Last August, the rules committee of the Judicial Conference of the United States published its long-awaited proposed changes to the Federal Rules of Civil Procedure. The advisory committee on civil rules – which included private lawyers John Barkett of Shook, Hardy & Bacon, Elizabeth Cabraser of Lieff Cabraser Heimann & Bernstein, Parker Folse of Susman Godfrey and Peter Keisler of Sidley Austin as well as federal judges, law professors and a Justice Department representative – suggested amendments to 10 rules, all with the goal of speeding up the pretrial litigation process. You’re forgiven if you didn’t dive right into the document. It’s more than 350 pages long, and you have to thumb past more than 200 pages of proposed changes to federal bankruptcy rules before you even get to the section on proposed civil rules amendments. But every civil practitioner will be affected by these changes, which are open for public comment until Feb. 15. So it’s probably time to start paying attention.
I’m pretty sure we can all agree that the Internet has wrought fundamental changes in our daily lives. Remember when you had to call friends with encyclopedic memories for pop-culture trivia to remind you of the name of the Brady Bunch’s dog or the lyrics to the second verse of the theme song of Gilligan’s Island? Okay, so maybe the world would keep spinning without instantaneous answers to those sorts of questions, but more seriously, can you recall (if you’re over 40 or so) or imagine (if you’re younger) the practice of law without e-filing? Voir dire without Google and Facebook? Networking without LinkedIn and Twitter?
Last Friday, with rumors of SAC Capital’s imminent guilty plea as inescapable as stale candy corn on Halloween, class action lawyers from Wohl & Fruchter filed a first-of-its-kind letter with U.S. District Judge Laura Swain, the judge presiding over the Justice Department’s criminal case in Manhattan against Steven Cohen’s infamous hedge fund. The firm explained that it is co-lead counsel in a securities class action in federal court in Manhattan, alleging that SAC harmed investors in the Irish drug company Elan when the hedge fund dumped Elan shares based on inside information. Along with Wyeth investors, whose parallel class action has been consolidated with the Elan case, Elan shareholders claimed that they’re a victim of SAC’s crimes. And under the federal Crime Victims Rights Act of 2004, wrote Wohl & Fruchter, Elan and Wyeth shareholders have a right to present her with their view of SAC’s plea.
Last January, Boies, Schiller & Flexner filed a complaint in federal court in Manhattan against the hotel management company Marriott International, the New York hotel workers’ union and the real estate investment trust Host Hotels & Resorts, which owns 118 hotels in the United States and abroad. The suit made quite stunning assertions. Boies’s client, Madison 92nd Street Associates, accused Marriott, Host and the union of engaging in a racketeering conspiracy in which Marriott agreed secretly to help the union organize workers at certain unlucky Marriott-managed hotels in New York City, while leaving key Host properties managed by Marriott, including the Marriott Marquis, ununionized. Madison, which owned a Marriott-run hotel on New York’s Upper East Side, claimed that as a victim of the three-way conspiracy, it was forced into bankruptcy by high labor costs after its workers joined the union.
For a change, JPMorgan’s rollercoaster negotiations with state and federal regulators to resolve the bank’s liability for rotten mortgage-backed securities did not make news Wednesday. Has there ever been more public dealmaking between the Justice Department and a target? It feels as though the public has been made privy to every settlement proposal and rejection, as if we’re all watching a soap operatic reality show. Will there be a reunion episode if the bank and the Justice Department end up finalizing the reported $13 billion global settlement, with Eric Holder and Jamie Dimon shouting imprecations at each other?
Earlier this month I told you about a certiorari petition that has the potential to end securities class action litigation as we know it. Halliburton has asked the U.S. Supreme Court to dismantle the very foundation of modern shareholder fraud litigation: the court’s 1987 decision in Basic v. Levinson, which held that investors are presumed to have relied on public misrepresentations about stock trading in an efficient market. Basic preserved defendants’ opportunity to rebut that presumption of reliance, but as a group of eminent law professors and former officials of the Securities and Exchange Commission said in an Oct. 11 amicus brief supporting Halliburton’s petition, that’s more of a theoretical right than an actual one. “A quarter-century of experience with Basic has demonstrated that the fraud-on-the-market presumption is effectively not rebuttable, and that it essentially eradicates the element of reliance,” the brief said. “Time has borne out Justice (Byron) White’s concern that, ‘while, in theory, the court allows for rebuttal…such rebuttal is virtually impossible in all but the most extraordinary case.’ ” In fact, according to a working paper by Stanford law professor and former SEC Commissioner Joseph Grundfest, who signed on to the Halliburton amicus brief and is cited liberally within it, there have only been five – five! – cases in which securities fraud defendants actually succeeded in countering Basic’s presumption of reliance.
There’s an air of devilish glee in a new malpractice complaint against Wachtell, Lipton, Rosen & Katz, filed on Oct. 24 by CVR Energy in federal court in Kansas. Wachtell, as the suit explains, counseled CVR in its 2012 defense of a hostile tender offer by Carl Icahn. Icahn won the takeover fight, despite the involvement of the outspoken anti-takeover law firm and its investment-bank allies from Goldman Sachs and Deutsche Bank. So CVR is now an alter ego of Carl Icahn, who is using this suit to thumb his nose at Wachtell, his frequent opponent in takeover battles and the issuer of countless pronouncements about the scourge of activist investors like him.
The Federal Housing Finance Agency, the Congress-created conservator of Fannie Mae and Freddie Mac, operates independently of the U.S. Justice Department, which is why FHFA was able to announce its $5.1 billion settlement of securities fraud and breach-of-contract claims against JPMorgan Chase on Friday evening, before the much-ballyhooed but as yet unsigned $13 billion global deal between the bank and the government. As you know, FHFA and its lead counsel at Quinn Emanuel Urquhart & Sullivan have been whipping JPMorgan and its fellow bank defendants for as long as the conservator’s cases have been before U.S. District Judge Denise Cote in Manhattan. Facing a June 2014 trial date, and with no higher-court relief from Cote’s rulings in sight, JPMorgan had little choice but to settle FHFA’s claims that the bank and its predecessors Bear Stearns and Washington Mutual duped Fannie and Freddie about the mortgage-backed securities they were peddling. FHFA had all the leverage here.
A class action involving the supposed misappropriation of images of college athletes by the videogame maker Electronic Arts has provoked a thorny question about who truly represents the interests of absent class members. Is it the name plaintiff who filed the case on behalf of everyone who allegedly suffered the same injury as him? Or is it the lawyer who has been acting on the class’s behalf – even if he’s been fired by the name plaintiff?
Everyone with an interest in the future of class action settlements ought to be paying close attention to arguments slated to take place at the 5th Circuit Court of Appeals on Nov. 4. Objectors to BP’s multibillion-dollar settlement with victims of the 2010 Deepwater Horizon oil spill will tell a three-judge appellate panel why, in their view, U.S. District Judge Carl Barbier improperly approved a class settlement in which similarly situated claimants are treated differently. The plaintiffs steering committee that reached the agreement with BP will argue that the intricate 1,000-page settlement, painstakingly negotiated over several months, meets all of the requirements for class certification. And BP? Well, that’s where this appeal gets complicated – and fascinating.