THE AM LAW DAILY

SURVEYS AND RANKINGS

MAGAZINE

SPECIAL REPORTS

The Work

September 17, 2008 9:30 AM

The Am Law Litigation Daily: September 17, 2008

Posted by Ed Shanahan

Edited by Andrew Longstreth

SECURITIES
Financial Crisis Dims Prospects for Some Plaintiffs Lawyers
When markets tank, it can mean good news for plaintiffs lawyers, who have perfected the art of transforming falling share prices into class action complaints. But this week's financial crisis--unlike any other we've seen--may prove to be a serious setback for plaintiffs firms suing financial institutions. (And yes, we understand that plaintiffs lawyers are not the country's most deserving candidates for sympathy right now, but we are called the Litigation Daily.)

Consider the plight of Labaton Sucharow's Thomas Dubbs. His firm is lead counsel in a securities class action against American International Group. It's fought hard in the case, beating back AIG's motion to dismiss and preparing class certification motions. Labaton expected big returns when it filed the case in 2004. AIG's stock was then trading north of $55 per share. Yesterday it closed at under $4.

Even though the the Federal Reserve agreed to loan the company $85 billion so it could avoid bankruptcy, the plaintiffs will almost certainly be forced to settle for less than they'd once hoped. One thing is for sure: Labaton Sucharow's case looks a lot worse today than it did even last week. Yesterday we reached Dubbs, who has suddenly (though not surprisingly) become a big AIG booster. At mid-day he applauded New York Governor David Paterson's decision to allow AIG to borrow $20 billion from its subsidiaries, and told us he was hoping for more help.

"We are, on behalf of AIG shareholders, hopeful that arrangements will be made to give AIG room to put its house in order," Dubbs said. "We applaud [Governor Paterson's decision] and hope other regulators see fit to give AIG breathing room. We should realize that notwithstanding AIG's various issues, which are the subject of litigation, these underlying securities that AIG holds--there is real value there that can be realized over time."

Dubbs isn't alone among his plaintiffs bar brethren in rooting for AIG's survival. Bernstein Litowitz Berger & Grossmann is also serving as lead counsel in a class action against AIG, this one involving the insurance giant's subprime holdings. It's also lead counsel in a major class action against Lehman Brothers Holdings, which on Monday asked a bankruptcy court for protection against such suits. We called Bernstein partner Sean Coffey, who's usually an insightful securities litigation analyst. He declined to comment on the status of his firm's cases. But he and his firm can at least take comfort that Bernstein filed its AIG and Lehman class actions this year. At least they haven't thrown much time and money into them.

M&A
B of A's Merrill Merger: Let the Suits Begin!
Then again, maybe we shouldn't be worrying about the plaintiffs bar. The ink on Bank of America's acquisition of Merrill Lynch wasn't even dry on Monday before Brian Murray of New York-based Murray, Frank & Sailer filed a suit against Merrill's directors, claiming they had breached their fiduciary duty when they negotiated the deal. According to Bloomberg, the complaint, which was filed in New York state court, argues that the directors grossly mismanaged Merrill and had a conflict of interest in striking the B of A deal, which was "designed to unlawfully divest Merrill public stockholders of their controlling interest in the company for grossly inadequate consideration."

The $29 a share that Merrill stockholders will receive from B of A "compares poorly" to Merrill's $90 per share value in 2007, the complaint claims. A response from Merrill's directors likely won't come for weeks and it's unclear who will represent the firm. Our e-mail to a Merrill spokesperson was not returned.

We're not sure how the Murray firm's suit will fare--B of A's offer to Merrill shareholders does, after all, represent a 70 percent premium over Merrill's closing share price last Friday--but the case does exemplify a trend we're expecting to continue to see: class action suits naming directors and officers. In these uncertain times, those D&O insurance policies can look mighty tasty to hungry plaintiffs firms.

Lest we seem stuck on one side of the bar, we want to point out that it's not just plaintiffs firms that will suffer in the fallout of the market crisis. The Am Law Daily's Zach Lowe has a story about the firms that will feel the pinch if Washington Mutual goes under. Topping the list is a shop that can ill afford any more pain: Heller Ehrman, which has been battling to steady itself following crippling partner defections and failed merger talks. Other firms that have done significant work for WaMu include Edwards Angell Palmer & Dodge; Reed Smith; Simpson Thacher & Bartlett; Goodwin Procter; K&L Gates; and Ballard Spahr Andrews & Ingersoll.

FIRMS
New York Judge Clears Nixon Peabody in Poaching Suit
Listen up, New York managing partners. You know those non-compete agreements that firms in merger talks sign to discourage poaching? They may not be worth the paper they're printed on, at least in New York. The Am Law Daily reports that a New York trial judge ruled yesterday that Nixon Peabody did not violate any contract when it hired a dozen lawyers from erstwhile merger partner Taylor Wessig this summer--even though the laterals joined Nixon less than a year after the firm agreed to a two-year moratorium on recruiting from Taylor.

A refresher on the case's background: Taylor Wessing and Nixon Peabody entered into merger talks in July 2007. The talks broke down last November. But the managing partner for Taylor's Paris office continued the courtship with Nixon, which subsequently hired him and 12 other non-equity partners. In its suit, Taylor claimed that Nixon had breached a non-compete agreement in which both firms agreed not to hire one another's lawyers for two years if their deal didn't pan out. But in his ruling Judge Kenneth Fisher said that such an agreement is not enforceable under New York law. Nixon, which was represented by a team from the Wolford Law Firm and Patterson Belknap Webb & Tyler, applauded the decision.

"From the start, we were convinced these claims should never have been filed," Richard Langan, Jr., the firm's managing partner, said in a statement. "Nixon Peabody looks forward to welcoming a team of dynamic partners from Taylor Wessing France to join our firm."

Dreier name partner Marc Dreier represented Taylor. He predicted dire consequences from the ruling. "No firm will feel comfortable," entering into merger talks, he told the Am Law Daily.

DEFAMATION
Guns Versus Money: Libertarian Presidential Candidate Argues Case Against Bloomberg
Former Republican Congressman and current Libertarian presidential candidate Bob Barr has an impressive resume. His jobs have included: CIA officer, U.S. Attorney for the Northern District of Georgia, U.S. Representative for the Seventh District of Georgia, and board member for the National Rifle Association. He's also of counsel with the Law Offices of Edwin Marger of Jasper, Georgia. It was in that capacity that he took some time off the campaign trail yesterday to appear before the U.S. Court of Appeals for the Eleventh Circuit. Barr argued on behalf of a Georgia gun store that he claims was defamed by New York Mayor Michael Bloomberg.

The case stems from the legal assault on the gun industry that Mayor Bloomberg launched two years ago. Georgia sporting goods store Adventure Outdoor Sports was one of the outfits Bloomberg labeled as "rogue gun dealers." Bloomberg sued 15 dealers, claiming they allowed New York criminals to obtain weapons. Barr responded by filing the defamation suit against the Mayor. (In June Adventure Outdoor Sports defaulted in the underlying litigation, contending it could not afford the cost of a trial.)

Yesterday's argument was about whether the defamation suit should be in state or federal court. Barr wants to litigate in the friendly confines of Cobb County Court. Peter Canfield of Dow Lohnes, who argued for Bloomberg, pushed for a stay in federal court or a dismissal of the suit, arguing that the issue is whether the gun dealers broke federal law. We'll let you know when the Eleventh Circuit rules.

TORTS
AMA Touts Medical Malpractice Reform in Texas
Five years after Texas voters approved a state constitutional amendment limiting non-economic damages from physicians in med mal cases to $250,000, the American Medical Association is declaring victory. In an editorial on Monday, the organization argued that the reform has encouraged more doctors to come to the state, increased the number of insurers, and lowered liability insurance premiums for doctors.

"While a comprehensive national solution has long been a goal of tort reformers--and long blocked in the U.S. Senate--Texas serves as a fresh example of the progress that can be achieved," the editorial says.
We checked to see if the American Association of Justice (formerly ATLA) had issued a response to the AMA editorial, which doesn't address accounts we've heard over the years of legitimately injured patients in Texas who can't find lawyers to take their cases. No word from AAJ.

Meanwhile, tort reformers, despite the gains such as those touted by the AMA, refuse to stop shooting at their favorite targets. In an editorial called "The Tort Bar's Comeback," The Wall Street Journal yesterday warned that trial lawyers "have also been laboring to create opportunities for more lawsuits, more money and more time to sue." The Journal talked about "reviving the monster." But perhaps it's tort reformers who are propping up a convenient bogeyman.

Make a comment

Comments (1)
Save & Share: Facebook | Del.ic.ious | | Email |

Reprints & Permissions

Comments

Report offensive comments to The Am Law Daily.

Tort reformers "propping up a convenient bogeyman"?? That's absurd. You can carry water for the tort bar all you want but you cannot have your own facts. Everything in the WSJ article is fact-based. The tort bar is throwing millions of dollars at Dems in order to buy lawsuit-favorable legislation. But justice has nothing to do with it. The old canard about legitimately injured patients unable to find lawyers proves that point. That is the real bogeyman. You refer to unspecified "accounts" you have heard "over the years" but not to any real instances of it happening. Moreover, if those lawyers at the laughably re-named "American Association of Justice" (truly lipstick on a pig) cared one whit about justice those patients would be having beauty contests to choose their lawyer. This more than proves that "justice" is not a concern at all because justice doesn't pay for a Gulfstream. Despite the intense lobbying by the tort bar, legislatures (elected by the citizenry) are resisting. And guess what? Those citizens are benefiting, as the AMA data shows. Frantic posts like this show that the tort bar is truly desperate. And American business and American consumers can only gain from that.

The comments to this entry are closed.

By: TwitterButtons.comhttp://www.facebookloginhut.com/facebook-login/


theamlawdaily@alm.com




From the Law.com Newswire

Sign up to receive Legal Blog Watch by email
View a Sample

Advertisement