Court sentences Chris Correa to 46 months in Astros hacking case

crimeandpunishment

Crime and Punishment of a different sort

Yesterday, Judge Lynn Hughes sentenced Christopher Correa to 46 months in Club Fed. At first blush, the sentence seems harsh to me. Four years in federal prison for seeing how another club evaluates 19 year-old shortstops in the low minors? C’mon. It’s not as if Correa committed a violent crime or forced the Astros into bankruptcy. In March 2016, Forbes valued the Astros at $1.1 billion and estimated the team received an annual revenue of $270 million.

So why almost four years? Was it the perceived value of the trade secret information? The Astros valued the information at over $1 million. I don’t know much about the Federal Sentencing Guidelines, but I assume the value of the information stolen/accessed drives the sentence.

Also, Correa apparently accessed the information more frequently than originally reported. He apparently claimed he accessed the information a handful of times. The reports yesterday suggest Correa accessed the information more like sixty times. The discrepancy couldn’t have helped Correa.

I’d love to read the pre-sentence report. Unfortunately, the Court sealed it (as is routine).

Some unanswered questions:

  1. Did anyone else within the Cards’ organization know Correa infiltrated Ground Control?
  2. How did Correa use the information? Did the Cards benefit in a direct way? Did the team target a particular player based on the information? Did the Cards try to drive up the price on a player knowing the Astros wanted him?
  3. What does the league want to discover in its investigation? Will it punish the Cards?

I think this sentence is a huge wake-up call. I don’t anticipate many baseball men will risk real jail time to gain a marginal (at best) competitive edge in player evaluation. The sentence is a stronger deterrent than any penalty imposed by MLB.

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Update: TDI holds hearing on request for mandatory mediation-arbitration endorsement

Yesterday, TDI held a hearing on Farm Bureau’s request to offer optional mandatory mediation-arbitration endorsements in certain homeowner’s policies. You can read about it here. I discussed some of the issues here.

Here’s Farm Bureau’s explanation on why it wants to write the endorsement:

Stephens said many unique factors prompted the Farm Bureau — which only serves Texas and is not publicly traded — to ask permission to “try something different” to help its bottom line.

That included a dramatic rise in lawsuits in South Texas and along the Gulf beginning in 2012. The rate of disputed claims in those regions, he said, outpaced the rest of the state by nearly 30-fold.

That last sentence tells the tale. Farm Bureau has been pounded with lawsuits in the Valley in the last few years. It wants to stem the tide.

Apparently, insurance commissioner David Mattax didn’t tip his hand on whether TDI would allow Farm Bureau to write the endorsement. Stay tuned.

TDI mulls mandatory mediation-arbitration endorsements

On July 6, the Texas Department of Insurance will consider whether to allow Texas Farm Bureau to offer a mandatory mediation-arbitration endorsement with its homeowner’s policies. The insured would give up their right to sue Farm Bureau in court in exchange for an unknown reduction in premium.

Under the endorsement, the insured and Farm Bureau must attempt mediation first ( I always appreciate the opportunity for more mediation business!) and go to arbitration if they do not settle at mediation.The arbitration clause limits discovery to the sharing of certain documents related to the claim. No depositions unless the arbitrator permits them. Farm Bureau pays the fees for mediators and arbitrators. An arbitrator’s award would be confidential unless both sides agree to disclose. I don’t read the endorsement as limiting the types of damages an arbitrator can award. The endorsement does not provide for an award of attorney’s fees.

I don’t like arbitration for most consumer transactions, particularly those involving adhesion contracts. Experience shows arbitration isn’t an effective or practical mechanism for most consumers to enforce their rights. (I have no qualms about two parties in relatively comparable bargaining positions agreeing to arbitrate their disputes). Heck, I typically work on the defense side of the bar, and I don’t typically prefer arbitration as lawyer. I suppose I prefer the structure provided by court rules and procedures instead of the unpredictable flexible rules of arbitration. At least Farm Bureau offers to mitigate certain barriers associated with arbitration in other fields, such as paying administrative fees.

I think TDI will bless then endorsement. I fear most policyholders won’t understand what rights they will relinquish in exchange for a lower premium. Most insureds will agree to the endorsement because their agent will tell the insured he or she will save some dough in the short-term and it’s rare whenever a dispute arises out of a claim. Notwithstanding my doubts, I don’t think TDI should prohibit Farm Bureau from offering the endorsement. It’s not my place to mandate whether certain people voluntarily give up certain rights in exchange for money, especially when other safeguards exist.

I suspect TDI will allow Farm Bureau to offer the endorsement, as long as the insured receives a tangible break on policy premiums. If the consumer gets no real benefit, forget it. Having to front arbitration and mediation fees can make it difficult for an insured to pursue a remedy against a carrier. It helps that Farm Bureau will bear most of the administrative fees and costs for mediators and arbitrators. Also, for it to work for me, policyholders have to be able to obtain policies from admitted carriers which do not require the endorsement. Otherwise, arbitration will become the norm.

Will we see mandatory mediation-arbitration endorsement as a matter of course?  That’s the big question. I anticipate most other HO carriers will follow suit if TDI allows Farm Bureau to offer this endorsement. I imagine most carriers see this as an opportunity for carriers to lower claim costs and potential exposure. Carriers may have to offer the endorsement to compete with Farm Bureau on premium price. The problem arises if and when each carrier offers the endorsement and policyholders have to pay significantly more to remove it. What if carriers may refuse to write policies without the endorsement. That result would be terrible for Texas consumers.

FTR, I wouldn’t personally agree to the endorsement if I was a Farm Bureau insured.

 

In re Nationwide: Forum-selection clauses, waiver, and actual prejudice

In In re Nationwide Ins. Co. of America, No. 15-0328 (Tex. Jun. 24, 2016), the Supreme Court of Texas held that a party who claims another party waived enforcement of a contractual forum-selection clause must establish actual prejudice resulted from the alleged waiver.

Facts and Procedural History

 

This case involves a dispute between Nationwide and an independent insurance agent. The contract between Nationwide and the agent had a forum-selection clause. The clause provided for venue in Franklin County, Ohio.

The agent filed suit against Nationwide in Travis County, Texas, in December 2012. Nationwide’s lawyer told the agent’s lawyer Nationwide intended to enforce the forum-selection clause; however, Nationwide waited over two years to seek to enforce it, and only after changing lawyers. Nationwide sought to enforce the forum-selection clause by filing a motion to dismiss.

During the two years, the parties conducted written discovery. Nationwide filed special exceptions and two partial motions to dismiss. The trial court sustained the special exceptions. The trial court never heard the motions to dismiss because the agent amended his pleadings. The parties submitted an agreed confidentiality and protective order and the trial court signed it.

The limitations period on the agent’s contract claim expired during the pendency of the Texas lawsuit. Nationwide agreed to waive the limitations argument to move the case to Ohio. The limitations period on the agent’s fraud claim expired months after Nationwide moved to dismiss the Texas lawsuit. The trial court denied Nationwide’s motion to dismiss; consequently, the agent never filed suit in Ohio. The court of appeals denied Nationwide’s mandamus petition.

The Supreme Court of Texas held the agent did not establish any prejudice resulted from the delay. Consequently, the Court granted mandamus relief.

Analysis

 

As a general rule, Texas enforces contractual forum-selection clauses. A party waives enforcement “by substantially invoking the judicial process to the other party’s detriment or prejudice.” In determining whether a party waived enforcement, a court looks at the totality of the circumstances on a case-by-case basis.

The Court punted somewhat on the substantial invocation question. The Court noted Nationwide was active in the Texas lawsuit but the parties’ interaction with the trial was “minimal.” While the trial court sustained special exceptions and entered an agreed order, the Court did not make any dispositive rulings. Ultimately, the Court deferred to the trial court’s ruling that Nationwide had substantially invoked the judicial process.

The Court concluded the agent had suffered no prejudice as a result of Nationwide’s substantial invocation of the judicial process . The mere fact that the agent had already spent time and money in working up the Texas lawsuit did not help the agent. The agent could have avoided that by filing in the correct forum in the first place. The Court held no actual prejudice resulted from the delay. The agent’s prejudice was theoretical because Nationwide agreed to waive its limitations argument on the contract claim. Meanwhile, Nationwide did not prejudice the agent’s fraud claim. The agent could have dismissed and refiled after Nationwide filed the motion to dismiss based on the forum-selection clause. (Why the agent would have done so after winning at the trial court level beats me). Nationwide maintained it had informed the agent’s lawyer regarding the Ohio statute of limitations for fraud claims months before the limitations period expired, so it wasn’t “laying behind the log.” Because the agent did not suffer any actual prejudice, Nation

My Two Cents

 

This case and result strikes me as an odd one. Generally, I have no problem with enforcing forum-selection clauses. I don’t have a ton of sympathy for a party who tries to avoid forum selection clauses by filing suit in the “wrong” forum. The agent’s lawyer could have prevented this mess by filing in Ohio.

I can’t see why a party who waited two years to enforce a forum-selection clause deserves any relief. If you have the forum-selection clause in the contract, move to enforce it early. Instead, as a result of the delay, the parties likely spent a good chunk of change in the discovery process during the two years.

Now the parties are a lot closer to the beginning of the lawsuit than the end. The parties probably should have resolved this case within two years, but that’s a different issue.

Some unanswered questions re: strategy: why was Nationwide so adamant about moving the case to Ohio after so much time passed? Why didn’t Nationwide’s first lawyer pull the trigger early on in the case? Did Nationwide think the agent would fold as soon as the case moved there? Have Ohio courts construed similar agency agreements such that Nationwide had a sure win? Texas courts can apply Ohio contract law, too.

I think the dissent gets it right.

Seger v. Yorkshire Ins. Co., Ltd.: Stowers requires coverage

Some observations on the Supreme Court of Texas’ recent decision in Seger v. Yorkshire Ins. Co., Ltd., No. 13-0673 (Tex. Jun. 17, 2016):

  1. The plaintiff/insured must establish coverage as an essential element of its Stowers claim. The plaintiff/insured bears the initial burden of establishing coverage. If the plaintiff/insured proves coverage, the burden shifts to the insurer to establish the policy excludes coverage.
  2. Under certain circumstances, an insured may reject or void, at its option, a policy issued by an unauthorized insurer. If the insured elects to enforce a policy subject to avoidance, it must enforce the entire contract, including any policy exclusions. An insured cannot select provisions which favor coverage and reject exclusions. In other words, the plaintiff/insured must accept all of the policy terms or none.
  3. As an aside to #2 above, I wonder whether a plaintiff/insured must accept provisions in a voidable policy that are otherwise unenforceable on public policy grounds. I don’t think the “all or nothing” logic mandates such a result. The Seger Court didn’t discuss that issue.
  4. This case gives Jarndyce vs. Jarndyce a run for its money. The underlying accident and death occurred in 1992. That’s unacceptable.

The bottom line: No coverage? No Stowers claim.

Getting out of the office more often

It never ceases to amaze me how much more productive I can be when I work outside of my office.

Today’s office: Latte on the Square

Today I have a deposition in La Grange. I decided to drive out a couple of hours early and bang out some work at a coffee bar across the street from a courthouse. Notwithstanding my post here, I’ve been able to accomplish much more work here than I accomplish at the office.

Here’s why I like working offsite: no phones interrupting me. I have fewer opportunities to goof off on the Internet (even with wi-fi). I have fewer questions to answer. I have fewer distractions with colleagues discussing last night’s Astros game. I don’t mind doing any of those things, but I’d prefer to limit my time doing them.

I’ve long thought about spending a couple of hours at Starbucks a few times a week. It makes sense to me as a means to reduce distractions. I’ll try it tomorrow morning during my “normal” office hours, when I have a motion that requires me to focus.

What do you do to limit distractions while working?

Barry Bonds Wins Appeal

In a terse per curiam opinion, the U.S. Ninth Circuit Court of Appeals overturned Barry Bonds’ conviction for obstruction of justice.

The feds prosecuted Bonds based on his answers to this line of questioning:

Prosecutor: “Did Greg ever give you anything that required a syringe to inject yourself with?”

Bonds: “I’ve only had one doctor touch me. And that’s my only personal doctor. Greg, like I said, we don’t get into each others’ personal lives. We’re friends, but … we don’t sit around and talk baseball, because he knows I don’t want — don’t come to my house talking baseball. If you want to come to my house and talk about fishing, some other stuff, we’ll be good friends. You come around talking about baseball, you go on. I don’t talk about his business. You know what I mean?”

Prosecutor: “Right.”

Bonds: “That’s what keeps our friendship. You know, I am sorry, but that — you know, that — I was a celebrity child, not just in baseball by my own instincts. I became a celebrity child with a famous father. I just don’t get into other people’s business because of my father’s situation, you see. …”

Prosecutor: “And, again, I guess we’ve covered this, but — did [Anderson] ever give you anything that he told you had to be taken with a needle or syringe?”

Bonds: “Greg wouldn’t do that. He knows I’m against that stuff. So, he would never come up to me — he would never jeopardize our friendship like that.”

Prosecutor: “OK. So, just so I’m clear, the answer is no to that, he never gave you anything like that?”

Bonds: “Right.”

I’d forgotten the flimsy basis of Bonds’ conviction.That type of exchange occurs all the time during civil depositions and trials. I’ve seen countless witnesses testify in a manner similar to Bonds. Did Bonds answer the question directly? No. Did he eventually answer the question? Yes. So the feds prosecuted Bonds for not answering the question the first time? That constitutes a felony now? Puh-leeze.

Good lawyers persist in the face of evasive answers and secure the answers they need. Once that’s accomplished, the lawyer continues. That’s what the prosecutor did with Bonds. The fact that the feds resorted to going after Bonds for obstruction based on that testimony demonstrates the utter failure of their investigation.

Without condoning Bonds’ evasive answers, and notwithstanding my belief that jurors should decide facts, I don’t see how his testimony can constitute a felony. I’m happy the Ninth Circuit reversed.