Legal Briefing: Bank of America Shareholder Lawsuit Moves Forward
Claims That Lewis and Thain Hid Bonuses, Losses Can Proceed
The Securities and Exchange Commission's original settlement with Bank of America over its failure to disclose to shareholders the magnitude of Merrill Lynch's losses and the investment bank's bonus plans before they voted on the merger was famously rejected by District Judge Jed Rakoff. After it was beefed up, Rakoff reluctantly approved the deal, but one of his major qualms about it was the strikingly different set of facts that New York Attorney General Andrew Cuomo alleged. Unlike the SEC, which claimed that Bank of America was merely negligent, Cuomo claimed the bank and specific executives, including ex-CEO Ken Lewis, withheld information from shareholders with fraudulent intent. Lewis has just responded to those charges in derisive fashion.
Now, the judge presiding over the Bank of America shareholders' suit concerning the same disclosure allegations has refused to dismiss plaintiffs' claims. That means that they will get the chance to attempt to prove at trial that Lewis and former Merrill Lynch CEO John Thain at least recklessly -- and thus fraudulently -- didn't tell shareholders that Merrill employees were going to get $5.8 billion bonuses, at a time when Merrill was posting massive losses. The fraud charge is only one of the plaintiffs' claims: In his 140-page order, Judge Kevin Castel allows some others to go forward as well, though he dismisses some too, reports Am Law Litigation Daily and Kevin LaCroix of D&O Diary.
Arizona Files Brief in Immigration Law Appeal
The National Law Journal reports that Arizona has filed a brief arguing how District Judge Susan Bolton got it wrong when she blocked several parts of the controversial immigration law from taking effect. Arizona argues in particular that Bolton was wrong in finding the federal government would win on the merits and that the injunction was in the public interest. The federal government has until Sept. 23 to reply, and arguments are scheduled for Nov. 1.
Another Reason for That Paul Allen Patent Suit
The Wall Street Journal reports that Microsoft co-founder Paul Allen may have a motive for suing all the Internet giants except Microsoft over patents beyond "monetizing" his investment in a defunct company: his legacy. In the article, experts comment that, in addition to money that could easily top $100 million if he wins, Allen probably wants "acknowledgment that his work 20 years ago was on the right path" and note "[h]e had incredible foresight into the future of this technology." Though I'm betting this is all about the money, I suppose we should never underestimate the power of ego.
And in the Business of Law:
• An adjunct law professor at Georgetown has a radical suggestion for law school reform, reports the National Law Journal: Law schools should build two-tier faculties, one in the traditional model of theoretical scholars, and one filled with well-practiced attorneys. The professor, Brent Evan Newton, agrees with critics that legal educators are failing to teach students what they need to know to practice law, and points out that since most law professors have little real world experience practicing law, their scholarship has "lost its practical moorings," so it's not surprising that students graduate without lawyering skills.
• Congratulations to those who passed the North Carolina Bar Exam, and to North Carolina for being the first to grade its July tests, as reported by Above the Law.