You know that Jeffrey Abraham convinced the Second Circuit last month to revive an insider trading case against Xcelera big wigs. But did you know the case has Greater Import than Blawgletter told you about?
It does. As Jeff tells us:
The more important parts of the holding, in my opinion, are that in a claim like this, consistent with Affiliated Ute,* the plaintiff does not have to prove reliance and that scienter is adequately alleged based upon possession of insider information and then trading on same.
To establish an insider trading claim, it is not necessary to show that corporate insiders used the nonpublic information; it is sufficient to prove that they traded their corporation’s securities "while knowingly in possession of the material nonpublic information." . . . Additionally, the Supreme Court has "dispensed with a requirement of positive proof of reliance, where a duty to disclose material information had been breached, concluding that the necessary nexus between the plaintiffs’ injury and the defendant’s wrongful conduct had been established."
Xcelera, slip op. at 8 (citations omitted).
Jeff also points to a second case -- this one in Delaware -- where his client earned a big win in December 2013. In Silverberg v. Gold, No. 7646-VCP (Del. Ch. Dec. 2013), the court upheld a derivative complaint against insiders of Dendreon Corporation for selling big chunks of their Dendreon holdings just before bad news came out about Dendreon's only product, Provenge. The fate of such a case often hinges on whether the complaint alleges facts that allow a court to infer that the insiders sold their shares with an intent to exploit the inside info. The Silverberg pleading cleared the hurdle because:
Defendants’ large-scale disposal of stock immediately following the FDA’s approval of Provenge is accompanied by alleged facts supporting a reasonable inference that Defendants knew when they sold that, at a minimum, there was a significant risk of the physician community being reluctant to prescribe Provenge because of the cost and reimbursement concerns associated with it, and that Defendants did not disclose that information to the public. For purposes of a motion to dismiss, therefore, Plaintiff’s allegations are sufficient to support a reasonable inference that Defendants, including Bayh and Watson, intentionally exploited their informational advantage.
Silverberg, slip op. at 36.
What does it all mean? Mainly that clearing the reliance and scienter hurdles in insider trading cases looks easier than many insiders may have assumed.
It also means that Jeff has a thriving docket. Go Jeff.
In Affiliated Ute Citizens v. United States, 406 U.S. 128 , 153-54 (1972), the Court held that a failure to disclose key facts about a stock can allow a court to presume that the buyer of the stock believed the facts didn't exist -- the buyer presumptively relied on the failure to disclose.
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You know what the phrase "legal costs" refers to, right? It means the amount that a plaintiff spends to achieve a recovery by way of pressing a lawsuit? US Airways, Inc. v. McCutchen, 133 S. Ct. 1537, 1550-51 (2013) (treating "legal costs" as a party's "costs of recovery").
You would never equate "legal costs" with damages -- payment for actual harm -- would you? No, of course you wouldn't.
But you should know that The Wall Street Journal begs to differ with you. Blawgletter knows because of recent WSJ headlines, which include these:
What does the WSJ mean by "legal costs"? Just this (with our emphasis in the RBS article):
[T]he new provisions include setting aside an extra £1.9 billion to cover litigation and other claims around mortgage-backed securities sold before the financial crisis. It added £465 million to its funds to repay customers who bought payment protection insurance on credit cards and loans, bringing its total PPI provisions to £3.1 billion, and said it would take a further £500 million in provisions to make payments to small businesses that bought interest-rate hedging products on loans. The bank also warned of around £200 million of extra provisions for various conduct related and legal expenses at its "bad bank" unit.
Add in the fact that the item on that "Backdating Scandal" includes a claim that "settlements cost companies and their executives, auditors and advisers a combined $7.3 billion." "Legal costs" in the WSJ sense therefore include all the damages money that the "settlements cost" for the companies that engaged in the unlawful backdating.
Which leaves the question of whether the WSJ's depiction of harm to customers as a kind of "legal cost" matters.
Blawgletter believes that it does.
The characterization implies a belief that damages are no more regrettable than other sorts of business expenses.
Legal costs properly consist of legal fees and expenses of litigation. They do not include damages, actual or punitive.
The WSJ should know better.
The big three of intellectual property disputes in federal courts -- the Copyright Act, the Patent Act, and the Lanham (Trademark) Act -- drew the focus of the U.S. Supreme Court today. The justices granted review in three IP cases and one IP-ish one. The cases present these questions:
Whether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) even though no one has committed direct infringement under Section 271(a). Limelight Networks, Inc. v. Akamai Technologies, Inc., No. 12-786 (U.S.).
(1) Whether the Federal Circuit’s acceptance of ambiguous patent claims with multiple reasonable interpretations – so long as the ambiguity is not “insoluble” by a court – defeats the statutory requirement of particular and distinct patent claiming; and (2) whether the presumption of validity dilutes the requirement of particular and distinct patent claiming. Nautilus, Inc. v. Biosig Instruments, Inc., No. 13-369 (U.S.).
Whether a company “publicly performs” a copyrighted television program when it retransmits a broadcast of that program to thousands of paid subscribers over the Internet. Am. Broadcasting Co., Inc. v. Aereo, Inc., No. 13-461 (U.S.).
Whether the court of appeals erred in holding that a private party cannot bring a Lanham Act claim challenging a product label regulated under the Food, Drug, and Cosmetic Act. POM Wonderful LLC v. The Coca-Cola Co., No. 12-761 (U.S.).
The case dealt with a post on "The Politics Blog" by Esquire writer Mark Warren. The item claimed that President Obama's release of a copy of his long-form birth certificate from the Aloha State had prompted the publisher of Where's the Birth Certificate? The Case that Barack Obama is not Eligible to be President to yank the book from shelves and turn the copies into pulp. The publisher, Joseph Farah, and author, Jerome Corsi, sued Esquire for libel. The district court dismissed the case.
Affirming, the D.C. Circuit noted that the first amendment permits a libel claim only for false and defamatory statements of "actual facts". Farah, slip op. at 11. Satire, the panel pointed out, may purport to state facts but in truth bends or hyperbolizes them. That "reasonable readers would take the fictitious blog post literally" for awhile at least didn't matter. "[I]t is the nature of satire that not everyone 'gets it' immediately." Id. at 14. A headline in The Onion -- "Error Found on Internet" -- comes to mind.
Nor did the weakness of the effort at humor deprive the post of constitutional protection. "[P]oorly executed or not, the reasonable reader would have to suspend virtually all that he or she knew to be true of Farah's and Corsi's views on the issue of President Obama's eligibility to serve in order to conclude the story was reporting the facts." Id. at 18.
Ten, 20, or even 100 judges who look at the same evidence will all reach the same conclusion about the True Facts of a case, right?
Ms. Greenhouse cites recent Supreme Court rulings in which the majority seems to have made a faulty assumption that may have prompted an incorrect result. But Blawgletter thinks she has a More Telling point, as her choice of an ending quotation -- of Seventh Circuit Judge Richard Posner -- suggests:
By self-awareness and discipline, a judge can learn not to allow his sympathies or antipathies to influence his judicial votes -- unduly. But the qualification in "unduly" needs to be emphasized. Many judges would say that nothing "outside the law," in the narrow sense that confines the word to the texts of formal legal documents, influences their judicial votes at all. Some of them are speaking for public consumption, and know better. Those who are speaking sincerely are fooling themselves.
We suspect that the phenomenon of which Judge Posner speaks plays its Widest Role where judges attempt to explain what the evidence before them proves. As the Court urged not long ago, judging "what [the evidence] prove[s] is no more a question of fact than what our opinions hold." Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1434 n.5 (2013).
What do you think?
The American jury makes a profound contribution to the very structure and fabric of American law, Ciulla v. Rigny, 89 F. Supp. 2d 97, 98 (D. Mass. 2000), and so it is here. Indeed, this particular case would be of little interest to anyone other than the litigants were it not for the remarkable role of the American jury. According to this federal jury, a broker-dealer who fails to disclose his poor forex trading record to clients, where knowledge of such a record may influence whether they choose to invest in forex with him managing that investment, violates his fiduciary duties and the Exchange Act. Since this jury determined that a broker-dealer who fraudulently has failed to disclose his poor forex trading record has violated the Exchange Act, other broker-dealers should now be on notice that such a failure by them could lead to the same finding. This important jury finding is as much “the law” as it would be were this Court to have made the same finding in a jury-waived case. No longer can the securities industry simply advance the SEC’s equivocation or its own internal procedures as the standard against which its conduct should be measured. Why? An American jury has said so.
Blawgletter once wrote Barnett's Notes on Commercial Litigation on a more-or-less monthly basis. But guess what? Each issue took at least a couple of days to compose. Which time at $875 an hour adds up.
So now we blog, or blawg, on Blawgletter. So much time is saved!
Which brings us to a topic we adore -- passive voice. The item you'll see below inspired our friend and world-class column-writer for Bloomberg, Jonathan Weil, to use it to teach his students just what stuff of which the awful, terrible, and despicable "passive voice" consists.
A dear client in a hard case once took to assuring our trial team of victory by telling us that "we will kill them." An Italian by birth, upbringing, and temperament, the client rendered "kill" as "keel", which made his assurance more, well, assuring. It worked for us.
In the years since, I've comforted other clients by telling them the same thing -- even saying it the same way that my friend Alberto Lombardi did. They love to hear me say we will keel them!
I've said we will keel them so many times now that people in my office use it to make fun of my near-obsessive distaste for passive voice. My colleagues taunt me with they will be killed by us. Ouch.
I don't like passive voice. I don't like it one bit. Not even a tiny bit is it liked by me.
In my view, passive voice reveals either of three unflattering things about the writer -- cowardice, fuzziness of thinking, or slothful ways. Cowardice in this context means that the writer doesn't have the guts to identify the actor or wants to hide his identity ("mistakes were made" instead of "I made mistakes"). By fuzzy thinking I mean that the author doesn't have the wattage to fix the imprecision of his writing ("mistakes were made" seems perfectly fine to this dullard). Slothfulness suggests that the author could take the time to connect the actor to the action but chooses not to do the work or to do it in a loopy way ("mistakes were made by me").
A judge who reads passive voice in a brief should extend the magisterial antennae of skepticism. Alarms should go off. Red flags ought to billow. The writer either wants to hide something, doesn't know what to say, or rates his time as more valuable than yours.
All this adds up to one thing: passive voice in legal writing shows disrespect to the reader. It lengthens, complicates, and obstructs writing; it forces the reader to remember too much, to fill too many gaps, to work too durn hard.
The audience -- your audience -- deserves better.
Active voice propels the reader forward. It holds interest. It makes reading easier, more fun, and maybe irresistible. It can even save writers from writing nonsense because it forces them to think through exactly what they mean.
Please use active voice always. Or consequences will be suffered. By you.
The head of CME Group -- the Chicago Mercantile Exchange -- writes for the today's WSJ op-ed page:
In 2008, Harvard sent 28% of its graduating class to firms where they would become bankers, traders or investors. By 2010, Harvard was sending just 17% of its graduating class. Yale graduates entering the finance business fell to 14% from 26% during the same period. Even Princeton, traditionally the most finance-friendly school, fell to 35.5% from 40%.
Where have these young people gone? Alas, the author says, "more graduates with 'quant' skills are choosing tech over finance."
Sad, right? Who wants to live in a world that sends a dwindling share of HYP's "most promising college graduates" into high finance! One in which more super-smart people head for a place that doesn't involve credit-default swaps and the like! Oh, the humanity!
The writer thinks the problem arises from "lost trust".
Blawgletter suspects it has a to do with the post-financial-crisis refusal to allow Wall Street to make crazy bets with taxpayer money.
Let's start by saying we've found that the biz reporters have a not-very-good grasp of antitrust law. A terrible one in fact. They seem to think that whatever business wants, business ought to get. If it makes business sense, antitrust law should promote it, not try to stop it. Which fact we suppose shouldn't surprise anyone.
Just yesterday, the local paper here issued a paean in favor of the pending hook-up. The ink-stained wretch who wrote the item praised U.S. Air's CEO Doug Parker for making "the right call" by over and over again calling for . . . less competition -- or, in the item's telling, "industry consolidation".
The piece deems Parker "visionary" for wanting to cut the number of carriers and reduce airline capacity. It also credits Parker for wanting to gobble up Delta in 2007 -- in spite of the fact that the deal would have happened just in time for the Great Recession, whose onset swung Delta itself from a $1.6 billion profit to an $8.9 billion loss in the year after its 2008 merger with Northwest Airlines. Parker dodged a bullet, if you ask us.
The author even dismisses as merely "embarassing" and "bone-headed" an email that Parker sent the Delta CEO to complain about a "triple miles" offer that the rival carrier had made. He says "most other" moves that Parker tried, by contrast, "made business sense". See Complaint ¶ 45.
Illegally buying up the competition to gain market power also makes "business sense" -- ask John D. Rockefeller. Also inquire of AT&T, which tried to snag rival T-Mobile but failed after the DOJ moved to block the deal in court.
Thwarting competition almost always makes terrific business sense. That explains why it happens so often. As Adam Smith wrote:
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
Antitrust laws exist to protect competition from conspiracy, to purge markets of unfair monopolies, and shield the public from bad service and high prices. Who cares about airline passengers? Reading the pro-merger, pro-CEO item we just went through, you'd think The Dallas Morning News does not.