One of the most controversial and consequential antitrust rulings of the last few years came last March, when U.S. District Judge Naomi Reice Buchwald of Manhattan tossed class action claims under the Sherman Act against the banks on the London Interbank Offered Rate panel. Buchwald acknowledged that her holding was “incongruous,” considering that some of the bank defendants had already admitted to colluding to manipulate the benchmark Libor rate, which was used to set interest rates for trillions of dollars of securities. But the judge was convinced the class couldn’t show any antitrust injury. The Libor rate-setting process (in which individual banks report the interest rates they’re being charged to borrow, which are then averaged and reported daily) was cooperative, not competitive, she said. So even if the banks conspired to rig Libor, Buchwald held, any harm they caused was not from reduced competition — and since federal and state antitrust laws are intended to target conduct that impedes competition, they don’t apply to Libor manipulation.
U.S. District Judge Jesse Furman of Manhattan grabbed the chance Thursday to set precedent on a question that has received surprisingly little attention in the courts: Does the First Amendment’s protection of free speech extend to the results of Internet searches? Furman was clearly captivated by the issue as an intellectual challenge, delving into the vigorous academic discussion of the First Amendment and Internet search even deeper than the two sides in the case, the Chinese search engine Baidu and the activists who sued the site for supposedly violating their civil rights by blocking their pro-democracy works from appearing in search results. In a supersmart opinion that Furman seems to have written to be widely read, the judge concluded that when search engines exercise editorial judgment – even if that judgment is just algorithms that determine how results will be listed – they are entitled to free speech protection.
Complaining about mandatory arbitration clauses in consumer and employment contracts is like whining about the weather: an exercise in futility. Whatever slim hope remained for opponents of mandatory arbitration after the U.S. Supreme Court’s 2011 ruling in AT&T Mobility v. Concepcion was extinguished last year in the court’s decision in American Express v. Italian Colors, which said that arbitration clauses are valid even if they effectively preclude people from enforcing their statutory rights. After the Italian Colors ruling came down, I speculated that corporations would next take advantage of the Supreme Court’s enthusiasm for arbitration by enacting provisions to require shareholders to arbitrate their claims against the company or its directors.
France, Brazil and Mexico told the U.S. Supreme Court this week that the 2nd Circuit Court of Appeals has endangered sovereign debt markets with its ruling last year against the Republic of Argentina. In amicus briefs supporting Argentina’s petition for Supreme Court review, the foreign sovereigns argue that the 2nd Circuit gravely misinterpreted the so-called “pari passu” (or equal footing) clause of Argentina’s sovereign debt contracts. By ruling that Argentina may not pay bondholders who exchanged defaulted bonds for restructured debt before it pays hedge fund creditors that refused to exchange their defaulted bonds, the amicus briefs argue, the 2nd Circuit has undermined international debt restructurings, permitting vulture investors to hold entire foreign economies hostage.
This country’s most important arbiter of corporate law – Chief Justice Leo Strine of the Delaware Supreme Court – believes that shareholder democracy has run amok. In a startling new essay for the Columbia Law Review, “Can We Do Better by Ordinary Investors?” Strine outlines the deleterious long-term effects of subjecting corporate decision-makers to shareholder votes dominated by short-term investors. These ill consequences range, according to Strine, from the outright dollars corporations must spend to educate shareholders about everything they’re entitled to vote on all the way to excessive risk-taking and regulatory corner-cutting by executives and directors worried about delivering quick returns lest they be ousted by shareholders. Strine is deeply worried about a divergence of interests between money managers, who wield the power of shareholder votes, and ordinary investors in their funds, who are typically saving for retirement or their kids’ education. He’s convinced that the entire American economy will suffer unless short-term investors are reined in.
Some very sophisticated hedge funds are claiming to be victims of a secret Treasury Department scheme to nationalize the government-sponsored mortgage entities Fannie Mae and Freddie Mac. In a summary judgment brief filed Friday in federal court in Washington, D.C., Fairholme Funds and Perry Capital (along with other Fannie and Freddie preferred shareholders) said they’ve obtained a Treasury memo from December 2010 that proves the government intended to wipe out the value of their shares without telling them.
Last year, when U.S. District Judge Sterling Johnson of Brooklyn was skeptical about the impact of a suit accusing a Subway restaurant of failing to provide access to customers in wheelchairs, he took a field trip. According to an opinion he wrote in March 2013, Johnson checked eight establishments that had been targeted in Americans with Disabilities Act suits by the same team of plaintiffs lawyers. The cases had all been resolved through settlements or default judgments, but Johnson was shocked to discover that the defendants hadn’t bothered to fix handicapped access problems. The judge’s fact-finding mission confirmed his worst suspicions that the lawyers who brought the cases were more concerned about ginning up fees for themselves than about the civil rights of the disabled.
There is probably no law firm more closely associated with corporate charter and bylaw provisions requiring shareholders to litigate their claims in Delaware Chancery Court than Wachtell, Lipton, Rosen & Katz. Wachtell didn’t defend the Chevron and FedEx cases that led then Chancellor Leo Strine to uphold the validity of forum selection clauses, but Wachtell partners Theodore Mirvis and William Savitt (among others) have been ardent boosters of the tactic as a means of curbing the expensive and duplicative shareholder suits that almost inevitably now follow deal announcements.
Does Chief Justice Alex Kozinski of the 9th Circuit Court of Appeals know more about the Copyright Act than the U.S. Copyright Office?
In an interview last November with The Daily Beast, Judge Richard Posner of the 7th Circuit Court of Appeals explained why he wouldn’t want to sit on the U.S. Supreme Court. “I don’t think it’s a real court,” Posner said. “It’s a quasi-political party. President, House of Representatives, Supreme Court. It’s very political. And they decide which cases to hear, which doesn’t strike me as something judges should do. You should take what comes.”