Reviewing 5 of June’s top stories

News Corp.’s restructuring, HP’s legal battles, a Megaupload extradition controversy and more

HP Happenings

The legal battle between Hewlett-Packard (HP) and Oracle started a year ago, when the latter announced that it would stop developing software compatible with Intel Corp.’s Itanium chip. HP, which uses the chip in many of its products, responded with a $4 billion lawsuit alleging that Oracle’s actions violated an agreement between the two companies.

Over the ensuing 12 months, the case saw a countersuit from Oracle, plenty of pretrial motions and each side’s refusal to settle despite a judge’s urging. Sections of the eventual testimony focused on former CEO Mark Hurd, whose departure for Oracle amid sexual harassment allegations spawned another lawsuit between the two companies. That dispute was eventually settled with the so-called “Hurd Agreement,” which included a clause stating that the relationship between the two companies would continue unchanged.

In closing arguments Tuesday, HP lawyers asked Judge James Kleinberg to enforce that clause as a contract. If Kleinberg decides that the contract is valid, a jury will determine whether Oracle breached the contract and set damages.

In a separate decision last week, Judge Donald Parsons threw out a shareholder suit over Hurd’s hefty severance package, ruling that HP’s directors acted in good faith.

Risperdal Resolution

For years after its 1993 introduction, Risperdal was a boon for Johnson & Johnson (J&J), reportedly netting the company $4.5 billion in 2007 alone. But sales dropped after the pharmaceutical company lost its patent on the drug in 2003.

Around that time, J&J allegedly began marketing Risperdal as a treatment for other diseases, including bipolar disorder, dementia and anxiety. The U.S. government eventually opened an investigation into the company’s unauthorized marketing claims.

Early this year, J&J agreed to pay $1 billion to end the investigation, an offer that federal prosecutors rejected a few months later. Meanwhile, the company paid out millions of dollars in settlements with individual states—including a $1.1 billion deal with Arkansas and a $158 million settlement with Texas.  But the end may be in sight: Last week, Reuters reported that J&J and the U.S. government are nearing a settlement of between $1.5 billion and $1.7 billion, though some experts estimate that the total may be more than $2 billion.

Hacking Horror

News Corp.’s recent decision to split into two companies—an entertainment unit and a publishing company—capped a controversial year for the media company. The company’s 168-year-old News of the World paper folded last July amid reports that some of its journalists had hacked into more than 1,000 peoples’ phones, including those of celebrities, politicians and a young murder victim. News Corp. eventually agreed to pay more than £642,000 to settle claims from 36 of those victims.

But the company’s troubles didn’t stop with the settlements. In mid-May, former News International head Rebekah Brooks became the first executive to face criminal charges in the scandal.

Brooks, who was arrested along with her husband and several staff members, was charged with three counts of conspiring to obstruct justice for allegedly hiding documents, computers and other electronic equipment from London police officers during the investigation.

Dealing with the mess is new general counsel Gerson Zweifach, who took over the company’s internal investigation on June 29.

 

Megaupload Mishap

As part of the government crusade against online piracy earlier this year—a crusade that included the controversial Stop Online Piracy Act and the Protect IP Act—the Department of Justice (DOJ) indicted seven people for copyright infringement connected to the content hosting website Megaupload.com.

U.S. officials charged the group, known as the “Mega Conspiracy,” with multiple crimes, including copyright infringement, racketeering and money laundering, and the drama hasn’t stopped since. First four of the suspects, including Megaupload founder Kim Dotcom, were arrested in an armed raid on Dotcom’s New Zealand mansion. Next, a conflict of interest forced Hogan Lovells Partner Robert Bennett to withdraw from Megaupload’s defense.

Finally, New Zealand’s High Court dealt a major blow to the U.S.’s extradition efforts when it ruled earlier this week that local authorities used an invalid warrant to search Dotcom’s home and illegally seized evidence including computer hard drives.

Airline Accord

The friendly skies have turned contentious, at least when it comes to American Airlines (AA) and its unionized workers. Just months after filing for Chapter 11 protection last year, the airline was hit with a lawsuit from the Allied Pilots Association (APA), which argued that the company could not use the bankruptcy to force new employment terms on pilots.

On June 27, just two days before a U.S. bankruptcy judge was set to decide on AA’s proposed $1.25 billion labor spending cuts, the APA and the airline reportedly reached a tentative contract agreement. The new deal would give pilots furlough protections, 14.8 percent pay raises and a stake in the company.

In a separate union battle, AA filed suit earlier this month to block a union-representation election by its ticket counter and gate agents. The airline argued that a new federal law required the group to muster up 50 percent support from its agents before holding the election, which would determine whether the workers would be represented by the Communications Workers of America Union. The union contended that, under the law in place when it originally filed for the election, it only needed 35 percent support. But a federal judge sided with AA last week, blocking the elections.

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