Advance SheetAuthor(s): Michael B. ReubenSource: Litigation, Vol. 15, No. 1, DISCOVERY (Fall 1988), pp. 53-55Published by: American Bar AssociationStable URL: http://www.jstor.org/stable/29759293 .

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(Re)reading the Rules

It happens all the time. "I want the parties in here," says the

district judge or magistrate. "Let's see if the case can be settled." This familiar directive brings liti?

gants together on neutral territory. It forces combatants out of the trenches to assess the battlefield. It ensures that clients hear the weaknesses of their case along with its strengths?some? thing they do not always hear from their lawyers, who may be inclined, by professional hubris and pecuniary in? terest, to accentuate the positive. It of? ten leads to early settlement, with sav?

ings for both parties and courts. It is now illegal in the Seventh Cir?

cuit.

The Joseph Oat Corporation had manufactured a pretreatment system for a waste-water facility built by RME Associates for the G. Heileman brew?

ery. A Dutch company called Centrale had developed the system and given Oat an exclusive license in the United States.

When the facility did not work prop? erly, the result was multiparty litigation in both state and federal court. In the federal case, Oat sued Heileman and RME, and RME counterclaimed

against Oat and impleaded Centrale. The presence of Oat's and RME's in? surers added to the complexity. As trial approached, the magistrate

set a settlement conference under Rule 16. He directed each party to send a

representative with settlement author?

ity. The only exception was Centrale, who was ordered to have its representa? tive available by telephone in The

Netherlands. Oat, however, sent no representative.

It appeared solely through its attorney, who told the magistrate that Oat was

unwilling to pay anything in settle? ment. An adjuster from Oat's insurer

also attended and confirmed Oat's

position. The magistrate was not amused. He

excluded the adjuster and Oat's attor?

ney from the rest of the conference and then adjourned for several days, repeat? ing his order that all parties send a rep? resentative. When the conference re?

sumed, though, the only additional at? tendee for Oat was its outside corporate counsel. He, too, said that Oat would

pay nothing. The magistrate ordered Oat and its

insurer to pay the other parties their

expenses and fees for attending the two conferences. The district court upheld the magistrate. In between those two

decisions, everyone else settled, leav?

ing the sanction against Oat as the sole issue for appeal. A divided Seventh Circuit panel

reversed. G. Heileman Brewing Co. v.

Joseph Oat Corp., 848 F.2d 1415 (7th Cir. 1988). Judge Manion's majority opinion displayed far closer attention to

linguistic subtleties than his confirma? tion opponents ever could have antici?

pated. His opinion, joined by Judge Easterbrook, is a startling reinterpreta tion of Rule 16.

According to the majority, the very text of Rule 16 prohibits a district court from requiring that a party attend a set? tlement conference?or, indeed, any conference. As amended in 1983, Rule

16(a) authorizes district courts to "di? rect the attorneys for the parties and

any unrepresented parties" to appear for a pretrial conference for enumer? ated purposes, including settlement. By explicitly naming only two kinds of

participants, Judge Manion wrote, the drafters explicitly meant to exclude all others.

Avowed adherents of judicial re?

straint, Judges Manion and Easter? brook were loath to endow district courts with "inherent power" in an area

expressly covered by the federal rules.

They therefore concluded that a district court's power to call conferences derives solely from Rule 16(a), and held that?given the rule's language? the magistrate lacked authority to com?

pel Oat to attend a pretrial conference in person. And since the magistrate's order was invalid, Oat could not be sanctioned for refusing to obey it.

Judge Raum, the only member of the

panel with experience managing a trial docket, dissented. The 1983 amend? ments to Rule 16, he noted, were de?

signed to help district courts control their burgeoning caseloads?in part by encouraging early settlement. Though no court can force a party to settle

against its will,

(i)t cannot be inconsistent with Rule 16 to allow district courts ... to require the very parties

who invoke the court's jurisdic? tion to simply attend settlement conferences.

Because Rule 83 permits district

judges and magistrates to "regulate their practice in any manner not incon? sistent with these rules," Judge Raum noted, the magistrate was within his

authority to order Oat to attend and to sanction it for noncompliance. In fact, Rule 16(f) specifically empowers dis? trict courts to sanction "a party or a

party's attorney" for disobeying a pre trial order.

The majority's feeble reply was that

ordering Oat to attend was inconsistent with Rule 16(a), which they had just reinterpreted to prohibit such orders?a

masterpiece of circular reasoning, which assumed what it needed to

prove.

Judge Flaum was right. In reaching out to limit the authority of district courts under Rule 16, the majority de?

prived them of an effective device for

achieving "the just, speedy and inex?

pensive determination of every action," Fed. R. Civ. P. 1. The decision is con

Litigation Fall 1988 Volume 15 Number 1

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trary to sound policy, practical experi? ence, and the overall design of the fed? eral rules. But, as Jimmy Malone says in the film The Untouchables, "That's the Chicago way."

Business as Usual

The halls of justice throng with com? mercial deals gone sour. Business A contracts with business B in anticipa? tion of a pending agreement between B and business C. When B's deal with C falls through, B tells A that their deal is off. The result: a lawsuit.

The story is familiar, especially to

lawyers. It happened in Bruce R. Raines Associates, Inc. v. Whitman & Ransom, 530 N.Y.S.2d 571 (1st Dep't 1988). But Raines Associates was no

ordinary case. In it, B was a law firm and A was a headhunter (or "executive

placement service," as they prefer to be

called). The New York firm, Whitman &

Ransom, wanted an attorney with expe? rience in the Middle East. Among the search agencies it contacted was Raines Associates. The search firm placed an

ad, and Robert Thorns responded. Whitman & Ransom wanted to ce?

ment a relationship with the firm of a Saudi Arabian lawyer named Salah Al

Hejailan. William Gnichtel, a Whitman & Ransom partner, had been an associ? ate with Salah's firm in Riyadh. Now he hoped to place another American

lawyer there to continue servicing his clients doing business in the Middle East.

After the usual interviews, Gnichtel, Thorns, and Salah agreed that Thorns would be "seconded" to Salah's office for a three-month trial period. After that, Whitman & Ransom would pro?

mote Thorns to partnership, but he would continue with Salah for the re? mainder of two years. Salah would pro? vide Thorns with housing and a car, and

pay his moving expenses and a salary of $15,000 a month, plus "secondment" fees to Whitman & Ransom of $4,000 a month and various percentages of bill?

ings. Business referred by Salah to Whitman & Ransom would be credited

against the secondment fees. Thorns signed a "Secondment

Agreement" with Whitman & Ransom, which was conditioned on the firm's

reaching a final agreement with Salah. While negotiations between the firm and Salah dragged on, Salah sent Thorns his moving money and an ad

vance on salary. Thorns left for Riyadh as scheduled, and Whitman & Ransom added his name to their New York and Saudi Arabian listings in Martindale's.

Six months later, Whitman & Ran? som and Salah still could not reach a final accord. Faced with an apparent impasse, the firm withdrew its proposal to Salah and its agreement to make Thorns a partner; it also instructed Martindale's to remove Thorns's name

from its listings. Thorns continued to

CONTRIBUTORS

The following have contributed opinions for this column:

R. Bruce Beckner

Washington, D.C.

Hon. Elaine E. Bucklo

Chicago, Illinois

Christopher T. Lutz

Washington, D.C.

Steven J. Miller

Cleveland, Ohio

Mark A. Neubauer Santa Monica, California

Kenneth P. Nolan New York, New York

The editors welcome copies of

significant decisions. We are in? terested in decisions that might otherwise go unreported, as well as those that can be expected to

appear in the usual reporter services.

Send copies of decisions to:

Michael B. Reuben

Kay Collyer & Boose 1 Dag Hammarskjold Plaza New York, NY 10017-2299

CIS 72571, 633

work in Salah's office in Riyadh. But Raines Associates sent Whitman

& Ransom a bill for $45,000?25 per? cent of Thorns's salary for the first

year. Whitman & Ransom protested that it

hadn't received what it bargained for: a

lawyer working for the firm. Raines Associates sued, both sides moved for

summary judgment, and, when the trial

judge denied the motions, both sides

appealed. The Appellate Division awarded

Raines its fee. The court held that Whitman & Ransom had indeed hired Thorns?for a special assignment to Salah. Thus, Raines had fully "per? formed its obligations by providing a suitable candidate, who was found

qualified and acceptable for the posi? tion he was to fill." The fact that Salah

ultimately refused to come to terms was irrelevant to Raines, for

[a]s between plaintiff, the place? ment service, and defendant, the law firm, the risk that Salah

might refuse, as he ultimately did, or breach any contract he

might have had with defendant, should not fall on plaintiff. . . .

Defendant could easily have ex?

empted itself from liability for the placement fee in the event the details of the secondment agree? ment could not be worked out to the parties' satisfaction. It did not.

One may sympathize with Whitman & Ransom, but its loss was, as the

Appellate Division noted, foreseeable. No longer is employment by a law firm

purely a professional affiliation. We

practice in a world of "secondments," "special counsel," "senior attorneys," "contract associates," and a host of

other personnel categories dictated by law firms' estimates of commercial ad?

vantage. The revolving doors of em?

ployment spin. Firms expand, contract, merge, divide, and explode. Mean? while, headhunters and sundry "con? sultants" find their services in ever

greater demand.

As law practice has grown into big business, it has become subject to all the vagaries of commerce from which

lawyers long sought to protect their clients. Small wonder, then, that firms now find themselves entangled in mer? cantile disputes. Small wonder that

counseling lawyers is fast becoming a

legal specialty. Welcome to the age of law firm law.

The Law of the Market

As the legal business becomes more

competitive, the struggle for clients

grows more ferocious. As a result, and

despite persistent handwringing from the more traditional bastions of our

profession, ads for legal services are now a fact of life. Beginning with the

Supreme Court's decision in Bates v. State Bar of Arizona, 433 U.S. 350

Litigation Fall 1988 Volume 15 Number 1

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(1976), which overturned blanket re? strictions on attorney advertising as a violation of the First Amendment, law?

yers have gained increasing freedom to

pitch their services to the prospective consumer. As usual, though, freedom has its price.

Leo Raychuk, a Manhattan attorney, specializes in divorce cases and immi?

gration matters. His newspaper ads, in both English and Spanish, used to read: "Divorce, Low Fee, Possible 10 Days, Green Card." And, in fact, Raychuk says he has obtained some divorces in 10 days "in emergency situations." In

response to telephone inquiries by the New York City Department of Con? sumer Affairs, his secretary explained that a quickie divorce might be avail? able "if you want to get remarried within two weeks," or if the other party would waive service.

The department remained uncon? vinced. It sued Raychuk to enjoin the ads, as well as for damages, attorneys' fees, the costs of the department's in?

vestigation, and other relief. According to the department, Raychuk's ads

promised both divorces and green cards in 10 days, and no one could obtain either on such short notice. Even if an accelerated result might be possible in

special cases, Raychuk's advertising failed to spell out the restrictions and

exceptions. Either way, the department charged, the lawyer's ads were false and misleading, and thereby violated the city's Consumer Protection Law. It went straight to court for a preliminary injunction. Raychuk fought back as any aggres?

sive advocate would. The Consumer Protection Law did not apply to him, he said, because only the state of New York could regulate lawyers. Where

lawyers are concerned, the state's Judi?

ciary Law had preempted city regula? tions. Under the Judiciary Law, the courts alone license attorneys to prac? tice, and only the courts are empowered to regulate attorney advertising. The two state appellate divisions in New York City had done just that by prom? ulgating rules that broadly prohibit "any public communication containing statements or claims that are false, de?

ceptive, (or) misleading." And the rules have teeth: A violation constitutes mis? conduct and subjects the offending lawyer to discipline. No sale, replied the Supreme Court

of New York County. Aponte v. Ray? chuk, 531 N.Y.S.2d 689 (Sup. Ct. N.Y.

County 1988). While the court ac?

knowledged that supervision of attor?

neys is principally a state judicial func? tion, it refused to take the next step and

preempt local consumer protection laws. As Justice Moskowitz explained, the state scheme was incomplete be? cause it did not provide suitable relief or protect the public in case of infrac? tion:

(N)owhere in the State's regula? tory scheme is there power to

enjoin publication of any adver?

tising in violation of the rules or fine an attorney who has had

published deceptive advertising. The court then parsed Raychuk's ads

and determined that they did not, after all, promise to obtain green cards in 10

days. As for divorces, however, the court agreed that the ads were mislead?

ing and ordered them modified pending full trial.

Of course, Raychuk may still prevail at trial or in a higher court. But, he faces tough obstacles. In the first place, applying local consumer protection statutes to lawyers still leaves courts with the final say over attorney disci?

pline, as long as the courts and not local

agencies have the last word on when those statutes have been violated. But

more importantly, if attorneys claim the freedom to hawk their wares like

every other vendor, they necessarily subject themselves to the same system of regulation. He who lives by the mar?

ketplace may also die by the market?

place. iS

From

the Bench

(continued from page 6) vise lawyers to hire more experts to

pretest proposed exhibits on simulated

juries of the same demographic charac? ter as the trial jury. The prospect of

combining such talents with the art of the video maker is staggering. Videos can be re-edited or reshot, animations can be restructured, and narrations can be rearranged to reflect the measured reaction of mock jurors and to maxi? mize their subliminal impact. In such a

world, who can know what "inherently prejudicial" means? Many makers of

exhibits of all kinds (and not just vid? eos) are striving for just such a result.

The issue is partly philosophical. The

goal of our legal system should be de?

vising a process in which disputes can be resolved by reason rather than emo? tion. We do this now by having lay jurors determine the "real truth" by di? rect observation of witnesses and ex? hibits subject to critical examination by the opponent. However far we are from the ideal, videotapes have the potential for moving us miles in the wrong direc? tion. The unvarnished truth will be coated with thick layers of Hollywood gloss if we accept videos uncritically. One can imagine litigants seeking to

sign up Steven Spielberg just after they retain F. Lee Bailey?or maybe even before.

Unchecked, such inclinations will

surely pick up speed. If lawyers have one common characteristic, it is their

proclivity for copying. If the plaintiff has Spielberg, surely the defense will

get Francis Ford Coppola. It is easy to

imagine lawyers offering expensive and highly refined videos whose rela?

tionship to the issues in a case is tan?

gential at best. Courtroom evidence could soon be where political adver? tisements are now.

This nightmare holds two dangers. The first is that, in the pursuit of ef? fective communication, we undermine the safeguards in our delicate system for reaching the truth. The black magic of the video maker and the image maker might really work. Second, whatever their value, videotapes may ultimately increase the cost, retard the

speed, and compound the complexity of an already complex system of litiga? tion. Here is why: Videotape is not a substitute for expert testimony. It has

legal significance only after the expert lays a traditional foundation. Showing a video, and then a countervideo, will

require more experts and generate more

questions. If there are foundation dis?

putes, the proceedings will be length? ened even more. And in the end, like

today's competing experts, tomorrow's

competing videos may simply cancel each other out or further confuse the

jury. I am not saying that all videos should

be prohibited. They have their place. But any device as powerful as videos must be handled with great care. It would be far better to have legislated rules in place soon?before the video?

tape wave crashes over us?than to rely

Litigation Fall 1988 Volume 15 Number 1

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