20 May
2015

Judge Pauley Orders Sprint and Regulator to Provide Details on Proposed Settlement

In an order yesterday, Judge Pauley rejected the joint request of the Consumer Financial Protection Bureau and Sprint to move forward on court approval of a $50 million settlement of the regulator’s investigation into the telecom company.  The parties had submitted a proposed one-sentence joint motion for approval of a final judgment and settlement, and indicated that no further briefing would be provided.  Judge Pauley was unimpressed.

How the Bureau believes a judge can evaluate the proposed settlement with a one sentence joint motion, no memorandum of law, and no declarations, eludes this Court. It is especially ironic, given the Bureau’s core mission as described on its website to “give consumers the information they need to understand the terms of their agreements …. ” See “About Us,” Consumer Financial Protection Bureau, http://www.consumerfinance.gov/the-bureau/ (last visited May 19, 2015).

Judge Pauley ordered the parties to submit a motion as soon as practicable explaining why the “proposed settlement is fair, reasonable, and does not disserve the public interest.”

14 May
2015

Judge Scheindlin Certifies Injunction Class in Antitrust Challenge to “Territorial” Structure of Sports Broadcasts

In an opinion today, Judge Schiendlin certified a Rule 23(b)(2) injunction class in a case alleging that it is anticompetitive for Major League Baseball and the National Hockey League to divide the market for games into various territories exclusive to the local teams, while allowing the broadcast of out-of-market games only as part of all-or-nothing packages like MLB Extra Innings or NHL Center Ice.

The defendants’ primary argument against class certification was that the class would impermissibly consist of those would benefit from a dismantling of the existing structure — e.g., a Yankee fan in Iowa who would prefer to be able to buy a package of just Yankee games — and those who would be harmed — e.g., a Yankee fan in Iowa who would in all events buy the full MLB Extra Innings package but, if a-la-carte options were available, might not have the package option or might have to pay more.  According to the defendants, these “winners” and “losers” cannot form a cohesive class. 

Judge Scheindlin concluded that this argument “fails three times over”:

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11 May
2015

After Bench Trial, Judge Cote Rules For FHFA in Case Against Nomura, RBS

Following a bench trial, Judge Cote today issued a 361-page ruling in favor of FHFA (the conservator to Freddie Mac and Fannie Mae) in a case accusing Nomura and RBS of misrepresenting the quality of mortgages underlying various securities.  There had been 16 similar cases before Judge against various banks, all of which settled except this one.  Judge Cote resolved various disputes between the parties as to how damages should be calculated, but did not specify the final judgment amount. She instead directed the FHFA, which had initially sought over $1 billion, to submit a proposed judgment following the formula in her opinion.

The opinion begins:

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08 May
2015

Judge Román, Disagreeing With Eighth Circuit, Rules Suit Over “Organic” Label Not Preempted

In an opinion yesterday, Judge Román denied a motion to dismiss a class action accusing the makers of “Earth’s Best” branded foods of falsely labeling certain products as “organic.”  The defendants argued the claims were preempted by the Organic Food Production Act (or, OFPA), which defines what foods can be labeled “organic,” and prohibits the sale of products labeled “organic” unless approved by a “certifying agent.”

In an earlier case, the Eighth Circuit found similar claims preempted because (among other reasons) state law claims challenging “organic” labels would create the risk of “conflicting interpretations” and would “directly conflict[] with the role of the certifying agent.”

Judge Román disagreed, finding that the risk of “divergent” views not enough to result in preemption:

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07 May
2015

Second Circuit Declares NSA’s Bulk Phone Data Collection Unlawful

In an opinion today, the Second Circuit reversed a decision by Judge Pauley (see our prior posts on the case here), and ruled that the NSA’s bulk collection of phone data is unlawful. Section 215 of the Patriot Act allows the government to collect “tangible things” that are “relevant” to an “authorized investigation” of terrorism, but the Second Circuit found that bulk collection did not meet the test of relevance:

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30 Apr
2015

Judge Forrest: “Flash Boys” Suit Against Exchanges is Preempted by Federal Law

In an opinion Tuesday, Judge Forrest dismissed various class action suits accusing stock exchanges of improperly allowing high-frequency traders to pay to obtain and trade on market data faster than other investors.  The plaintiffs subscribed to market data via subscriber contracts that, in turn, incorporated the terms of standardized market data dissemination “plans.”  Those plans, which the SEC approved, stated the data would be provided on “fair and reasonable terms” that are “not discriminatory” (or used similar language).

Judge Forrest ruled that the claims were preempted by the detailed federal statutory and regulatory regime governing stock exchanges:

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26 Apr
2015

Judge Scheindlin Allows Class Action Over Barclays “Dark Pool” to Proceed

In an opinion Friday, Judge Scheindlin largely denied Barclays’ motion to dismiss a securities fraud class action alleging that Barclays misled investors about its anonymous trading platform, or “dark pool,” referred to as “LX.” 

At the outset, Judge Scheindlin found it appropriate for the plaintiffs to have borrowed substantially from the New York Attorney General’s complaint against Barclays in a similar state court case because the “facts are derived from a credible complaint based on facts obtained after an investigation.” (By way of contrast, we covered a case in 2013 in which Judge Cote took issue with borrowing from another private complaint that was based on confidential sources.)

On the sufficiency of the allegations, Judge Scheindlin dismissed claims arising from various public statements about the company’s overall business practices and risk controls that she concluded were “not only generic, but are for the most part aspirational.”  But she allowed claims to go forward that were specific to LX.  According to the plaintiffs, Barclays boasted about LX being a platform free from “predatory” traders while secretly encouraging predators.  And she found those statements to be material, notwithstanding that LX represented a small portion of Barclays’ revenue, because she concluded “the specific misstatements about LX — which include touting its safety while secretly encouraging predatory behavior — call into question the integrity of the company as a whole”