The BLT: The Blog of Legal Times

The Morning Wrap

Surveillance reform: President Obama this morning will deliver a speech at the U.S. Department of Justice that outlines reform of government surveillance efforts. Obama is expected to announce an overhaul of the controversial National Security Agency bulk phone data collection program. Sens. Richard Blumenthal, Ron Wyden and Mark Udall wrote an op-ed for POLITICO trumpeting the push to reform the Foreign Intelligence Surveillance Court.

Voting rights: Federal lawmakers Thursday unveiled their effort to fix the Voting Rights Act following a U.S. Supreme Court ruling that gutted a key provision, The National Law Journal reports. Coverage in NPR here, and USA Today here.

Cell phone searches: The U.S. Supreme Court today could announce whether the justices will review the scope of Fourth Amendment protection concerning police searches of cell phones. The Associated Press reports: "The Supreme Court decided 40 years ago that police don't need a search warrant to look through anything a person is carrying when arrested. But that was long before smartphones gave people the ability to take with them the equivalent of millions of pages of documents or thousands of photographs."

The Morning Wrap

Stronger Economy: Federal Reserve Chairman Ben Bernanke on Friday painted a sunny picture for the U.S. economy in 2014, saying that numerous obstacles to growth in the past year seem to be subsiding, The Associated Press reports.

Federal Circuit: The U.S. Court of Appeals for the Federal Circuit is bracing for a flood of appeals in 2014, The Recorder reports.

BlackBerry Suit: BlackBerry Ltd. has sued Ryan Seacrest's Typo Products LLC, claiming the "American Idol" host's company copied designs for a keyboard case, Bloomberg reports.

The Morning Wrap

Defended: The U.S. Department of Justice is expected this morning to defend the Affordable Care Act's contraceptive mandate in a dispute that reached the U.S. Supreme Court on New Year's Eve. Justice Sonia Sotomayor then granted a temporary injunction in the suit, brought by a group of nuns. She ordered the government to respond by 10 a.m. today.

Licensed: The Recorder reports: "In First for Nation, Undocumented Immigrant to Become Lawyer in California." The Los Angeles Times has coverage here and The New York Times here. The applicant, Sergio Garcia, wrote this op-ed in September for The National Law Journal.

Departed: The New York Times spotlights Gary Gensler's leadership of the Commodity Futures Trading Commission. "Even as Mr. Gensler’s aggressive streak thrust the once-backwater agency into the front lines of reform, it also maddened colleagues and complicated his legacy. And now that his tenure is ending on Friday, the agency has reached an inflection point, prompting Wall Street to hope for a friendlier regulator," The Times reported. Timothy Massad was nominated in November to replace Gensler as chairman.

Paid: The Washington Post reports: "Virginia taxpayers may continue to foot the bill for two private law firms representing Gov. Robert F. McDonnell and his staff in connection with state and federal criminal investigations, even after the governor leaves office Jan. 11." Lawyers from Jones Day and Holland & Knight have advocated for McDonnell.

Senators Call for Hearing over Target Data Breach

Following the revelation this month about Target Corp.'s data breach, Democratic Sens. Mark Warner of Virginia and Robert Menendez of New Jersey plan to put companies' fraud and identity theft-prevention practices under the microscope.

Warner and Menendez on Monday urged the Senate Banking Committee to hold a hearing on whether businesses are doing enough to protect consumer data and if stronger cybersecurity standards are needed. The senators wrote in a letter to panel Chairman Tim Johnson (D-S.D.) that "consumers’ interests must come first."

"With our economy and financial sector becoming increasingly information-based and data-reliant, consumers depend on the companies and financial service providers with whom they do business to protect their sensitive information," the senators wrote. "As companies collect, store, and process ever-greater quantities of consumer data, they—and our regulators—must become even more vigilant against breaches and improper use."

This Week in The National Law Journal

Court Revives Claim to Art: Amanda Bronstad looks at the U.S. Court of Appeals for the Ninth Circuit ruling that breathed new life into a dispute over claims of art taken by the Nazis. "A panel concluded the claims, brought under a California law, did not infringe the federal government's exclusive power to conduct foreign affairs — the so-called foreign affairs doctrine," according to the report.

Second Thoughts on False Claims: Advocates for amending the False Claims Act -- a powerful tool for the U.S. Justice Department -- are pitching reforms on Capitol Hill, Andrew Ramonas reports. Among those lawyers who are pushing for change was a familiar face at the Justice Department: David Ogden, a former deputy attorney general under Eric Holder Jr. "I hope you look at [the FCA amendments] hard, think about them and do the right thing," Ogden said at a recent discussion on the Hill.

Banks Draw Out Their Knives: Legal challenges to the new Volcker Rule appear certain, Jenna Greene reports this week. "When federal financial regulators last week adopted the massive Volcker Rule, it didn't mean their work was finished. If anything, lawyers say the work is just beginning," Greene writes. One lawyer remarks: "The implications [for] banks are so widespread that it is highly likely there will be challenges to the final rule on a number of grounds."

Judge Approves $153 Million Settlement in Fannie Mae Securities Class Action

A Washington federal trial judge today approved a $153 million settlement between Fannie Mae and shareholders who sued the mortgage giant for securities fraud.

U.S. District Judge Richard Leon found the settlement and plan for distributing it among the more than one million class members was "fair, reasonable and adequate." The case is the largest securities class action settlement in the D.C. federal courts since modern securities litigation laws went into effect in 1996.

The order ends nearly a decade of litigation against Fannie Mae and its auditor, KPMG LLP. The class members, led by the Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio, accused Fannie Mae and KPMG of defrauding shareholders by manipulating earning and violating guidelines known as generally accepted accounting principles.

D.C. Avoids Arbitration in $117 Million Lawsuit Against Bank of America

The District of Columbia can move forward with a $117 million lawsuit against Bank of America N.A. in connection with an embezzlement scheme carried out by a former city employee, the D.C. Court of Appeals ruled last week.

Harriette Walters, a former manager in the city's tax office, is serving more than 17 years in jail after pleading guilty to issuing $48 million in fraudulent property tax refunds. The District sued Bank of America in 2008, accusing it of failing to take steps to protect the city's money.

Bank of America argued its contract with the city required the dispute to go to arbitration in North Carolina. A trial judge disagreed, and on Nov. 27, the appeals court found the city wasn't bound by any arbitration or forum-selection clauses. The court released the opinion yesterday.

Justice Dept. Sued Over Access to Non-Prosecution Agreement

The U.S. Department of Justice is being sued over its refusal to publicly disclose a $2 million non-prosecution agreement prosecutors reached with a Houston-based tree services company that employed undocumented workers.

The U.S. Attorney's Office of the Southern District of Texas issued a news release in May 2012 revealing the deal between prosecutors and ABC Professional Tree Services Inc. The company agreed to forfeit $2 million in revenue that flowed from the use of undocumented workers between 2006 and 2011, DOJ officials said.

But prosecutors will not disclose a copy of the agreement between the government and ABC, according to a Freedom of Information Act lawsuit filed Nov. 26 in U.S. District Court for the District of Columbia. The Thomas Jefferson Center for the Protection of Free Expression represents the challenger, Jonathan Ashley, a business reference librarian at the University of Virginia School of Law.

Ashley and Brandon Garrett, a criminal justice professor at the law school, run a web site that features hundreds of deferred prosecution agreements and non-prosecution agreements. Garrett in 2007 published an article in the Virginia Law Review that explored these pre-trial deals—where the government often collects a fine, and demands remedial action, in exchange for not pursuing criminal charges.

Kind Words for 'No Admit' Securities Settlements

The former head of enforcement for the U.S. Securities and Exchange Commission today defended settlements that allow financial institutions to forego admissions of wrongdoing, saying they permit quicker resolution of cases and put money back in investors pockets.

Robert Khuzami, who spent four years as enforcement director, defended the commission's long-standing "no admit, no deny" practice. Any person reading a newspaper article about a big SEC settlement, he said, would not walk away with the notion the company making the deal did nothing wrong. Khuzami described what he called the "whole package" of enforcement actions.

"I didn’t think there was much doubt in most cases that a defendant engaged in wrongdoing when you had a 20-page complaint, you had them writing a big check, you may well have prosecuted an individual in the wrongdoing," Khuzami said while addressing the state of securities enforcement during The National Law Journal Regulatory Summit in Washington.

Khuzami, who joined Kirkland & Ellis this year as a partner in the firm's government and internal investigations practice, didn't make a resounding endorsement of the SEC's new position that companies, in certain instances, now will be required to admit wrongdoing. The move, he said, raises a myriad of questions and could pose significant challenges.

Government Contractors Prepare For Rough Regulatory Roads

By Alex Zank

Douglas Manya, vice president at Booz Allen Hamilton Inc., today predicted a less rosy landscape for government contractors.

"The last 10 years were rather flush for contractors, [but] those times aren’t going to come back very soon," he said in a panel discussion during The National Law Journal Regulatory Summit. Contractors, he said, "are going to have to be more thoughtful of what they sell. Manya added: "There will be a winnowing.”

Manya’s statements were very much in line with the rest of the panel discussing the future of U.S. government contracting. The panelists agreed that political uncertainty, along with fiscal restraint and regulatory pains, require contractors to innovate.

Contractors face a “trifecta of fiscal woes,” said Elizabeth Ferrell, partner at McKenna Long & Aldridge. Contractors are dealing with the sequestration, the recent debt ceiling debate and potential fiscal issues looming for 2014—potentially including another budget showdown.