Monthly Archives: October 2012

Manhattan U.S. Attorney Files Billion Dollar Lawsuit Against Bank of America, Citing “Brazen” Mortgage Fraud

By Mark Rutter, J.D. Candidate 2015 | Posted on

On October 24th, the United States Attorney for the Southern District of New York, Preet Bharara, along with the Inspector General of the Federal Housing Finance Agency and the Special Inspector General for the Troubled Asset Relief Program (TARP), announced a civil mortgage fraud lawsuit against Bank of America Corporation and Countrywide Home Loans, Inc., seeking punitive and treble damages under the False Claims Act, 31 U.S.C. §3729.

The complaint alleges a systematic lack of oversight in the loan origination process, known as the High Speed Swim Lane, which led to defaults and foreclosures resulting in over a billion dollars in losses for the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. The High Speed Swim Lane (“the Hustle”) process originated at Countrywide in 2007 in the face of tightening loan purchase requirements by the GSEs, and was continued under Bank of America after its acquisition of Countrywide a year later. (more…)

New Berkeley Law Skills Course Opens Portal to the ‘Human Dimension’ of Lawyering

By Michael S. Young, J.D. Berkeley Law 2012, Associate, Perkins Coie LLP | Posted on

Since even before Dale Carnegie’s day, it has been common knowledge among climbers in the business world that aptitude will only get you so far — the key to success is in managing relationships.  For a long time, the self-help industry appeared to have the market cornered on offering tools for cultivating better interpersonal relations.  But modern neuroscience indicates that mastery of interpersonal dynamics (sometimes called ‘emotional’ or ‘social’ intelligence’) is actually a teachable skill set.  “Skills of Exceptional Lawyers–Social Intelligence and the Human Dimension” a relatively new addition to Berkeley Law’s course catalog, seeks to help law students harness these powerful skills.

The course, now in its third year at Boalt, covers a wide range of interpersonal skills including body language and facial expression recognition, the art of “difficult conversations,” rapport-building, conflict resolution, decision-making, and cultivating meaningful self-awareness. (more…)

Wage Garnishment and Household Debt in CA

By Prasad Krishnamurthy, Assistant Professor, Berkeley Law | Posted on

California leads the nation in household debt.  According to the Federal Reserve’s most recent Quarterly Report, the average level of debt in California for an individual with a credit history is over $70,000.  Most of this debt consists of home mortgage loans, but about $10,000 per person consists of unsecured loans such as credit card debt and student loans.

Individuals and families who are struggling to make ends meet prioritize their mortgage and rent payments in order to avoid foreclosure and eviction.  As a result, the amount of delinquent debt—for which payments are 30 days or more late—is closely related to the amount of unsecured debt.  When workers fall behind on their unsecured debt, creditors can obtain a court order to deduct loan payments directly from a worker’s paycheck.  In this weak economy, thousands of workers face such wage garnishments. (more…)

News from the Bench: Kertesz v. GVC (2nd Circuit)

By Will Schildknecht, J.D. Candidate 2015 | Posted on

On October 17, 2012 the Second Circuit Court of Appeals ruled that Emory Kertesz, who had previously defended himself against a lawsuit brought by General Video Corporation (“GVC”) can pursue both an indemnification claim against GVC and an alter-ego corporate veil-piercing claim against the only other shareholder of the now defunct company. (more…)

Firm Advice: Your Weekly Update

By Joseph Santiesteban, J.D. Candidate 2014 | Posted on

As we mentioned earlier this week, Professor Bartlett soon will be presenting his paper on the value of the 10b-5 action to institutional investors. The paper uses evidence of trading behavior following the Supreme Court case Morrison v. National Australia Bank (2010)—a case that dealt with bringing securities fraud claims based on securities traded on foreign exchanges.  This week, Latham & Watkins presents the challenges of litigating securities fraud actions against foreign-based issuers of securities traded on domestic exchanges. These actions present special challenges in the areas of jurisdiction, service, and discovery. The paper, published as part of Bloomberg’s Securities Regulation & Law Report, is available for download here.

Skadden presents “The 2012 U.S. Supreme Court Term: Business Cases to Watch.” The upcoming term has several important business-related cases, including three class action cases: Amgen, Comcast, and The Standard Fire Insurance Co.  The court will also be considering in Royal Dutch Patroleum whether actions may be brought against companies for human rights abuses committed in other countries.  Skadden’s update provides brief summaries of these and other business-related cases facing the Court this term.

On November 1, EU Regulation 236/2012, which regulates the short selling of stock and sovereign debt in the European Economic Area, will come into effect. The regulation also places restrictions on taking uncovered short positions.  In a recent client alert, Ropes & Gray explains the specifics of whom and what types of securities are covered, as well as the sanctions for failure to comply.

Judge Orders Emails Published in Private Equity Antitrust Case

By Joseph Santiesteban, J.D. Candidate 2014 | Posted on

Following a request from the New York Times, a Federal Judge in the District of Massachusetts recently unsealed the complaint in a lawsuit against 11 private equity firms alleging a market allocation and bid-rigging conspiracy in violation of Section 1 of the Sherman Act. The complaint concerns 27 private equity company purchases from 2003-2007, and alleges that the private equity firms “agreed to work together to allocate deal outcomes and purchase the target companies at artificially suppressed prices.” The class-action complaint was brought on behalf of shareholders of the target companies.

The firms named as defendants in the lawsuit include Blackstone Group, Kohlberg Kravis Roberts, Bain Capital, and Carlyle Group.  The alleged conspiratorial transactions include the purchases of some of the most well known names in American commerce, including Toys R Us, Warner Music, Neiman Marcus, and Clear Chanel. (more…)

Professor Robert Bartlett to Present: “Do Institutional Investors Value the 10b-5 Private Right of Action?”

By Berkeley Center for Law, Business and the Economy | Posted on

On November 1, 2012, Robert Bartlett will present at The Ohio State University “Do Institutional Investors Value the 10b-5 Private Right of Action?  Evidence from Investor Trading Behavior Following Morrison v. National Australia Bank Ltd. (2010).” Using an abrupt change in U.S. securities law, this paper examines the value institutional investors place on the private right of action under Rule 10b-5 of the Securities Exchange Act of 1934.  In June 2010, a combination of the U.S. Supreme Court’s decision in Morrison v. National Australia Bank Ltd. and Congress’ prompt response to it ensured that U.S. institutional investors would henceforth no longer be permitted to pursue private 10b-5 actions against many of the non-U.S. issuers in their international equity portfolios.  Rather, the U.S. antifraud regime that had increasingly been used by institutional investors to police foreign issuers would thereafter be limited to the domain of the SEC.  With this new regime of 10b-5 enforcement, however, came one critical exception for U.S. investors seeking to maintain their power to bring private 10b-5 actions: Investors purchasing securities traded on a U.S. stock exchange could continue to bring 10b-5 actions against the issuing company regardless of its domicile. In effect, the combination of this new bright-line rule and the fact that so many non-U.S. firms trade on both foreign and U.S. exchanges provided investors with something that had historically been difficult to achieve—the power to choose whether a security comes with the right to sue under Rule 10b-5.

By analyzing a proprietary data set of equity trades made by 356 institutional investors during the thirty month period surrounding Morrison, this paper examines whether investors reallocated their international buy-orders in cross-listed issuers from foreign markets to U.S. exchanges to exercise this newfound power.  Notwithstanding the oft-voiced concerns among institutional investors that Morrison would encourage such a reallocation, the results of this study reveal a remarkable persistence in the allocation of investors’ purchase orders following the decision.  Indeed, the overall trend in the fifteen months following Morrison was a modest decrease in U.S.-exchanged based purchases even after controlling for ADR trading costs.  Overall, the absence of any significant change in trading behavior among this large sample of investors suggests that whatever concerns animate institutional investors’ public policy positions when it comes to Rule 10b-5 are not necessarily shared by their trading desks.

18 Law Professors Urge SCOTUS to Find that Plaintiffs Need Not Prove Materiality at the Class Certification Stage

By Joseph Santiesteban, J.D. Candidate 2014 | Posted on

A few weeks ago, eighteen law professors, including Berkeley Law Professor Robert Bartlett, filed an amicus brief in support of respondents in the pending Supreme Court case, Amgen, Inc. v. Conn. Retirement Plans and Trust Funds. Before the Court is whether plaintiffs using a “fraud-on-the-market” theory of reliance in a securities fraud (10b-5) class action must prove the “materiality” of alleged misstatements at the class certification stage. The brief argues that the histories of FRCP Rule 23 and the fraud-on-the-market presumption show that plaintiffs do not.

Under FRCP Rule 23, plaintiffs in a securities class action are required to show that the elements of a rule 10b-5 claim, including reliance, are common to the class. Reliance typically is shown through invoking the fraud-on-the-market presumption. The presumption, as articulated in the Supreme Court case Basic, Inc. v. Levinson, is based on the theory that most publicly available information is reflected in a stock’s price. Thus, a company’s public material misstatements are reflected in the price at which investors bought the security. “[A]n investor’s reliance on any public material misrepresentations, therefore, may be presumed.” The Court went on to state that materiality is an objective standard, “involving the significance of an omitted or misrepresented fact to a reasonable investor.” The Court did not hold, however, whether a showing of materiality is required to invoke the presumption. (more…)

The JOBS Act’s Public/Private Contradiction

By Ian Peck, LL.M. Candidate, 2013 | Posted on

The JOBS Act, which became law on April 5, 2012, is designed to lessen the burden for small companies to gain access to investor capital in hopes that these firms will drive American job creation.  The law is really more of a series of distinct initiatives rather than a cohesive piece of legislation that points in the same direction.  This reality is nowhere more apparent than in the contradiction at the heart of the JOBS Act.  That is, while Title I of the JOBS Act makes it less burdensome for “emerging growth companies” to conduct an initial public offering, many of those same firms will now, thanks to the JOBS Act, be able to remain private longer.  This post will discuss the JOBS Act mechanisms that create this contradiction and offers a possible explanation for why it exists. (more…)

Firm Advice: Your Weekly Update

By Joseph Santiesteban, J.D. Candidate 2014 | Posted on

DOJ and FTC leniency for failing to file Hart-Scott-Rodino notifications may be over. The passive investment exception to the Hart-Scott-Rodino Act’s reporting requirements excuses notification when the acquirer will hold not more than 10 percent of the outstanding shares solely for investment purposes. Biglari Holdings, Inc. viewed its investment in Cracker Barrel as passive and did not timely notify the FTC or DOJ. The agencies, however, did not view Biglari’s investment as passive, indicating Biglari’s attempt to attain “a board seat was alone sufficient to show that Biglari was not a passive investor.”  Goodwin Proctor has an analysis of this recent shift in regulatory strategy in a recent client aler.

California has become the third state to regulate employer access to the social media accounts of applicants and employees. The law, A.B. 1844, is set to take effect on January 1, 2013. The law prohibits employers from requesting or requiring employees or applicants to 1) disclose their username or password, 2) access their private information in presence of employer, or 3) divulge any personal social media information. There are some exceptions. In a recent client alert, Wilson Sonsini suggests that the law “contains many undefined and unclear provisions that create potential landmines for California employers.”

On its Words of Wisdom blog, Latham & Watkins has a series on complying with SEC’s XRBL requirement, “part of the family of interactive reporting standards required by the SEC.” The most recent installment covers what types of filings must include an interactive data file and just as important, what to do if you are going to be late.