The Futility of Human Endeavor

Once, long ago and far away, a shareholder sued the directors, financial advisors, and accountants of a savings and loan in North Carolina, mainly over the purchase of another savings and loan. But generally, the plaintiffs alleged that the directors had completely screwed up in their management of the savings and loan, which had failed. Remember when savings and loans were failing in the late 80s? This was one of the first of them.

My law firm represented one of the directors. In what I suppose might be a useful exercise, all of the defendants—accountants, financial advisors, and other directors—gathered in a west North Carolina city law firm’s conference room to conduct interviews of all of the defendants. Nothing was on the record, and we had a joint agreement that everything said by anyone to anyone was attorney-client privileged. Was the meeting useful?

I don’t know. It sure was expensive for the clients. All of these lawyers for a week in a conference room, plus hotel, plus meals?

A trial lawyer I helped out some, Joseph W. Moss, now gone, hated taking so much discovery like that. He said, “Tell them to come to the courtroom and bring their documents, put them on the stand, and ask them what they know.”

He was an exemplar from a simpler time. Probably there are few trials lawyers with the Joe’s intellectual capacity. We’d be in a trial, in the middle of a cross-examination, and he’d lean over to me and say, “Gimme that document.”

What fucking document? There were boxes of documents. Joe had that kind of memory. Rest easy, Joe. I miss you.

Anyway, to jerk us back to the present action of our story, (as we fiction writers would say, God knows I wish this had been fiction) we had all gathered in a law firm’s cramped conference room and took this informal discovery. What I mainly remember of that awful, claustrophobic week, are several things:

• Our main client, whom my wife and I nicknamed Fuzzy Bear because that’s what he looked like: he wore a dark blue suit and socks that were blue for a while but up near the calf turned white. He’d answer, “That’s ex-ACT-leh raght” to most questions.

• A lawyer from Nancy’s firm participated: Jim, a large man, who played football on Wake Forest’s line. They were playing Virginia, and Jim was plowing away at this Virginian on every play till the Virginian said, “Hey, we’re going to be out here all afternoon, do you really want to go so hard at it?” Anyway, Jim was to my Yankee ears incomprehensible, and at some point in our informal discussions he said, “Mmmm, mmmm, mmmm, class action discovery, if they ask for it.” Nancy and I have, as all couples, used that as a catchphrase for something ominous and incomprehensible: “Mmmm mmmmm mmm class action discovery.”

• The motel where the partner I was accompanying, Dan Fouts, now also gone, featured a fantastical breakfast bun, full of sugar, cinnamon, but just so much more than your typical cinnamon bun. It’s probably why Fouts died so young.

• A couple of summers before, I had been a summer associate at a firm in Birmingham, AL, where I learned about 503(c)(3) trusts, I think. Or some variation. Employee benefit trusts. I wonder if anyone even uses them anymore. Someone in the conference room happened to mention them, and I chimed in for some reason, completely unlike me, on some point of them, and the lawyer said, “Can we bring you in to help?” and Fouts’ chest swelled with pride: his associate had just impressed someone.

Time to get on with it: this was a case subject to what used to be called (and maybe still is) the Business Judgment Rule, which holds that you can’t just sue directors or officers of a corporation for a bad decision. I especially see the wisdom; we all fuck up in good faith. So if you want to go after the directors of a corporation, like our client, you have to say that they did something more than just be a moron (which our client appeared to be). You have to say, for instance, that they actually committed fraud.

Well, I read the complaint, and I didn’t see any statements of fact except that the directors were just stupid. No fraud, no self-dealing, no conflicts of interest were alleged. So I wrote my brief to the trial court: the Business Judgment Rule insulates directors from liability unless they committed fraud, or had conflicts of interest, etc. The plaintiff in this case didn’t allege anything of the sort. The complaint was, on its face, deficient, and subject to dismissal under Rule 12(b)(6). If any of you out there are nodding your heads in recognition at the reference, I’m so so very sorry for you.

The plaintiffs appealed, and the North Carolina Court of Appeals affirmed the judgment of the trial court: dismissal was appropriate. (There were other issues; plaintiffs have to allege that they didn’t ask the directors to fix their mistake because it would have been futile, and there wasn’t anything of the sort in the complaint.)

Counsel for the co-defendants congratulated me: the court of appeals had essentially copied my brief to write their opinion. It was a rare, unqualified victory.

A couple of years later, in a quiet, boring lull, I thought about that case, savoring such an unqualified victory, and went back and found the plaintiff’s complaint and glanced through it. Guess what: they had alleged fraud. They shouldn’t have been thrown out of court but been allowed to continue. I’d completely missed it and had thus made a complete mess of justice.

But so had the other defendants, who hadn’t noticed it either, or the judges, who presumably had looked at the entire record, including the bloody complaint; or the goddamn plaintiffs who wrote the complaint! Why didn’t they remember that they had alleged fraud? How could they not? I was actually a little angry with the plaintiffs.

What should I do? It turns out that my duty of zealous representation of my client wins out over anything else, like going to the court and telling it that everyone had screwed up. I was not allowed to disclose the secret.

However, the bottom line is that Fuzzy Bear and his buddies may have been dumb, but they weren’t bad guys and didn’t commit fraud or act out of a conflict of interest. Justice was done; plaintiffs really didn’t have a case. If I had exposed the mess-up in a timely manner, the case would have ground on at great expense to everyone (I’m looking at you, cinnamon buns) and ended up the same way: no damages for the plaintiffs.

But in the ensuing years, I’ve wondered about that case. Why do we bother? A bunch of lawyers spent a week and untold thousands of dollars of insurance company dollars in a conference room and motels, interviewing people to no point whatsoever. What, were the directors and accountants and advisers going to stride in, plop down in a seat, grin, and say, “Man, we really pulled a fast one! We had a whole bunch of sweetheart deals, and they all went south, but we got our fees, you betcha!”

That was a wasted week save for the cinnamon buns. Also I made Fouts go to a Chinese restaurant and even though he got a mild dish he was sweating all over his forehead before it was over. That was pretty funny.

Also, on the way up there, Fouts was driving and I saw a vanity plate and railed against people’s egos. Fouts gently reminded me that his license plate read “USAFR”, as he was a general in the Air Force reserve. Anyway I had screwed up. Fortunately I had that minor victory about 501(c)(3) trusts later in the week, so maybe he forgave me.

I read somewhere that most of what every generation does is useless, and it’s only a few people, maybe like Gates and Jobs, Edison and Tesla, who make a real difference. The rest of us are only treading water and pretty ineffectively at that till we expire. Please refer to the title.