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November 11, 2008 9:00 AM

The Am Law Litigation Daily: November 11, 2008

Posted by Ed Shanahan

Edited by Andrew Longstreth

FIRMS
Cohen Milstein Ousts Michael Hausfeld; He Opens Own Shop

The plaintiffs powerhouse Cohen, Milstein, Hausfeld & Toll is now sans Hausfeld. Michael Hausfeld, who cofounded the firm 22 years ago, announced yesterday that he's leaving Cohen Milstein to open his own firm, Hausfeld LLP. It was a stunning move that neither the firm nor Hausfeld has explained. But on Friday, Hausfeld sent an e-mail to colleagues indicating he'd been "expelled" from Cohen Milstein in a manner he described as "abrupt and unceremonious."

"Hausfeld LLP will handle competition and other complex litigation in the United States and throughout the world," Hausfeld said in the e-mail, which one recipient forwarded to the Litigation Daily. "Along with my partners and colleagues, I look forward to speaking with you in the near future."

On Monday afternoon Hausfeld issued a press release offering a few more details about his plans. The new firm will be headquartered in Washington, D.C., and, according to the release, will "provide domestic and international legal services in the areas of competition law, human rights, product liability civil rights, environmental law, and securities."

In an interview with us, Cohen Milstein name partner Steven Toll declined to comment on Hausfeld's departure. Toll said that "a certain number of lawyers" from Cohen Milstein will join Hausfeld at his new shop. As for clients, Toll said, the firm isn't sure who will go with Hausfeld. "We expect the clients that dealt primarily with Michael will more than likely [go]," Toll said. "He'll ask them to retain him at his new firm, and we expect that many of them will, but it's only a small portion of our business."

Hausfeld's press release said the new firm will include between 25 and 30 lawyers and that some would come from his former firm. We called and e-mailed Hausfeld to find out more, but he did not immediately get back to us.

Hausfeld was head of Cohen Milstein's antitrust practice, which was widely considered the firm's biggest strength. According to his bio, which was still available on the firm's Web site as of Monday afternoon, he served as co-lead counsel in antitrust cases involving bulk vitamin manufacturers, managed health care companies, and international industrial cartels. Recently, Hausfeld has been representing plaintiffs suing the tobacco industry in connection with the sale of "light" cigarettes.

ELECTION
Gibson Dunn's Mastro Leads Term Limits Suit Against Bloomberg

A diverse group of folks has filed a suit against New York mayor Michael Bloomberg, challenging the constitutionality of the recently passed legislation that will permit him to run for a third term. The coalition suing the mayor includes elected officials, private citizens, and public interest groups. But we were most interested to see that one of the group's lawyers is Randy Mastro of Gibson, Dunn & Crutcher, who once served as Rudy Giuliani's deputy mayor.

Given his loyalty to Giuliani, Mastro's work on the legal campaign to block Bloomberg's efforts had already raised eyebrows even before he coauthored the coalition's complaint. "If Mastro succeeds in derailing Bloomberg's plan for another four years, he'd embarrass [Bloomberg]," wrote Jacob Gershman in a recent New York magazine story. "Taking Bloomberg down a peg could only help Giuliani, who's positioning himself to mount a comeback by seeking to unseat [New York governor] David Paterson in 2010."

In the same article, one veteran political operative jokingly described Mastro as the "Luca Brasi" of the term limits operation. But Mastro denied that his firm's pro bono work in support of term limits was influenced by his ties to Giuliani. "It has nothing to do with anyone I worked for in the past," Mastro told the magazine.

Also listed on the complaint (available here) are Gibson attorneys Jim Walden, Richard Bierschbach, and Gabriel Herrmann, and solo practitioner Norman Siegel. Lovells attorney Pieter Van Tol is listed as counsel to the New York Public Interest Group.

PRODUCT LIABILITY
California Generics Ruling Inspires Fear and Loathing in Products Defense Bar

A pharmaceutical liability ruling from San Francisco's First Court of Appeal has (momentarily) distracted lawyers from the wait for a Supreme Court decision on preemption in Wyeth v. Levine. In Conte v. Wyeth, the state appeals court made the extremely unusual finding that a drug manufacturer is liable for injury caused by a generic version of its product. "As the foreseeable risk of physical harm runs to users of both name-brand and generic drugs, so too runs the duty of care," wrote Justice Peter Siggins. Here's the story from The Recorder, and here's the opinion.

The plaintiff in the case, a San Francisco woman named Elizabeth Conte, developed a neurological condition after using a generic version of a Wyeth antiheartburn medication called Reglan. Her lawyer, Lawrence Masson of Berkeley, used a  "negligent misrepresentation" theory to argue that Wyeth was responsible for warning doctors about how Reglan and its generics should be used. Conte took the generic for nearly four years when it was supposed to be used for no more than 12 weeks at a time. The appellate ruling reversed a lower court's summary judgment ruling in favor of Wyeth, which was represented by Gordon & Rees attorneys Stuart Gordon, James Reilly, and Fletcher Alford, and Davis Graham & Stubbs attorney Jeffrey Pilkington.

The decision sent the folks at the Drug and Device Law blog (both big-firm defense lawyers) into a bit of a tizzy. "There's no effective limitation on the scope of the theory, only 'foreseeability,' which amounts to no limitation at all," wrote Dechert's Jim Beck and Jones Day's Mark Herrmann. "It's also a terrible place to put liability as a matter of jurisprudence, because it created a huge 'free rider' problem in that pioneer manufacturers are stuck with liability for generic products that, not only do they not get any profit from, but whose sales are detrimentally affected by the generic product."

Beck and Herrmann called the California court's negligent misrepresentation reasoning "an end run around decades of product liability precedent." They also predicted that in the wake of its ruling, plaintiffs' misrepresentation claims will skyrocket, as will manufacturers' indemnification claims against generic makers.

SECURITIES
New SEC Enforcement Study: Unprecedented Penalties Since Sarbanes-Oxley Was Passed

Six years post-SOX, the Securities and Exchange Commission is done playing small ball. A new study by NERA Economic Consulting, "SEC Settlements: A New Era Post-SOX," details the agency's escalating penalty demands since the passage of Sarbanes-Oxley in 2002. Before SOX, the biggest penalty ever levied against a publicly traded company was $10 million against Xerox in 2002. In the six years since, 115 defendants have had to pay $10 million or more in penalties. Among that group, 14 were hit for at least $100 million. Topping the list is American International Group, which agreed in February 2006 to pay $800 million in penalties.

The study also looks at the number of settlements since the passage of Sarbanes-Oxley. This year the SEC is on pace to settle 739 actions. It's the second year of increased activity after three years of declines from 2003 to 2006. The majority of the settlements involve individuals. Company settlements are on pace to reach 171, which would be the lowest total since SOX was enacted.

JUDICIARY
Handicapping the Supreme Court's Next Vacancy

Now that Senator Barack Obama has been elected president, which of the Supreme Court's aging liberal justices is going to step down? Maybe none. At least not right away. Legal Times's indefatigable Tony Mauro throws cold water on talk of impending retirements at the high court. He starts his piece with a great anecdote about 75-year-old justice Ruth Bader Ginsburg, who told a gathering of former law clerks last year that she didn't want to discuss retiring. "If anyone asks you, 'When is she retiring?'" Ginsburg reportedly said to those at the reunion, "tell them I have a great role mode in Justice [John Paul] Stevens, who is going strong at age 88."

History suggests that justices don't always decide retirement based on who's in the White House, according to University of Missouri-Kansas City political scientist David Atkinson, who has written a book on the subject of retiring from the Supreme Court. "I don't think justices retire strategically, by and large," he told Mauro. "As long as they are in good health and feel happy and indispensable, they tend to stay."

David Souter, 69, is one of the justices who is said to be thinking about stepping down. It's well-known that he can't stand Washington, D.C., but his friends say he's willing to stick around a few more years. The 88-year-old Stevens--who still writes his own opinions--is regarded as the justice most likely to retire. A longtime friend of the justice told Mauro that Obama's election might encourage Stevens to rethink his future.

Before any of the justices makes a move, he or she will likely talk with the others. The Court doesn't like more than one chair to be empty at a time.

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