On Tuesday morning at the U.S. Supreme Court, Charles Cooper of Cooper and Kirk was no more than a sentence into his spiel on the sanctity of traditional marriage when Chief Justice John Roberts interrupted with the request that he first address a more prosaic issue: Do Cooper’s clients, as leading proponents of the 2008 California ballot initiative that banned same-sex marriage, even have standing to defend the initiative, known as Proposition 8, in federal court? By the time oral arguments concluded more than an hour later, it seemedlikelier than not that the court would avoid a sweeping ruling on equal protection under federal law for gays and lesbians – and that they’d do it via a finding that Cooper’s clients did not have standing to bring an appeal.
Robbins Geller Rudman & Dowd has had more than its share of problems with recanting confidential witnesses in securities class actions, but an 18-page ruling Tuesday from the 7th Circuit Court of Appeals is the worst news yet for the plaintiffs’ firm. Judge Richard Posner, writing for a panel that also included Judges William Bauer and Diane Sykes, said the firm had ignored red flag warnings that its lone informant in a securities class action against Boeing was unreliable. No lawyer from the prolific plaintiffs’ firm took the trouble of checking out the informant’s allegations, Posner said, yet the firm didn’t hesitate to repeat his claims in an amended complaint against the aerospace company. The appeals court, not surprisingly, refused to revive the class action claiming Boeing misled investors about its Dreamliner planes, but remanded the case to U.S. District Judge Ruben Castillo to determine whether Robbins Geller should be sanctioned under Rule 11, and, if so, for how much money.
In 2009, six retired pro football stars filed a class action against the National Football League in federal court in Minneapolis, claiming that the NFL misappropriated their names and images without their consent. The class action, led by (among others) former Houston Oiler Hall of Famer Elvin Bethea and former Los Angeles Ram All Pro and television star Fred Dryer, asserted that the NFL didn’t compensate its retired players when it used clips from old games to promote the league. In September 2011, the Dryer case was consolidated with two other similar class actions. Three firms, Zimmerman Reed, Hausfeld and Bob Stein, were named interim lead counsel.
Alan Kaplinsky of Ballard Spahr had a good thing going at the turn of the century. Along with a couple of partners at the firm now known as Wilmer Cutler Pickering HaleandDorr, Kaplinsky was the leading lawyer for credit card issuers considering the addition of mandatory arbitration clauses to their agreements with cardholders. Between 1999 and 2003, Kaplinsky and three Wilmer partners, Ronald Greene, Christopher Lipsett and Eric Mogilnicki, led a series of meetings with in-house lawyers for the credit card companies, virtually all of which subsequently hired Wilmer or Ballard Spahr to help them implement new cardholder agreements that mandated arbitration and foreclosed class actions.
The 2nd Circuit Court of Appeals has been known on occasion to buck the judicial trend of deference to arbitration and champion plaintiffs’ rights to class action litigation. But not if the only justification for classwide litigation is a phantom statutory right. In a notably short and emphatic decision issued Thursday in a closely watched sex discrimination case against Goldman Sachs, a three-judge appellate panel reversed a lower-court ruling that former Goldman managing director Lisa Parisi may pursue a class action despite the mandatory arbitration clause in her employment contract. The appeals court agreed with just about every argument by Goldman’s lawyers at Sullivan & Cromwell, ruling that the bank’s arbitration clause does not preclude Parisi’s statutory rights under Title VII of the Civil Rights Act because she has no private cause of action to claim that her employer engaged in a pattern or practice of discrimination.
More than two years after General Motors received court approval for a plan to issue its old creditors stock in its shiny new self, a dispute among those creditors threatens to saddle the new company with almost $1 billion in liability. In a statement filed this week before U.S. Bankruptcy Judge Robert Gerber of Manhattan, the new company and warring creditor factions disclosed that mediation has failed to produce a settlement of creditor allegations that one group of noteholders extracted preferential treatment from the company as it teetered on the verge of Chapter 11 in 2009. The failure of mediation means that Gerber will be left to reach a ruling based on testimony he heard last fall in an adversary proceeding initiated by the trustee for GM’s unsecured creditors.
The U.S. Supreme Court’s unanimous seven-page ruling Tuesday in Standard Fire v. Knowles proves that sometimes the best way to get through a thorny briar patch is with a machete. The court cut through incredibly complex jurisdictional arguments and what-if scenarios to reach the essential intent of the Class Action Fairness Act, a law passed in 2005 to assure that big-money class actions are litigated in federal court. And according to the Supreme Court’s decision, name plaintiffs and their lawyers cannot evade federal court jurisdiction by simply stipulating that their damages fall beneath CAFA’s $5 million threshold.
Last week my Reuters colleagues Luciana Lopez, Peter Rudegeair and Matt Goldstein published a piece contending that the JusticeDepartment’s fraud suit against the credit-rating agency Standard & Poor’s may turn out to be a bust. Despite purportedly damning internal S&P emails quoted in the Justice Department complaint, a dozen securities lawyers told Reuters that the government would be hard-pressed to show that S&P deliberately skewed ratings to retain market share or that the presumably sophisticated credit unions and other financial institutions that relied on S&P’s ratings were actually gulled into investment decisions. Said one structured finance consultant: “It is a crappy case.”
On Tuesday, shareholder lawyers leading the 10-month-old securities fraud class action accusing JPMorgan Chase of deceiving investors about billions of dollars in losses by the bank’s chief investment office received permission to delay filing their latest complaint until April 12, in order to allow them time to digest the findings of a Senate investigation of the bank’s so-called “whale trades.” That was good thinking. The 307-page reportof the Permanent Subcommittee on Investigations, released Thursday evening, is a trove for plaintiffs’ lawyers, filled with well-documented allegations of overly risky, undersupervised trading by JPMorgan’s chief investment office; deliberate attempts by the CIO to minimize the appearance of burgeoning losses; and subsequent efforts by the bank to mislead regulators and investors about the CIO’s activities and losses. The report references “previously undisclosed” emails, memos and other documents purportedly showing that “senior managers were told the (CIO portfolio) was massive, losing money, and had stopped providing credit loss protection to the bank, yet downplayed those problems and kept describing the portfolio as a risk-reducing hedge, until forced by billions of dollars in losses to admit disaster.”
In all the tsuris for class action lawyers from the U.S. Supreme Court’s 2011 ruling in Wal-Mart v. Dukes, one category of collective litigation continues to boom: overtime claims brought under the Fair Labor Standards Act. That’s because wage-and-hour cases aren’t really class actions but rather representative actions. Under the process established in a 1987 New Jersey ruling called Lusardi v. Xerox and followed by most federal trial judges overseeing FLSA cases, courts certify a conditional class based on allegations of a representative employee. Other employees who are similarly situated are then notified of the action and offered the opportunity to opt into the case. After discovery, the defendant gets a crack at decertifying the class by showing that employees aren’t actually situated similarly. By convention, the language of federal class actions applies to certification and decertification in wage-and-hour cases. But most judges don’t subject the suits to the strict Federal Rules of Civil Procedure for class actions, so the Supreme Court’s tightening of those rules in the Dukes case hasn’t been of much help to wage-and-hour defendants.