Good morning. The SEC has opened an inquiry into Wall Street's SPAC frenzy, prosecutors have been stepping back from some of the serious claims they initially leveled against a handful of U.S. Capitol riot defendants, the U.S. Senate Judiciary Committee votes today on whether to approve Lisa Monaco and Vanita Gupta for the DOJ's No. 2 and No. 3 posts, Skadden, Milbank and Paul Weiss are among those joining the Big Law bonus wars, and litigation funder Burford Capital is boasting big returns on its investments. Let's go!
Our guest contributor today is Chinekwu Osakwe. Were you forwarded this email? Subscribe here.
SEC opens inquiry into Wall Street's blank check IPO frenzy, sources say
The SEC has opened an inquiry into Wall Street's blank check acquisition frenzy and is seeking information on how underwriters are managing the risks involved, Jody Godoy and Chris Prentice report, citing four people with direct knowledge of the matter. The securities regulator in recent days sent letters to Wall Street banks seeking information on their special purpose acquisition company, or SPAC, dealings, the people said. SPACs are shell companies that raise funds to acquire a private company with the purpose of taking it public, allowing such targets to sidestep a traditional initial public offering. The SEC letters asked the banks to provide the information voluntarily and, as such, the move did not rise to the level of a formal investigative demand, two people said. But one said the letters came from the SEC's enforcement division, suggesting they may be a precursor to a formal investigation. The SPAC structure provides startups with an easier path to go public with less regulatory scrutiny than the traditional IPO route. Earlier this month, the SEC warned investors against buying into SPACs based on celebrity endorsements and said it was closely watching SPAC disclosures and other "structural" SPAC issues. Find out more about what the SEC is asking about.
Prosecutors amid setbacks abandon some claims in U.S. Capitol riot cases
REUTERS/Shannon Stapleton
Missteps by prosecutors pursuing cases over the deadly U.S. Capitol attack are threatening to harm the DOJ's credibility.
Sarah N. Lynch examines how prosecutors have walked back or abandoned some of the serious claims they first made after the events of Jan. 6, including that they had evidence rioters planned to kill elected officials or that a Virginia man at the building received directives to gas lawmakers.
The department suffered another blow on Tuesday when U.S. District Judge Amit Mehta threatened to impose a gag order on prosecutors after former District of Columbia Acting U.S. Attorney Michael Sherwin, who initially oversaw the cases, told CBS's "60 Minutes" that evidence pointed toward sedition charges against some defendants.
No such charge has been brought against any of the 400-plus people arrested. The most serious charges have been assault, conspiracy and obstruction of Congress or law enforcement.
Among the cases the DOJ has shifted its claims on is that of Proud Boys member Ethan Nordean, who the DOJ in a March 1 filing said "dressed all in black, wearing a tactical vest, led the Proud Boys through the use of encrypted communications." But prosecutors later acknowledged his cell phone was not functioning the entire day.
Michael Ferrara, a former federal prosecutor now with Kaplan Hecker & Fink, said bail arguments can sometimes venture into "hyperbole." But such errors could "color the way the judge sees this case going forward" and impact outcomes on everything from plea deals to motions to dismiss charges, he said. Learn more.
Industry buzz
- California Governor Gavin Newsom ended speculation about who would replace Xavier Becerra as attorney general, picking Democratic Assemblyman Rob Bonta to be the first Filipino American to serve in the role if confirmed. Becerra left to become secretary of health and human services in the Biden administration, and Bonta, a left-leaning criminal justice advocate, has introduced legislation surrounding private prison reform and improper evictions. Bonta's appointment comes after calls for increased representation for Asian Americans in government. (Los Angeles Times)
- Willie Dennis, a former K&L Gates partner, sued the firm for racial bias alleging unequal pay and fewer opportunities for Black attorneys. Now, U.S. District Judge Mary Kay Vyskocil in Manhattan has halted the lawsuit against the firm after a judge in D.C. Superior Court said the parties should resolve things through arbitration. (Reuters)
- Kramer Levin has proved to be winning in more ways than one. Not only did firm lawyers win the first Zoom IP bench trial, Kramer's profits per equity partner increased by 6.4% to $2.3 million. However, revenue at the New York-based firm declined by 2% in 2020, a fact the firm attributed to the pandemic. The firm's leaders say that with the courts opening up and litigation resuming, 2021 looks positive. (The American Lawyer)
- The State Bar of Georgia's board of governors recently passed a proposal that would increase the penalties for prosecutors who engage in misconduct, potentially exposing them to disbarment. Currently, the maximum punishment they can face is a public reprimand. (Atlanta Journal-Constitution)
- A new study, which looked at data spanning 40 years starting in 1979, showed that almost a quarter of law students who ultimately graduated in the top 10% of their class didn't do nearly as well during their first year. As a result, these students missed out on selective opportunities such as law review membership and judicial clerkships, which are largely based on first-year performance. But law schools have not been able to convince judges or law firms to change their hiring processes. (ABA Journal)
Number of the day:
$608 million
Burford Capital, the large litigation funder that provides third-party financing for lawsuits in exchange for a cut of any recovery, finished 2020 with its best year yet for returns on its investments. Burford reported that its realizations increased 72% to $608 million. It generated $1 billion in group-wide cash receipts, but it reported a 6% decline in operating profits of about $249 million and a 19% decrease in profit after tax to about $172 million. (Reuters)
Coming up today
- The U.S. Senate Judiciary Committee will vote on whether to send to the Senate floor for confirmation President Joe Biden's nominees Lisa Monaco and Vanita Gupta to serve as the DOJ's No. 2 and No. 3 top officials. Gupta has faced fierce Republican opposition, but she is expected to win Senate confirmation after Democratic Senator Joe Manchin of West Virginia, a crucial swing vote, told CNN he will likely back her nomination.
- The U.S. Judicial Panel on Multidistrict Litigation convenes to consider several requests to consolidate cases nationally. On the agenda is a motion by two retail traders represented by Joseph Saveri of the Joseph Saveri Law Firm to consolidate more than 40 lawsuits nationally against trading platforms including Robinhood for disallowing sales of certain hot stocks including GameStop during the so-called "Reddit Rally." Cravath's Kevin Orsini is defending Robinhood.
- The Texas Supreme Court will consider whether Amazon.com Inc can be held liable as the seller of a defective product listed by a third-party vendor on its website in one of a series of similar cases against the e-commerce giant nationally. The 5th Circuit in December asked the state's top court to consider whether under Texas product liability law Amazon was a "seller" of a battery from a Chinese-made knockoff Apple TV remote that injured a toddler. Jeff Meyerson of The Meyerson Law Firm will argue the case for the toddler's mother and will face Brendan Murphy of Perkins Coie for Amazon.
- SEC Commissioner Hester Peirce will give a fireside chat at Draper Goren Holm's Security Token Summit. Dubbed by cryptocurrency enthusiasts as the "Crypto Mom" due to her supportive stance on the asset class, Peirce has long advocated for regulators to create clear rules that would allow crypto assets to thrive without fear of breaking the law.
- Facebook CEO Mark Zuckerberg, Google CEO Sundar Pichai, and Twitter CEO Jack Dorsey will testify at a remote joint hearing of the U.S. House of Representatives Energy and Commerce Committee's Communications and Technology and Consumer Protection and Commerce subcommittees on "misinformation and disinformation plaguing online platforms."
- A former bank CEO accused of bribing former President Donald Trump’s onetime campaign chairman Paul Manafort is slated to be arraigned again before U.S. District Judge Lorna Schofield after federal prosecutors in Manhattan secured a new, two-count indictment that added a conspiracy charge. Prosecutors alleged that Stephen Calk, the former CEO of Federal Savings Bank in Chicago, approved $16 million in high-risk loans to Manafort in exchange for help getting a position in the Trump administration. Calk, defended by Kramer Levin's Paul Schoeman, denies wrongdoing.
Video: Immigration lawyers voice cautious optimism on Biden visa moves
President Joe Biden's early moves aimed at rolling back some of the Trump-era immigration restrictions, such as doing away with the "public charge" rule, are giving immigration lawyers reason for optimism. But they say workers seeking H-1B and other employment-related visas still face high hurdles ranging from COVID restrictions to understaffed consulates and a massive visa backlog. Watch the video.
Reporter's notebook: Will bonuses help associates stick around?
Reuters business of law reporter Caroline Spiezio on the new round of bonuses at large law firms.
It's Big Law bonus season again – yes, in March.
Law firms including Willkie Farr and Davis Polk have made headlines in recent days for promising associates "special" bonuses, like those they gave in 2020 to reward hard work during the pandemic.
More firms have followed, including Milbank, Skadden and Paul Weiss on Wednesday. But there's a catch – to get all the bonus money, which could be as much as $64,000 – associates must stick around until autumn or later.
While the bonus amounts are eye-popping, it's the timing-strings attached aspect of this story that has fascinated me. I've long heard law firm leaders say they’re worried about associates quitting work to relax after an extremely stressful year.
As a 25-year-old with friends who are law firm associates, those leaders’ concerns are valid. Some young lawyers are tired. Most entered Big Law expecting long hours – but they expected to work those hours in-person, making friends and meeting mentors (and without the added stress of a pandemic).
Bonuses sprinkled throughout 2021 could help keep associates motivated. It's not the only way to combat burnout, either. Orrick is giving timekeepers 40 hours of billable credit to unplug – no working, checking emails or voicemails. "When the boundaries between work and home have become fewer and fewer, this is something we need," Orrick chief talent officer Siobhan Handley told my colleague Jenna Greene.
"Uncovering this otherwise discoverable factual information would be a monumental, if not Herculean, task absent Facebook disclosing the app information."
Justice Scott Kafker, who penned a 52-page ruling for the Massachusetts Supreme Judicial Court that held state Attorney General Maura Healey demonstrated a "substantial need" to obtain from Facebook information from an internal investigation overseen by lawyers at Gibson Dunn related to the identities of third-party apps suspected of misusing customer data. The state’s top court overturned a lower-court ruling that cleared the way for Healey to obtain the records for an investigation launched following the Cambridge Analytica scandal but said further proceedings would likely determine that a "significant amount of information" could be disclosed to investigators despite Facebook’s claims that it constituted privileged attorney work product. (Reuters)
In the courts
- U.S. Supreme Court justices during arguments on Wednesday grappled with whether to make it easier for police officers to enter a home without a warrant for reasons of health or public safety in a case involving the confiscation of a Rhode Island man's guns. Several justices seemed wary of impeding officers from quickly responding to grave situations in which a person might be injured or die, using examples of people who are suicidal or elderly people who may need help. Skadden's Shay Dvoretzky argued the case for the Rhode Island man, Edward Caniglia, who is appealing the dismissal of his lawsuit accusing police of violating his constitutional rights. (Reuters)
- Fourteen Republican state attorneys general including those in Louisiana and Wyoming filed lawsuits challenging President Joe Biden's pause on new oil and gas leasing on federal lands and waters. One lawsuit was filed in Louisiana, the home of Attorney General Jeff Landry, while the other was filed in the federal court shared by the state of Wyoming Attorney General Bridget Hill. (Reuters)
- A federal jury in Manhattan found two consultants to the online marijuana delivery company Eaze Technologies guilty of participating in a scheme to get $150 million in marijuana payments past banks by keeping the financial institutions in the dark about what their cardholders were ordering. Lawyers for consultants Hamid Akhavan and Ruben Weigand said they plan to challenge the verdict. "We believe the evidence established that the banks were and remain complicit in the processing of marijuana payments by credit and debit cards," said Quinn Emanuel's Christopher Tayback, a lawyer for Akhavan. (Reuters)
- An en banc panel of the 9th Circuit on a 7-4 vote upheld the state of Hawaii's restrictions on individuals openly carrying guns in public in self-defense, saying the regulated conduct "is outside the historical scope of the Second Amendment." A 2-1 panel had previously ruled that the state violated plaintiff George Young's rights by denying him a permit to openly carry a loaded gun in public. (AP)
- The 1st Circuit ruled that an Uber driver's attempt to force the company to treat drivers in Massachusetts as employees rather than independent contractors became moot after the plaintiff’s case was transferred to a different court in California and sent to arbitration. Uber counsel Theane Evangelis of Gibson Dunn pressed the company's defense on appeal during arguments earlier this month that took place the same day the 1st Circuit heard a similar dispute involving Lyft, which remains pending. (Reuters)
- A former SEC compliance examiner was ordered to spend nine months in home confinement after pleading guilty to stealing information from the regulator while it was investigating a private equity firm where he had been seeking a job. Michael Cohn, who became chief compliance officer at GPB Capital after leaving the SEC, was sentenced by U.S. District Judge Gary Brown in Central Islip, New York. His attorney, Scott Resnik of Katten Muchin Rosenman, had sought probation. (Reuters)
- The judge overseeing Purdue Pharma's bankruptcy extended an automatic stay against litigation to the members of the Sackler family who own the OxyContin maker as the company continues its efforts to bring in more support for its estimated $10 billion settlement of opioid-related lawsuits. The order by U.S. Bankruptcy Judge Robert Drain in White Plains, New York, came over the objections of 24 states that have not signed on to the proposed deal, under which the Sacklers would contribute $4.275 billion. Davis Polk's Marshall Huebner reps Purdue. (Reuters)
- The 9th Circuit overturned a $1.8 billion award that AECOM Energy & Construction Inc, the successor to construction company Morrison Knudsen Corp, won against a company it accused of committing "remarkable fraud" to usurp the identity of Morrison Knudsen, known for its involvement in projects including the Hoover Dam. The court sent the case back to a lower-court judge to recalculate the award but left intact an injunction barring the defendants from using the name. Diana Torres of Kirkland & Ellis argued the case for AECOM against defense lawyer Stanley Gibson of Jeffer Mangels Butler & Mitchell. (Reuters)
Industry moves
- DLA Piper has tapped Morgan Lewis' Scott Fischer in New York to lead its U.S. insurance regulatory practice. He previously had a leading role at the New York State Department of Financial Services, where he oversaw 1,700 insurers and $4 trillion in assets. (Reuters)
- Florida-based law firm Kelley Kronenberg has added Robert Segear, a former attorney at Avelino Law, to its probate litigation and estate planning and guardianships practices. Segear specializes in "snowbird planning" and will operate out of Short Hills, New Jersey and Miami, Florida. (Kelly Kronenberg)
- Christopher Boyle is the eighth Faegre Drinker partner to join FisherBroyles' environmental, health and safety practice group in Philadelphia. While at Faegre Drinker, Boyle led the firm's environmental and energy practice group. (FisherBroyles)
- Erika Levin, a former partner at Lewis Baach Kaufmann Middlemiss, has moved to 950-lawyer Fox Rothschild in New York. Levin joins the international practice group and will work on complex litigation and international arbitration. (Fox Rothschild)
Columnist spotlight: $650 million securities class action trial v. CoreCivic set for May
The odds of a securities class action making it to a jury trial are way less than one 1 in 100. But as Alison Frankel writes, a class action against the private prison company CoreCivic has beaten those odds. U.S. District Judge Aleta Trauger of Nashville on Tuesday denied the company's motion for summary judgment on shareholder allegations that it misrepresented conditions at its facilities and the strength of its relationship with the Federal Bureau of Prisons, a major CoreCivic client. "This is potentially a very big case," Frankel writes. Find out why.
Check out other recent pieces from all our columnists: Alison Frankel, Jenna Greene and Hassan Kanu.
Lawyer speak: HHS OIG greenlights gift card incentive program
After 30% of patients under 19 were found to have missed one or more preventative or early intervention care appointments, a federally qualified health center proposed an incentive program that would allow $20 gift cards to be given to patients who rescheduled and kept new appointments. The U.S. Department of Health and Human Services' Office of Inspector General said the program, which would not be publicly advertised, was low risk for fraud. Michaela Poizner of Baker Donelson in a recent article discusses the legal ramifications of the program. Read more.
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