The Work

November 7, 2008 9:00 AM

The Am Law Litigation Daily: November 7, 2008

Posted by Ed Shanahan

Edited by Andrew Longstreth

Barry Lee and Robert Zeavin of Manatt, Phelps & Phillips

Before this year, Barry Lee and Robert Zeavin had never tried a case together. But after winning a $600 million-plus verdict, they may want to team up on a more regular basis. This summer the Manatt, Phelps & Phillips duo represented ICO Global Communications Holdings in a three-month breach of contract trial against Boeing in Los Angeles superior court. The jury kept them waiting for three long weeks of deliberations but on October 21 awarded ICO a whopping $370.6 million in compensatory damages. Then last Friday, the same jury tacked on another $236 million in punitive damages. When prejudgment interest is added to the total, Lee told us, the award is expected to end up north of $700 million--which would make it the largest trial verdict of 2008. (Boeing, which was represented by Munger, Tolles & Olson, has announced it will appeal.)

For those not familiar with the case, it's rooted in a contract for 12 satellites that ICO signed with Hughes Electronics in the 1990s. When Boeing purchased Hughes in 2000, it took over the contract--and promptly demanded an additional $400 million from ICO to build the remaining satellites. ICO claimed that Boeing, now a competitor, had jacked up prices in an effort to drive ICO out of business. At trial, Lee told us, he asked jurors to award ICO as much as $1.5 billion for the busted business deal.

The trial began in June and lasted all summer. Given the case's length and complexity, we wondered if Lee or Zeavin had any tips to offer Litigation Daily readers.

"The longer you can keep together your core team through discovery and trial, the far better presentation and representation you're going to give to the client," Lee advised. "That's something we all know, but this case drove it home with the way our team worked together, as coordinated we were. The fact that we had the core of the team through discovery and trial was just tremendously helpful."

Zeavin stressed his side's presentation to the jury. "We had a very, very coherent theory of our claims that we tied to the facts," he said. "Boeing's theory of the case was much more of a legal theory that was not really tied to the evidence available to them."

No Charges Against Client No. 9

Eliot Spitzer has long had a good eye for legal talent. During his stints as governor and New York state attorney general, he employed top-notch lawyers. One of them was Michele Hirshman, who served as his number two in the AG's office. Hirshman is now at Paul, Weiss, Rifkind, Wharton & Garrison, where she's been part of a team representing her old boss. Apparently she's been doing a pretty good job. Yesterday, Manhattan U.S. attorney Michael Garcia announced that he won't pursue charges against Spitzer for patronizing the Emperors Club VIP call girl service.

"After a thorough investigation, this office has uncovered no evidence of misuse of public or campaign funds," Garcia said in a statement. "We have determined that there is insufficient evidence to bring charges against Mr. Spitzer for any offenses relating to the withdrawal of funds for, and his payments to, the Emperors Club VIP."

We tried to get a comment from Hirshman but her secretary referred us to a spokesperson for Spitzer. "I appreciate the impartiality and thoroughness of the investigation by the U.S. attorney's office," said Spitzer in a statement. "I acknowledge and accept responsibility for the conduct it disclosed."

Another attorney who has kept his client out of criminal trouble in the Emperors Club case is Kelley Drye's Don Buchwald. He represents Ashley Alexandra Dupré, the prostitute whom Spitzer met at a Washington, D.C., hotel in February. Buchwald told Bloomberg that "Ashley is pleased that this matter is now entirely behind her."

Debating the Future of the Securities Class Action Bar

Boy, do we wish we had attended the panel discussion on the future of the securities class action bar at the Plus International Conference in San Francisco on Wednesday. Just to see the video "The Rise and Fall of Bill Lerach" would have been worth the price of admission. Kevin LaCroix at D&O Diary reports that the tape, which chronicled Lerach's career up until his incarceration, included "some extraordinary footage, including a vintage video clip of Lerach in a 2003 speech about supposedly corrupt officials, quoting the Bible as saying, 'What profit a man if he gain the whole world but lose his own soul?'--adding parenthetically on his own, 'or his freedom.'" To quote Alanis Morisette, "Isn't it ironic? Don't ya think? A little too ironic?"

The panelists, who offered provocative opinions on a range of issues, included Edwards Angell Palmer & Dodge partner John McCarrick (who moderated), Wilson Sonsini Goodrich & Rosati partner Boris Feldman, Stanford Law School professor Joseph Grundfest, San Francisco federal district court judge Vaughn Walker, and Grant & Eisenhofer partner Keith Fleischman.

Interestingly, a few of the panelists predicted more securities class action trials, but for different reasons, according to LaCroix. Fleischman suggested more cases may go to trial because the expectations of plaintiffs and defendants have diverged in recent years. Feldman said the politicians who control public pension funds that often serve as lead plaintiffs may see advantages with voters in trial wins. And Grundfest reasoned that some plaintiffs lawyers may find a trial win improves their leverage in negotiating settlements in other cases.

The panelists also seemed to agree that the big Democratic gains on Election Day will benefit the class action bar. "Christmas comes early," said the ever-felicitous Grundfest, adding that the only question is  "what's in the boxes and what's under the tree." One gift, panelists suggested, may be a legislative reversal of Supreme Court decisions like Stoneridge and Central Bank or a relaxation of the pleading standard for securities class actions.

Citigroup Wins Dismissal of Credit Default Swap Case

Last month we asked whether credit default swap litigation would soon be all the rage. But hedge fund plaintiffs haven't gotten off to a very good start. If you're planning to file a swap suit (or to defend one), you'll want to take a look at a decision handed down this week by Manhattan federal district court judge Barbara Jones in a hedge fund's suit against Citigroup.

Citigroup and VCG Special Opportunities Master Fund--which has about $50 million under management--entered into a $10 million swap agreement in June 2007. Two months later, when the credit markets went south, swap purchaser Citigroup asked VCG to post additional collateral, according to court papers. In its complaint, VCG alleged that the demand was unnecessary. But in her decision dismissing the suit, Judge Jones ruled that Citigroup was allowed to ask for the additional collateral.

VCG's lawyer, Steven Mintz of Mintz & Gold, told Bloomberg, which first reported the decision, that the fund was "deeply disappointed by the court's decision and the refusal to allow discovery to go forward in the case." VCG he said, was "evaluating all [its] options."

Citigroup was represented by Paul, Weiss, Rifkind, Wharton & Garrison's cochair of litigation, Allan Arffa.

'Bong Hits 4 Jesus' Case Settles

The First Amendment case that introduced the U.S. Supreme Court to the term "bong hits" has finally concluded. The Juneau Empire reports that the former Juneau-Douglas High student who sued his town's school board for forcing him to take down his "Bong Hits 4 Jesus" sign at a school rally in 2002 has settled his case. As part of the deal, the Juneau Board of Education will pay the student, Joseph Frederick, $45,000.

That's not a bad result for Frederick, considering that he lost at the Supreme Court, which ruled last year that the school board did not violate the student's First Amendment rights. In addition to the $45,000 payment, Frederick's lawyer apparently negotiated a provision that Juneau's school district must spend up to $5,000 for a neutral constitutional law expert to lead a forum on free speech at Frederick's former high school by the end of the year. In return, Frederick will drop his remaining claims against the school board.

Douglas Mertz, who argued for Frederick at the Supreme Court (against Kirkland & Ellis's Kenneth Starr), told the Juneau Empire that it was time "to close the chapter of what happened to Joe."

Mark Choate, Juneau's school board president, said that he was happy to have the matter resolved. "Every case involves different opinions, but we're pleased to have it resolved so we can focus more on the important work the board has to do to improve schools in Juneau," he told the Empire.

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