In an opinion today allowing a securities class action to be dismissed without prejudice, Judge Engelmayer expressed concern about the lawyers using confidential witnesses in complaint without confirming the accuracy of the statements attributed to them or warning the witnesses that their identity might have to be revealed. On the first point, the complaint’s 11 confidential witnesses were not given the chance to confirm the statements attributed to them and at least four believed they were misquoted or misleadingly quoted. This risk of error, Judge Engelmayer concluded, counsels in favor of better diligence before filing a complaint. On the second point, Judge Engelmayer concluded that it was a matter of “decency” to alert confidential witnesses that their identities might eventually be revealed:
Continue Reading Judge Engelmayer: Lawyers Using Confidential Witnesses in Complaints Should Confirm Their Testimony and Warn of Risks of Being Outed
Bankers Association Renews Challenge to City Regulation of Banks as Preempted by State and Federal Law
The New York Bankers Association filed a complaint Tuesday seeking to invalidate “Local Law 38,” which calls for the creation of a Community Investment Advisory Board (the “CAIB”) to gather information about banks that take deposits from the City and to establish “best practices” for those banks regarding various initiatives, including (for example) offering financial services most needed by low and moderate income individuals. The New York Bankers Association brought a similar challenge last year, but Judge Failla dismissed the case without prejudice, largely because then-Mayor Bloomberg did not enforce it. The renewed complaint argues that the CAIB is up and running and that its regulation is preempted by state and federal banking laws:
Continue Reading Bankers Association Renews Challenge to City Regulation of Banks as Preempted by State and Federal Law
Judge Abrams: Boxer Entitled to Injunction Over Heavyweight Title Rematch
In an entertaining opinion Friday, Judge Abrams granted heavyweight boxer Fres Oquendo $775,000 and injunctive relief against a German promotional firm referred to as Terek, which failed to pay Oquendo his fill purse after a WBA world heavyweight tile match in Chechnya against Ruslan Chagaev. Oquendo lost the fight and, under the parties’ contract, was entitled to a rematch. Judge Abrams rejected Terek’s primary defense — that the contract was unenforceable — and, in addition to awarding Oquendo his payment shortfall, enjoined Terek from promoting any bout for Chagaev within the next 18 months unless it first scheduled the promised rematch. She explained that an injunction was appropriate in these circumstances because of the unique nature of a title fight:
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NYT: SDNY Judges Call One Another For Input on Hard Issues
The story, headlined “Faced With Legal Puzzles, Judges Often Turn to Fellow Jurists,” is here.
Judge Scheindlin Certifies Injunction Class in Antitrust Challenge to “Territorial” Structure of Sports Broadcasts
In an opinion today, Judge Schiendlin certified a Rule 23(b)(2) injunction class in a case alleging that it is anticompetitive for Major League Baseball and the National Hockey League to divide the market for games into various territories exclusive to the local teams, while allowing the broadcast of out-of-market games only as part of all-or-nothing packages like MLB Extra Innings or NHL Center Ice. The defendants’ primary argument against class certification was that the class would impermissibly consist of those would benefit from a dismantling of the existing structure — e.g., a Yankee fan in Iowa who would prefer to be able to buy a package of just Yankee games — and those who would be harmed — e.g., a Yankee fan in Iowa who would in all events buy the full MLB Extra Innings package but, if a-la-carte options were available, might not have the package option or might have to pay more. According to the defendants, these “winners” and “losers” cannot form a cohesive class. Judge Scheindlin concluded that this argument “fails three times over”:
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After Bench Trial, Judge Cote Rules For FHFA in Case Against Nomura, RBS
Following a bench trial, Judge Cote today issued a 361-page ruling in favor of FHFA (the conservator to Freddie Mac and Fannie Mae) in a case accusing Nomura and RBS of misrepresenting the quality of mortgages underlying various securities. There had been 16 similar cases before Judge against various banks, all of which settled except this one. Judge Cote resolved various disputes between the parties as to how damages should be calculated, but did not specify the final judgment amount. She instead directed the FHFA, which had initially sought over $1 billion, to submit a proposed judgment following the formula in her opinion. The opinion begins:
Continue Reading After Bench Trial, Judge Cote Rules For FHFA in Case Against Nomura, RBS
Judge Román, Disagreeing With Eighth Circuit, Rules Suit Over “Organic” Label Not Preempted
In an opinion yesterday, Judge Román denied a motion to dismiss a class action accusing the makers of “Earth’s Best” branded foods of falsely labeling certain products as “organic.” The defendants argued the claims were preempted by the Organic Food Production Act (or, OFPA), which defines what foods can be labeled “organic,” and prohibits the sale of products labeled “organic” unless approved by a “certifying agent.” In an earlier case, the Eighth Circuit found similar claims preempted because (among other reasons) state law claims challenging “organic” labels would create the risk of “conflicting interpretations” and would “directly conflict[] with the role of the certifying agent.” Judge Román disagreed, finding that the risk of “divergent” views not enough to result in preemption:
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Second Circuit Declares NSA’s Bulk Phone Data Collection Unlawful
In an opinion today, the Second Circuit reversed a decision by Judge Pauley (see our prior posts on the case here), and ruled that the NSA’s bulk collection of phone data is unlawful. Section 215 of the Patriot Act allows the government to collect “tangible things” that are “relevant” to an “authorized investigation” of terrorism, but the Second Circuit found that bulk collection did not meet the test of relevance:
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Judge Forrest: “Flash Boys” Suit Against Exchanges is Preempted by Federal Law
In an opinion Tuesday, Judge Forrest dismissed various class action suits accusing stock exchanges of improperly allowing high-frequency traders to pay to obtain and trade on market data faster than other investors. The plaintiffs subscribed to market data via subscriber contracts that, in turn, incorporated the terms of standardized market data dissemination “plans.” Those plans, which the SEC approved, stated the data would be provided on “fair and reasonable terms” that are “not discriminatory” (or used similar language). Judge Forrest ruled that the claims were preempted by the detailed federal statutory and regulatory regime governing stock exchanges:
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Judge Scheindlin Allows Class Action Over Barclays “Dark Pool” to Proceed
In an opinion Friday, Judge Scheindlin largely denied Barclays’ motion to dismiss a securities fraud class action alleging that Barclays misled investors about its anonymous trading platform, or “dark pool,” referred to as “LX.” At the outset, Judge Scheindlin found it appropriate for the plaintiffs to have borrowed substantially from the New York Attorney General’s