Alison Frankel

Last October, when BofA’s proposed $8.5 billion settlement of Countrywide mortgage-backed securities breach of contract claims was just a twinkle in Kathy Patrick’s eye, David Grais of Grais & Ellsworth told me that one of the biggest problems for lawyers representing disgruntled MBS noteholders was the investors’ reluctance to come forward. Noteholders were afraid to provoke the banks that issued mortgage-backed securities, Grais said, so they didn’t want to sue under their own names. That’s why one of Grais & Ellsworth’s early put-back cases was filed on behalf of an ad hoc coalition of anonymous Countrywide MBS investors operating under the name Walnut Place.

It’s also why the Gibbs & Brun investor group that negotiated the BofA deal made such a splash. Kathy Patrick’s big institutional investor clients, including Pimco, BlackRock, and the New York Federal Reserve’s Maiden Lane funds, showed their faces when they offered public support for the proposed $8.5 billion settlement. In fact, after Grais’s Walnut Place investors filed an objection to the proposed deal, supporters of the settlement drew a contrast between the Gibbs group’s public face and Walnut’s anonymity.

But as time runs out for investors to claim a place in the litigation over the proposed settlement, more and more Countrywide MBS noteholders are shrugging off secrecy. On Monday, six new interventions motions appeared in either the original state court docket or in federal court, where Grais & Ellsworth removed the case last week. (A seventh intervention petition, by American Fidelity Assurance, popped up Tuesday morning.) The big news was the placeholder petition Grais filed on behalf of the Federal Deposit Insurance Corporation, which says it is “the receiver of numerous banks and owner of many certificates issued by many of the trusts that would be covered by the proposed settlement.” (Hard to know from that how big a stake the FDIC has in the Countrywide MBS offerings.) Like the six Federal Home Loan Banks that have already intervened in the proposed settlement, the FDIC isn’t yet objecting to the deal, but said it wants more information to evaluate the fairness of the deal.

I was intrigued by a point Squitieri & Fearon made in an intervention petition on behalf of Waterfall Eden Master Fund, which owns certificates in six Countrywide MBS offerings. Waterfall’s lawyers cited the class action bombshell in the recent appellate opinion tossing out a settlement between freelancers and publishers. The BofA MBS settlement isn’t a class action — it was filed as a special proceeding under a New York State law permitting trustees to seek court approval of their actions. But as Waterfall notes, if Grais & Ellsworth manages to keep the case in federal court as a mass action under the Class Action Fairness Act, the Second Circuit’s new requirement that subclasses have their own counsel could turn out to be quite a messy complication for Bank of America.

Perhaps the most intriguing of the latest filings came from Peter N. Tsapatsaris, who’s working with Talcott Franklin of the Investors Clearinghouse. Franklin has worked closely with Grais & Ellsworth in the past, but the request for information he filed Monday isn’t as aggressive as some of David Grais’s intervention papers. It’s not a formal objection to the proposed settlement or even a motion to intervene, but is instead styled as an “objection in the form or a request for more information.”

The filing’s big revelation is the long list of noteholders Franklin represents. The petition names almost three dozen Countrywide MBS noteholders — mostly insurance companies, hedge funds, and small and medium-sized banks — with a stake in almost 250 Countrywide MBS trusts. That’s more noteholders than the Gibbs & Bruns group supporting the settlement, though it’s unlikely that the Franklin group crosses the all-important threshold of 25 percent voting rights in all of the trusts listed in the petition. (When BofA announced the MBS settlement at the end of June, the Gibbs group crossed the 25 percent threshold in 225 of the 530 Countrywide MBS trusts.)

Emerging publicly, of course, means enduring the spotlight. I wrote last week about the irony of the CDO manager Triaxx objecting a deal supported by its biggest noteholder, the New York Fed. There’s a similarly ironic tidbit in the Franklin filing. Among the hedge funds seeking more information about the proposed Countrywide MBS deal is LibreMax Capital, which was cofounded by Greg Lippman, the former Deutsche Bank trader who famously made a pile of money by betting against mortgage-backed securities. Lippman recently turned up in TIAA-CREF’s suit against Deutsche Bank as the author of a bunch of damning e-mail describing Deutsche Bank’s own mortgage-backed offerings as “pigs” and “crap.” Lippman is now making his money by investing in the same instruments he once derided — including, apparently, Countrywide MBS notes.

Talcott Franklin declined comment. A spokesman for LibreMax also declined comment.

I’ll keep checking the BofA MBS dockets all day and post significant new filings on Twitter.

For more of Alison’s posts, please go to Thomson Reuters News & Insight

Follow Alison on Twitter

The three judges who heard the Justice Department’s appeal in a case called United States v. Ali Shaygan knew full well how consequential their ruling would be. The government wanted the appellate court to overturn a Miami federal judge’s imposition of $602,000 in sanctions for the U.S. Attorney’s prosecution of Shaygan, a physician accused of illegally writing prescriptions for controlled substances. And as Judge Pryor wrote in the majority opinion in the case, the issues on appeal were profound: “They involve the sovereign immunity of the United States, the constitutional separation of powers, and the civil rights and professional reputations of two federal prosecutors.”

That’s why it’s so compelling that the Eleventh Circuit’s ruling came down to an interpretation of the word “or” in the Hyde Amendment of the 1998 Appropriations Act. The Hyde Amendment says federal judges can sanction prosecutors when “the position of the United States was vexatious, frivolous, or in bad faith.” The majority in the Shaygan case — Eleventh Circuit judge William Pryor Jr. and Fifth Circuit judge Rhesa Barksale, sitting by designation — decided that the government’s prosecution of the doctor wasn’t vexatious or frivolous, so by definition it wasn’t conducted in bad faith. The majority vacated the $602,000 attorneys fee award, as well as a public reprimand of two of Shaygan’s prosecutors. But in a dissent, Chief Judge James Edmondson said the Hyde Amendment’s plain language means a prosecution can be undertaken in bad faith even if it isn’t vexatious or frivolous. He found Shaygan was prosecuted in bad faith, so the district court’s $602,000 fee award should have been upheld.

Shaygan’s lawyer, David Markus of Markus & Markus said he plans to ask the entire Eleventh Circuit to review the ruling en banc, and, if that is denied, to appeal to the U.S. Supreme Court. “The way Judge Pryor tried to rewrite the statute — the Eleventh Circuit or the Supreme Court is going to be very interested in that,” he told me.

Here’s the backstory. Shaygan was a pain-management specialist who came under government scrutiny when one of his patients died after taking a combination of methadone and illegal drugs. Shaygan was indicted for trafficking in illegal prescriptions. His lawyer, Markus, moved to suppress Shaygan’s statements to investigators, arguing that his client had asked for a lawyer before making the disclosures. Assistant U.S. attorney Sean Cronin warned Markus that the motion to suppress was going to result in a “seismic shift” in the case against Shaygan.

Sure enough, the government soon obtained a 141-count superseding indictment. And unbeknownst to Markus or his client, prosecutors began a side investigation of allegations that Shaygan was secretly offering patients money to influence their statements to investigators. Prosecutors signed up one of Shaygan’s former patients as a confidential informant and enlisted him to tape conversations with Shaygan and Markus.

Prosecutors never turned over discovery on the witness tampering investigation (which came up empty) to Markus. It came to light at Shaygan’s trial, through a slip in the testimony of the government’s confidential informant. Markus managed to turn the disclosure to Shaygan’s advantage, arguing that his client had been targeted in a government witch-hunt. The jury ended up acquitting Shaygan of all 141 counts in the indictment.

But that wasn’t the end of the case for the Miami U.S. Attorney’s office. In April 2009, Judge Alan Gold found that the government had acted in bad faith when it sought the superseding indictment, launched the witness tampering investigation, and then failed to disclose that investigation to the defense. Concluding that the superseding indictment and witness tampering investigation were retribution for defense counsel Markus’s motion to suppress, the judge ordered prosecutors to pay Shaygan’s legal fees. He also publicly reprimanded Cronin and another Miami assistant U.S. attorney, Andrea Hoffman.

On appeal, the Justice Department and private lawyers representing Cronin and Hoffman argued that Judge Gold had abused his discretion. The government conceded prosecutors made mistakes in the Shaygan case, but said there was plenty of witness testimony at trial to back their drug trafficking assertions.

The Eleventh Circuit majority agreed. Under the doctrines of sovereign immunity and separation of powers, the majority said, prosecutors have broad discretion, and the Hyde Amendment sets a high bar for sanctions against the U.S. “A defendant must show that the government’s position underlying the prosecution amounts to prosecutorial misconduct — a prosecution brought vexatiously, in bad faith, or so utterly without foundation in law or fact as to be frivolous,” Judge Pryor wrote. Judge Gold, the majority concluded, erred when he found that the superseding indictment of Shaygan was a bad-faith response to the motion to suppress. “In light of the evidence that supported the superseding indictment, the charges against Shaygan were not objectively filed in bad faith,” the opinion said. “The record establishes that, regardless of [prosecutor] Cronin’s displeasure or subjective ill-will, the government had an objectively reasonable basis for superseding the indictment.”

In dissent, Chief Judge Edmondson said his colleagues had contravened Congress by taking the “or” out of the Hyde Amendment. “It is not decisive under the statute that a criminal prosecution was conducted in an objectively reasonable way (not vexatious) and that the prosecution had an objectively reasonable likelihood of success (not frivolous),” he wrote. “Congress, by adding the phrase ‘or in bad faith,’ was looking beyond litigation positions that were either vexatious or frivolous and addressing something different. We must not take the word ‘or’ out of the statute by reading ‘in bad faith’ as meaning the same thing as either ‘vexatious’ or frivolous.’”

Shaygan counsel Markus told me he’s “extremely disappointed” that Judge Pryor’s interpretation of the Hyde Amendment prevailed. “I think Judge Pryor is wrong as a matter of law that prosecutors can act in bad faith as long as they have an objectively reasonable basis for prosecution,” he said. “That’s basically giving prosecutors a blank check.”

All of the appellate judges agreed that prosecutors Cronin and Hoffman should not have been reprimanded without getting a chance to defend themselves before Judge Gold. Cronin was represented by Robert Josefsburg of Podhurst Orseck. Hoffman was represented by Roberto Martinez of Colson Hicks Eidson. Josefsburg didn’t return my call; Martinez said he hadn’t read the opinion yet. The Justice Department declined comment.

For more of Alison’s posts, please go to Thomson Reuters News & Insight

Follow Alison on Twitter

There is never a dull moment in Bank of America’s attempt to resolve its Countrywide mortgage-backed securities liability. In a stunning move Friday, the law firm leading the fight against BofA’s proposed $8.5 billion settlement with Countrywide MBS noteholders removed the case from New York state supreme court to federal court. “The purpose of removal is to make sure that this proceeding is adjudicated in the proper forum,” Grais & Ellsworth wrote in a letter to lawyers for Bank of New York Mellon (the Countrywide MBS trustee) and for the big institutional investors who crafted the proposed settlement. “We believe in good faith that this proceeding is subject to federal jurisdiction as a mass action under the Class Action Fairness Act.” (Here’s the Grais & Ellsworth letter with the removal petition attached.)

The removal to federal court plunges the proposed settlement, at least temporarily, into more uncertainty than ever. Judge Barbara Kapnick, who is presiding over the unusual state court proceeding to evaluate the proposed deal, had imposed an August 30 deadline for Countrywide MBS investors to intervene in the case. She had also established a preliminary schedule for the discovery Grais & Ellsworth and other objectors’ counsel have demanded from BNY Mellon, BofA, and the institutional investors and their Gibbs & Bruns counsel. The removal to federal court means that Judge Kapnick isn’t in charge of the case, so it’s not clear whether lawyers are required to abide by her schedule.

The Grais & Ellsworth filing was a surprise tactic. The firm has been in the state court litigation since early July, filing its initial petition to intervene only days after Bank of New York Mellon, as Countrywide trustee, filed a suit asking for court approval of the settlement of investors’ claims. David Grais even appeared before Judge Kapnick at an August 5 hearing on objectors’ requests for expedited discovery. Grais & Ellsworth apparently waited to remove the case to federal court until Judge Kapnick granted the firm’s motion to intervene in the state court case on Monday. (Grais, who was not in the office Friday, didn’t respond to my e-mail; his partner Owen Cyrulnik, who signed the letter to opposing counsel, didn’t respond to an e-mail and phone message.)

You can bet that BNY Mellon and the institutional investors will move quickly to try to get the case back to Judge Kapnick, whose first substantive ruling, albeit on a minor procedural matter, went their way. Lawyers from Mayer Brown and Dechert (for BNY Mellon) and Gibbs & Bruns (for the investors backing the settlement) will be filing remand motions next week, possibly as soon as Monday or Tuesday. Whoever hears the remand fight — Grais & Ellsworth’s petition said the case is related to a Countrywide MBS investor suit before Manhattan federal judge William Pauley -- will have to deal with all kinds of novel questions. Among them: Grais & Ellsworth’s own previous precedent on put-back claims in federal court.

Grais’s argument for sending the $8.5 billion proposed settlement to federal court comes under the Class Action Fairness Act, the 2005 law that requires big-money class actions to be litigated under the oversight of a federal judge. CAFA also mandates that mass actions, in which at least 100 plaintiffs have filed parallel suits seeking money damages against the same defendant, be transferred to federal court. Grais & Ellsworth is asserting that because the proposed Countrywide MBS settlement will resolve the claims of investors in 530 trusts, it’s a mass action under CAFA.

But here’s the thing: there’s actually only one plaintiff in the proceeding before Judge Kapnick. As I’ve explained, the banks and the Gibbs & Bruns investor group that negotiated the proposed settlement are seeking court approval for the $8.5 billion deal under Article 77, a provision of the New York rules of civil procedure that’s typically invoked in small-time family trust matters. The lawyers behind the settlement opted for an Article 77 proceeding — instead of a class action — specifically because New York trust laws give broad leeway to trustees, who are presumed to be acting in the interests of trust beneficiaries unless someone can show they acted unreasonably. It may turn out that the banks’ Article 77 strategy also undermines Grais & Ellsworth’s attempt to move the case to federal court because technically the case is not a mass action.

There’s also the little matter of a previous ruling by the U.S. Court of Appeals for the Second Circuit, upholding a Manhattan federal court’s remand of a Countrywide MBS put-back case to state court. It’s worth taking a moment to consider that case, in which a plaintiff called Greenwich Financial Services asserted in New York state supreme court that Countrywide had breached representations and warranties about the mortgage loans underlying notes Greenwich bought. Those are the exact sort of investor claims, remember, that are at issue in the proposed $8.5 billion settlement.

Countrywide removed the case to federal court under the Class Action Fairness Act. (Sound familiar?) Greenwich successfully remanded the case to state court, arguing that CAFA didn’t apply to its put-back suit because of an exception in the class action law for cases related to rights and duties, including fiduciary duties, over securities. It was a smart argument by Greenwich’s lawyers, who badly wanted to keep the case in state court. Put-back suits argue that the MBS sponsor is required to buy back underlying mortgages that breach the representations the sponsor made about them. They’re based on the issuer’s contractual duty, not on fraud allegations.

Countrywide appealed, but the Second Circuit found that “as long as a plaintiff’s claim seeks enforcement of a right that arises from an appropriate instrument, its falls within the [CAFA] exception.” (Technically, the appellate court found that it didn’t have jurisdiction to hear Countrywide’s appeal.)

The Article 77 proceeding that Grais & Ellsworth has now removed to federal court is distinct from the Greenwich case because it was filed by the Countrywide MBS trustee, not by an investor. Nevertheless, the Second Circuit seemed pretty clear that put-back claims, which the Article 77 proceeding addresses, are an exception to the Class Action Fairness Act.

Grais & Ellsworth, as it happens, knows the Greenwich precedent very well: Grais represented the plaintiff who fought so hard — and effectively — to remand the put-back case to state court. And guess who oversaw the Greenwich case when it returned to state court? Judge Kapnick! Last October, she dismissed Grais’s case on procedural grounds, finding that Greenwich didn’t own the requisite 25 percent voting rights that would have permitted it to demand put-backs.

For more of Alison’s posts, please go to Thomson Reuters News & Insight

Follow Alison on Twitter

In the next day or two, W. Mark Lanier of the Lanier Law Firm will file a letter with Dallas federal judge Ed Kinkeade outlining the reasons why he should lead what Lanier believes will become a huge mass tort: the multidistrict litigation over DePuy’s Pinnacle hip replacements. More than 300 personal injury suits accusing the Johnson & Johnson unit of failing to warn patients about design defects in the best-selling product have been filed in federal courts around the country and consolidated before Judge Kinkeade. Lanier made a preemptive play to take charge of the MDL, proposing that he and a handful of other well-known mass tort veterans head up a broadly inclusive plaintiffs steering committee. But instead, in an August 10 order, Judge Kinkeade threw open the leadership contest with a call for plaintiffs firms to respond to a long list of questions about their experience in big cases.

“It’s an interesting situation,” Lanier told me. “You’ve got the usual crew of mass tort lawyers who’ve done this rodeo time and time again. And then you’ve got a new crew of Dallas lawyers who are looking to be in leadership roles because they know the judge, know the Dallas system.”

Lanier’s allies include Edward Blizzard of Blizzard McCarthy & Nabers; Richard Arsenault of Neblett Beard & Arsenault; Kenneth Seeger of Seeger Salvas; and Paul Hanly of Hanly Conroy Bierstein Sheridan Fisher & Hayes. Blizzard told me that coalition is holding together, “but what I took from Judge Kinkeade is that he’s going to make his own decision.” The judge, who has never before presided over an MDL, has said he may even interview candidates to lead the case.

Notably absent from the contenders’ ranks is Ellen Relkin of Weitz & Luxenberg – but that’s because she’s already co-lead counsel in the other DePuy hip replacement MDL. Yes, that’s right: the Pinnacle litigation is a younger brother to the year-old MDL over DePuy’s ASR hip replacement. Johnson & Johnson recalled the ASR implants a year ago, and that MDL already includes more than 2,000 cases. Relkin and her co-lead counsel, Steven Skikos of Skikos Crawford Skikos & Joseph, previously led the Ortho Evra birth control MDL before the Cleveland federal judge who’s overseeing the ASR case, David Katz. Judge Katz picked Relkin and Skikos from among dozens of plaintiffs lawyers who filed applications.

The big question, according to Lanier, Relkin, and Blizzard, is how the two DePuy hip replacement MDLs will differ. Obviously, they involve different products, only one of which was recalled. J&J has been proactive about complaints by patients with ASR hip replacements. As Reuters reported earlier this week, the company reached out to doctors who used the ASR products and, in a controversial move, brought in a consultant, Broadspire Services, to administer patient claims for replacement surgery. (Ed Blizzard calls Broadspire, a health insurance management company, “a spy for J&J.”)

All ASR implants have a metal-on-metal hip-in-socket design, which is the source of the problems plaintiffs allege. (The basis assertion is that when the two metal pieces rub against one another, they create metallic residue that causes debilitating local irritation and, possibly, systemic metal poisoning.) Some Pinnacle products, on the other hand, have polyethylene or ceramic liners between the metal parts. That means, according to Relkin, that there’s a known universe of potential ASR plaintiffs — about 34,000 in the U.S. — but not of potential Pinnacle plaintiffs because it’s not clear how many Pinnacle implants are metal-on-metal. (Relkin’s firm, Weitz & Luxenberg, is involved in both MDLs.) Lanier is convinced Pinnacle claims will eventually outpace ASR claims because DePuy sold many more Pinnacle implants; Blizzard said ASR will be the bigger MDL.

All three plaintiffs lawyers told me J&J will eventually have to settle the ASR cases, considering that the company recalled the product and has already begun paying for replacement surgery through Broadspire. Relkin and Lanier said, however, that J&J seems to be gearing up for a real fight over the Pinnacle, which is still on the market. The company’s lead counsel in the ASR MDL is Drinker Biddle & Reath and Tucker Ellis & West; in the Pinnacle MDL it’s Skadden, Arps, Slate, Meagher & Flom.

“Skadden and John Beisner are known to fight to the death,” Lanier said. “Bringing them in was an overt gun-shot blast. The hard part of leadership in the case is that [plaintiffs lawyers] generally compete against each other. So how do you get a group to coordinate to go up against Skadden Arps?”

I left messages with lawyers at Drinker Biddle; Tucker Ellis; and Skadden, as well as a corporate spokesperson at DePuy. Beisner of Skadden declined comment; none of the others got back to me.

For more of Alison’s posts, please go to Thomson Reuters News & Insight

Follow Alison on Twitter

As all the world knows, Samsung is engaged in a do-or-die international patent battle with Apple. On Wednesday alone, Samsung saw a court in the Netherlands enjoin it from infringing an Apple smartphone patent; planned for an injunction hearing in Germany, where a court enjoined the Samsung Galaxy Tab, then lifted the preliminary injunction; and went before Judge Lucy Koh in San Jose federal court, where Apple is demanding yet another injunction barring Samsung devices.

But all that bet-the-company stuff doesn’t mean there’s no place for fun. In an August 23 declaration that set the tech world snickering, Samsung’s lawyers at Quinn Emanuel Urquhart & Sullivan asserted that Apple’s extremely broad design patents on the iPad were anticipated by (among other pop culture reference points) Stanley Kubrick’s 1969 movie 2001: A Space Odyssey. Quinn even helpfully provided a link to a YouTube clip of the crew of the Kubrick spaceship Discovery using thin rectangular devices that look curiously like iPads. (A similar Star Trek clip suggests Captain Picard also used an iPad before Apple invented it.)

The argument isn’t quite as wacky as you might think. Just recently, lawyers for Yves Saint Laurent told Manhattan federal judge Victor Marrero that Christian Louboutin can’t trademark red soles because Dorothy had red shoes in The Wizard of Oz; Judge Marrero cited Dorothy’s “famous ruby slippers” on the first page of his opinion knocking out Louboutin’s trademark. Trademarks have squishier standards than patents, but if it worked for Yves, maybe it’ll work for Samsung as well.

While Judge Koh ponders the question of invalidity-by-science-fiction, I thought about how other patent defendants, present and future, might make use of pop culture. Those flying cars now on the market for a cool $230,000? Sorry Terrafugia Transition. Chitty Chitty Bang Bang got there first. You can find all kinds of wristwatch televisions for sale (including models by Samsung). Wonder if they all disclosed Dick Tracy in applications to the Patent & Trademark Office. Inequitable conduct, anyone?

Creepy human-looking robots have experienced a recent population explosion, but C-3PO of Star Wars beat them by 30 years. Then again, C-3PO was himself anticipated by the (alas, unnamed) humanoid robot on the TV series Lost in Space. Laugh all you want, but Lost in Space is a trove of prior art. Look out Martin Jetpack – Lost in Space saw you coming forty years ago. (And not only Lost in Space: a jetpack scene appeared both in the 1965 James Bond film Thunderball, and in 1949′s King of the Rockiet Men.) Animal cloning? Jurassic Park. Human gene patents? Planet of the Apes. Even IBM’s landmark chess-playing computer was dreamed up back in 1910, in a sci-fi short story by Ambrose Bierce.

I’ve managed to avoid the obvious, but every Star Trek buff knows where we’re headed. That’s right: the Star Trek communicator. It’s a handheld device that flips open to permit Captain Kirk to talk with his ship and crew. Nokia liked the parallels between the Star Trek device and modern cellphones so much that it actually produced working prototypes based on Captain Kirk’s communicator. But by Samsung’s 2001: Space Odyssey standard, the entire cellphone industry was anticipated by Gene Roddenberry. Who knows how many of Nortel and Motorola patents for which Google, Microsoft, and Apple have recently decided to shell out billions are design patents that under Quinn Emanuel’s Space Odyssey standard are invalid because of Star Trek prior art?

The mind boggles.

For more of Alison’s posts, please go to Thomson Reuters News & Insight

Follow Alison on Twitter

A couple of cases from the last few years drove home that lesson. Proskauer Rose represented Allen Stanford’s Stanford Financial as the Ponzi scheme collapsed. Proskauer partner Thomas Sjoblom was in the room with Stanford Financial’s chief investment officer, Laura Pendergest-Holt, when she was interviewed by the SEC in 2009. Sjoblom told the SEC that he was representing the company, not Pendergest-Holt. But she ended up indicted for lying to investigators and obstructing justice based on that SEC interview. Pendergest-Holt turned around and sued Sjoblom and Proskauer, asserting that she was never told the firm wasn’t representing her. Sjoblom subsequently resigned from Proskauer. (Proskauer’s spokesman didn’t return my call.)

In another case, Irell & Manella represented Broadcom in an internal investigation of its stock options backdating practices. As part of that investigation, Irell lawyers interviewed Broadcom CFO William Ruehle. Irell was simultaneously representing Ruehle in two securities suits, and, he later said that he believed Irell was his counsel. But it wasn’t: when Broadcom decided to cooperate with prosecutors, Irell turned over its notes of the Ruehle interview. Ruehle was indicted and (among other things) blamed Irell for misleading him. The trial judge in Ruehle’s case, Cormac Carney, blasted Irell for breaching its duty to Ruehle, though the U.S. Court of Appeals for the Ninth Circuit later cleared the firm of wrongdoing. (Judge Carney eventually tossed charges against Ruehle for other reasons.)

So Sullivan & Cromwell and Blankfein are both better off now that the CEO’s interests are protected by another lawyer, even if Blankfein only brought in counsel for an interview with DOJ investigators. In that regard, we shouldn’t assume that Weingarten’s entrance necessarily bodes ill for Goldman or Blankfein. Goldman told Reuters Monday that this is entirely routine: “As is common in such situations, Mr. Blankfein and other individuals who were expected to be interviewed in connection with the Justice Department’s inquiry into certain matters raised in the PSI report hired counsel at the outset,” the bank said.

Nevertheless, Blankfein’s choice of Weingarten is very intriguing. Weingarten is a great lawyer with close ties to the Justice Department, where he once worked in the Public Integrity section, and to Attorney General Eric Holder, whom he actually represented when Congress grilled Holder about President Bill Clinton’s eleven-hour pardon of financier Marc Rich. Weingarten is not, however, part of the club of white-collar defense counsel who typically get referrals from New York firms like S&C. (That group includes Andrew Levander of Dechert; Mary Jo White of Debevoise & Plimpton; Patricia Hynes of Allen & Overy; and Gary Naftalis of Kramer Levin Naftalis & Frankel, all of whom represent high-profile Wall Streeters in financial crisis cases.)

One white-collar defense lawyer who gets referrals from Wall Street firms told me it could be significant that Blankfein went outside the usual circle, turning to a lawyer best known for his trial work. “For many people, the choice of Reid Weingarten would be unusual to represent someone in a simple interview,” he said. “He’s often retained when an investigation is going to lead to a case that would go to trial.”

That unseen hand that guides the market, in other words, may turn out to be pretty smart.

For more of Alison’s posts, please go to Thomson Reuters News & Insight

Follow Alison on Twitter

Remember the Cold War military doctrine of Mutually Assured Destruction? The idea was that if the United States and the Soviet Union both knew the enemy had enough weapons to wipe the entire country off the map, neither would actually use those weapons. Mutually Assured Destruction got the entire world through the age of fallout shelters and Barry Goldwater. So the doctrine should be powerful enough to get Google, Apple and Microsoft past Justice Department antitrust regulators.

It’s a given that Google’s $12.5 billion Motorola bid is going to be scrutinized for its antitrust implications. Google’s law firm on the deal, Cleary Gottlieb Steen & Hamilton, has conceded that point; the firm announced that David Gelfand – who previously escorted Google unscathed through antitrust reviews of its DoubleClick and AdMob acquisitions — will be antitrust counsel on the Motorola bid. The $4.5 billion acquisition of Nortel’s intellectual property by a consortium led by Microsoft and Apple is already under review by the DOJ’s antitrust division. I’m betting that each patent plays will have an easier time passing regulatory muster because of the other.

Before I get to why, there’s the issue of which agency will be investigating the Google deal. Both the Federal Trade Commission and the Justice Department have the power to conduct premerger antitrust reviews. They’ve both looked at Google acquisitions in the past: the FTC green-lighted the 2007 DoubleClick and 2010 AdMob deals; the DOJ rejected Google’s proposed advertising partnership with Yahoo in 2008 and approved, with some modifications, its deal with ITA Software in 2011. The FTC is also reportedly conducting a widespread antitrust investigation of Google’s search engine business. But I have it on good authority that the Justice Department will be handling the Motorola review, partly because DOJ has historically overseen competition in the telephone industry and is already reviewing the AT&T merger with T-Mobile and the Nortel IP sale.

Traditionally, antitrust regulators look at deals as either horizontal or vertical acquisitions. The classic horizontal deal is a merger of two rivals in the same market. A vertical acquisition is one that helps a company with its own upstream or downstream products. Vertical deals are considered less of a threat to competition within a market, so they get less antitrust scrutiny. In one regard, Google’s Motorola acquisition is a simple vertical merger, since it puts Google into two businesses it wasn’t in before: manufacturing smartphone handsets (and set-top devices) and licensing patents.

But IP complicates the traditional horizontal-or-vertical analysis, because patents, by their very nature, are intended to squelch competition: patent holders have a short-term monopoly on their invention. If you’ve paid even the slightest attention to the patent-bound technology industries, you know how viciously patents can be wielded for anticompetitive purposes, particularly when end products like computers and smart phones are covered by hundreds of patents. The FTC conducted hearings in June (here’s the transcript) on what it calls “patent hold-up” — the ability of a patent owner to extract big licensing fees for IP that’s just part of a sophisticated tech product.

So when antitrust regulators look at patent-heavy deals, they have to analyze the patent licenses that will transfer in the merger from both horizontal and vertical perspectives. The relevant market in patent deals, to use another bit of antitrust lingo, is the technology market, not necessarily the market for a particular downstream product or service. When the DOJ looks at the Motorola deal, its antitrust lawyers will want to know which companies license Motorola technology, how those licenses affect the relevant markets, and how much leverage the licensing agreements and Motorola patents give Google in those markets.

That’s where the Nortel IP consortium comes in. DOJ has to ask the same questions about how Microsoft, Apple, Research in Motion, Ericcson, Sony, and EMC can leverage the 6,000 or so Nortel patents they acquired for $4.5 billion in June. The last (and only) time the Justice Department previously reviewed a similar IP transfer was in 2010, when DOJ examined the $442 million purchase of Novell software patents by a different Microsoft and Apple consortium. In that review, regulators barred Microsoft from acquiring any patents outright and said EMC couldn’t acquire 33 of the patents it wanted.

This time around, though, Microsoft and Apple can point to Google’s purchase of the Motorola patents to argue that the Android smartphone platform is now as heavily armed as the iPhone and Microsoft’s Windows Mobile smart phone. Google, in turn, can credibly claim that it needs the Motorola smartphone patents to protect Android from the power its rivals acquired via the Nortel patents.

It would be easy for regulators to look at the two potent patent portfolios (say that three times fast!) — wielded by warring competitors in one of the most cutthroat industries in the world — and see a balance of power. If Google monkeys with Motorola patent licenses, Microsoft and Apple will retaliate with Nortel IP licenses. You can call it mutually assured destruction, but it could turn out to be a constructive end to the expensive smartphone patent wars.

For more of Alison’s posts, please go to Thomson Reuters News & Insight

Follow Alison on Twitter

AstraZeneca’s approach to the 28,000-case litigation over its antipsychotic Seroquel has been notable for two things. First, the pharma company was incredibly successful in court. It won pre-trial dismissal of hundreds of state and federal suits blaming Seroquel for causing diabetes and more serious injuries and got a defense verdict in the one Seroquel case that made it to trial. Second, AZ has been notoriously secretive about settling the remaining cases. AZ reached private deals with plaintiffs firms that controlled big Seroquel dockets, offering token amounts of money to plaintiffs in exchange for their lawyers agreeing to drop out of the litigation. The company disclosed settlements in blocks, finally announcing in late July that it had reached agreements in principle to resolve all but 250 Seroquel suits for a total of $647 million — a small fraction of what plaintiffs lawyers once hoped they’d get.

The last big holdout on the plaintiffs side of the litigation was Weitz & Luxenberg, an asbestos powerhouse that had one of the biggest Seroquel dockets in the country. Weitz fought harder and sank more resources into Seroquel cases than any other firm; partner Paul Pennock was still insisting the cases would yield big settlements even after he lost the first (and, as it turns out, only) Seroquel trial, a New Jersey state court case that went to a defense verdict in March 2010.

Weitz apparently capitulated earlier this summer, agreeing to settle its 2,300 remaining cases. And last week, the Seroquel Lawsuit blog posted what purports to be the letter Weitz & Luxenberg sent to its Seroquel clients, announcing the group settlement and explaining the allocation process. According to the letter, AZ offered Weitz & Luxenberg a $92.25 million pot to divide amongst its clients. Clients were given three options: they could sign up for a quick $12,000 payment; they could present the facts of their case to a special master for an individualized payment that could be less than $12,000; or they could reject the offer and endanger the entire settlement, which depends on the participation of 98 percent of Weitz & Luxenberg’s clients.

“We strongly believe [the framework] is fair and reasonable and offers each of our clients the best possible outcome under the circumstances of this litigation,” the posted document said. “Based on public reports regarding settlement programs reached with other plaintiff law firms we are confident that the settlement program outlined below has more favorable terms and for this reason we are recommending your participation.”

I should say up front that Paul Pennock of Weitz & Luxenberg told me the posted letter is not a scanned or photocopied version of the letter his firm sent its Seroquel clients. He also said the posted letter “makes characterizations that are completely inaccurate,” though he said he could not address specifics because he is bound by a confidentiality agreement. “[The letter] is not describing what is happening in our resolution,” Pennock said.

I also, however, spoke with the Seroquel Lawsuit blogger, who insisted on anonymity. He is not a Weitz & Luxenberg client, he said, but received the purported W&L letter from a Weitz client who e-mailed the blogger that he was “disgusted” with the settlement offer.

The blogger told me he developed diabetes and experienced other side effects after he was prescribed Seroquel for “situational depression.” He has been urging Seroquel plaintiffs to reject settlement offers and push ahead with litigation against AstraZeneca because he believes plaintiffs lawyers haven’t adequately represented victims’ interests. “Who are they working for? They’re not working for their clients. That’s a miscarriage of justice,” he said. In his own case, he told me, he signed a retainer agreement with a firm that advertised for Seroquel clients, but then turned those clients’ files over to another firm that handled the litigation. He said he has struggled to obtain information from the second firm, which hasn’t responded to his questions about his own case. “That’s a bad model,” he said. “It encourages this kind of stuff.”

AstraZeneca, meanwhile, didn’t offer a direct response to my question about the authenticity of the posted letter. Spokesman Tony Jewell sent this e-mail comment: “We cannot comment on the financial terms of the settlement as they are confidential.”

The letter certainly reads like it was drafted by lawyers who’ve spent long years litigating Seroquel claims, to little avail. “As you know, we have engaged in a long legal battle with AstraZeneca over the past 6 years,” it said. “Weitz & Luxenberg led the charge for the plaintiffs around the country. AstraZeneca put up a tremendous and expensive defense and they successfully were able to get a large number of cases to be permanently dismissed by the court. Weitz & Luxenberg is the only firm who took a case to trial anywhere in the country As a direct result of the endless and consistent pressure applied by the attorneys at Weitz & Luxenberg, we are happy to report that AstraZeneca has now agreed to participate in a favorable settlement program.”

After detailing the two possible tracks for claimants — fast track to $12,000 and individualized special master track in which payouts will depend on the number of claimants — the letter notes that Weitz will be collecting attorneys fees on the settlements. “The terms of your signed contingency fee agreement will be in effect,” it said.

In a separate post Tuesday, the Seroquel Lawsuit blogger added commentary deriding the letter, Weitz & Luxenberg, and the “secret backroom dealings” in which the firm’s lawyers “were selling our clients down the river.”

“REJECT AstraZeneca’s disgraceful Seroquel settlement offer-demand justice, fairness, and accountability,” the blogger wrote.

Pennock of Weitz & Luxenberg said in response that it’s “a shame. Someone who isn’t even a client is trying to derail something that’s going to make a real difference in people’s lives. I don’t think that’s right.”

For more of Alison’s posts, please go to Thomson Reuters News & Insight

Follow Alison on Twitter

Monday was mostly a good day for Google and Motorola. Unless you’re on vacation where there’s no Internet access, in which case you’re not reading this, you’re surely aware that Google announced its $12.5 billion acquisition of Motorola, which means that Google is picking up one of the best patent portfolios in wireless history — and supposedly had the pleasure of besting Microsoft in doing so. But the news wasn’t all good for Google and its new best friend, Motorola. Deep down in the patent litigation trenches at the U.S. International Trade Commission, Administrative Law Judge Theodore Essex denied Google’s high-profile, third-party motion for sanctions against Microsoft in Microsoft’s infringement suit against Motorola.

Okay, so it’s not exactly on a par with the $12.5 billion deal. It’s a little humbling, though, for Google and its lawyers at Quinn Emanuel Urquhart & Sullivan. As I mentioned yesterday, Google filed an Aug. 10 motion for sanctions in the Microsoft ITC case, claiming that Microsoft violated a confidentiality order when it disclosed Google code to one of its experts without informing Google. (The ITC proceeding, in case you hadn’t figured it out, involves Motorola products that employ Google’s Android operating system.) Google asserted that when it found out what Microsoft planned to disclose, in-house lawyer Matthew Warren emailed a Microsoft lawyer to request a conference. Microsoft, according to Google, didn’t respond. Google then filed the sanctions motion.

But Judge Essex said Google rushed to judgment. The ground rules in the case, in which just about everything is (frustratingly) shielded by the confidentiality order, say that any party that objects to another’s use of confidential materials has to make a good-faith effort to resolve the dispute, and then must wait two days before filing a motion for sanctions. “The ALJ finds no basis to discern from Google’s statement whether Google made a reasonable, good-faith effort to resolve the matter with Microsoft,” Judge Essex wrote. “The ALJ notes to Google failed to attach the Warren email to its motion and it is unclear whether Google even notified Microsoft of its intention to file the instant motion.”

There you have it: evidence that Google may know how to snatch a $12.5 billion company away from Microsoft, but not how to make nice with its rival in a discovery fight. I left word with Microsoft counsel Brian Nester of Sidley Austin; Motorola counsel Charles Schill of Steptoe & Johnson; and Google counsel Amy Candido of Quinn. None got back to me.

For more of Alison’s posts, please go to Thomson Reuters News & Insight

Follow Alison on Twitter

There are all sorts of questions out there about Google’s $12.5 billion acquisition of Motorola Mobility. What will the deal mean for HTC and Samsung, the other cellphone makers using the Android platform? Will the merger force Microsoft to make a bid for Nokia? And is Carl Icahn, Motorola’s biggest shareholder, finally satisfied? I’ll leave it to others to ruminate on all that. I’m interested, as always, in what this deal means for lawyers.

The one clear answer is that a union between Google and Motorola is a good thing for Quinn Emanuel Urquhart & Sullivan.

Quinn’s Charlie Verhoeven and his patent litigation team are favorites of both Google and Motorola in the smartphone wars. With Google’s endorsement, Quinn has been representing both Samsung and HTC in high-stakes litigation against Apple; Quinn got those assignments after amassing an impressive collection of patent trial wins for Google in the Eastern District of Texas. (Even Verhoeven and Google can’t win ‘em all; I reported in May on a $5 million verdict against Google in the Bedrock patent trial.)

There’s been speculation that Google brought Quinn into the HTC and Samsung cases under an Android indemnification agreement. Google and its partners have never confirmed that any such deal exists. If there is an indemnity arrangement, that might explain why Quinn Emanuel is representing Motorola in smartphone litigation with Apple and Microsoft. (When Google recently filed a non-party motion for sanctions against Microsoft in Microsoft’s U.S. International Trade Commission case against Motorola, Quinn Emanuel signed the Google pleading — even though Quinn also represents Motorola in the case, along with Steptoe & Johnson.)

But Quinn Emanuel’s relationship with Motorola extends beyond Motorola’s smartphone litigation. The firm stepped into a vicious trade secrets fight between Motorola and a Florida company after Motorola was twice sanctioned for discovery violations. The $10 billion case ended up settling for less than $50 million.

Also worth pointing out whenever we’re talking about Google: one of the two most recent appointees to the Federal Trade Commission, Edith Ramirez, was previously an IP partner at Quinn Emanuel. Last October, in a speech before the Golden State Antitrust and Unfair Competition Law Institute, Ramirez spoke of her first FTC review: Google’s proposed merger with AdMob, the rival smartphone advertising network. Even though the deal meant the combination of two of the biggest players in a rapidly expanding market, Ramirez voted with her fellow commissioners to permit the merger, partly because Apple was developing its own mobile ad network.

I reached out to John Quinn and Charles Verhoeven, but neither responded to my e-mail.

For more of Alison’s posts, please go to Thomson Reuters News & Insight

Follow Alison on Twitter