Rebublican Law Journal
 
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Vol. 219 No. 217 pp. 157-165 January 19, 1998

ARTICLES

Historic & Modern Foundation Of Freedom Of Expression, Speech & Press.

Free Speech & Modern Technology.



NEWS & COMMENT UPDATE

Charles Keating Loses Motion

Ninth Circuit Reinstates Fraud Convictions

By Howard Hobbs JD, PhD, Law Journal Editor

SAN FRANCISCO DESK - Charles Keating,74, state securities junk bond fraud convictions for taking part in the bilking of Lincoln Savings depositors were all reinstated by the 9th Circuit Court of Appeals on Thursday. Keating will likely return to federal prison as a result of the ruling.

Keating had been sentenced to 10 years in prison in his 1991 conviction. But, he has been free since 1996 when he was granted a new trial by U.S. District Judge John Davies.

Davies justified Keating's release on the theory that '...jurors should have been asked to decide whether the sellers of junk bonds in Lincoln's parent company intended to defraud the buyers.' If not...' Davies wrote, 'Keating could not have been guilty of aiding a fraud.'

In reviewing Davies Opinion, a Ninth Circuit panel of three judges, in Keating v. Hood, 96-56175, did not decide whether Davies was right but instead ruled that he should not have considered the issue. The court wrote '...Keating had not raised the issue in his earlier, unsuccessful appeal in the state court system. Only arguments that have been considered and rejected in state court can be made in a subsequent federal appeal.'

The court then ordered the appeal dismissed and ordered Keating to return to state court before presenting the issue to the federal courts.

'Keating will likely complete his state sentence...' deputy attorney general Sanjay Kumar said.

William Hodgman, deputy district attorney, who prosecuted Keating, said 'For so many thousands of people who felt that our victory in state court was a triumph of justice and had that taken away, this is a great day!' Hodgman stold reporters.

Meanwhile, Stephen Neal, Keatings attorney, told reporters he would go be back in the U.S. district court on another issue that Davies decided in Keating's favor, '...the jury was given the option of convicting him as a direct perpetrator of fraud. Not merely as an aider of fraudulent sales without having to decide whether he intended to defraud investors.'

Keating's original trial and conviction wasin Los Angeles Superior Court on 17 felony charges of securities fraud.

State courts upheld the Los Angeles Superior Court conviction. But, appelate court judge Davies ruled that the trial judge, Lance Ito, should have tinstructed jurors the charges required proof that Keating's intended to defraud investors. Without proof of fraudulent intent, Davies said, the jury could not find Keating guiltyof fraud in their verdict.

This case is heading for the U.S. Supreme Court.

Copyright 1998 HTML Graphics By The Daily Republican Newspaper. All rights reserved

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Wednesday September 23, 1997

Paula Jones Attorneys' $800k Lein

By Howard Hobbs, JD PhD, Law Journal Editor

WASHINGTON DESK - When Paula Jones parted company with the former lawyers, their lein for $800,000 in attorney's fees became a permanent part of her cae.

Joseph Cammarata, former Jones attorney said he and Gilbert Davis served writtten Notive on Jones, Clinton and two insurance companies of the lien for hourly fees.

Camman alleged disagreement with Jones over a settlement. Jones' spokeswoman, Susan Carpenter-McMillan, called the request pathetic especially because they are asking for $100,000 more than what they urged Jones to accept in settlement.


Friday, August 22, 1997

Ninth Circuit Upholds Prop 209

By Howard Hobbs, JD PhD, Law Journal Editor

WASHINGTON DESK - California Proposition 209 the anti-affirmative action law that has stirred the passions of California voters and divided the federal courts, is now headed to the United States Supreme Court.

On Thursday the Ninth Circuit U.S. Court of Appeals rejected a plea to have an 11-judge panel reconsider the legality of the measure. The court upheld an April ruling by a three-judge Ninth Circuit panel that found constitutional the ballot initiative outlawing state hiring and educational preference programs for racial minorities and women.

Unless the Ninth Circuit or the Supreme Court grants a request to temporarily block enforcement of Thursday's order, the law normally would be implemented in seven days. However, the Ninth Circuit on Thursday also extended indefinitely the week-long waiting period, according to the Circuit spokesman Mark Mendenhall, making uncertain the exact date that the law could take effect.

Prop 209 is in effect. California is now back on the Constitutional track.

Attorneys for the American Civil Liberties Union said Thursday that they will immediately ask the Ninth Circuit to block the measure while it prepares an appeal to the Supreme Court.

However, it is likely that the Supreme Court will allow California Proposition 209 stand.

Californians Against Discrimination and Preferences, a private organization that joined state Attorney General Dan Lungren in defending the law, praised the Ninth Circuit Order, with its spokespersssons telling news agencies 'This is another historic day for those who believe in equal rights under the law...The government can't use race to classify people.'

Proposition 209 prohibits preferences based on race or sex in government education, employment and contracting. After 54 percent of California voters approved the initiative in November, civil rights attorneys sued in federal court to overturn the ballot measure.

The suit claimed that the law improperly banned constitutionally permissible affirmative action programs to the detriment of women and racial minorities.

In December, Northern District Chief Judge Thelton Henderson played into the hands of critics by issuing an injunction barring enforcement of the law.

The Ninth Circuit reversed Henderson in a sharply-worded opinion in April.

'Where a state denies someone a job, an education or a seat on the bus because of her race or gender, the injury to that indicidual is clear,' wrote Ninth Circuit Judge Diarmuid O'Scannlain. '...no one contends that individuals have a constitutional right to preferential treatment.'

On Thursday, O'Scannlain and his two colleagues on the Ninth Circuit panel issued a terse unsigned order, rejecting the request by civil rights attorneys to reconsider the April ruling.

None of the court's judges issued a dissent from the order.

The ruling meand that local government agencies throughout California will now be preparing to enforce the law under Proposition 209.

President Clinton's Department of Justice has filed briefs opposing Proposition 209 and seeking to unddddue the majority vote of the California electorate.

So, it is now headed for the U.S. Supreme Court.

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When Economists Go To Court

By Howard Hobbs, JD PhD, Law Journal Editor

WASHINGTON DESK - Appraising and prooving the reasonable value of economic losses resulting from death or injury is a special area of expert testimony needed to establish the value of a legal case for settlement purposes and for jury awards.

Doctoral level forensic economists can provide valuable advice and are well worth generally the retainer and hourly fees which are more than off-set by favorable settlements, court awards, and jury verdicts.

It is not unusual for a forensic economist to testify to proof of economic loss exceeding $5 million. Fees of this service range from around $3500 to $8000. The significance of the forensic economists written report to jury verdicts in economic damage cases cannot be over started.

This issue of minimal damages is subjective, but in general, if the case is worth at least, $100,000, then it may be worth considering use of an economic expert. Incidentally, in most personal injury or wrongful death cases, an experienced forensic economist should be able to provide a "guesstimate" of economic damages for a fee of $300-500. This is provided informally by only a few experts, e.g.. presented via phone conversation, using minimal research, and not involving any written letters, or reports.

Many factors are important to economists. Not all agree on issues like the following

-style, this is generally considered the most important single factor, believability in court;
-costs can the expected fees be justified; what are the risks of not hiring an expert economist;
-strategy of case and is work to be done for defense or plaintiff to be economic consulting and thus not discoverable;
-experience, credentials such as a Ph.D. in Economics from a noted university, a strong resume, publication record, and persuasive speaking style most important.

There are a number of ways of functions a forensic economist performs. But, most forensic economists offer case analysis. From a few simple calculations the forensic economist general follows a step-wise process to which he will offer sworn testimony at time of trial that will show:
a theory of damages for example, the so-called human capital model lies at the core of many lost earnings cases, but it is not the only theory. The point is that the theory should be made explicit;
-a but-for analysis,what are mitigation earnings or profits;
-appropriate Data and Information used, examine the company or the individual in terms of industry, occupation, past and future outcomes, markets, and economic conditions;
-assumptions underlying calculations, depending on the case, the expert should consider the following factors: productivity, inflation, taxes, expected duration of loss, work-life and life expected of a person, time value of money, and similar factors.

When the plaintiff hires a forensic economist, the expert writes a report, cites sources, and attaches spreadsheet models and references. For defense, the expert can use this same general outline and also estimate damages and/or develop a line of questions for the opposition, e.g.. theory of damages, and, in a wrongful death case, the defense might want to know about projecting foregone lifetime earnings, and the life span of a person with a terminal illness or injury;

During the litigation of claims for economic loss forensic economists usually also advise the employing attorney about some or all of the following:
-estimates of economic damages;
-document production during discover phase of case; data collection; review; damage estimation; review opposition expert's report; develop deposition lines of question for opposition;
-presentation of economic damages during settlement phase; evaluate settlement offers; develop probability of settlement decision trees;
-preparation of trial binder and exhibit materials for trial phase, including damages reports, question scripts, exhibits, background of expert; present testimony; develop lines of questions for opposition.

Forensic economists can often provide detailed economic modeling, forecasts, statistical analyses, and market assessments in cases involving cost analysis and state and federal income tax issues.

The 'care & feeding' of a forensic expert is similar to hiring of a highly specialized case management consultant. Finding them is not always easy, however.

Once retained, it not always easy to keep a forensic economist. Often economist work 'both sides of the street' so there is always a possible conflicts of interest present and not readily disclosed. It is not ethical for the forensic economist to be paid on a contingency basis when doing plaintiff work.

So in most instances, an experienced forensic economist will provide the employing attorney with an invoice retainer statement covering the economist plan which outlines tasks and resources to be utilized in arriving at the economist's report. This greatly reduces surprises, enhances communication and overall quality of results.

During the case the economist will generally provide the employing attorney with systematic oral reports, briefings and other progress statements in addition to invoices for fees and expenses. Because any written reports from the forensic economist submitted to the employing attorney are discoverable by opposing legal counsel, written reports the timing of such reporting will be arranged by the employing attorney.

Some areas of the forensic economist's report will be especially vulnerable to attack by opposing counsel. These include subjective factors of the economist's choice of:
-the normal level of past and future earnings or profits;
-an interest rate for use in discounting future earnings and possibly determining pre-judgment interest;
-the timing or duration of economic loss; and
-assumptions in the 'but for' analysis; changes in economic profit or earnings.

There are several excellent references, books, and journals, including:
-Determining Economic Loss in Injury & Death Cases, 2nd ed., New York, Shepard's/McGraw-Hill, Inc., 1993;
-Trial Manual For Proving Hedonic Damages,Westport, Conn., Lawpress Corporation, 1992;
-Litigation Economics, Patrick A. Gaughan, Robert J. Thornton (eds.), Greenwich, CT: JAI Press, Inc., 1993;
-Disability Handbook, Alan Balsam, M.D., Albert P. Zabin, New York, Shepard's/McGraw-Hill, Inc., 1990.
-Recovery For Wrongful Death and Injury (Economic Handbook), Stuart M. Speiser, John Maher, Rochester, New York,Clark Boardman Callaghan, 1995;
-Structured Settlements, Design and Evaluation, (Release 3) Steven L. Cooper, et al., Boerne, Texas, 1993.

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Students Sue Chapman Law School

Sidebar

ANAHEIM - Four law students at the Law School at Chapman University filed a class action alleging the two-year old Law School of violating a state law requiring the non-accredited law school to inform students that graduation would take four years instead of the usual three.

The civil complaint alleges the student plaintiffs were smoozed into attending the Law School with promises that it would receive accreditation by the 1997-1998 school year, eliminating the need for a fourth year of studies. Annual Law School tuition exceeds $18,500 at Chapman. However, the American Bar Association denied the Law School's application, citing a low-quality faculty, easy entrance requirements, easy grading, and a lack of systematic faculty evaluation.


WILLIAM BRENNAN'S REACH

Editor, Republican Law Journal

WASHINGTON DESK - Justice William Joseph Brennan Jr. has died at the age of 91. In 1956 president Dwight D. Eisenhower(R) elevated Brennan to the U.S. Supreme Court, filling the vacancy created by the retirement of Associate Justice Sherman Minton. Brennan retired from the Court in 1990.

Brennan's closed, flag-draped coffin was brought to the Supreme Court last Monday as his former colleagues, family and others mourned the death of one of the most controversial jurists in U.S. history.

The casket containing the remains of justice Brennan was carried up the court's marbled steps across from the U.S. Capitol by 10 pallbearers who had worked as law clerks for the legendary liberal whose rulings interposed upon the liberty and rights of most Americans. Brennan's body will lay-in-repose for the day.

Three of the nine current Supreme Court members, two retired colleagues, Brennan's wife, his three children and numerous court employees attended a brief ceremony before the hall was opened for public viewing.

A Catholic priest, Milton Jordan, referred to Brennan's accomplishments during 34 years on the nation's highest court. Brennan, retired from the bench in 1990 after suffering a stroke, and died Thursday after a long illness.

Brennan is widely acknowledged for his activism in reshaping the American society through his controversial judicial decisions dramatically altering the course of the nation's social fabric and institutions.

Brennan had a bold enthusiasm for issues that had political implication coming before the bench and bar. He grasped liberal principles securely and disassembled many age-old traditions.

One decision for which Brennan previled and for which he has been credited was Earl Warren's opinion in Brown v. Board of Education which blasted at the foundation of American values in public education. That decision was widely opposed by Americans as going too far. The consequences of the controversial ruling have haunted America and ruined the public schools institutionalizing the effects of racsism and poverty through court-ordered busing, housing ghettos,and hollow afffirmative action programs.

In a noted pique of federalist activism, Brennan, in a 1964 opinion, New York Times Co. v. Sullivan not only gave the broadest protections conceivable to newspaper publications critical of federal government officials he also went on to predicate his entire opinion on an assumed constitutional principle that, if true, would make it applicable not only to the federal courts but also intervene into states rights.

Brennan compulsively viewed his task on the Supreme Court as a mission '...to protect individual freedom from repressive governmental action.' By 'governmental action' Brennan referred to laws passed by congress and signed by the president.

To wage war against the executive and legislative branches of government, Brennan unfairly depicted American life as an '...unceasing contest between personal liberty and government [congress] oppression.'The judiciary, to Brennan, weilded the only power to overcome the executive power of the president and the legislative authority of the congress. For justice Brennan, however, there was porecious little difference between the state government and the federal government. To him all were oppressive.

So, Brennan always attempted to argue that the Bill of Rights applied to botj state and local governments because, as he reasoned, that way he could assume jurisdictional power over state's rights through the metaphor of the protections already incorporated into the due process clause of the Fourteenth Amendment of the federal Constitution.

Brennan thought the 24th Amendment (qualificatin of electors) was '...the most important...and the legal instrument of the egalitarian revolution which ... transformed the contemporary American society.'

Brennan had the zeal of a misguided missionary who tried to single-handedly reshape American society with the hammer of constitutional law, as he dreamed it should be. As a result of his intensity and long career on the bench, he introduced gender classes including homosexuality and attempted to shield such classifications behind the equal protection clause in order to, as he imagined it, 'safeguard...the ability to define one's identity that is central to any concept of liberty'.

Brennan authored important opinions in such wide areas as justiciability, standing, habeas corpus, adequate state grounds, sovereign immunity, implied causes of action and abstention.

Ironically, Brennan thought courts were not part of the government bureaucratic and oppressive state. He justified his activism on the grounds that courts were '...the essentially disinterested, rational and deliberate element of our society.'

Brennan was so far over the edge, that he once even tried to compare public interest litigation to '...a form of political expression' to be protected by the courts.

Much of Brennan's opinions were eventually reversed in subsequent cases on point. Brennan's legal reasoning attempted to refashion almost all of First Amendment jurisprudence . To accomplish this he introduced a new jargon to the courts with words like vagueness and chilling effect he tried to persuade a nation that rules regulating and limiting freedom of speech were perfectly constitutional as long as the rules were formulated in ways that accounted for the costs of enforcing them. Clearly William Brennan's grasp of the constituional limits of his office was only exceeded by his exuberance and insatiable hunger for the power to change things.


July 28, 1997

STRIPPERS

By Paul Elias, Cal Law Writer

SAN QUENTIN PRISON - From his cell in State Prison, pornography king Jim Mitchell is waging an all-out legal battle.

This battle, however, has nothing to do with his voluntary manslaughter rap. Mitchell is done appealing that conviction and expects to be paroled later this year after serving half of his six-year sentence for killing his brother and business partner, Artie.

Instead, Mitchell is using all of his legal resources to beat back an employment class action brought by about 300 nude dancers who have appeared at his strip joint, the O'Farrell Theatre in San Francisco.

The case -- replete with an appropriate backdrop of sex and greed -- has generated enough paranoia, suspicion and intrigue to satisfy even the most discerning pulp fiction aficionado.

But at its core, the dispute is about a common corporate strategy practiced by titans from Bill Gates on down: Like his straight-laced brethren, Mitchell has converted his employees to independent contractors, setting off a rancorous struggle over labor relations.

Both sides have dug in for a winner-take-all contest in a case that may well set the standard for strip club employment. And it could turn on an 8-year-old case involving Central Valley cucumber pickers.

Although only a handful of class members still dance at the club, the plaintiffs have refused offers to settle.

And Mitchell's side is in no hurry to resolve the dispute, either. He has hired and fired several attorneys, and a contingent of pro-management strippers has helped slow the process further with repeated attempts to intervene in the suit.

Just last week, a San Francisco judge tossed out their latest effort, essentially calling it a naked attempt to muzzle the other dancers.

At the center of it all is Jim Mitchell, a hard-drinking, hard-drugging flesh impresario. For 20 years, Mitchell has managed to keep tourists, bachelor parties and busloads of rich Japanese businessmen churning through his turnstiles at $40 a head, making his club, by all accounts, not only the most popular, but probably the most profitable in San Francisco.

"The O'Farrell Theatre has remained the most notorious strip club in California, perhaps the country" a glowing article in the most recent Hustler magazine asserts.

Mitchell boasts that despite being behind bars he still leads his industry and it appears he's not just bragging.

Nine years ago he revolutionized the way strip clubs employ dancers when he embraced a trend then sweeping the more buttoned-up corners of corporate America: Mitchell fired most of his employees -- the strippers -- and had them sign independent contractor agreements. He also began charging each dancer a "stage fee" to dance. Today, every dancer pays the theater $30 a shift.

Mitchell's attorney, Steven Finley of Finley & Deaton, says the arrangement saves his client $1 million a year in payroll expenses and taxes.

Clubs up and down the coast soon followed suit.

"I'll give Mitchell credit -- this was his idea and everybody jumped on the bandwagon," says attorney Miles Locker of the California Department of Industrial Relations.

But a group of exotic dancers at the O'Farrell think that more than their costumes are getting ripped off.

In 1994, two performers -- ecdysiasts, if you will -- sued Mitchell and his club. His dancers, the plaintiffs say, should be paid the minimum wage and other benefits that other California employees are entitled to receive. The plaintiffs also allege that the stage fees are illegal.

Two years later, Superior Court Judge William Cahill certified a class of about 300 strippers who appeared at the club between 1991 and 1995.

Today, Vickery v. Cinema Seven Inc., 959610, is 26 volumes thick and is doing a slow bump and grind in San Francisco Superior Court without a trial date in sight.

On July 17, a none-too-pleased Superior Court Judge David Garcia tossed out an ancillary suit brought by a faction of strippers who oppose the class action.

In that case, Holt v. Bryce, 986991, the pro-management strippers had asked Garcia to approve their independent contractor status and dismiss the class.

But Garcia agreed with the other side that Holt was nothing more than a Strategic Lawsuit Against Public Participation, or SLAPP. He also dressed down the Holt plaintiffs for going to the well three times too many.

"This is the fourth time you've tried this," Garcia said.

The pro-management strippers have also riled Cahill, who has presided over the case almost since its inception. Their participation, Cahill said, smacks of behind-the-scenes manipulation by Mitchell.

"Ever since we have been in this case, we've had a problem with people being maybe or maybe not coerced," Cahill said at a hearing last year.

The hearing was called over a bizarre letter mailed to every class member.

Signed by stripper Martine "Bambi" Banks, the letter lobbied every dancer in the class to opt out.

"We don't want to end up testifying under oath in court about how much we have made in tips," the letter stated. "We don't want the IRS sticking their noses in our lives and making us go back and change our tax returns. . . . We are exotic dancers, not factory workers."

Cahill responded with a missive of his own, informing class members that Banks' communique should be disregarded.

Mitchell -- in a deposition taken at San Quentin in 1995 and through his attorneys -- denied having anything to do with the letter or, for that matter, organizing the pro-management strippers.

"It was our idea and we pay for the attorney," says dancer Stacy Crawford, adding that she relishes her role as an independent contractor "because it gives me freedom." Crawford says if she were classified as an employee, management could dictate her work duties.

"They could order you to do simulated sex acts and who to do it with," Crawford said. "That's a sticky subject."

Crawford is one of the pro-management dancers, currently represented by David Barry of Barry, Sanford & Foley.

"Right now, there's a very clean situation as far as money goes," Barry notes. "The dancers get to keep everything they make and the theater doesn't interfere -- everybody is happy."

The other side, however, has its doubts about the group's independence.

"They've gotten all kinds of special treatment at the theater," contends lead plaintiffs' counsel Lynn Rossman Faris, a partner with Leonard, Nathan, Zuckerman, Ross, Chin & Remar. "It sure feels like Mitchell's behind it."

Cahill, too, has his suspicions.

"I'm going to be surprised if at the end of all this, we just find that management was passive and they didn't do anything," Cahill said at the Banks hearing. "Something is going on here, but I don't know what it is."

Aside from taking time out to litigate the likes of the Bambi letter, the fact that Mitchell has substituted counsel several times has also worked to slow things considerably.

Mitchell's current lawyer, Finley, got the case when Cahill disqualified Joseph Wood of Lindley & Wood last year.

Mitchell had hired Wood -- firing Littler Mendelson -- after the lawyer filed an unsuccessful motion to intervene on behalf of the pro-management strippers.

But Cahill said Wood's representation of the strippers precluded him from representing Mitchell.

Cahill's ruling prompted an angry letter from Jeff Armstrong, the O'Farrell Theatre's manager.

"Maybe you think you are helping exploited dancers, but in fact you are helping the union people behind the scenes destroy a business that has for 20 years paid a lot of taxes and made it possible for many women to make a lot of money while maintaining an independent professional life," Armstrong wrote to Cahill.

Armstrong then went on to tell the judge that he believed that the class is being bankrolled by labor union organizers who, in turn, are a front for organized crime, which hopes to break into the lucrative sex trade. Cahill filed the letter into the court record without comment.

The plaintiffs' attorney vigorously dismisses the labor union-mob theory as nothing short of an Oliver Stone fantasy. "That's some story, isn't it?"

Discovery is due to close by the end of next month and Cahill wants summary judgment arguments and other dispositive motions filed by October.

So far, it looks like at least part of the suit will turn on the interpretation of a case involving migrant farm workers.

Both sides are citing a seminal California Supreme Court ruling from 1989, Borello & Sons v. Department of Industrial Relations, 48 Cal.3d 341, in which migrant workers who signed a 60-day contract to pick cucumbers were deemed employees.

In making their finding, the justices said that several factors need to be weighed in determining if a worker is an independent contractor, among them:

    -- Control of work schedule and environment.

    -- Economic risk taken by the worker.

    -- Investment in equipment.

    -- The employees' skill level, and

    -- Is the work an integral part of the business?

Mitchell argues that Borello supports his cause because the dancers depend on tips, buy their costumes and props, and have liberal scheduling choices.

The plaintiffs counter that because the theater depends almost exclusively on the dancers, has posted rules for their behavior and, in fact, sets schedules, the dancers should be classified as employees.

And each side comes equipped with a local case to bolster its arguments.

Mitchell points to an administrative law judge's determination last year that strippers at the Kit Kat and Candid clubs are independent contractors.

Administrative Law Judge C.L. Botsford noted that the dancers controlled most aspects of their employment -- from choosing their music, dance routine and costume to influencing their schedules. The evidence, Botsford wrote, "is overwhelming that the nude and exotic dancers who performed at the . . . Kit Kat Club and the Candid Club did so as independent contractors and not employees."

But San Francisco Superior Court Judge Lee Baxter last year ruled the other way in Williams v. Bijou Group, 969116.

In that case, the Department of Industrial Relations argued successfully that dancer Carla Williams -- along with two other colleagues -- should have been classified as employees and paid the minimum wage for performing at the Market Street Cinema.

"They have a set schedule and the clubs have a lot of control over employment terms," says department attorney Locker, who represented the women.

Both sides, naturally, scoff at each other's arguments.

Mitchell points out that Baxter's ruling was tentative as the case is still pending. Faris, meanwhile, counters that the ALJ's decision in the Kit Kat Club matter isn't case law.

But before the two sides can get down to arguing the merits, more delays are expected.

"Both sides have conducted this in a spirited manner so far," says Mitchell's lawyer, Finley. "And I would be surprised


July 22, 1997

A Market Waiting to Happen

By Dan Goodin, Cal Law Writer

SACRAMENTO - In the analog world, ASCAP investigators help enforce songwriters' intellectual property rights by hanging out in bars and nightclubs to ensure members are getting their royalties.

But how does an artist whose work is distributed on the Internet protect himself?

In the case of popular musician Thomas Dolby, the answer was simple: design a software product that permanently affixes copyright and licensing information to digital music files.

Now the head of a San Mateo software and Internet publishing start-up, Dolby says the need to track intellectual property on the global network is paramount.

"There's a general lack of awareness of copyright issues among Web users," says Dolby, the chief executive of Headspace Inc. "Anything that people have on their computer, they feel they own. As a composer and the owner of a music publishing company, that's unsatisfactory to me."

In response, Headspace has integrated the enforcement feature into Beatnik, its software for mixing songs and distributing them on the Internet. Beatnik's so-called digital watermark cannot be stripped out of a file without rendering it useless.

Beatnik is one of dozens of new products designed to help digital content owners enforce their intellectual property rights. IBM Corp. and a bevy of start-ups have also hit the market with similar wares.

But despite projections that Internet commerce will reach into the hundreds of billions of dollars in the next few years, the electronic marketplace has yet to take off. Consequently, the use of watermarking technologies and other electronic rights management products remains light. And some IP lawyers are reluctant to recommend use of the new products until their costs -- running into the thousands of dollars -- make sense relative to the value of the products they're meant to protect.

Once electronic commerce begins to realize its potential, however, most experts in the field say digital enforcement products won't be far behind.

"There's an explosion of software products designed to provide the technical muscle to protect intellectual property that exists in digital form," says John Kennedy, a New York of counsel with Morrison & Foerster. "As time goes by, these technologies will come into much greater use and may in fact be dictated by corporate policy."

Playboy Enterprises Inc. recently announced that it is using a digital watermark developed by Digimarc Corp. to keep track of whether photos from Playboy's Web site wind up elsewhere on the Net. The software costs $4,950 for the first year and $2,500 every year thereafter.

Portland, Ore.-based Digimarc embeds unique information into the images that can be discerned only by a computer. Digimarc then searches the Internet for the identifying information and alerts Playboy to pirate Web sites. Digimarc's product also automatically displays copyright information whenever a user views the image using popular browsing software.

"We've left no excuse for inadvertent infringement," says Scott Carr, director of business development at Digimarc.

Another site, which publishes Swimsuit Illustrated and other online magazines on the Internet, recently installed Site Shield, a product designed by Costa Mesa's Maximized Software Inc. to prevent Web surfers from downloading images at all. Since 1USA.Com installed the product two weeks ago on its supermodels site, the company has received a dozen e-mail messages protesting the change.

Barry Zettlemoyer, chief executive of Redding, Pa.-based 1USA.Com, says disabling browsers' ability to copy the pictures is crucial to building his business.

"The fashion photographers, who are very sensitive to copyright matters, are more apt to give us the better quality material and photos than they would to other Web sites because we're able to prevent the illegal use of the material," he says.

But Playboy and 1USA.Com appear to be exceptions when it comes to using digital enforcement products. Few sites running today offer material worthy of protection.

Demonstrating that point is a Stanford University graduate student project that tracks plagiarism and copyright infringement on the Internet.

Narayanan Shivakumar's Stanford Copy Analysis Mechanism -- or SCAM for short -- compares texts in its database to writings available on the Net. In 1995, it uncovered a number of scientific articles submitted by a graduate student in Greece that were lifted wholesale from other works.

So far, though, SCAM remains only a research project; Shivakumar hasn't received enough interest to make a commercial go of it.

"It's not being used by anybody," he says. "Nobody seems to have content right now [on the Internet] that is really valuable."

Six attorneys interviewed for this story, meanwhile, express reservations about using any of the commercial technology that is available, recommending it to few, if any, of their online clients.

Ronald Laurie, a partner at McCutchen, Doyle, Brown & Enersen, says that the level of security built into many of the products doesn't gibe with the value of the content being protected.

Some products, like those by Digimarc and Dolby's Headspace, merely provide an audit trail that an owner can trace to a particular infringement -- after searching the Web for the pirated material in the first place. Some attorneys think such "passive" products, as they are known, cost copyright owners too much time and money in tracking down infringers who may have already ripped off, say, a report that sells for hundreds or thousands of dollars.

"Active" products, on the other hand, which give users access to content only after paying fees or agreeing to licensing terms, can turn off potential customers. IBM's Cryptelope, which allows a user to read information only after meeting certain requirements, is one example of active protection.

"The real issue on the active side is what kinds of pricing models will users accept," adds McCutchen's Laurie, a specialist in online and computer legal matters.

Web site developers are still wrestling with whether their primary source of revenue should be to charge users on a pay-per-use basis, to charge subscription fees, or to give away content but selling advertisements.

"What the consumers are [ultimately] more comfortable with is going to affect which technologies become successful," Laurie says.

While the market for electronic copyright enforcement products might be embryonic at this point, I. Joel Riff, who heads Fenwick & West's licensing and online commerce group in Palo Alto, is confident the technology will gain ground.

"My guess is that to the extent [the technology] is being used, it's probably companies on their own deciding that it's an advantage that they want to incorporate into their business," he says.

"You shouldn't take the fact that lawyers aren't spending a lot of time with it as a sign that it's not effective or legally sound."


July 21, 1997

Curiouser and Curiouser

By Bill Ainsworth, Cal Law Writer

SACRAMENTO - If it's true that consistency is the hobgoblin of little minds, then Gov. Pete Wilson and Senate leader Bill Lockyer must be pretty broad-minded - at least when it comes to capital punishment.

In the interest of speeding death penalty appeals, they're both standing long-held convictions on their heads.

Wilson, a proponent of contracting out more government services to the private sector, wants to hire more state attorneys to represent condemned prisoners. Lockyer, who typically opposes privatizing government, supports using private lawyers.

Currently, 151 of the state's 469 condemned inmates do not have a lawyer to handle their appeal. The dearth of counsel is hurting the state's efforts to comply with a new federal law that forces death row inmates to file their appeals more quickly.

Like many Republicans, Wilson has been talking about contracting out government functions for years, claiming that the private sector can do the job more efficiently than the public sector.

Wilson's aggressive campaign to contract out work has turned him into one of the top political enemies of the powerful state employee unions.

For the past year, however, the governor has been pushing a scheme that relies largely on expanding the state public defender's office and creating a new bureaucracy -- the office of post-conviction counsel -- to make sure that all indigent condemned prisoners quickly receive an attorney to appeal their death sentence.

Wilson's proposal -- a sort of Full Employment Act for criminal appellate attorneys -- is an attempt to help speed up executions of condemned prisoners.

"We're taking another step toward the day when old age will no longer be the leading cause of death among inmates on death row," he said at a news conference last year when he announced the program.

In contrast to Wilson, Lockyer, D-Hayward, is one of the state workers' best friends.

He believes that for the most part, government workers should perform government tasks. And he has been a strong supporter of the state employee unions' campaign to prevent Wilson from handing more state work to private firms.

In May, Lockyer indirectly blocked Wilson's proposal to hire more government workers. The bill is stalled in the Senate Appropriations Committee, which reviews new government spending programs.

"It's curious to me that the same governor who wants to contract out CalTrans engineering work wants to create this huge new bureaucracy to handle appeals," Lockyer said.

But it's just as curious that Lockyer is blocking a plan that would add more attorneys to the state payroll.

Lockyer believes that increasing the pay of private attorneys will entice more of them to take a death row appeal and reduce the number of unrepresented inmates. He's carrying legislation that would raise the pay of private counsel handling death penalty cases from about $100 to $125 an hour.

A legislative analyst's study shows that death penalty appeals handled by private sector attorneys cost $75,000, while cases handled by state attorneys cost $205,000.

Most of the appellate attorneys representing convicted killers come from the private sector. The state public defender's office is currently handling just 27 capital appeals and 26 state habeas corpus petitions.

Wilson also embraces the pay raise, but he believes that salary hikes are only a small part of the solution. He won't sign Lockyer's bill unless the Legislature passes the rest of his program.

Unlike many of Wilson's other ideas, this one has bipartisan support. Sen. Charles Calderon, D-Whittier, is carrying one part of Wilson's plan.

Last week, Republican Attorney General Dan Lungren blasted Lockyer for delaying Calderon's bill. Lungren charges that the state's top Democrat just wants to delay executions.

Lockyer, a supporter of the death penalty, denies the charge.

Calderon, who serves under Lockyer as the No. 2 person in the Democrat-controlled Senate, has been more muted in his criticism. But he may revive the issue if he faces Lockyer in a battle for the Democratic nomination for attorney general. Both men are potential candidates.

Earlier this year, top State Bar lobbyist Mel Assagai quit the Bar, started his own lobbying firm, and quickly won a $450,000 no-bid contract to represent his former employer.

The fact that the contract was one of the richest between a lobbying firm and a lobbying client didn't go unnoticed. In fact, it prompted criticism from lawmakers, outrage from bar critics and even a little envy among his fellow advocates.

Now, it turns out that Assagai, closely connected with Senate Democrats, is sharing some of that wealth. He has signed up a firm with ties to Republican Gov. Wilson to help the Bar with the governor's office and Republicans.

Sloat Higgins and Associates is headed by Kevin Sloat, a former top aide to Wilson. Sloat's quick entry into the world of lobbying earlier this year prompted a good-government group to charge that he had violated the state's revolving door law. But the agency in charge of investigating such complaints, the Fair Political Practices Commission, found his activities were lawful.

Sloat, said Assagai, won't be lobbying the governor's office this year. Instead, his partner, Maureen Higgins, a former Wilson administration official, will handle the duties.

Last year, the State Bar paid Richard Robinson & Associates about $48,000 for similar duties.

Democrats in the Legislature had written the script for the opening scene of the welfare drama, but they got upstaged when a key player missed his cue.

Both Democrat-controlled houses were to pass legislation implementing federal welfare reform earlier this month. But -- since everyone assumed Gov. Wilson would veto the bill -- they had planned to wait a day before giving the legislation to the governor.

The delay, the Democrats hoped, would let them to bask in morning news headlines suggesting they were moving forward in implementing the tough, new federal law.

It turned out, however, that the Assembly, led by rookie Speaker Cruz Bustamante of Fresno, didn't have his lines well-rehearsed.

Instead of passing the bills and holding on to them for a day, the Assembly sent its bill to the governor's desk.

Wilson's veto stole the scene -- making the Democrats look soft on welfare recipients.


July 2, 1997

Important Decisions of
the U.S. Supreme Court's 1996-97 Term

WASHINGTON D.C. - In the term concluded in June the Supreme Court handed down decisions with full opinion in 80 cases. All have been added to party name tables in the Cornell Supreme Court collection. In addition, the Cornell editors have added available print citations to their records in this site's searchable index to decisions of the Court.

The U.S. Supreme Court ruled on:

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