American Express-Stanford, Hontex, EBay, Merrill Lynch, CDR in Court News

Patricia Cohen, who filed a lawsuit against her ex-husband, SAC Capital Advisors LP founder Steven A. Cohen, over money she claims is owed her from their divorce, was sued by her former lawyer in the case for unpaid fees.

In his complaint, which also names Patricia Cohen's new attorney, Gaytri Kachroo, lawyer Paul Batista seeks to place a lien on any eventual settlement or judgment that Patricia Cohen wins. Batista also seeks reimbursement for expenses he incurred on his former client's behalf over the seven months he spent preparing the case.

"Kachroo and Cohen have publicly, repeatedly and falsely claimed that plaintiff Batista was 'discharged' or 'terminated' for 'cause,'" Batista's lawyers said in the complaint filed April 1 in New York state court in Manhattan. Their "statements regarding plaintiff Batista are false and are a pretext created by defendants Kachroo and Cohen in an effort to deprive plaintiff of the fees earned and to be earned."

Patricia Cohen fired Batista soon after he filed the Dec. 16 lawsuit against her ex-husband. In it, Patricia Cohen, who separated from her then-husband in 1988, claimed he and SAC filed false documents and hid assets from her and New York state courts during divorce proceedings. She also claimed he told her that he used inside information in a 1985 investment. Steven Cohen, who in 1992 started the now-$14 billion SAC with about $25 million, has denied the allegations.

Kachroo said she will fight Batista's claims.

"The lawsuit is frivolous and replete with inappropriate disclosure of confidential and privileged communications," she said in a telephone interview. Kachroo said Batista wrongly withdrew Patricia Cohen's original complaint without authority from the client. Kachroo, based in Cambridge, Massachusetts, said she planned to file an amended complaint in the lawsuit against Steven Cohen and SAC.

The case is Batista v. KLS-Kachroo Legal Services, 10- 104295, Supreme Court, New York County (Manhattan).

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New Suits

Allen Stanford Sued by American Express Over Credit Card Debt

Indicted financier R. Allen Stanford was sued by a unit of American Express Co. for $115,712.79 in back credit card debt.

Stanford, who faces 21 criminal charges that he led a $7 billion Ponzi scheme, has been incarcerated since June. American Express Centurion Bank said its lawsuit could be served on Stanford at the federal detention center in downtown Houston.

"Defendant benefited from all of the charges made to the Centurion Card account, has acknowledged receipt of those benefits, and has failed to pay for same," Donald D. DeGrasse, American Express's lawyer, said in papers filed in Texas state court in Houston March 31.

Stanford was sued in February 2009 by the U.S. Securities and Exchange Commission on allegations he swindled investors through a scheme built on fraudulent certificates of deposit at Antigua-based Stanford International Bank Ltd. The judge overseeing that case froze all of Stanford's personal and corporate assets and placed them under the control of court- appointed receiver Ralph Janvey.

DeGrasse, in a telephone interview, said he also plans to file American Express's claim with the receivership, which is marshalling Stanford's assets to repay investors and creditors. American Express's suit also asks that Stanford pay $34,000 to cover the bank's anticipated legal fees in the bad debt matter.

Stanford denies any wrongdoing in connection with the allegations. His criminal trial is set for January 2011.

Kent Schaffer, Stanford's criminal defense attorney, declined to comment on the lawsuit. Janvey's spokeswoman, Kristie Blumenschein, didn't return calls or e-mails after regular business hours seeking comment on the matter.

The case is American Express Centurion Bank v. Stanford, 2010-20554, 234 Judicial District, District Court of Harris County, Texas (Houston).

The civil case is SEC v. Stanford International Bank, 3:09- cv-00298, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 4:09-cr-00342, U.S. District Court, Southern District of Texas (Houston).

For more new suits news from last week, click here. For copies of recent civil complaints, click here.

Lawsuits/Pretrial

Murdoch Faces New Claims From Ex-Supermarket Promotion Rival

News Corp.'s $500 million settlement of Valassis Communications Inc.'s unfair competition complaints has stirred a former rival in the business of supermarket promotions to try to reopen a closed case to take another crack at the company built by Rupert Murdoch.

Floorgraphics Inc., which settled its allegations of anticompetitive behavior by selling News Corp. its contracts for $29.5 million in 2009, asked a New Jersey judge this month to let it examine new evidence that might entitle it to more money. Company executive George Rebh said in a March 29 affidavit he wanted to renew his fight after reading how much News Corp. paid Valassis and its January statement that it saw "significant risks" in presenting that case to a jury.

"It was the combination," he said in court papers.

Murdoch may already have spent more than the projected earnings of News Corp.'s hit "Avatar" movie to settle Valassis's lawsuits. Floorgraphics' potential demands would be added to that, and separate claims by Insignia Systems Inc. at a trial to be scheduled after April 12. The Minneapolis-based marketer of in-store promotions seeks unspecified damages from New York-based News Corp.'s News America Marketing, or NAM, which contributed to its division's $414 million operating loss in the quarter ended Dec. 31 due to the Valassis payment.

"News Corp. cost us hundreds of millions of dollars in lost opportunity," Insignia Chief Executive Officer Scott Drill said in an interview. Rebh declined to say what his estimates of damage to Floorgraphics are.

News Corp. said in a filing that Floorgraphics couldn't reopen the case because it couldn't show "extraordinary justifying circumstances." Teri Everett, a spokeswoman for News Corp., declined to comment beyond its court filing.

The cases are Insignia Systems Inc. v. News America Marketing In-Store Inc., 04-cv-04213, U.S. District Court, District of Minnesota (Minneapolis) and Floorgraphics Inc. v. News America Marketing In-Store Services Inc., 04-cv-03500, U.S. District Court, District of New Jersey (Trenton).

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Ex-Qwest CEO Nacchio Wins Ruling Narrowing SEC Suit

Former Quest Communications International Inc. Chairman Joseph Nacchio won a federal court ruling narrowing the scope of a lawsuit filed against him by the U.S. Securities and Exchange Commission.

U.S. District Judge Marcia Krieger in Denver on March 31 granted a request by Nacchio and four co-defendants that she reject some of the allegations lodged by the SEC in the five- year-old securities fraud case.

In her 46-page ruling, Krieger said both sides appeared to have different understandings of the remainder of the SEC's case, preventing her from addressing its "major thrust." She directed the parties to appear before her on April 14 for oral argument on unresolved dismissal requests.

"It is essential that the court and defendants understand the SEC's current theory," the judge said.

John Heine, a spokesman for the SEC, declined to comment on the ruling. Nacchio's attorney, Sean Berkowitz, didn't reply to voicemail and e-mail messages seeking comment.

The agency sued Nacchio and eight other former Qwest officers and employees in March 2005 accusing them of violating federal securities laws. A federal grand jury indicted the executive for insider trading later that year.

Nacchio was later convicted for selling $52 million in Qwest stock based on inside information. His conviction was upheld by a federal appeals court. The U.S. Supreme Court last year declined to review that decision. Krieger, the trial court judge, declined to grant Nacchio's motion for a new trial, in an order posted on Jan. 12, 2010.

The civil case is SEC v. Nacchio, 05cv480, in the U.S. District Court for Colorado (Denver). The criminal case is U.S. v. Nacchio, 05cr545, in the U.S. District Court for Colorado (Denver).

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Hong Kong Court Freezes HK$1 Billion Hontex IPO Funds

Hong Kong's Securities and Futures Commission obtained a court order freezing assets and funds from the initial public offering of Hontex International Holdings Co., a Chinese fabric maker that raised almost HK$1 billion ($129 million) in a share sale last year.

The Court of First Instance granted the order after the SFC filed a complaint March 30 saying the Hontex IPO had violated its rules. The court stopped Hontex from moving funds out of Hong Kong and ordered a receiver to be appointed.

"We've employed lawyers so we can't disclose any information right now," said Hontex Chief Financial Officer Fion Ko when reached by phone at the company's Hong Kong office. Hontex shares were suspended earlier in the week.

"There's not much clarity on what's happening," said Gary Lim, a senior portfolio manager at Natixis-affiliated Absolute Asia Asset Management in Singapore. The company's Golden Dragon Renaissance Fund held 11 million shares of Hontex at the end of January.

Ernest Kong, a spokesman for the SFC, declined to comment beyond the court filings, which don't contain details of the regulator's allegations.

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For more lawsuits news from last week, click here.

Trials/Appeals

EBay Acts Forced Craigslist Response, Lawyers Argue

EBay Inc. executives' threats to take over Craigslist Inc. forced the online-advertising company's managers to take defensive measures to ward off the Internet auctioneer, Craigslist lawyers said in court papers.

Craigslist's board acted in the closely held company's best interest when implementing protective measures including changing its stock structure, attorneys for San Francisco-based Craigslist said in briefs in a Delaware Chancery Court lawsuit over the changes.

Craig Newmark and Jim Buckmaster, Craigslist's owners, "acted honestly and in good faith to protect Craigslist from a powerful adversary that exploited its position as shareholder and board member to obtain and misuse confidential information to develop competing businesses and repeatedly threatened to take over the company," attorney Anne C. Foster said in the March 27 filing unsealed April 1.

EBay bought a 28 percent stake in Craigslist in 2004. It is asking Judge William B. Chandler III to find Newmark and Buckmaster violated Delaware corporate law by issuing shares to themselves to dilute the company's stake.

Newmark and Buckmaster testified during a two-week trial in December that they changed Craigslist's stock structure to beef up its anti-takeover defenses. They alleged former EBay Chief Executive Officer Meg Whitman and other executives repeatedly vowed to acquire Craigslist and used their board seat to gather confidential data that helped their business. Whitman stepped down as EBay's top executive in 2008.

EBay argued in papers filed Feb. 12 that the changes were made in "bad faith" and were "motivated by a desire to harm EBay."

"The claims in the Craigslist answering brief are not new or surprising," Michelle Fang, EBay's senior director of litigation, said April 1 in an e-mailed statement. "We believe that the evidence clearly shows that Craigslist's board and controlling shareholders devised a scheme to wrongfully diminish EBay's rights as a minority shareholder."

The Craigslist board had "not only the right but the obligation" to protect the company from "harm reasonably perceived" from third parties or other shareholders, Foster said in the court filing.

The protective measures were implemented with "great care" as Craigslist's board deliberated for about six months before implementing the changes, Foster wrote.

The case is EBay Domestic Holdings Inc. v. Newmark, CA3705, Delaware Chancery Court (Wilmington).

EBay Wins Tiffany Trademark Appeal, Faces Ad Claim

EBay Inc. didn't infringe Tiffany & Co.'s trademark because of fake goods sold on its Web site, an appeals court ruled, while returning Tiffany's lawsuit to the trial court for further action on a false-advertising claim.

EBay's ads promoting Tiffany merchandise may be misleading and in violation of federal law, the New York-based appeals court said April 1.

"The law prohibits an advertisement that implies that all of the goods offered on a defendant's Web site are genuine when, in fact, as here, a sizeable portion of them are not," a three- judge panel wrote.

The ruling may force EBay to change its advertising policy to include disclaimers that some trademark goods, like Tiffany jewelry, may be counterfeit. The judges said they "rather doubt that the consequences will be so dire" that advertising will be deterred because sellers can't confirm the authenticity of goods for sale as EBay maintained.

Tiffany said in a statement that it is "very disappointed" by the ruling and considering an appeal.

"EBay knew that counterfeit merchandise was being sold on its site -- and EBay took no effective steps to stop it," Tiffany Chief Executive Officer Michael J. Kowalski said in the statement. "EBay deliberately misled consumers for profit, and unfortunately the court has justified its actions."

Jim Larkin, a spokesman for San Jose, California-based EBay, didn't immediately reply April 1 to a request for comment.

The case is Tiffany v. EBay, 08-3947, U.S. Court of Appeals for the Second Circuit (Manhattan).

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For more trial and appeals news from last week, click here.

Verdicts/Settlements

Pfizer Agrees to First Neurontin Lawsuit Settlement

Pfizer Inc. agreed to pay about $400,000 to settle a lawsuit mid-trial that blamed its Neurontin epilepsy medicine for helping cause a Massachusetts man's suicide, two people familiar with the accord said.

It's the first settlement over a Neurontin-related suicide claim. Pfizer, the world's largest drugmaker, agreed April 1 to resolve allegations by Hartley Shearer's family in Boston federal court that its Warner-Lambert unit knew the drug posed a suicide risk and failed to disclose it to patients and doctors.

"Pfizer agreed to settle the case for less than its defense costs remaining in this case," said Rob Haralson, a spokesman for New York-based Pfizer. "Pfizer maintains that it has strong defenses to each of plaintiff's claims."

Pfizer faces more than 1,000 lawsuits accusing it of illegally promoting Neurontin for unapproved uses and helping to cause some users' suicides. The settlement comes a week after another Boston jury ordered Pfizer to pay more than $140 million in damages to an insurer over the drug. Pfizer has denied any wrongdoing in connection with its handling of Neurontin.

The 57-year-old Shearer, a part-time lecturer at Williams College in Williamstown, Massachusetts, took Neurontin for 16 months before killing himself, according to court filings.

Shearer's family contends his doctor wasn't aware of Neurontin's suicide risk when he prescribed the drug to help deal with pain generated by a 1999 stroke.

Pfizer argued Shearer battled depression for most of his life and was taking a dozen prescription drugs, including an anti-depressant, when he shot himself to death with a .357 Magnum handgun in 2002.

Ron Rosenkranz, a lawyer for the Shearers, declined to comment when contacted.

The Shearer case is Shearer v. Pfizer Inc., 07-cv-11428- PBS, U.S. District Court, District of Massachusetts (Boston).

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Merrill Lynch Wins Dismissal of Auction-Rate Suit

Merrill Lynch won dismissal of an investors' class-action lawsuit over auction-rate securities, at least the seventh such victory since the market collapsed in February 2008.

U.S. District Judge Loretta A. Preska in New York found that Merrill Lynch, a unit of Bank of America Corp., couldn't have manipulated the market by propping up the auctions with its own bids, because it disclosed that it participated in the bidding.

"The market is not misled when a transaction's terms are fully disclosed," Preska wrote in an opinion March 31. "The fact that Merrill Lynch could prevent failed auctions through the placement of support bids was disclosed in numerous publicly available documents."

At least 19 underwriters and broker-dealers were sued in class-action, or group, suits since the $330 billion market for auction-rate securities collapsed. The instruments are municipal bonds, corporate bonds and preferred stocks whose rates of return are periodically reset through auctions.

"We are studying the decision at this time and evaluating our options with our clients," Aaron M. Sheanin, a lawyer for the investors at Girard Gibbs LLP in San Francisco, said in a phone interview April 1.

In the lawsuits, investors accused the financial institutions of steering them to instruments promoted as safe as cash that turned out to be illiquid and couldn't be redeemed. They also said the banks didn't sufficiently disclose that they took part in the auctions to keep them from failing.

The case is in re Merrill Lynch Auction Rate Securities, 09-md-2030, 08-cv-3037, U.S. District Court, Southern District of New York (Manhattan).

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Saudi Financier Khashoggi Settles SEC's GenesisIntermedia Case

Saudi Financier Adnan Khashoggi and former GenesisIntermedia Inc. Chief Executive Officer Ramy El-Batrawi settled a U.S. Securities and Exchange Commission lawsuit accusing them of orchestrating a stock fraud scheme.

Khashoggi and El-Batrawi, without admitting or denying the allegations, agreed to be barred for five years from serving as an officer or director of a company that issues registered securities, the SEC said in filings March 31 in federal court in Los Angeles.

The settlement doesn't include any fine, George Newhouse, the lawyer for both men, said in a telephone interview.

The SEC sued Khashoggi and El-Batrawi four years ago, saying they ran a $130 million scheme in which they loaned out GenesisIntermedia stock at market value while artificially inflating the stock price. They failed to repay the intermediary brokers when the scheme collapsed, the SEC said in the lawsuit.

GenesisIntermedia is a defunct Van Nuys, California-based telemarketing company that sold the "Ab-Twister" exercise device and "Men Are From Mars, Women Are From Venus" relationship products through infomercials.

The case is SEC v. Ramy El-Batrawi, 06-2247, U.S. District Court, Central District of California (Los Angeles.)

SEC May Release Details of Settlements, Washington Post Reports

The U.S. Securities and Exchange Commission may release details of settlements with companies and individuals over wrongdoing, ending a policy of withholding them, the Washington Post reported.

Robert Khuzami, the SEC's enforcement director, told the newspaper in an interview that the agency may revise existing practices of not disclosing such information.

Releasing more information might make defendants less likely to agree to a settlement and boost lawsuits by shareholders, the Post said. The SEC has customarily favored settlements in a bid to reduce the number of cases because of limited staffing, the newspaper said.

For more verdict and settlement news from last week, click here.

Court News

Kagan, Judges Said to Be Considered for Supreme Court Vacancy

The Obama administration, contemplating the possible retirement of U.S. Supreme Court Justice John Paul Stevens, is focusing on three candidates to succeed him, a White House official familiar with the deliberations said.

The group includes U.S. Solicitor General Elena Kagan and federal appellate judges Diane Wood and Merrick Garland, the person said, speaking on the condition of anonymity.

Stevens, who will turn 90 on April 20, told the New York Times in an April 2 interview that he will decide soon whether he will step down. "The president and the Senate need plenty of time to fill a vacancy," Stevens told the newspaper.

Stevens hasn't communicated his intentions to the White House one way or another, according the person familiar with the deliberations. President Barack Obama hasn't begun discussing particular candidates with aides, and the list of leading candidates could change in the coming weeks, the person said.

"We'll be prepared if a vacancy arises, but there's no vacancy on the court, and there's no short list awaiting a potential vacancy," White House spokesman Ben LaBolt said in an e-mail.

White House officials expect that any retirement announcement would come after the high court's last argument of its current term, on April 28, the person said. The administration is preparing to move quickly with a nomination, the person said.

For more, click here.

Court Filings

CDR Criminal Case Most Popular Docket on Bloomberg System

The criminal case against Los Angeles-based local- government adviser CDR, its founder David Rubin and three executives was the most-read litigation docket on the Bloomberg system last week.

Rubin, Zevi Wolmark and Evan Zarefsky were indicted in October by a federal grand jury for conspiring to rig bids on investment contracts in exchange for kickbacks. The company and the three men have denied wrongdoing. Since last month, three former CDR employees who weren't charged in the initial indictment have pleaded guilty and agreed to cooperate with the Justice Department.

On March 24, a government list of previously unidentified "co-conspirators" contains more than two dozen bankers at firms including JPMorgan Chase & Co., Lehman Brothers Holdings Inc., UBS AG and Bank of America Corp., according to documents filed in U.S. District Court in Manhattan. None of the firms or individuals named on the list has been charged with wrongdoing.

To read more of this story, click here.

The case is U.S. v. Rubin/Chambers, Dunhill Insurance Services Inc., 09-CR-01058, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at eamon2@bloomberg.net.

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