TheCorporateCounsel.net

Last Tuesday, the US Court of Appeals for the Second Circuit – in Stein v. KPMG, No. 06-4358 (2nd Cir. 2007) – vacated Judge Kaplan’s (ie. the trial court’s) assertion of ancillary jurisdiction over contract claims for attorney fees brought in a criminal tax case against KPMG, a non-party (see my blog on Judge Kaplan’s opinion). If it is found that DOJ violated the appellees’ due process rights by coercing the defendants, it is possible that the indictments will be dismissed. We have posted a copy of the Stein opinion in our “Advancement of Legal Fees” Practice Area.

Here is some analysis from Keith Bishop: The Court of Appeals didn’t reject Judge Kaplan’s Fifth and Sixth Amendment conclusions – but it did not agree with his pro-active attempt to exercise ancillary jurisdiction. Basically, the Second Circuit rejected Judge Kaplan’s exercise of ancillary jurisdiction over the criminal defendant’s implied (and in one case) express claims for payment of legal expenses. The Court of Appeals left open the possibility of dismissal of the claims, stating “Dismissal of an indictment for Fifth and Sixth Amendment violations is always an available remedy.” However, it also suggested other action such as ordering “cessation of such conduct” was possible. The Second Circuit also noted the apparent inconsistency between the Thompson Memorandum’s focus on voluntary payment of legal fees and Judge Kaplan’s assertion of ancillary jurisdiction over claims by the defendants to payment.

By the way, this case emanates from the same type of fishy tax shelters that have now landed Ernst & Young in trouble – see this related article and here is the indictment.

[Friday Funnies – Check out Will Ferrell’s short takes on FunnyorDie.com.]

Failure to Provide Evidence of Loss Causation Precludes Class Certification

Recently, the U.S. Court of Appeals for the Fifth Circuit – in Oscar Private Equity Investments v. Holland – raised the bar in federal securities fraud litigation by requiring plaintiffs to come forward with evidence of loss causation in order to obtain class certification, particularly where investor losses could be attributed to multiple factors unrelated to the alleged fraud. We have posted memos regarding this decision in our “Securities Litigation” Practice Area.

FASB Plans Project to Simplify Hedge Accounting

Recently, the FASB voted to simplify FAS 133, “Accounting for Derivative Instruments and Hedging Activities.” According to this CFO.com article, FASB will replace current assessment and testing mandates with a fair-value approach.