Alison Frankel

Suit reveals new details of Paulson’s role in Goldman Abacus CDO

January 31, 2013

Ever since Goldman Sachs agreed to pay $550 million to resolve claims by the Securities and Exchange Commission that it deceived investors in the Abacus collateralized debt obligation, there’s been a giant question mark hovering over the hedge fund Paulson & Co. Paulson worked with Goldman Sachs to select the CDO’s reference portfolio of mortgage-backed securities, then reaped the profits from a short position when the instrument failed. The implication was that Paulson picked securities that doomed Abacus, but the SEC never brought a case against the hedge fund. And when the bond insurer ACA Financial Guaranty, which was nominally the portfolio selection agent on the CDO, sued in 2011 to recover the $30 million it lost (plus punitive damages), it named only Goldman as a defendant.

Who are Justice Department’s ‘outside experts’ on prosecuting banks?

January 30, 2013

Lanny Breuer made the formal announcement Wednesday that he is stepping down as head of the Justice Department’s criminal division, after a week that he surely won’t remember as his favorite in public service. Last Tuesday, PBS’s Frontline made Breuer seem insincere and evasive about Justice’s failure to prosecute bankers involved in mortgage securitization. Then yesterday, a pair of U.S. senators, Chuck Grassley (R-Iowa) and Sherrod Brown (D-Ohio), sent a follow-up letter to Attorney General Eric Holder, demanding information about the Justice Department’s settlements with big banks. In particular, the letter quoted comments by both Holder and Breuer about receiving advice from “experts” on the dire economic consequences of indicting financial institutions. Brown and Grassley asked the Justice Department to disclose the identity (and compensation) of all outside experts who opined on prosecuting banks with more than $1 billion in assets and to explain how it vetted the experts to ensure that they “provided unconflicted and unbiased advice to DOJ.”

Truth and justice are elusive in Chevron Ecuador case

January 29, 2013

On Monday, Chevron filed a new motion for summary judgment in its fraud and racketeering case against the lawyers and expert witnesses who helped 47 Ecuadoreans from the Lago Agrio region of the rainforest obtain an $18 billion judgment against the oil company from an Ecuadorean court in 2011. The motion discloses what seems to be incredibly powerful evidence that the Ecuadorean judgment was illegitimate: A onetime presiding judge on the Ecuadorean case, Alberto Guerra, submitted a declaration asserting that he acted as the middleman in setting up a $500,000 bribe from plaintiffs’ lawyers to the Ecuadorean judge who entered the judgment against Chevron. Guerra claimed that the plaintiffs actually drafted the 2011 judgment and that he, as a behind-the-scenes ghostwriter, worked with plaintiffs’ lawyers to make it seem more like a court ruling. According to his declaration, filed before U.S. District Judge Lewis Kaplan of Manhattan, Guerra had previously received regular payments from the plaintiffs in the Chevron case to ghostwrite other rulings subsequently issued by the presiding judge. And, to boot, Guerra asserted that Chevron — unlike the plaintiffs — didn’t respond to his solicitation of bribes.

Inside ‘unseemly’ lead counsel fight in Nexium antitrust class action

January 29, 2013

The Federal Judicial Center says that the preferred way to determine lead counsel in a complex multidistrict litigation is for plaintiffs’ lawyers to meet and reach a consensus on which firms should direct the case. But that’s not always the way things work out. Just ask Linda Nussbaum at Grant & Eisenhofer, who lost a bid last week to lead an antitrust class action by drug wholesalers accusing AstraZeneca and three generic drugmakers of conspiring to keep AZ’s blockbuster heartburn drug Nexium off of the market. Nussbaum accused three other big pharmaceutical antitrust players — Hagens Berman Sobol Shapiro, Garwin Gerstein & Fisher and Berger & Montague — of plotting to exclude her and then misrepresenting her stellar record. In the end, Nussbaum’s rivals won the battle for lead counsel, but not without also incurring the disgust of the judge overseeing the case.

Why U.S. is forgoing appeal of landmark 2nd Circuit off-label ruling

January 24, 2013

On Wednesday, the Food and Drug Administration announced that the government has decided not to seek review of a landmark 2012 ruling by the 2nd Circuit Court of Appeals in U.S. v. Caronia. As you probably recall, a split 2nd Circuit panel held in December that the First Amendment protects truthful speech about the off-label use of FDA-approved products, finding that the misbranding provisions of the Food, Drug and Cosmetic Act do not prohibit off-label marketing, as long as it’s not misleading. Wednesday’s announcement by the FDA means that in New York, Connecticut and Vermont, pharmaceutical and medical device makers can give physicians information about their products that they can’t discuss in other states without risking prosecution.

Avandia case: the new normal for plaintiffs’ fees in mass torts?

January 23, 2013

Last week, the court-appointed mediator in the consolidated Avandia marketing and product liability litigation against GlaxoSmithKline informed U.S. District Judge Cynthia Rufe of Philadelphia that 58 plaintiffs’ firms in the case have agreed to an allocation plan for $143.75 million in common-fund fees. As mediator Bruce Merensteinof Schnader Harrison Segal & Lewis described the process, nine law firms objected to the initial allocation plan proposed by a Rufe-appointed fee committee. After a dozen phone calls and 15 in-person sessions over the last few months, members of the fee committee adjusted their own take to bring the objectors on board. In the final allocation outlined in Merenstein’s report, the biggest share of the common fees, $22.6 million, will go to Reilly PoznerWagstaff & Cartmell is in line for $17.2 million; Andrus Hood & Wagstaff for $14.7 million; and Miller & Associates and Heard Robins Cloud & Black for more than $10 million. The Miller firm was an objector to the original allocation plan, but all of the other firms looking at eight-figure awards from the common fund were on the fee committee.

New suit: Financial straits led to ethics infractions by Hausfeld

January 22, 2013

Jon King, a California lawyer who was a founding partner at Michael Hausfeld’s eponymous antitrust shop but was fired from the firm last October, spares no accusations in the 78-page wrongful termination complaint he filed last week in federal court in the Northern District of California. The suit is a compendium of supposed misbehavior by Hausfeld and some of his partners, allegedly committed under the pressure of financial straits. I’m not sure how much fire underlies the clouds of smoke from King’s red-hot complaint, but Hausfeld has made enough enemies and is leading enough big cases — including a potentially gargantuan investor class action against the banks that allegedly manipulated Libor rates — that the suit is going to be the talk of the antitrust bar.

In smartphone wars, Apple stalks the elusive injunction

January 18, 2013

If ownership of a valid patent can’t help you stop a competitor from selling products that incorporate your proprietary technology, then — according to an extraordinary new filing by Apple — there’s something seriously wrong with the patent system.

Supreme Court conundrum: How far does a soybean seed patent go?

January 17, 2013

Vernon Hugh Bowman is the rare Indiana soybean farmer destined for immortality as a U.S. Supreme Court caption.

New paradigm for mortgage put-back claims?

January 16, 2013

I did a double take Wednesday, when I noticed a pair of new suits by Lehman Brothers Holdings in federal court in Colorado. The complaints, which are almost identical, claim that the mortgage originator Universal American Mortgage breached representations and warranties about loans it sold to Lehman, which subsequently suffered losses as a result of those breaches. But here’s the thing: Each suit addresses only one supposedly deficient loan! Lehman’s lawyers at Akerman Senterfitt allege that Lehman sustained about $100,000 in damages on one of the loans and $120,000 on the other — numbers that are light years apart from the multibillion-dollar claims we’ve seen from groups of mortgage-backed securities investors who band together to assert contract breaches in thousands of loans at a time.