Reviewing 5 of January's top stories

The Kodak saga, merger mania, the indictment of Megaupload and more

The Kodak Saga

It began with a whisper. When Kodak entered talks with bidders to sell its patent portfolio in October 2011, it was suggested that task might be more easily accomplished if the camera maker filed for bankruptcy first, since if Kodak turned out to be insolvent, such purchases could be considered “fraudulent transfers.”

A couple months later, the company promoted its GC to president, perhaps thinking that a new leader could successfully navigate these troubled waters. But rumors of bankruptcy continued to circulate. Then, seemingly grasping at straws, Kodak sued Apple and HTC for patent infringement, accusing the smartphone makers of using Kodak’s image transmission technology without permission.

But eventually, in spite of its best efforts, Kodak’s day of reckoning arrived. On Jan. 19, the company officially filed for Chapter 11 bankruptcy in the Southern District of New York.

Crowell’s Crime

Douglas Arntsen, the former Crowell & Moring associate accused of stealing $4 million from one of the firm’s escrow accounts, was denounced by his former employer in December 2011. Checking back in with Arntsen, we find that at his bail hearing, the judge deemed him a serious flight risk. You might be too, if you were facing at least three civil lawsuits. He was ordered to be held without bail.

But all is not gloom and doom in Arntsen’s world (though for the most part it is). Alan Lewis, a prominent white collar defense attorney and partner at Carter, Ledyard & Milburn, has signed on to represent him as of Jan. 23.

Megafail

Many online websites shut down on Jan. 18 to protest the controversial SOPA and PIPA internet piracy legislation on the table at Congress. But despite the public outcry against censorship, the U.S. government achieved a small victory of its own when it indicted major content hosting website Megaupload.com and its family of Mega sites a couple days later.

Seven individuals were arrested in conjunction with the case, and accused of running an “international organized criminal enterprise” responsible for infringement that caused copyright holders to lose $500 million. Then, to add insult to injury, Hogan Lovells partner Robert Bennett, the lawyer scheduled to represent Megaupload, was required to withdraw from the case due to a conflict of interest on Jan. 23.


SEC Struggles

Judge Jed Rakoff’s famous rejection of the Securities and Exchange Commission’s (SEC) $285 million settlement with Citigroup back in November 2011 is old news by now, but the SEC still seems disgruntled.

Judge Rakoff reasoned that for cases such as this one, it wasn’t in the public interest for companies to be allowed to settle without admitting wrongdoing. Some progress was made on that front when the SEC changed its “neither admit nor deny” policy on Jan. 6, saying that when a company has admitted wrongdoing in criminal proceedings, it can no longer turn around and settle with the SEC without owning up to the conduct in that case as well. However, the SEC explicitly said that this policy change had nothing to do with Judge Rakoff’s rejection of the Citigroup settlement.

The SEC further expressed its displeasure with Rakoff’s decision on Jan. 25, when it said in a filing that the Citigroup settlement didn’t need to be in the public interest.

Merger Mania

2011 was a huge year for law firm mergers, as we saw in December with the tightly packed announcements of the Bryan Cave and Holme Roberts marriage, as well as mergers between Arnold & Porter and Howard Rice and the top law firms in China and Australia. The Hildebrandt Institute reported that mergers increased by 67 percent in 2011, and it predicted the trend would continue into 2012. If the first month of this year has been any indication, they were right.

McKenna Long and Luce Forward announced that they will be tying the knot on March 1, and the Wall Street Journal recently reported that we’ll be seeing a lot more such stories in the coming months. The reason for this, the Journal says, is that since the advent of the recession, law firms have not been able to raise billing rates when profits are low, leaving many smaller firms with the choice between merging or going out of business. On the other hand, mergers can be costly, and Canadian firms seem to be taking the opposite tactic—putting mergers on hold and hoping to ride out the storm.

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