Friday, February 29, 2008

Attorneys in Coke Case May be Disqualified for Paying for Stolen Documents in Channel-Stuffing Lawsuit

The WSJ Law Blog and Fortune's Legal Pad reported that the law firm Coughlin Stoia Geller Rudman & Robbins may be barred from serving as class counsel because it had purchased stolen company documents from a former Coke executive.

After two Coke executives approached the firm with an offer of providing evidence, Coughlin Stoia hired them as consultants, one of whom then gave the firm over 3,000 documents taken from the company, including many marked confidential.

The firm filed a class-action suit against Coca-Cola on behalf of investors for allegedly inflated reported revenues through channel-stuffing. Carpenters Health & Welfare Fund v. Coca-Cola Co., No. 00-2838 (N.D. Ga.). A special master recommended that a motion for class certification be denied without prejudice so that new class counsel can be appointed.

Coughlin Stoia was named Lerach Coughlin prior to William Lerach's guilty plea in a scheme to pay named plaintiffs for their participation in lawsuits.

FTC Chair to Become P&G VP-General Counsel

FTC Chairwoman Debora Platt Majoras will resign from the FTC and will join Procter & Gamble as Vice-President General Counsel, its number two attorney.

P&G's current general counsel, James Johnson, earlier this month announced his plans to retire in June. The company named deputy general counsel Steven Jemison, 56, as his successor. There is speculation that Majoras, who is over ten years younger, will be in line to succeed Jemison when he retires.

Majoras will primarily be responsible for the company's global antitrust and litigation departments. P&G is the top-spending advertiser in the country, according to Nielsen, and is involved in a number of big cases. For example, P&G's $57 billion acquisition of Gillette was allowed by the FTC in 2005, though the FTC required P&G to divest some of its brands, and Majoras recused herself because her husband's law firm was involved in the case. As another example of P&G's litigation practice, yesterday an opinion was issued by a district court in Delaware in favor of P&G in a patent infringement lawsuit against Teva Pharmaceuticals related to an osteoporosis therapy, Actonel. Teva had sought to market a generic version of the drug, asserting that P&G's patent was invalid for obviousness. The court rejected the argument, ruling in favor of P&G after a bench trial. The opinion, P&G v. Teva Pharmaceuticals USA, Inc., No. 04-940-JJF (D.Del. Feb. 28, 2008), is available here (.pdf). In recent years, the FTC has had significant involvement in cases related to lawsuits and settlements between brand name and generic drug manufacturers, and Majoras experience in these types of suits may prove valuable to P&G.

As we reported a few days ago, recent surveys demonstrate that top in-house counsel positions, especially at large consumer goods companies, can be highly lucrative, which may be one reason for the move. Majoras has Chaired the FTC since August 2004, prior to which she worked at Jones Day and the DOJ Antitrust division. FTC William Kovacic is expected to be appointed to replace her as Chair.

Links to the Majoras story: WSJ Law Blog, FTC, Cincinnati Enquirer, Adage.
Update June 6, 2008: Corporate Counsel magazine reported that Jemison took the helm at P&G's legal department on June 1, and that Majoras was in line to eventually succeed him, citing blog contributor Daniel Kotchen.

Monday, February 25, 2008

General Counsel in Food/Beverage Industry the Highest Paid, According to Survey

In its March issue, Inside Counsel magazine published the results of recent surveys of in-house attorney compensation.

The survey results included salaries of Chief Legal Officers and General Counsel pay by industry. The Food/Beverage and Retail Trade industries led the pack with median total cash compensation exceeding $500,000.

The results also included a summary of Median Total Cash Compensation for in-house lawyers generally, which ranged from $208,100 for the Technology industry, to $230,300 for the Biotech, Pharma & Medical Devices industry. Of potential interest to readers of this blog, median total cash compensation for other industries included:

Consumer Products $222,900

Food & Beverages $217,900

While corporate law departments are concerned with the rising salaries of associates of large law firms (which can exceed $180,000 for first-year associates, including bonuses), salaries for in-house counsel have also been rising quickly. General Counsel's cash compensation reportedly rose 19% from the previous year.

Going forward, some reports suggest that the rise in legal costs will slow in 2008, with an expected 5% increase in outside legal fees. In part, this may be attributed to the fact that corporations have been trying to control costs, and have brought more legal work in-house. There may also be more price competition among law firms for legal work, with corporations offering more work to outside counsel with lower billing rates.

While salaries of in-house counsel and billing rates of outside counsel are a visible element of costs, they are only one component of legal costs and expenses related to litigation, and it is often a mistake to sacrifice quality for price. Though high rates are not necessarily indicative of quality, even if consumers are likely to make that assumption, as discussed here.

The survey results were also summarized on Legal Blog Watch.

Saturday, February 23, 2008

Investigation of Chocolate Price Fixing Goes Global

An investigation into price-fixing by chocolate manufacturers has been expanded to Europe.

I originally posted on the investigation after it was revealed that Canadian authorities were investigating chocolate pricing, and that the U.S. DOJ had followed suit. More recently, it was reported that Germany's Federal Cartel Office raided the offices of several chocolate makers. In addition, the European Commission has requested information on pricing practices of chocolate makers, as reported by the AP.

In its annual report, Hershey's states that it is the target of over 50 class action lawsuits in the U.S. and 3 in Canada. Hershey's reported that several other chocolate confectionaries are co-defendants. Hershey's further stated that:

"While it is not feasible to predict the final outcome of these proceedings, in
our opinion they should not have a material adverse effect on the financial
position, liquidity or results of operations of the Company. The Company is
cooperating with the government investigations and inquiries and intends to
defend the lawsuits vigorously."

In my earlier post, I noted the benefits companies may gain from cooperating with the DOJ in a price fixing investigation. For such cooperation to be effective, the company's lawyers must learn what impermissible acts occurred before the authorities do. In a global investigation of this type with countless documents and numerous decision-makers, that can be a difficult task, requiring swift and aggressive action by counsel. Ideally, the attorneys will learn that their company was not involved in any wrongdoing, but if they learn that the company was involved, they may be able to cooperate with DOJ and gain leniency.

Related Post: Chocolate Makers Allegedly Fixed Prices

Friday, February 22, 2008

Insignia Provides Update on Legal Proceedings

Insignia Systems reported earnings on February 20 and provided an update on legal proceedings.

Insignia's President and CEO, Scott Drill, was optimistic about the lawsuit against News America Marketing, stating:

"On the legal front, the schedule now calls for us to be trial ready December 12, 2008. The slippage in the schedule was due primarily to the sheer volume of documents being exchanged. As has been the case from the start, we continue to be optimistic about the prospects for our affirmative claims and our defense of the counterclaims. Legal expense for the fourth quarter of 2007 was $495,000 versus $310,000 in the fourth quarter of 2006."

Insignia reported net income for the quarter ended December 31, 2007 of $0.15 a share ($0.14 per fully diluted share), compared to one cent more for the same period in the prior year. POPS sales were soft during the quarter, but the company reported a strong 2008 outlook.

Related Posts: News America's Bullying, and Insignia Systems' Ongoing Lawsuit ; Court Approves Consent Decree Between Minnesota AG and News America Marketing .

Tuesday, February 19, 2008

Shareholder Lawsuit Forces Company to Reregister Its Stock

In response to a shareholder lawsuit, off-price retail clothing company Syms Corp announced that it has decided to reverse its recent decision to move its stock from the major exchanges to the pink sheets.

Syms original decision was driven by a desire to reduce costs related to Sarbanes Oxley compliance. In reversing its decision, Syms' management also cited a desire to reduce costs – this time from litigation related to the delisting decision. The company is now seeking a listing on the Nasdaq exchange.

While management likely had the shareholders' best interests at heart in deciding to delist, and it was likely protected from a legal standpoint by the Business Judgment Rule, the decision turned out to be a strategic mistake.

Related Post: Retail Clothing Company Sued for Decision to Delist from NYSE.

Tuesday, February 12, 2008

Developing Legally-Compliant Trade Promotion Management Programs

How can a manufacturer design a legally-compliant trade program that rewards those retailers that deliver the best profit per trade dollar? That's a question that Daniel Kotchen, a contributor to this site, addressed in an article he recently wrote for Forum magazine. Specifically, he addressed the legality of:

The full article is available here.

Related Post: State Resale Price Maintenance Laws and Leegin

Sunday, February 10, 2008

Court Approves Consent Decree Between Minnesota AG and News America Marketing

Last week, the U.S. District Court in Minnesota approved a consent decree entered into between the Minnesota Attorney General and News America Marketing.

The Minnesota AG had intervened in the ongoing lawsuit between Insignia Systems and News America in December 2006, alleging that News America had engaged in deceptive trade practices. I previously discussed the lawsuit here.

Under the terms of the consent decree, the State agreed to release its claims without an admission of liability from News America. In return, News America agreed that it would not make any further representation to any CPG or other customer regarding Insignia's compliance rate through December 31, 2003, falsely disparage its competitors, or violate the Minnesota Deceptive Trade Practices Act, Section 325D.44. News America also agreed to pay $20,000 in attorneys' fees to Minnesota.

Insignia's lawsuit against News America continues. The parties have spent the last several months in discovery, including motions for protective orders and motions to compel. The court recently entered a revised scheduling order, as follows:

  • May 16, 2008 -- Discovery ends.
  • August 26, 2008 -- Dispositive motions due.
  • December 12, 2008 -- Ready for trial.

Insignia probably would have preferred that the Minnesota Attorney General continue its lawsuit rather than enter into the Consent Decree, as the presence of the State as a party at trial would have added to Insignia's credibility. The consent decree provides limited benefit to Insignia, and does little to punish News America for its alleged bad acts.

Related Post: News America Marketing's Bullying, and Insignia Systems' Ongoing Lawsuit.

Friday, February 8, 2008

Update: Valassis v. News America Marketing Lawsuit Over FSIs

I posted earlier on Valassis' $1.5 billion dollar lawsuit against News America Marketing, which had been scheduled for trial this month. As expected, however, trial has been postponed -- likely until early 2009.

A status conference was held on January 23, 2008 before Judge John Feikens. In a status report filed by News America the day before the status conference, News America indicated that it had produced 374,404 documents, while Valassis had produced 107,479. While this is a lot of documents, such voluminous discovery is increasingly common in high-stakes antitrust litigation, and attorneys should have systems in place to effectively cope with such a volume of discovery, including suitable document review software and tools, as well as sufficient staff for document review (which, for large projects, often consists of contract attorneys), and a strong organizational scheme (including protocols for communication and decision-making). Discovery continues in the case on a rolling basis.

News America requested that the scheduling order be revised as follows:

  • April 30, 2008 – Completion of document production.
  • July 31, 2008 – Close of non-expert discovery. Each side limited to 30 depositions.
  • October 22, 2008 – Close of expert discovery.
  • December 1, 2008 – Dispositive motions due.
  • January 22, 2009 – Joint Pretrial Statement due.

Mediation had been held on November 20, 2007 without resolution before Judge Thomas Penfield Jackson, who is best known for presiding over United States v. Microsoft. The parties discussed the possibility of further mediation, and "agreed that an additional session would not be productive."

At the status hearing on January 23, 2008, Judge Feikens ordered the parties to return to mediation, despite the parties' position on the futility of additional mediation.

I'll continue to follow this case with interest as there are further developments.

Related Posts: Valassis' $1.5 Million Antitrust Suit Against News America Marketing Over FSIs;
News America Marketing's Bullying, and Insignia Systems' Ongoing Lawsuit

Wednesday, February 6, 2008

Securities Class Action Filings Expected to Increase

A recently released study, Predicting Securities Litigation, found that securities class action filings rose 43% in 2007, and predicted another year of increased litigation in 2008.

The study found that small and mid-cap companies are increasingly subjected to such lawsuits, and found that a strong indicator of potential securities litigation is whether CEO compensation practices are poorly-aligned with shareholder interests.

2008 is already off to a strong start for securities filings, with a reported minimum of 24 securities class actions filed in January.

Related Post: Retail Clothing Company Sued for Decision to Delist

Live and On-Demand Trial Video Service Launched

The launch of Courtroom Live was announced today, providing access to live trial video and on-demand video of trial highlights. The service aims to assist attorneys in trial preparation, expert witness evaluation, and education and training.

The site includes only prominent or precedent-setting trials, and only has a handful available for viewing so far. These include a few cases related to consumer goods or the retail industry, e.g., Valassis v. Advo (seeking cancellation of Valassis' agreement to acquire Advo); Tellez v. Dole Food (personal injuries sustained on banana plantations); McDarby v. Merck (Vioxx product liability); and McCreary v. Wyeth (product liability based on Wyeth's HRT drug).


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