The Workologist: Sharing Your Wisdom, Within Limits

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Judge Considers Limits on Apple’s Future E-Book Deals

In a sometimes testy hearing in United States District Court in Lower Manhattan, Judge Denise L. Cote said that she was considering a plan in which Apple would negotiate contracts with publishers in a staggered fashion — possibly six to eight months apart — to prevent them from engaging in another price-fixing conspiracy.

Judge Cote ruled in July that Apple colluded with publishers to raise the price of e-books before the introduction of its iPad in 2010. Those charges were brought against Apple and five major publishers by the Justice Department in 2012. The publishers all settled, but Apple held out and went to trial.

The judge’s proposal was a scaled-back version of the guidelines put forth by the government last week, when it suggested that Apple be forced to end its agreements with the five settling publishers and avoid entering similar agreements with producers of movies, TV and music. Apple responded by calling the proposal a “draconian and punitive intrusion” into its business.

The publishers who settled also objected to the Justice Department’s proposed remedy, saying that it would fundamentally change their existing settlements.

In court on Friday, Judge Cote said that she wanted an injunction to be tailored so that it would encourage innovation in a rapidly changing e-book business and yet prevent collusion on price in the future.

“I have no desire to regulate the App Store,” she said.

But Judge Cote also slammed the publishers for lacking “contrition” and said that she feared future collusion in the e-book market. Although the publishers eventually agreed to settlements, none of them admitted wrongdoing.

Judge Cote said that the publishers had played “a rough and tumble game” and engaged in “blatant price fixing.”

“None of the publisher defendants have expressed any remorse,” she said. “They are, in a word, unrepentant.”

Lawyers for Apple and the government said in court that they would meet in the next week and discuss the judge’s proposal. Another hearing is expected later this month.

Apple and the Justice Department declined to comment.

Hachette Book Group, HarperCollins and Simon & Schuster settled in April 2012; Penguin Group USA and Macmillan settled later. Penguin has since merged with Random House, which was not named in the lawsuit.

U.S. Supreme Court Limits SEC's Time to Seek Civil Penalties

In seeking civil penalties for fraud, the U.S. Securities and Exchange Commission must bring an enforcement action within five years of the alleged misconduct, a unanimous U.S. Supreme Court ruled on Wednesday.

Legislation Aims to Undo Limits on Gun Makers' Liability

President Obama's plan to use his executive authority to prevent gun violence came on the heels of proposed legislation intended to give more power to gunshot victims after the fact.

Third Circuit Nudges Western District Judge on Time Limits

U.S. District Judge Arthur J. Schwab of the Western District of Pennsylvania wasn't ordered to amend the time limit he imposed for an upcoming trial, but the U.S. Court of Appeals for the Third Circuit did suggest that he do so.

Young Litigator Pushes the Limits in Her Private Time

By Michael Tierney All Articles 

Daily Report

November 6, 2012

Thompson hangs from a zipline during one adventurous outing, but she likes to take regular sightseeing vacations, too.

Among lawyers, Sara Thompson is hardly unique in pursuing after-work-hours endeavors to retain her zest for life.

What separates Thompson from the herd is a tendency to tackle challenges that are not her normal cup of tea. More like a cup of castor oil.

Normally disinclined to become one with nature, she roughed it during a four-day hike at the famed Milford Track in New Zealand -- and cannot wait for the sequel.

Preferring to log miles on planes to vacation spots, the travel buff recently decided to try covering long distances by running. Shin-splint trouble from training has not dissuaded her from taking on a half-marathon, with a full one on her possible to-do list.

Once intimidated by the notion of sitting at a poker table with serious players, Thompson has become a semi-regular at various casinos and aspires to stack chips at the World Series of Poker someday.

Not every venture is initially beyond her comfort zone. Thompson, reared in a cooking-minded family, prepares a mean meal while dabbling in oddities such as cupcakes and infused liquor. It should come as no surprise that the competition-minded Thompson, whose practice at Greenberg Traurig focuses on medical devices and pharmaceuticals, plans to eventually audition for television's Master Chef.

Do you have a general philosophy about staying busy outside of your work by seeking out new activities?

I'm always looking to try new things. One advantage of being single is having more time to look for opportunities to do this. The first eight or nine years of my practice, I didn't travel a lot because I was focused on my work. In 2008, I made a point of starting to take big trips. With work, we have a hard-charging group here, but they have been very supportive of the crazy activities that I do.

When I went to New Zealand, I thought it would be controversial since it was six weeks before a big trial. I told them I was going to be gone 17 days. They won't be able to reach me by cellphone. They knew I would come back and bust my hump for four months.

Where does your interest in travel come from?

When I was a kid, we didn't take a lot of vacations. My parents built their own business and worked hard on that. If we took a vacation, it would be to visit family. So there are a million places I want to go to. I have a long list of places that I'm keeping.

Do you look for trips that are more adventurous than sightseeing?

A little bit of both. I'm more outdoorsy now than I was. When I went to New Zealand, I had to buy my first hiking boots. I think I only broke them in for a day. It was something very outside my comfort zone.

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Endowment Fund, Run by Mark Yusko, Limits Withdrawals

But now investors in the fund, the nine-year-old, $3.3 billion Endowment Fund, are finding it was much easier to get in than it is to get out.

The fund, run by Mark Yusko, the charismatic former chief of the endowment for the University of North Carolina at Chapel Hill, sent letters on Friday to investors saying it was limiting the amount of money that could be taken out each quarter. Investors withdrew more than $1 billion, or about a quarter of the fund’s assets, this year through September, according to a filing with the Securities and Exchange Commission.

Investors generally have been disappointed with hedge fund returns for the last couple of years because many have lagged the gains made in the stock market. Investors have pulled about $13.2 billion, or 2 percent of total assets, from hedge funds for the year through August, according to estimates by BarclayHedge and TrimTabs Investment Research. The firms estimate that in the 3,000 hedge funds that they track, assets have fallen 28.7 percent from their peak of $2.4 trillion in 2008 through a combination of weak performance and withdrawals.

But hedge fund investors and lawyers said the move by the Endowment Fund was one of the first forms of gating, or reducing the ability of investors to take out their money, since the financial crisis. Then, several large hedge funds gated, angering their investors who could not get access to their money.

The troubles at the Endowment Fund are a black eye for Mr. Yusko, a frequent speaker at investment conferences who, after leaving the University of North Carolina in 2004, built a substantial hedge fund empire that at its peak in 2008 controlled $22 billion in assets. Today, he oversees $14 billion.

Mr. Yusko declined to comment on Monday.

He started the Endowment Fund in 2003 with Salient Partners, a Houston firm that managed money for wealthy individuals. It is a fund that invests in dozens of other funds, including some run by prominent managers who have stumbled in recent years, like John A. Paulson, Philip A. Falcone and Eric Mindich.

Several experts were quick to say they saw the gating at the Endowment Fund as a reflection of what that fund had invested in, not as a general trend among funds. About 35 percent of the fund’s assets are invested in real estate, energy and private equity assets — investments that the fund simply could not exit quickly if investors were to demand their cash.

The substantial redemptions in the Endowment Fund follow several years of weak returns. For the 12 months ending late August, the fund was down 2.5 percent, compared with an 18 percent gain in the Standard & Poor’s 500-stock index and a 0.9 percent decline in the average hedge fund. Over the last five years, the Endowment Fund returned 5.7 percent annually, lagging the 7.7 percent gain by the S.&. P. 500 and the 7.3 percent annual gain by the average hedge fund.

“Hedge funds, as an asset class, have underperformed the stock market and there are definitely some investors out there who feel like they haven’t been invited to the party,” said Stewart Massey, a partner at Massey Quick in Morristown, N.J., which invests money for individuals and institutions.

But the fees investors have paid the Endowment Fund for its lukewarm performance have been considerable, up to about 3.5 percent a year. Additionally, the underlying funds can receive as much as 25 percent of any profits they make.

On top of that, some of the fund’s investors who came in through Merrill Lynch financial advisers may have paid as much as a 2.5 percent upfront fee, similar to what is charged for other funds, according to internal Merrill Lynch documents.

A spokesman for Bank of America, which acquired Merrill Lynch in 2009, declined to answer specific questions about the Endowment Fund. But he did confirm that the wealth management arm of Bank of America on Friday changed the Endowment Fund’s status from “open,” to “on hold,” meaning that wealthy investors could not put any new or additional money into the fund.

Case Could Test Limits on Electronic Searches

More than a year after federal agents arrested 14 people accused in a cyberattack on PayPal, the high-profile prosecution has ground to a standstill over the handling of computers seized in the investigation.