Late Wednesday, U.S. District Judge George Daniels of Manhattan ruled that the Palestinian Authority and the Palestine Liberation Organization are not entitled to summary judgment on Anti-Terrorism Act claims by more than 40 U.S. citizens (or their survivors) who were the victims of attacks in and around Jerusalem between 2000 and 2004. Judge Daniels’ decision clears the way for a trial, scheduled to begin on Jan. 12, against the Palestinian Authority and the PLO.
Last week, the Federal Home Loan Bank of Pittsburgh filed a brief opposing summary judgment for the credit rating agency Standard & Poor’s, which the bank has accused of fraud in Pennsylvania state court. The case, which involves FHLB’s investments in supposedly misrepresented mortgage-backed securities, dates back to 2009. The Pittsburgh lender’s doggedness has already pushed JPMorgan Chase into a settlement (on undisclosed terms) last January, after FHLB’s lawyers at Robins Kaplan Miller & Ciresi demanded to see the Justice Department’s draft complaint against JPM. Countrywide and the credit rating agency Moody’s also made deals with FHLB in June to have claims against them dismissed. S&P is the last remaining defendant in the case.
As I reporter, I love when federal judges say provocative things outside of their courtrooms. It’s news if U.S. District Judge Jed Rakoff of Manhattan publishes an article chastising the Justice Department for prosecuting corporations instead of individuals or if his colleague Shira Scheindlin gives interviews about her willingness to stand up to prosecutors. The public benefits when brave judges like U.S. Magistrate Stephen Smith of Houston, who highlighted the government’s secret use of electronic surveillance in a 2012 paper for the Harvard Law and Policy Review, call attention to what they’ve observed from the bench. I also understand that judges, just like ordinary people, want to share (or occasionally overshare) their thoughts in a forum aside from judicial opinions.
The life insurance settlement company Imperial Holdings, as I told you last week, appears to be the first public corporation to adopt a bylaw requiring investors to provide written consent from at least 3 percent of all shareholders before they can sue the company. But it almost surely won’t be the last. Phillip Goldstein of Bulldog Investors, who is the board chairman at Imperial, sits on the boards of two other public corporations whose shareholders will vote on virtually identical minimum-stake bylaws at annual meetings in December: the Mexico Equity and Income Fund and the Special Opportunities Fund. Goldstein told me he expects shareholders at both funds to accept the provisions, just as he expects Imperial’s shareholders to endorse the board’s adoption of the minimum-stake bylaw at their annual meeting this spring.
On Thursday, the plaintiffs’ firm Robbins Geller Rudman & Dowd sued the Securities and Exchange Commission, which Robbins Geller accuses of improperly withholding Wal-Mart documents requested under the Freedom of Information Act. Robbins Geller is lead counsel in a shareholders’ securities fraud class action against Wal-Mart in Arkansas federal court. It wants the SEC to turn over all of the material as received from Wal-Mart in the government’s investigation of the company’s alleged coverup of bribes paid by its Mexican unit. The SEC has refused, citing its ongoing investigation. Robbins Geller’s suit argues that since all of the material it is requesting came from Wal-Mart – and much of it has been revealed in the New York Times articles and congressional disclosures – turning it over won’t interfere with the SEC’s case.
One of the biggest reasons for the seismic shift in shareholder litigation over the past decade from securities fraud class actions to M&A challenges is that it’s easier for plaintiffs’ firms to bring M&A cases and derivative suits. After Congress amended securities laws in 1995 to rein in shareholder suits, federal-court fraud class actions became the near-exclusive province of institutional investors, not individual shareholders with small holdings. But those small-timers could still bring derivative suits and shareholder class actions challenging M&A deals. So a lot of shareholder firms without ties to big pension funds stopped bringing fraud cases and started filing these instead.
Does the Securities and Exchange Commission have the right to define when someone who trades on insider information has committed a crime? Or is the SEC – and, for that matter, every other executive-branch agency – treading on Congress’s toes when it adopts rules interpreting laws with both criminal and regulatory implications?
Last August, when the 10th U.S. Circuit Court of Appeals affirmed its previous decision that the National Credit Union Administration is not barred from proceeding with a suit alleging that Nomura duped a failed credit union into buying misrepresented mortgage-backed securities, Nomura wasn’t the only bank crushed by the ruling.
Soldiers die in wartime. Charlotte Freeman knew that when her husband, Brian – a West Point graduate, world-class bobsledder and Army Reserve captain – went to Iraq in 2006. Patrick Farr knew it when his son Clay called home on his 21st birthday to say he’d been wounded by a roadside bomb in Iraq but not badly, so he’d be back in action right away. After Brian Freeman and Clay Farr were killed – Farr by another roadside bomb a week after he was first injured in 2006, and Freeman in an attack on the provisional U.S. military headquarters in Kerbala in 2007 – their families grieved terribly. Charlotte Freeman was left to raise two tiny children on her own. Patrick Farr mourned the grandchildren he would never have.
The conventional narrative of the GM ignition switch fiasco – and, for that matter, most coverups of automotive defects – casts victims’ lawyers as heroes, exposing the corporate cynicism that puts profits before safety. Defective ignition switches came to light because plaintiffs’ lawyers prosecuted products liability cases against GM, just as they did in previous automotive scandals that proved the hazards of Ford Pinto fuel lines, Dodge Caravan door latches, and GM pickup truck and Chevy Malibu gas tanks. It’s intuitive to assume that these cases make the marketplace safer. That’s the point, after all, of tort litigation – and especially of the gigantic punitive damages awards that notorious car-defect cases have provoked. Companies are supposed to be so afraid of ending up on the wrong side of a jury verdict that they are more likely to evaluate safety risks.