THE AM LAW DAILY

SURVEYS AND RANKINGS

MAGAZINE

SPECIAL REPORTS

The Work

December 19, 2008 11:24 AM

The Am Law Litigation Daily: December 19, 2008

Posted by Ed Shanahan

Edited by Andrew Longstreth

LITIGATOR OF THE WEEK
Richard Strassberg of Goodwin Procter

During closing arguments in the KPMG tax fraud trial, New York federal prosecutor John Hillebrecht made a stunning admission. The credibility of one of the government's key witnesses, accountant Steven Acosta, had been shredded by defense attorney Richard Strassberg of Goodwin Procter, who represented ex-KPMG partner David Greenberg.

"Let there be no doubt about it, not that I thought there was any, Steven Acosta was a catastrophe," Hillebrecht told the jury. "Steve Acosta got destroyed on cross-examination by Mr. Strassberg. There's no question about that. Mr. Strassberg will be telling that story for years. But speaking personally, I wanted to crawl under the table." (Click here to read a transcript of the closing arguments.)

As reported yesterday, Strassberg's client, Greenberg, was found not guilty while his three codefendants, including former Brown & Wood partner Raymond Ruble, were convicted. According to the New York Law Journal, the government tried to use Acosta to show that Greenberg sold a tax shelter with fraudulent intent. Instead, Acosta was revealed as a liar.

"This is a case that the government premised...on the word of this one cooperator," Strassberg told us yesterday. "A lot of our efforts were put into making it clear to the jury that it could not rely on that cooperator."

Strassberg also told us that Hillebrecht's comments about his cross-examination of Acosta were not just polite praise. It was a strategic move. "He was attempting to concede what was obvious, I think, and get back in the jury's good graces," said Strassberg. "In that sense, I think it was actually pretty smart of him, and probably helped him with the other defendants to try to do that. Because, at least from my perspective, by the time I finished my closing, I think the jury was not very happy with what the government had done, at least on the case with respect to my guy."

To find our Litigator of the Week's cross-examination of Acosta, click here and here. Strassberg assures us it makes for good reading.

CORPORATE / M&A
Hexion Continues to Battle with Banks

When Huntsman announced earlier this week that it terminated its merger agreement with Hexion Specialty Chemicals as part of a settlement, it looked like the end of Hexion's suit against Credit Suisse and Deutsche Bank. You'll recall that after Vice Chancellor Stephen Lamb of Delaware Chancery Court found Hexion had willfully breached its merger agreement with Huntsman, he ordered Hexion to fulfill its obligations under the agreement. To make good on that order, Hexion, represented by Kasowitz, Benson, Torres & Friedman, sued Credit Suisse and Deutsche Bank in New York state court to force them to fund the deal.

But on Monday, Kasowitz name partner Marc Kasowitz wrote to New York Supreme Court justice Eileen Bransten to inform her that Hexion still may have to litigate with the banks if they refuse to fund the $325 million breakup fee that Huntsman is owed. If that's resolved, Hexion may still have to battle with the banks over their counterclaims for indemnification in a tortious interference suit that Huntsman has brought against Credit Suisse and Deutsche Bank in Texas state court, which is scheduled for trial in May 2009. "Should those proceedings give rise to damages or to a settlement, the issue of Hexion's obligations to indemnify those losses can be litigated at that time," wrote Kasowitz.

Not so fast, wrote Richard Clary in a response to Justice Bransten. Clary, a partner at Cravath, Swaine & Moore who represents the banks, accused Hexion of trying an end run around the New York court on a critical issue of whether a merged entity of Huntsman and Hexion would have created an insolvent entity. Hexion wants the issue addressed in Texas state court. That's because, as part of the settlement, Hexion could potentially share in a settlement or judgment that Huntsman receives against the banks. If a New York court declares that the merged entity would have been insolvent, Huntsman's suit against the banks in Texas would presumably be weakened.

After a hearing on Tuesday, Justice Bransten ordered more briefing and set a hearing for January 5.

MALPRACTICE
Quinn Emanuel Hit with Malpractice Suit

Quinn Emanuel Urquhart Oliver & Hedges has been hit with a malpractice lawsuit that claims the firm botched a $48.8 million settlement even as it took in some $12 million in contingency fees.

Former client Todd Kurtin, a onetime principal at the real estate concern SunCal Companies, filed the claim earlier this month in Los Angeles superior court. In his complaint, Kurtin accuses Quinn Emanuel of negligence for failing to advise him of "the meaning and ramifications of all terms of the settlement agreement" he reached with a former business partner, Bruce Elieff, that unwound their co-ventures.

Under the 2005 settlement, Kurtin was to receive his payout in four installments, but, according to the complaint, wound up getting only two payments and is still owed nearly $23 million, not including interest. Kurtin is pursuing claims against Elieff for reneging on the settlement agreement.

The complaint against Quinn Emanuel highlights how the firm has received approximately $12 million in fees for representing Kurtin--the result of a contingency agreement that essentially guaranteed Quinn Emanuel half of any amount recovered up to $20 million and 20 percent thereafter. That amount is equal to what Kurtin himself has gotten to date from the settlement, which was reached a little more than four months after Quinn Emanuel took on the case.

Kurtin could not be reached for comment. Paul Kennerson, an attorney at San Diego-based Kennerson & Grant who is representing Kurtin in the malpractice claim, says, "The case is what it is. You can get the allegations from the pleadings. I don't think it is appropriate for me to comment any further."

Quinn Emanuel partner Ken Chiate declined to comment on the firm's relationship with Kurtin because he is a former client.

But Chiate added, "It is our opinion that the lawsuit is totally without merit. It reflects someone who is unhappy and has decided to exercise his right to seek remedies which we believe are totally inappropriate and will be defeated at trial."

--Drew Combs

SECURITIES
NERA Study: Credit Crisis Could Reduce Settlement Amounts in Securities Class Actions

NERA Economic Consulting has released its latest report on trends in shareholder class actions. For those who follow this area, there aren't too many surprises. Filings are way up. NERA projects a total of 267 by year-end, which would be a 37 percent increase over 2007 and would represent a ten-year high if atypical cases related to the IPO securities litigation, analyst cases, and mutual fund market-timing cases are excluded.

Perhaps the most intriguing part of the study is the musings about what impact the financial crisis might have on future settlements. The study notes that as a general rule, there's a strong correlation between investor losses and settlement amounts. That would portend bad news for targets these days. According to NERA, the median stated loss in credit crisis cases filed in 2008 was $3.5 billion. That's a huge number historically, but settlement figures are not simply dictated by investor losses. The financial health of the defendant also comes into play, according to the authors of the NERA study.

"Historically, indicators of the financial wherewithal of the defendant have been positively and significantly correlated with settlement values: controlling for a number of other factors (although not the merits of a particular case), defendants with higher market capitalization have high settlements, and companies that are bankrupt or have share prices of less than $1 have significantly lower settlements," they write.

Now that the market cap of most major financial institutions has plunged, that could mean lower-than-anticipated settlements. The authors of the NERA study note that the reported $700 million settlement that the major investment banks agreed to in the mammoth IPO case may be proof that expectations should be lowered, considering that the plaintiffs allegedly rejected a $3 or $4 billion settlement offer two years ago.

PRODUCT LIABILITY
Jones Day Wins Trial over Surgically Implanted Mesh Slings

Before this week, we'd never heard of transvaginal surgical mesh litigation. If you haven't either, a little background: It involves a treatment developed a few years ago for women who suffer from stress urinary incontinence. A synthetic mesh called a "sling" is implanted under the urethra, to help maintain continence. Women who have suffered complications have filed more than 50 federal cases against Mentor Corporation, which makes the sling ObTape.

The first case was filed two years ago in California state court in Alameda County, alleging negligence and failure to warn. The plaintiff, seeking $2 million in compensatory damages plus punitives, claimed that the sling extruded through the incision and caused an infection. On Monday, after a six-week trial, a jury found in favor of Mentor, which was represented by Jones Day. Partners Ed Sebold and John Lewis, who tried the case, said they emphasized the benefits of the product throughout the trial.

"With any of these products there's going to be a risk, but that risk here was acceptable, and I think the jury understood that," said Sebold. "In order to get the benefit of these devices, there may often times be some side effects. But this product was designed to minimize those as much as possible."

We called Michael Kelly of Walkup, Melodia, Kelly & Schoenberger, who represented the plaintiff, but didn't hear back immediately.

Lewis of Jones Day says he thinks this win will give them momentum in defending the other cases, which are coordinated as multidistrict litigation in Georgia. Said Lewis: "We had a position and a message and these jurors accepted it, and so we feel real good about that."

Make a comment

Comments (0)
Save & Share: Facebook | Del.ic.ious | | Email |

Reprints & Permissions

Comments

Report offensive comments to The Am Law Daily.

The comments to this entry are closed.

By: TwitterButtons.comhttp://www.facebookloginhut.com/facebook-login/


theamlawdaily@alm.com




From the Law.com Newswire

Sign up to receive Legal Blog Watch by email
View a Sample

Advertisement