At around the time on Tuesday that the Securities Exchange Commission announced its latest award to a whistleblower – at $14 million, it’s by far the largest of the handful of tipster payments the SEC has made since implementing its Dodd-Frank whistleblower program in 2011 – Andrew Calamari of the SEC’s New York regional office was fielding questions about the program from Susan Brune of Brune & Richard. Brune, who was moderating a panel at the Practising Law Institute’s White Collar Crime conference, asked Calamari whether the commission has any policy on fee agreements between whistleblowers and the lawyers who represent them. Calamari, who had previously said that the tipsters his office sees are typically accompanied by lawyers who’ve whipped up nifty presentations on their clients’ allegations, said the SEC “hasn’t publicly announced a position.”
Wachtell, Lipton, Rosen & Katz put out a plaintive client alert last week, responding to SEC Chair Mary Jo White‘s speech to the Council of Institutional Investors. White, who is, as you know, a former U.S. Attorney, emphasized the agency’s enforcement power and obligations. “The more successful we are at being – and being perceived as – the tough cop that everyone rightfully expects, the more confidence in the markets investors will have, the more level the playing field and the more wrongdoing that will be deterred,” she said in her speech on Sept. 26. Wachtell’s response questioned whether the SEC ought to be playing cops.
There’s an ideological battle under way in the federal courts of America that will determine the future viability of class actions.
U.S. District Judge William Alsup of San Francisco has the instincts of a really great reporter. He is a skeptic who pushes for answers, even if that means hauling the CEOs of Google and Oracle into settlement talks or demanding that state pension funds disclose their lead counsel selection process. So when shareholders proposed an unusual settlement of their securities class action against Diamond Foods, in which nearly 90 percent of the class recovery would come in the form of new stock in the company, I was really curious to see what Alsup would make of the deal. If the judge thought class members were being rooked in this peculiarly structured settlement, he’d say so.
In a board meeting on July 21, the satellite television company Dish Network disbanded a two-member independent committee that had been established in May to vet Dish’s $2.2 billion bid for the spectrum licenses of the bankrupt company LightSquared. A few days later, one of the directors on the committee, Gary Howard, resigned from the board in what The Wall Street Journal has reported to be a protest over the abrupt end of the special committee, whose members expected to have an ongoing role in the bidding process for LightSquared’s licenses. Dish’s directors – including majority shareholder Charles Ergen – have said that the independent committee’s work ended when the company finalized its stalking-horse offer in LightSquared’s Chapter 11. But shareholders in a derivative suit in state court in Las Vegas say that’s not why Ergen and his allies on Dish’s board ditched the independent committee. They claim that Ergen was looking out for his own conflicting interest as the holder of $1 billion in LightSquared debt. According to the shareholders, Dish’s “fundamental corporate governance breakdown” has endangered the company’s bid for LightSquared’s licenses and exposed Dish to liability for interfering with LightSquared bankruptcy.
The 21st Amendment of the U.S. Constitution, which repealed Prohibition but also gave states the right to enact laws regulating the import and distribution of liquor within their borders, was ratified in December 1933. Within three years, the U.S. Supreme Court was confronted for the first time with a constitutional dilemma that courts are still trying to resolve a full 80 years after the amendment took effect: Since the Commerce Clause prohibits discrimination against out-of-state businesses, how can the 21st Amendment permit states to treat in-state liquor companies differently from those outside of their borders? On Wednesday, the 8th Circuit Court of Appeals issued the latest installment in this long-running saga, upholding the constitutionality of Missouri’s requirement that officers and directors of licensed liquor wholesalers reside in Missouri.
On Monday, the National Credit Union Administration filed the latest blockbuster complaint based on banks’ manipulation of the benchmark London Interbank Offered Rate. On behalf of five failed corporate credit unions that held tens of billions of dollars of financial instruments with Libor-pegged interest rates, the federal agency – like so many duped investors before it – claims that Libor panel banks conspired to suppress their reported borrowing costs to the British Bankers’ Association, which supervised the benchmark average of reported rates. NCUA contends that because traders at Libor banks schemed to depress rate reports, the credit unions received less interest income than they were entitled to. The agency also raises the familiar accusation that as a result of artificial Libor suppression, the panel banks appeared healthier than they really were. NCUA asserts the same cause of action for this alleged (and in some cases admitted) misbehavior that we’ve seen in the big over-the-counter investors’ Libor class action and a host of suits by cities and counties that claim to be victims of Libor rate-rigging: antitrust violations under the Sherman Act and related state laws.
Off the top of your head, do you know whether the Jim Croce hit “Bad, Bad Leroy Brown” was recorded before February 15, 1972? How about Don McLean’s “American Pie”? Thankfully, most of us don’t need to clog our brains with the knowledge that Croce’s song was third on Billboard’s year-end chart in 1973 and McLean’s, recorded in late 1971, was third on the 1972 chart. But then, most of us aren’t Internet service providers that rely upon the safe harbor protections of the Digital Millennium Copyright Act of 1998. For Internet sites engaged in any kind of file-sharing, there’s now a deep gulch of potential liability dividing songs that came out before and after February 1972, when Congress passed the Copyright Act. And unless Congress acts to fill in the gap, video-sharing sites have to be very concerned about permitting users to upload files containing any old songs at all, for fear that they predate the Copyright Act.
Patents are by their very nature anticompetitive. Patent holders, after all, enjoy a limited-time monopoly on their products, during which they and they alone are legally permitted to profit from their innovation. When antitrust claims rear up in the context of patent law, they’re almost always brought against patent holders that supposedly abused their monopoly power to stifle competition, whether by falsely asserting patents to scare off rivals or by refusing to license their technology. But a counterintuitive $113 million (before trebling) verdict Thursday by federal-court jurors in Marshall, Texas, shows that patent holders can successfully wield allegations of infringement to bolster their own antitrust claims.
The Securities and Exchange Commission was pretty darn pumped about its $200 million settlement Thursday with JPMorgan Chase, part of the bank’s $920 million resolution of regulatory claims stemming from losses in the notorious “London Whale” proprietary trading. And why not? As George Cannellos, the co-director of enforcement, said in a statement, JPMorgan’s $200 million civil penalty is one of the largest in SEC history. The agency also showed that it’s serious about its new policy of demanding admissions of liability from some defendants. For those of us accustomed to the SEC’s “neither admit nor deny” boilerplate, it’s startling to see the words “publicly acknowledging that it violated the federal securities laws” in an SEC settlement announcement. So let’s permit Cannellos some chest-thumping: “The SEC required JPMorgan to admit the facts in the SEC’s order – and acknowledge that it broke the law – because JPMorgan’s egregious breakdowns in controls and governance put its millions of shareholders at risk and resulted in inaccurate public filings.”