It’s not often that Judge Richard Posner of the 7th U.S. Circuit Court of Appeals concedes that he might have been wrong. (Just ask U.S. Supreme Court Justice Antonin Scalia and his “Reading Law” co-author Bryan Garner, who have been engaged in a back-and-forth war of words with Posner since he first harshly criticized their research back in August 2012.)
Don’t get too excited about the news Monday that the U.S. Supreme Court has agreed to hear the appeal of bond investors whose antitrust claims against the global banks involved in the Libor-setting process were tossed last year.
As inevitably as thunder follows lightning, shareholder class actions follow deal announcements. Debate has been raging for years now about whether shareholders derive any real benefits from the resolution of these cases, with judges increasingly skeptical about awarding big fees to plaintiffs lawyers who win only enhanced disclosures in deal documents. For defendants, the upside of settlements is more obvious: They obtain global releases of shareholder claims related to the transactions.
Last spring, when U.S. District Judge Naomi Reice Buchwald of Manhattan decimated the consolidated private litigation over banks’ manipulation of the London Interbank Offered Rate, the only claims that remained upright in the rubble of her ruling were those brought under the Commodity Exchange Act, which makes tampering with the price of exchange-traded commodities or futures illegal. Buchwald’s opinion cited a plethora of Manhattan federal court decisions that permitted victims of futures price manipulation to move forward with their suits, including three consolidated class actions involving rigged prices for oil futures. I suspect we’re going to be hearing a lot more about those cases over the next several months. Even as the class action bar tries to persuade the 2nd Circuit Court of Appeals to reinstate the Libor antitrust claims that Buchwald dismissed, plaintiffs lawyers are gearing up for the next big litigation: claims that BP, Royal Dutch Shell, Statoil and other unidentified conspirators violated commodity and antitrust laws by reporting false prices for North Sea Brent crude oil to the price-setting agency Platts.
In the U.S. Supreme Court’s ruling Monday on pay-for-delay settlements in the pharmaceutical industry – in which a brand-name drugmaker pays generic rivals to drop challenges to its patent, thus assuring its monopoly – five justices agreed with the Federal Trade Commission that the key question isn’t whether pay-for-delay deals exceed the scope of the brand-maker’s patent. Courts cannot simply rubber-stamp such settlements as presumptively legal, the majority said in FTC v. Actavis. But nor can they assume that pay-for-delay settlements are illegal by their very nature. Instead, according to the majority, trial courts must conduct a “rule of reason” analysis to determine whether reverse-payment settlements violate antitrust law.
On Wednesday, Reuters confirmed what it first reported last month: Apple and four book publishers have offered to settle a European Commission investigation of price-fixing in the market for e-books. That’s particularly notable because Apple and two of those publishers – Macmillan and Viking – have refused to settle with the U.S. Justice Department’s antitrust division, which reached an agreement last April with three other publishers accused of conspiring with Apple to change the pricing model for e-books. Neither the DOJ settlement nor the proposed EC deal involve a financial penalty, so why would Apple, Viking and Macmillan agree to settle with antitrust regulators from the European Union but not their U.S. counterparts?
There’s a new entry in the category of no-brainers: A holder of Barclays American Depository Receipts has brought the first of what is sure to be a string of Libor-related securities fraud class actions. The 47-page complaint, filed by Wolf Haldenstein Adler Freeman & Herz in federal court in Manhattan, asserts that Barclays and its former CEO, Bob Diamond, and outgoing chairman, Marcus Agius, lied to shareholders when they failed to disclose the bank’s manipulation of reports to the authorities who calculate the daily London interbank offered rate (or Libor), a benchmark for short-term interest rates.
In a really smart piece last month, my Reuters pal Dan Levine wrote that Steve Jobs’ promise to kill Google’s Android operating system has not been fulfilled. Instead, wrote Levine and co-author Poornima Gupta, Apple’s patent war against Android users Motorola, Samsung, and HTC had become “a costly global war of attrition.” Both sides have won skirmishes, but no battle has been decisive. The Reuters story quoted Judge Richard Posner of the 7th Circuit Court of Appeals, who is overseeing a Motorola case in U.S. District Court in Chicago. “You’re not going to shut down the smartphone,” Posner told Apple’s lawyer. “[And] they’re not going to shut down the iPhone.”
Remember the Cold War military doctrine of Mutually Assured Destruction? The idea was that if the United States and the Soviet Union both knew the enemy had enough weapons to wipe the entire country off the map, neither would actually use those weapons. Mutually Assured Destruction got the entire world through the age of fallout shelters and Barry Goldwater. So the doctrine should be powerful enough to get Google, Apple and Microsoft past Justice Department antitrust regulators.