Conventional wisdom has it that the future of most securities fraud class actions will come down to U.S. Supreme Court Chief Justice John Roberts (and possibly Justice Samuel Alito, who, as a judge on the 3rd Circuit Court of Appeals, wrote quite interesting decisions about fraud-on-the-market reliance). Last term, in dissents in Amgen v. Connecticut Retirement Plans, Justices Antonin Scalia, Clarence Thomas and Anthony Kennedy made clear their skepticism about the court’s 1988 precedent in Basic v. Levinson, the case that made securities fraud class actions possible via its holding that shareholders may be presumed to have relied on corporate misstatements about a stock that trades in an efficient market. Based on the Amgen majority opinion, Justices Ruth Bader Ginsburg, Stephen Breyer, Elena Kagan and Sonia Sotomayor seem disinclined to overturn Basic when the court once again takes up the issue of classwide shareholder reliance on March 5 in Halliburton v. Erica P. John Fund.
You’ve got only 10 days left to offer your opinion of the U.S. Judicial Conference’s proposed changes to the Federal Rules of Civil Procedure: The comment period ends on February 15. I don’t share the apocalyptic vision of the U.S. civil justice system that Senator John Kyl described in a Jan. 20 Wall Street Journal op-ed on the proposed new rules, but I do endorse his advice that you speak up if you’ve got something to say about how the changes will affect your practice.
If any law firm out there has learned from bitter experience the difficulty of suing audit firms for supposedly helping companies run themselves into ruin, it’s Quinn Emanuel Urquhart & Sullivan. The firm represented litigation trustees for Refco and the Italian dairy company Parmalat, and though Quinn sued the auditors of both fraud-beset corporations, the trustees’ claims foundered on the doctrine of in pari delicto, which holds that one wrongdoer can’t sue another over their joint misconduct. It’s a weird irony of litigation against audit firms: In pari delicto defenses are most powerful in cases brought by former clients (or the shells that remain of those clients) whose fraud is unequivocal.
Remember the diplomatic crisis with India that followed the arrest last December of a deputy consul general named Devyani Khobragade? Khobragade, who worked at the Indian consulate in Manhattan, was picked up by the Diplomatic Security Services for allegedly committing visa fraud to get her nanny into the United States. Indian officials were outraged when Khobragade said she’d been strip-searched, even though the U.S. Marshals later said that she was not subjected to an internal cavity search. The crisis took a peculiar turn when Manhattan U.S. Attorney Preet Bharara – whom the Indian government criticized for abusing his prosecutorial discretion – put out a statement defending Khobragade’s arrest and processing. Among Bharara’s points in the Dec. 18 announcement: State Department agents had arrested the deputy consul, not prosecutors from his office.
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.