Updates with Microsoft in Verdicts and Settlements; MassMutual, John Hancock and Transocean in New Suits.)
Oct. 13 (Bloomberg)-- Just as his trial was set to start its second day, Umar Farouk Abdulmutallab yesterday pleaded guilty to all eight charges in the attempted bombing of a Northwest Airlines plane on Christmas Day 2009.
U.S. District Judge Nancy Edmunds in Detroit immediately swore in the Nigerian-born Abdulmutallab, telling the so-called underwear bomber he had the right to remain silent. He waived the right and admitted the charges against him.
The surprise announcement by Abdulmutallab and attorney Anthony Chambers, so-called standby counsel appointed to assist him, came as the day’s first witness was about to be called. Abdulmutallab planned to represent himself.
In a statement to the court, Abdulmutallab said he tried to bomb the plane as an act of retaliation against the U.S. for the “killing of my brothers and sisters in Muslim lands.”
“I intentionally carried an explosive device” onto the plane, he said. The device was concealed in his underwear. He was subdued by passengers after failing to set it off.
Asked if he was aware that his actions were against the law, he replied, “Yes, U.S. law.” He called American law unjust and oppressive according to the Koran.
Edmunds accepted his guilty pleas to all eight felony counts and set sentencing for Jan. 12. The charges include attempted murder and attempted use of a weapon of mass destruction. Abdulmutallab has been in custody since his arrest.
Chambers and U.S. Attorney Barbara L. McQuade said Abdulmutallab will spend the rest of his life in prison.
“This case demonstrates that civilian courts are an appropriate tool for bringing terrorists to justice,” McQuade said in a press conference after the plea.
The case is U.S. v. Abdulmutallab, 10-cr-20005, U.S. District Court, Eastern District of Michigan (Detroit).
Sprint, Cellular South Seek Access to U.S. Data in AT&T Case
Sprint Nextel Corp. and Cellular South Inc. asked for access to confidential information that the Justice Department got from AT&T Inc. in its probe of the company’s proposed merger with T-Mobile USA Inc.
The companies said U.S. District Judge Ellen Segal Huvelle in Washington should allow their outside lawyers and experts to use the private data to prepare for trial in their own lawsuits challenging the T-Mobile deal. To deprive them of that opportunity creates a “fundamental unfairness,” they said.
The companies, in a joint filing made public yesterday, argued that, as competitors with relevant information, they have been subpoenaed for documents by AT&T in the government’s antitrust suit to block the deal. At the same time, Huvelle, overseeing all the AT&T cases, froze document exchanges in the private lawsuits while she weighs the company’s bid to dismiss them.
In an order yesterday, Huvelle said AT&T and the Justice Department had until Oct. 17 to respond to the request.
“Sprint’s filing is another step in their fight against competition,” Mike Balmoris, an AT&T spokesman, said in an e- mail.
The Justice Department sued Dallas-based AT&T and Bonn- based Deutsche Telekom AG’s T-Mobile unit on Aug. 31, saying a combination of the two companies would “substantially” reduce competition. Seven states and Puerto Rico joined the government’s effort to block the deal, which would make AT&T the biggest U.S. wireless carrier.
Sprint, based in Overland Park, Kansas, brought its antitrust lawsuit on Sept. 6. The combination of AT&T and T- Mobile would form the country’s largest mobile phone company.
Cellular South sued on Sept. 19 claiming the merger threatened to “substantially” cut competition. Cellular South based in Ridgeland, Mississippi, changed its name to C Spire Wireless on Sept. 26, according to its website.
The case is U.S. v. AT&T Inc., 11-cv-01560, U.S. District Court, District of Columbia (Washington).
Cerberus, Innkeepers Trial Over Purchase Delayed to Oct. 20
A trial over Cerberus Capital Management LP’s decision to end a deal to buy 64 hotels from Innkeepers USA Trust was delayed for a fourth time yesterday.
The trial will begin Oct. 20, Innkeepers lawyer Dan Donovan said yesterday in U.S. Bankruptcy Court in Manhattan.
The start date was initially postponed from Oct. 10, when two people with knowledge of settlement talks said Cerberus might resolve the dispute by agreeing to buy the hotels at a lower price. Innkeepers sued after Cerberus, a New York-based private-equity firm, and Chatham Lodging Trust in August sought to cancel their $1.1 billion purchase.
The companies agreed to the sale in May and Innkeepers won approval of its reorganization terms in June. The company, in bankruptcy since July 2010, operates 71 hotels, including Residence Inns, Marriott hotels and Hampton Inns.
Cerberus cited a clause in the sale agreement allowing the buyers to back out if there was an adverse change in the lodging company’s business or in the overall economy.
The lawsuit against Cerberus is Innkeepers USA Trust v. Cerberus Four Holdings LLC, 11-02557, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The Chapter 11 case is In re Innkeepers USA Trust, 10-13800, in the same court.
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Trials and Appeals
Mark Hurd Lawyers Appeal Ruling on Unsealing Fisher Letter
Lawyers for former Hewlett-Packard Co. Chief Executive Officer Mark Hurd sought to keep secret a letter about his relationship with contractor Jodie Fisher, contending in Delaware Supreme Court yesterday that the contents are private.
In March, Delaware Chancery Court Judge Donald Parsons Jr. ruled that a copy of the letter, with a few redactions, should be made public. The order was stayed after Hurd appealed to the state’s high court.
“The right to public access is non-existent,” and the parties have “a constitutional right to privacy,” Hurd’s lawyer, Rolin P. Bissell, told the justices at a public hearing in Dover.
Publicizing the letter will provide “a full opportunity to air out” background details of Hurd’s departure,’’ Felipe Arroyo, a lawyer for shareholder Ernesto Espinoza, told the panel.
The letter was sent to Hurd by Fisher’s lawyer, Gloria Allred, and is part of a Chancery case filed by Espinoza seeking access to company books and records. The letter contains accusations of sexual harassment and details of Hurd’s alleged advances toward Fisher and her rejection of them, according to Parsons’s ruling.
Hurd is now president of software maker Oracle Corp. He resigned from Palo Alto, California-based HP in August 2010 after a company investigation determined he violated its standards of business conduct. HP said it didn’t find that Hurd had violated the company’s sexual-harassment policy.
Espinoza also wants to see an internal report prepared for the HP board by lawyers at Covington & Burling LLP as part of his investigation into possible waste by directors. Parsons on March 25 denied Espinoza access to the report.
The Chancery case is Espinoza v. Hewlett-Packard Co., CA6000, Delaware Chancery Court (Wilmington). The appeal is Hurd v. Spinoza, 167, 2001, Delaware Supreme Court (Dover).
J&J Didn’t Warn Levaquin Riskier Than Rivals, Lawyer Argues
A Johnson & Johnson unit never warned users of the Levaquin antibiotic that it posed a greater risk of tendon damage than rival medications, a lawyer for two men suing the company said yesterday.
Executives of J&J’s Ortho-McNeil-Janssen Pharmaceutical unit sought to protect sales by omitting information about Levaquin’s “comparative risk” from its warning label, Andy Alonso, a lawyer for Paul Gaffney and Robert Beare, said in closing arguments in the trial of their lawsuits against the drugmaker.
The case, in state court in Atlantic City, New Jersey, is the third over Levaquin tendon injuries to go to trial since November and the first to be tried in New Jersey state courts. J&J faces more than 2,600 claims in U.S. courts over the drug, court dockets show.
A lawyer for the J&J unit countered that for more than a decade starting in 1996, Levaquin’s labels contained repeated warnings about the risk of tendon injuries associated with the drug.
Gaffney’s and Beare’s own doctors said “they were aware” of the tendon risk posed by the drug, Christy Jones, one of the drugmaker’s lawyers, told jurors in her closing argument yesterday.
Levaquin, which generated more than $1 billion in sales over an eight-year period starting in 2000, was J&J’s third- largest selling product at one point. In 2008, the U.S. Food and Drug Administration required all makers of antibiotics in Levaquin’s class to beef up warnings about tendon ruptures.
Regulators required the upgraded warnings after finding that the antibiotics increased the risk of tendon ruptures to three to four times that of the general population, FDA officials said.
Lawyers for a Minnesota man relied on the FDA’s push for stronger warnings on the class of antibiotics that included Levaquin to convince a federal court jury in December 2010 to award him a total of $1.8 million in damages over tendon damage he blamed on the drug. A separate jury in June rejected another former Levaquin user’s claim for damages over his Achilles- tendon injury.
The case is Beare v. Johnson & Johnson, L-196-10-MT, Superior Court of New Jersey for Atlantic County (Atlantic City).
Strip Searches of Newly Arrested Questioned by High Court
The U.S. Supreme Court questioned whether jails can constitutionally search the private body parts of all new prisoners, including those arrested for traffic violations.
During an hourlong argument full of graphic descriptions of jailhouse strip-search protocols, the justices yesterday sought to draw a line that would both prevent the smuggling of weapons and drugs and protect the privacy interests of people arrested for minor violations.
Several justices questioned whether jails needed to strip- search people charged with nonviolent offenses, pointing to studies indicating that intrusive searches of such people rarely uncover hidden items.
“It’s very hard to find somebody who really was in this minor offender category who really was found to have contraband,” Justice Stephen Breyer said.
In the case before the justices, Albert W. Florence says he was strip-searched twice during the week he was jailed following his arrest for failing to pay an old fine -- a penalty that he had already paid. Florence is suing officials from two New Jersey counties -- Burlington and Essex -- over the searches.
Federal appeals courts around the country are divided on the issue, which turns on the Constitution’s Fourth Amendment. A Philadelphia-based federal appeals court said the counties’ policies were reasonable ways to prevent prisoners from smuggling in weapons and drugs.
Both sides in the case yesterday sought to narrow the issues before the court. The lawyer for the two counties, Carter Phillips, said jail officials might be barred from touching inmates during a search.
Florence’s lawyer, Thomas Goldstein, allowed that jails could perform body-cavity inspections on certain categories of inmates, such as those charged with violent offenses. He also said all new inmates could be required to strip naked and shower in front of guards, as long as officials stopped short of a close-range search of a prisoner’s genitals and anus.
That distinction was lost on Justice Sonia Sotomayor.
“It’s OK to stand five feet away, but not two?” she asked. She added, “That’s a line that doesn’t make much sense to me.”
The Obama administration argued alongside the counties, urging the court to give jail officials broad latitude. Nicole Saharsky, a Justice Department lawyer, said federal jail officials don’t have enough information to decide whether a particular inmate needs to be searched.
The case is Florence v. Board of Chosen Freeholders of the County of Burlington, New Jersey, 10-945, U.S. Supreme Court (Washington).
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Verdicts, Settlements and Sentences
Microsoft Award to Alcatel-Lucent May Be Lowered, Judge Says
Microsoft Corp. shouldn’t have to pay $70 million to Alcatel-Lucent for patent infringement and the jury award may be lowered to $26.3 million, a federal judge said.
U.S. District Judge Marilyn Huff in San Diego said at a hearing yesterday that she will review more legal arguments before issuing a ruling. Huff said she agreed with the world’s largest software maker that the jury’s July 29 award wasn’t supported by evidence presented during a 10-day trial.
The judge said $26.3 million is “a fair damages figure that is not excessive based on the totality of the evidence.” She asked lawyers on both sides to file additional legal arguments on her finding by the end of the month before she makes her decision final.
The jury found that an Alcatel-Lucent patent was infringed by Microsoft in versions of its Outlook program and two other applications. Microsoft asked the judge to reduce the award to no more than $5 million.
A different jury in San Diego in 2008 found that Redmond, Washington-based Microsoft had infringed the patent and awarded $358 million in damages. An appeals court, upholding the infringement verdict, overturned the damages award, finding the calculation lacked sufficient evidentiary support. The case was sent back for retrial on damages only.
The case is Lucent Technologies Inc. v. Gateway Inc., 07- cv-2000 U.S. District Court, Southern District of California (San Diego).
Bayer Settles With Onyx Over Regorafenib Cancer Treatment
Bayer AG settled a lawsuit with Onyx Pharmaceuticals Inc. over the promotion and sale of regorafenib, a cancer treatment. Under the agreement reached Tuesday, Bayer will pay Onyx a 20 percent royalty on worldwide sales of regorafenib for use in oncology, South San Francisco-based Onyx said yesterday in a regulatory filing. Leverkusen, Germany-based Bayer also will pay Onyx $160 million for the Japanese royalty rights for Nexavar, a liver-cancer treatment, according to the filing.
Regorafenib hasn’t been approved by the U.S. Food and Drug Administration or the European Medicines Agency, according to the statement. Nexavar is approved in the U.S.
The case is Onyx Pharmaceuticals Inc. v. Bayer Corp., 09-2145, U.S. District Court, Northern District of California (San Francisco).
Kimelman Gets 2 1/2 Years on Eve of Rajaratnam Sentencing
Michael Kimelman, the Incremental Capital LLC co-founder, yesterday was sentenced to 2 1/2 years in prison for insider trading. Kimelman was found guilty in June with Zvi Goffer, a former Galleon employee, and his brother, Emanuel Goffer, in a scheme to bribe two lawyers at Boston-based Ropes & Gray LLP for secret information about transactions involving 3Com Corp., Axcan Pharma Inc., Kronos Inc. and Hilton Hotels Corp.
“I was made aware when I went to trial that I could be convicted,” Kimelman told U.S. District Judge Richard Sullivan. “Now that has happened, I am ready to pay the price and face the consequences of my decision.”
Sullivan yesterday also ordered Kimelman to forfeit $289,000, the amount prosecutors said he made from the scheme. In September, Sullivan gave Zvi Goffer 10 years in prison, and last week he sentenced Emanuel Goffer to three years.
Kimelman has continued to claim he is innocent and intends to appeal the conviction. Last week Sullivan denied his requests for acquittal or for a new trial.
Kimelman’s lawyer, Michael Sommer, asked Sullivan for leniency, arguing that his client never used a prepaid cell phone to evade detection, as others in the ring did. Kimelman never took or gave any bribes, wasn’t a leader of the scheme and didn’t pass any tips to others, Sommer said.
Assistant U.S. Attorney Richard Tarlowe urged Sullivan to sentence Kimelman within the advisory federal guideline range of 33 months to 41 months. He said Kimelman created a phony paper trail to disguise the insider trades.
Sullivan said he was influenced in his decision to sentence Kimelman below the guideline range by the more than 100 letters he received from Kimelman’s friends and family.
The case is U.S. v. Goffer, 10-cr-00056, U.S. District Court, Southern District of New York (Manhattan).
Rajaratnam Shouldn’t Get Bail After Sentencing, U.S. Says
Galleon Group LLC co-founder Raj Rajaratnam shouldn’t be granted bail pending appeal after he’s sentenced today for insider trading, prosecutors said, because he has millions of dollars and could flee the U.S.
Federal prosecutors said that Rajaratnam has failed to prove that he isn’t a flight risk and hasn’t refuted their argument that he has substantial ties outside the U.S., including in Sri Lanka where he was born, according to a filing yesterday in federal court in Manhattan. Rajaratnam, who is a naturalized U.S. citizen, also retains his Sri Lankan citizenship.
While the government has said it opposes bail pending appeal, prosecutors also said yesterday they have told his lawyers they won’t object if Rajaratnam surrenders shortly after his sentencing and goes directly to the facility designated by the U.S. Bureau of Prisons. Prosecutors said prison authorities indicated it will take 21 days for them to process his designation to a federal prison.
‘Should Rajaratnam flee to Sri Lanka or elsewhere, he would have access to tens of millions of dollars by the mere touch of a keystroke and thus could use that money to live abroad,’’ wrote assistant U.S. attorneys Jonathan Streeter, Reed Brodsky and Andrew Michaelson.
Prosecutors, saying he made $72 million from his crimes, have asked for a prison term of 19 years and seven months to 24 1/2 years, which Rajaratnam’s lawyers called “grotesquely severe.” Defense lawyers said that he only made $7.4 million from the trades.
John Dowd, a lawyer for Rajaratnam, didn’t immediately return a voice-mail message seeking comment on the government’s filing.
The case is U.S. v. Rajaratnam, 09-01184, U.S. District Court, Southern District of New York (Manhattan).
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Visa, Mastercard Accused of Price Fixing by ATM Operators
Visa Inc. and Mastercard Inc., the world’s biggest payment networks, were sued by a trade group representing operators of automated teller machines over claims the card companies fix prices and suppress competition between ATM networks.
The companies, in a lawsuit filed yesterday in federal court in Washington, are accused of “eliminating or severely restricting independent decision-making” among ATM operators by establishing a uniform agreement with almost every card-issuing U.S. bank to “fix” ATM access fees.
The allegations were made by the National ATM Council Inc., a trade group based in Jacksonville, Florida, and 13 operators of ATMs in nine states.
“The ATM restraints prevent ATM operators from offering their customers a discount or benefit for completing a transaction over a network that is less costly to the ATM operator, so consumers cannot be rewarded for using a lower cost and more efficient network,” the lawsuit states.
James Issokson, a spokesman for Mastercard, based in Purchase, New York, declined to comment, saying the company had not been served with the lawsuit. Will Valentine, a spokesman for San Francisco-based Visa, declined to comment on the lawsuit.
The case is National ATM Council v. Visa Inc., 11-1803, U.S. District Court, District of Columbia (Washington).
MassMutual, John Hancock Sued Over Madoff Investment
Massachusetts Mutual Life Insurance Co. and John Hancock Life Insurance Co. USA were sued by a limited-liability company that said they lost millions of the company’s dollars to Bernard Madoff’s Ponzi scheme.
SSR II LLC bought variable life insurance policies from John Hancock and Security Life of Denver Insurance Co. Through the investment-account component of the policies, SSR invested $13 million in a Tremont Group Holdings Inc. fund, according to a lawsuit filed yesterday in New York State Supreme Court.
The fund, through its fund-of-funds structure, allocated 22 percent of its assets to other funds, substantially all of which went to Madoff, according to the complaint. MassMutual and other defendants “maintained significant influence and/or control over and provided substantial assistance to” various Tremont entities, SSR said.
“Rather than managing a portfolio of underlying securities, however, defendants funneled over one-fifth of plaintiff’s investment to Madoff’s Ponzi scheme, where those funds were dissipated,” SSR II said.
Representatives of Boston-based John Hancock, MassMutual and Security Life of Denver couldn’t be reached for comment after normal business hours.
The case is SSR II LLC v. John Hancock Life Insurance Co., 652793-2011, New York State Supreme Court (Manhattan).
Transocean Sued by U.S. Agency Over Gulf-Rig Blast Subpoenas
The U.S. Chemical Safety and Hazard Investigation Board has sued a Transocean Ltd. unit for its allegedly inadequate response to requests for information related to the April 2010 sinking of the Deepwater Horizon oil drilling rig in the Gulf of Mexico.
Transocean Deepwater Drilling didn’t fully comply with “38 of 39 specific demands” in five subpoenas issued between Nov. 24, 2010, and April 7, 2011, Donald Holmstrom, an investigator for the agency said in a sworn statement filed yesterday in Houston federal court. The board is seeking to force the drilling contractor to comply with its requests.
The Deepwater Horizon exploded and sank while drilling a well for BP Plc off the Louisiana coast, killing 11 workers and causing the worst offshore oil spill in U.S. history. The board has been investigating the incident since June 2010.
“Transocean’s ongoing failure to provide information has impeded and delayed the CSB’s critical safety inquiry,” Holmstrom said.
Transocean “produced a number of responsive documents” under subpoenas issued by the board between July and August 2010, Holmstrom said. When the agency sought additional documents and answers to “11 specific interrogatories,” Transocean either refused to respond or provided an insufficient response, he said.
Lou Colasuonno, a spokesman for Vernier, Switzerland-based Transocean, said the company’s lawyers advised the CSB in July of its position that the Deepwater Horizon investigation should be left to the U.S. Coast Guard.
“The Chemical Safety Board has no jurisdiction over marine spills,” Colasuonno said in a phone interview.
Holmstrom said the information is “critical” to the board’s analysis of the blast.
The case is U.S. v. Transocean Deepwater Drilling Inc., 4:11-cv-3638, U.S. District Court, Southern District of Texas (Houston).
--With assistance from Andrew Dunn, Patricia Hurtado, Tiffany Kary, David McLaughlin and Bob Van Voris in New York; Tom Schoenberg and Greg Stohr in Washington; Jef Feeley and Phil Milford in Wilmington, Delaware; Bill Callahan in San Diego; Laurel Brubaker Calkins in Houston; and Margaret Cronin Fisk in Southfield, Michigan. Editors: Mary Romano, Glenn Holdcraft.
To contact the reporter on this story: Ellen Rosen in New York at email@example.com.
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