We are living in  a profoundly challenging time.  Businesses are shuttered, restaurants are closed(or carry out only) and the economy is at a stand still.   One of the most famous restaurants in the world is closed and  is suing its insurance carrier under its business interruption insurance  policy.

The French Laundry is a Yountville, California(Napa Valley) restaurant owned and operated by Thomas Keller.  It is housed in a former French Laundry and has been operated by Keller since 1994.   It is a  three star Michelin restaurant, and if you ever have the chance, save your pennies and GO.   I still remember the blood orange venison I had there in 1996…

https://www.thomaskeller.com/yountville-california/french-laundry/restaurant

Here is a review from Wine Spectator:

https://www.winespectator.com/articles/napa-guide-french-laundry

And something from the New York Times:

On March 18, 2020 Napa County California issued a “stay at home order.”  The order was subsequently modified on April 2, 2020.  The order requires that all restaurants cease dine in service and only conduct carry out or delivery.   The French Laundry serves 9 course tasting menus–they don’t do carry out.

Anticipating that its insurance carrier will deny any claim, the French Laundry filed a preemptive lawsuit seeking a declaratory judgment that coverage for its business losses exists.  The French Laundry complaint states that access to its property is prohibited.    The French Laundry further alleges that the presence of the Coronavirus that causes Covid 19 is “physically impacting public and private property and  physical spaces around the world and the United Sates….any effort by the…Defendants…to deny the reality that the virus causes physical loss and damage would constitute a false and potentially  fraudulent misrepresentation….”

In sum, the lawsuit seeks a judgment  that “the policy provides coverage to plaintiffs for any current and future civil authority closure of restaurants on Napa county due to physical loss or damage from the Coronavirus under the Civil Authority coverage parameters and the policy provides business interruption coverage in the event that Coronavirus has caused loss or damage at the insured premises or in the immediate area of he insured premises.”

A similar lawsuit has been file in Louisiana on very similar grounds.

Insurance carriers are prepared to argue that these types of claim are not covered.  Detailed analyses of arguments  against coverage are found here:  https://www.zelle.com/Commercial_Property_Insurance_Coverage_and_Coronavirus

and here:

https://www.insurancejournal.com/blogs/big-i-insights/2020/03/24/562253.htm

In short, policyholders will argue that their businesses are closed due to the order of a civil authority and that the presence of the virus constitutes a covered physical damage to their property.

Carriers will argue that virus exclusions apply and in the absence of such exclusions, they will argue that a traditional physical injury to property(like a fire) is required for coverage to exist.  These issues will be hotly contested in the coming months and years and the legal issues are  not simple.

Insurance coverage is like politics-anytime you read an article or blog post, be mindful of the source.  There are pro-carrier coverage lawyers and there are pro-policyholder lawyers.  We have handled insurance matters for carriers and policyholders over the years.  While these business interruption claims have similarities, there are different coverage forms that impact whether coverage exists and these are complex claims.  We are carefully reviewing these policies for our clients.  If you have a question about whether your business interruption policy  covers your losses, please call or email me.

The Country Club of Jackson is  a “Golden Age” gem that is an extremely interesting golf course. It is certainly the one of most naturally beautiful courses on the Southeast.

(Photos by Stephen Oakes)

This will make for an interesting experience for the players and for spectators of the Sanderson Farms Championship. There are several holes that spectators will enjoy because of the shots called for and others that provide excellent areas to see a variety of  shots on different holes at once.

The 16^th hole is a 475 yard par 4 that runs along a cypress break and is the prettiest hole in Mississippi. It is also one of the hardest.   The players are required to keep the ball out of the water on the left and out of the rough and trees on the right.  A recently added fairway bunker on the right side has added to the difficulty of this hole.  If you attend the tournament, you need to head out to number 16.

Right next to the 16th tee is the 15^th green and a nice set of bleachers that are very close to the 15^th green. 15 is a drivable short par 4 that is one of the most interesting holes on the golf course.  I misplaced tee shot leaves a very difficult chip. There will be eagles birdies and bogies on 15. 15 and 16 are on the very back of the golf course but are must see holes.

The Bank Plus Pavilion on 12 is almost on top of the 12^th green. For an upgraded ticket, spectators have access to a pavilion that provides exceptional views of the 12^th and 13^th greens.

Fans wanting to see a lot of golf from one spot should try out the area around the 5^th green. That area offers views of the 5^th green the 6^th and 9^th tees as well as quick access to the 8^th green.

Another great spot is the third green area which offers views of the 3^rd green, all of number 4 and quick access to the 5 tee box, the 11^th green and the 14^th green.

The green on number 2 offers views of the 2nd green, 16th green and the third tee.  Additionally, the ropes are very close to the green on 2 and the tee box on 3 offering great access to the players.

The “old school” layout of the CCJ provides excellent views of the golf and a beautiful golf course. With major champions Zach Johnson, Jason Dufner, Lucas Glover and Jimmy Walker, we have a large number of major champions in the field.   The course is in perfect condition and the greens are as good as bermuda gets.  Go check it out.

Litigation funding is the financing of litigation by a nonparty. Nonparty lenders charge interest on the advances of cash to fund litigation and the loans typically are nonrecourse. The loans are secured by the claim itself. Said another way, the collateral for the loan is the potential proceeds from the litigation.

There are three varieties of litigation funding. Litigation funders will advance funds to actual plaintiffs. This can be done in both personal injury and in commercial settings. In the personal injury setting the funds are typically advanced as a percentage of the potential recovery and the plaintiff is incentivized to participate in the litigation to receive the balance of the potential recovery in the case. In commercial cases the funds can be used to fund the litigation and pay attorneys’ fees or can be used to fund the continuing operation of the business. A third category of litigation funding is lending money to law firms that have taken matters on a contingency fee basis to provide capital to litigate and operate their firm.

The US Chamber of Commerce is vigorously opposed to litigation funding. Lisa Rickard, president of the US Chamber of Commerce’s Institute for Legal Reform claims that “litigation financing is a sophisticated scheme for gambling on litigation.” She claims that third-party funding leads to “more lawsuits, more litigation uncertainty, higher settlement payoffs to satisfy cash hungry funders and in some cases even corruption.”

See http://www.instituteforlegalreform.com/resource/the-real-and-ugly-facts-of-litigation- funding

Proponents of litigation funding of course contend that litigation funding levels the playing field and allows litigants with less economic leverage to participate in litigation and vindicate their rights in meritorious claims. But for litigation funding, many meritorious claims could not be pursued.

The first obvious question is whether litigation funding contracts are ethical. The antiquated doctrine of maintenance and champerty could be viewed as a prohibition on third-party litigation funding. Champerty is “an      agreement to divide litigation proceeds between the owner of the litigated claim a party unrelated to the lawsuit who supports or helps enforce the claim.” Maintenance involves “assistance to you in prosecuting or defending a lawsuit [is] given to litigate by someone who has no bona fide interest in the          case.”    See http://www.minnesotalawreview.org/wp- content/uploads/2012/03/Steinitz_PDF.pdf

These historical prohibitions on third-party lending have been raised by litigants. A 2016 Delaware decision specifically addressed whether a litigation funding agreement constituted “maintenance and champerty.” Charge Injection Technologies, Inc. v. DuPont, Cause Number N07C – 12 – 134 – JRJ, Superior Court of Delaware directly addressed this issue. Charge Injection Technologies (“CIT”) sued DuPont alleging that DuPont unlawfully used CIT’s proprietary and confidential technology.

To avoid “war by attrition,” CIT entered into a litigation financing agreement to continue its litigation with Dupont. DuPont moved to dismiss on the basis that the financing agreement violated Delaware’s prohibition against “champerty and maintenance.” The litigation financing agreement involved financing by third-party litigation funder in exchange for a percentage of any future proceeds of litigation. The third-party funder also obtained a security interest in CIT’s claim as collateral.

CIT maintained that the litigation funding agreement was not champerty because CIT did not assign its claim to the third-party funder. The Delaware court rejected DuPont’s claims because CIT demonstrated that it was “the bona fide owner of the claims this litigation and [the lender] has no right to maintain the action.” Id. at 9. The court also noted that under the financing agreement the funds could be used for “litigation expenses as well as other business expenses” and the agreement specifically provided that the lender did not have any rights as to the “direction, control, settlement or other conduct litigation … and CIT retains the unfettered right to settle the litigation at any time for any amount.” Id. at 12-13 For these reasons, the Delaware court denied DuPont’s motion to dismiss on champerty and maintenance grounds.

The CIT case reflects the trend of allowing third-party litigation funding to occur. While there have been efforts to regulate third- party funding, it remains a largely unregulated industry in the United States and appears to be expanding. Third-party litigation funding allows businesses, law firms and individual plaintiffs the ability to withstand “trench warfare” from more powerful and well-funded litigants.

If you have questions about litigation funding, email or call me.

The Consumer Financial Protection Bureau has proposed a new rule that, if adopted,  will limit the use arbitration agreements in certain consumer lending transactions.  In a nut shell, this rule would prevent the use of arbitration agreements that prevented borrowers from participating in class action lawsuits.  The reaction  from industry was swift and predictable.

Forbes condemned the proposed rule and stated,”the result of the CFPB’s proposed action will be an onslaught of frivolous class action lawsuits in the finance industry by lawyers seeking a big payday.”

http://www.forbes.com/sites/robertberger/2016/05/05/cfpb-overrules-supreme-court-and-federal-law-on-arbitration/#4e550d004552

House Financial Services Chairman Jeb Hensarling (R., Texas) called the proposed rule “a big, wet kiss to trial attorneys.” It “essentially hands over the keys of the CFPB’s luxury office building to the wealthy, powerful, and politically well-connected trial lawyer lobby,” he said in a statement.

And, trial lawyers are in fact thrilled:

“It levels the playing field,” said trial lawyer George Zelcs.

http://www.wsj.com/articles/cfpb-unveils-proposed-rule-to-let-consumers-sue-banks-credit-card-companies-1462420862

A summary of the rule is as follows:

The Bureau of Consumer Financial Protection (Bureau) is proposing regulationsgoverning agreements that provide for the arbitration of any future disputes between consumersand providers of certain consumer financial products and services. Congress directed the Bureau to study these pre-dispute arbitration agreements in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank or Dodd-Frank Act).  In 2015, the Bureau published and delivered to Congress a study of arbitration. In the Dodd-Frank Act, Congress also authorized the Bureau, after completing the Study (hereinafter Study), to issue regulations restricting or prohibiting the use of arbitration agreements if the Bureau found that such rules would be in the public interest and for the protection of consumers. Congress also required that the findings in any such rule be consistent with the Bureau’s Study.

In accordance with this authority, the Bureau is now issuing this proposal and request forpublic comment. The proposed rule would impose two sets of limitations on the use of predispute arbitration agreements by covered providers of consumer financial products and services.

First, it would prohibit providers from using a pre-dispute arbitration agreement to block consumer class actions in court and would require providers to insert language into theirarbitration agreements reflecting this limitation. This proposal is based on the Bureau’s preliminary findings – which are consistent with the Study – that pre-dispute arbitration agreements are being widely used to prevent consumers from seeking relief from legal violations on a class basis, and that consumers rarely file individual lawsuits or arbitration cases to obtain such relief.

Second, the proposal would require providers that use pre-dispute arbitration agreementsto submit certain records relating to arbitral proceedings to the Bureau. The Bureau intends to use the information it collects to continue monitoring arbitral proceedings to determine whether there are developments that raise consumer protection concerns that may warrant further Bureau action. The Bureau intends to publish these materials on its website in some form, with appropriate redactions or aggregation as warranted, to provide greater transparency into the arbitration of consumer disputes.

The proposal would apply to providers of certain consumer financial products and services in the core consumer financial markets of lending money, storing money, and moving or exchanging money.

Click to access CFPB_Arbitration_Agreements_Notice_of_Proposed_Rulemaking.pdf

 Arbitration is a lot like whiskey – it can be a good thing or a bad thing. My friend Phil Thomas wrote a blog post several weeks ago pointing out the alleged evils of arbitration http://www.mslitigationreview.com/2015/06/articles/general-1/arbitration-jurisprudence-bad-for-legal-profession/.

The CFPB has written a recent report outlining the purported evils of consumer arbitration.  http://www.consumerfinance.gov/newsroom/cfpb-study-finds-that-arbitration-agreements-limit-relief-for-consumers/

Two Scholars recently have criticized the CFPB study:http://mercatus.org/sites/default/files/Johnston-CFPB-Arbitration.pdf

This back-and-forth reminds me of the famous Soggy Sweat  speech about whiskey.

It is a fairly long speech so I will paraphrase a few of the points that demonstrate the parallels between whiskey and arbitration -arbitration and whiskey have a lot in common.

Judge Soggy Sweat said this in 1952 during prohibition(more or less):

If when you say whiskey you mean the devil’s brew, the poison scourge, the bloody monster that the defiles innocence, dethrones reason, destroys the home, creates misery and poverty, if you mean the drink that topples the Christian man and woman from the pinnacle of righteous living  into the bottomless pit of degradation and despair shame and hopelessness than certainly I’m against it.

But if when you say whiskey you mean the oil of  conversation, the philosophic wine,  if you mean the stimulating drink that puts the spring in the step of an old man on a  frosty morning, the drink which enables man to magnify his joy and happiness and forget life’s great sorrows, if you mean that drink which pours into our state coffers untold millions of dollars which provide tender care for our little children, build highways,  hospitals and schools  I am certainly for it. This is my stand, I will not retreat  I will not compromise.

This is a link to John  Grisham reading the speech.  http://www.youtube.com/watch?v=qPzUcJcgXUA:

With apologies to Soggy Sweat I think the same points can be made about arbitration.  Here is my take on arbitration:

If when you say arbitration you mean, a quick, inexpensive forum for claim resolution, a way for defendants to avoid getting railroaded in a bad venue, a way for sophisticated parties to avoid the vagaries of uneducated jurors, a way to truncate the expensive drawn out litigation process yet still have a right of appeal, a way to insure come predictability of  claim resolution, then I am for it.

But, if when you say arbitration, you mean that drawn out, expensive, three member panel process without a right of appeal, with expensive administrative fees, where parties can drag out the arbitrator appointment process and  the administrators are toothless tigers that have no real remedies to bend the will of a recalcitrant litigant, that baby splitting process where hard calls are not made and clear cut dispositive motions are not granted, the process where industry prevails against consumers at impossibly high levels, then I am against it.

There are ways to get into the Masters, but it is very hard to get inside the ropes, even as a caddie.  Atlanta lawyer Richard Grice is caddying this week for US Amateur  champion.  Last year the Atlanta Athletic Club hosted the US Am and a group of members offered to caddie for players who did not have caddies.  Grice agreed to caddie for Gunn Yang.  During the course of the event, Yang offered to pay Grice.   Grice said he did not want to be paid, but if  Yang he won, he wanted to caddie for him in the Masters.

Yang came into the event as the 776th ranked amateur in the world.  Grice figured he would only have to caddie for a few days.  It tuned into a marathon caddying job and lead to the US Am finals.

Yang went on to win the US Amateur and was rewarded with an invitation to the Masters.  Grice is now skipping some work to caddie at the Masters.

A more detailed story is found here: http://www.wsbradio.com/news/news/walk-lifetime-atlanta-lawyer-turns-caddie-masters/nkqW9/

I previously posted about whether alternative fee agreements(“AFA”) are attractive.    I do think the legal industry will evolve in that direction as corporate law departments demand greater cost savings and certainty in legal fees.  This same rationale applies to individual business owners who cannot withstand an onslaught  work based on hourly fees.

What type of AFA’s make sense to provide clients with certainty in legal expenses and avoid the cost of a “blank check book” on hourly rates?  There are a host of potential AFA’s available to creative lawyers and their clients.

The best known AFA is a traditional contingency fee.  Big firm lawyers are notoriously bad at these because they have been raised in the billable hour world that rewards inefficiency.  However, if cases are carefully vetted and staffed in an efficient manner, law firms and clients can benefit form this.  Typically, because of the potential risk it pays to have several of these to have wins offset losses.  The more hooks in the water, the better.

A second AFA is a hybrid of hourly rates and a contingency fee.   This involves  reduced hourly rates but at the end of the case there is  an incentive payment based on a percentage of the recovery or a success fee for money saved in defense of the case.

Reverse contingency fees are sometimes used by resolution counsel in major cases.  Resolution counsel are brought in to settle cases and are not active in the actual litigation.   Resolution counsel’s only  role is to settle the case.  They are sometimes paid with a percentage of the  amount saved in settlement payments or at a reduced hourly rate with a premium rate paid on the back end.

In cases where the amount of work is somewhat predictable, a flat fee can  be charged on a per case basis.  Flat fees can also be used to pay for a volume of recurring work and paid on a monthly basis.  These arrangements require trust and communication between lawyers and client.  The goal is economic certainty and a win-win for the client and lawyer.  Frequently, these flat fees are based on a “look back” at work done in earlier time periods of several months or a few years.

Fee caps can also be used when the amount in controversy is limited and known.  It makes no sense for a business to spend the amount at issue in fee and lawyers need to recognize this reality.

The terms of AFA’s are limited only by the imagination of the lawyer and the client.  by creating win-win situations clients will be happier and lawyers will provide the best possible service.

The Country Club of Jackson is  a “Golden Age” gem that is an extremely interesting golf course. It is certainly the one of most naturally beautiful courses on the Southeast.

(Photos by Stephen Oakes)

This will make for an interesting experience for the players and for spectators of the Sanderson Farms Championship. There are several holes that spectators will enjoy because of the shots called for and others that provide excellent areas to see a variety of  shots on different holes at once.

The 16^th hole is a 475 yard par 4 that runs along a cypress break and is the prettiest hole in Mississippi. It is also one of the hardest.   The players are required to keep the ball out of the water on the left and out of the rough and trees on the right.  A recently added fairway bunker on the right side has added to the difficulty of this hole.  If you attend the tournament, you need to head out to number 16.

Right next to the 16th tee is the 15^th green and a nice set of bleachers that are very close to the 15^th green. 15 is a drivable short par 4 that is one of the most interesting holes on the golf course.  I misplaced tee shot leaves a very difficult chip. There will be eagles birdies and bogies on 15. 15 and 16 are on the very back of the golf course but are must see holes.

The Bank Plus Pavilion on 12 is almost on top of the 12^th green. For an upgraded ticket, spectators have access to a pavilion that provides exceptional views of the 12^th and 13^th greens.

Fans wanting to see a lot of golf from one spot should try out the area around the 5^th green. That area offers views of the 5^th green the 6^th and 9^th tees as well as quick access to the 8^th green.

Another great spot is the third green area which offers views of the 3^rd green, all of number 4 and quick access to the 5 tee box, the 11^th green and the 14^th green.

The green on number 2 offers views of the 2nd green, 16th green and the third tee.  Additionally, the ropes are very close to the green on 2 and the tee box on 3 offering great access to the players.

The “old school” layout of the CCJ provides excellent views of the golf and a beautiful golf course. With major champions Zach Johnson, Jason Dufner, Lucas Glover and Jimmy Walker, we have a large number of major champions in the field.   The course is in perfect condition and the greens are as good as bermuda gets.  Go check it out.

Arbitration is supposed to provide a cheap and inexpensive forum to resolve disputes.

The reality is that it can be slow and expensive like traditional litigation.

Why is arbitration not as fast as it is supposed to be?

First, there are often disputes over whether a claim  is arbitrable.   This is  true when an individual sues a corporation.  Typically, the corporation wants to arbitrate and the individual wants to litigate in state court.  This results in litigation over arbitrability in the trial court or can lead to a federal court action to compel arbitration.

State court trial judges are sometimes reluctant to compel arbitration, and if a party moves to compel arbitration and loses, they will be faced with a slow and expensive appellate process.  I have had cases where the trial judge denied a motion to compel arbitration, the intermediate trial  court compelled arbitration and on a writ of certiorari the Mississippi Supreme Court found the claims not to be arbitrable.  This process took more than two years and was very expensive.

A recent federal court case illustrates how long even a federal action to compel arbitration can last.  In  Douglas v. Regions Bank, 757 F. 3d 460(5th Cir. 2014)  a bank customer sued the bank.  In response,  the Bank filed  motion to compel arbitration of the plaintiff’s claims.  The trial court ruled that the claims were not arbitrable and three judge panel of the fifth Circuit ruled that the claims were not arbitrable.

The arbitration agreement at issue contained a “delegation clause” in the arbitration agreement that required that the issue of arbitrability be decided by an arbitrator.   The Fifth Circuit ruled that the delegation clause did not apply where the Bank’s contention that her claims fell within the scope of the arbitration agreement was wholly groundless.  Undeterred, the Bank has asked for en banc consideration by the full Fifth Circuit.  The initial case was filed in 2012, so arbitrability has now been litigated for over two  years.

Another issue is delay in the actual process of selecting arbitrators and setting hearing dates.  Clever lawyers can gum up the arbitrator selection process which delays the start of the process.  I have also had lawyers raise  innumerable  “conflicts” that push the hearing date well out into the future.  Arbitrators  can be  reluctant to push on these kinds of issues(they might not get picked again if they step on toes) and don’t have the leverage of judges in pushing matters to resolution.

How can you speed arbitration up?

To speed things along, use abritration provisions that only require 1 arbitrator(and add in the AAA optional appellate rules in case you get a crazy result).  Additionally, set a time deadline to have a hearing and/or use expedited procedures.  Finally, consider using a delegation clause.  This might help, but it can lead to satellite litigation like in the Douglas case cited above.

Update your arbitration agreements

It is important for businesses to have updated arbitration agreements in place to make sure they are drafted in a fashion that leads to the fastest resolution possible, while adding the safety net of the new appellate rules that are now available.