There is an awful lot of weight on David Boies‘s shoulders in the U.S. Supreme Court case known as Halliburton v. Erica P.John Fund. The renowned litigator and his partners at Boies, Schiller & Flexner represent the EPJ Fund, but in a larger sense, they represent everyone who invests in shares listed on U.S. exchanges. If Boies and his firm can’t persuade the justices of the Supreme Court to leave intact the court’s 1988 precedent in Basic v. Levinson, securities fraud class actions will be decimated. Small investors without the resources to bring their own fraud claims will be stranded – as will all of the lawyers, economists, academics and consultants who make a living in the multibillion-dollar securities class action industry.
In his latest update on class actions filed in the wake of deal announcements, Dealbook’s Deal Professor Steven Davidoff (whose day job is teaching law at Ohio State) found that in 2013, shareholder suits followed almost all – 97.5 percent – deals of more $100 million. That’s not quite as inevitable as night following day but it’s getting there, especially when you consider that the rate of post-M&A class action filings is up from 91.7 percent in 2012 and 39.3 percent in 2005. Companies grumble all the time that these suits are nothing more than a “deal tax,” a sort of legal extortion racket by plaintiffs lawyers whose true motive is not enhancing shareholder value but skimming millions in fees for holding up transactions with silly claims.
I don’t usually cover the same cases as TMZ and Entertainment Weekly, but Quentin Tarantino’s copyright complaint against Gawker, filed Monday in federal court in Los Angeles, could well turn out to be one of those extremely rare celebrity suits that end up being more important for the legal principles they establish than for the name in the caption. Believe it or not, the prickly filmmaker’s suit against the snarky website raises apparently unprecedented questions about whether a news organization contributes to copyright infringement when it knowingly links, without elaboration, to copyrighted material.
Can corporations use copyright laws to block news organizations from publishing their own information about themselves? Not according to a ruling Monday from the 2nd Circuit Court of Appeals in an intriguing case called Swatch v. Bloomberg. The appeals court said that Bloomberg was entitled to publish an audiotape of an invitation-only analyst call with Swatch officials, even though Swatch held a U.S. copyright on the recording and told analysts who participated in the call that the audio could not be published or broadcast. The 2nd Circuit’s extremely broad view of the media’s fair use of copyrighted corporate information – which gives primacy to the investing public’s interest in financial reports and data – is good news indeed for financial news reporters and their employers. In combination with the appeals court’s 2011 holding in Barclays v. Theflyonthewall, the Swatch opinion makes it clear that when a corporation’s statements constitute news, the corporation doesn’t have the right to control how that news gets out.
After news broke Thursday that federal prosecutors had charged conservative commentator, author, film-maker and professional Obama-basher Dinesh D’Souza with violating campaign finance laws, Walter Olson at the Overlawyered blog posted on the relatively mild civil sanction meted out to a “big-league trial lawyer” who’d done pretty much the same thing D’Souza is accused of. D’Souza has been indicted for allegedly paying $20,000 to reimburse straw donors to the campaign of Republican Senate candidate Wendy Long, who lost a 2012 contest against incumbent Kirsten Gillibrand. Arkansas trial lawyer Tab Turner, as Overlawyered recounted in 2006, reimbursed donors of $8,000 to John Edwards’ 2004 presidential campaign and just had to cough up a $9,500 civil fine. By highlighting the contrast in his post Thursday, Olson seemed to be suggesting that D’Souza has been selectively targeted for prosecution because he’s so critical of the Obama administration.
There are probably fewer than 100 lawyers in America who argue regularly before the U.S. Supreme Court and the highest state courts of appeal. And of those, a scant handful argue against corporate interests. That is particularly true when banks are involved: Lawyers who practice at big firms that regularly represent (or hope to represent) financial institutions avoid cases that endanger those relationships, even when one bank is suing another. But the renowned former U.S. Solicitor General Paul Clement left behind those concerns in 2011 when he left King & Spalding and joined Bancroft, a tiny appellate startup. Last year, Clement took up the Supreme Court case of small merchants suing American Express for antitrust violations. (He lost.) Now he’s turned up to oppose banks in one of the biggest-dollar appeals in the courts. On Tuesday, as first reported by the New York Commercial Litigation Insider, Clement appeared as counsel of record in HSBC’s motion, as a mortgage-backed securities trustee, for the New York Appellate Division, First Department to reconsider its Dec. 19 ruling on the timeliness of MBS breach-of-contract claims or else let the case proceed to the state’s highest court.
Justice Antonin Scalia of the U.S. Supreme Court got at least one thing right in his controversial dissent last term in U.S. v. Windsor, the case that struck down federal prohibitions on same-sex marriage as an unconstitutional intrusion on the equal rights of gays and lesbians. In a 5-to-4 opinion by Justice Anthony Kennedy, the majority said its ruling addressed only the conflict between the federal Defense of Marriage Act and the laws of states that have approved same-sex marriage, not the right of a state to bar same-sex marriages. Chief Justice John Roberts’s dissent emphasized the limited scope of the ruling. But Justice Scalia predicted otherwise.
You have to say this for Dish Network founder and corporate governance poster boy Charles Ergen: He has made corporate swashbuckling fun again. For reporters, at least. Less so for his onetime allies on the secured creditors committee of the bankrupt wireless satellite company LightSquared, whose prospects for a full recovery dimmed earlier this month when Dish officially pulled its $2.2 billion bid for LightSquared’s spectrum licenses. The creditors committee had previously supported Dish and Ergen when they were fending off a competing plan for LightSquared by Philip Falcone’s Harbinger Capital; after all, Ergen is one of their own, as the largest holder of LightSquared debt. But now they’ve had quite enough of the Dish founder. On Monday, the creditors’ lawyers at White & Case filed a brief asking U.S. Bankruptcy Judge Shelley Chapman of Manhattan to force Dish to follow through with its LightSquared bid – and to reserve their right to sue Dish for damages.
There’s essentially no way to undo the reputational harm of a judicial opinion. If a federal judge – especially an appellate judge – has something bad to say about you in a published opinion, your permanent record (as we used to say in grade school) is forever besmirched even if it later turns out that the opinion was based on misinformation. You can’t sue a judge for libel for what’s said in an opinion, and judicial rulings live on forever.
I’ve been writing a lot recently about the struggles of the 5th Circuit Court of Appeals to find consensus on the constitutionality of a settlement class that sweeps in uninjured claimants. Two different 5th Circuit panels have reached different conclusions on that issue in a pair of overlapping appeals in BP’s epic class action settlement of claims stemming from the 2010 Deepwater Horizon oil spill: Judge Edith Clement, in an opinion last October, said that trial judges may not approve certification of a class that includes members who lack constitutional standing; but last week, two judges on another 5th Circuit panel upheld certification of the BP class, with Judge Eugene Davis citing decisions by other federal circuits that acknowledged the reality of uninjured class members swept into global settlements. The 5th Circuit’s divide highlights the complexity of the underlying question, which is as important for defendants as it is for plaintiffs: Can a defendant buy global peace through a class action settlement when the class might not otherwise be certifiable?