The Costly Consequences of One Big Company’s Legal Mistake [e169]

March 27, 2015

Nasir and Matt cap off the week by discussing how AT&T’s legal counsel failed to appeal a decision and the costly consequences that resulted.

Full Podcast Transcript

NASIR: All right. Welcome to our podcast where we cover business in the news and add our legal twist to the podcast that we record, and my name is Nasir Pasha.

MATT: And I’m Matt Staub. Hey, I had something, I thought you would think this is funny. This is a good start to Friday. I saw this commercial.

NASIR: I’m already laughing.

MATT: I saw this commercial last night. It’s not LegalZoom, but it’s something like that. I forget the company, or something. Good domain.

NASIR: Yeah.

MATT: It’s like cheap filings for incorporating businesses and their quote in here was, “Incorporating can be the difference between making a fortune and losing everything.” That doesn’t make any sense at all. It’s like, well, if you incorporate, you’ll become rich. But, if you don’t, you’re going to lose everything. It’s like, incorporating is not going to depend on the success of your business.

NASIR: No, that’s all you need to do. It’s like, “Yup! I’m incorporated!” No, but it’s true. You know, businesses in general – or I should say “business owners and entrepreneurs” – kind of put this, especially for the first time that they’ve formed an entity, it’s almost like this unattainable, this kind of, like, prestigious thing to incorporate and it kind of is because, you know, it’s the same thing of putting your shingle out for the first time and entering into that business lease and basically making a commitment to your business so I understand that. But then, that kind of catchphrase is kind of exploiting that kind of sentiment, for sure.

MATT: It can make the difference between making a fortune and losing everything.

NASIR: Yeah.

MATT: Even if you don’t have a good business model.

NASIR: Yeah. At the end, entity forming is – I guess, from a lawyer’s perspective – it’s different. But, even those business owners that have been in business for a while, it’s a formality. It’s just something that you have to go through. In a sense, if you think about it from a legal perspective, it’s almost a joke. Like, just because I file this piece of paper now, I have limited liability and what’s up with that, you know? And, the day before, I did not. It’s kind of funny. Well, that’s how the law works and that’s why you have to pay us a billion dollars to perform legal work for you.

MATT: Especially if you’re the in-house counsel for AT&T because they might be in some trouble here.

NASIR: I don’t think they’re paying their lawyer that much this time because of this.

MATT: I also assume they probably – I’m going to go on a limb and say – they probably have more than one lawyer.

NASIR: Oh, they definitely did. I think they had 18. Was it 18? Yeah, 18 lawyers and assistants who basically messed up.

MATT: Oh, that’s the actual number?

NASIR: Yeah.

MATT: Well, yeah. So, they had this, you know, they’re probably involved in many lawsuits, some of which are frivolous but, yeah, there’s this patent infringement case and, essentially, they missed the deadline to appeal a jury verdict. So, AT&T lost this case and they were going to appeal. They had 30 days to do so and they didn’t figure it out until 51 days after and, yeah, they missed their opportunity and now they’re saying they could be on the hook for this $40M payment that resulted from this lawsuit involved with Two-Way Media, LLC.

NASIR: Yeah. So, let’s break down how this exactly happened. Basically, there’s a docket notice that is sent out every time something is filed with the court. Like any kind of index of anything, it’s like a table of contents. All you see is the title or a very limited description of what the document is. If you want to read the actual order, then you just click on the link or, if it’s a state court, then you download the document or you’re notified accordingly. Some of this is not electronic but this particular case was in the federal court. And so, you click on the link and then you download the order and you actually read the order. What happened here was the order was mislabelled and I guess it was a faulty court docket but, if you actually read the order, it showed that the judge had denied the request to overturn the jury’s verdict and so, therefore, it’s a final judgment. When that happens, the losing party basically has a limited time to appeal. In federal court, it’s 30 days. And so, this is the issue. Okay. The 30 days passed but then, in fact, it was 51 days until one of the attorneys must have noticed and they were like, “Oh, I think we need to file this.” And so, of course, the trial court said, “No, you missed your deadline,” and that’s where we’re at now.

MATT: Yeah. And so, they are going to – well, I assume they’re going to but they can ask the panel of three judges that decided on this. I thought they said it was a jury verdict though.

NASIR: Yeah, it was a jury verdict they were asking to overturn.

MATT: So, there was a panel of three judges that rules 2-1 not in favor of them, saying that they couldn’t go back and file past the deadline. But, now, I guess they can ask the panel to reconsider the decision?

NASIR: Yeah.

MATT: Or request to be heard in front of all active judges.

NASIR: They can ask for a full panel, I think, because this was only a three-judge ruling.

MATT: Yeah. And then, yeah, they can go to the Supreme Court, too, after that.

NASIR: What do you think? I mean, usually – okay, this is my experience – the court and the law are pretty lenient when it comes to excusable neglect of missing a deadline. In fact, for example, a classic one is that, let’s say you get sued, you have 21 days in federal court to 30 days in usually state court to respond. If you fail to do so, then the other party can default against you, enter into a default judgment, and basically collect as if they had won the entire lawsuit against you without you even showing up, and that’s a risk, and that’s why, when you get served, what’s the first thing you do? You call your attorney and you say, “Hey, I got served with a lawsuit. What do I do?” That timeline starts to tick and you have to respond. Now, if you miss that deadline, what happens? Is it automatic? Can you always go back? Usually, the answer is yes. I’m not saying you should depend upon this but, in a lot of circumstances where, “Hey, you know, you missed this deadline, there could be an excuse,” it’s like going late to class. It’s like, “Hey, look, I know I’m late,” or going late to work, you know? “Hey, I know I’m late but, you know, I got a flat tire,” or whatever. You know, most people are reasonable and, because the judges are real people, and even the law allows some discretion in this. But, in this case, I don’t necessarily feel bad for AT&T but I understand how it works because you get a notice that says – in fact, what does the notice say? It said that the trial judge had granted AT&T’s request to seal some documents in the case. So, it was mislabelled as AT&T winning some motion. And so, it’s understandable why they didn’t necessarily read the entire details because what do they care because they won, right? They don’t need to understand the details. So, I don’t know, what do you think about the judge’s ruling in this respect?

MATT: I’m fine with it just because I’m not a big fan of the constant appeal process anyway.

NASIR: That’s true.

MATT: I don’t know if that factored into the decision of the judges.

NASIR: No, you’re right. If it was a default judgment, it’d be a different story.

MATT: Yeah. So, you know, maybe they’re just thinking, “Well, if we let this happen, it’s going to drag on for however many more years and we know the ultimate result anyway.” I’m not saying that they should look at it that way – hopefully they didn’t, I guess – but I’m fine with this just because, if you missed the deadline on this, they actually used the phrase I used earlier in the week, “Too bad, so sad,” in this article.

NASIR: “Too bad, so sad.” Well, yeah, they said that. I mean, the trial judge, I think, well-noted that AT&T had 18 lawyers on notice for this case and so, out of the 18 – I think lawyers and assistants so I’m not sure how many were lawyers but different people that missed this and that’s not great, you know, That’s not a good fact for them and they weren’t notified that it was corrected because the court docket notice was eventually corrected but they didn’t get that notification. But I think you’re right. When it comes to the appeals aspect of it, a little bit different than the scenario I was talking about because that is an automatic loss where, in AT&T’s position, they went through the whole trial so the facts have already been decided.

MATT: Yeah, exactly what you said. Default judgment is going to be different. Nothing’s even happened at that point so bit difference from a full-on jury trial that occurred and the it was as if it was already entered.

NASIR: And, back on default judgments, not only the problem is that you’ll automatically lose, all the facts are assumed to be true now.

MATT: Yeah.

NASIR: You know, there’s a website, it’s like, You Got Posted. It was like a revenge porn site of some sort that a couple of people sued them for I guess $450,000 each for two of the partnes and I don’t know where that number came from but that’s what they alleged and they got a defaulted judgment against them and now these two people have a $900,000 default judgment against them. I guess it’s against them personally. Unless they find some way to overturn that default judgment then they’re pretty much stuck. Now, compare that to, if they fought the lawsuit from the beginning, a jury said that they should be found liable and then they missed the 30-day deadline, that’s a lot different because they’ve already gone through that setup and gone through that trial.

MATT: Yeah, I agree completely.

NASIR: Oh, you agree with the revenge porn site people?

MATT: No, I agree with you.

NASIR: Oh, okay.

MATT: Don’t try to trick me.

NASIR: So, you’re anti-revenge porn site then?

MATT: Yes.

NASIR: I didn’t make it too complex. I didn’t say, like, anti-anti.

MATT: I’m hesitant to say yes or no because I feel like you’re trying to trick me by wording things weirdly and then I’ll end up saying something when you use a triple negative.

NASIR: Yeah. What do you think? Obviously, AT&T hired a big law firm to do this, but think about it. To me, every hour or minute that these lawyers are spending time to try to reverse this judgment, they’re basically appealing the judgment of the trial judge that they are not allowed to appeal and I think every minute, every dollar that is spent or I should say every minute that these lawyers are spent on behalf of AT&T are probably free at this point because it seems to be very clear that it’s these attorneys that messed it up and missed this.

MATT: Well, that’s what I was thinking, too. But I wouldn’t be surprised if AT&T just had their own in-house counsel that all made salaries so they might not even…

NASIR: Well, think about it this way. They did most likely hire an outside firm for litigation – I would suspect but I could be wrong in that respect – but I’m sure their in-house attorneys are part of these 18 people because they’re going to be monitoring. So, at the least, they have AT&T employees in there. So, you’re right. I mean, there’s a certain respect on that. But, I think, whoever the attorneys, there’s probably two or three attorneys that are actually in-charge of the case itself, I mean, they need to take responsibility. I mean, on one hand, I understand how it happened and it’s excusable. But, on the other, it should be common practice to at least skim the actual order.

MATT: I think, if they’re able to appeal and successfully get this reversed, then all AT&T customers should be able to do the same if they’re late paying their bill and use that as an excuse – at least once.

NASIR: Good point! It’s like, “Oh, I didn’t see it! It was mislabelled as I thought it was just an advertisement for AT&T.”

MATT: I like that idea. I’m not an AT&T customer but, if I was, I would use that or I would purposely miss my bill payment and then call them back 21 days after it was due.

NASIR: I’m a Verizon customer.

MATT: Yeah, so am I.

NASIR: I feel like Verizon’s really good but they charge you for it.

MATT: You’ve heard my theory on this, right?


MATT: I don’t know what kind of data you said you have but I have a joint one with my wife.

NASIR: Same here.

MATT: So, we have a set amount. But we do the same thing pretty much every single month. My theory is this; once or twice a year, Verizon just says you use more data than your limit and then they make you pay the extra. It’s not much, it’s like $10.00, I think, if you go over that month which is nothing for one individual. But, if they do it to every single customer once or twice a year, that adds up to some pretty significant amount of money there.

NASIR: It’s big. Good class action if we can prove it. But I think there are a lot of instances like that. I mean, I think even grocery stores at one point. I remember in San Diego, all the Safeway affiliated grocery stores were being fined because their actual prices at the register were not matching their advertised prices by, like, cents or even more. Of course, that adds up.

MATT: Yeah, I’ve always wondered about that. There’s two things I always wonder about and never look into – one of which I could and one or which I can’t. One would be grocery store; like, you just go and pay whatever and then you get a receipt and probably never look at it. Like, you never compare the items that have their price to what you end up paying. Some people do but I would think most don’t.

NASIR: Actually, my mom used to. I don’t know if she still does.

MATT: Some people do.

NASIR: And she’d always catch something. She’d be like, “Oh, I was charged twice for this item,” before we left the store. I’m like, “Mom, you don’t have to, it’s okay. It’s, like, $2.00.”

MATT: The funny thing is, if you do that and you’re like, “Oh, this was supposed to be this price,” a lot of times, they’ll just be like, “Oh, okay,” and they’ll change it on the spot.

NASIR: Yeah.

MATT: So, the other one being, filling your car up with gas. Like, there’s no way to tell.

NASIR: You’re right – unless you’ve got those gallon tanks.

MATT: Yeah.

NASIR: They’re governed by the state and they’re supposed to be inspected, but you can see – I’m trying to remember – I know some states actually put in the date that it was inspected and I think California does. I haven’t filled my gas there in a while but sometimes it’s been a while so, you know, who knows? It’s all a scam.

MATT: It’s what you’ve got to deal with.

NASIR: That’s why we’re here! I mean, we’re here to protect the public and inform you about it and that’s why I think everyone should just give up gasoline. Stay away from it. Boycott it.

MATT: No one would be able to go anywhere. Can’t fly anywhere.

NASIR: The gas stations would lose, too, though. So, it’s a lose-lose situation.

MATT: Gas stations don’t make money off of the actual gas. They make their money off of the convenience store.

NASIR: They make some money, but you’re right, absolutely. So, okay, well, thanks for joining us for today’s episode of Legally Sound Smart Business. Thanks for joining us.

MATT: I don’t even know what we talked about but keep it sound and keep it smart.


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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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