Experts.com is excited to announce its partnership with the Legal Innovators California, taking place in San Francisco on June 7 and 8, 2023. As a media partner for the event, we are thrilled to support this gathering of the legal industry’s key decision makers and experts in the field of legal innovation and legal technology.
Legal Innovators California is organized by Artificial Lawyer, the premier legal tech publication, and Cosmonauts, a recognized leading conference firm. Following three successful events in the UK from 2019 to 2022, the conference will bring together law firm partners, general counsel, legal ops/legal technology professionals, legal service delivery specialists, legal tech start-ups, and investors in technology for a two-day event.
The conference offers a unique opportunity to network with like-minded legal professionals, learn and share insights, and stay updated on the constantly changing world of legal innovation. The impressive line-up of expert panelists, speakers, and exhibitors from around the world will explore a range of topics, including the reshaping of legal services through technology, how in-house legal teams and legal operations professionals are applying rigor to the delivery of legal services, the legal research revolution, and the huge increase in the value of legal data.
Day 1: Will focus on law firms and Alternative Legal Service Providers (ALSP).
Day 2: Will focus on in-house counsel and legal operations.
Legal Innovators California promises to be an informative and exciting event, where attendees can learn about the latest developments in legal technology, innovation, and the business of law. Whether you’re a seasoned expert or just starting in the field, the conference is the perfect place to connect with industry experts, explore new ideas and learn about the future of the legal profession.
As a media partner for the event, Experts.com is committed to supporting the Legal Innovators California Conference and its mission to promote legal innovation and technology. We invite you to join us for this fantastic opportunity to connect with industry experts and learn about the future of the legal profession. Don’t miss out on Legal Innovators California Conference 2023!
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I’ll be at the event and I hope to meet you there! You can get your tickets here: Tickets. Use code: “EXPERTS25” for 25% off of your ticket!
In 2018, Experts.com uploaded a blog post regarding the separate SEC charges against Theranos founder, Elizabeth Holmes, and Chief Operating Officer, Ramesh “Sunny” Balwani, for securities fraud and injunctive relief. The post offered predictions of the types of experts expected to provide their insight on the situation due to the case’s multifaceted nature. As the trial began on September 8th, 2021, this month’s blog post will cover the events that have transpired since the SEC charge in 2018, the opening statements made in the trial thus far, and insight from Experts.com Member, Mr. James (Jim) Ellis, to help explain the legalities from an Expert Witness perspective.
As mentioned, the SEC has pressed separate charges against Holmes and Balwani for securities fraud in March 2018. Before these charges, Theranos had advertised how it could drastically change the healthcare industry by providing the world’s first portable, needle-free, and affordable blood analyzer sold in stores like Walgreens and Safeway. Essentially, people can test for various diseases and get results from a prick of a finger. Theranos would be a pioneer in modernizing blood tests without large vials with the help of their Edison blood analyzer machines. Investors were sold on this dream and the company was able to garner a net worth of $9 billion. Due to this seemingly revolutionary invention, she was heralded as the “next Steve Jobs” by multiple news outlets.
Since 2015, suspicions have been raised by various media and medical groups including the Wall Street Journal, Journal of the American Medical Association, Food and Drug Administration, Central for Medicare and Medical Services, and various investors, as the technology of Theranos’ product proved to be faulty. Holmes and Balwani not only denied any wrongdoings when criticized by skeptics, but they continuously reassured customers and investors that their blood analyzer was sure to be the next life-altering invention for the healthcare industry. As time went on, Theranos failed to execute its mission technologically, ethically, and by medical guidelines. Investors sued for fraud in 2016. The amount of money misappropriated by Theranos totaled approximately $700 million.
This led to the eventual indictment of both Holmes and Balwani despite having separate SEC charges. According to ABC News, Holmes agreed to pay a $500,000 fine, relinquish her role as CEO of Theranos and any other publicly traded company for the next decade, and give back her $18.9 million in stocks. As for Balwani, it remains to be seen whether he will decide to settle with the Securities and Exchange Commission. ABC News also highlighted Balwani’s attorney, Jeffrey Coopersmith, stating his client, “accurately represented Theranos to investors to the best of his ability.” He will, however, still be tried in court after Holmes.
Since the settlement, the rise and fall of Theranos have been the subject of various documentaries like HBO’s “The Inventor: Out For Blood in Silicon Valley,” (2019) and ABC’s podcast “The Dropout: Elizabeth Holmes on Trial,” (2019). Holmes’ trial date was set to occur in 2020, but due to the pandemic and her pregnancy, the trial was delayed and set for 2021.
On September 8th, 2021, the long-overdue trial between Elizabeth Holmes and the U.S. Government began. As this trial is ongoing, there is a limited amount of information. In his opening statement, Robert Leach, Assistant U.S. Attorney and lead prosecutor for the case stated, “This is a case about fraud, about lying and cheating to get money… Out of time and out of money, the defendant decided to mislead…. The defendant’s fraudulent scheme made her a billionaire. The scheme brought her fame, it brought her honor, and it brought her adoration.”
Holmes’ attorney, Lance Wade, shot back in an opening statement for the defense with, “Elizabeth Holmes did not go to work every day intending to lie, cheat and steal. The government would have you believe her company, her entire life, is a fraud. That is wrong… In the end, Theranos failed, and Ms. Holmes walked away with nothing. But failure is not a crime. Trying your hardest and coming up short is not a crime.”
There have been some predictions about what strategies Holmes’ legal team may use in court. In 2020, CNN reported the relationship between Holmes and Balwani was more than just business partners. As the two were romantically involved in the past, and according to recently unsealed court documents, Holmes may admit to experiencing emotional, psychological, and sexual abuse. Whether Holmes testifies regarding these claims remains to be seen. Balwani has vehemently denied the abuse allegations, and since his trial commences after Holmes’, only time will tell if this topic will be discussed in court.
Considering the charges of the trial, Experts.com Member and Private Investigation Expert Witness, Mr. James (Jim) Ellis, sheds light on the elements that constitute wire fraud and the situations for which the federal charge is used. According to Mr. Ellis, “Wire fraud, and mail fraud as well, are generally federal statutes that can be used against fraud schemes where no other federal statutes apply.” Since the statute is extensive, federal prosecutors use this to charge the varying types of fraud. Four characteristics constitute wire fraud (941. 18 U.S.C. 1343, United States Department of Justice Archives):
The defendant was part of a scheme to defraud another person, such as obtaining money or something else of value through false pretenses.
The defendant acted knowingly with the intent to defraud.
The defendant made or caused to be made false representations that were material to the scheme to defraud.
The defendant transmitted a material misrepresentation by wire, radio, or television communications in interstate or foreign commerce.
Mr. Ellis adds how the courts also include electronic communication in their interpretation of the statute due to the emergence of the internet and cellular devices in recent decades. This increases the odds of Ponzi schemes, phishing, catfishing, online shopping scams, and other duplicitous actions taking place. Most of these cases would not be considered wire fraud scams unless the dollar amount lost equals or surpasses $1 million. Anything less does not warrant federal attention. Although this is unrelated to the Theranos v. United States Government trial, Mr. Ellis mentioned, “According to the FBI, over $600 million was stolen from unsuspecting people in 2020 through online romance scams.”
From the elements of the statute and the multitude of avenues wire fraud can be committed nowadays, it can be inferred that wire fraud cannot be an accidental crime. Due to the second element of wire fraud, federal prosecutors who use this charge must provide evidence of the defendant having the intent to scam individuals, knowingly providing promises under false pretenses, and doing so to acquire monetary gain from their victims.
To play devil’s advocate regarding Elizabeth Holmes’ trial, it is possible her intention at the beginning of building her business was not to scam investors and patients. From her interviews on various media channels, her belief in Theranos and its mission never wavered. Mr. Ellis imparts, “However… if the same person began to realize their company wasn’t sustainable or even profitable, or if their product wasn’t turning out as they thought it would; and they knowingly made misrepresentations about their company or product in the hope they could eventually turn it around; then they quite possibly have committed wire fraud.” Because it is difficult to distinguish a failed attempt from a duplicitous sale, law enforcement must be meticulous in looking for the elements of fraud (listed in the statute above) before starting an investigation.
This case is interesting not only because of the nature of Theranos’ inventive endeavor, but because we see two corporate executives being sued for wire fraud. Mr. Ellis mentioned, “Often the federal government will use civil statutes to target the corporate entity itself. The wire fraud statute is normally used against the employees of a corporation who is committing fraud.” Those who hold corporate positions, especially people that lead the corporations, tend to be entrepreneurs. Why is this important? Because those with an entrepreneurial spirit are most likely to find themselves in legal matters like Elizabeth Holmes if they are not careful enough. “These people who start new ventures, even with the best of intentions, could easily fall into a trap of telling a ‘white lie’ to not let a dream die,” Mr. Ellis added. The question of how often corporate executives find themselves in civil or criminal fraud lawsuits remains unanswered, but what is salient is the undesirable consequence of committing wire fraud, an outcome Elizabeth Holmes and Sunny Balwani are currently facing.
It remains to be seen how this will all play out in the courtroom but investors, clients, and the general public are on the edge of their seats to learn the fate of these two infamous entrepreneurs.
Update:
On Monday, February 21st, 2022, Elizabeth Holmes was found guilty on four of eleven counts of conspiracy to commit wire fraud and wire fraud. The four counts are (WSJ):
Conspiracy to commit wire fraud against Theranos investors.
Wire fraud against Theranos investors: wire transfer of $38,336,632 from PMF Healthcare Master
Wire fraud against Theranos investors: wire transfer of $99,999,984 from Lakeshore Capital Management LLP
Wire fraud against Theranos investors: wire transfer of $5,999,997 from Mosley Family Holdings LLC
According to New York Times, Ms. Holmes “faces a maximum sentence of 20 years in prison for each count.” Her sentence will be finalized and announced on September 26th, 2022. Sunny Balwani’s trial commenced on March 23rd, 2022, so the verdict is yet to be determined.
Technology giants like Amazon, Facebook, and Google face legal battles yearly. Recently, another behemoth has followed suit (pun intended). On August 13th, 2020, Apple found itself involved in an antitrust lawsuit against Fortnite video game creator, Epic Games. The trial began on May 3rd, 2021 and is ongoing, so this blog post will not have all the answers. As it unfolds, this post will delve into the perspectives of both businesses, describe the nature of the trial, introduce opening statements from the first day of the trial, and explain possible outcomes for both Epic Games and Apple.
Epic Games
Epic Games has filed an antitrust lawsuit against Apple Inc. in response to the removal of its most popular game, Fortnite, from the iPhone App Store. This prohibited 116 million of its 350 million users from updating the game and new consumers from downloading the app (this does not affect the remaining players using other smartphones or gaming consoles). Fortnite’s eradication from iOS App Stores has caused players from around the world to unite in a social media campaign called #FreeFortnite. Epic Games accused the tech giant of monopolizing purchasing options for apps by restricting other methods of conducting transactions. Due to Apple’s renowned international success, Epic Games has filed lawsuits against Apple in Australian, United Kingdom, and European courts. Epic Games not only wants Fortnite back on the iOS App Store, but it also wants to launch a rival App Store on all Apple devices so users can purchase Epic Games products through non-Apple means.
Apple
The catalyst for Fortnite’s removal from Apple’s App Store was the release of a new update by Epic Games which included the implementation of an in-game purchasing currency called “V-Bucks.” This currency allows players to buy items through non-App Store channels. Users who purchase Fortnite items such as outfits, pickaxes, and the latest season’s Battle Pass get to enjoy a 20% discount, which incentivizes players to continue using V-Bucks. Since these purchases are not made through the App Store, V-Bucks circumvents Apple’s chances of receiving its 30% share of any transaction, hence its removal from the App Store and the foundation of #FreeFortnite. In response to Epic Games’ claim of Apple becoming a monopoly, Apple explains the fairness in its decision to remove the game from its App Store. According to Apple, Epic Games violated its agreement by installing V-Bucks without Apple’s permission. If Apple wins the trial, this contract violation could keep Fortnite and all other apps made by Epic Games, or apps run by its game engine, Unreal Engine, from the App Store (The Verge).
The Trial
The trial began on Monday, May 3rd, 2021 in federal court in Oakland, California. This proceeding is a bench trial; thus, the judge will be making the final ruling with no jury. The trial will be held in person and the press and public are prohibited from entering the courtroom. The presiding judge for the United States trial is Judge Yvonne Gonzalez Rogers. Pending trial, she declined Epic Games’ request for Apple to host Fortnite on iOS devices. Trial dates for the international lawsuits against Apple are unknown. However, Epic Games has recently filed lawsuits in November 2020 (Australia), January 2021 (United Kingdom), and February 2021 (Europe).
Opening Statements and Trial Arguments (photo credits from The Verge)
In its opening statement, Epic Games compares Apple’s restrictive policies to a “Walled Garden.” Its argument is based on the unfairness of Apple’s control over purchasing options. Two expert witnesses testified on behalf of Epic Games. University of Chicago economist, Dr. David Evans, told the court, “Apple’s rules unfairly prevent developers from letting consumers know if their prices for in-app purchases take into account the iPhone maker’s 30% commission or that consumers may be able to get better deals elsewhere,” (Wall Street Journal). To add, Susan Athey, an Economics of Technology professor at the Stanford Graduate School of Business, explained Apple’s stronghold over consumers is due to their prohibitive iOS mobile operating system. In the case of this trial, if a consumer wanted to access Fortnite an iPhone, the user would need to switch to a different smartphone brand and repurchase all the apps originally purchased from iOS devices. Since the internet is needed to play Fortnite, Evans highlights how gaming consoles could never replace smartphones, as it lacks cellular data for users who want to play the game from anywhere.
Apple’s opening statement was a defensive response to Epic Games’ claims. According to The Wall Street Journal, Apple hired University of Pennsylvania Wharton School professor, Lorin Hitt, to discuss in-app purchases. Hitt claims, “anticompetitive measures tend to result in reduced quality, yet that hasn’t happened with iPhone and iPads apps, as developers have seen their revenue increase over time.” Essentially, consumers notice the value in the offers proposed by Apple. As noted by the graph below, Mr. Hitt also denounced Epic Games’ claim about Apple’s monopoly-like practices. Users switch devices frequently because people like the products acquired for different reasons. If this were not the case, Play Station and XBOX would not generate over 50% of Fortnite’s revenue for the last two years. This also infers that most Fortnite users are not on iOS devices, which is surprising considering there are 1.5 billion active Apple devices. In addition, Apple insists the iPhone offers multiple avenues for financial transactions. Although difficult to decipher, the second picture provided by Apple indicates that the iPhone, compared to its competitors and subsidiaries, offers three types of digital game transactions options: The App Store, Web Applications, and Purchasing on Other Platforms to play on iOS. Ultimately, Apple is arguing that its practices are not prohibitive nor remotely resemble a “Walled Garden.”
Possible Outcomes
The outcome of the trial between Epic Games and Apple Inc. can end in multiple ways. One hypothetical is the verdict will resume the current situation: users could not access Fortnite on iOS devices, but other games produced by Unreal Engine will remain on Apple’s App Store. If the judge rules in favor of Epic Games, it may be able to create and launch its own App Store on iOS devices.
Legislation
In addition to the trial, a new state bill that recently passed the House 31-29 may negatively impact Apple’s case. According to The Verge, Arizona’s House Bill 2005, “prevents app store operators from forcing a developer based in the state to use a preferred payment system…,” which would ultimately force Apple to provide various payment methods on iOS. This development could be beneficial for Epic Games.
On Friday night, February 2, 2019, my Twitter feed exploded with news of the “power outage” at the Metropolitan Detention Center, Brooklyn. There were protesters and news stories trending about inmate health and safety.
It appears the New York Times broke the story, with the headline “No Heat for Days at a Jail in Brooklyn Where Hundreds of Inmates Are Sick and Frantic.” The frantic nature of the story was certainly increased by the protesters outside the facility advocating for inmate rights. Additionally, we were at the tail end of an incredibly cold week, referred to as the “Polar Vortex.” So, the stars had aligned for an uncomfortable and scary incident for those incarcerated. I’m certain I’d experience fear in the same circumstance.
As the New York Times reported, most of the accounts were described to them by Federal Public Defenders who represent the inmates. The inmates were limited in communication with the outside world, but were able to communicate with defense counsel in some instances. It appears heat was the primary complaint, although there were claims of limited hot water access.
In the article above there seems to be a disagreement between different stakeholders (i.e. warden, union officials, public defenders, and inmates) as to whether there was an electrical or heating problem and which one was causing the problem. For our purposes, the cause of the event does not matter. We’re interested in response.
On Monday, February 4th, a lawsuit was filed against the Federal Bureau of Prisons (FBOP) and warden, as described in this article from NBCNews, “claiming the jail kept inmates in “inhumane” and unconstitutional conditions during a dangerously cold week.”
Did you expect a lawsuit would not be filed? This is a legal blog. Of course a lawsuit was filed. Many questions arise. Was the treatment inhumane? Was it as frigid in the facility as reported? Did prison officials fail to provide humane care? It is hard to say from the publicly reported facts. We are unlikely to know, until a FBOP investigation is completed and/or discovery made public.
Nevertheless, I thought it would be helpful for us to get a better understanding of jail and prison policies and procedures from a correctional expert witness.
Jail Management Expert Witness Donald Leach:
Donald L. Leach, II, is a Jail / Corrections Management expert with over 30 years of experience. He has 20 years of consulting experience on jail management issues nationally, focusing on Risk Management for jails and jail operational methodology. Mr. Leach has served as an expert witness for 5 years, in both State and Federal court. His services are available to counsel for both Plaintiff and Defense and include case review, testimony, and consultation for jail and prison issues. You can learn more about his practice at: https://www.dlleach.me/.
As I often do, I posed several questions to Mr. Leach, and he provided answers to those questions. I have posted them verbatim below.
Nick: Are there health and safety requirements for jails/prisons when experiencing inclement weather?
Mr. Leach: The same requirements for providing humane living conditions exist regardless of weather. The Court has not specified what those conditions have to be, unless addressing an individualized case, but they have to fall within a general range of adequate conditions of confinement. This is in a normal situation. When inclement weather, such as the cold hits, then more leeway is typically given because it involves a relatively short period of time.
Nick: Do jails/prisons have policies and procedures in place for responding to a loss of electricity/heat?
Mr. Leach: More likely than not, FBOP has policies and procedures for managing the loss of electricity and heat. These are generally short-term events and are addressed as such. A close reading of the news articles coming out indicates that while conditions may be unpleasant they are far from life threatening. Depending on the facility design, adequate light may be obtained from natural sources-such as daylight. Evening hours may involve the use of lanterns placed in common areas. Again, these are typically short term events and like you address them when the lights at home go out, jails and prisons have similar policies. Additionally, I would be surprised to find that there are no emergency generators that provide general lighting and power life safety systems.
Nick: Assuming a lack of heat and electricity occurs in a jail/prison, while temperatures outside are below freezing, how should correctional personnel address the issue?
Mr. Leach: I would recommend issuing extra blankets, sheets. If additional clothing is available for issuance, provide that. If the weather has not significantly impacted commerce, then possibly an emergency purchase of thermal tops and bottoms. Extra materials would be issued to the female inmates who seem to suffer from the cold more than the males.
Nick: There were concerns about certain at-risk inmates (elderly and those with medical needs). How would you address medical concerns in a similar situation?
Mr. Leach: The administrator may have to consider temporarily transferring those inmates to neighboring facilities. We would do this on a regular and common enough basis, lasting only until the situation is rectified. Agencies will typically work together to overcome these situations. Today it’s freezing temps but tomorrow it may be plumbing!
Nick: Based only on the publicly available reporting (i.e. NYTimes & ABAJournal), what recommendations would you have for other institutions who may face similar issues in the future?
Mr. Leach: There has to be some prior planning for emergency situations such as this. A general outline of actions to take would be appropriate. The details would be decided based upon available resources and issues. For example, you can plan on transferring the elderly and medically fragile but what if the roads are closed. Keeping a stock of emergency supplies, such as extra blankets may be appropriate, or in dry areas it may be pallets of water. This is going to be geographically determined.
There it is folks! I’ll try to be ahead of the curve on the next major story to likely result in litigation.
Once considered “The Next Steve Jobs” or the “female Steve Jobs,” Elizabeth Holmes has fallen from grace and landed directly in the cross-hairs of the Securities and Exchange Commission (SEC). Today, the SEC filed a civil complaint against Elizabeth Holmes and her company Theranos, Inc. There was a separate action filed against the Chief Operating Officer, Ramesh “Sunny” Balwani.
The complaint alleges, in part:
“Holmes, Balwani, and Theranos raised more than $700 million from late 2013 to 2015 while deceiving investors by making it appear as if Theranos had successfully developed a commercially-ready portable blood analyzer that could perform a full range of laboratory tests from a small sample of blood. They deceived investors by, among other things, making false and misleading statements to the media, hosting misleading technology demonstrations, and overstating the extent of Theranos’ relationships with commercial partners and government entities, to whom they had also made misrepresentations.”
Oh the good old torts of negligent and intentional fraud and misrepresentation. Takes me right back to the first year of law school, when Nickelback was a hot new band, rather than the sad punchline of Internet memes. I digress.
The complaint goes on to allege that based on representations, investors believed Theranos had developed a proprietary medical device able to conduct comprehensive diagnostic tests from a small amount of blood taken from the patients’ finger. They also made representations that they would collect and transport these samples in order to complete the tests on their proprietary analyzer. All of this would be done more efficiently and economically than traditional blood testing labs.
According to the complaint, Theranos was only able to perform about 12 of the 200 tests they claimed they were capable of performing.
Let’s stop here and give a simple warning: If you are soliciting money from investors, make it very clear what you are able to achieve. Differentiate this from what you hope to achieve in the future. Do not mix the two. Otherwise you get into a bad area called misrepresentation, or in this case, securities fraud.
A wide variety of expert witnesses:
In complex civil litigation such as this, there is room for a wide variety of different experts. I can only imagine the SEC and Theranos are both using consulting experts at this time in preparation for a long drawn out litigation. The complaint has only been filed today, so expert disclosures are a way off. Here are a few types of expert witnesses or consulting experts I expect to see in this matter.
Corporate Governance:
Expert witnesses on corporate governance are highly likely to play a role in this case. Officers of a corporation are fiduciaries of the corporation. Holmes owed a duty of care to the company and to her investors. She is accused of misrepresentation which, if proven, would certainly violate the standard of care owed to shareholders and the company. I expect there will be significant dispute by the parties to prove she either did or did not violate her fiduciary duties.
Securities & Finance:
Several different types of experts who practice in the area of securities fraud may come into play. We are likely to see experienced Wall Street experts with a history in equity trading, proprietary trading, investment research, securities valuation, financial forecasting, venture capital and investment banking.
Some experts will probably have backgrounds in IPO’s, private equity financing, securities financing, and stock options financing.
In this area, I feel as though I can go on ad infinitum. That’s not true and it is probable one or two candidates will have the requisite expertise, described in this section, to address the finance and fraud related matters.
Economics:
Although the SEC is primarily suing for injunctive relief, they do mention the potential for civil monetary penalties. I would expect there will be some need for an economist (by both parties) to establish the value of Theranos and shares owned by Holmes and Balwani.
As I do not practice securities litigation and this is not a law review article, it is possible the civil penalties are predetermined by the Securities Act and there is no need to value the penalties other than by the trier of fact.
UPDATE:
Within hours of writing this blog post, I discovered that Elizabeth Holmes has settled with the SEC. According to Reuters, she will be stripped of her majority control of the company and will have to return millions of shares to Theranos. She will also pay a $500,000 fine and be barred from being an officer or director of a public company for 10 years. As of this update, Mr. Balwani has not settled with the SEC.
Imagine a lovely 10-day cruise through the South Pacific. You and your family have boarded the Carnival Legend, sat through the mandatory lifeboat drill, found your cabin, and prepared to enjoy a week-and-a-half on the open ocean. Eating, drinking, dancing, and having a grand old-time.
Let’s take it a little further. Imagine a family of twenty-three (23) individuals has joined you on your voyage. They are probably on the ship for the same reasons you are: rest and relaxation. Alas, that was not the case!
Over the last weekend, news broke that a violent brawl had occurred on the Carnival Legend on or around February 15, 2018. This brawl appears to have been the culmination of many days of unrest on the cruise ship. The Washington Post reports, “A Carnival cruise devolved into near-anarchy during its 10 days in the South Pacific, with some passengers locking themselves inside their cabins, others kicked off the ship and security guards brawling with vacationers in a bare-knuckles melee.”
After cell phone footage surfaced of the fight, Carnival has stated they would investigate the event in full. However, they are already blaming a large family for instigating unrest. Some passengers have claimed the violence and disobedience had escalated for days before security had intervened. When security did intervene, as evidenced by the cell phone footage, they appear to battle it out with the passengers. Punching and kicking passengers into submission and working to stop other passengers from filming the quarrel.
Will a lawsuit arise from the brawl?
In my experience, lawsuits arise from just about every kind of event. So, I expect to hear about some possible legal action related to a fight between vacationers and security, which resulted in worldwide news coverage. Call it an educated guess that legal action may take place after this incident.
For what reason might someone bring legal action? In this case, there are a wide variety of issues. Let’s concentrate on security participating in the brawl. My assumption is someone will sue on the issues of negligence and premises liability. There appear to be plenty of options for a negligence cause of action (negligent security, negligent hiring, negligent training, negligent supervision, and more).
Brawl at the Nightclub
On dozens of occasions we have located expert witnesses after a fight erupted at a bar or nightclub. These are very common lawsuits. A patron is harmed in a scuffle and later brings suit against the bar/restaurant/nightclub operator. Oftentimes, these establishments employ separate security guard contractors and a suit is brought against that company as well. Since there is cell phone footage of the brawl, I expect Carnival to face litigation surrounding the fight. Visual evidence is more compelling than witness statements as long as the video can be authenticated.
Furthermore, it appears the Carnival employees, including security, are unprepared to detain unruly passengers. Their attempts to control the fight leads to a violent struggle between passengers, staff and security. I am quite certain the use of punches and kicks to bring a passenger into submission will be considered an unnecessary use of force.
In the video, I do not see an effort by Carnival staff and security to detain and secure the disruptive passengers. Quite the contrary, they appear to engage them in fisticuffs. Such behavior by crew members is likely to fall below the standard of care for cruise ship personnel and security.
In fact, Carnival’s own Safety and Security statement on their website claims, in pertinent part:
All Carnival officers and crew undergo comprehensive regular safety and emergency training that meets or exceeds all regulatory requirements.
Our crew members undergo specific training to handle emergency situations and help our guests. Crew roles, responsibilities and duties are clearly defined and assigned to handle any emergency on board.
Looking at the above statement in conjunction with the available video, and this pundit believes the crew members are likely to require extensive training on handling ill-tempered passengers. Punching and kicking the passengers, even if well-deserved per other passenger statements, probably does not meet Carnival’s safety and security standards.
Family Evacuated in Australia
It seems the disorderly family of 23 was escorted off the ship Australia. Police boarded the ship to remove the large family. According to the Washington Post, nobody was immediately charged with a crime.
Am I alone in hoping the family is not identified as United States citizens?
Super Bowl Sunday is upon us! In just five days, we’ll be sitting down with friends and family to watch the Eagles and Patriots duke it out to determine NFL supremacy in 2018. I’ll be filling up on smoked brisket, barbecue beans, and a variety of other chips and dips (likely including mass quantities of guacamole). Sunday is also a time of unrepentant gambling. A day of vice if you will. It’s great fun!
This year is no different from years past, except we in the legal community are expecting a ruling from the Supreme Court on the Christie v. NCAA, a case that could open the flood gates for legalized sports betting throughout the United States.
Let’s be honest, many citizens are already participating in sports gambling. Whether it be the office pool, fantasy football, prop bets during the game, or bets with your local bookmaker (not recommended), gambling is a massive part of this annual event.
The Las Vegas hotels and casinos are busy with enormous bets. A story from Boston.com last week highlighted some six and seven-figure bets being placed at the South Point sports book and The Mirage Hotel & Casino. One person placed a bet for $2 million, which is just a tad more than I’m willing to bet this year. Bookies expect total legal betting on the Super Bowl to break last years’ record $138.5 million.
So let’s take a look at how all of this began approximately 7 years ago.
PASPA and Christie v. NCAA:
Gambling is big business and other states want in – New Jersey included! In 1992, Congress passed the Professional and Amateur Sports Protection Act (PASPA), which prohibited state-sanctioned sports gambling with a few exceptions. According to this post from The Legal Intelligencer, “The act includes exceptions for state-sponsored gambling in Nevada and sports lotteries in Delaware and Oregon.” The act was enacted with the support of all four professional sports associations and the NCAA. The intent of the law was to preserve the integrity of athletic events.
Starting in 2011, then New Jersey Governor Chris Christie’s administration took measures to challenge PASPA, leading to a multi-year court battle to have PASPA declared unconstitutional for violating the anti-commandeering doctrine of the 10th Amendment. It should be noted that New Jersey has lost the case(s) every step of the way (trial and appeals), yet the Supreme Court granted certiorari and heard oral arguments in December of last year.
As laid out by The Legal Intelligencer, “New Jersey argues that, by requiring it to enact state laws to prohibit sports betting, PASPA is commandeering the state’s law enforcement system. The state claims that PASPA violates its sovereignty.”
SCOTUS Ruling Expected by June 2018:
As oral arguments have already been heard, we can expect the decision to be released no later than June of this year. What will happen? I’m no professional SCOTUS commentator, so I dare not hazard a guess at the potential outcome. However, Professor I. Nelson Rose of the Gambling and the Law Blog, predicts “a fairly large majority of the Supreme Court will rule that states cannot be told that they have to continue to make a product or service illegal.” Professor Rose is a law professor at Whittier and has served as an expert witness in civil and criminal trials on the topic of legalized gambling.
If Professor Nelson is correct, next years’ Super Bowl could be a whirlwind of new state-sanctioned sports gambling. Will this also open the doors for eSports and fantasy gambling sites like FanDuel and DraftKings? I guess we’ll have to wait to see how the Supreme Court rules.
As I mentioned in our blog post on November 6, 2017, we would be covering the US “opioid crisis” as the lawsuits against manufacturers and distributors heated up. Today, we found out Kentucky Attorney General, Andy Beshear, filed a complaint against McKesson Corp. According to this story by Reuters, Mr. Beshear “accused drug distributor McKesson Corp of helping fuel the opioid epidemic by failing to halt shipments of suspiciously large or frequent orders by pharmacies of prescription painkillers.”
Mr. Beshear’s office filed suit in Kentucky state court. The complaint further alleges McKesson filled suspicious orders and shipped tremendous quantities of prescription opioid pharmaceuticals to Kentucky pharmacies, without reporting them to authorities or preventing the shipments. According to the AG’s own press release, “Federal and state law requires pharmaceutical distributors to monitor and report to law enforcement when it ships large or suspicious supplies of opioids to a state or region.”
There’s a wide array of state and local governments pursuing lawsuits against pharmaceutical companies, including McKesson, for deceptive marketing and failures to report suspicious activity which are resulting in opioid addiction and deaths within their cities and towns.
Let’s take a look at causes of action and potential experts:
Based on the complaint, we see that the Kentucky AG is attacking McKesson on some interesting causes of action, including: Consumer Protection Act Violation; Public Nuisance; Negligence per se; Negligence; Unjust Enrichment; Fraud by Omission; and Medicaid Fraud. Mr. Beshear is seeking punitive damages for the State of Kentucky. The complaint further provides the Kentucky Consumer Protection Act protects citizens from “predatory or inappropriate acts by sellers of goods.” The Act states “unfair, false, misleading, or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.”
With this information it appears deceptive marketing practices will be an issue in this lawsuit. Both Kentucky and McKesson are likely to employ marketing expert witnesses to address which practices may or may not be false and misleading.
Within this cause of action, Mr. Beshear further alleges violations of the Kentucky Controlled Substances Act. This Act creates a “broad duty on the part of wholesalers to monitor, detect, investigate, refuse to fill, and report suspicious orders of prescription opioids.”
One can only imagine there will be an argument over what constitutes a “suspicious order of prescription opioids.” As such, we expect both parties will be retaining pharmaceutical and pharmacy industry experts. The parties are likely to argue about the existence of indicators used to alert a distributor when a suspect order is placed. I anticipate the parties will be looking to pharmaceutical supply chain or logistics expert witnesses to provide background about notification and indicator systems for identifying suspicious orders.
What relief is the Kentucky AG seeking?
By reviewing the complaint and articles mentioned above, Kentucky is arguing McKesson’s activity has resulted in overdoses which put a drain on emergency services and hospitals. I’m certain Mr. Beshear will argue the costs of medical services have increased significantly as the state has had to deal with opioid overdose.
I further envision an argument will be made about the increase in law enforcement and first responder costs associated with fighting the illegal sales of heroin and other opiates stemming from addiction.
The complaint makes it pretty clear Mr. Beshear is seeking punitive damages on behalf of Kentucky. That being said, both parties are going to employ damages experts. This may involve the use of economists and forensic accountants to determine the amount of financial damage inflicted on Kentucky by McKesson’s actions.
Final Thoughts:
As I’m sitting here in California, I do not understand the true ramifications of the opioid crisis on the State of Kentucky. I am interested to see what individual civil litigation options may be available to the citizens of Kentucky. As such, I invite my friend Daryl Dixon of Daryl T. Dixon Law, in Paducah, Kentucky, to provide us with his thoughts on this subject on his own blog! Ball is in your court, Daryl. Let’s see what the Wildcats have for me…
As 2017 comes to an end, I am looking at what we accomplished this year and what is on our “to do a list” for 2018. There is one item I’m very excited about. I’ll be moderating a panel at the ABA-GPSolo/GLSA 2018 Joint Spring Meeting (April 25-28, 2018) in New Orleans. This is the GLSA’s (Group Legal Services Association) annual educational conference.
Legal Technology:
The panel is covering the topics of legal technology (legaltech) and access to justice. Many may wonder why I’m excited about this. If you are not in the legal or legaltech business, I understand the topic may seem dry. I’ve been working in legaltech for nearly 8 years at Experts.com and one of my hobbies includes vlogging about legal technology. I am deeply passionate about the impact of technology on the practice of law and delivery of legal services. In essence, I get to host a panel on a topic that fascinates me.
There are a lot of exciting advancements taking place in legaltech. You may have heard about topics such as artificial intelligence, blockchain, and chatbots. These subjects have been dominating legal news for the last couple of years. The innovations are very cool, at least to an admitted nerd like myself. However, our panel will not be taking a deep dive into these legaltech topics. A friend and colleague, Tom Martin of LawDroid will be at the conference and he’ll be discussing running his practice virtually while vacationing in Europe. I highly recommend chatting with Tom about chatbots and how they can help to run a lean, efficient practice as well as improve access to justice.
Access to Justice:
As much as I’d like to have a more involved discussion about the cutting edge technologies impacting the practice of law, there are less sophisticated, readily accessible technologies that can be employed by lawyers and law firms to improve access to justice. In fact, many of these technologies are already employed by legal practitioners. I’ll be hosting the panel with four actively practicing lawyers, with varying levels of technical aptitude, who are actively improving consumer access to justice.
Here is a brief breakdown of the items identified by our panel for discussion to improve access to justice within the United States:
Cost of legal services
Consumer awareness of pro-bono services
Time restraints for lawyers
Technologies used to improve access to justice
As mentioned above, you and your firm already have access to many of the technologies we’ll be discussing. It is just a matter of how the technology is used to improve consumer access to legal services.
Here are a few of the technologies we will cover:
Open source and cloud-based services
Mobile technology
Social media
Prepaid legal services
If you are a solo-practitioner looking to improve client access to justice, what would you want to learn about in this presentation?
To my friends and colleagues in the legaltech space, what other legacy technologies should be covered?
The ABA Journal reported this week that Google was subpoenaed by the Missouri attorney general (Josh Hawley) for antitrust and consumer protection violations. Google has been placed on notice and the investigation is ongoing. Earlier this year, the Mississippi attorney general sued Google for similar violations and the European Union fined the company $2.7 billion for consumer protection violations. Are you seeing a pattern? Antitrust litigation against Google seems to be full speed ahead.
According to the article, the Federal Trade Commission (FTC) completed an investigation against Google in 2013. The FTC concluded, “We have not found sufficient evidence that Google manipulates its search algorithms to unfairly disadvantage vertical websites that compete with Google-owned vertical properties.” Evidently, Mr. Hawley does not agree with the FTC finding so he decided to investigate on his own.
When investigating and prosecuting cases involving sophisticated technology and antitrust issues, attorneys depend on experts to perform complex investigations and unravel complex issues. Who will the attorneys general and defense counsel turn to in support of these involved matters? Let’s take a look at the issues:
Antitrust / Consumer Protection:
To understand more about the laws governing antitrust issues in the US please visit the FTC for a brief summary.
Essentially, United States antitrust law is a collection of federal and state laws regulating the conduct and organization of businesses, generally to promote fair competition for the benefit of consumers. As the FTC page indicates, there are three main laws covering antitrust behavior: the Sherman Act 1890, the Clayton Act 1914 and the Federal Trade Commission Act 1914. For more than 100 years, “The antitrust laws have had the same basic objective: to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.” The laws also basically prevent collusion or cartel-like practices and monopolies.
The Missouri attorney general has said, “There is strong reason to believe that Google has not been acting with the best interest of Missourians in mind.” It appears the Mr. Hawley believes Google is doing things which are not promoting, and possibly impeding, fair competition. Further, their algorithms may be directing users to Google-owned properties rather than websites offering services which compete with those Google-owned properties. As Google is the 800 pound gorilla when it comes to Internet searching, any tactics directing users to their own goods or services could be considered a restraint of trade.
In order to prove Google manipulates algorithms for their own benefit, the Missouri attorney general is probably going to have to employ some expert consultants who may later testify as expert witnesses. Google’s defense counsel will probably have to do the same. I assume Google will have many of the pre-litigation consultants in-house.
During the investigation, Mr. Hawley will likely need to consult with antitrust and antitrust economics experts to determine if actions by Google are negatively impacting consumers or restraining trade. Furthermore, he may need to employ consultants to conduct market research to have statistical evidence of the impact on consumers.
Algorithms:
Most of us (is this too presumptive?) have some sort of rough idea about search algorithms and what they accomplish. We understand it to be a mathematical equation used to search data and deliver a result based on the search terms we utilized.
After reading my last paragraph, I have to say there are probably far more accurate and simplistic descriptions of an algorithm. I may not have properly described how they work. That’s because I’m not a computer scientist. Luckily, neither the prosecution nor defense will be calling Nick Rishwain as an expert witness in Missouri v. Google.
The legal representatives from both sides are going to need assistance in understanding search algorithms and how algorithms might be manipulated by Google. They are going to need to know this quite early in the case in order to request and deliver the proper documentation during the investigation and discovery stages should Missouri file a lawsuit.
As the ABA Journal article made abundantly clear: Google has faced many legal actions related to antitrust and it appears even more legal actions lie ahead. It should be noted that Google is not alone in this area. There appears to be increased chatter about antitrust actions against Amazon as well. If the US Department of Justice and the Federal Trade Commission avoid taking action, we may see more attorneys general choosing to investigate and possibly prosecute the corporate giants for dominating the market.
For more information, check out the Experts.com Antitrust Articles section.
Updated: 07/24/2019:
Well, as we noted when we last wrote about the Google antitrust matter, more was likely to come. Yesterday, we learned the Department of Justice (DOJ) has opened an antitrust investigation into some of the world’s largest tech companies, although they did not mention the companies by name.
According to Ars Technica, the DOJ’s Antitrust Division opened an investigation which would “consider the widespread concerns that consumers, businesses, and entrepreneurs have expressed about search, social media, and some retail services online.”
From this, we can only take a guess that they mean they’ll be investigating Google, Facebook, Amazon, and some others. Other pundits assume Apple will also be investigated. If the investigation is a broad as reports are indicating, we can assume others will find themselves in the cross hairs at some point in the future.
