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October 20, 2008 11:15 AM

The Am Law Litigation Daily: October 20, 2008

Posted by Joe Phalon

WHITE-COLLAR
Should Stevens Have Testified?

Legal Times reports today that last week Ted Stevens became the first sitting U.S. Senator in nearly 30 years to testify at his own criminal trial. Before Stevens took the stand on Thursday and Friday, the Alaska Republican's lawyers at Williams & Connolly seemed to have the government on its heels, with prosecutors sanctioned twice for discovery violations by Washington, D.C., federal district judge Emmet Sullivan. W&C lawyers had also effectively cross-examined the government's chief witness. So with momentum favoring Stevens, why did his lawyers take the risk of putting their 84-year-old client on the stand?

That decision, Legal Times says, is being closely scrutinized. "Once the defendant testifies, then he becomes the center of the universe, and the jury is either going to believe him or not believe him," Ropes & Gray partner Stephen Braga told the paper.

During direct examination, Stevens was able to tell the jury about his many years of public service as a World War II pilot, U.S. Attorney for Alaska, and U.S. senator. But on cross-examination, prosecutor Brenda Morris also provoked his well-known temper. During one exchange, Stevens told the prosecutor, "You're not listening to me." During another, he said, "You're making a lot of assumptions that are unwarranted."

The trial is close to wrapping up. Legal Times reports that the prosecution will continue its cross-examination of Stevens on Monday, but it does not intend to call any rebuttal witnesses.

PRODUCT LIABILITY
West Coast Firms Expected to Reap Big Pay Day in $894 Million Bextra/Celebrex Settlement

Pfizer announced on Friday that it had agreed to settle the vast majority of cases connected to its pain drugs, Bextra and Celebrex. (Bextra was withdrawn from after it was linked to increased risk of cardiovascular problems; Celebrex remains on the market.) The sweeping deal includes personal injury cases, consumer fraud cases, and state Attorney General claims. Pfizer's total price tag for peace--$894 million--should be a boon for plaintiffs lawyers.

Two West Coast firms, San Francisco's Lieff Cabraser Heimann & Bernstein and and Burlingame's Cotchett, Pitre & McCarthy, which spearheaded litigation consolidated in San Francisco federal court, will likely receive a large chunk of attorneys fees from the settlement, reports The Recorder. Lieff Cabraser partner Scott Nealey offered a hint of how much those fees may be when he told The Recorder that lawyers on the 13-member steering plaintiffs committee spent "tens of millions of dollars' worth of hours" on the case. Not that they've been on the case that long: According to a press release issued by the plaintiffs steering committee, the parties have only been litigating for three years, a relatively short period of time considering the magnitude of the claims.

Daniel Becnel, a plaintiffs lawyer in Louisiana, told The New York Times that plaintiffs and Pfizer had been trying to settle cases for two years, but it wasn't until the Feinberg Group got involved that discussions gained traction. (The Feinberg Group is headed by lawyer-turned-mediator Ken Feinberg, who led the September 11 Victims Compensation Fund.) Becnel said the Feinberg Group negotiated with plaintiffs lawyers after reviewing their clients' medical records.

Pfizer had been represented by Amy Schulman--its GC since May--in the San Francisco MDL. When she moved from DLA Piper to Pfizer, DLA's Loren Brown became the firm's liaison counsel to Pfizer.

CORPORATE
Skadden Tops Quinn in Home Depot Spin-Off Dispute

Here at The Litigation Daily, we love a good rivalry, so we're pretty excited about the one developing between Skadden, Arps, Slate, Meagher & Flom and Quinn Emanuel Urquhart Oliver & Hedges. It has some good plot lines. It's West Coast (Quinn) versus East Coast (Skadden). It's the upstart (Quinn) versus the establishment (Skadden). There are already some great war stories. Remember the dispute over luxury hotel rooms during the Bratz trial?

The two firms have recently found themselves on opposite sides again in a case pending in Delaware Chancery Court. Although the issues--post-closing purchase price adjustments from Home Depot's 2007 spinoff of HD Supply--are not as sexy as, say, trade secrets and funny-looking dolls, the outcome of the case could be worth millions.

As is the case in most spinoffs, HD Supply had one balance sheet at the deal's signing and another at the closing. The final purchase price was to be adjusted based on the spinoff's working capital. Disagreements over some of the deal's provisions were set aside for arbitration, but HD Supply, represented by Skadden, believed that some of those disagreements belonged in court. It filed a complaint in Delaware, seeking a preliminary injunction that would halt the arbitration until the Delaware case was resolved.

Home Depot, represented by Quinn Emanuel, asked the Chancery Court for exactly the opposite ruling: a dismissal of HD Supply's case or a stay in the Delaware proceedings pending arbitration. On Friday, Delaware Chancellor William Chandler III granted HD Supply's request for a preliminary injunction to stop the arbitration, which means the case will go forward in Delaware.

We called Quinn Emanuel partner Stephen Neuwirth, who represents Home Depot, but didn't hear back. HD Supply is represented by Skadden partners Christopher Malloy, Paul Lockwood, Scott Musoff, and Jay Kasner. Lockwood and Mussof declined to comment.

WHITE-COLLAR
Lawyers Line Up in Lehman Criminal Probes

In a front-page story, The New York Times reported yesterday that as a result of the FBI's redeployment of agents to national security investigations after September 11, the bureau is struggling to staff financial fraud cases. But the FBI has apparently found enough agents to assist prosecutors targeting Lehman Bothers. At least a dozen current and former executives of the fallen investment bank have reportedly received subpoenas.

Who's representing them? The Am Law Daily's Vivia Chen confirms that Robert Cleary of Proskauer Rose has been retained by former Lehman CFO Erin Callan. And Simpson Thacher & Bartlett partner Michael Chepiga--who's been representing Lehman for years in securities cases--told The Litigation Daily that his firm represents "a number of Lehman people," but he declined to give specific names.

INTERNATIONAL
Monumental Human Rights Abuse Trial Against Chevron to Begin Next Week

If any company knows the perils of managing far-flung international operations, it's Chevron. As we told you last month, two of the oil giant's attorneys were recently indicted by the Ecuadorean government in connection with an environmental tort case that it and predecessor Texaco have been battling since the 1990s. Chevron is waiting for an Ecuadorean judge to issue what is expected to be a multibillion-dollar damages assessment in that case.

But first, the company faces trial next week in San Francisco federal district court in a long-running human rights abuse case stemming from an incident at its Nigerian facilities. At issue, according to The National Law Journal, is whether Chevron "sanctioned human rights abuses that killed and wounded protesters at its Nigerian facilities, or was simply protecting its employees from belligerent kidnappers."

A group of Nigerians, represented by Dan Stormer of Hadsell, Stormer, Keeny, Richardson & Renick of Pasdena, California, alleges that Chevron, in conjunction with the Nigeria's government, was involved in assaulting and torturing protesters challenging the company's hiring practices and environmental record. Chevron, represented by Jones Day partner Robert Mittelstaedt, claims that the individuals were engaged in a scheme to extort money by holding Chevron employees hostage.

The National Law Journal says the case could result in an important precedent for plaintiffs suing under the Alien Tort Claims Act, which they've used recently to seek redress in U.S. courts for alleged wrongs committed overseas. Mittelstaedt told NLJ that the Chevron plaintiffs are improperly applying the law. "In our view, international law imposes duties on governments, not duties on private actors," he said.

SECURITIES
A Securities Class Action Panacea? UMich Law Prof May Have One

Over the last few weeks, there's been a lot of buzz surrounding an article that a University of Michigan Law School professor published in the Cato Supreme Court Review. The author, Adam Pritchard, puts forward a proposal that he believes can fix a fundamental flaw in Basic v. Levinson, a Supreme Court decision that he writes "unwittingly released the floodgates for securities class action lawsuits." (Pritchard also published a piece explaining his theory in the National Law Journal.)

As summarized by the Securities Docket blog, Pritchard's argument is that Basic established a fraud-on-the-market theory that did not require plaintiffs to show that they relied on false claims when they bought their shares. Instead, Basic permits investors to argue that the share price they paid reflected the fraud. Pritchard says, however, that that model does not take into account the inflated gains enjoyed by shareholders who sold at the fraud-adjusted price.

The professor suggests a shareholder proposal that could eliminate the problem he believes Basic created, while also greatly reducing plaintiffs lawyers' incentives for filing class actions. At first blush, it sounds fairly controversial: Investors would partially waive their fraud-on-the-market class action rights in favor of a stipulated disgorgement under which violators would give up the benefits of the fraud.

The Securities Docket blog features a fascinating discussion with Prichard about his modest proposal. "My guess is that no company will buy on to it unless it gets past the SEC first, in response to a no-action letter attempting to exclude the proposal as inconsistent with federal law," Pritchard said in response to a question about the likelihood of his idea withstanding a court challenge. "I'll concede that the chances of ultimate success are less than 50 percent, but I don't see a big downside from trying."

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