This article is the second in a series identifying a number of myths related to IP rights, and explaining, in simple terms, steps you can take to recognize and protect the IP your business creates and acquires. In the first installment, the authors discuss trademark myths.
Second in this three-part series identifying myths related to IP rights is Copyright Myths.
Copyright is a form of protection provided by the laws of the United States to the authors of “original works of authorship” that are fixed in a tangible form of expression. An original work of authorship is a work that is independently created by a human author and possesses at least some minimal degree of creativity. A work is “fixed” when it is captured (either by or under the authority of an author) in a sufficiently permanent medium such that the work can be perceived, reproduced, or communicated for more than a short time. Copyright protection in the United States exists automatically from the moment the original work of authorship is fixed.
U.S. copyright law is federal law (17 U.S.C. §§ 101-1401), which addresses both unpublished and published works of authorship. There is no state law governing copyright rights, and a state cannot register or enforce a copyright.
Copyright law is a nebulous area of law, and many aspects of it do not have a straightforward answer. Below, we try to dispel certain copyright misconceptions.
1. I can sue for copyright infringement as long as I have submitted my application to the United States Copyright Office.
In the Supreme Court case, Fourth Estate Public Benefit Corp. v. Wall-Street.com, 139 S.Ct. 1881 (2019), the court unanimously ruled that a copyright infringement suit must wait until the copyright is successfully registered by the United States Copyright Office. Therefore, a pending copyright application is insufficient grounds to bring suit. Given that copyright applications are relatively inexpensive ($60 per application), we recommend registering your work whenever possible.
2. Copyright can protect my ideas.
Copyright applies to a tangible work, and cannot apply to something as intangible as an idea. Indeed, section 102(b) of the Copyright Act explicitly states, “in no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.”
3. I can copyright a name or title.
Copyright laws require creativity and originality, and do not apply to items such as names and titles that may be duplicated coincidentally, or that may be legitimately used in unrelated instances. Book titles are among the list of things that cannot be copyrighted. Titles are only “short phrases,” not original enough to be eligible for protection. The Copyright Office will not restrict titles to one book; there may be other works for which a title may be equally usable and appropriate. For example, in McGraw-Hill Book Co. v. Random House, Inc., 32 Misc.2d 704, 710, 225 N.Y.S.2d 646, 653 (Sup.Ct. 1962), McGraw Hill was unable to bar Random House from publishing a book titled, “John F. Kennedy & PT 109” even though McGraw Hill had first published a book titled, “PT 109: John Kennedy in World War II.” The court found legitimate use of the words “PT 109” and “John Kennedy” and that the words could not be copyrighted. Id. at 713.
4. Everything on the internet is in the public domain and free to use.
This is false. Although much information posted to the internet is freely available to the public, the internet is not itself public domain. Most material posted there is protected by copyright law, regardless of whether a content host obtained the requisite permissions from the author. A work does not fall into the public domain until its copyright expires, which is typically many decades after an author’s death.
5. Anything without a copyright notice is not protected.
Use of a copyright notice is optional, and has been since March 1, 1989. Thus, copyright protections apply regardless of whether a copyright notice is displayed on the work. An author of an original work may receive absolute protection as soon as the work is created. Registration is not mandatory, but it is worthwhile to place a copyright notice on a work because it reminds others that copyright exists and, therefore, may help deter infringement. Additionally, putting a notice on your work may help establish willful infringement, which enhances the monetary compensation to which you are entitled.
6. If I change someone else’s work, I can claim it as my own.
The act of copying or adapting someone else’s work is a restricted act. Any adaptation will be legally regarded as a derived work. The purpose and character of your intended use of the material is the single most important factor in determining whether a use is fair under U.S. copyright law. If you simply adapt a work, it will still be considered the work of the creator, and that person may object if you publish an adaptation without permission to do so. They are also entitled to reclaim any money you make from selling their work. If, however, your use is transformative—i.e., the new work has significantly changed the appearance or nature of the copyrighted work—you are more likely to succeed in a fair use defense. The transformative use concept arose from a 1994 decision by the U.S. Supreme Court, Campbell v. Acuff-Rose Music, 510 U.S. 569 (1994), concerning the song “Pretty Woman” by the rap group 2 Live Crew, a parody of “Oh, Pretty Woman” by Roy Orbison. The court focused not only on the small quantity taken from the copyrighted work, but also on the transformative nature of the defendant’s use, and was persuaded that no infringement occurred because the defendant added a new meaning and message rather than simply superseding the original work. This meant the new work likely would not affect the market for the original work, so the copyright owner would not suffer financial harm.
7. I can legally copy 10 percent without it being infringement.
This is not the case. Unless it is explicitly allowed under the doctrine of fair use, any unauthorized use of a copyrighted work can potentially lead to legal action. When using quotes or extracts, there is no magic figure or percentage that can be applied. Courts typically look to the quality and importance of the content copied, not simply the quantity. In fact, if you base a creation on someone’s copyrighted work, the result is called a “derivative work.” A derivative work must be substantially different from the original work (minor changes are not enough) in order to not be considered copyright infringement.
8. It’s okay to use, copy, or publish another’s work if I don’t make any money from it.
No, except in limited circumstances permitted under the doctrine of fair use, any copying or publication without the consent of the copyright owner may be deemed copyright infringement, and you could face legal action. If the use has a financial impact on the copyright owner (i.e., lost sales), then you could also face a claim for damages to reclaim lost revenue and royalties. The key factor is not the user, but the nature of the material, how it is being used, and whether the new use adversely affects the value of the original work. Because even a nonprofit educational use can undermine the value of a copyrighted work, it is advisable to consult an attorney before copying any original work.
***
We hope this has been a helpful starter guide on copyright law. Please tune in next month for part three of the series, in which we will debunk popular patent myths.
If you have questions or would like to follow up on the topics discussed in the series, please reach out to any of the authors listed above at Hunton Andrews Kurth LLP.
Tucker Ellis LLP 950 Main Avenue, Suite 1100 Cleveland, OH 44113 216-696-2476 [email protected]
Giovanna Ferrari
Seyfarth Shaw LLP 560 Mission Street, Suite 3100 San Francisco, CA 94105 415-544-1019 [email protected]
§ 1.1 Introduction
Trial lawyers eagerly anticipate the day they begin opening statements in the courtroom and get to take their client’s matter to trial. With a trial comes a lot of hard work, preparation, and navigation of the civil rules and local rules of the jurisdiction. This chapter provides a general overview of issues that a lawyer will face in a courtroom, either civil or criminal. The authors have selected cases of note from the present United States Supreme Court docket, the federal Circuit Courts of Appeals, and selected federal District Courts, that provide a general overview, raise unique issues, expand or provide particularly instructive explanations or rationales, or are likely to be of interest to a broad cross section of the bar. It is imperative, however, that prior to starting trial, the rules of the applicable jurisdiction are reviewed.
§ 1.2 Pretrial Matters
§ 1.2.1 Pretrial Conference and Pretrial Order
Virtually all courts require a pretrial conference at least several weeks before the start of trial. A pretrial conference requires careful preparation because it sets the tone for the trial itself. There are no uniform rules across all courts, so practitioners must be fully familiar with those that affect the particular courtroom they are in and the specific judge before whom they will appear.
According to Federal Rule of Civil Procedure 16, the main purpose of a pretrial conference is for the court to establish control over the proceedings such that neither party can achieve significant delay or engage in wasteful pretrial activities.[1] An additional goal is facilitating settlement before trial commencement.[2] Following the pretrial conference, the judge will issue a scheduling order, which “must limit the time to join other parties, amend the pleadings, complete discovery, and file [pre-trial] motions.”[3]
A proposed pretrial conference order should be submitted to the court for review at the conference. Once the judge accepts the pre-trial conference order, the order will supersede all pleadings in the case.[4] The final pretrial conference order is separate from pretrial disclosures, which include all information and documents required to be disclosed under Federal Rule of Civil Procedure 26.[5]
§ 1.2.2 Motions in Limine
A motion in limine, which means “at the threshold,”[6] is a pre-trial motion for a preliminary decision on an objection or offer of proof. Motions in limine are important because they ensure that the jury is not exposed to unfairly prejudicial, confusing, or irrelevant evidence, even if doing so limits a party’s defenses.[7] Thus, a motion in limine is designed to narrow the evidentiary issues for trial and to eliminate unnecessary trial interruptions by excluding the document before it is entered into evidence.[8]
In ruling on a motion in limine, the trial judge has discretion to either rule on the motion definitively or postpone a ruling until trial.[9] Alternatively, the trial judge may make a tentative or qualified ruling.[10] While definitive rulings do not require a renewed offer of proof at trial,[11] a tentative or qualified ruling might well require an offer of evidence at trial to preserve the issue on appeal.[12] A trial court’s discretion in ruling on a motion in limine extends not only to the substantive evidentiary ruling, but also the threshold question of whether a motion in limine presents an evidentiary issue that is appropriate for ruling in advance of trial.[13] Where the court reserves its ruling on a motion in limine at the outset of trial and later grants the motion, counsel should remember to move to strike any testimony that was provided prior to the ruling.
Motions in limine are not favored and many courts consider it a better practice to deal with questions as to the admissibility of evidence as they arise at trial.[14]
§ 1.3 Opening Statements
One of the most important components of any trial is the opening statement—it can set the roadmap for the jury of how they can find in favor of your client. The purpose of an opening statement is to:
“acquaint the jury with the nature of the case they have been selected to consider, advise them briefly regarding the testimony which it is expected will be introduced to establish the issues involved, and generally give them an understanding of the case from the viewpoint of counsel making a statement, so that they will be better able to comprehend the case as the trial proceeds.”[15]
It is important that any opening statement has a theme or presents the central theory of your case. As a general rule, a lawyer presents facts and evidence, and not argument, during opening statements. Being argumentative and introducing statements that are not evidence can be grounds for a mistrial.[16] It is also important that counsel keep in mind any rulings on motions in limine prohibiting the use of certain evidence. Failure to raise an objection to matters subject to a motion in limine or other prejudicial arguments can result in the waiver of those rights on appeal.[17] And the “golden rule” for opening statements is that the jurors should not be asked to place themselves in the position of the party to the case.[18]
Defense counsel may decide to reserve their opening until their case in chief — this is a strategic decision and is typically disfavored in jury trials.
§ 1.4 Selection of Jury
§ 1.4.1 Right to Fair and Impartial Jury
The right to a fair and impartial jury is an important part of the American legal system. The right originates in the Sixth Amendment, which grants all criminal defendants the right to an impartial jury.[19] However, today, this foundational right applies in both criminal and civil cases.[20] This is because the Seventh Amendment preserves “the right of trial by jury” in civil cases, and an inherent part of the right to trial by jury is that the jury must be impartial.[21] Additionally, Congress cemented this right when it passed legislation requiring “that federal juries in both civil and criminal cases be ‘selected at random from a fair cross section of the community in the district or division where the court convenes.’”[22]
Examples of ways that jurors may not be impartial include: predispositions about the proper outcome of a case,[23] financial interests in the outcome of a case,[24] general biases against the race or gender of a party,[25] or general biases for or against certain punishments to be imposed.[26]
Over the years, impartiality has become more and more difficult to achieve. This is due mainly to citizens’ (potential jurors) readily available access to news, and the news media’s increased publicity of defendants and trials.[27] In Harris, the Ninth Circuit analyzed whether pre‑trial publicity of a murder trial biased prospective jurors and prejudiced the defendant’s ability to receive a fair trial.[28] The court recognized that “[p]rejudice is presumed when the record demonstrates that the community where the trial was held was saturated with prejudicial and inflammatory media publicity about the crime.”[29] However, the court found that despite immense publicity prior to trial, because the publicity was not inflammatory but rather factual, there was no evidence of prejudice in the case.[30]
§ 1.4.2 Right to Trial by Jury
All criminal defendants are entitled to a trial by jury and must waive this right if they elect a bench trial instead.[31] However, a criminal defendant does not have a constitutional right to a bench trial if he or she decides to waive the right to trial by jury.[32] In civil cases, the party must expressly demand a jury trial. Failure to make such a demand constitutes a waiver by that party of a trial by jury.[33] For example, in Hopkins, the Eleventh Circuit explained that a plaintiff waived his right to trial by jury in an employment discrimination case when he made no demand for a jury trial in his Complaint and did not file a separate demand for jury trial within 14 days after filing his complaint.[34] Some jurisdictions require payment of jury fees to reserve the right to a jury trial.
Additionally, not all civil cases are entitled to a trial by jury. First, the Seventh Amendment expressly requires that the amount in controversy exceed $20.[35] Additionally, only those civil cases involving legal, rather than equitable, issues are entitled to the right of trial by jury.[36] Equitable issues often arise in employment discrimination cases where the plaintiff seeks backpay or another sort of compensation under the ADA, ERISA, or FMLA.[37]
Another issue that arises in civil cases is contractual jury trial waivers. Most circuits permit parties to waive the right to a jury trial through prior contractual agreement.[38] Generally, the party seeking enforcement of the waiver “must show that consent to the waiver was both voluntary and informed.”[39]
§ 1.4.3 Voir Dire
Voir dire is a process of questioning prospective jurors by the judge and/or attorneys who remove jurors who are biased, prejudiced, or otherwise unfit to serve on the jury.[40] The Supreme Court has explained that “voir dire examination serves the dual purposes of enabling the court to select an impartial jury and assisting counsel in exercising peremptory challenges.”[41]
Generally, an oath should be administered to prospective jurors before they are asked questions during voir dire.[42] “While the administration of an oath is not necessary, it is a formality that tends to impress upon the jurors the gravity with which the court views its admonition and is also reassuring to the litigants.”[43] Moreover, jurors under oath are presumed to have faithfully performed their official duties.[44]
Federal trial judges have great discretion in deciding what questions are asked to prospective jurors during voir dire.[45] District judges may permit the parties’ lawyers to conduct voir dire, or the court may conduct the jurors’ examination itself.[46] Although trial attorneys often prefer to conduct voir dire themselves, many judges believe that counsel’s involvement “results in undue expenditure of time in the jury selection process,” and that “the district court is the most efficient and effective way to assure an impartial jury and evenhanded administration of justice.”[47]
“[I]f the court conducts the examination it must either permit the parties or their attorneys to supplement the examination by such further inquiry as the court deems proper or itself submit to the prospective jurors such additional questions of the parties or their attorneys as the court deems proper.”[48] However, a judge still has much leeway in determining what questions an attorney may ask.[49] For example, in Lawes, a firearm possession case, the Second Circuit found that it was proper for a trial judge to refuse to ask jurors questions about their attitudes towards police.[50] If, on appeal, a party challenges a judge’s ruling from voir dire, the party must demonstrate that trial judge’s decision constituted an abuse of discretion.[51] Thus, it is extremely difficult to win an appeal regarding voir dire questioning.[52]
§ 1.4.4 Jury Selection Methods
Each court has its own proceeds for jury selection. The two basic methods are the struck jury method and the jury box method (also known as strike-and-replace). At a high level, the methods differ with respect to how many prospective jurors are subject to voir dire and the order in which jurors can be challenged or struck from the jury panel. For example, the jury box method seats the exact number of jurors in the jury box needed to form a viable jury, and allows voir dire and challenges to those jurors.. The stuck method allows voir dire of a larger number of prospective jurors, usually the number of jurors needed to form a viable jury, plus enough prospective jurors to cover all preemptory challenges. Counsel should review local and judge rules to determine which method will be applied. Where there is no set rule or judicial preference, counsel may stipulate with opposing counsel as to the method.
§ 1.4.5 Challenge For Cause
A challenge “for cause” is a request to dismiss a prospective juror because the juror is unqualified to serve, or because of demonstrated bias, an inability to follow the law, or if the juror is unable to perform the duties of a juror. 18 U.S.C. § 1865 sets forth juror qualifications and lists five reasons a judge may strike a juror: (1) if the juror is not a citizen of the United States at least 18 years old, who has resided within the judicial district at least one year; (2) is unable to read, write, or understand English enough to fill out the juror qualification form; (3) is unable to speak English; (4) is incapable, by reason of mental or physical infirmity, to render jury service; or (5) has a criminal charge pending against him, or has been convicted of a state or federal crime punishable by imprisonment for more than one year.[53]
In addition to striking a juror for these reasons, an attorney may also request to strike a juror “for cause” under 28 U.S.C. § 1866(c)(2) “on the ground that such person may be unable to render impartial jury service or that his service as a juror would be likely to disrupt the proceedings.”[54]
A challenge “for cause” is proper where the court finds the juror has a bias that is so strong as to interfere with his or her ability to properly consider evidence or follow the law.[55] Bias can be shown either by the juror’s own admission of bias or by proof of specific facts that show the juror has such a close connection to the parties, or the facts at trial, that bias can be presumed. The following cases illustrate examples of challenges for cause:
U.S. v. Price: The Fifth Circuit explained that prior jury service during the same term of court is not by itself sufficient to support a challenge for cause. A juror may only be dismissed for cause because of prior service if it can be shown by specific evidence that the juror has been biased by the prior service.[56]
Chestnut v. Ford Motor Co.: The Fourth Circuit held that the failure to sustain a challenge to a juror owning 100 shares of stock in defendant Ford Motor Company (worth about $5000) was reversible error.[57]
United States v. Chapdelaine: The First Circuit found that it was permissible for trial court not to exclude for cause jurors who had read a newspaper that indicated co‑defendants had pled guilty before trial.[58]
Leibstein v. LaFarge N. Am., Inc.: Prospective juror’s alleged failure to disclose during voir dire that he had once been defendant in civil case did not constitute misconduct sufficient to warrant new trial in products liability action.[59]
Cravens v. Smith: The Eighth Circuit found that the district court did not abuse its discretion in striking a juror for cause based on that juror’s “strong responses regarding his disfavor of insurance companies.”[60]
§ 1.4.6 Peremptory Challenge
In addition to challenges for cause, each party also has a right to peremptory challenges.[61] A peremptory challenge permits parties to strike a prospective juror without stating a reason or cause.[62] “In civil cases, each party shall be entitled to three peremptory challenges. Several defendants or several plaintiffs may be considered as a single party for the purposes of making challenges, or the court may allow additional peremptory challenges and permit them to be exercised separately or jointly.”[63]
Parties can move for additional peremptory challenges.[64] This is common in cases where there are multiple defendants. For example, in Stephens, two civil codefendants moved for additional peremptory challenges so that each defendant could have three challenges (totaling six peremptory challenges for the defense).[65] In deciding whether to grant the defendants’ motion, the court recognized that trial judges have great discretion in awarding additional peremptory challenges, and that additional challenges may be especially warranted when co-defendants have asserted claims against each other.[66] The court in Stephens ultimately granted the defendants’ motion for additional challenges.[67]
Parties may not use peremptory challenges to exclude jurors on the basis of their race, gender, or national origin.[68] Although “[a]n individual does not have a right to sit on any particular petit jury, . . . he or she does possess the right not to be excluded from one on account of race.”[69] When one party asserts that another’s peremptory challenges seek to exclude jurors on inappropriate grounds under Batson, the party challenged must demonstrate a legitimate explanation for its strikes, after which the challenging party has the burden to show that the legitimate explanation was pre-textual.[70] The ultimate determination of the propriety of a challenge is within the discretion of the trial court, and appellate courts review Batson challenges under harmless error analysis.[71]
Finally, some courts have found that it is reversible error for a trial judge to require an attorney to use peremptory challenges when the juror should have been excused for cause. “The district court is compelled to excuse a potential juror when bias is discovered during voir dire, as the failure to do so may require the litigant to exhaust peremptory challenges on persons who should have been excused for cause. This result, of course, extinguishes the very purpose behind the right to exercise peremptory challenges.”[72] However, courts also acknowledge that an appeal is not the best way to deal with biased jurors. The Eighth Circuit recognized that “challenges for cause and rulings upon them . . . are fast paced, made on the spot and under pressure. Counsel as well as court, in that setting, must be prepared to decide, often between shades of gray, by the minute.”[73]
§ 1.5 Examination of Witnesses
§ 1.5.1 Direct Examination
Direct examination is the first questioning of a witness in a case by the party on whose behalf the witness has been called to testify.[74] Pursuant to Fed. R. Evid. 611(c), leading questions, i.e., those suggesting the answer, are not permitted on direct examination unless necessary to develop the witness’ testimony.[75] Leading questions are permitted as “necessary to develop testimony” in the following circumstances:
To establish undisputed preliminary or inconsequential matters.[76]
If the witness is being impeached by the party calling him or her.[80]
If the witness is frightened, nervous, or upset while testifying.[81]
If the witness is unresponsive or shows a lack of understanding.[82]
Additionally, it is improper for a lawyer to bolster the credibility of a witness during direct examination by evidence of specific instances of conduct or otherwise.[83] Bolstering occurs either when (1) a lawyer suggests that the witness’s testimony is corroborated by evidence known to the lawyer, but not the jury,[84] or (2) when a lawyer asks a witness a question about specific instances of truthfulness or honesty to establish credibility.[85] For instance, in Raysor, the Second Circuit found that it was improper for a witness to bolster herself on direct examination by testifying about her religion or faithful marriage.[86]
When a party calls an adverse party, or someone associated with an adverse party, the attorney has more leeway during direct examination. This is because adverse parties may be predisposed against the party direct-examining him. Because of this, the attorney may ask leading questions, and impeach or contradict the adverse witness.[87] Courts have broadened who they consider to be “associated with” or “identified with” an adverse party. Employees, significant others, and informants have all constituted adverse parties for purposes of direct examination.[88] Further, even if the witness is not adverse, an attorney may also ask leading questions to a witness who is hostile. In order to ask such leading questions, the direct examiner must demonstrate that the witness will be resistant to suggestion. This often involves first asking the witness non-leading questions in order to show that the witness is biased against the direct examiner.[89]
When a witness cannot recall a fact or event, the lawyer is permitted to help refresh that witness’s memory.[90] The lawyer may do so by providing the witness with an item to help the witness recall the fact or event. Proper foundation before such refreshment requires that:
the witness’s recollection to be exhausted, and that the time, place and person to whom the statement was given be identified. When the court is satisfied that the memorandum on its face reflects the witness’s statement or one the witness acknowledges, and in his discretion the court is further satisfied that it may be of help in refreshing the person’s memory, the witness should be allowed to refer to the document.[91]
However, the item/memorandum does not come into evidence.[92] In Rush, the Sixth Circuit found that although the trial judge properly permitted defense counsel to refresh a witness’s memory with the transcript of a previously recorded statement, the trial judge erred in allowing another witness to read that transcript aloud to the jury.[93]
Further, sometimes the party calling a witness wishes to impeach that witness. Generally, courts are hesitant to permit parties to impeach their own witnesses because the party who calls a witness is vouching for the trustworthiness of that witness, and allowing impeachment may confuse the jury or be unfairly prejudicial.[94] Prior to adoption of the Federal Rules of Evidence, a party could impeach its own witness only when the witness’s testimony both surprised and affirmatively damaged the calling party.[95]
However, Federal Rule of Evidence 607 states that “the credibility of a witness may be attacked by any party, including the party calling the witness.”[96] The Advisory Committee Notes of Rule 607 indicate that this rule repudiates the surprise and injury requirement from common law.[97] A party can impeach a witness through prior inconsistent statements, cross-examination, or prior evidence from other sources.[98] However, a party may not use Rule 607 to introduce otherwise inadmissible evidence to the jury.[99] Additionally, a party may not call a witness with the sole purpose of impeaching him.[100] Further, even courts that do not permit a party to impeach its own witness still permit parties to contradict their own witnesses through another part of that witness’s testimony.[101]
§ 1.5.2 Cross-Examination
Cross-examination provides the opposing party an opportunity to challenge what a witness said on direct examination, discredit the witness’s truthfulness, and bring out any other testimony that may be favorable to the opposing party’s case.[102] Generally under the federal rules, cross-examination is limited to the “subject matter” of the direct examination and any matters affecting the credibility of the witness.[103] The purpose of limiting the scope of cross-examination is to promote regularity and logic in jury trials, and ensure that each party has the opportunity to present its case in chief. However, courts tend to liberally construe what falls within the “subject matter” of direct examination.[104] For example, in Perez-Solis, the Fifth Circuit found that a witness’s brief reference to collecting money from a friend permitted opposing counsel to cross-examine him on all of his finances.[105] Additionally, the language of Fed. R. Evid. 611(b) states that although cross-examination “should not” go beyond the scope of direct examination, the court may exercise its discretion to “allow inquiry into additional matters as if on direct examination.”[106] However, if the questioning goes beyond the subject matter, it generally should not include leading questions.
One of the main goals of cross-examination is impeachment. The Federal Rules of Evidence explain three different methods of impeachment: (1) impeachment by prior bad acts or character for untruthfulness,[107] (2) impeachment by prior conviction of a qualifying crime,[108] and (3) impeachment by prior inconsistent statement.[109] Additionally, courts still apply common law principles and permit impeachment through three additional methods as well: (1) impeachment by demonstrating the witness’s bias, prejudice, or interest in the litigation or in testifying, (2) impeachment by demonstrating the witness’s incapacity to accurately perceive the facts, and (3) impeachment by showing contradictory evidence to the witness’s testimony in court.[110] The following present case examples of each of the six methods of impeachment:
Prior bad act or dishonesty: In O’Connor v. Venore Transp. Co.,[111] the First Circuit found that trial judge did not abuse discretion when he allowed defense counsel to cross-examine plaintiff with his prior tax returns with the purpose of demonstrating dishonesty.
Conviction of qualifying crime: In Smith v. Tidewater Marine Towing, Inc.,[112] the Fifth Circuit found that, in Jones Act action arising from injuries plaintiff received while working on a tugboat, defense counsel permissibly crossed the plaintiff about his prior convictions.
Prior inconsistent statement: In Wilson v. Bradlees of New England, Inc.,[113] a product liability case, the First Circuit found that defense counsel appropriately crossed plaintiff with an inconsistent statement made in a complaint filed in a different case against a different defendant.
Bias or prejudice: In Udemba v. Nicoli,[114] the First Circuit found that it was permissible for defense counsel to cross-examine the plaintiff’s wife about domestic abuse to show bias in a case involving excessive force claims against the police.
Incapacity to accurately perceive: In Hargrave v. McKee,[115] the Sixth Circuit found that the trial court should have permitted defense counsel to question a victim about how her ongoing psychiatric problems affected her perception and memory of events.
Contradictory evidence: In Barrera v. E. R. DuPont De Nemours and Co., Inc.,[116] the Fifth Circuit held, in a personal-injury action, that the trial judge erred in denying the use of evidence showing that plaintiff received over $1000 per month in social security benefits because the evidence was admissible to contradict defendant’s volunteered testimony on cross-examination that he did not have a “penny in his pocket.”
Once the right of cross-examination has been fully and fairly exercised, it is within the trial court’s discretion as to whether further cross-examination should be allowed.[117] In order to recall a witness, the party must show that the new cross-examination will shed additional light on the issues being tried or impeach the witness. Further, it is helpful if the party seeking recall demonstrates that it came into possession of additional evidence or information that it did not have when it previously crossed that witness.[118] Further, it is difficult to succeed on an appeal of a trial court’s failure to permit recall for further cross‑examination. This is because courts review a trial judge’s decision for abuse of discretion, and often find that the lack of recall was a harmless error.[119]
§ 1.5.3 Expert Witnesses
Experts are witnesses who offer opinion testimony on an aspect of the case that requires specialized knowledge or experience. Experts also include persons who do not testify, but who advise attorneys on a technical or specialized area to better help them prepare their cases. A few key criteria should be considered at the outset when choosing an expert. First is the level of relevant expertise and the ability to have the expert’s research, assumptions, methodologies, and practices stand up to the scrutiny of cross-examination. Many law firms, nonprofits, commercial services, and government agencies maintain lists of experts categorized by the expertise; those lists are a helpful place to begin. Alternatively, counsel may begin by researching persons who have spoken or written about the subject matter that requires expert testimony. An Internet search is, in many cases, the place to start when developing a list. Counsel also might consider using a legal search engine to identify persons who have provided expert testimony on the subject matter in the past. Westlaw and LexisNexis both maintain expert databases.
Any expert who is on counsel’s list of candidates should produce, in addition to his or her curriculum vitae (CV), a list of prior court and deposition appearances, as well as a list of publications over the last 10 years. In federal court, this information must be disclosed in the expert report, per Federal Rule of Civil Procedure 26(a)(2).[120]
Another consideration when retaining an expert is whether he or she will be a testifying expert, or whether the expert will only act in a consulting role in preparing the case for trial (non-testifying expert) because this will determine the discoverability of the expert’s opinions. Testifying experts’ opinion are always discoverable, while consulting experts’ opinions are nearly always protected from discovery.
A testifying expert must be qualified, and the proponent of an expert witness bears the burden of establishing the admissibility of the expert’s testimony by a preponderance of the evidence. Federal Rule of Evidence 702 sets forth a standard for admissibility, wherein a witness may be qualified as an expert by knowledge, skill, experience, training or education and may testify in the form of an opinion if they meet certain criteria. Opposing counsel may challenge the qualifications of the expert before the expert’s opinions are presented; to do so, opposing counsel can ask to voir dire the expert (usually outside of the presence of the jury). It is for the trial court judge to determine whether or not “an expert’s testimony both rests on a reliable foundation and is relevant to the task at hand,” thereby making it admissible.[121]
§ 1.6 Evidence at Trial
§ 1.6.1 Authentication of Evidence
With the exception of exhibits as to which authenticity is acknowledged by stipulation, admission, judicial notice, or exhibits which are self-authenticating, no exhibit will be received in evidence unless it is first authenticated or identified as being what it purports to be. Under the Federal Rules of Evidence, the authentication requirement is satisfied when “the proponent . . . produce[s] evidence sufficient to support a finding that the item is what the proponent claims it is.”[122]
When an item is offered into evidence, the court may permit counsel to conduct a limited cross-examination on the foundation offered. In reaching its determination, the court must view all the evidence introduced as to authentication or identification, including issues of credibility, most favorably to the proponent.[123] Of course, the party who opposed introduction of the evidence may still offer contradictory evidence before the trier of fact or challenge the credibility of the supporting proof in the same way that he can dispute any other testimony.[124] However, upon consideration of the evidence as a whole, if a sufficient foundation has been laid in support of introduction, contradictory evidence goes to the weight to be assigned by the trier of fact and not to admissibility.[125] It is important to note that many courts have held that the mere production of a document in discovery waives any argument as to its authenticity.[126]
While there are many topics to discuss regarding authentication of evidence, this section will focus on electronically stored information. Proper authentication of e-mails and other instant communications, as well as all computerized records, is of critical importance in an ever-increasing number of cases, not only because of the centrality of such data and communications to modern business and society in general, but also due to the ease in which such electronic materials can be created, altered, and manipulated. In the ordinary course of events, a witness who has seen the e-mail in question need only testify that the printout offered as an exhibit is an accurate reproduction.
Web print out – Printouts of Internet website pages must first be authenticated as accurately reflecting the content of the page and the image of the page on the computer at which the printout was made before they can be introduced into evidence; then, to be relevant and material to the case at hand, the printouts often will need to be further authenticated as having been posted by a particular source.[127]
Text message – When there has been an objection to admissibility of a text message, the proponent of the evidence must explain the purpose for which the text message is being offered and provide sufficient direct or circumstantial corroborating evidence of authorship in order to authenticate the text message as a condition precedent to its admission; thus, authenticating a text message or e-mail may be done in much the same way as authenticating a telephone call.[128]
Social networking services – Proper inquiry for determining whether a proponent has properly authenticated evidence derived from social networking services was whether the proponent adduced sufficient evidence to support a finding by a reasonable jury that the proffered evidence was what the proponent claimed it to be.[129]
§ 1.6.2 Objecting to Evidence
Objections must be specific. The party objecting to evidence must make known to the court and the parties the precise ground on which the objecting party is basing the objection.[130] The objecting party must also be sure to indicate the particular portion of the evidence that is objectionable.[131] However, a general objection may be permitted if the evidence is clearly inadmissible for any purpose or if the only possible grounds for objection is obvious.[132]
The purpose of a specific objection to evidence is to preserve the issue on appeal. On appeal, the objecting party will be limited to the specific objections to evidence made at trial. However, an objection raised by a party in writing is sufficiently preserved for appeal, even if that same party subsequently failed to make an oral, on-the-record objection.[133]
Objections to evidence must be timely so as to not allow a party to wait and see whether an answer is favorable before raising an objection.[134] Failure to timely object results in the evidence being admitted. Once the evidence is admitted and becomes part of the trial record, it may be considered by the jury in deliberations, the trial court in ruling on motions, and a reviewing court determining the sufficiency of the evidence.[135] In some instances, the trial judge may prohibit counsel from giving descriptions of the basis for his or her objections. However, the attorney must still attempt to get in the specific grounds for the objection on the record.[136]
Counsel objecting the evidence should remember to strike the evidence from the record after their objection is sustained.
§ 1.6.3 Offer of Proof
If evidence is excluded by the trial court, the party offering the evidence must make an offer of proof to preserve the issue on appeal.[137] For an offer of proof to be adequate to preserve an issue on appeal, counsel must state both the theory of admissibility and the content of the excluded evidence.[138] Although best practice is to make an offer of proof at the time an objection is made, an offer of proof made later in time, even if it is made at a subsequent conference or hearing, may be acceptable.[139] An offer of proof can take several different forms:
A testimonial offer of evidence, whereby counsel summarizes what the proposed evidence is supposed to be. Attorneys using this method should be cautious, however, as the testimony may be considered inadequate.[140]
An examination of a witness, whereby a witness is examined and cross-examined outside of the presence of a jury.[141]
A written statement by the examining counsel, which describes the answers that the proposed witness would give if allowed to testify.[142]
An affidavit, taken under oath, which summarizes a witness’s expected testimony and is signed by the witness.[143] However, this use of documentary evidence should be marked as an exhibit and introduced into the record for identification on appeal.[144]
There are exceptions to the offer of proof requirement. First, an offer of proof is unnecessary when the content of the evidence is “apparent from the context.”[145] Second, a cross-examiner who is conducting a proper cross-examination will be given more leeway by a court, since oftentimes the cross-examiner does not know what a witness will say if permitted to answer a question.[146]
§ 1.7 Closing Argument
Different than an opening statement, closing argument is the time for advocacy and argument on behalf of your client. It is not an unfettered right, however, and there are certain rules to remember about closing argument. First, present only that which was presented in evidence and do not deviate from the record.[147] You also do not want to comment on a witness that was unable to testify or suggest that a defendant’s failure to testify results in a guilty verdict.[148] Further, an attack on the credibility or honesty of opposing counsel is considered unethical.[149] But that does not mean lawyers cannot comment on the credibility of evidence and suggest reasonable inferences based on the evidence.[150] And keep in mind, generally, courts are “reluctant to set aside a jury verdict because of an argument made by counsel during closing arguments.”[151]
§ 1.8 Judgment as a Matter of Law
Federal Rule of Civil Procedure 50 governs the standard for judgment as a matter oflLaw, sometimes referred to as a directed verdict in state court matters.[152] A motion for judgment as a matter of law “may be made at any time before the case is submitted to the jury” and the motion “must specify the judgment sought and the law and facts that entitle the movant to the judgment.”[153] But, “[a] motion under this Rule need not be stated with ‘technical precision,’” so long as “it clearly requested relief on the basis of insufficient evidence.”[154] Although it may be “better practice,” there is no requirement that the motion be made in writing.[155] The 6th Circuit Court of Appeals has even held that it is “clearly within the court’s power” to raise the motion “sua sponte.”[156]
Importantly, Rule 50 uses permissive, not mandatory, language, which means “while a district court is permitted to enter judgment as a matter of law when it concludes that the evidence is legally insufficient, it is not required to do so.” The Supreme Court has gone as far as to say “the district courts are, if anything, encouraged to submit the case to the jury, rather than granting such motions.”[157] There is a practical reason for this advice: if the motion is granted, then overturned on appeal, a whole new trial must be conveyed. Conversely, if the case is allowed to go to the jury, a post-verdict motion or appellate court can right any wrong with more ease.
In entertaining a motion for judgment as a matter of law, courts should review all of the evidence in the record, but, in doing so, the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence.[158] Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.[159] The question is not whether there is literally no evidence supporting the party against whom the motion is directed but whether there is evidence upon which the jury might reasonably find a verdict for that party. Since granting a judgment as a matter of law deprives the party opposing the motion of a determination of the facts by a jury, it is understandable that it is to be granted cautiously and sparingly by the trial judge.
§ 1.9 Jury Instructions
§ 1.9.1 General
The purpose of jury instructions is to advise the jury on the proper legal standards to be applied in determining issues of fact as to the case before them.[160] The court may instruct the jury at any time before the jury is discharged.[161] But the court must first inform the parties of its proposed instructions and give the parties an opportunity to respond.[162] Although each party is entitled to have the jury charged with his theory of the case, the proposed instructions must be supported by the law and the evidence.[163]
§ 1.9.2 Objections
Federal Rule of Civil Procedure 51 provides counsel the ability to correct errors in jury instructions.[164] The philosophy underlying the provisions of Rule 51 is to prevent unnecessary appeals of matters concerning jury instructions which should have been resolved at the trial level. An objection must be made on the record and state distinctly the matter objected to and the grounds for the objection.[165] Off-the-record objections to jury instructions, regardless of how specific, cannot satisfy requirements of the rule governing preservation of such errors.[166] A party may object to instructions outside of the presence of the jury before the instructions and arguments are delivered or promptly after learning that the instructions or request will be, or has been, given or refused. [167] Even if the initial request for an instruction is made in detail, the requesting party must object again after the instructions are given but before the jury retires for deliberations, in order to preserve the claimed error.[168]
Whether a jury instruction is improper is a question of law reviewed de novo.[169] Instructions are improper if, when viewed as a whole, they are confusing, misleading, and prejudicial.[170] If an instruction is improper, the judgment will be reversed, unless the error is harmless.[171] A motion for new trial is not appropriate where the omitted instructions are superfluous and potentially misleading.[172]
Further, while some courts have been lenient on whether objections are made in accordance with Rule 51, many courts hold that one who does not object in accordance with Rule 51 is deemed to have waived the right to appeal. A patently erroneous instruction can be considered on appeal if the error is “fundamental” and involves a miscarriage of justice, but the movant claiming the error has the burden of demonstrating it is a fundamental error.[173]
§ 1.10 Conduct of Jury
§ 1.10.1 Conduct During Deliberations
Jury deliberations must remain private and secret in order to protect the jury’s deliberations from improper, outside influence.[174] Control over the jury during deliberations, including the decision whether to allow the jurors to separate before a verdict is reached, is in the sound discretion of the trial court.[175] During this time, a judge may consider the fatigue of the jurors in determining whether the time of deliberations could preclude effective and impartial deliberation absent a break.[176] Although admonition of the jury is not required, one should be given if the jury is to separate at night and could potentially interact with third parties.[177]
The only individuals permitted in the jury room during deliberations are the jurors. However, in the case of a juror with a hearing or speech impediment, the court will appoint an appropriate professional to assist that individual and the presence of that professional is not grounds for reversal so long as the professional: (1) does not participate in deliberations; and (2) takes an oath to that effect.[178]
Courts have broad discretion in determining what materials will be permitted in the jury room.[179] Materials received into evidence are generally permitted,[180] including real evidence,[181] documents,[182] audio recordings,[183] charts and summaries admitted pursuant to Federal Rule of Evidence 1006,[184] video recordings,[185] written stipulations,[186] depositions,[187] drugs,[188] and weapons.[189] Additionally, jurors are typically permitted to use any notes he or she has taken over the course of trial.[190] Pleadings, however, are ordinarily not allowed.[191]
§ 1.10.2 Conduct During Trial
Traditionally, the trial judge has discretion to manage the jury during trial.[192] To ensure the jurors are properly informed, the court may, at any time after the commencement of trial, instruct the jury regarding a matter related to the case or a principal of law.[193] If a party wishes to present an exhibit to the jurors for examination over the course of trial, counsel should request that the court admonish the jury not to place undue emphasis on the evidence presented.[194] Additionally, the trial court may, in its informed discretion, permit a jury view of the premises that is the subject of the litigation.[195]
During trial, the court may allow the jury to take notes and dictate the procedure for doing so.[196] The trial court may permit note-taking for all of the trial or restrict the practice to certain parts.[197] A concern of permitting note-taking during trial is that jurors may place too much significance on their notes and too little significance on their recollection of the trial testimony.[198] To mitigate this risk, a judge should give a jury instruction informing each juror that he or she should rely on his memory and only use notes to assist that process.[199]
Allowing a juror to participate in examining a witness is within the discretion of the trial court,[200] although some courts have strongly opposed the practice.[201] If allowed, procedural protections should be encouraged to mitigate the risks of questions.[202] Additionally, the court should permit counsel to re-question the witness after a juror question has been posed.[203]
While trial is ongoing, jurors should not discuss the case among themselves[204] or share notes[205] prior to the case being submitted for deliberations. The same rule applies to communication between jurors and trial counsel[206] or jurors and the parties,[207] although accidental or unintentional contact may be excused.[208]
§ 1.11 Relief from Judgment
§ 1.11.1 Renewed Motion for Judgment as a Matter of Law
Pursuant to Federal Rule of Civil Procedure 50(b) a party may file a “renewed” motion for judgment as a matter of law, previously known as a “motion for directed verdict,” asserting that the jury erred in returning a verdict based on insufficient evidence.[209] However, in order to file a renewed motion, a party must have filed a Rule 50(a) pre-verdict motion for judgment as a matter of law before the case was submitted to the jury.[210] The renewed motion is limited to issues that were raised in a “sufficiently substantial way” in the pre-verdict motion[211] and failure to comply with this process often results in waiver.[212] The renewed motion must be filed no later than 28 days after the entry of judgment.[213]
The standard for granting a renewed motion for judgment as a matter of law mirrors the standard for granting the pre-suit motion under Rule 50(a).[214] A party is entitled to judgment only if a reasonable jury lacked a legally sufficient evidentiary basis to return the verdict that it did.[215] In rendering this analysis, a court may not weigh conflicting evidence and inferences or determine the credibility of the witnesses.[216] Upon review, the court must:
“(1) consider the evidence in the light most favorable to the prevailing party, (2) assume that all conflicts in the evidence were resolved in favor of the prevailing party, (3) assume as proved all facts that the prevailing party’s evidence tended to prove, and (4) give the prevailing party the benefit of all favorable inferences that may reasonably be drawn from the facts proved. That done, the court must then deny the motion if reasonable persons could differ as to the conclusions to be drawn from the evidence.”[217]
The analysis reflects courts’ general reluctance to interfere with a jury verdict.[218]
§ 1.11.2 Motion for New Trial
Federal Rule of Civil Procedure 59 permits a party to file a motion for new trial, either together with or as an alternative to a 50(b) renewed motion for judgment as a matter of law.[219] Like a renewed motion for judgment as a matter of law, a motion for new trial must be filed no later than 28 days after an entry of judgment.[220]
Rule 59 does not specify or limit the grounds on which a new trial may be granted.[221] A party may move for a new trial on the basis that “the verdict is against the weight of the evidence, that the damages are excessive, or that, for other reasons, the trial was not fair . . . and may raise questions of law arising out of alleged substantial errors in admission or rejection of evidence.”[222] Other recognized grounds for new trial include newly discovered evidence,[223] errors involving jury instruction,[224] and conduct of counsel.[225] Courts often grant motions for new trial on the issue of damages alone.[226]
Unlike when reviewing a motion for judgment as a matter of law, courts may independently evaluate and weigh the evidence.[227] Additionally, the Court, on its own initiative with notice to the parties and an opportunity to be heard, may order a new trial on grounds not stated in a party’s motion.[228]
When faced with a renewed judgment as a matter of law or a motion for new trial, courts have three options. They may (1) allow judgment on the verdict, if the jury returned a verdict; (2) order a new trial; or (3) direct the entry of judgment as a matter of law.[229]
§ 1.11.3 Clerical Mistake, Oversights and Omissions
Federal Rule of Civil Procedure 60(a) provides that “the court may correct a clerical mistake or a mistake arising from oversight or omission whenever one is found in a judgment, order, or other part of the record. The court may do so on motion or on its own, with or without notice.” This rule applies in very specific and limited circumstances, when the record makes apparent that the court intended one thing but by mere clerical mistake or oversight did another; such mistake must not be one of judgment or even of misidentification, but merely of recitation, of the sort that clerk or amanuensis might commit, mechanical in nature.[230] It is important to note that this rule can be applied even after a judgment is affirmed on appeal.[231]
§ 1.11.4 Other Grounds for Relief
Federal Rule of Civil Procedure 60(b) provides for several additional means for relief from a final judgment:
mistake, inadvertence, surprise, or excusable neglect;
newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b);
fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party;
the judgment is void;
the judgment has been satisfied, released or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or
any other reason that justifies relief.
Courts typically require that the evidence in support of the motion for relief from a final judgement be “highly convincing.”[232]
§ 1.12 Virtual Hearings and Trials
In the wake of the COVID-19 pandemic and numerous government shut downs, hearings and trials in both criminal and civil matters have been proceeding electronically. It may be necessary, now and in the future, to submit an application for a trial to proceed remotely.[233] Courts have almost universally found that the COVID-19 pandemic constitutes “good cause” to permit a remote trial. We also know that courts have been challenged but have ultimately found that trials by zoom are not an abuse of discretion, and as such, they may be around for some time to come, or maybe even permanently.[234]
And while trials always present unique and challenging issues, virtual trials present a new set of challenges, especially jury trials. It brings about a whole new set of factors—what makes for a successful trial in person can be very different from a successful trial over a virtual platform. There are new considerations for jury selection, opening statement demonstratives, testimony by witnesses who are no longer in the same room as counsel, presentation of evidence when counsel can no longer bring binders or large boards, jury selection, and a myriad of other issues. What remains the same, however, is that preparation and practice are key. Being familiar with the local court’s practice and working out any technology issues in advance are critical to ensuring a successful virtual trial.To date, the Courts have not created consistent rules for remote trials; every judge has their preferred procedures and technology. Accordingly, it is important to review judge and court rules regarding remote proceedings. For example, many judges have rules that prohibit the coaching of witnesses through off-screen methods, dictate courtroom behavior and appearance, limit public access and recording, and provide guidance on presentation of documents including documents that are filed under seal,[235] These rules not only dictate how the trial proceeds day-to-day, but may provide a basis for motions in limine and should be discussed with your judge in the pre-trial conference.[236]
So the question remains will remote trials remain a part of practice or not? Some would agree with the 1996 Advisory Committee Note to Federal Rule of Civil Procedure 43 “the importance of presenting live testimony in court cannot be forgotten” and that “the opportunity to judge the demeanor of a witness face-to-face is accorded great value in our tradition.”
[6]Luce v. United States, 429 U.S. 38, 40 n.2 (1984).
[7]United States v. Romano, 849 F.2d 812, 815 (3d Cir. 1988).
[8]Frintner v. TruPosition, 892 F. Supp. 2d 699 (E.D. Pa. 2012).
[9]United States v. LeMay, 260 F.3d 1018, 1028 (9th Cir. 2001).
[10]Wilson v. Williams, 182 F.3d 562, 565-66 (7th Cir. 1999).
[11]Id. at 566 (“Definitive rulings, however, do not invite reconsideration.”).
[12]Fusco v. General Motors Corp., 11 F.3d 259, 262-63 (1st Cir. 1993).
[13]Flythe v. District of Columbia, 4 F. Supp. 3d 222 (D.D.C. 2014).
[14]U.S. v. Denton, 547 F. Supp. 16 (E.D. Tenn. 1982).
[15]Henwood v. People, 57 Colo 544, 143 P. 373 (1914). An opening statement presents counsel with the opportunity to summarily outline to the trier of fact what counsel expects the evidence presented at trial will show. Lovell v. Sarah Bush Lincoln Health Center, 397 Ill. App. 3d 890, 931 N.E.2d 246 (4th Dist. 2010).
[16]Testa v. Mundelein, 89 F.3d 445 (7th Cir. 1996) (“being argumentative in an opening statement does not necessarily warrant a mistrial, but being argumentative and introducing something that should not be allowed into evidence may be a predicate for a mistrial.”).
[17]Krengiel v. Lissner Copr., Inc., 250 Ill App. 3d 288, 621 N.E.2d 91 (1st Dist. 1993) (“party whose motion in limine has been denied must object when the challenged evidence is presented at trial in order to preserve the issue for review, and the failure to raise such an objection constitutes a waiver of the issue on appeal.”).
[18]Forrestal v. Magendantz, 848 F.2d 303, 308 (1st Cir. 1988) (suggesting to jury to put itself in shoes of plaintiff to determine damages improper because it encourages the jury to depart from neutrality and to decide the case on the basis of personal interest and bias rather than on the evidence.).
[31]People v. Jordan, 2019 IL App (1st Dist.) 161848.
[32]Singer v. United States, 380 U.S. 24, 36 (1965) (finding that it is constitutionally permissible to require prosecutor and judge to consent to bench trial, even if the defendant elects one); United States v. Talik, No. CRIM.A. 5:06CR51, 2007 WL 4570704, at *6 (N.D.W. Va. Dec. 26, 2007).
[33] Fed. R. Civ. P. 38; Hopkins v. JPMorgan Chase Bank, NA, 618 F. App’x 959, 962 (11th Cir. 2015).
[37]See Lutz v. Glendale Union High Sch., 403 F.3d 1061, 1069 (9th Cir. 2005) (“[W]e hold that there is no right to have a jury determine the appropriate amount of back pay under Title VII, and thus the ADA, even after the Civil Rights Act of 1991. Instead, back pay remains an equitable remedy to be awarded by the district court in its discretion.”); see also Bledsoe v. Emery Worldwide Airlines, 635 F.3d. 836, 840-41 (6th Cir. 2011) (holding “statutory remedies available to aggrieved employees under the Worker Adjustment and Retraining Notification (WARN) act provide equitable restitutionary relief for which there is no constitutional right to a jury trial.”).
[38]K.M.C. Co. v. Irving Tr. Co., 757 F.2d 752, 758 (6th Cir. 1985); Leasing Serv. Corp. v. Crane, 804 F.2d 828, 832 (4th Cir. 1986); Telum, Inc. v. E.F. Hutton Credit Corp., 859 F.2d 835, 837 (10th Cir. 1988).
[39]Zaklit v. Glob. Linguist Sols., LLC, 53 F. Supp. 3d 835, 854 (E.D. Va. 2014); see also Nat’l Equip. Rental, Ltd. v. Hendrix, 565 F.2d 255, 258 (2d Cir. 1977).
[40]United States v. Steele, 298 F.3d 906, 912 (9th Cir. 2002) (“The fundamental purpose of voir dire is to ‘ferret out prejudices in the venire’ and ‘to remove partial jurors.’”) (quoting United States v. Howell, 231 F.3d 615, 627-28 (9th Cir. 2000)); Bristol Steel & Iron Works v. Bethlehem Steel Corp., 41 F.3d 182, 189 (4th Cir. 1994) (stating that the purpose of voir dire is to ensure a fair and impartial jury, not to operate as a discovery tool by opposing counsel).
[47]Hicks v. Mickelson, 835 F.2d 721, 726 (8th Cir. 1987).
[48]U.S. v. Lewin, 467 F.2d 1132 (7th Cir. 1972) (citing Fed. R. Crim. P. 24(a)).
[49]U.S. v. Lawes, 292 F.3d 123, 128 (2d Cir. 2002); Hicks v. Mickelson, 835 F.2d 721, 723-26 (8th Cir. 1987).
[50]Lawes, 292 F.3d at 128 (noting that “federal trial judges are not required to ask every question that counsel—even all counsel—believes is appropriate”).
[51]Finks v. Longford Equip. Int’l, 208 F.3d 225, at *2 (10th Cir. 2000).
[52]Mayes v. Kollman, 560 Fed. Appx. 389, 395 n.13 (5th Cir. 2014); Richardson v. New York City, 370 Fed. Appx. 227 (2d Cir. 2010); c.f. Kiernan v. Van Schaik, 347 F.2d 775, 779 (3d Cir. 1965) (finding that judge’s refusal to ask prospective jurors questions about connection to insurance companies constituted reversible error).
[55]United States v. Bishop, 264 F.3d 535, 554-55 (5th Cir. 2001).
[56]United States v. Price, 573 F.2d 356, 389 (5th Cir. 1978).
[57]Chestnut v. Ford Motor Co., 445 F.2d 967 (4th Cir. 1971); c.f. United States v. Turner, 389 F.3d 111 (4th Cir. 2004) (finding that district court was within its discretion in failing to disqualify jurors who banked with a different branch of the bank that was robbed).
[58]United States v. Chapdelaine, 989 F.2d 28 (1st Cir. 1993).
[59]Leibstein v. LaFarge N. Am., Inc., 767 F. Supp. 2d 373 (E.D.N.Y. 2011), as amended (Feb. 15, 2011).
[60]Cravens v. Smith, 610 F.3d 1019, 1032 (8th Cir. 2010).
[61]See 28 U.S.C. § 1866 (stating that a juror may be “excluded upon peremptory challenge as provided by law”).
[62]Davis v. United States, 374 F.2d 1, 5 (1967) (“The essential nature of the peremptory challenge is that it is one exercised without a reason stated, without inquiry and without being subject to the court’s control.”).
[63] 28 U.S.C. § 1870; see also Fedorchick v. Massey-Ferguson, Inc., 577 F.2d 856 (3d Cir. 1978).
[64]Stephens v. Koch Foods, LLC, No. 2:07-CV-175, 2009 WL 10674890, at *1 (E.D. Tenn. Oct. 20, 2009).
[68]See Batson v. Kentucky, 476 U.S. 79 (1986) (race); J.E.B. v. Alabama ex rel. T.B., 511 U.S. 127 (1994) (gender); Rivera v. Nibco, Inc., 372 F. App’x 757, 760 (9th Cir. 2010) (national origin).
[70]Robinson v. R.J. Reynolds Tobacco Co., 86 F. App’x 73, 75 (6th Cir. 2004).
[71]Rivera v. Illinois, 556 U.S. 148 (2009); see also King v. Peco Foods, Inc., No. 1:14-CV-00088, 2017 WL 2424574 (N.D. Miss. Jun. 5, 2017).
[72]Kirk v. Raymark Indus., Inc., 61 F.3d 147, 157 (3d Cir. 1995) (holding, in asbestos litigation, that trial court’s refusal to remove two panelists for cause was error, and the party’s subsequent use of peremptory challenges to remedy the judge’s mistake required per se reversal and a new trial) (citations omitted).
[87]Elgabri v. Lekas, 964 F.2d 1255, 1260 (1st Cir. 1992).
[88]SeeRosa-Rivera v. Dorado Health, Inc., 787 F.3d 614, 617 (1st Cir. 2015) (employees); United States v. Bryant, 461 F.2d 912, 918-19 (6th Cir. 1972) (informants); United States v. Hicks, 748 F.2d 854, 859 (4th Cir. 1984) (girlfriend).
[89]SeeU.S. v. Cisneros-Gutierrez, 517 F.3d 751, 762 (5th Cir. 2008).
[90] Fed. R. Evid. 612 authorizes a party to refresh a witness’s memory with a writing so long as the “adverse party is entitled to have the writing produced at the hearing, to inspect it, to cross-examine the witness thereon, and to introduce in evidence those portions which relate to the testimony of the witness.”
[91]Rush v. Illinois Cent. R. Co., 399 F.3d 705, 715-22 (6th Cir. 2005).
[92]Rush v. Illinois Cent. R. Co., 399 F.3d 705, 715-22 (6th Cir. 2005).
[98]Util. Control Corp. v. Prince William Const. Co., 558 F.2d 716, 720 (4th Cir. 1977).
[99]United States v. Gilbert, 57 F.3d 709, 711 (9th Cir. 1995).
[100]United States v. Finley, 708 F. Supp. 906 (N.D. Ill. 1989).
[101]United States v. Finis P. Ernest, Inc., 509 F.2d 1256, 1263 (7th Cir. 1975); United States v. Prince, 491 F.2d 655, 659 (5th Cir. 1974).
[102]SeeDavis v. Alaska, 415 U.S. 308, 316, 94 S. Ct. 1105, 1110, 39 L. Ed. 2d 347 (1974) (“Cross-examination is the principal means by which the believability of a witness and the truth of his testimony are tested.”).
[103]See Fed. R. Evid. 611(b) (effective December 1, 2011) (“(b) Scope of Cross-Examination. Cross-examination should not go beyond the subject matter of the direct examination and matters affecting the witness’s credibility. The court may allow inquiry into additional matters as if on direct examination.”).
[104]See United States v. Perez-Solis, 709 F.3d 453, 463-64 (5th Cir. 2013); see alsoUnited States v. Arias-Villanueva, 998 F.2d 1491, 1508 (9th Cir. 1993) (cross-examination is within the scope of direct where it is “reasonably related” to the issues put in dispute by direct examination), overruled on other grounds; United States v. Moore, 917 F.2d 215 (6th Cir. 1990) (subject matter of direct examination under Rule 611(b) includes all inferences and implications arising from the direct); United States v. Arnott, 704 F.2d 322, 324 (6th Cir. 1983) (“The ‘subject matter of the direct examination,’ within the meaning of Rule 611(b), has been liberally construed to include all inferences and implications arising from such testimony.”).
[106]Id; see also MDU Resources Group v. W.R. Grace and Co., 14 F.3d 1274, 1282 (8th Cir. 1994), cert. denied, 513 U.S. 824, 115 S. Ct. 89, 130 L. Ed. 2d 40 (1994) (“When cross-examination goes beyond the scope of direct, as it did here, and is designed, as here, to establish an affirmative defense (that the statute of limitations had run), the examiner must be required to ask questions of non-hostile witnesses as if on direct.).
[107] Under Fed. R. Evid. 608, if the witness concedes the bad act, impeachment is accomplished. If the witness denies the bad act, Rule 608(b) precludes the introduction of extrinsic evidence to prove the act. In short, the cross-examining lawyer must live with the witness’s denial.
[108] To qualify, “the crime must have been a felony, or a misdemeanor that has some logical nexus with the character trait of truthfulness, such as when the elements of the offense involve dishonesty or false statement. The conviction must have occurred within ten years of the date of the witness’s testimony at trial, or his or her release from serving the sentence imposed under the conviction, whichever is later, unless the court permits an older conviction to be used, because its probative value substantially outweighs any prejudice, and it should, in the interest of justice, be admitted to impeach the witness. If the prior conviction is used to impeach a witness other than an accused in a criminal case, its admission is subject to exclusion under Rule 403 if the probative value of the evidence is substantially outweighed by the danger of unfair prejudice, delay, confusion or the introduction of unnecessarily cumulative evidence. If offered to impeach an accused in a criminal case, the court still may exclude the evidence, if its probative value is outweighed by its prejudicial effect.” Behler v. Hanlon, 199 F.R.D. 553, 559 (D. Md. 2001).
[109] Fed. R. Evid. 608 (bad acts or character of untruthfulness); Fed. R. Evid. 609 (qualifying crime); Fed. R. Evid. 613 (prior inconsistent statement).
[123]U.S. v. Goichman, 547 F.2d 778, 784 (3d Cir. 1976) (“[T]here need be only a prima facie showing, to the court, of authenticity, not a full argument on admissibility . . . . [I]t is the jury who will ultimately determine the authenticity of the evidence, not the court.”).
[125] Fed. R. Evid. 803(6), 902(11); United States v. Senat, 698 F. App’x 701, 706 (3d. Cir. 2017).
[126]See, e.g., Stumpff v. Harris, 31 N.E.3d 164, 173 (Ohio App. 2 Dist. 2015) (“Numerous courts, both state and federal, have held that items produced in discovery are implicitly authenticated by the act of production by the opposing party); Churches of Christ in Christian Union v. Evangelical Ben. Trust, S.D. Ohio No. C2:07CV1186, 2009 WL 2146095, *5 (July 15, 2009) (“Where a document is produced in discovery, ‘there [is] sufficient circumstantial evidence to support its authenticity’ at trial.”).
[128] Rules of Evid., Rule 901(a). Idaho v. Koch, 334 P.3d 280 (Idaho 2014).
[129]State v. Smith, 2015-1359 La. App. 4 Cir. 4/20/16, 2016 WL 3353892, *10-11 (La. Ct. App. 4th Cir. 2016); see also OraLabs, Inc. v. Kind Group LLC, 2015 WL 4538444, *4, Fn 7 (D. Colo. 2015) (in a patent and trade dress infringement action, the court admitted, over hearsay objections, Twitter posts offered to show actual confusion between the plaintiff’s and defendant’s products.).
[130]Jones v. U.S., 813 A.2d 220, 226-227 (D.C. 2002).
[133]U.S. v. Gomez-Alvarez, 781 F.3d 787, 792 (5th Cir. 2015).
[134]Jerden v. Amstutz, 430 F.3d 1231, 1237 (9th Cir. 2005).
[135]See, e.g., Hastings v. Bonner, 578 F.2d 136, 142-143 (5th Cir. 1978); United States v. Johnson, 577 F.2d 1304, 1312 (5th Cir. 1978); United States v. Jamerson, 549 F.2d 1263, 1266-67 (9th Cir. 1977).
[136]SeeUnited States v. Henderson, 409 F.3d 1293, 1298 (11th Cir. 2005).
[137]Inselman v. S & J Operating Co., 44 F.3d 894, 896 (10th Cir. 1995).
[138]SeeUnited States v. Adams, 271 F.3d 1236, 1241 (10th Cir. 2001) (“In order to qualify as an adequate offer of proof, the proponent must, first, describe the evidence and what it tends to show and, second, identify the grounds for admitting the evidence.”).
[139]Murphy v. City of Flagler Beach, 761 F.2d 622 (11th Cir. 1985).
[140]See id. at 1241-42 (“On numerous occasions we have held that merely telling the court the content of . . . proposed testimony is not an offer of proof.”).
[141] Fed. R. Evid. 103(c) (The trial court “may direct an offer of proof be made in question-and-answer form.”). See, e.g., United States v. Yee, 134 F.R.D. 161, 168 (N.D. Ohio 1991) (stating that “hearings were held for approximately six weeks” on whether DNA evidence was admissible).
[145] Fed. R. Evid. 103(a)(2); Beech Aircraft v. Rainy, 488 U.S. 153 (1988).
[146]Alford v. United States, 282 U.S. 687, 692 (1931).
[147]United States v. Harris, 536 F.3d 798, 812 (7th Cir. Ill. Aug. 6, 2008), overruled on other grounds.
[148]See, e.g., United States v. St. Michael’s Credit Union, 880 F.2d 579 (1st Cir. 1989); Griffin v. California, 380 U.S. 609, 615 (Apr. 28, 1965).
[149] Model Rule of Professional Conduct Rule 3.4(e).
[150]Jones v. Lincoln Elec. Co., 188 F.3d 709, 731 (7th Cir. 1999) (“We find nothing improper in this line of argument. Closing arguments are the time in the trial process when counsel is given the opportunity to discuss more freely the weaknesses in his opponent’s case.”).
[151]Vineyard v. County of Murray, Ga., 990 F.2d 1207, 1214 (11th Cir. 1993).
[152]See, Fed. R. Civ. P. 50(a)(1) (“If a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue, the court may: (A) resolve the issue against the party; and (B) grant a motion for judgment as a matter of law against the party on a claim or defense that, under the controlling law, can be maintained or defeated only with a favorable finding on that issue.”).
[154]Arch Ins. Co. v. Broan-NuTone, LLC, 509 F. App’x 453, fn. 5 (6th Cir. 2012) (quoting Ford v. Cnty. of Grand Traverse, 535 F.3d 483, 492 (6th Cir. 2008).
[155]U. S. Indus., Inc. v. Semco Mfg., Inc., 562 F.2d 1061, 1065 (8th Cir. 1977).
[156]Am. & Foreign Ins. Co. v. Gen. Elec. Co., 45 F.3d 135, 139 (6th Cir. 1995).
[157]Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S. 394, 405 (2006).
[158]Reeves v. Sanderson Plumbing Prod., Inc., 530 U.S. 133, 120 S. Ct. 2097, 147 L. Ed. 2d 105 (2000); citing Lytle v. Household Mfg., Inc., 494 U.S. 545, 554-555, 110 S.Ct. 1331, 108 L.Ed.2d 504 (1990); Liberty Lobby, Inc., supra, at 254, 106 S.Ct. 2505; Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 696, n.6, 82 S.Ct. 1404, 8 L.Ed.2d 777 (1962).
[162] Fed. R. Civ. P. 51(b) (1)-(2); see also Vialpando v. Cooper Cameron Corp., 92 F. App’x 612 (10th Cir. 2004) (explaining that “a district court can no longer give mid-trial instructions without first advising the parties of its intent to do so and giving the parties an opportunity to object to the proposed instruction.”).
[163]Apple Inc. v. Samsung Elecs. Co., No. 11-CV-01846-LHK, 2017 WL 3232424 (N.D. Cal. July 28, 2017); see also Daly, 491 F.2d.104 (affirming court’s omission of instructions on the due process requirements of the Fourteenth Amendment since no facts supported a violation).
[165]Estate of Keatinge v. Biddle, 316 F.3d 7 (1st Cir. 2002).
[166]Positive Black Talk Inc. v. Cash Money Records, Inc., 394 F.3d 357, 65 Fed. R. Evid. Serv. 1366 (5th Cir. 2004), abrogated on other grounds.
[167] Fed. R. Civ. P. 51(c)(2); Fed. R. Crim. P. 30(d); see also Abbott v. Babin, No. CV 15-00505-BAJ-EWD, 2017 WL 3138318, at *3 (M.D. La. May 26, 2017) (explaining that upon an untimely objection courts may only consider a plain error in the jury instructions).
[169]Chuman v. Wright, 76 F.3d 292, 294 (9th Cir. 1996).
[170]Benaugh v. Ohio Civil Rights Comm’n, No. 104-CV-306, 2007 WL 1795305 (S.D. Ohio June 19, 2007), aff’d, 278 F. App’x 501 (6th Cir. 2008).
[171]Chuman v. Wright, 76 F.3d 292, 294 (9th Cir. 1996) (reversing judgment since the instructions could allow a jury to find the defendant liable based on premise unsupported by law).
[172]United States v. Grube, No. CRIM C2-98-28-01, 1999 WL 33283321 (D.N.D. Jan. 16, 1999) (denying motion for new trial since the omitted instructions were superfluous and potentially misleading); see also Cupp v. Naughten, 414 U.S. 141, 94 S. Ct. 396, 397, 38 L. Ed. 2d 368 (1973); Lannon v. Hogan, 555 F. Supp. 999 (D. Mass.), aff’d, 719 F.2d 518 (1st Cir. 1983) (generally cannot seek such relief based on a claim of improper jury instructions, unless the error “so infect[ed] the entire trial that the resulting conviction violated the requirements of Due Process Clause and the Fourteenth Amendment.”).
[173]Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48 (2d Cir. 2002) (failure to make specific objections to jury instructions before jury retires to deliberate results in waiver, and Court of Appeals may review the instruction for fundamental error only.).
[174]United States v. Olano, 507 U.S. 725, 737 (1993).
[175]Cleary v. Indiana Beach, Inc., 275 F.2d 543, 545-46 (7th Cir. 1960); Sullivan v. United States, 414 F.2d 714, 715-16 (9th Cir. 1969).
[176]Cleary, 275 F.2d at 546; Magnuson v. Fairmont Foods Co., 442 F.2d 95, 98-99 (7th Cir. 1971).
[177]See United States v. Williams, 635 F.2d 744, 745-46 (8th Cir. 1980) (“It is essential to a fair trial, civil or criminal, that a jury be cautioned as to permissible conduct in conversations outside the jury room. Such an admonition is particularly needed before a jury separates at night when they will converse with friends and relatives or perhaps encounter newspaper or television coverage of the trial.”); United States v. Hart, 729 F.2d 662, 667 n.10 (10th Cir. 1984) (“[A]n admonition . . . should be given at some point before jurors disperse for recesses or for the day, with reminders about the admonition sufficient to keep the jurors alert to proper conduct on their part.”).
[178]United States v. Dempsey, 830 F.2d 1084, 1089-90 (10th Cir. 1987).
[179]United States v. Gross, 451 F.2d 1355, 1359 (9th Cir. 1971).
[180]United States v. Williams, 87 F.3d 249, 255 (8th Cir. 1996).
[194]United States. v. Venerable, 807 F.2d 745, 747 (8th Cir. 1986).
[195]United States v. Gray, 199 F.3d 547, 550 (1st Cir. 1999).
[196]United States v. Scott, 642 F.2d 791, 797 (9th Cir. 2011); United States v. Bassler, 651 F.2d 600, 602 n.3 (8th Cir. 1981).
[197]See, e.g., United States v. Darden, 70 F.3d 1507, 1537 (8th Cir. 1995) (court permitted note-taking while examining exhibits only); United States v. Porter, 764 F.2d 1, 12 (1st Cir. 1985) (court permitted note-taking only during opening statements, closing statements, and jury charge).
[198]United States v. Scott, 642 F.3d 791, 797 (9th Cir. 2011).
[199]See United States v. Rhodes, 631 F.2d 43, 45-46 (5th Cir. 1980) (“The court should also explain that the notes taken by each juror are to be used only as a convenience in refreshing that juror’s memory and that each juror should rely on his or her independent recollection of the evidence rather than be influenced by another juror’s notes.”).
[200]United States v. Richardson, 233 F.3d 1285, 1288-1289 (11th Cir. 2000).
[201]United States v. Rawlings, 522 F.3d 403, 408 (D.C. Cir. 2008); United States v. Bush, 47 F.3d 511, 514-516 (2nd Cir. 1995); DeBenedetto by DeBenedetto v. Goodyear Tire & Rubber Co., 754 F.2d 512, 516 (4th Cir. 1985).
[202] Perhaps the most important protection is a screening mechanism where questions are submitted to a judge and reviewed by counsel prior to the question being posed. Rawlings, 522 F.3d at 408; United States v. Collins, 226 F.3d 457, 463 (6th Cir. 2000).
[210]Exxon Shipping Co. v. Baker, 554 U.S. 471, 486, 128 S. Ct. 2605, 2617 n.5, 171 L. Ed. 2d 570 (2008).
[211]CFE Racing Prod., Inc. v. BMF Wheels, Inc., 793 F.3d 571, 583 (6th Cir. 2015).
[212]Id. (explaining that the waiver rule serves to protect litigants’ right to trial by jury, discourage courts from reweighing evidence simply because they feel the jury could have reached another result, and prevent tactical victories at the expense of substantive interest as the pre-verdict motion enables the defending party to cure defects in proof) (quoting Libbey-Owens-Ford Co. v. Ins. Co. of N. Am., 9 F.3d 422, 426 (6th Cir. 1993)).
[213]Bowen v. Roberson, 688 F. App’x 168, 169 (3d Cir. 2017).
[214]McGinnis v. Am. Home Mortg. Servicing, Inc., 817 F.3d 1241, 1254 (11th Cir. 2016).
[215]Bavlsik v. Gen. Motors, LLC, 870 F.3d 800, 805 (8th Cir. 2017).
[218]See, e.g., Stragapede v. City of Evanston, Illinois, 865 F.3d 861, 866 (7th Cir. 2017), as amended (Aug. 8, 2017) (upholding jury verdict in favor of plaintiff for ADA violation when challenged in renewed 50(b) motion on grounds that the jury properly discounted employer’s evidence).
[221]Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007) (noting that federal courts are guided by the common law’s established grounds for permitting new trials).
[222]Montgomery Ward & Co. v. Duncan, 311 U.S. 243, 251, 61 S.Ct. 189, 85 L.Ed. 147 (1940).
[223]Kleinschmidt v. United States, 146 F. Supp. 253, 257 (D. Mass. 1956) (explaining that a party seeking new trial on ground of newly discovered evidence has substantial burden to explain why the evidence could not have been found by due diligence before trial).
[224]Gross v. FBL Fin. Servs., Inc., 588 F.3d 614, 617 (8th Cir. 2009) (granting new trial in age discrimination case where jury instruction improperly shifted the burden of persuasion on a central issue).
[225]Warner v. Rossignol, 538 F.2d 910, 911 (1st Cir. 1976) (counsel’s conduct in going beyond the pleadings and evidence to speculate and exaggerate the plaintiff’s injuries, despite repeated warnings from the trial judge, warranted new trial).
[226]See, e.g., Bavlsik v. Gen. Motors LLC, No. 4:13 CV 509 DDN, 2015 WL 4920300, at *1 (E.D. Mo. Aug. 18, 2015) (granting new trial on issue of damages and rejecting defendants’ argument that the record demonstrated a compromised verdict).
[230]In re Transtexas Gas Corp., (5th Cir 2002), 303 F.3d 571.
[231]U.S. v. Mansion House Center North Redevelopment Co., (8th Cir. 1988), 855 F.2d 524,, certiorari denied 109 S.Ct. 557, 488 U.S. 993, 102 L.Ed.2d 583 (district court had jurisdiction to modify judgment, even after it was affirmed on appeal, in order to clarify its intentions and conform judgment to parties’ pretrial stipulation).
[232] See United States v. Cirami, 563 F.2d 26, 33 (2d Cir. 1977).
[233]Flores v. Town of Islip, No. 18-CV-3549 (GRB)(ST), 2020 WL 5211052, at *1 (E.D.N.Y. Sept. 1, 2020) (the court granted a motion to proceed with a virtual trial but required counsel and the court staff to have a pre-trial conference to discuss the logistics of a virtual trial).
[234]In re Alle, No. 2:13-BK-38801-SK, 2021 WL 3032712 (C.D. Cal. July 19, 2021).
[235] See, e.g., New Jersey Federal Bankruptcy Court Zoom Trial Guidelines.
There are many types of intellectual property (IP)—for example, trademarks, trade secrets, copyrights, or patents. These are all valuable assets of a company. One way the legal department can help generate money for a company is to find ways to monetize the company’s IP. Being aggressive with enforcing patents is a good strategy, but the strategy goes nowhere if the company does not have any patents to fight with. To get over this hump, the first step is creating or enhancing a patent development program. It is a fairly straightforward process to generate patents. The licensing half, however, is not easy, but can be very lucrative if the patents are valid, have value, and you find the right targets.
A patent is a government-granted monopoly to build, sell, and use your invention (and prevent others from doing so). If you are issued a patent in the United States, it is typically good for twenty years, after which time your patent expires and anyone can copy, build, and sell your invention. In exchange for a short-term monopoly, you must disclose the details of your invention to the public so that someone practiced in the arts could recreate it. To receive a patent, your idea must meet four requirements.
The subject matter must be patentable, as defined by Congress and the courts.
Your idea must be new.
The idea must be useful.
Your idea must be non-obvious.
Additionally, there is what lawyers commonly called the Alice decision whereby the U.S. Supreme Court established a two-part test to determine if a software patent was patentable or not as pertaining to ineligible subject matter. To sum it up quickly, under Alice, simply reciting the use of a conventional computer in the claims to implement the known idea does not make the idea for a utility patent patentable subject matter.
There are three types of patents you can file for:
Utility patents may be granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof (good for twenty years).
Design patents may be granted to anyone who invents a new, original, and ornamental design (good for fourteen years).
Plant patents may be granted to anyone who invents or discovers and asexually reproduces any distinct and new variety of plant (good for twenty years).
There is a lot that goes into determining if your technology or idea is patentable and, if so, which type of patent is best. Unless the company has the money to have its own patent attorney on staff, you will need experienced outside counsel to help you with this process and draft the application. Simply put, getting a patent is not easy (unless you buy them from someone looking to sell or in bankruptcy, which is always an option). The overall process takes a lot of work and time. It can also be expensive—roughly $15,000–$25,000 to get a patent issued. Buying already issued patents is likely far more expensive. To start, in the United States, you need to file a patent application that sets out in detail a description of your idea. These applications must be filed by a patent attorney (in-house or outside) skilled in the art of drafting a patent application. You must also review publications and other sources to make sure there is nothing already out there that overlaps with your idea or would allow someone skilled in the arts to build your invention just from reading what is already out there. (This is called prior art.) Then an examiner from the U.S. Patent and Trademark Office (USPTO) reviews your application. They might reject it in total, or they might reject part of it (for any of the reasons noted). You have a chance to appeal (called an office action), and the examination process (with the exception of design patents) generally goes back and forth for several years before either your patent is issued or finally denied. At each stage, you must determine whether it is worth the cost and the effort to continue or, depending on the objections from the examiner, whether the changes you must make to your patent leave you with anything good after it is all said and done.
You also need to decide in which jurisdictions you will seek patent protection. Patents are only valid in the country where they are issued. You cannot enforce a patent issued in the United States against a business operating within the European Union or in China. You would need patents issued in those countries. Additionally, in the United States, you must seek patent protection within one year of when you first sold or disclosed the patented material. If you wait too long (more than twelve months), you cannot get a patent. Finally, one neat trick in the U.S. system is filing for what is called a provisional patent. This is a relatively inexpensive process that allows you to get an application on file quickly (with far less detail and expense than a regular patent application). The provisional patent application is good for one year and buys you time to decide if you truly want to pursue a full patent while preserving your position as first to file.
Given the cost, the business side will ask why they should get a patent. It is a fair question, especially if you are going to be spending time and treasure trying to get inventions patented. Ultimately, the answer to the question depends on the company’s strategy concerning IP generally and patents specifically. You can break the reasons down as follows:
Protect innovations. The most straightforward reason to get a patent is to protect a valuable invention, in particular, one you believe competitors or others may reverse engineer or invent on their own.
Offensive use. This means getting patents to use for licensing purposes (i.e., money) or to preclude others (competitors) from practicing your invention, which, if done correctly, could mean they are no longer competitors.
Defensive use. This contemplates getting patents to use to defend the company in the event a competitor or other patent owner tries to assert their patent against you. If the party asserting the patent operates a real business (versus being a patent troll), then you may own a patent that you could enforce against them. When this happens, the parties often agree to a cross-licensing program that allows each party to use the other’s patents.
Increase shareholder value. Patents have value. A portfolio of patents can increase the value of your company for its shareholders, particularly in cases of a potential sale of the business. You will always see questions around patents (and other IP) in a due diligence request. Additionally, if your company is publicly traded, a fulsome patent portfolio (or simply obtaining a single new, but important, patent) can mean an increase in share price.
Taxes. Being able to demonstrate that you apply for and have patents can be used as a justification for research and development costs, which typically qualify as deductions for purposes of corporate income taxes.
Prestige. Companies with large patent portfolios (or even just a handful of important patents) are viewed as innovators in their field. Employees, especially for technology companies, take pride in the innovations developed by their companies, including patents. This can lead to an improvement of morale generally, especially among the technical teams.
Another important consideration regarding any particular piece of intellectual property is whether you should protect it with a patent or treat it as a trade secret. Not all ideas are worth the cost of trying to obtain a patent. Additionally, once the patent issues, the particulars of the invention are disclosed to the world, and your protection only lasts for twenty years (and it also depends on how willing you are to enforce your patents). Accordingly, there are times when a patent simply does not make sense. For example, the good folks at Coca-Cola could have patented the formula for Coke. But, for obvious reasons, it was a far better decision to treat the formula as a trade secret and keep it out of the public realm. A patent only lasts twenty years. A trade secret can last forever. So, when deciding to patent something, you need to think hard about whether this is, in fact, the right course or if you are better off keeping it as a trade secret.
There are two key documents you must have in place as you look to develop your company’s IP. The first is an invention disclosure form. This is a form you require inventors to fill out so their inventions can be properly evaluated. The form should only be a few pages long to encourage inventors to complete it. The inventor should provide information such as:
a description of the technology, how it operates, the identity of competitors in the field, and their products/technology;
how the invention will make a difference in the marketplace for the company and allow the company’s products to surpass others (i.e., why is it worth seeking a patent);
are there easy ways to design around the technology;
the date the invention was created; and
whether the invention has been offered for sale and, if so, when?
The second document is a form whereby all employees who join the company agree to assign ownership of any inventions that employee creates on company time or using company resources to the company. This form is often combined with other agreements such as confidentiality, non-solicitation, and non-compete agreements. You do not want to be in a position where the company is defending challenges to its attempt to obtain a patent from an employee claiming she is the real owner.
Securitization is a subset of structured finance. Structured finance transactions are generally finance transactions that involve the isolation of a pool of financial assets from the originator of those assets and a loan that relies on the strength of the assets rather than the creditworthiness of the owner. A securitization is a transaction in which a sponsor or originator obtains funding by causing a special purpose entity to issue securities backed by (and paid from) the proceeds of financial assets. The underlying assets are generally originated by companies seeking funds to finance operations or other corporate initiatives.
A variety of assets are used in securitizations. For example, securitizations may involve residential or commercial mortgages, credit card receivables, auto loans, student loans, corporate loans, or other financial assets.
A key feature of securitizations is legal isolation of the underlying assets. The underlying assets are transferred to the issuer of the securities on a “true sale” basis, and the issuer is structured in such a way as to be isolated from the bankruptcy risk of the originator.
Another feature of securitizations is credit enhancement. There are several methods for credit enhancement, including “tranching,” whereby the bonds are divided in a number of tranches[1] with varying risk profiles (see Figure 1 for an example of tranches). Another is “overcollateralization,” which involves having more assets than necessary to cover payment on the securities.
Figure 1: Example of tranching. A flow chart illustrates that the most senior tranche is paid first and the most junior tranche last.
Why Securitize?
The credit enhancement inherent to securitizations, especially due to the aforementioned legal isolation techniques, permits the originating companies to obtain higher ratings than if such companies were to obtain a traditional loan. Consequently, the originating companies can obtain financing at a lower cost of funding.
Main Parties and Legal Documents
While securitizations come in a variety of structures, the following highlights the main parties and documents in a typical securitization.
Parties
The Originator/Sponsor
The originator generates (originates) and/or owns the receivables (the cash-flowing assets) that it seeks to securitize. A securitization may have many originators. The sponsor is the person who initiates and drives the securitization. In some transactions, the originator is also the sponsor of the transaction.
The Servicer
The servicer is the person who performs the administrative services related to the collection of the receivables. The servicer may also have active management responsibilities with respect to the receivables/underlying assets, if the securitization’s portfolio is “dynamic.”
The Trustee/Collateral Agent
The Trustee/Collateral Agent is the person/organization (typically a bank) that holds the security interest on behalf of the investors and may perform certain other duties under the transaction documents. The person serving as Trustee may have multiple additional roles in a transaction, such as serving as custodian, account bank, or collateral administrator.
The Issuer
The Issuer is an entity created solely for purposes of a securitization and is responsible, among other duties, for issuing the securities. Some transactions have more than one issuer.
The Underwriter
The underwriter is the person responsible for arranging for the sale of the Issuer’s securities to the initial investors.
The Investors
The investors are the persons who invest in the securitization transaction by purchasing the securities originally issued by the Issuer and placed by the underwriter.
(See Figure 2 for a relationship diagram with typical transaction parties.)
Figure 2: Securitization Parties. A flow chart indicates the relationships between the main parties in a typical securitization.
Main Legal Documents
The two main legal documents in a securitization transaction are generally the indenture and the offering document.
Indenture
The indenture provides the terms of the securities issued in the securitization and describes the rights and duties of transaction parties.
Offering Document
The offering document is the main disclosure document that investors use to make their investment decisions. The offering document includes a description of the risk factors, the structure of the transaction, and the terms of the securities.
Bankruptcy Law
One of the main objectives in a securitization is to isolate the portfolio of underlying assets from the bankruptcy risk of the originator of those assets. Features of a securitization that are designed to achieve this objective include structuring the Issuer as a special purpose entity and transferring the underlying assets from the originator to the Issuer in a true sale.
Securities Law
In securitization transactions not registered with the U.S. Securities and Exchange Commission (“SEC”), the structure of the transaction and the types of investors investing in the transaction have to be carefully considered in order to meet the requirements of a private transaction. In registered transactions, the SEC reviews the offering document, and the document has to meet the disclosure requirements of a public transaction.
Other Regulatory Regimes
A number of other regulatory regimes can be relevant to securitizations. Examples include the restrictions on ownership or sponsorship of a “covered fund” by a banking entity under the Dodd–Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the risk retention rules under the Dodd Frank Act, and, in transactions that securitize consumer loans, rules issued by the Consumer Financial Protection Bureau.
[1] From the French word tranche, or “slice” in English.
In the event of a management deadlock among owners of a closely held entity with a limited number of shareholders, partners, or members, the non-operating owners often pursue a resolution of the parties’ management disputes through state court litigation. The simplest example of corporate deadlock involves a company with two co-owners who are equal (50–50) shareholders or members and can no longer agree on how to run or capitalize their business leading to major animosity and a lack of goodwill between the parties. In cases such as this, when the breakdown of the interest holders’ relationship is irreparable, an aggrieved shareholder or member who wants themself or their business partner(s) to exit the company, or to even wind up the company as a whole, may seek to accomplish his goals through the appointment of a state court receiver.[1]
In state court, receivers are generally appointed by filing an order to show cause along with a verified complaint.[2] Because an action to appoint a receiver is an equitable remedy, and the receiver’s duties and powers are determined based on the specific facts of each case, such actions are generally heard by a chancery court sitting in equity.[3] Notwithstanding the equitable nature of a receivership action, courts view the appointment of a receiver as an extraordinary remedy that requires imposing and persuasive proof.[4] As such, it can take months or even years before a receiver is appointed and given a directive by the appointing court to run, liquidate certain assets, or even dissolve a deadlocked company. Accordingly, breaking a corporate deadlock by using a state court appointed receiver can be a time consuming, expensive, and arduous process, which, in the interim, can lead to the further deterioration of a company’s finances and ability to conduct business as a going concern.
In contrast to the drawn out nature of a receivership action, a non-operating owner can break a company’s management deadlock in a relatively short amount of time by electing to put his or her company in a Chapter 7 bankruptcy proceeding.[5] Indeed, once a Chapter 7 proceeding is filed the day to day control and operations of the business immediately pass to a Chapter 7 trustee, an independent and objective third party, pursuant to § 541(a) of the Bankruptcy Code. The non-operating owner can then negotiate with the Chapter 7 trustee to sell the business entity as a going concern through a § 363 asset sale or even request that the company be liquidated outright. Both of these actions would result in the non-operating owner (and perhaps the operating owner if he or she does not elect to purchase the assets alone or through another entity) essentially selling his or her interest in the now-bankrupt company and cashing out, thereby breaking the management deadlock. This is the case because the funds derived from the sale of the business or its assets after paying the administrative expenses associated with the sale(s) and all outstanding pre-petition creditors will be distributed to the entity’s members or shareholders under Bankruptcy Code § 726(a)(6).[6]
In regard to selling a business as a going concern, a non-operating owner can also request that a Chapter 7 trustee request authorization from the bankruptcy court to temporarily operate the business under Bankruptcy Code § 721 to preserve the debtor entity’s business relationships and by extension its going concern value while working toward completing the sale. Unlike the drawn out process of a party seeking a state court receiver, a bankruptcy court can grant a trustee the authority to run a debtor’s business temporarily within a week of the bankruptcy filing if the trustee deems it necessary to file an expedited motion during the first days of the case. What’s more, with the expressed interest of a motivated buyer, a going concern sale or full asset liquidation can be accomplished within weeks of a bankruptcy petition being filed if the trustee is aware of the potential purchaser of the company or its underlying assets. Such a purchaser may be one of the company’s owners who now seeks to operate the business or a successor entity without the constraints of his or her former business partner.
This was exactly the case in the recent Chapter 7 bankruptcy case of In re Key Metal Refining, LLC filed in the United States Bankruptcy Court for the District of New Jersey.[7] In that case, the 51 percent majority owner of Key Metal Refining, LLC (the Debtor) was a separate entity that filed the Debtor’s Chapter 7 petition. The minority owner of the Debtor was also an entity that together with its sole principal owned the remaining 49 percent of the Debtor. The principal of the minority owner also owned a separate real estate holding entity that, in turn, owned the property on which the Debtor operated. Prior to the management deadlock, the real estate holding entity had leased the property to the Debtor with such lease remaining in effect as of the date of the Debtor’s bankruptcy filing.
Once appointed, the Chapter 7 trustee[8] in this case expeditiously filed first day motions with the bankruptcy court for the authority to operate the Debtor’s business on an interim basis and to obtain post-petition financing directly from the majority owner to fund the projected shortfall in the Debtor’s business operations and the costs of administering the Chapter 7 case. The goal of both of these motions was to allow the trustee to continue to operate the Debtor’s business pending the negotiation and consummation of a sale of the business’s assets in an effort to maximize the value of the Debtor’s assets, which otherwise would have significantly deteriorated in value. The bankruptcy court granted both the trustee’s motions on an interim basis just three days after the Debtor’s bankruptcy filing.
Thereafter, the trustee negotiated with the two deadlocked members of the Debtor and ultimately came to a consensual settlement and asset purchase agreement, which provided, among other things, that the trustee would sell substantially all of the Debtor’s assets to the Debtor’s majority owner. The proceeds of the sale would be placed in a settlement fund and then go toward the claims of the Debtor’s non-insider general unsecured creditors. The minority owner of the Debtor benefited from the sale and settlement agreement because the trustee rejected the Debtor’s property lease with the real estate holding company controlled by the debtor’s minority owner under Bankruptcy Code § 365. As such, the principal of the minority owner and his real estate holding company were now free to use the property for their own independent business operations. Moreover, the parties stipulated that the minority owner was entitled to a substantial claim for damages stemming from the trustee’s rejection of the lease agreement. This rejection claim was paid pro rata with other non-insider unsecured creditors from the settlement fund. The entire sale and settlement agreement between the parties was negotiated, agreed, and consummated within approximately six months of the Debtor’s bankruptcy filing.
The Key Metal Refining, LLC case goes to show that the time constraints associated with a Chapter 7 asset sale are likely to incentivize the deadlocked owners of a company to come to some form of an agreement regarding their business’s or a successor entity’s future management structure within a relatively short amount of time. This is the case as the value of the debtor company and its associated good will continue to deteriorate the longer it remains in a Chapter 7 bankruptcy proceeding without the ability to conduct its normal business operations.
In sum, while putting a company in a Chapter 7 proceeding is not a panacea, it is certainly worth considering in the right situations. Indeed, such an approach can be an economical and expedient way to break a management deadlock and solve what could otherwise be a prolonged and complicated litigation battle in state court for the appointment of a receiver.
[1] Generally, a receiver appointed in state court has the power to acquire legal title of the debtor’s assets and to liquidate and dissolve the debtor entity. See e.g., N.J.S.A. § 14A:14-4. Depending on state law and the retention order, receivers can also have the authority to continue to operate the debtor’s business, assume or reject unexpired leases, sell assets, collect rents, and have the power to close the business.
[2] In New Jersey, the procedures governing receiverships are provided in Court Rule 4:53-1, et seq.
[3]See e.g., Roach v. Margulies, 42 N.J. Super. 243, 245 (App. Div. 1956) (holding that it is well recognized that a court of equity has inherent power to appoint a receiver for a corporation).
[5] A significant limitation to this strategy is that the non-managing owner must have the authority to place the business in a bankruptcy proceeding or else he or she risks the case being thrown out upon a motion to dismiss being filed by one or more of the remaining owners of the company. State laws differ regarding whether a consensus among an entity’s owners is a prerequisite for a bankruptcy filing. For instance, in New Jersey, unless the members otherwise agree in writing, the law governing LLCs requires the unanimous vote of the members of an LLC to undertake actions outside the ordinary course. N.J.S.A. § 42-2C-37(c)(1)-(4); see alsoIn re Crest By The Sea, LLC, 522 B.R. 540, 545 (Bankr. D.N.J. 2014) (concluding New Jersey LLC statute applies when LLC operating agreements are silent as to the vote required to authorize a debtor’s bankruptcy filing). In contrast, New York law does not specify what type of consent is required by the members of an LLC prior to filing a petition for bankruptcy; consequently courts look to the entity’s operating agreement for guidance. See In re E. End Dev., LLC, 491 B.R. 633, 639 (Bankr. E.D.N.Y. 2013) (holding that LLC operating agreement that conferred on the managing member broad authority to take any action necessary to preserve the value of its assets and to further its business operations, authorized managing member to file for bankruptcy on behalf of the LLC).
[6] Section 726(a) governs the order of distribution of property of the estate in a Chapter 7 case. A debtor, or the equity owners thereof, can receive nothing from the estate until after all administrative expenses and claims held by creditors are paid in full with interest. In re Deer Valley Trucking, Inc., 569 B.R. 341, 347 (Bankr. D. Idaho 2017).
[7]In re Key Metal Refining LLC, Case No. 19-24581-VFP, filed on July 28, 2019.
[8] The co-author of this article, Eric R. Perkins, served as the Chapter 7 trustee in this case.
The dramatic increase in SPAC IPOs in 2020 and early 2021 and related de-SPAC merger transactions that followed are creating billions of dollars’ worth of privately-placed common stock and warrants of newly public companies. That means more demand for “no registration” and legend removal opinions from company and selling stockholders’ counsel.
SPACs are special purpose acquisition companies—shell companies, also known as blind pool or blank check companies—that are newly formed to raise equity capital in an IPO and, after they are public, to pursue an acquisition of a target company, effectively taking a private target company public. Because SPACs by their terms must offer to redeem their outstanding common stock at the time of the acquisition and the acquisition price of the target company often exceeds the SPAC’s capital, SPACs typically raise additional capital to fund their acquisitions through PIPEs offerings (Private Investment/Public Equity) at the time of the merger.
The SPAC IPO boom cooled rapidly after the first months of 2021 for a number of reasons, not least of which was renewed SEC scrutiny. The SEC staff announced changes to the accounting for SPAC warrants, and the acting head of the Division of Corporation Finance questioned the availability of the safe harbor for forward-looking statements as applied to projections used in connection with de-SPAC transactions.[1] There have also been high profile failures and stock price volatility of some de-SPAC companies. The perceived risk of de-SPAC transactions has increased and with it the pressure to get liquidity in the shares, which could mean increased urgency for legend removal when the Rule 144 exemption permitting public resales becomes available.
“No registration” and legend removal opinions are often needed for all types of public companies, but these opinions for a former SPAC company present a specific set of problems. In particular, because every SPAC is a shell company prior to its de-SPAC transaction, Rule 144 is not available until a year after the de-SPAC transaction. Also, to maintain Rule 144 eligibility, the company must have filed all of its reports (other than Form 8-K reports) required under the Securities Exchange Act of 1934 (the “’34 Act”) with the SEC for the 12 months prior to the sale. That means a critical part of diligence for giving “no registration” and legend removal opinions is determining whether the issuer of the shares is or was a SPAC or other shell company and, if so, whether it has filed all the required periodic reports.
Policing a Private Offering Exemption
The Securities Act of 1933 (the “’33 Act”) requires all offers and sales of securities to be registered with the SEC or to fit within an exemption from registration. Private companies usually issue shares under exemptions based on Section 4(a)(2) of the ’33 Act, which exempts offers and sales of securities by issuers in transactions “not involving a public offering” (i.e., private offerings). PIPEs offerings rely on this exemption. However, subsequent resales of privately-placed securities could result in the chain of transactions being considered a public offering, thereby invalidating the private offering exemption. As a result, companies restrict resales of privately-placed securities. Typically, the stock certificates for such securities will bear a legend to the effect that:
The shares represented by this certificate have not been registered under the Securities Act of 1933 or the securities laws of any state, and have been acquired for investment and not with a view to, or in connection with, the sale or distribution thereof. No such sale or distribution may be effected without an effective registration statement related thereto or an opinion of counsel in a form satisfactory to the company that such registration is not required under the Securities Act of 1933 or the securities laws of any state. (Emphasis added)
So, to transfer shares with a legend like the foregoing on the stock certificate, the holder needs an opinion of counsel. Imposing transfer restrictions and placing legends on stock certificates are ways that companies strive to “police” their private offering exemptions. They do not permit transfers of privately-placed shares without an opinion of counsel that the transfer does not require registration under the ’33 Act, and they place a legend on the new stock certificate unless counsel advises that no legend is required. Broker-dealers and transfer agents involved in the resale of shares also enforce the transfer restrictions. Broker-dealers will conduct due diligence because of their role in buying or placing shares and potential ’33 Act liability. Transfer agents will require legal opinions to remove ’33 Act restrictive legends because of their regulation by the SEC and liability concerns.[2]
Stock certificate legends are not the only way for issuers to police their private offering exemptions. Qualified institutional buyers (“QIBs”), as defined in Rule 144A, are often viewed as being capable of complying with the ’33 Act on their own, so a letter from the QIB to the issuer may under some circumstances substitute for legended physical certificates.
Unregistered Public Resales
While there are exemptions that permit the private resale of shares, the privately sold shares remain subject to restrictions and consequently do not trade at the same price as freely tradable shares.[3] Often, sellers are not interested in reselling privately at the kind of discount required, so, in the absence of registration of the resale, will only be interested in an unregistered public resale under Rule 144, which allows counsel to give both a “no registration” and a legend removal opinion.
Rule 144 is a safe harbor for resales under Section 4(a)(1) of the ’33 Act, which exempts resales “by any person other than an issuer, underwriter or dealer.” If the seller holds restricted securities as defined in Rule 144(a)(3)(i), that is, securities acquired directly or indirectly from the issuer, or from an affiliate of the issuer, in a transaction or chain of transactions not involving any public offering, then by reselling through a broker (as it typically would), the broker could be viewed as an underwriter, engaged in a distribution of the securities to the public. A stockholder who resells securities in compliance with the applicable conditions of Rule 144 and its broker, however, is deemed not to be engaged in a distribution of securities and, therefore, not to be an underwriter.
Rule 144 generally permits resales of restricted securities that have been held for at least six months, in the case of an issuer that has been subject to the reporting requirements of the ’34 Act for 90 days and is current in its annual and quarterly reports, or held for at least one year in all other cases. In the case of resales by affiliates of the issuer, Rule 144 requires, in addition, that volume and manner of sale limitations be met and that the seller file a Form 144 with the SEC. However, Rule 144(i) provides that the rule is not available for a SPAC or other shell company, even after its de-SPAC transaction, until one year after it ceased to be a shell company and has filed with the SEC information that would satisfy the requirements of Form 10 or, for foreign issuers, Form 20-F (“Form 10 Information”). Although business combination related shell companies are excluded from the Rule 144(i) limitation, SPACs are not business combination related shell companies.
Another difference between Rule 144 for SPACs and Rule 144 generally is the requirement in Rule 144(i) that a former SPAC or other shell company must have filed all reports required under the ’34 Act, other than reports on Form 8-K, for the 12 months preceding the sale. Under Rule 144, for non-affiliate stockholders, once they have completed a one-year holding period, there is no current public information requirement for resales under Rule 144, so for ordinary companies there is no need in the case of non-affiliate resales to ascertain whether the company has filed its periodic reports. Even if the company has for some reason, such as accounting irregularities making it unable to finalize its financial statements, been unable to file its ’34 Act reports, non-affiliate stockholders with restricted stock and a one-year holding period can freely resell their shares under Rule 144. However, if the company was a SPAC, Rule 144 would not be available.
Affiliates are subject to the current public information requirement of Rule 144(c) even after a one-year holding period, which in the case of public companies is satisfied by the filing of reports required under the ’34 Act (other than on Form 8-K) for the 12 months prior to the sale. A note to Rule 144(c) allows a stockholder to rely on a statement in the most recent quarterly or annual report that the company has filed its ’34 Act reports, but that note does not appear in Rule 144(i) for former shell companies.
SPAC Opinion Considerations
Lawyers asked to give a “no registration” or legend removal opinion need to ascertain if the issuer is or was a SPAC or other shell company. If so, Rule 144 will not be available for resales until one year after the company ceased to be a shell company (accomplished its de-SPAC transaction) and has filed full Form 10 Information with the SEC.
Also, as described above, there is an additional requirement for all holders of securities in a former SPAC that the issuer has made periodic report filings for the preceding 12 months. Counsel will seek confirmation that those filings have been made before giving the opinion. That will likely mean, in the absence of other satisfactory policing arrangements, that legend removal will not be available for the holders of shares of issuers that were once SPACs until a sale occurs—compared to the otherwise common practice of removing legends for non-affiliate holders of restricted stock once they have a one-year holding period.
Unlike typical post-IPO companies, SPACs cannot provide the usual liquidity to their private placement investors or their directors, executive officers and other affiliates shortly after the private company “goes public.” In a traditional IPO of an operating company, non-affiliated private placement investors that have held stock for one year can sell immediately after the IPO registration statement goes effective and, 90 days after that, Rule 144 becomes available to insiders and non-affiliates with a six-month holding period, subject in each case to the underwriters’ lock-up (typically 180 days).
Former SPAC companies, following the de-SPAC transaction, often file a shelf registration statement on Form S-1 to register resales by PIPEs investors and other holders of restricted and control stock. Sometimes, counsel will be asked for a legend removal opinion for shares registered with the SEC. However, until the shares are actually sold pursuant to a registration statement, they remain restricted shares. The issuer risks allowing an indirect public offering by removing the legends before those sales take place (subject to the potential alternative for QIBs described above and imposing other policing arrangements).
Even when a resale shelf registration statement is in place for PIPEs investors and affiliates, as a practical matter, the ability to freely resell shares may be severely constrained. PIPEs investors and affiliates do not typically have the right to conduct underwritten offerings. As a result, investment banks and other broker-dealers often strictly limit the amount of resales they facilitate pursuant to resale shelfs. They are concerned about potential ’33 Act liability and the lack of due diligence procedures, negative assurance confirmations and other protections available in an underwritten offering.[4]
SPACs are often initially capitalized with privately-placed warrants alongside shares of common stock and their PIPEs offerings may feature warrants as well. Warrants can complicate the “no registration” and legend removal analysis. The holding period for shares issued upon a cash exercise of privately-placed warrants typically begins when the warrants are exercised and the stock is issued, which means that a new Rule 144 holding period begins at that time. If, instead of paying cash to exercise the warrants, the warrants are net-share-settled (cashless exercise), then Section 3(a)(9) of the ’33 Act exempts the issuance and the holding period of the warrants may be tacked onto the holding period of the shares, potentially satisfying the Rule 144 holding period.
Conclusion
Lawyers who are asked to give “no registration” and legend removal opinions should exercise special care. If the issuer is or was a SPAC or other shell company, Rule 144 will not be available until one year after the de-SPAC transaction (and filing of the Form 10 Information) and then only if the issuer has filed all of its ’34 Act reports (other than on Form 8-K). As a result, lawyers should get assurance that the issuer satisfies the requirements of Rule 144(i) before issuing such an opinion, and should think twice before issuing an opinion for legend removal in the absence of a specific sale.
Lawyers should have in mind that legend removal and “no registration” opinions have been a source of liability for lawyers in the past, particularly involving penny stocks and “pump and dump” schemes. The SEC has even used its authority to deny lawyers the ability to practice before it for improper legend removal opinions.[5] The lack of available liquidity sometimes can prompt investors and companies to find creative ways to allow resales of restricted shares, which can put added pressure on lawyers when they are asked to give these opinions. All these considerations add up to the need for lawyers to use extra caution when giving “no registration” and legend removal opinions for shares of former SPACs.
This article originally appeared in the Winter 2021–2022 issue of In Our Opinion, the newsletter of the ABA Business Law Section’s Legal Opinions Committee. Read the full issue and previous issues on the Legal Opinions Committee webpage.
See John Coates (Acting Director, Division of Corporation Finance) and Paul Munter (Acting Chief Accountant), “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (‘SPACs’)” (April 12, 2021), available here; John Coates, “SPACs, IPOs and Liability Risk Under the Securities Laws” (April 8, 2021), available here. ↑
See Subcommittee on Securities Law Opinions, Federal Regulation of Securities Committee, ABA Business Law Section, No Registration Opinions (2015 Update), 71 Bus. Law. 129 (2015/2016), available here. ↑
See Subcommittee on Securities Law Opinions, Federal Regulation of Securities Committee, ABA Business Law Section, “Legal Opinions on Section 4(1-1/2) Resale Transactions” (to be published in a 2022 issue of The Business Lawyer). ↑
See Subcommittee on Securities Law Opinions, Committee on Federal Regulation of Securities, ABA Section of Business Law, “Negative Assurance in Securities Offerings (2008 Revision),” 65 Bus. Law 395 (2009), available here. ↑
See, e.g., the order entered by the SEC In The Matter of Virginia K. Sourlis, dated July 23, 2013, available here, suspending attorney Sourlis for five years under Rule 102(e) of the SEC’s Rules of the Practice, 17 C.F.R. § 201.102(e), for issuing a false opinion letter that facilitated the illegal public offering of securities; see alsoSEC v. Sourlis, 851 F.3d 139 (2d Cir. 2016) (related litigation finding Sourlis liable for securities law violations arising from the issuance of the opinion letter). ↑
One of the more daunting obstacles encountered by companies involved in a merger is the need to respond to a Second Request under the Hart-Scott-RodinoAntitrust Improvements Act of 1976. HSR Second Requests often involve reviewing and producing substantial numbers of documents within extremely tight time frames, which can be both costly and inefficient; however, there are solutions that allow you to be as proactive as possible in an inherently reactive situation. This article explains the keys to ensuring you use best practices for improving processes and reducing the inefficiencies that are common when responding to Second Requests.
The days are long gone when a client could rely on a law firm to prepare the response to a typical Second Request entirely in-house. The sheer volume is likely to outstrip the scale of any captive solution, and legal departments are looking to their outside counsel to partner with them to mitigate the cost impact through process efficiencies, without sacrificing quality. Creating the right team of in-house counsel, outside counsel, technology vendor, and managed document review provider is essential to achieving these goals. The following list sets out best practices surrounding managed document review to alleviate the burden associated with responding to a Second Request.
Experience with Second Requests is crucial. You want team members who have been there before and can demonstrate that this is not their first rodeo. This means that the entire review team—from the project managers to the technologists and any secondary stakeholders—should have all worked on multiple Second Requests and have been on the receiving end of many calls from outside counsel asking how they can meet the demands of a regulator holding substantial compliance over their heads like a sword of Damocles. This can only come from a team of permanent employees who have been together for years and have worked hand in hand with case teams to confront these issues and make the impossible seem possible. (Further, permanent employees can return to a review even if there is a gap in stages—either before a “second sweep” or “topping off,” or to help with a white paper, preparing for witness interviews, or responding to a challenge to a merger, which means the client retains institutional knowledge of this transaction as well as general Second Request experience.)
Bringing this experience to bear can ensure you meet the substantive goals of responding to a Second Request: producing all responsive, not privileged materials; withholding or redacting privileged content; and identifying and escalating important documents to counsel as quickly as possible. In addition to providing the subject matter expertise of their review teams, the managed document review provider must also be able to make informed recommendations as to the use of technology and/or search terms to cut through the volume and reduce the time to respond. If technology-assisted review is an option, the provider can help design and implement the TAR protocol, as well as identify and account for any blind spots to give the regulator confidence in the robustness of the process. This is especially true when using continuous active learning, or CAL. The review provider must be able to seamlessly adapt to any changes in priorities in terms of custodians, subjects, and/or time frames as the regulator changes the focus of the review. While CAL can certainly facilitate this process, the managed document review provider must monitor changes in scoring for documents that have previously been reviewed; move any new ones that have received a higher score into the first-level review workflow for review and possible production; and provide details so that outside counsel can report back to the regulator if needed. It should also document the decisions made as a team and approved by outside counsel throughout the review, in case the regulator seeks additional information about how the response to the Second Request was prepared.
Even if documents are deemed responsive to the Second Request, not all of them will be produced, as the team must make a determination as to whether they are fully privileged or require redaction prior to production. Important considerations regarding this aspect of the review include:
Ensuring that there is a process in place for the law firm to sign off on any documents or members of a document family that were once in the privilege review but are now going to be produced.
Utilizing a tool that streamlines and to a certain extent automates the creation of the log of documents that are withheld for privilege, and customizing that tool for the needs of the particular matter and requirements of outside counsel.
Putting in place a process that makes sure that all documents redacted for privilege are redacted accurately and consistently. (Note: This applies to redactions of any kind that the review requires, including for data privacy.)
It is also important to avoid pitfalls common to Second Requests. It’s crucial to:
Recognize when outside counsel wants to start asserting work product over documents related to the potential transaction. Determine any exceptions, such as for documents pertaining to the antitrust clause of the merger agreement or ones where outside counsel for both parties are working jointly to establish “rules of the road” for pre-closing sharing of information between the parties.
Determine how counsel wants to treat parties for purposes of maintaining privilege, e.g., economists hired specifically to address the regulator’s concerns about market power vs. investment bankers copied on the deal document. While the former would certainly be privileged, outside counsel differ on the approach to the latter.
Identify third parties with whom communications would normally be at arm’s length and not considered privileged, and be careful to avoid producing communications with members or the client’s board of directors because they communicated with their Gmail addresses. To mitigate this risk, outside counsel should work with the client to provide a list of email addresses—either company emails, personal emails, or emails associated with the directors’ “day jobs”—that they use to communicate with the company.
It is more efficient to address these issues at the start, as opposed to spending precious time and resources on them unnecessarily at the end of the review, when there is pressure from the regulators, the parties (especially if you are working for the target company), the shareholders, or any combination of the above.
Finally, it is imperative to find important documents and escalate them to outside counsel as quickly as possible for further investigation. Reviewers will identify helpful documents based on their experience and review-specific training provided by outside counsel. Examples of helpful documents include ones that show robust competition in the relevant market; conversely, they should also be able to spot instances of gun-jumping or anti-competitive behavior, which are sometimes not as obvious and require a subtler understanding. Managed review teams should also be able to leverage technology and/or search terms to identify any documents similar to the ones confirmed as important by the case teams, as slight differences might provide more context.
Responding to a Second Request might be a necessary evil that is part of the merger clearance process; however, that does not mean that you have to absorb the full brunt of the chaos and inefficiency inherent in the high-volume, time-sensitive process. There are best practices from both a process and substantive perspective that you can deploy to reduce the associated cost and inefficiency and that also ensure the response is as robust as possible.
The second edition of my book, Structured Negotiation, a Winning Alternative to Lawsuits, adds two new quotations from business lawyers. I’m proud of those quotations because they confirm that the way I’ve practiced law for a quarter century as a disability civil rights lawyer has value to lawyers and clients on all sides of the table.
Structured Negotiation is a collaborative way to resolve legal claims. Born at the intersection of technology, disability rights, and dispute resolution, the method has been used for twenty-five plus years to resolve disability rights and other claims. In my own practice, I’ve used the strategy to advance digital accessibility—the civil right of disabled people to participate in the digital world.
Structured Negotiation has allowed me to bring together my clients and some of the largest organizations in the country to build relationships, solve problems, and resolve legal claims. All without lawsuits. Yes, Structured Negotiation is a dispute resolution strategy that has helped me avoid the courthouse, the deposition table, and the expert battles for decades.
Why Structured Negotiation
The process is called “Structured” Negotiation because it is comprised of building blocks that have brought win-win results in the disability community’s cases with dozens of public and private organizations including Walmart, Bank of America, Houston’s public transit agency, and CVS. Those building blocks include:
writing an invitation to negotiate instead of a harsh demand letter
negotiating ground rules (that replace court rules) for the collaboration
sharing information without formal discovery (or discovery battles)
meetings that build relationships for long-term results that stick
using joint experts and relying on client skills and knowledge to bring needed expertise to the process
monitoring commitments with flexibility to account for the unexpected
These elements of Structured Negotiation have helped my clients and our negotiating partners achieve results without lawsuits. And in the past few years, other lawyers have used the Structured Negotiation building blocks with a lawsuit on file to reduce the animosity, reputational damage, and excessive costs seemingly built into the United States litigation process.
But none of these elements would work—either outside of or within litigation—without the secret sauce of Structured Negotiation: a collaborative mindset. The Structured Negotiation mindset, and the language that accompanies it, are essential to successfully resolving claims outside the litigation system.
I often refer to the elements of the mindset as dolphin skills. Why? To emphasize that being a shark is unnecessary. Being a shark limits the possibility of collaboration. And in my experience, being a shark often makes lawyers miserable.
What are the dolphin skills that comprise the Structured Negotiation mindset?
Active patience and equanimity
Good listening skills and not making assumptions
Understanding and dismantling the fear that prevents so many people and organizations from resolving claims in efficient ways
Transparency and trust
These qualities can be learned, just as lawyers have long learned that aggression, hiding the ball, and mistrust are tools of the trade. I’m sure of this because I have learned (and am still learning) these skills with each new case I resolve in Structured Negotiation. Read more about dolphin skills in Structured Negotiation.
What about language?
Did you know that the French root of the word “plaintiff” means “wretched complainer”? Should “defendants” always have to defend instead of problem solve? Do lawyers representing different parties always have to oppose each other wearing the hat of “opposing counsel”? When you want something of someone, is it helpful to demand it in a terse letter, or invite participation in a collaborative process?
As the stories I share in my book reveal, in Structured Negotiation every communication (email, meetings, phone calls) is made with a collaborative intent. And that means language choices matter. Language that invites cooperation is a fundamental building block of this dispute resolution method.
What do business lawyers say?
Back to the two business lawyers whose quotations are mentioned earlier. One quotation comes from Brian Frumkin, Associate General Counsel at Bank of America. Brian has been involved in many Structured Negotiations with Bank of America and my clients over the past 21 years. (The very first web accessibility agreement in the United States in 2000 was the result of a Structured Negotiation between blind customers and the bank.)
Brian Frumkin’s quotation in the second edition of my book came from his remarks at a 2019 gala at which Bank of America received an award from a disability rights organization. In his speech, he said:
Bringing the collaborative approach to my practice has, I think, made me a more effective lawyer and, perhaps, a happier person.
The second quotation is from Priya Sanger, who was Deputy Legal Counsel at Patreon during a 2020 Structured Negotiation with that company. Start-ups, Sanger explained:
are mission-driven. As a rule, we tend never to have enough people or money to meet our big visions. Start-ups are solution-oriented. When we identify a problem, we want to get it fixed quickly and cost-effectively, with a focus on people. We don’t like spending money on litigation. These qualities make Structured Negotiation particularly well suited for our type of business.
[With Patreon] Structured Negotiation quickly brought the right people to the table and the process created room to educate teams on the value of adding disability awareness and inclusion in the digital space.
Sanger and Frumkin’s words underscore the value of Structured Negotiation to both business lawyers and their clients. In writing my book I interviewed many other lawyers who represented companies in Structured Negotiation. They too shared similar views on the value of Structured Negotiation to both themselves as lawyers and to their corporate clients.
Structured Negotiation is of course not suited for every dispute. But in many cases, there is nothing to lose (and much to gain) by trying it. Michael Bruno is a defense lawyer who has worked in Structured Negotiation. As he says in my book:
In court, discovery cut-offs, motion deadlines, and sometimes judges themselves force the parties to take expensive depositions that may be of little utility. I found Structured Negotiation to be fairer to my client than litigation. I like the process because it gives my client the opportunity to do the right thing and avoids costly litigation. And if the negotiation does not succeed, my client has not waived the right to engage in an aggressive, strategic defense.
I love hearing about how lawyers have used the tools of Structured Negotiation to advance their client’s interest with collaboration instead of conflict. If you try it, please let me know!
“The Important Role of Business Lawyers as Custodians of the Rule of Law” is the sixth article in a series on intersections between business law and the rule of law, and their importance for business lawyers, created by the American Bar Association Business Law Section’s Rule of Law Working Group. Read more articles in the series.
What is the Rule of Law? Different organizations have answered that question using varying formulations. We have been working with the World Justice Project (which was founded in 2006 by William Neukom when he was president of the American Bar Association), which answers that question as follows:
The rule of law is a durable system of laws, institutions, and community commitment that delivers four universal principles:
Accountability The government as well as private actors are accountable under the law.
Just Laws The law is clear, publicized, and stable; and is applied evenly. It ensures human rights as well as property, contract, and procedural rights.
Open Government The processes by which the law is adopted, administered, adjudicated, and enforced are accessible, fair, and efficient.
Accessible & Impartial Dispute Resolution Justice is delivered timely by competent, ethical, and independent representatives and neutrals who are accessible, have adequate resources, and reflect the makeup of the communities they serve.
The World Justice Project maintains a Rule of Law Index that measures the following nine factors: Constraints on Government Powers; Absence of Corruption; Open Government; Fundamental Rights; Order and Security; Regulatory Enforcement; Civil Justice; Criminal Justice; and Informal Justice.
The Rule of Law is the foundation that supports the pillars of democracy and freedom, and it is in decline in the United States. The World Justice Project’s 2021 Rule of Law Index reflects that our country’s overall score declined, once again, and that our global ranking also declined—and this is in the context of an index that shows the Rule of Law in decline globally. The legal profession must take the lead in strengthening the Rule of Law, and the first step is to acknowledge the magnitude and urgency of the problem, and the consequences of inaction.
“Lack of Civic Literacy Threatens Our Republic” was the title of an opinion piece by Professor David Adler in July 2014. Professor Adler wrote: “The alarming deficit in civic literacy threatens the future of the republic.”[1] He elaborated, “This is not a partisan position or conclusion. Studies and assessments conducted by a variety of organizations, including the conservative Intercollegiate Studies Institute, document a widespread lack of knowledge of politics and government, alienation and apathy, and low levels of civic engagement.”[2]
Professor Austin Sarat, a professor of jurisprudence at Amherst College, found that “among millennials, support for the Rule of Law is even lower than it has been in previous generations: Only 33 percent of people who were born after 1980 believe it is ‘essential to live in a democracy,’ compared to 72 percent of people born before World War II.”[3]
People frequently think of democracy as dying “at the hands of men with guns” but democracies can also die because they “erode slowly, in barely visible steps.”[4] So there is an urgent need to educate the public about our democracy, and at the heart of our democracy is the Rule of Law.
The preamble to the Rules of Professional Responsibility states:
A lawyer, as a member of the legal profession, is a representative of clients, an officer of the legal system and a public citizen having special responsibility for the quality of justice.
So business lawyers, no less than trial lawyers, are officers of the legal system and public citizens having a special responsibility with respect to our system of laws. Also, while people may have a tendency to think about issues related to the Rule of Law in terms of the rights of individuals, businesses benefit from the Rule of Law to no less a degree than do individuals.
When Kenneth C. Frazier was the Chairman and CEO of Merck & Co., Inc., he wrote:
Some may argue that, from a corporation’s perspective, it suffices to focus on business aspects of the law—for instance, a well-functioning patent system for corporations like Merck that depend on patent rights—and that if business law works well, that is enough. Some may posit further that a legal system (by design or not) that has strong institutions for businesses but not for individuals, and particularly not for the disadvantaged, is exactly what corporations should want. Improving the system for others could undermine the advantages to corporations of a system disproportionately favorable to them.
These positions are shortsighted and unrealistic. Certainly, corporations have an interest in the segments of the law that most directly affect them. But while corporations may always place a higher value on advocating for reform and success in those areas, it is not an either-or proposition. A healthy corporation should nevertheless appreciate the extent to which it depends on a well-functioning system as a whole. Effective corporations take that broader perspective. Corporations may have little direct interaction with various segments of the law—family law and the world of indigent criminal defense, among others—but they have just as much at stake as individuals in the fairness of how justice is dispensed. Forward-thinking companies realize that compartmentalized justice is unlikely to work for them or others.[5]
Consequently, the Rule of Law Working Group has as its mission engaging business lawyers and the business community in advancing the Rule of Law. We hope to increase the awareness of business lawyers of their responsibility for maintaining and encouraging support for the Rule of Law, as required under the Rules of Professional Responsibility.
The Working Group would like to get business lawyers actively involved in helping support the Rule of Law, and it is starting an initiative with the goal of doing so. The Working Group will ask members of the Section to commit to making a presentation to a business client or a business group sometime during the month of May, which has been chosen because May 1 is Law Day. The Working Group will provide support for members who commit to making such a presentation. More details about this initiative will be coming soon.
For the Rule of Law Working Group,
John H. Stout, Co-Chair Alvin W. Thompson, Co-Chair Winda Chan, Vice Chair
The COVID-19 pandemic nudged the legal industry to adopt virtual business practices more widely. While lawyers have rarely been early adopters when it comes to tech, the pressures of the pandemic on attorneys’ bottom line (and greater demand from clients) have forced firms of all sizes to adapt or die.
In fact, in the American Bar Association’s recent study “Practicing Law in the Pandemic and Moving Forward,” it was reported that 52% of lawyers thought that securing new business was harder or much harder than the previous year. This was regardless of age, gender, or race. To survive, law firms have been forced to accelerate their adoption of services that can be done remotely, like the e-signing of contracts, electronic billing, and virtual client meetings, among many other activities. But that’s not all…
Law firms have had to manage a three-fold pandemic-driven challenge:
Adapt to the changing needs of the lawyers and employees who work for them—many of whom remain remote or in a hybrid work situation.
Step up and find ways to deliver legal services that are more accessible for clients and their various pandemic-related communications needs.
Manage an explosion in video, chat, and social communication that has become more pervasive and relevant in the practice of law.
The Zoom Boom’s Impact on Lawyers & Firms:
Digital platforms like Zoom and others have made it possible for lawyers to collaborate and become closer than ever before. With video, audio, and real-time chat, the functionality of these tools has led to greater collaboration during very difficult times.
Digital communication platforms have enabled lawyers to follow through with their mandatory continuing education requirements (CLE)—allowing them to stay on top of changes in the legal field, best practices, and technology training without taking time away from their actual jobs. Zoom and others have also been key to facilitating virtual trade shows and conferences, such as the ABA TECHSHOW and others. While in-person is typically preferred, Zoom and the like have allowed for these learning opportunities to continue.
Let’s also not underestimate the impact Zoom has had on businesses. During the heart of nationwide lockdowns, and still to this day, lawyers and their clients have been able to continuously communicate in a safe and effective way. Yes, security concerns have been top-of-mind. However, many firms have taken internal steps and outlined requirements on how to create a secure virtual environment that all parties feel comfortable with.
Digital Communication and the Proliferation of Data:
While Zoom and other platforms offer some real benefits during COVID, and continue to do so as we emerge from the worst of the pandemic, such platforms also offer significant challenges—especially when it comes to the data they produce. The Zoom platform and others like it contain video, audio, and real-time chat functionalities between participants. When you consider that some professionals are now spending 6–8 hours a workday in some form of Zoom, meeting the potential scope of the electronically stored information (ESI) generated is potentially daunting.
However, Zoom isn’t the only means of communication that has exploded in usage since the beginning of the pandemic:
Texting
Texting is the leading communication style of mobile device users, with over 23 billion messages sent daily. Unfortunately, the text messaging data directly exported from collection tools like Cellebrite is challenging to understand and quickly review. It is important to identify solutions that can render text messages in an easy-to-understand manner to accelerate time to insight.
Gadgets & IoT
The Internet of Things (IoT) refers to the network of physical objects (things) that are embedded with sensors, software, and other technologies to connect and exchange data with other devices or systems via the internet. The IoT is a vast ecosystem of over 30 billion web-enabled things (from smartwatches to doorbell cameras to smart refrigerators) that are constantly performing tasks, collecting data, and in some cases, sharing it. As these IoT devices have become commonplace, they have created a vast digital fingerprint that savvy legal practitioners are beginning to mine for ESI.
Self-destructing messages
A new type of “self-destructing” short-form messaging known as ephemeral messaging is further complicating the discovery process by automatically encrypting or destroying messages to erase their digital footprint entirely. Relatively new ephemeral messaging tools like Wickr, Signal, and Telegram, some of what are aimed at businesses, have recently been involved in litigation cases. In one case, Uber v. Waymo, the use of Wickr by all engineering staff in a theft of IP case was determined to be intentionally obfuscating and led to an adverse inference.
Social media
Social media is big business, and a source of a wealth of potentially relevant ESI relating to deceptive marketing, user privacy, and corporate security, or simply general information about litigants. Organizations and their individual employees rely on social media platforms like LinkedIn, Twitter, Facebook, TikTok, and Instagram to interact directly with potential clients, raise brand awareness, and answer customer complaints. This vast digital social footprint at the organizational and individual employee level is all potentially discoverable if deemed relevant to a case. Social media requires the same consideration as any electronic evidence source and must be defensibly preserved.
Mobile devices and apps
The largest single driver for this data explosion has been the increasing ubiquity of mobile-powered business communication. With this shift to mobile, an influx of new short-form communication applications have burst onto the scene in the last decade, and now some like WeChat, WhatsApp, and Facebook Messenger boast user counts in the billions. The informal, rapid-fire, short-format nature of apps makes them a treasure trove for identifying potentially highly relevant data, but the various formats and short nature of the communication can make review more difficult.
How to find evidence today:
Understanding how your organization communicates and conducts business will enable paralegals to construct a plan to manage the burgeoning data volumes. A linear approach of throwing as many attorneys as possible in a room and going page by page through the data is no longer going to cut it. Getting the big picture of how people are actually communicating is critical and requires a deeper investigative approach than simply requesting a data map from IT. Practitioners must engage in conversations with key custodians across a variety of business functions to ensure that they understand and are collecting from all relevant communication channels.
Ask key custodians and members of their team what tools are used to communicate.
Prioritize key custodians’ data sources based on frequency and type of communication.
Determine situations when certain tools may be used (work-related texts or Slack messages are often sent after hours).
Inquire where various data sources reside (on premises, in iCloud, on backup servers).
Determine how employees are using new data types (social communication vs. work product).
Research what kind of licenses the enterprise has for each tool (some licenses are limited in what data is exportable).
The pandemic has rocked the entire legal community, with both lasting positive and negative effects. COVID-19 will continue to impact the legal profession and the court system, and many will have to react and adapt quickly to these changes. Those who embrace the usage of digital communications tools, along with managing the vast amounts of data they generate, will be at a massive competitive advantage.
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