Alison Frankel

How Facebook IPO class action lawyers changed judge’s mind

By Alison Frankel
December 20, 2013

The first paragraph of Facebook’s motion to dismiss a securities class action that raised allegations about disclosures in its initial public offering was a no-brainer. Last February, U.S. District Judge Robert Sweet of Manhattan tossed four shareholder derivative suits based on the same underlying facts, concluding in a voluminous opinion that Facebook had “repeatedly made express and extensive warnings” about potential weaknesses in its revenue model as users shifted from desktop computers to mobile devices. So in May, when Facebook’s lawyers at Kirkland & Ellis and Willkie Farr & Gallagher moved to dismiss the parallel securities class action, which is also before Judge Sweet, they quoted the judge’s own words right back to him, not just in the first paragraph but seven more times in the dismissal brief.

Wachtell: ‘Bully’ Icahn tried to shake us down with ‘malicious’ lies

By Alison Frankel
December 19, 2013

In October, when I told you about a malpractice suit against Wachtell, Lipton, Rosen & Katz by Carl Icahn’s CVR Energy, I pointed out the undertone of devilish glee that ran through the Kansas federal court complaint. Icahn is the ultimate activist investor, a perennial foe of corporate board defender and long-term value guru Martin Lipton. Icahn beat Wachtell when he succeeded in acquiring CVR last year, despite CVR’s anti-takeover advice from the firm and Goldman Sachs and Deutsche Bank. His suit accusing Wachtell of malpractice – for supposedly failing to warn CVR’s board about the fees the company would have to pay Goldman and Deutsche Bank if Icahn prevailed – seemed to be icing on Icahn’s already tasty cake.

How to resolve Indian consul arrest flap: retroactive immunity

By Alison Frankel
December 18, 2013

The Dec. 12 arrest of Devyani Khobragade, a deputy consul general at India’s consulate in Manhattan, has precipitated quite a diplomatic brouhaha. Khobragade, who is accused of underpaying her nanny and falsifying documents to get the nanny into the United States, was handcuffed by diplomatic security staff, turned over to U.S. Marshals and strip-searched before being released on $250,000 bail. As anger escalated in India on Tuesday, with reports that Khobragade was forced to undergo a cavity search, Indian authorities retaliated by removing protective concrete barriers in front of the U.S. embassy in New Delhi. (The Marshals Service has said there was no cavity search.) On Wednesday, Secretary of State John Kerry expressed “regret” and “concern” to his Indian counterpart, and the White House told reporters that it is looking into Khobragade’s arrest “to ensure that all standard procedures were followed and that every opportunity for courtesy was extended.”

New ruling puts Fannie, Freddie in line for windfall MBS recovery

By Alison Frankel
December 17, 2013

Has there ever been a more lopsided multibillion-dollar case than the Federal Housing Finance Agency’s fraud litigation against the banks that sold mortgage-backed securities to Fannie Mae and Freddie Mac? I don’t think U.S. District Judge Denise Cote of Manhattan, who is overseeing securities fraud suits against 11 banks that haven’t already settled with the conservator for Fannie and Freddie, has sided with the banks on any major issue, from the timeliness of FHFA’s suits to how deeply the defendants can probe Fannie and Freddie’s knowledge of MBS underwriting standards in the late stages of the housing bubble. But even in that context, Judge Cote’s summary judgment ruling Monday – gutting the banks’ defenses against FHFA’s state-law securities claims – is a doozy.

Why shield corporations from disclosing political spending?

By Alison Frankel
December 16, 2013

I’m going to confess right here that I don’t possess the requisite statistical skills to hazard an opinion on whether shareholders benefit when their corporation engages in lobbying and campaign expenditures. If you have a more powerful appetite for numbers than I do, John Coates of Harvard Law School offers a bibliography of academic studies that conclude corporate political spending is bad for shareholders at the Harvard Forum on Corporate Governance (including his own influential 2012 paper for the Journal of Empirical Legal Studies). Want a different view? A pair of economics consultants from Sonecon disputed Coates and those who think likewise in a 2012 paper for the Manhattan Institute that found corporate political spending has “a generally positive effect” on a company’s value, in terms of market returns. You can pick whichever analysis suits you because I’m not going to argue the merits of either. I do believe, however, that regardless of the benefits of lobbying and campaign contributions, shareholders have a right to know when and how their money is being spent on politics.

Lawyers can’t force unwitting clients into arbitration: 9th Circuit

By Alison Frankel
December 13, 2013

In 2011, the U.S. Supreme Court schooled the 9th Circuit Court of Appeals on the primacy of arbitration clauses in AT&T Mobility v. Concepcion. The high court’s landmark ruling reversed a 9th Circuit holding that AT&T’s prohibition of classwide arbitration was unconscionable under California law, finding instead that the Federal Arbitration Act preempts state laws restricting the use of arbitration. In combination with the Supreme Court’s ruling last term in American Express v. Italian Colors, Concepcion pretty much wiped out any hope that consumers and employees can avoid mandatory arbitration if they’ve signed contracts with arbitration provisions.

Class actions deliver more money to more people than arbitration: CFPB

By Alison Frankel
December 12, 2013

What a difference a day – and a data source – makes.

Yesterday I told you about a new study of class action outcomes that Mayer Brown conducted at the urging of clients like the U.S. Chamber of Commerce. The law firm looked at 148 consumer and employment class actions filed in federal court in 2009, and found evidence that a grand total of one case – a $1.2 billion settlement of ERISA claims rooted in Bernard Madoff’s Ponzi scheme – delivered meaningful recoveries to class members. Of the five other cases in which claims data was publicly disclosed, Mayer Brown found distressingly minimal participation in settlement funds by class members: 0.000006 percent, 0.33 percent, 1.5 percent, 9.66 percent and 12 percent.

Class action mystery: Where does the money go post-settlement?

By Alison Frankel
December 11, 2013

I would have been shocked if Mayer Brown‘s new study of 148 federal-court class actions filed in 2009 concluded that the cases are of any real benefit to class members. Mayer Brown Supreme Court litigator Andrew Pincus, remember, is not only frequently counsel to the U.S. Chamber of Commerce, but was also the winner of the U.S. Supreme Court’s landmark 2011 endorsement of mandatory arbitration in AT&T Mobility v. Concepcion. Pincus told me that the firm decided to collect information on the outcome of consumer and employment class actions filed in 2009 at the behest of clients worried about the Consumer Financial Protection Bureau’s study of arbitration agreements. The Chamber and other clients, he said, have been frustrated at CFPB’s refusal to disclose exactly what it’s looking at. So, as the Chamber explained in a Dec. 11 letter to CFPB, Mayer Brown and its clients seized the initiative and compiled empirical evidence to show the agency what will happen if it precludes arbitration and forces consumers to litigate through class actions. “If you’re going to take away arbitration,” Pincus said, “you have to understand the alternative.”

FHLB demands DOJ draft complaint: ‘What is JPMorgan trying to hide?’

By Alison Frankel
December 10, 2013

If JPMorgan Chase and the Justice Department thought that all the zeroes at the end of the bank’s multibillion-dollar settlement for mortgage securitization failures would foreclose questions about the bank’s actual wrongdoing, clearly they thought wrong. Days after the much-leaked-about $13 billion deal was finally announced, New York Times columnist Gretchen Morgenson looked at the admissions accompanying the settlement and wondered why it had taken the federal government so long to hold the bank accountable for conduct that’s been in the public domain for years. Morgenson’s column echoed posts at Bloomberg and Slate that also scoffed at JPMorgan “admissions.” On Monday, even a commissioner of the Securities and Exchange Commission piled on. Dan Gallagher, a Republican, criticized the settlement as a penalty on the bank’s current shareholders that’s not justified by JPMorgan’s admitted conduct. “It is not rational,” Gallagher told an audience in Frankfurt at an event organized by the American Chamber of Commerce in Germany.

The Supreme Court, moldy washers and the future of consumer class actions

By Alison Frankel
December 6, 2013

Are Sears and Whirlpool trying to hoodwink the justices of the U.S. Supreme Court about cases that could devastate consumer class action litigation?