Legal Briefing: iPhone Antitrust Lawsuit Could Be Costly for Apple, AT&T

A daily look at legal news and the business of law:

Love Your iPhone But Hate AT&T? Help May Be Coming

A antitrust lawsuit against Apple and AT&T is going forward as a class action, thanks to a California judge. The plaintiffs charge that Apple's (AAPL) five-year exclusive agreement with AT&T (T) makes a sham of the "two year" contracts iPhone users sign with AT&T, and is part of an effort to monopolize the iPhone market. The class in the case could include 20 million people. If Apple and AT&T lose this suit, it could be really expensive -- damages would be tripled, and they'd owe attorneys' fees, too. With a 20 million-person class, the numbers get big quickly, so if the plaintiffs' case is strong enough, surely the companies will try to settle.

Although not commenting on the suit, Reuters Breaking Views claims that AT&T would benefit if it lost iPhone exclusivity. That's because companies selling the iPhone might switch to AT&T's tiered pricing approach, which is more profitable, but hard to get consumers to sign up for when AT&T is the only one doing it. But if others get the iPhone without doing tiered pricing, AT&T's least attractive iPhone users -- the ones who use the most data services, putting them in the most expensive tier -- would disproportionately switch to other service providers, freeing bandwidth for the company.

State Courts Friendly to Suits Against Banks Too

I've written previously on DailyFinance about how burned investors are suing the ratings agencies over their AAA ratings of mortgage-backed securities that turned out to be junk. The only place those suits are making headway is in state courts and under state laws -- federal securities law bars the investors' claims. Turns out state courts and law are also better for suits against the banks, reports The New York Times. Although claims against those financial institutions aren't barred by federal securities law because the banks were "underwriters" of the securities investors are suing over, they are much harder to bring on the federal level than in state courts.

Whose Costly Idea Was the AIG Legal Waiver?

When the government bailed out American International Group (AIG), the company agreed to a broad waiver preventing it from suing the banks that it had done business with. That waiver may deprive AIG of millions or even billions of dollars, if the banks start losing cases alleging that the banks fraudulently misrepresented securities to counterparties such as AIG. The original New York Times story, which I discussed when it broke last week, suggested that regulators demanded that AIG sign the waiver. Davis Polk & Wardell, counsel to the New York Federal Reserve, denies that claim, and instead points the finger at Weil, Gotschal & Manges -- AIG's own counsel, reports AmLaw Litigation Daily. If that's true, and Weil is responsible, perhaps AIG can find a silver lining by suing their counsel for malpractice.

And in the Business of Law...

Clients concerned about legal bills are cutting out the big-firm middleman and hiring contract attorneys directly, reports the Legal Intelligencer. With the markup on contract attorney rates gone, firms are losing a profit center. But they're gaining their space back. Without the markup, firms aren't willing to have the contract attorneys on site, so the contracting agencies are increasingly supplying space and computers as well as staff. For contract attorneys, working at a firm often means access to nice space, but working offsite often means no dress code. The most important thing to the contracting attorneys is the thing that so many attorneys want these days: work.