DealBook: Criminal Action Is Expected for JPMorgan in Madoff Case

Obama Presses for Action on Bank Rules

Aides said Mr. Obama also told the regulators that the United States needed a more simplified and certain system of financing housing. The president recently endorsed proposals to reduce the government’s role in providing mortgages.

Administration officials and some lawmakers have expressed frustration that critical parts of Mr. Obama’s overhaul of the financial system, which was voted into law three years ago and is known as the Dodd-Frank act, remain unenforced as an alphabet soup of federal agencies wrangle over how to adopt it.

In particular, top presidential aides have highlighted the failure in putting the Volcker Rule into effect. It would prohibit banks from risking institutional money in certain speculative investments. Last month, Jacob Lew, the Treasury secretary, complained in a speech that the regulators were moving too slowly to confront the dangers of banks that are so large that governments cannot allow them to fail for fear of bringing down the economy.

“If we get to the end of this year, and cannot, with an honest straight face, say that we’ve ended ‘too big to fail,’ we’re going to have to look at other options because the policy of Dodd-Frank and the policy of the administration is to end ‘too big to fail,’ ” Mr. Lew said.

The meeting on Monday was an attempt to raise those concerns directly with the agencies that are responsible for turning the law into reality. Among those in attendance were Mr. Lew; Ben S. Bernanke, the chairman of the Federal Reserve; and top officials at the Federal Housing Finance Agency, the Consumer Financial Protection Bureau, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation and the National Credit Union Administration.

Josh Earnest, a White House spokesman, said Mr. Obama wanted to convey “the sense of urgency that he feels about getting these regulations under Wall Street reform implemented promptly.”

“There are some important rules that have been put in place,” he added. “More work needs to be done.”

Congress passed Dodd-Frank in 2010 in response to the financial crisis of 2008. Since then, regulators have been working to turn the mammoth law into workable regulations, often in the face of opposition from lobbyists for banks that opposed the law.

Among the rules that have yet to be put into effect, according to Treasury Department officials, are enhanced prudential standards for banks and certain other institutions, capital and margin rules for derivatives, new mortgage disclosure regulations and the Volcker Rule. Treasury officials said they expected regulators to finish work in those areas by the end of the year.

As the banks have returned to profitability, the Obama administration has sounded increasingly impatient about the pace of bank regulation. Its desire to speed things up comes at what appears to be an opportune time. The fear that banks are too big, and could jeopardize the wider economy if they fail, is shared by people on both the left and right. Congress has introduced two bills in recent months that envision far more drastic overhauls than Dodd-Frank, both with bipartisan support.

“The politics are pretty good for the administration if they can do something on this,” Nolan McCarty, a professor of politics and public affairs at Princeton.

Some lawmakers also have expressed concern that the regulators are moving too slowly. Senator Elizabeth Warren, Democrat of Massachusetts, and several other senators have proposed new laws that would reinstate a firewall between banks and investment firms like those in the Depression-era Glass-Steagall Act.

Senators David Vitter, Republican of Louisiana, and Sherrod Brown, Democrat of Ohio, have introduced separate legislation that would increase the amount of capital that the nation’s biggest banks are required to carry.

“For too long, financial watchdogs were asleep on the job, allowing Wall Street megabanks to become too complex to manage and regulate and ‘too big to fail,’ ” said a spokeswoman for Senator Brown.

She said Senator Brown was “hopeful that today’s meeting will lead to progress in ensuring that taxpayers and our financial system are no longer threatened by ‘too big to fail’ banks.”

The administration may also want to sound the right notes as the financial crisis’s fifth anniversary approaches. The bankruptcy of Lehman Brothers, the event blamed for paralyzing the world financial system, occurred on Sept. 15, 2008. The fact that many rules have not been completed so long after Lehman’s failure could be a source of embarrassment to the administration and regulators.

“They certainly don’t want that story dominating things over the next couple of months,” said Marcus Stanley, policy director of Americans for Financial Reform, a group that has called for stricter regulation of financial firms.

Michael D. Shear reported from Washington and Peter Eavis from New York.

Affirmative Action Case Is Sent Back to Lower Court

The 7-to-1 decision avoided giving a direct answer about the constitutionality of the program, from the University of Texas at Austin, which will allow it to continue for now. But the justices ordered an appeals court to reconsider the case under a demanding standard that appears to jeopardize the program.

The ruling was simultaneously modest and significant, and its recalibration of how courts review the constitutionality of race-conscious decisions by the government will reverberate beyond higher education.

The brief decision, issued eight months after the case was argued, was almost surely the product of intense negotiation among the justices.

The compromise that the majority reached was at least a reprieve for affirmative action in higher education, and civil rights groups that had feared for the future of race-conscious admission programs were relieved. But conservatives and other opponents of the current version of affirmative action vowed to use the court’s ruling as a road map to bring future cases.

Justice Anthony M. Kennedy wrote the majority opinion, joined by the four members of the court’s conservative wing — Chief Justice John G. Roberts Jr. and Justices Antonin Scalia, Clarence Thomas and Samuel A. Alito Jr. — and two of its liberals, Justices Stephen G. Breyer and Sonia Sotomayor.

Only Justice Ruth Bader Ginsburg dissented, writing that lower courts were correct to uphold the Texas program. Justice Elena Kagan disqualified herself from the case, presumably because she had worked on it as solicitor general in the Obama administration.

The decision did not disturb the Supreme Court’s general approach to affirmative action in admissions decisions, saying that educational diversity is an interest sufficient to overcome the general ban on racial classifications by the government. But the court added that public institutions must have good reasons for the particular methods they use to achieve that goal.

Colleges and universities, Justice Kennedy wrote for the majority, must demonstrate that “available, workable race-neutral alternatives do not suffice” before taking account of race in admissions decisions.

That requirement could endanger the Texas program when it is reconsidered by the United States Court of Appeals for the Fifth Circuit in New Orleans. The university’s program admits most undergraduates under race-neutral criteria, accepting all Texas students who graduate near the top of their high school classes. But the university also uses a race-conscious system to choose the remaining students.

Courts reviewing government programs that make distinctions based on race subject them to a form of judicial review known as “strict scrutiny,” requiring the government to identify a compelling interest and a close fit between means and ends. Justice Kennedy’s opinion focused on and tightened the second part of the test.

“Strict scrutiny,” Justice Kennedy wrote, “does not permit a court to accept a school’s assertion that its admissions process uses race in a permissible way without closely examining how the process works in practice.”

Courts reviewing affirmative action programs must, he wrote, “verify that it is necessary for a university to use race to achieve the educational benefits of diversity.” That requires, he said, “a careful judicial inquiry into whether a university could achieve sufficient diversity without using racial classifications.”

Justice Ginsburg, who announced her dissent from the bench, said the race-neutral part of the Texas program worked only because of “de facto racial segregation in Texas’ neighborhoods and schools.”

The case, Fisher v. University of Texas, No. 11-345, arose from a lawsuit filed by a white woman, Abigail Fisher, who said the university had denied her admission based on her race.

In a statement issued Monday, Ms. Fisher said she was “grateful to the justices for moving the nation closer to the day when a student’s race isn’t used at all in college admissions.”

This article has been revised to reflect the following correction:

Correction: June 24, 2013

An earlier Web address and page title misstated the Supreme Court’s ruling. As the headline correctly noted, the justices sent the case back to a lower court.

Rare Win for Class Action Plaintiffs in Amgen

The Supreme Court on Wednesday continued its extensive exploration of class action litigation, handing a rare victory to plaintiffs in one case while hearing arguments in another that could come down on the side of defendants.

Action and Reflection Go Hand in Hand for Atlanta Litigator

Atlanta solo practitioner Auden Grumet writes poetry in his head while riding his bicycle. He has logged more than 800 rides and says the activity has helped him network with other lawyers.
John Disney, Daily Report

Two poems by Auden L. Grumet: "Victuals" and "Tuesday Afternoon."

A good workday for civil litigation attorney Auden L. Grumet ends with a night bike ride of 25 to 50 miles. There would be no crashes and he'd return home with the answer to a thorny legal issue or the persistent line for a poem running through his head.

"There's no better feeling than getting back from a nice ride," said solo practitioner Grumet. "But when I bang out a good poem -- that feels really good, too."

Grumet specializes in consumer protection and advocacy, credit disputes and real estate/mortgage issues, including home loan modifications.

The Daily Report spoke with Grumet about how his active lifestyle and his writing enhance his career and life.

When did you first become interested in cycling?

My first long cycling experience was with a school group in 1987. I was 16. We rode 600 miles to Dauphin, Ala., in five days. I was a terrible student when I was younger and was expelled from three schools. I didn't do anything really bad, but I would get in trouble for running my mouth and not doing what I was told. My dad found a school that focused on vocational learning, biking and camping trips and, although I didn't want to go there, it helped me get myself together.

As an adult, I started bike-riding for exercise and to help with back problems in 2005. I haven't gone more than 10 days without being on a bike since, unless I've been out of town. My log shows 800 rides.

How many miles do you ride in a week?

Since my legal practice got busier, I'm averaging about 100 to 150 miles a week. I ride alone three to five times a week, mostly at night. I also take weekend rides with the North Georgia Cycling Association and Dunwoody Cycling groups.

How fast do you go?

I average 16 to 22 miles per hour in darkness and stop-and-go traffic.

Subscribe to Daily Report

You must be signed in to comment on an article

Sign In or Subscribe
">

Samsung Drops Action to Block Apple in Europe

PARIS — Samsung said Tuesday that it had dropped its request for a ban on sales of certain Apple phones and tablet computers in Europe, a sharp tactical turn in a patent war that the companies have been fighting on multiple fronts around the world.

Samsung, the South Korean electronics giant, had been seeking injunctions in a number of countries, including Britain, France, Germany, Italy and the Netherlands, contending that Apple, Samsung’s biggest rival in the smartphone market, had infringed on Samsung patents.

The move came only a day after a ruling in a related case in San Francisco, where a U.S. District Court judge rejected a request by Apple, which is based in California, for an injunction to block sales of certain Samsung devices. The decision followed a previous jury ruling that Samsung had violated Apple patents.

After the latest twist in the European case, Samsung said it had acted “in the interest of protecting consumer choice.” Analysts said other factors might have been in play, including a possible nudge from the European Commission.

In January, the commission opened a formal antitrust investigation of Samsung’s terms for licensing patents covering wireless technologies. Under a previous agreement, Samsung had pledged to make the patents available to competitors on “fair, reasonable and nondiscriminatory” terms.

“The scope of what was withdrawn precisely matches the area in which the European Commission has been investigating,” said Florian Müller, a patent consultant in Germering, Germany. “It’s not just that the plot is thickening; in my view, there can be no other plausible view than that there is pressure from Brussels.”

The commission had said previously that it was concerned about possible abuse of patents like the ones at issue in the Apple-Samsung injunction request, those covering technologies needed for a device to function. Without some of these “standard essential patents” from Samsung, for example, phones cannot connect to high-speed wireless networks.

“Regulators have been saying, if the patent holders try to abuse these patents, then they are going to get in trouble,” Mr. Müller said.

The commission declined to comment directly on whether there might be a link between Samsung’s announcement Tuesday and the antitrust case in Brussels. “We take note of this development,” said Antoine Colombani, the spokesman for the E.U. competition commissioner, Joaquín Almunia. “Our investigation is ongoing.”

Samsung, meanwhile, said it could not comment on the proceedings. It said it was “fully co-operating with the European Commission.”

“Samsung remains committed to licensing our technologies on fair, reasonable and nondiscriminatory terms, and we strongly believe it is better when companies compete fairly in the marketplace, rather than in court,” it said in a statement.

There has been speculation that Samsung and Apple have been in talks to try to reach a settlement, though the broad scale of the litigation between the two companies, with lawsuits seeking sales bans or damages continuing on several continents, could make that challenging.

“We cannot comment on details of ongoing legal proceedings, but we believe a commercial resolution is achievable,” Samsung said in a statement.

Alan Hely, a spokesman for Apple, declined to comment.

The announcement by Samsung does not end litigation between the two companies in Europe. Samsung said it planned to pursue lawsuits seeking damages from Apple for what it contends is patent infringement.

Apple and Samsung have also been battling over other patents, covering nonessential features of their devices, like design.

Apple, too, has previously secured bans on the sale of certain Samsung products. Last year, for example, a court in Düsseldorf ruled that Samsung could not sell one of its Galaxy tablet devices in Germany because it bore too close a resemblance to the iPad 2 from Apple.

While some analysts cited regulatory pressure as a possible reason for Samsung’s decision Tuesday, others said the company might have decided that the lawsuits were simply a distraction. Samsung’s phones, especially its Galaxy S3, have been selling well.

In the third quarter, the S3 surpassed the iPhone 4S to become the world’s best-selling smartphone, according to Strategy Analytics, a research firm.

“Maybe the market was telling them that they were succeeding and their time was better spent promoting sales of their product,” said Charles Golvin, an analyst at Forrester Research.

James Kanter contributed reporting from Brussels.

Civil Rights Advocate's Disadvantaged Childhood Spurs Her Into Action

Kristen Clarke
NYLJ/Rick Kopstein

Kristen Clarke parlayed a childhood in crime-ridden East Brooklyn into a career as a civil rights lawyer and commentator on issues of race, law and democracy. As chief of the New York attorney general's Civil Rights Bureau, a position she assumed a year ago, Clarke promotes civil rights enforcement with an arsenal of New York's robust anti-discrimination laws.

Previously, Clarke was an attorney with the civil rights division of the U.S. Department of Justice and co-director of the Political Participation Group at the NAACP Legal Defense and Education Fund. She was part of the NAACP litigation team that successfully defended the Voting Rights Act in Northwest Austin Municipal Utility District No. One v. Holder, 557 U.S. 193 (2009). Another voting rights case she argued at the trial level, Shelby County, Alabama v. Holder, is headed to the U.S. Supreme Court.

A graduate of Harvard University and Columbia Law School, the 38-year-old Clarke was honored in 2011 by the National Bar Association as one of the "Nation's Best Advocates: 40 Lawyers Under 40." She has also written extensively on civil rights issues. Her recent books include Barack Obama and African American Empowerment: The Rise of Black America's New Leadership and Seeking Higher Ground: The Hurricane Katrina Crisis, Race and Public Policy Reader, both edited with the late Manning Marable, a leading black history scholar and Pulitzer Prize winner.

Her salary at the attorney general's office is $140,000.

Q: You have spent virtually your entire career advocating for civil rights. What drove you to this area of the law?

A: My experience growing up in the East New York section of Brooklyn played a large role in my decision to pursue a career in civil rights. This is a section of Brooklyn that is racially isolated and one with some of the highest poverty, crime and unemployment rates in the city. Although I have had the benefit of attending exceptional schools, I know that there are far too many who have not had access to equal educational opportunities.

I have profound respect for the work of civil rights lawyers and advocates such as Thurgood Marshall and Charles Hamilton Houston and Constance Baker Motley. Through seminal cases such as Brown v. Board of Education, they used the law as a vehicle to promote integration and as a tool to close some of the stark racial gaps that we face. I chose this path recognizing that their work is not yet done and that the progress we have achieved remains fragile.

Q: Have you personally experienced discrimination?

A: I grew up in a community called Starrett City, one of the largest housing developments in the country. Starrett City was the subject of litigation under the Fair Housing Act. For years, the complex maintained a system of racial quotas -- white prospective tenants could walk in and easily rent an apartment while black and Latino prospective tenants often faced a wait list. Starrett City defended its quota system by arguing that its purpose was to maintain a certain racial balance in the apartments, but a group of minority litigants defeated the policy by bringing a successful claim under the Fair Housing Act.

My experience in Starrett City reminds me that tackling racial segregation and isolation are incredibly complex challenges with no easy solutions but precisely the kind of problems that we need to tackle head on.

Q: How has the definition of discrimination changed? Which are the groups most at risk today?

A: Discrimination has definitely become more sophisticated in form though its impact remains the same. The challenge today is figuring out how to ensure that civil rights enforcement remains tailored to dealing with the new barriers and challenges that we face today.

For example, our state and our country are continuing to grapple with the effects of the mortgage foreclosure crisis, the overall economic downturn and high rates of unemployment. We are now seeing many employers using credit history reports as tools to evaluate job candidates. We are seeing other employers who refuse to hire job candidates who are currently unemployed. These kinds of hiring practices may be ones that have a greater impact on African-Americans, Latinos, women, the elderly and other minority groups.

The challenge is making sure that we remain focused on combating discrimination in whatever shape it rears its ugly head.

Marriage equality in New York certainly stands as a landmark achievement and we must work to ensure that same-sex couples are treated equally and fairly. We have a number of veterans and military personnel who are increasingly the targets of predatory schemes. New immigrants to our state are far too often subject to fraud and reluctant to seek the assistance of law enforcement.

Q: What does the Attorney General's Civil Rights Bureau do?

A: The Civil Rights Bureau is an engine of aggressive civil rights enforcement. The attorneys within the bureau are among the brightest and most dedicated advocates that I have had the chance to work with.

We review the complaints that come to us with a fine-tooth comb and we meet and hear from advocates about the problems that they are facing. We are proactive in our approach and frequently launch new initiatives to tackle stubborn areas of discrimination. We work to fight employment and housing discrimination, combat immigration fraud and predatory practices aimed at minority groups, and work to promote equal educational opportunity and full access to the ballot box. Sometimes achieving real results means taking a stance that is unpopular and we have an attorney general who is not afraid to do that.

Subscribe to New York Law Journal

You must be signed in to comment on an article

Sign In or Subscribe
">

Obituary: Joanne Zack, Leading Class Action Attorney, Dies

Joanne Zack, an attorney specializing in complex commercial litigation including representing authors in their copyright class action over Google's efforts to build the largest digital library in the world, was a brilliant attorney who was never boastful or conceited about her accomplishments, colleagues said in the wake of Zack's death last week.

BofA Settles Action For $2.4 Bil. Over Merrill Acquisition

Bank of America Corp. has agreed to pay $2.43 billion to settle alleged federal securities law violations in Bank of America's acquisition of Merrill Lynch & Co. Inc. in 2009.

DealBook: Bank of America to Pay $2.43 Billion to Settle Class Action Over Merrill Deal

Bank of America announced on Friday that it would pay $2.43 billion to settle a class-action lawsuit related to its acquisition of Merrill Lynch, as the legal woes continue for the financial institution.

In 2009, shareholders accused Bank of America of making false and misleading statements about the health of the two companies. In part, the plaintiffs accused Bank of America of hiding a major loss at Merrill Lynch just shortly before shareholders were set to vote on the deal.

While Bank of America denied the allegation, the institution said it decided to settle to put the litigation to rest. As part of the proposed settlement, Bank of America also agreed to institute new corporate governance policies.

“Resolving this litigation removes uncertainty and risk and is in the best interests of our shareholders,” Brian Moynihan chief executive said in a statement. “As we work to put these long-standing issues behind us, our primary focus is on the future and serving our customers and clients.”

Early in the financial crisis, Bank of America looked to be one of the winners. As other banks struggled to stay afloat, the firm swooped in to buy Countrywide Financial, the mortgage lender, in 2008. Later that year, Bank of America agreed to purchase Merrill Lynch, the beleaguered investment bank.

But both deals are proving to be a legal albatross.

Countrywide’s mortgage problems have weighed on profits for awhile. In the second quarter of 2011, the bank reported an $8.8 billion loss, mainly related to a settlement with mortgage investors. Earlier this year, Bank of America and four other banks agreed to a $26 billion settlement related to their foreclosure practices.

Now, it faces a similar burden from the Merrill Lynch deal. Bank of America said it would take a $1.6 billion hit related to the settlement. The insititution also agreed to enhance its corporate governance, including those related to “say-on-pay” shareholder votes, the independence of the board’s compensation committee and policies for committees focused on acquisitions.

The settlement won’t be the only black mark on the bank’s financials this quarter. On Friday, the company said that profits would be hurt by a $1.9 billion adjustment related to the value of its debt. It also faces an $800 million charge related to a income tax expense.

In all, Bank of America said earnings would be cut by 28 cents a share. The company is set to report earnings on October 17.