James D. Crosby – Business Trials & Arbitrations –

James D. Crosby, Attorney/Shareholder, Klinedinst PC:

A nice piece on trademarks and trademark clearance searches from my Klinedinst colleague, Sam Strohbehn. via @wordpressdotcom

Originally posted on Strohbehn IP:

Trademark protection in the United States operates on a first-come first-served basis.  All things being equal, if you are the first to use a given mark for a good or service in a geographic area, you’re going to have exclusive trademark rights to that mark for those goods and services in that area.

By the flip-side of the same coin however, if you’re looking at naming a new product, company, or service in a given market, you better make sure that there’s no one out there already using the same or similar name for the same or similar goods and services, aka a senior user.  If there is, and you proceed with using the name anyway, sooner or later it’s going to cost you.  That cost could come sooner, in the form of a threat of litigation from the senior user if you don’t stop using the mark.  Or it…

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In an opinion that will put a broad grin on the faces of plaintiff malpractice attorneys across the state, the Fourth District Court of Appeal held this week in Lee v. Hanley (G048501) that the Code of Civil Procedure Section 340.6 one year statute of limitations for attorney malpractice may not apply in cases involving a client claim for return of attorneys fees retained by the attorney. The court distinguished leading cases applying section 340.6 and analyzed the legislative history of the statute. But, the basic premise of the opinion is stated by the court as follows:

“Here, we find the words of the statute to be plain and unambiguous. They provide the applicable statute of limitations for an action based on “a wrongful act or omission, other than for actual fraud, arising in the performance of professional services . . . .” (§ 340.6.) So, if the wrongful act or omission at issue arises “in the performance of professional services,” the statute applies. If the wrongful act or omission at issue does not arise “in the performance of professional services,” the statute is inapplicable. As we have already stated, an attorney does not provide a service to the client by stealing his or her money.”

While I share in the Court’s obvious revulsion towards an attorney stealing a client’s money, I think the opinion, especially in its repeated reference to the tort of conversion as one area where the one-year statute may not apply, is problematic. And it will certainly be used by plaintiff’s attorneys to attempt to break open the one year statute in any malpractice case involving a claim for the return of fees, including those where the attorney hasn’t stolen anything or done anything wrong.

This was a demurrer case. In its analysis of the complaint at issue, the Court stated the following:

The second amended complaint in the matter before us alleged that, after Attorney Hanley’s services with respect to the settled litigation had been fully completed,he knowingly refused to release money belonging to Lee, which he himself had characterized as her “credit balance.” When we liberally construe the second amended complaint we see that, despite Lee’s form of pleading, she has made factual allegation adequate to state a cause of action for conversion, for example. (Welcon Electronics, Inc. v. Mora (2014) 223 Cal. App. 4th 202, 208-209, 215-216 [wrongful exercise of dominion over identifiable sum of money belonging to another].) 

To me, this is a troubling passage and subject to much potential abuse by smart attorneys with otherwise stale claims. Seems like the case could be used to extend the limitation period beyond one year in any matter involving fees – like when the client wants a refund of fees already earned. Couldn’t the client just claim the attorney is not entitled to the fees, sue for conversion and then, based on Lee v. Hanley, push the applicable statute to 2 or 3 years?

But, conversion is an odd bird – it can be an intentional tort but it can also be just a general intent exercise of dominion or control over another’s property. “Conversion is a strict liability tort. The foundation of the action rests neither in the knowledge nor the intent of the defendant. Instead, the tort consists in the breach of an absolute duty; the act of conversion itself is tortious. Therefore, questions of the defendant’s good faith, lack of knowledge, and motive are ordinarily immaterial.” Los Angeles Federal Credit Union v. Madatyn (2012) 209 Cal.App.4th 1383, 1387. “Conversion must be knowingly or intentionally done, but a wrongful intent is not necessary. Because the act must be knowingly done, ‘neither negligence, active or passive, nor a breach of contract, even though it result in injury to, or loss of, specific property, constitutes a conversion.’ It follows therefore that mistake, good faith, and due care are ordinarily immaterial, and cannot be set up as defenses in an action for conversion.” Taylor v. Forte Hotels International (1991) 235 Cal.App.3d 1119, 1124. Under Lee v. Hanley, a careful drafter with a stale claim but a story involving client money, will sue, claim “conversion” and maybe get past demurrer on an otherwise time-barred claim – but, on a claim based on a strict liability tort where the attorney’s good-faith, mistake and due care are meaningless. Conversion is not always theft and not always “wrongful” in the traditional sense.

I  understand the court’s concern about disreputable lawyers absconding with client monies. I share it, as most all lawyers do. And the simple phrase “…an attorney does not provide a service to the client by stealing his or her money” makes sense. But, this is a case where the law of unintended consequences may trap a lot of fine attorneys, who have good faith disputes with clients over earned fees, into defending what would otherwise be stale claims and losing the statutorily-mandated protection accorded by Section 340.6.

Trial lawyers spend much of their professional existence trying to prove that a witness’ or party’s testimony is not truthful – that the party or witness is lying. We seek out and use documents, photos and ESI that are contrary to the witness’s current testimony to call the witness’ credibility into question. We depose witnesses to get their story “under oath” in case they change their testimony at trial. When a party testifies differently from his deposition testimony or other previous statement on a material point, we go on the attack! “Do you recall giving deposition testimony in this case? And, you gave that testimony under oath, right? You swore to tell the truth at that deposition just like you did in front of this jury today, right?” Then, we point out the inconsistencies between the deposition testimony and the trial testimony, and stride triumphantly back to our counsel table having decimated the opponent. Come on, admit it, don’t we all just love catching the opposing party in a bald-faced lie in front of a jury entranced by the real-life conflict playing out in front of them. “Ladies and gentlemen of the jury, he’s a liar – he says one thing one time and another thing another time – and all under oath – don’t believe him!”

But, what if the witness’ current testimony, while materially different from her previous testimony, is no less “truthful” than the previous impeaching testimony was when given? What if a witness testifying differently at different times about a past event was still telling the “truth” each time? Wouldn’t that undercut the whole premise of what trial attorneys spend much of their time doing – using the contrast between a witness’s testimony at trial and her testimony or statements at prior times to suggest the witness is a liar? It appears that may just be the case. In fact, it may be worse than you think. According to neuroscientists at Northwestern University Feinberg School of Medicine in a study recently published in the Journal of Neurosceince (Hippocampal Binding of Novel Information with Dominant Memory Traces Can Support Both Memory Stability and Change by Donna J. Bridge and Joel L. Voss, Journal of Neuroscience, February 5, 2014), your memory regularly rewrites the past with current information, updating your recollections with new experiences. When a memory is recalled, the brain updates that memory in light of current salient facts – “… all memory is adaptively tuned to information that is currently salient.”

In a layman’s discussion of the study (“How Your Memory Rewrites Your Past.” by Marla Paul, Northwestern University News, February 4, 2104), Donna Jo Bridge, one of its co-authors, states that “Our memory is not like a video camera. Your memory reframes and edits events to create a story to fit your current world. Its built to be current.” The co-author notes the study’s implications for eyewitness court testimony – “our memory is built to change, not regurgitate facts, so we are not very reliable witnesses”. The other study co-author, Joel Voss, says the notion of perfect memory is a myth. “Everyone likes to think of memory as this thing that lets us vividly remember our childhoods or what we did last week. But, memory is designed to help us make good decisions in the moment and, therefore, memory has to stay up-to-date. The information that is relevant right now can overwrite what was there to begin with.”

If this study, and these findings, are correct and generally applicable to everybody, it is profoundly disturbing. If this is correct, can a witness or party recollection of a past event or discussion ever be deemed reliable and credible, or, more pointedly, can we even lay a foundation of personal knowledge for a witness’ testimony about past events if that witness’ personal knowledge and memory of those events has been “updated” multiple times since the event she is recalling? Look at it this way, if an agreement was altered to reflect current facts and circumstances every time somebody read it, would such an agreement ever be admitted into evidence as reflective of the parties’ actual agreement at the time it was signed? Surely not. But it seems that may be exactly how the brain alters memories!

If this is true, are not contemporaneous-to-the-event-in-question agreements and writings perhaps the only credible evidence of the event in question; that is, unless the author’s memory of the event wasn’t recalled and “updated” between the event and the writing?

Is a party’s memory of a critical event “updated” to reflect current circumstances every time that party recalls and discusses those events with his attorney?

If a witness recalls an event at trial differently than she did in deposition a year earlier, is she really lying and simply giving truthful testimony both times based her then-current and -updated memory of those events?

If this is true, shouldn’t we have jury instructions that advise a jury to view testimony based upon memories of past events with much skepticism in that such memories are subject to change and not likely accurate evidence of the events recalled?

If you have a case which pits testimony about past events against contemporaneous documents memorializing those events, shouldn’t the documents always win. And, shouldn’t you be able to call one of these neuroscientists to give an expert opinion that, based upon their study, witness recollection of past events should never be believed over contemporaneous documents memorializing those events because the memories have likely been “rewritten” any number of times since the events and the documents presumably have not?

Given these findings, shouldn’t all integration clauses in all contracts be fully and strictly enforced, because current witness testimony about prior contractual intent is always suspect and likely incorrect?

I could go on and on. If these findings are correct and generally applicable to everybody, the permutations are endless and disturbing to the point that perhaps witnesses should never be allowed to testify based upon memories of past events because those memories could never actually reflect the event. Wow! Sure shakes things up a bit, doesn’t it?

This is all pretty troublesome and, frankly, warrants a great deal of serious thought about the quality and reliability of the evidence upon which triers of fact regularly decide cases – cases which bear profound significance not only to the litigants involved, but to us all.

All I can say now is – take a lot of pictures!

On April 24, 2014, the American Bar Association Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 466 – Lawyer Reviewing Juror’s Internet Presence. In the opinion, the Committee considered the following question:

Whether a lawyer who represents a client in a matter that will be tried to a jury may review the jurors’ or potential jurors’ presence on the Internet leading up to and during trial, and , if so, what ethical obligations the lawyer might have regarding information discovered during the review.”

The Committee formally opined that:

Unless limited by law or court order, a lawyer may review a juror’s or potential juror’s Internet presence, which may include postings by the juror or potential juror in advance of and during a trial, but may not communicate directly or through another with a juror or potential juror.  

A lawyer may not, either personally or through another, send an access request to a juror’s electronic social media. An access request is a communication to a juror asking the juror for information that the juror has not made public and that would be the type of ex parte communication prohibited by Model Rule 3.5(b).

The fact that a juror or a potential juror may become aware that a lawyer is reviewing his Internet presence when a network setting notifies the juror of such does not constitute a communication from the lawyer in violation of Rule 3.5(b).

In the course of reviewing a juror’s or potential juror’s Internet presence, if a lawyer discovers evidence of juror or potential juror misconduct that is criminal or fraudulent, the lawyer must take reasonable remedial measures including, if necessary, disclosure to the tribunal.

More simply stated, using Facebook as an example, a lawyer can look at the juror’s Facebook page before and during trial, but cannot seek to “friend” the juror. The former would not be an improper communication with a juror, the latter would be. Further, if the juror’s Facebook page evidences juror or potential juror misconduct that is criminal or fraudulent, the lawyer must disclose same to the court.

In an interesting opinion, the Committee noted the “strong public interest in identifying jurors who might be tainted by improper bias or prejudice” and the equally strong public policy “in preventing jurors from being approached ex parte by the parties to the case”. The Committee stated that in today’s “Internet-saturated” world, the line between properly investigating jurors and improperly communicating with them is “increasingly blurred.” With the opinion, the Committee sought to clarify where that line is.

In approving the “passive review” of a juror’s social media presence or websites, the Committee stated that “the mere act of observing that which is open to the public” is not an improper communication. By analogy, the Committee noted that “a lawyer … would not be engaging in an improper ex parte contact with a prospective juror by driving down the street where the prospective juror lives to observe the environs in order to glean publicly available information that could inform the lawyer’s jury-selection decisions.”

But, the Committee opined that sending an access request ( e.g., a Facebook “friend” request) to a juror crosses the line  – it is an improper communication because it asks the juror for information that the juror has not made public.

On the issue of the obligation of a lawyer who sees evidence of juror misconduct on a juror’s social media site, the Committee drew a bright line where the juror’s misconduct is fraudulent or criminal – the lawyer must act and report the misconduct to the court. But, where the juror conduct evidenced on the social media site or website violates court instructions to the jury but does not rise to the level of criminal or fraudulent conduct, the lawyer’s obligation is less clear and not addressed by ABA Rule. The court noted:

“While any Internet postings about the case by a juror during trial may violate court instructions, the obligation of a lawyer to take action will depend on the lawyer’s assessment of those postings in light of court instructions and the elements of the crime of contempt or other applicable criminal statutes. For example, innocuous postings about jury service, such as the quality of the food served at lunch, may be contrary to judicial instructions, but fall short of conduct that would warrant the extreme response of finding a juror in criminal contempt. A lawyer’s affirmative duty to act is triggered only when the juror’s known conduct is criminal or fraudulent, including conduct that is criminally contemptuous of court instructions.”

So, according to the ABA, trial lawyers can review the Facebook, Linkedin, Twitter, Instagram, etc., pages of jurors and potential jurors in advance of, and during, trial without violating ABA ethical rules.

And well they should! Social media sites can provide a wealth of information that can be very useful in voir dire, jury selection, opening statement and closing argument. Social media postings can provide insights into a juror’s politics, prejudices and predilections, insights which can be extraordinarily valuable at trial.

In fact, in the future and perhaps even now, not conducting Internet research into jurors could be risky. In an opinion footnote, the Committee noted as follows: “While this Committee does not take a position on whether the standard of care for competent lawyer performance requires using Internet research to locate information about jurors that is relevant to the jury selection process, we are also mindful of the recent addition of Comment [8] to Model Rule 1.1. This comment explains that a lawyer “should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology.”

Won a victory before the Ninth Circuit today in a significant published decision. The case is Ramona Equipment Rental v. Carolina Casualty Insurance (No. 12-55156). I represented Ramona Equipment. The appeal was from a case I tried before Judge Marilyn Huff in District Court here in San Diego the summer of 2011. The issue before the Ninth Circuit concerned application of the Miller Act (the payment bond statute for federal works of improvement) ninety-day notice provision to a supplier providing goods/equipment to the federal work of improvement on an open-book account. The ninety-day notice provision (40 U.S.C. section 1331(b)(2)) provides, in pertinent, as follows:

“[a] person having a direct contractual relationship with a subcontractor but no contractual relationship, express or implied, with the contractor furnishing the payment bond may bring a civil action on the payment bond on giving written notice to the contractor within 90 days from the date on which the person did or performed the last of the labor or furnished or supplied the last of the material for which the claim is made . . . .”

My client had supplied rental equipment to a subcontractor on a federal construction project on an open book account. The rentals were provided to the worksite over a six-month period of time. The subcontractor did not pay in full. Client gave the required ninety-day notice to the general contractor and filed suit under the Miller Act. The general contractor and the bond surety argued at trial that the ninety-day notice was untimely as to all rental equipment furnished to the project more than ninety days before service of the notice. The District Court disagreed and, relying heavily on Noland Co. v. Allied Contractors, Inc. 273 F.2d 917, 920 (4th Cir. 1959) in the absence of Ninth Circuit authority, concluded that, in light of the open book account, the ninety-day notice covered all rental equipment furnished to the Project.

The Ninth Circuit Court of Appeal, addressing the issue for the first time in today’s published opinion, agreed and affirmed the District Court judgment. Citing to Noland and other decisions from the First, Fourth and Fifth Circuits, the Court held that:

“…if all the goods in a series of deliveries by a supplier on an open book account are used on the same government project, the ninety-day notice is timely as to all of the deliveries if it is given within ninety days from the last delivery.”

The dissenting opinion noted that “the ninety-day notice requirement serves to protect the general contractor and its surety.” The majority opinion countered that:

“.. the weight of circuit authority recognizes a broader purpose in the Miller Act. In the end, the goal of the notice provision must take a back seat to the purpose of the overall statute, which is to provide recovery for suppliers who have provided materials but not received compensation.”

This is a nice win for a good client after a long battle. The case is also significant in that it serves to clarify application of the Miller Act ninety-day notice provision to suppliers of materials and equipment to federal jobs on open-book accounts in a fashion consistent with the overall remedial goals of the Act.

It is a nice victory. Like I always say – Winning is Always Better than Losing!


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