Delaware Judge Chandler Retires, Rajaratnam, Health Care in Court News

Delaware Chancery Court Chief Judge William B. Chandler III, who oversaw challenges to the Walt Disney Co. (DIS) and Hewlett-Packard Co. (HPQ) boards as head of one of the most important U.S. business litigation courts, is stepping down. Chandler, 60, led the influential five-member court since 1997 and most recently ruled on Air Products & Chemicals Inc. (APD)’s hostile $5 billion bid for Airgas Inc. (ARG)

Charles Elson, director of the University of Delaware’s Weinberg Center for Corporate Governance, said in a phone interview that Chandler “leaves behind a tremendous legacy. He was well-respected across the spectrum in the financial community.”

In the Hewlett-Packard case, ousted director Walter Hewlett claimed information about the Compaq deal was withheld from shareholders. In 2002, Chandler concluded that the company didn’t mislead investors, clearing the way for the $18.5 billion merger.

In the Disney case, shareholders contended the board violated its duties by approving severance for Michael Ovitz. Chandler ruled in 2006 that directors properly oversaw the firing and that Ovitz’s $140 million package wasn’t a waste of corporate assets.

In February, Chandler upheld use of a poison pill by Airgas to block a hostile takeover attempt by Air Products.

“I’ve had a great run,” Chandler said in a telephone interview yesterday. “I’m really excited about the possibilities in the private sector with corporate law and corporate governance issues.”

No replacement has yet been announced for Chandler. Elson said that Chancery Court Judge Leo Strine is the most likely choice.

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Trials/Appeals

Rajaratnam’s Fate Now Rests With Bookkeeper, Nurse, Teachers

Galleon Group LLC co-founder Raj Rajaratnam’s fate rests with jurors including a retired bookkeeper, a nurse and a customer-service representative for the New York subway system, as deliberations began at his insider-trading trial.

U.S. District Judge Richard Holwell in Manhattan yesterday instructed jurors on the law of conspiracy and securities fraud and asked the panel to weigh the evidence presented at the trial of Rajaratnam, who prosecutors said was worth at least $1 billion the day of his arrest in October 2009.

The deliberations follow six weeks of trial testimony in the largest crackdown on hedge-fund insider trading in U.S. history. Jurors heard parts of four dozen conversations secretly recorded by the U.S. government of Rajaratnam talking to fellow traders, business executives and corporate consultants.

Rajaratnam, 53, is accused of gaining $63.8 million from tips leaked by corporate insiders and hedge-fund traders about a dozen stocks, including Goldman Sachs Group Inc. (GS), Intel Corp., Clearwire Corp. and Akamai Technologies Inc.

He faces 14 counts: five counts of conspiracy to commit securities fraud and nine of securities fraud. The conspiracy counts each carry a maximum five-year prison sentence and the fraud charges each carry a maximum 20-year term.

The jury hails from Westchester County, the Bronx and Manhattan. The panel includes teachers, a retired bookkeeper who worked with the Israel Defense Forces, an activities therapist for a private nursing home, a nurse, a customer-service representative for the Metropolitan Transportation Authority and a three-decade veteran food-service worker for New York’s Education Department.

The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).

Thomas Hardin, Galleon ‘Tipper X,’ Ordered to Pay $19,000

Thomas Hardin, the former Lanexa Global Management trader called “Tipper X” in the Galleon Group LLC insider-trading case, was ordered to pay a $19,000 judgment in a U.S. Securities and Exchange Commission lawsuit.

If Hardin has to forfeit more than $40,000 in a related criminal case, he’ll be credited in the SEC case for the amount more than $40,000, according to a judgment Hardin agreed to that was filed yesterday in federal court in Manhattan.

In the criminal case, Hardin, a former managing director at hedge fund investment adviser Lanexa, pleaded guilty to conspiracy and securities fraud and agreed to cooperate with the government. The SEC sued in November, saying he traded securities of Hilton Worldwide Inc., Google Inc. and Kronos Worldwide Inc. based on nonpublic information.

Larry Krantz, Hardin’s lawyer, declined to comment.

The case is SEC v. Lanexa Management, 10-8599, U.S. District Court, Southern District of New York (Manhattan).

Supreme Court Won’t Expedite Review of U.S. Health-Care Law

The U.S. Supreme Court declined an opportunity to review President Barack Obama’s health-care overhaul, rejecting Virginia’s bid to have its challenge to the law considered on an unusual fast-track basis.

Virginia, one of 28 states suing to invalidate the measure, urged the justices to schedule arguments without waiting for the four appeals courts that are poised to consider the law. The states say Congress overstepped its authority by requiring Americans to either obtain insurance or pay a penalty.

The rebuff doesn’t preclude the Supreme Court from hearing the case later, perhaps even before the 2012 election. For the time being, yesterday’s action is a victory for the Obama administration, which urged the justices not to grant Virginia’s bid for a hearing.

“Expediting our case would have been the exception and so, although disappointing, this is not surprising,” Virginia Attorney General Kenneth Cuccinelli, said in a statement. He had said in court papers that the dispute was “of imperative national importance requiring immediate determination in this court.”

The step sought by Virginia, known as certiorari before judgment, is one the court has taken only a handful of times, including its 1974 decision ordering President Richard Nixon to turn over Oval Office tape recordings and its 1952 ruling blocking President Harry S Truman from seizing the nation’s steel mills.

The Obama administration argued that the health-care dispute doesn’t rise to that level of urgency, in part because the disputed provision doesn’t take effect until 2014.

The Supreme Court case is Virginia ex rel. Cuccinelli v. Sebelius, 10-1014.

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Clement Quits King & Spalding Over Defense of Marriage Act

Paul D. Clement, the solicitor general in the Bush administration, resigned yesterday as head of King & Spalding LLP’s national appellate practice. The move came after the firm withdrew from representing the U.S. House of Representatives in supporting the Defense of Marriage Act.

In a letter to firm Chairman Robert D. Hays, Clement said that the firm shouldn’t abandon its representation simply because a client’s legal position is unpopular. “Defending unpopular positions is what lawyers do,” Clement said.

House Speaker John Boehner said last month that Republicans would defend the 1996 Defense of Marriage Act after the Obama administration said it would not. The act bars same-sex married couples from collecting federal benefits when eligibility is determined by marital status.

Hays said that the firm’s vetting process for the case was “inadequate” in a statement yesterday. “Ultimately I am responsible for any mistakes that occurred and apologize for the challenges this may have created,” Hays said in the statement.

Clement, who was to serve as lead attorney for the Atlanta- based firm, said he wouldn’t have undertaken the matter unless he believed he had the firm’s full backing.

“But having undertaken the representation, I believe there is no honorable course for me but to complete it,” Clement said in his letter to Hays. “If there were problems with the firm’s vetting process, we should fix the vetting process, not drop the representation.” Clement is joining Bancroft PLLC, a Washington litigation boutique, where he will continue to represent the House.

“We’re sorry to see Paul Clement leave. He’s been a good partner and we wish him the best,” Les Zuke, a spokesman for the firm, said yesterday in an e-mail.

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NFL Can’t Lock Out Players Under Order as League Moves to Appeal

National Football League team owners must end their month- old lockout of players under a court ruling in an antitrust lawsuit that the league said it will appeal.

The NFL responded to yesterday’s order by moving to appeal the decision by U.S. District Judge Susan Richard Nelson in St. Paul, Minnesota. The league also asked Nelson to put her ruling on hold during its appeal.

Nelson issued the order in a lawsuit filed by 10 players, led by Super Bowl winning quarterbacks Tom Brady, Peyton Manning and Drew Brees, who accused the league of anticompetitive practices that violated federal antitrust laws.

“The players’ motion is confined to a very precise and narrow issue regarding only one of the antitrust claims -- whether the NFL may lock out the players,” she said.

“The policies and decisions of the individual teams constitute ‘concerted action’ seems plain,” the judge said, concluding the players had established the “requisite fair chance of success” on the merits of that claim.

The NFL declared a labor lockout on March 12 after talks to create a new collective bargaining agreement failed and the players association said it no longer would act as a union.

The labor dispute involves the formula by which the New York-based, 32-team league and its players would divide about $9 billion in annual revenue.

Areas of dispute also include extending the season to 18 games from 16, a rookie salary cap and health care for players.

During a lockout, players aren’t paid and teams can’t practice, sign new players or make trades.

The NFL filed a notice that it would challenge Nelson’s ruling before the 8th U.S. Circuit Court of Appeals, which hears arguments in St. Paul and in St. Louis.

“We believe that federal law bars injunctions in labor disputes,” Greg Aiello, an NFL spokesman, said in an e-mailed statement. “We are confident that the Eighth Circuit will agree.”

Players’ lawyer James W. Quinn said the NFL’s quick move to appeal was unsurprising and that he expected the league to seek an order staying enforcement of Nelson’s ruling until the issue can be argued before the appeals court.

If the lockout remains lifted, the NFL’s offseason would officially begin after being put on hold since March.

The case is Brady v. NFL, 0:11-639, U.S. District Court, District of Minnesota (St. Paul).

For the latest trial and appeals news, click here.

New Suits

Apple Accused in Suit of Tracking IPad, IPhone User Location

Apple Inc. (AAPL) was accused of invasion of privacy and computer fraud by two customers who claim in a lawsuit that the company is secretly recording movements of iPhone and iPad users.

Vikram Ajjampur, an iPhone user in Florida, and William Devito, a New York iPad customer, filed a suit April 22 in federal court in Tampa, Florida, seeking a judge’s order barring the alleged data collection.

The complaint cited a report last week by two computer programmers claiming that Apple’s iOS4 operating system is logging latitude-longitude coordinates along with the time a spot is visited. The programmers said Apple devices are collecting about a year’s worth of location data. Apple hasn’t commented on the matter since the April 20 report was released.

“We take issue specifically with the notion that Apple is now basically tracking people everywhere they go,” Aaron Mayer, an attorney for the plaintiffs, said yesterday in a telephone interview. “If you are a federal marshal you have to have a warrant to do this kind of thing, and Apple is doing it without one.”

Steve Dowling, a spokesman for Cupertino, California-based Apple, didn’t immediately return a call seeking comment on the suit.

The plaintiffs are seeking to represent a group of U.S. customers whose iPhones and iPads have the operating system that allegedly collects location data, Mayer said. About one-third to one-half of the country’s 60 million iPhone users could be part of the class, he said. Ajjampur and Devito are also asking for refunds because they wouldn’t have bought their products had they known about the feature, Mayer said.

The case is Ajjampur v. Apple Inc., 11-cv-00895, U.S. District Court, Middle District of Florida (Tampa).

Harvard Law School Faces Discrimination Probe of Policies

Harvard Law School is under federal investigation after a Boston lawyer filed a discrimination complaint regarding the school’s response to rape and harassment of women.

Harvard Law School’s policies for investigating such cases don’t meet U.S. standards for timeliness and clarity, Wendy Murphy, an adjunct professor at the New England School of Law who filed the complaint, said in a telephone interview yesterday. As a result, Harvard’s law school in Cambridge, Massachusetts, has been under investigation by the U.S. Education Department’s Office of Civil Rights since December, she said.

The violations at Harvard can be found at schools throughout the U.S., said Murphy, who took similar action against the University of Virginia in Charlottesville and Princeton University in Princeton, New Jersey. Murphy contacted the Education Department in September after Harvard hired her to address an issue related to Title IX, the 1972 federal law that bans discrimination against women on campus, she said.

“It was in connection with that work that I discovered these violations,” said Murphy, who declined to give specifics on her work at Harvard. “It became necessary to file the complaint.”

The law school, founded in 1817, holds women to too high a standard to prove sexual assault and harassment, Murphy said she alleged in her complaint. The school also incorrectly tells women that its own probe must follow that of local police and prosecutors, a practice that often needlessly delays the resolution of campus investigations, Murphy said.

Harvard takes sexual assault seriously and is fully assisting the Education Department’s investigation of its policies, said Robb London, a spokesman for the law school.

“We have a responsibility to protect and maintain the safety and well-being of our students and to offer complete support and assistance to any student who makes us aware of harm,” he said in an e-mailed statement. “That responsibility includes making sure that we have effective processes for ensuring a safe environment and for investigating any allegation of assault expeditiously and fairly, followed by appropriate disciplinary action.”

Jim Bradshaw, an Education Department spokesman, confirmed that the agency is investigating Harvard Law School’s compliance with Title IX.

Yale University in New Haven, Connecticut, is also being probed by the Education Department’s civil rights office after 16 current and former students filed complaints. Yale created an advisory committee on “campus climate” earlier this month that will be led by Margaret H. Marshall, a former chief justice of the Massachusetts Supreme Court and former Yale trustee, the school said April 15.

For the latest new suits news, click here. For copies of recent civil complaints, click here.

Speeches/Interviews

Levitt Says Insider Trading Convictions Remain Elusive

Former U.S. Securities and Exchange Commission Chairman Arthur Levitt says it is “very, very hard to convict someone in an insider trading case.” Levitt made his remarks in an interview on Bloomberg Radio’s “Bloomberg Surveillance.”

To listen to the interview, click here.

To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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