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December 5, 2008 9:00 AM

The Am Law Litigation Daily: December 5, 2008

Posted by Ed Shanahan

Edited by Andrew Longstreth

LITIGATOR OF THE WEEK
Robert Mittelstaedt of Jones Day

In the pretrial phase of the landmark Alien Tort Claims Act case that Nigerian plaintiffs brought against Chevron, the oil company's lawyer, Jones Day partner Robert Mittelstaedt, was dealt a tough blow. San Francisco federal district court judge Susan Illston found that the plaintiffs had presented evidence showing Chevron Nigeria Ltd. had aided and abetted military attacks against Nigerian civilians on an oil platform in the late nineties. Illston ordered the case to proceed. "[Plaintiffs] present evidence that CNL personnel were directly involved in the attacks; CNL transported the [government security forces]; and CNL knew that the [government security forces] were prone to excessive force," Judge Illston wrote in an August 2007 ruling. "These facts, among others, are sufficient to raise a triable issue to whether CNL knew that the [government security forces] planned to attack, and whether CNL agreed that the [government security forces] should commit the attacks."

So the case headed to trial--and to Chevron's exoneration. On Monday, following a four-week trial and two days of deliberation, jurors found Chevron not liable for the deaths and injuries of the Nigerian civilians. In what was considered a crucial test of the Alien Tort Claims Act, the Jones Day lawyer halted a movement to hold U.S.-based businesses responsible for overseas tragedies.

"The decision to shoot in self-defense was made by military," Mittelstaedt told the jury during his closing argument, according to Bloomberg. "Not only did we not think anything wrong would happen, we certainly didn't intend for anything to happen."

The verdict has generated plenty of chatter in cyberspace. Conservative columnist Walter Olson called it "a stinging rebuke to a small army of progressive American academics, journalists, foundation grantmakers, and others who've promoted the case for years." FindLaw columnist Anthony Seabok, meanwhile, cast doubt on the significance of the outcome.

According to Dan Levine of The Recorder, our Litigator of the Week kept his poker face on in the courtroom when the verdict was announced, but once outside, cracked a smile. Considering the stakes, it was an understandable show of emotion.

CORPORATE
Class Action Challenging JPMorgan/Bear Stearns Deal Dismissed

We've repeatedly noticed that these extraordinarily tough times have resulted in very little good news for plaintiffs lawyers. Yesterday we received more evidence in support of that theory when New York Supreme Court justice Herman Cahn dismissed a suit challenging the adequacy of JPMorgan Chase's $10-a-share purchase price for Bear Stearns. Bear shareholders, represented by Daniel Krasner of Wolf Haldenstein Adler Freeman & Herz, had sued Bear Stearns directors for breach of fiduciary duty and JPMorgan for allegedly aiding and abetting those breaches.

In granting the defendants' motion for summary judgment, Justice Cahn concluded that the Bear Stearns directors were protected by the business judgment rule. "The board's efforts to preserve some shareholder value while averting the uncertainty of a bankruptcy--an event with potentially cataclysmic consequences for the broader economy as well as for the shareholders--would survive scrutiny even if some enhanced standard of review under Delaware law did apply," he wrote. Justice Cahn also found that JPMorgan's role did not expose it to liability.

At oral arguments (transcript available here), Greg Markel of Cadwalader, Wickersham & Taft argued for Bear Stearns and the inside directors, and Marc Wolinsky of Wachtell, Lipton, Rosen & Katz argued for JPMorgan.

IP
Barbie's Savior: Quinn Emanuel Wins Big for Mattel with Sweeping Bratz Injunction

We should have listened to John Quinn. Back in August, when Mattel won $100 million in damages from the federal jury that decided the company's copyright infringement case against MGA Entertainment Inc., the verdict was widely considered--including by us--to be a disappointment for Mattel, which had asked for more than $1 billion after the jury determined that MGA created its widely popular Bratz dolls based on designs by a Mattel employee.

But Mattel lead trial counsel John Quinn of Quinn Emanuel Urquhart Oliver & Hedges chided us for not focusing on what he called "the single most important fact about the jury's verdict: the jury found infringement." Quinn said he intended to use the jury's ruling that MGA had infringed Mattel's copyrights when it created the Bratz doll to seek an injunction against the big-headed dolls that had cut through Barbieland like an army of tiny, eye-shadowed Godzillas.

Late Wednesday evening, Quinn was proved prescient. Federal district court judge Stephen Larson granted Mattel a sweeping injunction that essentially shuts down MGA's Bratz operation. Larson ordered MGA to cease manufacturing, marketing, and selling almost every doll in the Bratz line, as well as every ancillary product that makes use of images of those dolls. He also ordered MGA, at its own expense, to deliver all infringing dolls and products to Mattel for impoundment and destruction. In a separate order, Judge Larson granted Mattel's motion for a constructive trust on the Bratz name, which means that MGA can no longer even call any of its products "Bratz."

The judge stayed enforcement of the injunction until February, when he has scheduled a hearing on posttrial motions by both sides. 

"[The ruling] is a vindication of the principles Mattel has been pursuing all along," said Quinn Emanuel partner Michael Zeller, who is co-lead counsel with Quinn. "We had an employee who was getting paid by Mattel, who received the benefits of working for Mattel, who secretly sold his designs to a competitor."

We asked Zeller whether Quinn Emanuel was now laughing at everyone (including us) who had portrayed the $100 million damages ruling as a semi-victory for MGA. He graciously declined to crow, but did allow that the firm is "gratified about the court's ruling." 

MGA, which is represented by Thomas Nolan at Skadden, Arps, Slate, Meagher & Flom, told The Wall Street Journal that it planned to appeal Larson's ruling. Nolan did not return the Litigation Daily's call for comment.

Judge Larson explicitly rejected MGA's central argument in a ruling explaining his reasoning on the injunction. Skadden's Nolan had argued that any injunction should be limited to the first generation of Bratz dolls, which he claimed were the only dolls that made use of designs created when the Bratz designer was on Mattel's payroll. Nolan argued that the $100 million jury verdict reflected the jury's belief that only the early dolls infringed Mattel's copyright. Judge Larson disagreed. The jury sent a note asking whether it could limit its infringement finding, but its final verdict did not. "The jury made no express finding on this issue," Larson wrote.

CORPORATE
Judge Ramos Allows AIG Suit to Move Forward Against Greenberg

As Michael Corleone might say (in a different context), AIG keeps pulling New York Supreme Court justice Charles Ramos back in. Ramos rather colorfully expressed his impatience with AIG litigation at a November 17 hearing, but the cases keep rolling through his courtroom. On Tuesday afternoon the justice guaranteed that he'll be subject to plenty more appearances by AIG's lawyers: He ruled that the insurance giant's suit against former CEO Maurice Greenberg and other executives can go forward. Here's Ramos's decision.

AIG, represented by Martin Flumenbaum and Robbie Kaplan of Paul, Weiss, Rifkind, Wharton & Garrison, alleged that Greenberg and six other former AIG executives "misappropriated" about $20 billion in stock that was held by AIG affiliate Starr International Company. Historically, managers at AIG were compensated through Starr, but AIG's lawyers contend that Greenberg and the other defendants seized control of Starr in 2005 and used it for their own benefit.

"Accepting the complaint's allegations as true, as the court must do at this stage, AIG has stated in sufficient detail a cause of action for breach of fiduciary duty against defendants to survive," wrote Ramos.

Boies, Schiller & Flexner partner Christopher Duffy, who represents Greenberg, told Bloomberg that Ramos's decision makes no final determination. "In light of the economy and AIG's heath as a company, it's curious that AIG is using litigation to try to expand the bonus pool to its top executives," Duffy said in an e-mail to Bloomberg.

The other defendants in the suit include former AIG CFO Howard Smith (represented by Vincent Sama of Winston & Strawn); former AIG director Edward Matthews (represented by John Gardiner of Skadden, Arps, Slate, Meagher & Flom); former AIG director Ernest Stempel (represented by Roland Riopelle of Sercarz & Riopelle); former AIG director L. Michael Murphy (represented by Craig Singer of Williams & Connolly); former AIG director John Roberts (represented by Alan Futerfas); and former AIG director Houghton Freeman (represented by Sean O'Shea of O'Shea Partners).

SECURITIES
Analysis: Plaintiffs Lawyers Will Have Subprime Blues If They Can't Prove Intent and Causation

Back in September we likened the state of subprime class action litigation to the first inning of a baseball game (third item). There were more than 100 cases out there, but few judges had ruled on defendants' motions to dismiss them. Three months later, it's still early in the subprime game, but we're always on the hunt for clues about how these cases are likely to turn out.

We got a hint yesterday from an article in CCH Wall Street, which pointed us to a good piece of analysis from Gibson, Dunn & Crutcher partner Jennifer Rearden and associate J. Taylor McConkie. The Gibson lawyers looked at some of the early results in subprime cases and concluded that most have been decided for defendants. Five cases have been dismissed, including two without prejudice, while only two have been permitted to proceed. Scienter has been at the forefront of the decision-making by the courts. So has loss causation.

"By the time the market began to react significantly to concerns about subprime mortgages, many corporate holders and purveyors of mortgage-backed securities had already seen their share prices fall steadily for months or even years," wrote the Gibson Dunn duo. "This fact alone may complicate efforts to plead and prove loss causation in subprime-related securities cases."

IP
California Judge Rules for Midway Games in Copyright Suit by Screenwriter

As a science fiction buff, Drinker Biddle & Reath partner Darren Cahr was well-suited to defend Midway Games against a copyright claim involving Dungeons & Dragons-esque psionic powers. The plaintiff in the case, William Crawford II, claimed that Midway's video game Psi-Ops: The Mindgate Conspiracy infringed his copyrights to his screenplay, "Psi-Ops," and to the Web sites he used to promote it.

The stars of Crawford's screenplay (which was never sold or made into a movie) are soldiers with psionic powers to fight terrorists. (Cahr described the story to us, in movie-pitch style, as X-Men-meets-Chuck Norris.) The video game features U.S. government agents in pursuit of a rogue movement that's trying to overturn existing governments. The lead government agent in the game develops psionic powers.

Since the case was filed in February 2007, Cahr has picked up all kinds of fascinating facts. He learned, for example, that in the Cold War, both the United States and Russia studied whether psychic powers would be useful in combat. He also learned plenty from his expert witness, Eric Rabkin, who teaches science fiction writing at the University of Michigan.

"As much as I love science fiction," Cahr told us, "it's impossible to go through a case like this and not to learn something."

But the fun has come to an end for Cahr. On Wednesday, Los Angeles federal district court judge Florence-Marie Cooper granted Midway's motion for summary judgment. In deciding for Midway, Judge Cooper found that "no reasonable juror can find that the plaintiffs' screenplay and defendants' video game are substantially similar in the expression of their ideas." We detected a certain affection for the game in Judge Cooper's ruling. "The screenplay reads like a conventional military or espionage operation," she wrote. "[But] the video game resembles a fantasy world with jellyfish monsters, invisible buildings, and invisible enemies." Clearly she preferred the game's storytelling to Crawford's, which she said "is dark, contains more profanity, and is more sinister than the language employed in the video game."

Crawford's lawyer, Joseph Fogel of Fogel & Associates, told us he still believes his client's case is strong and that he's considering what steps to take next.

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