ATTORNEY FEES

DEWEY BANKRUPTCY LAWYERS EARN A SCOLDING FROM JUDGE

NEW YORK — Advisers working on the Dewey & LeBoeuf bankruptcy endured a round of criticism on January 24 from the judge overseeing the defunct firm’s Chapter 11 case.

Taxi rides around New York, pricey hotel stays and vague time entries all got cut as U.S. Bankruptcy Judge Martin Glenn approved preliminary fee requests from a dozen law firms, accounting shops and other advisory outfits.

“The issue is, what’s overhead and what’s compensable?” Glenn asked. Overall, few of the fee requests escaped at least some criticism, although Glenn ultimately approved most of them on an interim basis. In total, $14.1 million in bills have been submitted for time spent working on the bankruptcy.

BUSINESS LAW

FIRST SETTLEMENT REACHED IN FANNIE, FREDDIE CASES

NEW YORK — The Federal Housing Fin­ance Agency, the conservator for Fannie Mae and Freddie Mac, has reached the first settlement in the massive litigation campaign it launched against Wall Street two years ago.

The agency on January 22 voluntarily dismissed its case against General Electric Co., which owns the financial services firm GE Capital, after the parties notified U.S. District Judge Denise Cote that they’d reached a resolution.

The deal put an end to allegations that GE Capital duped Freddie into buying $550 million in mortgage-backed securities by misrepresenting the quality of the underlying loans. The agency didn’t disclose the terms of the settlement, which also resolved the agency’s claims over the same offerings against Morgan Stanley and Credit Suisse Group A.G.

CIVIL PROCEDURE

CASE’S COMPLEXITY JUSTIFIED A FOUR-MONTH FILING DELAY

NEW YORK — A four-month delay by a law firm in bringing a motion seeking permission to file a late claim was not unreasonable given the complexity of the medical malpractice action at issue, a state judge has ruled.

New York Court of Claims Presiding Judge Richard Sise said that while he could find no precedents setting time frames for a law firm’s evaluation of the viability of a malpractice case, the four months that it took Duffy & Duffy of Uniondale, N.Y., to review the circumstances surrounding the death of Joan Abruzzo did not appear excessive.

Attorneys must be allowed reasonable time to “gather enough information to make an intelligent assessment” of a malpractice case, including consultation with a medical expert, Sise said.

CIVIL RIGHTS

CITY’S OBJECTION TO JAIL ­SETTLEMENT DON’T PERSUADE

NEW ORLEANS (AP) — A federal judge has granted preliminary approval of an agreement between the U.S. Department of Justice and the city of New Orleans that’s designed to clean up the city-funded jail.

The consent decree requires Orleans Parish, La., Sheriff Marlin Gusman to provide adequate medical and mental health care and overhaul policies on use of force and rape prevention, among other reforms. U.S. District Judge Lance Africk approved the terms on January 22.

The city, which pays for operations at the jail, objected and is at financial odds with Gusman. Mayor Mitch Landrieu has said the reforms suggested within the decree could cost as much as $17 million and could “bankrupt the city.”

CONSTITUTIONAL LAW

CHALLENGE TO MONUMENT SURVIVES MOTION TO DISMISS

PHILADELPHIA — A constitutional challenge to a six-foot-tall marble monument to the Ten Commandments that stands in front of Valley High School in New Kensington, Pa., has survived a motion to dismiss.

Noting a split among the circuits regarding which of the four tests from the U.S. Supreme Court should determine whether a “passive display” violates the establishment clause, U.S. District Judge Terrence McVerry said the factual record must be further developed before he can rule.

“Discovery will also afford defendant the opportunity to inquire deeper into whether particular hypersensitivities exist such that the viewpoint of a reasonable observer would differ, uncover the historical background of the monolith, and confirm the claimed nature of the content on the display,” he said.

JUDGE DELAYS HER ORDER TO END SUSPICIONLESS STOPS

NEW YORK — A federal judge has stayed her ruling directing the New York City Police Department to halt suspicionless stops for trespass of people at Bronx buildings whose owners have enlisted in a patrol program.

U.S. District Judge Shira Scheindlin issued an injunction against the practice on January 8 but delayed ordering relief pending a March trial in a class action alleging widespread violations of the Fourth Amendment in police stop-and-frisk policies on city streets.

Scheindlin said she was aware that “administrative inefficiencies may result from ordering certain remedies now and potentially ordering different remedies” after a consolidated remedies hearing in the two cases.

CONSUMER PROTECTION

CLASS ACTION PROCEEDS OVER FORD’S RUSTING FUEL TANKS

NEWARK, N.J. — Ford Motor Co. may have to stand trial in a putative class action over rusting fuel tanks in certain of its vans and pickup trucks.

U.S. District Judge Dickinson Debevoise declined to dismiss claims for breach of express warranty and the implied covenant of good faith and fair dealing, Although he dismissed counts of common-law fraud, violation of the New Jersey Consumer Fraud Act and breach of the implied warranty of merchantability.

The suit alleges the tanks suffer from delamination, in which their inner lining flakes off, allowing rust particles to lodge in the fuel lines, fuel filter and fuel injection system. 

CRIMINAL LAW

STANFORD CRONY SENTENCED IN MASSIVE FRAUD SCHEME

DALLAS — A federal judge on January 18 sentenced James Davis, former chief financial officer of Stanford International Bank and Houston’s Stanford Financial Group, to five years in prison in connection with an alleged conspiracy to defraud investors who bought about $7 billion in certificates of deposit sold through the bank.

U.S. District Senior Judge David Hittner also imposed a “personal money judgment” of $1 billion against Davis, which federal prosecutors described in a press release as an “ongoing obligation for Davis to pay back criminal proceeds.”

Davis pleaded guilty in 2009 to three criminal charges and cooperated with the government in its prosecution of R. Allen Stanford, former chairman of the financial group, and other executives.

EMPLOYMENT LAW

INSURANCE AGENTS LOSE BID TO REINSTATE PRUDENTIAL CLASS

NEWARK, N.J. — Prudential Financial Inc. insurance agents who claim they lost overtime pay because they were misclassified as independent contractors have lost another round in their attempt at bringing a class action.

U.S. District Judge Dennis Cavanaugh found the proposed class, divided into 18 subclasses based on location and claim type, would demand unmanageable, individualized inquiries.

The suit was filed in September 2006 on behalf of about 3,200 current and former agents classified by Prudential as independent contractors, exempt from state and federal overtime requirements. The class was conditionally certified in 2008, but Prudential’s motions to decertify the class and dismiss the Fair Labor Standards Act claims were granted in February 2010.

PRODUCTS LIABILITY

$10 MILLION VERDICT UPHELD FOR GIRL BLINDED BY MOTRIN

PHILADELPHIA — A state judge said there were no errors of law that should lead to the overturning of a $10 million verdict for a young girl whose use of over-the-counter Children’s Motrin left her blind in one eye.

Philadelphia Common Pleas Judge Nitza Quiñones Alejandro sustained $10 million in compensatory ­damages against Johnson & Johnson’s McNeil-PPC Inc. on the claim that the drug maker failed to adequately warn of the risks of taking over-the-counter Children’s Motrin.

The jury did not award punitive damages nor did it find that the medication was negligently designed. The girl also suffered damage to her reproductive system and permanent disfigurement of much of her skin.