Alison Frankel

At the beginning of his closing argument way back on Sept. 20, Micron counsel William Price of Quinn Emanuel Urquhart & Sullivan told jurors that his client and its co-defendant, Hynix, had fixed prices on some computer memory chips. They did it 11 years ago, he said, when the tech bubble burst and memory chip prices were plummeting. “That activity was wrong, and there were victims,” Price said, according to this transcript. “But Rambus wasn’t a victim …. And, so, what Rambus has done here is they’ve taken something that we have told you from the beginning was true and said they were victims when they weren’t.”

Price told jurors about an instruction New York City used to give its bus drivers:  if there’s a crash, lock the doors. “The reason wasn’t to keep people from leaving,” Price said. “The reason was to keep people from jumping on and saying they had hurt themselves, [that] they had hurt their back. Those people were called ‘ghost riders.’” Rambus, Price said, was a ghost rider. It claimed to be a victim of Hynix and Micron’s wrongdoing but wasn’t even on the bus. Rambus and its lawyers at Munger, Tolles & Olson asserted that Micron and Hynix conspired to wreck the market for its proprietary computer memory chip; Price and Hynix’s lead counsel, Kenneth Nissly of O’Melveny & Myers, had to show jurors that their clients’ admitted price-fixing involved the market for an alternative memory chip; the failure of Rambus’s chip, they argued, was due entirely to problems with the product.

“The challenge was to say, ‘Yes, there was price-fixing, but not this price-fixing,’” Price told me.

Quinn Emanuel and O’Melveny met the challenge, though they had to wait almost two months to find out they’d won the case. Twelve jurors began deliberations in late September. On Wednesday they finally returned a verdict, concluding that Rambus had not proved Micron and Hynix engaged in a price-fixing conspiracy to keep Rambus’s chip from becoming the industry standard. (Here’s the verdict sheet.) The jury also found that Micron and Hynix didn’t conspire to disrupt Rambus’s relationship with Intel. Those were the only questions jurors had to answer, since everything else in Rambus’s case depended on jurors finding a conspiracy to harm the company.

Price said the trial was truly a bet-the-company case for Micron. In its closing arguments, Rambus asked jurors to award about $4 billion in damages. With the trebling permitted under antitrust laws, the potential $12 billion exposure exceeds Micron’s market share. (Rambus had everything riding on the outcome as well; as Dan Levine reported Wednesday for Reuters, the company’s share price fell 61 percent after the verdict was announced.)

The big guns are rolling out on both sides of Microsoft’s patent infringement suit against Barnes & Noble at the U.S. International Trade Commission. Microsoft has no fewer than four firms (Sidley Austin; Orrick, Herrington & Sutcliffe; Woodcock Washburn; and Adduci, Mastriani and Schaumberg) working on the six-month-old case, in which it accuses Barnes & Noble’s Nook e-readers of infringing Microsoft patents. Barnes & Noble this week supplemented its team of Cravath, Swaine & Moore and Kenyon & Kenyon with Paul Brinkman‘s group from Quinn Emanuel Urquhart & Sullivan. The Quinn addition is notable because Barnes & Noble’s devices use Google’s Android operating system; Quinn, which is one of Google’s go-to IP firms, previously defended the Android system in Apple’s ITC case against HTC.

When it comes to Android, Microsoft and Google don’t exactly think the same way, as you’ll see below. But there is one issue on which they have a peculiar alignment of interests: they’re both trying to put the kibosh on supposedly confidential information that’s jumped from litigation into the public domain.

Google, as you’ll no doubt recall, has been fighting for months to undo the damage an email written by one of its Android engineers has apparently caused to Google’s defense of Oracle’s Java infringement claims. (The engineer, Tim Lindholm, said all alternatives to Java “suck” and Google should license the software code.) Google has been arguing, without any success, that Oracle improperly introduced the damning email into the record and all traces of it should be purged — even though, by now, Lindholm’s email is plastered all over the Internet.

On Monday the National Credit Union Agency announced a pair of breakthrough mortgage-backed securities settlements. Deutsche Bank agreed to pay the government’s credit-union regulator $145 million for its role in underwriting mortgage-backed notes purchased by five credit unions that subsequently failed. Citigroup threw another $20.5 million into NCUA’s settlement pot, which will offset the $5 to $9 billion in fees the agency is charging solvent credit unions to pay for losses associated with the five failed institutions.

As best I can tell, these are the first settlements of MBS securities claims (as opposed to put-back contract claims) since Wells Fargo’s landmark $125 million class action MBS settlement this summer. That means the NCUA deals are just the second and third MBS securities settlements that plaintiffs have scored. They’re also, as the Wall Street Journal noted, the first MBS securities recoveries by a government agency. (Again, I’m distinguishing between securities and put-back claims; Fannie Mae and Freddie Mac both reached put-back settlements with Bank of America in January.)

So, given the paucity of MBS securities settlements, what clues do the NCUA settlements offer for the future of the litigation?

One of the most controversial aspects of the U.S. Supreme Court’s June 2011 ruling in Janus v. First Derivative Traders was that the Justices rejected the Securities and Exchange Commission’s interpretation of federal securities laws. The SEC said Janus Capital wasn’t liable for the allegedly misleading statements in a prospectus issued by a Janus mutual fund, even though the SEC argued that it was — and even though federal courts traditionally pay deference when they ask agencies to offer their expertise in interpreting the law.

The SEC took another blow Monday, when a three-judge panel of the U.S. Court of Appeals for the Second Circuit affirmed the dismissal of an auction-rate securities class action against Merrill Lynch, despite an SEC brief arguing the case should proceed. The SEC agreed with a Merrill ARS investor who asserted that the boilerplate disclosure Merrill posted after a 2006 SEC consent decree shouldn’t shield it from claims it manipulated the market for ARS. The Second Circuit panel felt otherwise.

To be sure, Judge Robert Katzmann, writing for a panel that also included Judges Robert Sack and Amalya Kearse, said that the Merrill opinion should be read narrowly. “We see no need to fix the ‘exact molecular weight’ of the deference that we owe to the SEC’s position,” Katzmann wrote. “We readily acknowledge that at least some deference to the agency’s position is appropriate, given the SEC’s expertise and accountability. Here, however, we are unable to agree with the SEC’s application of the legal principles governing Merrill’s disclosures.”

With very little fanfare, Motorola Mobility announced Monday that it has reached a memorandum of understanding to resolve shareholder litigation that might have stood in the way of a vote on Google’s proposed $12.5 billion all-cash acquisition of the company. The memo is, alas, not public, so we don’t know just what the settlement entails, or how much the plaintiffs’ lawyers who challenged the deal will get in fees. Motorola Mobility did file an 8-K amending its proxy materials, giving shareholders marginally more information about (among other things) how the Google deal came together and what kind of equity awards Motorola officers will receive. These relatively insignificant disclosure amendments are a typical ending for the rash of M&A shareholder suits that have broken out in the last few years; it’s a pretty good bet that, in this case, the additional disclosures aren’t going to sway very many Motorola Mobility shareholders when they vote on the Google deal on November 17.

So why am I highlighting an unremarkable settlement that basically amounts to a litigation footnote in a blockbuster $12.5 billion tech deal? Because the Motorola Mobility shareholder M&A litigation is a case study in the weird, private regulatory system that’s evolved as a check on deal activity. In rare instances, when plaintiffs’ lawyers uncover shady behavior by deal participants, shareholders wind up with sweetened offers. But much more often — as in the Motorola Mobility case — the primary beneficiaries of this M&A scrutiny are lawyers: both the plaintiffs’ lawyers who say they have a right to make sure insiders were looking out for shareholders and the defense lawyers representing those insiders.

Shareholder M&A litigation amounts to a “deal tax” companies pay in order to assure their equity holders that the board and its advisers fulfilled their duties. And that leads to a question that’s previously arisen in litigation over cigarettes and guns: do we want private lawyers to do what public regulators seemingly can’t or won’t?

For all of its zeal in squelching what it considers unfounded class actions against U.S. businesses, the Chamber of Commerce rarely strays from appellate courts to venture into the weeds of a federal district court discovery dispute. But Monday, the Chamber filed an amicus brief in an uncertified wage-and-hour class action against the accounting firm KPMG, warning that if U.S. District Judge Colleen McMahon of Manhattan federal court adopts the order of a magistrate judge, the ruling will set “a dangerous precedent” that will be of “profound significance to businesses in America.” Piling on in their own Nov. 8 amicus brief, the Washington Legal Foundation and the International Association of Defense Counsel assert that the magistrate’s ruling could fundamentally distort class-action litigation by potentially making it cheaper to settle a case than to comply with discovery orders.

So what is this supposedly devastating, albeit preliminary, ruling? On Oct. 11, U.S. Magistrate Judge James Cott issued an order resolving a dispute between KPMG and Outten & Golden, the law firm representing two proposed classes of entry-level auditors who claim the accounting firm owes them overtime wages. The fight involved the computer hard drives of potential class members: KPMG and class counsel agreed that the plaintiffs could use sampling software to limit the electronic information KPMG would have to preserve, but they couldn’t agree on the sampling criteria or the number of computer hard drives to include in the sample. KPMG’s lawyers at Sidley Austin moved for an order limiting the sample size to 100 randomly selected hard drives.

Instead, Cott ruled that KPMG has to preserve the hard drive of every potential class member. “Prudence favors retaining all relevant materials,” Cott wrote, pointing to the seminal e-discovery ruling, Zubulake v. UBS Warburg. The magistrate judge reasoned that because McMahon, the district judge, hasn’t yet ruled on class certification in the KPMG audit associate case, every entry-level auditor in the opt-in action is a potential “key player” under Zubulake, whether in the Manhattan class action or in another case that could be filed depending on how McMahon ultimately defines the class.

Like a stage mom watching from the wings, Bank of America and its lawyers at Wachtell, Lipton, Rosen & Katz have so far been observers — and not direct participants — in the fight to win court approval of the bank’s proposed $8.5 billion settlement with Countrywide mortgage-backed securities holders. BofA signed the settlement, of course, but the case was filed as an Article 77 proceeding in New York State Supreme Court by Bank of New York Mellon, as Countrywide’s MBS trustee. The 22 institutional investors that negotiated the proposed deal with BofA and BNY Mellon intervened in the proceeding in support of the settlement. And their lawyers from Gibbs & Bruns have worked alongside BNY Mellon’s counsel from Mayer Brown and Dechert to ward off opposition to the deal, without overt involvement from BofA and Wachtell. When the case was removed to federal court, it was Mayer Brown and Gibbs & Bruns that argued before U.S. District Judge William Pauley III of Manhattan that the proceeding should be remanded to state court; then, when Pauley decided to retain jurisdiction, it was BNY Mellon and the Gibbs clients who asked the U.S. Court of Appeals for the Second Circuit to review the district court judge’s decision.

Late Monday, BofA took the stage. In a pair of filings at the Second Circuit, the bank’s Wachtell lawyers petitioned for leave to submit an amicus brief and filed the proposed brief itself. We can all chuckle at the idea that BofA is a mere friend of the court in this case, given that the bank was relying so heavily on the proposed $8.5 billion deal to remove the black cloud of Countrywide MBS liability from its attempt to return to market stability. But the bank makes a strong argument for why it should be heard if the Second Circuit decides to take the appeal of Pauley’s ruling: it is, after all, BofA’s settlement.

The bank’s lawyers repeat in summary (though quite elegant) fashion the same arguments we’ve already seen from BNY Mellon and the Gibbs investors about Pauley’s alleged errors. BofA’s proposed amicus brief argued that the judge twisted the language of the Class Action Fairness Act in a way Congress never intended in order to hold onto the $8.5 billion case. The judge improperly construed a state court proceeding that sought what amounts to a declaratory judgment on the trustee’s conduct into a mass settlement for money damages, BofA argued. He considered the dissident Countrywide MBS investors (known as Walnut Place) a defendant under CAFA, even though Walnut Place doesn’t fit the traditional definition of a defendant. And, most significantly, the proposed BofA brief said, Pauley misapplied the Second Circuit’s own precedent on the securities exception to CAFA, interpreting the exception in a way that would essentially strip it of any meaning. For all of those reasons, the bank argued, the Second Circuit should accept the appeal.

Even tobacco companies are entitled to the free speech protections of the First Amendment.

As U.S. District Judge Richard Leon of Washington, D.C. federal court explained in a fascinating ruling Monday, the Constitution grants not just the right to speak, but also the right not to. “Compelled speech” violates the First Amendment, except in a narrow commercial context; the U.S. government can require businesses to make “purely factual and uncontroversial” disclosures to protect consumers.

Judge Leon found that nine graphic images the Food and Drug Administration and the Department of Health and Human Services planned to require tobacco companies to carry on every pack of cigarettes amounted to compelled speech. He granted the tobacco companies an injunction against the requirement, finding that “unfortunately for the government, the evidence here overwhelmingly suggests that the rule’s graphic-image requirements are not the type of purely factual and uncontroversial disclosures that are [permissible].” “Indeed, the fact alone that some of the graphic images here appear to be cartoons, and others appear to be digitally enhanced or manipulated, would seem to contravene the very definition of ‘purely factual.’”

On Thursday, a firm called Brower Piven filed a Manhattan federal court securities-fraud class action against Jon Corzine and three other officials of the bankrupt brokerage MF Global. The complaint, as Jon Stempel reported for Reuters, claims that beginning in May, the MF execs deliberately misled shareholders about the brokerage’s leverage and risk-management controls. It’s really a placeholder: the plaintiff is one individual investor, and the suit asserts a single count of securities fraud based only on public MF Global regulatory filings, press releases, “and other information readily obtainable on the Internet.”

But meanwhile, behind the scenes, the big players in securities litigation are busily analyzing potential claims for MF shareholders and, perhaps more importantly, MF bondholders. They’re drafting memos and talking to the clients who usually lead major securities class actions — institutional investors such as public and union pension or health-care funds. There hasn’t been a lot of juicy securities fraud litigation of late, one plaintiffs’ lawyer told me, so firms are trying to figure out how to position themselves to lead this case. “It’s going to be a bloodbath,” another lawyer said. “Everyone is looking at this.” (Almost everyone I talked to declined to be named because they haven’t firmed up their plans for the MF litigation.)

So let’s take a look at how the shareholder and bondholder cases may shape up, and what pitfalls MF investors may face.

On Thursday, the Buffalo federal court judge overseeing Paul Ceglia’s claim to own half of Facebook — by virtue of a 2003 contract he claims CEO Mark Zuckerberg signed as a Harvard undergraduate — is expected to enter an order directing Ceglia to return from Ireland to produce crucial undisclosed computer evidence, and to answer Facebook’s withering questions about the authenticity of the contract and his own failures to comply with previous court directives.

For Facebook’s lawyers at Gibson, Dunn & Crutcher, this order, which follows a three-hour hearing Wednesday, is the latest success in a string of rulings that express the judge’s concern with the evidence offered by Ceglia, an upstate New York wood-pellet salesman who decamped to Ireland in the face of Facebook’s relentless attacks. Facebook’s lead lawyer, Orin Snyder of Gibson, said that when Ceglia finally produces the evidence ordered Thursday, his purported two-page contract with Zuckerberg will be indisputably exposed as a fraud.

But Ceglia’s latest lawyer — who joined the case about two weeks ago, after four other firms resigned over the last year — told me in a long interview Wednesday evening that he and Ceglia have turned the tables on Facebook and Gibson Dunn. In the face of sanctions motions by Facebook, California solo Dean Boland filed retorts accusing Facebook and Gibson Dunn of tampering with the original contract between Ceglia and Zuckerberg, who did some coding work for Ceglia before founding Facebook, and with Zuckerberg’s Harvard email account. Facebook and Gibson have argued, very persuasively, that the Harvard email records prove Ceglia fabricated a series of emails between him and Zuckerberg to bolster his false account of their contract.