The Work
July 25, 2008 10:55 AM
THE AM LAW LITIGATION DAILY: July 25, 2008
Posted by Dimitra Kessenides
Edited by Ben Hallman
LITIGATOR
OF THE WEEK
John
Quinn
The Litigation
Daily needs tech support. We've worn out the "q" key on our keyboards writing
about the courthouse doings of the lawyers at Quinn Emanuel Urquhart Oliver and
Hedges. They're everywhere this summer. In the past three days alone, Quinn
attorneys helped Nokia settle its licensing dispute with Qualcomm, settled
a trade secrets battle between client Motorola and SPS Technologies, and made
opening arguments in the damages phase of the Bratz doll showdown between client
Mattel Inc. and MGA Entertainment. Like we said: They're everywhere.
Dozens of Quinn Emanuel lawyers worked on these matters, but there can
be only one litigator of the week. For his work on the Mattel case, we're giving
the nod to Quinn Emanuel's name partner, head cheerleader, and resident drill
sergeant John Quinn. Quinn, who started the firm in 1986 by going door-to-door
to drum up business, has a reputation for carving up the competition in the
courtroom--and for leading bands of lawyers and associates through the wild on
annual firm treks. Earlier this summer, 131 Quinn Emanuel lawyers "hiked over 10
miles and climbed more than 3,500 feet through rugged Alpine terrain" in
Switzerland, according to the firm's account of this adventure. Once, Susan Beck
reported in a June 2006 profile in The American Lawyer, Quinn
promised a prospective associate a job if he would swim across an icy lake.
The man is so tough that he wore bike shorts on the cover of The American
Lawyer.
But back to the Bratz trial, as the Mattel/MGA case is
popularly known. Quinn told the Litigation Daily that the first phase of the
trial came down to a question of timing. When did former Mattel designer Carter
Bryant sketch the design that became the MGA-produced Bratz doll? To make
Mattel's case, Quinn brought in a document examiner who performed indentation
analysis on notebooks that Bryant used while a Mattel employee. The Bratz
drawings had been torn out, but the document expert was able to show that traces
of the drawings remained on blank pages in Bryant's notebook. Quinn also used
forensic analysis to show that Bryant resorted to a software program called
"Evidence Eliminator" to wipe a computer hard drive shortly before it was to be
turned over to Mattel. On July
17, a federal jury in Riverside, California concluded that Bryant had indeed
sketched the original Bratz doll while he was on Mattel's payroll.
The damages phase of the trial began on Wednesday. Quinn told us his
team will try to prove that the three-dimensional Bratz doll is derived from the
drawings Bryant made at Mattel--which means that Mattel can claim lost profits
on the billion-dollar-a-year phenom of toydom. Thomas Nolan of Skadden, Arps,
Slate, Meagher & Flom, representing MGA, says his side will show that MGA's
doll is substantively different from the sketches made by Bryant. The first
generation of Bratz made a profit of only $4.3 million on sales of $81.5
million, Nolan argues, and only 2.6 percent of current Bratz revenue can be
attributed to the first generation of dolls. In a bit
of pretrial gamesmanship, MGA announced on Tuesday that Mattel wanted $600
million in damages, an amount it called "a massive overreach."
If
Quinn wins a big award for Mattel, we have a suggestion about how the company
can put that money to good use. Barbie and Bratz dolls are passe, we think. John
Quinn action figures--that's the future.
IP
Qualcomm's
Nokia Deal: The Beginning of the End?
Is there any
tech company in the world embroiled in as much high-stakes litigation as the San
Diego chipmaker Qualcomm? As the Litigation Daily's own Andrew Longstreth wrote
in a December 2007 cover story in The American Lawyer, Qualcomm
funded a $200 million war chest to fight licensing battles in courtrooms around
the globe. We repeat: $200 million set aside for litigation. Longstreth
explained that Qualcomm generated a huge percentage of its revenue from
licensing its patents. So when its customers, including Nokia and Broadcom,
began to balk at paying licensing fees, Qualcomm went to court, making a
strategic decision to fight like hell for its patents, even if, as Longstreth's
story chronicled, it endured multiple defeats and courtroom humiliations in the
process.
But
Wednesday morning, as a trial between Qualcomm and Nokia was about to begin in
Delaware Chancery Court, Qualcomm abruptly abandoned its litigate-to-the-death
tactics and settled all its cases with Nokia, reaching a 15-year
cash-and-royalties deal that The Wall Street Journal says could be worth
hundreds of millions to the chipmaker. As luck would have it,
Longstreth--who knows more about the Qualcomm litigation than any reporter out
there--just happened to be taking his first day off since the launch of the
Litigation Daily six weeks ago. Doing our best to channel our colleague as he
attempts to lower his handicap on the links, we called up Qualcomm counsel
Steven Strauss of Cooley Godward to find out what changed the chipmaker's mind.
Strauss told us that settlement talks began in earnest on Monday between
Steven Altman, Qualcomm's president, and Tero Ojanperä, executive vice president
of Nokia, after a pretrial hearing last Friday in which Qualcomm won all its
motions. "That seemed to change the settlement dynamic," he said. Strauss said
he was disappointed the trial was called off--he'd spent a long time
preparing--but was ultimately satisfied that his client's best interests had
been served. He declined to discuss the financial details of the settlement,
except to describe it as a "multi-billion dollar award."
Partners
Charles Verhoeven and A. William Urquhart of Quinn Emanuel Urquhart Oliver &
Hedges represented Nokia. Cravath's Evan Chesler handled the case with Strauss
for Qualcomm.
Does the Nokia deal portend an end to Qualcomm's
litigation with other licensers-turned-adversaries? Broadcom
told The Wall Street Journal that if Qualcomm's ready to talk, it's ready to
listen. IP litigators, can you hear that $200 million war chest slamming
shut?
MERGERS
AND ACQUISITIONS
Genentech
Shareholder Say No Deal to Roche
In today's
bearish market, most investors would be thrilled with an 8.8 percent overnight
return on one of their stocks. But not Ira Gaines, a small investor in the stock
of Genentech, the San Francisco-based research company. Two days
after Roche Holding made a $43.7 billion, $89-per-share offer for the company,
plaintiffs firm Cohen, Milstein, Hausfeld & Toll filed a class action on
behalf of Gaines and other Genentech shareholders in Delaware Chancery Court,
seeking to block the deal unless Roche sweetens its offer. The class action
puts the value of Genentech shares at a high of $125 apiece.
This is the
third big M&A-related investor suit in a year for Cohen Milstein. The firm
also represents plaintiffs angered that Yahoo! Inc. turned down a $31-per-share
bid by Microsoft Corp., which would have been a 62 percent premium over the
previous day's closing share price. (Cohen Milstein is not lead counsel in the
Yahoo case.) And last fall, Cohen Milstein partner Steven Toll told the
Litigation Daily, the firm took the lead in a challenge to Alfa Corp.'s $639
million buyout of minority shareholders. In that case, shareholders
got a boost of more than $4 per share as a result of the litigation,
according to SEC filings. Toll is leading the Genentech class action; Cohen
Milstein has Lynda Grant and Elizabeth Berney on the Yahoo! case. Davis, Polk
& Wardwell partners Arthur Golden and Christopher Mayer are advising Roche
on the Genentech deal. No word yet on Roche and Genentech's counsel in the
shareholder litigation.
SECURITIES
New
York AG Jumps on the Auction-Rate Securities Bandwagon
Another
state is joining Massachusetts in pursuit of UBS AG for its alleged
misrepresentation of the risk to clients of auction rate securities. In a
suit filed on Thursday, New York Attorney General Andrew Cuomo claims that UBS
pushed bad paper on clients to reduce its own exposure, and that executives sold
$21 million in personal holdings without disclosing the risks to buyers. When
the market for these securities subsequently froze up, clients were unable to
unload their investments.
"Not only is UBS guilty of committing a
flagrant breach of trust between the bank and its customers, its top executives
jumped ship as soon as the securities market started to collapse, leaving
thousands of customers holding the bag," Cuomo
said in a statement.
The Litigation Daily has confirmed that
Debevoise & Plimpton partner Andrew Ceresney, who is representing the bank
in the Massachussetts suit, is also defending UBS in the New York case. The Am
Law Daily reported last month that Ceresney, a former SDNY prosecutor who led
the probe of former New Jersey Senator Robert Torricelli, may also get some help
from lawyers at Paul, Hastings, which has represented UBS in recent subprime
litigation.
SECURITIES
Guess
What? Shareholder Class Action Filings Are Up and Big Business is Bummed
Pity the poor
securities class action lawyers. Their king, Bill Lerach, has been dethroned.
The Supreme Court recently dismissed the concept of "scheme liability," which
was a big blow. And then yesterday came the latest indignity, a plaintiffs
lawyer dis-a-thon at the University Club in New York, sponsored by the Manhattan
Institute for Policy Research and the U.S. Chamber of Commerce's Institute for
Legal Reform (ILR).
The Am
Law Daily's Brian Baxter reports that panelists at the lunch took turns
launching verbal broadsides at the plaintiffs' bar. "Most businesses decide
to settle even the most baseless of claims," said ILR president Lisa Rickard--a
former partner at Akin, Gump, Strauss, Hauer & Feld--in her opening
presentation. "And plaintiffs lawyers know this."
The ILR did take time
out from its recitation of such blinding insights to release statistics from its
report, "Securities Class Action Litigation: The Problem, Its Impact, and The
Path to Reform." Here's a taste: Plaintiffs lawyers and their "middlemen" have
raked in nearly $17 billion in fees over the past decade. Total class action
payouts during that same period of time amounted to approximately $51.8 billion.
New filings in the first half of this year have increased 60 percent over last
year's first two quarters.
"[Plaintiffs lawyers] are very
entrepreneurial people and [most of us] probably wish they were doing something
else that benefits our economy," said panelist Andrew Pincus, a securities
litigation partner at Mayer Brown. Another panelist--assistant general counsel
Alyssa Kelman of JPMorgan Chase--said the situation is so bad for companies that
whenever JPMorgan makes an acquisition, she thinks the bank will be sued for
either paying too much or too little. "Then we just wait for the ERISA suit and
the shareholder derivative suits," says Kelman, adding that the company "got
slammed" by a wave of new suits in January stemming from the downturn in the
capital markets. Of course, without crafty plaintiffs lawyers, the securities
defense bar would be sadly underemployed. You'd think these folks could show a
little more gratitude!
FIRMS
Wilmer's
Off the Hook, Thelen's On It
On Wednesday
we told you about Wilmer
Cutler Pickering Hale and Dorr's response to the $12 million fraud and breach of
contract claim brought against the firm by the antivirus software company
McAfee, which was unhappy with Wilmer's fee requests in the defense of its
former CFO. Apparently, East Texas federal district court judge Michael
Schneider liked what Wilmer's lawyers from Williams & Connolly and Yetter
& Warden had to say. Yesterday, after oral arguments on Wilmer's motion to
dismiss McAfee's suit, Judge Schneider ruled from the bench, dismissing McAfee's
suit in its entirety on four grounds, including failure to state a legally valid
claim.
But there seems to be no end to the parade of disgruntled clients
of Am Law 200 firms. Today's
Recorder is reporting that a former client, Delaware-based IVI Smart
Technologies, is suing Thelen Reid Brown Raysman & Steiner for $100 million
in damages for alleged malpractice. IVI and two subsidiaries claim that
while Thelen was representing them, it simultaneously transferred their
intellectual property to a key competitor. Thelen, the former clients allege,
admitted the conduct was "improper" and attempted to conceal its actions by,
among other things, hiding a retainer check from the competitor in a desk
drawer.
"This is a case about the deceit, divided loyalties, and gross
violations of professional standards and fiduciary duties by Thelen Reid Brown
Raysman & Steiner," the three companies claim in the suit, filed June 12 in
federal district court in Manhattan.
Thelen is represented by Patterson
Belknap Webb & Tyler. The firm's lawyers referred The Recorder to a Thelen
spokesperson, who said, "We believe the claims made in the lawsuit are without
merit and we will vigorously defend against the allegation." The firm has not
yet responded to the complaint.
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