A filing late Monday confirmed what I reported last month: Merrill Lynch has agreed to a $315 million settlement of a securities class action stemming from 18 Merrill mortgage-backed note offerings. This agreement is the fourth MBS securities settlement, following this summer’s landmark $125 million Wells Fargo class action deal and a pair of settlements with Citigroup and Deutsche Bank, totaling $165.5 million, that National Credit Union Agency reached in November. The Merrill agreement, negotiated by lead class counsel at Bernstein Litowitz Berger & Grossmann, is by far the biggest score so far for MBS investors in a securities suit (as opposed to contract, or put-back, litigation).
The standard for U.S. judges to grant a preliminary injunction is notoriously high. Plaintiffs have to show that they’re likely to succeed on the merits; that they’ll suffer irreparable harm if the injunction isn’t granted; that the injunction is in the public interest; and that the balance of fairness supports awarding the bar. In patent cases, the analysis of likely success on the merits offers two outs for defendants: they can show that the plaintiffs’ patent probably isn’t valid or that they didn’t infringe it. In other words, there’s a long list of reasons for a judge to refuse to grant a preliminary injunction (which is one reason why so many patent holders also seek injunctions overseas).
You don’t have to look very hard for an explanation of why two industry trade groups hired Eugene Scalia of Gibson, Dunn & Crutcher to bring their suit to block the Commodity Futures Trading Commission from enforcing a new rule limiting commodity speculation through derivatives trading. In July, Scalia won a ruling from the U.S. Court of Appeals for the District of Columbia that struck down the Securities and Exchange Commission’s Dodd-Frank-mandated rule requiring corporations to provide stockholders with access to proxy materials on shareholder-nominated board nominees. (The SEC subsequently announced it wouldn’t appeal the ruling.) Nor was the proxy-access victory Scalia’s first whack at federal agency rule-making: he’s managed to overturn two previous SEC rules (see here and here); mounted a landmark challenge to Sarbanes-Oxley whistleblower protections; and won cases striking down a pair of laws requiring certain employers to provide employees with health benefits. For business groups that consider themselves overregulated, Scalia is the man to see.
In the run-up to the first trial of a corporation charged with violating the Foreign Corrupt Practices Act, Lindsey Manufacturing and its lead counsel, Jan Handzlik, put up as vigorous a defense as you can imagine. Handzlik (then at GreenbergTraurig and now at Venable) worked with Janet Levine of Crowell & Moring (counsel for Steve Lee, Lindsey’s former CFO) to challenge the government’s conduct, its evidence, even its interpretation of the FCPA’s language. It was to no avail. In May, after a five-week trial and seven hours of deliberation, a Los Angeles federal jury convicted Lindsey Manufacturing, chairman and CEO Keith Lindsey, and CFO Lee on all counts. For Handzlik and Levine, who were convinced the prosecution’s allegations that their clients funneled bribes to officials of a Mexican state-owned electric company were meritless, the conviction was devastating.
Last month, as U.S. banks began reporting their third-quarter financials, I noted that the banks had beefed up their disclosure of potential liability for mortgage-backed securities activity. Morgan Stanley revealed that it had received a demand letter from Gibbs & Bruns, the firm that represents the big funds that negotiated the proposed $8.5 billion MBS breach-of-contract settlement with Bank of America. Goldman upped its reported MBS exposure to $15.8 billion, from a mere $485 million in the second quarter. The new emphasis on disclosure, I said, was partly the result of more claims, but also partly due to pressure from the Securities and Exchange Commission and the Public Company Accounting Oversight Board to improve MBS disclosures.
On Tuesday, as you probably heard, Facebook reached a settlement with the Federal Trade Commission to resolve allegations that it deceived users about how it used their personal information. Facebook CEO Mark Zuckerberg said publicly that “we made a bunch of mistakes.” But you won’t find any such admission in Facebook’s proposed settlement agreement with the FTC. In that document, Facebook “expressly denies the allegations set forth in the [FTC] complaint.”