The courts have largely ground to a halt for the holidays, though there’s still time for few more decisions in 2012 that could ensure a happy or gloomy New Year for the litigators involved. In the meantime, here are some of the biggest rulings we’re looking forward to in 2013:
Fannie Mae and Freddie Mac’s conservator, the Federal Housing Finance Agency, is seeking a whopping $190 billion in damages from 18 leading banks at the heart of the financial crisis. But first the FHFA and its lawyers at Quinn Emanuel Urquhart & Sullivan and Kasowitz, Benson, Torres & Friedman have to get past the banks’ defense that the FHFA waited too long to sue.
In May lawyers for UBS AG at Skadden, Arps, Slate, Meagher & Flom failed to persuade U.S. District Judge Denise Cote in Manhattan that the FHFA’s litigation assault is time-barred. The judge rejected the banks’ argument that the statute that created the agency didn’t extend the statute of repose to bring federal securities claims, and she’s since refused to dismiss the cases on multiple other grounds. But the time-limits question is now before the Second Circuit, which heard oral arguments in November. The court’s decision could wipe out most the litigation in a single stroke, or else send the cases hurtling toward trial.
The Republic of Argentina’s bond battle in New York was one of the biggest litigation stories of 2012. There’s a lull in the action now, but the new year may bring a climactic ruling.
After Argentina’s massive debt default a decade ago, most bondholders agreed to take 30 cents on the dollar. Distressed debt investors like NML Capital instead sued Argentina for every cent in U.S. court. The Republic has refused to pay up, despite U.S. District Judge Thomas Griesa awarding the funds more than $10 billion in final judgments. Upping the ante, Griesa entered an injunction in February ordering Argentina to start treating all of its creditors equally.
In a surprise move, the Second Circuit affirmed in October, but remanded the case so that Griesa could clarify the scope of his injunction. On remand–with Argentina’s leaders vowing never the pay the “vulture funds”–Griesa declared that the Republic must fork over $1.3 billion by mid-December. But the Second Circuit intervened to stay Griesa’s latest ruling, averting the December deadline, and possibly a new default, so that it can decide whether the judge went too far. Oral argument is set for Feb. 27, featuring David Boies of Boies, Schiller & Flexner (for holders of restructured Argentine debt); Theodore Olson of Gibson, Dunn & Crutcher (for NML); and likely either Carmine Boccuzzi Jr. or Jonathan Blackman of Cleary Gottlieb Steen & Hamilton (for Argentina).
Monoline insurers are still pressing more than 30 lawsuits against banks that drove the mortgage securitization frenzy ahead of the subprime meltdown. The bond insurers argue that under so-called put-back clauses in their contracts, the banks must repurchase billions of dollars worth of deficient mortgages. By the end of January, U.S. District Judge Jed Rakoff in Manhattan is expected to decide the first of those put-back cases to go to trial, Assured Guaranty Municipal Corp v. Flagstar Bank. A bench trial before Rakoff wrapped up in November. Assured, which is represented by Susman Godfrey, seeks roughly $110 million in damages. Arnold & Porter represents Flagstar.
Back in 2011 Rakoff controversially rejected Citigroup’s $285 million settlement with the U.S. Securities and Exchange Commission over allegations that the bank duped investors in a $1 billion collateralized debt obligation, calling the deal “neither fair, nor reasonable, nor adequate, nor in the public interest.” Since then, other judges have questioned the tendency of regulators to let companies settle without admitting wrongdoing.
An appeal of Rakoff’s decision has been fully briefed before the U.S. Court of Appeals for the Second Circuit, which is scheduled to hear oral arguments in February. The case pits Rakoff’s court-appointed counsel, John “Rusty” Wing of Lankler Siffert & Wohl, against both the SEC and Citigroup, which is represented by Brad Karp of Paul, Weiss, Rifkind, Wharton & Garrison. Wing has his work cut out for him: When the Second Circuit agreed to stay the SEC’s underlying case in March, it ruled that there was “strong likelihood” Rakoff’s ruling won’t be allowed to stand.
Two leading smartphone makers, Motorola Mobility Inc. and Samsung Electronics Co., came under fire in 2012 for putting a hefty price tag on their “standards-essential” patents, which must be licensed on fair and reasonable terms. Both Motorola and Samsung initially asked rivals like Apple Inc. and Microsoft Corporation to pay a royalty rate equal to 2.25 percent of their annual sales revenue. U.S. District Judge James Robart in Seattle will soon weigh in on whether those demands were excessive.
Microsoft asked Robart to set a reasonable price for Motorola’s essential wireless and video patents after negotiations between the two companies reached a standstill. As Reuters reported, the two rivals were still worlds apart during a bench trial that wrapped up earlier this month. Robart is expected to issue his decision in the spring. Once he does, he’ll hold a separate trial on whether Motorola’s demands constituted a breach of contract.
Robart’s ruling will offer rare judicial insight into what constitutes a reasonable price for essential smartphone patents. The Federal Trade Commission, meanwhile, is investigating whether Motorola’s handling of FRAND patents violated antitrust laws.
Weary of patent litigation, some companies have been begging the courts to strike down patents on the grounds that they cover “laws of nature” or “abstract ideas,” which Section 101 of the Patent Act says aren’t patentable in the first place. After the U.S. Supreme Court punted on the question two years ago in Bilski v. Kappos, the U.S. Court of Appeals for the Federal Circuit has issued a string of decisions defining patentable subject matter. The 11 Federal Circuit judges don’t all see eye-to-eye, however, so their decisions haven’t been a model of clarity.
In October the court agreed to hold an en banc rehearing in one of those cases, CLS Bank v. Alice Corporation. The Federal Circuit’s decision could finally define the scope of patentability more clearly–and make or break the viability of a Section 101 defense for years to come.
On a related note, in 2013 the Supreme Court will weigh in–possibly once and for all–on whether human genes are patentable. In August, the Federal Circuit upheld Myriad Genetics Inc.’s right to patent isolated genes known as BRCA1 and BRCA2, which cause breast and ovarian cancer. The American Civil Liberties Union sued Myriad in 2009, accusing it of trying to monopolize a “natural entity like air and war.” Myriad’s lawyers at Jones Day counter that Myriad spent considerable time and energy purifying and isolating the gene, and that a ruling against it could stifle the burgeoning field of personalized medicine. The Supreme Court granted cert in November, and has yet to set an oral argument date. Read our coverage of the case at the Federal Circuit here and here.
Another major Supreme Court case we’re watching is Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, in which the high court may make it harder for securities plaintiffs to win class certification. Under the court’s 1988 decision in Basic Inc. v. Levinson, securities plaintiffs don’t need to show that they relied on material misstatements at the class certification stage. Reliance is presumed based on the so-called “fraud on the market” theory, which assumes that the price of securities reflects all publicly available information. As we explained when the court granted cert in June, the fraud on the market presumption may be in serious jeopardy. Oral argument was held in November, pitting Seth Waxman of Wilmer Cutler Pickering Hale and Dorr against David Frederick of Kellogg, Huber, Hansen, Todd, Evans & Figel.
Aereo Inc.–a well-funded start-up that streams live network television to subscribers for $12 a month without paying a cent in retransmission fees to broadcasters–could revolutionize television. As one would expect, NBC, ABC, CBS, and FOX have joined forces to sue Aereo for copyright infringement. The broadcasters were dealt a big blow in June, when U.S. District Judge Alison Nathan in Manhattan refused to enjoin Aereo’s launch. She ruled that Aereo’s unusual business model, which involved filling a warehouse in Brooklyn with tiny antennas, probably conforms with Second Circuit precedent in a 2008 copyright case. The broadcasters’ lawyers at Jenner & Block have appealed to the Second Circuit. Oral argument, with R. David Hosp of Goodwin Procter making the case for Aereo, was held in early December.
