Good morning. The first of President Joe Biden's judicial nominees have cleared the Senate, Wall Street lawyers and accountants are grappling with what to do about the SEC's crackdown on the use of equity warrants with SPACs, another Thompson & Knight partner has left ahead of its planned merger with Holland & Knight, El Chapo's wife is preparing to plead guilty, and Ohio's AG is suing to declare Google a public utility. Chug that coffee down, there's more news where that came from!
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Senate approves first of Biden's judicial nominees, with more to come
The U.S. Senate on Tuesday approved President Joe Biden's first judicial nominees, two picks to serve as district court judges in New Jersey and Colorado.
Senate Majority Leader Chuck Schumer ahead of the vote called Julien Neals of New Jersey and Regina Rodriguez of Colorado "the first of many jurists that the Democratic Senate will consider to restore the balance to the federal judiciary," after former President Donald Trump's appointment of 234 federal judges.
They were advanced out of the Senate Judiciary Committee last month along with three others including Ketanji Brown Jackson, a D.C. Circuit nominee seen as a potential Supreme Court pick. Schumer on Tuesday filed for a so-called cloture vote on Brown Jackson, setting up a confirmation vote in the coming days.
Senators voted 66-33 and 72-28 respectively to confirm Neals, the county counsel and acting county administrator for Bergen County, New Jersey, and Rodriguez, the co-chair of WilmerHale's trial practice. Former President Barack Obama had nominated both to the same positions but they languished in the Republican-controlled Senate.
Diversity has dominated Biden's 20 judicial nominees. The Senate Judiciary Committee is slated today to consider five more, including two current federal public defenders, Eunice Lee for a seat on the New York-based 2nd Circuit and Veronica Rossman for a spot with the Denver-based 10th Circuit.
Wall Street grapples with new SPAC equity contracts after SEC crackdown
Wall Street accountants and lawyers are trying to figure out new equity agreements to lure investors back to the blank-check company market after the SEC cracked down on the use of warrants, Chris Prentice reports.
Special-purpose acquisition companies, or SPACs, raise cash on the stock market to acquire and take public a private company. SPACs typically offer common stock with warrants attached that give SPAC sponsors and outside investors the right to buy common stock in the new entity created by the merger at a pre-agreed price.
But the SEC in April concluded that many equity warrants for SPACs should be considered liabilities. The surprise announcement ground the already-slowing SPAC market to a halt, and accountants and lawyers have been scrambling since to figure out a fix with SEC staff. Accountants and lawyers are now discussing jettisoning warrants in favor of rights agreements or dramatically restructuring the warrants, Prentice reports, citing people familiar with the matter.
"There are ongoing discussions between the auditing firms, the companies pressure-testing the SEC's views," said David Brown, an attorney at Alston & Bird. "Certainly those companies that haven't IPO-ed yet are looking for potential workarounds." Learn more.
Industry buzz
- Legal technology company Factor has launched a new service that it says will help law firms on deal work by providing tech-fueled transaction management, due diligence and documentation support. Corporate teams at many Big Law firms have grappled with record-high workloads this year. (Reuters)
- Another partner is leaving Thompson & Knight's Dallas home office following its announcement that it planned to merge with Miami-founded Holland & Knight. This time it’s tax lawyer Dean Hinderliter, who joined Winston & Strawn. Several partners – including Texas office leaders – have left Thompson & Knight recently for rival law firms including Stinson, O'Melveny, Sidley Austin, Akin Gump, Baker Botts and BakerHostetler. (Reuters)
- Michael van der Veen and Bruce Castor, the Pennsylvania lawyers with van der Veen, O'Neill, Hartshorn, and Levin who defended former President Donald Trump at his second impeachment trial against allegations that he incited an insurrection at the U.S. Capitol on Jan. 6, are now defending at least three people charged in connection with the riot. (NPR)
- Democratic Virginia Attorney General Mark Herring defeated a primary challenge from a Black state lawmaker, Jay Jones, who had argued that Herring was not strong on police reform and who had also won the endorsement of Governor Ralph Northam. (Richmond Times-Dispatch)
- U.S. Bankruptcy Judge Barry Russell in Los Angeles approved a request by the Chapter 7 trustee overseeing disgraced plaintiffs' attorney Tom Girardi's law firm Girardi Keese to hire Ronald Richards of Ronald Richards & Associates as outside counsel to investigate his estranged wife, "Real Housewives of Beverly Hills" star Erika Jayne Girardi to see if she is hiding assets. (Reuters)
- Two Senate Judiciary Committee members – Sheldon Whitehouse, a Democrat, and John Kennedy, a Republican – are urging the DOJ to disclose SCOTUS justices’ travel information in an effort to boost transparency. Groups have pushed for such disclosures since late Justice Antonin Scalia died in 2016 at a Texas ranch whose owner also owned a company that was previously involved in a case in front of the high court. (Roll Call)
- Black lawyers are more likely than white lawyers to face mental health struggles, but are less likely to feel that their firm supports their well-being or that they can take time off, according to new survey data from ALM. (The American Lawyer)
Number of the day:
92.18%
Google's legal woes deepened on Tuesday, when Ohio Attorney General Dave Yost filed a novel lawsuit asking a state court judge in Delaware County Court to declare the Alphabet subsidiary a public utility, a step the Republican said would forbid the search and advertising giant from giving preferential treatment to its own products. Yost cited Google's dominance in internet search -- it controls 92.18% of the worldwide search engine market, according to the web analytics firm StatCounter. Google, which is facing antitrust lawsuits by the DOJ and various states, said the lawsuit if successful would worsen its internet search business. (Reuters)
Coming up today
- U.S. Attorney General Merrick Garland will appear before a subcommittee of the U.S. Senate Appropriations Committee to discuss the DOJ's budget request and policy priorities. The department is seeking $35.3 billion as part of a budget request that emphasizes civil rights enforcement, countering domestic terrorism and enforcing voter rights.
- Goldman Sachs' Malaysian unit faces sentencing by U.S. District Judge Margo Brodie in Brooklyn after pleading guilty to conspiring to violate the Foreign Corrupt Practices Act by bribing Malaysian officials to win business with the country's sovereign wealth fund, 1MDB. Under a plea agreement, the judge must sentence the subsidiary to a $500,000 criminal fine, part of the $2.9 billion Goldman agreed to pay to resolve probes by the DOJ and other authorities. Robert Luskin of Paul Hastings is defending Goldman.
- The 2nd Circuit will rehear a challenge by Robert Olan and Ted Huber, two former partners at the hedge fund Deerfield Management, and two other individuals to their convictions for taking part in a scheme to illegally trade healthcare stocks based on leaks about pending U.S. healthcare regulatory changes. Prosecutors recently said that the bulk of the convictions should be overturned because, pursuant to the U.S. Supreme Court's ruling last year in the "Bridgegate" case, government information could not be considered property under the fraud and conversion statutes. In light of that view, the 2nd Circuit appointed an amicus, former securities fraud prosecutor and Akin Gump partner Katherine Goldstein, to argue in favor of upholding the convictions. Donald Verrilli of Munger Tolles & Olson, Olan's lawyer, is expected to argue for the appellants.
- Two conservative advocacy groups will urge the 1st Circuit in Boston to revive their challenge to Rhode Island campaign finance laws that require groups seeking to influence elections to disclose their donors and include disclaimers on advertisements stating who paid for them. Daniel Suhr of the Liberty Justice Center in a brief filed for Rhode Island’s Gaspee Project and the Illinois Opportunity Project noted that the U.S. Supreme Court is in the midst of considering a challenge by two conservative groups to a California requirement that tax-exempt charities disclose their top donors. Rhode Island Special Assistant Attorney General Katherine Connolly Sadeck will defend the laws.
- The 1st Circuit will also take up a challenge by the Consumer Data Industry Association, whose members include credit reporting agencies Experian, Equifax and TransUnion, to two Maine laws that aim to protect consumers with medical debt and who claim they are subject to economic abuse. A federal judge ruled for the trade group, represented by Jennifer Sarvadi of Hudson Cook, in finding the laws are preempted by the federal Fair Credit Reporting Act. Sarvadi will have support from Misha Tseytlin of Troutman Pepper Hamilton Sanders, who will argue for amici the U.S. Chamber of Commerce and the American Financial Services Association. Maine Chief Deputy Attorney General Christopher Taub and Chi Chi Wu of the National Consumer Law Center will argue in the laws’ defense.
- Closing arguments are expected in the first trial to result from litigation against cryopreservation tank manufacturer Chart Industries Inc over the failure of one of its tanks at San Francisco fertility clinic Pacific Fertility Center that resulted in the destruction of thousands of embryos and eggs. The jury trial before U.S. Magistrate Judge Jacqueline Scott Corley in San Francisco centers on five plaintiffs out of more than 200 patients who have brought claims over the 2018 tank failure. Pacific Fertility and its parent company previously won motions to send the claims against them to arbitration, leaving Chart as the only defendant in court. Dena Sharp of Girard Sharp and Amy Zeman of Gibbs Law Group will argue for the plaintiffs. John Duffy of Swanson, Martin & Bell is defending Chart.
- Opening statements are expected to be delivered in the latest trial over claims that Bayer-owned Monsanto failed to warn the public about the health risks associated with synthetic chemicals known as polychlorinated biphenyls, or PCBs, that the company manufactured. The lawsuit in King County Superior Court in Seattle, Washington, centers on three former teachers who worked in a school building that contained the chemicals. The company denies the allegations. The plaintiffs are being represented by Rick Friedman of Friedman Rubin. Thomas Goutman and Adam Miller of Shook Hardy & Bacon are leading the defense.
- A former senior executive at venture capital funds known collectively as Downing is slated to be sentenced after admitting to participating in a Ponzi-like scheme that caused more than 30 investors to lose nearly $10 million. Federal prosecutors are asking U.S. District Judge Alvin Hellerstein in Manhattan to sentence Marc Lawrence to 78 to 97 months in prison. His lawyers, led by Andrew St. Laurent of Harris St. Laurent & Wechsler, in a filing said he "deeply regrets the crimes" but that probation is sufficient to punish him.
"DOJ is not trying to save Trump, but protect a strong presidency and executive branch."
Andrew Wright, a K&L Gates lawyer who worked on President Joe Biden's presidential transition, on the DOJ's moves in two cases to shield former President Donald Trump or those who served in his administration, angering liberals. The latest instance came when the DOJ under Attorney General Merrick Garland urged the 2nd Circuit to substitute the government as a defendant in a lawsuit by former Elle magazine columnist E. Jean Carroll accusing Trump of defamation for denying he raped her a quarter-century ago. Legal experts said the DOJ under Biden is seeking to protect the office rather than the personal interests of the person holding it. (Reuters)
In the courts
- The wife of Joaquin "El Chapo" Guzman, the imprisoned former leader of Mexico's Sinaloa drug cartel, is expected to plead guilty on Thursday in federal court in D.C. following her arrest in February on charges that she helped her husband continue to run his drug trafficking cartel while he was behind bars, The New York Times reports, citing a person familiar with the matter. Emma Coronel Aispuro was a regular attendee at her husband’s trial two years ago. He is serving a life sentence. (New York Times, Reuters)
- Members of the Democratic-led U.S. House Oversight and Reform Committee called for accountability from members of the Sackler family that own Purdue Pharma for their role in the opioid crisis and made their case for legislation that would bar non-bankrupt individuals from receiving legal protections through a company’s bankruptcy. The bill is in response to the proposed settlement in Purdue's Chapter 11 case that provides releases for the Sackler family from lawsuits over the epidemic. "This is an outrageous loophole made up by a bunch of bankruptcy judges," Representative Jamie Raskin of Maryland said. (Reuters)
- Job sharing a single full-time position with a coworker does not qualify as a reasonable accommodation that an employer must provide under the Americans with Disabilities Act, the 4th Circuit ruled. The ruling came in a lawsuit by a pharmaceutical sales representative with an autoimmune disease against Sanofi, The EEOC backed the arguments advanced by the ex-employee, Janet Perdue, and her attorney Michelle Gessner of Gessner Law. Theresa Sprain of Womble Bond Dickinson defended the company. (Reuters)
- The New York State Senate voted to make it easier for plaintiffs to win antitrust lawsuits and to allow the state's attorney general to sue gun manufacturers "responsible for the illegal or unreasonable sale, manufacture, distribution, importing or marketing of firearms" for public nuisance. The bills still need to be passed by the New York State Assembly. (Wall Street Journal, AP)
- Over the objections of lawyers for investors at Robbins Geller suing Toshiba over its accounting scandal, U.S. District Judge Dean Pregerson in Los Angeles allowed the Japanese government to file an amicus brief in favor of the case not proceeding as a class action. (Reuters)
- An Australian businessman pleaded guilty to involvement in what U.S. prosecutors called a scheme to bilk hundreds of thousands of mobile phone users out of more than $50 million for unwanted text messaging services. "I seriously regret my actions, and am sorry for the many people who were defrauded by this autosubscription scheme," Michael Pearse told U.S. District Judge Analisa Torres in Manhattan. (Reuters)
- Former Plated shareholders can continue with a narrowed breach of contract suit accusing Albertsons of intentionally preventing the meal kit company from receiving certain payments related to its merger with the supermarket operator in 2017, Delaware Vice Chancellor Joseph Slights ruled. The lawsuit was filed by Shareholder Representative Services, represented by John Ruskusky and Lisa Sullivan of Nixon Peabody. Albertsons’ lawyers include Schulte Roth & Zabel's Michael Schwartz. (Reuters)
- The 10th Circuit ruled that the attorneys' fees standard that the U.S. Supreme Court adopted for "exceptional" patent cases in 2014’s Octane Fitness, LLC v. ICON Health & Fitness also applies to trademark cases, joining every other federal appeals court in applying the standard to Lanham Act litigation. The ruling came in a dispute involving a skin treatment microneedle maker. (Reuters)
Industry moves
- Jenner & Block has hired Jeri Somers, the former chair of the U.S. Civilian Board of Contract Appeals, as a partner in its government contracts practice. Somers, who is based in D.C., will be the third former senior government official to join that team. (Reuters)
- Mayer Brown has added Yevgeniy Markov, who was counsel at Willkie Farr & Gallagher, as a partner in its corporate and securities practice in New York and as a member of its global insurance industry group. (Mayer Brown)
- The deputy chair of Kelley Drye's global hospitality and leisure practice Michael Kosmas is joining Stroock & Stroock & Lavan as partner in D.C. He advises hotel owners and operators on franchise and management contracts, among other things. (Stroock)
Just kidding! How a Stanford 3L got the last laugh against the Federalist Society. For Stanford 3L Nicholas Wallace, his final two weeks as a law student have been "completely surreal," he told Jenna Greene. One minute the 32-year-old 3L from Ann Arbor, Michigan, was finishing his last class and getting ready to take finals. The next, his entire future was in jeopardy because the Federalist Society — or at least the local Stanford chapter — couldn’t take a joke. Greene spoke with Wallace about what happened after he created a satirical flier, "The Originalist Case for Inciting Insurrection," poking fun at the Stanford FedSoc chapter. Days before graduation, Wallace found himself under investigation by the university for violating its code of conduct, his law degree on hold. Read more here about how he and First Amendment champions from Foundation for Individual Rights in Education prevailed.
Copyright controversy erupts as prominent scholars urge veto of ALI restatement. On Tuesday night, members of the American Law Institute voted to approve a draft restatement of copyright law that was seven years in the making. The ALI vote followed a dramatic last-ditch email to ALI members from four prominent copyright scholars who were advisors on the draft restatement – but who urged fellow members of the prestigious group to reject the proposal. Their argument: This groundbreaking restatement of statutory law does not always present the statutory text of the Copyright Act as "black letter" law. As Alison Frankel reports, Jane Ginsburg and Shyam Balganesh of Columbia Law School, Peter Menell of the University of California Berkeley School of Law and David Nimmer of Irell & Manella told ALI members that the proposed copyright restatement could be the first step down a troubling path as ALI begins to tackle other restatements in areas of law governed by federal statutes. And they’re not the only ones worried about "black letter" departures from statutory text. Read Frankel's latest column to see why these profs and others are worried that ALI is putting its very legitimacy at risk.
Biden reopens shuttered Office for Access to Justice, but slowly. The Biden White House recently announced efforts to restore and reinvigorate the DOJ's Office for Access to Justice, a unit formally established in 2016 to develop and coordinate civil legal aid and criminal defense initiatives for low-income Americans. The office was shut down in 2018 under former President Donald Trump, whose administration saw it as costly and unnecessary, Hassan Kanu writes. But the current White House and DOJ directives regarding the office seem to point to a preliminary process – something more like an exploratory committee – rather than immediately picking up where the Obama administration had left off, Kanu writes. And, the budget proposal sent by the administration to Congress last month suggests a slow restart and expansion of the division's crucial business. Learn more about the office’s reopening.
Lawyer speak: How Biden's efforts to stop cyberattacks will impact contractors
President Joe Biden recently signed an executive order that aims to protect the federal government’s networks and software supply chains against cyber attacks, with new security standards for software sold to the government and an accelerated adoption of cloud networks and multifactor authentication. Perkins Coie's Alexander Canizares and Paul Korol discuss how the order will impact government contractors. Read more.
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