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US Court To Hear Review Of “Light” Cigarettes
Lawyer Blog News | 2008/01/20 16:49
The Supreme Court agreed Friday to a cigarette maker's request to decide whether tobacco companies can be sued under state law for allegedly deceptive advertising of "light" cigarettes.

The tobacco industry is trying to head off a wave of state-based challenges regarding the light cigarettes, even as it is appealing a federal judge's order to stop marketing cigarettes as "low tar," "light," "ultra light" or "mild" because they mislead consumers.

The issue before the justices is whether state laws against unfair marketing practices may be used in suits against the tobacco companies or whether federal law bars such lawsuits. The Federal Cigarette Labeling and Advertising Act says states can't impose any requirements on the advertising or promotion of cigarettes.

A federal judge initially threw out a suit filed by three Maine residents against Altria Group Inc. and its Philip Morris USA Inc. subsidiary that alleged the advertising of light cigarettes was unfair and deceptive.

The 1st U.S. Circuit Court of Appeals in Boston, however, reinstated the suit.

The Maine plaintiffs said they smoked Marlboro Lights, made by Philip Morris, for at least 15 years. They claim the company marketed the cigarettes as "light" and having "lowered tar and nicotine" despite knowing that those statements were false, in violation of Maine's Unfair Trade Practices Act.

The company has research, the plaintiffs say, that shows it knew that smokers of the light cigarettes took deeper puffs and used other techniques to ensure they received as much nicotine as they would have gotten from regular cigarettes.

Philip Morris said the lawsuit was properly dismissed by the federal judge and called on the Supreme Court to resolve a conflict between appeals courts over these sorts of lawsuits. The 5th U.S. Circuit Court of Appeals in New Orleans last year dismissed a similar suit.

In the government's landmark case against tobacco companies, U.S. District Judge Gladys Kessler said the companies "distorted the truth about low tar and light cigarettes so as to discourage smokers from quitting."

That case is on appeal with the U.S. Circuit Court of Appeals for the District of Columbia.

A separate federal lawsuit filed by smokers is pending in New York. The class-action suit alleges tobacco companies violated federal racketeering laws by promoting light cigarettes as lower-risk alternatives to regular cigarettes even though their internal documents showed they knew the risks were about the same. The class may consist of as many as 60 million people, lawyers say.

The 2nd U.S. Circuit Court of Appeals in New York is considering whether the lawsuit can proceed as a class action or whether smokers must file suit individually.

The basics of the claims against the companies are similar in all the lawsuits: The companies knew that smokers may compensate for the lower tar and nicotine yields by taking deeper puffs, holding the smoke in their lungs longer or smoking more cigarettes.

The R.J. Reynolds Tobacco Company filed a brief in support of its chief rival, saying the financial stakes in the case are enormous.

The U.S. Chamber of Commerce, also backing Altria, said the appeals court ruling could extend well beyond cigarette labels to product liability lawsuits against many industries.



Chief Justice Recuses Himself from Massey Case
Lawyer Blog News | 2008/01/18 16:51
The chief justice of the state Supreme Court agreed Friday to remove himself from a pending case involving Massey Energy Co., days after vacation photos surfaced showing him in Monaco with the coal producer's top executive. Chief Justice Elliott "Spike" Maynard said he was stepping down from the matter "despite the fact that I have no doubt in my own mind and firmly believe I have been and would be fair and impartial in this case."

But in the three-paragraph statement, Maynard said "it has now become an issue of public perception and public confidence in the courts."

Maynard helped form a 3-2 majority in November that overturned a multimillion-dollar judgment against Richmond, Va.-based Massey that another company, Harman Mining, and its president, Hugh Caperton, had won in a contract dispute. Caperton had asked Maynard to step down from the case before the high court reconsiders that ruling. With interest, the damages are worth $76.3 million.

Bruce Stanley, a lawyer for Caperton, declined to comment Friday until after discussing the development with his client.

A Massey spokesman did not immediately respond to a message requesting comment.

The photos of Maynard and Massey Energy chief Don Blankenship together in Monaco in 2006 were included in a revised court motion filed Monday.

Both men have said they were on separate vacations, and that each paid his own way. Maynard has also said his friendship with Blankenship has not affected his impartiality on the court.

In one picture, the men are sitting side-by-side, smiling over empty glasses at a cafe along the Riviera as the Mediterranean sun sets behind them. In others, they are posing by the seaside. Ten other photos were filed under seal, and depict the men with two female companions, the motion said.

The court must now appoint a replacement, likely a circuit judge or retired jurist, to sit in Maynard's place.

Harman Mining is also challenging the impartiality of another justice, Brent Benjamin, arguing he should step down because Blankenship spent millions of dollars on an ad campaign attacking another justice on the court that helped to boost Benjamin into office in 2004.

That recusal petition was filed late Thursday. Benjamin has not yet responded, court spokeswoman Jennifer Bundy said Friday.

State court rules require judicial officers to disqualify themselves from proceedings if their "impartiality might reasonably be questioned," or if they have "a personal bias or prejudice concerning a party or a party's lawyer."

Caperton contends that he and his company were driven into bankruptcy by unfair and deceptive dealings by Massey, the country's fourth-largest coal producer. A Boone County jury awarded Harman and Caperton $50 million in damages, which later swelled to $76.3 million with interest.

In the 3-2 ruling in November, though, three justices including Maynard and Benjamin agreed that whatever its merits, the case should not have been pursued in West Virginia courts.

On Thursday, a settlement was announced in Washington in which Massey agreed to pay a $20 million fine over allegations it routinely polluted hundreds of streams and waterways in West Virginia and Kentucky with sediment-filled waste water and coal slurry.

Under the agreement with the U.S. Environmental Protection Agency, Massey also will invest millions of dollars for pollution control improvements at its 44 mines and coal facilities in the two states and in Virginia, the EPA and Justice Department said.



Attorneys Press High Court To Hear Enron Investor Suit
Lawyer Blog News | 2008/01/18 14:47
A $40 billion lawsuit by Enron investors against several banks for orchestrating financing deals for the now-defunct energy trader is not dead, despite a recent Supreme Court decision that helps protect such third parties.

In fact, some lawyers who represent investors argue the high court decision involving cable company Charter Communications and two of its suppliers, made a clear distinction that justifies hearing the Enron case.

The Supreme Court ruled 5-3 that shareholders cannot sue third parties in securities fraud cases, unless investors relied on their statements or representations when making investment decisions.

Stoneridge Investment Partners, on behalf of Charter shareholders, had accused the two suppliers of scheming to inflate company revenues in 2000.

Lawyers for investors point to sections of Justice Anthony Kennedy's majority opinion, which they say makes a distinction between third parties involved in the goods and services arena and those involved in the investment sector.

"He repeatedly made that distinction. That distinction distinguishes Enron from Stoneridge," said Pamela Gilbert, a consultant for the American Association for Justice, the world's largest trial bar association.

"Stoneridge involves a customer relationship. In Enron, the major wrongdoers are the investment banks involved in the financial transactions," Gilbert said.



Court Upholds NY Judicial Nominee System
Lawyer Blog News | 2008/01/17 18:06
A U.S. Supreme Court ruling that upholds New York's system of choosing trial judges is likely to renew calls for legislative reform, but even some proponents of change say their chances of success are slim. That's because the current system gives tremendous power to local party leaders, who select judicial candidates and often hold sway over state lawmakers.

"Party chairmen like the system, for obvious reasons, and people who run for the legislature are usually in a position where it's difficult to vote for something like this because their party leaders are opposed to it," state Sen. John DeFrancisco said after Wednesday's ruling. DeFrancisco, a Republican, chairs the Senate Judiciary Committee.

In New York, primary voters elect convention delegates who choose candidates for the judgeships. Once nominated, the candidates run on the general election ballot, frequently without opposition.

Unsuccessful candidates for judgeships and a watchdog group won a lawsuit challenging the system, and the 2nd U.S. Circuit Court of Appeals agreed that it is very difficult for candidates to get on the ballot if they don't have the support of party leaders.

The rulings said candidates who are not the choice of party leaders are excluded from elections by an onerous process that violates their First Amendment rights.

The Supreme Court unanimously reversed the lower courts, saying there is nothing unconstitutional about the process. The high court said the state legislature is free to change the system if it wishes.

Former New York Mayor Ed Koch — who was among a diverse group of politicians and legal groups asking the court to uphold the lower court rulings — called the decision a "dreadful mistake."

"The county leaders will now continue to basically assure the appointment to the (state) Supreme Court of their candidates," Koch said.

The state legislature adopted the current system 86 years ago. Lawmakers scrapped direct primaries for New York's Supreme Court justices because they didn't want them to be corrupted by raising campaign money. Other judges in New York are elected through primaries.



Court limits investor suits against 3rd parties
Lawyer Blog News | 2008/01/16 15:02
In a case born of the accounting scandals that rocked the nation in the first half of the decade the Supreme Court Tuesday limited the ability of defrauded investors to sue accountants, bankers and lawyers who may have helped a company commit the fraud.

The 5-3 decision represents a victory for corporate America, the business lobby and the Bush administration, all of which urged the court to insulate those third parties from so-called "scheme liability," which attempts to reach outside companies who may have contributed to the stock fraud.

"The Supreme Court today handed down a major victory for the U.S. economy and investor welfare," said Stephen Shapiro, the Chicago lawyer who argued the defendants.

The ruling is likely to have a major impact on class-action lawsuits arising from the implosions of Enron Corp. and HealthSouth Corp., among others, making it less likely that those suits will survive. It brought a torrent of criticism from investor advocates and some on Capitol Hill, including Sen. Christopher Dodd (D-Conn.), chairman of the Senate Banking Committee.

The decision, Dodd said, will "protect wrongdoers from the consequences of their actions."

The case involved investors who sued Scientific-Atlanta Inc. and Motorola Inc., vendors for cable company Charter Communications Inc., alleging that the vendors were part of a scheme to misrepresent Charter's revenue and pump up its stock price. When the accounting errors were revealed the stock price plummeted.

The dispute was one some observers labeled the "Roe vs. Wade" of securities law, with more than 30 friend-of-the-court briefs filed. When the case was accepted by the court, speculation mounted on the Bush administration's position. In an unusual move, the White House ignored the advice of the Securities and Exchange Commission, accepting instead the Justice Department's recommendation to side with such groups as the U.S Chamber of Commerce and the National Association of Manufacturers.

Justice Anthony Kennedy, writing for the five-justice majority, said that because the vendors made no specific representations about the health of Charter's finances to Charter's investors the vendors weren't liable under federal securities laws. Only the SEC has the authority to bring such "aid-and-abetter" actions against third parties, the court held.

Jeffrey McFadden, a Washington securities litigator, said, "The court looked at the case in very practical terms: Who were the parties that actually made the statements that deceived someone?"

In October Kennedy voiced concern that siding with the investors would result in an explosion of securities litigation. And on Tuesday he seemed to echo that concern in writing, "Were the implied cause of action to be extended to the practices described here, there would be a risk that federal power would be used to invite litigation beyond the immediate sphere of securities litigation."

Kennedy noted the potential impact on the U.S.economy, saying that "contracting parties might find it necessary to protect against these threats. Overseas firms with no other exposure to our securities laws could be deterred from doing business here."

Shapiro, with Chicago firm Mayer Brown, said the outcome actually benefits most investors because a decision the other way would have driven up the costs of outside legal and financial services.

Along with Kennedy, Justices Antonin Scalia, Clarence Thomas, John Roberts and Samuel Alito formed the majority. Justice Stephen Breyer recused himself from consideration of the case because he owns stock in one of the parties.

Justice John Paul Stevens, with Justices David Souter and Ruth Bader Ginsberg, dissented. Stevens wrote that Charter could not have pulled off the accounting fraud without the vendors' help and that the vendors knew that investors would rely on Charter's inflated stock price as a measure of the company's worth.


MySpace agrees to social-networking safety plan
Lawyer Blog News | 2008/01/15 13:58

MySpace, the country’s largest social-networking Web site, has agreed with attorneys general of 49 states to take new steps to protect children from sexual predators on its site. It also agreed to lead a nationwide effort to develop technology to verify the ages and identities of Internet users, officials announced Monday.

The agreement is the latest attempt by law enforcement officials nationwide to shield children from online dangers, including the risk of encountering inappropriate sexual content or receiving sexual advances through sites like MySpace and Facebook. The sites, increasingly popular among college, high school and even younger students, allow any Internet user to create a profile to display personal information and build networks of friends online.

Richard Blumenthal, the Connecticut attorney general, announced the deal at a news conference in Midtown Manhattan, along with a MySpace executive and Roy Cooper, the attorney general of North Carolina. Also present were Attorney General Anne Milgram of New Jersey and the attorneys general of Pennsylvania and Ohio.

Mr. Blumenthal said the voluntary agreement went further than the one struck in October between New York’s attorney general, Andrew M. Cuomo, and the Facebook Web site.

“It’s stronger, broader, a very significant step or even a milestone in making the industry aim higher to keep kids safer,” Mr. Blumenthal said in an interview.

He cited steps in the new agreement to separate children’s profiles from those of adults and to seek ways to verify users’ ages — steps that he called for after the Facebook agreement, when he and Mr. Cooper had said that stronger measures were needed.

Mr. Cuomo said the MySpace agreement built on Facebook’s acknowledgment that it bore responsibility for protecting users.

“The Facebook agreement broke the ice,” he said.

The most important new measure, Mr. Blumenthal said, is that MySpace will create and lead a task force to find ways to verify ages and identities online. The task force, which will receive input from competing sites, child protection groups and technology companies, will report back to the attorneys general quarterly and issue recommendations at the end of this year.

Facebook, in its agreement with New York prosecutors, promised to respond more speedily to complaints about sexual messages and to warn users in stronger language that the site could not guarantee children’s safety.

The new agreement with MySpace, signed by 50 attorneys general — the top prosecutors of the District of Columbia and every state except Texas, includes similar provisions, and more.

“This is an industrywide challenge, and we must all work together to create a safer Internet,” Hemanshu Nigam, the chief security officer of MySpace, said in a statement.

MySpace, which says it has about 70 million users, agreed to install safeguards that require an adult user to prove that he or she knows a child user in order to contact that child, for instance by typing in an address or phone number.

Profiles of users under 18 will automatically be set to “private,” preventing casual browsers from seeing them.



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