Alison Frankel

$90 bln answer: Rakoff says Picard has no standing in bank suits

July 29, 2011

In the end, it wasn’t even a close call.

Using words like “conjecture,” “bootstrapping,” and “a stretch,” Manhattan federal court judge Jed Rakoff on Thursday decimated trustee Irving Picard‘s multibillion-dollar campaign against the banks that allegedly helped Bernard Madoff engineer his fraud, in a 26-page opinion that left no room for doubt. Rakoff so thoroughly rejected each and every one of Picard’s arguments for why he had the right to bring common law fraud claims against HSBC and UniCredit that the judge didn’t even cite much legal precedent through the first half of the ruling. He simply applied what he calls “ordinary use of the English language” to conclude that no reading of the relevant laws or cases grants Picard standing to sue the banks for unjust enrichment and aiding and abetting fraud and breach of fiduciary duty. This ruling derived its power — and it is a very powerful opinion — from its simplicity.

New study: SEC enforcement — and class actions — actually work

July 27, 2011

There are few scapegoats more overloaded with blame for all that ails the U.S. economy (at least when we’re not on the brink of defaulting on our loans) than securities class action lawyers and the Securities and Exchange Commission. You know the rap. Class action lawyers are accused of accomplishing nothing more than transferring money out the pockets of corporate shareholders and into their own wallets; the SEC, meanwhile, is derided for failing to detect flagrant fraudsters like Bernard Madoff and letting the true perpetrators of the mortgage crisis off the hook. (Reuters, incidentally, has a great story today about the SEC’s new hotline for fraud tips, so the next Bernie Madoff won’t get away with deceiving investors.) There’s precious little hard data to measure the deterrent effect of SEC enforcement or securities class actions — how can you count averted frauds? — so it’s all too easy to assume securities litigation and SEC enforcement don’t stop corporations from misbehaving.

In push for settlement, judge tells Oracle, Google to get real

July 26, 2011

When Oracle and the European software developer SAP went to trial last winter to figure out what SAP owed Oracle for infringing software copyrights, Oracle asked for the moon. SAP argued that Oracle lost only about $40 million in actual profits as a result of its infringement. Oracle’s lawyers at Bingham McCutchen and Boies, Schiller & Flexner, however, told jurors to ignore lost profits and focus on what SAP should have paid Oracle in licensing fees. They ultimately persuaded jurors that Oracle could have received $1.3 billion in hypothetical licensing negotiations for the intellectual property SAP misappropriated. The jury verdict left SAP sputtering with astonishment; in attempts to set aside the award, SAP’s lawyers at Jones Day and Durie Tangri have called Oracle’s calculations of what it might have received in licensing talks “sheer speculation.”

Muddy Waters indeed! China stock analyst claims blackmail, libel

July 22, 2011

The whirlwind of controversy surrounding supposed securities fraud by China-based, U.S.-listed companies spins ever faster. Today’s development: an utterly fascinating libel and defamation complaint that a tiny Hong Kong research outfit called Muddy Waters filed late Thursday in Los Angeles Superior Court against yet-unidentified defendants.

Bondholder beats Argentina on appeal but still may not recover

July 21, 2011

For vulture funds holding defaulted Argentinean bonds, the U.S. Court of Appeals for the Second Circuit has been a brick wall with only the tiniest of chinks. In recent years, the appellate court has rejected all sorts of clever stratagems the bondholders and their lawyers have dreamed up in an effort to get their hands on Argentine assets, including an attempt to attach assets belonging to Argentina’s central bank and pension system.

Picard drops $2bl in claims against UBS? Um, no, he doesn’t

July 20, 2011

The damages claims in Irving Picard’s pursuit of the banks that allegedly helped Ponzi schemer Bernard Madoff are so outsized that even a simple two-page letter from a federal judge can lead to a $2 billion kerfuffle. On Tuesday, Manhattan federal district court judge Colleen McMahon sent a letter to lawyers for Picard, the bankruptcy trustee for Bernard L. Madoff Investment Securities, and to lawyers for UBS, which is a defendant in two of Picard’s suits. UBS’s counsel at Gibson, Dunn & Crutcher had moved in June to transfer two Picard suits naming the bank as a defendant out of bankruptcy court and into federal court; Judge McMahon, who is overseeing Picard’s case against JPMorgan Chase, agreed to take the cases on July 7 and began requesting information, by letter, from Picard counsel at Baker & Hostetler and UBS counsel at Gibson Dunn.

Who gets to sue News Corp?

July 19, 2011

Well, here’s a big shocker: Grant & Eisenhofer and Bernstein Litowitz Berger & Grossmann aren’t the only shareholders’ firms that think Rupert Murdoch’s News Corp is ripe for the picking. It’s been a little more than a week since G&E and Bernstein amended the complaint in their already-underway Delaware Chancery Court shareholder derivative suit against the News Corp board to include allegations from the British phone-hacking and bribe-paying scandal. Turns out that’s plenty of time for other shareholder lawyers to fire up their word processors and lodge their own complaints.

Tale of two defendants: HTC, Nokia fates diverged in Apple case

July 18, 2011

Back in March 2010, Apple filed separate suits at the U.S. International Trade Commission against Nokia and HTC, accusing both cellphone makers of infringing Apple’s smartphone patents. In April, the ITC staff recommended that the patents Apple had asserted against both Nokia and HTC should be tested in a consolidated case. Nokia and HTC supported the proposal. Apple’s lawyers at Kirkland & Ellis complained that the partial consolidation would aid Nokia and HTC by creating “complexity and delay,” but the lawyers didn’t fight hard against it because they didn’t want the case — which had the potential to knock iPhone competitors out of the U.S. market — to get bogged down.

Gibbs & Bruns comes to NY to sell investors on $8.5bl BofA deal

July 16, 2011

Kathy Patrick wants to set the world straight.

The Gibbs & Bruns partner, who represented 22 major Countrywide mortgage-backed securities investors in the negotiations that led to the June 29 proposed $8.5 billion Bank of America deal, has come East from her home office in Houston to sell Countrywide MBS noteholders and anyone else who will listen on the settlement she and her partner Scott Humphries negotiated with BofA and Countrywide MBS trustee Bank of New York Mellon.

BoNY releases expert reports backing $8.5bl BofA MBS deal

July 14, 2011

Faced with a barrage of investor criticism (see here, here, and here) of its proposed $8.5 billion mortgage-backed securities settlement with Bank of America, Bank of New York Mellon, the MBS trustee, has released the expert reports underlying the agreement. The reports—in particular the valuation report by Brian Lin, the managing director of RRMS Advisors—provide an extraordinary window into how this deal got done. They may not change anyone’s mind about the fairness of the settlement proposal, but they answer a lot of the questions that challengers of the deal have raised.