Alison Frankel

HP has launched claims vs. Autonomy execs. Can they countersue?

March 16, 2015

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.

‘Most revealing’ CFPB evidence on class actions? Overdraft fee case study

March 13, 2015

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.

Ex-RBS trader’s plea highlights issue at 2nd Circuit: Can brokers lie?

March 12, 2015

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.

No payout for pre-Dodd-Frank SEC whistleblowers – 2nd Circuit

March 11, 2015

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.

CFPB arbitration study a powerful vindication of consumer class actions

March 10, 2015

The big frustration in the debate over the relative merits of arbitration and consumer class actions has always been the scarcity of hard data. Sure, the U.S. Chamber of Commerce and the class action bar could talk all day about why the other side’s ideology is dead wrong, but neither side had convincing empirical information. So the Consumer Financial Protection Bureau set out in 2012 to collect it.

Unanswered question in Blankenship seal ruling: Whom can judges gag?

March 9, 2015

The 4th U.S. Circuit Court of Appeals wasted no time in deciding that U.S. District Judge Irene Berger of Beckley, West Virginia, went too far when she issued a sweeping seal-and-gag order in the government’s criminal case against former Massey Energy CEO and chairman Don Blankenship. A three-judge panel heard oral arguments in a challenge to Berger’s order last Monday, less than two weeks after four media companies and a nonprofit petitioned the 4th Circuit to undo Berger’s restrictions. On Thursday, 4th Circuit Judges Roger Gregory, James Wynn and Andre Davis did just that in a short per curiam opinion.

Trial judges shouldn’t decide if SEC in-house cases unconstitutional – new ruling

March 5, 2015

As the Securities and Exchange Commission follows through with its promise – or threat, depending on how you look at these things – to bring more of its enforcement actions as administrative proceedings before judges employed by the commission, at least a half-dozen defendants have brought constitutional challenges to the SEC’s right to pursue charges outside of federal district court. They’ve asserted two different theories: First, administrative proceedings violate their Seventh Amendment and due process rights because there’s no jury and the evidentiary rules favor the SEC; and second, the entire administrative law judge system violates separation-of-powers doctrine under the U.S. Supreme Court’s 2010 decision in Free Enterprise Fund v. Public Company Accounting Oversight Board.

Federal judge orders deposition of Illinois justice in RICO suit

March 4, 2015

One of the hottest and ugliest judicial campaign battles of last fall was over Justice Lloyd Karmeier‘s reelection to the Illinois Supreme Court. Karmeier, who was first elected to the state high court in 2004 and subsequently voted to overturn billion-dollar judgments against Philip Morris and State Farm, faced a deluge of ads from plaintiffs’ lawyers who claimed he was beholden to corporate defendants that had supposedly bankrolled his 2004 campaign.

Record $275 mln Activision settlement goes before Dela. Chancery Court

March 3, 2015

Most of the nation’s attention on Wednesday will be fixed on the U.S. Supreme Court, where the justices will hear arguments in King v. Burwell, a case that could bring down President Obama’s healthcare law. Securities lawyers, though, should keep an eye on Delaware Chancery Court as well. Vice Chancellor Travis Laster is scheduled to hear arguments about whether to approve a proposed $275 million settlement of derivative claims against Activision board members who allegedly breached their duties when they agreed to a $6 billion buyback of shares held by Vivendi in 2013.

Next big test for SEC rulemaking could be State Street execs’ appeal

March 2, 2015

There’s been a lot of discussion lately of the Securities and Exchange Commission’s authority to define insider trading, thanks to the 2nd U.S. Circuit Court of Appeal’s landmark December 2014 decision in U.S. v. Newman and a statement last November by U.S. Supreme Court Justices Antonin Scalia and Clarence Thomas that questioned whether the SEC has the power to determine what constitutes criminal conduct. The commission’s redefinition of the scope of liability for civil securities fraud – in a split opinion last December in an enforcement action against two former employees of the investment manager State Street – has received much less attention. But as an appeal of the SEC opinion by the former State Street executives, John Flannery and James Hopkins, moves forward at the 1st Circuit, it could test the SEC’s authority to interpret securities law through a specific enforcement action.