U.S. District Judge Vanessa Gilmore is currently presiding over a rather ugly criminal case in Houston against against three people accused in the deaths of 19 illegal immigrants who were being smuggled into this country in the back of a blistering hot trailer. To say that the prosecution has not gone smoothly is an understatement.
On this past Thursday, after the prosecution closed its case in chief and the defendants chose not to put on any evidence in defense of the case, Judge Gilmore dismissed charges against one of the defendants, ruling that the government had failed to show that the defendant had benefited financially from an arrangement in which illegal immigrants were harbored and transported.
Then, on Friday, Gilmore threatened to hold one of the prosecutors in contempt if he failed to get a letter from U.S. Attorney General John Ashcroft by the end of the day explaining his refusal to disclose why the death penalty sought against one of the black defendants in this case is the first time that the death penalty has been sought against a defendant in an immigrant smuggling case. According to this Chronicle story on the matter, Judge Gilmore stated from the bench:

“They are taking the position that they can indict whoever they want to and charge the death penalty and not disclose the reason.”

Judge Gilmore has not yet issued an order for the prosecutors to show cause why they should not be held in civil contempt for failing to disclose the information, which is a prerequisite for the enforcement of the civil contempt penalty.

U.S. Bankruptcy Judge Letitia Z. Clark issued a temporary restraining order late Thursday enjoining the Russian government’s auction in Moscow on Sunday of the main production subsidiary of Russia’s OAO Yukos. Here are the earlier posts on the Yukos chapter 11 case.
Although no one involved in the case really expects the Russian government to comply with a United States court order, the real purpose behind Yukos seeking the order in the first place is to chill participation by Western financial insitutions in financing an acquisition of the Yukos unit at the auction.
Russian natural-gas company Gazprom is expected to bid on the Yukos unit named Yuganskneftegaz (“Yugansk”) and Deutsche Bank AG is leading a consortium of Western banks in financing Gazprom’s bid for Yugansk. The Russian government owns 40% of Gazprom, which has extensive dealings with Western oil and gas firms. Consequently, the prospect of being held in contempt of the TRO is a serious consideration for the banks and Gazprom, both of which are quite likely to be found to be subject to the jurisdiction of U.S. courts.
Although a major issue in the Yukos chapter 11 case is whether a U.S. Bankruptcy Court can exercise jurisdiction over a Moscow-based business with tenuous American ties, Judge Clark concluded that she had jurisdiction in issuing the TRO. The fact that U.S. investors own 15% of Yukos’ shares was an important factor in her decision, which stated in part:

“Participants in international commerce, in Russia, in the United States and elsewhere, need to have an expectation that when they invest in foreign enterprises they may do so without fear that their investments may be the subject of confiscatory action by agencies of the foreign government.”

Judge Clark went on to find in her order that the events in Russia that led to the notice of the auction are “inconsistent with the regular application of Russian law within Russia” and that harm to Yukos from the sale would be “irreparable.” In comparison, she noted that delaying the sale did not cause any material harm to the Russian government’s ability to collect its tax claim.
Consequently, Yukos looks to have won the first round of this fight to take its case against the Russian government to the investing public. And make no mistake about it, this is really a high stakes public relations battle in which Yukos is attempting to embarrass the Kremlin in the international business community. Although the principles of sovereign immunity almost certainly protect the Russian government from any damage claims, the basis for damage claims against Western banks and Gazprom is far better. Many precedents exist for Western companies grabbing assets of Russian firms in the West to satisfy judgments issued by Western courts.
That is the essential point that Alan Riley, an expert on European law, makes in this Wall Street Journal ($) op-ed:

Mr. Putin now may well find that in lands with independent courts and respect for the rule of law, the title of Gazprom to Yukos’s assets will come under serious legal attack. Yukos has a very strong property rights argument in most Western jurisdictions to persuade the courts that Gazprom has no title to its assets and then seek compensation in the form of seizing Gazprom tankers, bank accounts and subsidiaries. If Yukos can prevail in the Western courts, Gazprom’s revenues are likely to fall sharply as a result. Oil and gas arriving in the West will be seized and Gazprom, for fear of further seizures, will be unwilling to ship more oil and gas abroad. Given Gazprom’s size, such a disruption will have a knock-on effect on the flow of oil and gas to the EU, and a serious negative impact on the Russian economy. If Yukos prevails in the courts of the West, Mr. Putin, however bitter he may find it, may realize that he has to settle if he wants to protect Gazprom and keep the oil flowing.

So, bankers — lend at your peril and stay tuned.

Lawrence R. Velvel, the dean of the University of Massachusetts Law School, lays the wood to Harvard over its handling of the recent plagiarism of Harvard professors Laurence Tribe and Charles Ogletree. The entire piece is hard-hitting academic criticism at its best, and here is a snippet to arouse your interest in reading the rest:

The continued silence of [Harvard] President Summers and Dean Kagan gives wings to what until recently has been only a slight suspicion. It promotes the idea that they are simply saying nothing — are lying low — in the hope that the story will simply disappear with time. They are, after all, old Washington hands. They cannot help but be familiar with the two-day-wonder nature of the media. They cannot fail to know, that is, that generally speaking the press jumps on a story for one or two days and then forgets about it as reporters and anchormen turn to and jump on other stories. They know that the febrile minds of the press, minds based not on principle but on sensationalism and the new new thing, are usually unable to stick with something for longer than 48 hours.
So our flagship university, like the rest of American society, which it purports to lead by example, appears to be condoning dishonesty instead of punishing it in clear, public and no uncertain terms. Bravo President Summers. Bravo Dean Kagan. Your failure to act accords with the dishonesty that is rampant in society today. And the actions of a flagship should accord with those of the society it leads, shouldn?t they?

Care to respond, Harvard?

Jamie Perdigao, a former partner with the New Orleans office of Adams & Reese, has been accused of embezzling $20 million. Read about the case here.

South Texas of Law Professor Dru Stevenson is now blogging over at South Texas Law Professor.

University of Iowa Law Professor Tung Yin observes persuasively that jury’s assessment of the death penalty on Scott Peterson is not in the public interest.

The bankruptcy judge in the bankruptcy case of former tech law firm Brobeck, Phleger & Harrison has decided to conduct an auction of Brobeck’s cause of action against old line law firm Clifford Chance.
The theory of Brobeck’s case is that Clifford Chance caused Brobeck’s decline by inducing 17 key Brobeck partners to defect to Clifford Chance.
The idea of the auction arose earlier this week when the trustee in Brobeck’s bankruptcy case attempted to settle the lawsuit against Clifford Chance for $4.5 million. At the hearing on approval of the settlement, a group of creditors objected to the settlement when a coalition of plaintiff’s lawyers (including several from the Houston area) offered $4.8 million for the lawsuit, and the bankruptcy judge decided simply to sell the lawsuit to highest bidder. Both Clifford Chance and the plaintiff’s lawyers group appear poised to participate in the “lawsuit auction.”
Interestingly, there has been no outcry from tort reformers regarding this unseemly trading in outlandish damage claims. ;^)

The Fifth Circuit issued an opinion yesterday in Fiess v. State Farm Lloyds in which the primary issue was whether mold damage was covered under a homeowner’s policy. In reversing a summary judgment in the insurer’s favor, the Fifth Circuit applied the doctrine of concurrent cause in concluding that the insureds might be able to segregate covered losses from uncovered losses. In so doing, the Fifth Circuit also certified the following question to the Texas Supreme Court:

Does the ensuing loss provision contained in Section IExclusions, part 1(f) of the Homeowners Form B (HO-B) insurance policy as prescribed by the Texas Department of Insurance effective July 8, 1992 (Revised January 1, 1996), when read in conjunction with the remainder of the policy, provide coverage for mold contamination caused by water damage that is otherwise covered under the policy?

In this extraordinary NY Sunday Times article, U.S. Supreme Court sources provide highly unusual and scathing public criticism of the Fifth Circuit Court of Appeals and the Texas Court of Criminal Appeals‘ handling of appeals of Texas Death Row inmates. The Houston Chronicle chimes in with a similar article here.
My sense is that the Fifth Circuit judges will not be exchanging Holiday Greeting cards this year with the SCOTUS Justices. And with good reason. The Fifth Circuit must attempt to decipher SCOTUS’s almost indecipherable standards for setting aside death penalty convictions while administering hundreds more of such cases each year than SCOTUS. Although excess volume certainly does justify sloppy adjudication, SCOTUS’s difficult-to-ascertain standards — coupled with prisoners’ easy access to the appellate process — is the real culprit here, not any disrespect for SCOTUS or political agenda, as the NY Times article suggests.

Don’t miss Professor Ribstein’s post about the ongoing trial over the Walt Disney Co. board’s decision to pay Michael Ovitz a rather generous severance package for essentially doing nothing during his short stay at Disney.
The trial is an interesting one because it combines Hollywood largesse with knotty issues of corporate law, such as the limits of judicial supervision over the business judgment rule. However, Professor Ribstein wonders whether something even more basic is unfolding:

But I wonder whether something more basic is at stake — the future of the corporate enterprise as we know it. After all that we have seen in the last few years, can we really be optimistic that things are changing?

He goes on to point out that Disney could well be the product of an obsolescent business model:

Think about this in the Disney context. Why do we need this Disney behemoth? The brand? Synergy? Michael Powell recently wondered “if Walt Disney would be proud,” speculating on the disastrous cross-promotion of Disney’s Desperate Housewives on Disney’s Monday night football. Does this sort of thing make people want to go into Disney’s family-oriented amusement parks? Even the film business has gotten away from the Disney brand — Pixar was providing the meat until Eisner chased it away.

Professor Ribstein points out that there is a better way:

I’ve argued in Why Corporations? for the dismantling of the corporate entity and the greater use of partnership-type forms for publicly held business. This could be spurred by a change in the tax laws that puts more emphasis on distribution rather than retention of earnings.

How about spinning the amusement parks into a real estate limited partnership, divesting the television properties, and focusing on the movie business? Aside from giving Eisner less to play with over his remaining two years, what would be lost?

In short, the Disney Board’s foible of approving the Ovitz severance package pales in comparison to its failure to require Michael Eisner to adapt Disney’s corporate strategy to maximize value for Disney’s shareholders. This is true clear thinking, so check out the entire post.