Good morning. Elon Musk is set to take the witness stand in a blockbuster trial in Delaware, Sidney Powell and other lawyers behind a "Kraken" election lawsuit are facing a sanctions hearing in Michigan, and former Yankees first baseman Joe Pepitone is going to court to seek the return of the bat Mickey Mantle used to hit his 500th home run. Let's get this week going!
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Elon Musk to testify as blockbuster trial starts over Tesla's SolarCity deal
How much control Elon Musk has over Tesla Inc is the $2.6 billion question in a trial kicking off today in Delaware, as shareholders seek to recoup money they say was wrongly spent saving solar panel maker SolarCity - and the billionaire's investment in it - from bankruptcy.
Musk is expected to take the stand during the first day of trial in a lawsuit by union pension funds and asset managers who say he strong-armed Tesla's board to buy SolarCity just as it was about to run out of cash, Tom Hals and Sierra Jackson report.
The plaintiffs aim to convince Delaware Vice Chancellor Joseph Slights that Musk, who owned about 22% of Tesla at the time, is that rare controlling stockholder who does not hold a majority stake. If he did, it would impose a tougher legal standard, increasing the likelihood the deal was unfair to shareholders.
"It would be a surprise to most people if the court were to come out and say that he doesn’t control here," said Brian Quinn, a Boston College Law School professor. "Because he certainly acts like he does." But Musk's lawyers, led by Cravath's Evan Chesler, contend that what the plaintiffs see as evidence of control is little more than strong management.
Board members settled related allegations against them for $60 million. The plaintiffs are repped by a Who's Who of the shareholder litigation scene, including Daniel Berger of Grant & Eisenhofer; Lee Rudy of Kessler Topaz Meltzer & Check; and Randall Baron of Robbins Geller. Learn more.
Industry buzz
- Britney Spears has held discussions recently with Mathew Rosengart, a former federal prosecutor now at Greenberg Traurig, about taking over as her lawyer and pushing to end her controversial conservatorship, a person briefed on the matter told the New York Times. He has previously counted as clients Sean Penn, Steven Spielberg and Kenneth Lonergan. (New York Times, TMZ)
- White & Case and Goodwin Procter led the law firm M&A deal charts by value and number respectively for the first half of 2021, as per Refinitiv data. New York-based White & Case picked up 264 deals valued at $363.7 billion, led by a $3.37 billion sale of Sempra Energy's infrastructure arm to KKR. Goodwin had the highest number of deals with 460, one more than Kirkland & Ellis. (Reuters)
- Manatt, Phelps & Phillips partner Jack Quinn, who served in the President Bill Clinton White House, is suing plaintiffs' firm Kreindler & Kreindler for legal fees he says are owed to him under a 2013 fee-sharing agreement for his work supporting families of victims of the Sept. 11, 2011, attacks. (Reuters)
- New York lawyers can advise clients in compliance with the state's recreational marijuana law despite federal narcotics law to the contrary, according to a new ethics opinion by the New York State Bar Association. Lawyers can also accept ownership stakes in a cannabis businesses as payment, consume marijuana recreationally and cultivate it, subject to certain limits. (Reuters)
- The growing spread of the Delta coronavirus variant could force law firms to adjust their re-opening plans and office guidelines, such as whether to mandate masks and continue social distancing policies for in-person work. (The American Lawyer)
- Tai Park, a former federal prosecutor who went on to represent billionaire Macau real estate developer Ng Lap Seng during his U.N. bribery scheme trial, has left White & Case to join Quinn Emanuel as a partner in New York. (Reuters)
- Gibson Dunn has picked up securities litigator James Farrell, who has represented large accounting firms like Deloitte, Ernst & Young and BDO, from Latham & Watkins. Farrell joins as a partner in New York where he will continue his complex civil litigation practice, which focuses on securities and professional liability litigation, the firm said. (Reuters)
- Five law firms, including Kirkland & Ellis and Morgan, Lewis & Bockius, are guiding Bullish's agreement to go public through a blank-check merger with SPAC Far Peak Acquisition Corp that values the cryptocurrency exchange at $9 billion. (Reuters)
Number of the day:
38,000
Glitches in a new system used to manage the DOJ's $4.7 billion grant program are causing delays in funding programs from victim services to criminal justice research, say more than a dozen staffers and grant recipients. Data obtained by Sarah N. Lynch through a Freedom of Information Act request shows the system, known as "JustGrants," has generated more than 38,000 tech support requests from its October launch through May 10. The DOJ’s inspector general in May issued a warning saying the problems hampered award recipients' ability to achieve program objectives. (Reuters)
Reuters video journalist Tom Rowe gives you an early view of the week ahead in legal news. Watch the video. For a quick take on what's coming this week, listen to journalist Alex Cohen's audio Lookahead.
Coming up today
- U.S. District Judge Judith Levy in Ann Arbor, Michigan, will begin considering whether to approve a $641 million class action settlement with the state for victims of the Flint tainted-water scandal. Lawyers at firms including Cohen Milstein and Pitt McGehee Palmer & Rivers who negotiated the deal have asked Levy to award them up to $209 million for fees and expenses. More than 150 individuals have filed objections to the deal, raising concerns about the use of bone lead tests to assess awarding larger payouts for some individuals and the size of the attorneys fees.
- Sidney Powell, L. Lin Wood and other attorneys who filed lawsuits to overturn former President Donald Trump's loss in Michigan during the 2020 presidential election on the basis of unsubstantiated fraud claims have been ordered to appear before U.S. District Judge Linda Parker in Detroit as she mulls whether to sanction them. The request for sanctions came from lawyers for the city and Democratic Michigan Attorney General Dana Nessel.
- Johnson & Johnson is slated to face its first trial in more than a year following COVID-19 court closures in litigation over claims that its talc products including Johnson’s Baby Powder can cause ovarian cancer. The trial in the 20th Judicial Circuit Court of St. Clair County, Illinois, stems from a case brought by the sister of Elizabeth Driscoll, who alleges she died from ovarian cancer as a result of the company's talc. J&J, which faces thousands of similar lawsuits, has denied the allegations, saying numerous studies and tests by regulators worldwide have shown its talc to be safe. John Driscoll of The Driscoll Firm is representing the plaintiff and will face defense lawyers including Paul Johnson of King & Spalding.
- U.S. District Judge R. Gary Klausner in Los Angeles will consider whether to approve a $73 million settlement resolving claims against the University of California, Los Angeles, by patients who say they were sexually abused by James Heaps, a former UCLA gynecologist who is facing related criminal charges. Daniel Girard of Girard Sharp represents the class while Gibson Dunn’s Debra Wong Yang is defending the university.
- Mall operator Washington Prime Group will seek the approval of U.S. Bankruptcy Judge Marvin Isgur in Houston to begin soliciting creditor votes for its proposed reorganization plan. Under the proposed plan, senior lenders will receive new debt, unsecured noteholders will swap their debt for equity, and the company will hold a $325 million equity rights offering. But the company, represented by Chad Husnick of Kirkland & Ellis, will also market its assets during the bankruptcy to determine whether a higher-value deal is possible.
- Neustar's TRUSTID unit will take rival caller verification company Next Caller Inc to trial in federal court in Wilmington, Delaware, on claims that it infringed patents related to its anti-spoofing caller ID technology and made false statements about the system's capabilities. Next Caller, represented by Paul Schoenhard of McDermott Will & Emery, denies the allegations. TRUSTID’s lawyers include Michael Specht of Sterne Kessler.
Later this week
- Jury selection is scheduled to begin on Tuesday in Santa Ana, California, in the second federal trial of Michael Avenatti, the celebrity lawyer previously convicted of trying to extort Nike. Avenatti faces 10 criminal counts on charges he embezzled nearly $10 million of settlement proceeds from five clients. He faces 26 additional charges at a separate trial including bankruptcy, bank and tax fraud. A federal judge in Manhattan sentenced him on Thursday to 2-1/2 years in prison in the Nike case.
- The federally-appointed board tasked with overseeing Puerto Rico's restructuring will ask U.S. District Judge Laura Taylor Swain on Tuesday to grant it approval to solicit credit votes for its proposed plan of debt adjustment. The board, represented by Martin Bienenstock of Proskauer Rose, is pushing a deal that it says would reduce Puerto Rico’s public debt by nearly 80% to $7.4 billion. Lawyers for the government of Puerto Rico including Peter Friedman of O’Melveny & Myers have opposed the proposal, which includes cuts to public pensions.
- The Missouri Supreme Court on Tuesday will consider whether the Republican-led state of Missouri must implement a voter-approved Medicaid expansion. Cole County Circuit Judge Jon Beetem in Jefferson City, Missouri, last month ruled that the initiative was unconstitutional because it would force the legislature to set aside funds to pay for it. Lawyers for the plaintiffs, three individuals suing for coverage after the legislature declined to fund the expansion, include Chuck Hatfield of Stinson and Lowell Pearson of Husch Blackwell.
- Lawyers for Google, the DOJ and various state attorneys general on Wednesday will appear before U.S. District Judge Amit Mehta in D.C. for a hearing to address any unresolved issues on third-party subpoenas the tech giant issued to defend itself against some of the blockbuster antitrust lawsuits it’s facing. Those lawsuits accuse the company of abusing its power to maintain a monopoly in the search and search advertising markets. Google is defended by lawyers who include John Schmidtlein of Williams & Connolly, Susan Creighton of Wilson Sonsini and Mark Popofsky of Ropes & Gray.
- Lyft on Thursday will ask U.S. District Judge Haywood Gilliam in Oakland, California, to grant it summary judgment and throw out a shareholder class action alleging the ride hailing app company hid information about looming losses, sexual assaults committed by Lyft drivers and labor issues ahead of its 2019 IPO. The company, represented by Matthew Rawlinson of Latham & Watkins, has said the lawsuit is without merit. Whitney Street of Block & Leviton represents the shareholders pursuing the case.
"By focusing too much on religious liberty and too little on counterarguments and other interests, the majority opinion takes our circuit's law beyond necessary protection of religious liberty. It instead creates for religious institutions a constitutional shelter from generally applicable laws, at the expense of the rights of employees."
U.S. Circuit Judge David Hamilton, who dissented from the 7th Circuit's 7-3 en banc ruling holding that the "ministerial exception" to federal anti-discrimination law protected a Catholic church in Chicago, St. Andrew the Apostle Parish, from facing hostile work environment claims by a gay music director who was fired after he married another man. Hamilton warned that the majority had created an "absolute bar" to hostile environment claims by ministerial employees regardless of a religious institution's motives or conduct. (Reuters)
In the courts
- U.S. District Judge Nancy Rosenstengel in East St. Louis, Illinois, has named a diverse team of 16 lawyers to the executive committee that will lead the multidistrict litigation against Chevron and ChemChina's Syngenta over claims that the weedkiller paraquat causes Parkinson's disease. The judge’s decision to name 11 women and four attorneys of color to the committee comes amid ongoing discussions about the mass tort plaintiffs bar’s lack of diversity. The co-lead counsel will be Khaldoun Baghdadi of Walkup, Melodia, Kelly & Schoenberger; Sarah Shoemake Doles of Carey Danis & Lowe; and Peter Flowers of Meyers & Flowers. (National Law Journal)
- The D.C. Circuit concluded that an annual cap on HB-5 investor visas includes those awarded to the investor's spouse and children as it upheld the dismissal of a proposed class action by several Chinese citizens. Their lawyer, Ira Kurzban of Kurzban, Kurzban, Tetzeli & Pratt, called on Congress "to correct the egregious error of counting family members." (Reuters)
- U.S. Magistrate Judge Jacqueline Scott Corley in San Francisco set jury selection to begin in January in the second trial in litigation against cryogenic tank manufacturer Chart Industries over the failure of one of its tanks at a fertility clinic, Pacific Fertility Center. The first trial ended with a $15 million verdict for five plaintiffs represented by lawyers at Girard Sharp; Peiffer Wolf Carr Kane & Conway and Gibbs Law Group. John Duffy of Swanson, Martin & Bell is defending Chart. (Reuters)
- Navient Corp must face a proposed class action by student borrowers who accuse the company of fraudulently misallocating payments to increase the life of potentially millions of student loans, U.S. District Judge Susan Wigenton in New Jersey ruled. Lisa Simonetti of Greenberg Traurig and Xavier Bailliard of Kranjac Tripodi & Partners rep Navient and the plaintiffs, respectively. (Reuters)
- Oracle sued Japanese information technology company NEC Corp in San Francisco federal court, alleging it infringed its copyrights by breaching its license agreement to use its popular database software in its biometric identification system. Oracle, represented by Fred Norton of The Norton Law Firm, said it suffered more than $7 million in damages as a result. (Reuters)
- The SEC in a lawsuit in Manhattan federal court accused three men of insider trading ahead of Long Island Iced Tea Corp's announcement it would change its name to Long Blockchain Corp and shift its focus to blockchain from iced tea and lemonade, causing its shares to soar nearly 400%. At least two of the men, broker Oliver Barret-Lindsay and stock promoter Gannon Giguiere, have retained lawyers: Michael Lipman of Duanne Morris for Barret-Lindsay and Mimi Bahcall of Greenberg Traurig for Giguiere. (Reuters)
Columnist spotlight: Onetime Yankees All Star Joe Pepitone sues Hall of Fame over Mantle home run bat
In the spring of 1967, legendary Yankees' star Mickey Mantle was chasing the milestone that would make him the first switch-hitter to club 500 home runs. As Mantle stepped up to the plate in the seventh inning of a game against the Orioles, his good buddy Joe Pepitone handed Mantle a good-luck bat that Pepitone had just used to hit a home. The bat, Pepitone said, "had another home run in it." He was right: Mantle smacked one into the right field stands. The Yankees sent Pepitone's fateful bat to the Hall of Fame to commemorate his friend’s achievement. A heartwarming tale? Perhaps, but as Alison Frankel writes in her latest column, it’s now also a lawsuit. Read here to find out why Pepitone’s case may determine if there's no laches, along with no crying, in baseball.
Lawyer speak: A look at FTC authority to regulate artificial intelligence
The FTC's authority to regulate private sector uses of personal information and algorithms that impact consumers is now being extended to cover AI deployments. New FTC guidelines offer examples of how AI-based data collection and use could be deemed deceptive, unfair or adversely impact certain racial or ethnic groups. Bret Cohen, W. James Denvil and Filippo Raso of Hogan Lovells provide guidance on how organizations deploying AI can align themselves with the FTC’s recommendations and demonstrate fair, equitable and non-discriminatory use of AI-based algorithms. Read more.
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