Good night, sleep tight,
Don’t let the bedbugs bite.
And if they do
Then take your shoe
And knock ‘em ‘til
They’re black and blue!



Of all the things that go bump in the night, bedbugs might be the creepiest. But not so creepy, apparently, that they lead automatically to punitive damages.

Manhattan judge Judith J. Gische has, uh, scratched a request for punitive damages by two bedbug plaintiffs, while allowing their negligence claims to go forward. Debra Grogan and her daughter, Dana, both Maryland residents, were seeking $2 million in compensatory damages and an unspecified amount of punitives for bites they allegedly sustained during a two-night stay in New York City’s Milford Plaza in 2003. Click here for the gory details of the Grogan case, and here for a 2006 LB post on a different bedbug bite case.

In ruling out punitive damages, Gische distinguished a precedent on the grounds that, in a past case where the plaintiffs had won punis, the hotel in question had been aware of the bedbugs but decided not to fumigate the premises. Milford Plaza, by contrast, had under contract a pest control company, which, three weeks prior to the Grogan’s stay, had been asked to exterminate bedbugs in two rooms near the room reserved by the Grogans.

However, Judge Gische wrote, the Grogans had presented enough evidence that the hotel had “constructive notice” of the need to fumigate room 1540 to deny the defendants’ summary judgment motion. The case must go to trial, Gische ruled, because Novak’s affidavit “set forth genuine issues of fact about the life span of bedbugs, how they migrate and whether these factors should have been (or were) taken into consideration by the defendants in how rooms were treated following bedbug complaints by other guests.”

Milford Plaza is represented by Andrew J. Funk of Smith Mazure, while the Grogans are represented by Hayley R. Greenberg of Greenberg & Merola.

While we’d be honored if Justice Scalia read the Law Blog, we sure hope he didn’t have us in mind yesterday. In D.C., at a conference of the Food and Drug Law Institute, Scalia reportedly took the news media to task for failing to focus on the text of the laws the High Court interprets.

According to the AP story, he cited news accounts of February’s 8-1 decision in Riegel v. Medtronic, a preemption case that addressed whether the manufacturer of a medical device approved for sale by the FDA can be sued for damages under state law if the device injures a patient. (Click here for past LB coverage.) The Court sided with Medtronic. Scalia wrote the opinion.

In his talk, Scalia singled out for criticism a New York Times editorial on the case headlined “No Recourse for the Injured.” He said the media often make it appear as though the Court is reaching policy judgments on its own rather than basing its decisions on the text of the law at issue.

In some instances, said Scalia, the news media leave the impression that no ruling based on the text of a law “is even possible.”

A couple weeks ago, we posted on a survey that sized up the salaries of in-house lawyers. The results surprised us a bit. While the survey was geographically limited to Southern California, the salaries weren’t as eye-popping as we expected.

But of course there are other benefits to working in-house. You get to dial back your practice a bit. The hours are better and there’s less stress than there is in the deadline-crazed world of law firms, right? Perhaps not, according to the Fulton County Daily Report, and that change in in-house practice is leading many corporate counsel back to firms.

“It used to be a one-way street from law firm to in-house,” said Frederick J. Krebs, president of the Washington-based Association of Corporate Counsel. “Now you see much more of people going both ways.”

The piece cites a report from the Minority Corporate Counsel Association. “Historically, corporate law departments focused on handling of routine legal matters while more complex legal issues were managed by outside law firms.” The report quotes an unnamed GC saying, “For many years, the role of in-house counsel was to act as a conduit between inside business people and outside counsel. Their role lasted only so long as it took to get a matter from their in-box to their out-box.”

But now, according to the MCCA the typical corporate law department has evolved from an intermediary between the company and its law firms to a full-service legal team. That change, the reasoning goes, is upping the status of in-house lawyers and making them more attractive to firms.

“It comes out wrong when I say this,” Krebs said, “but there’s not the sitgma there used to be. I mean, 20 or 30 years ago, people used to look at the inside practice differently.”

LB Readers: Corporate counsel among you? How is the role of the in-house lawyer changing?

This morning, the writing was on the wall — the planned privatization of Clear Channel Communications was on the rocks, with the private equity firms and banks backing the transaction failing to resolve differences over final financing terms.

This afternoon, the private equity firms — Thomas H. Lee and Bain Capital — went on the litigation offensive, filing lawsuits in Texas and New York against a syndicate of Wall Street banks in an effort to force them to fund the firms’ $19 billion buyout, according to a dispatch from the Journal’s Matthew Karnitschnig and our very own law blog alumnus Peter Lattman.

Friedman Kaplan Seiler & Adelman filed the New York suit (click here). The firm, with about 50 lawyers, sometimes gets a piece of high-profile cases where the mega law firms that regularly represent banks of the ilk sued here feel conflicted out of suing them, for ethical or biz reasons.

The pair of suits, one filed in Bexar County, Texas and another in New York’s State Supreme Court, charge that the banks — Citigroup, Morgan Stanley, Credit Suisse, The Royal Bank of Scotland, Deutsche Bank and Wachovia — breached a contract with the private equity firms to fund the Clear Channel deal. Clear Channel joined the suit in Texas, where it is based.

The banks “pretended to negotiate the final documentation in good faith,” the New York lawsuit states, “but in reality inserted into the final documents poison provisions” squarely contrary to the terms of the agreement.

The firms’ decision to sue, which came after a breakdown in negotatiations over the finanicing terms on the deal, could undo the transaction just days before it was supposed to close.

Flight Delayed? Too bad! Last year, New York lawmakers passed the nation’s first so-called “bill of rights” for air passengers after severe winter weather left some travelers stranded on board planes for hours on the tarmac at JFK. Nice try, New York!

Under the banner of federal preemption, the Second Circuit threw out the laws, which required airlines to provide food, water and clean toilets to travelers who are delayed on-board a plane for more than three hours. The three-judge panel held that the Airline Deregulation Act preempts states from regulating activities by the nation’s air carriers. Here’s the story.



Can Female Lawyers Learn from Hillary? Kathleen Wu, a partner at Andrews Kurth in Dallas, published a piece today on Hillary’s lessons for women attorneys. Given the daily criticism she gets, Wu writes, “to be able to get up every morning and convince herself that not only does she deserve to be a U.S. senator but that she also has every right to be president is, frankly, awe-inspiring. . . .That’s something women attorneys should remember the next time they feel shortchanged by a colleague or don’t get deserved appreciation.” Clinton’s other lessons, writes Wu, range from the behavioral (”a bit of femininity doesn’t hurt”) to the attitudinal (”Fear not the B-word”) to the sartorial (”well-made, flattering suits = good; figure-hugging, cleavage-showing suits = not so good”).



KPMG, On Appeal: Meanwhile, LB colleague Amir Efrati was at the Second Circuit today, listening to prosecutors’ arguments that Judge Lewis Kaplan’s controversial ruling in the so-called KPMG criminal-tax case should be overturned. Judge Kaplan had dismissed indictments against 13 former execs of the accounting firm after finding that the government violated their constitutional rights to counsel and due process by pressuring the company not to pay the individuals’ legal costs. In Tuesday’s hearing, the government was appealing that decision.

According to Efrati, two judges on the three-judge panel expressed skepticism about the government’s postion (the third was quiet). Here’s his report.

When we posted last week on the libel-in-fiction claim of lawyer Ravi Batra — whose suit against the creators of a “Law & Order” episode survived summary judgment — we got to thinking: If it’s so difficult to sue for alleged defamation in a fictional TV show, it must be a lot easier when the alleged defamation appears in a purportedly non-fictional documentary.

But a recent ruling, in a different libel case, challenges that notion. In a March 21 decision, Aida Delgado-Colon, a district judge in Puerto Rico who was assigned to a three-judge panel on the First Circuit Court of Appeals, wrote that Michael Moore’s 2004 documentary, “Fahrenheit 9/11,” did not defame Peter Damon, a former U.S. Army Reserve sergeant. Click here for the opinion, and here for the NLJ story.

The clip, taken from an NBC Nightly News interview, portrays Damon discussing his war injuries and treatment. Damon, whose claims against Moore included appropriation of name, portrait and picture and intentional infliction of emotional distress, argued that viewers of the film were led to believe that he supported Moore’s anti-war agenda.

But Judge Delgado-Colon held that the film, one of the few documentaries to ever win the top prize at the Cannes Film Festival — the Palm d’Or — couldn’t be “reasonably construed as a statement promoting disloyalty or denouncing either the Commander-in-Chief or the medical treatment received by veterans.”

Damon’s lawyer, Philip D. Moran, reportedly said Damon is considering considering filing for cert at the U.S. Supreme Court.

Law Blog headquarters was bombarded with legal news this afternoon. Here’s an afternoon roundup of the best:



“Even Children Understand That Lying is Wrong” Those were the words of Wayne County Prosecutor Kym Worthy, who today announced that 12 criminal charges — including obstruction of justice, misconduct and perjury — were filed against Detroit Mayor Kwame Kilpatrick and his former Chief of Staff Christine Beatty in connection with their alleged affair, a/k/a the “text message scandal.”

Here’s the story, and here’s a press release detailing the charges.

“Our investigation has clearly shown that public dollars were used, peoples lives were ruined,” said Worthy, downplaying the arguments of those who claimed that the mayor’s alleged affair with his chief of staff was a “private matter.” Worthy’s been investigating claims they lied under oath during a whistle-blower trial last summer when they denied having a romantic relationship. Published excerpts of sexually explicit text messages left on Beatty’s city-issued pager in 2002 and 2003 appear to contradict their testimony.

“I look forward to complete exoneration once all the facts surrounding this matter have been brought forth,” Kilpatrick said in a prepared statement.



“Hillary: The Movie” Back in January, we blogged on a fun little lawsuit about whether a 90-minute movie excoriating Hillary Clinton was a campaign advertisement, or not. If it is, the film would have to contain a disclaimer about its funding and restrictions on its broadcast. In the case, heard before a federal three-judge panel that hears campaign-finance cases, Citizens United, a conservative group, argued that “Hillary: The Movie” and related TV ads are not political spots, even though she’s a presidential candidate.

James Bopp, the lawyer for Citizens, argued the movie should be considered “issue-oriented” speech. But he failed to convince the panel that viewers aren’t urged to vote for or against the Democrat. The panel ruled that the film ran afoul of McCain-Feingold.

Today, our colleagues over at WSJ’s Washington Wire are reporting that the Supreme Court decided it didn't have jurisdiction to hear Citizens United's appeal. Campaign finance law allows a direct appeal to the Supreme Court on some constitutional issues but the court, save for Justice Stephen Breyer, decided that it didn't apply in this case.



XM-Sirius Merger Gets Half-way Home: The DOJ approved the merger of satellite radio companies Sirius and XM, a deal that was signed up more than a year ago and still requires approval from the FCC. While it’s unlikely that the FCC will go against Justice’s ruling, this WSJ story reports that it has the power to impose conditions that might make the merger slightly more palatable to the groups lined up against it. A ruling from the FCC is expected in coming weeks.

But while the FCC deliberates on XM-Sirius, it will not be seeing payment any time soon of a $91,000 indecency fine it levied recently against Fox television for a 2003 episode of “Married by American,” which featured strippers and whipped cream. In a statement, Fox said it believes the FCC’s decision that the show in question was indecent was “arbitrary and capricious, inconsistent with precedent, and patently unconstitutional.” Last week, the Supreme Court announced it will take up a challenge of the agency’s indecency authority — marking the first time in 30 years that the Court has addressed the issue of broadcast indecency.



Veiled Accounting at Biovail? Today, the SEC charged the Canadian pharma company, and some of its top execs, with accounting fraud, reports the WSJ. Biovail agreed to pay $10 million to settle the matter without admitting or denying the claims. The SEC claimed Ontario-based Biovail overstated earnings and hid losses to deceive investors and meet quarterly and annual earnings targets. When that failed, the SEC said, “Biovail actively misled investors and analysts about the reasons for the company’s poor performance.”

According to a statement, the SEC’s civil complaint alleges that Biovail engaged in three different accounting-fraud schemes between 2001 and 2003, including shifting $47 million of R&D expenses from its books; using a phony bill-and-hold transaction to record $8 million of revenue; and deliberately understating foreign-exchange losses. Former CEO Eugene Melnyk, and former CFO Brian Crombie, are contesting the charges, as are Biovail finance chief Kenneth Howling and Controller John Miszuk.

The early word on the upcoming summer associate season is in, and the news, while not terrible, isn’t great. The 2008 summer class at Kirkland will be thinner than last year’s by about 17%, according to the NLJ, while summer classes at Skadden, Latham, Sidley Austin and Jones Day will contain between 5% and 8% fewer summers than their 2007 classes.

But if you’re among the lucky who managed to snag yourself a summer full of virtual video gaming and bottomless iced teas, here’s the $3,000-per-week question: With the economy stumbling toward possible recession, will firms — come August — find a mismatch between their stockpile of summer associates and their demands for 2009 first-years?

“Doing good work and behaving appropriately will be more important than ever,” Bruce Elvin, the associate dean at Duke Law School and director of career services, told the NLJ. On-campus recruiting remained robust last fall at Duke, he said, but the recent economic upset has created some jitters among would-be associates. “Over the next few weeks, we’ll get a better sense of the signals.”

But some say cutting partners, rather than first-years, is a smarter move for firms looking to trim down during tough economic times. Joel Henning, a Hildebrandt International consultant, reportedly said: “Nobody knows what the economy will mean to law firms.” For those firms needing to trim costs, the simple move is to ‘cut at the bottom,’ by getting rid of existing associates or restricting the number of job offers. But, he added, sending unproductive partners packing, though a more complicated move, is a better strategy. “You get bigger savings.”

LB’ers: During that 10th or 11th week of the summer program, we remember an uptick in ties and coats as summers, often turned over-confident by months of pampering, began to fret over their offers. But, still, stories about summers who didn’t get offers to come back always seemed mostly the stuff of myth.

Do you think this year will be different?

A jolly bit of news from the other side of the pond caught our eye today. According to this article from Legal Week, law firms in the U.K. are getting hip to a new trend: taking other people’s money to fund lawsuits. “Eight out of 10 of London’s top law firms are already using or assessing external funding for litigation and arbitration cases,” reads the article, “marking a dramatic move of third-party funding into mainstream practice.”

According to the story, Clifford Chance is currently using third-party funding for an arbitration case, while Allen & Overy, Freshfields Bruckhaus Deringer, Herbert Smith and Lovells are all actively seeking funding for a number of cases. Even Skadden is getting into the action, reportedly using third-party funding in an arbitration case.

Under the model, outside investors offer litigation funding in return for a slice of the damages. Skadden European arbitration head Paul Mitchard told Legal Week: “Funding is definitely here to stay. It is a significant development in dispute resolution, where litigation and arbitration are now being viewed as a commercial venture for outside funders for the first time.”

So many good things that start in the U.K. ultimately find their way here, of course (i.e., The Office, fried Mars bars, the English language). So is third-party funding, which is banned in many jurisdictions, on its way toward mainstream acceptance?

It’s possible. Hofstra law professor Monroe Freedman thinks it should be. “I think it’s a very good thing,” he told the Law Blog. “The Supreme Court has ruled several times that the right to sue is really a First Amendment right to petition for redress of grievances. It seems to me therefore that enhancing the ability to fulfill that constitutaional right is a good thing.”

Stanford law professor Deborah Rhode has a slightly different take. She says that under the current regime of most U.S. jurisdictions, only lawyers are permitted to fund suits. “If you opened that up, and allowed others in, it would likely drive down the price of legal services.” In other words, those standard 1/3 contingency fees would likely fall down a la the London Bridge.

Law Blog readers, any thoughts on this? We’ve heard that third-party funding is popular in some quarters in the U.S., such as on Brooklyn’s Court Street, but how popular has it become?

Consider this real-life fact-pattern that was used for a “Law & Order” episode: In 2003, New York State Supreme Court Judge Gerald Garson was charged with granting a divorce lawyer, Paul Siminovsky, preferential treatment in exchange for kickbacks. After the accusation, Garson reportedly agreed to help pursue a separate case by wearing a wire to a lunch with Ravi Batra — an Indian-born Manhattan lawyer who served on the Brooklyn democratic judicial screening committee. Garson’s goal was to gather evidence that judicial seats could be bought by paying Assemblyman Clarence Norman, also a screening committee member who happened to be of counsel to Batra’s law firm. At the lunch, Garson tried, but failed, to elicit incriminating statements from Batra about the alleged bribes. Ultimately, Garson and Norman went to prison; Batra was never charged.

Still, a 2003 NYT story, entitled “Cozying Up to Judges and Reaping Opportunity,” characterized Batra (pictured, right) as a “particularly potent force” who had a hand in selecting judges. The Times story was followed by a “Law & Order” episode that portrayed an Indian-American matrimonial attorney, named “Ravi Patel,” — played by India-born actor Erick Avari (pictured, left) bribing a female Brooklyn Supreme Court justice. Ravi Batra, the real lawyer, responded with a $15 million libel-in-fiction suit against the L&O creators.

In an opinion made public yesterday, New York State Supreme Court Justice Marilyn Shafer, denied the defendants’ summary judgment motion, making the suit the first “libel-in-fiction” claim to survive SJ in nearly 25 years. (Here’s the NYLJ story, and here’s the NYT story.)

To make out a libel-in-fiction claim — a somewhat counterintuitive theory in which a plaintiff claims that something that is fictional is not factually accurate — Batra must demonstrate that the identities of the real and fictional characters are “so complete that the defamatory material” becomes a “plausible aspect” of the plaintiff’s real life.

Justice Shafer held that viewers “would identify” a fictional lawyer character dubbed “Ravi Patel” with Batra “because of the uniqueness of [Batra’s] name, ethnicity and appearance.” Furthermore, she wrote, “because of the widespread media coverage of the Garson/Siminovsky scandal, with which the accusations against [Batra] were inextricably intertwined, it would be reasonable for a viewer to associate Batra” with the “Law & Order” character.

And the last name remaining is that of a long-deceased founder.

The firm formerly known as Milberg Weiss Bershad & Shulman LLP, then Milberg Weiss Bershad LLP, then later Milberg Weiss LLP, will now be known just as Milberg LLP. According to a Milberg insider, the name change was announced at a staff meeting this morning, at which Mel Weiss gave a speech talking about the accomplishments of the firm. The audience reportedly applauded. A spokeswoman for the firm didn’t immediately respond to a request for comment.

The WSJ reported this morning that Mel Weiss has struck a deal to agree to plead guilty in a case alleging improper kickbacks. Other former name partners David Bershad and Steven Schulman had previously pleaded guilty in the case. Famed plaintiffs lawyer Bill Lerach, who worked at the Milberg firm for years before launching his own firm in 2004, pleaded guilty last fall and was recently sentenced to two years in prison.

According to this letter written by Mel Weiss’s son, Larry Milberg, the founder of the firm, was 22 years older than Mel, and was 1936 Harvard Law School graduate. He died in 1989 at the age of 76.

At the markets’ close today, Bear Stearns shares were trading at $5.33. It’s not much compared to where the stock was trading early last year, but it’s a significant premium over the $2.34 per share recently offered by J.P. Morgan Chase.

As the WSJ reported this morning, Bear bondholders were partly responsible for the stock’s rise yesterday. Some are eager to see the deal get done and avoid a bankruptcy, so they’re buying up shares to increase their voting position on the deal. That said, the story hinted at the possibility of disgruntled shareholders rejecting the deal outright.

An up or down vote isn’t shareholders’ only recourse. They could — drum roll please — sue to enjoin the deal.

But would would such a suit look like? Could Bear shareholders possibly mount a winning challenge? We here at the Law Blog are too many years removed from our second-year corporations class to come up with a cogent analysis on our own. (All we remember from corporations — or Enterprise Organizations, as it was called at Michigan back in the day — is the phrase ultra vires. But we haven’t the foggiest idea what it means.)

So we checked in with an expert to help us out, this time Gordon Smith, a professor at BYU Law School and contributor to the Conglomerate blog. Smith didn’t have a lot of time — he was rushing out to teach class, but did give us a stellar overview. Let’s put it in his own words:

Okay, professor Smith, so what would a lawsuit look like? We’re presuming it would be filed under Delaware law, right?
In all likelihood. The shareholders might first argue that the Bear Stearns board breached its fiduciary duty to shareholders. But here’s the thing: With stock-for-stock transactions, which the Bear-J.P. Morgan deal is, Delaware courts generally apply the business judgment rule, which allows for broad deference to board rulings. In cash-for-stock deals, under the old Revlon case, the courts apply an enhanced level of scrutiny. But all-stock deals are harder to challenge.

Huh. Why the difference?
Well, I’m not sure it’s a rationale that makes perfect sense — and it’s been criticized widely. But the theory is that in a stock-for-stock deal, the market is essentially setting the price, and courts are typically reluctant to second-guess the wisdom of the market. But when you have a cash-for-stock deal, there’s a greater likelihood that shareholders will be taken advantage of.

Okay, so in this instance, it’d be a losing case for Bear shareholders?
Probably, if the court held that Revlon didn’t apply and went with the business judgment rule.

Any other lines of attack for shareholders?
Well, the most likely course of attack for shareholders would be a Unocal attack. I’m sure you guys studied the Unocal case in your corporations class. Unocal is another seminal Delaware case. It addresses the validity of defensive mechanisms, which are provisions the parties embed in a deal to keep it from falling apart. They include termination fees, no shop provisions, and a host of others.

Is there one in the Bear-J.P. Morgan deal?
There is. It’s very interesting. It’s provision 6.10, and it says that if shareholders reject the deal, JP Morgan can go back and renegotiate and Bear shareholders can’t accept a different deal until a year from now.

Have you ever seen a provision like that?
I haven’t. It’s probably a Wachtell innovation and it’s very clever. Under Unocal, if a court finds that a provision does, in fact, qualify as a “defensive mechanism,” then they apply a heightened standard of scrutiny to the deal. It’s my guess that that’s probably what would happen.

And under this enhanced level of scrutiny, what would a court look at?
The court would look at whether Bear directors had interests other than the shareholders’ in mind when they made the deal. It’s often hard to tell what a board’s interests might have been. A situation which sometimes comes up under Unocal is that the board wanted to avoid being sued by someone else, like bondholders, and figured that a sale would assuage them.
In the course of this review, a court could look at whether the defensive mechanism precludes someone else from coming in and proposing a better deal.

Well, that sounds exactly like what the provision does!
I’m not sure it’s so easy a case. There’s a lot of case law out there, and analogies to be drawn by either side. But it does appear to me that this provision has some preclusive effect.

So shareholders would at least have a colorable claim here, right?
Making predictions like this is always dicey, but I’d say yes, they’d have a colorable claim.

Thanks for taking the time.
No problem.

Back in the fall, we posted on the antitrust suit that MSG, owner of the New York Rangers, filed in New York federal court against the NHL. According to reports, MSG filed the suit in the face of the NHL’s promise to begin fining MSG $100,000 per day if it didn’t give the league complete control over the Rangers’ web site. Reportedly, the league wants to convert the site into one of 30 “cookie-cutter” club web sites at NHL.com - The National Hockey League Web Site. (Here’s commentary on the complaint from the Sports Law blog, and here’s more from the Sports Economist blog.)

“By seeking to control the competitive activities of independent businesses in ways that are not necessary to the functioning of that legitimate joint venture, the NHL has become an illegal cartel,” the suit said (the complaint was not available). “The NHL has no competitive justification for seizing the Rangers Web site, which MSG today uses as a competitive tool to generate and maintain fan interest in the Rangers in competition with other NHL teams.”

In November, the district court ruled against MSG’s request for a preliminary injunction. Today, more bad news for MSG. The Second Circuit Court of Appeals released a summary order (not available) finding MSG’s PI argument “without merit,” and sending the suit back to the trial court for a trial on the merits of the case — a process that could reportedly take more than a year if MSG pursues it.

The court of appeals wrote that MSG “did not show that the NHL’s website ban has had an actual adverse effect on competition in the relevant market. Nor did MSG demonstrate that the many procompetitive benefits of the NHL’s restrictions could be achieved through an alternative means that is less restrictive of competition.”

We hear lots of highfalutin theories about trial strategy and how to manage jury psychology, but a courtroom approach based on a fictional fraternity speech is new to us. And that, of course, is why we read the New York Post’s Page Six everday - for enlightenment on complicated legal issues.

According to the gossip column, defense lawyer Mickey Sherman’s forthcoming memoir, “How Can You Defend Those People?” explains that, like the boys of Delta House in the 1978 classic comedy, “Animal House,” Sherman tries to sidestep the issue of guilt by blaming the system. Just like the frat boys do in the 1978 comedy.

In the memoir, Sherman, the lawyer for Michael Skakel, who was convicted in 2002 for the 1975 murder of Martha Moxley, reportedly writes: “After a long list of infractions are rattled off, Otter stands up and declares that any criticism of his fraternity is the same as . . . indicting the entire American education system, and ’say what you will about the Delta House, but we won’t stand for anyone trying to put down the United States of America.’ I guess it speaks volumes about my oratory skills, or lack thereof, that I rely on the movie ‘Animal House’ to advocate for my causes.”



Law Blog YouTube Clips of the Day: For all those who don’t remember the scene that proved so instructive to Sherman, click here for Eric “Otter” Stratton’s impassioned speech. And speaking of impassioned speeches by lawyers — real and would-be — Barack Obama’s speech in Philadelphia yesterday seems to have assumed news-of-the-day status. Feel free to sound off!

When the Law Blog heard last night that Bear Stearns, the deflated investment bank that was torn to pieces by the mortgage crisis, had agreed to be sold to J.P. Morgan Chase for a measly two buck a share, a couple thoughts came to mind. The first was, “Argh, we should’ve pooled our resources and made a topping bid.” The second was, “Who were the lawyers?”

For those LB readers whose eyes tend to move swiftly past all M&A-related headlines, here’s some background info on, and a summary of, today’s jaw-dropping news on Wall Street. In January, Bear was worth about $20 billion. On Friday — yes, the Friday that was three days ago — Bear had a stock-market value of about $3.5 billion. Last night, it sold for $236 million — a price that, its advisors apparently thought, was preferable to bankruptcy. The Law Blog will be interested to see whether shareholders agree. (Here are stories from the WSJ, the NYT, and the FT.)

If Bear does face shareholder suits, at least it can say it didn’t scrimp on lawyers. Representing Bear was S&C’s Rodgin Cohen, the lawyer who stood at the center of January’s slew of sovereign wealth fund deals; Cadwalader’s Dennis Block, the only lawyer we know who gets to the office as early as the Law Blog; and Skadden’s Peter Atkins.

J.P. Morgan was counseled by Wachtell Lipton’s Ed Herlihy and Nick Demmo.
Representing Lazard, as financial advisor to Bear, were Cravath partners B. Robbins Kiessling, Richard Levin, Erik R. Tavzel and associate Minh Van Ngo.

We blogged about the Stolen Valor Act last year, but since then we’d pretty much managed to push it off our radar screen. That is, until this morning, when we read Adam Liptak’s sidebar column. A refresher: Introduced in 2005 by Colorado Congressman John Salazar, the Act is intended to penalize distributors of phony medals and those who fraudulently claim to be decorated veterans. (Prior to the Stolen Valor Act, law only allowed prosecution of imposters who wore unearned Medal of Honor on their person.)

Apparently, Xavier Alvarez hadn’t paid close enough attention to our blog post when he stood up last summer at a meeting of a California water board to say a few words about himself. “I’m a retired marine of 25 years. I retired in the year 2001. Back in 1987, I was awarded the Congressional Medal of Honor. I got wounded many times by the same guy. I’m still around.”

As Liptak reports, only the last three words were true. Now Alvarez is going to trial next month in federal court in Los Angeles for violating the Stolen Valor Act.

“You don’t want to stifle speech about opinions and ideas,” saud Craig Missakian, the prosecutor in the case. “But Congress, and rightfully so, recognized the great sacrifice that people awarded the Medal of Honor made on behalf of their country. To the extent we have phony Medal of Honor winners running around like Alvarez, it dilutes the value of their sacrifice.”

Others liken the law to a ban on flag-burning, which the Supreme Court held unconstitutional in Texas v. Johnson. “If the government cannot under the First Amendment compel reverence when it comes to our nation’s highest symbol,” asked Ronald K. L. Collins, a scholar at the First Amendment Center in Washington, “why then can it compel reverence when it comes to lesser forms of symbolic expression?”

The planned sale of Bear to JPM knocks a major client from the legal marketplace. But let’s begin on a positive note. Some of Bear’s lawyers and connections to law firms may migrate to J.P. Morgan, say attorneys, who note that J.P. Morgan now uses law firms with historical ties to other banks previously acquired by JPM. And most top law firms, attorneys says, do a better job than in years past of spreading their work around, so that they are not overly exposed should one client go under.

Still, attorneys say, law firms often suffer a net loss when their clients merge or become acquired. “My assumption is that many of the folks handing out legal business at Bear Stearns may not be doing so in the future,” says James Jones, a consultant at Hildebrandt and a former managing partner of Arnold & Porter. “If I were a firm that had done a lot of work with Bear Stearns, I’d be concerned.”

So which firms might lose out in the Bear meltdown?

Latham & Watkins

In a 2005 profile of the firm, partner William Voge told American Lawyer that Bear Stearns had generated $15 million in revenue the prior year. Latham, to cite one deal, advised Bear in connection with the 2006 initial public offering of Hirco, an Indian real estate development group. (Latham did not return calls for comment.)

Skadden Arps

A host of Skadden attorneys have counseled Bear in corporate and litigation matters (including this weekend’s deal). Last year, the firm represented Bear Stearns Merchant Banking and other financial firms in the consortium’s $1 billion investment in Ironshore Inc, a newly formed insurance company. (Skadden was not immediately available for comment.)

Cadwalader, Wickersham & Taft

Cadwalader will also enjoy a short-term boost from Bear right now, since uber partner Dennis Block is also counseling the bank in the J.P. Morgan deal. But Bear has funneled a lot of work to Cadwalader in the past, and to Block in particular. He advised Bear in connection with the failed merger between Hughes Electronics Corporation and EchoStar Communications, to name one matter. (Cadwalader declined to comment and Block did not return a call for comment.)

Weil Gotshal

The firm has represented Bear Stearns in a slew of deals, including in the merger last year between Accredited Home Lenders, a mortgage company, and Lone Star Fund. (Weil did not return a call for comment.)

So, who are among the winners?

WilmerHale would seem to be one obvious contender, given that its former partner, Steve Cutler, is the general counsel of JP Morgan. A person familiar with Wilmer says it does a significant amount of regulatory and litigation work for the bank. But Wilmer also did regulatory work for Bear Stearns, underscoring the fact that it will take time to get a precise score for the winners and losers.

All eyes still glued on the Mess in Mississippi were wondering if Zach Scruggs, son of Dickie, would follow in his father’s footsteps today and plea in the judicial bribery case pending against him in federal court in Oxford, Miss. Instead, we see he’s retained another lawyer, none other than Mike Moore, the ex-AG of the state. Here’s the notice of of entry of appearance. HT: folo.wordpress.com.

We caught up with Todd Graves, the former U.S. attorney who’s been representing Zach. He and Mike Moore, he says, have been “working together on this. Mike will be trying the case with me and Nathan Garrett,” a colleague of Graves’s.

Mike Moore sent this prepared statement from his office:
“I have known Zach Scruggs since he was a little boy. He asked me to represent him should his case ever get to trial. Zach is innocent of the charges pressed against him, and we look forward to his exoneration.”

A full week has passed since the much-hyped trial of Hollywood PI Anthony Pellicano started, and, yet, we haven’t written about it since describing the opening statements from last Thursday. Why? Well, nothing much has happened; even the trial’s hometown paper is taking a pass.

“It’s kind of yesterday’s news,” producer Bill Mechanic told the LAT on Saturday. “There were all these rumors a couple of years ago that it would explode, and it seemingly never did.” Apparently, having a C-list of tinseltown glitterati attached to the case isn’t enough. Pellicano would likely need to turn on his former clients in order to reinspire the public’s interest in his case. Meanwhile, many of those who benefited the most from Pellicano’s allegedly surreptitious ways — his clients — are being used against him by the prosecution.

Still, it’s not all hum-drum at the Pellicano trial. Yesterday, comedian Garry Shandling took the stage stand to describe how it felt to be on the receiving end of Pellicano’s investigative tactics. Among the first questions AUSA Kevin Lally asked Shandling was to name his occupation. The star of “The Larry Sanders Show” paused, as if to acknowledge he hadn’t been working much lately. “That’s a bad sign,” said Shandling, drawing laughs from jurors and the courtroom crowd. (Here’s the NYT report, and here’s a story from the NYP.)

Shandling’s testimony focused on a $100 million lawsuit he brought against Paramount chairman Brad Grey in 1998. In that suit, Shandling accused Grey — who before going to Paramount was Shandling’s manager — of “triple dipping,” or taking half-ownership of Shandling’s HBO show, “The Larry Sanders Show,” plus a producer’s fee, plus commissions on Shandling’s acting and writing fees. In the suit, prosecutors say Pellicano, on behalf of Grey, bribed cops for information about Shandling from police databases. (Grey’s lawyer in that suit was Bert Fields, a frequent user of Pellicano’s services.)

In a brief cross, Pellicano, representing himself, reportedly tried and failed to get Shandling to say that Grey had helped make him a success. Pellicano asked Shandling who had negotiated his deal with HBO for “The Larry Sanders Show.” But Shandling said he sold the show to an HBO executive in one phone call. “Brad Grey had nothing to do with it till he said, ‘I’ll take half of the show,’ ” Shandling said.

Political speeches get dissected by historians for years to come. Among the questions — sincere, or not? At the Law Blog, we’ve been mulling Mr. Spitzer’s words this morning for some insight on that question.

Here’s part of what he said, indicating that his decision came from the heart:

“… I cannot allow my private failings to disrupt the people’s work. Over the course of my public life I have insisted, I believe correctly, that people, regardless of their position or power, take responsibility for their conduct. I can and will ask no less of myself. For this reason I am resigning from the office of governor.”

Yet the news that has emerged could offer a less-generous interpretation. Today, the New York Times reported that even Tuesday Mr. Spitzer’s aides were trying to gauge whether he could survive politically.

In one of the last and desperate rounds of the end game, a top Spitzer administration official reached out to Assembly Speaker Sheldon Silver's staff on Tuesday to see if the governor could avoid an impeachment vote. But the prospects were grim.

The juxtaposition struck us — was the impetus for Spitzer’s resignation an inner call to take responsibility for his conduct, as he suggested? Or was it a strategic move meant to avoid impeachment? Or both?

LB Readers: What’s your take on Spitzer’s speech? (linkable from here).