The Justice Department really, really, really does not want to turn over documents disclosing the government’s projection of profits at Fannie Mae and Freddie Mac, nor its policy plans for the mortgage giants. In a filing this week in the U.S. Court of Federal Claims, the head of Fannie and Freddie’s conservator, Melvin Watt of the Federal Housing Finance Agency, warned that if FHFA has to produce that material to preferred shareholders suing for a share of Fannie and Freddie’s profits, the entire housing market — nay, the entire U.S. economy! — will be destabilized. That’s an awfully dire prediction for what amounts to a discovery dispute.
Remember the hullabaloo in the last couple of years over Delaware’s plan to permit corporations to resolve their disputes in secret arbitration before Chancery Court judges? It was quite an idea, giving businesses the opportunity to present their arguments to the most experienced corporate jurists in the land without the inconvenience of public exposure. Unfortunately for its proponents, the secret arbitration regime didn’t take the U.S. Constitution into quite enough account. The plan was shot down by the 3rd U.S. Circuit Court of Appeals, which found that under the “logic and experience” test for public access, the Delaware scheme ran afoul of the First Amendment. In March, the U.S. Supreme Court declined to review the 3rd Circuit decision, which meant that corporations no longer have the right to arbitrate in secret in Chancery Court.
Poor besieged BP. As you know if you’ve seen the full-page newspaper ads BP has been running for the last year, or watched a 60 Minutes report earlier this month, BP — the company whose well spewed millions of gallons of oil into the Gulf of Mexico in the 2010 disaster that killed 11 workers on the Deepwater Horizon rig — considers itself a victim, too. As BP tells it, the company has been martyred over and over again: by trickster trial lawyers who forced it into an open-ended class action settlement; by the administrator of the settlement, Patrick Juneau, who misinterpreted the terms of the deal in a way that permitted claims by people who weren’t even harmed by the oil spill; by U.S. District Judge Carl Barbier of New Orleans, who threw in with the plaintiffs lawyers and approved Juneau’s interpretation; and, most recently, by the 5th U.S. Circuit Court of Appeals, which just refused BP’s last plea for mercy.
In a matter of weeks, the securities class action industry — I’m talking here about both plaintiffs and defense lawyers — will find out whether the U.S. Supreme Court has ended business as they know it. As you know, the justices will decide by the end of this term, in Halliburton v. Erica P. John Fund, if investors may continue to take advantage of the fraud-on-the-market doctrine the Supreme Court established in the 1988 decision Basic v. Levinson, which codified shareholders’ right to sue as a class. At oral arguments in March, the justices seemed to be reluctant to conduct radical surgery on the existing regime for class actions brought under the fraud provisions of the Exchange Act of 1934, but that’s no guarantee of the outcome.
Not every shred of hope is lost for Bernard Madoff trustee Irving Picard in his quest to recover billions from the international banks he has accused of abetting Madoff’s fraud. But it’s looking bleak for the Madoff trustee after the Justice Department filed a brief Friday at the U.S. Supreme Court. In response to the court’s request for the government’s view of Picard’s petition for a writ of certiorari, Solicitor General Donald Verrilli advised the justices to reject Picard’s appeal.
The biggest frustration for Ecuador’s ambassador to the United States, Nathalie Cely Suárez, in her country’s seemingly endless dispute with Chevron over the cleanup of old drilling sites in the Amazon rainforest, is how effectively the oil company has created doubts about the contamination. “Of course contamination existed, and still exists today,” Cely said in an interview Wednesday. “People tend to forget that the most important thing in this case is people’s lives.”
Valeant Pharmaceutical’s soon-to-be sweetened $47 billion bid for Allergan has been called “a weird textbook for the Future of Mergers & Acquisitions”: It’s the first deal in which an activist hedge fund investor, William Ackman of Pershing Square Capital, has teamed up with an operating company on a bid; and the first in which hostile bidders have convened an unofficial shareholder meeting and proxy vote to scare their target into negotiations. Ackman and Valeant are adding new steps to the old M&A dance — and shareholder class action lawyers are trying to figure out how to keep up with their moves.
The 5th U.S. Circuit Court of Appeals has had it with BP and its attempts to evade the consequences of the deal it struck to end litigation over the 2010 Deepwater Horizon oil spill.