Jason Gottlieb

3Hey, it's great to talk to you again.

5really shocked. It is an image, it's a fake background, but the bookshelves are real. They're actually in my living room. So these are my bookshelves and my books. I should say our books. They're mostly my wife's books. She's a professor.

7Okay, and we're warmer.

9Not from Toronto. I was born in Colorado Springs, Colorado. Both my parents are originally New Yorkers. My, my dad was in the U.S. military in the Air Force, so he transferred around a little bit before I was born, and he was stationed at NORAD, the North American Radar Defense system buried in Cheyenne Mountain right outside Colorado Springs. So I was born in Colorado Springs, but I moved back to the East Coast at some point. So I went to, you know, high school and college on the East Coast in New Jersey. And then I traveled around the world a little bit. I did graduate school at Harvard for a year and a half, went to Tokyo to work at a computer company for 2 and a half years.

10And then back to New York to Columbia Law School.

12I, I, I'm not sure how many Canadians are going to be in a highly classified military intelligence—

14Yeah, I didn't know that.

16Fort Lee, New Jersey. There's, there's, it's just the public high school in Fort Lee. Fort Lee, New Jersey, and I put it there because I was proud of it and happy to go there. Nothing more.

18I saw the interview that you did with Mike. It was a terrific interview. Yeah, I had a chance to meet Mike. We overlapped. Rutgers is just sort of right up the street from Princeton. And we worked together a lot. We spent a lot of long hours in car rides together up and down the East Coast going to various other universities for these debate tournaments on weekends. So I got to know Mike, and then we reconnected when we both lived in Japan at the same time. So we've been friends for— I hate to admit how many years it's been, but you were naming years already, so it's, you know, going on 30 years now.

20Even though apparently they were, they were there around me all the time, I just didn't know it. Yeah, I don't I, I don't really remember. I don't remember a, a large Canadian contingent at my local high school in New Jersey. I'm sure we had a whole a group of them at Rutgers, which is sort of our— Rutgers is the state university in New Jersey, so it's a very, very large school. So I'm sure there were some, but I don't particularly remember much about it.

22Lawyers doing science, man.

24But before before I went to a law school, when I was in graduate school, I lived across the hall from a Canadian who invited me to a Canadian Thanksgiving dinner at Harvard, and we had a really great conversation there. I met some prominent former Canadian politicians, including Kim Campbell, and we had a spirited discussion about whether— this was back when Quebec was voting whether or not to secede, and I volunteered that I thought that if Quebec voted to secede, then they would cut off the Maritimes, so they should also vote to secede and they should join the United States. Which everyone found absolutely absurdist. And I think I was mostly kidding about it, but who knows?

25So things like that had been in the news, obviously, in the United States. It was a fairly significant event or issue even down here, the Quebecois secession question. So every now and then we'd think about it. But for the most part, I think your audience would agree that Americans are wonderfully solipsistic and we only think about ourselves.

28It's, it's funny you should say a quintessential New York lawyer and ask what we think, because, you know, for the quintessential New York lawyer, if he get 5 of us together and ask us any question, we'll have about 15 opinions and then we'll voice them all loudly and quickly. Look, like any group of people, it's going to vary widely. But I've been very fortunate in my practice that the Canadian lawyers that I've worked with have been absolutely wonderful to work with. In addition to working with Mike Lubetsky and his partners at Davies Ward. You mentioned the Medjedovic— I'm sorry, I can't— I still have trouble pronouncing it, but Andayan's case, the cryptocurrency case. And there I've worked with the team from Stockwoods, Gerald Chan and Stephen Aylward, and they've just been absolutely phenomenal lawyers to work with, very smart, understand this space very well.

29So from my point of view, I may be spoiled having had access to only the very top Canadian lawyers, litigators, but you know, from that I can say my opinion of them is extremely high.

31of the differences between the regions, you know, New York litigators have a certain style and a rhythm and a cadence and a way of practicing. They're the way that the courts work. And in other parts of the country, sometimes it works the same way and sometimes it doesn't. I was in one southern state that I won't identify where I had a local counsel who were into the courtroom, the big cowboy hat and a bow tie and the cowboy boots and a little stubby cigar that he kept in his mouth the entire court appearance. And he knew everyone in the courthouse and everyone knew him. And after the hearing, the judge stepped off the bench and was chatting with my local counsel and the other side's local counsel about, you know, where they were going to go dove hunting that weekend.

32And I have to say that us out-of-town New York lawyers were kind of standing back thinking, this is not the way this would go in a New York courtroom. But that's okay. I mean, one of the cool things about America is that we have so many different customs and practices across the states. People are going to be regional, and even within the regions, there are lawyers who kind of fit into the local stereotypes. You mentioned that the quintessential New York lawyers, we've got our own stereotypes. And there are lawyers who, who who don't fit that or who transcend the stereotypes. It's a very varied practice.

34You know, there are even differences between our federal system and our state system. For example, in the state system, you know, if you're up for an argument, the judge has 30 other cases waiting. You're going to get, you know, 5, 10 minutes maybe and you're going to speak very quickly because if you take a breath or pause, sometimes you'll get interrupted by your opposing counsel, by the judge, sometimes by people in the peanut gallery. It can be a little bit more of a free-for-all, and you're sort of expected to just jump right in and get to the point. The federal courts, you may have more time allocated for you and only you. It could be a little bit more formal, a little bit more of a presentation.

35And the judges can have more control over their calendar. So I've had, you know, an argument that was scheduled for an hour end up going 3 or 4 hours because the judge just really took an interest in the material and wanted to dig in and answer all the questions. So you'll have even different experiences, you know, in courtrooms that may be across the street from each other just because of the style of that courtroom and what's on their docket. So I think that most people would expect the federal system where lawyers stand up and, you know, can orate at length about their view of the case law. And most of New York justice gets done in the state courts where it's much more rapid-fire free-for-all.

38Sure. We also have a dual system, a federal court system and a state court system. Our federal court system is a system of limited jurisdiction. The federal courts can take on cases where there is either a federal question. So as you were just responding to, if there's a question involving a federal statute or issues of federal law, then federal court jurisdiction is appropriate. The federal courts can also take on cases that are known as diversity cases. That is, you have a citizen— citizens from different states involved and the matter in question has to be over $75,000. So it has to be a matter of more than just trivial import. In that case, a federal court can hear the matter.

39And the idea there is just because they don't want, say, someone from New York to sue someone from Texas in a local New York court where it might be unfair to the Texan and vice versa. So the idea is if you have people on different sides of the V from different states in a matter of some import, you can take that to a federal court where, in theory, you'll have a more neutral hearing. You won't have judges who may be your local elected judges. So that's the system. And in theory, it sounds pretty simple, but could actually get to some really complicated problems. So, for example, in the federal system for diversity, you have to have complete diversity.

40All the people on one side of the V have to be from different states as all the people from the other side of the V. But an LLC or a partnership for diversity purposes takes on the decision— the citizenship of all the members of the LLC or all the members of the partnership. So if one person is suing an LLC, that person has to plead the citizenship of all of the members of the LLC. And if there are members of the LLC that are themselves LLCs, all of the citizenships of all the members of that sub-LLC in order to make sure that there is complete diversity. If there's not complete diversity at any point in the case, the case can be dismissed out of federal court.

41So I've been involved in cases where, you know, one person in a partnership sues the partnership And nobody realized that that actually knocks it out of federal court until quite later in the case. And once it's realized, everyone may be very annoyed that they've wasted all that time in the federal court and now they have to start over again in state court. But that's the rule. That's what happens. So it's not exactly the most efficient system sometimes, but that's the system we have.

43Yes, they cannot— the federal court cannot hear the case unless they have jurisdiction. And if they don't have either subject matter jurisdiction or diversity jurisdiction, then they have to dismiss the case. Then at that point, it has to be brought in a state court. The state courts, as you said, something like the provincial courts, can take any case. So you know, if you— if there's some doubt, you can sue in state court and the state court should hear it. Although you— there's a process to remove a state court case if it belongs in federal court. So if I brought a case in state court and my opponent thinks actually there is subject matter jurisdiction or diversity jurisdiction, they can remove it to the federal court.

44And then I have to go to the federal court. And if I agree, we just stay in federal court. But if I disagree, if I think that the removal was improper, I can make a motion to remand it back to the state court. And an interesting point here is if I win that motion to remand and find that the case was improperly removed, then I can recover the attorney's fees incurred for the remand, for the removal and remand, which is one of the few cases in US litigation where you actually can get attorney's fees from the other side.

46So inconvenient forum is a separate basis to— there are sort of two questions that you're, that you're asking here. So one is, let's say I sued on behalf of a New Yorker A New Yorker sues a Texan in the New York state court. The Texan could decide, I'd rather be in federal court and attempt to remove the case to federal court. But if for whatever reason the Texan said, no, I like this judge, I like this court, I'll stay in state court. There's no mandatory removal of that case. So that case can proceed in state court and the judge there will hear it and probably isn't going to ask, why isn't this in federal court?

47That it may not be the case if there is a federal question. So if the parties— if I sue someone for a securities, federal securities fraud matter in a state court and that person decides not to remove it to federal court, the judge may say, what, why is this in front of me? Doesn't this seem like a question of federal law? But the judge still has jurisdiction to hear that case. So that's the answer to your first question. On the inconvenient forum, there's a separate doctrine, forum non conveniens, or forum non, as we call it, where you can say this isn't the right forum for this matter. And that's separate from the jurisdictional point. That's saying if I brought a case on behalf of a Texan against a Californian and I brought it in New York just because I happen to be in New York, then the California citizen may say, this, this is silly, this doesn't belong in a New York courtroom, this has no connection to New York, this belongs in either Texas or California, but, but not in New York.

48So that would be a, an example of a forum non-argument.

50Well, that's been a 240-year-long argument, but yes, essentially that's right.

52it? So did we all.

54I think the answer to that is no. Most cases are in the state system, just because the federal courts can only take certain kinds of cases, whereas the state courts can take more. And I think more cases just in terms of averages, you know, you forget, don't forget things like small claims court or other kinds of, you know, places. As soon as we're saying a federal court is for diversity for matters over $75,000, you know, many of the sort of bigger ticket items that people at big law firms will work on, a $75,000 threshold can seem trivial, but for most people and most disputes, $75,000 is a lot of money. So you have a lot of disputes that play out in small claims courts or in courts that are slightly below, you know, sort of premier commercial divisions in the state courts.

55And a lot of litigation happens there. You know, things like landlord-tenant litigation, family law, et cetera, et cetera, that all takes place in the state courts. Courts. In terms of the business litigation, I think it's sort of probably equal between federal and state. And it's really largely a question of coincidence. Right. Where are the parties from? But those issues of federal importance all get played out in the federal courts.

57I think there's an overwhelming, or rather disproportionate amount of business litigation that happens in the Court of Chancery in Delaware, partially just because so many corporations are incorporated in Delaware For historical purposes, Delaware has tried very hard for a long time to have a very corporate-friendly, business-friendly legal system, corporate law statutes. And the Court of Chancery is generally comprised of some of the best corporate law minds in Delaware who understand it. So it's probably one of the premier business litigation courts in the United States. But apologies to my friends in Delaware. I'll have a little New York pride. New York is still the center of commerce in America. So it's hard to say which is more relevant between the Delaware courts and the New York courts.

58Obviously, you have a lot of very high-profile things taking place in the Delaware courts. Just the most current example, Twitter just sued Elon Musk in the Delaware court over that merger agreement, and we'll see what will happen there. But I think you have, you know, premier commercial litigation filed in the federal and state courts of New York all the time, every day. So I'll have a little New York pride for that. But also, you know, we can't forget some others, right? The Southern District— I'm sorry, the Central District of California which is the federal court covering Los Angeles, as well as the Los Angeles state courts, have a lot of big business litigation going on.

59The Northern District of California, which covers the San Francisco area, is, you know, for pretty obvious reasons, it covers Silicon Valley. So it's a hub for a lot of high-tech litigation issues. You get a lot of high-profile cases coming out of there as well.

63We have a lot of, every New Yorker's got their great stories. I mean, there are so many sort of famous people who live here and work here. And then of course, you know, even famous people like, They eat and they do kind of normal things. I sat next to one of the big Yankees stars at a circus for kids. So we all had our kids crawling all over each other and we were, you know, just kind of two dads out with families. You know, we've had other encounters with athletes or kind of, you know, movie stars, that sort of thing. And you just gotta, you know, if you're a New Yorker, you just play it cool.

64Yeah, how are you doing? I was eating with a client in one restaurant where I saw, you know, our— the new James Bond. He was very, very suave, very good-looking. And when I looked up at him and he looked down at me and we sort of met eyes for a minute, and he just, as he passed our table, looked at me and said, "It's nice to see you again." And I said, you know, gave him a little nod. And I've never seen this guy other than on a movie screen. I have no idea who he is. But, you know, my lunch companion was extremely impressed. You know James Bond? Like, no, I do not.

65I do not.

67There's, there's a mix of that. I think for the most part the rules of procedure are reasonably standardized, at least in principle. Right. In New York, we call it a motion to dismiss. In California, maybe it's a demurrer. In Texas, they try not to have those at all in the state courts. But there exist the same principles across most of the states. They're just little variations. So obviously, the Federal Rules of Civil Procedure, the Federal Rules of Evidence, Federal Rules of criminal procedure are all standardized in every federal court in the country. But even after that, you'll have the federal rules, but there's a lot in the gaps of the federal rules.

68So each district can have its own district's local rules. You know, the Southern District and Eastern District of New York covering basically Manhattan and Brooklyn and Long Island have a set of local rules. And each judge has their own individual practices that they put it on the website. So, you know, knowing the federal rules in a New York court are not enough when you go out to California, there are different ways of doing things. Even just the timing on briefs and arguments have different ways. In the Southern District of New York, and this is all in the federal system where it's supposed to be standardized, I would file my motion, generally speaking, and then there are X days for opposition, X days for reply, and then the judge can set oral argument whenever the judge wants to, and the parties will wait for a hearing if there's going to be one until the judge is ready.

69Whereas, you know, in a California federal court, you set a hearing date and then you work backwards from there to set when the briefs are going to be due. Now, practically speaking, both cases, parties will just agree on a schedule. But these kinds of differences show that the rules, even when they are harmonized, aren't really that harmonized. You multiply those differences when you go into the states. The New York civil procedure rules are a completely different thing. And of course, they have a lot of the same principles, but a lot of the rules are fairly different in terms of how practically things are going to be accomplished. And you have definite differences, regional differences.

70And those differences can be both explicit in these rules and sometimes they're implicit. I'm always surprised at how quick the Texas lawyers are to tell me that in Texas state courts, motions to dismiss or demurrers are just routinely denied. You're going to go to discovery. Don't bother making it. And we shouldn't even try to get out early. Whereas in the New York courts, it's much more common to make a motion to dismiss at an early stage. And if you can make an argument that the complaint does not allege a claim for whatever reasons, you actually have a reasonably good chance of getting out. So differences— what's the system saying? Two countries divided by a common language.

71We are 51 systems divided by a common set of civil procedure rules.

73That's a great phrase to take out of context. Ontario is much more like Texas. We have to cabin that a little bit.

75I'll add a 5th in there. I'll add a 5th in there. We have a summary judgment procedure as well.

77That's, that's correct. So how often can that happen?

79Well, it's, it's more, it's more common in some areas of law than others because of the standards that are set up. So for example, and let's just take the, the Federal Rules of Civil Procedure. So Rule 8 governing pleading standards says that most causes of action only need a short, plain statement of the cause of action. So take a negligence claim, right, for physical damage. If I allege, you know, Pulat was walking down the street and was carelessly swinging around a baseball bat and he hit me in the head and I've been injured and I'm suing him for negligence, that case would be very difficult to dismiss on a motion to dismiss, because the standard for a motion to dismiss for under Rule 8 is that the judge is not going to examine any of the facts.

80The judge will accept all the facts that were pleaded as being true as long as they are plausible. So if on the complaint I just said, that's plausible. I mean, it's, it's a little silly that you've been walking down the street swinging around a baseball bat, but it could happen. Right. If I alleged that you were walking—

82In America, it could happen. The least likely thing that could happen in America. If, if, if, if if I alleged you were walking down the street, you know, swinging around an alien from, from Pluto, then maybe that gets dismissed as implausible. But, but the— that would be a tough one to dismiss on a motion to dismiss. And frankly, you may not even get a motion to dismiss on, on that particular issue. However, there are variations. So for example, negligence that only only causes economic loss in the absence of some special relationship isn't even a cause of action. So you may be able to get that dismissed on a motion to dismiss stage.

83And then when there are certain causes of action that have special pleading standards, so for example, if you are pleading fraud, a different rule kicks in. And under, under Rule 9, you have to allege fraud with particularity. All of the elements must be alleged with particularity, including, say, intent. So you have to very particularly allege facts that give rise to a strong inference of intent to commit fraud. And if you do not put those facts in the pleading, then it's ripe for a motion to dismiss based on, based on that absence of fact. So especially in business cases alleging fraud or securities fraud, there are a fairly strict set of hurdles that a plaintiff has to hit in that original pleading just in order to survive this initial motion to dismiss.

84Even taking all of the facts that they allege as true.

86Yeah, I'll take the second one first because it's the easier question. Most plaintiffs will get at least another bite at the apple, if not more, if it's evident that amendment would not be futile. That is, they could amend in a way that would meet the pleading standards. So take this securities fraud case. I plead that I was supposed to purchase some securities. I gave you the money. You didn't give me the securities. But I don't plead anything about intent. No facts about intent at all. And the judge says, you have to plead facts about intent, otherwise I'm going to dismiss it. But I will dismiss this one without prejudice. You can replead because you could plead facts that would get you there.

87So go right ahead and try again. Judges will freely give at least one retry, sometimes two. After that, your chances diminish pretty, pretty success— pretty successfully, pretty severely. If you, if you can't do it on the first or second try, judge is going to think, yeah, you're not going to be able to do it on the third or fourth or definitely not the fifth. So you'll, you'll see that go down. In terms of the question of how hard is it It really depends on the circumstances. In something like that, if it was just you and me, right, we're going back to a simplified model. I said, hey, I'd really love to buy those securities from you.

88Here's all the money. And if you said, thanks a lot, I'm taking your money. And by the way, you're never going to see the securities because I hate you. See you later. That would be an easier case to successfully allege the facts that would infer that you have intent to commit fraud. But it could be a little bit more difficult in a case— and these are the most often cases we see— where a company is going into a merger with another company and a plaintiff's lawyer will bring a class action saying, we think that you didn't disclose all of the information in the proxy statements or in your public materials that would have enabled us to get a fair price, and therefore we didn't get a fair price and we should have gotten more out of it.

89Well, okay, but you have to allege that the company or the executives in question intended to omit these materials in order to, you know, change the price in some way. And that can be difficult if you're an outsider to this, to this whole arrangement. And I think there are good reasons to force plaintiffs to have to plead that with particularity. Because otherwise, you could say that for just every single merger that goes through. I think you omitted something, and if you had only disclosed it, we would have been richer, and therefore you're to blame. You could say that for every corporate transaction ever. So it makes sense to require people to plead a little bit more to show that there could actually be a fraud claim there.

90The cost of discovery in the United States is a very important factor in making sure that motions to dismiss serve an appropriate gatekeeping function. Because if you sue a big company and they make a motion to dismiss and that motion to dismiss loses, then they're looking at a discovery practice that could— it's going to be very intrusive, very intensive, and very expensive. Six figures easily, sometimes seven figures and sometimes more for a year-long intrusive practice. So, you know, if you're a big company that gets repeat class action litigation, it could cost you millions and millions and millions of dollars a year in discovery for claims that are bogus, for claims that everyone knows aren't going to go anywhere at the end of the day.

91But we can make out this facial prima facie case. Maybe something will come out of discovery. Because of these abusive practices, we've actually had a series of laws going back to the '90s, the Clinton era. The PSLRA, the Private Securities Litigation Reform Act, raised the bar a little bit for bringing these actions. And we also had a couple of court decisions, most notably the Iqbal case, I-Q-B-A-L, which raised the standards for pleading fraud. So we have a situation now where there is a fairly high barrier to plead a case for securities fraud, plead a securities class action. And whether it's too high or not, I'll leave to other practitioners or academics. But it does have to be appropriately high because if it's too low, then unscrupulous plaintiffs' lawyers can inflict a million-dollar discovery budget on companies at will and thus say, I'm going to bring this case against you, but I'll settle for half a million dollars.

92And companies will take that deal every day because it's cheaper for them to do so. But these are tollbooths on the highways of American capitalism. And we have to find that right balance that allows people to bring good cases where there truly are frauds or wrongs or harms, but not have the barrier be so low that people can inflict these massive bills in order to just extract value from companies where they might not have good cases.

94We've always had those problems. I think COVID made that worse because a lot of things got pushed off or scheduled, and that the court is still digging through a backlog of when it was unable to function at all or when it was unable to function as efficiently because everything was remote and the court system just was not set up for that. So we're still digging through the backlogs. The backlogs are particularly bad in the state system, which is always overcrowded and delayed as it is. I think it's a real problem because things happen more quickly. I practice a lot in the cryptocurrency area and crypto happens in nanoseconds. We've seen massive shifts in market forces.

95We've seen meteoric rises. We've seen catastrophic falls happen in a matter of days. So when you're talking about needing to take action immediately, And you have a court system that provides no opportunity for taking action in anything less than weeks or months. Even a TRO or a preliminary injunction sequence can take a few weeks. These are delays that are really difficult to deal with. And I think the brunt of it falls not on the bigger businesses that have Sure, we've got a business dispute. It's going to take a long time. It'll be inconvenient, but this is the way it goes. And after all, it's just money. It's $1 million one way or the other, which is massive amounts of money to normal people.

96But for large businesses, they can function pretty much normally during the pendency of a dispute like that. But when you have disputes that are bet the company, as the cliché goes, that doesn't play anymore. And I think it particularly hurts ordinary people who want to have access to justice, but the court system is so backed up that it can't give that to them. So if you are, you know, just to take a landlord-tenant example, right? If you are a tenant whose landlord hasn't fixed anything since 1957 and your roof is falling in, it can take an embarrassingly long time to get a court to intervene and help fix the problem. To be fair to landlords, if you're a very great landlord whose tenants are just not paying you and refusing to leave the premises, it can take an embarrassingly long time to get the courts to redress that situation as well.

97So, you know, not putting any blame on, on anyone in particular here, but for sort of ordinary folks and ordinary business disputes that are of critical importance to your everyday lives, that delay is, is really difficult. Some judges are taking measures to address it. Some of those measures are better than others. I've had judges have put us on lightning-fast discovery schedules, and sometimes that's— it's too much, right? A judge says, I want this massive thing, you know, to be tried in 6 months, so everyone's going to do all their discovery in 2 months. And all the parties say that's crazy. There's no way we can do that. It's just impossible. But I think that the fixes that are needed are deeper and more structural.

98I mean, the courts need to be bigger. We need more judges, more court personnel. We just need more resources. And that's something that I think has to come from legislatures, either federal legislatures for the federal court system, from our Congress. Or for states that are dealing with already strained budgets. I'm not so optimistic that's going to happen soon.

100That was my, my pleasure. And you know hello and best wishes to all my friends up north,