For more than nine years, U.S. District Judge Lynn Hughes of Houston presided over a False Claims Act case in which two auditors from the U.S. Minerals Management Service accused Shell Exploration of improperly deducting transportation and storage costs from the royalties it owes the U.S. government on offshore oil and gas leases. Hughes didn’t think much of the plaintiffs’ claims. He granted summary judgment to Shell in 2012, and then, after the 5th U.S. Circuit Court of Appeals revived and remanded the suit in 2012, granted Shell’s renewed summary judgment motion in 2014.
I don’t envy Judge Thomas Wheeler of the U.S. Court of Claims. Last week, the Justice Department and former AIG chief Maurice Greenberg filed hundreds of pages of post-trial briefs in Greenberg’s multibillion-dollar Fifth Amendment case, which alleges that the government engaged in an unconstitutional taking when it received about 80 percent of AIG’s equity in exchange for bailing the company out of a near-death liquidity crisis in 2008. Wheeler, who oversaw a six-week bench trial last fall, featuring testimony from officials who led the government’s response to the financial crisis, now has to wade through the two sides’ competing versions of both the facts and the law.
Timothy McGee, a onetime Ameriprise financial advisor, contends that he never would have been found guilty of insider trading if the Securities and Exchange Commission hadn’t revised its interpretation of securities fraud law in 2000. On Friday, the U.S. Supreme Court is scheduled to consider McGee’s argument when the justices conference on his petition for review of his 2013 conviction. And there’s a good chance that McGee’s appeal will catch the attention of Justices Antonin Scalia and Clarence Thomas, who invited insider trading defendants to challenge the SEC’s authority in a statement last November in an appeal by a different convicted inside trader, Douglas Whitman.
Remember the unusual structure of FreeportMcMoran’s $137.5 million settlement with investors last month? The settlement resolved shareholder derivative claims, brought by investors in the name of the corporation. Typically, the cash recovered in shareholder derivative litigation goes to the company’s treasury, which means investors benefit only indirectly. But Freeport agreed to distribute all of the settlement money (less attorneys’ fees) to shareholders in a special dividend. I hypothesized that the Freeport deal might be a new model for derivative suits, an answer to critics who call derivative litigation a mere shift of funds from one corporate pocket to another.
Last October, when a federal jury in Cleveland concluded that Whirlpool was not liable to a class of Ohio washing machine purchasers who claimed the products had a tendency to develop a moldy smell, I said the outcome was a vindication of class actions. Whirlpool had argued in the years leading up to the trial in federal court in Cleveland that it couldn’t get a fair shake if consumers’ claims were tried en masse. I argued that the jury’s defense verdict showed that defendants – and not just plaintiffs – can reap the benefits of a trial of classwide claims.
(Update: After this post was published, I learned from a reliable source that Chief Justice Strine was being facetious in his assessment of Beck! The Chief Justice was actually dissing Kanye; I misread his deadpan comment about Beck.)
On Tuesday, the 2nd U.S. Circuit Court of Appeals ruled that former employees of several Applebee’s restaurants in upstate New York are not barred from suing as a group over supposedly unpaid wages, even though the lost wages will eventually have to be assessed individually. The appeals court rejected the restaurant owner’s arguments that under the U.S. Supreme Court’s 2013 decision in a case called Comcast v. Behrend, plaintiffs cannot be certified to sue as a class unless they can offer a model for measuring damages that applies to everyone in the group.
Oh, to be a fly on the wall Tuesday afternoon at Willkie Farr & Gallagher, when the firm is slated to talk to retailers suing MasterCard about findings from Willkie’s internal investigation of the work of former partner Keila Ravelo.
A Maryland company called Beyond Systems has a business model like none I’ve ever seen. The company provides Internet services to a very small clientele. But mostly, according to a ruling Wednesday by the 4th U.S. Circuit Court of Appeals, it exists to sue corporations that send out supposedly misleading email spam. For a long time, that very unusual business plan worked out quite well for Beyond Systems’ founder, Paul Wagner, and his brother, Joe Wagner, who runs a similar enterprise, called Hypertouch, in California. Beginning in 2005, when Beyond Systems switched its litigation target from spam faxes to spam emails, the company took in more than $1 million in settlements with alleged spammers, mostly Internet ad and marketing companies, according to Beyond Systems’ list of its cases.
It has been a week since China’s State Administration for Industry and Commerce published a report accusing the e-commerce company Alibaba of selling counterfeits, infringing trademarks and other dubious business practices. The Chinese regulator has since retracted the report, but in the meantime Alibaba announced disappointing earnings for the third quarter of 2014. The company’s U.S.-traded American Depositary Shares, which launched in a record-setting initial public offering in September, fell sharply after both troubling disclosures. In all, Alibaba lost $11 billion in market capitalization last week.