The Work

August 5, 2008 10:10 AM


Posted by Jonathan Thrope

Edited by Andrew Longstreth

New York AG's Auction-Rate Securities Investigation Heats Up
New York Attorney General Andrew Cuomo said last Friday that he was planning to file a complaint against Citigroup, adding Citi to the list of banks accused by one state or another of misleading investors about the risks associated with auction-rate securities. All day yesterday we waited for Cuomo's press conference--the AG is not one to file suit quietly--but nothing happened.

For Citigroup's lawyers--Brad Karp of Paul, Weiss, Rifkind, Wharton & Garrison and Harry Weiss of WilmerHale--no news was good news. But Cuomo's auction-rate securities investigation still made headlines: UBS general counsel David Aufhauser, reportedly implicated in Cuomo's case against the bank, resigned his post. Aufhauser, who previously served as general counsel to the Treasury Department and was once considered a candidate to replace Harriet Miers as President Bush's top lawyer, has not been charged with any wrongdoing, but The Wall Street Journal identified him as "Executive A" in Cuomo's complaint against UBS. The complaint alleges that Executive A was one of seven UBS executives who sold personal holdings in auction-rate securities with inside knowledge of the market's problems.

We've been told that Gibson, Dunn & Crutcher is representing Aufhauser, but Gibson's not yet commenting. Former Manhattan U.S. Attorney Mary Jo White of Debevoise & Plimpton is representing UBS.

Judge Rejects Mistrial Motion in Bratz Trial
John Quinn was right. The Quinn Emanuel Urquart Oliver & Hedges name partner, lead counsel for Mattel Inc. in the fight over the popular Bratz doll, told the Litigation Daily this weekend that he was confident he'd prevail against MGA Entertainment's motion to throw out a Riverside, California jury's finding that the MGA designer who conceived of the Bratz doll did so while he was on Mattel's payroll. MGA had asked federal district court judge Stephen Larson to invalidate the verdict after members of the jury revealed that one juror made racist remarks about Iranians during deliberations. (MGA's CEO was born in Iran.) MGA lead counsel Thomas Nolan of Skadden, Arps, Slate, Meagher & Flom argued that his client had a constitutional right to an impartial jury and moved for a mistrial.

Yesterday, after a short hearing, Judge Larson denied MGA's motion from the bench. He called the remarks of the juror, who has been dismissed from the case, "grossly inappropriate," but said the other nine jurors were unbiased. And, like Quinn in his opposition brief, Larson distinguished between criminal cases, in which the Supreme Court has carved out exceptions to the rule of jury secrecy when there's evidence of racial bias, and civil cases. "At stake here is property--a lot of property. [Later] I'll be taking cases where people's life and liberty are at stake," the judge said. "That's not the case here. And there is a difference."

Nolan told the Associated Press that Mattel plans to appeal to the Ninth Circuit.

Fifth Circuit Rules Against Duane Morris in Malpractice Case
Duane Morris hasn't heard the last of Robin Singh. For years, Singh, the owner of a California LSAT test-prep company, has been after the firm and partner Richard Redano for allegedly mishandling his trademark infringement case against a competitor. Duane Morris may have thought the long-running case was finally dead and buried after winning a summary judgment motion against Singh from a Houston federal district court judge, but last week, according to the National Law Journal, the Fifth Circuit vacated the district court's ruling. Singh now has the chance to revive his suit in state court.

The case has all the jurisdictional wrinkles of a bar exam hypothetical. Singh, represented by Daniel Sheehan of Houston, originally filed the malpractice suit in Texas state court. But Duane Morris and Redano, represented by George Kryder of Vinson & Elkins, removed the case to federal court. Houston federal judge Vanessa Gilmore denied Singh's motion to remand the case to state court and later granted Duane Morris' motion for summary judgment. But the Fifth Circuit Court of Appeals ruled on July 30 that Judge Gilmore lacked subject matter jurisdiction and vacated her order.

The appeals court dismissed the case, but now Sighn can re-file in state court, which would prolong a saga that began more than a half-decade ago when Redano had represented Singh at a five-day, federal court trial against Test Masters Educational Services. Redano persuaded the jury that Singh's company, Testmasters, had firmly established its trademark, giving it "secondary meaning" in the market; and that TES infringed Singh's mark. But jurors didn't find TES liable because they found it was an "innocent prior user." Moreover, when the original verdict went up on appeal in 2002, the Fifth Circuit reversed the jury's finding on secondary meaning. In his suit against Duane Morris and Redano, Singh claims that Redano failed to introduce evidence that would have established secondary meaning. He's seeking $29 million.

Singh told The National Law Journal he's "excited" about the opportunity to re-file his case. Duane Morris general counsel Michael Silverman, on the other hand, is less thrilled. "[We] obviously felt that the federal district court had jurisdiction," said Silverman in a written statement to the NLJ. "We are reviewing the court's opinion and considering our next steps."

California Appeals Court Affirms Dismissal of Antitrust Case Against Big Pharma
Show me the damages. That was the message a California appeals court delivered to 17 independent pharmacies that sued the world's largest pharmaceutical companies for price fixing. In a July 25 order, the appeals court affirmed the trial court's dismissal of the case on the grounds that the plaintiffs had passed on all of the claimed overcharges to their customers. It was the first time that a California appeals court has upheld a price-fixing defendant's argument that plaintiffs cannot recover damages they passed on and thus did not themselves sustain.

In Clayworth v. Pfizer, the pharmacies claimed that the big drug companies conspired to keep prices in California above those charged in Canada. The defendants denied any price-fixing conspiracy, but also argued that even if they had manipulated prices, the plaintiffs passed along every penny of the claimed overcharges to their customers.

The case has kept a fair share of the Am Law 200 well employed. Big Pharma's counsel included (in no particular order): Faegre & Benson; Hogan & Hartson; Arnold & Porter; Mayer Brown; Latham & Watkins; Cravath, Swaine & Moore; Sedgwick, Detert, Moran & Arnold; Covington & Burling; Gibson, Dunn & Crutcher; Oppenheimer Wolff & Donnelly; and Reed Smith.

But wait! There's more: Folger Levin & Kahn; Patterson Belknap Webb & Tyler; Cleary Gottlieb Steen & Hamilton; Dickstein Shapiro; Nossaman; Drinker, Biddle; Hughes Hubbard & Reed; Winston & Strawn; Eimer Stahl Klevorn & Solberg; Filice Brown Eassa & McLeod; and Kaye Scholer.

On this long, long list one firm deserves particular recognition. It was Davis Polk & Wardwell, representing AstraZeneca, that took up the pass-on issue. Partner William Fenrich argued the pass-on defense for all of the defendants before the trial court judge, and again before the appeals court. Joining him on the briefs were Davis Polk attorneys Amelia Starr, Arthur Golden, and Daniel Schwartz. Joseph Alioto of the Alioto Law Firm argued for the plaintiffs at the appeals court.

Backing Black: Delaware Judge Rules for Former Hollinger CEO in Fee Dispute
Among corporate law geeks, Vice Chancellor Leo Strine, Jr., of Delaware's Court of Chancery is a rock star. At the annual Tulane Corporate Law Institute in New Orleans, the man even has groupies. So we're sure that this week his fans are breathlessly poring over Strine's 70-page July 30 ruling on the advancement of legal fees in the Conrad Black debacle.

The Sun-Times Mirror Group (formerly known as Hollinger International), represented by Daniel Kramer of Paul, Weiss and William Johnston of Young Conaway Stargatt & Taylor (among others), sued former CEO Conrad Black and other executives, claiming it was not obligated to advance legal fees after their sentencing for the crimes they were convicted of in July 2007. Black, who was represented in Delaware by David Jenkins and Joelle Polesky of Smith Katzenstein & Furlow, insisted that the company was required to advance fees until his case reached a non-appealable conclusion. Vice Chancellor Strine, after some serious pontificating, agreed with Black. For some weekend analysis of the opinion, check out this post on the Corporate and Commercial Litigation Blog.

The opinion is not only good news for Black and the other defendants, it's also a boon for Andrew Frey of Mayer Brown, who represents Black in his criminal-case appeal to the Seventh Circuit. We called Frey, who is just back in the office from vacation, and were a little surprised, given what we know about litigators on "vacation," to hear that he hadn't yet had a chance to read the opinion. He told us, however, that he's "not surprised" by Vice Chancellor Strine's ruling, given the reports he'd heard of Strine's irritation with the Sun-Times claim. And surely, we asked, Frey is happy that his work will not go unpaid? "We expect to be paid," said Frey.

We also called Johnston of Young Conaway, who we're told argued the case for Sun-Times, but he didn't call back.

IP Boutiques: Reports of Their Death Greatly Exaggerated
The death of the IP boutique has been predicted so many times in the last decade that it has become a hardened cliche. But in the August issue of IP Law & Business, reporter Lisa Shuchman takes a chainsaw to conventional wisdom. (Subscription required.) She cites numerous examples of boutiques that have thrived just when they were supposed to be withering. Take Washington, D.C.-based Sterne, Kessler, Goldstein & Fox, which started out with a handful of lawyers 30 years ago. Today it's a healthy 80 attorneys, and thumbing its nose at what firm cofounder Robert Sterne called the "prophesized demise" of its ilk. To be sure, these have been challenging times for boutiques, which have witnessed the sad end of such once-successful shops as Fish & Neave and Pennie & Edmonds. But others, including Fish & Richardson and Finnegan, Henderson, Farabow, Garrett & Dunner, are booming. Shuchman concludes that cost efficiency, specialization, and organizational advantages have allowed boutiques to compete effectively, especially in patent prosecutions, where law firm consultant Peter Zeughauser says general-practice firms have not been able to create a profitable model.

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