A daily look at legal news and the business of law...
Novartis Faces Punitive Damages
Well, that didn't take long. A week after the jury got the case in the largest sex discrimination case ever to go to a jury (cases of this type usually get settled), the jurors found Novartis Pharmaceuticals (NVS) guilty.
Based on the ruling, the drugmaker is liable for both compensatory and punitive damages to a class of 5,600 female sales representatives. So far, the compensatory damages total $3.3 million, which will be split among the 12 lead plaintiffs. The rest of the 5,600 suing sales reps now have the right to ask Judge Coleen McMahon for compensatory damages too, including back pay and compensation for the pain and suffering associated with the discrimination. Depending on how many women file claims and how much they're owed, the additional compensatory damages could total upwards of $100 million.
However, the potential cost to Novartis of that back pay doesn't compare to the specter of punitive damages. On Tuesday, both sides will argue before the jury about just how much Novartis should be punished for its systemic discrimination against women, particularly pregnant women. Plaintiffs reportedly will ask for $200 million. Regardless of what the jury awards them, however, they are unlikely to see any money for quite some time, since Novartis has promised to appeal.
Many observers wondered why Novartis gambled on the case, since the 12 lead plaintiffs had horror stories to share and there was statistical evidence to show the stories weren't isolated. But business website bnet points out that with annual revenues of $45 billion, the verdict, even with punitive damages, is a rounding error to Novartis. Given that, why not gamble on owing nothing? I'm not sure I agree with the logic, if only because of the harm the case has done to the company's reputation. Before this trial, I never thought much of Novartis one way or the other. Now, to me at least, it's the company that punished one of its sales reps because she was raped by the buddy of one of its favorite doctors.
Update on Wall Street Litigation
Peter J. Henning of the The New York Times's White Collar Watch has a nifty scorecard of the types of cases pending against the Street. His predictions: Goldman Sachs (GS) is very likely to settle the Securities and Exchange Commission's fraud suit. Similar suits against other firms are also likely, although he predicts that in those cases, the SEC and the firms will skip straight to announcing settlements, and criminal prosecutions are unlikely. I think Henning is persuasive on each point, though I don't know how fast settlement with Goldman will come. We will all assess the terms of the settlement to decide whether the SEC or Goldman "won," and both sides have so much riding on that perception that I think settlement will be hard to reach, even if it's clearly in the interest of both sides.
Regarding New York Attorney General Andrew Cuomo's investigation of whether the banks lied to the ratings agencies, Henning predicts that more regulators will eventually get into the act, and ultimately, all sides will agree to a global settlement akin to the deal Wall Street cut a decade ago to separate its analysts from its investment bankers. Henning won't make a call on criminal prosecutions yet: It's way too early. While I generally agree with him on this point too, I think it's a little early to know if Cuomo's really on to something. Based on the public record so far, the ratings agencies were pretty cooperative with the banks in producing ratings the banks wanted, so I'm not sure how deep or systemic any lying to the agencies really was. Assuming Cuomo gets the goods, however, Henning's analysis is persuasive.
Henning also discusses the ongoing investigations into claims that the banks had conflicts of interest when selling state and municipal bonds: The banks sold the bonds, and then bet against them. Henning suggests the likelihood of suits by states and municipalities is high, while the chance of SEC action is unknown. Given the dire condition of many state and municipal budgets across the country, I imagine such suits are inevitable. After all, Wall Street's pockets are deep.
Finally, Henning takes on the Lehman Brothers Holding's repo 105 balance sheet manipulation, action the bankruptcy examiner alleged was fraudulent. Henning thinks the SEC is likely to civilly sue individual executives, but puts a low to medium chance on criminal prosecution. I'm a bit more bullish on criminal prosecutions, if the evidence to back up the examiner's analysis really is there. The fraud alleged is intuitively easy to understand, and in general, the public is quite willing to believe both that Wall Street executives know what is happening at their companies and that Wall Street cooks its books, so a jury should be receptive to the government's arguments.
And in the business of law...
• Above the Law reports that Pillsbury Winthrop raised associate salaries nationwide, but in an oddly secretive way. ATL also notes that job prospects for judicial clerks about to end their clerkships are looking up.
• The Am Law Daily notes that Hunton & Williams has snagged five Paul Hastings partners, beefing up Hunton's already strong energy practice.
• The ABA Journal notes that Reed Smith picked up a seven-attorney real estate group from Pepper Hamilton. And just to restore a little faith in the legal profession (since I usually focus on stories of attorney fraud and whatnot), check out ABA Journal's story on a high school mentoring program run by Kilpatrick Stockton.
Reading a Stock Quote
Learn to read the ingredients of a stock.View Course »