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Novartis, Immigration, Cisco, TJX, Whistleblower, `Wiseguys' in Court News
Novartis AG’s sales representatives are covered by federal wage-and-hour laws requiring payment of overtime, a U.S. appeals court in New York ruled.
A three-judge panel of the court yesterday overturned a lower-court finding that the salespeople fell under exceptions to the federal Fair Labor Standards Act for outside representatives.
“The district court should have ruled that the reps are not outside salesmen,” the appeals court said in its opinion.
The decision affects about 2,500 current and former salespeople employed by Novartis from March 2000 to April 2007 who sued for unpaid overtime, according to the court’s decision. The law requires the payment of 1 1/2 times a worker’s hourly wage for more than 40 hours’ work in a week.
In its decision yesterday, the appeals court relied on Labor Department regulations that define “outside salesman” and “administrative” employees. The government supported the salespeople on the appeal.
The court said the employees lack the “discretion and independent judgment” required to classify them as administrative employees.
In a related case, the appeals court yesterday upheld a ruling that a group of Schering Corp. sales representatives aren’t outside salespeople and the overtime requirement applies to them. Eric Althoff, a Novartis spokesman, didn’t immediately return a voice-mail message seeking comment.
The case is Re Novartis Wage and Hour Litigation, 09-437, Second U.S. Circuit Court of Appeals (Manhattan).
New Suits
U.S. Sues in Effort to Block Arizona Immigration Law
The U.S. government sued the state of Arizona, challenging the constitutionality of an immigration law set to take effect later this month.
The lawsuit, filed yesterday in federal court in Phoenix, follows challenges by the American Civil Liberties Union and by an Arizona police officer who doesn’t want to enforce the statute.
The law makes it a state crime to be in the U.S. illegally. It requires local police officers, after having a law enforcement reason to stop someone, to determine their immigration status if they suspect the person lacks proper documentation.
A legal challenge steps up the battle between the Obama administration and Arizona officials. U.S. Secretary of State Hillary Clinton earlier said the administration planned to challenge the law.
Hedge Funds Holding WaMu Securities Want Exchange Deal Voided
Washington Mutual Inc.’s trust preferred securities holders asked the court overseeing the company’s bankruptcy case to rule that an exchange of the securities for preferred equity didn’t happen in the hours before WaMu sought Chapter 11.
Black Horse Capital LP, Greywolf Capital Partners II, Whitebox Special Opportunities LP and other funds also asked the U.S. Bankruptcy Court in Wilmington, Delaware, for a declaration that JPMorgan Chase & Co. was aware of misrepresentations in the sale of the securities and that a regulator aided and abetted fraud.
The holding company Chapter 11 case is Washington Mutual Inc., 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Trials/Appeals
Cisco Loses Court Appeal of Telcordia Patent Verdict
Cisco Systems Inc., the biggest networking-equipment maker, lost its appeal of a $6.5 million verdict for infringing two Telcordia Technologies Inc. patents and must negotiate payments for future use of the technology.
The ruling upholds a 2007 decision that Cisco appealed, according to an opinion posted yesterday on the website of the U.S. Court of Appeals for the Federal Circuit. Telcordia lost in its effort to revive a third patent claim that could have let it collect damages on an industry standard for data transmission.
Telcordia, the former research division of the Bell telephone companies, sought $75 million in damages related to two patents. Cisco was found to infringe a patent for synchronizing phone data and eliminating sound dropouts, as well as another for re-routing voice, video and data when telephone wires are cut, according to testimony in the 2007 trial.
Each side appealed aspects of the case. Piscataway, New Jersey-based Telcordia appealed the ruling that the third patent wasn’t infringed. Cisco challenged the validity of the patent. The Federal Circuit said the judge erred in his interpretation of patent wording and sent back the case for further arguments on validity.
Telcordia sued Tellabs Inc. in another case pending in Delaware involving the same patent.
Kristin Carvell, a spokeswoman for San Jose, California- based Cisco, said the company had no immediate comment. Lawyers for Telcordia didn’t immediately return a message seeking comment.
The case is Telcordia Technologies Inc. v. Cisco Systems Inc., 2009-1175 and 2009-1184, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Telcordia Technologies Inc. v. Cisco Systems Inc., 04CV876, U.S. District Court for the District of Delaware (Wilmington).
Verdicts/Settlements
TJX Officials Sued, Settle With Investor Over Theft Losses
TJX Cos., owner of the T.J. Maxx and Marshalls discount retail chains, was sued by an investor seeking damages from directors on behalf of the company over a computer-hacking scheme, then settled the case almost immediately for $595,000 in legal fees and enhanced oversight of customer files.
The lawsuit, made public yesterday in Delaware Chancery Court in Wilmington, alleged that the TJX board failed to take proper steps to protect company data and recover costs of “computer intrusion” from 2005 to 2007.
“Criminals accessed the company’s computer system through a wireless data network,” the Louisiana Municipal Police Employees’ Retirement System said in court papers. The ring stole card numbers of at least 45.7 million holders of credit and debit cards, leading to card-replacement and investigative costs and multimillion-dollar settlements with Visa Inc. and MasterCard Inc., according to the complaint.
In March, a Miami man was sentenced to 20 years in prison in connection with what prosecutors said was the largest identity-theft case in U.S. history. In that case, TJX cited $200 million in losses.
The lawsuit sought an order requiring officials to beef up security to prevent fraud. In settlement papers, TJX agreed to continue corporate governance changes including a telephone hot line for customers and heightened computer oversight.
“The settlement is subject to court approval” and “the current and former directors deny all allegations of wrongdoing,” a TJX spokeswoman, Debra McConnell, said in an e- mailed statement.
The case is Louisiana Municipal Police Employees’ Retirement System v. Alvarez, CA5620, Delaware Chancery Court (Wilmington).
Court News
U.S. Says It Charged Soldier With Disclosing Airstrike Video
The U.S. government filed charges, including the transfer of classified information, against a soldier accused of giving a video of an airstrike to a website, according to a press release yesterday.
The soldier, Private First Class Bradley Manning, 22, of the 2nd Brigade Combat Team, 10th Mountain Division, in Iraq, was charged yesterday in a case involving a video obtained by Wikileaks.org, a website that posts leaked documents, according to the press release.
Manning was also charged with communicating, transmitting and delivering national defense information to an unauthorized source. Between November 2009 and May of this year, he obtained the video, more than 150,000 diplomatic cables and a classified presentation, according to a list of charges provided by the Army.
“The initial investigation is still ongoing because there are additional items to sift through,” said Lieutenant Colonel Eric Bloom, a spokesman for U.S. Division-Center, the Army headquarters that oversees security in central Iraq.
Bloom said Manning faces up to 52 years in prison if convicted.
In April, Wikileaks.org posted a video showing a U.S. helicopter strike in July 2007 in which 12 people died, including two journalists. It was taken by cameras on U.S. Apache helicopters. Wikileaks.org said at the time it had obtained the footage “from a number of military whistleblowers.”
Attempts to contact a Wikileaks spokesman weren’t successful.
Court Filings
‘Wiseguys’ Ask Dismissal of Computer Ticket-Purchase Charges
Three men accused of beating computer security to buy and scalp 1.5 million seats for events such as Bruce Springsteen concerts asked for dismissal of charges they say seek to turn lawful activity in crimes.
The men, dubbed the “Wiseguys” because they ran Wiseguy Tickets Inc., claim U.S. prosecutors misapplied the Computer Fraud and Abuse Act and wire fraud statute to charge them with illegally getting ahead of the public to buy premium seats through Ticketmaster, Live Nation Entertainment Inc., Telecharge and other vendors.
The indictment is “a naked effort to punish legal conduct under federal law -- the resale of tickets for events -- by using the Computer Fraud and Abuse Act (‘CFAA’), a statute that has nothing to do with so-called ‘ticket scalping,’” lawyers for the men said in a July 2 motion in federal court in Newark, New Jersey.
Prosecutors claim that after buying tickets on a first- come, first-served basis, the defendants resold them making more than $28.9 million in profit from 2005 to 2008. They were accused of buying 220 of the 440 best seats offered to the public for a Springsteen concert at Giants Stadium in East Rutherford, New Jersey, on July 27, 2008.
Rebekah Carmichael, a spokeswoman for Paul Fishman, the U.S. attorney in New Jersey, declined to comment and said prosecutors will respond in writing by the Aug. 2 deadline.
By working with programmers in Bulgaria, California-based Wiseguy Tickets defeated technology known as CAPTCHA, which required users to read, then retype, distorted images of letters and numbers to buy tickets, prosecutors alleged. They also sidestepped audio CAPTCHA challenges for the visually impaired.
The case is U.S. v. Lowson, 10-cr-114, U.S. District Court, District of New Jersey (Newark).
To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net.
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