allegedly conspired to offer illegal kickbacks to medical providers, such as paying sham “honoraria” fees to physicians to attend all-expense-paid meetings in order to increase Aranesp sales.

As a result, Medicare and Medicaid programs paid thousands of ineligible claims on Aranesp prescriptions potentially totaling millions of dollars, the complaint alleges.

Betweeen October 2005 to October 2009, Indiana Medicaid has paid $10,345,966.24 in total claims for Aranesp. The number and value of the claims that were ineligible in Indiana has not been determined, according to the MFCU.

Aranesp (darbepoetin alfa) is an injectable drug developed and manufactured by Amgen to stimulate and boost production of red blood cells in the body. Approved by the FDA in 2001 to treat anemia from chronic renal failure and in 2002 to treat chemotherapy-induced anemia, Aranesp has been a lucrative product for Amgen, with total sales estimated at $11 billion since the drug first was introduced on the market. The FDA in 2007 issued a “black box” warning – the most serious type of warning on a drug’s label — due to potentially severe side effects from Aranesp, including increased risk of death, serious cardiovascular events and tumor growth. Physicians are encouraged to prescribe the lowest effective dose to improve blood counts enough to avoid transfusion, medical references say.

“The allegations in this lawsuit are disturbing. Pharmaceutical marketers promoting Aranesp used improper tactics to induce physicians to artificially boost sales of this drug, resulting in needless Medicaid claims where taxpayers got stuck with the bill,” Zoeller said. “If this lawsuit succeeds in recovering what the public has been defrauded, then we hope it will empower whistleblowers in other companies to bring to light similar medical frauds.”

Any employee in the health care field who is aware of fraudulent claims on Medicare or Medicaid is urged to contact the Attorney General’s office at 1-800-382-1039.

“This lawsuit allows us to recover Medicaid money that Amgen should never have claimed. At the same time, it allows us to handsomely reward an honest whistleblower,” Allen K. Pope, director of the Indiana Medicaid Fraud Control Unit, said. “Through Medicaid, our society gives our neediest neighbors the best health care in the history of the world, for free. Unfortunately, someone at Amgen perceived Medicaid not as an opportunity to serve, but as an opportunity to fleece the taxpayers. Taking on this lawsuit is our way of punishing that conduct and encouraging good.”

A whistleblower who becomes a plaintiff or “relator” in a qui tam lawsuit could share in a percentage of any money recovered. In a previous qui tam case involving drugmaker Pfizer Inc., two groups of whistleblowers are receiving 15 percent and 18 percent respectively of a $1 billion settlement Pfizer agreed to pay in September.

In the settlement of the Pfizer whistleblower case over unlawful drug promotions, the State of Indiana received a $3.7 million recovery. In a separate whistleblower case involving Mylan Pharmaceuticals and UDL laboratories that also settled in September, Indiana recovered $482,500.

In today’s Amgen case, the original whistleblower suit was filed in 2006 in U.S. District Court for the District of Massachusetts. The lawsuit, Kassie Westmoreland v. Amgen et al, had been under seal until today, when 14 states and the District of Columbia joined the case as intervenors. The intervening states seek treble damages and civil penalties.

In yet more bad news for the structured settlement profession the FBI today put out an announcement for information from the public and investors who had been burned or involved with what they are calling the Rothstein Structure Settlement Investments. (RSSI). Scott Rothstein

Great, just what we needed as a profession, more traffic and news with our trade name dragged into what looks to be a growing fraud in which the term Structured Settlements was used to lull investors into thinking this scam had the legitimacy and security offered by structured settlements.

You can read the entire FBI press release by clicking here.

What is also distressing is that what looked to be a $100 million scam and limited to a few cases is now being announced by the FBI as potentially exceeding $1 billion in losses and involving a network of individuals who were working with Scott Rothstein.

The Legal Broadcast Network will be following this story closely over the next few week but as a special guest we had Civil Action Attorney Jan Schlichtmann join us today to discuss from the perspective of a trial lawyer the distressing trend of lawyers being implicated in not just frauds, but in the betrayal of their clients and associates all in the name of greed. Watch today’s extended interview with Jan Schlichtmann on Voices of the Law and tune in next week as we continue to bring in more commentators and news on this scam, as well as shine light on the “cash now” industry that seems to have been the model for how this program was designed.

Watch Attorney Jan Schlichtmann discuss the Scott Rothstein fraud and the issues confronting trial lawyers nationally regarding the proliferation of “cash now schemes” that are being offered to lawyers, plaintiffs and investors with little or no regulation or oversight.

Jan SchlichtmannSchlichtmann said a worker for Ashland Inc., based in Covington, Ky., also participated in filling up the 2,000-gallon mixing tank that overheated inside the CAI/Arnel factory, causing an explosion that nearly flattened the Danversport neighborhood.

Stephen Zack Interview in English

Miami lawyer Stephen N. Zack, a partner in the national law firm Boies, Schiller & Flexner, was elected as president-elect of the American Bar Association – the first Hispanic American to achieve that distinction.  Zack will serve one year as president-elect before taking office as president in August 2010 at the ABA’s Annual Meeting in San Francisco.  

The son of a Cuban mother and American father, Zack is focused on promoting civics education, the importance of inspiring a new generation of lawyers and ABA programs that advance access to justice for everyone in the United States.  In addition, he will work to create a commission on Hispanic rights.

“I am proud to be the first Hispanic American slated to become the president of the ABA.  This country is still a land of opportunity.  I want to work as an advocate for access to justice – and also for the possibilities that can exist for all young students from all backgrounds.”  

Stephen ZackIn his speech to the House of Delegates, Zack said he will focus on “two critical areas” of the legal profession – civics education and the high cost of legal education.  He said these issues and the programs and strategies to address them will have “an impact on the profession and on future generations.”

In the coming year, Zack, who grew up in Cuba and has practiced law for more than 35 years, will work with other bar associations to develop a pilot program for an American to teach students about everything from making an opening statement to understanding the Bill of Rights.  The goal is to eventually enroll a small group of students – half of which would be minority students — from every high school in the United States to participate in an educational program over the President’s Day holiday weekend.  Zack called on members of the ABA to get involved.

 “Every last one of us will go in and teach these students.  We can’t wait.  We will begin to reach out to a new generation,” said Zack.

In addition, Zack said he is determined to push for a renewed focus on teaching civics education in the classrooms of America so that students truly understand why we have three separate branches of government.

“With every right that we have comes an obligation to understand those rights,” Zack said after quoting a study that revealed that most Americans cannot name the three branches of government.

 His hope is that a renewed interest in civics and an understanding of the role of government will not only create a more informed citizenry, but also increase student interest in pursuing a career in law.  

Zack said a law school education must be affordable for all, otherwise, “We will become an elitist profession at a time when we must look like the people we represent.  We have an overriding obligation to make sure that a new generation can service the needs of all Americans.”

Prior to his selection as president-elect, Zack served from 2004-2006 as chair of the ABA’s House of Delegates, the 555-member body that debates and votes on issues that become official ABA policy.  The chair of the House is the second highest elected office within the association.      

More than three decades ago, Zack became an active ABA member not long after completing his law degree at the University.  He is passionate about the mission of the ABA – serving the public and legal profession by “defending liberty and delivering justice as the national representative of the legal profession” – and believes that all lawyers have a special obligation to promote these goals and to speak out against the repression of freedom.

At the ABA, Zack has a long record of service.  In addition to his serving as chair of the policy-making House of Delegates, recent activities have included being a member-at-large of the Long Range Planning Committee of the Board of Governors, member of the Advisory Committee to the chair of the House of Delegates, member of the Center for Racial and Ethnic Diversity, member-at-large of the Section of International Law and secretary of the American Bar Endowment.

Zack has served as a member of the House of Delegates since 1988, and was a Florida delegate from 1997-2000.  He is a former member of the ABA Board of Governors (1992-1995), and was a board liaison to the Sections of Litigation and Dispute Resolution.  In addition, Zack served as president of the National Conference of Bar Presidents, is a former chair of the Standing Committee on Bar Activities and Services, a former member of the Commission on the Judiciary in the 21^st Century and a former chair of the ABA Latin American Council.

Zack is also a founding member of the Cuban American Bar Association and a life Fellow of the American Bar Foundation, which promotes justice through research on the law and its impact on society.

An active member of the Florida Bar Association, Zack has served as president of the association, president of the Young Lawyers Section and chair of the International Law Section.  He was a member of the 11^th Circuit (Miami-Dade) Judicial Nominating Committee for the Southern District, the Federal Judicial Nominating Commission’s Board of Governors and a Florida Bar Fellow.

Zack’s civic activities in Florida include special counsel to Gov. Bob Graham, chair of the State Ethics Commission of the State of Florida and member of the Florida Constitutional Revision Commission.  He chaired the City of Miami Beach Charter Review Commission and the Environmental Commission for the City of Miami.  He is a former legislative aide to Rep. Claude Pepper and a former member of the Orange Bowl Committee and of the Public Health Trust.

Zack received his B.A. from the University, where he was elected to its Hall of Fame.  He has been admitted to practice in Florida, New York and Washington, D.C.; the Supreme Court of the United States; the Supreme Court of Florida; the U.S. Court of Appeals for the 11^th Circuit; and the U.S. District Courts for the Northern, Middle and Southern Districts of Florida.

With more than 400,000 members, the American Bar Association is the largest voluntary professional membership organization in the world.  As the national voice of the legal profession, the ABA works to improve the administration of justice, promotes programs that assist lawyers and judges in their work, accredits law schools, provides continuing legal education, and works to build public understanding around the world of the importance of the rule of law.

(Source: American Bar Association)

(How to become A Legal Broadcast Network Commentator)

(Boston.com) A  Connecticut lawyer has filed hundreds of ethics complaints across the country, setting the stage for a possible major change in how legal services are marketed over the Internet.

Zenas Zelotes, a Norwich  resident and bankruptcy lawyer, said he has filed more than 550 complaints in 47 states, claiming improper referrals are being made through Internet sites run by Total Attorneys Inc. of Chicago. Referrals obtained through sites such as totaldivorce.com and totaldui.com breach rules against for-profit lawyer referral services, Zelotes claims.

Kevin Chern, president of Total Attorneys says this is a cooperative advertising arrangement permitted Kevin Chernunder the rules,and attorneys are paying him for the cost of licensing the website and marketing costs.

This is a “natural extension of marketing models that are ubiquitous across the Internet,” Chern said.

Hawaii Rules

(Business Wire) The first to rule on the complaint, Hawaii’s Office of Disciplinary Counsel completed a full inquiry and determined that there is no basis upon which to take any action in the case. Hawaii also stated in its letter that the complaint raised serious First Amendment free commercial speech and other legal issues.

“The ruling in Hawaii affirms our belief that the advertising model used by Total Attorneys is within the bounds of ethical and professional conduct,” said Chern. “In Connecticut, as in most states, the Rules of Professional Conduct do not expressly address modern technology. That said, the Hawaii finding demonstrates that reasonable attorney regulators can certainly apply antiquated Rules to contemporary technology in a way that fulfills their mission to protect consumers and that retains the spirit of those Rules.”

(National Law Journal) An unusual twist in the multibillion-dollar battle between the federal government and utility companies over spent nuclear fuel threatens to send more than 50 breach-of-contract lawsuits back to square one after a decade of litigation.

Last week, the full U.S. Court of Appeals for the Federal Circuit heard arguments on whether the government, for the first time, can argue “unavoidable delay” to excuse its failure to pick up and dispose of the industry’s nuclear waste.

The issue in Nebraska Public Power v. U.S. comes before the court nearly 10 years after the Federal Circuit found the government liable for breaching the utility contracts and after more than $1 billion has been awarded in damages and settlements. “We’re now very far down the road and this would potentially open up everything,” said Jay Silberg, a partner in Pillsbury Winthrop Shaw Pittman’s Washington, D.C., office who represents Nebraska Public Power.

Jerry StouckAnd that road has been very long and costly, said Jerry Stouck, a partner in Greenberg Traurig’s Washington office who filed the first suit charging the government with failure to begin picking up his clients’ spent nuclear fuel by Jan. 31, 1998, as required by contracts entered into in 1983.

Lawyers involved in the litigation were stunned not only when the delay argument came alive in a U.S. Court of Federal Claims case but when, after waiting more than a year for a decision on an appeal to a Federal Circuit panel, the full court intervened to hear the case. “This latest episode is particularly interesting because it’s a fascinating insight into the Federal Circuit and these big, high-powered cases, a real example of how challenging it can be to obtain relief from the federal government,” said Stouck.

Nine years ago, the Federal Circuit held in Stouck’s first case — Maine Yankee Atomic v. U.S. — that the government’s delay in picking up the fuel constituted a breach of contract. In 2006, Stouck won $143 million in damages for Maine Yankee and two other utility clients — awards still mired in litigation.

To date, utilities have filed 71 breach-of-contract cases in the Claims Court. With liability established, the utilities and the government have been fighting primarily about damages. The utilities seek damages largely for the costs of storing the fuel, often on site, costs they would not have had if the government had performed in a timely manner.

The Department of Energy’s most recent estimate of the government’s potential liability is $12.3 billion, based on a pickup date of 2020. But the industry estimates damages claims ultimately will total about $50 billion.

“This involves a lot of money,” said James Ramsay, general counsel to the National Association of Regulatory Utility Commissioners. “It’s now more than 20 years [since the contracts were signed] and billions spent on Yucca Mountain as a repository, which is not going anywhere. We’re not happy to see the issue being raised now in the Federal Circuit.”

WASTE AND TIME

The issue that the Federal Circuit will hear on Sept. 18 has its roots in a 1997 decision by the U.S. Court of Appeals for the D.C. Circuit. Soon after the 1983 contracts were signed, it became clear that the Department of Energy would not meet the Jan. 31, 1998, deadline to beginning picking up the waste. There was no operating storage facility, and potential sites, such as Yucca Mountain in Nevada, soon faced political and public opposition.

In 1995, the department issued a “final interpretation” of its obligations under the Nuclear Waste Policy Act and the contracts, saying it had no obligation under either to begin disposal in the absence of a repository or interim storage facility. Several utilities and state commissions petitioned the D.C. Circuit for review of the department’s interpretation. The court said the department was wrong — the government had an obligation under the act reciprocal to the utilities’ contract obligation to pay into the Nuclear Waste Fund to cover storage costs.

But on remand, the department again said it could not meet the deadline but its delay was excused by the “unavoidable delay” clause in the contracts.

The utilities returned to the D.C. Circuit seeking an order to compel performance by the department. The court did not issue that broad writ of mandamus but a narrower one in which it specifically precluded the government from using “unavoidable delay” as a defense to breach-of-contract claims. That defense, it said, was inconsistent with the department’s obligation under the federal act.

Fast forward to 2006 and the Nebraska Public Power case. Claims Court Judge Francis Allegra becomes the first and only judge in the spent nuclear fuel litigation to hold that the D.C. Circuit’s 1997 order is void because it exceeds the D.C. Circuit’s jurisdiction and infringes the Federal Circuit’s jurisdiction. Unavoidable delay as a defense is back on the table. “We’re revisiting this history at a time when the government said nothing about this from 1998 to 2005, and all these cases are proceeding forward and all the judges are operating under the assumption this is a valid decision by the D.C. Circuit,” said Silberg.

The Pillsbury lawyers argued an appeal to a three-judge panel of the Federal Circuit in December 2007, and then “we tried to read the tea leaves” as to why a decision was so slow in coming. In June of this year, the Federal Circuit issued its en banc hearing order.

The National Association of Regulatory Utility Commissioners and a number of utilities with spent nuclear fuel cases have filed amicus briefs supporting Nebraska Public Power. They and Nebraska Public Power argue that the D.C. Circuit properly exercised its jurisdiction to interpret the statutory provisions of the Nuclear Waste Policy Act under that act’s judicial review section and properly directed the parties to seek remedies in the Federal Circuit under the contract if and when the breach occurred.

But Assistant Attorney General Tony West counters that, absent action by Congress granting another court jurisdiction to hear contract claims, the Court of Federal Claims has exclusive jurisdiction. The Nuclear Waste Policy Act’s judicial review provision, he said, did not give the D.C. Circuit jurisdiction to issue an order concerning contract remedies.

DEFINING DELAY

The delays clause in the utilities’ contracts has two subcategories, according to Greenberg’s Stouck: avoidable and unavoidable delays. The Federal Circuit, in one of Stouck’s cases, interpreted avoidable delays as applying to delays during the performance of the contract, he added. “When the government fundamentally fails to perform its most basic obligation, that’s not a delay,” said Stouck.

The unavoidable-delays category has not been interpreted by the Federal Circuit, but the utilities urge the court in their briefs to settle the issue of what it means if they lose the jurisdiction issue. “The rationale is the same,” said Ramsay of the National Association of Regulatory Utility Commissioners. “Those clauses were not meant to apply to a systemic failure of a government program. They were meant to apply in situations like hurricanes, acts of God and war.”

If the government wins in the Federal Circuit and that court does not interpret “unavoidable” delays, Stouck predicted the utilities will endure another five years of litigation in the Claims Court and Federal Circuit only to find that the government’s failure to perform is not an unavoidable delay. “The government, like any contracting party, is not excused by events it is in control of,” he said. “It’s possible to construct and operate a storage facility for spent nuclear fuel. The contract doesn’t require Yucca Mountain to be built.”

Both sides are concerned about the time and cost of the litigation.

Deputy Assistant Attorney General Michael Hertz, in July testimony before the House Budget Committee, told the lawmakers, “A legislative solution would be preferable to the current drain on the resources of the courts and the Department of Justice caused by the seemingly endless litigation.”

He reported that, of the 71 lawsuits filed, 51 cases remain pending either in the Claims Court or the Federal Circuit, 10 have been settled, six were voluntarily withdrawn and four have been litigated through final nonappealable judgment.

Of the 51 pending cases, the trial court has entered judgments in 13 cases, most of which are not final because of appeals and remands.

Counting judgments and settlements, Hertz said, the government’s liability to date stands at $1.3 billion. The government, he said, has paid $565 million in settlements and one judgment that was not appealed.

The department, he said, has spent approximately $24 million in attorney costs, $91 million in expert funds and $39 million in litigation support costs in defense of these suits.

“There is every reason to believe that these cases will continue to be filed and litigated into the foreseeable future, and these costs will continue to be incurred,” Hertz said.

The costs to the utilities are staggering too, said a number of their lawyers. Taking a case just from complaint through trial averages $5 million to $7 million, not including expert witness fees, a document-maintenance fee and other costs, they said. And, utilities are still paying fees into the Nuclear Waste Fund — their side of the contract.

“It’s a lot of money, and even if we get a judgment, we haven’t been able to collect it, and its value diminishes with time,” said Silberg.

(Marcia Coyle NLJ)

(NY Times) This fall, law students are competing for half as many openings at big firms as they were last year in what is shaping up to be the most wrenching job search season in over 50 years.

For students now, the promise of the big law firm career — and its paychecks — is slipping through their fingers, forcing them to look at lesser firms in smaller markets as well as opportunities in government or with public interest groups, law school faculty and students say.

The frenzy has even pushed the nation’s top firms, a tradition-bound coterie, into discussing how to reform the recruitment process with an earnestness that would have been unthinkable just years ago.

Read the article in the New York Times

Washington and Lee Law School Dean Rod Smolla discusses the current job market and the school’s revolutionary 3L curriculum with LBN host Scott Drake.

In a stunning turn of events on what could be one of the largest Qui Tam cases in US history, the First Circuit Federal Appeals Court released it’s opinion today reinstating a part of the whistleblower claim against Ortho Biotech, the Johnson & Johnson subsidiary, regarding the alleged kick back scheme for it’s drug Procrit. 

You may read the entire opinion by clicking the link here, The case number is 08-1409 and the name is United States, ex rel. Mark Eugene Duxbury and Dean McClellan, Plaintiffs vs Ortho Bio Products.

This case was spearheaded by Attorney Jan Schlichtmann on behalf of the relators Duxbury and MacClellan and when the trial court dismissed the claim, the appeal was filed and argued in mid 2008 and today’s decision affirmed part of the decision but cleared the way for the Duxbury claim on kick backs and rebating tied to the off label marketing and use of Procrit in oncology clinics and hospitals.

We will be having Attorney Jan Schlichtmann on Speaking of Justice this Friday to discuss the courts ruling, his thoughts on the elements that were affirmed as well as the next steps in this long dormant but now front page Whistle Blower case regarding Procrit and the marketing of it’s off label use. As long time readers of this page will recall this was also featured in a Wall Street Journal profile on the case at about the time of  the original trial in 2007 and while many had given the case up for dead, the Appeals Court has done a comprehensive analysis of what the bar is to filing a Whistle Blower claim and brought in a real stunner on what could be a massive potential claim against Ortho Biotech.

BOSTON - A jury in a high-profile federal copyright infringement trial here ordered a Boston University graduate student to pay $675,000 to several record companies for illegally downloading and distributing 30 of their songs.

Joel Tenenbaum appeared stoic as the jury announced that each of the 30 counts of willful infringement would cost him $22,500. The tab— while steep — is far less than the $4.5 million that the companies could have received had the jury imposed the maximum per-song damages allowed under law. Copyright law allows for damages of $750 to $30,000 for each copyright infringement and up to $150,000 for each willful infringement.

Tenenbaum said he was happy the verdict wasn’t in the millions and “not displeased with the jury given how the trial went.”

Tenenbaum’s attorney, Harvard Law School professor Charles Nesson, whose case has faced several setbacks in recent weeks, closed his eyes just before the jury read the verdict. Nesson said he expects to appeal the judgment – and contends that U.S. District Judge Nancy Gertner’s ruling that Tenenbaum couldn’t cite fair use, or the legal use of copyrighted works under certain circumstances, is “vulnerable.” That ruling was issued the morning jury selection began.

“It’s not a fair verdict because the jury never got to consider the fairness issue,” Nesson said. “We had a pretty darn good argument.”

Nesson himself tangled with plaintiffs lawyers after the jury left the room Friday. The lawyers — Matthew Oppenheim of the Oppenheim Group in Potomac, Md. and Timothy Reynolds of Denver-based Holme Roberts & Owen — sought sanctions against Nesson for posting deposition excerpts on the Internet.

Nesson said the plaintiffs’ side offered to drop the sanctions motion if he destroyed the materials at issue. But he said he wanted to use at least some of the materials for teaching purposes. Oppenheim told Gertner that he and Reynolds didn’t want to be a part of Nesson’s classroom materials or to be a party to any Internet distribution of the information. Gertner asked Nesson to send her a letter by Aug. 10 outlining his plans for the material.

Throughout closing arguments on Friday, Nesson, tried to convince the jury to keep damages low. He argued that Tenenbaum was “addicted” to downloading music, and that the college student was only taking advantage of available technology. He was not, Nesson said, attempting to deprive the record companies of profits. Declining profits at record companies, Nesson said, was caused by their inability to keep up with technological change.

“Progress happens, it’s not Joel who is responsible,” Nesson said. “There’s no reason for [the industry] to put their calamity off on kids.”

Near the end of three hours of testimony on July 30, Tenebaum admitted liability for downloading and distributing the songs at issue in the case. After Tenenbaum’s testimony, Gertner ruled that the jury had only to decide whether infringement was willful and how much Tenenbaum should pay in damages.

In a statement for the plaintiffs’ side, the RIAA said the organization “appreciates that Mr. Tenenbaum finally acknowledged that artists and music companies deserve to be paid for their work…We only wish he had done so sooner rather than lie about his illegal behavior.”

The District of Massachusetts case, Capitol Records Inc. v. Alaujan, is one of many that record companies and the Recording Industry Association of America have filed against college students for making illegal Internet music downloads. (The companies involved in the case at this point are: Arista Records LLC, Sony BMG Music Entertainment, Warner Bros. Records Inc., and UMG Recordings Inc.)

Most have settled, but Vivendi-owned The Universal Music Group took home a $1.92 million verdict in June when a Minnesota jury decided Jammie Thomas-Rasset should pay $80,000 for each of 24 songs she posted on a Web site for others to download.

The final day of trial focused on damages after an earlier order by Gertner ruling for the plaintiffs on the issues of copyright ownership and liability.

On Friday, Nesson called ethnomusicologist Wayne Marshall, a Mellon Fellow at the Massachusetts Institute of Technology, as his sole witness to demonstrate the current ease of buying an MP3, or digital song, from Amazon.com for 99 cents.

Gertner directed Nesson to do a trial run of Marshall’s testimony without the jury because the plaintiff’s team expressed concerns about the late addition of Marshall as a witness.

Later, during his closing argument, Nesson said Tenenbaum “didn’t have the option of getting an MP3 song in a sleek and easy way” as late as August 2004, when the record companies captured images of 800 songs Tenenbaum infringed.

Gertner sustained a few of the numerous objections the plaintiffs lobbed at Nesson during his closing, including his advice that the jury had “the power not to fill in the boxes” on the jury form, which asks jurors to list damages for copyright infringement of each of the 30 songs.

Nesson said the form looks like “a kind of school exam,” but he said, “justice is in the bottom line, the total number.”

“If that bottom line is just and appropriate, then you’re doing your job,” Nesson said. Nesson also said that because Tenenbaum was distributing music downloaded from others as opposed to posting the first copy, he wasn’t responsible for the companies’ lost revenue. “[As for the] value of the copyright to Joel, I submit it’s 99 cents [for each song],” Nesson said. “That’s what he has to pay for it if he purchases it from Amazon.”

The plaintiffs’ attorney, Reynolds, painted Tenenbaum as a “hard-core, habitual, long-term infringer.”

Reynolds also disputed Nesson’s arguments that Tenenbaum’s sharing simply passed along other people’s downloads. He said Tenenbaum downloaded 600 to 5,000 songs onto a Goucher College shared network while he was an undergraduate and before the Baltimore-based school shut down online song sharing.

He also noted that Tenenbaum continued making illegal downloads for at least a year-and-a-half after the record companies notified him he’d been caught. Illegal downloading has caused lost sales, significant layoffs and harmed the record companies’ ability to develop new products, he said.

“The need for deterrence here is great,” said Reynolds.

Scott Drake Interviews Harvard Law professor Charles Nesson.

Scott Drake speaks with RIAA plaintiff lawyer Matthew Oppenheim

Sales rose to an annual rate of 384,000 in June, the Commerce Department reported, up 11 percent from May. * Housing inventory fell to 8.8 months of supply, compared with 9.6 months a year ago. * The rise in sales and the declining inventory is another indication the housing sector, which led the United States into the current recession, may have hit bottom and is starting to rebound. * Despite the encouraging data, the median sale price for a newhome fell to $206,200, down 5.8 percent of the previous month, and down 12 percent from a year ago.

Real Estate and Financial expert James Ponte in Scottsdale is interviewd by LBN host Scott Drake. They discuss the current state of the housing market which Ponte says probably won’t start recovering until mid 2011.

The U.S. Supreme Court took a major step toward ending a 17-year legal battle Thursday, saying lower courts made a mistake by focusing too much on forcing Arizona to spend more money to help students who haven’t yet learned to speak, read or write English.

Scott Drake interviews Luis Bartolomei a partner with Reyes, Bartolomei and Browne in Dallas.

(Arizona Daily Star) The U./S. Supreme Court ruled Arizona lawmakers don’t have to provide more funds to teach English to students statewide.

The justices accepted the arguments by attorneys for state School Superintendent Tom Horne that it was improper for a federal judge in Tucson to issue a statewide injunction without evidence that school districts throughout Arizona were violating the Equal Education Opportunity Act. That law requires states to ensure that all students have an opportunity to learn, an opportunity which specifically requires states to take “appropriate action” to help students become proficient in English.

Justice Samuel Alito, writing the majority decision, said the only thing that is relevant is whether the Nogales Unified School District — the district at issue when the lawsuit was filed in 1992 — is now doing a better job of teaching English to its students.

The ruling most immediately absolves the state of funding an additional $40.6 million to schools. But it also opens the door to lawmakers actually being able to decrease some of the extra dollars they have given schools in the past to help students classified as “English language learners.”

In fact, Alito said that U.S. District Court Judge Raner Collins overstepped his authority in all of his mandates to the Legislature to provide more money, several of which were enacted under the threat of monetary penalties, orders that were repeatedly upheld by the 9th Circuit Court of Appeals.

The U.S. Supreme Court today ruled that school officials violated the constitutional rights of a 13-year-old Arizona girl when they strip searched her based on a classmate’s uncorroborated accusation that she previously possessed ibuprofen. The American Civil Liberties Union represents April Redding, the plaintiff in the lawsuit, whose daughter, Savana Redding, was strip searched by Safford Middle School officials six years ago.

“We are pleased that the Supreme Court recognized that school officials had no reason to strip search Savana Redding and that the decision to do so was unconstitutional,” said Adam Wolf, an attorney with the ACLU who argued the case before the Court. “Today’s ruling affirms that schools are not constitutional dead zones. While we are disappointed with the Court’s conclusion that the law was not clear before today and therefore school officials were not found liable, at least other students will not have to go through what Savana experienced.”

Savana Redding, an eighth grade honor roll student at Safford Middle School in Safford, Arizona, was pulled from class on October 8, 2003 by the school’s vice principal, Kerry Wilson. Earlier that day, Wilson had discovered prescription-strength ibuprofen – 400 milligram pills equivalent to two over-the-counter ibuprofen pills, such as Advil – in the possession of Redding’s classmate. Under questioning and faced with punishment, the classmate claimed that Redding, who had no history of disciplinary problems, had given her the pills.

After escorting Redding to his office, Wilson demanded that she consent to a search of her possessions. Redding agreed, wanting to prove she had nothing to hide. Wilson did not inform Redding of the reason for the search. Joined by a female school administrative assistant, Wilson searched Redding’s backpack and found nothing. Instructed by Wilson, the administrative assistant then took Redding to the school nurse’s office in order to perform a strip search.

In the school nurse’s office, Redding was ordered to strip to her underwear. She was then commanded to pull her bra out and to the side, exposing her breasts, and to pull her underwear out at the crotch, exposing her pelvic area. The strip search failed to uncover any ibuprofen pills.

“The strip search was the most humiliating experience I have ever had,” said Redding in a sworn affidavit following the incident. “I held my head down so that they could not see that I was about to cry.”

The strip search was undertaken based solely on the uncorroborated claims of the classmate facing punishment. No attempt was made to corroborate the classmate’s accusations among other students or teachers. No physical evidence suggested that Redding might be in possession of ibuprofen pills or that she was concealing them in her undergarments.

Furthermore, the classmate had not claimed that Redding currently possessed any pills, nor had the classmate given any indication as to where they might be concealed. No attempt was made to contact Redding’s parents prior to conducting the strip search.

In response to today’s ruling, Redding said, “I wanted to make sure that no other person would have to go through this, so I am pleased by the Court’s decision. I’m glad to have helped make students feel safer in school.”

The case, Safford Unified School District v. Redding, was appealed from the U.S. Court of Appeals for the Ninth Circuit, which found the strip search to be unconstitutional. A six-judge majority of the appeals court further held that, since the strip search was clearly unreasonable, the school official who ordered the search is not entitled to immunity. In today’s Supreme Court decision, despite deeming the strip search of Redding unconstitutional, the Court found that the school officials involved are immune from liability. The decision leaves open the possibility, however, that the Safford Unified School district could be held liable.

“Neither the Constitution nor common sense permits school officials to treat a strip search the same as a locker or backpack search,” said Steven R. Shapiro, the ACLU’s national Legal Director. “Today’s ruling eliminates any confusion that school officials may have had about this seemingly obvious point.”

The ACLU and ACLU of Arizona were joined in the case by Bruce Macdonald, with the law firm McNamara, Goldsmith, Jackson & Macdonald, and Andrew Petersen, with the firm Humphrey & Petersen.

In addition, a broad constellation of adolescent health experts and privacy rights advocates filed friend-of-the-court briefs in support of Redding, including the National Education Association, National Association of Social Workers (NASW), CATO Institute, Rutherford Institute, Goldwater Institute and Urban Justice Center, among others.

The decision is available online at: www.aclu.org/drugpolicy/search/40031lgl20090625.html

The ACLU’s brief in the case is available online at: www.aclu.org/scotus/2008term/saffordunifiedschooldistrictv.redding/39160lgl20090325.html

Scott Drake interviews ACLU attorney Adam Wolf.

Jerome Kowalski, a legal consultant who tracks the New York Market discusses why major law firms are shrinking with LBN host Scott Drake. Kowalski says “The mood at White & Case — and at probably 15 or 20 more firms in New York — is kind of like sitting at a deathbed and watching a close relative wither away. It’s like you’re right there in the I.C.U. with the patient and you know that the condition is terminal.”

(NY Times)

While the legal industry is hardly battling the existential threat that is facing, say, the newspaper trade, Big Law — especially in competitive New York — is facing a potential paradigm shift as fundamental as the one that has hit investment banks and the auto industry. Big, as a business model (let alone as an expression of the national mood), seems bound for obsolescence.

The Hildebrandt index found, for example, that at the nation’s 20 top-grossing law firms — 12 of which are in New York — average profit per partner and revenue per lawyer both dropped in the first quarter of 2009, for the first time since 1991.

At the root of the law-firm crisis, legal experts say, is the credit crisis, which has pulverized the need for traditional practice areas like structured finance, mergers and acquisitions and private-equity transactions — the very things that have always kept a high gleam of polish on the city’s whitest shoes. The downward trend has been unrelenting: fewer Wall Street deals mean fewer Wall Street lawyers.

“I hear the stories all the time,” Mr. Kowalski, the consultant, said. “Real estate lawyers are honing their skills playing solitaire. Younger lawyers are gossiping all day and scaring the crap out of one another. The head of the corporate department of a major firm just told me that he hasn’t billed a minute’s worth of work in the last two weeks,” he added.

The article in the New York Times

Watch the Interview below.

(Boston Globe) A class-action lawsuit that seeks to repay Massachusetts Turnpike toll-payers hundreds of millions of dollars and provide future relief from what their lawyers call “illegal taxes” now includes 1,650 plaintiffs from 21 states, according to the lead attorney.

The plaintiffs, who include residents from 212 Massachusetts cities and towns, argue that their tolls are unfairly being used to pay for the Big Dig, rather than for the cost of using the turnpike, said Jan R. Schlichtmann, who gained fame through the book and film “A Civil Action.”

Schlichtmann’s legal team has also expanded to include Scott Harshbarger, a former state attorney general; Daniel B. Winslow, the chief legal counsel to former governor Mitt Romney, and Donald Griswold, a Washington-based partner in the international law firm Reed Smith LLP.

“This is a simple case of fairness and equity,” Harshbarger said yesterday. “It’s time for the courts, the Legislature, and the governor to fix this inequity and provide financial relief to toll-payers.”

The lawsuit, filed last month in Middlesex District Court, argues that the Massachusetts Turnpike Author ity must reimburse as much as $300 million to toll-payers and change how it uses the tolls it collects. The lawsuit asserts that 58 percent of Mass. Pike tolls are used to finance Big Dig roads.

To pay for the returned tolls, the state would have to choose between raising taxes, imposing tolls on Interstate 93, or requiring the Turnpike Authority to sell some of its real estate, they said.

“We have to figure out how to make amends for the past,” Schlichtmann said.

Turnpike Authority officials declined to comment.

Harshbarger and Winslow said they were drawn to the case because they think toll-payers who commute from the west and the North Shore have unfairly borne the brunt of Big Dig costs.

“The turnpike’s diversion of toll receipts is part of a disturbing trend we’re seeing across the country,” Griswold said. “This is another desperate cash-strapped state using illegal and unconstitutional means to raise badly needed revenues.”

The lawyers are calling for Beacon Hill to pass reforms that would mandate that the turnpike’s tolls be used for maintenance, capital expenditures, and operating expenses of the road on which they are collected.

Such a provision has been approved by the House in a budget amendment, but it was not included in the final version of the bill the Senate passed. The differences are being worked out by a conference committee.

“Without this provision, the legislative efforts to reform are mostly moving boxes around on the organizational chart,” Winslow said.

Next week, the lawyers will argue in court that the judge should attach all the authority’s real estate assets to the lawsuit, so they cannot be sold or liquidated before the case is resolved.

Scott Drake interviews Jan Schlichtmann in this video: