August 6, 2008 9:54 AM
THE AM LAW LITIGATION DAILY: August 6, 2008
Posted by Jonathan Thrope
Edited by Andrew Longstreth
Gibson, Dunn Wins Reversal of $277 Million Verdict Against Apollo
Just eight months ago Gibson, Dunn & Crutcher earned the dubious distinction of losing the biggest securities class action trial since 1995: Last January a federal jury in Arizona slapped Gibson's client, Apollo Group, with a $277 million verdict for allegedly misleading investors about the Apollo-owned for-profit University of Phoenix. But on Monday Phoenix federal district court judge James Teilborg overturned the verdict in an 11-page order, giving sweet redemption to Gibson, Dunn and its lead trial attorney Wayne Smith.
The case hinged on a Department of Education review of the University of Phoenix. In February 2004, the DOE sent Apollo a report that found the university had violated federal regulations. Apollo didn't immediately inform investors of the report. The lead securities class action plaintiff, the Policemen's Annuity and Benefit Fund of Chicago, represented by Stephen Basser of Barrack, Rodos & Bacine, alleged that Apollo's failure to disclose the report misled investors--even though when news of the report was made public in national newspapers in September 2004, Apollo's stock didn't dip. Not until a few days later, when an analyst downgraded the company, did the share price fall. In his ruling on Monday, Judge Teilborg disagreed with the plaintiffs theory that the analyst's report constituted a corrective disclosure.
"The court's decision validates the arguments made by Apollo Group since the beginning of the case," Gibson partner Smith told the Am Law Daily. "There was nothing in that analyst's report that corrected anything."
On the critical post-trial motions, Smith was assisted by Gibson, Dunn partner Joseph Busch III and associates Christopher Campbell, Kristopher Diulio, Maura Logan, Jessica Taggart, and Jared Toffer.
For those keeping score in the boomlet of securities class-action trials, we're all tied up: three wins for the plaintiffs and three for the defense, according to D&O Diary. But like we said at the top, things can change fast in litigation. And this case ain't over yet. Basser told Bloomberg he plans to appeal Judge Teilborg's decision.
Brendan Sullivan Seeks Alaska Trial for Senator Stevens
The life of a trial lawyer is so glamorous. Consider Brendan Sullivan's last few years. In 2004 and 2005 he got to sample every restaurant in Hartford during the first two trials of former Cendant chairman Walter Forbes on securities fraud charges. For Forbes's third (and final) trial, Sullivan spent months in beautiful downtown Bridgeport. But Sullivan has apparently had enough of these urban wonderlands; he's asking to move his next trial--defending Republican Senator Ted Stevens on public corruption charges--to the great state of Alaska.
Legal Times reports that Sullivan and his partner Robert Cary filed a 17-page memo this week with Washington, D.C., federal district court judge Emmet Sullivan, arguing that Stevens' trial should take place in Alaska, where all the evidence and witnesses are. You will probably not be surprised to hear that Alaska is also where Senator Stevens plans to campaign for re-election this fall--when he's not in court. (Democrats offer their deepest thanks to the Senator for his courageous decision to stand for re-election.)
"Senator Stevens must be able to campaign, albeit limitedly, during the trial," the motion states, according to the Legal Times. "Unfortunately, no matter the outcome of this trial, this schedule alone may not be enough to ensure that Senator Stevens has the ability to compete meaningfully in the upcoming election."
A unique wrinkle in the motion is that the Williams & Connolly team wants to keep Judge Sullivan on the case. No word yet on whether Judge Sullivan shares trial lawyer Sullivan's desire to see snow in September.
European Firm Sues Nixon Peabody for Poaching Partners
Firms that play the merger dating game have to be careful. Even when the romance between firms withers, individual partners sometimes jump to would-be suitors. European firm Taylor Wessing, based in Germany and the U.K., thought it had protected itself from such a scenario when it talked merger with Nixon Peabody last summer and fall: The two firms signed an agreement--call it a prenup--in July 2007, pledging not to recruit one another's partners if the deal fell through. Well, the deal did fall apart, but according to a suit filed by the Taylor firm on Friday in Manhattan state court, Nixon colluded with a former Taylor partner in an attempt to poach 12 of the 15 nonequity partners in Taylor's Paris office. According to the Am Law Daily, the suit, filed by Manhattan's Dreier firm, is seeking $5 million in damages and an injunction preventing the Taylor attorneys from moving to Nixon.
According to the complaint, the former managing partner of Taylor's Paris office, Arnaud de Senilhes, "surreptitiously continued negotiations" with Nixon partners after he had written a letter to Nixon in November 2007 indicating the firm was no longer interested in pursuing merger discussions. According to the Dreier complaint, de Senilhes is the only lawyer to have resigned from Taylor. The others have only agreed to move to Nixon.
FOIA Fight Sheds Light on BlackBerry Litigation
We always knew the rivalry between BlackBerry manufacturer Research In Motion and NTP was intense. The protracted patent litigation that led to a $612.5 million payment from RIM to NTP was epic. (So, by the way, was the $200 million payout to NTP's lawyers at Wiley Rein.) But we had no idea what was going on behind the scenes at the Patent and Trademark Office, where several NTP patents were under reexamination, until we read this feature in the August issue IP Law & Business.
It turns out that an attorney for RIM was spending a lot time at the PTO, apparently checking to see how those reexaminations were going. Documents obtained by NTP's lawyers at Hunton & Williams and Wiley Rein through a Freedom of Information Act request indicate that an official at the PTO warned examiners to "keep their doors locked" after "an elderly gentleman walked into my office inquiring as to the status of the NTP reexams." That elderly gentleman? David Stewart, then with Orlando-based Allen, Dyer, Doppelt, Milbrath & Gilchrist, who had filed RIM's requests for reexamination of certain NTP patents that were later ruled invalid.
According to the story, there may be much more evidence of contact between RIM and the PTO. NTP's attorneys sought documents from the PTO and the Justice Department, but many were withheld or redacted. Hunton & Williams and Wiley will be arguing before the Fourth Circuit this September to get a look at them.
Eleventh Circuit Gives Class Action a Lifeline
You know how those home improvement projects never quite get finished? You think you're done, you put away the toolbox, and then, bang--the ceiling falls in. That's how Home Depot must be feeling after a ruling last week from the Eleventh Circuit, which revived an ERISA class action that had been dismissed by Atlanta federal district court judge Orinda Evans in September 2007. The appeals court ruling sends the case back to district court.
The purported class of plaintiffs, which includes current and former Home Depot employees who invested in the company's 401(k) plan since 2001, alleged that the company and officials including former CEO Robert Nardelli mismanaged the fund by purchasing Home Depot stock, which had been inflated due to an options backdating scheme. The employees, represented by Jeffrey Norton of Harwood Feffer, argued that the fund would have done better if the defendants had invested in other stocks. But Judge Evans ruled that the plaintiffs lacked standing because they had cashed out of their plans. And even if they had standing, Judge Evans ruled, the plaintiffs had not exhausted their administrative remedies.
The Eleventh Circuit judges decided that Judge Evans erred when she found that the plaintiffs lacked standing--but because they also found she was correct in ruling that the plaintiffs had not exhausted their out-of-court options, the appellate judges ordered Judge Evans to either stay the case pending administrative proceedings or dismiss it altogether. A spokesman for Home Depot told the Atlanta-Journal Constitution that it is "pleased that the Court of Appeals said that the plaintiffs must now pursue any of their claims outside of the courtroom." Home Depot and the other defendants are represented by David Tetrick, Jr. of King & Spalding.
Plaintiffs counsel Norton said he's happy with the result, although skeptical about any remedy from Home Depot. "I have very little faith that the Home Depot plan administrators are going to say, 'Yes, we think you're right. We breached our duties to the tune of tens of millions of dollars and we'll reimburse your plan for that,'" Norton told the Atlanta-Journal Constitution. "That's why we argued it'll be futile to go down that road, but that's what the Eleventh Circuit requires. I presume we'll have our case back in district court."