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Samsung, Apple, SEC, Barclays, FDIC, JPMorgan in Court News

Samsung Electronics Co., facing allegations that it stole tablet computer patents from Apple Inc., says the design for such devices can be traced back to Stanley Kubrick’s 1968 film “2001: A Space Odyssey.”

The design claimed in a 2005 patent Apple holds covering parts of the appearance of the iPad is depicted in the film, in which two astronauts are using tablet computers, Samsung attorney Sara Jenkins said in a court filing Aug. 23 in federal court in San Jose that included a clip from the film.

Apple sued Samsung this year saying the South Korean company’s Galaxy line of mobile devices, including its Galaxy Tab, infringes Apple’s D’889 and other patents. The iPad maker is seeking a court order blocking Samsung from selling products that violate its patents. A hearing is scheduled for October.

Kristin Huguet, an Apple spokeswoman, didn’t immediately return a voice-mail message seeking comment on the filing.

The D’889 patent covers parts of the iPad’s “unique and novel ornamental appearance” such as the black face, the matrix of icons and a rim surrounding a flat screen, Cupertino, California-based Apple said in court filings. Samsung’s Galaxy Tab infringes the patent, the company alleges.

The case is Apple Inc. v. Samsung Electronics Co., 11-1846, U.S. District Court, Northern District of California (San Jose).


SEC Wins Civil Judgment Against Fugitive Analyst Deep Shah

The U.S. Securities and Exchange Commission won a judgment against Deep Shah, who has been declared a fugitive in the insider trading case of Galleon Group LLC co-founder Raj Rajaratnam, that includes a civil penalty of $24.6 million.

Shah, an ex-analyst at Moody’s Investors Service Inc., was charged in November 2009 by Manhattan U.S. Attorney Preet Bharara and sued by the SEC for allegedly passing along inside information about acquisitions involving Hilton Hotels Corp. and Kronos Inc.

The commission sought a default judgment in June against Shah claiming that he had not responded to its suit. U.S. District Judge Jed Rakoff signed the order Aug. 22 and it was filed Tuesday in federal court in Manhattan.

The judgment says Shah must pay back $8.2 million in profits gained or losses avoided as a result of the conduct alleged in the complaint, along with prejudgment interest of $1.76 million and the civil penalty.

The SEC is “pleased with the decision,” spokesman John Nester said.

Lawyers for the SEC said in court documents filed in March that the commission had located Shah in Mumbai, where a bailiff found Shah’s residence in the Juhu neighborhood of the city and left an amended complaint on March 22, 2010.

Shah is accused of tipping Roomy Khan, a former Intel Corp. product-marketing engineer, in 2007 to material nonpublic information about pending takeover bids for Hilton Hotels Corp. and Kronos Inc. Khan then passed on the tips to Rajaratnam, prosecutors said; she pleaded guilty in 2009.

The case is Securities and Exchange Commission v. Galleon Management LP, 09-cr-8811, U.S. District Court, Southern District of New York (Manhattan).

Chicago Hedge Fund Principal Pleads Guilty to Wire Fraud

Philip J. Baker, principal of the collapsed Chicago hedge fund Lake Shore Asset Management Ltd., yesterday pleaded guilty to one count of wire fraud for his role in an alleged $292 million global scheme.

Indicted in absentia in February 2009 for his role in the scheme that ensnared about 900 investors, Baker had faced 27 criminal counts including 17 for wire fraud and two for commodities fraud, as well one count of embezzlement of commodity pool funds. He pleaded not guilty last year after being extradited from Hamburg.

Baker is also liable for $154 million in restitution, U.S. District Judge John W. Darrah in Chicago said. Sentencing is set for Nov. 17.

“The government will recommend the maximum term of 20 years in prison when Baker is sentenced,” Chicago U.S. Attorney Patrick Fitzgerald said in an e-mailed statement after the plea was entered. A trial had been scheduled for Sept. 19.

Baker’s lawyer, Kurt Stitcher of Baker & Daniels LLP, declined to comment after the hearing.

The criminal case is U.S. v. Baker, 1:09-cr-00175, and the civil case is U.S. Commodity Futures Trading Commission v. Lake Shore Asset Management Ltd., 1:07-cv-03598, U.S. District Court, Northern District of Illinois (Chicago).

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CIFG Opposes BofA’s Mortgage-Bond Accord With Investors

Bank of America Corp.’s proposed $8.5 billion mortgage-bond settlement, which has drawn criticism from a group of investors and two states, is opposed by bond insurance company CIFG Assurance North America Inc.

The accord requires approval from a New York state judge, and CIFG filed a “notice of intention to appear and object” to the agreement yesterday in New York State Supreme Court.

The proposed settlement calls for Bank of America to pay $8.5 billion to resolve claims from investors in Countrywide Financial Corp. mortgage bonds. Charlotte, North Carolina-based Bank of America acquired Countrywide in 2008.

Lawrence Grayson, a Bank of America spokesman, declined to comment.

The case is In the matter of Bank of New York Mellon, 651786/2011, New York State Supreme Court, New York County (Manhattan).

Sirius XM Wins Subscriber Class-Action Accord Court Approval

Sirius XM Radio Inc. won court approval for the settlement with subscribers who sued the satellite-radio broadcaster over claims it broke the law by raising prices after acquiring its only rival.

U.S. District Judge Harold Baer in Manhattan endorsed the accord in a filing yesterday over the objections of some subscribers who had argued at an Aug. 8 hearing that the deal paid them too little and the lawyers too much.

“I have reviewed the settlement’s substantive terms and conclude that they demonstrate sufficient fairness, adequacy and reasonableness,” Baer wrote. “The vast majority of class members will benefit in the course of their normal subscription payments.”

Subscriber Carl Blessing of Florida sued Sirius XM in 2009, claiming the company violated federal antitrust law and state consumer-protection law when it raised some prices and levied a music royalty fee after Sirius Satellite Radio acquired XM Satellite Radio in 2008.

Sirius XM said the increases were imposed to cover higher costs.

The deal, valued at $180 million, provides that prices for basic service and Internet access, as well as the music royalty fee, will remain at current levels through the end of the year. Subscribers who canceled can reconnect without paying a fee. Those whose plans expire after Dec. 31 can renew before that time at current rates. Subscribers will get no cash.

Sirius XM declined to comment on Baer’s decision, spokeswoman Kelly Sullivan said in an e-mail. Objectors called the settlement of “dubious value” because Sirius XM hadn’t said it planned to raise prices this year. They also objected to the $13 million in fees to be paid to the lawyers representing the class.

The case is Blessing v. Sirius XM Radio, 09-10035, U.S. District Court, Southern District of New York (Manhattan).

New Suits

JPMorgan Sues Homebuilder Over Share of $381.7 Million Loan

JPMorgan Chase & Co., leader of a group of lenders that is owed $381.7 million on a bankrupt homebuilding project in Henderson, Nevada, sued Meritage Homes Corp. to recover the builder’s share of a guarantee.

JPMorgan and other lenders agreed in 2004 to advance as much as $535 million to a group of builders including Meritage and Beazer Homes USA Inc., taking repayment guarantees from each builder, according to a court filing on Tuesday. The share of Meritage for the loans advanced to date is $13.3 million, JPMorgan said in the filing as it asked a judge to compel payment.

“JPMorgan has made due demand under the repayment guaranty and the defendants have failed and refused to pay their liabilities,” the bank said.

South Edge LLC, which is owned by the builders, is in bankruptcy court in Nevada. The bankruptcy triggered the repayment guarantee, JPMorgan said.

A voice mail left for Steven Hilton, Meritage’s chairman, wasn’t immediately returned.

The case is JPMorgan v. Meritage Homes, 11-cv-01364, U.S. District Court, District of Nevada.

FDIC Sues Ex-First National Bank of Arizona CEO Over Losses

Ex-First National Bank of Arizona Chief Executive Officer Gary A. Dorris and former director Philip A. Lamb “sacrificed safety” and promoted risky nontraditional mortgage loans that ultimately caused the bank’s failure, the Federal Deposit Insurance Corp. said in a lawsuit.

Dorris and Lamb were negligent in exercising their duties, given the obvious risks of the bank’s business model, the agency said yesterday in a complaint in federal court in Phoenix.

The bank operated a wholesale mortgage division to purchase and market nontraditional “Alt-A” loans that lacked proper underwriting, required no verification of borrowers’ income or assets, and had terms that guaranteed high default rates, the FDIC alleged.

“Although these risky loans returned record profits in the near term, they produced losses once the real estate market softened, and ultimately caused the bank’s failure,” the agency said in the complaint, which seeks to recover more than $193 million in damages.

As of Aug. 4, the FDIC has authorized lawsuits against 266 officers and directors in an effort to recoup more than $6.8 billion in losses stemming from the credit crisis, the agency said on its Web site. An additional 172 residential malpractice and mortgage fraud lawsuits are pending, consisting of lawsuits filed and inherited, the agency said. More than 350 lenders have failed since the start of 2008.

A woman who answered the phone at Dorris’s home in Scottsdale, Arizona, said he was unavailable. Lamb has no public phone listing and couldn’t immediately be reached for comment.

The case is Federal Deposit Insurance Corp. v. Dorris, 2:11-cv-01652, U.S. District Court, District of Arizona (Phoenix).

For more, click here.

Comscore Accused in Lawsuit of Installing Data-Mining Software

Comscore Inc., a company that measures website traffic, was accused in a lawsuit by two Internet users of surreptitiously installing data-mining software on their computers.

The company’s secret installation of the programs, which come bundled with free screen-saver software and other applications, violates Illinois and U.S. laws including the federal Electronic Communications Privacy Act, according to a federal lawsuit filed Aug. 23 in Chicago.

“The scope and breadth of data that Comscore collects from unsuspecting customers is terrifying,” Californian Jeff Dunstan and Illinois resident Mike Harris said in their complaint.

Comscore, based in Reston, Virginia, compiles Internet traffic data from about 2 million consumers in 170 countries and then markets the information to financial analysts, advertising agencies and other businesses, according to its own website.

Harris and Dunstan said the company’s software collects user names and passwords, credit card numbers, and prices paid for consumer goods purchased on line, in addition to logging the sites consumers visited and ads they’ve clicked on.

“We have reviewed the lawsuit and find it to be without merit and full of factual inaccuracies,” Andrew Lipsman, a Comscore vice president, said in an e-mailed statement. “Comscore intends to aggressively defend itself against these claims.”

The plaintiffs seek a class action status.

The case is Harris v. Comscore Inc., 11cv5807, U.S. District Court, Northern District of Illinois (Chicago).

Barclays Sues U.K. Debt Recovery Company Over ‘Misleading’ Name

Barclays Plc sued a U.K. debt recovery company in a trademark dispute over the use of the name of the U.K.’s second-largest bank by assets.

Barclays Recovery Services has no connection to the London-based bank, Barclays said in a statement. The lawsuit was filed in London on Aug. 22.

Under U.K. intellectual property law, company names can be protected as registered trademarks, according to the Intellectual Property Office’s website. Infringement may occur when a logo or name can be confused with a registered trademark, or where it takes advantage of another company’s reputation.

“The legal proceedings seek to stop Barclays Recovery Services Ltd. from infringing the bank’s trademarks and engaging in conduct that is misleading,” Barclays said. “Barclays values its reputation with its customers and the general public and will always act to protect its name.”

Barclays Recovery Services, which is registered at an address on Regent Street in London, doesn’t have a listed phone number.

The case is Barclays Bank Plc v. Barclays Recovery Services Ltd., High Court of Justice Chancery Division, HC11C02895.

Lawsuit News

Alabama Immigrant Status Checks May Spark Suits, Judge Says

Alabama’s new immigration law requiring that police officers check immigrants’ legal status might lead to lawsuits for unlawful detention, a judge said in a hearing on challenges to the statute.

“There are a lot of problems with this statute,” U.S. District Judge Sharon Blackburn in Birmingham, Alabama, said yesterday in a hearing on three cases filed by the federal government, groups including the American Civil Liberties Union and Christian clergy. “My job is to decide if this is constitutional.”

The measure, to go into effect Sept. 1, requires police officers to verify the immigration status of anyone they stop and suspect may be in the U.S. illegally. Businesses must use a federal database called E-Verify to determine whether job applicants are eligible to work. And it’s a crime to rent housing to illegal immigrants.

The U.S. Justice Department and the ACLU argue that federal law governs the handling of undocumented immigrants. Roman Catholic, Episcopal and Methodist clergy say the statute makes it illegal for them to fulfill their mission to feed, clothe and give communion to undocumented aliens.

Alabama is the fifth U.S. state to enact such legislation. The three lawsuits are consolidated before Blackburn.

Governor Robert Bentley signed the bill into law in June.

The cases are Hispanic Interest Coalition of Alabama v. Bentley, 5:11-cv-2484, Parsley v. Bentley, 5:11-cv-2736, and U.S. v. Bentley, 5:11-cv-2746, U.S. District Court, Northern District of Alabama (Birmingham).

Homeowner Associations in Need of Cash Sue to Force Foreclosures

Members of the Vintage East Condominium Association in Miami Beach got tired of waiting for JPMorgan Chase & Co. to foreclose on unit 9, so they sued the bank in February to take control of the property.

In June, more than four years after the owner stopped making payments, a judge ruled that JPMorgan lost its claim to the $144,000 mortgage. The apartment is now on the market for $87,500, and the association may stave off insolvency with proceeds from the sale and a new owner who pays monthly dues, said Jane Losson, a board member at the complex in a telephone interview. Four of the 11 other owners at the property are also behind on dues.

Financially troubled condo associations are taking banks to court as foreclosure delays enable delinquent homeowners to stay in their buildings for years, often without paying dues that keep boards running. The groups start by pressuring lenders to speed up home seizures and take over payment of the monthly fees. In extreme situations, like the Vintage East case, associations may force banks to give up rights to the property.

“The lenders are stalling foreclosures,” Ben Solomon, the Miami Beach attorney for the Vintage East association, said in a telephone interview. “Our complaints say the banks abandoned their interest and either need to accept responsibility for the title or walk away.”

Solomon, whose Association Law Group represented homeowner boards in 16 Florida counties with 15,000 delinquent owners, also won what he calls “mortgage terminator” lawsuits in claims against Bank of America Corp., Citigroup Inc., Deutsche Bank AG and Wells Fargo & Co., according to court records.

The bank defendant is usually a trustee for the loan that was sold into a mortgage-backed security, a legal structure that can leave the party responsible for a mortgage unclear.

Citigroup and Deutsche Bank declined to challenge lawsuits brought by Solomon because both banks were trustees, not the servicers of the delinquent loans, bank representatives said.

In March 2010, Citigroup lost a lawsuit over a Miami Beach condo with a $136,000 mortgage, according to court filings. Danielle Romero-Apsilos, a spokeswoman for the New York-based bank, declined to comment, saying Citigroup wasn’t the servicer.

Deutsche Bank in September forfeited its right to a unit with a $149,300 mortgage to the Palm Aire Gardens Condominium Association Inc. in Pompano Beach, Florida.

“Litton Loan Servicing, the loan servicer for the loan, and not Deutsche Bank as trustee, was responsible for all foreclosure activity relating to the loan,” John Gallagher, a Deutsche Bank spokesman in New York, said in an e-mail.

Thomas Kelly, a spokesman for JPMorgan in Chicago, declined to comment on cases in which the bank lost properties to homeowner associations.

For more, click here.

Viktor Bout Statements to U.S. Agents Coerced, Judge Rules

Viktor Bout, a Russian accused of conspiring to sell weapons to a Colombian terrorist group, won a bid to bar from his trial statements he made after U.S. authorities threatened to abandon him in a Thai prison.

U.S. District Judge Shira A. Scheindlin in Manhattan yesterday granted Bout’s request to exclude his comments to Drug Enforcement Administration agents after his arrest in Bangkok, saying the agents ignored Bout’s request for more time to decide whether to talk. Bout, 44, said he was told that if he didn’t speak immediately, he’d be left in a Thai jail to face “heat, hunger, disease and rape,” Scheindlin wrote in her ruling.

“When coupled with the agents’ deceptive suggestion that if Bout ‘cooperated’ he could come back to the United States with them (rather than be ‘abandoned’ in a Thai jail), I find that this credible threat of violence also materially induced Bout to make statements,” Scheindlin said.

Albert Dayan, one of Bout’s attorneys, didn’t immediately return a telephone message left at his office seeking comment on the decision.

“We respectfully disagree with the judge’s opinion and plan to request that it be reconsidered,” Ellen Davis, a spokeswoman for the Manhattan U.S. Attorney’s office, said in a statement.

The case is U.S. v. Bout, 08-cr-0365, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

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