N.J. Carpenters Health Fund v. NovaStar Mortgage

The U.S. Court of Appeals for the Second Circuit on March 1 reinstated a multibillion-dollar class action brought on behalf of investors in a mortgage-backed securities offering underwritten and sold by several major banks, including The Royal Bank of Scotland Group PLC, Wells Fargo & Company, and others. The decision gives the investor plaintiffs hope that they can revive five other related offerings for a total of $7 billion in claims. (RBS owns a minority stake in ALM Media LLC.)

Joel Laitman and Christopher Lometti of Cohen Milstein Sellers & Toll brought the case in 2008 on behalf of New Jersey Carpenters Health Fund. The fund alleges that three banks—RBS, Wells Fargo, and Deutsche Bank AG—misrepresented the underwriting standards they used for six trusts backed by subprime mortgages originated by NovaStar Mortgage Inc. The trusts, marketed between June 2006 and May 2007, were each valued at more than $1 billion. According to Cohen Milstein, half of the underlying mortgages eventually defaulted, and ratings agencies downgraded the securities because of allegedly lax underwriting.

But in her March 2012 ruling, U.S. District Judge Deborah Batts sided with Thomas Rice of Simpson Thacher & Bartlett, who represents the bank defendants. She ruled that the fund could not assert claims relating to trusts it didn’t actually invest in. Since the fund only invested in one of the trusts at issue, Batts’s ruling shrunk the case dramatically. Shortly thereafter, she dismissed the case entirely, ruling that the fund presented insufficient evidence that investors were misled.

The fund appealed, with Laitman giving oral arguments; the defendants looked to Rice and to William Alderman of Orrick, Herrington & Sutcliffe.

Reversing Batts’s decision, the appeals court found that the plaintiffs had alleged enough evidence to survive a motion to dismiss. The court also instructed Batts to reconsider her decision to trim the case on standing grounds, noting that it is at odds with a September 2012 ruling by the Second Circuit, NECA-IBEW Health & Welfare Fund v. Goldman Sachs, that found that investors can have standing to sue over mortgage-backed securities that share common loan originators even if the plaintiffs didn’t directly invest in each security.

For Plaintiff-Appellant 
New Jersey Carpenters 
Health Fund

Cohen Milstein Sellers & Toll: Michael Eisenkraft, Joel Laitman, and Christopher Lometti. (They are in New York.) The firm wrote to Judge Batts requesting that she reopen discovery.

For Defendants-Appellees The Royal Bank of Scotland Group PLC (Edinburgh) et al.

Simpson Thacher & Bartlett: Thomas Rice, Alan Turner, and associates Patrick Connorton, John Robinson, and Alyssa Watzman. (They are in New York.) The firm is representing RBS, Deutsche Bank, and others in a number of matters arising from RMBS litigation.

Orrick, Herrington & Sutcliffe: William Alderman, Steven Fink, and associates Andrew Silverman and Philipp Smaylovsky. (Alderman is in San Francisco; the rest are in New York.) Alderman has represented NovaStar (now renamed Novation Companies Inc.) since 2004.

For Amici National Association of Shareholder and Consumer ­Attorneys

Bernstein Litowitz Berger & Grossmann: David Stickney and associate Ann Lipton. (Stickney is in San Diego; Lipton is in New York.)

For Amici National Credit Union Administration

In-House: General counsel Michael McKenna and associate general counsel John Ianno.

Kellogg, Huber, Hansen, Todd, Evans & Figel: David Frederick, Wan Kim, and Gregory Rapawy. (They are in Washington, D.C.)

For amici Securities Industry and Financial Markets Association

Vinson & Elkins: Steven Paradise and Michael Rella. (Paradise is in New York. Rella has since left the firm.)

—Jan Wolfe, with Tom Coster

 

Apotex v. Bristol-Myers Squibb

Capping seven years of litigation over a pharmaceutical pay-for-delay deal gone awry, Debevoise & Plimpton’s Mark Goodman and Sean Hecker won a nine-day jury trial in Florida state court on March 13 on behalf of client Bristol-Myers Squibb Company. The jurors deliberated for about four hours before throwing out a $3.4 billion breach of contract claim.

Generic drug manufacturer Apotex Inc. filed suit in 2011 in Fort Lauderdale, claiming that BMS sought to undermine an exclusive licensing deal covering a generic version of BMS and Sanofi-Aventis SA’s blockbuster blood-clot prevention drug Plavix. (Sanofi was dismissed 
as a defendant last November.)

The case is rooted in a pay-for-delay deal in 2006. In early 2006 BMS and Sanofi, which share a license to market Plavix, signed a deal with Apotex to drop a patent suit against BMS and Sanofi over the validity of the Plavix patent. In exchange, BMS and Sanofi made a written promise to give Apotex a head start over other companies in selling its generic version of the drug. BMS also promised to refrain from introducing its own generic version for the six months in advance of the expiration of the Plavix patent.

But the Federal Trade Commission and state attorneys general, who had to approve any such agreement under earlier consent decrees with Apotex and BMS, rejected the agreement, citing antitrust concerns about BMS’s promise. Subsequently, BMS and Sanofi negotiated another deal with Apotex and pitched that new deal to regulators. The approval process got derailed, however, when Apotex CEO and founder Bernard Sherman asserted in his regulatory submission that BMS had again made the same exclusivity promise, but this time in the form of a verbal agreement with a BMS executive, Andrew Bodnar.

BMS didn’t mention any side agreement in its own submission to the FTC, and Sherman’s sworn statement quickly got the company into hot water. Not only did regulators reject the deal, citing the same antitrust concerns, but prosecutors began investigating BMS over the alleged side deal. (BMS never ­conceded that such a deal ­existed, though it pleaded in 2007 to making a false statement related to Bodnar’s representations.)

Apotex restarted the patent battle it had earlier agreed to drop over the Plavix patent, but ultimately lost at trial; it paid $442 million in damages in 2010. But in January 2011, Apotex, tapping Katten Muchin Rosenman’s Robert Breisblatt, sued BMS in Ft. Lauderdale, alleging that BMS had breached its contractual obligations when it failed to make reasonable efforts to get the settlement deal approved by regulators.

At trial the Debevoise team cited internal Apotex emails to make their case that it was Sherman, not BMS, that breached the contract by doing everything he could to undermine regulatory approvals. Then the judge instructed the jury to only consider a narrow question of whether Apotex had demonstrated that the FTC would have ruled differently if BMS had informed it about the private representations that its executive had made.

At press time Apotex was considering an appeal.

For Plaintiff Apotex Inc. (Toronto)

Katten Muchin Rosenman: Robert Breisblatt, Eric Cohen, and asso­ciate Carolyn Passen. (They are in Chicago.) The firm was originally tapped in late 2006 to handle Apotex’s patent trial against Bristol-Myers and Sanofi. Breisblatt also represented Apotex in wins against Pfizer Inc. and Daiichi Sankyo Co. Ltd.

Duane Morris: Lida Rodriguez-Taseff. (She is in Miami.) The firm was local counsel.

For Defendant 
Bristol-Myers Squibb 
Company (New York)

Debevoise & Plimpton: Mark Goodman, Sean Hecker, and ­associates Charles Baxter, David Gopstein, Lauren Kapsky, and ­Jacob Stahl. (They are in New York.) The firm represented BMS in the underlying investigation of the ­pay-to-delay deal. Goodman led at trial.

Carlton Fields: Benjamine Reid and associate Joshua Roberts. (They are in Miami.) The firm was local counsel.

—Julie Triedman

 

Ryan et al. v. JPMorgan Chase

On February 22, U.S. District Judge Vincent Briccetti in Manhattan dismissed a purported overtime class action against JPMorgan Chase & Co., citing a mandatory arbitration and class action waiver clause in a former employee’s contract. The decision is one of the first in which a federal district judge cited the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion to kill a class action in an employment context.

Lawyers for plaintiff Tiffany Ryan—Adam Klein at Outten & Golden and Donald Sapir and Howard Schragin at Sapir & Frumkin—had argued that arbitration clauses such as the one Ryan signed are unenforceable under the Fair Labor Standards Act, because the statutory rights available to her would be limited in an arbitration setting, and because pressing her claims individually would be too expensive.

Briccetti didn’t buy those arguments. Siding with JPMor­gan’s lawyers, Thomas Linthorst and Samuel Shaulson at Morgan, Lewis & Bockius, he ruled that binding arbitration agreements are permitted under Concepcion, and that the Federal Arbitration Act was enacted to encourage arbitration as an alternative to costly and time-consuming litigation. The judge also rejected the notion that he should defer to the National Labor Relations Board’s January 2012 decision in In re D.R. Horton Inc., in which the NLRB held that binding arbitration agreements in employment contracts violate the National Labor Relations Act. He wrote that the Horton ruling was both nonpersuasive and nonbinding.

The plaintiffs have filed a notice of appeal to the Second Circuit.

For Plaintiffs 
Tiffany Ryan et al.

Outten & Golden: Adam Klein, counsel Molly Brooks, and asso­ciate Michael Scimone. (They are in New York.) The firm did not respond to a request for comment.

Sapir & Frumkin: Donald Sapir and Howard Schragin. (They are in White Plains, New York.) The firm has filed an unfair labor complaint with the NLRB.

For Defendant JPMorgan Chase & Co. (New York)

In-House: Assistant general counsel Heather Mitchell.

Morgan, Lewis & Bockius: Thomas Linthorst, Samuel Shaulson, and associate Stephanie Reiss. (Linthorst is in Princeton; Shaulson is in New York; and Reiss is in ­Pittsburgh.) Morgan Lewis has previously represented JPMorgan Chase in wage-and-hour litigation.


—Victor Li, with T.C.