The BLT: The Blog of Legal Times

Sen. Ted Stevens Resigns Committee Posts

Sen. Ted Stevens has issued the following response to today's indictment:

I have proudly served this nation and Alaska for over 50 years. My public service began when I served in World War II. It saddens me to learn that these charges have been brought against me. I have never knowingly submitted a false disclosure form required by law as a U.S. Senator.

In accordance with Senate Republican Conference rules, I have temporarily relinquished my vice-chairmanship and ranking positions until I am absolved of these charges.

The impact of these charges on my family disturbs me greatly.

I am innocent of these charges and intend to prove that.

Akin Gump Losing D.C. Partners to Hunton & Williams

Akin Gump Strauss Hauer & Feld has spent the month bleeding partners. Now, several more are heading out the door, bound for Hunton & Williams — including some big Washington names.

Legal Times has learned that the departing partners include Washington rainmaker Richard Wyatt Jr., as well as D.C. partners Joseph Esposito, Todd Stenerson, J. Steven Patterson, Michael O’Shea, and Michael Mueller. Texas Lawyer reported early this week that a total of nine partners are leaving, though not all are from the Washington office.

The departing partners cover a range of practice areas.

Wyatt’s firm biography lists him as a member of the firm’s executive committee, and Washington legal recruiters say he was one of the highest paid partners, if not the highest paid partner, in Akin Gump’s D.C. office. He focuses on antitrust, commercial litigation, class actions, and labor and employment matters.

Esposito focuses on commercial litigation and class actions. Stenerson also handles commercial litigation, but also focuses on antitrust matters. Patterson specializes in corporate governance matters, mergers and acquisitions, and corporate finance and securities. O’Shea practices in IP litigation, and also focuses on commercial litigation and biosciences work.

The departing partners did not return requests for comment. Akin Gump was not immediately available for comment, and Hunton & Williams declined to comment.

On July 15, Akin’s D.C. office lost another high profile rainmaker, Michael Madigan. After nearly 30 years with Akin Gump, the white-collar defender jumped to Orrick, Herrington & Sutcliffe. Read more on that departure in this recent Legal Times story.

The most recent group heading to Hunton follows a team of ex-Akin Gump labor and employment partners who joined Hunton July 1. Roland Juarez and Laura Franze left Akin to split their time between Hunton’s Los Angeles and Dallas locales. And Brett Burns and Fraser McAlpine joined Hunton’s San Francisco office.

Self-Appreciation Day

We gave yesterday’s internal report on how politics influenced hiring at the Justice Department our full attention, and darned if it didn’t give us a little love back.

On Page 125 (of 140), investigators recall a March 2007 e-mail sent by Legal Times to the Justice Department, requesting a response to allegations that politics had seeped into the selection of candidates for detail positions in the Executive Office for U.S. Attorneys. (Click here for the resulting story.)

When John Nowacki, the deputy director of that office, got wind of the e-mail, he forwarded it to the acting director at the time, Steven Parent.

“Steve -- Let’s talk about this tomorrow. It’s crap,” wrote Nowacki, who graduated from Regent University Law School, same as Monica Goodling, and rose through the DOJ ranks with her help.

Er, really? Crap?

The report documents several instances in which Goodling, who had been the atorney general's White House liaison, let politics influence her detail decisions -- as when she snubbed a veteran anti-terrorism prosecutor whose wife was active in Democratic politics.

And though Nowacki was aware of Goodling’s habits -- as he would later admit -- he drafted this response to our question: “The process to select candidates has nothing to do with party affiliation.”

He never sent us the statement, but he still maintains it was accurate, the report says. His logic? Goodling had already resigned; the statement used the present tense. The report still concludes Nowacki’s actions were “improper and constituted misconduct.”

This is even more exciting than that time Legal Times had a cameo in Michael Clayton.

Sen. Ted Stevens Charged

Senator Ted Stevens has been indicted.

In an early afternoon press conference, Department of Justice, FBI, and IRS officials announced a 7-count indictment alleging Stevens made false statements regarding the renovation and expansion of his Girdwood, Alaska home, which was raided by federal agents a year ago.

Stevens will be allowed to turn himself in, said Matthew Friedrich, Acting Assistant Attorney General for the Criminal Division, at the conference.

According to the indictment, Stevens accepted more than $250,000 in gifts and home renovations from VECO, an oil-services company, including the construction of a second story and a wrap-around deck. Friedrich said Stevens also participated in a 1999 car swap in which VECO CEO Bill Allen traded a new Land Rover, worth $44,000, for Stevens’ ’64 Mustang, worth less than 20 grand.

Allen also gave him a new “permanently attached, professional Viking gas grill and a new multi-drawer, stationary tool storage cabinet.” Stevens did not disclose the gifts on his Senate ethics form, according to the indictment.

Allen who pleaded guilty to bribery charges last year, is cooperating with prosecutors.

Prosecuting the case is Principal Deputy Chief Brenda Morris, trial attorneys Nicholas Marsh and Edward Sullivan of the Criminal Division's Public Integrity Section, and assistant U.S. attorneys Joseph Bottini and James Goeke from the District of Alaska.

At the press conference, Friedrich was guarded in answering a reporter’s question about why Stevens was only being prosecuted for false statements.

“We always need to pay attention to the statute of limitations,” he said. “I’m not going to comment beyond that.”

The 28-page indictment does not allege a quid-pro-quo arrangement with Alan or VECO. It does, however, state that in the time period he received VECO’s gifts, Stevens “received and accepted solicitations for multiple official actions” aiding VECO projects overseas, the company’s attempts to secure federal grants and contracts, and its efforts to construct a gas pipeline.

The indictment makes the Republican Senator the highest-ranking official to be charged in a corruption probe that has already netted 7 state senators, lobbyists, and oil services executives.

Stevens is up for election in November, a fact that Friedrich says did not affect Justice’s decision to bring charges. Referring to a memo by Attorney General Michael Mukasey reiterating Justice’s policy against unnecessary political interference earlier this year, Friedrich said “that policy has been followed to the letter in this case.”

Legal Times wrote about Stevens' legal troubles and Alaskan earmark lobbying last year. A call to Williams & Connolly's Brendan Sullivan, who was hired by Stevens shortly before the Girdwood raid, was not immediately returned.

Still under investigation are Stevens' son, Ben Stevens, and Alaska's only House Representative, Republican Don Young.

One question will be whether the indictment has ramifications for Stevens' committee assignments. Currently, he's the ranking member on the defense appropriations subcommittee and vice chairman of the Committee on Commerce, Science, and Transportation.

Subprime Class Actions Proliferate

For months, securities industry lawyers have been saying they’ve got a lot on their plate. Now a new report confirms it.

The report released by Cornerstone Research and Stanford Law’s Securities Class Action Clearinghouse quantifies a significant rise in litigation. In the first six months of 2008, the financial services sector produced 63 class action filings, more than the total number from all of last year. The overwhelming majority stem from subprime issues, and filings in the securities sector are currently outpacing all other types of class actions combined.

“Pretty much all of the big players have been sued,” says Stanford law professor Joe Grundfest. His advise to lawyers: “Tool up on your knowledge of credit markets.”

The uptick isn’t just in quantity. The report also tracks the market cap losses that sparked the suits, finding that the median loss associated with suits filed since the beginning of the year reached $243 million. To put
that in perspective, the report notes that losses haven’t been so high since the flurry of class actions between 2000 and 2002.

But the current wave of litigation should play out differently from those before it. For one, the bar to winning a class action is higher following a Supreme Court decision last year. Tellabs v. Makor Issues & Rights, authored by Justice Ruth Bader Ginsburg, raised the standard for a securities complaint to survive a motion to dismiss.

Grundfest downplays the significance of the ruling to the current crop of suits — “If you have a strong case that would have survived in the past, it would have survived today,” he says — but concedes that the recent behavior of the overall market may aide defense attorneys. Given that financial institutions tanked in quick succession, plaintiffs will have more trouble demonstrating that losses were the result of deception.

“These losses were marketwide phenomena,” Grundfest says. “The fact that a lot of people did not understand the risks they were taking will be used to argue that mistakes were made but fraud was not committed.”

D.C. Circuit Rules Trial Court Moved Too Quickly on Whole Foods Merger

A trial judge improperly dismissed a Federal Trade Commission challenge to the $565 million merger between Whole Foods Markets and Wild Oats Markets, the U.S. Court of Appeals for the D.C. Circuit ruled today.

The D.C. Circuit opinion, written by Judge Janice Rogers Brown, says the trial court underestimated the FTC’s likelihood of success on the merits and did not take enough time to determine whether the merger violated antitrust law.

“The court should have taken whatever time it needed to consider the FTC's evidence fully,” Brown wrote for the divided court. “The district court must independently exercise its discretion considering the circumstances of the case, including the fact that the merger has taken place.”

Whole Foods completed its purchase of Wild Oats less than two weeks after U.S. District Judge Paul Friedman denied an FTC request for an injunction to block the merger last August. Now that the two companies are well on the way to becoming fully integrated, the options for how to address the FTC’s concerns may be limited.

“Rather than trying to unscramble the eggs and saying the two chains can’t merge, the district court may focus on specific locations where there are only two stores and require the chains to sell off one store to a third party,” says Jane Willis, a partner in Ropes & Gray’s antitrust practice in Boston.

“It wouldn’t surprise me if they came to a settlement instead of further litigating the matter,” she adds.

The combined companies have almost 300 stores. Willis says there are 18 cities where the FTC contends divesting some stores may be required to avoid creating a monopoly.

According to Willis, the D.C. Circuit opinion places an unusual emphasis on the stores’ core customers, who would presumably continue to frequent the premium natural and organic food stores even if their prices rose, instead of their marginal customers, who would seek out alternatives if Whole Foods increased its prices.

Willis dubs this the major takeaway from the opinion: “With respect to market definition, people historically think about the marginal customers and where they go in the event of price increases. This marks an increased emphasis on the core customers.”

This Week in Points of View

The legal battle continues over gun rights in the District, as Dick Heller, the victorious plaintiff in the Supreme Court case, filed suit on Monday over the D.C. Council's latest gun regulations.

Such litigation was entirely expected, writes professor Ilya Somin. Mere judicial recognition of a constitutional right does not ensure its protection, he argues. The next set of gun cases are the ones that will determine if Heller's Supreme Court victory "has any truly significant impact."

The prominent statesmen who make up the National War Powers Commission claim that the Constitution ambiguously divides the war power between the president and Congress. Not so, contends Louis Fisher: The power belongs to Congress, and the commission's proposed War Powers Consultation Act would undercut popular government and the rule of law.

Morning Wrap

Aides Used Politics in Hires: A Department of Justice report revealed aides to former Attorney General Alberto Gonzalez used illegal hiring tactics by using job candidates' politics to guide hires for several high-level positions, including immigration judges and U.S. assistant lawyers, according to The New York Times.

Ban on Toxins: The Washington Post reports members of Congress have decided to ban a group of toxins that are often found on toys and believed to cause health problems. The ban reveals a shift in favor of consumers in their ability to successfully challenge the chemical industry.

New Lawsuit Over D.C. Gun Legislation: The Associated Press reports Dick Heller, the plaintiff in the Supreme Court case that ended the District's 32-year-old gun-ban, filed a new lawsuit against the city that claims its new gun legislation continues to violate a person's right to own a gun for protection. The lawsuit claims the new gun regulations make it unreasonably difficult for D.C. residents to store a gun in a home for self-defense.

Maryland Death Penalty Commission Holds First Meeting: A Maryland commission that is examining the state's death penalty convened for the first time yesterday in the first of several meetings, according to The Washington Post. The commission will make a recommendation to the governor and state about the future of capital punishment in Maryland. In the first meeting, the commission was exposed to statistics that suggest racial and jurisdictional disparities in how the death penalty is applied and heard testimony from the Unabomber's brother.

Robert Novak Diagnosed With Brain Tumor

Political columnist Robert Novak, 77, says he has been diagnosed with a brain tumor and will be taking a leave of absence as he pursues treatment, The Chicago Sun-Times reports.

In a statement, Novak said, “On Sunday, July 27, I was diagnosed with a brain tumor. I have been admitted to Brigham and Women’s Hospital in Boston, where doctors will soon begin appropriate treatment. I will be suspending my journalistic work for an indefinite but, God willing, not too lengthy period.”

Last week, Novak struck and injured a pedestrian while driving his Corvette in Washington, D.C. Novak was issued a $50 citation.

A spokesman for Novak said it's "too early to tell" whether the accident was linked to his brain tumor.

Chamber Attacks Plaintiff's Bar on "Earmarks"

Whatever your opinion of the U.S. Chamber of Commerce's evergreen battle with the plaintiffs bar, it's hard not to admire the metaphorical flourish of its latest advertising campaign.

A new Chamber site, TrialLawyerEarmarks.com, depicts a thicket of vines sprouting and strangling the U.S. Capitol. Each one represents a legislative front where the "trial lawyer agenda" is on the march.

Less metaphorically, the site acts as a clearinghouse for all the Chamber’s lawsuit-related legislative gripes. Anti-mandatory-arbitration legislation targeting the credit card industry, Consumer Product Safety Act reauthorization, and carve-outs on federal pre-emption — it's all there, along with a dozen other bills.

"The out of control U.S. lawsuit system already costs the average American family of four $3,200 a year," the Chamber claims, extrapolating from a Towers Perrin study that counts the losses from tort litigation (though not the gains).

One thing that caught Influence's eye about the new media campaign is the Chamber's use of the word "earmarks" to describe non-monetary legislative provisions rather than congressionally directed funding for specific projects. Most of the objectionable items of legislation aren’t earmarks at all — just measures that are allegedly of benefit to an interest group. Evidently, the Chamber hopes the term's stigma can rub off.