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Legal News Report 7-24-15
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Anthem to Buy Cigna Amid Wave of Insurance Mergers
Jul 24, 2015 | New York Times
By Chad Bray
The health insurer Anthem said on Friday that it had agreed to acquire its rival Cigna for $48.3 billion in a deal that would further concentrate the United States market to just a few major players. -
UPDATE 2-Facebook defeats shareholder litigation over IPO
Jul 24, 2015 | Reuters
By Jonathan Stempel
A federal appeals court on Friday said Facebook Inc officials including Chief Executive Mark Zuckerberg cannot be sued by shareholders who said the social media company concealed threats to its growth prospects before its May 2012 initial public offering. -
BP asks Montana judge to dismiss lawsuit alleging deceit
Jul 24, 2015 | Associated Press
Attorneys for BP asked a Montana judge Thursday to dismiss a lawsuit by the state alleging the oil giant has deliberately concealed information for decades. -
Lawsuit accuses 22 banks of manipulating U.S. Treasury auctions
Jul 23, 2015 | Reuters
By Johnathan Stempel
Twenty-two financial companies that have served as primary dealers of U.S. Treasury securities were sued in federal court on Thursday, in what was described as the first nationwide class action alleging a conspiracy to manipulate Treasury auctions that harmed both investors and borrowers. -
Wage Lawsuit Against Skadden Arps Can Proceed, Appeals Court Says
Jul 23, 2015 | Wall Street Journal
By Sara Randazzo
A lawsuit demanding overtime pay from law firm Skadden, Arps, Slate, Meagher & Flom LLP can proceed, an appeals court ruled Thursday, potentially clearing the way for temporary lawyers hired to do routine document review to earn extra wages.
Legal News
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Anthem to Buy Cigna Amid Wave of Insurance Mergers
Jul 24, 2015 | New York Times
By Chad Bray
The health insurer Anthem said on Friday that it had agreed to acquire its rival Cigna for $48.3 billion in a deal that would further concentrate the United States market to just a few major players.
The combined company would have estimated revenue of about $115 billion and serve more than 53 million people with medical coverage.
A flurry of deals are reshaping the industry. Earlier this month Aetnaagreed to acquire Humana, the smallest of the big five insurers, for $37 billion in cash and stock. If both transactions are completed, the number of major health insurers in the United States will shrink to three.
Health insurers are seeking to consolidate to gain greater scale to reduce costs and capitalize on growing opportunities in the government and individual markets. A major force has been the Obama administration’s health care overhaul, which has bolstered revenues. But greater transparency in pricing and less generous funding of government plans have also put profit margins under pressure.
Alex Cullen, an analyst with Forrester Research, said that the challenge for all health insurers was moving from “a plan and claim-centric model to a customer-centric model.” Making that transition while completing a merger will be difficult, he said.
“I would expect a lot of angst within Anthem management on how to execute on a customer-centric strategy,” Mr. Cullen said.
Anthem said on Friday that it expected to achieve nearly $2 billion in annual cost savings as a result of the merger. Anthem said there would be one-time charges of $600 million over a two-year period associated with the merger.
“We believe that this transaction will allow us to enhance our competitive position and be better positioned to apply the insights and access of a broad network and dedicated local presence to the health care challenges of the increasingly diverse markets, membership, and communities we serve,” Joseph R. Swedish, the Anthem chief executive, said in a news release.
Mr. Swedish will oversee the combined insurer.
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UPDATE 2-Facebook defeats shareholder litigation over IPO
Jul 24, 2015 | Reuters
By Jonathan Stempel
A federal appeals court on Friday said Facebook Inc officials including Chief Executive Mark Zuckerberg cannot be sued by shareholders who said the social media company concealed threats to its growth prospects before its May 2012 initial public offering.
The 2nd U.S. Circuit Court of Appeals said investors who lost money on shares they bought after the $16 billion IPO lacked standing to sue Facebook directors and underwriters led by Morgan Stanley, over alleged inadequate disclosures made before the company went public.
Shareholders said Facebook should have publicly revealed its internal projections on how increased mobile usage might reduce future revenue, rather than quietly warn its underwriters, which then cut their earnings forecasts. They said the stock price was "hammered" after the truth came out.
Circuit Judge Dennis Jacobs, however, wrote that the plaintiffs could not have owned Facebook shares before the IPO, and thus could not demonstrate "contemporaneous" ownership while the directors were breaching their fiduciary duties.
"A proper plaintiff must have acquired his or her stock in the corporation before the core of the allegedly wrongful conduct transpired," Jacobs wrote for a 3-0 panel.
The decision upheld a February 2013 dismissal of the so-called derivative litigation by U.S. District Judge Robert Sweet in Manhattan. Sweet also oversees shareholder class-action litigation against Facebook itself over the IPO.
Lawyers for the plaintiffs did not immediately respond to requests for comment.
A Facebook spokeswoman said the Menlo Park, California-based company is pleased with the decision.
The defendants also included Facebook Chief Operating Officer Sheryl Sandberg,Goldman Sachs Group Inc and JPMorgan Chase & Co, among others. Andrew Clubok, a Kirkland & Ellis partner representing them, declined to comment.
Facebook began trading on May 18, 2012 after going public at $38 per share, only to see its share price fall to $17.55 on Sept. 4, 2012 and stay below the IPO price for more than a year. The price has kept rising, and peaked at $99.24 on Tuesday.
Nasdaq OMX Group Inc in April agreed to pay $26.5 million to settle shareholder litigation over technology problems that plagued the IPO.
The case is In re: Facebook Inc Initial Public Offering Derivative Litigation, 2nd U.S. Circuit Court of Appeals, Nos. 14-632, 14-1309, 14-1445, 14-1784 and 14-1788.
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BP asks Montana judge to dismiss lawsuit alleging deceit
Jul 24, 2015 | Associated Press
Attorneys for BP asked a Montana judge Thursday to dismiss a lawsuit by the state alleging the oil giant has deliberately concealed information for decades.
District Judge Jeffrey Sherlock did not make an immediate ruling after the two sides presented their cases in Helena.
Montana attorneys had claimed in the original 2011 lawsuit that BP, its subsidiaries and its predecessors “double-dipped” by taking money to clean up leaky oil tanks from both a state fund and its insurers.
The state’s claims have since shifted away from that argument to general accusations of deceit.
Bill Rossbach, a special attorney for the state, acknowledged that he has found no evidence of the double-dipping alleged in the original lawsuit, but he said the company negligently omitted information of its subsidiaries’ pollution and oil-spill insurance since the 1970s.
BP knowingly installed then never maintained leaky storage tanks all over Montana, Rossbach said, adding that he can prove the company sold the tanks but failed to disclose they were leaking or that BP had pollution coverage that may have revealed the problems.
“In Montana, there is strict liability for pollution and they are the responsible party,” Rossbach said of BP. “When the state has to clean it up, they have to pay.”
BP attorney Mark Lillie argued the state is attempting to sidestep time limits and put the company on the hook for anything its predecessors and successors have done.
“The passage of time matters,” Lillie said. “The rules say that at some point memories fade, documents are lost, people die, businesses go out of business, all sorts of things happen with the passage of time.”
Sherlock will decide whether adequate evidence exists to carry the case forward.
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Lawsuit accuses 22 banks of manipulating U.S. Treasury auctions
Jul 23, 2015 | Reuters
By Johnathan Stempel
Twenty-two financial companies that have served as primary dealers of U.S. Treasury securities were sued in federal court on Thursday, in what was described as the first nationwide class action alleging a conspiracy to manipulate Treasury auctions that harmed both investors and borrowers.
The State-Boston Retirement System, the pension fund for Boston public employees, accused Bank of America Corp's (BAC.N) Merrill Lynch unit, Citigroup Inc (C.N), Credit Suisse Group AG CGSN.VX, Deutsche Bank (DBKGn.DE), Goldman Sachs Group Inc(GS.N), HSBC Holdings Plc (HSBA.L), JPMorgan Chase & Co (JPM.N), UBS Group AG (UBSN.S) and 14 other defendants of illegally trying to profit on the sale of Treasury bills, notes and bonds at investors' expense.
According to the pension fund's complaint, filed in U.S. District Court in New York, the banks used chat rooms, instant messages and other means to swap confidential customer information and coordinate trading strategies in the roughly $12.5 trillion Treasury market.
This enabled the banks to inflate prices on Treasuries they sold to investors in the pre-auction "when issued" market, and deflate prices when they bought Treasuries to cover their pre-auction sales, violating antitrust laws, according to the complaint.
Primary dealers are the banks authorized to transact directly with the Federal Reserve. They are big players in Treasury bond auctions and act as market makers in the secondary market.
The pension fund said its "expert economists" observed wide gaps between when-issued and auction prices around December 2012, but that these gaps narrowed significantly as the U.S. Department of Justice and other regulators began probing alleged manipulation of the London interbank offered rate, a benchmark used to set interest rates for trillions of dollars worth of loans around the world.
"The only plausible explanation for the sharp break," the fund said, "is that defendants felt the heat of the DOJ's ongoing investigation into Libor, and ceased their efforts to manipulate the Treasury securities market because defendants' Treasury traders feared that they too would be prosecuted."
Media reports last month said the Justice Department was also investigating possible collusion in Treasury auctions.
"The scheme harmed private investors who paid too much for Treasuries, and it harmed municipalities and corporations because the rates they paid on their own debt were also inflated by the manipulation," Michael Stocker, a partner at Labaton Sucharow, which represents State-Boston, said in an interview. "Even a small manipulation in Treasury rates can result in enormous consequences."
The lawsuit seeks class-action status on behalf of investors in Treasury securities, including futures and options, from 2007 to 2012, and unspecified triple damages.
Spokespeople for Bank of America, Citigroup, Credit Suisse, Deutsche Bank, Goldman, HSBC and UBS declined to comment. Other banks had no immediate comment or were not reached.
The case is State-Boston Retirement System v Bank of Nova Scotia et al, U.S. District Court, Southern District of New York, No. 15-05794.
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Wage Lawsuit Against Skadden Arps Can Proceed, Appeals Court Says
Jul 23, 2015 | Wall Street Journal
By Sara Randazzo
A lawsuit demanding overtime pay from law firm Skadden, Arps, Slate, Meagher & Flom LLP can proceed, an appeals court ruled Thursday, potentially clearing the way for temporary lawyers hired to do routine document review to earn extra wages.
The Second U.S. Circuit Court of Appeals ruling came in a lawsuit brought against Skadden and legal staffing agency Tower Legal Solutions by an attorney who claims he deserves overtime for a $25-an-hour assignment reviewing documents on a Skadden case.
The case is being watched closely in the legal industry as contract attorneys are now routinely hired to review large volumes of documents in the early stages of litigation and investigations. In a tough market for legal employment, many law school graduates end up jumping from one contract assignment to the next to earn a living.
Under federal labor laws, employers aren’t required to pay licensed lawyers overtime pay for time logged in excess of 40 hours a week if what they are doing is considered legal work.
But the plaintiff, David Lola, says he deserves extra pay because the tasks he did were so basic they shouldn’t qualify as practicing law. Mr. Lola said in his 2013 lawsuit that his work entailed searching documents for predetermined terms, sorting them into categories, and at times making redactions based on procedures given to him.
The appeals court agreed. While finding that state laws should dictate what is considered practicing law, the court said that Mr. Lola adequately showed in his complaint that “he failed to exercise any legal judgment” on the document-review assignment.
A “fair reading,” of his lawsuit is that “he provided services that a machine could have provided,” the court said.
The ruling doesn’t create a precedent on how to define legal practice, but legal observers say it could open the door for other courts to find that some document review isn’t the practice of law.
Some say Thursday’s decision could lead to unintended consequences. Shari Klevens, the co-chair of the law firm practice at Dentons, said “a trend toward classifying this work as non-legal” could result in clients refusing to pay for skilled workers to take on such assignments, causing the work to “get pushed down to the lowest common denominator.”
Mr. Lola’s case will now continue to be litigated in Manhattan federal court.
“We hope contract attorneys all over the country stand up for their rights,” said Mr. Lola’s lawyer, D. Maimon Kirschenbaum. “We hope that law firms learn their lesson.”
Mr. Kirschenbaum represents other contract attorneys in two similar suits, which had been on hold until the Second Circuit ruled.
Skadden and Tower declined to comment on the decision.
The ruling comes as the U.S. Labor Department weighs a regulation that would expand the number of workers eligible for overtime pay. The proposal would more than double the threshold that generally determines which salaried workers are eligible for overtime to those earning less than $50,400 annually, or $970 a week.
The new rule would expand overtime pay to about 4.6 million more workers, the Labor Department said.
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