Will bank defendants come to regret shelling out nearly $20 billion to the Federal Housing Finance Agency and about $350 million to the National Credit Union Administration to resolve allegations that they misrepresented mortgage-backed securities peddled to government-regulated entities? In the not-too-distant future, the 2nd U.S. Circuit Court of Appeals is going to be looking again at an issue that might have wiped out most of the FHFA and NCUA claims. The 2nd Circuit sided against the banks when it first looked at the defense in 2013 – which is one big reason why FHFA and NCUA have been able to squeeze so much money from them. But this time around, the appeals court is going to have to figure out what to do about a 2014 U.S. Supreme Court case that has persuaded two federal district judges in Manhattan to disregard the 2nd Circuit’s 2013 precedent.
This is getting to be an annual rite. The U.S. Supreme Court agrees to take a case that could significantly reshape the securities class action business. Defendants get their hopes up, loading the docket with amicus briefs calling on the justices to impose new restrictions on the cases. But ultimately the justices leave the status quo more or less intact, to the relief of shareholder lawyers across the land.
There are so many interesting jurisdictional issues in the U.S. government’s prosecution of foreign bankers allegedly involved in the manipulation of benchmark London Interbank Offered Rates, calculated in London under the auspices of the British Bankers’ Association. Last December, Covington & Burling laid out at least three solid arguments for why U.S. courts shouldn’t hear the government’s criminal case against Roger Darin, a Swiss UBS interest-rate trader charged with one count of conspiracy to commit wire fraud by supposedly submitting false reports of UBS’ yen Libor, including the territorial limits of the U.S. wire fraud statute and Darin’s due process right not to be tried in U.S. courts for conduct that took place entirely outside of the United States.
If you think the furious debate over corporate loser-pays provisions in shareholder litigation will end if Delaware legislators enact the proposal suggested earlier this month by the state bar’s Corporation Law Council, think again.
Remember the strange, sad tale of Keila Ravelo, once a Willkie Farr & Gallagher partner representing MasterCard in retailers’ gigantic swipe-fee class action and now a federal criminal defendant accused of defrauding Willkie, MasterCard and her former firm, Hunton & Williams? When I first wrote about Ravelo last month, Willkie had just informed lawyers involved in the $5.7 billion swipe-fee settlement with MasterCard and Visa that documents from Ravelo’s files at the firm needed to be disclosed to the court overseeing the case.
It seems very likely that the U.S. Supreme Court will eventually have to clarify the reach of U.S. antitrust laws to foreign cartels whose actions ultimately impact U.S. companies and consumers. There is a stark split among the federal circuits on the question, as you can see from two new petitions for Supreme Court review. The Taiwanese company AU Optronics and two former officers of the company argue that the 9th U.S. Circuit Court of Appeals wrongly held the Sherman Act can extend to overseas sales between foreign companies when it affirmed their convictions for conspiring to fix the prices of liquid crystal display screens used in mobile devices sold in the United States. Motorola, which sold devices featuring the very same LCD screens sold by AU Optronics and its cartel partners, believes the 7th Circuit made a mistake when it said Motorola can’t sue over the price-fixing.
It took three tries, but HP’s controversial no-money settlement of a shareholder derivative suit stemming from its disastrous 2011 takeover of the British software company Autonomy finally won preliminary approval Friday from U.S. District Judge Charles Breyer of San Francisco. After objecting shareholders kicked up a fuss about previous settlement proposals – the first, for instance, included a side deal in which HP agreed to pay as much as $48 million to hire the settling plaintiffs’ lawyers to help the company prosecute a case against former Autonomy officers – HP’s counsel at Wachtell Lipton Rosen & Katz and shareholder lawyers from Cotchett, Pitre & McCarthy and Robbins Geller Rudman & Dowd managed to assuage Judge Breyer’s concerns. Now that the deal specifically resolves only allegations against HP’s directors and officers from the Autonomy deal, Breyer said, the settlement’s corporate governance reforms appear to be fair and reasonable to shareholders.
After my initial take Tuesday on the 728-page report by the Consumer Financial Protection Board on mandatory arbitration clauses in consumer contracts for financial products and services – which found that class actions deliver vastly more money to vastly more consumers than arbitration – I heard from some critics of the CFPB’s process and analysis.
There is a very unusual paragraph at the beginning of the plea agreement former RBS trader Matthew Katke entered Wednesday with federal prosecutors in Connecticut. Katke admitted to conspiring to commit securities fraud when he worked at RBS. But he and prosecutors agreed that his conduct may turn out not to be a crime at all, depending on what the 2nd U.S. Circuit Court of Appeals eventually rules in an appeal by ex-Jefferies broker Jesse Litvak.
Larry Stryker first told the Securities and Exchange Commission about supposedly shady business practices at a firm called Advanced Technologies Group in 2004. At the time, there was no bounty program for tips to the SEC. But Stryker was in the midst of his own fight with ATG’s leaders, whom he accused of cheating him out of an ownership stake in a previous enterprise. Over the next six years, as Stryker pursued his own ultimately unsuccessful litigation against his former business partners, he continued to badger the SEC to bring a case against them and ATG. After a meeting with Stryker in 2009, the commission finally sued the company and its principals for illegally offering unregistered securities in 2010. The case ended in 2011 with judgments of more than $20 million against the defendants.