Category: News Feeds

‘Tis the season: the season for fancy back-of-the-envelope calculations to determine which hedge fund billionaires made inconceivably more money than the next hedge-fund billionaire who made an inconceivable amount of money, and on down the line. We’ve already seen that Chase Coleman (and his wife), Izzy Englander and Steve Mandel had pretty good years (and careers) for their clients and, consequently, for themselves. Likewise, Jim Simons’ heirs had a spectacularly shitty year for their clients, but an even more spectacularly good one for themselves.

Although California has adopted one of the most robust medical and recreational marijuana programs (known as “cannabis” programs), and despite the enactment of the Agriculture Improvement Act of 2018 (the 2018 Farm Bill), the state can’t seem to convene specific legislation around the regulation and oversight of hemp-derived products.

Following the passage of the 2018 Farm Bill, state lawmakers attempted to pass AB-228, which intended to forge a legal pathway for many hemp-derived ingestible products in the state. While the bill made it pretty far, it ultimately died toward the end of the legislative session partially due to strong opposition.

In 2020, at the very end of the legislative session, California lawmakers tried to revive this issue by introducing AB-2028, which also failed to gather sufficient support.

Then, on the eve of this new year, the state legislature introduced a new CBD bill entitled, AB-45. Like its predecessor bills, the goal of AB-45 is to “legalize” a plethora of hemp-derived products. AB-45 contains many concepts originally found in AB-228 but adds some provisions, which, while intended to reach a compromise with former opponents of AB-228’s predecessors, will most certainly encounter opposition from the hemp industry.

Here is a high-level overview of some of the key provisions of AB-45:

1. Authority: The bill would give the California Department of Public Health (the CDPH) regulatory authority over hemp-derived products, which the agency would need to revise, if need be, once the Food and Drug Administration (the FDA) formerly develops a federal regulatory framework for these products. Despite the current lack of state regulations, the CDPH has released an FAQ in which it adopts the FDA’s position that conventional foods and dietary supplements infused with cannabidiol (CBD) as strictly prohibited and, as such, has taken consistent enforcement actions against in-state manufacturers, distributors and retailers of these products.
2. Lawful Products: “Industrial hemp products”, which are defined as foods, food additives, dietary supplements, herbs, and cosmetics, for human or animal consumption, won’t be deemed unlawful provided they meet specific requirements. For instance, the products will need to have a certificate of analysis (COA) showing that they contain no more than 0.3% total THC and were derived from lawful hemp.
3. Prohibited Products: The bill makes clear that hemp derivatives cannot be added to medical devices, prescription drugs, products containing nicotine, tobacco, or alcohol, or any other smokable product (including both smokable flower and vape products). This last category is sure to be an issue for the industry, and the most hotly debated provision during the legislative cycle, as many companies already manufacture and sell smokable hemp products across the state.
4. Labeling and Advertisement:
   • Labeling: The bill contains fairly comprehensive labeling requirements that are largely consistent with other states’ requirements, including the use of a label, scannable barcode, internet website, or quick response (QR) code linked to the COA of the product batch by an independent testing laboratory that provides a wide range of information such as the concentration of cannabinoids marketed and the expiration date.
   • Advertising: Consistent with the FDA’s existing enforcement actions, manufacturers and retailers of hemp-derived products would be strictly prohibited from making false health claims regarding the therapeutic values of their products.
   • Age Requirements: The CDPH would have the ability to adopt age requirements for the sale of some products. This is an interesting feature of the bill. The state decided (so far) not to require that all hemp-derived products be sold to persons over 21 or 18. Instead, lawmakers propose to give the CDPH the discretion to decide this issue based on a product-by-product basis and based on scientific research. Nevertheless, the bill contains a provision that restricts advertising to people under 18.

5. Registration Requirements: The following actors would need to register with the CDPH: (1) In-state manufacturers of hemp-derived products; (2) in-state and out-of-state manufacturers of raw hemp extract intended to be infused to finished products by in-state manufacturers; and (3) retailers of raw hemp extract and finished products.
6. Manufacturing Requirements:

• • Good Manufacturing Practices: Food manufacturing facilities that make products containing hemp derivatives will need to comply with good manufacturing practices as defined by California law, and will be prohibited from using hemp in food products or dietary supplements unless it comes from a state or county that has adopted a hemp production plan in compliance with federal law and the cultivator at issue is in good standing under its jurisdiction’s laws. This, again, is fairly consistent with most states’ regulations of hemp-derived products.
  • Testing: Raw hemp extract would have to be tested to allow its use as an ingredient prior to being incorporated into a product. Testing would have to be completed by an independent testing laboratory. The COA issued by said laboratory would have to show the total THC concentration is below 0.3 percent and any other requirements the CDPH may adopt on this issue. For example, AB-45 provides that the CDPH “may regulate and restrict the cap on extract and may cap the amount of total THC concentration at the product level based on the product form, volume, number of servings, ratio of cannabinoids to THC in the product, or other factors, as needed.”

AB-45 is in its infancy so upcoming amendments are likely, especially to the provisions banning smokable hemp products. It will be interesting to see how California tackles its third attempt at regulating hemp-derived products and, hopefully, for the sake of Californian consumers, that state lawmakers finally succeed. Until then, consumers and companies of hemp-derived products should remember that the sale of these products remains unlawful in the state and that products found in California are not expressly regulated by the CDPH nor recognized as safe for human consumption.

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Nathalie practices out of Harris Bricken’s Portland office and focuses on the regulatory framework of hemp-derived CBD (“hemp CBD”) products. She is an authority on FDA enforcement, Food, Drug & Cosmetic Act and other laws and regulations surrounding hemp and hemp CBD products. She also advises domestic and international clients on the sale, distribution, marketing, labeling, importation and exportation of these products. Nathalie frequently speaks on these issues and has made national media appearances, including on NPR’s Marketplace. For two consecutive years, Nathalie has been selected as a “Rising Star” by Super Lawyers Magazine, an honor bestowed on only 2.5% of eligible Oregon attorneys.  Nathalie is also a regular contributor to her firm’s Canna Law Blog.

Lord but these self-styled warriors are sniveling cowards when they’re not posturing for the camera. Turns out it’s not just Sidney Powell who talked tough about welcoming the suit by Dominion Voting Systems while dodging the process server. America’s Mayor also did his best deadbeat dad act by enlisting his staff to keep the $1.3 billion defamation complaint from landing in his lap.

New York Daily News reports that it took Dominion an entire week of chasing the presidential lawyer turned YouTube ranter to get him to accept notice of their suit:

On Feb. 7, a pair of process servers and Giuliani got into an awkward standoff during a nasty winter storm. That morning, the doorman to the building waved to a Ford Explorer SUV parked down the street. Giuliani got in the passenger seat and closed the SUV door as a process server lunged forward with a bag full of documents.

“This is not the way it’s supposed to be done. You should have gone to my office,” Giuliani said, according to the account. The lawsuit was lodged between the SUV door.

The doorman got involved, jabbing his umbrella into the SUV door. The driver and doorman pulled the bag of legal documents, allowing Giuliani to close the SUV door. The process server left the bag in front of Giuliani’s building, which the doorman had locked yet again.

Maintenance staff tossed the notice of Dominion’s suit into the trash, but the process server excavated it from under the last remains of Rudy Giuliani’s dignity and managed to persuade the podcaster’s assistant to accept it on February 10.

Dominion’s attorney Thomas Clare confirms the account, saying that the former federal prosecutor did everything to throw a wrench in the suit he supposedly welcomed.

“After not responding to requests to waive service, Mr. Giuliani evaded in-person service of process for nearly a week. It took numerous attempts, at both his home and office, before we were able to successfully serve Mr. Giuliani on February 10,” he said. “Mr. Giuliani’s repeated false claims about Dominion have been immeasurably damaging; this service of process is one more step forward in our pursuit of justice.”

It’s a tactic familiar to Giuliani’s famous client, who spent weeks refusing to accept service at the White House or in New York by E. Jean Carroll in her defamation suit. And it’s a far cry from Giuliani’s bravado two weeks earlier when he claimed to be delighted with the impending legal action.

“Dominion’s defamation lawsuit for $1.3B will allow me to investigate their history, finances, and practices fully and completely,” he said in January 25 statement. “The amount being asked for is, quite obviously, intended to frighten people of faint heart.”

And nothing says “brave” like throwing your body behind a bulky door man.

“It is another act of intimidation by the hate-filled left-wing to wipe out and censor the exercise of free speech, as well as the ability of lawyers to defend their clients vigorously. As such, we will investigate a countersuit against them for violating these Constitutional rights,” he continued, without specifying exactly which Constitutional rights he meant. (Spoiler alert: No countersuit has been filed.)

On his own podcast Giuliani added, “We’ll have a nice fight, a real fight, and by fight, I don’t mean, don’t mean any words of violence. I fight in the courtroom, you know? That’s what I always mean when I talk about fight. We fight in the courtroom. We fight in the debate hall. I got a pretty good record in court. And I’m a damn good investigator.”

How did Giuliani’s last courtroom outing go?

Oh, right.

Well, good luck with that one, Mister Mayor!

Rudy Giuliani tried dodging getting served with $1B Dominion Voting Systems suit: source [NY Daily News]

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Elizabeth Dye lives in Baltimore where she writes about law and politics.

Does it ever get better? [My husband is] a lovely man and he earns a good salary but I’m twenty or so years in and the work never stops. I mean never. Not on holiday. Not during births. Not during house moves. …

I am getting a bit tired of being at the bottom of the priority list which appears to be: work, children (quite rightly), dog, household necessities, life admin, wife. Except by the time he gets time to focus on me he is so tired his eyes literally glaze over when we speak. I try not to take it personally.

— a lawyer’s spouse writing a rather candid post about what seems to be a one-sided marriage on Mumsnet, a UK parenting forum. While some responded with thoughtful advice, others familiar with this woman’s plight referred to it as “the nature of the beast,” and others still calling her husband a “workaholic.”

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Staci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.

One year into the COVID-19 pandemic, businesses are still dealing with complex questions related to contracts, liability, and ever-shifting guidelines from federal and local authorities. As clients look for guidance, lawyers need trusted sources of information.

In a new treatise from PLI Press, COVID-19 and Other Pandemics: Business and Legal Challenges, public health and safety regulation experts James T. O’Reilly and Philip Hagan offer background and analysis for lawyers. The first publication to address these evolving issues, the treatise combines practical advice with the latest scientific research and guidance from key government agencies.

Here are some key points for businesses – and their counsel – to consider as they wade through the challenges posed by the pandemic:

Contracts are key. If you haven’t brushed up on force majeure since law school, now is a good time to revisit this and other contract concepts. A chapter on “COVID-19, Contracts and Frustration Defenses” provides an overview of contract law for businesses who may have seen their operations interrupted by the pandemic when they, their vendors, or third parties were unable to fulfill contracts. In addition to force majeure clauses, O’Reilly and Hagan explore issues of foreseeability, and defenses to non-performance like impossibility, impracticability, and frustration of purpose.

Employers should continuously evaluate risks and liabilities in their workspaces. OSHA has provided recommendations for how businesses can evaluate the risk of COVID-19 spreading in their workplaces and design systems for preventing transmission. These include both engineering controls, such as workspace redesign and upgrades to office air filtration systems, and administrative controls, which reduce person-to-person contact through “staggered work shifts, downsizing operations, delivering services remotely, and other exposure-reducing measures.” In the treatise, O’Reilly and Hagan adapt these and other recommendations into actionable guidelines.

The book includes an overview of workplace liability claims, looking at potential employer liability for employees who contract the virus on the job. The authors discuss potential theories of liability that employers should be aware of and the evidentiary difficulties that the parties will encounter. In that context, they also dive into the complexities of contact tracing as it relates to employer liability and evidence of infection. In addition, they discuss liability risks arising not just from employees catching the virus, but from customers and other members of the public catching the virus. The authors provide an overview of certain tort concepts, an explanation of workers’ compensation programs, and once again draw on OSHA guidance, or lack thereof, and explain the interaction of these concepts with respect to employer liability.

Focus on active response. Regardless of their type of business, all employers should maintain active response plans that minimize potential COVID-19 exposures to their employees and customers, the authors say. The CDC and other government entities provide guidance that can be incorporated into business operating scenarios.

Plan for “black swans.” In other words: expect the unexpected. Now that a rare event with extreme global consequences has in fact occurred, businesses will endeavor to structure contracts and business plans with risk scenarios in mind. When counseling businesses on planning and liability, think about these “black swan” events and develop strategies accordingly.

To download a complimentary chapter of COVID-19 and Other Pandemics: Business and Legal Challenges from PLI, click here.

Visit PLI’s Coronavirus Developments page to access related webcasts and on-demand programs.

In 1985, the Coca-Cola Company changed the formula for their classic soft drink and released “New Coke.” The product was extremely well researched and the launch plans were meticulously developed, but “New Coke” became a storied example of a high-profile business misstep.

Why did the company develop a new formula in the first place? For context, Coca-Cola was dealing with a problem. They had been losing market share in the beverage industry for years, and blind taste tests established that even Coke loyalists preferred the taste of Pepsi. So Coca-Cola sought to create a better-tasting product. They continued their efforts using the same type of blind market research until they found a formula for a “New Coke” that was preferred over Pepsi.

Within three months of the launch of “New Coke,” the Coca-Cola Company re-introduced original Coca-Cola as “Coke Classic.” “New Coke” was given a new name (Coke II) and was ultimately discontinued. While the misstep was widely criticized, Coca-Cola was nevertheless able to recover (which is a whole other topic).

Innovators understand there are new ways to approach problems that need solving. Customer or user input is critical to the process of successful innovation, but if used or interpreted incorrectly — as the “New Coke” product launch highlights — an innovative move can go flatter than a can of soda left open overnight.

Here are some tips that can help legal professionals understand how to navigate and interpret research to increase the successful outcomes of innovation.

Interpreting Research

There are a number of ways of looking at why “New Coke” failed. In the end, the research was correct, but the interpretation of the research is where the pitfalls occurred. True, Coca-Cola had built a better product, and their customers agreed, but they did not consider how customers would respond if the tried-and-true Coca-Cola formula that was loved and revered were taken away or changed in exchange for the new offering. Things may have turned out differently if Coca-Cola had introduced “New Coke” as an additional product in the market, while continuing to make the original recipe available to consumers.

The point here is that innovators need to dig deeper to interpret the results of research. And it is also important to review a proposed solution completely with customers or users. This should include anything that is changing or that is being taken away.

Understanding Context

Another way to more effectively perform research is to ensure there is proper context. There are full systems like Contextual Design that can be leveraged to get a comprehensive understanding of your users or customers. Some less involved tips and tools can include:

Creation of Personas: Study and define a profile for a typical user. Think of it like describing a role for a casting call in a movie. You can even give them a name and describe some of their personality traits, what makes them successful in their job, their education, or any other factors that might be relevant. It is also perfectly fine to develop more than one persona, if you serve users with different traits. For example, you may have customers who prefer to talk over the phone, versus other customers who prefer to communicate via email or text. Studying and understanding the different preferences and needs of your users can help to inform which user needs and viewpoints should be evaluated and taken into account during the innovation process.

Task based context: For many problems, it is important to know what a user or customer was doing right before or right after completing a task. As an example, say your customer liked a report that you provided and wanted to share it out to other stakeholders and departments within their organization. An innovator might ask questions like:

• What prompted you to access the report?
• After you accessed the report, what did you do next?
• Why do you find the report valuable?

Questions like these can help interpret user feedback on their workflow that can help identify ways that you can deliver greater value.

Who is Your Customer? Understanding Stakeholders

On the surface you may think you may be solving a problem for a particular user or customer. Let’s say the user is a senior associate in a law firm who’s supported by the firm’s knowledge management staff. The senior associate has her work reviewed by a partner. The partner advises in-house counsel, who then helps a business leader make a decision about an important acquisition. If you can get a better idea of who your user supports and how their role functions within the larger organization, it can help improve your understanding of that user’s needs, perhaps even before they know what they need. That understanding can help you define the importance of the solution you’re providing and make informed decisions about how to innovate that solution to deliver better value.

Innovators can benefit by ensuring they are properly hearing and interpreting customer or user feedback. By applying these kinds of research techniques, innovation projects are far more likely to be successful.

Finally, if you are looking for a story about customer research that resulted in the successful launch of an innovative product, then consider this article from Mental Floss about the history of the Trapper Keeper:

If anyone wonders how I developed a passion for innovation, I’m the 15-year-old son who showed his school locker to his father in the article!

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Ken Crutchfield is Vice President and General Manager of Legal Markets at Wolters Kluwer Legal & Regulatory U.S., a leading provider of information, business intelligence, regulatory and legal workflow solutions. Ken has more than three decades of experience as a leader in information and software solutions across industries. He can be reached at ken.crutchfield@wolterskluwer.com.

It’s a shame that the Merrick Garland confirmation hearings will be remembered for John Cornyn asking about the barely remembered Trump pee tape dossier and Mike Lee trying to school the Jewish federal judge on what anti-semitism really means, because there are some important issues facing the Department of Justice that the performative politics sideshow will overshadow. Maybe this is all a masterstroke by Biden. Any serious criticism of Neera Tanden’s OMB nomination has fallen aside as folks galvanize around the insanity that the people who voted to acquit Donald Trump weeks ago are incensed by mean Tweets all of a sudden. That one may not work out in the end, but if the administration’s whole goal is to quash substantive dissent by letting hearings get overtaken by scurrilous nonsense, it appears to be working.

Unfortunately, the Department of Justice should face a reckoning when it comes to the ongoing revolving door between Biglaw and the upper echelons of leadership. Biden’s initial leadership picks — Judge Garland, Kristen Clarke, and Vanita Gupta — all come to their new posts from outside the corporate legal superstructure. But they’re seemingly the exceptions rather than the rule.

A coalition of 37 racial, worker, environmental, and social justice organizations has sent a letter to Garland calling on him to reject “Filling the Department with corporate lawyers who profited defending powerful industries puts the fox in charge of the hen house — or at least the counsel who won the fox’s business over dozens of other attorneys.”

“If you’re a multimillionaire because you help corporations and corporate executives evade or violate the law, you should not be in charge of enforcing the law,” said Revolving Door Project Executive Director Jeff Hauser. “Lawyers at BigLaw firms, especially those with ‘government affairs’ practices, spend all day working to weaken and hamstring enforcement of white-collar criminal law, environmental law, antitrust law, and anything else which gets in the way of the biggest businesses’ bottom lines. These lawyers use tours through the Justice Department to refresh their insider knowledge, then take those insights back to corporate clients who want to dodge basic democratic accountability. It was an unacceptable practice when perpetrated under Trump, and it should have no place in the Biden administration.”

Reportedly, Garland had planned to hand leadership over antitrust efforts to a Susan Davies, who already defended Facebook against antitrust allegations. Garland said that’s not the case, but noted that, “Fortunately or unfortunately, the best antitrust lawyers in the country have some involvement” with the tech giants most deserving of antitrust inquiry.

On the one hand, I’m a believer in the old Vulcan proverb that “only Nixon could go to China” and its American legal corollary “only Joe Kennedy could make the SEC.” Putting the notorious stock market speculator in charge of writing and enforcing the rules reined in post-crash Wall Street. At a certain point, there’s expertise that can only be earned by sitting on the other side of the table.

In the reverse, lawyers exiting government service can and do use their experience to help clients skirt the system, but that’s hardly universal. I worked under a former SEC General Counsel and can vouch for the fact that his advocacy was always grounded in advising clients to do what the SEC rules expected rather than seeking out some sort of advantage. And getting it right the first time so they never had to find themselves on the wrong end of an enforcement action was the whole reason to hire him.

On the other hand, especially in enforcement roles, the temptation to pull punches to maintain employability on the back end is far too high. It’s an appearance of impropriety issue. Add in the smoothing of zeal that comes from recruiting from the ranks of people who built relationships with those they’re asked to regulate over the course of decades and there’s more than enough reason to impose a moratorium of Biglaw hiring at senior positions. As the letter states:

Rather than empower conflicted BigLaw attorneys, we urge you to instead appoint attorneys with a longstanding and consistent commitment to carrying out the missions of the divisions they will run. Public defenders running the criminal division, environmental lawyers leading the environment and natural resources division, plaintiffs attorneys running the antitrust division, and so on will produce more equitable outcomes. Alternative career paths which take attorneys outside of the fancified halls of corporate law firms better prepare them for the actual work of representing the federal government, and are statistically more likely to bring sorely-needed diversity to the Department’s halls. A Department which looks like America, including coming from life experiences similar to those of most Americans, is more likely to earn the trust of America.

Ethical rules that block people from taking clients averse to their government positions for a period of time are all well and good but they’re easily skirted and hardly long enough. Frankly, it would be ideal if we could have a shadow government structure where Biglaw attorneys interested in a post with a future administration have to depart their private sector job for a period of time before being eligible for a government position. It’s not that every private sector lawyer is corrupt, it’s that we can all do better when it comes to something as important as the Department of Justice.

But instead we’ll deal with Tucker Carlson yelling about Merrick Garland and Russiagate and just keep the revolving door twirling.

(Full letter on the next page…)

Garland Must Lock BigLaw Out Of DOJ Leadership To Enact Biden Agenda, 37 Groups Say [Revolving Door Project]

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Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

What’s next for your law firm when it’s already one of the most profitable in America, one of the highest grossing in the world, and one of the biggest on the planet? If you’re the global co-chair of DLA Piper, a Biglaw firm that handily ticks off each of those accomplishments, the answer is do even better by getting even bigger.

In a wide-ranging interview with Bloomberg that touched on everything from office life in a post-COVID world to diversity and inclusion, DLA’s Frank Ryan said he wants the firm to be able to provide “full-service” to all of its clients while at the same time working on high-end projects.

Growing revenue by taking market share is how Ryan said he will measure the firm’s success.

“The real opportunity for us is to drive that top revenue line, and to really build business,” Ryan said, adding, “We want to fight for more work.” …

Last year, he said the firm’s U.S. business grew revenue and profits per equity partner in the high single digits.

With about 90 offices in more than 40 countries and roughly 4,500 lawyers, the firm’s $3,112,130,000 gross revenue in 2019 is just the beginning. “For us, the theme of 2021 is unlocking value in the institution: breaking down walls and building teams to compete for the best work around the world,” Ryan said. That means associates at the firm should get ready for more work — and more varied kinds of work — in the future.

Will other Biglaw firms follow DLA Piper’s intrepid new strategy for success in 2021?

DLA Piper’s New Chair Wants His Giant Firm to Get Even Bigger [Bloomberg]

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Staci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.

For a full decade now, Bridgewater Associates has been writing its “Book of the Future,” and not just the one that involves creating a robotic Ray Dalio that will, after the Singularity, run Bridgewater Associates as a kind of closed system, accumulating capital as a matter of principle rather than on behalf of any living things, who will of course no longer have anything to add. Until then, however, law and practicality dictate that human beings run hedge funds, and Ray Dalio is 71 and will not be able to do so forever. And that requires succession planning which, even when done in accordance with Principles, is apparently not easy, given the number that have come and gone over the years with more or less fuss.

Back in June of last year, I highlighted the then-nascent patent and trade secret dispute involving streaming video technology purveyors Eko and Quibi. While Quibi’s attempt to become the Netflix of streamed “short-bite” mobile entertainment proved unsuccessful, its IP dispute with Eko is still kicking in earnest. While I could fill a column just going through the various and sundry filings (including the predicted Quibi IPRs) and counterfilings between the parties, at this point in the process the more interesting battle regards Quibi’s subpoena directed to Eko’s high-profile investor cum litigation financier, billion-dollar plus hedge fund Elliott Management. To date, Quibi’s attempts to get discovery from Elliott have been frustrated at every turn, with Elliott moving to quash the SDNY-issued subpoena seeking information into its knowledge as a publicly-disclosed investor in the lawsuit against Quibi.

Elliott’s motion to quash Quibi’s subpoena had a brief sojourn in the SDNY, before being transferred in late January to the Central District of California (where the underlying litigations between Eko and Quibi are pending) for adjudication. In early February, the CDCA’s Magistrate Judge Kim ordered Quibi to respond to the motion to quash within 10 business days, with Elliott getting five days to file an optional reply to Quibi’s opposition, before the motion would be deemed submitted for decision. As ordered, Quibi filed its opposition on February 18. And a doozy it is, going right to the heart of the significant questions raised when an outside investor takes a position in an IP dispute between two litigants. Because the disposition of this motion could have ramifications for discovery into litigation funding arrangements in patent cases, it is definitely a situation that litigation funders, IP lawyers, and their clients should be monitoring.

While the popular media, such as Variety, have focused on the more salacious question of whether Elliott’s investment in Eko was motivated in part or whole by romantic concerns involving Elliott’s founder, that aspect is less deserving of focus for our purposes. In my view, the motivation of a litigation funder is less important than the impact their investment has on the conduct of the case. As I pointed out in my June column on these pages — and as quoted by Quibi’s counsel in their opposition brief — the main impact of Elliott’s funding is that it has allowed Eko to litigate as if cost were no object.

But even accepting that as true, even that fact is probably less important to Quibi and the public interest as the question of whether the presence of Elliott’s funding means that settlement runs through Elliott’s boardroom table, or whether Eko’s $100 million-plus reasonable royalty demand was in part influenced by the need to generate a big return for the litigation funders. In my view, therefore, in the majority of cases the more salient focus should be on the consequences of the investment by a litigation funder, rather than the motivation behind the grant of that funding.

In its opposition, Quibi weaves in the merits of the litigation itself as a reason to grant discovery into the funding arrangement. In numerous places it highlights the incremental successes on the merits it has achieved thus far, while pointing out that the core aspects of Eko’s trade secret case remain unproven — all in the service of an effort to establish that the substance of communications between Eko and Elliott on the merits of the IP claims are relevant. Likewise, Quibi reinforces the unusually aggressive nature of Eko’s damages claim as a basis for establishing relevance concerning any valuation efforts undertaken by Elliott as part of its investment process. Quibi notes that it could use information generated by Elliott as to case valuation as impeachment fodder for Eko’s damages expert, on top of the need to refute any attempt by Eko to establish a David v. Goliath narrative at trial. (Though the likelihood of Eko taking that approach probably dropped precipitously once Quibi’s core business effort folded.)

Another interesting line of attack used by Quibi — one that I would expect to see other patent defendants pursue over time, especially if Quibi’s argument resonates with the magistrate judge — revolves around Elliott’s potential exposure as a litigation funder to an attorney’s fees award to Quibi. (In the past, I have mentioned that one of the compelling reasons for a patent owner to submit their claims to the rigorous diligence employed by litigation funders is as a form (albeit untested) of attorney’s fees insurance.) Since attorney’s fees can often be grounded in litigation misconduct, Quibi’s brief notes that to the extent Elliott is “driving” the litigation tactics espoused by Eko, it could be liable for attorney’s fees on that basis. Furthermore, Quibi argues that the speculation that Elliott may be exercising settlement control also warrants discovery, while also pointing out that Elliott’s belated identification of its pecuniary interest in the cases justifies further exploration. Finally, Quibi notes the potential standing impacts of Elliott’s investment, a fontanelle overlaying litigation funding arrangements that I expect sophisticated defendants to press on with vigor going forward.

While full of interesting arguments, it is hard to consider Quibi’s opposition a slam dunk to succeed. Yes, certain courts have been loath to grant discovery into litigation funding arrangements — even when those arrangements were deemed relevant without reservation — due to work product concerns. At the same time, all Quibi needs is a sympathetic ear from the magistrate judge to get a crack at Elliott. To that end, Quibi does its utmost to declare that “Elliott’s relationship with Eko is a business relationship, not a legal one.” Whether the magistrate judge agrees will go a long way to either reinforcing the current understanding that litigation funding arrangements are very hard to get discovery on, or in giving proponents of such discovery a high-profile example to seize on. Quibi’s business ambitions may have been quashed, but it is doing its best to make sure its discovery requests don’t suffer the same fate.

N.B. While I am flattered that Quibi’s legal team saw fit to include excerpts of my frank and objective commentary on this case in their brief, they did so solely on their own volition and without my knowledge or endorsement. To be clear, I have no problem with them doing so, as there is a limited universe of legal commentary on ongoing IP cases to draw from when trying to illustrate a media perspective on a dispute. But I also recognize the power of this platform to call attention to aspects of ongoing cases that would perhaps normally evade scrutiny or commentary, which is why I do my utmost to present these columns in as neutral and forward-looking manner as possible. At bottom, I like to think this column offers a unique perspective on the IP happenings of the day and to the extent it serves to advance the dialogue on issues important to the IP community, all the better. Thanks as always for reading along.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

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Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.