Manny Garcia gives up his claim that he, not the Associated Press, owns the copyright in the photo he shot and that Shepard Fairey used as the source of the image in the Obama Hope poster.

Manny Garcia has dropped all the claims in the lawsuit over whether Shepard Fairey’s Obama Hope poster infringed the copyright in the photo Garcia had taken and that Fairey had used as the source of the image. The Stipulation of Discontinuance with Prejudice filed in the case is embedded below.

What this means is that Garcia has given up his claim that he rather than the Associated Press owns the copyright in the photo. The Associated Press claims that it owns the copyright in the photo on the grounds that Garcia shot it as a “work for hire.” The fact that the claims by Garcia and against him have been discontinued by agreement of the parties “with prejudice” means that Garcia has given up any right to re-assert those claims in the future. The agreement constitutes a final, binding determination that the copyright in the photo belongs to the Associated Press.

It does nothing, however, to illuminate the outcome of the claim by the Associated Press that Fairey’s poster infringes the copyright in the photo. But it does illuminate those familiar with the history of copyright know — the enlargement and enforcement of copyright has always been more about protecting the interests of publishers than it has been of promoting artistic creation:

There is one group of people not shocked by the record industry’s policy of suing randomly chosen file sharers: historians of copyright. They already know what everyone else is slowly finding out: that copyright was never primarily about paying artists for their work, and that far from being designed to support creators, copyright was designed by and for distributors — that is, publishers . . .

Why Shepard Fairey’s deceit should not stop the court from finding that the Obama Hope poster did not infringe the copyright in the photo it was based on.

There has been a lot of discussion (here, for example) about whether Shepard Fairey’s deceit in the course of discovery in his lawsuit with the Associated Press and photographer Manny Garcia constitutes “bad faith” that will tilt the fair use analysis against him and compel the court to rule that his Obama Hope poster an infringement of the copyright in the photo that Garcia shot.

I don’t think so, and the discussion of the issue of an infringer’s bad faith in NXVIM Corp. v. The Ross Institute, 364 F.3d 471 (2d Cir. 2004) helps illuminate why. The Second Circuit Court of Appeals (whose decisions are binding on the court deciding Fairey v. AP) in NXVIM affirmed the lower court’s denial of a preliminary injunction on the grounds that NXVIM, the producer of a “business training seminar,” had been unable to show it would likely prevail on its claim that the defendants had infringed NXVIM’s copyright in a training manual for one of their online courses. The defendants had posted to the internet quotations from the manual in support of their analyses and criticisms of NXVIM’s activities. NXVIM argued to the Second Circuit that the lower court had inadequately considered the defendants’ “bad faith” in obtaining the manual from a former participant in the seminar rather than by purchasing it, as anyone could do.

The majority did in fact state that “it was error for the district court not to have fully and explicitly considered” the defendant’s bad faith, which presumably included inducing the former course participant to breach a confidentiality agreement by disclosing the course materials to them. The court did not reverse the district court’s decision, however, because the bad faith did not alter the conclusions that the use was a non-infringing one. In short, according to the majority, a defendant’s bad faith is not “dispositive” on the fair use question and consideration of all of the factors — and in particular the first, the “purpose and character” of the defendants’ use of the copyrighted material — was so great: “the first factor still favors defendants in light of the transformative nature of the secondary use.”

It is difficult to get a handle on how much weight, if any, the majority would therefore give to bad faith in the fair use analysis. It would have some weight, the majority seems to indicate, but not that much. Judge Dennis Jacobs‘ concurring decision is even more illuminating, however, and gives good reason to believe that the true weight to be given bad faith as a factor independent of the rest of the fair use analysis should be zero. After reviewing the rather recent history of the role of a defendant’s bad faith in fair use analysis, Judge Jacobs states rather bluntly:

I think that the secondary user’s good or bad faith in gaining access to the original copyrighted material ought to have no bearing on the availability of a fair use defense. Fair use defines the outer boundary of copyright protection, and that perimeter should be drawn by reference to the central objectives of copyright. Copyright itself would be distorted if its contours were made to depend on the morality and good behavior of secondary users.

To support his reasoning, Judge Jacobs pointed out first that the use of bad faith in fair use analysis had its origins in the Supreme Court’s 1985 decision in Harper & Row v. Nation Enterprises, in which the Court held that the Nation magazine had infringed Harper & Row’s copyright in the memoirs of former President Gerald Ford when it published a chapter from the memoir in the magazine in advance of the publication of the memoir. As Judge Jacobs makes clear in NXVIM, the fact the Nation obtained the manuscript illicitly tipped what was generally considered a close case in favor of the publisher.

One might question in retrospect precisely how close a case Harper & Row really was. The chapter the Nation published was the chapter Ford wrote about his pardon of the disgraced Richard Nixon. It seems quite likely that many people who would have purchased the book for that chapter alone (it was clearly the most noteworthy event of Ford’s political career) would have purchased the magazine and therefore not bothered with the book. In other words, the infringement very directly robbed the copyright holder of a significant amount of value that the copyright holder had every reasonable expectation it would derive from the sale of the book.

But Judge Jacobs points out too that in its post-Harper & Row decision in Campbell v. Acuff Rose Music, Inc., 510 U.S. 569 (1994), the Supreme Court backed off the suggestion that bad faith was part of the fair use analysis, stating that the core of the fair use analysis must remain on (1) the transformative purpose of the appropriating work and (2) whether the appropriating market “usurps a market” that belongs to the copyright holder:

Campbell’s footnoted discussion questioning the pertinence of good faith reinforces the entire thrust of the decision, which requires that fair use be assessed primarily in light of whether the secondary work quotes the original with a transformative purpose and whether it usurps a market that properly belongs to the original author — issues as to which the defendant’s good faith in accessing the plaintiff’s original work does not matter.

In other words, according to Judge Dennis, “the fair use defense exists to encourage the creation of original works that do not ’supersede the objects’ — and thus the market value — of the original. Nor is fair use a doctrine a privilege we confer on people we like. It is not ‘earned by good works and clean morals; it is a right — codified in § 107 and recognized since shortly after the Statute of Anne — that is ‘necessary to fulfill copyright’s very purpose, “[t]o promote the Progress of science and the useful arts….”‘ Campbell, 510 U.S. at 575, 114 S.Ct. 1164 (quoting U.S. Const., art. I, § 8, cl. 8).”

Thus, while someone’s bad acts may subject him to criminal or civil prosecution on a number of grounds, they should not bear on the fair use analysis:

A person who acquires the original work by crooked or unsavory means may expose himself to all sorts of civil claims and criminal charges; but the question of fair use itself should be decided on the basis of the transformative character and commercial effects of the secondary use. If the use satisfies the criteria of § 107 [of the Copyright Act], it is fair because it advances the utilitarian goals of copyright.

Shepard Fairey’s deceit in the course of discovery in the lawsuit has been uncovered, and it can be punished through civil sanctions or even criminal prosecution. But it should not affect the court’s determination of the artistic legitimacy of the Obama Hope poster. “[C]opyright is not about virtue; it is about the encouragement of creative output, including the output of transformative quotation. Its goals are not advanced if bad faith can defeat a fair use defense.” Nor is “good faith” a factor in fair use determinations. Willing as you may be to pay a license fee, if the copyright holder refuses to sell you a license and your subsequent unauthorized use is infringing, your willingness to pay is of no credit to you in the fair use analysis.

In short, as Judge Dennis so cogently puts it, fair use is central to the copyright regime; it is not a tolerated exception to the copyright holder’s domain:

Fair use is not a permitted infringement; it lies wholly outside the domain protected by the author’s copyright.

A few more (last?) thoughts on Donald Rosenberg v. Plain Dealer and Cleveland Orchestra

Tim Smith, with whom I participated in a twitter chat 2 nights ago, expressed there and on his blog yesterday, the kind of thinking about the conflict between Donald Rosenberg, the Plain Dealer, and the Cleveland Orchestra that represents a problem and dispute resolving attitude that, I think, the best lawyers embody. There’s no question Rosenberg was no fan of Franz Welser-Möst, the Orchestra’s conductor. There’s no question his views on Welser-Möst were shared by many (though by no means all). There’s no question the repeated expression of those views irritated the Orchestra. So, what should have happened? Perhaps the Plain Dealer could have split up the reviews of the Orchestra between Rosenberg and another reviewer. Perhaps they could have published “dueling” reviews.

In short, there were things the Plain Dealer could have done to address the problems they perceived short of the ham-handed way they did handle it. Indeed, it may have been a better idea to have reassigned Rosenberg years earlier, at the point the Orchestra replaced Christoph von Dohnányi, whom Rosenberg was a fan and friend of, with Welser-Möst.

Let that be a lesson. Anticipate and address problems, and address them creatively, not in blunt fashion that exploits nothing more than your clients power.

That’s not to say, as should be clear from all I’ve written on this affair, that I think Rosenberg did a wise thing in suing in response to the Plain Dealer’s ham-handed way of dealing with the problem. As I’ve said from the beginning, it was very unlikely that Rosenberg would prevail on any claim in his lawsuit. Nor was it a situation the defendants were likely to settle in order to resolve what little legal uncertainty did exist for them. The Plain Dealer and Cleveland Orchestra’s biggest problem resulting from the lawsuit wasn’t any potential damages they might have to pay, no matter how unlikely — rather, the biggest problem was the hit Rosenberg’s claims had on their reputations. His claims resonated in the larger world. At times he seemed almost like a martyr to the cause of critical integrity. And, indeed, the problems caused by our corporate media’s corruption by the subjects they cover is a huge one (though I happen to think Rosenberg’s situation is a rather minor instance of it, if it even is an instance of it).

If the Plain Dealer and the Orchestra had settled the lawsuit, the perception would have been that they had conceded on the issue of undue influence by the Orchestra over the newspaper. Since the perception of that influence was their biggest problem vis-a-vis Rosenberg, they could ill afford to settle. Settlement was even less attractive since their legal position was so strong. So this lawsuit was not going to settle. And in all likelihood — a very strong likelihood that I would never deem a certainty only because law doesn’t permit certainty any more than does, say, medicine — Rosenberg was going to lose (as I’ve said from the very beginning).

And what did Rosenberg have to gain by suing and losing? I don’t think he gained anything. If anything, having had a jury declare his claims without merit, he seems less compelling a figure than he did before the trial. There’s the virtual certainty the lawsuit cost him quite a bit of money. And lawsuits are not fun for litigants.

Some suggest that the mere fact of discovery in the lawsuit made it a worthwhile endeavor. But what did we learn as a result of the evidence compelled by the lawsuit? That the Orchestra didn’t like Rosenberg’s repeated negativity, and that the Orchestra wasn’t alone.  That the Orchestra expressed these views to the Plain Dealer. Unlike Tim Smith, I see nothing noteworthy in Anne Midgette’s belief that the trial disclosed something new about the Orchestra’s role in Rosenberg’s reassignment. One would have to be particularly naive to believe that the Orchestra would not express its disagreement to the Plain Dealer with Rosenberg’s repeated negative views regarding Welser-Möst. Finally, we also learned, as we would have known with a second’s thought before the lawsuit, that the Plain Dealer’s editors know less about music than Rosenberg.

We knew all these things already. So the lawsuit did nothing but hurt Rosenberg, cost the defendants and taxpayers money, and generate a lot of material for a few writers.

One final word: I do not mean to say Donald Rosenberg had no right to file the lawsuit. He had every right, and assuming he knew that he was very likely to lose, I would even have been happy to represent him. I would have been clear to him, however, that I did not see the benefit he was deriving from it. There’s no question I would have derived a lot of benefit from it. He would have paid me, and it would have been a fun and interesting lawsuit to be part of.

Tweet chat at 9pm tonight on Donald Rosenberg v. PD and Cleveland Orchestra

Janice Harayda has arranged and agreed to moderate a twitter chat on the Donald Rosenberg lawsuit against the Plain Dealer and the Cleveland Orchestra tonight at 9 p.m. EDT. I will be fortunate enough to be participating with Tim Smith, the classical music critic for the Baltimore Sun. The hashtag for the chat will be #DonR.

Addendum: Rosenberg’s claims against the Plain Dealer are grounded in an article he wrote for the newspaper on August 25, 2004, an article which, he claimed, provoked a concerted campaign on behalf of the Cleveland Orchestra to have the Plain Dealer assign someone else to review their concerts. Four years later, in 2008, the Plain Dealer reassigned him. For informational purposes, the relevant portions of the 2004 article are set forth below:

Welser-Möst speaks out

Some of Welser-Möst’s comments in current Swiss magazines have raised eyebrows.

In Weltwoche, under the headline, “Many Rich Widows,” he discusses private funding for culture in the United States, deeming it necessary to find “rich widows” and that “charm certainly is no disadvantage when you want the ladies to understand you well.”

Welser-Möst refers to the Friday-matinee audiences in Cleveland that are filled with “ ‘Blue Hair Ladies’ because of the coloring of their hair” and states that these “so-called ‘Blue Hair Audiences’ ” largely comprise retirees who are too tired to attend performances at night.

Asked what the ladies must donate to meet Welser-Möst personally, he answers: “For $500, you don’t get a handshake from the music director.”

And for $5,000? “No, it has to be a little more than that. A few years ago, an enthusiastic middle-age fan, in this case a man, moved a check across the table for $10 million. With such a person, of course, you go to dinner.”

How do you like Cleveland? “Cleveland is an island. Here we have a world-class orchestra in what I call an inflated farmer’s village. For me, who loves the country, it is wonderful to live there among the green. Recently in the street in front of my home, I found a huge turtle. It had not escaped from the zoo. It was just walking in the street.”

Why I didn’t like Donald Rosenberg’s lawsuit against the Plain Dealer and Cleveland Orchestra.

I want to expand a bit on why I don’t believe a lawsuit of the sort Donald Rosenberg brought is a useful way of enforcing journalistic integrity. My opinion, of course, is grounded in the belief I’ve had since I first heard of the lawsuit that there was little if any legal merit in it.

First, our legal system is intended to remedy individual harm. It does so by limiting the power of courts to decide individual cases brought be people with a genuine stake in the controversies they sue over. Courts do not have the power to decide hypothetical questions. They do not have the power to decide concrete questions if they parties who sue aren’t the parties who have actually suffered direct harm resulting from the alleged wrong. And our legal system is overwhelmed. People wait years for justice in cases where the harm is serious and direct. To allow lawsuits to proceed merely because they involve behavior we don’t like, therefore, is to do plenty of harm.

Some have suggested that, regardless of the merits of Rosenberg’s lawsuit, the discovery forced by the litigation serves a useful function in disclosing information about behavior they didn’t like. Discovery is a powerful mechanism for forcing people to disclose information. And so it is a dangerous game. When you seek discovery, discovery is sought from you as well, and it’s tough to put a limit on things. So, if you sue, be ready to open up your own life to the public. And if you are sued, don’t believe for a minute that you won’t have to open up your life.  Litigation is a dangerous game.

Paradoxically, while discovery discloses a lot, we should understand too that it doesn’t disclose everything. Parties to a lawsuit seek discovery about the matters they care about and deem it worth their while and their money to go after. They disclose to the court and the public only portions of the information they seek and obtain. So what the public actually receives is never the entire picture. It is as selected, shaped, and manipulated as is any other set of facts.

It’s plain that those rooting for Rosenberg in his lawsuit were convinced of the soundness of his critical writings regarding the Cleveland Orchestra. But I’m not exactly sure whether they want courts and juries to start engaging in the kind of aesthetic and critical evaluation that would be required to distinguish Rosenberg’s legal claims from those brought by some hack they would consider the Cleveland Orchestra to be entirely right to complain about. To do so would require the court to determine which reviews the Orchestra had a legitimate beef about and which reviews the Orchestra did not have a legitimate beef about. I can’t believe that anyone would be happy with that going on.

And the only other answer to that problem would be to forbid the Cleveland Orchestra or any other journalistic subject to opine about the quality of the coverage afforded them. Besides the obvious First Amendment problems, that alternative is plainly unworkable.

Has the Plain Dealer’s credibility been damaged? I think so, though to be honest I’m not sure that Rosenberg’s lawsuit caused that damage. Rather, the decision to reassign Rosenberg and the ensuing hue and cry from the musical and critical worlds did that. If anything, I suspect that having lost the lawsuit, Rosenberg may have revived some of the Plain Dealer’s lost reputation.

Finally, I hate the fact that Rosenberg likely paid good money for what plainly to me seemed a losing set of claims. And if, as I hope, his lawyer was representing him on a contingency basis, I’d be pretty pissed off if I were his lawyer’s partner or employee.

Addendum: I’ve been asked why, given that Rosenberg’s age discrimination arises under Title VII, which is federal law, the case was heard in state court. Federal courts do not have exclusive “jurisdiction” (that is, judicial power) over Title VII claims. State courts are courts of “general jurisdiction” and therefore can exercise judicial power over any claims, though Congress can restrict jurisdiction over federal claims to federal courts. In 1990, the Supreme Court ruled that Congress had not done so (explicitly or implicitly) in Title VII.

Jury rules against Donald Rosenberg

A jury found for the Plain Dealer and the Cleveland Orchestra’s governing body yesterday, rejecting all of reporter Donald Rosenberg’s legal claims arising out of the decision by the Plain Dealer to relieve him of his duties as the Orchestra’s reviewer and reassign him.

As anyone who has followed my speculations on this lawsuit knows, I have always been skeptical of the legal merits of Rosenberg’s claims. As the NY Times article linked to above explains, the lawsuit “became a cause célèbre among music critics, who charged that The Plain Dealer had caved in to complaints from a subject of its reviews, touching a raw nerve among those who review arts for a living.”

Nevertheless, I could not discern any contractual right Rosenberg had to the job reviewing the Orchestra, so the reassignment didn’t seem to constitute any breach of contract. The Orchestra’s representatives have every right to complain about negative reviews to the Plain Dealer’s management as long as they didn’t lie about him in expressing those complaints. And the addition of an age discrimination claim simply didn’t fit the gist of the complaint — how could it be that the Plain Dealer’s reassignment of Rosenberg under pressure from the Orchestra constituted age discrimination?

If I were Rosenberg’s lawyer, I’d advise him not to appeal. The Los Angeles Times reports, however, that he hasn’t ruled out that possibility. It’s not that I don’t care if the Plain Dealer did cave into pressure from the Orchestra (certainly not the only quarter from which complaints about Rosenberg were heard). It’s that I don’t think a lawsuit by an individual who is reassigned as a result of that kind of pressure is the means of ensuring journalistic integrity.

Judge refuses to sanction Shepard Fairey.

The common wisdom seems to be that the judge in Shepard Fairey’s lawsuit with AP and Manny Garcia over the use Fairey made of Garcia’s photo in creating the Obama Hope poster would be sanctioned for having lied during the course of the lawsuit about knowing he used the photo that was identified in February 2009 as his source. The sanctions could range from monetary “fines” all the way up to ruling against Fairey without ever having determined the legitimacy of his legal claims. But earlier this week the judge, Alvin K. Hellerstein, issued an order in which he denied AP’s pending motion for sanctions. The order states that AP has engaged in an “endless quest” for information from Fairey in an effort to pin him down. At the same time, the judge acknowledged that Fairey’s carefully phrased answers to questions and his earlier dishonesty would be left to be judged for themselves during trial: ”The Associated Press, in its effort to pin down Fairey, has engaged in an endless quest for discovery. If there has been willfulness, it will be proved at trial through Fairey’s evasiveness.”

On tossing aside centuries of tradition.

New York Times, May 2009:

Racially segregated proms have been held in Montgomery County [,Georgia] — where about two-thirds of the population is white — almost every year since its schools were integrated in 1971. Such proms are, by many accounts, longstanding traditions in towns across the rural South, though in recent years a number of communities have successfully pushed for change. . . . The senior proms held by Montgomery County High School students — referred to by many students as “the black-folks prom” and “the white-folks prom” — are organized outside school through student committees with the help of parents. All students are welcome at the black prom, though generally few if any white students show up. The white prom, students say, remains governed by a largely unspoken set of rules about who may come. Black members of the student council say they have asked school administrators about holding a single school-sponsored prom, but that, along with efforts to collaborate with white prom planners, has failed. According to Timothy Wiggs, the outgoing student council president and one of 21 black students graduating this year, “We just never get anywhere with it.” Principal Luke Smith says the school has no plans to sponsor a prom, noting that when it did so in 1995, attendance was poor.

Students of both races say that interracial friendships are common at Montgomery County High School. Black and white students also date one another, though often out of sight of judgmental parents. “Most of the students do want to have a prom together,” says Terra Fountain, a white 18-year-old who graduated from Montgomery County High School last year and is now living with her black boyfriend. “But it’s the white parents who say no. … They’re like, if you’re going with the black people, I’m not going to pay for it.”

“It’s awkward,” acknowledges JonPaul Edge, a senior who is white. “I have as many black friends as I do white friends. We do everything else together. We hang out. We play sports together. We go to class together. I don’t think anybody at our school is racist.” Trying to explain the continued existence of segregated proms, Edge falls back on the same reasoning offered by a number of white students and their parents. “It’s how it’s always been,” he says. “It’s just a tradition.”

The decision in Perry v. City and County of San Francisco — trial court decision striking down Proposition 8, which banned gay marriage.

Proposition 8 Gay Marriage Trial Court Decision, Perry v. City and County of San Francisco

The ADL forgets things that we should never forget.

I share wholeheartedly Paul Krugman’s “shock” at the Anti-Defamation League’s opposition to the construction of a mosque near Ground Zero. The temple I grew up as a member of and at which my older son and I each were bar mitzvahed has a long history, exemplified by Rabbi Arthur Lelyveld, in the fight for civil rights and interfaith relations. Even more to the point, however, the temple’s present building was completed in 1957, but only after a bitter lawsuit against the City of Beachwood that required the temple to go all the way to the U.S. Supreme Court. The litigation was over zoning matters, but you’re quite naive if you think the opposition was motivated by zoning concerns.

Judge dismisses one of Donald Rosenberg’s claims against the Plain Dealer.

As the Plain Dealer reports, on Friday, the judge in Donald Rosenberg’s lawsuit against the Plain Dealer and the Musical Arts Association (the body that manages the Cleveland Orchestra) dismissed one of two of Rosenberg’s claims against the Plain Dealer — the claim that the Plain Dealer had unlawfully retaliated against Rosenberg in forbidding him to use the words “Cleveland Orchestra” in his reporting after he had filed his lawsuit. The judge granted what is called a “directed verdict” on the claim even before the Plain Dealer has presented its evidence to the jury, deciding that either the facts are undisputed and do not establish Rosenberg’s legal right to recover or that even assuming the facts are as Rosenberg contends they are he is not entitled to recover.

In order to recover on a retaliation claim, an employee must show that in response to a discrimination claim the employer made changes in the terms of employment that “might have dissuaded a reasonable worker from making or supporting” the claim. It doesn’t seem particularly controversial that the judge decided that forbidding Rosenberg from referring to one of the parties he was suing would have dissuaded him from filing the lawsuit or that the Plain Dealer intended to punish him for filing the lawsuit. The Plain Dealer argued, in fact, that the restriction was intended to protect against any claim that Rosenberg had a conflict of interest. Rosenberg, on the other hand, argued that the restriction “effectively limited his reporting about other fine arts matters in Northeast Ohio because so many of them could also involve Cleveland Orchestra players.”

My access to the case thus far has largely been limited to what has been reported in the press, but it’s difficult for me to imagine the inability to identify someone as a member of the Orchestra constituted any real restriction on Rosenberg’s reporting. It’s much easier for me to imagine that argument is a lawyer’s effort to support a very weak claim.

Eugene R. Anderson, R.I.P.

Gene Anderson, one of the truly great people I have had the pleasure of knowing personally, died this morning. Gene was a brilliant lawyer, a wonderful human being, and one of those genuinely creative and original souls who did things the way he believed they should be done, not merely the way everyone is told they should be done. I consider myself blessed to have had the opportunity to learn from him. It doesn’t surprise me to have heard that yesterday, knowing he had only a brief time left, Gene planned his funeral, which will go on as he’d decided on Monday, August 2nd, at 4 PM at the Frank E. Campbell Funeral Home, 1076 Madison Avenue (between 81st and 82nd Streets), NY, NY.

Addendum: here’s Gene’s obituary in the NY Times. The Wall Street Journal adds the following:

Born in 1927 in Portland, Ore., and the son of a single mother who was frequently disabled, he grew up partly in foster homes and orphanages. He put himself through the University of California, Los Angeles. Upon graduation, he began hitchhiking across the country. One person who gave him a ride was a lawyer who would later help him get into Harvard Law School.

After becoming a partner at Chadbourne & Parke, he went to the U.S. Attorney’s office in the Southern District of New York, where he worked for Robert M. Morgenthau, who would later become Manhattan District Attorney. Mr. Anderson married Mr. Morgenthau’s daughter, Jenny.

Mr. Anderson’s office was decorated with a moose head his brother carved with a chainsaw, and instead of his law degree, he hung his kindergarten certificate on the wall alongside plaques from pro bono clients.

Donald Rosenberg v. Plain Dealer & Cleveland Orchestra, continued

The Plain Dealer reports that attorneys for Donald Rosenberg completed the presentation of their evidence to the jury in Rosenberg’s lawsuit against the Plain Dealer and the Musical Arts Association, the governing body of the Cleveland Orchestra. I expressed a lot of my views on what I perceive to be the weaknesses of Rosenberg’s case a couple of weeks ago. What I have read so far has not changed my opinion.

First, it is important to note that Rosenberg is not claiming that the Plain Dealer was in breach of contract when it reassigned him to a different  beat after his many years of writing reviews of the Orchestra. His only legal claim against the newspaper is that the reassignment constituted age discrimination. As I wrote previously, that’s an odd claim, since the entire thrust of the case is that the reassignment was wrongful because it was done at the Orchestra’s behest. Reassignment under pressure of someone who doesn’t like what’s being written doesn’t sound like age discrimination to me. And he testified that he never mentioned age discrimination at the time of the reassignment. According to the Plain Dealer story, he thought it was “onerous and unusual” that the person doing the reassigning had told him he’d covered the Orchestra for a long time. I guess he’s claiming the Plain Dealer reassigned him because the beat had become too burdensome after his many years, but I cannot imagine that the physical and mental burden of covering the Orchestra formed any part of the Plain Dealer’s thinking in reassigning a 57 year old guy to a different beat.

It’s also not clear at all what legal damages Rosenberg suffered. He testified that he had not lost pay or benefits under his reassignment in 2008. He had no legal right to the position reviewing the Orchestra, and try as he might to establish that his critical reputation has suffered, he by all appearances seems to have skyrocketed in reputation in the music community, which sees him as a martyr on the altar of critical integrity.

It’s funny: the music community never seemed to be particularly concerned with Rosenberg’s critical integrity during his years covering the Orchestra under the direction of Christoph von Dohnányi despite his close friendship with von Dohnányi.

Rosenberg’s claims against the Musical Arts Association are in the nature of defamation claims. The problem is that unless he can establish that someone affiliated with the Orchestra lied about him, there doesn’t seem much there there. There’s nothing illicit about someone who’s being reviewed complaining about the review. Nor is there anything illicit in the employer of the reviewer listening to and even responding to those complaints. And it’s not as if there haven’t been complaints about Rosenberg. Rosenberg admitted on the stand that, in the Plain Dealer’s words, “others — including newspaper readers, members of the orchestra and others in the community — had complained about what was perceived as a pervasive negative tenor to his reviews of [Franz] Welser-Most [the Orchestra's conductor and von Dohnányi's succesaor] .”

Don’t get me wrong. I’m not thrilled with the idea of newspapers shaping their coverage to please the subjects. I just don’t see the newspapers employees having any legal right to ensure that the newspapers don’t do so. Nor is the Plain Dealer’s alleged favoritism of its subject in this instance, even if true, one of the more glaring instances of this aspect of journalism. There’s no First Amendment requirement that the media be objective.

Now that Rosenberg’s lawyers have called all of their own witnesses, the Plain Dealer and the Musical Arts Association will have an opportunity to call their own. Then the lawyers will give closing arguments, the judge will instruct the jury in the law applicable to the evidence, and the jury will deliberate. At several steps on the way, as well, the judge could conceivably stop the trial and rule in favor of the defendants if the judge decides no reasonable jury could find that Rosenberg can recover on his legal claims.

Stay tuned.

Goldman Sachs is a bunch of big fat liars.

Let’s make sure we understand why Goldman Sachs was willing to pay $550 million to settle the SEC’s lawsuit against it – “one of the largest penalties ever paid by a Wall Street Firm.” Goldman Sachs committed fraud to get investors to buy into a fund of securities. It isn’t even a difficult fraud to understand.

Goldman agreed with John A. Paulson, a prominent hedge fund manager who earned an estimated $3.7 billion in 2007, that Paulson could choose the particular mortgage-backed securities that Goldman would sell. Paulson chose securities he knew would default. At the same time he bought credit default swaps on those same securities — in essence, insurance policies that would pay him the value of those securities if they defaulted. In short, he chose the securities for the fund because he knew they would fail and their failure would profit him mightily.

Goldman’s problem, of course, is that no one would buy the securities if they knew Paulson had chosen them. As the complaint filed in the case by the SEC (embedded below) states: Goldman “knew that it would be difficult, if not impossible, to” sell the securities in the fund “if they disclosed to investors that” someone who had “shorted” the securities, “such as Paulson, played a significant role in selecting the securities.”

So Goldman went out and got ACA Management LLC, a company with experience in analyzing the credit risks associated with funds like that it was selling, to agree to be “Portfolio Selection Agent” — that is, to represent itself as the entity that had chosen the securities Goldman was selling. Of course, ACA was not the Portfolio Selection Agent, but Goldman knew what it needed. As Goldman’s Fabrice B. Tourre wrote in a memo:

“One thing that we need to make sure ACA understands is that we want their name on this transaction. This is a transaction for which they are acting as portfolio selection agent, this will be important that we can use ACA’s branding to help distribute the bonds.”

Tourre later wrote in another memo:

“We expect to leverage ACA’s credibility and franchise to help distribute this Transaction.”

I’m happy to learn that the settlement does not include any agreement with Tourre personally. One thing I wonder, though: wasn’t Paulson part of a conspiracy to defraud investors? Why has he gotten to go off with his billions untouched by the SEC?

S.E.C.’s Civil Lawsuit Against Goldman Over C.D.O

Donald Rosenberg’s lawsuit against the Cleveland Orchestra goes to trial, but stupidity is not an actionable offense.

Back in 2008 I wrote about Donald Rosenberg’s lawsuit against the Plain Dealer, the Cleveland Orchestra, its conductor Franz Welser-Möst, and members of both organizations. Rosenberg alleges that the defendants engaged in a conspiracy to remove him as the Plain Dealer’s music critic. As the Plain Dealer reports, the trial of Rosenberg’s claims began this week. Apparently, Rosenberg has amended his complaint since he originally filed the lawsuit to add an age discrimination claim:

Rosenberg’s complaint against the newspaper is that his reassignment was an act of age discrimination and that the paper retaliated against him for filing the lawsuit by preventing him from even mentioning the orchestra in the course of his reporting.

My guess is that the age discrimination claim against the newspaper was added because there was no breach of contract that resulted from the newspaper’s reassignment of Rosenberg to a different beat. He might not have liked it, and, indeed, the move might have been monumentally stupid, but there is no legal right to recover damages for being treated stupidly. I really don’t see the connection, though, between the age discrimination claim and what Rosenberg alleges the newspaper did wrong in caving to pressure from the Cleveland Orchestra, which did not like Rosenberg’s scathing reviews of the orchestra under Welser-Möst’s direction. If they reassigned him because of the complaints, how does that constitute a reassignment based on Rosenberg’s age (57)?

As to the claims against Welser-Möst, the Cleveland Orchestra, and other Orchestra employees, I will assume that Rosenberg’s lawyer is telling the truth when he explained to the jury in his opening statement that the Orchestra “had waged a campaign to get Rosenberg removed from the orchestra beat, that the Plain Dealer “caved into that pressure,” and that the “case about powerful and influential people in the community trying to manipulate the news.”

Which confirms that — in the words of Baltimore Sun classical music critic Tim Smith, as reported in the Cleveland Scene — the Plain Dealer and the Cleveland Orchestra look “ridiculous” in their ham-handed efforts to influence the public’s opinion of the Orchestra:

“It looks ridiculous,” [Smith] says of the fracas. “You wouldn’t dream of doing this to your political commentator because he attacks the mayor week in and week out, or your local sports team. Who hasn’t been in a town with a sports columnist who is constantly knocking the hell out of the coach of the football team? And who then would take him off that beat?”

As Smith wrote in 2008, both the Plain Dealer and the Orchestra have had their credibility irrevocably damaged:

In the end, it may not matter too much who led the charge, who exerted influence, who gave in to pressure or doubt. The damage has been done. Zach Lewis, who has been told he will now cover the Cleveland Orchestra for the paper, is a good guy and good writer placed in an impossible situation. If he says positive things about Welser-Most, some people will think he’s just doing that to keep his job. If he says negative things, some people will think he’s under Don’s influence and will have to be replaced, too. As I said before, the Cleveland Orchestra and the Plain Dealer are worse off, not better off, as a result of this controversy. Music and journalism have taken a painful hit.

But if you could sue someone for doing something monumentally stupid that damaged their credibility and that you didn’t like, Northeast Ohio would have filed a class action lawsuit last week against LeBron James. As I stated above, I don’t see what legal duty the Plain Dealer violated in reassigning Rosenberg. And as long as what the Orchestra’s employees said about Rosenberg was truthful or a matter of opinion, there is no legal claim against them either. As the Orchestra’s lawyer put it to the jury:

“Don Rosenberg had a mighty bully pulpit to print whatever he thought of Franz Welser-Most and [the defendants] were only using the pulpit available to them” by contacting newspaper editors to complain about Rosenberg’s coverage of the orchestra.

Finally, even if Rosenberg can establish that employees of the Orchestra lied about him, he needs to prove that he has suffered damages — that is, he must establish that he has suffered some loss that can be compensated with money. He hasn’t lost any income as a result of his reassignment by the Plain Dealer. And, indeed, his prominence as a music critic — should he wish to engage in music criticism in places other than the Plain Dealer — only seems to have been increased.

Court decides federal government cannot refuse to give legal effect to state laws that recognize same sex marriage.

A federal court in Massachusetts today struck down the Defense of Marriage Act (“DOMA”), which states that for purposes of determining rights to federal benefits “the word ‘marriage’ means only a legal union between one man and one woman as husband and wife, and the word ’spouse’ refers only to a person of the opposite sex who is a husband or wife. A copy of the decision is here (pdf). In passing DOMA, Congress had, in the words of the law’s legislative history, “sought a means to both ‘preserve[] each State’s ability to decide’ what should constitute a marriage under its own laws and to ‘lay[] down clear rules’ regarding what constitutes a marriage for purposes of federal law.” (Opinion at 3)

In other words, Congress acknowledged and no one disputes that states have the exclusive right to define what marriage is. Nevertheless, in response in particular to the decision of the Hawaii Supreme Court to recognize the right of same sex couples to marry one another in Baehr v. Lewin (a/k/a Baehr v. Miike), Congress expressed concern that the redefinition of marriage at the state level “‘to include homosexual couples could make such couples eligible for a whole range of federal rights and benefits.’”

That indeed is the case. As the court stated, [t]here can be no dispute that the subject of domestic relations is the exclusive province of the states.” And so if you are entitled to a benefit under federal law as a “spouse,” whether or not you are a “spouse” is determined by the state in which you were married. Again, as the court stated, “there is no federal law of domestic relations.” (Opinion at 29) Thus, even though individual states have often differed in what they have defined as marriage, federal rights based on marriage have always depended on those individual state determinations:

Indeed, pursuant to the sovereign power over family law granted to the states by virtue of the federalist system, as well as the states’ well-established right to “experiment[] and exercis[e] their own judgment in an area to which States lay claim by right of history and expertise,” individual states have changed their marital eligibility requirements in myriad ways over time. And yet the federal government has fully embraced these variations and inconsistencies in state marriage laws by recognizing as valid for federal purposes any heterosexual marriage which has been declared valid pursuant to state law. (Opinion at 29)

In fact, before the Supreme Court in 1967 ruled that state laws outlawing interracial marriage were unconstitutional (in Loving v. Virginia), federal law deferred to state law on marriage and refused to recognize interracial marriages in those states which made them illegal. “Importantly, the passage of DOMA marks the first time that the federal government has ever attempted to legislatively mandate a uniform federal definition of marriage–or any other core concept of domestic relations, for that matter.” (Opinion at 30)

It will be interesting to see if those who usually tout states’ rights come down hard on this decision, which merely binds the federal government to the deference to state law on matters it has always deferred to the states on.

Was Kagan forthcoming? So far it seems to depend on whether you thought she’d be.

I suggested about 7 weeks ago that Elena Kagan might be more forthcoming in her confirmation hearings about the substance of her legal views than has any nominee since Robert Bork’s nomination was rejected over 20 years ago. Now that the hearings are complete, my colleague on the Case Western Reserve Law School faculty, Jon Adler, voiced what seems to be the common wisdom iyesterday — Kagan continued in the recent tradition and avoided answering direct questions:

Wednesday’s hearings offered more of the kabuki theater we have come to expect from Supreme Court confirmation hearings. Senate Republicans tried to elicit evidence she would be a doctrinaire liberal on the court, with little success. Peppered with questions on topics from Habeas Corpus and the Commerce Clause to gun rights and gay marriage, Kagan refused to show her hand.

Jeffrey Rosen, however, has what seems to be a very different view, that “[f]ar from turning into a ‘vapid and hollow charade,’ to use Elena Kagan’s now-famous condemnation of other Supreme Court confirmation hearings, her own have been impressively substantive.

Kagan, of course, did refuse to answer any questions regarding how she would rule in pending or future cases. As a lawyer, I would expect nothing else. No responsible legal mind would prejudge a case before allowing the lawyers for the parties to the case present their evidence and arguments to the court. Only law professors think legal questions can and ought to be decided based on the possible circumstances and arguments they can imagine without input from people whose lives will genuinely be affected by the decisions.

As Rosen points out, Kagan was asked about and did answer that she considered certain matters that existing precedent ignores important, no small thing. Thus, for example, Kagan was asked whether the decision in New York Times v. Sullivan, which insulates from liability false statements about public figures unless they are made with knowledge of their falsity, is sufficient in an age of social media and blogging. Kagan first graciously stated that “I think people should be able to write anything they want about me, and I don’t think that I should be able to sue them for libel” (again, no small thing), but then acknowledged that the legal system does have to recognize the reality of harm posed by current media:

Even as we understand the absolute necessity for a kind of New York Times versus Sullivan sort of rule and for protection of speakers from libel suits, defamation suits, even as we understand that, we should also appreciate that people who did nothing to ask for trouble, who didn’t put themselves into the public sphere can be greatly harmed when something goes around the Internet and everybody believes something false about a person. That’s a real harm. And the legal system should not pretend that it’s not.

As a lawyer I respect the nuances she displayed on issues pertaining to gay rights, though it’s plain to me too that people with fixed views on these matters would like her to share their fixed views.

After I have had a bit of time to review the transcript of the hearings, I hope to include my own evaluation of her performance.

Viacom’s schizophrenia over YouTube: the industry cries “serial killer!”

Does YouTube threaten the entertainment industry? On the one hand, Viacom and others will scream that it threatens the very livelihood of those who produce our entertainment. On the other, Viacom and others use it effectively to promote their products. And would you really prefer a regime that required YouTube to approve the legitimacy of every video uploaded to it? Frankly, it simply wouldn’t exist if that were required. To me it makes sense that if a copyright holder believes his copyright is being infringed by an online video, he can have it removed upon request. And if the person who uploaded the video believes the request is mistaken, he can ask Google to review it and make its determination at that point whether it will allow it to remain.

Moreover, history teaches that you should view with extreme skepticism the cries of alarm from the entertainment industry. In doing so, you likely would be doing them a favor.

As I wrote the other day in connection with the decision dismissing Viacom’s lawsuit against Google alleging copyright infringement for the posting on YouTube of videos infringing Viacom’s copyrights, As I wrote above, the existing regime makes sense to me and, as I wrote in that recent post,  ”[t]he decision is a straightforward application of the DMCA’s “safe harbor” provision, which insulates service providers from liability for activities by their users that infringe copyrights.” Viacom, of course, disagrees, stating in its press release:

We believe that this ruling by the lower court is fundamentally flawed and contrary to the language of the Digital Millennium Copyright Act, the intent of Congress, and the views of the Supreme Court as expressed in its most recent decisions. We intend to seek to have these issues before the U.S. Court of Appeals for the Second Circuit as soon as possible.

And those who represent the interests of large corporate copyright holders such as Viacom, like the Washington Legal Foundation (whose mission is to “champion free market principles [and] limited and accountable government”) argue that the decision allows Google “to exploit the statute’s safe harbors by designing an entire business model based on improperly profiting from copyrighted content.” Ronald Cass writes in Forbes that the decision is “broad enough to sink the protection copyright holders had enjoyed under the law.” And the Directors Guild of America claims its members’ very livelihoods are at stake:

We fear that the precedent established in this ruling, if not overturned by the appeals court, could result in a drastic rising tide of Internet theft that could decimate our members’ livelihoods, their pension and health plans, and their ability to continue creating the content that is beloved by people all over the world.

Reading these dire warnings you might not realize that as the judge stated in his decision Google took down the offending videos the day after Viacom delivered a mass takedown notice identifying the ones it claimed a copyright in. Nor would you realize that Viacom recognized the value of YouTube to its business by employing people to post its videos to YouTube to promote its productions while at the same time other Viacom employees were adding those same videos to the list for the takedown notice:

For years, Viacom continuously and secretly uploaded its content to YouTube, even while publicly complaining about its presence there. It hired no fewer than 18 different marketing agencies to upload its content to the site. It deliberately “roughed up” the videos to make them look stolen or leaked. It opened YouTube accounts using phony email addresses. It even sent employees to Kinko’s to upload clips from computers that couldn’t be traced to Viacom. And in an effort to promote its own shows, as a matter of company policy Viacom routinely left up clips from shows that had been uploaded to YouTube by ordinary users. Executives as high up as the president of Comedy Central and the head of MTV Networks felt “very strongly” that clips from shows like The Daily Show and The Colbert Report should remain on YouTube.

Viacom’s efforts to disguise its promotional use of YouTube worked so well that even its own employees could not keep track of everything it was posting or leaving up on the site. As a result, on countless occasions Viacom demanded the removal of clips that it had uploaded to YouTube, only to return later to sheepishly ask for their reinstatement. In fact, some of the very clips that Viacom is suing us over were actually uploaded by Viacom itself.

Fear that directors will have their livelihoods decimated and that the decision sinks copyright protection is of course, nothing new for an entertainment industry that can profit enormously from new technologies they demonize, so Viacom’s schizophrenia is, perhaps, progress over Hollywood’s reaction to the VCR, which was 100% self-destructive. In 1982, Jack Valenti, in sworn testimony before Congress , stated “that the VCR is to the American film producer and the American public as the Boston Strangler is to the woman home alone.” But, as Digital America explains, Valenti was not merely crying wolf — he was describing the greatest benefit to the movie industry in the last 40 years as a serial killer:

As the VCR became more important to the consuming public, the Hollywood establishment that fought it bowed to its inevitable benefits. In January 1984, the U.S. Supreme Court concluded 5-4 that VCRs were legal products and that home taping of copyrighted works fell under the “fair use” exception to copyright. While Congress passed the Audio Home Recording Act of 1992 (AHRA), legislative attempts to codify the Betamax decision and fair video recording rights are still pending before Congress. CEA (at that time known as the Consumer Electronics Group of the Electronic Industries Association), in cooperation with the Home Recording Rights Coalition, protected the legality of home recording and promoted the acceptance of the new technology.

Additionally Hollywood studios established home video divisions to reap the profits from a technology it once considered a threat. Blay’s idea sparked a retail revolution as hundreds of mom-and-pop video rental and sales stores popped up in every community in America. In 1987, video rental income reached $5.25 billion for the year, surpassing movie theater ticket sales for the first time. Today, movie studios regularly make more money on a film from home video sales and rentals than from the theatrical box office.

Judge Dismisses Viacom’s Lawsuit against Google for Infringing Videos Uploaded to YouTube.

Judge Louis L. Stanton of the United States District Court for the Southern District of New York has granted Google’s motion for summary judgment (opinion and order embedded below) and dismissed Viacom’s lawsuit that alleged that that Google was liable under the Digital Millennium Copyright Act (DMCA) for videos uploaded to YouTube that infringed Viacom’s copyrights because Google had “actual knowledge” and was “aware of facts and circumstances from which infringing activity [was] apparent” but failed to “act[] expeditiously to stop it, “received a financial benefit directly attirubutable to the infringing activity” and “had the right and ability to control such activity” and did not engage in these infringements solely by providing “storage at the direction of the user” or any other Internet function specificied in the DMCA.”

The decision is a straightforward application of the DMCA’s “safe harbor” provision, which insulates service providers from liability for activities by their users that infringe copyrights. The judge acknowledged that Viacom was right about its central contention: Google was “not only aware of, but welcomed, copyright-infringing material being placed on their website.” (Opinion and Order at 6) Nonetheless, he also noted that Google designates an agent who, when he receives a takedown notice, “swiftly” removes infringing videos. (Id.)

The judge concluded that for Google to be liable under the DMCA Viacom would have to show more than that Google knew that infringing activity “in general” was occurring on YouTube because the DMCA does not require that degree of responsibility on service providers for the actions of its users:

To let knowledge of a generalized practice of infringement in the industry, or of a proclivity of users to post infringing materials, impose responsibility on service providers to discover which of their users’ postings infringe a copyright would contravene the structure and operation of the DMCA.

By insulating service providers from liability for infringements by their users, the Judge Stanton concluded, the DMCA makes perfect sense because it would be far too burdensome for the service provider to make individual judgments on each of its user’s activities to determine whether those activities were infringing:

The infringing works . . . may be a small fraction of millions of works posted [on the service provider’s] platform, [and the service provider] cannot by inspection whether the use has been licensed by the owner, or whether its posting is a “fair use” of the material, or even whether its copyright owner or licensee objects to its posting. The DMCA is explicit: it shall not be construed to condition “safe harbor” protection on a “service provider monitoring its service or affirmatively seeking facts indicating infringing activity . . . .”  (citations omitted)

Moreover, the fact Google took down over 100,000 videos within one business day in response to a single, mass take-down notice sent by Viacom was proof to Judge Stanton that the existing regime works perfectly well:

Indeed, the present case shows that the DMCA notification regime works efficiently: when Viacom over a period ov months accumulated some 100,000 videos and then sent one mass take-down notice on February 2, 2007, by the next business day YouTube had removed virtually all of them.

Viacom v YouTube Summary Judgment

Our courts and legislatures are bought and paid for — the laws they’ve made with respect to oil spills prove it.

In March, I emphasized — not for the first time — the insanity of considering corporate and other business entities as rational actors of the sort many economists consider people to be. The problem is that corporate decisions are made by individuals and are therefore driven to benefit those individuals, not the corporations (and their shareholders).”

One reason corporations focus on short-term profits is that the individuals making the decisions for a company will often take the cash made in the short term out of the company (by paying special dividends, for example) and then sell there stock, evading the long-term loss. Even if they hold onto their stock, they may have taken so much cash out of the company before the stock crashes in value that they’ve profited mightily from their holdings regardless of the company’s failures.

But still another reason is the idiocy of the regulation that is in place, regulation that instead of imposing responsibility on the companies for problems they cause limits that responsibility.

10 days ago David Leonhardt wrote about the  perversity of the federal limitations on corporate liability for oil spills and how they made BP’s oil spill, in retrospect, no great surprise:

In a little-noticed provision in a 1990 law passed after the Exxon Valdez spill, Congress capped a spiller’s liability over and above cleanup costs at $75 million for a rig spill. Even if the economic damages — to tourism, fishing and the like — stretch into the billions, the responsible party is on the hook for only $75 million. (In this instance, BP has agreed to waive the cap for claims it deems legitimate.) Michael Greenstone, an M.I.T. economist who runs the Hamilton Project in Washington, says the law fundamentally distorts a company’s decision making. Without the cap, executives would have to weigh the possible revenue from a well against the cost of drilling there and the risk of damage. With the cap, they can largely ignore the potential damage beyond cleanup costs. So they end up drilling wells even in places where the damage can be horrific, like close to a shoreline. To put it another way, human frailty helped BP’s executives underestimate the chance of a low-probability, high-cost event. Federal law helped them underestimate the costs.

We shouldn’t be surprised, then, at BP’s pathetic safety record and the retrospective inevitability of the Gulf spill:

Years before the Deepwater Horizon rig blew, BP was developing a reputation as an oil company that took safety risks to save money. An explosion at a Texas refinery killed 15 workers in 2005, and federal regulators and a panel led by James A. Baker III, the former secretary of state, said that cost cutting was partly to blame. The next year, a corroded pipeline in Alaska poured oil into Prudhoe Bay. None other than Joe Barton, a Republican congressman from Texas and a global-warming skeptic, upbraided BP managers for their “seeming indifference to safety and environmental issues.”

BP was only acting rationally!

Unsurprisingly, the Supreme Court has teamed with Congress in being an accessory to the corporate rape of the country. Even if compensatory damages are capped, conceivably courts can impose punitive damages in civil lawsuits to deter particularly egregious conduct. And, indeed, courts reacted precisely that way to the Exxon Valdez oil spill — that is, until the Supreme Court stepped in. In 1994, a jury imposed $5 billion in punitive damages on ExxonMobil for the Exxon Valdez  oil spill. 12 years later an appellate court reduced that amount to $2.5 billion, half the original amount.

2 years later, in a 5-3 vote (Sam Alito recused himself from the case because he owned Exxon stock), the Supreme Court reduced the amount to $507.5 million, about 10% of the jury’s award. The Court ruled that punitive damages (intended to punish bad behavior, not to compensate a plaintiff for his losses caused by that behavior) cannot be greater than compensatory damages (which compensate victims for their economic losses). As reported at the time, the reduced amount represented “about 12 hours of revenue for [Exxon], which reported record profits of $40.6 billion in February.” Justice Souter, writing for the Court, explained that “a penalty should be reasonably predictable in its severity, so that even Justice Holmes’s ‘bad man’ can look ahead with some ability to know what the stakes are in choosing one course of action or another. See The Path of the Law, 10 Harv. L. Rev. 457, 459 (1897). Exxon Shipping Co. v. Baker (U.S. 2008)(hyperlink added).

Of course, one might argue pretty cogently that neither the Exxon Valdez spill nor the BP Gulf spill were conceivable in the minds of the people who made the decisions that resulted in disasters and that it is precisely that failure to conceive of, much less consider, those consequences that is what the courts should retain the power to punish.