Deals & Suits

Corporate Counsel

08-01-2012

Facebook IPO

Facebook Inc. shares began trading on the Nasdaq Stock Market on May 18 after an $18.4 billion initial public ­offering that put a value of $104 billion on the social network and made Facebook the largest U.S. company ever at the time of its stock market debut. Its IPO was the second-largest ever ­completed by a U.S. issuer after that of Visa Inc., which raised $19.65 billion in its 2008 IPO [Deals & Suits, June 2008]. Facebook sold 484 million shares at $38 each; they opened at $42 on May 18 and closed the day at $38.23 before sinking in the weeks thereafter, stabilizing at around $33 a share for a capitalization of roughly $70 billion as of June 26, in a drop that greatly displeased investors.

The company sold about half of the stock, while existing Facebook owners accounted for the other half. CEO Mark Zuckerberg sold about $1.2 billion worth of stock in the IPO but retains a stake worth well above $10 billion and will continue to control the company he cofounded in a Harvard University dormitory room in 2004. Fenwick & West led the team advising Facebook.

Wall Street underwriters eagerly anticipated the company's IPO for several years. Shortly before the IPO, Facebook bought photo-sharing Web application Instagram for $1 billion in cash and stock and also paid Microsoft Corporation $550 million for patents the software giant had acquired from AOL Inc.

For issuer Facebook Inc. (Menlo Park, California)

In-House:

General counsel Theodore "Ted" Ullyot, deputy general counsel David Kling, deputy general counsel–intellectual property Sam O'Rourke, asso­ciate general counsel–corporate/securities/M&A Michael Johnson, and corporate counsel Cindy Leeper.

Fenwick & West:

Securities: Gordon Davidson, Jeffrey Vetter, and associates Dawn Belt, Ran Ben-Tzur, James Evans, and Lara Muller. Corporate: Richard Dickson, R. Gregory Roussel, senior associate Christian Lymn, and associates Matthew Karwoski and Morgan Sawchuck. M&A: Douglas Cogen. Tax: David Forst, Adam Halpern, and associate Natalie Pardo de Zela. Executive compensation and employee benefits: Scott Spector and associates Gerald Audant, Elizabeth Gartland, and Adie Sherwood. Intellectual property: Ralph Pais and associates Christopher Joslyn and Michael Riskin. Antitrust: Mark Ostrau. (All are in Mountain View, California, except for Seattle-based Evans and Karwoski and San Francisco–based Lymn, Cogen, Audant, Gartland, and Sherwood.) Davidson, Vetter, Belt, Ben-Tzur, Evans, Muller, and Dickson worked on the IPO. Roussel, Cogen, and Forst advised on the Microsoft deal, and Roussel also led a 16-lawyer team that worked on the Instagram deal.

Cooley:

Intellectual property: Adam Ruttenberg. (He is in Reston, Virginia.) Ruttenberg worked on the Microsoft deal.

For lead underwriters Morgan ­Stanley (New York), J.P. Morgan Chase & Co. (New York), and Goldman, Sachs Group Inc. (New York)

Simpson Thacher & Bartlett:

Capital markets: William Hinman, Daniel Webb, and associates E. Ryan Coombs, Ryan Nolan, Alexis Orenstein, Erin Rinn, and Andrew Sparks. Intellectual property: Jeffrey Ostrow and asso­ciates Arun Goel, Roxana Niktab, and Keren Siman-Tov. Executive compensation and employee benefits: Tristan Brown and asso­ciates Paul Koppel and Jennifer Wolff. Tax: Katharine Moir and asso­ciate Daniel Foster. Corporate: asso­ciate Jennie Getsin. (All are in Palo Alto except for New York–based Koppel and Getsin.) Simpson also represented Morgan Stanley as lead underwriter on the 2004 IPO of Google Inc.

For target Instagram (San Francisco)

Orrick, Herrington & Sutcliffe:

Emerging companies: Stephen Venuto, Daniel Yost, managing associate Joseph Perkins, senior associates Anik Guha and Scott Iyama, and associates Brian Day and Vivian Lo. M&A: Mark Seneca. Tax: Steven Malvey. Executive compensation and benefits: Christine McCarthy and managing associate Michael Yang. Antitrust: Antony Kim and of counsel Patricia Zeigler. Intellectual property: I. Neel Chatterjee. (All are in Menlo Park, California except for Seattle-based Guha; San Francisco–based Malvey; and Washington, D.C.–based Kim and Zeigler.)

For seller Microsoft Corporation (Redmond, Washington)

In-House:

Deputy general counsel Horacio Gutierrez and David Heiner, associate general counsel Chris Meyers and Matthew Penarczyk, assistant general counsel Greg Sivinski, and senior attorney Steven Fricke.

Covington & Burling:

Corporate: Bruce Deming, Kenneth Ebanks, and associates Bradley Chernin, Paula Domingos, Andrew Hall, and Ingrid Rechtin. Tax: Robert Heller and asso­ciate Sarah Burnham. Intellectual property: Evan Cox, Amy Toro, and associate Jeffrey Davidson. E.U. antitrust: Miranda Cole. (All are in San Francisco except for New York–based Heller, Washington, D.C.–based Burnham, and Brussels–based Cole.) Covington represented Microsoft on the intellectual property aspects of its $8.5 billion acquisition of Skype S.à r.l. [Deals & Suits, August 2011] and was its counsel on Nortel Networks Corporation's auction of its patent portfolio last June [Deals & Suits, October 2011]. Microsoft general counsel Brad Smith is a former Covington partner.

Cadwalader, Wickersham & Taft:

Antitrust: Jonathan Kanter, Charles "Rick" Rule, special counsel Amy Ray, and associates Ngoc Hulbig and Derek Moore. (All are in Washington, D.C.) Rule was Microsoft's antitrust counsel on the Skype and Nortel deals.

—David Marcus

* * * * * *

USA v. Abbot Labs

Abbott Laboratories agreed on May 7 to pay federal and state governments $1.5 billion to resolve criminal and civil liability related to the off-label promotion of its antiseizure drug Depakote. The deal, in which Abbott pleaded guilty to violations of the federal False Claims Act, is the second-largest pharmaceutical fraud settlement ever between the federal government and a drug company. It resolves four suits filed by whistle-blowers over fraudulent marketing practices for the pill.

Six former Abbott employees filed four whistle-blower suits between 2007 and 2010 in U.S. district courts in Virginia and Illinois. The suits were consolidated before the U.S. District Court for the Western District of Virginia in June 2011.

Abbott revealed in October 2011 that it had set aside $1.5 billion to cover the cost of a potential settlement in the matter. But it wasn't until May 7 that the parties involved announced a plea deal at a hearing before U.S. District Judge Samuel Wilson in Roanoke.

Under the terms of the deal, the drugmaker pleaded guilty to misbranding Depakote by promoting it for unapproved uses, such as controlling agitation and aggression in elderly dementia patients and treating schizophrenia. The U.S. Department of Justice said in a statement that Abbott Labs maintained a specialized sales force to market the drug to nursing homes.

Abbott also agreed to pay a criminal fine of $500 million, to forfeit assets of $198.5 million, and to pay $1.5 million to the Virginia Medicaid Fraud Control Unit. It will pay civil fines of $5.6 million to the federal government and $2.4 million to states that opt in to a process to resolve false claims. Abbott also will be subject to court-supervised probation and reporting obligations for Abbott's CEO and board of directors.

Whistle-blowers stand to receive $84 million under the False Claims Act's qui tam provision. A final approval hearing is set for September.

For plaintiff the United States of America

In-House:

At the U.S. attorney's office for the Western District of Virginia: Civil division chief Rick Mountcastle, U.S. Attorney Timothy Heaphy, and Assistant U.S. Attorney Randy Ramseyer. At the commercial litigation branch: Edward Crooke and Brian McCabe. At the consumer protection branch: Lauren Bell and Carol Wallack.

For relator Tamara Dietzler

Halunen & Associates:

Susan Coler. (She is in Minneapolis.)

For relator Meredith McCoyd

Grant & Eisenhofer:

Reuben Guttman. (He is in Washington, D.C.)

For relators Susan Mulcahy et al.

Law Office of James A. Backstrom:

James Backstrom. (He is in Philadelphia.)

For relator Thomas Spetter Jr.

Blank Rome:

W. Scott Simmer. (He is in Washington, D.C.)

For defendant Abbott Laboratories (Abbott Park, Illinois)

In-House:

Executive vice president, general counsel, and secretary Laura Schumacher.

Paul, Weiss, Rifkind, Wharton & Garrison:

James Brochin, Roberto Finzi, Theodore Wells Jr., and associates Corey Callahan, Aaron Delaney, Demian Ordway, Suzanne Skinner, Jennifer Vakiener, Erin White, and Caroline Youdan. (They are in New York; Skinner has since left the firm.)

Kirkland & Ellis:

Henry DePippo and Mark Filip. (DePippo splits his time between New York and Washington, D.C.; Filip splits his time between Chicago and Washington, D.C.) The firm was cocounsel.

—Tania Karas

* * * * * *

One Twelve Inc. Et Al. v. Sirius XM Radio Inc.

On April 16 a New York state court judge knocked out claims that the satellite radio company Sirius XM Radio Inc. owes shock jock Howard Stern's production company and his agent a combined $330 million in stock awards for helping Sirius surpass growth targets.

According to an April 16 order granting summary judgment, Sirius had a contract in which it promised to award Stern $75 million in common stock for meeting each of five different subscriber thresholds, with his agent Don Buchwald due an additional 10 percent.

When Sirius merged with rival XM Radio in 2008, however, the company's subscriber base suddenly ballooned by more than 9 million XM subscribers. One Twelve Inc. filed suit against Sirius XM in March 2011, putting the radio company on the hook for $300 million in stock payments for Stern and $30 million for Buchwald.

One Twelve's lawyers cited Sirius's own public statements after the merger welcoming the new "Sirius subscribers." Sirius, on the other hand, argued that the benchmarks only pertained to subscribers who specifically signed up for Sirius, and that there was a separate contract provision awarding Stern $25 million in the event of a merger with XM.

The court agreed with Sirius that, at the time of the Stern contract, "Sirius subscribers" clearly didn't refer to the influx of new customers from XM. The court also held that since the only time that XM customers were mentioned in Stern's contract was in the merger provision, the contract clearly intended to exclude XM subscribers from his payment plan.

On April 25, One Twelve appealed the decision.

For plaintiff One Twelve Inc. (New York) et al.

Hughes Hubbard & Reed:

Seth Rothman and associate Stephan Hornung. (They are in New York.)

For defendant Sirius XM Radio Inc. (New York)

Kramer Levin Naftalis & Frankel:

Peter Abruzzese, Gary Naftalis, Michael Oberman, and asso­ciate Jared Heller. (They are in New York.)

—Victor Li, with Tom Coster