Good morning. The Epic Games v. Apple trial that could reshape the app distribution market is fully underway, Cigna lost its bid to win a $1.8 billion termination fee from Anthem over their collapsed merger, SCOTUS is gearing up to hear its final case of this term, and a former terrorism prosecutor at Gibson Dunn is teaming up with Amal Clooney to help Islamic State victims. Let's get started!
Please welcome Arriana McLymore as one of our new regular contributors. Caitlin Tremblay is stepping away from The Daily Docket to launch the new Reuters Legal website (coming June 1) and a new afternoon newsletter (coming June 7). It's so exciting!
Epic asks judge to end Apple's monopolistic 'walled garden' as major trial starts
REUTERS/Brittany Hosea-Small
Lawyers for "Fortnite" developer Epic Games and Apple Inc faced off on Monday before a federal judge in Oakland, California, as a trial got underway in a lawsuit that could redefine how the market for distributing apps for mobile devices works.
Epic CEO Tim Sweeney (pictured) testified he knew his company was breaking Apple's App Store rules by putting Epic's own in-app payment system into Fortnite, prompting Apple to then kick it off, Stephen Nellis reports. "I wanted the world to see that Apple exercises total control over all software on iOS, and it can use that control to deny users' access to apps,” Sweeney said.
Epic then filed an antitrust case. Its lawyer, Katherine Forrest of Cravath (also pictured), in her opening statement argued that Apple enforced its policies in a monopolistic way to turn its App Store into an artificial "walled garden" that allowed it to extract as much as a 30% cut of developers' app sales to Apple's one billion iPhone users. "The most prevalent flower in the walled garden is the Venus fly trap," she told U.S. District Judge Yvonne Gonzalez.
But Karen Dunn, Apple's lawyer at Paul Weiss, said that didn't mean consumers lacked choice. She said Epic effectively was asking Gonzales to let third-party software be installed on its phones outside the App Store, something consumers can already do using Google's Android operating system.
"Epic is asking for government intervention to take away a choice that consumers currently have," Dunn told the court. Learn more.
Industry buzz
- Steven Engel, who during the Trump administration headed up the DOJ's Office of Legal Counsel, has returned to Dechert as a partner. Former President Donald Trump in September included Engle on his list of potential nominees to the U.S. Supreme Court. (Reuters)
- Former U.S. Senator Doug Jones of Alabama has joined Arent Fox in D.C., where he will be part of the firm's government relations practice. The Democrat after losing re-election in November was considered a contender to serve as President Joe Biden's attorney general. (AL.com)
- The Biden administration has appointed former CFPB director Richard Cordray to oversee the nation's more than $1.6 trillion in student loans. (Politico)
- The pandemic has taken its toll in the workplace, and legal professionals have not escaped the impact. According to a new survey by ALM, the pandemic has made the legal industry’s mental wellness and substance abuse issues worse. (Law.com)
- Law firms are juggling their messaging around vaccines as businesses gear up to fully reopen. While some firms are encouraging workers to get vaccines, others see vaccine requirements as potential privacy problems. (Law.com)
- Money is calling for three law firms advising on Verizon's $5 billion sale of Yahoo and AOL to Apollo Global Management. Kirkland & Ellis and Freshfields are representing Verizon, while Paul Weiss is advising long-time client Apollo. (Reuters)
- Sidley Austin is starting off the month with a hiring spree. The firm has added Thomas Ward, the CFPB's former enforcement director, and former SEC division of enforcement assistant director Ranah Esmaili to its D.C., office, while environmental partner Maureen Gorsen joined the firm in Los Angeles from Alston & Bird. (Sidley)
Number of the day:
$1.85 billion
The Delaware Supreme Court rejected a bid by Cigna Corp to obtain a $1.85 billion termination fee from Anthem Inc following the failure of the two insurers' proposed $54 billion merger in 2017. Both companies had sued each other for billions of dollars following the collapse of a deal that would have created the nation's largest health insurer, but ultimately Delaware Vice Chancellor Travis Laster declined to award either side damages. Cigna, represented by William Savitt of Wachtell Lipton, appealed only the issue of the termination fee, saying that it was contractually automatically entitled to the fee if the merger failed to get regulatory approval. Anthem lawyer Glenn Kurtz of White & Case during arguments last month called that a misreading of the contract. (Reuters)
Coming up today
- The U.S. Supreme Court in the final argument of its current term will weigh whether low-level crack cocaine offenders should be among the beneficiaries of a federal law that reduced certain prison sentences. Defendant Tarahrick Terry is challenging an 11th Circuit ruling that held his crime isn't covered by the 2018 First Step Act.
- U.S. Attorney General Merrick Garland will appear before a subcommittee of the U.S. House of Representatives' Appropriations Committee to testify about the DOJ's budget request. The $35.2 billion proposal calls for greater funding for civil rights enforcement and immigration courts. Garland in prepared remarks called the DOJ's civil rights work "critical" to priorities including protecting voting rights and prosecuting hate crimes like those experienced recently by Asian Americans.
- Greyhound Lines will ask the 9th Circuit to rule that Washington Attorney General Bob Ferguson's challenge to the company's practice of allowing federal agents to board its buses and conduct immigration sweeps belongs in federal, and not state, court. A federal judge ruled otherwise, rejecting claims by Greyhound's lawyers including Jesse Miller of Reed Smith that it was acting under the direction of the federal government by allowing the sweeps.
- The 1st Circuit in Boston will hear three cases dealing with whether or not the Federal Housing Finance Agency as conservator for Fannie Mae and Freddie Mac should be considered a government actor when it initiates non-judicial foreclosures. Consumer and homeowner groups say that treating the FHFA as a government actor in such cases can help protect Fannie and Freddie borrowers from mortgage servicers. Steven Salvador Flores and Michael Zabelin of Rhode Island Legal Services will argue for two of the homeowners and will face Michael Johnson of Arnold & Porter for the FHFA.
- An accountant for onetime payday lending mogul and race car driver Scott Tucker will ask U.S. District Judge Julie Robinson in Kansas City, Kansas, not to force him to go to trial on tax fraud charges alongside Tucker, who is serving more than 16 years in prison after an earlier racketeering conviction in New York for a crime that prosecutors say exploited millions of cash-strapped consumers. W. Brett Chapin, who practices tax and accounting law, is charged with helping Tucker avoid failing to report to the IRS millions of dollars in income. Lance Sandage of Sandage Law is defending Chapin.
- Reserve Mechanical Corp, which was formed as a micro-captive excess insurer for mining and construction parts manufacturer Peak Mechanical & Components, will urge the 10th Circuit to overturn a U.S. Tax Court judge's ruling holding that it was a tax shelter that did not provide "insurance in the commonly accepted sense." Reserve, represented by Val Albright of Foley & Lardner, has drawn the support from the Self-Insurance Association of America and other industry trade groups that say the factors the judge considered were contrary to "widely accepted and long-standing principles of insurance and tax law."
Terrorism prosecutor-turned-Gibson Dunn partner returns to her 'old world' to help Islamic State victims
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Zainab Ahmad Gibson Dunn
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Zainab Ahmad made her name as a terrorism prosecutor in Brooklyn before joining Special Counsel Robert Mueller's team investigating Russian meddling in the 2016 election.
Now the Gibson Dunn partner is returning her focus to the world of Islamic extremists by teaming up with international human rights lawyer Amal Clooney to help five Yazidi women get answers about the status of the prosecution of an Islamic State figure who they said enslaved them.
The case concerns Umm Sayyaf, the wife of Abu Sayyaf, a senior Islamic State leader who was killed in a U.S. raid in Syria in 2015. She was captured in that raid, and the DOJ charged her in 2016 over the death of American aid worker Kayla Mueller. At the time, the DOJ said Sayyaf was in Iraqi custody to be prosecuted there. But the Yazidi women, who say they suffered sexual violence and torture, say they have been kept in the dark about the case's status.
Ahmad and Clooney want to change that. In a motion made public last week, they asked a federal magistrate judge in Alexandria, Virginia, to recognize the women as victims under the Crime Victims' Rights Act. Such a designation would entitle them to certain rights, including receiving notification about the status of Sayyaf's case, where she is being detained and any efforts to extradite her.
"I feel like I'm back in my old world," Ahmad said. But she added that not keeping victims abreast of international developments was contrary to how she had handled terrorism cases. "The goal of this filing is to enable them to get some information as to what happened," she said.
The judge will hear arguments on May 14. The DOJ did not respond to a request for comment.
"We intend to prove the simple truth that the distributor defendants sold a mountain of opioid pills into our community, fueling the opioid epidemic."
Paul Farrell, a lawyer at Farrell and Fuller for Cabell County, West Virginia, which along with the city of Huntington on Monday took the nation’s three largest drug distributors to trial over claims that they helped fuel the U.S. opioid epidemic by ignoring red flags that painkillers were being diverted to illegal channels. Lawyers for AmerisourceBergen, McKesson Corp and Cardinal Health during their own opening statements in the bench trial before U.S. District Judge David Faber in Charleston denied the allegations and said they should not be forced to pay up to $2.6 billion to address the epidemic in the communities. (Reuters)
In the courts
- The U.S. Supreme Court in its Monday order on various cases asked the solicitor general to weigh in on whether it should hear a case that could create a significant precedent on the contentious issue of patent eligibility. The justices also declined to revive a lawsuit related to Wells Fargo's fake accounts scandal and directed the 5th and 6th Circuits to reconsider several deportation cases following last week’s ruling in Niz-Chavez v. Garland. (Reuters)
- The Supreme Court also declined to take up an appeal of a former West Point cadet who said she was raped at the academy, prompting a dissent from Justice Clarence Thomas, who argued it should have taken the case to overturn a ruling that barred military personnel from suing the government over injuries "incident to" their service. The cadet "could have brought these same claims had she been a civilian contractor employed by West Point instead of a student," Thomas wrote. (NBC News)
- The U.S. Army Corps of Engineers said it doesn't believe U.S. District Judge James Boasberg in D.C. should order the Dakota Access oil pipeline shut while an environmental review continues. Boasberg is now considering whether to grant a request by Native American tribes to require that the line cease flows. The pipeline's operators, led by Energy Transfer and represented by lawyers at Gibson Dunn, plan to ask the U.S. Supreme Court meanwhile to review a D.C. Circuit decision to throw out a key permit for the pipeline. (Reuters)
- A lawyer for New York Attorney General Letitia James called the National Rifle Association's bankruptcy bid "a circus sideshow" during closing arguments in a trial in Dallas bankruptcy court over whether to allow the NRA to reorganize in the gun-friendly state of Texas. The NRA filed for Chapter 11 in January, saying it planned to use the bankruptcy process to exit New York, where is it currently incorporated, after James, a Democrat, sued to dissolve it. (Reuters)
- Federal prosecutors in Boston want to increase to 17.5 years the time that Barry Cadden, New England Compounding Center's ex-president, and Glenn Chin, its former supervisory pharmacist, each spend in prison after its tainted drugs sparked a fungal meningitis outbreak in 2012 that resulted in more than 100 deaths. The 1st Circuit recently ordered the resentencing of Cadden and Chin, who were originally sentenced to nine and eight years in prison, respectively. Bruce Singal, Cadden's at Hinckley Allen, called the request for more time "way out of line." (Reuters)
- Environmental groups including the Center for Biological Diversity filed a lawsuit in federal court in Great Falls, Montana, alleging that the U.S. Army Corps of Engineers failed to consider environmental harms including those posed to endangered species when it re-issued a nationwide permit to build oil and gas pipelines across streams. (Reuters)
- Sports apparel manufacturer Under Armour has agreed to pay $9 million to resolve SEC charges that it misled investors about the bases of its revenue growth and failed to disclose uncertainties related to its future prospects. The company, represented by James Wareham of Fried Frank, did not admit wrongdoing. (Reuters)
Industry moves
- Gibson Dunn has snagged a big name from the IRS. Michael Desmond, who recently served as the chief counsel of the IRS and assistant general counsel in the U.S. Department of the Treasury under the Trump administration, will focus on tax controversy matters. (Reuters)
- Former Comcast senior deputy general counsel Shelita Stewart is heading back to Hogan Lovells six years after leaving the firm. She joins as a partner in the Washington, D.C. office (Hogan Lovells)
- William Squires, the former chair of Hinckley, Allen & Snyder's land use and development group, is taking his talents to Mintz's Boston office. He will be a member of his new firm’s environmental and real estate practices. (Mintz)
- Neal Gerber Eisenberg has brought aboard IP partner Emer Simic from Green, Griffith & Borg-Breen. Simic, whose practice focuses on pharmaceutical patent litigation, will be based in Chicago. (Neal Gerber)
- Another IP litigator is making moves this week. George Chaclas is leaving Burns & Levinson to join Day Pitney in Boston. Chaclas will head to Day Pitney’s Providence, Rhode Island, office once the firm completes its merger with Howland Evangelista Kohlenberg. (Day Pitney)
- Data privacy compliance expert Adrienne Ehrhardt is making her way to Perkins Coie, where she will be a partner in the firm’s technology transactions and privacy practice. She leaves Michael Best & Friedrich's Madison, Wisconsin, office. (Reuters)
- Structured finance lawyer Deborah Festa has joined Akin Gump as a partner in its corporate practice in Los Angeles from Milbank, where she led the New York-based firm’s West Coast securitization and investment management practices. (Akin Gump)
Columnist spotlight: Chancery's Decopac opinion shows 'ordinary course' breaches will remain extraordinary
Last November, a Delaware Chancery Court judge provoked consternation in the M&A bar with a ruling that even in a global pandemic, target companies can’t stray far from their historical practices without breaching "ordinary course" provisions in merger agreements. But in a ruling on Friday in a dispute over a $550 million deal for a cake decorating company, the incoming head judge of Chancery Court, Kathaleen McCormick, offered reassurance to sellers, concluding that ordinary course clauses aren’t supposed to be an escape hatch for rueful buyers. Read Alison Frankel's analysis of McCormick's decision in Snow Phipps v. KCake Acquisition.
Check out other recent pieces from all our columnists: Alison Frankel, Jenna Greene and Hassan Kanu.
Lawyer speak: SAG-AFTRA welcomes the influencer
The Screen Actors Guild-American Federation of Television and Radio Artists, an entertainment industry labor union, is now letting social media content creators into its fold. Davis & Gilbert attorneys Howard Weingrad, Samantha Rothaus and Jordan Thompson walk through the ins and outs of the SAG's latest contract updates. Read more.
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