The Work

December 4, 2008 9:00 AM

The Am Law Litigation Daily: December 4, 2008

Posted by Ed Shanahan

Edited by Andrew Longstreth

Lamb Again? This Time, Apollo Company Taps Skadden to Defend Delaware Chancery Court Case

Earlier this week Carl Icahn's High River Limited Partnership filed a suit in Delaware Chancery Court against Realogy--a company owned and controlled by Apollo Management Group--over Realogy's $1.1 billion debt refinancing deal. The last time that an Apollo portfolio company was in Delaware Chancery Court, things didn't turn out so well: Vice Chancellor Stephen Lamb found Hexion Specialty Chemicals in breach of its $10 billion merger agreement with Huntsman.

Guess who's going to be presiding over the Realogy case? Yep--Lamb again, which can't have made the folks at Apollo very happy. The DealBook's Deal Professor points out that the judicial assignment is no coincidence. "Cases in Delaware Chancery Court are assigned by Chancellor William B. Chandler III--[and there's] no doubt the good chancellor thought Judge Lamb had experience with Apollo's corporate machinations," Deal Professor wrote. "In other words, Judge Lamb is now Delaware's resident decider for all things Apollo."

But this time around, Lamb will hear from a different set of lawyers. Instead of Wachtell, Lipton, Rosen & Katz, which represented Hexion in the Huntsman case, Realogy will be defended by Skadden, Arps, Slate, Meagher & Flom. Partner Thomas Allingham II, who works out of the firm's Wilmington office, will head the Skadden team in Delaware. Apollo's choice of Skadden can't be considered a big surprise: The firm has long represented the company that was known as Cendant, from which Realogy spun off in 2006.

Icahn is represented by Sigmund Wissner-Gross of Brown Rudnick. Vice Chancellor Lamb has set a hearing for December 15 to listen to arguments from both sides.

Philip Morris Punitives Damages Case Gets Third Hearing at the Supreme Court; Mayer Brown Partner Receives Rave Review

The last time the Supreme Court heard arguments in the case of the Portland janitor's widow who won a $79.5 million punitive damages award against Philip Morris, the high court sent the case back to the Oregon Supreme Court, suggesting that it reconsider the punitives award. In February, in what was viewed as a big diss to the Supremes, Oregon's highest court upheld the $79.5 million in punitive damages. Philip Morris appealed, and for the third time, the high court took the case.

Oral arguments took place yesterday. (Here's the transcript.) And according to ABC News Supreme Court reporter Jan Crawford Greenberg, the give-and-take was quite lively. Greenberg reports that Mayer Brown's Stephen Shapiro, counsel to Philip Morris, at first took a shelling from Justices Souter, Ginsburg, and Breyer. "But Shapiro never quit," Greenberg writes. "He did a herculean job of fending off all those questions--even without help from Scalia or Roberts, who tend to jump in and propose helpful answers to Souter. Shapiro was so impressive in keeping his composure and his focus--coupled with his obvious preparation--that by the end of his half hour the field seemed a little more level."

The plaintiff in the case was represented by Robert Peck of the Center for Constitutional Litigation.

The issue before the Supreme Court is a state court's interpretation of the constitutional standard on punitive damages that was established by the high court. But Greenberg reports that the justices probed other issues. Some expressed concern about allowing a lower court to evade one of its rulings. And Chief Justice Roberts spiced things up when he asked whether the court should consider the more sweeping question of whether the $79.5 million punitive damages award was unconstitutionally excessive.

Greenberg writes that the case could fracture the court in "surprising ways." Despite the court's conservative tilt, a split decision might go against Philip Morris. "That would mean a major reversal of Supreme Court business law--and open the door for greater punitive damages awards in the future," writes Greenberg.

Now Starring in the Roman Polanski Rape Case: Manatt Phelps Partner Chad Hummel

We're beginning to think Chad Hummel of Manatt, Phelps & Phillips has one of the coolest practices going. Earlier this year he represented a Los Angeles police sergeant charged with feeding confidential information stored in government computers to infamous L.A. investigator-to-the-stars Anthony Pellicano. Last month, he was part of the trial team (which also included lawyers from McKool Smith) that successfully represented former NFL players suing their union for excluding them from marketing deals. And now he's representing film director Roman Polanski in an effort to have Polanski's decades-old statutory rape conviction tossed out.

On Tuesday night, Hummel and Bart Dalton of Cauley Bowman Carney & Williams, the son of Polanski's original defense attorney, submitted a brief to Los Angeles superior court judge David Wesley, asking that Polanski's conviction be overturned on the basis of a new documentary. (Here's yesterday's New York Times story on the movie and the motion.) Hummel and Dalton claim that evidence uncovered in the making of Roman Polanski: Wanted and Desired shows that the judge in Polanski's case was improperly influenced by a former deputy district attorney. In the documentary, deputy district attorney David Wells, who was not officially involved in Polanski's prosecution, admits that he advised the judge on sentencing and that he "was privy to almost everything that went on in that case."

Polanski fled the country after he was convicted of having sex with a minor. He has lived in Paris for more than 30 years.

We reached out to Hummel yesterday to find out how he landed the Polanski assignment but he declined to comment. In a statement, Hummel and Dalton said that the documentary and its aftermath "have revealed a pattern of misconduct and improper communication between the superior court and the district attorney's office, in violation of the rule of law and without knowledge of the defendant or his counsel. This case serves as a classic example of how our justice system can be abused, and defendants' rights trampled, by an unholy alliance between courts and criminal prosecutors."

Judge Wesley is scheduled to hear from Polanski's new lawyers and the Los Angeles district attorney's office January 21.

Eleventh Circuit Revives Negligence Claim Against Epstein Becker

The optical fiber company OFS Fitel will get another shot at making its negligence case against Epstein, Becker & Green. Last week the Eleventh Circuit reversed a lower court's dismissal of the case and vacated a key sanction against Fitel.

The case stems from the 2001 purchase by Fitel's parent company of a Lucent division. Fitel hired Epstein Becker to advise on labor laws in connection with the deal. But the company was subsequently sued by laid-off employees who claimed age discrimination. Fitel eventually settled the ex-employees' claims for $1.9  million, paying its lawyers $450,000 in the litigation. In its suit against Epstein Becker, Fitel asked for reimbursement of both the settlement amount and legal fees, claiming that Epstein had failed to warn it about compliance with the law barring age discrimination.

The case has since been mired in discovery disputes and accusations of stonewalling from both sides. Atlanta federal district court judge Thomas Thrash, Jr., concluded that Fitel was the prime offender. He granted Epstein Becker's motion to exclude Fitel's claim for attorneys fees  because, Judge Thrash ruled, Fitel had failed to turn over its legal bills. Thrash also ordered Fitel's expert witness report to be excluded because it was turned in after the discovery deadline, even though Fitel blamed Epstein Becker delay tactics for its tardiness. After the ruling barring its expert's report, Fitel voluntarily dismissed its case so it could appeal.

The Eleventh Circuit agreed with Judge Thrash that Fitel couldn't seek repayment of it attorneys' fees. But it reversed the ruling that excluded Fitel's expert witness report--and reinstated the suit. Neither Fitel's counsel, Jeffrey Bramlett of Bondurant, Mixson & Elmore, nor Epstein Becker's lawyer, Robert Wedge of Shapiro Fussell Wedge & Martin, returned calls for comment. A spokesperson for Epstein told us that the firm's policy is not to comment on pending litigation.

Law Professor Finds a Guinea Pig in Class Action Reform Effort

A couple months ago we told you about an idea to reduce securities class actions that University of Michigan Law School professor Adam Pritchard was floating (last item). Pritchard suggested that corporate shareholders propose a fix for what he considers flaws in the Supreme Court's Basic v. Levinson ruling. Shareholder proposals, he argued, could reduce the incentive for plaintiffs lawyers to file class actions.

Back in October, Pritchard told the Securities Docket blog that he was optimistic a shareholder might give his idea a try. "I only need one shareholder to get it started," he said. "Proxy season is just around the corner, so now is the time to submit a proposal."

Professor Pritchard now has his guinea pig. A shareholder for Alaska Air Group has submitted a proposal, which can be accessed here via Securities Docket. "Securities fraud class actions impose enormous costs on public companies while providing little benefit to shareholders," the proposal says. "This proposal, suggested by professor Adam Pritchard of the University of Michigan, would limit damages in secondary-market securities class actions...Currently, such suits effectively result in a 'pocket-shifting' of money from one group of shareholders (those who continue to hold the company's shares) to another (those who bought during the time that the price was distorted by fraud). Frequently, shareholders will be members of both groups simultaneously, which means they are paying themselves compensation in securities class actions."

Pritchard has predicted a snowball effect for such proposals. We'll have to wait and see if Alaska Air gets that snowball rolling.

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