Legal Briefing: Is the $624 Million Countrywide Settlement in Jeopardy?
A daily look at legal news and the business of law:
Is Another Judge Pulling a Rakoff?
U.S. District Judge Jed Rakoff, already well known in legal circles, became even more famous when he rejected a settlement between Bank of America (BAC) and the Securities and Exchange Commission as inadequate, then reluctantly approved its stronger albeit "half-baked" replacement. His fellow Southern District of New York judge, Alvin Hellerstein, similarly made headlines when he threw out the settlement between New York City and 9/11 workers, a rejection that also resulted in a better settlement, which he approved.
Now, Los Angeles District Court Judge Mariana Pfaelzer may be preparing for a similar maneuver. She has canceled Tuesday's hearing on the massive Countrywide Financial settlement with its shareholders. Bank of America, which acquired the failing lender, had agreed to pay $624 million to resolve the claims that the bank had misled investors about its lending practices and the levels of risk it was taking.
The judge wants to know where that number came from and why certain executives were dismissed from the action before the settlement. According to the Am Law Litigation Daily, the plaintiffs' attorneys aren't concerned that the settlement will be rejected outright, and they are confident they can address the judge's concerns. We'll soon see if they're right to be so confident.
Saint Consulting Sues Ex-Employee Over Wal-Mart Story
A couple of weeks ago, The Wall Street Journal reported that a consulting company, Saint Consulting Group, was hired by grocery stores such as Safeway (SWY) and SuperValu (SVU) to use its "black arts" to stop Wal-Mart (WMT) from expanding. Specifically, they are alleged to have infiltrated and funded citizens' groups opposing the new stores. Now, The Wall Street Journalreports that Saint Consulting is going after the person it believed leaked them the story. Although the paper doesn't comment on the employee's possible role, it does note that it interviewed "former employees," reviewed hundreds of documents and confirmed the story with the company's founder. Somehow, that doesn't sound like the classic case of a single insider airing the company's dirty laundry.
Punitive Damages Will No Be Longer Deductible
When a corporation is hit with punitive damages, the point is to punish past bad conduct and deter any repetition of it. But that core purpose is undermined when the company can deduct the punitive damages from their tax bill, as they have been able to do. The Blog of the Legal Times reports that a Senate is moving to end that deduction, by amending a jobs bill that has already passed the House.
And in the Business of Law...
• Nixon Peabody has shrunk again, this time by at least 14 attorneys, who have defected to Pillsbury Winthrop Shaw Pittman LLP, including several significant corporate partners. This relocation is the third group departure since May 1. Nixon denies the departure will have a material impact on the firm, although they acknowledge that headcount is down 20% in the New York office.
• Sacramento, Calif., firm McDonough, Holland & Allen has decided to close after losing more than 20% of its attorneys since March, reports the ABA Journal.
• HP is overhauling its in-house counsel hiring, reports ABA Journal. Instead of picking up fifth- to seventh-year law firm associates, it's hiring straight out of law school and giving the new grads apprenticeships. If HP's (HPQ) approach is successful, and other big companies follow suit, this could be the start of a transformation of the legal marketplace. It would expand opportunities for new grads, change client expectations of firm associates, and perhaps reduce the work sent to outside counsel.
• Will firms rescue public defenders? Professor Lawrence Tribe thinks they should. Given the big firms' need to train their associates, and the firms' deep pockets, why not have firms provide lawyers to the indigent?
