U.S. v. JPMorgan Chase Bank N.A.
On Jan. 7 JPMorgan Chase & Co. agreed to pay $1.7 billion to settle criminal charges by the U.S. Department of Justice that the bank had helped facilitate Bernard Madoff’s multibillion-dollar Ponzi scheme. Prosecutors called the amount a record recovery for violating the 1970 Bank Secrecy Act.
JPMorgan will pay $350 million more to resolve civil charges, and $543 million to settle claims by the Bernard L. Madoff Investment Securities LLC liquidation trustee, Baker & Hostetler’s Irving Picard. As part of the settlement, the bank signed a two-year deferred prosecution agreement and agreed to an extensive statement of facts in connection with alleged violations of the Bank Secrecy Act. It also agreed to continue reforms of its compliance programs.
The bank tapped Wachtell, Lipton, Rosen & Katz’s John Savarese for the civil resolutions, and Sullivan & Cromwell’s Steven Peikin on the criminal side. JPMorgan general counsel Stephen Cutler and global litigation head Jill Centella also played key roles.
According to documents filed in Manhattan federal court related to the agreement, JPMorgan had served as Madoff’s primary bank since 1986. As far back as the early 1990s, the bank had concerns that Madoff was engaged in suspicious transactions. But it never alerted U.S. regulators about its concerns, and its U.S. compliance officers did little to investigate those suspicions.
Many documents filed in the government’s case echo claims made by the Madoff trustee in earlier litigation. The trustee’s 2010 suit against JPMorgan was packed with incriminating emails, such as the now-infamous June 2007 email that the government cites from the bank’s chief risk officer to his colleagues that “there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.” A series of unfavorable court rulings, however, blocked Picard from recovering much of what he sought for Madoff’s investors. —Susan Beck, with Rebekah Mintzer
In re Payment Card Interchange Fee Antitrust Litigation
In the largest attorney fee award ever in a private antitrust case, a federal judge in Brooklyn granted a group of plaintiffs attorneys $545 million for their work in a class action on behalf of 12 million merchants against Visa Inc., MasterCard Incorporated, and a group of banks. U.S. District Judge John Gleeson gave the firms all but $25 million of the amount they requested, noting that the case involved years of extraordinary efforts and high risk. A similar earlier case had failed, and the lawyers didn’t piggyback on a government action, he noted.
The lion’s share of the fees will go to three plaintiffs class action firms that filed suit in 2005. Leading the charge were K. Craig Wildfang and Thomas Undlin of Robins Kaplan Miller & Ciresi, Bonny Sweeney and Patrick Coughlin of Robbins Geller Rudman & Dowd, and H. Laddie Montague Jr. and Merrill Davidoff of Berger & Montague. The three firms contributed about 55 percent of the hours in the fee request, which suggests they could split about $270 million.
In December, Gleeson approved a $5.7 billion settlement resolving claims brought by merchants. Retailers accused the defendants of conspiring to fix the so-called interchange fees that retailers are charged when customers pay with a credit card. Before the settlement’s approval, 10 of the 19 named plaintiffs and several large retailers opted out. Objectors argued that it unfairly released Visa and MasterCard from future liability and would do little to affect interchange fees.
Representing Mastercard were Kenneth Gallo of Paul, Weiss, Rifkind, Wharton & Garrison and Keila Ravelo of Willkie Farr & Gallagher. Visa tapped Robert Vizas and Mark Merley of Arnold & Porter. The settlement and fee award are the largest ever in a private antitrust case, according to the National Association of Legal Fee Analysis. But the fee award is a third lower than the $688 million granted to lawyers who represented Enron Corporation shareholders in a $7.2 billion settlement in 2008.
Several retailers filed notices that they intend to appeal the settlement and the fee. —Ross Todd, with R.M.
Swatch v. Tiffany
Wilmer Cutler Pickering Hale and Dorr partner Franz Schwarz helped deliver a nice Christmas gift to client The Swatch Group SA, persuading an arbitration panel on Dec. 21 that the watchmaker is entitled to more than a half-billion dollars from former business partner Tiffany & Co.
The arbitration panel, associated with the Netherlands Arbitration Institute, ordered Tiffany to pay $450 million for undermining a joint venture with Swatch. The panel also awarded Swatch interest and about $9.6 million in attorney fees and costs. The panel also dismissed Tiffany’s $500 million counterclaim for breach of contract.
Tiffany, best known for its jewelry, has long been eager to capture the market for high-end timepieces. In 2008 Tiffany and Swatch entered into a 20-year agreement to sell and distribute Tiffany-branded watches, but by 2011 the companies had terminated the partnership. Swatch filed an arbitration in April of that year. Swatch’s CEO told the Financial Times that Tiffany “pushed for the partnership’s creation in 2008 but then neglected it and blocked its development.” Tiffany, for its part, alleged that Swatch failed to provide sufficient distribution for the watches.
The ruling follows hearings held in October 2012. The proceedings took place in Amsterdam, since Dutch law controlled the agreements at issue. (Tiffany and Swatch presumably wanted any disputes resolved on neutral turf.) Schwarz, an Austrian-born international arbitration specialist based in London, served as lead counsel for Swatch, which is based in Biel, Switzerland. The Wil­mer team also included London-based partner Duncan Speller. The Dutch firm NautaDutilh was Wilmer’s cocounsel and advised on Dutch law. Tiffany was represented by Brian King, Elliot Friedman and Walter Stuart of Freshfields Bruckhaus Deringer.
Lawyers on either side declined to comment. But in a public statement, Tiffany conceded to investors that Swatch’s liability theory carried the day, while Tiffany prevailed substantially in its damage calculations. While Schwarz didn’t get all he was seeking—Swatch wanted $4 billion-plus in damages—the ruling is still a major win for Swatch. —Jan Wolfe, with R.M.
In re: Southeastern Milk Antitrust Litigation
A federal appeals court on Jan. 3 reinstated an antitrust complaint against Dallas-based Dean Foods Company, and remanded the case to U.S. District Judge J. Ronnie Greer in Greeneville, Tenn.
Food Lion LLC and other retailers allege in a complaint filed in 2007 in Tennessee that there was a conspiracy between Dean Foods and its subsidiary, a new milk processor, the National Dairy Holdings L.P., half-owned by the Dairy Farmers of America Inc., to restrict milk output, forcing up prices for processed milk.
The National Dairy processing partnership was originally set up to compete with Dean Foods under a settlement with federal regulators related to Dean Foods’ 2001 merger with Suiza Foods Corp. The lawsuit alleges that Dean Foods subsequently teamed up with Dairy Farmers of America to undercut its own subsidiary in order to raise milk prices. The retailers accused Dean of striking a secret deal to buy the raw milk it needed while Dairy Farmers restricted milk output, harming National Dairy’s ability to compete and raising milk prices for retail milk buyers.
Greer dismissed three of five counts in 2010. Defendants successfully moved for reconsideration of his decision to allow two counts, but during hearings on the motion, Greer excluded key expert testimony by a former director of the economics bureau at the Federal Trade Commission that concerned the relevant geographic market for the antitrust claims. In 2012 Greer threw out both remaining counts, ruling that the retailers lacked proof of injury and failed to establish the relevant antitrust geographic market. The retail milk buyers appealed.
A U.S. Court of Appeals for the Sixth Circuit panel, in reversing Greer’s ruling on the count of a conspiracy not to compete, wrote that the trial judge used the wrong standard for excluding an expert witness, incorrectly believing the expert could consider only the facts in the case record. In fact, the panel ruled, experts are not thus limited.
Food Lion looked to Richard Wyatt Jr., litigation co-head at Hunton & Williams; R. Laurence Macon of Akin Gump Strauss Hauer & Feld; and Gordon Ball to lead the underlying case. Wyatt’s colleague Neil Gilman argued the retailers’ appeal. Paul Friedman, a Washington, D.C. partner at Dechert, argued for Dean Foods, and Steven Kuney of Williams & Connolly represented the Dairy Farmers. —Sheri Qualters, with R.M.