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.”
In the last few months, the victims of supposed overseas human rights atrocities have begun to feel the impact of the U.S. Supreme Court’s ruling last April in Kiobel v. Royal Dutch Petroleum. As you know, the Supreme Court held that Alien Tort Statute cases cannot proceed in U.S. courts unless they have a significant connection to the United States. As a result, ATS claims by foreign citizens accusing international corporations of abetting torture and murder on foreign soil have since been dismissed against Daimler, Arab Bank, Rio Tinto and KBR. Some ATS cases have survived post-Kiobel scrutiny, as my friend Michael Goldhaber reported for The American Lawyer in August, and alleged victims can still assert claims under Other U.S. laws that specifically apply to conduct abroad. But without a doubt, Kiobel has extinguished the jurisdiction of U.S. courts over a wide swath of human rights litigation.
This much is uncontested: In December 2008, Initiative Legal Group filed a wage-and-hour class action against Starbucks in federal court in Los Angeles. Lawyers at Initiative and, later, Capstone Law dedicated more than 8,000 hours to the case, which settled in May 2013 for $3 million. About 13,000 current and former Starbucks employees in California have made claims in the case, which resolves the coffee chain’s alleged failure to provide adequate meal breaks to workers when only two employees were on duty, as well as class assertions that Starbucks didn’t publish overtime rates on workers’ pay statements.
It’s no secret that one of the most active and successful friend-of-the-court participants at the U.S. Supreme Court in recent years has been the U.S. Chamber of Commerce, otherwise known as the lobbying arm of corporate America. Last term, according to the website of the National Chamber Litigation Center (the U.S. Chamber’s legal wing), the group filed amicus briefs addressing the merits of 22 business-related cases before the Supreme Court. The Chamber was in the fray in all of the big cases involving class actions against businesses, including American Express v. Italian Colors, Amgen v. Connecticut Retirement, Comcast v. Behrend and, of course, Standard Fire v. Knowles. In all of those cases, the Chamber advocated positions that would make it tougher for claimants to file and litigate class actions; in three of them – Italian Colors, Comcast and Standard Fire – the Chamber and pro-business interests prevailed.
In July, the justices of the Delaware Supreme Court entertained oral arguments on a question the 9th Circuit Court of Appeals asked them to answer: Can shareholders maintain post-merger derivative claims against officers and directors whose alleged misconduct drove their company into a disadvantageous deal? In ordinary circumstances, shareholders lose the right to assert derivative breach-of-duty claims on behalf of the corporation when a merger ends their stock ownership. There’s only one exception to that rule of continuous ownership, under 30-year-old Delaware precedent, for sham mergers undertaken specifically to end the threat of liability against the board. But shareholders in a Los Angeles federal court case against Countrywide persuaded the 9th Circuit that the Delaware Supreme Court, in dicta in a separate but related Countrywide case, may have widened the exception. The federal appeals court asked the state court to clarify its position.
Reading opinions by Judge Richard Posner of the 7th Circuit Court of Appeals is like jumping waves in a calm ocean. You bob along in the buoyancy of Posner’s ideas until you turn around to face shore and wonder how you drifted so far from where you started. So it is in an 11-page ruling Tuesday, addressing whether a class of ATM users may be certified to seek statutory damages under the Electronic Funds Transfer Act for a tiny defendant’s failure to post stickers notifying users of ATM fees. As you know, these are more turbulent waters than they first appear, roiled by uncertainty about constitutional standing and appropriate classwide relief. Posner’s prose nevertheless carries you along so forcefully that you don’t even notice until you’re done that he has deposited you in a land where all the rules are Posner-made.
I’m on record as a skeptic of BP’s doomsday predictions about the impact of ballooning claims in its settlement with alleged victims of the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. I still don’t buy BP’s argument that future mass disaster defendants will shy away from group settlements because BP’s agreement was open to what the oil company contends is misinterpretation by claims administrator Patrick Juneau. Nor do I think the 5th Circuit Court of Appeals should permit BP to argue that the settlement it once asked U.S. District Judge Carl Barbier of New Orleans to approve should now be undone. BP is a sophisticated defendant ably represented by Kirkland & Ellis in the long negotiations that produced the settlement agreement proposed to Barbier in March 2012. The oil company says the deal has been warped by Barbier’s endorsement of Juneau’s overly expansive reading of the terms for business and economic losses. But it bargained hard for the language in the settlement agreement and should have to abide by the deal it struck.