1/18. The Supreme Court granted certiorari in Chadbourne & Parke v. Troice, Willis of Colorado v. Troice, and Proskauer Rose v. Troice, consolidated cases involving the Securities Litigation Uniform Standards Act (SLUSA) and state class actions against the law firms that represent persons and entities alleged to have defrauded investors. See, January 18 Orders List [PDF].

These are petitions for writ of certiorari to the U.S. Court of Appeals (5thCir), which issued its opinion on March 19, 2012. It is reported at 675 F.3d 503.

These cases are related to Allen Sanford, who is now serving time in prison. See, Department of Justice (DOJ) web page regarding criminal proceedings against Sanford and others.

While Sanford's name is often associated with terms such as "securities fraud" and "ponzi scheme", he was convicted, not of securities fraud, but rather on numerous charges related to wire fraud, mail fraud, money laundering, and obstructing Securities and Exchange Commission (SEC) investigations.

Various plaintiffs' class action lawyers, representing defrauded investors, filed complaints in state courts, alleging violations of state laws, seeking to impose liability on numerous deep pocket defendants, including the law firms of Chadbourne & Parke and Proskauer Rose.

Proskauer represented Stanford International Bank (SIB), which was controlled by Allen Sanford. SIB issued certificates of deposit, which Sanford falsely represented where backed by safe liquid investments. The government alleged that this was part of a ponzi scheme.

These class action lawyers allege that Proskauer engaged in civil conspiracy, and that it aided and abetted the primary violations. However, they did not allege that Proskauer made any misrepresentations directly to the class plaintiffs.

The relevant language of the SLUSA, at 15 U.S.C. § 78bb, provides in part, at subsection (f), that "No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging ... a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security ..."

The actions were removed to federal court, and consolidated in the U.S. District Court (NDTex). It held that the SLUSA precluded the class action claims against the law firms. The Court of Appeals reversed. The issue will now be decided by the Supreme Court.

Petitioners argued that the Court of Appeals misconstrued the SLUSA.

Chadbourne also argued that "the Fifth Circuit's decision will lead to absurd results. It will preclude state-law class claims against defendants directly involved in SLUSA-covered securities fraud, but allow such class actions against remote actors. That result is completely backwards, and utterly without basis in the scheme Congress established."

Also, other circuits have ruled in similar cases. Petitioners argued that there is a deep circuit split over the meaning of the SLUSA.

The Office of the Solicitor General (OSG) filed an amicus curiae brief on December 14, 2012 urging the Supreme Court to deny certiorari. While the Supreme Court often follows the recommendation of the OSG, it did not do so in this case.

It might be noted that President Obama's election campaigns have benefited from generous contributions from the plaintiffs bar, and the Attorney General and Solicitor General are appointed by the President.

Supreme Court Order Granting Certiorari. The order states that "The petition for a writ of certiorari in No. 12-79 is granted limited to Question 1 presented by the petition. The petition for a writ of certiorari in No. 12-86 is granted. The petition for a writ of certiorari in No. 12-88 is granted limited to Question 1 presented by the petition."

Sup. Ct. No. 12-79 is Chadbourne & Parke v. Troice. Question 1 in that petition is "Whether SLUSA precludes a state-law class action alleging a scheme of fraud that involves misrepresentations about transactions in SLUSA-covered securities."

Sup. Ct. No. 12-86 is Willis of Colorado v. Troice. That petition presents only one question: "The question presented is whether a covered state law class action complaint that unquestionably alleges ``a´´ misrepresentation ``in connection with´´ the purchase or sale of a SLUSA-covered security nonetheless can escape the application of SLUSA by including other allegations that are farther removed from a covered securities transaction."

Sup. Ct. No. 12-88 is Proskauer Rose v. Troice. Question 1 in that petition is "Does the Securities Litigation Uniform Standards Act of 1998 (``SLUSA´´), 15 U.S.C. §§ 77p(b), 78bb(f)(1), prohibit private class actions based on state law only where the alleged purchase or sale of a covered security is ``more than tangentially related´´ to the ``heart, crux or gravamen´´ of the alleged fraud?".

History. There has been a history of frivolous and/or abusive private securities litigation in the US. In response, in 1995, the Congress enacted the Private Securities Litigation Reform Act (PSLRA). It was directed at securities fraud actions brought in the U.S. District Courts under Section 10b5 of the Securities Exchange Act of 1934. Among other things, the PSLRA created heightened pleading requirements, and the "safe harbor" for forward looking statements made by publicly traded companies.

However, plaintiffs' securities lawyers reacted by shifting to state courts to evade the provisions of the PSLRA. The Congress came back by passing the SLUSA, which is at issue in the present matter. The SLUSA established uniform national standards for class action lawsuits involving nationally traded securities, and made federal courts the exclusive venue for large scale securities fraud lawsuits.

The SLUSA was S 1260 in the 105th Congress. President Clinton signed it on November 3, 1998. It is Public Law No. 105-353.

During debates over passage of the PSLRA and SLUSA, one of the major concerns was frivolous strike suits directed at technology companies.

See, TLJ story titled "Securities Litigation Reform Bill Passes Congress", October 14, 1998. See also, TLJ web page on the SLUSA.

For more on Congressional enactment of the SLUSA, see earlier TLJ stories:

• Senate Committee Approves S 1260, 4/30/98.
• Securities Litigation Reform Bill on Track for Passage, 5/20/98.
• House Subcommittee Approves Securities Litigation Bill, 6/11/98.
• House Commerce Committee Approves Securities Bill, 6/25/98.
• House Passes Securities Litigation Reform Bill, 7/23/98.

This case is Chadbourne & Parke LLC v. Samuel Troice, et al., Willis of Colorado, et al. v. Samuel Troice, et al, and Proskauer Rose v. Samuel Troice, et al., Supreme Court of the U.S., Sup. Ct. Nos. 12-79, 12-86, and 12-88, petitions for writ of certiorari to the U.S. Court of Appeals for the 5th Circuit, App. Ct. Nos. 11-10932, 11-11031 and 11-11048. Judge Edward Prado wrote the opinion of the Court of Appeals, in which Judges Thomas Reavley and Eugene Davis joined. The Court of Appeals heard an appeal from the U.S. District Court for the Northern District of Texas, Judge David Godbey presiding.

1/17. The U.S. Court of Appeals (FedCir) issued its opinion [15 pages in PDF] in Allflex v. Avid, a patent case regarding when settlements render subsequent appeals moot.

Allflex filed a complaint in the U.S. District Court (CDCal) against its competitor Avid seeking a declaratory judgment that Avid's patents regarding radio frequency identification (RFID) technology for pet and animals are unenforceable due to inequitable conduct. Avid counterclaimed, alleging infringement of the patents in suit.

Subsequently, the District Court ruled that Avid "should be sanctioned" for failure disclose the existence of reexamination proceedings that were pending with respect to the patents in suit. However, the District Court never got around to actually sanctioning Avid.

Later, the District Court granted summary judgment of non-infringement.

The District Court also granted partial summary judgment in favor of Allflex on its inequitable conduct claim. It held that Avid's failure to disclose information about prior public use and offers to sell one of its products was material for purposes of Allflex's claim of inequitable conduct. However, the District Court also denied summary judgment on the inequitable conduct claim as a whole because there was a genuine issue of fact as to whether Avid's President had the requisite intent to deceive the USPTO.

Allflex and Avid then reached the settlement agreement at the heart of this appeal. Avid agreed to pay $6.55 Million to Allflex. They also agreed that Avid would be free to appeal issues the summary judgment of non-infringement, the finding of materiality as to the undisclosed information about prior public use and offers for sale, the ruling that Avid and its counsel should be sanctioned, and claim constructions. Moreover, they agreed that if Avid were to prevail on appeal, Allflex would pay $50,000 to Avid.

The District Court accepted the settlement, and wrote in its Stipulated Order of Final Judgment, that the above listed issues are "ripe for appellate review".

Avid brought the present appeal. Allflex did not participate. The Court of Appeals ruled as to sanctions that there was no final decision to appeal. Then, it ruled the rest of the appeal moot.

The Court addressed the materiality issue in the inequitable conduct claim. "Avid has not suffered an adverse judgment on Allflex’s inequitable conduct claim because the district court dismissed this case without finding Avid’s patents unenforceable. Regardless of whether this court reverses the materiality ruling, Avid’s patents will remain in force because neither the district court nor the parties contemplate further proceedings on the issue of intent, which would be necessary before the court could enter a judgment on inequitable conduct. Under those circumstances, Avid's disagreement with the court’s ruling on the materiality issue does not give it a right to appeal."

The Court wrote that "The fact that Avid is unhappy with the district court's decision in this case is not enough to breathe life into the case in the absence of a continuing controversy between the parties."

It also held that the settlement provision that Allflex pay $50,000 if Avid prevailed was not sufficient to maintain adversity and controversy. The Court also distinguished two 1982 Supreme Court opinions which held that those cases did not become moot when the parties agreed to stipulated damages depending on the outcome of appeals. See, Nixon v. Fitzgerald, 457 U.S. 731, and Havens Realty Corp. v. Coleman, 455 U.S. 363.

The Court also suggested that a "contrivance invented for the purpose of avoiding a mootness determination", or a "token or arbitrary sum introduced for the purpose of manufacturing a controversy", does not maintain controversy.

The Court also noted that "$50,000 represents less than one percent of the payment included as consideration for the partial settlement", and that $50,00 appears more like a "side bet".

The Court also wrote that "While counsel emphasized the advantages to parties of being able to take appeals after settling their disputes -- usually in an attempt to upset rulings that they fear may have adverse downstream consequences for the would-be appellant -- the consequences for the judicial system are sufficiently detrimental that we believe it is important to avoid creating incentives for one-sided appeals such as this one."

This case is Allflex USA, Inc. v. Avid Identification Systems, Inc., U.S. Court of Appeals for the Federal Circuit, App. Ct. No. 2011-1621, an appeal from the U.S. District Court for the Central District of California, D.C. No. 06-CV-1109, Judge Mariana Pfaelzer presiding. Judge Bryson wrote the opinion of the Court of Appeals, in which Judges Clevenger and Lourie joined.

1/17. The Department of Health and Human Services (DHHS) released a notice [563 pages in PDF], to be published in the Federal Register (FR) on January 25, 2013, that announces, describes and recites amendments to its rules that implement the privacy and security provisions of the Health Insurance Portability and Accountability Act (HIPAA).

Leon Rodriquez of the DHHS stated in a release that "This final omnibus rule marks the most sweeping changes to the HIPAA Privacy and Security Rules since they were first implemented".

Rep. Henry Waxman (D-CA) stated in a release that "The final privacy rule issued by HHS yesterday was a long time in coming, but it was worth the wait. This final rule puts people more in control of their personal health information. Given the ever changing world of technology and health care, I am pleased that Secretary Sebelius has taken this pro-patient and pro-privacy stance."

These rules changes take effect on March 26, 2013.

Inauguration Day.

The House will meet at 10:00 AM for the Inauguration of President Obama. See, Rep. Cantor's schedule.

The Senate will meet at 11:30 AM.

Martin Luther King's birthday. This is a federal holiday. See, OPM list of 2013 federal holidays.

The House will meet at 10:00 AM for morning hour, and at 12:00 NOON for legislative business. There are no technology related items on the agenda. See, Rep. Cantor's schedule.

10:00 AM. The House Commerce Committee (HCC) will hold its organizational meeting for the 113th Congress. See, notice. Location: Room 2123, Rayburn Building.

12:30 PM. The House Oversight and Government Reform Committee (HOGRC) will hold its organizational meeting for the 113th Congress. Location: Room 2154, Rayburn Building.

1:00 PM. The House Oversight and Government Reform Committee (HOGRC) will hold a hearing titled "Wasting Information Technology Dollars: How Can the Federal Government Reform its IT Investment Strategy?". See, notice. Location: Room 2154, Rayburn Building.

2:30 PM. The Senate Intelligence Committee (SIC) will hold a closed hearing on undisclosed topics. See, notice. Location: Room 219, Hart Building.

3:30 - 5:15 PM. The American Enterprise Institute (AEI) will host an event titled "China in 2013 and Beyond". The speakers will be Frank Lavin (Export Now), Carolyn Bartholomew (US-China Economic and Security Review Commission), Dan Blumenthal (AEI), Phillip Swagel (AEI), and Danielle Pletka (AEI). Webcast. Free. Open to the public. See, notice. For more information, contact Lara Crouch at lara dot crouch at aei dot org or 202-862-7160. Location: AEI, 12th floor, 1150 17th St., NW.

5:00 PM. Deadline to submit reply comments to the Copyright Office (CO) in response to its notice in the Federal Register regarding its proposed fee schedule for filing cable and satellite statements of account. See, FR, Vol. 77, No. 235, December 6, 2012, at Pages 72788-72791.

Day one of a two day conference titled "State of the Net Conference". Prices vary. See, notice and registration page. Location: Hyatt Regency, 400 New Jersey Ave., NW.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rulemaking (NPRM) [18 pages in PDF] regarding the amateur radio service. The FCC adopted this NPRM on October 1, 2012, and released the text on October 2. It is FCC 12-121 in WT Docket Nos. 12-283 and 09-209. See, notice in the Federal Register, Vol. 77, No. 206, October 24, 2012, at Pages 64947-64949.

EXTENDED TO FEBRUARY 13. Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rulemaking (NPRM) regarding its licensing and operating rules for satellite services. The FCC adopted and released this NPRM on September 28, 2012. It is FCC 12-117 in IB Docket No. 12-267. See, original notice in the Federal Register, Vol. 77, No. 217, November 8, 2012, at Pages 67171-67201. See also, extension notice in the Federal Register, Vol. 77, No. 250, December 31, 2012, at Pages 77001-77002.

The House will meet at 9:00 AM for legislative business. See, Rep. Cantor's schedule.

Day two of a two day conference titled "State of the Net Conference". Prices vary. See, notice and registration page. Location: Hyatt Regency, 400 New Jersey Ave., NW.

9:00 AM. The House Science Committee (HSC) will hold its organizational meeting for the 113th Congress. Location: Room 2318, Rayburn Building.

9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in American Electric Power Serv. v. FCC, App. Ct. No. 11-1146. This is a challenge to the Federal Communications Commission's (FCC) pole attachment rules. See, April 7, 2011, Report and Order and Order on Reconsideration [144 pages in PDF]. It is FCC 11-50 in WC Docket No. 07-245 and GN Docket No. 09-51. See also, FCC brief. This case is the third of three on the schedule. Judges Sentelle, Tatel and Williams will preside. Location: USCA Courtroom, 5th floor, Prettyman Courthouse, 333 Constitution Ave., NW.

10:00 AM. The House Homeland Security Committee (HHSC) will hold its organizational meeting for the 113th Congress. See, notice. Location: Room 311, Cannon Building.

10:00 AM. The Senate Judiciary Committee (SJC) will hold a hearing on judicial nominations: Nelson Roman (USDC/SDNY), Analisa Torres (USDC/SDNY), Raymond Moore (USDC/DColo), Derrick Watson (USDC/DHaw), and Claire Kelly (USCIT). See, notice. Webcast. Location: Room 226, Dirksen Building.

11:00 AM. The House Appropriations Committee (HAC) will hold its organizational meeting for the 113th Congress. See, notice. Location: Room 2359, Rayburn Building.

1:00 PM. The House Small Business Committee (HSBC) will hold its organizational meeting for the 113th Congress. See, notice. Location: Room 2360, Rayburn Building.

1:00 - 2:30 PM. The American Bar Association (ABA) will host a webcast and teleconferenced panel discussion titled "Trademark Fundamentals: The United States Patent and Trademark Office Federal Registration Process". The speakers will be Dawn Cassie (Navigant Consulting), Maureen Gorman (Marshall Gerstein Borun), Casey Mangan (Allstate Insurance Company), and Rene Guess (Procter & Gamble). Prices vary. CLE credits. See, notice.

House schedule. See, House calendar for 113th Congress, 1st Session, and Rep. Cantor's schedule.

9:00 - 10:30 PM. The Information Technology and Innovation Foundation (ITIF) will host a panel discussion titled "Data Innovation in Government". The speakers will be Robert Bectel (Department of Energy), Teresa Carlson (Amazon Web Services), Richard Culatta (Department of Education), David Forrest (Department of Health and Human Services), Jason O'Connor (Lockheed Martin), and Daniel Castro (ITIF). See, notice. Location: ITIF/ITIC, Suite 610A, 1101 K St., NW.

10:00 AM. The Senate Foreign Relations Committee (SFRC) will hold a hearing on the nomination of John Kerry to be Secretary of State. See, notice. Location: Room 216, Hart Building.

12:00 NOON - 1:15 PM. The American Bar Association's (ABA) Section of Antitrust Law will host a teleconferenced panel discussion titled "Recent Developments in Two-Sided Markets in US and Canada". The speakers will be Micah Wood (Blakes), David Evans (Global Economics Group), Roger Ware (Queens University), and Leah Brannon (Cleary Gottlieb). Free. No CLE credits. See, notice.

12:00 NOON - 3:00 PM. The Information Technology and Innovation Foundation (ITIF) will host a panel discussion titled "Data Innovation in the U.S. Economy". The speakers will be William Chernicoff (Toyota Motor North America), Scott Neuman (Opower), and Daniel Castro (ITIF). See, notice. Location: Reserve Officers Association, 5th Floor, One Constitution Ave., NE.

2:30 PM. The Senate Intelligence Committee (SIC) will hold a closed hearing on undisclosed topics. See, notice. Location: Room 219, Hart Building.

6:30 - 8:00 PM. The Federal Communications Bar Association (FCBA) Legislative Committee will host an event titled "Communications and Technology Policy in the 113th Congress". The participants will include House and Senate staff. No webcast. Closed to reporters. No CLE credits. Location: Georgetown University law school, Gewirz Student Center, 12th Floor, 120 F St., NW.

House schedule. See, House calendar for 113th Congress, 1st Session, and Rep. Cantor's schedule.

12:00 NOON - 1:00 PM. The American Bar Association's (ABA) Section of Antitrust Law will host a teleconferenced panel discussion titled "Criminal Antitrust Update". The speakers will be Anne Marie Cushmac (SunTrust Banks), Mark Rosman (Wilson Sonsini), Jeff VanHooreweghe (Wilson Sonsini), and Creighton Macy (Wilson Sonsini). Free. No CLE credits. See, notice.

Deadline to submit written comments to the U.S. Patent and Trademark Office (USPTO) regarding its January 11, 2013 roundtable on the possibility of changing USPTO rules of practice to require the disclosure of real party in interest information during patent prosecution and at certain times post-issuance. See, notice in the Federal Register, Vol. 77, No. 227, November 26, 2012, at Pages 70385-70389. See also, story titled "USPTO to Host Roundtable on Requiring Real Party in Interest Disclosures" in TLJ Daily E-Mail Alert No. 2,483, December 5, 2012.

EXTENDED FROM DECEMBER 21. Extended deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rulemaking (NPRM) [205 pages in PDF] regarding incentive auctions. The FCC adopted this NPRM on September 28, and released the text on October 2. It is FCC 12-118 in Docket No. 12-268. See, notice in the Federal Register,  Vol. 77, No. 225, November 21, 2012, at Pages 69933-69992. See also, stories titled "FCC Adopts NPRM on Incentive Auctions" and "FCC Adopts Spectrum Aggregation NPRM" in TLJ Daily E-Mail Alert No. 2,455, October 1, 2012. See, extension notice in the Federal Register, Vol. 77, No. 239, December 12, 2012, at Page 73969.

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