Google, Skilled Healthcare, Pfizer in Court News

Paul G. Allen, a Microsoft Corp. co-founder who was once the second-richest American, accused 11 companies including Google Inc. and Apple Inc. of infringing patents he holds for online-shopping technology.

A lawsuit filed in Seattle Aug.27 by Interval Licensing LLC, a business Allen controls, also targets EBay Inc., AOL Inc., Facebook Inc., Netflix Inc., Office Depot Inc., OfficeMax Inc., Staples Inc., Yahoo! Inc. and Google’s YouTube. Interval Licensing is seeking a court order to block further use of the inventions and order unspecified cash compensation.

A Google spokesman, Aaron Zamost, said in an e-mail that the suit “reflects an unfortunate trend of people trying to compete in the courtroom instead of the marketplace.”

Interval Licensing owns the patents of a defunct computer-science and communications research business Allen and David Liddle founded in 1992, according to a statement from the Seattle-based company. The four patents cited in the lawsuit are primarily common electronic-commerce applications for displaying and categorizing product information.

Facebook, owner of the world’s biggest social-networking website, said the lawsuit is without merit and the company will “fight it vigorously,” Andrew Noyes, a spokesman for the Palo Alto, California-based company, said in an e-mail.

Dana Lengkeek, a spokeswoman for Yahoo, owner of the second-most popular U.S. Internet search engine behind Google, declined to comment. EBay, the owner of e-commerce sites and the PayPal payment service, said it’s reviewing the complaint.

“We intend to defend ourselves vigorously,” said Johnna Hoff, a spokeswoman for the San Jose, California-based company.

Representatives of Apple, Netflix and Office Depot all declined to comment, as did a spokeswoman for AOL.

The case is Interval Licensing LLC v. AOL Inc., 10cv1385, U.S. District Court for the Western District of Washington (Seattle).

New Suits

Former Dell Top Accountants Sued for Fraud by U.S. Regulators

Dell Inc.’s former assistant controller and former chief accounting officer were sued by the U.S. Securities and Exchange Commission for accounting fraud, a month after the computer maker settled with the regulator.

Randall Imhoff, the former assistant controller and Robert W. Davis, the former chief accounting officer, each took part in “improper accounting” that led to the restatement of Dell’s financial results from 2003 through 2006, the SEC said in separate lawsuits filed Aug. 27 in federal court in Washington.

Dell, based in Round Rock, Texas, agreed on July 22 to pay $100 million to resolve the SEC’s accounting fraud allegations as part of an accord that allows founder Michael Dell to stay on as chief executive officer.

Davis, 51, and Imhoff, 48, maintained a variety of so-called cookie jar reserves to meet earnings shortfalls and misrepresented Dell’s financial results, the regulator said.

Attorneys for Imhoff and Davis didn’t immediately return calls after business hours seeking comment and Imhoff could not be reached by phone.

The cases are SEC v. Davis, 10-cv-1464, and SEC v. Imhoff, 10-cv-1465, U.S. District Court, District of Columbia (Washington).


Stanford Committed No Crimes, Securities Expert Testifies

R. Allen Stanford didn’t lead a Ponzi scheme that fleeced investors of $7 billion, a former federal prosecutor who reviewed evidence against him told a U.S. judge in Houston.

Securities lawyer Christopher Bebel reported his conclusions on the fourth day of trial in a case brought by the indicted financier to force Lloyd’s of London underwriters to pay for his criminal-defense lawyers. He testified Aug. 27 that he hasn’t seen “any evidence” that links Stanford to “any particular criminal act”.

The case is Pendergest-Holt v. Certain Underwriters at Lloyd’s of London, 4:09-cv-03712, U.S. District Court, Southern District of Texas (Houston).

The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas).

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Feinberg Challenged by State Attorneys General on BP Claims

Kenneth Feinberg’s effort to pick among claims on BP Plc’s $20 billion fund for victims of its oil spill has attracted a group of self-described watchdogs: attorneys general from affected Gulf Coast states.

Feinberg, a Washington lawyer, took over operations of the BP fund on Aug. 23. Backing from the attorneys general may be crucial to winning broad participation in the fund and minimizing protracted legal fights. The Gulf Coast Claims Facility, which will draw on the escrow fund to pay people and businesses harmed by the largest U.S. oil spill, received 7,754 claims in its first two days, Amy Weiss, a spokeswoman for Feinberg, said in an e-mail on Aug. 25.

The attorneys general, including Republicans Bill McCollum of Florida and Troy King of Alabama, have said they are concerned Feinberg may reject claims for indirect damage from the spill, such as those from hotels that lost guests who feared beaches might become tarred by oil.

Feinberg said he “respectfully disagreed” with the criticism from the attorneys general.

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Bank of America Must Defend Claims It Hid Merrill Bonuses

Bank of America Corp. must defend lawsuit claims it concealed bonuses and losses at Merrill Lynch & Co after it agreed to acquire the brokerage firm, a judge ruled.

U.S. District Judge Kevin Castel in Manhattan on Aug. 27 granted some of Bank of America’s requests to dismiss claims in the consolidated class-action securities-fraud and derivative lawsuits, while denying others.

Bank of America, the largest U.S. bank, acquired Merrill Jan. 1, 2009, in a deal criticized by lawmakers, regulators and investors over its cost and the U.S. bailout that followed. Investors claim in the suits that the merger agreement triggered a duty to disclose negative events before the shareholder vote. Castel granted Bank of America’s request to dismiss that claim.

Bank of America spokesman Bob Stickler said the company is studying the ruling and declined to comment further. Andrew Entwistle, a lawyer representing shareholders, declined to comment.

The case is In Re Bank of America Corp. Securities, Derivative, and ERISA Litigation, 10-05563, U.S. District Court, Southern District of New York (Manhattan). The SEC case is Securities and Exchange Commission v. Bank of America Corp., 09-cv-06829, U.S. District Court, Southern District of New York (Manhattan). The Cuomo case is People of State of New York v. Bank of America, 450115-2010, State Supreme Court (Manhattan).

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Vivendi, Time Warner Seek Arbitration in ‘Ellen’ Case

Vivendi SA’s music labels and Time Warner Inc. are seeking arbitration in a copyright case in which Vivendi charged that “The Ellen DeGeneres Show” played its recordings without a license.

Lawyers for the two sides said they’d entered into an arbitration agreement and asked U.S. District Judge Stephen Wilson to halt the case and transfer it to binding arbitration, according to an Aug. 26 filing in federal court in Los Angeles.

Labels in Vivendi’s Universal Music Group, the largest record company in the world, filed a copyright infringement lawsuit in March against the producers of the daily “Ellen” talk show and Time Warner, whose television unit distributes the program to stations.

Time Warner’s lawyers said Universal gave an implied consent to play the recordings.

The case is Interscope Records v. Time Warner Inc., 10-01662, U.S. District Court, Central District of California, Western Division (Los Angeles).


Skilled Healthcare Loses Mistrial Bid Over Verdict

Skilled Healthcare Group Inc. lost its request for a mistrial over $677 million in damages a California jury had awarded over claims the company improperly staffed its nursing homes.

Humboldt County Superior Court Judge W. Bruce Watson, in an order filed Aug. 27, said Skilled Healthcare failed to prove juror misconduct. Watson ordered the company to comply with California minimum staffing requirements at its nursing homes.

The plaintiffs accused Foothill Ranch, California-based Skilled Healthcare of improperly staffing 22 facilities in the state. The jury on July 6 found the company liable for statutory damages and restitution.

Shelly Hubbard, a Skilled Healthcare spokeswoman, didn’t immediately return a call to her office. Plaintiffs’ lawyer Timothy Needham didn’t immediately return a call to his office.

The verdict is the largest jury award in the U.S. this year, according to data compiled by Bloomberg.

The case is Lavender v. Skilled Healthcare Group, DR060264, Superior Court, Humboldt County, California (Eureka).

Conviction Upheld for Ex-KMPG Manager; Fine Reduced

Ex-KPMG LLP senior manager John Larson’s conviction for selling illegal tax shelters was upheld by a U.S. appeals court in New York. The three-judge panel said the prosecution’s evidence supported the jury’s finding that the shelters were “marketed solely as tax-avoidance schemes.” The convictions of two co-defendants were also upheld.

The appellate court threw out Larson’s $6 million fine, ordering the trial court to recalculate the fine to less than $3 million.

The U.S. initially accused 17 ex-KPMG executives, including former Deputy Chairman Jeffrey Stein, and two outsiders of selling shelters that cost the Treasury $2 billion. Kaplan dismissed charges against all but four defendants.

Charges against New York-based KPMG, one of the Big Four U.S. accounting firms, were dismissed after it paid a $456 million fine. The shelters allowed clients to falsely claim to have taken large loans to buy stock and claim losses, prosecutors said.

Steven Bauer, a lawyer for Larson, said by phone he was disappointed by the ruling and is considering his options. Yusill Scribner, a spokeswoman for U.S. Attorney Preet Bharara, whose office prosecuted the case, declined to comment.

The case is U.S. v. Stein, 1:05-cr-00888, U.S. District Court, Southern District of New York (Manhattan).

Fed Gets 60 Days to Appeal Court’s Disclosure Order

The Federal Reserve Board was given 60 days to decide whether to take a Freedom of Information Act case to the U.S. Supreme Court or disclose documents about loans it made to banks during the credit crisis.

The U.S. Court of Appeals in New York on Aug. 27 acceded to the Fed’s request to delay implementation of a ruling that compels the central bank to release the reports, giving the bank until Oct. 19 to appeal. The clock began to run on Aug. 20 when the court refused to revisit its earlier ruling against the Fed.

The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 09-04083, U.S. Court of Appeals for the Second Circuit (New York).

L.A. Dodgers Ownership at Stake in McCourts’ Divorce Trial

Frank McCourt’s claim to be the sole owner of the Los Angeles Dodgers will be tested in a divorce trial starting today against his estranged wife, who says she co-owns the Major League Baseball team.

Judge Scott M. Gordon in California Superior Court in Los Angeles will be asked to decide the validity of a 2004 marital property agreement signed by Frank and Jamie McCourt when they bought the team and moved to California from Boston.

Jamie McCourt, 56, filed for divorce in October, six days after her husband fired her as chief executive officer of the baseball team. Frank McCourt, 57, accused her of insubordination and of “inappropriate behavior with regard to a direct subordinate.”

Lawyers for Jamie McCourt said last year that her relationship with that employee started after the marriage had fallen apart. The couple had been married for 30 years.

The $421 million acquisition of the Dodgers from Fox Entertainment Group Inc. closed on Feb. 13, 2004.

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Pfizer Settles Prempro Case Before Damages Retrial

Pfizer Inc. agreed to settle an Arkansas woman’s claims that the company’s Prempro menopause drug caused her breast cancer before the drugmaker endured another trial over punitive damages in the case, according to a court filing.

New York-based Pfizer faced an Oct. 1 retrial of Donna Scroggin’s claims that the world’s largest drugmaker should pay millions of dollars to punish it for mishandling its Prempro hormone-replacement medicine, according to court records. An appeals court overturned the original $27.1 million punitive award last year and ordered a new trial on damages.

The company agreed to settle Scroggin’s case, U.S. District Judge William Wilson said in an Aug. 19 court filing. Wilson is overseeing more than 8,000 cases over the medicine consolidated in federal court in Arkansas. Terms of the settlement weren’t disclosed in the filing.

Pfizer officials declined to comment on Scroggin’s settlement, Victoria Davis, a company spokeswoman, said in an e-mail last week. Jim Morris, one of Scroggin’s lawyers, also declined to comment.

The case is Scroggin v. Wyeth, 04-1169, U.S. District Court, Eastern District of Arkansas (Little Rock).

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Northwest Wins Approval of $38 Million Price-Fix Agreement

Northwest Airlines Inc.’s plea agreement over price-fixing in the air-cargo market, requiring the airline to pay a $38 million fine, was approved Aug. 27 by a federal judge.

Northwest Airlines Cargo, which is no longer operating, conspired to fix air-cargo rates in the U.S. and overseas from July 2004 to February 2006, prosecutors charged. Northwest Airlines is now part of Delta Air Lines Inc.

“The company has accepted responsibility fully,” U.S. Judge John D. Bates said during the sentencing Aug. 27 in Washington.

The case is U.S. v. Northwest Airlines LLC, 1:10-cr-00204, U.S. District Court for the District of Columbia (Washington).

Google Wins Dismissal of German Suit Over YouTube

A German court declined to issue an emergency order forcing Google Inc. to block German access to some music videos on its YouTube website in a dispute over monitoring files on the Internet.

The Hamburg Regional Court said it might ultimately rule in favor of a group of music-collecting societies, including the German agency GEMA, if a new suit was filed under standard court procedures.

The case is part of a dispute over who is responsible for detecting illegal files on YouTube. Google, the owner of the world’s most popular search engine, in June won dismissal of a $1 billion suit brought by Viacom Inc. in a U.S. court for unauthorized use of content from programs on YouTube.

The court dismissed GEMA’s emergency suit Aug. 27 because the agency has known for a long time that the songs were available on YouTube.

The ruling is an opportunity to ask GEMA to come back to the negotiating table to find an amicable solution, said Kay Oberbeck, spokesman for Mountain View, California-based Google.

GEMA will file a lawsuit under regular proceedings to have the dispute cleared, its lawyer Matthias Lausen said.

Google and GEMA had a license agreement that lapsed in March last year and negotiations didn’t lead to a new deal. YouTube blocked access to music videos on its German website after talks between the company and GEMA broke down.

The case is: LG Hamburg, 310 O 197/10.

Litigation Departments

Paul Weiss, Lowenstein Sandler Sanctioned in Perelman Case

A New Jersey judge ordered two law firms to pay $1.96 million in legal fees after sanctioning them for filing frivolous litigation they pursued on behalf of billionaire Ronald Perelman.

Superior Court Judge Ellen Koblitz imposed the fees on Paul Weiss Rifkin Wharton & Garrison LLP of New York and Lowenstein Sandler PC of Roseland, New Jersey. Koblitz ruled the firms filed a frivolous amended complaint for the estate of Perelman’s late wife, Claudia Cohen, in seeking hundreds of millions of dollars from her father, Robert Cohen, and brother James Cohen.

The judge said the evidence should have convinced the firms that Robert Cohen didn’t make an oral promise before 1978 to leave Claudia as much of his estate as James would get. Koblitz dismissed the lawsuit last year after a trial.

“We believe the lower court’s decision and monetary award are unjustified,” Paul Weiss’s chairman, Brad Karp, said in a statement.

Lowenstein Sandler Managing Director Gary Wingens said in a statement that the firm “acted properly at all times in representing its client in this matter.”

The New Jersey case is Estate of Claudia L. Cohen v. Cohen, BER-C-134-08, Superior Court of New Jersey, Bergen County (Hackensack).

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Calpers Private-Equity Manager Linked to Lawsuit Steps Down

Leon Shahinian, who headed the private-equity portfolio at the California Public Employees’ Retirement System, resigned amid a fraud lawsuit at the nation’s largest pension fund.

Joseph Dear, the chief investment officer, will take over Shahinian’s duties until a replacement is found, Calpers said Aug. 26 in a statement.

The fund put Shahinian on administrative leave May 8 after the investment manager was identified in a lawsuit by California Attorney General Jerry Brown. Shahinian was not accused of wrongdoing in the suit, which brought civil claims against Frederico Buenrostro Jr., a former Calpers chief executive, and Alfred Villalobos, a former board member.

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