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Supreme Court Refuses to Hear Enron Case
Breaking Legal News |
2008/01/22 09:43
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The Supreme Court dealt a blow Tuesday to Enron investors who sued major investment banks to recover money lost when the Texas energy giant collapsed amid a massive accounting fraud. By refusing to review the investors' lawsuit, the court took away what may have been their only hope of keeping the case alive. Enron stockholders may seek to revive their case in the lower federal courts, though the 5th U.S. Circuit Court of Appeals in New Orleans has ruled against them once before. Enron's demise wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans. Tuesday's turndown for the Enron investors came without comment in a routine Supreme Court list of cases the justices had decided not to hear. The chances that Enron shareholders can recover some money dimmed a week ago with the Supreme Court's decision against investors in a separate suit. It alleged that two suppliers doing business with a cable TV company engaged in securities fraud. That suit was politically sensitive for the Bush administration because of its potential to affect the Enron case. The administration sided with the business community against investors, despite the recommendation of the Securities and Exchange Commission to side with the investors. It was left to attorneys general from 30 states to support shareholders in the case against the cable TV suppliers. The justices ruled that the investors in Charter Communications Inc. did not have the right to sue because they did not rely on the deceptive acts of the suppliers. The same principle could apply to the Enron case, where investors relied on Enron's glowing description of its business, but were arguably unaware of any deceptive conduct by the investment banks. Lawyers for Enron investors say the circumstances in the two cases are not comparable. In the Enron suit, stockholders are accusing Wall Street investment banks of colluding with the energy company to hide its losses. To date, Enron plaintiffs have settled for $7.3 billion from several financial institutions including JPMorgan Chase & Co., Citigroup and Canadian Imperial Bank of Commerce. Enron stockholders are seeking more than $30 billion from Merrill Lynch & Co., Credit Suisse First Boston and Barclays Bank PLC. The investment banks, say Enron investors, schemed with the energy company, scheming with Enron by entering into partnerships and transactions that enabled the energy company to take liabilities off its books, recording revenue from the deals when it was actually incurring debt. Now that the Supreme Court has rejected the case, "I think that the chances of succeeding on a scheme liability theory are nearly zero; the resolution of this Enron case was made clear by the decision" last week against investors in the cable TV suppliers suit, said attorney Greg Markel, who represents corporate clients in securities fraud lawsuits. Last March, the appeals court in New Orleans reversed a decision by U.S. District Judge Melinda Harmon in Houston, who had said Enron shareholders could sue as a class. The issue of certifying a class is a critical one. Once the courts allow huge numbers of investors to pursue a securities fraud lawsuit, the defendants almost always settle rather than exposing their corporations to potentially catastrophic liability. The appeals court decision in the Enron case meant that shareholders and investors could not pool their resources to sue as a group. Lawyers for Enron investors estimate the class size at over 1 million shareholders. Enron Corp., once the nation's seventh-largest company, crumbled into bankruptcy in December 2001. The failure became a symbol of the corporate scandals that rocked Wall Street early this decade. |
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Supreme Court will hear employee harassment case
Breaking Legal News |
2008/01/20 08:52
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A longtime local government worker is fired after she cooperates with an investigation of sexual harassment allegations against a high-ranking official. The Supreme Court said Friday it will decide whether federal civil rights law protects employees from such retaliation. The justices agreed to review claims by Vicky Crawford, who was fired in 2003 after more than 30 years as an employee of the school system for Nashville, Tenn., and Davidson County. Months earlier, investigators interviewed Crawford about the school district's director of employee relations, Gene Hughes, and Crawford told them Hughes had sexually harassed her and other employees. The investigation found Hughes had acted inappropriately, but did not recommend that he been disciplined. Instead, Crawford learned she faced charges of irregularities in her job as payroll coordinator, and she was fired. Crawford then filed a federal lawsuit claiming she had been dismissed in retaliation for alleging harassment by Hughes. A U.S. district judge and a three-judge panel of the 6th U.S. Circuit Court of Appeals dismissed the suit. The courts said the anti-retaliation provision of Title VII of the 1964 Civil Rights Act did not apply to Crawford because she didn't raise harassment claims on her own but merely responded to investigators' questions. The Bush administration is supporting Crawford. "Internal investigations are an integral aspect of Title VII and there is no reason to leave cooperating witnesses unprotected," said Solicitor General Paul Clement. The justices also will review a separate case involving age-discrimination claims filed by former workers at the Knolls Atomic Power Lab. |
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US Court To Hear Review Of “Light” Cigarettes
Breaking Legal News |
2008/01/20 08:49
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The Supreme Court agreed Friday to a cigarette maker's request to decide whether tobacco companies can be sued under state law for allegedly deceptive advertising of "light" cigarettes. The tobacco industry is trying to head off a wave of state-based challenges regarding the light cigarettes, even as it is appealing a federal judge's order to stop marketing cigarettes as "low tar," "light," "ultra light" or "mild" because they mislead consumers. The issue before the justices is whether state laws against unfair marketing practices may be used in suits against the tobacco companies or whether federal law bars such lawsuits. The Federal Cigarette Labeling and Advertising Act says states can't impose any requirements on the advertising or promotion of cigarettes. A federal judge initially threw out a suit filed by three Maine residents against Altria Group Inc. and its Philip Morris USA Inc. subsidiary that alleged the advertising of light cigarettes was unfair and deceptive. The 1st U.S. Circuit Court of Appeals in Boston, however, reinstated the suit. The Maine plaintiffs said they smoked Marlboro Lights, made by Philip Morris, for at least 15 years. They claim the company marketed the cigarettes as "light" and having "lowered tar and nicotine" despite knowing that those statements were false, in violation of Maine's Unfair Trade Practices Act. The company has research, the plaintiffs say, that shows it knew that smokers of the light cigarettes took deeper puffs and used other techniques to ensure they received as much nicotine as they would have gotten from regular cigarettes. Philip Morris said the lawsuit was properly dismissed by the federal judge and called on the Supreme Court to resolve a conflict between appeals courts over these sorts of lawsuits. The 5th U.S. Circuit Court of Appeals in New Orleans last year dismissed a similar suit. In the government's landmark case against tobacco companies, U.S. District Judge Gladys Kessler said the companies "distorted the truth about low tar and light cigarettes so as to discourage smokers from quitting." That case is on appeal with the U.S. Circuit Court of Appeals for the District of Columbia. A separate federal lawsuit filed by smokers is pending in New York. The class-action suit alleges tobacco companies violated federal racketeering laws by promoting light cigarettes as lower-risk alternatives to regular cigarettes even though their internal documents showed they knew the risks were about the same. The class may consist of as many as 60 million people, lawyers say. The 2nd U.S. Circuit Court of Appeals in New York is considering whether the lawsuit can proceed as a class action or whether smokers must file suit individually. The basics of the claims against the companies are similar in all the lawsuits: The companies knew that smokers may compensate for the lower tar and nicotine yields by taking deeper puffs, holding the smoke in their lungs longer or smoking more cigarettes. The R.J. Reynolds Tobacco Company filed a brief in support of its chief rival, saying the financial stakes in the case are enormous. The U.S. Chamber of Commerce, also backing Altria, said the appeals court ruling could extend well beyond cigarette labels to product liability lawsuits against many industries. |
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Chief Justice Recuses Himself from Massey Case
Breaking Legal News |
2008/01/18 08:51
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The chief justice of the state Supreme Court agreed Friday to remove himself from a pending case involving Massey Energy Co., days after vacation photos surfaced showing him in Monaco with the coal producer's top executive. Chief Justice Elliott "Spike" Maynard said he was stepping down from the matter "despite the fact that I have no doubt in my own mind and firmly believe I have been and would be fair and impartial in this case." But in the three-paragraph statement, Maynard said "it has now become an issue of public perception and public confidence in the courts." Maynard helped form a 3-2 majority in November that overturned a multimillion-dollar judgment against Richmond, Va.-based Massey that another company, Harman Mining, and its president, Hugh Caperton, had won in a contract dispute. Caperton had asked Maynard to step down from the case before the high court reconsiders that ruling. With interest, the damages are worth $76.3 million. Bruce Stanley, a lawyer for Caperton, declined to comment Friday until after discussing the development with his client. A Massey spokesman did not immediately respond to a message requesting comment. The photos of Maynard and Massey Energy chief Don Blankenship together in Monaco in 2006 were included in a revised court motion filed Monday. Both men have said they were on separate vacations, and that each paid his own way. Maynard has also said his friendship with Blankenship has not affected his impartiality on the court. In one picture, the men are sitting side-by-side, smiling over empty glasses at a cafe along the Riviera as the Mediterranean sun sets behind them. In others, they are posing by the seaside. Ten other photos were filed under seal, and depict the men with two female companions, the motion said. The court must now appoint a replacement, likely a circuit judge or retired jurist, to sit in Maynard's place. Harman Mining is also challenging the impartiality of another justice, Brent Benjamin, arguing he should step down because Blankenship spent millions of dollars on an ad campaign attacking another justice on the court that helped to boost Benjamin into office in 2004. That recusal petition was filed late Thursday. Benjamin has not yet responded, court spokeswoman Jennifer Bundy said Friday. State court rules require judicial officers to disqualify themselves from proceedings if their "impartiality might reasonably be questioned," or if they have "a personal bias or prejudice concerning a party or a party's lawyer." Caperton contends that he and his company were driven into bankruptcy by unfair and deceptive dealings by Massey, the country's fourth-largest coal producer. A Boone County jury awarded Harman and Caperton $50 million in damages, which later swelled to $76.3 million with interest. In the 3-2 ruling in November, though, three justices including Maynard and Benjamin agreed that whatever its merits, the case should not have been pursued in West Virginia courts. On Thursday, a settlement was announced in Washington in which Massey agreed to pay a $20 million fine over allegations it routinely polluted hundreds of streams and waterways in West Virginia and Kentucky with sediment-filled waste water and coal slurry. Under the agreement with the U.S. Environmental Protection Agency, Massey also will invest millions of dollars for pollution control improvements at its 44 mines and coal facilities in the two states and in Virginia, the EPA and Justice Department said. |
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Attorneys Press High Court To Hear Enron Investor Suit
Breaking Legal News |
2008/01/18 06:47
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A $40 billion lawsuit by Enron investors against several banks for orchestrating financing deals for the now-defunct energy trader is not dead, despite a recent Supreme Court decision that helps protect such third parties. In fact, some lawyers who represent investors argue the high court decision involving cable company Charter Communications and two of its suppliers, made a clear distinction that justifies hearing the Enron case. The Supreme Court ruled 5-3 that shareholders cannot sue third parties in securities fraud cases, unless investors relied on their statements or representations when making investment decisions. Stoneridge Investment Partners, on behalf of Charter shareholders, had accused the two suppliers of scheming to inflate company revenues in 2000. Lawyers for investors point to sections of Justice Anthony Kennedy's majority opinion, which they say makes a distinction between third parties involved in the goods and services arena and those involved in the investment sector. "He repeatedly made that distinction. That distinction distinguishes Enron from Stoneridge," said Pamela Gilbert, a consultant for the American Association for Justice, the world's largest trial bar association. "Stoneridge involves a customer relationship. In Enron, the major wrongdoers are the investment banks involved in the financial transactions," Gilbert said. |
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Court Upholds NY Judicial Nominee System
Breaking Legal News |
2008/01/17 10:06
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A U.S. Supreme Court ruling that upholds New York's system of choosing trial judges is likely to renew calls for legislative reform, but even some proponents of change say their chances of success are slim. That's because the current system gives tremendous power to local party leaders, who select judicial candidates and often hold sway over state lawmakers. "Party chairmen like the system, for obvious reasons, and people who run for the legislature are usually in a position where it's difficult to vote for something like this because their party leaders are opposed to it," state Sen. John DeFrancisco said after Wednesday's ruling. DeFrancisco, a Republican, chairs the Senate Judiciary Committee. In New York, primary voters elect convention delegates who choose candidates for the judgeships. Once nominated, the candidates run on the general election ballot, frequently without opposition. Unsuccessful candidates for judgeships and a watchdog group won a lawsuit challenging the system, and the 2nd U.S. Circuit Court of Appeals agreed that it is very difficult for candidates to get on the ballot if they don't have the support of party leaders. The rulings said candidates who are not the choice of party leaders are excluded from elections by an onerous process that violates their First Amendment rights. The Supreme Court unanimously reversed the lower courts, saying there is nothing unconstitutional about the process. The high court said the state legislature is free to change the system if it wishes. Former New York Mayor Ed Koch — who was among a diverse group of politicians and legal groups asking the court to uphold the lower court rulings — called the decision a "dreadful mistake." "The county leaders will now continue to basically assure the appointment to the (state) Supreme Court of their candidates," Koch said. The state legislature adopted the current system 86 years ago. Lawmakers scrapped direct primaries for New York's Supreme Court justices because they didn't want them to be corrupted by raising campaign money. Other judges in New York are elected through primaries. |
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Court limits investor suits against 3rd parties
Breaking Legal News |
2008/01/16 07:02
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In a case born of the accounting scandals that rocked the nation in the first half of the decade the Supreme Court Tuesday limited the ability of defrauded investors to sue accountants, bankers and lawyers who may have helped a company commit the fraud.
The 5-3 decision represents a victory for corporate America, the business lobby and the Bush administration, all of which urged the court to insulate those third parties from so-called "scheme liability," which attempts to reach outside companies who may have contributed to the stock fraud.
"The Supreme Court today handed down a major victory for the U.S. economy and investor welfare," said Stephen Shapiro, the Chicago lawyer who argued the defendants.
The ruling is likely to have a major impact on class-action lawsuits arising from the implosions of Enron Corp. and HealthSouth Corp., among others, making it less likely that those suits will survive. It brought a torrent of criticism from investor advocates and some on Capitol Hill, including Sen. Christopher Dodd (D-Conn.), chairman of the Senate Banking Committee.
The decision, Dodd said, will "protect wrongdoers from the consequences of their actions."
The case involved investors who sued Scientific-Atlanta Inc. and Motorola Inc., vendors for cable company Charter Communications Inc., alleging that the vendors were part of a scheme to misrepresent Charter's revenue and pump up its stock price. When the accounting errors were revealed the stock price plummeted.
The dispute was one some observers labeled the "Roe vs. Wade" of securities law, with more than 30 friend-of-the-court briefs filed. When the case was accepted by the court, speculation mounted on the Bush administration's position. In an unusual move, the White House ignored the advice of the Securities and Exchange Commission, accepting instead the Justice Department's recommendation to side with such groups as the U.S Chamber of Commerce and the National Association of Manufacturers.
Justice Anthony Kennedy, writing for the five-justice majority, said that because the vendors made no specific representations about the health of Charter's finances to Charter's investors the vendors weren't liable under federal securities laws. Only the SEC has the authority to bring such "aid-and-abetter" actions against third parties, the court held.
Jeffrey McFadden, a Washington securities litigator, said, "The court looked at the case in very practical terms: Who were the parties that actually made the statements that deceived someone?"
In October Kennedy voiced concern that siding with the investors would result in an explosion of securities litigation. And on Tuesday he seemed to echo that concern in writing, "Were the implied cause of action to be extended to the practices described here, there would be a risk that federal power would be used to invite litigation beyond the immediate sphere of securities litigation."
Kennedy noted the potential impact on the U.S.economy, saying that "contracting parties might find it necessary to protect against these threats. Overseas firms with no other exposure to our securities laws could be deterred from doing business here."
Shapiro, with Chicago firm Mayer Brown, said the outcome actually benefits most investors because a decision the other way would have driven up the costs of outside legal and financial services.
Along with Kennedy, Justices Antonin Scalia, Clarence Thomas, John Roberts and Samuel Alito formed the majority. Justice Stephen Breyer recused himself from consideration of the case because he owns stock in one of the parties.
Justice John Paul Stevens, with Justices David Souter and Ruth Bader Ginsberg, dissented. Stevens wrote that Charter could not have pulled off the accounting fraud without the vendors' help and that the vendors knew that investors would rely on Charter's inflated stock price as a measure of the company's worth. |
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Class action or a representative action is a form of lawsuit in which a large group of people collectively bring a claim to court and/or in which a class of defendants is being sued. This form of collective lawsuit originated in the United States and is still predominantly a U.S. phenomenon, at least the U.S. variant of it. In the United States federal courts, class actions are governed by Federal Rules of Civil Procedure Rule. Since 1938, many states have adopted rules similar to the FRCP. However, some states like California have civil procedure systems which deviate significantly from the federal rules; the California Codes provide for four separate types of class actions. As a result, there are two separate treatises devoted solely to the complex topic of California class actions. Some states, such as Virginia, do not provide for any class actions, while others, such as New York, limit the types of claims that may be brought as class actions. They can construct your law firm a brand new website, lawyer website templates and help you redesign your existing law firm site to secure your place in the internet. |
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