The Work
June 26, 2008 9:23 AM
THE AM LAW LITIGATION DAILY: June 26, 2008
Posted by Jonathan Thrope
Edited by Andrew Longstreth
ANTITRUST
David
Boies Strikes Gold (Again) in AmEx's $1.8 Billion Settlement With MasterCard
We've got a
lot to tell you about American
Express's $1.8 billion antitrust settlement with MasterCard. First a little
background: The suit grew out of an action taken by the Justice Department
against Visa and MasterCard in the late 1990s. A federal district court in New
York found that the two companies had broken antitrust laws when they prevented
their member banks from issuing their competitors' credit cards. The Second
Circuit upheld the decision, and in 2004 the Supreme Court declined to review
the case. That same year, American Express, represented by David Boies and
Donald Flexner at Boies Schiller, filed a piggyback suit against Visa and
MasterCard, claiming damages for lost business.
The Deal: Seven months
ago, Visa, represented by lawyers at Arnold & Porter and Keker & Van
Nest, settled with AmEx for $2.07 billion (five defendant banks banks also
settled, which brought the total to $2.25 billion). The seven months between the
Visa and MasterCard settlements raise an obvious question: Did MasterCard do
better than Visa by holding out? It did, after all, agree to pony up less money
than Visa. But Visa has a much bigger share of the market in bank-issued credit
cards. In fact, by some calculations, MasterCard paid more to AmEx, relative to
its market share, than Visa. We called MasterCard's lawyers--Simpson Thacher's
Kevin Arquit and Paul Weiss's Kenneth Gallo--to ask about the decision to hold
out. Arquit referred us to MasterCard; Gallo did not return our call. In a
statement, MasterCard CEO Robert Selander said it settled to "[eliminate] the
uncertainty, time commitment, and expense of a prolonged court case."
The
Lawyers: Gallo and Arquit have been representing MasterCard since this case
began in the late 1990s. At the time they were partners at Rogers & Wells
(pre-Clifford Chance merger) and MasterCard was in trouble with the Justice
Department. When they went their separate ways to new firms--and AmEx filed suit
against their client--MasterCard opted to keep them both on the case. Gallo and
Arquit are also cocounsel for MasterCard in an antitrust suit filed by Discover
Financial Service, which makes allegations similar to those in the AmEx
case.
The Negotiations: We learned that Ken Feinberg, the dispute
resolution savant, played a role in mediating settlement talks between David
Boies and Arquit. Feinberg, a former Kaye Scholer partner who now heads his own
firm, The Feinberg Group, gained national recognition when he was appointed
Special Master of the government's September 11 Victims Compensation
Fund.
The Fees: Boies Schiller has now obtained $4 billion in its
historic antitrust case for AmEx. We expect the firm's contingency fees to be
historic as well. Susan Beck at the Am Law Daily takes her pencil to the back of
an envelope to do some calculations. Making modest assumptions based on AmEx SEC
filings, she estimates that Boies
Schiller could collect up to $190 million for its AmEx work. A nice payday,
indeed.
APPELLATE
The
Supreme Court Speaks and Exxon Plaintiffs Attorneys' Fees Plummet
It's
impossible to see the Supreme Court's ruling yesterday in the grand-daddy of
punitive damages cases as anything but a
devastating loss for plaintiffs and their lawyers. In its highly anticipated
Exxon Shipping Co. v. Baker opinion, the Court reduced Exxon's punitive damages
for the horrific 1989 Alaskan oil spill from $5 billion to $507.5 million. (The
total is $995 million with interest.) The Am Law Daily reports that plaintiffs
lawyers will lose about 80 percent of the fees they've been anticipating for
almost 15 years. Their award will still total about $188 million, with Davis
Wright Tremaine, which logged the most hours on the case, due to collect the
lion's share. Another beneficiary will be Faegre & Benson. But Faegre's
fees, given the time it's devoted to the Exxon Valdez case, will apparently
amount to less than $200 an hour.
We don't think Exxon's lead defense
attorney--John Daum at O'Melveny & Myers--was working on contingency. But
O'Melveny has done just fine in the Valdez litigation, along with cocounsel from
Covington and Patton Boggs: A Faegre partner told The Am Law Daily that Exxon
has poured about $400 million into defending this case. With the Supreme Court's
ruling, it seems to have been money well spent.
APPELLATE
Another
Win For Grasso In Pay Case
Two years ago
it looked like ousted New York Stock Exchange chairman Dick Grasso was flat out
of luck: New York State Supreme Court judge Charles Ramos, presiding over
then-AG Eliot Spitzer's challenge to Grasso's $187.5 million severance package,
scheduled trial in the case to take place when Grasso's lead lawyer, Brendan
Sullivan of Williams & Connolly, was set to be in a New Jersey courtroom
defending former Cendant chair Walter Forbes. "Grasso
Loses Brendan Sullivan," was the headline over at CNBC. Perhaps it should
have been "Grasso Gains Gerson Zweifach." Sullivan's partner has kept Grasso's
case tied up in appellate courtrooms since 2006. Yesterday, ruling in an appeal
argued by Zweifach, New York
State's top court affirmed a lower appellate decision to toss out four of the
six claims against Grasso.
Second
Circuit Hears Cleary Sanctions Case
One can
reasonably argue the wisdom of Cleary Gottlieb's decision to appeal the
sanctions that New York federal district court judge Loretta Preska ordered
against the firm last year. Wouldn't it be better to let the ugly episode, in
which Preska took Cleary to task for supposedly trying to dissuade a witness
from testifying against its client, fade into history? Why revive memories of
Preska's opinion, which accused Cleary of a "willingness to operate in the murky
area between zealous advocacy and improper conduct"?
Because Cleary is a
firm full of pride. The New York Law Journal's Anthony Lin reports that a few Cleary lawyers, including managing partner Mark Walker, filled a number of seats in the ceremonial courtroom of the Daniel Patrick Moynihan U.S. Courthouse. Cleary's lawyer, Roy
Reardon of Simpson Thacher, told the appellate panel that Judge Preska's ruling
was just plain wrong. In fact, Reardon argued, Cleary was the victim of a smear
campaign by the plaintiff in the underlying case, a hedge fund that frequently
sued Cleary clients.
Quinn Emanuel's Kevin Reed argued on behalf of the
hedge fund that Preska's order should be upheld. We'll let you know when the
Second Circuit rules.
PLAINTIFFS
BAR
Peter
Angelos Manages to Give $5 Million to Baltimore Law School
These days,
the mega-rich plaintiffs lawyer seems to have been put on the endangered species
list. Tort reformers--and federal prosecutors--have taken aim at the flashier
members of the plaintiffs bar in a frenzied (and generally successful) effort to
reduce their influence over the last several years. The Gulfstream jets, the
100-foot yachts, even the handmade suits and chunky cufflinks that once
characterized the superstars of the plaintiffs bar now seem passé. Which is why
we felt a pang of nostalgia when we read the Am Law Daily story about asbestos
kingpin Peter Angelos today. Angelos--who
made so much money representing asbestos victims that he bought himself the
Baltimore Orioles--has just given $5 million to expand the University of
Baltimore's law school.
That's a happy story, no doubt. But perhaps
a more telling tale of the times is what reportedly happened to another giant of
the asbestos bar, Texas's Wayne Reaud, whose $12.5 million gift to Texas Tech
University was turned down by its regents. Why did the regents look askance at
$12.5 million? The Democratic Reaud suspected the motivation was political; the
regents had been appointed by then-governor George Bush. Reaud was disappointed
not to have the law school renamed in his honor. But forever a loyal Red Raider,
he didn't sulk. He gave a revised gift of $2 million to the law school, which in
turn endowed a professorship in his name. We wonder if the tort reformers would
have been as gracious in defeat.
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