If you think the furious debate over corporate loser-pays provisions in shareholder litigation will end if Delaware legislators enact the proposal suggested earlier this month by the state bar’s Corporation Law Council, think again.
Remember the strange, sad tale of Keila Ravelo, once a Willkie Farr & Gallagher partner representing MasterCard in retailers’ gigantic swipe-fee class action and now a federal criminal defendant accused of defrauding Willkie, MasterCard and her former firm, Hunton & Williams? When I first wrote about Ravelo last month, Willkie had just informed lawyers involved in the $5.7 billion swipe-fee settlement with MasterCard and Visa that documents from Ravelo’s files at the firm needed to be disclosed to the court overseeing the case.
It seems very likely that the U.S. Supreme Court will eventually have to clarify the reach of U.S. antitrust laws to foreign cartels whose actions ultimately impact U.S. companies and consumers. There is a stark split among the federal circuits on the question, as you can see from two new petitions for Supreme Court review. The Taiwanese company AU Optronics and two former officers of the company argue that the 9th U.S. Circuit Court of Appeals wrongly held the Sherman Act can extend to overseas sales between foreign companies when it affirmed their convictions for conspiring to fix the prices of liquid crystal display screens used in mobile devices sold in the United States. Motorola, which sold devices featuring the very same LCD screens sold by AU Optronics and its cartel partners, believes the 7th Circuit made a mistake when it said Motorola can’t sue over the price-fixing.
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.
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.
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.
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.
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.
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.
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.