The Work

November 13, 2008 9:00 AM

The Am Law Litigation Daily: November 13, 2008

Posted by Ed Shanahan

Edited by Andrew Longstreth and Alison Frankel

Lanier Sues Nintendo; Prepares to Go Hunting with Justice Scalia (No Joke!)

Mark Lanier is as resilient as Silly Putty. Lanier made his fortune trying asbestos cases, and cemented his national reputation with a stunning $253 million verdict in the first Vioxx trial. Lately, as we all know, the mass torts business in Texas has been rather less lucrative than it once was (especially when a state appellate court knocks out your $253 million Vioxx verdict). So Lanier's firm has been investing steadily in IP cases, with two lawyers now dedicated full-time to IP matters. Lanier said he's handled ten to 15 intellectual property cases himself in the last few years.

But he's never taken one to trial--yet. Lanier told us yesterday that he may have finally found an IP case that will end up being decided by a jury. This week he filed a patent infringement complaint in the Eastern District of Texas against the Japanese video game giant Nintendo and its U.S. subsidiary. Lanier's client is a small Ohio company called Motiva, which claims that it owns the technology behind the "human movement system" that's made Nintendo's Wii video game system a blockbuster.

Lanier's predicting a "knock-down, drag-out" affair. "I'm waiting for the opportunity to not settle one of my IP cases, 'cause I'm excited to try one," he told us. There's reason to believe Nintendo will put up a good fight: Earlier this year, in a patent infringement case involving the Wii game controller, the company went to trial in Marshall. On the other hand, the result of that trial--a $21 million verdict against Nintendo--may have made the company trial-shy. We left a message with Nintendo but didn't hear back.

Lanier, meanwhile, is gearing up to host Supreme Court justice Antonin Scalia, who will be visiting Lubbock as the second guest lecturer in the annual Sandra Day O'Connor Distinguished Lecture Series at Lanier's alma mater, Texas Tech School of Law. (You've probably figured out that Lanier is the creator and underwriter of the series, which was inaugurated last year with a lecture by O'Connor.) Lanier, never one to let an opportunity drift by, told us he plans to take Justice Scalia hunting. He didn't say, though, whether he'll lobby Scalia to vote against FDA preemption in Wyeth v. Levine while he's got the justice in the woods at gunpoint.

Antitrust Case Against Chinese Manufacturers of Vitamin C Moves Forward

Antitrust regulators should launch an investigation of Boies, Schiller & Flexner partner William Isaacson: He seems to have cornered the market in antitrust suits against vitamin cartels. In the 1990s, Isaacson was part of a plaintiffs steering committee that rang up more than $1 billion in settlements in a case against European and Japanese vitamin manufacturers, and for the last few years, he's been targeting Chinese producers of vitamin C. That case just took a big step forward with a ruling from Brooklyn federal district court judge David Trager that denies the defendants' motion to dismiss.

Isaacson's clients claim that four manufacturers and their affiliates, which allegedly control around 80 percent of the $100 million-a-year market for vitamin C, formed an illegal price-fixing cartel beginning in 2001. Isaacson and his cocounsel--James Southwick of Susman Godfrey and Michael Hausfeld of the newly launched Hausfeld firm--have already presented the court with publicly available documents that show the defendants agreeing to restrict supply. And they say they have plenty more incriminating documents.

In their motion to dismiss, the defendants didn't dispute the facts. They argued instead that the Chinese government forced them to set prices. The Chinese government, represented by Sidley Austin, even filed an amicus brief confirming that it did--the first time the Chinese government has registered an appearance in an American court. Isaacson helpfully pointed out to us that he's the only attorney ever to argue against the Chinese government in an American court. He now wants to be the only lawyer to beat them.

"European and Japanese companies were held responsible for vitamin price-fixing in the nineties," said Isaacson. "The Chinese could be held liable next."

The defendants are represented by Baker & McKenzie; Zelle Hofmann Voelbel Mason & Gette; Orrick, Herrington & Sutcliffe; and Greenberg Traurig.

Justice Department Indicts Senior UBS Executive for Tax Fraud; Covington & Burling Will Lead Defense

Yesterday the Justice Department announced the indictment in Miami of Raoul Weil, the head of UBS's global wealth management division. The prosecution, according to Brian Baxter's story at The Am Law Daily, grows out of the June guilty plea of former UBS private banker Bradley Birkenfeld, who admitted to helping wealthy clients hide assets in overseas accounts to avoid paying U.S. income taxes. Birkenfeld's sentencing has been delayed until January 8 to ensure his continued cooperation with the government.

Weil's defense team at Covington & Burling, led by former Manhattan assistant U.S. attorney Aaron Marcu, wasted no time ripping into the prosecution. "Today's indictment is totally unjustified and without any factual basis," said Marcu in a statement to The Am Law Daily. "[Weil] denies any suggestion that he was aware of, engaged in, or tolerated any illegal conduct in the operation of UBS's U.S. cross-border business. That business represented only a tiny percentage of the global wealth management business for which [Weil] is responsible."

The prosecution, meanwhile, will be headed by a familiar face: senior trial attorney Kevin Downing, who assisted in the infamous prosecution of the KPMG tax shelter criminal case in federal court in Manhattan. Trial attorney Michael Ben'Ary of the Justice Department's tax division and assistant U.S. attorney Jeffrey Neiman in Fort Lauderdale are also involved.

SEC Clears Former AOL Exec John Tuli. Where Does He Go to Get His Reputation Back?

With all indications pointing to an imminent wave of white-collar indictments, we were interested in this week's announcement by Steptoe & Johnson that the Securities and Exchange Commission has dropped all charges against its client John Tuli, a onetime AOL vice president who was caught up in the government's investigation of suspicious contracts between AOL and a company called PurchasePro.

Tuli and two PurchasePro defendants were acquitted of criminal charges in a 2007 trial. (Amy Kolz of The American Lawyer wrote a fabulous piece about the trial, explaining how a conservative jury in the Eastern District of Virginia came to doubt the government's case.) So the SEC's decision to drop its case means Tuli is finally in the clear, almost seven years after the government began investigating him.

"It's over and done with," said Tuli's lawyer, Mark Hulkower of Steptoe. "Everything they charged him with is all gone. No settlements, no promises from us, no nothing. It's the best result a defendant can get, short of never being charged in the first place."

We asked Hulkower, who previously helped win acquittals for Tyco general counsel Mark Belnick and Teamsters president Ron Carey, to talk about the toll the long-running case took on Tuli. "It put his life on hold for six years," Hulkower said. "It was very difficult for him to find employment, very difficult to start a family." During the criminal trial, Tuli's mother, brother, sister-in-law, and wife all moved from Boston to Virginia; Tuli's wife, a pediatrician, took partial leave from her medical practice. "And beneath the surface," Hulkower said, "there's the terrible anxiety: Are you going to jail, going into bankruptcy, about to be barred from the industry you work in?"

Moreover, in the age of Google, the charges against Tuli will never be forgotten, Hulkower said. "You can never fully erase the taint. The DOJ insures that every press release, every press conference, lives on forever."

Nevertheless, as Hulkower talks to clients coming to Steptoe for help in white-collar cases stemming from the economic crisis, he can tell them what the Tuli case shows: "Not everything bad that happens is a crime," Hulkower said. "And not everyone involved is a criminal."

Marty Lipton: Caremark Standards May No Longer Be Good Enough

Over the next couple days, we'll be popping in and out of the PLI's 40th Annual Institute on Securities Regulation. This year's conference, at the Hilton in New York, is called "Lessons Learned from the Market Meltdown," with the lawyerly subtitle: "Life After the Age of Innocence: How to Advise on Doing Business, Managing Risk, Documenting Deals, and Meeting Accounting Disclosure Obligations." Really, there's no place we'd rather be.

Yesterday morning we attended the opening panel, "What Lawyers Need to Know About Risk Management." The group included moderator Alan Beller of Cleary, Gottlieb, Steen & Hamilton; Bank of America risk executive Amy Woods Brinkley; Citigroup in-house attorney Scott Flood, and the legendary Martin Lipton of Wachtell, Lipton, Rosen & Katz, whose previous pronouncements on the economic crisis made business section headlines.

Our ears perked up when Lipton began to talk about potential derivative shareholder litigation arising from the meltdown. Lipton said that when lawyers are advising boards on how to oversee legal compliance in this environment, they will have to push board members to exceed the standards articulated in the Delaware case In re Caremark International Inc. Derivative Litigation, which is regarded as a very low bar. Lipton said he could imagine future shareholder derivative case rulings in which judges point to the more stringent standards demanded by various regulatory bodies.

Lipton reminds us of the old E.F. Hutton TV commercials. When he talks, people listen. So here's what Lipton's saying: "I have grave doubts that the Caremark standard is going to survive this financial crisis."

Jones Day Defeats Government's Motion to Dismiss Case Seeking White House E-mails

Future historians of the Bush administration may someday be thanking Sheila Shadmand of Jones Day in their acknowledgments. On Monday, Shadmand won a ruling from Washington, D.C., federal district court judge Henry Kennedy, Jr., that will permit two nonprofits to continue their efforts to find and secure millions of missing White House e-mails.

Shadmand represents the National Security Archive, a group based at George Washington University that helps researchers obtain government documents. In September 2007--after prosecutors in the Scooter Libby case revealed that White House e-mails were missing--Jones Day filed suit against the Executive Office of the President, the National Archives, and the heads of both agencies, asserting that the Federal Records Act requires them to preserve White House records, including e-mails.

"There's no evidence of anything untoward [happening to the missing e-mails]," said Shadmand, who's working with Jones Day lawyers John Williams and Tom Bednar on the case. (The National Security Archive's co-plaintiff, Citizens for Responsibility and Ethics in Washington, is relying on in-house counsel.) "But the good thing about our lawsuit is that it doesn't matter. Under the Federal Records Act, the agencies must take action."

Justice Department lawyers moved on behalf of the agencies to dismiss the suit, arguing, among other things, that White House e-mails fall under the Presidential Protection Act, so the administration's handling of them is not subject to judicial review. Judge Kennedy disagreed, ruling that presidential protection is not supposed to provide a shield from Freedom of Information Act requests.

While the case proceeds, a temporary restraining order that Jones Day won last November will preserve the backup tapes of White House e-mails.

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