By Douglas W. Greene and Claire Loebs Davis, Shareholders with Lane Powell PC in Seattle, Washington. They co-authored WLF’s amicus brief pro bono in Omnicare.
In the opinion issued on March 24 in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund (“Omnicare”), the Supreme Court rejected the two extremes advocated by the parties regarding how the truth or falsity of statements of opinion should be considered under the securities laws. Instead, it adopted the middle path advocated in the amicus brief filed by Lane Powell on behalf of Washington Legal Foundation (“WLF”).
In doing so, the Court also laid out a blueprint for examining claims of falsity under the securities laws, which we believe will do for falsity analysis what Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007), did for scienter analysis. Hence, Omnicare will help defense counsel defeat claims that opinions were false or misleading in § 11 cases, as well as in cases brought under § 10(b) of the Securities Exchange Act. Continue reading
In a recent post, we lampooned the “high trans fat intake consumer” the Food and Drug Administration (FDA) invented to advance its de facto ban of partially hydrogenated oils (PHOs) as being a cross between Augustus Gloop and Homer Simpson. The ramifications of such a PHO ban for many processed food makers and their customers, however, are no laughing matter. Among other things, FDA’s final determination could expose the food industry to an avalanche of lawsuits and potentially billions of dollars in liability costs.
The Current Litigation Environment. Plaintiffs’ lawyers have been working feverishly for the past decade to turn lawsuits against “Big Food” into the next big payday. As chronicled on this blog since its inception in 2011, a small but persistent segment of the Litigation Industry has filed hundreds of class-action lawsuits alleging that everything from a perceived excess of empty space in a bag of chips to the printing of “evaporated cane juice” on a label violates state consumer protection laws.
By Litigation Industry standards, this lawsuit product line has not yet met profit expectations. But the lawsuits have successfully established, especially in California, that private litigants can enforce federal food laws and regulations. Continue reading
Tomorrow morning from 10:00 a.m. to 11:00 a.m., Washington Legal Foundation will be broadcasting a live Web Seminar program entitled Aguinda v. Chevron: The Remarkable Rise and Fall of a Stage-Managed Litigation & PR Crusade. You can register for free viewing by clicking on the program title.
Our speakers will be Paul M. Barrett, Assistant Managing Editor of Bloomberg BusinessWeek and author of the just-released book Law of the Jungle; and Eric G. Lasker, a partner with the Hollingsworth LLP law firm.
Even though the litigation accusing Chevron of environmental harm in Ecuador has been going on for over two decades, the case itself, and Chevron’s counter-litigation alleging the plaintiffs’ lawyers committed fraud, remain unresolved. The U.S. Court of Appeals for the Second Circuit will soon hear the plaintiffs’ lawyers’ appeal of Federal District Court Judge Lewis Kaplan’s RICO ruling. And just yesterday, the U.S. Court of Appeals for the Fourth Circuit affirmed a lower court’s order that two lawyers affiliated with lead plaintiffs’ lawyer Steven Donziger provide documents and computer drives Chevron sought in support of its RICO charges. Paul Barrett’s coverage of that Fourth Circuit ruling can be read here.
by Lyle Roberts, Cooley LLP
*Editor’s note: We are cross-posting this commentary from Mr. Roberts’s blog, The 10b-5 Daily, where it originally appeared. Mr. Roberts authored Washington Legal Foundation’s amicus brief in Halliburton.
The U.S. Supreme Court has issued a decision in the Halliburton v. Erica P. John Fund case holding that defendants can rebut the fraud-on-the-market presumption of reliance at the class certification stage with evidence of a lack of stock price impact. It is a 9-0 decision authored by Chief Justice Roberts, although Justice Thomas (joined by Justices Alito and Scalia) concurred only in the judgment. As discussed in a February 2010 post on this blog, Halliburton has a long history that now includes two Supreme Court decisions on class certification issues. A summary of the earlier Supreme Court decision can be found here.
Under the fraud-on-the-market presumption, reliance by investors on a misrepresentation is presumed if the misrepresentation is material and the company’s shares were traded on an efficient market that would have incorporated the information into the stock price. The fraud-on-the-market presumption is crucial to pursuing a securities fraud case as a class action—without it, the proposed class of investors would have to provide actual proof of its common reliance on the alleged misrepresentation, a daunting task for classes that can include thousands of investors.
The fraud-on-the-market presumption, however, is not part of the federal securities laws. It was judicially created by the Supreme Court in a 1988 decision (Basic v. Levinson). In Halliburton, the Court agreed to revisit that decision, but ultimately decided that there was an insufficient “special justification” for overturning its own precedent. Continue reading
The U.S. Court of Appeals for the Fourth Circuit issued a decision on April 16 in a case called Company Doe v. Public Citizen that signals hope for asbestos defendants who are seeking to combat fraudulent claims in North Carolina. Those claims were brought in connection with a bankruptcy proceeding styled as In re: Garlock Sealing Technologies, LLC et al. (“Garlock”). How could an anonymous CPSC case from Maryland affect a gasket company’s asbestos bankruptcy from North Carolina? In a word: transparency. Both cases involve the ability of third parties to gain access to documents enmeshed in public litigation.
In issuing its ruling in Company Doe, the Fourth Circuit surely had no inkling that its words might cheer long-suffering asbestos defendants. However, that court’s insistence on transparency and public access to the judicial process bodes well for an asbestos case in which similar issues have been percolating. When the district court (and perhaps eventually the Fourth Circuit) hears motions from asbestos defendants and others about divulging sealed documents from the Garlock asbestos bankruptcy docket, the recent decision in Company Doe will surely loom large. There is no guaranty as to where the Fourth Circuit ultimately will come down on the sealing issues in Garlock. But it does appear that a new day is dawning, and—if the Court of Appeals acts consistently with its stated policy favoring public access in Company Doe—it just might prove to be the Day of Reckoning for fraudulent asbestos plaintiffs and their trial lawyer accomplices.
Company Doe Takes Two Steps Forward in District Court
Company Doe v. Public Citizen, No. 12-2209 (“Company Doe”), started when the U.S. Consumer Product Safety Commission received a “report of harm” and sought to post it on its new government-run product safety database website. [Full disclosure: I worked as legal counsel to CPSC Commissioner Anne Northup from 2009 through 2010, but left before this report of harm was received.] The report alleged that a company’s product was related to the death of an infant, but the company strongly objected that the report of harm was not accurate. When the company could not obtain satisfaction through direct negotiations with the Commission, it was forced to file suit against the CPSC in federal district court in Maryland (where the CPSC is located) to enjoin the Commission from posting the erroneous report of harm. Continue reading
by John E. Villafranco, Michael C. Lynch, and Paul R. Garcia, Kelley Drye & Warren LLP*
(Ed. Note: Villafranco and Lynch authored an October 2013 WLF Legal Opinion Letter previewing the Lexmark case which can be accessed here)
On March 25, 2014, a unanimous Supreme Court in Lexmark Int’l, Inc. v. Static Control Components, Inc. ruled that a manufacturer of components for use in refurbished toner cartridges has standing under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), to sue the maker of printers in which the cartridges could be used for false advertising. Static Control Components, Inc., the component manufacturer, alleged that Lexmark International, Inc., the printer company, falsely told consumers that they could not lawfully purchase replacement cartridges made by anyone other than Lexmark, and falsely told companies in the toner cartridge remanufacturing business that it was illegal to use Static Control’s components.
The question before the Court was not whether Static Controls has constitutional standing under Article III, but whether it has so-called “prudential standing.” The Court initially noted that “prudential standing” is a misnomer, and that the real question “is whether Static Control falls within the class of plaintiffs whom Congress authorized to sue under § 1125(a).” Slip Op. 8-9. If it does, a court “cannot limit a cause of action that Congress has created because ‘prudence’ dictates.” Slip Op. 9. Rejecting the various approaches of the lower courts—from the competitor-only test, to antitrust standing, to the reasonable interest inquiry—the Supreme Court instead adopted a two-party inquiry.
Washington Legal Foundation filed an amicus brief supporting the petitioner in Halliburton v. Erica P. John Fund, on which we were represented by Lyle Roberts on a pro bono basis. The brief is available here.
If you would like a copy of Mr. Robert’s comments, click here.