The Bush administration, per an amicus brief by the U.S. Solicitor General, sided with Wall Street yesterday in an important securities law case.  See WSJ article, Dow Jones item, and Washington Post story.

The case tests the edges of federal securities law.  The plaintiffs claim that investment banks, law firms, accountants, and suppliers may incur liability if they participate in a scheme to defraud investors even if they don’t tell lies themselves.  They lost in the Eighth Circuit.  In re Charter Communications, Inc., Securities Litig., 443 F.3d 987 (8th Cir. 2006).

The defendants — and now the administration — argue that "secondary" actors deserve immunity from such claims.  Otherwise, they assert, a Pandora’s box of unpredictable and far-reaching liability will open.

The U.S. Supreme Court granted review to consider the following question:

Whether this Court’s decision in Central Bank, N.A. v. First Interstate Bank, N.A., 511 U.S. 164 (1994), forecloses claims for deceptive conduct under § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5(a) and (c), 17 C.F.R. 240.l0b-5(a) and (c), where Respondents engaged in transactions with a public corporation with no legitimate business or economic purpose except to inflate artificially the public corporation’s financial statements, but where Respondents themselves made no public statements concerning those transactions.

The court will hear arguments in the case on Octoer 9, 2007.  Stoneridge Inv. Partners LLC v. Scientific-Atlanta, Inc., No. 06-43 (U.S.).  Briefs available here (scroll down to find).

A Fifth Circuit decision went the other way earlier this year, rejecting the fraud-by-silence theory.  Regents of the Univ. of Calif. v. Credit Suisse First Boston (USA), Inc., 482 F.3d 372 (5th Cir. 2007).  See Blawgletter post here.

If the pro-business trend from the 2006 Term continues into the 2007 Term — and Blawgletter has no reason to suppose it won’t — Wall Street will get good news from the Court when it decides Stoneridge.

Barry Barnett

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The Sixth Circuit today joined the Third and Seventh Circuits in holding that cashing out of an ERISA plan doesn’t kill standing to sue under section 502(a)(2).  The statute allows a plan "participant" to bring a case for breach of fiduciary duty on behalf of the plan.  The district court denied class certification on the ground that plaintiff Kermit D. Bridges lacked standing against his former employer, American Electric Power.  Bridges v. Am. Elec. Power Co., Inc., No. 06-4100 (6th Cir. Aug. 15, 2007).

In case you missed them, check out the Third and Seventh Circuit decisions — both from 2007 — here and here, respectively.

Barry Barnett

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A wit scrawled the title of this post in a library carrel.  It plays on two Greek names — Euripides and Euminides — and makes sense only if you say it out loud.  You-rip-a-dese pants, you-men[d]-a-dese pants.

Blawgletter wishes that Administrative Law Judge Roy Pearson had the wit to heed the common sense of the collegian’s graffiti.  Judge Pearson claimed that a cleaner lost his pants.  Fine.  Ask for, and accept, a replacement pair or the money to get one.  But don’t demand $54 million.

He did anyway.  And now he’s appealed from an order dismissing his case.

Euripides wrote that those whom the gods would destroy they first make mad.  Meaning crazy.  Because only a nut would do what Judge Pearson has done.  Law gods, go get him.

Barry Barnett

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If two circuits split in the forest, do they make a sound?

Blawgletter supposes that they do.  But, whether you agree with us on that epistomelogical question or not, we bet you know a circuit-split when you see it.

Take a gander at this one.  The Ninth Circuit held that the American Pipe line of cases does not toll the statute of limitations for people who file an individual lawsuit before certification of a pending class action.   In re Hanford Nuclear Reservation Litig., No. 05-35648 (9th Cir. Aug. 14, 2007).  By contrast, as we reported three weeks ago, the Second Circuit in In re WorldCom Sec. Litig., No. 05-6979 (2d Cir. July 26, 2007), held that it does. 

Looks pretty splitty to us.

But the Ninth Circuit didn’t mention the Second Circuit’s WorldCom decision.  Indeed, the court thought that it simply joined "the Sixth Circuit, which which is the only circuit to have addressed the issue directly." Hanford Nuclear, slip op. at 9821 (citing Wyser-Pratte Mgmt. Co., Inc. v. Telxon, 413 F.3d 553, 569 (6th Cir. 2005)).  And — and this will really make you laugh — the Ninth Circuit even cited the WorldCom district court’s opinion!  So had the Sixth Circuit!!

Barry Barnett

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The WSJ reports that a Florida jury awarded $170 million in actual damages against audit firm BDO Seidman for gross negligence.  The plaintiff, a Portuguese bank, alleged that BDO botched its audit of a Miami financial services company, Bankest, by failing to detect Bankest executives’ fraud.  The scheme led to Bankest’s bankruptcy, criminal convictions, and (apparently) a big loss to the Portuguese bank, which backed Bankest financially.

The jury found BDO grossly negligent in June.  Now it will consider how much, if any, to award in punitive damages.  If it assesses the maximum — three times actuals — the price tag for BDO will come to $680 million.

Barry Barnett

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A 2-1 Third Circuit panel today reversed a summary judgment in a price-discrimination case under the Robinson-Patman Act.  The majority held that the district court erred by requiring too much proof of "competitive injury".

Michaels Foods, a supplier of egg and potato products, negotiated to charge below-list prices to Sodexho, a food distributor, but charged list prices to another food distributor, Feesers.  The district court granted summary judgment because Feesers didn’t show that it lost customers due to Sodexho’s lower egg-and-potato prices.  The Third Circuit reversed:

In order to establish a prima facie violation of section 2(a), Feesers does not need to prove that Michael Foods’ price discrimination actually harmed comptition, i.e., that the discriminatory pricing caused Feesers to lose customers to Sodexho.  Rather, feesers need only prove that (a) it competed with Sodexho to sell food and (b) there was price discrimination over time by Michael Foods.  This evidence gives rise to a rebuttable inference of "competitive injury" under section 2(a). . . . The inference, if it is found to exist, would then have to be rebutted by defendants’ proof that the price differential was not the reason that Feesers lost sales or profits.

Feesers, Inc. v. Michael Foods, Inc., No. 06-2661, slip op. at 15-16 (3d Cir. Aug. 14, 2007) (emphasis in original; citations and footnote omitted).

Barry Barnett

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The Fifth Circuit today reversed a summary judgment in an antitrust case.  Wow!  And great!!  Tunica Web Advertising v. Tunica Casiono Operators Ass’n, Inc., No. 06-60305 (5th Cir. Aug. 13, 2007).

The court did so because the owner of an internet domain name — tunica.com — provided direct evidence that casino owners in Tunica, Mississippi, agreed not to do business with it.  The court held that testimony about a "gentlemen’s agreement" along those lines sufficed.  And that the plaintiff doesn’t have to prove that the plaintiff in a per se boycott case that at least one of the conspirators directly competed with the plaintiff.

Barry Barnett

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Carollam
Carol C. Lam graduated from college with Blawgletter.

QUALCOMM announced today:

Lou Lupin has resigned his position as executive vice president and general counsel.  Carol Lam, senior vice president and legal counsel, will serve as acting general counsel of QUALCOMM while a nationwide executive search is conducted for a new general counsel.

The company didn’t give a reason for Mr. Lupin’s departure, but some people associate it with bad stuff and worse stuff that have happened in lawsuits over intellectual property.

Blawgletter also notes that Ms. Lam knows a thing or two about resignations.  Despite her steller work, someone in the Department of Justice asked her to quit as the U.S. Attorney for the Southern District of California.  Very unfair.

We like that she’s landed on her feet.  You go, Ms. Lam!

Barry Barnett

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Judges say ugly things about lawyers, and lawyers sometimes return the favor.  Most of the time, the criticism stays in bounds, especially in the from-lawyer-to-judge direction.  But what happens when the lawyer takes such offense that he protests to a higher court, which believes that "there appears to be some force to his arguments on the merits"?

The lawyer probably will just have to lick his wounds and go home.  So said the Federal Circuit today in dismissing a lawyer’s appeal from a judgment against his client.  Nisus Corp. v. Perma-Chink Systems, Inc., Nos. 06-1592 & 07-1142 (Fed. Cir. Aug. 13, 2007).

The district court found that the lawyer engaged in "inequitable conduct" in prosecuting a patent, which the court therefore deemed unenforceable.  Noting that the parties had settled the case and that the district court did not purport to impose any sanction on the lawyer, the Federal Circuit held that it lacked jurisdiction to review the court’s finding.

Barry Barnett

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After 9/11, employees at a Honda dealership in Conroe, Texas, started calling a Muslim car salesman from India "Taliban" and "Arab".  Managers made fun of what he ate and mocked his prayer rituals.  When he asked why he had to attend a United Way meeting, his supervisor wrote him up for acting like a "Muslim extremist".  When he objected to people banging on the partition between his office and the showroom floor, the dealership fired him.

The district court granted summary judgment for the dealership, holding that the Equal Employment Opportunity Commission presented no evidence of a "hostile work environment".  The Fifth Circuit reversed.  EEOC v. WC&M Enterprises, Inc., No. 05-21090 (5th Cir. Aug. 10, 2007).

Politically correct?  Perhaps.  Legally correct.  For sure.

Barry Barnett

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